DragonWave Announces Financial Results for First Quarter Fiscal Year 2013

Marketwired

OTTAWA, CANADA--(Marketwire -07/11/12)- DragonWave Inc. (DWI.TO)(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.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® 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 SHEETS
Expressed in US $000's except share amounts


As at As at
May 31, February 29,
2012 2012
----------------------------------
Assets
Current Assets
Cash and cash equivalents 42,248 52,798
Restricted cash 400 177
Trade receivables 13,516 9,850
Inventory 25,591 27,043
Other current assets 5,533 5,501
Future income tax asset 180 69
----------------------------------
87,468 95,438
Long Term Assets
Property and equipment 4,650 5,184
Future income tax asset 1,817 1,308
Deferred financing cost 435 -
Intangible assets 3,319 6,264
Goodwill 11,927 11,927
----------------------------------
22,148 24,683

Total Assets 109,616 120,121
----------------------------------
----------------------------------

Liabilities
Current Liabilities
Accounts payable and accrued liabilities 15,796 12,720
Deferred revenue 1,184 723
Contingent royalty 219 372
Contingent consideration - 1,884
----------------------------------
17,199 15,699

Long Term Liabilities
Contingent royalty 184 1,292
Other long term liabilities 666 1,063
----------------------------------
850 2,355

Commitments

Shareholders' equity
Capital stock 174,076 172,264
Contributed surplus 4,999 4,606
Deficit (78,027) (65,448)
Accumulated other comprehensive loss (9,692) (9,658)
----------------------------------
Total Shareholder's equity 91,356 101,764

Non-controlling interests 211 303
----------------------------------
Total Equity 91,567 102,067

Total Liabilities and Shareholder's equity 109,616 120,121
----------------------------------
----------------------------------


Shares issued & outstanding 36,001,067 35,586,206



CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Expressed in US $000's e and per share amounts


Three months ended
----------------------------------
May 31, May 31,
2012 2011
----------------------------------

REVENUE 12,974 11,049
Cost of sales 8,841 6,405
----------------------------------
Gross profit 4,133 4,644
----------------------------------

EXPENSES
Research and development 4,399 6,266
Selling and marketing 3,658 4,080
General and administrative 5,270 3,963
Government assistance - (350)
----------------------------------
13,327 13,959
----------------------------------
Income (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 income 29 84
Investment gain - 39
Impairment of intangible assets (2,869) -
Gain on change in estimate of contingent
liabilities 1,190 -
Foreign exchange gain (1,003) 120
----------------------------------
Income (loss) before income taxes (13,209) (9,935)

Income tax expense (recovery) (572) 9
----------------------------------
Net Income (loss) (12,637) (9,944)

Net Loss Attributable to Non-Controlling
Interest 58 54
----------------------------------
Net Income (loss) applicable to
shareholders (12,579) (9,890)

Foreign currency translation differences
for foreign operations 68 3
----------------------------------
Comprehensive Income (Loss) (12,647) (9,893)

Comprehensive Income (Loss) applicable
to Non-Controlling Interest 34 2
----------------------------------
Comprehensive Income (Loss) applicable to
shareholders (12,613) (9,891)

Income (loss) per share
Basic (0.35) (0.28)
Diluted (0.35) (0.28)

Weighted Average Shares Outstanding
Basic 35,931,347 35,429,049
Diluted 35,931,347 35,429,049



CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in US $000's


Three months ended
----------------------------------
May 31, May 31,
2012 2011
----------------------------------

Operating Activities
Net Income (Loss) (12,637) (9,944)
Items not affecting cash
Amortization of property and equipment 754 829
Amortization of intangible assets 542 587
Accretion expense 22 276
Non cash royalty amortization (93) (201)
Impairment of intangible assets 2,869 -
Gain on change in estimate of
contingent liabilities (1,190) -
Stock-based compensation 404 492
Unrealized foreign exchange loss 1,116 1
Non cash future income tax expense
(recovery) (572) 9
Inventory impairment 34 57
----------------------------------
(8,751) (7,894)

Changes in non-cash working capital items 463 (1,324)
----------------------------------
(8,288) (9,218)
----------------------------------

Investing Activities
Acquisition 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 Activities
Initial formation contribution by non-
controlling interest in DW-HFCL - 555
Deferred financing cost (435) -
Issuance of common shares net of
issuance costs 43 178
----------------------------------
(392) 733
----------------------------------

Effect 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
period 52,798 77,819

----------------------------------
Cash and cash equivalents at end of period 42,248 63,641
----------------------------------
----------------------------------

Cash paid during the period for interest - -
----------------------------------
----------------------------------

Contact:

Investor
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
613-895-7000
Media
Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
613-599-9991 ext 2262

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