[logo] Westell News Release
News Release: FOR IMMEDIATE RELEASE
For Additional Information, contact:
SENIOR VICE PRESIDENT & CFO: TRADE/BUSINESS PRESS:
NICHOLAS C. HINDMAN, SR. KEN TRANTOWSKI
WESTELL TECHNOLOGIES INC. KGT COMMUNICATIONS GROUP
630.375.4136 630.469.8765
NHIND@WESTELL.COM kennethg_trantowski@msn.com
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WESTELL TECHNOLOGIES REPORTS 4TH QUARTER AND FISCAL 2004 RESULTS
AURORA, IL, MAY 18, 2004 - -Westell Technologies, Inc. (NASDAQ: WSTL), a leading
provider of broadband access solutions and conferencing services, today
announced the results for its fourth quarter and fiscal year 2004, ending March
31, 2004.
Total revenues for the quarter increased 13% to $62.1 million from $54.8 million
in the fourth quarter of last fiscal year. Total revenues for fiscal year 2004
increased 12% to $235.7 million from $210.0 million for fiscal 2003.
WSTL reported net income for the fourth quarter of $19.6 million, or $0.28 per
diluted share, which includes a tax benefit of $13.1 million, or $0.19 per
diluted share, from a partial release of the Company's deferred tax valuation
allowance. During the same period last year, the Company recorded net income of
$3.8 million, or $0.06 per diluted share. Net income for the year was $34.9
million, or $0.49 per diluted share, including the tax benefit, compared to net
income of $7.3 million or $0.11 per diluted in the prior fiscal year.
Excluding the tax benefit, non-GAAP net income in the fourth quarter increased
74% to $6.5 million, or $0.09 per diluted share, compared to $3.8 million, or
$0.06 per diluted share in the fourth quarter of last year. Non-GAAP net income,
excluding the tax benefit for the year was $21.8 million, or $0.31 per diluted
share, compared with $7.3 million, or $0.11 per diluted share for last year. A
reconciliation of non-GAAP results to GAAP results is provided as part of this
press release.
"We are greatly encouraged by our year-end position. ConferencePlus continued to
contribute to our revenue growth and continuing demand for our Customer
Networking Equipment products drove sequential and year over year improvements,"
said Van Cullens, Westell President and CEO.
"Fiscal 2004 was a year of strong execution for Westell. We strengthened our key
customer relationships, increased profitability, and strengthened the Company's
balance sheet, all while investing in innovative new products that have created
an opportunity for the back half of fiscal 2005. We performed well in an
extremely competitive environment for our products and changing demand
conditions for our customers." Cullens said.
Net cash provided by operating activities totaled $22.4 million for the fiscal
year. "We have been working to significantly reduce our debt over the last year
and we remain on target to be debt free by the end of the June 2004 quarter,"
said Nicholas Hindman, Westell's Senior Vice President and CFO.
NEW EFFECTIVE TAX RATE FOR FISCAL YEAR 2005 INCOME STATEMENTS
Due to the Company's strong performance in fiscal 2004 and projected future
ability to generate taxable income, the Company was required under GAAP to
release a portion of its recorded valuation allowance against the carrying value
of its deferred tax assets, consisting primarily of net operating loss
carryforwards. This increased the deferred tax asset recognized on the Company's
balance sheet in the amount of $13.1 million as of March 31, 2004.
Cullens commented, "Our decision to release a portion of Westell's deferred tax
valuation allowance should be viewed positively. It reflects our strong
financial performance in Fiscal 2004 as well as our assessment of the Company's
ability to generate future taxable income."
Consequently, in fiscal 2005 Westell projects it will record an effective tax
rate for income statement purposes of 38.1 %. However, the Company does not
expect to incur any significant cash tax payments for the foreseeable future as
a result of the anticipated utilization of net operating loss carryforwards to
reduce its cash tax liabilities.
OUTLOOK
"Westell is well positioned as broadband customers continue to seek
differentiated offerings including networking capabilities, voice-over-internet
protocol (VoIP), Wi-Fi and fiber-to-the-premise (FTTP) connectivity. We will
remain focused on strengthening and developing key customer relationships. We
are optimistic that Westell's VersaLink (TM), TriLink (TM) and EnVoy TM products
will help our customers remain competitive in 2005 and beyond, and have begun to
see early stage evidence of that belief through product trials." Cullens added.
Westell provided guidance for the first fiscal quarter ending June 30, 2004. The
Company expects revenue to be in a range of $56 to $58 million. Westell expects
non-GAAP EPS of $0.08 (excluding a provision for income tax expense of
approximately $ 2.4 million) and EPS of $0.05 on a GAAP basis including the
provision for tax expense.
RECONCILIATION OF NON-GAAP TO GAAP RESULTS AND GAAP OUTLOOK
The Company provides non-GAAP operating results as a supplement to its GAAP
financial results. The Company's non-GAAP results exclude the income benefit
from the release of valuation allowance from the Company's statements of
operations.
