EX-99.1 2 a2201556zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

         GRAPHIC

        FOR IMMEDIATE RELEASE


DRAGONWAVE ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER FISCAL YEAR 2011

        OTTAWA, Canada, January 12, 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 the third quarter of fiscal year 2011, ended November 30, 2010. All figures are in U.S. dollars and in accordance with Canadian generally accepted accounting principles.

        Revenue for the third quarter of fiscal year 2011 was $27.0 million, compared with $27.2 million in the second quarter of fiscal year 2011 and $51.6 in the third quarter of fiscal year 2010. Revenue from customers within North America was $22.8 million, compared with $20.3 million in the second quarter and $48.7 million in the third quarter of the prior fiscal year. Revenue from customers outside North America was $4.2 million, compared with $6.9 million in the second quarter of this fiscal year and $2.9 million in the third quarter of the prior fiscal year. DragonWave had two customers who each contributed more than 10% of revenue in the third quarter.

        Net loss in the third quarter of fiscal year 2011 was $0.05 million, which equated to $0.00 per diluted share, compared with net income of $1.2 million or $0.03 per diluted share in the second quarter of this fiscal year and $11.6 million or $0.34 in the third quarter of the prior fiscal year. Gross margin for the third quarter increased to 48%, from 44% in the second quarter of this fiscal year and 43% in the third quarter of the prior fiscal year.

        "We made progress this quarter in our global diversification strategy, particularly with the acquisition of Axerra Networks and the announcement of our joint venture in India," said DragonWave President and CEO Peter Allen. "Our leading-edge technology positions us well for important upcoming network builds supporting the growing demand for mobile broadband services; however, the visibility into these opportunities with both new and existing customers remains very limited at this time."

Third Quarter Fiscal Year 2011 Performance Summary

    •
    Revenue: $27.0 million, versus $27.2 Q2 FY2011 and $51.6 in Q3 FY2010

    •
    Gross margin: 48%, versus 44% in Q2 FY2011 and 43% in Q3 FY2010

    •
    Net loss: $0.05 million, versus net income of $ 1.2 million in Q2 FY2011 and $11.6 in Q3 FY2010

    •
    Diluted EPS: $0.00, versus $0.03 in Q2 FY2011 and $0.34 in Q3 FY2010

    •
    Total cash generated from operations: $6.2 million

    •
    DSO performance: 62 days, based on ending balance

    •
    Ending cash, cash equivalents, restricted cash and short-term investments: $95.4 million

    •
    Shipped product to 31 new customers in Q3 FY2011, bringing year-to-date total to 64 new customers. This included eight customers from the acquisition of Axerra.

        Revenue for the first nine months of fiscal year 2011 was $102.9 million, compared to $97.0 million for the same period of the prior fiscal year. Net income for the first nine months of fiscal 2011 was $10.7 million or $0.29 per diluted share, compared to $15.0 million or $0.48 per diluted share for the first nine months of the prior fiscal year.

Revenue Outlook for Fourth Quarter Fiscal Year 2011

        DragonWave expects revenue of approximately $15 million for the fourth quarter of fiscal year 2011.

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 tomorrow, January 13, 2011.

        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: (877) 312-9202

    •
    International: (408) 774-4000

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.

Forward-Looking Statements

        Certain statements in this release, including the estimate of revenue for the fourth 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 and DragonWave's future growth depends on the success of its customer diversification efforts.

    •
    DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services.

    •
    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 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:
 
Media Contact:
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
Tel: 613-895-7000		   Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
Tel: 613-599-9991 ext 2262


CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

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

(unaudited)

 
   Three months ended
November 30 		  Nine months ended
November 30 		 
 
   2010   2009   2010   2009  

REVENUE

     27,008     51,594     102,905     97,016  
 

Cost of sales

     14,049     29,453     56,763     56,757  
                   

Gross profit

     12,959     22,141     46,142     40,259  
                   

EXPENSES

                          
 

Research and development

     4,817     4,139     13,104     9,743  
 

Selling and marketing

     4,735     4,118     13,339     9,444  
 

General and administrative

     3,294     2,084     8,477     4,748  
 

Government assistance

     (246 )   (55 )   (246 )   (159 )
                   

    12,600     10,286     34,674     23,776  
                   

Income from operations

     359     11,855     11,468     16,483  
 

Amortization of intangible assets

     (277 )   (48 )   (421 )   (145 )
 

Accretion expense

     (122 )   —     (122 )   —  
 

Interest income

     88     12     196     29  
 

Investment gain

     155     —     168     —  
 

Gain on sale of property and equipment

     —     226     —     258  
 

Foreign exchange gain (loss)

     (44 )   (135 )   142     (1,445 )
                   

Income before income taxes

     159     11,910     11,431     15,180  
 

Income tax expense

     209     263     566     138  
                   

Net and Comprehensive Income (Loss)

