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 Westell Technologies Reports Fiscal Fourth Quarter 2016 Results
   Wednesday, May 18, 2016 4:01:01 PM ET

Westell Technologies, Inc. (WSTL ), a leading provider of in-building wireless, intelligent site management, cell site optimization, and outside plant solutions, today announced results for its fiscal 2016 fourth quarter ended March 31, 2016 (4Q16). Management will host a conference call to discuss financial and business results tomorrow, Thursday, May 19, 2016 at 9:30 AM Eastern Time (details below).

Consolidated revenue for 4Q16 was $20.9 million, up 12% year-over-year and 3% on a sequential quarter basis, and consisted of $5.8 million from the In-Building Wireless (IBW) segment and $15.1 million from the Communication Solutions Group (CSG) segment. Consolidated revenue for fiscal year 2016 (FY16) grew 5% to $88.2 million. More significantly, gross margin increased year-over-year from 31.9% in FY15 to 39.1% in FY16.

"CSG delivered strong 4Q16 results, with segment revenue up 31% on both a year-over-year and sequential quarter basis, led by solid performances from our Intelligent Site Management (ISM) and Outside Plant (OSP) product areas. While IBW was affected by the integration of our Distributed Antennas System (DAS) Conditioner products into larger network elements, we anticipate future IBW growth from our new ClearLink DAS and from enhancements to our Repeater product line," said Tom Gruenwald, Chairman, CEO, and President of Westell Technologies.

"FY16 was a year of powerful change for Westell, during which we successfully launched our multi-phase ’fix-build-expand’ turnaround plan. Under new leadership, we gained positive momentum in transforming several key areas of the business, most notably a significant upgrade of our sales organization, a more effective supply chain, and the establishment of a CTO (Chief Technology Office) function. While we face headwinds with the decline of some of our late-lifecycle products, we are firmly focused on returning the Company to profitability through continued scrutiny of expenses and structure, and the introduction of new products," Gruenwald said.

Total cash and short-term investments were $29.7 million at March 31, 2016, compared to $34.8 million at December 31, 2015. The use of cash increased when compared to each of the three previous quarters primarily due to a revenue pattern weighted more towards the latter part of the quarter, resulting in a higher customer receivable balance at March 31, 2016.

4Q16 Performance

                         4Q16           3Q16         4Q15          4Q16         4Q16
                                       3 months ended 3 months ended     vs.           vs.
                                          12/31/15       03/31/15       3Q16          4Q15
-------------------------------------- -------------- -------------- ---------- ---------------
Consolidated Revenue                       $20.9M         $20.2M       $18.6M          +3%         +12%
-------------------------------------- -------------- -------------- ---------- --------------- ----------
Gross Margin                                37.8%          39.4%        25.1%         -1.6%       +12.7%
-------------------------------------- -------------- -------------- ---------- --------------- ----------
Net Income (Loss)                          ($5.1M)        ($4.8M)     ($13.0M)       ($0.3M)       $7.9M
-------------------------------------- -------------- -------------- ---------- --------------- ----------
Earnings (Loss) Per Share                  ($0.08)        ($0.08)      ($0.22)   $--   $0.14
-------------------------------------- -------------- -------------- ---------- --------------- ----------
Non-GAAP Earnings (Loss) Per Share (1)     ($0.04)        ($0.05)      ($0.09)        $0.01        $0.05
-------------------------------------- -------------- -------------- ---------- --------------- ----------
(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.
-----------------------------------------------------------------------------------------------------

FY16 Performance

                          FY16             FY15             FY16
                                        12 months ended        vs.
                                           03/31/15           FY15
                                       ---------------- ----------------
Consolidated Revenue                        $88.2M           $84.1M             +5%
-------------------------------------- ---------------- ---------------- ----------------
Gross Margin                                 39.1%            31.9%            +7.2%
-------------------------------------- ---------------- ---------------- ----------------
Net Income (Loss)                          ($16.2M)         ($58.9M)          $42.7M
-------------------------------------- ---------------- ---------------- ----------------
Earnings (Loss) Per Share                   ($0.27)          ($0.98)           $0.71
-------------------------------------- ---------------- ---------------- ----------------
Non-GAAP Earnings (Loss) Per Share (1)      ($0.14)          ($0.20)           $0.06
-------------------------------------- ---------------- ---------------- ----------------
(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 4Q16 revenue performance year-over-year and on a sequential quarter basis was largely indicative of a market shifting away from stand-alone DAS conditioners, as the function served by these devices are increasingly integrated into larger network elements. IBW’s 4Q16 gross margin improvement compared to 4Q15 was primarily due to lower excess and obsolete inventory costs, and decrease compared to 3Q16 was principally a result of the change in segment revenue.

