EX-99.1 2 a2199331zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

         LOGO

FOR IMMEDIATE RELEASE

DRAGONWAVE INC. ANNOUNCES FIRST QUARTER FISCAL YEAR 2011 RESULTS

        Ottawa, Canada, July 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 its first quarter fiscal year 2011, ended May 31, 2010. All figures are reported in U.S. dollars and were prepared in accordance with Canadian generally accepted accounting principles.

Q1 FY2011 Performance Summary

Revenue of $48.7 million, up 275% versus $13.0 million in Q1 FY2010
Gross margin of 44% compared with 35% in Q1 FY2010
Operating margin of 20%
GAAP diluted earnings per share of $0.26
Cash generated from operations of $3.5 million
Ending cash, cash equivalents and short-term investments of $115.8 million

        Revenue for the first quarter of fiscal year 2011 was $48.7 million, compared with $13.0 million in the first quarter of fiscal year 2010 and $61.0 million in the fourth quarter of fiscal year 2010. Revenue from customers within North America was $42.9 million, compared with $10.5 million in the first quarter of the prior fiscal year. DragonWave had one major customer in the first quarter of fiscal year 2011 that generated 78% of revenue.

        Net income in the first quarter of fiscal year 2011 was $9.7 million or $0.26 per diluted share, compared with a net loss of $2.4 million or ($0.08) per diluted share in the first quarter of 2010. Gross margin for the first quarter was 43.6%, compared with 34.5% in the first quarter of the prior fiscal year; operating margin was 20% in the quarter.

        "DragonWave delivered strong year-over-year growth in the first quarter," said DragonWave President and CEO Peter Allen. "We are focused on achieving our key strategic objectives of broadening and deepening our global market presence, expanding our customer base and continuing to deliver innovative solutions. The global mobile broadband Internet is unstoppable, which will drive the growth for DragonWave solutions in markets throughout the world."

        Cash, cash equivalents, and short-term investments totaled $115.8 million at the end of Q1 FY2011, compared to $113.4 million at the end of the prior quarter, and $20.0 million at the end of Q1 FY2010.

Revenue Outlook for Q2 FY2011

        Beginning in Q1 FY2011, DragonWave is reporting financial results in US dollars. The Company expects revenue for Q2 FY2011 to be approximately $25 million. DragonWave's largest customer is expected to contribute approximately 25% of Q2 FY2011 revenue. We expect significant growth from other customers from the $10.7 million level in Q1 of FY2011 and estimate that revenue from these customers will be approximately 75% of total revenue in Q2 of FY2011.

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, July 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, visit http://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 second 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 at www.sedar.com and www.sec.gov, respectively, and include the following:

    •
    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.

    •
    DragonWave may conduct acquisitions of products and businesses. There are risks associated with such acquisitions.

    •
    DragonWave's success depends on its ability to develop new products and enhance existing products.

    •
    If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected.

    •
    DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially.

    •
    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:
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
Tel: 613-599-9991 ext 2252		   Media Contact:
Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
Tel: 613-599-9991 ext 2262


CONSOLIDATED BALANCE SHEETS

Expressed in US $000's

 
   As at
May 31,
2010 		  As at
February 28,
2010 		 
 
    
   (Note 2)
  

Assets

              

Current Assets

              
 

Cash and cash equivalents

     70,559     105,276  
 

Short term investments

     45,266     8,074  
 

Trade receivables

     17,687     28,926  
 

Other receivables

     983     1,801  
 

Inventory

     28,006     23,910  
 

Prepaid expenses

     1,336     721  
 

Future income tax asset

     331     436  
           

    164,168     169,144  

Long Term Assets

              
 

Property, equipment and intangible assets

     8,517     7,546  
 

Future income tax asset

     155     59  
           

    8,672     7,605  

Total Assets

     172,840     176,749  
           

Liabilities

              

Current Liabilities

              
 

Accounts payable and accrued liabilities

     21,317     33,949  
 

Income taxes payable

     363     835  
 

Deferred revenue

     800     1,017  
           

    22,480     35,801  

Long Term Liabilities

    
2,436		    
2,102		  

Shareholders' equity

              
 

Capital stock

     178,482     179,174  
 

Contributed surplus

     1,663     1,375  
 

Deficit

     (22,603 )   (32,085 )
 

Accumulated other comprehensive income

     (9,618 )   (9,618 )
           

    147,924     138,846  

Total Liabilities and Shareholders' Equity

    
172,840		    
176,749		  
           

Shares issued & outstanding

    
36,789,760		    
36,934,917		  


CONSOLIDATED STATEMENTS OF OPERATIONS,
COMPREHENSIVE INCOME (LOSS)

Expressed in US $000's except share and per share amounts

 
   Three months ended
May 31 		 
 
   2010   2009  
 
    
   (Note 2)
  

REVENUE

     48,726     12,999  
 

Cost of sales

     27,495     8,509  
           

Gross profit

     21,231     4,490  
           

EXPENSES

              
 

Research and development

     4,698     2,465  
 

Selling and marketing

     4,136     2,069  
 

General and administrative

     2,576     1,003  
 

Investment tax credits

     —     (49 )
           

    11,410     5,488  
           

Income (Loss) from operations

     9,821     (998 )
 

Interest income

     32     22  
 

Investment loss

     (49 )   —  
 

Foreign exchange gain (loss)

     117     (1,374 )
           

Income (Loss) before income taxes

     9,921     (2,350 )
 

Income tax expense

     231     —  
           

Net and Comprehensive Income (Loss)

     9,690     (2,350 )

Income (Loss) per share

              
 

Basic

     0.26     (0.08 )
 

Diluted

     0.26     (0.08 )


CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

 
   Three months ended
May 31 		 
 
   2010   2009  
 
    
   (Note 2)
  

Operating Activities

              

Net Income (loss)

     9,690     (2,350 )

Items not affecting cash

              
 

Depreciation

     713     248  
 

Stock-based compensation

     295     197  
 

Unrealized foreign exchange loss

     16     841  
 

Inventory impairment (recovery)

     (57 )   20  
 

Unrealized loss on short term investments

     49     —  
 

Accrued interest on short term investments

     (7 )   —  
           

    10,699     (1,044 )

Changes in non-cash working capital items

     (5,034 )   3,883  
           

    5,665     2,839  
           

Investing Activities

              
 

Acquisition of property, equipment and intangible assets

     (2,225 )   (482 )
 

Purchase of short term investments

     (45,308 )   —  
 

Maturity of short term investments

     8,074     11,800  
           

    (39,459 )   11,318  
           

Financing Activities

              
 

Change in line of credit

     —     30  
 

Share repurchase

     (1,054 )   —  
 

Issuance of common shares net of issuance costs

     147     9  
           

    (907 )   39  
           

Effect of foreign exchange on cash and cash equivalents

     (16 )   (841 )

Net increase (decrease) in cash and cash equivalents

     (34,717 )   13,355  

Cash and cash equivalents at beginning of period

     105,276     6,693  

Cash and cash equivalents at end of period

     70,559     20,048  
           

Cash paid during the period for interest

     —     6  
           



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CONSOLIDATED BALANCE SHEETS Expressed in US $000's
CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME (LOSS) Expressed in US $000's except share and per share amounts
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's