Exhibit 99.1
                        
westelllogoonelinexa01a12.jpg
 
NEWS RELEASE

Westell Reports Fiscal 2019 Second Quarter Results
AURORA, IL, October 31, 2018 – Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of high-performance network infrastructure solutions, announced results for its fiscal 2019 second quarter ended September 30, 2018 (2Q19). Management will host a conference call to discuss 2Q19 results and plans for future growth tomorrow, Thursday, November 1, 2018, at 9:30 AM Eastern Time (details below).
Revenue was $10.1 million and comprised $3.6 million from the In-Building Wireless (IBW) segment, $2.6 million from the Intelligent Site Management (ISM) segment, and $3.8 million from the Communication Network Solutions (CNS) segment. Cash and short-term investments grew to $28.5 million at September 30, 2018, up from $25.8 million at June 30, 2018, driven by improved working capital, partly offset by an operating loss and share repurchases.
“We grew cash significantly and continued to exceed our gross margin target of 40% or greater. While 2Q19 sequential IBW and CNS segment revenues were up slightly, overall results were affected by lower ISM revenue from one of our larger customers,” said Stephen John, President and Chief Executive Officer. “We continue to aggressively pursue growth opportunities through organic initiatives, partnerships, and acquisitions. In 2Q19, we received initial customer orders and recognized our first revenue for the fiber access solutions we began developing in April of this year. In addition, our recently announced small cell product agreement positions us to expand in the market for private LTE networks using the emerging OnGo spectrum.”
 
2Q19
3 months ended 9/30/18
1Q19
3 months ended 6/30/18
 + increase /
- decrease
Revenue
$10.1M
$13.0M
-$2.9M
Gross Margin
41.5%
45.5%
-4.0%
Operating Margin
-17.4%
-1.2%
-16.2%
Net Income (Loss)
($1.7M)
($0.0M)
-$1.7M
Earnings (Loss) Per Share
($0.11)
($0.00)
-$0.11
Non-GAAP Operating Margin (1)
-6.2%
+8.6%
-14.8%
Non-GAAP Net Income (Loss) (1)
($0.5M)
$1.2M
-$1.7M
Non-GAAP Earnings (Loss) Per Share (1)
($0.03)
$0.08
-$0.11
Non-GAAP Adjusted EBITDA (1)
($0.5M)
$1.3M
-$1.8M
Ending Cash and ST Investments
$28.5M
$25.8M
+$2.7M
(1) Please refer to the schedule at the end of this press release for a complete GAAP to non-GAAP reconciliation and other information related to non-GAAP financial measures.






In-Building Wireless (IBW) Segment
IBW’s revenue was up slightly in 2Q19 when compared to 1Q19, driven primarily by higher sales of DAS conditioners and passive system components, partly offset by lower repeater revenue. IBW’s segment profit decrease was due primarily to the increased R&D expense associated with the OnGo small cell development.

($ in thousands)
2Q19
3 months ended 9/30/18
1Q19
3 months ended 6/30/18
 + increase /
- decrease
IBW Segment Revenue
$3,646
$3,557
+$89
IBW Segment Gross Margin
46.4%
46.7%
-0.3%
IBW Segment R&D Expense
$867
$522
+$345
IBW Segment Profit
$825
$1,140
-$315

Intelligent Site Management (ISM) Segment
ISM’s revenue decrease was due primarily to lower product revenue as one major domestic customer spent significantly less on remote monitoring than in previous quarters, partly offset by increased support services revenue. ISM’s segment profit decrease was due to the lower revenue.

($ in thousands)
2Q19
3 months ended 9/30/18
1Q19
3 months ended 6/30/18
 + increase /
- decrease
ISM Segment Revenue
$2,646
$5,744
-$3,098
ISM Segment Gross Margin
53.7%
51.3%
+2.4%
ISM Segment R&D Expense
$558
$569
-$11
ISM Segment Profit
$864
$2,379
-$1,515

Communication Network Solutions (CNS) Segment
CNS’s revenue increase was driven primarily by higher sales of integrated cabinets. CNS’s segment profit decrease was due primarily to a lower gross margin due to the revenue mix and slightly higher R&D expense related to product development activities for the fiber access solutions.

