DragonWave Inc.

DragonWave Inc.

October 12, 2016 17:00 ET

DragonWave Reports Second Quarter Fiscal Year 2017 Results

OTTAWA, CANADA--(Marketwired - Oct. 12, 2016) - 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 the second quarter of fiscal year 2017. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles ("GAAP").

Revenue for the second quarter of fiscal year 2017 was $13.2 million, compared with $12.5 million in the first quarter of fiscal year 2017. Revenue excluding the Nokia channel grew by 30% compared to the first quarter of fiscal year 2017. Revenue from the Nokia channel decreased to 24% of total revenue, versus 38% in the first quarter of fiscal year 2017.

Gross profit before inventory provisions was 31.9% in the second quarter of fiscal year 2017, compared to 31.0% in the first quarter of fiscal year 2017. There was a $0.4 million inventory provision taken in the second quarter of fiscal year 2017, while there were no inventory provisions taken in the first quarter of fiscal year 2017.

See "Non-GAAP Financial Measures" below for the most directly comparable measure to gross profit before inventory provisions when calculated in accordance with GAAP and presented in DragonWave's financial statements.

Operating expenses were reduced by $0.4 million from $7.3 million in the first quarter of fiscal year 2017 to $6.9 million in the second quarter of the current fiscal year.

Net loss attributable to shareholders in the second quarter of fiscal year 2017 was ($3.9) million or ($0.96) per basic and diluted share. This compares to a net loss attributable to shareholders of ($4.1) million or ($1.23) per basic and diluted share in the first quarter of fiscal year 2017.

"We are pleased with the growth in our direct revenue in the quarter and the progress that we have seen on our renewal and restructuring approach. We expect to continue this progress in coming quarters" said DragonWave President & CEO, Peter Allen. "We remain focused on revenue and margin growth opportunities presented by our new feature rich products while maintaining strong cost control."

Cash and cash equivalents totaled $7.5 million at the end of the second quarter of fiscal year 2017, compared to $4.0 million at the end of the first quarter of fiscal year 2017.

Webcast and Conference Call Details:

The DragonWave management team will discuss the results on a webcast and conference call beginning at 8:30 a.m. Eastern Time on October 13, 2016.

The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at: http://investor.dragonwaveinc.com/events.cfm

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

Conference call dial-in numbers:

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

International Dial-in: (408) 774-4000

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, including a range of products ideally suited to support the emergence of underlying small cell networks. Additional solutions include leased line replacement, last mile fiber extension and enterprise networks. DragonWave's corporate headquarters are 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®, Horizon® and Avenue® are registered trademarks of DragonWave Inc.

Non-GAAP Financial Measures

This press release contains certain information that is not consistent with financial measures prescribed under GAAP. We break out "Gross profit before inventory provisions" as this measure allows management to evaluate our operational performance and compare to prior periods more effectively. "Gross profit before inventory provisions" does not have any standardized meaning prescribed by GAAP, it is therefore unlikely to be comparable to similar measures presented by other issuers and is not designed to replace other measures of financial performance or the statement of operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We believe that it is useful to compare gross profit results without the impact of inventory provisions, since our inventory provisions generally relate to technical obsolescence and excess due to market changes. We believe this non-GAAP measure also provides investors with a better ability to understand our operational performance. We calculate "Gross profit before inventory provisions" consistently over each fiscal period.

The most directly comparable GAAP measure presented in our consolidated financial statements for the three and six months ended August 31, 2016 to "Gross profit before inventory provisions" is "Gross profit".

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements or forward-looking information as defined by applicable securities laws. Forward-looking statements include statements as to DragonWave's forward opportunities and the potential benefits of, and demand for: DragonWave's products; DragonWave's strategy and ability to execute on that strategy; and the outcome of DragonWave's restructuring efforts. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of DragonWave's products compared to competitive offerings in the industry, and our ongoing efforts to manage our cash flows.

Forward-looking statements are provided to help external stakeholders understand DragonWave's expectations as of the date of this release and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on such statements. DragonWave's actual results, performance, achievements and developments may differ materially from the results, performance, achievements or developments expressed or implied by such statements, as a result of the risks identified above as well as other risks identified in our publicly filed documents. Material risks and uncertainties relating to our business are described under the heading "Risks and Uncertainties" in the MD&A dated October 12, 2016 and in the Company's Annual Information Form 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. DragonWave assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

Expressed in US $000's except share amounts
As at As at
August 31, February 29,
2016 2016
Current Assets
Cash and cash equivalents7,471 4,277
Trade receivables13,879 18,986
Inventory22,701 22,702
Other current assets2,393 2,777
46,444 48,742
Long Term Assets
Property and equipment3,092 3,702
Intangible assets495 623
3,587 4,325
Total Assets50,031 53,067
Current Liabilities
Debt facility17,030 22,152
Accounts payable and accrued liabilities25,343 23,832
Deferred revenue779 1,944
Deferred tax liability281 294
Warrant liability1,057 117
44,490 48,339
Long Term Liabilities
Deferred revenue459 498
Warrant liability3,420 3
3,879 501
Commitments and contingencies
Shareholders' equity (deficiency)
Capital stock225,943 221,128
Contributed surplus9,593 9,235
Accumulated other comprehensive loss(9,618)(9,618)
Total Shareholders' equity (deficiency)(345)2,520
Non-controlling interests2,007 1,707
Total Equity1,662 4,227
Total Liabilities and Equity50,031 53,067
Shares issued & outstanding5,486,776 3,020,069
Expressed in US $000's except share and per share amounts
Three months ended Six months ended
August 31, August 31, August 31, August 31,
2016 2015 2016 2015
Hardware and other9,530 22,613 18,152 46,177
Services3,700 4,304 7,623 7,080
13,230 26,917 25,775 53,257
Hardware and other7,085 19,458 13,804 38,208
Services1,923 2,744 3,857 4,490
Inventory provision365 730 365 1,025
9,373 22,932 18,026 43,723
Gross profit3,857 3,985 7,749 9,534
Research and development2,027 3,875 4,136 8,108
Selling and marketing1,774 3,052 3,795 6,296
General and administrative3,120 3,603 6,251 7,089
6,921 10,530 14,182 21,493
Loss before other items(3,064)(6,545)(6,433)(11,959)
Goodwill impairment- (11,927)- (11,927)
Amortization of intangible assets(94)(149)(184)(332)
Accretion expense(33)(61)(68)(132)
Interest expense(354)(560)(736)(1,091)
Warrant issuance expenses(469)- (561)-
Fair value adjustment - warrant liability602 373 846 895
Foreign exchange loss(68)(214)(220)(294)
Loss before income taxes(3,480)(19,083)(7,356)(24,840)
Income tax expense220 1,620 382 1,687
Net loss and comprehensive loss(3,700)(20,703)(7,738)(26,527)
Net income attributable to non-controlling interest(238)(269)(300)(399)
Net loss and comprehensive loss attributable to shareholders(3,938)(20,972)(8,038)(26,926)
Net loss and comprehensive loss per share
Basic and diluted(0.96)(6.96)(2.16)(8.94)
Weighted average shares outstanding
Basic and diluted4,085,920 3,014,892 3,716,149 3,013,417

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