DragonWave Announces Financial Results for Fourth Quarter and Full Fiscal Year 2013

OTTAWA, CANADA--(Marketwired - May 8, 2013) - 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, 2013. 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 2013 was $28.3 million, compared with $38.5 million in the third quarter of fiscal year 2013 and $9.2 million in the fourth quarter of fiscal year 2012. Revenue from the Nokia Siemens Networks channel represented 61% of revenue in the fiscal quarter.

Gross margin for the fourth quarter of fiscal year 2013 was 5.3%, compared with 18.6% in the third quarter of fiscal year 2013 and 13% in the fourth quarter of fiscal year 2012. The gross margins in the fourth quarters of fiscal years 2013 and 2012 reflect the inclusion of inventory impairment provisions of $0.8 million and $1.7 million respectively.

"During the fourth quarter, several factors contributed to the low gross margin including the inventory provision, a larger mix of account incentives, and higher than expected manufacturing and logistics costs. While some of these pressures will continue in the short term we expect to return to Q3 FY13 gross margin levels over the next two quarters" said DragonWave CFO Russell Frederick. "Another important step in our integration and cost reduction activities has taken place with the renewed framework with Nokia Siemens Networks that we announced on April 10, 2013. As a result of this announcement and our other actions, our expense base has now been reduced by about 40% since the middle of last year and we expect to see some further reductions over the next couple of quarters", he added.

Net loss applicable to shareholders in the fourth quarter of fiscal year 2013 was $27.3 million or ($0.71) per basic and diluted share. This compares to a net loss applicable to shareholders of $13.9 million or ($0.36) per basic diluted share in the third quarter of fiscal year 2013 and net loss of $13.4 million or ($0.38) per basic and diluted share in the fourth quarter of fiscal year 2012.

"Based on the renewed framework with Nokia Siemens Networks that we announced on April 10, 2013, it is clear that Nokia Siemens Networks is committed to offering customers the best mobile broadband solution possible including the microwave that DragonWave brings to the table. We have strong alignment with Nokia Siemens Networks on the approach to sales push, business model, and incentives for the microwave business as a part of mobile broadband offering. I am convinced that the positive actions taken to reset our operating framework are the right steps to maximize the value of the relationship. We are currently seeing a stronger sales funnel, and increased trial activity over the coming months," said DragonWave President and CEO Peter Allen.

Cash, cash equivalents, restricted cash, and short-term investments totaled $23.0 million at the end of the fourth quarter of fiscal year 2013, compared to $36.8 million at the end of the third quarter of fiscal year 2013, and $53.0 million at the end of the fourth quarter of fiscal year 2012.

Revenue for the full fiscal year 2013 was $123.9 million, compared with $45.7 million for the prior fiscal year. Net loss applicable to shareholders for the full fiscal year 2013 was $54.7 million or ($1.46) per basic and diluted share.

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 9, 2013.

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: (866) 393-0571
• International: (760) 536-8545

U.S. Filings

DragonWave has filed its Form 40-F with the U.S. Securities and Exchange Commission (SEC). A copy of the Form 40-F is available on the DragonWave investor website at http://investor.dragonwaveinc.com/.

DragonWave shareholders may request a printed copy of the complete audited financial statements, free of charge, at http://investor.dragonwaveinc.com/contactus.cfm, or by regular mail at Shareholder Services, DragonWave Inc., 411 Legget Drive, Suite 600, Ottawa, Ontario, K2K 3C9.

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® and Horizon® are registered trademarks of DragonWave Inc.

Forward-Looking Statements

Certain statements in this release, including our statements regarding gross margins, targeted expense reductions, and our relationship with and the transactions involving Nokia Siemens Networks 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 forward-looking statements include DragonWave's expectations and plans regarding:

• The successful implementation of the renewed framework with Nokia Siemens Networks that was announced on April 10, 2013.

• Our ability to obtain operating expense reductions through measures including consolidation and rationalization of the business acquired from Nokia Siemens Networks, migration to new contract manufacturers, and optimization of our logistical framework to reduce overhead costs related to hardware sales.

There are risks associated with these assumptions, including that expected synergies will not materialize; that unexpected costs will be incurred; or that end-customer demand will not meet expectations.

