DragonWave : Reports Strong Third Quarter Fiscal Year 2015 Results

OTTAWA, CANADA--(Marketwired - Jan 13, 2015) - 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 third quarter of fiscal year 2015, ended November 30, 2014. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.

Revenue for the third quarter of fiscal year 2015 was $47.3 million, compared with $37.9 million in the second quarter of fiscal year 2015 and $22.2 million in the third quarter of fiscal year 2014. DragonWave had two customers who each generated more than 10% of revenue. Revenue through the Nokia channel was $23.7 million or 50% of total revenue this quarter, versus 60% in the second quarter of this fiscal year and 51% in the third quarter of the prior fiscal year. Another international customer contributed 26% of revenue in third quarter of fiscal year 2015.

Gross profit in the third quarter of fiscal year 2015 was 16.3%, compared with 15.5% in the second quarter and 11.1% in the third quarter of fiscal year 2014.

During this quarter, we made good progress on our journey toward profitability. Net loss applicable to shareholders in the third quarter of fiscal year 2015 was ($3.8) million or ($0.05) per basic and diluted share, compared to ($8.9) million or ($0.14) per basic and diluted share in the second quarter of this fiscal year and ($5.5) million or ($0.12) per basic and diluted share in the third quarter of fiscal year 2014.

"DragonWave delivered strong revenue growth again this quarter as we expected," said Peter Allen, President and CEO. "As we look forward, we believe that we have the opportunity in Q4 to again have sequential revenue growth of up to 10%. We are pleased that we have received first orders for our recently announced Harmony Enhanced product line, which extends our product leadership and will help drive the revenue growth opportunity beyond Q4."

Cash and cash equivalents totaled $29.5 million at the end of the third quarter of fiscal year 2015, compared to $33.6 million at the end of the second quarter.

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 January 14, 2015.

The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at: 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: [phone]

International Dial-in: [phone]

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 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®, Horizon® and Avenue® are registered trademarks of DragonWave Inc.

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 growth opportunities and the potential benefits of, and demand for, DragonWave's products, as well as our expectations regarding Q4 FY2015 revenue growth. 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. Our forward-looking statement on Q4 FY2015 revenue growth is subject to certain assumptions, including assumptions regarding the timing of orders and deliveries and the capacity of our supply chain.

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 January 13, 2015 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.

CONSOLIDATED BALANCE SHEETS
Expressed in US $000's except share amounts
(Unaudited)
		As at		As at
		November 30,		February 28,
		2014		2014
Assets
Current Assets
	Cash and cash equivalents	29,546		18,992
	Trade receivables	43,763		17,408
	Inventory	22,946		30,416
	Other current assets	5,479		5,909
	Deferred tax asset	119		69
		101,853		72,794
Long Term Assets
	Property and equipment	4,066		3,168
	Deferred tax asset	1,485		1,536
	Deferred financing cost	32		60
	Intangible assets	928		1,635
	Goodwill	11,927		11,927
		18,438		18,326
Total Assets		120,291		91,120
Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	42,619		29,964
	Deferred revenue	667		984
	Capital lease obligation	519		1,795
		43,805		32,743
Long Term Liabilities
	Debt facility	26,600		15,000
	Other long term liabilities	1,096		574
	Warrant liability	2,218		1,360
		29,914		16,934
Shareholders' equity
	Capital stock	220,934		198,593
	Contributed surplus	8,087		7,118
	Deficit	(173,653	)	(154,505	)
	Accumulated other comprehensive loss	(9,618	)	(9,682	)
Total Shareholders' equity		45,750		41,524
	Non-controlling interests	822		(81	)
Total Equity		46,572		41,443
Total Liabilities and Equity		120,291		91,120
Shares issued & outstanding		75,270,108		58,008,746

CONSOLIDATED STATEMENTS OF OPERATIONS
Expressed in US $000's except share and per share amounts
(Unaudited)
		Three months ended				Nine months ended
		November 30,		November 30,		November 30,		November 30,
		2014		2013		2014		2013
REVENUE		47,320		22,169		114,024		72,154
	Cost of sales	39,602		19,709		94,527		64,080
Gross profit		7,718		2,460		19,497		8,074
EXPENSES
	Research and development	4,353		5,000		13,046		15,085
	Selling and marketing	3,557		3,479		10,230		10,036
	General and administrative	4,282		4,144		13,137		13,325
		12,192		12,623		36,413		38,446
Loss before other items		(4,474	)	(10,163	)	(16,916	)	(30,372	)
	Amortization of intangible assets	(333	)	(500	)	(981	)	(1,496	)
	Accretion expense	(69	)	(53	)	(109	)	(174	)
	Interest expense	(301	)	(392	)	(1,105	)	(1,310	)
	Gain on change in estimate	200		2,970		301		3,312
	Gain on contract amendment	-		417		-		5,702
	Gain on sale of fixed assets	18		-		18		-
	Warrant issuance expenses	-		(662	)	(221	)	(662	)
	Fair value adjustment - warrant liability	1,880		3,587		1,028		3,587
	Foreign exchange gain (loss)	145		(724	)	519		(1,219	)
Loss before income taxes		(2,934	)	(5,520	)	(17,466	)	(22,632	)
	Income tax expense	502		102		1,047		270
Net Loss		(3,436	)	(5,622	)	(18,513	)	(22,902	)
	Net (Gain) Loss Attributable to Non-Controlling Interest	(320	)	113		(739	)	259
Net Loss applicable to shareholders		(3,756	)	(5,509	)	(19,252	)	(22,643	)
Net loss per share
	Basic	(0.05	)	(0.12	)	(0.29	)	(0.55	)
	Diluted	(0.05	)	(0.12	)	(0.29	)	(0.55	)
Weighted Average Shares Outstanding
	Basic	75,254,452		47,329,275		65,738,695		41,144,953
	Diluted	75,254,452		47,329,275		65,738,695		41,144,953