DragonWave Inc. Reports Second Quarter Fiscal Year 2013 Results
OTTAWA, CANADA, Oct 10, 2012 (Menafn - MARKETWIRE via COMTEX) --DragonWave Inc. DRWI a leading global supplierof packet microwave radio systems for mobile and access networks,today reported financial results for its second quarter of fiscalyear 2013, ended August 31, 2012. All figures are reported in U.S.dollars and were prepared in accordance with U.S. generally acceptedaccounting principles (GAAP).
Revenue for the second quarter of fiscal year 2013 was 44.2 million,compared with 13.6 million in the second quarter of fiscal year 2012and 13.0 million in the first quarter of fiscal year 2013.DragonWave had one customer, Nokia Siemens Networks, who generatedmore than 10% of revenue in the second quarter of fiscal year 2012.Revenue through the Nokia Siemens Networks channel totaled 32.3million in the quarter.
Gross margin for the second quarter of fiscal year 2013 was 15%,compared with 42% in the second quarter of fiscal year 2012 and 32%in the first quarter of fiscal year 2013. The gross margin in thesecond quarter of fiscal year 2013 reflects the inclusion of aninventory impairment provision of 2.6 million. Without the inventoryprovision, the gross margin in the second quarter was 21%.
Comprehensive loss applicable to shareholders in the second quarterof fiscal year 2013 was (1.1) million or (0.03) per basic anddiluted share, compared to a loss of (2.2) million or (0.06) perbasic and diluted share in the second quarter of fiscal year 2012.These results include a one-time gain of 19.4 million related to theaccounting treatment for the acquisition of the Nokia SiemensNetworks microwave transport business.
"We continue to advance our strategic priorities," said DragonWavePresident and CEO Peter Allen. "Our partnership with Nokia SiemensNetworks is still in the integration phase and involves a wide rangeof activities, including access to a wide range of major globaloperators. Following the June 1, 2012 closing of the acquisition ofNokia Siemens Networks' microwave transport business, we rationalizedour operations and reduced costs; we will continue to manage our costprofile to achieve profitability as we gain greater visibility intorevenue opportunities."
Cash, cash equivalents and restricted cash totaled 44 million,compared to 42.6 million at the end of the first quarter of fiscalyear 2013.
Revenue for the first six months of fiscal year 2013 was 57.1million, compared with 24.7 million for the first six months of2012. Net loss for the first six months of fiscal 2013 was (13.7)million or (0.37) per basic and diluted share, compared with (12.1)million or (0.34) per basic and diluted share for the first sixmonths of fiscal 2012.
DragonWave also announced today that Gerry Spencer, Chairman of theBoard, is stepping down as a director for family reasons. "Gerry hasmade a significant contribution to DragonWave," said Mr. Allen. "Wethank him for his service and wish him well in his future endeavours.Company director Claude Haw will become the new board chair. Claudehas more than 30 years of experience in the technology andtelecommunications industry. He first joined the DragonWave Board in2003. I look forward to working with Claude in his new capacity."
Revenue Outlook for Third Quarter Fiscal Year 2013
DragonWave expects revenue for the third quarter of fiscal year 2013to be in the range of 43 million to 50 million.
Webcast and Conference Call Details:
The DragonWave management team will discuss the results on a webcastand conference call beginning at 8:30 a.m. Eastern Time tomorrow,October 11, 2012.
The live webcast and presentation slides will be available at theInvestor 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: (866) 393-0571
--International: (408) 774-4000
About DragonWave
DragonWave(R) is a leading provider of high-capacity packet microwavesolutions that drive next-generation IP networks. DragonWave'scarrier-grade point-to-point packet microwave systems transmitbroadband voice, video and data, enabling service providers,government agencies, enterprises and other organizations to meettheir increasing bandwidth requirements rapidly and affordably. Theprincipal application of DragonWave's products is wireless networkbackhaul. Additional solutions include leased line replacement, lastmile fiber extension and enterprise networks. DragonWave's corporateheadquarters is located in Ottawa, Ontario, with sales locations inEurope, Asia, the Middle East and North America. For moreinformation, visit http://www.dragonwaveinc.com.
DragonWave(R) is a registered trademark of DragonWave Inc.
Forward-Looking Statements
Certain statements in this release, including the estimate of therevenue range for the third quarter of fiscal year 2013, ourstatement regarding our intentions with respect to our cost profileand the statements regarding our relationship with and thetransactions involving Nokia Siemens Networks constituteforward-looking statements or forward-looking information within themeaning of applicable securities laws. These statements are subjectto certain assumptions, risks and uncertainties.
