October 12, 2016

DragonWave Reports Second Quarter Fiscal Year 2017 Results

OTTAWA, CANADA--(Marketwired - Oct. 12, 2016) - 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 second quarter of fiscal year 2017. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles ("GAAP").

Revenue for the second quarter of fiscal year 2017 was $13.2 million, compared with $12.5 million in the first quarter of fiscal year 2017. Revenue excluding the Nokia channel grew by 30% compared to the first quarter of fiscal year 2017. Revenue from the Nokia channel decreased to 24% of total revenue, versus 38% in the first quarter of fiscal year 2017.

Gross profit before inventory provisions was 31.9% in the second quarter of fiscal year 2017, compared to 31.0% in the first quarter of fiscal year 2017. There was a $0.4 million inventory provision taken in the second quarter of fiscal year 2017, while there were no inventory provisions taken in the first quarter of fiscal year 2017.

See "Non-GAAP Financial Measures" below for the most directly comparable measure to gross profit before inventory provisions when calculated in accordance with GAAP and presented in DragonWave's financial statements.

Operating expenses were reduced by $0.4 million from $7.3 million in the first quarter of fiscal year 2017 to $6.9 million in the second quarter of the current fiscal year.

Net loss attributable to shareholders in the second quarter of fiscal year 2017 was ($3.9) million or ($0.96) per basic and diluted share. This compares to a net loss attributable to shareholders of ($4.1) million or ($1.23) per basic and diluted share in the first quarter of fiscal year 2017.

"We are pleased with the growth in our direct revenue in the quarter and the progress that we have seen on our renewal and restructuring approach. We expect to continue this progress in coming quarters" said DragonWave President & CEO, Peter Allen. "We remain focused on revenue and margin growth opportunities presented by our new feature rich products while maintaining strong cost control."

Cash and cash equivalents totaled $7.5 million at the end of the second quarter of fiscal year 2017, compared to $4.0 million at the end of the first quarter of fiscal year 2017.

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 October 13, 2016.

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 are 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), Horizon(R) and Avenue(R) are registered trademarks of DragonWave Inc.

Non-GAAP Financial Measures

This press release contains certain information that is not consistent with financial measures prescribed under GAAP. We break out "Gross profit before inventory provisions" as this measure allows management to evaluate our operational performance and compare to prior periods more effectively. "Gross profit before inventory provisions" does not have any standardized meaning prescribed by GAAP, it is therefore unlikely to be comparable to similar measures presented by other issuers and is not designed to replace other measures of financial performance or the statement of operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We believe that it is useful to compare gross profit results without the impact of inventory provisions, since our inventory provisions generally relate to technical obsolescence and excess due to market changes. We believe this non-GAAP measure also provides investors with a better ability to understand our operational performance. We calculate "Gross profit before inventory provisions" consistently over each fiscal period.

The most directly comparable GAAP measure presented in our consolidated financial statements for the three and six months ended August 31, 2016 to "Gross profit before inventory provisions" is "Gross profit".

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements or forward-looking information as defined by applicable securities laws. Forward-looking statements include statements as to DragonWave's forward opportunities and the potential benefits of, and demand for: DragonWave's products; DragonWave's strategy and ability to execute on that strategy; and the outcome of DragonWave's restructuring efforts. 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, and our ongoing efforts to manage our cash flows.

Forward-looking statements are provided to help external stakeholders understand DragonWave's expectations as of the date of this release and may not be appropriate for other purposes. 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, as a result of the risks identified above as well as other risks identified in our publicly filed documents. Material risks and uncertainties relating to our business are described under the heading "Risks and Uncertainties" in the MD&A dated October 12, 2016 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. 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.

                        CONSOLIDATED BALANCE SHEETS

                Expressed in US $000's except share amounts


                                                  As at               As at

                                             August 31,        February 29,

                                                   2016                2016



Current Assets

  Cash and cash equivalents                       7,471               4,277

  Trade receivables                              13,879              18,986

  Inventory                                      22,701              22,702

  Other current assets                            2,393               2,777


                                                 46,444              48,742

Long Term Assets

  Property and equipment                          3,092               3,702

  Intangible assets                                 495                 623


                                                  3,587               4,325

Total Assets                                     50,031              53,067




Current Liabilities

  Debt facility                                  17,030              22,152

  Accounts payable and accrued

   liabilities                                   25,343              23,832

  Deferred revenue                                  779               1,944

  Deferred tax liability                            281                 294

  Warrant liability                               1,057                 117


                                                 44,490              48,339

Long Term Liabilities

  Deferred revenue                                  459                 498

  Warrant liability                               3,420                   3


                                                  3,879                 501

Commitments and contingencies

Shareholders' equity (deficiency)

  Capital stock                                 225,943             221,128

  Contributed surplus                             9,593               9,235

  Deficit                                      (226,263)           (218,225)

  Accumulated other comprehensive

   loss                                          (9,618)             (9,618)


Total Shareholders' equity

 (deficiency)                                      (345)              2,520

  Non-controlling interests                       2,007               1,707


Total Equity                                      1,662               4,227

Total Liabilities and Equity                     50,031              53,067



Shares issued & outstanding                   5,486,776           3,020,069


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


                           Three months ended              Six months ended


                    August 31,     August 31,     August 31,     August 31,

                          2016           2015           2016           2015



 Hardware and

  other                  9,530         22,613         18,152         46,177

 Services                3,700          4,304          7,623          7,080


                        13,230         26,917         25,775         53,257



 Hardware and

  other                  7,085         19,458         13,804         38,208

 Services                1,923          2,744          3,857          4,490


  provision                365            730            365          1,025


                         9,373         22,932         18,026         43,723


Gross profit             3,857          3,985          7,749          9,534



 Research and

  development            2,027          3,875          4,136          8,108

 Selling and

  marketing              1,774          3,052          3,795          6,296

 General and

  administrative         3,120          3,603          6,251          7,089


                         6,921         10,530         14,182         21,493


Loss before

 other items            (3,064)        (6,545)        (6,433)       (11,959)


  impairment                 -        (11,927)             -        (11,927)

 Amortization of


  assets                   (94)          (149)          (184)          (332)


  expense                  (33)           (61)           (68)          (132)


  expense                 (354)          (560)          (736)        (1,091)



  expenses                (469)             -           (561)             -

 Fair value

  adjustment -


  liability                602            373            846            895


  exchange loss            (68)          (214)          (220)          (294)


Loss before

 income taxes           (3,480)       (19,083)        (7,356)       (24,840)

 Income tax

  expense                  220          1,620            382          1,687


Net loss and


 loss                   (3,700)       (20,703)        (7,738)       (26,527)

 Net income


  to non-


  interest                (238)          (269)          (300)          (399)


Net loss and



 attributable to

 shareholders           (3,938)       (20,972)        (8,038)       (26,926)

Net loss and


 loss per share

 Basic and

  diluted                (0.96)         (6.96)         (2.16)         (8.94)

Weighted average



 Basic and

  diluted            4,085,920      3,014,892      3,716,149      3,013,417


Investor Contact:

Peter Allen

President & CEO

DragonWave Inc.


+1-613-599-9991 ext 2222

Media Contact:

Nadine Kittle

Marketing Communications

DragonWave Inc.


+1-613-599-9991 ext 2262

Becky Obbema

Interprose Public Relations

(for DragonWave)



Source: DragonWave Inc.

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