DragonWave shares plummet following ‘disappointing’ third quarter

DragonWave (TSX:DWINASDAQ:DRWI) executives said they were disappointed in the company’s third-quarter revenues, a sentiment also expressed by investors who drove its share price down after the Ottawa tech company released its unaudited financial results late Wednesday.

Revenues for DragonWave’s third quarter, which ended Nov. 30, came in at $10.2 million, a decrease of more than 50 per cent from the same quarter a year ago, and a decrease of more than 75 per cent from the same quarter two years ago. (All figures in USD)

Shares of the Kanata-based provider of packet microwave radio systems plunged on the NASDAQ at the opening bell and ended the day down 19 per cent to $2.35.

DragonWave had hoped to build on the momentum it gained over the previous six months. But instead of continuing to grow sales, revenues came in at $3 million below second-quarter levels.

Sales from its Nokia channel, which have been upended by the communication giant’s deal with DragonWave competitor Alcatel-Lucent, continued to decrease to 22 per cent of total revenue this past quarter. This is nearly half of what the channel represented as a percentage of total revenues a year ago.

DragonWave CEO Peter Allen told investors and analysts on a conference call Thursday morning that he was “disappointed” with the quarter, attributing the drop in revenue to operational challenges such as delays in customer deployment, supply chain issues and late payments from a few customers.

He estimated $4 million in lost revenue from these setbacks, but said the company is working on solving these problems to avoid any issues carrying over into the fourth quarter.

On a more positive note, the company trimmed its year-over-year loss to $4.1 million, or $0.72 per basic and diluted share, compared to $6.2 million during the same period a year ago.

Mr. Allen highlighted multiple deals that are helping DragonWave restructure following a challenging 2016.

The company’s network densification project with Sprint was one bright spot, with the first two orders for that deal expected to ship in the fourth quarter. He also flagged deals with a tier-1 mobile operator in Argentina and an Australian telecom provider as strong examples of the company’s growing sales channels outside North America.

“These announcements reflect the progress on our renewal strategy,” Mr. Allen said.

The company continues its restructuring process after being informed by NASDAQ regulators that it no longer met listing requirements and was in danger of being delisted.

Asked by one shareholder on the call whether the company had been approached by any candidates looking to merge with or acquire DragonWave, Mr. Allen replied with a firm “no.”