DRAGONWAVE, INC. 
By OTTAWA, CANADA -- (MARKET WIRE) -- 01/11/12 -- 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 third quarter of fiscal year 2012, ended November 30, 2011. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.
Revenue for the third quarter of fiscal year 2012 was $11.8 million, compared with $13.6 million in the second quarter of fiscal year 2012 and $27.0 million in the third quarter of fiscal year 2011. Revenue from customers within North America was $8.2 million, compared with $11.8 million in the second quarter of this fiscal year and $22.8 million in the third quarter of fiscal year 2011. DragonWave had two customers who each contributed more than 10% of revenue in the third quarter.
Gross margin for the third quarter of fiscal year 2012 was 41%, compared with 42% in the second quarter of fiscal year 2012 and 48% in the third quarter of fiscal year 2011. Net and comprehensive loss applicable to shareholders in the third quarter of fiscal year 2012 was $8.0 million or ($0.23) per diluted share. This compares to a net and comprehensive loss applicable to shareholders of $2.2 million or ($0.06) per diluted share in the second quarter of fiscal year 2012 and net loss of $0.04 million, which equated to ($0.00) per diluted share in the third quarter of fiscal year 2011.
"We took a major step forward in our global diversification and growth strategy this quarter through the transformational comprehensive agreements we announced jointly with Nokia Siemens Networks, including our plans to acquire NSN's microwave transport business," said DragonWave President and CEO Peter Allen. "This strategic relationship with NSN will further strengthen our market-leading product and technology base and substantially expand opportunities with major mobile operators throughout the world. We continue to expect the planned acquisition to close in the first quarter of calendar 2012."
Cash, cash equivalents, restricted cash, and short-term investments totaled $60.2 million, compared to $71.6 million at the end of the second quarter of fiscal year 2012, and $89.7 million at the end of the fourth quarter of fiscal year 2011.
Revenue for the first nine months of fiscal year 2012 was $36.5 million, compared to $102.9 million for the same period of fiscal year 2011. Net and comprehensive loss applicable to shareholders for the first nine months of fiscal year 2012 was $20.1 million or ($0.57) per diluted share, compared to net and comprehensive income applicable to shareholders of $10.9 million or $0.29 per diluted share for the first nine months of fiscal year 2011.
Revenue Outlook for Fourth Quarter Fiscal Year 2012
DragonWave expects revenue for the fourth quarter of fiscal year 2012 to be in the range of $12.0 million to $15.0 million. This does not include any revenue from the planned acquisition of NSN's microwave transport business, as the precise closing date of the acquisition has not yet been determined.
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 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: (866) 393-0571 -- International: (760) 536-8545
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 fourth quarter of fiscal year 2012 and the statements regarding the proposed 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 the NSN Transactions include the parties' beliefs regarding the industry and markets in which the parties operate; successful completion of the proposed transaction; expectations regarding potential synergies and prospects for the business if the transaction is closed. The NSN Transactions are subject to risks, including: the risks that the parties will not proceed with the transactions for any reason; that the ultimate terms of the transactions will differ from those that are currently contemplated; that if the transactions are completed, 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. In particular, the completion of the NSN Transactions is subject to a number of terms and conditions, including, without limitation, no occurrence of a material adverse effect. These conditions to the transaction may not be satisfied, in which case the NSN Transactions could be modified, restructured or terminated. Material risks and uncertainties following closing of the NSN Transactions are described under the heading "Risks and Uncertainties" in the MD&A dated January 11, 2012 and on pages 20 and 21 of the Company's Annual Information Form, dated May 4, 2011.