($ in thousands)
2Q19
3 months ended 9/30/18
1Q19
3 months ended 6/30/18
 + increase /
- decrease
CNS Segment Revenue
$3,814
$3,736
+$78
CNS Segment Gross Margin
28.3%
35.5%
-7.2%
CNS Segment R&D Expense
$418
$341
+$77
CNS Segment Profit
$661
$984
-$323







Conference Call Information
Management will discuss financial and business results and plans for future growth during the quarterly conference call on Thursday, November 1, 2018, at 9:30 AM Eastern Time. Investors may quickly register online in advance of the call at https://www.conferenceplus.com/Westell. After registering, participants receive dial-in numbers, a passcode and a registration ID that is used to uniquely identify their presence and automatically join them into the audio conference. A participant may also register by telephone on November 1, 2018, by calling (877) 875-0056 no later than 8:15 AM Central Time (9:15 AM Eastern Time) and providing the operator confirmation number 47737770.

This news release and related information that may be discussed on the conference call will be posted on the Investor Relations section of Westell's website: http://ir.westell.com. A digital recording of the entire conference will be available for replay on Westell's website by approximately 12:00 PM Eastern Time following the conclusion of the conference.
About Westell Technologies
Westell is a leading provider of high-performance network infrastructure solutions focused on innovation and differentiation at the edge of communication networks where end users connect. The Company's portfolio of products and solutions enable service providers and network operators to improve performance and reduce operating expenses. With millions of products successfully deployed worldwide, Westell is a trusted partner for transforming networks into high-quality reliable systems. For more information, please visit www.westell.com.
 
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained herein that are not historical facts or that contain the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “plan,” “should,” or derivatives thereof and other words of similar meaning are forward-looking statements that involve risks and uncertainties.  Actual results may differ materially from those expressed in or implied by such forward-looking statements.  Factors that could cause actual results to differ materially include, but are not limited to, product demand and market acceptance risks, customer spending patterns, need for financing and capital, economic weakness in the United States (“U.S.”) economy and telecommunications market, the effect of international economic conditions and trade, legal, social and economic risks (such as import, licensing and trade restrictions, and the imposition of new, or changes in existing duties and tariffs), the impact of competitive products or technologies, competitive pricing pressures, customer product selection decisions, product cost increases, component supply shortages, new product development, excess and obsolete inventory, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies), the ability to successfully consolidate and rationalize operations, the ability to successfully identify, acquire and integrate acquisitions, the effect of the Company's accounting policies, retention of key personnel and other risks more fully described in the Company's SEC filings, including the Form 10-K for the fiscal year ended March 31, 2018, under Item 1A - Risk Factors.  The Company undertakes no obligation to publicly update these forward-looking statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, or otherwise.






Westell Technologies, Inc.
Condensed Consolidated Statement of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)

 
 
Three months ended
 
Six months ended
 
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
Revenue
 
$
10,106

 
$
13,037

 
$
17,232

 
$
23,143

 
$
33,806

 
Cost of revenue
 
5,913

 
7,102

 
9,957

 
13,015

 
19,764

 
Gross profit
 
4,193

 
5,935

 
7,275

 
10,128

 
14,042

 
Gross margin
 
41.5
%
 
45.5
%
 
42.2
%
 
43.8
%
 
41.5
%
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
R&D
 
1,843

 
1,432

 
2,205

 
3,275

 
4,481

 
Sales and marketing
 
1,876

 
2,137

 
1,992

 
4,013

 
4,328

 
General and administrative
 
1,400

 
1,534

 
1,809

 
2,934

 
3,520

 
Intangible amortization
 
832

 
990

 
1,048

 
1,822

 
2,095

 
Restructuring
 

 

 
165

(1) 

 
165

(1) 
Total operating expenses
 
5,951

 
6,093

 
7,219

 
12,044

 
14,589

 
Operating profit (loss)
 
(1,758
)
 
(158
)
 
56

 
(1,916
)
 
(547
)
 
Other income, net
 
165

 
119

 
677

(2) 
284

 
720

(2) 
Income (loss) before income taxes
 
(1,593
)
 
(39
)
 
733

 
(1,632
)
 
173

 
Income tax benefit (expense)
 
