DragonWave Inc.
LSE : DWI

DragonWave Inc.

July 11, 2008 02:00 ET

DragonWave Announces First Quarter Fiscal 2009 Results

FOR:  DRAGONWAVE INC.

AIM, TSX SYMBOL:  DWI

July 10, 2008

DragonWave Announces First Quarter Fiscal 2009 Results

24% growth in revenue to $10.7 Million

OTTAWA, CANADA--(Marketwire - July 10, 2008) - DragonWave Inc. ("DragonWave"), (TSX:DWI)(AIM:DWI) a
leading global supplier of next-generation wireless networks, today issued financial results for its
first quarter of fiscal year 2009 ended May 31, 2008. All figures are prepared in accordance with
Canadian generally accepted accounting principles (GAAP) and are reported in Canadian dollars.

Revenue for the quarter was $10.7 million, compared with $8.6 million for the same period of the last
fiscal year, an increase of 24%.

Revenue from customers in North America grew to $8.0 million, a 34% increase from the $6.0 million
reported in Q1 of fiscal year 2008. Revenue from outside North America represented 25% of total
revenue for the quarter.

Gross margin for the first quarter was 41%, up 6% from 35% gross margin reported in the first quarter
of fiscal 2008 as a result of continued cost reduction programs. This margin was consistent with the
41% gross margin reported in the previous quarter.

For the first quarter fiscal year 2009, the loss from operations was $2.5 million, compared to a loss
of $1.9 million in the first quarter of fiscal year 2008. Expenses increased from $4.9 million to $6.8
million due to increased staffing levels, sales and marketing activities required to support the
growing international business, market driven R&D associated with major near term opportunities and
the engineering activity required to comply with local certification and approval processes. The net
loss for the quarter was $1.9 million versus $2.7 million in Q1 fiscal 2008.

"DragonWave made good progress during the quarter. In addition to the growth and customer traction, we
introduced our Horizon Duo product with industry leading capacity, our Service Delivery Unit which
enables the convergence of mixed traffic on to carrier Ethernet networks, and expanded our frequency
coverage to include the 6 - 8 GHz frequency range. Our overall portfolio is strongly placed for the
growing high capacity wireless backhaul market. Our recent announcement of our selection by Sprint
validates our leadership position in North America" said Peter Allen, President and CEO of DragonWave.

The DragonWave management team will discuss the results on a conference call July 11, 2008 at 8:30
a.m. Eastern time (1:30 GMT).

Presentation material and a webcast link will be made available from the Investor Relations portal of
DragonWave's web site at http://www.dragonwaveinc.com/irevents.asp

/T/

Conference Call Details:

 - Beginning at 8:30 a.m., EDT
 - Toronto Dial In Number:      416-883-7132
 - Toll Free Dial In Number:    1-888-205-4499
 - UK Dial In Number:           00-800-8358-7000
 - Participant Pass Code:       57891#

/T/

For a replay of the call, it will be made available on DragonWave Inc. web site, through the Investor
Relations portal.

To review Management's Discussion and Analysis for the quarter, please go to www.sedar.com.

About DragonWave

DragonWave(TM) is a leading provider of high-capacity wireless Ethernet equipment used in emerging IP
networks. DragonWave designs, develops, and markets carrier-grade microwave radio frequency networking
equipment that wirelessly transmit broadband voice, video and other data. DragonWave's wireless
Ethernet products, which are based on a native Ethernet platform, function as a wireless extension to
an existing fibre-optic core telecommunications network. The principal application for DragonWave's
products is the backhaul function in a wireless communications network. Additional applications for
DragonWave's products include point-to-point transport in private networks, including municipal and
enterprise networks. DragonWave's corporate headquarters is located in Ottawa, Ontario, with sales
locations in Europe, Middle East and North America. The company's Web site is
http://www.dragonwaveinc.com

FORWARD LOOKING STATEMENTS

This release contains certain forward-looking statements. Readers are cautioned not to place undue
reliance upon any such forward-looking statements. Forward-looking statements are based on the
company's current expectations and assumptions that are subject to a variety of risks and
uncertainties that are difficult to predict and that may be beyond DragonWave's control.

Actual results could differ materially from those expressed in any forward-looking statements due to
factors including the following:

-DragonWave's growth is dependent on the development and growth of the market for broadband wireless
access.

-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's success depends on its ability to develop new products and enhance existing products.

-DragonWave has a history of losses and cannot provide assurance that it will attain profitability.

-If DragonWave is required to change its pricing models to compete successfully, its margins and
operating results may be adversely affected.

-DragonWave relies on a small number of customers for a large percentage of its revenue.

-DragonWave's ability to sell products and services is dependent upon it establishing and maintaining
relationships with channel partners.

-DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate
substantially.

-DragonWave has a lengthy and variable sales cycle.

Additional risks which can also impact upon forward looking statements are identified in DragonWave's
Annual Information Form which is available online at www.sedar.com. DragonWave assumes no obligation
to update these forward-looking statements as a result of new information or future events.