                   4Q16                           3Q16                           4Q15                           4Q16                    4Q16
                                                  3 months ended                                                                                                                3 months ended                                                                                                                3 months ended                                                                                                                      vs.                                                                                                                           vs.
                                  03/31/16                       12/31/15                       03/31/15                         3Q16                           4Q15
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
IBW Segment Revenue                   $5.8M                          $8.7M                          $7.1M                          -33%                    -18%
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
IBW Segment Gross Margin              35.6%                          38.2%                          23.0%                          -2.6%                  +12.6%
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
IBW Segment R&D Expense               $2.4M                          $2.7M                          $2.3M                         ($0.3M)                  $0.1M
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
IBW Segment Profit (Loss)            ($0.3M)                         $0.6M                         ($0.7M)                        ($0.9M)                  $0.4M
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Communication Solutions Group (CSG) Segment

CSG’s 4Q16 year-over-year revenue growth was due to increased ISM revenue and significantly higher OSP revenue, while the same growth level on a sequential quarter basis was due to the significantly higher OSP revenue and increased sales of Tower Mounted Amplifiers. OSP achieved its highest quarterly revenue level since the June 2013 quarter, driven predominately by sales of Integrated Cabinets. CSG’s 4Q16 gross margin improvement compared to 4Q15 was primarily due to lower excess and obsolete inventory costs, and decrease compared to 3Q16 was mainly due to a less favorable mix.

                   4Q16                           3Q16                           4Q15                           4Q16                    4Q16
                                                  3 months ended                                                                                                                3 months ended                                                                                                                3 months ended                                                                                                                      vs.                                                                                                                           vs.
                                  03/31/16                       12/31/15                       03/31/15                         3Q16                           4Q15
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
CSG Segment Revenue                  $15.1M                         $11.5M                         $11.5M                          +31%                    +31%
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
CSG Segment Gross Margin              38.6%                          40.3%                          26.4%                          -1.7%                  +12.2%
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
CSG Segment R&D Expense               $2.3M                          $2.2M                          $1.9M                          $0.1M                   $0.4M
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
CSG Segment Profit (Loss)             $3.5M                          $2.5M                          $1.1M                          $1.0M                   $2.4M
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Conference Call Information

Management will discuss financial and business results during the quarterly conference call on Thursday, May 19, 2016, 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 May 19 by dialing 888-206-4073 no later than 9:15 AM Eastern Time and providing the operator confirmation number 41589143.

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://www.westell.com . A digital recording of the entire conference will be available for replay on Westell’s website by approximately 1:00 PM Eastern Time after the call ends.

About Westell

Westell Technologies, Inc. is a leading provider of in-building wireless, intelligent site management, cell site optimization, and outside plant solutions focused on innovation and differentiation at the edge of telecommunication networks, where end users connect. The Company’s comprehensive set of products and solutions enable service providers and network operators to improve network 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), 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/A for the fiscal year ended March 31, 2015, 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.

Financial Tables to Follow:

 
                                                                                                                                              Westell Technologies, Inc.
                                                                                                                                    Condensed Consolidated Statement of Operations
                                                                                                                                   (Amounts in thousands, except per share amounts)
                                                                                                                                                      (Unaudited)
                                                                     