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 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'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 SHEETS
Expressed in US $000's except share and per share amounts
(unaudited)
As at As at
November 30, February 28,
2011 2011
------------------------------
Assets
Current Assets
Cash and cash equivalents 57,927 77,819
Restricted cash 132 714
Short term investments 2,123 11,181
Trade receivables 12,302 11,579
Inventory 29,608 28,204
Other current assets 5,866 5,306
Deferred income tax asset 365 553
------------------------------
108,323 135,356
Long Term Assets
Property and equipment 5,990 7,560
Deferred income tax asset 2,393 808
Intangible assets 5,495 14,929
Goodwill 11,927 11,927
------------------------------
25,805 35,224
Total Assets 134,128 170,580
------------------------------
------------------------------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities 12,496 15,967
Deferred revenue 1,233 1,453
Contingent royalty 300 622
Contingent consideration 2,470 14,622
------------------------------
16,499 32,664
Long Term Liabilities
Contingent royalty 1,431 3,290
Other long term liabilities 1,184 1,999
------------------------------
2,615 5,289
Commitments
Shareholders' equity
Capital stock 172,189 171,570
Contributed surplus 4,211 2,642
Deficit (52,080) (31,967)
Accumulated other comprehensive loss (AOCL) (9,693) (9,618)
------------------------------
Total Shareholder's equity 114,627 132,627
Non-controlling interests 387 -
------------------------------
Total Equity 115,014 132,627
Total Liabilities and Shareholder's equity 134,128 170,580
------------------------------
------------------------------
Shares issued & outstanding 35,567,896 35,421,893
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Expressed in US $000's except share and per share amounts
(unaudited)
Three months ended Nine months ended
----------------------------------------------------
November 30 November 30
----------------------------------------------------
2011 2010 2011 2010
REVENUE 11,830 27,008 36,506 102,905
Cost of sales 6,992 14,049 21,249 56,763
----------------------------------------------------
Gross profit 4,838 12,959 15,257 46,142
----------------------------------------------------
EXPENSES
Research and
development 5,661 4,817 18,623 13,104
Selling and marketing 3,793 4,735 11,722 13,339
General and
administrative 4,704 3,286 11,793 8,453
Government assistance (265) (246) (902) (246)
----------------------------------------------------
13,893 12,592 41,236 34,650
----------------------------------------------------
Income (loss) before
amortization of
intangible assets and
other items (9,055) 367 (25,979) 11,492
Amortization of
intangible assets (404) (277) (1,613) (421)
Accretion expense (60) (122) (612) (122)
Interest income 143 88 354 196
Investment gain (loss) 1 155 21 168
Impairment of
intangible assets - - (8,315) -
Gain on change in
estimate of
contingent
liabilities 1,362 - 14,523 -
Foreign exchange gain (202) (44) (118) 142
----------------------------------------------------
Income (loss) before
income taxes (8,215) 167 (21,739) 11,455
Income tax expense
(recovery) (157) 209 (1,458) 566
----------------------------------------------------
Net Income (loss) (8,058) (42) (20,281) 10,889
Net Loss Attributable
to Non-Controlling
Interest 41 - 168 -
----------------------------------------------------
Net Income (Loss)
applicable to
shareholders (8,017) (42) (20,113) 10,889
Foreign currency
translation
differences for
foreign operations 57 - 75 -
----------------------------------------------------
Net and Comprehensive
Income (Loss)
applicable to
shareholders (8,074) (42) (20,188) 10,889
Income (loss) per share
Basic (0.23) (0.00) (0.57) 0.30
Diluted (0.23) (0.00) (0.57) 0.29
Weighted Average Shares
Outstanding
Basic 35,542,247 35,125,724 35,486,924 36,010,148
Diluted 35,542,247 35,125,724 35,486,924 36,957,219
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in US $000's
(unaudited)
Three months ended Nine months ended
----------------------------------------------------
November 30 November 30
----------------------------------------------------
2011 2010 2011 2010
----------------------------------------------------
Operating Activities
Net Income (Loss) (8,058) (42) (20,281) 10,889
Items not affecting cash
Amortization of
property and
equipment 839 761 2,513 2,126
Amortization of
intangible assets 404 277 1,613 421
Accretion expense 60 122 612 122
Non cash royalty
amortization (21) - (423) -
Impairment of
intangible assets - - 8,315 -
Gain on change in
estimate of
contingent
liabilities (1,362) - (14,523) -
Stock-based
compensation 475 331 1,549 946
Unrealized foreign
exchange loss 56 100 130 290
Non cash future
income tax expense
(recovery) (157) 92 (1,458) 92
Inventory impairment 29 538 190 1,188
Unrealized gain on
short term
investments 11 74 (53) 58
Accrued interest on
short term
investments (17) (46) (19) (86)
----------------------------------------------------
(7,741) 2,207 (21,835) 16,046
Changes in non-cash
working capital items (3,220) 3,997 (6,551) (11,327)
----------------------------------------------------
(10,961) 6,204 (28,386) 4,719
----------------------------------------------------
Investing Activities
Acquisition of
property and
equipment (274) (402) (943) (3,208)
Acquisition of
intangible assets (91) (200) (494) (536)
Acquisition of Axerra
Networks Inc., net of
cash acquired - (8,700) - (8,700)
Purchase of short term
investments - - (22,432) (115,225)
Maturity of short term
investments 7,077 7,429 31,562 76,228
----------------------------------------------------
6,712 (1,873) 7,693 (51,441)
----------------------------------------------------
Financing Activities
Share repurchase - (415) - (10,738)
Equity contribution by
non-controlling
interest in DW-HFCL - - 555 -
Issuance of common
shares net of
issuance costs 106 142 450 353
----------------------------------------------------
106 (273) 1,005 (10,385)
----------------------------------------------------
Effect of foreign
exchange on cash and
cash equivalents (112) (100) (204) (290)
Net increase (decrease)
in cash and cash
equivalents (4,255) 3,958 (19,892) (57,397)
Cash and cash
equivalents at
beginning of period 62,182 43,921 77,819 105,276
----------------------------------------------------
Cash and cash
equivalents at end of
period 57,927 47,879 57,927 47,879
----------------------------------------------------
Cash paid during the
period for interest - 194 - 194
----------------------------------------------------
Contacts: John Lawlor VP, Investor Relations DragonWave Inc. jlawlor@dragonwaveinc.com 613-895-7000
Source: DragonWave Inc.
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