A detailed calculation of non-GAAP net income and pro forma net income per share
is included in the attached statement of operations, which also includes
equivalent GAAP net income and GAAP net income per share.
(1) Conference Call Information
Westell will host its earnings call on Wednesday, May 19th, at 9:30AM Eastern
Time for analysts, shareholders, investors, and the public.
The live earnings call will be available to the public. Participants can join
for the voice portion of the call by following the instructions below.
Participants must separately register for the call.
To participate in the voice portion:
1. All participants must pre-register by dialing 1-800-263-2115, International
1-402-227-9755. 2. Leave your name and the company whom you represent.
3. To participate in the call on the 19th, please dial ConferencePlus at
1-800-559-1203 no later than 9:15 AM, Eastern Time and ask for the "Westell
Technologies Analyst Call". International participants may dial 630-691-2762.
The Company's earnings press release and any related earnings information to be
discussed on the earnings call will be posted on the Investor Relations section
of the Company's web site at http://www.westell.com. Digital Audio Replay of
this call will be available one hour following the conclusion of the call by
dialing 1-888-843-8996 or 630-652-3044 and entering 8949391#.
ABOUT WESTELL
Westell Technologies, Inc., headquartered in Aurora, Illinois, is a holding
company for Westell, Inc. and ConferencePlus, Inc. Westell, Inc. manufactures
broadband telecommunications access products. ConferencePlus, Inc. is a
collaborative Application Service Provider that manages and hosts voice, video,
IP applications and back-office services. Additional information can be obtained
by visiting Westell's Web site at www.westell.com.
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ABOUT CONFERENCEPLUS
ConferencePlus, a Westell Technologies, Inc. (NASDAQ: WSTL - News) subsidiary,
is a leading global provider of audio, web, video and IP conferencing services.
ConferencePlus is dedicated to providing high quality, innovative conferencing
solutions to its domestic and international clients and telecommunications
resellers. ConferencePlus is recognized for outstanding customer service and
support to help clients meet their business objectives. The company is
headquartered in Schaumburg, Illinois with an international headquarters in
Dublin, Ireland. Additional information can be obtained by visiting the
ConferencePlus web site at www.conferenceplus.com.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT 1995:
- --------------------------------------------------------------------------------
Certain statements contained herein including, without limitation, statements
containing the words "on target", "assessment", "projects", "believe", "goal",
"on track", "anticipate", "committed", "expectation", "expect", "estimate",
"await", "continue", "intend", "may", "will", "should " and similar expressions
are forward looking statements that involve risks and uncertainties. These risks
include, but are not limited to, product demand and market acceptance risks,
need for financing, the economic downturn in the U.S. economy and telecom
market, the impact of competitive products or technologies, competitive pricing
pressures, product development, excess and obsolete inventory due to new product
development, commercialization and technological delays or difficulties
(including delays or difficulties in developing, producing, testing and selling
new products and technologies), the effect of Westell's accounting policies, the
need for additional capital, the effect of economic conditions and trade, legal
social and economic risks (such as import, licensing and trade restrictions) and
other risks more fully described in Westell's Annual Report on Form 10-K for the
fiscal year ended March 31, 2003 under the section "Risk Factors". Westell
undertakes no obligation to release publicly the result of any revisions to
these forward looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Financial Tables to Follow:
Westell Technologies, Inc.
Financial Results
(Dollars in thousands except per share amounts)
Three Months ended Mar. 31, Twelve Months ended Mar. 31,
% %
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Revenues
NSA $12,710 (1) $12,482 2% $54,736 (1) $57,070 -4%
CNE 37,899 31,348 21% 135,704 111,146 (2) 22%
Services 11,489 11,012 4% 45,299 41,805 8%
-------- -------- --- -------
Total
revenues 62,098 54,842 13% 235,739 210,021 12%
-------- -------- --- -------
Gross profit
Equipment 15,193 (1) 14,535 61,027 (1)(3) 49,067 (2)(4)
Services 6,134 4,299 18,714 (5) 14,693
-------- -------- ------- -------
Total gross
profit 21,327 18,834 13% 79,741 63,760 25%
-------- -------- ------- -------
Gross margin
Equipment 30.0%(1) 33.2% 32.0%(1)(3) 29.2%(2)(4)
