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FOR IMMEDIATE RELEASE
DRAGONWAVE INC. ANNOUNCES SECOND QUARTER FISCAL YEAR 2012 RESULTS
Ottawa, Canada, October 5, 2011 — 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 second quarter of fiscal year 2012, ended August 31, 2011. All figures are reported in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.
Revenue for the second quarter of fiscal year 2012 was $13.6 million, compared with $27.2 million in the second quarter of fiscal year 2011 and $11.0 million in the first quarter of fiscal year 2012. Revenue from customers within North America was $11.8 million, compared with $20.3 million in the second quarter of the prior fiscal year. DragonWave had two customers who generated more than 10% of revenue in the second quarter of fiscal year 2012.
Gross margin for the second quarter of fiscal year 2012 was 42%, compared with 44% in the second quarter of fiscal year 2011. Before amortization of intangible assets and other items, the loss in the second quarter of fiscal year 2012 was $7.6 million, compared with income of $1.2 million in the second quarter of fiscal year 2011. Net and comprehensive loss applicable to shareholders in the second quarter was $2.2 million or ($0.06) per diluted share, compared with income of $1.2 million or $0.03 per diluted share in the second quarter of the prior fiscal year. The results reflect a reduction in the expected earn-out payment associated with the Axerra acquisition which, when combined with the reduction of the related intangibles, generated a net one-time gain of $6.2 million or $0.17 per diluted share at the net and comprehensive loss level.
"We continue to make progress in a number of promising opportunities with major mobile operators globally and we remain positive about our prospects," said DragonWave President and CEO Peter Allen.
Cash, cash equivalents, restricted cash, and short-term investments totaled $71.6 million, compared to $79.9 million at the end of the first quarter of fiscal year 2012, and $89.7 million at the end of the fourth quarter of fiscal year 2011.
Revenue Outlook for Q3 FY2012
DragonWave expects revenue for the third quarter of fiscal year 2012 to be in the range of $12 million to $15 million.
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 6, 2011.
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 of the revenue range for the third quarter of fiscal year 2012 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: the network deployment plans of its existing and new customers, and the volume and timing of orders, shipments and revenue recognition. 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 4, 2011 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:
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- DragonWave relies on a small number of customers for a large percentage of its revenue and DragonWave's future growth depends on the success of its customer diversification efforts.
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- DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services.
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- Network deployment plans by DragonWave's existing and potential customers are capital intensive and the timing of such deployments is affected by such customers' access to capital.
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- 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.
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- 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 except share and per share amounts
(unaudited)
| As at August 31, 2011 | As at February 28, 2011 | ||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | 62,182 | 77,819 | ||||||
Restricted cash | 219 | 714 | ||||||
Short term investments | 9,194 | 11,181 | ||||||
Trade receivables | 10,614 | 11,579 | ||||||
Inventory | 31,532 | 28,204 | ||||||
Other current assets | 5,226 | 5,306 | ||||||
Deferred income tax asset | 524 | 553 | ||||||
119,491 | 135,356 | |||||||
Long Term Assets | ||||||||
Property and equipment | 6,555 | 7,560 | ||||||
Deferred income tax asset | 2,167 | 808 | ||||||
Intangible assets | 5,808 | 14,929 | ||||||
Goodwill | 11,927 | 11,927 | ||||||
26,457 | 35,224 | |||||||
Total Assets | 145,948 | 170,580 | ||||||
LIABILITIES | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | 15,034 | 15,967 | ||||||
Deferred revenue | 1,541 | 1,453 | ||||||
Contingent royalty | 301 | 622 | ||||||
Contingent consideration | 3,773 | 14,622 | ||||||
20,649 | 32,664 | |||||||
Long Term Liabilities | ||||||||
Contingent royalty | 1,449 | 3,290 | ||||||
Other long term liabilities | 1,491 | 1,999 | ||||||
2,940 | 5,289 | |||||||
COMMITMENTS | ||||||||
Shareholders' equity | ||||||||
Capital stock | 172,037 | 171,570 | ||||||
Contributed surplus | 3,593 | 2,642 | ||||||
Deficit | (44,063 | ) | (31,967 | ) | ||||
Accumulated other comprehensive loss (AOCL) | (9,636 | ) | (9,618 | ) | ||||
Total shareholder's equity | 121,931 | 132,627 | ||||||
Non-controlling interests | 428 | — | ||||||
Total Equity | 122,359 | 132,627 | ||||||
Total Liabilities and Equity | 145,948 | 170,580 | ||||||
Shares issued & outstanding | 35,530,757 | 35,421,893 |
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Expressed in US $000's except share and per share amounts
