DragonWave Inc.
LSE : DWI

DragonWave Inc.

October 10, 2008 02:00 ET

DragonWave Announces Second Quarter Fiscal 2009 Results

FOR:  DRAGONWAVE INC.

AIM, TSX SYMBOL:  DWI

October 9, 2008

DragonWave Announces Second Quarter Fiscal 2009 Results

OTTAWA, CANADA--(Marketwire - Oct. 9, 2008) - DragonWave Inc. ("DragonWave"), (TSX:DWI)(AIM:DWI) a
leading global supplier of next-generation wireless networks, today issued financial results for its
second quarter of fiscal year 2009 ended August 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 $10.6 million, compared with $9.9 million for the same period of the last
fiscal year, an increase of 7%.

Revenue from outside North America increased 73% from $1.7 million to $2.9 million and represented 28%
of total revenue for the quarter. Revenue from customers within North America decreased 7% from $8.2
million to $7.6 million and represented 72% of total revenue for the quarter.

Gross margin for the second quarter was 34%, a decrease of 2% from the gross margin reported in the
second quarter of fiscal 2008.

For the second quarter fiscal year 2009, the loss from operations was $2.8 million, compared to a loss
of $1.8 million in the second quarter of fiscal year 2008. Expenses increased from $5.4 million to
$6.5 million due to increased sales and marketing activities required to support the growing
international business, and R&D associated with the engineering activity related to the release of new
product platforms and variants. The net loss for the quarter was $1.7 million versus $2.1 million in
Q2 fiscal 2008.

"DragonWave made good progress during the quarter as we continued to increase our market presence. We
took major steps forward on three continents with the Sprint win in North America, the Altitude
announcement in Europe, and the addition of Brightstar in the Caribbean and Latin American region. Our
product portfolio continues to perform well in the high capacity wireless backhaul market globally."
said Peter Allen, President and CEO of DragonWave.

The DragonWave management team will discuss the results on a conference call October 10, 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: 52795#

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
                                     August 31,          February 29,
                                          2008                  2008
                                             $                     $
--------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents               27,697                 1,551
Short term investments                       -                31,908
Accounts receivable                     10,424                11,433
Other receivables                          679                 1,092
Inventory                               13,097                10,584
Prepaid expenses                           475                   424
--------------------------------------------------------------------
Total current assets                    52,372                56,992

Property and equipment                   2,999                 2,823
--------------------------------------------------------------------
                                         2,999                 2,823
--------------------------------------------------------------------
                                        55,371                59,815
--------------------------------------------------------------------
--------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Line of credit                             576                   550
Accounts payable and
 accrued liabilities                     7,933                 9,055
Deferred revenue                         1,526                 1,713
--------------------------------------------------------------------
Total current liabilities               10,035                11,318

Commitments

Shareholders' equity
Capital stock                          119,916               119,435
Contributed surplus                        909                   933
Deficit                                (75,489)              (71,871)
--------------------------------------------------------------------
Total shareholders' equity              45,336                48,497
--------------------------------------------------------------------
                                        55,371                59,815
--------------------------------------------------------------------
--------------------------------------------------------------------



DragonWave Inc.

                         CONSOLIDATED STATEMENTS OF
                       OPERATIONS, COMPREHENSIVE LOSS
                               AND DEFICIT
       (Expressed in Cdn $000's except share and per share amounts)
                               (unaudited)

                                Three months ended        Six months ended
--------------------------------------------------------------------------
                                Aug 31,     Aug 31,     Aug 31,     Aug 31,
                                  2008        2007        2008        2007

                                     $           $           $           $
--------------------------------------------------------------------------

REVENUE                         10,572       9,885      21,297      18,514
Cost of sales                    6,945       6,274      13,289      11,878
--------------------------------------------------------------------------
Gross profit                     3,627       3,611       8,008       6,636
--------------------------------------------------------------------------

EXPENSES
Research and development         2,594       2,467       5,725       4,909
Selling and marketing            2,783       1,945       5,407       3,738
General and administrative       1,133       1,102       2,263       2,048
Investment tax credits             (50)       (109)       (100)       (392)
--------------------------------------------------------------------------
                                 6,460       5,405      13,295      10,303
--------------------------------------------------------------------------
Loss from operations            (2,833)     (1,794)     (5,287)     (3,667)

Interest income                    179         205         433         305
Interest expense                    (9)        (63)        (18)       (158)
Interest expense on debt
 component of redeemable
 preferred shares and
 convertible debt                    -           -           -        (500)
Foreign exchange gain (loss)       997        (417)      1,265        (776)
--------------------------------------------------------------------------
Loss before income taxes        (1,666)     (2,069)     (3,607)     (4,796)
Income Taxes                       (11)          -         (11)          -
--------------------------------------------------------------------------
Net and Comprehensive Loss      (1,677)                 (3,618)

Deficit, beginning of period   (73,812)    (66,346)    (71,871)    (63,619)
--------------------------------------------------------------------------
Deficit, end of period         (75,489)    (68,415)    (75,489)    (68,415)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Loss per share
Basic and fully diluted          (0.06)      (0.08)      (0.13)      (0.25)
--------------------------------------------------------------------------

Basic and diluted weighted
 average number of shares
 outstanding                28,555,335  24,639,351  28,517,929  18,908,972
--------------------------------------------------------------------------



DragonWave Inc.

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

                                Three months ended        Six months ended
--------------------------------------------------------------------------
                                Aug 31,     Aug 31,     Aug 31,     Aug 31,
                                  2008        2007        2008        2007

                                     $           $           $           $
--------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss                        (1,677)     (2,069)     (3,618)     (4,796)
Items not affecting cash:
Amortization of property
 and equipment                     260         108         495         207
Interest expense on debt
 component of preferred shares       -           -           -         350
Interest expense on debt
 component of convertible debt       -           -           -         150
Stock-based compensation expense   157          38         303          73
Warrant expense                     (9)          -           2           -
Unrealized foreign exchange loss  (124)        (41)        (64)        321
Accrued interest on fair value
 of short term investments           -           -         150           -
Changes in non-cash working
 capital items                  (1,711)       (538)     (2,450)      2,117
--------------------------------------------------------------------------
Cash flows used in
 operating activities           (3,104)     (2,502)     (5,182)     (1,578)
--------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of property
 and equipment                    (347)     (1,048)       (670)     (1,307)
Maturity of short term
 investments                         -           -      31,758           -
--------------------------------------------------------------------------
Cash flows (used in) provided
 by investing activities          (347)     (1,048)     31,088      (1,307)
--------------------------------------------------------------------------

FINANCING ACTIVITIES
Change in line of credit            22      (1,426)         26      (1,998)
Exercise of warrants                 -           -         150           -
Issuance of common stock
 net of stock issuance costs         -         (99)          -      26,934
--------------------------------------------------------------------------
Cash flows (used in) provided
 by financing activities            22      (1,525)        176      24,936
--------------------------------------------------------------------------
Effect of foreign exchange
 on cash and cash equivalents      124          41          64        (321)

Net increase in cash and
 cash equivalents               (3,305)     (5,034)     26,146      21,730
Cash and cash equivalents
 at beginning of period         31,002      28,098       1,551       1,334
--------------------------------------------------------------------------
Cash and cash equivalents
 at end of period               27,697      23,064      27,697      23,064
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Cash paid during the
 period for:
Interest                             9          63          18         158
--------------------------------------------------------------------------

/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
www.dragonwaveinc.com

OR

Canaccord Adams Limited
Andrew Chubb
44 20 7050 6500

SUBJECT:   ERN

Contact Information

  • DragonWave Inc.