Services 53.4% 39.0% 41.3%(5) 35.1%
-------- -------- ------- -------
Total gross
margin 34.3% 34.3% 33.8% 30.4%
-------- -------- ------- -------
Operating expenses
Sales &
marketing 5,385 3,534 (9) 52% 20,242 16,017 (9) 26%
Expense to
revenue 8.7% 6.4% 8.6% 7.6%
General & admini-
strative 3,492 5,250 -33% 17,506 17,513 0%
Expense to
revenue 5.6% 9.6% 7.4% 8.3%
Research &
development 4,754 4,762 0% 17,385 16,483 5%
Expense to
revenue 7.7% 8.7% 7.4% 7.8%
Restructuring 698 (6) (244)(8) 698 (6) 1,678 (7)
Expense to
revenue 1.1% -0.4% 0.3% 0.8%
Intangibles
amorti-
zation (10) 364 599 1,455 1,766
Expense to
revenue 0.6% 1.1% 0.6% 0.8%
-------- -------- ------- -------
Total
operating
expenses 14,693 13,901 6% 57,286 53,457 7%
-------- -------- ------- -------
Expense to
revenue 23.7% 25.3% 24.3% 25.5%
Operating
income 6,634 4,933 34% 22,455 10,303 118%
Other income
(expense) 212 - 615 262
Interest
expense 60 663 -91% 743 2,648 -72%
-------- -------- ------- -------
Income before
minority
interest
and taxes 6,786 4,270 59% 22,327 7,917 182%
-------- -------- ------- -------
Income
taxes (12,923)(11) 372(12) (12,923)(11) 372 (12)
Minority
interest 118 137 373 271
Net income $19,591 $3,761 $34,877 $7,274
======== ======== ======= =======
Income per common
share:
Basic 0.29 0.06 0.52 0.11
-------- -------- ------- -------
Diluted 0.28 0.06 0.49 0.11
-------- -------- ------- -------
Average number of
common shares
outstanding:
Basic 67,726 64,937 66,858 64,925
Diluted 71,149 65,580 70,667 65,126
Non-GAAP Results and
Reconciliation to GAAP
GAAP net
income $19,591 $3,761 $34,877 $7,274
Income tax
benefit
from release of
tax valuation
allowance (13,055) - (13,055) -
-------- -------- ------- -------
Non-GAAP net
income (13) $6,536 $3,761 $21,822 $7,274
======== ======== ======= =======
GAAP Income per
basic share 0.29 0.06 0.52 0.11
Basic per share
income tax
benefit from
release of tax
valuation
allowance (0.20) - (0.19) -
-------- -------- ------- -------
Non-GAAP income
per basic share
(13) 0.10 0.06 0.33 0.11
======== ======== ======= =======
GAAP Income per
diluted share 0.28 0.06 0.49 0.11
Diluted per share
income tax benefit
from release of
tax valuation
allowance (0.19) - (0.18) -
-------- -------- ------- -------
Non-GAAP income
per diluted share
(13) 0.09 0.06 0.31 0.11
======== ======== ======= =======
Westell Technologies, Inc.
Financial Results (continued)
(Dollars in thousands)
Footnotes:
(1) The Company earned $875,000 in the three months ended March 31, 2004 for a
contractual settlement.
(2) The Company earned $1.7 million in the three months ended June 30, 2002 for
product royalties.
(3) Includes $1.2 million to settle a customer contract obligation which arose
in the quarter ended September 30, 2003.
(4) The Company reversed approximately $2 million of reserves in the quarter
ended September 30, 2002 primarily related to excess and obsolete modem
inventory.
(5) Includes a $775,000 one time early contract termination penalty of a long
distance contract at the Company's Conference Plus, Inc. subsidiary.
(6) Restructuring charge primarily for the Company's Westell Limited subsidiary.
(7) Restructuring charge of which $856,000 relates to net expense of the
Company's Conference Plus, Inc. subsidiary and $822,000 of which relates to
the Company's Westell Limited subsidiary.
(8) Restructuring charge of which a reversal of $855,000 of expense relates to
the Company's Conference Plus, Inc. subsidiary and $611,000 of expense
relates to the Company's Westell Limited subsidiary.
(9) The Company reduced warranty reserves by $782,000 and $874,000 for the three
and twelve month periods ended March 31, 2003 respectively.
(10) Teltrend product technology intangible amortization. (11) The Company
recorded a tax benefit from the release of valuation
allowances against net operating loss carryforwards.
(12) Tax expense recorded for federal audit liability relating to
Teltrend. Valuation allowances were released to offset taxable income in
these periods.
(13) Non-GAAP net income and net income per share excludes the impact of the tax
benefit noted in (11) above.
Westell Technologies, Inc.
Financial Results (continued)
(Dollars in thousands)
Mar. 31, Dec. 31,
2004 2003
---------- -----------
Cash and Short term Investments 11,241 10,678
Receivables 23,807 22,351
Inventory 16,075 12,437
Total current assets 62,117 51,976
Goodwill and long term intangibles 12,615 15,762
Total assets 129,781 105,974
Total current liabilities 34,492 35,761
Other notes payable 3,742 6,391
Total liabilities 38,016 40,359
Shareholders' Equity 91,765 65,615
Days Sales Outstanding 35 34
Contact:
Westell Technologies Inc.
Nicholas C. Hindman, Sr., 630-375-4136
nhind@westell.com
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or
KGT Communications Group
Ken Trantowski, 630-469-8765
kennethg_trantowski@msn.com
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