[logo] WESTELL NEWS RELEASE News Release: FOR IMMEDIATE RELEASE For Additional Information, contact: SENIOR VICE PRESIDENT & CFO: TRADE/BUSINESS PRESS: NICHOLAS C. HINDMAN, SR. KEN TRANTOWSKI WESTELL TECHNOLOGIES INC. KGT COMMUNICATIONS GROUP 630.375.4136 630.469.8765 nhind@westell.com kennethg_trantowski@msn.com WESTELL TECHNOLOGIES REPORTS 3RD QUARTER FISCAL 2005 RESULTS REVENUE FROM CUSTOMER NETWORKING EQUIPMENT INCREASES 52% YEAR OVER YEAR COMPANY POSTS IT'S ELEVENTH CONSECUTIVE PROFITABLE QUARTER AURORA, IL, JANUARY 19, 2005 - - Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of broadband access solutions and conferencing services, today announced the results for the quarter ending December 31, 2004. Total revenues for the December quarter increased 24% to $74.5 million from $60.0 million in the same quarter of last year and increased 21% from $61.4 million in the quarter ended September 30, 2004. Westell reported net income for the December quarter of $3.7 million, or $0.05 per diluted share, which includes tax expense of $2.6 million, or $0.04 per diluted share. Excluding the tax expense, the non-GAAP net income in the December quarter was $6.3 million, or $0.09 per diluted share. A reconciliation of non-GAAP results to GAAP results is provided as part of this press release. "Our Customer Networking Equipment revenue performance in the December quarter was well beyond our expectations. The early success of our new wireless gateway product, VersaLink(TM), far exceeded even our most optimistic forecast," said Van Cullens, Westell President and CEO. "As a result of this overwhelming initial demand, we expedited production and product delivery, which caused us to incur an incremental cost of approximately $3 million for the quarter. We expect these incremental expediting costs will decrease in the next quarter. We expect only approximately $750 thousand of such expense in the March quarter which should contribute to margin improvement," Cullens added. Mr. Cullens continued, "We remain encouraged by the growth in the broadband market. It is now very evident that our service provider customers are determined to be leaders in the delivery of broadband service, including video and VoIP. Aside from marketing promotions, we believe that market growth will be fueled by continued advancements in DSL, fiber, WiFi, VoIP, Video/Media gateways, home networking and ancillary services. We believe Westell is building a solid foundation of solutions to help customers successfully compete for these emerging opportunities. Our products, including the recently announced TriLink(TM) and Verizon One Gateways; UltraLine(TM); VersaLink(TM); ProLine; and EnVoy(TM) support multiple access options, service management and home networking requirements, all with the high quality and reliability that are Westell hallmarks. We believe these new products, and those we are planning, will expand Westell's traditional position as a preferred supplier in the broadband space," Cullens added. OUTLOOK Westell provided guidance for the fourth fiscal quarter ending March 31, 2005. The Company expects revenue to be in the range of $73-$77 million. Westell expects EPS to be in a range of $0.07 to $0.08 per diluted share (including a provision for income tax expense in the range of $3.2 to $3.7 million) and non-GAAP EPS in a range of $0.11 to $0.13 per diluted share, excluding the provision for tax expense. RECONCILIATION OF NON-GAAP TO GAAP RESULTS A detailed calculation of non-GAAP net income and net income per share is included in the attached statement of operations, which also includes equivalent GAAP net income and GAAP net income per share. Westell will host its earnings call on Thursday, January 20 at 9:30 AM Eastern Time for analysts, shareholders, investors and the public. The live earnings call will be available to the public. Participants can join for the voice portion of the call by following the instructions below. Participants must separately register for the call. To participate in the voice portion: 1. All participants must pre-register by dialing 1-800-299-5919, International 1-402-220-4796. 2. Leave your name and the company whom you represent. 3. To participate in the call on the 19th please dial ConferencePlus at 1-800-466-1671 no later than 9:15 AM, Eastern Time and ask for the "Westell Technologies Analyst Call". International participants may dial 847-413-3362. The Company's earnings press release and any related earnings information to be discussed on the earnings call will be posted on the Investor Relations section of the Company's web site at http://www.westell.com. Digital Audio Replay of this call will be available one hour following the conclusion of the call by dialing 1-888-843-8996 or 630-652-3044 and entering 10089758#. ABOUT WESTELL - ------------- Westell Technologies, Inc. (NASDAQ: WSTL) headquartered in Aurora, Illinois is a Tier-1 provider of intelligent, carrier-class broadband access products, manufactured using a TL9000 registered quality management system. Westell offers high-speed broadband/DSL and VoIP technology products for carriers, service providers and business enterprises around the world. Additional information can be obtained by visiting Westell's Web site at www.westell.com. ABOUT CONFERENCEPLUS - -------------------- Conference Plus, Inc., (ConferencePlus(TM)) a leading global provider of audio, web and videoconferencing services is dedicated to the workplace of the future - now. ConferencePlus is transforming the way work is done through its market-leading multimedia conferencing solutions that combine innovation, proven technology and exceptional customer service. Headquartered in Schaumburg, Illinois with an international headquarters in Dublin, Ireland, ConferencePlus is a subsidiary of Westell Technologies, Inc. (NASDAQ: WSTL). Additional information about ConferencePlus can be obtained by visiting http://www.conferenceplus.com. