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FOR IMMEDIATE RELEASE
DRAGONWAVE INC. ANNOUNCES SECOND QUARTER FISCAL YEAR 2011 RESULTS
Ottawa, Canada, October 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 the second quarter fiscal year 2011, ended August 31, 2010. All figures are reported in U.S. dollars and were prepared in accordance with Canadian generally accepted accounting principles.
Revenue for the second quarter of fiscal year 2011 was $27.2 million, compared with $32.4 million in the second quarter of fiscal year 2010. Revenue from customers within North America was $20.3 million, compared with $29.1 million in the second quarter of the prior fiscal year. Revenue from customers outside North America was $6.9 million, compared with $3.3 million in the second quarter of the prior fiscal year. DragonWave had two customers that each contributed more than 10% of revenue in the second quarter of fiscal year 2011.
Net income in the second quarter of fiscal year 2011 was $1.2 million or $0.03 per diluted share, compared with net income of $5.7 million or $0.19 per diluted share in the second quarter of fiscal year 2010. Gross margin for the second quarter was 44%, compared with 42% in the second quarter of the prior fiscal year; operating margin was 4% in the quarter, compared with 17% in the second quarter of the prior fiscal year.
"I am satisfied with our progress in the second quarter in meeting key objectives to strengthen our global market presence, expand our customer and partner base, and to continue to deliver innovative solutions," said DragonWave President and CEO Peter Allen. "The industry-leading Horizon Quantum shipped commercially and contributed to revenue for the first time in the quarter. In addition, we generated revenue from our OEM partnership for the first time this quarter, and we are close to adding another OEM partner. The global demand for mobile broadband Internet services continues to expand — we are still in the early stages of the growth potential for DragonWave mobile backhaul solutions in markets throughout the world."
Revenue for the first six months of fiscal year 2011 was $75.9 million, an increase of 67% compared with $45.4 million for the first six months of the prior fiscal year. Net income for the first six months of fiscal year 2011 was $10.9 million or $0.29 per diluted share, compared with net income of $3.4 million or $0.12 per diluted share for the first half of fiscal year 2010.
Cash, cash equivalents, and short-term investments totaled $98.5 million at the end of the second quarter of fiscal year 2011, compared to $115.8 million at the end of the prior quarter, and $19.5 million at the end of the second quarter of fiscal year 2010. The Company used $9.3 million of cash in support of the share repurchase program.
Revenue Outlook for Q3 FY2011
The Company expects revenue for the third quarter of fiscal year 2011 to be approximately $30 million.
DragonWave began reporting financial results in US dollars in the first quarter of fiscal year 2011. For comparative purposes all 2010 figures have been translated to US dollars.
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, October 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, visithttp://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 third 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 atwww.sedar.com andwww.sec.gov, respectively, and include the following:
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- 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.
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- DragonWave may conduct acquisitions of products and businesses. There are risks associated with such acquisitions.
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- DragonWave's success depends on its ability to develop new products and enhance existing products.
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- If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected.
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- DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially.
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- 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.
Investor Contact: | Media Contact: | |
John Lawlor VP, Investor Relations DragonWave Inc. jlawlor@dragonwaveinc.com Tel: 613-599-9991 ext 2252 | Nadine Kittle Marketing Communications DragonWave Inc. nkittle@dragonwaveinc.com Tel: 613-599-9991 ext 2262 |
CONSOLIDATED BALANCE SHEETS
Expressed in US $000's
(unaudited)
| As at August 31, 2010 | As at February 28, 2010 | ||||||
---|---|---|---|---|---|---|---|---|
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | 43,921 | 105,276 | ||||||
Short term investments | 54,556 | 8,074 | ||||||
Trade receivables | 20,654 | 28,926 | ||||||
Other receivables | 931 | 1,801 | ||||||
Inventory | 27,508 | 23,910 | ||||||
Prepaid expenses | 1,819 | 721 | ||||||
Future income tax asset | 338 | 436 | ||||||
149,727 | 169,144 | |||||||
Long Term Assets | ||||||||