                                                                                                                                                    Three months ended                                                                                             Twelve months ended
                                                                                         ----------------------------------------------------------------------------------------------------------------------------------------    ------------------------------------------------------------------------------
                                                                                                       March 31,                              December 31,                             March 31,                                March 31,                                March 31,
                                                                                                         2016                                     2015                                                      2015                                     2016                                     2015
                                                                                         ----------------------------------       ----------------------------------                        ----------------------------------       ----------------------------------       ----------------------------------
Revenue                                                                                        $  20,904                                $  20,215                                                 $  18,613                                $  88,203                                $  84,127
Gross profit                                                                                       7,893                                    7,963                                                     4,666                                   34,516                                   26,810
Gross margin                                                                                        37.8 %                                   39.4 %                                                    25.1 %                                   39.1 %                                   31.9 %
Operating expenses:
   Research & development                                                                          4,713                                    4,893                                                     4,220                                   19,317                                   17,348
   Sales & marketing                                                                               4,608                                    3,900                                                     3,343                                   15,817                                   12,407
   General & administrative                                                                        1,747                                    2,627                                                     5,547                                    9,836                                   14,678
   Intangibles amortization                                                                        1,305                                    1,418                                                     1,520                                    5,554                                    6,377
   Restructuring                                                                                     731                      (1)  --                                                     3,188                      (2)             748                      (1)           3,243                      (2)
   Goodwill impairment (3)                                                                --        --                         --        --                31,997  
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
   Total operating expenses                                                                       13,104                12,838                                 17,818                51,272                86,050  
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
Operating income (loss) from continuing operations                                                (5,211 )                                 (4,875 )                                                 (13,152 )                                (16,756 )                                (59,240 )
Other income (expense), net                                                                          107                    85                                    (18 )                                    169                    (2 )
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
Income (loss) before income taxes and discontinued operations                                     (5,104 )                                 (4,790 )                                                 (13,170 )                                (16,587 )                                (59,242 )
Income tax benefit (expense)                                                                          27                    (7 )                                                      31                   102                   201  
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
Net income (loss) from continuing operations                                                      (5,077 )                                 (4,797 )                                                 (13,139 )                                (16,485 )                                (59,041 )
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
Income (loss) from discontinued operations, net of income tax (4)                                      1        --                                    139                   273                   139  
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
Net income (loss)                                                                              $  (5,076 )                              $  (4,797 )                                               $ (13,000 )                              $ (16,212 )                              $ (58,902 )
                                                                                         ======= ======= ====================     ======= ======= ====================                      ======= ======= ====================     ======= ======= ====================     ======= ======= ====================
Basic and diluted net income (loss) per share:
   Basic and diluted net income (loss) from continuing operations                              $   (0.08 )                              $   (0.08 )                                               $   (0.22 )                              $   (0.27 )                              $   (0.98 )
   Basic and diluted net income (loss) from discontinued operations                       --        --                         --        --        --  
                                                                                         ------------------------------------     ------------------------------------                      ------------------------------------     ------------------------------------     ------------------------------------
     Basic and diluted net income (loss)                                                       $   (0.08 )                              $   (0.08 )                                               $   (0.22 )                              $   (0.27 )                              $   (0.98 )
                                                                                         ======= ======= ====================     ======= ======= ====================                      ======= ======= ====================     ======= ======= ====================     ======= ======= ====================
Weighted-average number of shares outstanding:
Basic and diluted                                                                                 60,847                                   60,810                                                    60,286                                   60,786                                   59,985
(1)   The Company recorded restructuring expense primarily relating to
                         severance costs for terminated employees.
(2)                      The Company recorded restructuring expense relating to severance
                         costs for terminated employees and abandonment of excess office
                         space at its headquarters.
(3)                      The Company recorded a non-cash charge of $32.0 million to record an
                         impairment of the full carrying amount of goodwill.
(4)                      Income from discontinued operations resulted from the expiration of
                         indemnity periods and release of contingency reserves related to the
                         sale of ConferencePlus.
                          
                                                                    Westell Technologies, Inc.
                                                               Condensed Consolidated Balance Sheets
                                                                      (Amounts in thousands)
 