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT 1995: Certain statements contained herein including, without limitation, statements containing the words "believe," "on track, " "anticipate," "focus," "should," "committed" "expect," "estimate", "await," "continue," "intend," "may," "will," "should," and similar expressions are forward looking statements that involve risks and uncertainties. These risks include, but are not limited to, product demand and market acceptance risks, need for financing, the economic downturn in the U.S. economy and telecom market, the impact of competitive products or technologies, competitive pricing pressures, product development, excess and obsolete inventory due to new product development, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies), the effect of Westell's accounting policies, the need for additional capital, the effect of economic conditions and trade, legal social and economic risks (such as import, licensing and trade restrictions) and other risks more fully described in Westell's Annual Report on Form 10-K for the fiscal year ended March 31, 2004 under the section "Risk Factors". Westell undertakes no obligation to release publicly the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. FINANCIAL TABLES TO FOLLOW: Westell Technologies, Inc. Financial Results (Dollars in thousands except per share amounts) Three Months ended Nine Months ended Dec. 31, % Dec. 31, % 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Revenues NSA $9,090 $13,442 -32% $33,484 (1) $42,025 -20% CNE 54,484 35,761 52% 125,592 97,805 28% Services 10,877 10,775 1% 32,946 33,810 -3% ------- -------- -------- -------- Total revenues 74,451 59,978 24% 192,022 173,640 11% ------- -------- -------- -------- Gross profit Equipment 15,090 (2) 16,036 41,990 (1)(2) 45,834 (3) Services 5,468 3,082 (4) 16,393 12,579 (4) ------- -------- -------- -------- Total gross profit 20,558 19,118 8% 58,383 58,413 0% ------- -------- -------- -------- Gross margin Equipment 23.7%(2) 32.6% 26.4%(1)(2) 32.8%(3) Services 50.3% 28.6%(4) 49.8% 37.2%(4) ------- -------- -------- -------- Total gross margin 27.6% 31.9% 30.4% 33.6% ------- -------- -------- -------- Operating expenses Sales & marketing 5,740 4,647 24% 16,622 14,857 12% Expense to revenue 7.7% 7.7% 8.7% 8.6% General & ad- ministrative 4,446 4,545 -2% 13,222 14,014 -6% Expense to revenue 6.0% 7.6% 6.9% 8.1% Research & development 4,053 3,874 5% 11,155 12,630 -12% Expense to revenue 5.4% 6.5% 5.8% 7.3% Restructuring - - (452) (5) - Expense to revenue 0.0% 0.0% -0.2% 0.0% Intangibles amortization(6) 324 364 1,012 1,091 Expense to revenue 0.4% 0.6% 0.5% 0.6% ------- -------- -------- -------- Total operating expenses 14,563 13,430 8% 41,559 42,592 -2% ------- -------- -------- -------- Expense to revenue 19.6% 22.4% 21.6% 24.5% Gain on sale of assets - - 1,453 (7) - Operating income 5,995 5,688 5% 18,277 15,821 16% Other income 395 212 788 403 Interest expense (7) (127) -94% (58) (683) -92% ------- -------- -------- -------- Income before minority interest and taxes 6,383 5,773 11% 19,007 15,541 22% ------- -------- -------- -------- Income taxes 2,614 - (8) 7,364 - (8) Minority interest 106 23 323 255 Net income $3,663 $5,750 $11,320 $15,286 ======= ======== ======== ======== Income per common share: Basic 0.05 0.09 0.17 0.23 ------- -------- -------- -------- Diluted 0.05 0.08 0.16 0.22 ------- -------- -------- -------- Average number of common shares outstanding: Basic 68,421 67,373 68,364 66,569 Diluted 71,081 70,897 70,874 70,502 Non-GAAP Results and Reconciliation to GAAP GAAP net income $3,663 $5,750 $11,320 $15,286 Income tax expense 2,614 - 7,364 - ------- -------- -------- -------- Non-GAAP net income (9) $6,277 $5,750 $18,684 $15,286 ======= ======== ======== ======== GAAP Income per basic share 0.05 0.09 0.17 0.23 Basic per share income tax expense 0.04 - 0.11 - ------- -------- -------- -------- Non-GAAP income per basic share (9) 0.09 0.09 0.27 0.23 ======= ======== ======== ======== GAAP Income per diluted share 0.05 0.08 0.16 0.22 Diluted per share income tax expense 0.04 - 0.10 - ------- -------- -------- -------- Non-GAAP income per diluted share (9) 0.09 0.08 0.26 0.22 ======= ======== ======== ======== Footnotes: (1) The Company earned $883,000 in the three months ended June 30, 2004 for a contractual settlement. (2) Includes approximately $3 million of expedited production and product delivery costs. (3) Includes $1.2 million to settle a customer contract obligation which arose in the quarter ended September 30, 2003. (4) Includes a $775,000 one time early contract termination penalty of a long distance contract at the Company's Conference Plus, Inc. subisdiary. (5) Reversal of restructuring charge resulting from an early lease termination at the Company's Conference Plus subsidiary. (6) Teltrend product technology intangible amortization. (7) Includes a $1.5 million gain from the sale of NSA assets. (8) Valuation allowances were utilized for taxable income. (9) Non-GAAP net income and net income per share excludes the impact of tax expense. Westell Technologies, Inc. Financial Results (continued) (Dollars in thousands) Dec. 31, Mar. 31, 2004 2004 ----------- ------------ Cash and Short term Investments 21,659 11,241 Receivables 28,477 23,807 Inventory 28,083 16,075 Total current assets 85,380 62,117 Goodwill and intangibles 13,930 13,944 Total assets 148,461 129,781 Total current liabilities 39,130 34,492 Bank and Solectron notes payable - 2,631 Total liabilities and minority interest 43,107 38,016 Shareholders' Equity 105,354 91,765 Days Sales Outstanding 34 35