(10
)
 

 
(13
)
 
(10
)
 
(25
)
 
Net income (loss) from continuing operations
 
(1,603
)
 
(39
)
 
720

 
(1,642
)
 
148

 
Income (loss) from discontinued operations (3)
 
(138
)
 

 

 
(138
)
 

 
Net income (loss)
 
$
(1,741
)
 
$
(39
)
 
$
720

 
$
(1,780
)
 
$
148

 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
Basic net income (loss)
 
$
(0.11
)
 
$

 
$
0.05


$
(0.11
)
 
$
0.01

 
Diluted net income (loss)
 
$
(0.11
)
 
$

 
$
0.05

 
$
(0.11
)
 
$
0.01

 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
15,583

 
15,632

 
15,461

 
15,602

 
15,471

 
Diluted
 
15,583

 
15,632

 
15,672

 
15,602

 
15,638

 



(1) During the quarter ended September 30, 2017, the Company recorded restructuring expense related to severance costs for terminated employees.
(2) During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity which triggered a one-time $0.6 million foreign currency gain with the reversal of the cumulative translation adjustment.
(3) During the quarter ended September 30, 2018, the Company recorded indemnification expense related to probable loss contingencies associated with a major customer contract related to a business which was previously sold and therefore is presented as discontinued operations.







Westell Technologies, Inc.
Condensed Consolidated Balance Sheet
(Amounts in thousands)


 
 
September 30, 2018 (Unaudited)
 
March 31, 2018
Assets
 
 
 
 
Cash and cash equivalents
 
$
28,471

 
$
24,963

Short-term investments
 

 
2,779

Accounts receivable, net
 
6,957

 
8,872

Inventories
 
10,370

 
9,222

Prepaid expenses and other current assets
 
1,131

 
816

Total current assets
 
46,929

 
46,652

Land, property and equipment, net
 
1,463

 
1,601

Intangible assets, net
 
9,613

 
11,435

Tax receivable, non-current
 
697

 
697

Other non-current assets
 
73

 
74

Total assets
 
$
58,775

 
$
60,459

Liabilities and Stockholders’ Equity
 
 
 
 
Accounts payable
 
$
2,822

 
$
1,903

Accrued expenses
 
3,235

 
3,328

Accrued restructuring
 

 
63

Deferred revenue
 
1,095

 
1,790

Total current liabilities
 
7,152

 
7,084

Deferred revenue non-current
 
557

 
846

Other non-current liabilities
 
241

 
234

Total liabilities
 
7,950

 
8,164

Total stockholders’ equity
 
50,825

 
52,295

Total liabilities and stockholders’ equity
 
$
58,775

 
$
60,459






Westell Technologies, Inc.
Condensed Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
 
 
 
Three months ended September 30,
 
Six months
 ended
September 30,
 
 
 
2018
 
2018
 
2017
 
Cash flows from operating activities:
 
 
 
Net income (loss)
 
$
(1,741
)
 
$
(1,780
)
 
$
148

 
Reconciliation of net income (loss) to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
 
971

 
2,113

 
2,526

 
Stock-based compensation
 
295

 
586

 
672

 
Loss on sale of fixed assets
 
1

 
1

 
8

 
Restructuring
 

 

 
165

 
Gain on disposal of foreign operations
 

 

 
(608
)
(1) 
Exchange rate loss (gain)
 
(9
)
 
1

 
(6
)
 
Changes in assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
 
3,619

 
1,914

 
1,025

 
Inventory
 
(643
)
 
(1,148
)
 
2,528

 
Accounts payable and accrued expenses
 
746

 
770

 
(2,306
)
 
Deferred revenue
 
(463
)
 
(655
)
(2) 
(1,477
)
 
Prepaid expenses and other current assets
 
152

 
(315
)
 
375

 
Other assets
 
1

 
1

 
73

 
Net cash provided by (used in) operating activities
 
2,929

 
1,488

 
3,123

 
Cash flows from investing activities:
 
 
 
 
 
 
 
Net maturity (purchase) of short-term investments
 
1,346

 
2,779

 
(5,011
)
 
Purchases of property and equipment, net
 
(103
)
 
(153
)
 
(254
)
 