(unaudited)
| Three months ended August 31 | Six months ended August 31 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||||||||||
REVENUE | 13,627 | 27,171 | 24,676 | 75,897 | ||||||||||
Cost of sales | 7,852 | 15,219 | 14,257 | 42,714 | ||||||||||
Gross profit | 5,775 | 11,952 | 10,419 | 33,183 | ||||||||||
EXPENSES | ||||||||||||||
Research and development | 6,365 | 3,668 | 12,962 | 8,299 | ||||||||||
Selling and marketing | 3,849 | 4,460 | 7,929 | 8,589 | ||||||||||
General and administrative | 3,457 | 2,585 | 7,089 | 5,145 | ||||||||||
Government assistance | (287 | ) | — | (637 | ) | — | ||||||||
13,384 | 10,713 | 27,343 | 22,033 | |||||||||||
Income (loss) before amortization of intangible assets and other items | (7,609 | ) | 1,239 | (16,924 | ) | 11,150 | ||||||||
Amortization of intangible assets | (622 | ) | (87 | ) | (1,209 | ) | (169 | ) | ||||||
Accretion expense | (276 | ) | — | (552 | ) | — | ||||||||
Interest income | 127 | 76 | 211 | 108 | ||||||||||
Investment gain (loss) | (19 | ) | 62 | 20 | 13 | |||||||||
Impairment of intangible assets | (8,315 | ) | — | (8,315 | ) | — | ||||||||
Gain on change in estimate of contingent liabilities | 13,161 | — | 13,161 | — | ||||||||||
Foreign exchange gain | (36 | ) | 69 | 84 | 186 | |||||||||
Income (loss) before income taxes | (3,589 | ) | 1,359 | (13,524 | ) | 11,288 | ||||||||
Income tax expense (recovery) | (1,310 | ) | 126 | (1,301 | ) | 357 | ||||||||
Net Income (loss) | (2,279 | ) | 1,233 | (12,223 | ) | 10,931 | ||||||||
Net Loss Attributable to Non-Controlling Interest | 73 | — | 127 | — | ||||||||||
Net Income (Loss) applicable to shareholders | (2,206 | ) | 1,233 | (12,096 | ) | 10,931 | ||||||||
Foreign currency translation differences for foreign operations | 13 | — | 18 | — | ||||||||||
Net and Comprehensive Income (Loss) applicable to shareholders | (2,219 | ) | 1,233 | (12,114 | ) | 10,931 | ||||||||
Income (loss) per share | ||||||||||||||
Basic | (0.06 | ) | 0.03 | (0.34 | ) | 0.30 | ||||||||
Diluted | (0.06 | ) | 0.03 | (0.34 | ) | 0.30 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||
Basic | 35,494,976 | 35,978,213 | 35,462,012 | 36,447,553 | ||||||||||
Diluted | 35,494,976 | 36,690,926 | 35,462,012 | 37,345,767 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in US $000's
(unaudited)
| Three months ended August 31 | Six months ended August 31 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | ||||||||||
Operating Activities | ||||||||||||||
Net Income (Loss) | (2,279 | ) | 1,233 | (12,223 | ) | 10,931 | ||||||||
Items not affecting cash | ||||||||||||||
Amortization of property and equipment | 845 | 709 | 1,674 | 1,340 | ||||||||||
Amortization of intangible assets | 622 | 87 | 1,209 | 169 | ||||||||||
Accretion expense | 276 | — | 552 | — | ||||||||||
Non cash royalty amortization | (201 | ) | — | (402 | ) | — | ||||||||
Impairment of intangible asstes | 8,315 | — | 8,315 | — | ||||||||||
Gain on change in estimate of contingent liabilities | (13,161 | ) | — | (13,161 | ) | — | ||||||||
Stock-based compensation | 582 | 328 | 1,074 | 615 | ||||||||||
Unrealized foreign exchange loss | 72 | 174 | 73 | 190 | ||||||||||
Non cash future income tax recovery | (1,310 | ) | — | (1,301 | ) | — | ||||||||
Inventory impairment | 104 | 707 | 161 | 650 | ||||||||||
Unrealized gain on short term investments | (25 | ) | (65 | ) | (64 | ) | (16 | ) | ||||||
Accrued interest on short term investments | (1 | ) | (33 | ) | (2 | ) | (40 | ) | ||||||
(6,161 | ) | 3,140 | (14,095 | ) | 13,839 | |||||||||
Changes in non-cash working capital items | (2,046 | ) | (10,290 | ) | (3,330 | ) | (15,324 | ) | ||||||
(8,207 | ) | (7,150 | ) | (17,425 | ) | (1,485 | ) | |||||||
Investing Activities | ||||||||||||||
Acquisition of property and equipment | (220 | ) | (656 | ) | (669 | ) | (2,806 | ) | ||||||
Acquisition of intangible assets | (89 | ) | (261 | ) | (403 | ) | (336 | ) | ||||||
Purchase of short term investments | — | (69,917 | ) | (22,432 | ) | (115,225 | ) | |||||||
Maturity of short term investments | 6,977 | 60,725 | 24,485 | 68,799 | ||||||||||
6,668 | (10,109 | ) | 981 | (49,568 | ) | |||||||||
Financing Activities | ||||||||||||||
Share repurchase | — | (9,269 | ) | — | (10,323 | ) | ||||||||
Equity contribution by non-controlling interest in DW-HFCL | — | — | 555 | — | ||||||||||
Issuance of common shares net of issuance costs | 166 | 64 | 344 | 211 | ||||||||||
166 | (9,205 | ) | 899 | (10,112 | ) | |||||||||
Effect of foreign exchange on cash and cash equivalents | (86 | ) | (174 | ) | (92 | ) | (190 | ) | ||||||
Net decrease in cash and cash equivalents | (1,459 | ) | (26,638 | ) | (15,637 | ) | (61,355 | ) | ||||||
Cash and cash equivalents at beginning of period | 63,641 | 70,559 | 77,819 | 105,276 | ||||||||||
Cash and cash equivalents at end of period | 62,182 | 43,921 | 62,182 | 43,921 | ||||||||||
Cash paid during the period for interest | — | — | — | — | ||||||||||
DRAGONWAVE INC. ANNOUNCES SECOND QUARTER FISCAL YEAR 2012 RESULTS
CONSOLIDATED BALANCE SHEETS Expressed in US $000's except share and per share amounts (unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Expressed in US $000's except share and per share amounts (unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's (unaudited)