UPDATE: DragonWave CEO says profitability not expected until mid-2014

OBJ Staff
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Executives at DragonWave Inc. (TSX:DWI) say it will take longer for the company to reach profitability than they expected three months ago.

Peter Allen is the president and CEO of Dragonwave. (Photo by Mark Holleron)

By Jacob Serebrin

Speaking to investors on a conference call on Thursday morning, DragonWave CEO Peter Allen said it’s now “more likely” that the company will reach its goal of breaking even from operations in the first quarter of the company’s 2015 financial year, which is the three-month period ending in June 2014.

“I do believe that’s in the vicinity of possibility,” said Mr. Allen, “and we have a path to get there.”

Executives had previously said they expected to break even by the fourth quarter of DragonWave’s 2014 financial year.

With second quarter results released on Wednesday evening, the Ottawa-based supplier of packet microwave radio systems, used in wireless broadband, has now reported 11 straight quarters of losses.

DragonWave reported a net loss of US$10.5 million during the three-month period ending Aug. 31. That’s up from the previous quarter, when the company reported a net loss of $6.6 million and from the same period last year, when the company reported net losses of $1.1 million

But in order to reach the break-even point the company will have to increase revenue significantly.

DragonWave did report a slight increase in revenue this quarter, compared to the previous quarter, with revenues reaching $25.5 million, up from $24.5 million. However that remained significantly lower than a year ago, when the company reported revenue of  $44.2 million.

Mr. Allen said the company is counting on growing demand in India, where carriers are upgrading their networks from 2G to 4G, to help drive growth.

He said the company has already booked orders above second quarter sales in India.

“We’re in position to post modest growth in Q3,” he said.

Mr. Allen said the company is also seeing opportunities in the United States, where Sprint is investing $6 billion to strengthen its network.

And Mr. Allen said he expects “the Middle East and Africa to be strong for us.”

DragonWave is also working to reduce costs, said Mr. Allen.

Operating expenses were down to $12.4 million this quarter from $13.4 million during the previous quarter.

A large portion – 61 per cent, or $15.5 million – of DragonWave’s revenue during the last quarter came from a single customer: Nokia Solutions and Networks.

DragonWave raised $23.5 million in cash through a public offering that closed on Sept. 23 but it was not recorded in this quarter.

“The financing we completed in September was to put us in the best possible position,” said Mr. Allen.

While Mr. Allen said the company doesn’t expect to issue more shares, he also added “it will depend on the magnitude of the opportunities in front of us.”

Instead, he said, the company would look to commercial lenders to increase working capital.

Organizations: DragonWave

Geographic location: Ottawa

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