/T/

                                 DragonWave Inc.
                         CONSOLIDATED BALANCE SHEETS
                          (Expressed in Cdn $000's)
                                  (unaudited)

                                             As at           As at
                                            May 31,    February 29,
                                              2008            2008
                                                 $               $
------------------------------------------------------------------
------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents                   31,002           1,551
Short term investments                           -          31,908
Accounts receivable                          7,542          11,433
Other receivables                              769           1,092
Inventory                                   12,347          10,584
Prepaid expenses                               417             424
------------------------------------------------------------------
Total current assets                        52,077          56,992

Property and equipment                       2,911           2,823
------------------------------------------------------------------
                                             2,911           2,823
------------------------------------------------------------------
                                            54,988          59,815
------------------------------------------------------------------
------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Line of credit                                 554             550
Accounts payable and accrued liabilities     6,193           9,055
Deferred revenue                             1,377           1,713
------------------------------------------------------------------
Total current liabilities                    8,124          11,318

Commitments

Shareholders' equity
Capital stock                              119,916         119,435
Contributed surplus                            760             933
Deficit                                    (73,812)        (71,871)
------------------------------------------------------------------
------------------------------------------------------------------
Total shareholders' equity                  46,864          48,497
------------------------------------------------------------------
                                            54,988          59,815
------------------------------------------------------------------



           CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
                                  AND DEFICIT
       (Expressed in Cdn $000's except share and per share amounts)
                                  (unaudited)
                                                        Three months ended
--------------------------------------------------------------------------
                                                        May 31,     May 31,
                                                          2008        2007
                                                             $           $
--------------------------------------------------------------------------
REVENUE                                                 10,725       8,629
Cost of sales                                            6,344       5,604
--------------------------------------------------------------------------
Gross profit                                             4,381       3,025
--------------------------------------------------------------------------

EXPENSES
Research and development                                 3,131       2,442
Selling and marketing                                    2,624       1,794
General and administrative                               1,130         946
Investment tax credits                                     (50)       (283)
--------------------------------------------------------------------------
                                                         6,835       4,899
--------------------------------------------------------------------------
Loss from operations                                    (2,454)     (1,874)

Interest income                                            254         100
Interest expense                                            (9)        (96)
Interest expense on debt component of redeemable
 preferred shares and convertible debt                       -        (501)
Foreign exchange gain (loss)                               268        (356)
--------------------------------------------------------------------------
Net loss and comprehensive loss                         (1,941)     (2,727)
Deficit, beginning of period                           (71,871)    (63,619)
--------------------------------------------------------------------------
Deficit, end of period                                 (73,812)    (66,346)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Loss per share
Basic and fully diluted                                  (0.07)      (0.21)
--------------------------------------------------------------------------

Basic and diluted weighted average
 number of shares outstanding                       28,480,522  13,181,112
--------------------------------------------------------------------------



                     CONSOLIDATED STATEMENTS OF CASH FLOWS
       (Expressed in Cdn $000's except share and per share amounts)
                                 (unaudited)

                                                        Three months ended
--------------------------------------------------------------------------
                                                          May 31,   May 31,
                                                            2008      2007
                                                               $         $
--------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss                                                  (1,941)   (2,727)
Items not affecting cash:
Amortization of property and equipment                       235       100
Interest expense on debt component of preferred shares         -       350
Interest expense on debt component of convertible debt         -       151
Stock-based compensation expense                             145        35
Warrant expense                                               11         -
Unrealized foreign exchange loss                              60       239
Accrued interest on fair value of short term
 investments                                                 150         -
Changes in non-cash working
 capital items                                              (740)    2,654
--------------------------------------------------------------------------
Cash flows provided by (used in) operating activities     (2,080)      802
--------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of property and equipment                       (323)     (260)
Maturity of short term investments                        31,758         -
--------------------------------------------------------------------------
Cash flows used in investing activities                   31,435      (260)
--------------------------------------------------------------------------

FINANCING ACTIVITIES
Change in line of credit                                       4      (572)
Exercise of warrants                                         152         -
Issuance of common stock net of stock issuance costs           -    27,033
--------------------------------------------------------------------------
Cash flows provided by financing activities                  156    26,461
--------------------------------------------------------------------------

Effect of foreign exchange on cash and cash equivalents      (60)     (239)

Net increase in cash and cash equivalents                 29,451    26,764
Cash and cash equivalents at beginning of period           1,551     1,334
--------------------------------------------------------------------------
Cash and cash equivalents at end of period                31,002    28,098
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Cash paid during the period for:
Interest                                                       9        96
--------------------------------------------------------------------------

/T/


-30-

FOR FURTHER INFORMATION PLEASE CONTACT:

DragonWave Inc.
Russell Frederick
Chief Financial Officer
613-599-9991 ext. 2253
rfrederick@dragonwaveinc.com

OR

DragonWave Inc.
Bruce Chick
Director, Investor Relations
613-599-9991 ext. 2517
bchick@dragonwaveinc.com

OR

Canaccord Adams Limited
Andrew Chubb
44 20 7050 6500

SUBJECT:   ERN

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