Assets:                                                                       March 31, 2016           March 31, 2015
                                                                                                   (Unaudited)
Cash and cash equivalents                                                                             $  19,169                             $               14,026
Short-term investments                                                                                   10,555                                             23,906
Accounts receivable, net                                                                                 16,361                                             11,845
Inventories                                                                                              13,498                                             16,205
Prepaid expenses and other current assets                                                                 1,900                                              3,285
Land held-for-sale                                                                               --                                                264
                                                                                                ----------------                      -----------------------------
   Total current assets                                                                                  61,483                                             69,531
                                                                                                ----------------                      -----------------------------
Property and equipment, net                                                                               3,977                                              3,603
Intangible assets, net                                                                                   20,388                                             25,942
Other non-current assets                                                                                    183                                                258
                                                                                                ----------------                      -----------------------------
      Total assets                                                                                    $  86,031                             $               99,334
                                                                                                ======= =======                       ======= ====================
Liabilities and Stockholders’ Equity:
Accounts payable                                                                                      $   7,856                             $                4,011
Accrued expenses                                                                                          5,932                                              5,576
Accrued restructuring                                                                                     1,537                                              1,161
Contingent consideration                                                                                    311                                              1,184
Deferred revenue                                                                                          1,601                                              2,415
                                                                                                ----------------                      -----------------------------
   Total current liabilities                                                                             17,237                                             14,347
                                                                                                ----------------                      -----------------------------
Deferred revenue non-current                                                                              1,236                                                751
Net deferred income tax liability                                                                            10                                                 46
Accrued restructuring non-current                                                                           550                                              1,642
Contingent consideration non-current                                                             --                                                400
Other non-current liabilities                                                                               314                                                409
                                                                                                ----------------                      -----------------------------
   Total liabilities                                                                                     19,347                                             17,595
                                                                                                ----------------                      -----------------------------
   Total stockholders’ equity                                                 66,684                                             81,739
                                                                                                ----------------                      -----------------------------
     Total liabilities and stockholders’ equity                            $  86,031                             $               99,334
                                                                                                ======= =======                       ======= ====================
                                                                                                                                               
                                                                              Westell Technologies, Inc.
                                                                    Condensed Consolidated Statement of Cash Flows
                                                                                (Amounts in thousands)
                                                                   