     (50 )   11,647     10,865     15,042  

Income (loss) per share

                          
 

Basic

     (0.00 )   0.36     0.30     0.50  
 

Diluted

     (0.00 )   0.34     0.29     0.48  

Weighted Average Shares Outstanding

                          
 

Basic

     35,125,724     32,604,077     36,010,148     29,911,913  
 

Diluted

     36,170,040     34,085,934     36,957,219     31,229,492  


CONSOLIDATED BALANCE SHEETS

         Expressed in US $000's

(unaudited)

 
   As at
November 30,
2010 		  As at
February 28,
2010 		 

Assets

              

Current Assets

              
 

Cash and cash equivalents

     47,879     105,276  
 

Restricted cash

     387     —  
 

Short term investments

     47,099     8,074  
 

Trade receivables

     15,024     28,926  
 

Other receivables

     2,513     1,801  
 

Inventory

     26,950     23,910  
 

Prepaid expenses

     2,124     721  
 

Future income tax asset

     543     436  
           

    142,519     169,144  

Long Term Assets

              
 

Property and equipment

     8,030     7,116  
 

Future income tax asset

     1,033     59  
 

Intangible assets

     15,044     430  
 

Goodwill

     11,927     —  
           

    36,034     7,605  

Total Assets

     178,553     176,749  
           

Liabilities

              

Current Liabilities

              
 

Accounts payable and accrued liabilities

     16,287     33,949  
 

Income taxes payable

     212     835  
 

Deferred revenue

     1,353     1,017  
 

Contingent royalty

     789     —  
           

    18,641     35,801  

Long Term Liabilities

              
 

Contingent consideration

     14,391     —  
 

Contingent royalty

     3,223     —  
 

Other long term liabilities

     2,002     2,102  
           

    19,616     2,102  

Commitments

              

Shareholders' equity

              
 

Capital stock

     170,513     179,174  
 

Contributed surplus

     2,324     1,375  
 

Deficit

     (22,923 )   (32,085 )
 

Accumulated other comprehensive loss

     (9,618 )   (9,618 )
           

    140,296     138,846  

Total Liabilities and Shareholders' Equity

    
178,553		    
176,749		  
           

Shares issued & outstanding

    
35,146,435		    
36,934,917		  


CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

(unaudited)

 
   Three months ended
November 30 		  Nine months ended
November 30 		 
 
   2010   2009   2010   2009  

Operating Activities

                          

Net Income

     (50 )   11,647     10,865     15,042  

Items not affecting cash

                       —  
 

Amortization of property and equipment

     761     366     2,126     825  
 

Amortization of intangible assets

     277     48     421     145  
 

Accretion expense

     122     —     122     —  
 

Stock-based compensation

     339     213     970     686  
 

Unrealized foreign exchange loss

     100     (617 )   290     552  
 

Gain on sale of property and equipment

     —     (226 )   —     (258 )
 

Non cash future income tax expense

     92     —     92     —  
 

Benefit on recognition of future income tax asset

     —     72     —     (244 )
 

Inventory impairment

     538     335     1,188     655  
 

Unrealized gain on short term investments

     74     —     58     —  
 

Accrued interest on short term investments

     (46 )   —     (86 )   —  
                   

    2,207     11,838     16,046     17,403  

Changes in non-cash working capital items

    
3,997		    
791		    
(11,327
)		  
(852
)
                   

    6,204     12,629     4,719     16,551  
                   

Investing Activities

                          
 

Acquisition of property and equipment

     (402 )   (2,242 )   (3,208 )   (3,792 )
 

Acquisition of intangible assets

     (200 )   (187 )   (536 )   (487 )
 

Acquistion of Axerra Networks Inc., net of cash acquired

     (8,700 )   —     (8,700 )   —  
 

Purchase of short term investments

     —     —     (115,225 )   —  
 

Maturirty of short term investments

     7,429     (12,750 )   76,228     (950 )
                   

    (1,873 )   (15,179 )   (51,441 )   (5,229 )
                   

Financing Activities

                          
 

Change in line of credit

     —     (543 )   —     (512 )
 

Share repurchase

     (415 )   —     (10,738 )   —  
 

Issuance of common shares net of issuance costs

     142     68,615     353     68,656  
                   

    (273 )   68,072     (10,385 )   68,144  
                   

Effect of foreign exchange on cash and cash equivalents

     (100 )   617     (290 )   (552 )

Net increase (decrease) in cash and cash equivalents

    
3,958		    
66,139		    
(57,397
)		  
78,914		  

Cash and cash equivalents at beginning of period

     43,921     19,468     105,276     6,693  
                   

Cash and cash equivalents at end of period

     47,879     85,607     47,879     85,607  
                   

Cash paid during the period for interest

     194     6     194     25  
                   



QuickLinks

DRAGONWAVE ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER FISCAL YEAR 2011
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's (unaudited)