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DragonWave Inc. Reports First Quarter Fiscal Year 2015 Results

Company posts 61% revenue growth over previous quarter

OTTAWA, CANADA -- (Marketwired) -- 07/09/14 -- 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 first quarter of fiscal year 2015, ended May 31, 2014. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.

Revenue for the first quarter of fiscal year 2015 was $28.8 million, compared with $17.9 million in the fourth quarter of fiscal year 2014 and $24.5 million in the first quarter of the fiscal year 2014. Revenue from the Nokia channel (formerly called Nokia Solutions and Networks) represented 61% of revenue in the first quarter of this fiscal year, versus 68% in the fourth quarter of fiscal year 2014 and 57% in first quarter of fiscal year 2014.

Gross margin for the first quarter of fiscal year 2015 was 20.5%, compared with 14.5% in the fourth quarter of fiscal year 2014 and 11.5% in the first quarter of fiscal year 2014.

Net loss applicable to shareholders in the first quarter of fiscal year 2015 was $6.6 million or ($0.11) per basic and diluted share. This compares to a net loss applicable to shareholders of $11.6 million or ($0.20) per basic and diluted share in the fourth quarter of fiscal year 2014 and a net loss applicable to shareholders of $6.6 million or ($0.17) per basic and diluted share in the first quarter of fiscal year 2014.

"We are pleased that the increased demand that we observed in Q1 2015 is continuing into our second quarter. Momentum is such that we anticipate revenue growth between 25% and 40% relative to Q1," said DragonWave President and CEO Peter Allen.

Cash and cash equivalents totaled $15.6 million at the end of the first quarter of fiscal year 2015, compared to $19.0 million at the end of the fourth quarter of fiscal year 2014.

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 July 10, 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 Q2 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 July 9, 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                                 
(Unaudited)                                                                 
                                                                            
                                                   As at              As at 
                                                 May 31,       February 28, 
                                                    2014               2014 
                                        -----------------  -----------------
Assets                                                                      
Current Assets                                                              
  Cash and cash equivalents                       15,567             18,992 
  Trade receivables                               21,505             17,408 
  Inventory                                       26,023             30,416 
  Other current assets                             4,974              5,909 
  Deferred tax asset                                 119                 69 
                                        -----------------  -----------------
                                                  68,188             72,794 
Long Term Assets                                                            
  Property and equipment                           2,964              3,168 
  Deferred tax asset                               1,536              1,536 
  Deferred financing cost                             49                 60 
  Intangible assets                                1,466              1,635 
  Goodwill                                        11,927             11,927 
                                        -----------------  -----------------
                                                  17,942             18,326 
Total Assets                                      86,130             91,120 
                                        -----------------  -----------------
                                        -----------------  -----------------
                                                                            
Liabilities                                                                 
Current Liabilities                                                         
  Accounts payable and accrued                                              
   liabilities                                    25,954             29,964 
  Deferred revenue                                   889                984 
  Capital lease obligation                         1,633              1,795 
                                        -----------------  -----------------
                                                  28,476             32,743 
Long Term Liabilities                                                       
  Debt facility                                   17,500             15,000 
  Other long term liabilities                      3,549                574 
  Warrant liability                                1,048              1,360 
                                        -----------------  -----------------
                                                  22,097             16,934 
                                                                            
Shareholders' equity                                                        
  Capital stock                                  198,769            198,593 
  Contributed surplus                              7,478              7,118 
  Deficit                                       (161,056)          (154,505)
  Accumulated other comprehensive loss            (9,682)            (9,682)
                                        -----------------  -----------------
Total Shareholders' equity                        35,509             41,524 
  Non-controlling interests                           48                (81)
                                        -----------------  -----------------
Total Equity                                      35,557             41,443 
Total Liabilities and Equity                      86,130             91,120 
                                        -----------------  -----------------
                                        -----------------  -----------------
                                                                            
Shares issued & outstanding                   58,491,243         58,008,746 
                                                                            
                                                                            
CONSOLIDATED STATEMENT OF OPERATIONS                                        
Expressed in US $000's except share amounts                                 
(Unaudited)                                                                 
                                                                            
                                            Three months       Three months 
                                                   ended              ended 
                                                 May 31,            May 31, 
                                                    2014               2013 
                                        -----------------  -----------------
                                                                            
REVENUE                                           28,771             24,532 
  Cost of sales                                   22,885             21,712 
                                        -----------------  -----------------
 Gross profit                                      5,886              2,820 
                                        -----------------  -----------------
                                                                            
EXPENSES                                                                    
  Research and development                         4,265              5,302 
  Selling and marketing                            3,365              3,382 
  General and administrative                       4,426              4,748 
                                        -----------------  -----------------
                                                  12,056             13,432 
                                        -----------------  -----------------
                                                                            
Loss before other items                           (6,170)           (10,612)
                                                                            
  Amortization of intangible assets                 (309)              (559)
  Accretion expense                                  (40)               (65)
  Interest expense                                  (425)              (538)
  Gain on change in estimate                         101                  - 
  Gain on contract amendment                           -              5,285 
  Fair value adjustment - warrant                                           
   liability                                         150                  - 
  Foreign exchange gain (loss)                       121                (98)
                                        -----------------  -----------------
Loss before income taxes                          (6,572)            (6,587)
                                                                            
  Income tax expense                                  95                 92 
                                        -----------------  -----------------
Net Loss                                          (6,667)            (6,679)
                                                                            
  Net Loss Attributable to Non-                                             
   Controlling Interest                               35                 54 
                                        -----------------  -----------------
Net Loss applicable to shareholders               (6,632)            (6,625)
                                                                            
Net loss per share                                                          
  Basic and Diluted                                (0.11)             (0.17)
                                                                            
Weighted Average Shares Outstanding                                         
  Basic and Diluted                           58,194,153         38,059,919 

Contacts:
Investor Contact:
John Lawlor
Investor Relations
DragonWave Inc.
[email protected]
613-599-9991 ext 2424

Media Contact:
Nadine Kittle
Marketing Communications
DragonWave Inc.
[email protected]
613-599-9991 ext 2262

Media Contact:
Becky Obbema
Interprose Public Relations
(for DragonWave)
[email protected]
(408) 778-2024

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