DragonWave Inc. Reports First Quarter Fiscal Year 2014 Results

DragonWave Inc. Reports First Quarter Fiscal Year 2014 Results 
OTTAWA, CANADA -- (Marketwired) -- 07/10/13 -- DragonWave Inc.
(TSX:DWI)(NASDAQ:DRWI) a leading global supplier of packet microwave
radio systems for mobile and access networks, today announced
financial results for its first quarter ended May 31, 2013. All
figures are in U.S. dollars and were prepared in accordance with U.S.
generally accepted accounting principles. 
Revenue for the first quarter of fiscal year 2014 was $24.5 million,
compared with $28.3 million in the fourth quarter of fiscal year 2013
and $13.0 million in the first quarter of fiscal year 2013. Revenue
from the Nokia Siemens Networks channel represented 57% of revenue in
the first quarter of fiscal 2014.  
Gross margin for the first quarter of fiscal year 2014 was 11.5%,
compared with 5.3% in the fourth quarter of fiscal year 2013 and
31.9% in the first quarter of fiscal year 2013. The gross margin in
the fourth quarter of fiscal year 2013 reflects the inclusion of an
inventory impairment provision of $0.8 million. 
Business highlights include: 


 
--  In the first fiscal quarter we reported results of our renewed framework
    with Nokia Siemens Networks, which was originally announced on April 10,
    2013. This included a cash payment to DragonWave in the quarter of $13.8
    million. 
--  Three of our major existing service provider customers in India,
    Southeast Asia and Africa are engaging in network expansions, starting
    in the second fiscal quarter. 
--  Industry developments include recent reports of a two year $16 billion
    investment in Sprint's network by Softbank, together with Sprint's
    acquisition of Clearwire. 
--  We recently announced the inclusion of DragonWave products in the
    Cisco(R) Small Cell Wireless Backhaul Ecosystem. 
--  We are also involved in a pilot small cell wireless backhaul deployment
    with a major Asian carrier. 
--  Our integration and restructuring activities yielded a 46% reduction in
    operating expenses compared to Q2 last year. 

 
"We have made progress on multiple fronts. We are working hard with
Nokia Siemens Networks to build the sales funnel for microwave,
progressing our direct relationships particularly in the United
States and India, advancing in the important area of small cell
backhaul, and our operating expenses are declining as we complete our
integration and restructuring activities" said DragonWave President
and CEO, Peter Allen. "We will continue to have a strong focus on
revenue growth and improving our margins." 
Net loss applicable to shareholders in the first quarter of fiscal
year 2014 was $6.6 million or ($0.17) per basic and diluted share.
This compares to a net loss applicable to shareholders of $27.2
million or ($0.71) per basic and diluted share in the fourth quarter
of fiscal year 2013 and net loss applicable to shareholders of $12.6
million or ($0.35) per basic and diluted share in the first quarter
of fiscal year 2013. 
Cash, cash equivalents, and restricted cash totaled $23.4 million at
the end of the first quarter of fiscal year 2014, compared to $23.0
million at the end of the fourth quarter of fiscal year 2013. 
Webcast and Conference Call Details: 
The DragonWave management team will discuss the results on a webcast
and conference call beginning at 8:30 a.m. Eastern Time on July 11,
2013. 
The live webcast and presentation slides will be available at the
Investor Relations section of the DragonWave website at:
http://investor.dragonwaveinc.com/events.cfm  
An archive of the webcast will be available at the same link. 
Conference call dial-in numbers: 


 
--  Toll-free North America: (877) 312-9202 
--  International: (408) 774-4000 

 
About DragonWave 
DragonWave(R) is a leading provider of high-capacity packet microwave
solutions that drive next-generation IP networks. DragonWave's
carrier-grade point-to-point packet microwave systems transmit
broadband voice, video and data, enabling service providers,
government agencies, enterprises and other organizations to meet
their increasing bandwidth requirements rapidly and affordably. The
principal application of DragonWave's products is wireless network
backhaul. Additional solutions include leased line replacement, last
mile fiber extension and enterprise networks. DragonWave's corporate
headquarters is located in Ottawa, Ontario, with sales locations in
Europe, Asia, the Middle East and North America. For more
information, visit http://www.dragonwaveinc.com. 
DragonWave(R) and Horizon(R) are registered trademarks of DragonWave
Inc.  
Forward-Looking Statements 
Certain statements in this release, including our statements
regarding our relationship with and the transactions involving Nokia
Siemens Networks, our expectations regarding customer network
expansions, our efforts to develop our direct customer relationships,
and our plans and expectations regarding operating expense
reductions, revenue growth and margin, constitute forward-looking
statements or forward-looking information within the meaning of
applicable securities laws. These statements are subject to certain
assumptions, risks and uncertainties. 
Material factors and assumptions used to develop forward-looking
statements include DragonWave's expectations and plans regarding:  


 
--  The successful implementation of our renewed framework with Nokia
    Siemens Networks that was announced on April 10, 2013, including sales
    growth from Nokia Siemens Networks as a result of the renewed framework.
 
--  Our ability to obtain operating expense reductions through measures
    including consolidation and rationalization of the business acquired
    from Nokia Siemens Networks, migration to new contract manufacturers,
    and optimization of our logistical framework to reduce overhead costs
    related to hardware sales. 