Net cash provided by (used in) investing activities
 
1,243

 
2,626

 
(5,265
)
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Purchase of treasury stock
 
(200
)
 
(605
)
 
(456
)
 
Net cash provided by (used in) financing activities
 
(200
)
 
(605
)
 
(456
)
 
Gain (loss) of exchange rate changes on cash
 
2

 
(1
)
 
20

 
Net increase (decrease) in cash and cash equivalents
 
3,974

 
3,508

 
(2,578
)
 
Cash and cash equivalents, beginning of period
 
24,497

(3) 
24,963

(3) 
21,778

 
Cash and cash equivalents, end of period
 
$
28,471

 
$
28,471

 
$
19,200

(3) 

(1) During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity which triggered a one-time $0.6 million foreign currency gain with the reversal of the cumulative translation adjustment.
(2) Includes the cumulative effect adjustment of the ASC 606 adoption.
(3) As of June 30, 2018, March 31, 2018, and September 30, 2017, the Company had $1.3 million, $2.8 million and $5.0 million, respectively, of short-term investments in addition to cash and cash equivalents.





Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)

Sequential Quarter Comparison
 
 
Three months ended September 30, 2018
 
Three months ended June 30, 2018
 
 
IBW
 
ISM
 
CNS
 
Total
 
IBW
 
ISM
 
CNS
 
Total
Total revenue
 
$
3,646

 
$
2,646

 
$
3,814

 
$
10,106

 
$
3,557

 
$
5,744

 
$
3,736

 
$
13,037

Gross profit
 
1,692

 
1,422

 
1,079

 
4,193

 
1,662

 
2,948

 
1,325

 
5,935

Gross margin
 
46.4
%
 
53.7
%
 
28.3
%
 
41.5
%
 
46.7
%
 
51.3
%
 
35.5
%
 
45.5
%
R&D expenses
 
867

 
558

 
418

 
1,843

 
522

 
569

 
341

 
1,432

Segment profit
 
$
825

 
$
864

 
$
661

 
$
2,350

 
$
1,140

 
$
2,379

 
$
984

 
$
4,503


Year-over-Year Quarter Comparison
 
 
Three months ended September 30, 2018
 
Three months ended September 30, 2017
 
 
IBW
 
ISM
 
CNS
 
Total
 
IBW
 
ISM
 
CNS
 
Total
Total revenue
 
$
3,646

 
$
2,646

 
$
3,814

 
$
10,106

 
$
7,919

 
$
4,730

 
$
4,583

 
$
17,232

Gross profit
 
1,692

 
1,422

 
1,079

 
4,193

 
3,650

 
2,219

 
1,406

 
7,275

Gross margin
 
46.4
%
 
53.7
%
 
28.3
%
 
41.5
%
 
46.1
%
 
46.9
%
 
30.7
%
 
42.2
%
R&D expenses
 
867

 
558

 
418

 
1,843

 
1,443

 
523

 
239

 
2,205

Segment profit
 
$
825

 
$
864

 
$
661

 
$
2,350

 
$
2,207

 
$
1,696

 
$
1,167

 
$
5,070

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 






Westell Technologies, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
(Amounts in thousands, except per share amounts)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2018
 
2018
 
2017
 
2018
 
2017
GAAP consolidated operating expenses
 
$
5,951

 
$
6,093

 
$
7,219

 
$
12,044

 
$
14,589

Adjustments:
 
 
 
 
 
 
 
 
 
 
Stock-based compensation (1)
 
(284
)
 
(279
)
 
(345
)
 
(563
)
 
(650
)
Amortization of intangibles (2)
 
(832
)
 
(990
)
 
(1,048
)
 
(1,822
)
 
(2,095
)
Restructuring, separation, and transition (3)
 

 

 
(165
)
 

 
(165
)
    Total adjustments
 
(1,116
)
 
(1,269
)
 
(1,558
)
 
(2,385
)
 
(2,910
)
Non-GAAP consolidated operating expenses
 
$
4,835

 
$
4,824

 
$
5,661

 
$
9,659

 
$
11,679


 
 
Three months ended
 
Six months ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2018
 
2018
 
2017
 
2018
 
2017
GAAP consolidated net income (loss)
 
$
(1,741
)
 