Material factors and assumptions used to develop revenue estimatesinclude DragonWave's expectations regarding: the plans of itsexisting and new direct and indirect customers, the volume and timingof orders, shipments and revenue recognition; and the capacity of oursupply chain to meet demand. Material factors and assumptionsrelating to our relationship with Nokia Siemens Networks and the NSNTransactions include the parties' beliefs regarding the industry andmarkets in which the parties operate; successful integration of theproduct lines acquired from Nokia Siemens Networks; and expectationsregarding potential synergies and prospects for the business. Thereare risks arising out of the NSN Transactions, including thatexpected synergies will not materialize; that unexpected costs willbe incurred to integrate the business; or that end-customer demandwill not meet expectations. Material risks and uncertainties relatingto the NSN Transactions are described under the heading "Risks andUncertainties" in the MD&A dated July 11, 2012 and on pages 19-22 ofthe Company's Annual Information Form, dated May 11, 2012.
Readers are cautioned not to place undue reliance on forward-lookingstatements. These statements are provided to assist externalstakeholders in understanding DragonWave's expectations as of thedate of this release and may not be appropriate for other purposes.Actual results, performance, achievements or developments ofDragonWave may differ materially from the results, performance,achievements or developments expressed or implied by such statements.
Risk factors, in addition to those detailed above, that may cause theactual results, performance, achievements or developments ofDragonWave to differ materially from the results, performance,achievements or developments expressed or implied by such statementscan be found in DragonWave's Annual Information Form dated May 11,2012 and other public documents filed by DragonWave with Canadian andUnited States securities regulatory authorities, which are availableat www.sedar.com and www.sec.gov, respectively, and include thefollowing:
--DragonWave's growth is dependent on the development and growth of the
market for high-capacity wireless communications services.
--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.
--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.
--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.
--DragonWave's success depends on its ability to develop new products and
enhance existing products.
--DragonWave's quarterly revenue and operating results can be difficult to
predict and can fluctuate substantially.
--If DragonWave is required to change its pricing models to compete
successfully, its margins and operating results may be adversely
affected.
--DragonWave has a lengthy and variable sales cycle.
DragonWave assumes no obligation to update or revise anyforward-looking statements or forward-looking information, whetherbecause of new information, future events or otherwise, except asexpressly required by law.
CONSOLIDATED BALANCE SHEETS
Expressed in US 000's except share amounts
As atAs at
August 31,February 29,
20122012
--------------------------------
Assets
Current Assets
Cash and cash equivalents43,58652,798
Restricted cash393177
Trade receivables32,3289,850
Inventory31,11627,043
Other current assets10,6405,501
Contingent receivable8,041-
Deferred tax asset17969
--------------------------------
126,28395,438
Long Term Assets
Property and equipment9,9445,184
Deferred tax asset1,8181,308
Deferred financing cost447-
Intangible assets13,6806,264
Goodwill11,92711,927
--------------------------------
37,81624,683
Total Assets164,099120,121
--------------------------------
--------------------------------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities45,84312,720
Deferred revenue1,177723
Capital lease obligation3,970-
Contingent royalty-372
Contingent consideration-1,884
--------------------------------
50,99015,699
Long Term Liabilities
Debt facility15,000-
Capital lease obligation1,492-
Other long term liabilities5881,063
Contingent royalty-1,292
--------------------------------
17,0802,355
Commitments
Shareholders' equity
Capital stock179,373172,264
Contributed surplus5,3304,606
Deficit(79,149)(65,448)
Accumulated other comprehensive loss(9,689)(9,658)
--------------------------------
Total Shareholder's equity95,865101,764
Non-controlling interests164303
--------------------------------
Total Equity96,029102,067
Total Liabilities and Shareholder's equity164,099120,121
--------------------------------
--------------------------------
Shares issued & outstanding38,025,30535,586,206
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Expressed in US 000's and per share amounts
Three months endedSix months ended
----------------------------------------------------
August 31,August 31,August 31,August 31,
2012201120122011
----------------------------------------------------
REVENUE44,15713,62757,13124,676
Cost of sales37,4147,85246,25514,257
----------------------------------------------------
