DragonWave Inc.
TSX : DWI
AIM : DWI

DragonWave Inc.

October 09, 2008 17:17 ET

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™ 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
August 31, February 29,
2008 2008
$ $
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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
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Total current assets 52,372 56,992

Property and equipment 2,999 2,823
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2,999 2,823
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55,371 59,815
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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
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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)
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Total shareholders' equity 45,336 48,497
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55,371 59,815
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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
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Gross profit 3,627 3,611 8,008 6,636
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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)
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6,460 5,405 13,295 10,303
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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)
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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)
--------------------------------------------------------------------------
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Loss per share
Basic and fully diluted (0.06) (0.08) (0.13) (0.25)
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Basic and diluted weighted
average number of shares
outstanding 28,555,335 24,639,351 28,517,929 18,908,972
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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
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Cash flows used in
operating activities (3,104) (2,502) (5,182) (1,578)
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INVESTING ACTIVITIES
Acquisition of property
and equipment (347) (1,048) (670) (1,307)
Maturity of short term
investments - - 31,758 -
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Cash flows (used in) provided
by investing activities (347) (1,048) 31,088 (1,307)
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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
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Cash flows (used in) provided
by financing activities 22 (1,525) 176 24,936
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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
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Cash and cash equivalents
at end of period 27,697 23,064 27,697 23,064
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Cash paid during the
period for:
Interest 9 63 18 158
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