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Press release from Marketwire

DragonWave Announces Financial Results for First Quarter Fiscal Year 2013

Wednesday, July 11, 2012

DragonWave Announces Financial Results for First Quarter Fiscal Year 201316:15 EDT Wednesday, July 11, 2012OTTAWA, CANADA--(Marketwire - July 11, 2012) - 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 first quarter of fiscal year 2013, ended May 31, 2012. 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 2013 was $13.0 million, compared with $9.2 million in the fourth quarter of fiscal year 2012 and $11.0 million in the first quarter of fiscal year 2012. Revenue from customers within North America was $10.1 million, compared with $4.8 million in the fourth quarter of fiscal year 2012 and $8.2 million in the first quarter of fiscal year 2012. DragonWave had two customers who each contributed more than 10% of revenue in the first quarter.Gross margin for the first quarter of fiscal year 2013 was 32%, compared with 13% in the fourth quarter of fiscal year 2012 and 42% in the first quarter of fiscal year 2012. The gross margin in the fourth quarter of fiscal year 2012 reflects the inclusion of an inventory impairment provision of $1.7 million.Net and comprehensive loss applicable to shareholders in the first quarter of fiscal year 2013 was ($12.6) million or ($0.35) per basic and diluted share. This compares to a net and comprehensive loss applicable to shareholders of ($13.4) million or ($0.38) per basic and diluted share in the fourth quarter of fiscal year 2012 and ($9.9) million or ($0.28) per basic and diluted share in the first quarter of fiscal year 2012."We recently completed a transformational event for DragonWave – the acquisition of Nokia Siemens Networks' microwave transport business," said DragonWave President and CEO Peter Allen. "Nokia Siemens Networks continues to strengthen its position as a leading global supplier of complete solutions for broadband mobile networks. Industry-best packet microwave backhaul from DragonWave is a key component of Nokia Siemens Networks' complete solution for broadband mobile networks. In turn, Nokia Siemens Networks gives DragonWave the leverage of its large direct sales channel and access to its customer base of tier one mobile operators throughout the world."Cash, cash equivalents, restricted cash, and short-term investments totaled $42.6 million at the end of the first quarter of fiscal year 2013, compared to $53.0 million at the end of the fourth quarter of fiscal year 2012. The results for the first quarter of fiscal year 2013 do not include any revenue from the microwave transport business acquired by DragonWave from Nokia Siemens Networks or DragonWave's new supply relationship with Nokia Siemens Networks, as the transactions closed on June 1, 2012 after the end of the first quarter.Revenue Outlook for Second Quarter Fiscal Year 2013 DragonWave expects revenue for the second quarter of fiscal year 2013 to be in the range of $35 million to $45 million.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 tomorrow, July 12, 2012. The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at: http://investor.dragonwaveinc.com/events.cfmAn 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® 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 Statements Certain statements in this release, including the estimate of the revenue range for the second quarter of fiscal year 2013 and the statements regarding our relationship with and the transactions involving Nokia Siemens Networks (the "NSN Transactions"), 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 revenue 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. Material factors and assumptions relating to our relationship with Nokia Siemens Networks and the NSN Transactions include the parties' beliefs regarding the industry and markets in which the parties operate; successful integration of the product lines acquired from Nokia Siemens Networks; and expectations regarding potential synergies and prospects for the business. There are risks arising out of the NSN Transactions, including that expected synergies will not materialize; that unexpected costs will be incurred to integrate the business; or that end-customer demand will not meet expectations. Material risks and uncertainties relating to the NSN Transactions are described under the heading "Risks and Uncertainties" in the MD&A dated July 11, 2012 and on pages 19-22 of the Company's Annual Information Form, dated May 11, 2012. 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 11, 2012 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's growth is dependent on the development and growth of the market for high-capacity wireless communications services. 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. 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's success depends on its ability to develop new products and enhance existing products. DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially. If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected. 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 amountsAs atAs atMay 31,February 29,20122012AssetsCurrent AssetsCash and cash equivalents42,24852,798Restricted cash400177Trade receivables13,5169,850Inventory25,59127,043Other current assets5,5335,501Future income tax asset1806987,46895,438Long Term AssetsProperty and equipment4,6505,184Future income tax asset1,8171,308Deferred financing cost435-Intangible assets3,3196,264Goodwill11,92711,92722,14824,683Total Assets109,616120,121LiabilitiesCurrent LiabilitiesAccounts payable and accrued liabilities15,79612,720Deferred revenue1,184723Contingent royalty219372Contingent consideration-1,88417,19915,699Long Term LiabilitiesContingent royalty1841,292Other long term liabilities6661,0638502,355CommitmentsShareholders' equityCapital stock174,076172,264Contributed surplus4,9994,606Deficit(78,027)(65,448)Accumulated other comprehensive loss(9,692)(9,658)Total Shareholder's equity91,356101,764Non-controlling interests211303Total Equity91,567102,067Total Liabilities and Shareholder's equity109,616120,121Shares issued & outstanding36,001,06735,586,206CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)Expressed in US $000's e and per share amountsThree months endedMay 31,May 31,20122011REVENUE12,97411,049Cost of sales8,8416,405Gross profit4,1334,644EXPENSESResearch and development4,3996,266Selling and marketing3,6584,080General and administrative5,2703,963Government assistance-(350)13,32713,959Income (loss) before amortization of intangible assets and other items(9,194)(9,315)Amortization of intangible assets(542)(587)Accretion expense(22)(276)Restructuring expense(798)-Interest income2984Investment gain-39Impairment of intangible assets(2,869)-Gain on change in estimate of contingent liabilities1,190-Foreign exchange gain(1,003)120Income (loss) before income taxes(13,209)(9,935)Income tax expense (recovery)(572)9Net Income (loss)(12,637)(9,944)Net Loss Attributable to Non-Controlling Interest5854Net Income (loss) applicable to shareholders(12,579)(9,890)Foreign currency translation differences for foreign operations683Comprehensive Income (Loss)(12,647)(9,893)Comprehensive Income (Loss) applicable to Non-Controlling Interest342Comprehensive Income (Loss) applicable to shareholders(12,613)(9,891)Income (loss) per shareBasic(0.35)(0.28)Diluted(0.35)(0.28)Weighted Average Shares OutstandingBasic35,931,34735,429,049Diluted35,931,34735,429,049CONSOLIDATED STATEMENTS OF CASH FLOWSExpressed in US $000'sThree months endedMay 31,May 31,20122011Operating ActivitiesNet Income (Loss)(12,637)(9,944)Items not affecting cashAmortization of property and equipment754829Amortization of intangible assets542587Accretion expense22276Non cash royalty amortization(93)(201)Impairment of intangible assets2,869-Gain on change in estimate of contingent liabilities(1,190)-Stock-based compensation404492Unrealized foreign exchange loss1,1161Non cash future income tax expense (recovery)(572)9Inventory impairment3457(8,751)(7,894)Changes in non-cash working capital items463(1,324)(8,288)(9,218)Investing ActivitiesAcquisition of property and equipment(220)(449)Acquisition of intangible assets(466)(314)Purchase of short term investments-(22,432)Maturity of short term investments-17,508(686)(5,687)Financing ActivitiesInitial formation contribution by non-controlling interest in DW-HFCL-555Deferred financing cost(435)-Issuance of common shares net of issuance costs43178(392)733Effect of foreign exchange on cash and cash equivalents(1,184)(6)Net decrease in cash and cash equivalents(10,550)(14,178)Cash and cash equivalents at beginning of period52,79877,819Cash and cash equivalents at end of period42,24863,641Cash paid during the period for interest--FOR 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