                                                                                                                        Twelve Months Ended March 31,
                                                                                       -----------------------------------------------------------------------------------------------
Cash flows from operating activities:                                                            2016 (Unaudited)                             2015
                                                                                       ----------------------------------                        ----------------------------------
   Net income (loss)                                                                         $ (16,212 )                                               $ (58,902 )
   Reconciliation of net income to net cash provided by (used in)
   operating activities:
     Depreciation and amortization                                                               7,098                                                     7,416
     Goodwill impairment                                                                --                                                    31,997
     Stock-based compensation                                                                    1,265                                                     2,605
     Restructuring                                                                                 748                                                     3,243
     Deferred taxes                                                                                (36 )                                                    (127 )
     Impairment loss or loss (gain) on sale of fixed assets                                         14                                                       117
     Exchange rate loss (gain)                                                                     (38 )                                                      23
   Changes in assets and liabilities:
     Accounts receivable                                                                        (4,476 )                                                   3,986
     Inventories                                                                                 2,707                                                     8,186
     Accounts payable and accrued expenses                                                       2,192                                                    (6,912 )
     Other                                                                                       1,131                                   (919 )
                                                                                       ------------------------------------                      ------------------------------------
   Net cash provided by (used in) operating activities                                          (5,607 )                                                  (9,287 )
                                                                                       ------------------------------------                      ------------------------------------
Cash flows from investing activities:
     Net purchases of short-term investments and debt securities                                13,351                                                    (8,322 )
     Acquisitions, net of cash acquired                                                 --                                                      (304 )
     Proceeds from sale of land                                                                    264                                            --
     Purchases of property and equipment                                                        (1,932 )                                                  (2,137 )
                                                                                       ------------------------------------                      ------------------------------------
   Net cash provided by (used in) investing activities                                          11,683                                (10,763 )
                                                                                       ------------------------------------                      ------------------------------------
Cash flows from financing activities:
     Payment of contingent consideration                                                          (808 )                                                  (1,104 )
     Purchases of treasury stock                                                                  (108 )                                                    (863 )
     Proceeds from stock options exercised                                              --                                    257  
                                                                                       ------------------------------------                      ------------------------------------
  Net cash provided by (used in) financing activities                                             (916 )                                                  (1,710 )
                                                                                       ------------------------------------                      ------------------------------------
Gain (loss) of exchange rate changes on cash                                                       (17 )                                                      (7 )
     Net increase (decrease) in cash and cash equivalents                                        5,143                                (21,767 )
                                                                                       ------------------------------------                      ------------------------------------
Cash and cash equivalents, beginning of period                                                  14,026                                 35,793  
                                                                                       ------------------------------------                      ------------------------------------
Cash and cash equivalents, end of period                                                     $  19,169                              $  14,026  
                                                                                       ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                                  
                                                                                                                                                              Westell Technologies, Inc.
                                                                                                                                                            Segment Statement of Operations
                                                                                                                                                                (Amounts in thousands)
                                                                                                                                                                      (Unaudited)
Sequential Quarter Comparison
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                      
                                                                                                   Three months ended March 31, 2016                                                                                                                           Three Months Ended December 31, 2015
                                               -----------------------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------------------
                                                             IBW                               CSG                              Total                                                IBW                               CSG                              Total
                                               -------------------------------                     --------------------------------                     --------------------------------                     -------------------------------                     --------------------------------                     --------------------------------
Revenue                                          $ 5,838                                             $ 15,066                                             $ 20,904                                             $ 8,680                                             $ 11,535                                             $ 20,215
Cost of revenue                                    3,761                             9,250                            13,011                            5,361                             6,891                            12,252  
                                               ------------------------------                      -------------------------------                      -------------------------------                      ------------------------------                      -------------------------------                      -------------------------------
Gross profit                                       2,077                                                5,816                                                7,893                                               3,319                                                4,644                                                7,963
Gross margin                                        35.6 %                                               38.6 %                                               37.8 %                                              38.2 %                                               40.3 %                                               39.4 %
   Research & development                          2,421                             2,292                             4,713                            2,701                             2,192                             4,893  
                                               ------------------------------                      -------------------------------                      -------------------------------                      ------------------------------                      -------------------------------                      -------------------------------
Segment profit (loss)                            $  (344 )                                           $  3,524                          $  3,180                          $   618                          $  2,452                          $  3,070  
                                               === ===== ====================                      === ====== ====================                      === ====== ====================                      === ===== ====================                      === ====== ====================                      === ====== ====================
Year-over-Year Quarter Comparison
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                      
                                                                                                   Three months ended March 31, 2016                                                                                                                             Three months ended March 31, 2015
                                               -----------------------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------------------
                                                             IBW                               CSG                              Total                                                IBW                               CSG                              Total
                                               -------------------------------                     --------------------------------                     --------------------------------                     -------------------------------                     --------------------------------                     --------------------------------
Revenue                                          $ 5,838                                             $ 15,066                                             $ 20,904                                             $ 7,082                                             $ 11,531                                             $ 18,613
Cost of revenue                                    3,761                             9,250                            13,011                            5,456                             8,491                            13,947  
                                               ------------------------------                      -------------------------------                      -------------------------------                      ------------------------------                      -------------------------------                      -------------------------------
Gross profit                                       2,077                                                5,816                                                7,893                                               1,626                                                3,040                                                4,666
Gross margin                                        35.6 %                                               38.6 %                                               37.8 %                                              23.0 %                                               26.4 %                                               25.1 %
   Research & development                          2,421                             2,292                             4,713                            2,315                             1,905                             4,220  
                                               ------------------------------                      -------------------------------                      -------------------------------                      ------------------------------                      -------------------------------                      -------------------------------
Segment profit (loss)                            $  (344 )                                           $  3,524                          $  3,180                          $  (689 )                                           $  1,135                          $    446  
                                               === ===== ====================                      === ====== ====================                      === ====== ====================                      === ===== ====================                      === ====== ====================                      === ====== ====================
                                                                                                                                                                                                                                                                                                                                  
Full Year Comparison
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                       
                                                                                                   Twelve months ended March 31, 2016                                                                                                                             Twelve months ended March 31, 2015
                                               ------------------------------------------------------------------------------------------------------------------------------------------                     ------------------------------------------------------------------------------------------------------------------------------------------
                                                              IBW                               CSG                              Total                                                 IBW                               CSG                              Total
                                               --------------------------------                     --------------------------------                     --------------------------------                     --------------------------------                     --------------------------------                     --------------------------------
Revenue                                          $ 34,407                                             $ 53,796                                             $ 88,203                                             $ 37,714                                             $ 46,413                                             $ 84,127
Cost of revenue                                    20,463                            33,224                            53,687                            23,999                            33,318                            57,317  
                                               -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------
Gross profit                                       13,944                                               20,572                                               34,516                                               13,715                                               13,095                                               26,810
Gross margin                                         40.5 %                                               38.2 %                                               39.1 %                                               36.4 %                                               28.2 %                                               31.9 %
   Research & development                          11,059                             8,258                            19,317                             8,955                             8,393                            17,348  
                                               -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------                      -------------------------------
Segment profit (loss)                            $  2,885                          $ 12,314                          $ 15,199                          $  4,760                          $  4,702                          $  9,462  
                                               === ====== ====================                      === ====== ====================                      === ====== ====================                      === ====== ====================                      === ====== ====================                      === ====== ====================
                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                     Westell Technologies, Inc.
                                                                                                                                                                                                                          Reconciliation of GAAP to non-GAAP Financial Measures
                                                                                                                                                                                                                            (Amounts in thousands, except per share amounts)
                                                                                                                                                                                                                                     (Unaudited)
 