Gross profit6,7435,77510,87610,419
----------------------------------------------------
15.3%42.4%19.0%42.2%
EXPENSES
Research and
development12,1396,10516,53812,371
Selling and marketing4,3573,8498,0157,929
General and
administrative8,5133,71713,7837,680
Government assistance-(287)-(637)
----------------------------------------------------
25,00913,38438,33627,343
----------------------------------------------------
Income (loss) before
amortization of
intangible assets and
other items(18,266)(7,609)(27,460)(16,924)
Amortization of
intangible assets(1,199)(622)(1,741)(1,209)
Accretion expense(30)(276)(52)(552)
Restructuring expense--(798)-
Interest income
(expense)(740)127(711)211
Investment gain (loss)-(19)-20
Impairment of
intangible assets(1,148)(8,315)(4,017)(8,315)
Gain on change in
estimate of
contingent
liabilities35213,1611,54213,161
Gain on purchase of
business19,397-19,397-
Foreign exchange gain
(loss)462(36)(541)84
----------------------------------------------------
Income (loss) before
income taxes(1,172)(3,589)(14,381)(13,524)
Income tax expense
(recovery)-(1,310)(572)(1,301)
----------------------------------------------------
Net Income (loss)(1,172)(2,279)(13,809)(12,223)
Net Loss Attributable
to Non-Controlling
Interest5073108127
----------------------------------------------------
Net Income (loss)
applicable to
shareholders(1,122)(2,206)(13,701)(12,096)
Foreign currency
translation
differences for
foreign operations(6)76210
----------------------------------------------------
Comprehensive Income
(Loss)(1,166)(2,286)(13,871)(12,233)
Comprehensive Income
(Loss) applicable to
Non-Controlling
Interest536777119
----------------------------------------------------
Comprehensive Income
(Loss) applicable to
shareholders(1,119)(2,212)(13,732)(12,104)
Income (loss) per share
Basic(0.03)(0.06)(0.37)(0.34)
Diluted(0.03)(0.06)(0.37)(0.34)
Weighted Average Shares
Outstanding
Basic37,992,85935,494,97636,962,10335,462,012
Diluted37,992,85935,494,97636,962,10335,462,012
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in US 000's
Three months endedSix months ended
-------------------------------------------------
August 31,August 31,August 31,August 31,
2012201120122011
-------------------------------------------------
Operating Activities
Net Income (Loss)(1,172)(2,279)(13,809)(12,223)
Items not affecting cash
Amortization of property
and equipment1,7248452,4781,674
Amortization of
intangible assets1,1996221,7411,209
Accretion expense3027652552
Royalty amortization(58)(201)(151)(402)
Interest expense211-211-
Rental expense957-957-
Impairment of intangible
assets1,1488,3154,0178,315
Gain on change in
estimate of contingent
liabilities(352)(13,161)(1,542)(13,161)
Stock-based compensation3885827921,074
Gain on purchase of
business(19,397)-(19,397)-
Unrealized foreign
exchange loss(467)7264973
Future income tax
recovery-(1,310)(572)(1,301)
Inventory impairment2,6391042,673161
-------------------------------------------------
(13,150)(6,135)(21,901)(14,029)
Changes in non-cash working
capital items13,606(2,072)14,069(3,396)
-------------------------------------------------
456(8,207)(7,832)(17,425)
-------------------------------------------------
Investing Activities
Acquisition of property
and equipment(903)(220)(1,123)(669)
Acquisition of intangible
assets(163)(89)(629)(403)
Acquisition of business(12,730)-(12,730)-
Purchase of short term
investments---(22,432)
Maturity of short term
investments-6,977-24,485
-------------------------------------------------
(13,796)6,668(14,482)981
-------------------------------------------------
Financing Activities
Initial formation
contribution by non-
controlling interest in
DW-HFCL---555
Debt facility15,000-15,000-
Deferred financing cost(757)-(1,192)-
Issuance of common shares
net of issuance costs60166103344
-------------------------------------------------
14,30316613,911899
-------------------------------------------------
Effect of foreign exchange
on cash and cash
equivalents375(86)(809)(92)
Net increase (decrease) in
cash and cash equivalents1,338(1,459)(9,212)(15,637)
Cash and cash equivalents
at beginning of period42,24863,64152,79877,819
-------------------------------------------------
Cash and cash equivalents
at end of period43,58662,18243,58662,182
-------------------------------------------------
-------------------------------------------------
Cash paid during the period
for interest13-13-
-------------------------------------------------
-------------------------------------------------
Contacts:
Investor Contact:
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
Tel: 613-895-7000
Media Contact:
Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
Tel: 613-599-9991 ext 2262
Becky Obbema
Interprose Public Relations
(for DragonWave)
Becky.Obbema@interprosepr.com
Tel: (408) 778-2024
SOURCE: DragonWave Inc.
mailto:jlawlor@dragonwaveinc.com
mailto:nkittle@dragonwaveinc.com
mailto:Becky.Obbema@interprosepr.com
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