DragonWave Inc.
TSX : DWI
AIM : DWI

DragonWave Inc.

July 10, 2008 17:01 ET

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



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#


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™ 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.



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

As at As at
May 31, February 29,
2008 2008
$ $
------------------------------------------------------------------
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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
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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
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54,988 59,815
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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
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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)
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6,835 4,899
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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)
--------------------------------------------------------------------------
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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
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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)
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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
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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
--------------------------------------------------------------------------
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Cash paid during the period for:
Interest 9 96
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Contact Information

  • 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