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Press release from Marketwire

DragonWave Announces Fourth Quarter and Full Fiscal Year 2011 Results

Wednesday, May 04, 2011

DragonWave Announces Fourth Quarter and Full Fiscal Year 2011 Results17:03 EDT Wednesday, May 04, 2011OTTAWA, ONTARIO--(Marketwire - May 4, 2011) - 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 the fourth quarter and full fiscal year 2011, ended February 28, 2011. All figures are in U.S. dollars and in accordance with Canadian generally accepted accounting principles.Revenue for the full fiscal year 2011 was $118.0 million, compared with $158.0 million for the prior fiscal year. Revenue from customers outside North America increased to $21.9 million or 18% of total revenue for the full fiscal year 2011, compared with $11.5 million or 7% of total revenue in the prior fiscal year.Net income for the full fiscal year was $2.0 million or $0.05 per diluted share, compared with net income of $27.8 million or $0.85 per diluted share in the prior fiscal year.Revenue for the fourth quarter of fiscal 2011 was $15.1 million, compared with $61.0 million in the fourth quarter of fiscal 2010. Revenue from customers outside North America increased to $4.9 million, compared with $4.2 million in the third quarter of fiscal year 2011 and $2.8 million in the fourth quarter of the prior fiscal year. DragonWave had two customers that contributed more than 10% of total revenue in the fourth quarter.Net loss in the fourth quarter of fiscal year 2011 was $8.9 million or ($0.25) per diluted share, compared with net income of $12.8 million or $0.34 per diluted share in the fourth quarter of 2010. Gross margin in the fourth quarter of fiscal year 2011 was 29%, compared with 43% in the fourth quarter of the prior fiscal year. The gross margin in the fourth quarter of fiscal 2011 reflects the inclusion of an inventory impairment provision of $2.1 million, compared to $0.3 million in the fourth quarter of the prior fiscal year."We made progress this quarter to broaden our global market presence to address the burgeoning growth of data traffic for mobile operators," said DragonWave President and CEO Peter Allen. "We are actively engaged and well positioned with a number of major mobile operators in different geographies throughout the world and are working to expand channels and actively pursuing opportunities to make acquisitions."Cash, cash equivalents, restricted cash, and short-term investments totaled $89.7 million as of the end of Q4 FY2011, compared to $95.4 million at the end of Q3 FY2011 and $113.4 million at the end of Q4 FY2010.Revenue Outlook for Q1 FY2012DragonWave expects revenue for Q1 FY2012 to be approximately $15 million.Conference Call Details:The DragonWave management team will discuss the results on a conference call and webcast beginning at 8:30 a.m. Eastern Time, tomorrow, May 5, 2011. The conference call can be accessed by dialing 877-312-9202 in North America, or 408-774-4000 outside North America.The webcast link and presentation slides can be accessed 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.About DragonWaveDragonWave® 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® is a registered trademark of DragonWave Inc.Forward-Looking StatementsCertain statements in this release, including the estimate of revenue for the first quarter of fiscal year 2012 provided above, 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 such estimates include:DragonWave's expectations regarding network deployment plans of its existing and new customers; and DragonWave's expectations regarding the volume and timing of anticipated order activity. Readers are cautioned not to place undue reliance on such 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 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 4, 2011 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, and include the following: DragonWave relies on a small number of customers for a large percentage of its revenue and DragonWave's future growth depends on the success of its customer diversification efforts. DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services. Network deployment plans by DragonWave's existing and potential customers are capital intensive and the timing of such deployments is affected by such customers' access to capital. DragonWave faces intense competition from several competitors and if it does not compete effectively with these competitors, its revenues may not grow and could decline. DragonWave also faces competition from indirect competitors. DragonWave relies on its suppliers to supply components for its products and the Company is exposed to the risk that these suppliers will not be able to supply components on a timely basis, or at all. DragonWave may conduct acquisitions of products and businesses. There are risks associated with such acquisitions. DragonWave's success depends on its ability to develop new products and enhance existing products. If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected. DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially. DragonWave has a lengthy and variable sales cycle. 