                                                                                                                                                                 Three months ended                                                                                                                                                                                      Twelve months ended
                                                                       ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               March 31,                                                      December 31,                                                             March 31,                                                                                 March 31,                                                              March 31,
                                                                                                 2016                                                                                2015                                                                                      2015                                                                                      2016                                                                                      2015
                                                                       ---------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------
GAAP net income (loss)                                                                    $         (5,076 )                                                            $                     (4,797 )                                                            $                    (13,000 )                                                            $                    (16,212 )                                                            $                    (58,902 )
Adjustments:
   Inventory fair value step-up (1)                                                         --                                                                            --                                                                                        36                                                                            --                                                                                       576
   Deferred revenue adjustment (1)                                                                      63                                                                                        73                                                                                        64                                                                                       281                                                                                       386
   Amortization of intangibles (2)                                                                   1,305                                                                                     1,418                                                                                     1,520                                                                                     5,554                                                                                     6,377
   Restructuring, separation and transition (3)                                                        799                                                                            --                                                                                     4,989                                                                                     1,022                                                                                     5,044
   Stock-based compensation (4)                                                                        291                                                                                       264                                                                                       977                                                                                     1,265                                                                                     2,605
   Land impairment                                                                          --                                                                            --                                                                                       108                                                                            --                                                                                       108
   Goodwill impairment (5)                                                                  --                                                                            --                                                                            --                                                                            --                                                                                    31,997
   (Income) loss from discontinued operations (6)                                    (1 )                                                       --                                                (139 )                                                                 (273 )                                                                 (139 )
                                                                       -------------------- -------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------
   Total adjustments                                                              2,457                                               1,755                                               7,555                                               7,849                                              46,954  
                                                                       -------------------- -------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------
   Non-GAAP net income (loss)                                                             $         (2,619 )                                                            $                     (3,042 )                                                            $                     (5,445 )                                                            $                     (8,363 )                                                            $                    (11,948 )
                                                                       ==================== ============== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================
GAAP net income (loss) per common share:
   Basic and diluted                                                                      $          (0.08 )                                                            $                      (0.08 )                                                            $                      (0.22 )                                                            $                      (0.27 )                                                            $                      (0.98 )
Non-GAAP net income (loss) per common share:
   Basic and diluted                                                                      $          (0.04 )                                                            $                      (0.05 )                                                            $                      (0.09 )                                                            $                      (0.14 )                                                            $                      (0.20 )
Average number of common shares outstanding:
   Basic and diluted                                                                                60,847                                                                                    60,810                                                                                    60,286                                                                                    60,786                                                                                    59,985
                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                    Three months ended                                                                                                                                                                                                         Twelve months ended
                                                                       ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               March 31,                                                                         December 31,                                                                                March 31,                                                                                 March 31,                                                                                 March 31,
                                                                                                 2016                                                                                2015                                                                                      2015                                                                                      2016                                                                                      2015
                                                                       ---------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------
GAAP operating expenses                                                                   $         13,104                                                              $  12,838                                                              $  17,818                                                              $  51,272                                                              $                     86,050
Adjustments:
   Amortization of intangibles (2)                                                                  (1,305 )                                                                                  (1,418 )                                                                                  (1,520 )                                                                                  (5,554 )                                                                                  (6,377 )
   Restructuring, separation and transition (3)                                                       (799 )                                                                          --                                                                                    (4,989 )                                                                                  (1,022 )                                                                                  (5,044 )
   Stock-based compensation (4)                                                                       (320 )                                                                                    (251 )                                                                                    (953 )                                                                                  (1,270 )                                                                                  (2,516 )
   Land impairment                                                                          --                                                                            --                                                                                      (108 )                                                                          --                                                                                      (108 )
   Goodwill impairment (5)                                               --                                      --                                      --                                      --                                             (31,997 )
                                                                       -------------------- -------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------
   Total adjustments                                                             (2,424 )                                                               (1,669 )                                                               (7,570 )                                                               (7,846 )                                                              (46,042 )
                                                                       -------------------- -------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------
Non-GAAP operating expense                                                                $         10,680                                           $  11,169                                           $  10,248                                           $  43,426                                           $  40,008  
                                                                       ==================== ============== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================                      ==================== ========================== ====================
                                                                                                                                                                                                                           
