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

OTTAWA, CANADA -- (Marketwired) -- 05/14/14 -- 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® 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® and Horizon® 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 

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