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Press release from Marketwire

DragonWave Inc. Reports Third Quarter Fiscal Year 2013 Results

Wednesday, January 09, 2013

DragonWave Inc. Reports Third Quarter Fiscal Year 2013 Results16:24 EST Wednesday, January 09, 2013OTTAWA, CANADA--(Marketwire - Jan. 9, 2013) - DragonWave Inc. (TSX:DWI)(NASDAQ:DRWI) a leading global supplier of packet microwave radio systems for mobile and access networks, today reported financial results for its third quarter of fiscal year 2013, ended November 30, 2012. All figures are reported in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles (GAAP).Revenue for the third quarter of fiscal year 2013 was $38.5 million, compared with $11.8 million in the third quarter of fiscal year 2012 and $44.2 million in the second quarter of fiscal year 2013. DragonWave had one customer, Nokia Siemens Networks, who generated more than 10% of revenue in the third quarter of fiscal year 2013. Revenue through the new Nokia Siemens Networks channel totaled $25.6 million in the quarter.Gross margin for the third quarter of fiscal year 2013 was 19%, compared with 41% in the third quarter of fiscal year 2012 and 15% in the second quarter of fiscal year 2013. The gross margin in the second quarter of fiscal year 2013 reflects the inclusion of an inventory impairment provision of $2.6 million. Without the inventory provision, the gross margin in the second quarter was 21%.Comprehensive loss applicable to shareholders in the third quarter of fiscal year 2013 was ($13.9) million or ($0.36) per basic and diluted share, compared to a loss of ($8.0) million or ($0.23) per basic and diluted share in the third quarter of fiscal year 2012. "While visibility into our revenue pipeline has been challenging, we have continued to work hard on completing the integration activities of our strategic partnership with Nokia Siemens Networks to position ourselves for growth," said DragonWave President and CEO Peter Allen. "These efforts combined with our continued focus on cost reduction are targeted at achieving a profitable business model." Cash, cash equivalents and restricted cash totaled $36.8 million, compared to $44.0 million at the end of the second quarter of fiscal year 2013.Revenue for the first nine months of fiscal year 2013 was $95.6 million, compared with $36.5 million for the first nine months of 2012. Net loss applicable to shareholders for the first nine months of fiscal 2013 was ($27.6) million or ($0.74) per basic and diluted share, compared with ($20.1) million or ($0.57) per basic and diluted share for the first nine months of fiscal 2012. Revenue Outlook for Fourth Quarter Fiscal Year 2013DragonWave expects revenue for the fourth quarter of fiscal year 2013 to be in the range of $40 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, January 10, 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.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 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 the revenue range for the fourth quarter of fiscal year 2013, our statement regarding our intentions with respect to our cost profile and target of a profitable business, 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 plans of its existing and new direct and indirect customers, the volume and timing of orders, shipments and revenue recognition; and the capacity of our supply chain to meet demand. 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 January 9, 2013 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 atNovember 30,February 29,20122012AssetsCurrent AssetsCash and cash equivalents36,44452,798Restricted cash393177Trade receivables31,8059,850Inventory29,66927,043Other current assets8,9685,501Contingent receivable13,739-Deferred tax asset24169121,25995,438Long Term AssetsProperty and equipment8,7345,184Deferred tax asset1,6931,308Deferred financing cost298-Intangible assets8,5226,264Goodwill11,92711,92731,17424,683Total Assets152,433120,121LiabilitiesCurrent LiabilitiesAccounts payable and accrued liabilities49,21312,720Deferred revenue973723Capital lease obligation2,617-Contingent royalty-372Contingent consideration-1,88452,80315,699Long Term LiabilitiesDebt facility15,000-Capital lease obligation1,444-Other long term liabilities6591,063Contingent