DragonWave Inc. Reports Third Quarter Fiscal Year 2014 Results

OTTAWA, CANADA--(Marketwired - Jan 13, 2014) - 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 third quarter ended November 30, 2013. 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 2014 was $22.2 million, compared with $25.5 million in the second quarter of fiscal year 2014 and $38.5 million in the third quarter of fiscal year 2013. Revenue from the Nokia Solutions and Networks ("NSN") channel represented 51% of revenue in the fiscal quarter.

Gross margin for the third quarter of fiscal year 2014 was 11.1%, compared with 11.0% in the second quarter of fiscal year 2014 and 18.6% in the third quarter of fiscal year 2013. We expect solid gross margin improvement starting in Q4.

On January 10, 2014 we signed a new supply agreement with a major US-based carrier. Activities associated with the first project with this carrier are underway. Deployments from the projects anticipated under this agreement are expected to commence during the first half of 2014.

"Network rollout plans in the United States and India are at the core of our future growth strategy. To position ourselves for these opportunities we have increased and extended our credit facilities in addition to the cash we raised in September" said DragonWave President and CEO, Peter Allen.

Net loss applicable to shareholders in the third quarter of fiscal year 2014 was $5.5 million or ($0.12) per basic and diluted share. This compares to a net loss applicable to shareholders of $10.5 million or ($0.28) per basic diluted share in the second quarter of fiscal year 2014 and net loss of $13.9 million or ($0.36) per basic and diluted share in the third quarter of fiscal year 2013.

Cash and cash equivalents totaled $23.5 million at the end of the third quarter of fiscal year 2014, compared to $9.8 million at the end of the second quarter of fiscal year 2014.

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, 2014.

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: [phone]
• International: [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® and Horizon® are registered trademarks of DragonWave Inc.

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements within the meaning of 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 margin improvement. 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, in relation to expected margin improvement, the timing of revenues and expenses. 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. 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 the public documents filed by DragonWave with U.S. and Canadian securities regulatory authorities. 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.

Forward-looking 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. Material risks and uncertainties relating to our business are described under the heading "Risks and Uncertainties" in the MD&A dated January 13, 2014 and in the Company's Annual Information Form dated May 17, 2013 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.

CONSOLIDATED BALANCE SHEETS
Expressed in US $000's except share amounts
(Unaudited)
		As at		As at
		November 30,		February 28,
		2013		2013
Assets
Current Assets
	Cash and cash equivalents	23,545		22,959
	Trade receivables	19,009		35,452
	Inventory	31,642		32,722
	Other current assets	4,920		6,077
	Contingent receivable	-		13,843
	Deferred tax asset	69		69
		79,185		111,122
Long Term Assets
	Property and equipment	3,848		7,444
	Deferred tax asset	1,536		1,581
	Deferred financing cost	-		149
	Intangible assets	1,617		2,771
	Goodwill	11,927		11,927
		18,928		23,872
Total Assets		98,113		134,994
Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	26,484		56,962
	Debt facility	-		15,000
	Deferred revenue	664		1,163
	Capital lease obligation	1,985		3,251
	Contingent liabilities	50		255
		29,183		76,631
Long Term Liabilities
	Debt facility	15,000		-
	Capital lease obligation	-		1,451
	Warrant liability	2,260		-
	Other long term liabilities	625		783
	Contingent liabilities	-		519
		17,885		2,753
Commitments
Shareholders' equity
	Capital stock	196,853		179,429
	Contributed surplus	6,948		6,047
	Deficit	(142,840	)	(120,197	)
	Accumulated other comprehensive loss	(9,679	)	(9,685	)
Total Shareholders' equity		51,282		55,594
	Non-controlling interest	(237	)	16
Total Equity		51,045		55,610
Total Liabilities and Equity		98,113		134,994
Shares issued & outstanding		52,823,364		38,048,297

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,
		2013		2012		2013		2012
REVENUE		22,169		38,452		72,154		95,583
	Cost of sales	19,709		31,314		64,080		77,569
Gross profit		2,460		7,138		8,074		18,014
EXPENSES
	Research and development	5,000		9,769		15,085		26,307
	Selling and marketing	3,479		3,935		10,036		11,950
	General and administrative	4,144		6,218		13,325		20,001
		12,623		19,922		38,446		58,258
Income (loss) before amortization of intangible assets and other items		(10,163	)	(12,784	)	(30,372	)	(40,244	)
	Amortization of intangible assets	(500	)	(1,162	)	(1,496	)	(2,903	)
	Accretion expense	(53	)	(16	)	(174	)	(68	)
	Restructuring expense	-		(839	)	-		(1,637	)
	Interest income (expense)	(392	)	(500	)	(1,310	)	(1,211	)
	Impairment of intangible assets	-		(4,407	)	-		(8,424	)
	Equity issuance expenses	(662	)	-		(662	)	-
	Gain on change in estimate	2,970		5,416		3,312		6,958
	Gain on contract amendment	417		-		5,702		-
	Gain on purchase of business	-		-		-		19,397
	Fair value adjustment - warrant liability	3,587		-		3,587		-
	Foreign exchange gain (loss)	(724	)	419		(1,219	)	(122	)
Income (loss) before income taxes		(5,520	)	(13,873	)	(22,632	)	(28,254	)
	Income tax expense (recovery)	102		63		270		(509	)
Net Income (loss)		(5,622	)	(13,936	)	(22,902	)	(27,745	)
	Net Loss Attributable to Non-Controlling Interest	113		69		259		177
Net Income (loss) applicable to shareholders		(5,509	)	(13,867	)	(22,643	)	(27,568	)
Income (loss) per share
	Basic	(0.12	)	(0.36	)	(0.55	)	(0.74	)
	Diluted	(0.12	)	(0.36	)	(0.55	)	(0.74	)
Weighted Average Shares Outstanding
	Basic	47,329,275		38,033,222		41,144,953		37,313,926
	Diluted	47,329,275		38,033,222		41,144,953		37,313,926