Material risks and uncertainties relating to our business are described under the heading "Risks and Uncertainties" in the MD&A dated May 8, 2013 and on pages 19-22 of the Company's Annual Information Form, dated May 11, 2012.

Readers are cautioned not to place undue reliance on forward-looking 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, in addition to those detailed above, 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 11, 2012 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.

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.

CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts

		As at		As at
		February 28,		February 29,
		2013		2012
Assets
Current Assets
	Cash and cash equivalents	22,959		52,798
	Restricted cash	-		177
	Trade receivables	35,452		9,850
	Inventory	32,722		27,043
	Other current assets	6,077		5,501
	Contingent receivable	13,843		-
	Deferred tax asset	69		69
		111,122		95,438
Long Term Assets
	Property and equipment	7,444		5,184
	Deferred tax asset	1,581		1,308
	Deferred financing cost	149		-
	Intangible assets	2,771		6,264
	Goodwill	11,927		11,927
		23,872		24,683
Total Assets		134,994		120,121
Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	56,962		12,720
	Debt facility	15,000		-
	Deferred revenue	1,163		725
	Capital lease obligation	3,251		-
	Contingent liabilities	255		372
	Contingent consideration	-		1,884
		76,631		15,701
Long Term Liabilities
	Capital lease obligation	1,451		-
	Other long term liabilities	783		1,063
	Contingent liabilities	519		1,292
		2,753		2,355
Commitments
Shareholders' equity
	Capital stock	179,429		172,264
	Contributed surplus	6,047		4,606
	Deficit	(120,197	)	(65,448	)
	Accumulated other comprehensive loss	(9,685	)	(9,658	)
Total Shareholders' equity		55,594		101,764
	Non-controlling interests	16		301
Total Equity		55,610		102,065
Total Liabilities and Shareholders' equity		134,994		120,121
Shares issued & outstanding		38,048,297		35,586,206

CONSOLIDATED STATEMENTS OF OPERATIONS

Expressed in US $000's and per share amounts

		Three months ended				Year ended
		February 28,		February 29,		February 28,		February 29,
		2013		2012		2013		2012
REVENUE		28,294		9,150		123,877		45,656
	Cost of sales	26,807		8,006		104,376		29,255
Gross profit		1,487		1,144		19,501		16,401
EXPENSES
	Research and development	7,713		5,400		34,020		22,898
	Selling and marketing	4,138		3,585		16,088		15,307
	General and administrative	6,600		4,735		26,601		17,653
	Government assistance	-		-		-		(902	)
		18,451		13,720		76,709		54,956
Income (loss) before amortization of intangible assets and other items		(16,964	)	(12,576	)	(57,208	)	(38,555	)
	Amortization of intangible assets	(845	)	(373	)	(3,748	)	(1,986	)
	Accretion expense	(56	)	(38	)	(124	)	(650	)
	Restructuring expense	(448	)	-		(2,085	)	-
	Interest income (expense) (net)	(451	)	39		(1,662	)	393
	Investment gain (loss)	-		46		-		67
	Impairment of intangible assets	(5,388	)	-		(13,812	)	(8,315	)
	Gain on change in estimate	-		623		6,958		15,146
	Gain on purchase of business	-		-		19,397		-
	Loss on sale of assets	(2,827	)	-		(2,827	)	-
	Foreign exchange gain (loss)	145		218		23		100
Income (loss) before income taxes		(26,834	)	(12,061	)	(55,088	)	(33,800	)
	Income tax expense (recovery)	428		1,354		(81	)	(104	)
Net Income (loss)		(27,262	)	(13,415	)	(55,007	)	(33,696	)
	Net Loss Attributable to Non-Controlling Interest	81		47		258		215
Net Income (loss) applicable to shareholders		(27,181	)	(13,368	)	(54,749	)	(33,481	)
Income (loss) per share
	Basic	(0.71	)	(0.38	)	(1.46	)	(0.94	)
	Diluted	(0.71	)	(0.38	)	(1.46	)	(0.94	)
Weighted Average Shares Outstanding
	Basic	38,043,594		35,573,810		37,495,818		35,506,689
	Diluted	38,043,594		35,573,810		37,495,818		35,506,689