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 STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)Expressed in US $000's except share and per share amountsThree months endedTwelve months endedFebruary 28February 282011201020112010REVENUE15,10560,973118,010157,989Cost of sales10,69734,80867,46091,565Gross profit4,40826,16550,55066,424EXPENSESResearch and development5,5725,06918,67614,620Selling and marketing3,9644,48117,30313,917General and administrative3,3402,67911,8177,405Government assistance(144)-(390)-12,73212,22947,40635,942Income (loss) before amortization of intangible assets and other items(8,324)13,9363,14430,482Amortization of intangible assets(472)-(893)(207)Accretion expense(271)-(393)-Interest income376023389Investment gain(161)-7-Gain on sale of property and equipment---258Foreign exchange gain (loss)536(991)678(2,436)Income (loss) before income taxes(8,655)13,0052,77628,186Income tax expense235203801341Net and Comprehensive Income (Loss)(8,890)12,8021,97527,845Income (loss) per shareBasic(0.25)0.350.060.88Diluted(0.25)0.340.050.85Weighted Average Shares OutstandingBasic35,208,60636,461,64335,812,50731,523,226Diluted36,208,60637,914,91436,741,96132,635,342CONSOLIDATED BALANCE SHEETSExpressed in US $000'sAs atAs atFebruary 28,February 28,20112010AssetsCurrent AssetsCash and cash equivalents77,819105,276Restricted cash714-Short term investments11,1818,074Trade receivables11,57928,926Inventory28,20423,910Other current assets5,3062,522Future income tax asset553436135,356169,144Long Term AssetsProperty and equipment7,5607,116Future income tax asset80859Intangible assets14,929430Goodwill11,927-35,2247,605Total Assets170,580176,749LiabilitiesCurrent LiabilitiesAccounts payable and accrued liabilities15,96733,949Income taxes payable-835Deferred revenue1,4531,017Contingent royalty622-Contingent consideration14,622-32,66435,801Long Term LiabilitiesContingent royalty3,290-Other long term liabilities1,9992,1025,2892,102Shareholders' equityCapital stock171,570179,174Contributed surplus2,4881,375Deficit(31,813)(32,085)Accumulated other comprehensive loss(9,618)(9,618)132,627138,846Total Liabilities and Shareholders' Equity170,580176,749Shares issued & outstanding35,421,89336,934,917CONSOLIDATED STATEMENTS OF CASH FLOWSExpressed in US $000'sThree months endedYear endedFebruary 28February 282011201020112010Operating ActivitiesNet (loss) Income(8,890)12,8031,97527,845Items not affecting cash-Amortization of property and equipment7965912,8951,416Amortization of intangible assets44562893207Accretion expense271-393-Non cash royalty amortization(140)-(266)-Stock-based compensation4592251,442911Unrealized foreign exchange loss(156)1,4431341,995Gain on sale of property and equipment---(258)Non cash future income tax expense235-358-Benefit on recognition of future income tax asset-(242)-(486)Inventory impairment2,0973143,285969Accrued interest on short term investments(5)(13)(5)(14)(4,727)15,18311,10432,585Changes in non-cash working capital items(1,052)580(12,296)(4,682)(5,779)15,763(1,192)27,903Investing ActivitiesAcquisition of property and equipment(631)(960)(3,839)(4,960)Acquisition of intangible assets(330)(160)(867)(446)Acquisition of Axerra Networks Inc., net of cash acquired--(8,700)-Purchase of short term investments(11,513)-(135,480)-Maturity of short term investments47,2754,775132,3783,82534,8013,655(16,508)(1,581)Financing ActivitiesChange in line of credit---(574)Share repurchase--(10,738)-Issuance of common shares net of issuance costs7621,6941,11570,3507621,694(9,623)69,776Effect of foreign exchange on cash and cash equivalents156(1,443)(134)(1,995)Effect of functional currency change--4,480Net increase (decrease) in cash and cash equivalents29,94019,669(27,457)98,583Cash and cash equivalents at beginning of period47,87985,607105,2766,693Cash and cash equivalents at end of period77,819105,27677,819105,276Cash paid during the period for interest-119426FOR FURTHER INFORMATION PLEASE CONTACT: John LawlorInvestor Contact:VP, Investor RelationsDragonWave Inc.jlawlor@dragonwaveinc.com613-895-7000ORNadine KittleMedia Contact:Marketing CommunicationsDragonWave Inc.nkittle@dragonwaveinc.com613-599-9991 ext. 2262