FOR: DRAGONWAVE INC.
AIM, TSX SYMBOL: DWI
October 4, 2007
DragonWave Announces Second Quarter Fiscal 2008 Results
91% growth in revenue sets new record of $9.9 Million
OTTAWA, CANADA--(Marketwire - Oct. 4, 2007) - DragonWave Inc. (TSX:DWI)(AIM:DWI)("DragonWave"), a
leading provider of carrier-grade microwave equipment for high capacity broadband wireless systems,
today issued financial results for its second quarter of fiscal year 2008 ended August 31, 2007. All
figures are prepared in accordance with Canadian generally accepted accounting principles (GAAP) and
are reported in Canadian dollars.
Revenue for the second quarter was $9.9 million, compared with $5.2 million for the same period of the
last fiscal year, an increase of 91%. Sequential growth from the first quarter of fiscal year 2008 was
15%. These results reflect another record for quarterly revenues.
Revenue from customers in North America grew to $8.2 million, more than double the $4.0 million
reported in the same quarter of fiscal year 2007. Revenue from outside North America grew to $1.7
million, up from $1.2 million in the same quarter of fiscal year 2007, representing an increase of 40%
year-over-year.
Gross margin for the second quarter was 37%, an increase over the first quarter, and an improvement
from the same quarter of fiscal year 2007. This increase is as a result of continued cost reduction
programs.
For the second quarter fiscal year 2008, the loss from operations was $1.8 million, compared to the
loss of $1.4 million in the second quarter of fiscal year 2007. Expenses increased from $3.2M to
$5.4M due to increased staffing levels, marketing activities required to support the growing
international business, and the engineering activity to comply with local certification and approval
processes. Net loss for the quarter was $2.1 million versus $2.5 million in fiscal Q2 2007.
"DragonWave made good progress during the quarter. We've seen very strong growth both in North America
and internationally, while continuing to improve our gross margins. We continue to be well positioned
as a leader in the high growth IP Ethernet based, high capacity wireless backhaul equipment market"
said Peter Allen, President and CEO of DragonWave.
The DragonWave management team will discuss the full results on a conference call to be held on
October 5, 2007 at 8:30 a.m. eastern time (1:30 p.m.BST).
Presentation material and a webcast link will be made available from the Investor Relations portal of
DragonWave's web site at http://www.dragonwaveinc.com/financialreports.asp.
Conference Call Details:
- Beginning at 8:30 a.m., EDT, (1:30 p.m. BST)
- Local call: 416-642-5212
- Toll free North American: 1-866-321-6651
- Toll free United Kingdom: 08-08-234-6237 or 08-08-234-6235 or 08-00-032-3524
A replay of the call will be made available at http://www.dragonwaveinc.com, through the Investor
Relations portal.
To review Management's Discussion and Analysis for the quarter, please go to www.sedar.com.
About DragonWave Inc.
DragonWave is a leading provider of high-capacity wireless Ethernet equipment used in emerging IP
networks. DragonWave designs, develops, and markets carrier-grade microwave radio frequency networking
equipment that wirelessly transmit broadband voice, video and other data. DragonWave's wireless
Ethernet products, which are based on a native Ethernet platform, function as a wireless extension to
an existing fibre-optic core telecommunications network. The principal application for DragonWave's
products is the backhaul function in a wireless communications network. Additional applications for
DragonWave's products include point-to-point transport in private networks, including municipal and
enterprise networks. DragonWave's corporate headquarters are located in Ottawa, Ontario, and have
sales locations in Europe and North America. The company's Web site is http://www.dragonwaveinc.com
FORWARD LOOKING STATEMENTS
This release contains certain forward-looking statements. Readers are cautioned not to place undue
reliance upon any such forward-looking statements. Forward-looking statements are based on the
company's current expectations and assumptions that are subject to a variety of risks and
uncertainties that are difficult to predict and that may be beyond DragonWave's control.
Actual results could differ materially from those expressed in any forward-looking statements due to
factors including the following:
- DragonWave's growth is dependent on the development and growth of the market for broadband wireless
access.
- 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's success depends on its ability to develop new products and enhance existing products.
- DragonWave has a history of losses and cannot provide assurance that it will attain profitability.
- If DragonWave is required to change its pricing models to compete successfully, its margins and
operating results may be adversely affected.
- DragonWave relies on a small number of customers for a large percentage of its revenue.
- DragonWave's ability to sell products and services is dependent upon it establishing and maintaining
relationships with channel partners.
- DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate
substantially.
- DragonWave has a lengthy and variable sales cycle.
Additional risks which can also impact upon forward looking statements are identified in DragonWave's
Annual Information Form which is available online at www.sedar.com. DragonWave assumes no obligation
to update these forward-looking statements as a result of new information or future events.
