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Press release from Marketwire

DragonWave Inc. Announces Second Quarter Fiscal Year 2012 Results

Wednesday, October 05, 2011

DragonWave Inc. Announces Second Quarter Fiscal Year 2012 Results16:33 EDT Wednesday, October 05, 2011OTTAWA, CANADA--(Marketwire - Oct. 5, 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 its second quarter of fiscal year 2012, ended August 31, 2011. All figures are reported in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.Revenue for the second quarter of fiscal year 2012 was $13.6 million, compared with $27.2 million in the second quarter of fiscal year 2011 and $11.0 million in the first quarter of fiscal year 2012. Revenue from customers within North America was $11.8 million, compared with $20.3 million in the second quarter of the prior fiscal year. DragonWave had two customers who generated more than 10% of revenue in the second quarter of fiscal year 2012.Gross margin for the second quarter of fiscal year 2012 was 42%, compared with 44% in the second quarter of fiscal year 2011. Before amortization of intangible assets and other items, the loss in the second quarter of fiscal year 2012 was $7.6 million, compared with income of $1.2 million in the second quarter of fiscal year 2011. Net and comprehensive loss applicable to shareholders in the second quarter was $2.2 million or ($0.06) per diluted share, compared with income of $1.2 million or $0.03 per diluted share in the second quarter of the prior fiscal year. The results reflect a reduction in the expected earn-out payment associated with the Axerra acquisition which, when combined with the reduction of the related intangibles, generated a net one-time gain of $6.2 million or $0.17 per diluted share at the net and comprehensive loss level."We continue to make progress on a number of promising opportunities with major mobile operators globally and we remain positive about our prospects," said DragonWave President and CEO Peter Allen.Cash, cash equivalents, restricted cash, and short-term investments totaled $71.6 million, compared to $79.9 million at the end of the first quarter of fiscal year 2012, and $89.7 million at the end of the fourth quarter of fiscal year 2011.Revenue Outlook for Q3 FY2012DragonWave expects revenue for the third quarter of fiscal year 2012 to be in the range of $12 million to $15 million.Webcast and Conference Call DetailsThe DragonWave management team will discuss the results on a conference call and webcast beginning at 8:30 a.m. Eastern Time, tomorrow, October 6, 2011.Toll-free North America Dial-in: 877-312-9202International Dial-in: 408-774-4000The live webcast and presentation slides will be available at: 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® is a registered trademark of DragonWave Inc.Forward-Looking StatementsCertain statements in this release, including the estimate of the revenue range for the third 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: the network deployment plans of its existing and new customers, and the volume and timing of orders, shipments and revenue recognition. 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 and, 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 BALANCE SHEETSExpressed in US $000's except share and per share amounts(unaudited)As atAs atAugust 31,February 28,20112011AssetsCurrent AssetsCash and cash equivalents62,18277,819Restricted cash219714Short term investments9,19411,181Trade receivables10,61411,579Inventory31,53228,204Other current assets5,2265,306Deferred income tax asset524553119,491135,356Long Term AssetsProperty and equipment6,5557,560Deferred income tax asset2,167808Intangible assets5,80814,929Goodwill11,92711,92726,45735,224Total Assets145,948170,580LiabilitiesCurrent LiabilitiesAccounts payable and accrued liabilities15,03415,967Deferred revenue1,5411,453Contingent royalty301622Contingent consideration3,77314,62220,64932,664Long Term LiabilitiesContingent royalty1,4493,290Other long term liabilities1,4911,9992,9405,289CommitmentsShareholders' equityCapital stock172,037171,570Contributed surplus3,5932,642Deficit(44,063)(31,967)Accumulated other comprehensive loss (AOCL)(9,636)(9,618)Total shareholder's equity121,931132,627Non-controlling interests428-Total Equity122,359132,627Total Liabilities and Equity145,948170,580Shares issued & outstanding35,530,75735,421,893CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)Expressed in US $000's except share and per share amounts(unaudited)Three months endedSix months endedAugust 31August 312011201020112010REVENUE13,62727,17124,67675,897Cost of sales7,85215,21914,25742,714Gross profit5,77511,95210,41933,183EXPENSESResearch and development6,3653,66812,9628,299Selling and marketing3,8494,4607,9298,589General and administrative3,4572,5857,0895,145Government assistance(287)-(637)-13,38410,71327,34322,033Income (loss) before amortization of intangible assets and other items(7,609)1,239(16,924)11,150Amortization of intangible assets(622)(87)(1,209)(169)Accretion expense(276)-(552)-Interest income12776211108Investment gain (loss)(19)622013Impairment of intangible assets(8,315)-(8,315)-Gain on change in estimate of contingent liabilities13,161-13,161-Foreign exchange gain(36)6984186Income (loss) before income taxes(3,589)1,359(13,524)11,288Income tax expense (recovery)(1,310)126(1,301)357Net Income (loss)(2,279)1,233(12,223)10,931Net Loss Attributable to Non-Controlling Interest73—127—Net Income (Loss) applicable to shareholders(2,206)1,233(12,096)10,931Foreign currency translation differences for foreign operations13—18—Net and Comprehensive Income (Loss) applicable to shareholders(2,219)1,233(12,114)10,931Income (loss) per shareBasic(0.06)0.03(0.34)0.30Diluted(0.06)0.03(0.34)0.30Weighted Average Shares OutstandingBasic35,494,97635,978,21335,462,01236,447,553Diluted35,494,97636,690,92635,462,01237,345,767CONSOLIDATED STATEMENTS OF CASH FLOWSExpressed in US $000's(unaudited)Three months endedSix months endedAugust 31August 312011201020112010Operating ActivitiesNet Income (Loss)(2,279)1,233(12,223)10,931Items not affecting cashAmortization of property and equipment8457091,6741,340Amortization of intangible assets622871,209169Accretion expense276—552—Non cash royalty amortization(201)—(402)—Impairment of intangible asstes8,315—8,315—Gain on change in estimate of contingent liabilities(13,161)—(13,161)—Stock-based compensation5823281,074615Unrealized foreign exchange loss7217473190Non cash future income tax recovery(1,310)—(1,301)—Inventory impairment104707161650Unrealized gain on short term investments(25)(65)(64)(16)Accrued interest on short term investments(1)(33)(2)(40)(6,161)3,140(14,095)13,839Changes in non-cash working capital items(2,046)(10,290)(3,330)(15,324)(8,207)(7,150)(17,425)(1,485)Investing ActivitiesAcquisition of property and equipment(220)(656)(669)(2,806)Acquisition of intangible assets(89)(261)(403)(336)Purchase of short term investments—(69,917)(22,432)(115,225)Maturity of short term investments6,97760,72524,48568,7996,668(10,109)981(49,568)Financing ActivitiesShare repurchase—(9,269)—(10,323)Equity contribution by non-controlling interest in DW-HFCL——555—Issuance of common shares net of issuance costs16664344211166(9,205)899(10,112)Effect of foreign exchange on cash and cash equivalents(86)(174)(92)(190)Net decrease in cash and cash equivalents(1,459)(26,638)(15,637)(61,355)Cash and cash equivalents at beginning of period63,64170,55977,819105,276Cash and cash equivalents at end of period62,18243,92162,18243,921Cash paid during the period for interest----FOR FURTHER INFORMATION PLEASE CONTACT: John LawlorInvestor Contact:VP, Investor RelationsDragonWave Inc.jlawlor@dragonwaveinc.com613-599-9991 ext 2252ORNadine KittleMedia Contact:Marketing CommunicationsDragonWave Inc.nkittle@dragonwaveinc.com613-599-9991 ext 2262