News Column

DragonWave Inc. Reports Fourth Quarter and Full Fiscal Year 2014 Results

May 14, 2014

OTTAWA, CANADA--(Marketwired - May 14, 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 the fourth quarter and full fiscal year ended February 28, 2014. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.

Revenue for the fourth quarter of fiscal year 2014 was $17.9 million, compared with $22.2 million in the third quarter of this fiscal year and $28.3 million in the fourth quarter of the prior fiscal year. Revenue from the Nokia channel (formerly called Nokia Solutions and Networks) represented 68% of revenue in the fourth quarter of this fiscal year, versus 51% in the third quarter of this fiscal year and 61% in fourth quarter of the prior fiscal year.

Gross margin for the fourth quarter of fiscal year 2014 was 14.5%, compared with 11.1% in the third quarter of this fiscal year and 5.3% in the fourth quarter of fiscal year 2013.

Net loss applicable to shareholders in the fourth quarter of fiscal year 2014 was $11.6 million or ($0.20) per basic and diluted share. This compares to a net loss applicable to shareholders of $5.5 million or ($0.12) per basic and diluted share in the third quarter of this fiscal year and a net loss applicable to shareholders of $27.2 million or ($0.71) per basic and diluted share in the fourth quarter of fiscal year 2013.

"We are deep into the first quarter of fiscal year 2015, and we see an inflection in demand which allows me to anticipate Q1 revenue growth of approximately 50% over Q4 fiscal year 2014." said DragonWave President and CEO Peter Allen. "I am pleased that there are contributions to this growth from both the Nokia channel and our direct business, and the funnel for both is improving."

Cash and cash equivalents totaled $19.0 million at the end of the fourth quarter of fiscal year 2014, compared to $23.5 million at the end of the third quarter, and $23.0 million at the end of the fourth quarter of fiscal year 2013.

Revenue for the full fiscal year 2014 was $90.0 million, compared with $123.9 million for the prior fiscal year. Net loss applicable to shareholders for the full fiscal year 2014 was $34.2 million or ($0.83) per basic and diluted share, compared with a net loss applicable to shareholders of $54.7 million or ($1.46) per basic and diluted share in the prior fiscal year.

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 May 15, 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 Dial-in: (877) 312-9202

International Dial-in: (408) 774-4000

About DragonWave

DragonWave(R) 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(R) and Horizon(R) 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 Q1 FY2015 revenues and the funnel for both direct sales and the Nokia channel. 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, the timing of orders and deliveries, revenues and expenses, and constraints in the supply chain. 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 May 14, 2014 and in the Company's Annual Information Form 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 As at As at February 28, February 28, 2014 2013 -------------------------- Assets Current Assets Cash and cash equivalents 18,992 22,959 Trade receivables 17,408 35,452 Inventory 30,416 32,722 Other current assets 5,909 6,077 Contingent receivable - 13,843 Deferred tax asset 69 69 -------------------------- 72,794 111,122 Long Term Assets Property and equipment 3,168 7,444 Deferred tax asset 1,536 1,581 Deferred financing cost 60 149 Intangible assets 1,635 2,771 Goodwill 11,927 11,927 -------------------------- 18,326 23,872 Total Assets 91,120 134,994 -------------------------- -------------------------- Liabilities Current Liabilities Accounts payable and accrued liabilities 29,964 56,962 Debt facility - 15,000 Deferred revenue 984 1,163 Capital lease obligation 1,795 3,251 Contingent liabilities - 255 -------------------------- 32,743 76,631 Long Term Liabilities Debt facility 15,000 - Capital lease obligation - 1,451 Warrant liability 1,360 - Other long term liabilities 574 783 Contingent liabilities - 519 -------------------------- 16,934 2,753 Shareholders' equity Capital stock 198,593 179,429 Contributed surplus 7,118 6,047 Deficit (154,505) (120,197) Accumulated other comprehensive loss (9,682) (9,685) -------------------------- Total Shareholders' equity 41,524 55,594 Non-controlling interests (81) 16 -------------------------- Total Equity 41,443 55,610 Total Liabilities and Equity 91,120 134,994 -------------------------- -------------------------- Shares issued & outstanding 58,008,746 38,048,297 CONSOLIDATED STATEMENTS OF OPERATIONS Expressed in US $000's except share and per share amounts Three months Year Ended ---------------------------------------------------- February 28, February 28, February 28, February 28, 2014 2013 2014 2013 ---------------------------------------------------- REVENUE 17,857 28,294 90,011 123,877 Cost of sales 15,268 26,807 79,348 104,376 ---------------------------------------------------- Gross profit 2,589 1,487 10,663 19,501 ---------------------------------------------------- EXPENSES Research and development 4,863 7,713 19,948 34,020 Selling and marketing 3,165 4,138 13,201 16,088 General and administrative 3,762 6,600 17,087 26,601 ---------------------------------------------------- 11,790 18,451 50,236 76,709 ---------------------------------------------------- Loss before amortization of intangible assets and other items (9,201) (16,964) (39,573) (57,208) Amortization of intangible assets (404) (845) (1,900) (3,748) Accretion expense (48) (56) (222) (124) Restructuring expense - (448) - (2,085) Interest expense (440) (451) (1,750) (1,662) Impairment of intangible assets - (5,388) - (13,812) Warrant issuance expenses - - (662) - Gain/(loss) on change in estimate (553) - 2,759 6,958 Gain on contract amendment - - 5,702 - Gain on purchase of business - - - 19,397 Fair value adjustment - warrant liability (352) - 3,235 - Loss on sale of assets - (2,827) - (2,827) Foreign exchange (loss) gain (311) 145 (1,530) 23 ---------------------------------------------------- Loss before income taxes (11,309) (26,834) (33,941) (55,088) Income tax expense (recovery) 128 428 398 (81) ---------------------------------------------------- Net Loss (11,437) (27,262) (34,339) (55,007) Net Loss Attributable to Non-Controlling Interest (162) 81 97 258 ---------------------------------------------------- Net Loss applicable to shareholders (11,599) (27,181) (34,242) (54,749) Net loss per share Basic and Diluted (0.20) (0.71) (0.83) (1.46) Weighted Average Shares Outstanding Basic and Diluted 57,062,936 38,043,594 41,438,383 37,495,818 FOR FURTHER INFORMATION PLEASE CONTACT: Nadine Kittle Marketing Communications DragonWave Inc.nkittle@dragonwaveinc.com 613-599-9991 ext. 2262 John Lawlor Investor Relations DragonWave Inc.jlawlor@dragonwaveinc.com 613-599-9991 ext. 2424 Becky Obbema Interprose Public Relations (for DragonWave) Becky.Obbema@interprosepr.com (408) 778-2024 Source: DragonWave Inc.


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