$
(39
)
 
$
720

 
$
(1,780
)
 
$
148

Less:
 
 
 
 
 
 
 
 
 
 
       Income tax benefit (expense)
 
(10
)
 

 
(13
)
 
(10
)
 
(25
)
      Other income, net
 
165

 
119

 
677

 
284

 
720

Discontinued operations (4)
 
(138
)
 
$

 
$

 
(138
)
 
$

GAAP consolidated operating profit (loss)
 
$
(1,758
)
 
$
(158
)
 
$
56

 
$
(1,916
)
 
$
(547
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
Stock-based compensation (1)
 
295

 
291

 
342

 
586

 
672

Amortization of intangibles (2)
 
832

 
990

 
1,048

 
1,822

 
2,095

Restructuring, separation, and transition (3)
 

 

 
165

 

 
165

    Total adjustments
 
1,127

 
1,281

 
1,555


2,408


2,932

Non-GAAP consolidated operating profit (loss)
 
$
(631
)
 
$
1,123

 
$
1,611

 
$
492

 
$
2,385

Depreciation
 
139

 
152

 
201

 
291

 
431

Non-GAAP consolidated Adjusted EBITDA (5)
 
$
(492
)
 
$
1,275

 
$
1,812

 
$
783

 
$
2,816







 
 
 
Three months ended
 
Six months ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2018
 
2018
 
2017
 
2018
 
2017
GAAP consolidated net income (loss)
 
$
(1,741
)
 
$
(39
)
 
$
720

 
$
(1,780
)
 
$
148

Adjustments:
 
 
 
 
 
 
 
 
 
 
Stock-based compensation (1)
 
295

 
291

 
342

 
586

 
672

Amortization of intangibles (2)
 
832

 
990

 
1,048

 
1,822

 
2,095

Restructuring, separation, and
transition
(3)
 

 

 
165

 

 
165

Discontinued operations (4)
 
138

 

 

 
138

 

Foreign currency translation adjustment (6)
 

 

 
(608
)
 

 
(608
)
    Total adjustments
 
1,265

 
1,281

 
947

 
2,546

 
2,324

Non-GAAP consolidated net income (loss)
 
$
(476
)
 
$
1,242

 
$
1,667

 
$
766


$
2,472

GAAP consolidated net income (loss) per common share:
 
 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.11
)
 
$

 
$
0.05

 
$
(0.11
)
 
$
0.01

Non-GAAP consolidated net income (loss) per common share:
 
 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.03
)
 
$
0.08

 
$
0.11

 
$
0.05

 
$
0.16

Average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
Diluted
 
15,583

 
15,748

 
15,672

 
15,713

 
15,638

The Company conforms to U.S. Generally Accepted Accounting Principles (GAAP) in the preparation of its financial statements. The schedules above reconcile the Company's non-GAAP financial measures to the most directly comparable GAAP measure. The adjustments share one or more of the following characteristics: they are unusual and the Company does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company's control. Management believes that the non-GAAP financial information provides meaningful supplemental information to investors. Management also believes the non-GAAP financial information reflects the Company's core ongoing operating performance and facilitates comparisons across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results. Non-GAAP measures should not be viewed as a substitute for the Company's GAAP results.
Footnotes:
 
(1) Stock-based compensation is a non-cash expense incurred in accordance with share-based compensation accounting standards.  
(2) Amortization of intangibles is a non-cash expense arising from previously acquired intangible assets.
(3) Restructuring, separation, and transition expenses are not directly related to the ongoing performance of our fundamental business operations.
(4) During the quarter ended September 30, 2018, the Company recorded indemnification expense related to probable loss contingencies associated with a major customer contract related to a business which was previously sold and therefore is presented as discontinued operations.
(5) EBITDA is a non-GAAP measure that represents Earnings Before Interest, Taxes, Depreciation, and Amortization. The Company presents Adjusted EBITDA.
(6) Non-recurring foreign currency translation gain related to the wind-up of the NoranTel legal entity during the quarter ended September 30, 2017.


For additional information, contact:
Tom Minichiello
Chief Financial Officer
Westell Technologies, Inc.
+1 (630) 375 4740
tminichiello@westell.com