royalty-1,29217,1032,355CommitmentsShareholders' equityCapital stock179,407172,264Contributed surplus5,7264,606Deficit(93,016)(65,448)Accumulated other comprehensive loss(9,685)(9,658)Total Shareholders' equity82,432101,764Non-controlling interests95303Total Equity82,527102,067Total Liabilities and Shareholders' equity152,433120,121Shares issued & outstanding38,041,01035,586,206CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)Expressed in US $000's except share and per share amountsThree months endedNine months endedNovember 30,November 30,November 30,November 30,2012201120122011REVENUE38,45211,83095,58336,506Cost of sales31,3146,99277,56921,249Gross profit7,1384,83818,01415,257EXPENSESResearch and development9,7695,38026,30717,751Selling and marketing3,9353,79311,95011,722General and administrative6,2184,98520,00112,665Government assistance-(265)-(902)19,92213,89358,25841,236Income (loss) before other items(12,784)(9,055)(40,244)(25,979)Amortization of intangible assets(1,162)(404)(2,903)(1,613)Accretion expense(16)(60)(68)(612)Restructuring expense(839)-(1,637)-Interest income (expense)(500)143(1,211)354Investment gain-1-21Impairment of intangible assets(4,407)-(8,424)(8,315)Gain on change in estimate5,4161,3626,95814,523Gain on purchase of business--19,397-Foreign exchange gain (loss)419(202)(122)(118)Income (loss) before income taxes(13,873)(8,215)(28,254)(21,739)Income tax expense (recovery)63(157)(509)(1,458)Net Income (loss)(13,936)(8,058)(27,745)(20,281)Net Loss Attributable to Non-Controlling Interest6941177168Net Income (loss) applicable to shareholders(13,867)(8,017)(27,568)(20,113)Foreign currency translation differences for foreign operations(8)575475Comprehensive Income (Loss)(13,928)(8,115)(27,799)(20,356)Comprehensive Income (Loss) applicable to Non-Controlling Interest(4)287337Comprehensive Income (Loss) applicable to shareholders(13,871)(7,989)(27,495)(20,076)Income (loss) per shareBasic(0.36)(0.23)(0.74)(0.57)Diluted(0.36)(0.23)(0.74)(0.57)Weighted Average Shares OutstandingBasic38,033,22235,542,24737,313,92635,486,924Diluted38,033,22235,542,24737,313,92635,486,924CONSOLIDATED STATEMENTS OF CASH FLOWSExpressed in US $000'sThree months endedNine months endedNovember 30,November 30,November 30,November 30,2012201120122011Operating ActivitiesNet Income (Loss)(13,936)(8,058)(27,745)(20,281)Items not affecting cashAmortization of property and equipment1,6728394,1502,513Amortization of intangible assets1,1624042,9031,613Accretion expense166068612Royalty amortization-(21)(151)(423)Interest expense210-421-Rental expense957-1,914-Impairment of intangible assets4,407-8,4248,315Gain on change in estimate of contingent liabilities(5,416)(1,362)(6,958)(14,523)Stock-based compensation4044751,1961,549Gain on purchase of business--(19,397)-Unrealized foreign exchange loss(670)56(21)130Future income tax recovery-(157)(572)(1,458)Inventory impairment18292,691190(11,176)(7,735)(33,077)(21,763)Changes in non-cash working capital items5,012(3,220)19,081(6,551)(6,164)(10,955)(13,996)(28,314)Investing ActivitiesAcquisition of property and equipment(462)(274)(1,585)(943)Acquisition of intangible assets(411)(91)(1,040)(494)Acquisition of business--(12,730)-Purchase of short term investments---(22,432)Maturity of short term investments-7,071-31,490(873)6,706(15,355)7,621Financing ActivitiesInitial formation contribution by non-controlling interest in DW-HFCL---555Capital lease obligation(809)-(809)-Debt facility--15,000-Deferred financing cost--(1,192)-Issuance of common shares net of issuance costs26106129450(783)10613,1281,005Effect of foreign exchange on cash and cash equivalents678(112)(131)(204)Net increase (decrease) in cash and cash equivalents(7,142)(4,255)(16,354)(19,892)Cash and cash equivalents at beginning of period43,58662,18252,79877,819Cash and cash equivalents at end of period36,44457,92736,44457,927Cash paid during the period for interest579-592-FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Investor Contact:John LawlorVP, Investor RelationsDragonWave Inc.jlawlor@dragonwaveinc.com613-895-7000Media Contact:Nadine KittleMarketing CommunicationsDragonWave Inc.nkittle@dragonwaveinc.com613-599-9991 ext 2262Becky ObbemaInterprose Public Relations(for DragonWave)Becky.Obbema@interprosepr.com(408) 778-2024