                                                                                                                                   Three months ended March 31, 2016                                                                                                                                                                                     Three months ended March 31, 2015
                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Revenue                                                       Gross Profit                              Gross Margin                                                     Revenue                                                             Gross Profit                                      Gross Margin
                                                         ---------------------------------------------------------                     --------------------------------------------------------------------                     -------------                     ---------------------------------------------------------------------                     --------------------------------------------------------------------                     ----------------------------
GAAP - consolidated                                                         $         20,904                                                              $                     7,893                                             37.8 %                                             $  18,613                                                              $  4,666                                             25.1 %
   Deferred revenue adjustment (1)                                                        63                                                                                       63                                                                                                                          64                                                                                       64
   Inventory fair value step-up (1)                                           --                                                                           --                                                                                                              --                                                                                       36
   Stock-based compensation (4)                            --                                                (29 )                                                                                         --                                                 24  
                                                         -------------------- -------------- --------------------                      -------------------- ------------------------- --------------------                                                        -------------------- -------------------------- --------------------                      -------------------- ------------------------- --------------------
Non-GAAP - consolidated                                                     $         20,967                                           $  7,927                          37.8 %                                             $  18,677                                           $  4,790                          25.6 %
                                                         ==================== ============== ====================                      ==================== ========================= ====================                                                        ==================== ========================== ====================                      ==================== ========================= ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                             
                                                                                                                     Twelve months ended March 31, 2016                                                                                                                                                                         Twelve months ended March 31, 2015
                                                         -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Revenue                                                             Gross Profit                               Gross Margin                                                     Revenue                                                             Gross Profit                                       Gross Margin
                                                         ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     -------------                     ---------------------------------------------------------------------                     ---------------------------------------------------------------------                     ----------------------------
GAAP - consolidated                                                         $                     88,203                                                              $                     34,516                                             39.1 %                                             $  84,127                                                              $  26,810                                             31.9 %
   Deferred revenue adjustment (1)                                                                   281                                                                                       281                                                                                                                         386                                                                                       386
   Inventory fair value step-up (1)                                                       --                                                                            --                                                                                                              --                                                                                       576
   Stock-based compensation (4)                                        --                                                  (5 )                                                                                         --                                                  89  
                                                         -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------                                                        -------------------- -------------------------- --------------------                      -------------------- -------------------------- --------------------
Non-GAAP - consolidated                                                     $  88,484                                           $  34,792                          39.3 %                                             $  84,513                                           $  27,861                          33.0 %
                                                         ==================== ========================== ====================                      ==================== ========================== ====================                                                        ==================== ========================== ====================                      ==================== ========================== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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.

(1)   On April 1, 2013 and on March 1, 2014, the Company purchased Kentrox
                         and CSI. These acquisitions required the step-up of certain assets
                         to fair value, which resulted in cost that will not recur once those
                         assets have fully settled. The adjustments remove the increased
                         costs associated with the third-party sales of inventory that was
                         stepped-up and the step-down on acquired deferred revenue that was
                         recognized in the periods presented.
(2)                      Amortization of intangibles is a non-cash expense arising from the
                         acquisition of intangible assets.
(3)                      Restructuring expenses are not directly related to the ongoing
                         performance of our fundamental business operations. This adjustment
                         also includes severance benefits related to the departure of certain
                         former executives.
(4)                      Stock-based compensation is a non-cash expense incurred in
                         accordance with share-based compensation accounting.
(5)                      The Company recorded a non-cash charge of $32.0 million during
                         fiscal 2015 to record the impairment of the full carrying value of
                         the Company’s goodwill.
(6)                      Income from discontinued operations resulted from the expiration of
                         indemnity periods and release of contingency reserves related to the
                         sale of ConferencePlus.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160518006415r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160518006415/en/

SOURCE: Westell Technologies, Inc.

Westell Technologies, Inc. 
Tom Minichiello 
Chief Financial Officer 
+1 (630) 375-4740 
tminichiello@westell.com


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