 
There are risks associated with these assumptions, including that
expected synergies will not materialize; that unexpected costs will
be incurred; or that end-customer demand will not meet expectations.  
Material risks and uncertainties relating to our business are
described under the headings "Risks and Uncertainties" and "Liquidity
Discussion" in the MD&A, dated July 10, 2013, and on pages 27-48 of
the Company's Annual Information Form, dated May 17, 2013. 
Readers are cautioned not to place undue reliance on forward-looking
statements. These statements are provided to assist external
stakeholders in understanding DragonWave's expectations as of the
date of this release and may not be appropriate for other purposes.
Actual results, performance, achievements or developments of
DragonWave may differ materially from the results, performance,
achievements or developments expressed or implied by such statements. 
Risk factors, in addition to those detailed above, that may cause the
actual results, performance, achievements or developments of
DragonWave to differ materially from the results, performance,
achievements or developments expressed or implied by such statements
can be found in DragonWave's Annual Information Form dated May 17,
2013 and other public documents filed by DragonWave with Canadian and
United States securities regulatory authorities, which are available
at www.sedar.com and www.sec.gov, respectively. 
DragonWave assumes no obligation to update or revise any
forward-looking statements or forward-looking information, whether
because of new information, future events or otherwise, except as
expressly required by law. 


 
 
                                                                          
                         CONSOLIDATED BALANCE SHEETS                       
               Expressed in US $000's except share amounts                 
                                                                           
                                                      As at          As at 
                                                    May 31,   February 28, 
                                                       2013           2013 
                                             ------------------------------
Assets                                                                     
Current Assets                                                             
  Cash and cash equivalents                          22,044         22,959 
  Restricted cash                                     1,308              - 
  Trade receivables                                  18,917         35,452 
  Inventory                                          35,258         32,722 
  Other current assets                                5,203          6,077 
  Contingent receivable                                   -         13,843 
  Deferred tax asset                                     69             69 
                                             ------------------------------
                                                     82,799        111,122 
Long Term Assets                                                           
  Property and equipment                              5,524          7,444 
  Deferred tax asset                                  1,568          1,581 
  Deferred financing cost                                 -            149 
  Intangible assets                                   2,436          2,771 
  Goodwill                                           11,927         11,927 
                                             ------------------------------
                                                     21,455         23,872 
                                                                           
Total Assets                                        104,254        134,994 
                                             ------------------------------
                                             ------------------------------
                                                                           
Liabilities                                                                
Current Liabilities                                                        
  Accounts payable and accrued liabilities           34,783         56,962 
  Debt facility                                      15,000         15,000 
  Deferred revenue                                    1,060          1,163 
  Capital lease obligation                            1,890          3,251 
  Contingent liabilities                                516            255 
                                             ------------------------------
                                                     53,249         76,631 
                                                                           
Long Term Liabilities                                                      
  Capital lease obligation                              988          1,451 
  Other long term liabilities                           558            783 
  Contingent liabilities                                128            519 
                                             ------------------------------
                                                      1,674          2,753 
                                                                           
Commitments                                                                
                                                                           
Shareholders' equity                                                       
  Capital stock                                     179,547        179,429 
  Contributed surplus                                 6,325          6,047 
  Deficit                                          (126,822)      (120,197)
  Accumulated other comprehensive loss               (9,683)        (9,685)
                                             ------------------------------
Total Shareholder's equity                           49,367         55,594 
                                                                           
  Non-controlling interests                             (36)            16 
                                             ------------------------------
Total Equity                                         49,331         55,610 
                                                                           
Total Liabilities and Equity                        104,254        134,994 
                                             ------------------------------
                                             ------------------------------
                                                                            
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
         Expressed in US $000's except share and per share amounts          
                                                                            
                                                                            
                                                         Three months ended 
                                              ------------------------------
                                                     May 31,        May 31, 
                                                        2013           2012 
                                              ------------------------------
                                                                            
REVENUE                                               24,532         12,974 
  Cost of sales                                       21,712          8,841 
                                              ------------------------------
Gross profit                                           2,820          4,133 
                                              ------------------------------
                                                                            
EXPENSES                                                                    
  Research and development                             5,302          4,399 
  Selling and marketing                                3,382          3,658 
  General and administrative                           4,748          5,270 
                                              ------------------------------
                                                      13,432         13,327 
                                              ------------------------------
Income (loss) before amortization of                                        
 intangible assets and other items                   (10,612)        (9,194)
                                                                            
  Amortization of intangible assets                     (559)          (542)
  Accretion expense                                      (65)           (22)
  Restructuring expense                                    -           (798)
  Interest income (expense)                             (538)            29 
  Impairment of intangible assets                          -         (2,869)
  Gain on change in estimate                               -          1,190 
  Gain on contract amendment                           5,285              - 
  Foreign exchange gain (loss)                           (98)        (1,003)
                                              ------------------------------
Income (loss) before income taxes                     (6,587)       (13,209)
                                                                            
  Income tax expense (recovery)                           92           (572)
                                              ------------------------------
Net Income (loss)                                     (6,679)       (12,637)
                                                                            
  Net Loss Attributable to Non-Controlling                                  
   Interest                                               54             58 
                                              ------------------------------
Net Income (loss) applicable to shareholders          (6,625)       (12,579)
                                                                            
Income (loss) per share                                                     
  Basic                                                (0.17)         (0.35)
  Diluted                                              (0.17)         (0.35)
                                                                            
Weighted Average Shares Outstanding                                         
  Basic                                           38,059,919     35,931,347 
  Diluted                                         38,059,919     35,931,347 

Contacts:
Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
613-599-9991 ext. 2262 
Russell Frederick
CFO
DragonWave Inc.
rfrederick@dragonwaveinc.com
613-599-9991 ext. 2253 
Becky Obbema
Interprose Public Relations
(for DragonWave)
Becky.Obbema@interprosepr.com
(408) 778-2024
 
 
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