DragonWave Inc.

DragonWave Inc.

July 07, 2010 16:31 ET

DragonWave Inc. Announces First Quarter Fiscal Year 2011 Results

OTTAWA, ONTARIO--(Marketwire - July 7, 2010) - 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 its first quarter fiscal year 2011, ended May 31, 2010. All figures are reported in U.S. dollars and were prepared in accordance with Canadian generally accepted accounting principles.

Q1 FY2011 Performance Summary

- Revenue of $48.7 million, up 275% versus $13.0 million in Q1 FY2010

- Gross margin of 44% compared with 35% in Q1 FY2010 Operating margin of 20%

- GAAP diluted earnings per share of $0.26

- Cash generated from operations of $3.5 million

- Ending cash, cash equivalents and short-term investments of $115.8 million

Revenue for the first quarter of fiscal year 2011 was $48.7 million, compared with $13.0 million in the first quarter of fiscal year 2010 and $61.0 million in the fourth quarter of fiscal year 2010. Revenue from customers within North America was $42.9 million, compared with $10.5 million in the first quarter of the prior fiscal year. DragonWave had one major customer in the first quarter of fiscal year 2011 that generated 78% of revenue.

Net income in the first quarter of fiscal year 2011 was $9.7 million or $0.26 per diluted share, compared with a net loss of $2.4 million or ($0.08) per diluted share in the first quarter of 2010. Gross margin for the first quarter was 43.6%, compared with 34.5% in the first quarter of the prior fiscal year; operating margin was 20% in the quarter.

"DragonWave delivered strong year-over-year growth in the first quarter," said DragonWave President and CEO Peter Allen. "We are focused on achieving our key strategic objectives of broadening and deepening our global market presence, expanding our customer base and continuing to deliver innovative solutions. The global mobile broadband Internet is unstoppable, which will drive the growth for DragonWave solutions in markets throughout the world."

Cash, cash equivalents, and short-term investments totaled $115.8 million at the end of Q1 FY2011, compared to $113.4 million at the end of the prior quarter, and $20.0 million at the end of Q1 FY2010.

Revenue Outlook for Q2 FY2011

Beginning in Q1 FY2011, DragonWave is reporting financial results in US dollars. The Company expects revenue for Q2 FY2011 to be approximately $25 million. DragonWave's largest customer is expected to contribute approximately 25% of Q2 FY2011 revenue. We expect significant growth from other customers from the $10.7 million level in Q1 of FY2011 and estimate that revenue from these customers will be approximately 75% of total revenue in Q2 of FY2011.

Webcast and Conference Call Details

The DragonWave management team will discuss the results on a conference call and webcast beginning at 8:30 a.m. Eastern Time, tomorrow, July 8, 2010.

Toll-free North America Dial-in: 877-312-9202

International Dial-in: 408-774-4000

The live webcast and presentation slides will be available at: http://investor.dragonwaveinc.com/events.cfm.

An archive of the webcast will be available at the same link.

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 and sources of revenue for the second quarter of fiscal year 2011 provided above, 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 such estimates include:

- DragonWave's expectations regarding network deployment plans of its existing and new customers; and

- DragonWave's expectations regarding the volume and timing of anticipated order activity.

Readers are cautioned not to place undue reliance on such 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 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 6, 2010 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.

- DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services.

- 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 may conduct acquisitions of products and businesses. There are risks associated with such acquisitions.

- 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.

Expressed in US $000's
  As at   As at  
  May 31,   February 28,  
  2010   2010  
Current Assets        
  Cash and cash equivalents 70,559   105,276  
  Short term investments 45,266   8,074  
  Trade receivables 17,687   28,926  
  Other receivables 983   1,801  
  Inventory 28,006   23,910  
  Prepaid expenses 1,336   721  
  Future income tax asset 331   436  
  164,168   169,144  
Long Term Assets        
  Property, equipment and intangible assets 8,517   7,546  
  Future income tax asset 155   59  
  8,672   7,605  
Total Assets 172,840   176,749  
Current Liabilities        
  Accounts payable and accrued liabilities 21,317   33,949  
  Income taxes payable 363   835  
  Deferred revenue 800   1,017  
  22,480   35,801  
Long Term Liabilities 2,436   2,102  
Shareholders' equity        
  Capital stock 178,482   179,174  
  Contributed surplus 1,663   1,375  
  Deficit (22,603 ) (32,085 )
  Accumulated other comprehensive income (9,618 ) (9,618 )
  147,924   138,846  
Total Liabilities and Shareholders' Equity 172,840   176,749  
Shares issued & outstanding 36,789,760   36,934,917  
Expressed in US $000's except share and per share amounts
  Three months ended  
  May 31  
  2010   2009  
REVENUE 48,726   12,999  
Cost of sales 27,495   8,509  
Gross profit 21,231   4,490  
Research and development 4,698   2,465  
Selling and marketing 4,136   2,069  
General and administrative 2,576   1,003  
Investment tax credits   (49 )
  11,410   5,488  
Income (Loss) from operations 9,821   (998 )
Interest income 32   22  
Investment loss (49 )  
Foreign exchange gain (loss) 117   (1,374 )
Income (Loss) before income taxes 9,921   (2,350 )
Income tax expense 231    
Net and Comprehensive Income (Loss) 9,690   (2,350 )
Income (Loss) per share        
Basic 0.26   (0.08 )
Diluted 0.26   (0.08 )
Expressed in US $000's
  Three months ended  
  May 31  
  2010   2009  
Operating Activities        
Net Income (loss) 9,690   (2,350 )
Items not affecting cash        
  Depreciation 713   248  
  Stock-based compensation 295   197  
  Unrealized foreign exchange loss 16   841  
  Inventory impairment (recovery) (57 ) 20  
  Unrealized loss on short term investments 49    
  Accrued interest on short term investments (7 )  
  10,699   (1,044 )
Changes in non-cash working capital items (5,034 ) 3,883  
  5,665   2,839  
Investing Activities        
  Acquisition of property, equipment and intangible assets (2,225 ) (482 )
  Purchase of short term investments (45,308 )  
  Maturity of short term investments 8,074   11,800  
  (39,459 ) 11,318  
Financing Activities        
  Change in line of credit   30  
  Share repurchase (1,054 )  
  Issuance of common shares net of issuance costs 147   9  
  (907 ) 39  
Effect of foreign exchange on cash and cash equivalents (16 ) (841 )
Net increase (decrease) in cash and cash equivalents (34,717 ) 13,355  
Cash and cash equivalents at beginning of period 105,276   6,693  
Cash and cash equivalents at end of period 70,559   20,048  
Cash paid during the period for interest -   6  

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