/T/
CONSOLIDATED INTERIM BALANCE SHEETS
(Expressed in Cdn $000's)
As at As at
August 31, February 28,
2007 2007
$ $
------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 23,064 1,334
Accounts receivable 7,219 7,677
Other receivables 1,422 986
Inventory 6,387 6,898
Prepaid expenses 383 332
------------------------------------------------------------
Total current assets 38,475 17,227
------------------------------------------------------------
Deferred financing charges 95 2,735
Property and equipment 1,678 578
------------------------------------------------------------
1,773 3,313
------------------------------------------------------------
40,248 20,540
------------------------------------------------------------
------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current
Line of credit 2,445 4,443
Accounts payable and accrued
liabilities 7,705 8,647
Deferred revenue 566 630
Convertible debt - 13,020
------------------------------------------------------------
Total current liabilities 10,716 26,740
------------------------------------------------------------
Debt component of redeemable
preferred shares - 18,004
------------------------------------------------------------
10,716 44,744
------------------------------------------------------------
Commitments and contingencies
Shareholders' equity (deficiency)
Capital stock 97,332 21,753
Contributed surplus 615 17,662
Deficit (68,415) (63,619)
------------------------------------------------------------
Total shareholders' equity
(deficiency) 29,532 (24,204)
------------------------------------------------------------
40,248 20,540
------------------------------------------------------------
------------------------------------------------------------
CONSOLIDATED INTERIM STATEMENTS OF
OPERATIONS, COMPREHENSIVE LOSS,
AND DEFICIT
(Expressed in Cdn $000's except share and per share amounts)
(unaudited)
Three months ended Six months ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
$ $ $ $
REVENUE 9,885 5,164 18,514 11,414
Cost of sales 6,274 3,390 11,878 7,919
-----------------------------------------------------------------------
Gross profit 3,611 1,774 6,636 3,495
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EXPENSES
Research and development 2,467 1,278 4,909 2,868
Selling and marketing 1,945 1,389 3,738 2,906
General and administrative 1,102 727 2,048 1,324
Investment tax credits (109) (182) (392) (381)
-----------------------------------------------------------------------
5,405 3,212 10,303 6,717
-----------------------------------------------------------------------
Loss from operations (1,794) (1,438) (3,667) (3,222)
Interest income 205 - 305 -
Interest expense (63) (65) (158) (108)
Interest expense on debt
component of
Redeemable preferred shares
and convertible debt - (921) (500) (1,776)
Amortization of deferred
financing charges - (9) - (16)
Foreign exchange loss (417) (88) (776) (387)
-----------------------------------------------------------------------
Loss before income taxes (2,069) (2,521) (4,796) (5,509
-----------------------------------------------------------------------)
Net loss and comprehensive
loss (2,069) (2,521) (4,796) (5,509)
-----------------------------------------------------------------------
Deficit, beginning of
period (66,346) (55,883) (63,619) (52,895)
-----------------------------------------------------------------------
Deficit, end of period (68,415) (58,404) (68,415) (58,404)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Loss per share
Basic and fully diluted (0.08) (0.70) (0.25) (1.52)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Basic and diluted
weighted average
number of shares
outstanding 24,639,351 3,617,288 18,908,972 3,619,644
-----------------------------------------------------------------------
-----------------------------------------------------------------------
CONSOLIDATED INTERIM STATEMENTS
OF CASH FLOWS
(Expressed in Cdn $000's)
(unaudited)
Three months ended Six months ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
$ $ $ $
-----------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss (2,069) (2,521) (4,796) (5,509)
Items not affecting
cash:
Amortization of property
and equipment 108 134 207 274
Interest expense on debt
component of preferred
shares - 587 350 1,146
Amortization of deferred
financing costs - 9 - 16
Interest expense on debt
component of convertible
debt - 334 151 630
Stock-based compensation
expense 38 24 73 32
Unrealized foreign
exchange loss (41) 10 321 110
Changes in non-cash
working capital items (538) 197 2,116 199
-----------------------------------------------------------------------
Cash flows used in
operating activities (2,502) (1,226) (1,578) (3,102)
-----------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property
and equipment (1,048) (65) (1,307) (154)
-----------------------------------------------------------------------
Cash flows used in
investing activities (1,048) (65) (1,307) (154)
-----------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of capital
lease obligations - - - (12)
Repayment of line of
credit (1,426) 1,221 (1,998) 1,077
Issuance of common stock
and stock issuance costs (99) - 26,934 -
-----------------------------------------------------------------------
Cash flows provided by
(used in) financing
activities (1,525) 1,221 24,936 1,065
-----------------------------------------------------------------------
Effect of foreign
exchange on cash
and cash equivalents 41 (10) (321) (110)
Net increase (decrease)
in cash and cash
equivalents (5,034) (80) 21,730 (2,301)
Cash and cash equivalents
at beginning of period 28,098 2,899 1,334 5,121
Cash and cash equivalents
at end of period 23,064 2,820 23,064 2,820
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Cash paid during the
period for: Interest 63 65 158 108
-----------------------------------------------------------------------
-----------------------------------------------------------------------
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
DragonWave Inc.
Russell Frederick
Chief Financial Officer
613-599-9991 ext. 2253
rfrederick@dragonwaveinc.com
OR
DragonWave Inc.
Nadine Kittle
Media Relations
613-599-9991 ext. 2262
nkittle@dragonwaveinc.com
OR
Canaccord Adams Limited
Chris Bowman / Andrew Chubb
44 20 7050 6500
OR
Weber Shandwick Financial
John Moriarty
Consultant
020 7067 0736
Mob: 07971 402224
jmoriarty@webershandwick.com
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