Property, equipment and intangible assets | 8,505 | 7,546 | ||||||
Future income tax asset | 106 | 59 | ||||||
8,611 | 7,605 | |||||||
Total Assets | 158,338 | 176,749 | ||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | 13,245 | 33,949 | ||||||
Income taxes payable | 93 | 835 | ||||||
Deferred revenue | 2,662 | 1,017 | ||||||
16,000 | 35,801 | |||||||
Long Term Liabilities | 2,473 | 2,102 | ||||||
Commitments | ||||||||
Shareholders' equity | ||||||||
Capital stock | 170,364 | 179,174 | ||||||
Contributed surplus | 1,992 | 1,375 | ||||||
Deficit | (22,873 | ) | (32,085 | ) | ||||
Accumulated other comprehensive income | (9,618 | ) | (9,618 | ) | ||||
139,865 | 138,846 | |||||||
Total Liabilities and Shareholders' Equity | 158,338 | 176,749 | ||||||
Shares issued & outstanding | 35,112,860 | 36,934,917 |
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Expressed in US $000's except share and per share amounts
(unaudited)
| Three months ended August 31 | Six months ended August 31 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||||||||||
REVENUE | 27,171 | 32,423 | 75,897 | 45,422 | ||||||||||
Cost of sales | 15,219 | 18,795 | 42,714 | 27,304 | ||||||||||
Gross profit | 11,952 | 13,628 | 33,183 | 18,118 | ||||||||||
EXPENSES | ||||||||||||||
Research and development | 3,733 | 3,236 | 8,431 | 5,701 | ||||||||||
Selling and marketing | 4,468 | 3,257 | 8,604 | 5,326 | ||||||||||
General and administrative | 2,607 | 1,661 | 5,183 | 2,664 | ||||||||||
Investment tax credits | — | (55 | ) | — | (104 | ) | ||||||||
10,808 | 8,099 | 22,218 | 13,587 | |||||||||||
Income from operations | 1,144 | 5,529 | 10,965 | 4,531 | ||||||||||
Interest income/(expense) | 76 | (5 | ) | 108 | 17 | |||||||||
Investment gain | 62 | — | 13 | — | ||||||||||
Gain on sale of property, equipment and intangible assets | — | 32 | — | 32 | ||||||||||
Foreign exchange gain (loss) | 69 | 64 | 186 | (1,310 | ) | |||||||||
Income before income taxes | 1,351 | 5,620 | 11,272 | 3,270 | ||||||||||
Income tax expense (recovery) | 126 | (125 | ) | 357 | (125 | ) | ||||||||
Net and Comprehensive Income | 1,225 | 5,745 | 10,915 | 3,395 | ||||||||||
Income per share | ||||||||||||||
Basic | 0.03 | 0.20 | 0.30 | 0.12 | ||||||||||
Diluted | 0.03 | 0.19 | 0.29 | 0.12 | ||||||||||
Weighted Average Shares Outstanding | ||||||||||||||
Basic | 35,978,213 | 28,620,162 | 36,447,553 | 28,594,700 | ||||||||||
Diluted | 36,690,926 | 29,675,696 | 37,345,767 | 29,281,050 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in US $000's
(unaudited)
| Three months ended August 31 | Six months ended August 31 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||||||||||
Operating Activities | ||||||||||||||
Net Income | 1,225 | 5,745 | 10,915 | 3,395 | ||||||||||
Items not affecting cash | ||||||||||||||
Depreciation | 796 | 308 | 1,509 | 556 | ||||||||||
Stock-based compensation | 336 | 276 | 631 | 473 | ||||||||||
Unrealized foreign exchange loss | 174 | 328 | 190 | 1,169 | ||||||||||
Gain on sale of property, equipment and intangible assets | — | (32 | ) | — | (32 | ) | ||||||||
Benefit on recognition of future income tax asset | — | (316 | ) | — | (316 | ) | ||||||||
Inventory impairment | 707 | 300 | 650 | 320 | ||||||||||
Unrealized gain on short term investments | (65 | ) | — | (16 | ) | — | ||||||||
Accrued interest on short term investments | (33 | ) | — | (40 | ) | — | ||||||||
3,140 | 6,609 | 13,839 | 5,565 | |||||||||||
Changes in non-cash working capital items | (10,290 | ) | (5,526 | ) | (15,324 | ) | (1,643 | ) | ||||||
(7,150 | ) | 1,083 | (1,485 | ) | 3,922 | |||||||||
Investing Activities | ||||||||||||||
Acquisition of property, equipment and intangible assets | (917 | ) | (1,368 | ) | (3,142 | ) | (1,850 | ) | ||||||
Purchase of short term investments | (69,917 | ) | — | (115,225 | ) | — | ||||||||
Maturirty of short term investments | 60,725 | — | 68,799 | 11,800 | ||||||||||
(10,109 | ) | (1,368 | ) | (49,568 | ) | 9,950 | ||||||||
Financing Activities | ||||||||||||||
Change in line of credit | — | 1 | — | 31 | ||||||||||
Share repurchase | (9,269 | ) | — | (10,323 | ) | — | ||||||||
Issuance of common shares net of issuance costs | 64 | 32 | 211 | 41 | ||||||||||
(9,205 | ) | 33 | (10,112 | ) | 72 | |||||||||
Effect of foreign exchange on cash and cash equivalents | (174 | ) | (328 | ) | (190 | ) | (1,169 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (26,638 | ) | (580 | ) | (61,355 | ) | 12,775 | |||||||
Cash and cash equivalents at beginning of period | 70,559 | 20,048 | 105,276 | 6,693 | ||||||||||
Cash and cash equivalents at end of period | 43,921 | 19,468 | 43,921 | 19,468 | ||||||||||
Cash paid during the period for interest | — | 13 | — | 19 | ||||||||||
DRAGONWAVE INC. ANNOUNCES SECOND QUARTER FISCAL YEAR 2011 RESULTS
CONSOLIDATED BALANCE SHEETS Expressed in US $000's (unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Expressed in US $000's except share and per share amounts (unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's (unaudited)