DragonWave shares hit all-time low as Ottawa firm hires restructuring consultant

Ottawa firm’s shares dip below dollar for first time following 2017 earnings
Peter Allen
DragonWave CEO Peter Allen

DragonWave’s struggles to reduce its debt load and avoid a de-listing by the NASDAQ continued as investors drove down the Ottawa-based company’s share price to an all-time low after it released its fiscal 2017 financial results.

The networking equipment provider has signed Alvarez & Marsal Canada ULC, the Canadian arm of the restructuring consultancy firm perhaps best known for handling Lehman Brothers’ bankruptcy filings during the 2008 global financial crisis.

DragonWave’s revenues continued its downward trend in the company’s fiscal 2017 year. Revenues were $43.9 million for the year ending Feb. 28. Comparatively, revenues were $86.3 million in 2016 and $157.8 million in 2015.

The firm reported a net loss of $15.9 million for 2017, an improvement from its $42.3-million loss a year earlier.

Shares of DragonWave (TSX:DRWI) (NASDAQ:DRWI) opened at an all-time low Monday morning, dipping below a dollar for the first time in its history before rising back to around $1.10 in midday trading on the TSX.

DragonWave is in the midst of renegotiations with lenders to pay off its debt and restructure the firm’s operations to avoid de-listing on the NASDAQ exchange. Last month, the firm asked for a hearing before the exchange to present its plan to meet the minimum listing requirement of $2.5 million in shareholders’ equity.

DragonWave’s adjusted cash flow, which directly affects the firm’s ability to pay down its $17-million debt facility, has become increasingly negative the past two quarters. The firm’s cash flow now stands at negative $4.3 million.

DragonWave CEO Peter Allen told investors on a call Monday morning to discuss the company’s financial results that the firm has been unable to execute on its liquidity restructuring plans – including discontinuing a few legacy products and downplaying operations in lower margin regions – due to “difficult operating conditions.” He added that he doesn’t expect a turnaround in the coming months.

“The challenges of Q4 have persisted through Q1 to date,” he told the call, citing collection delays and a lack of working capital as hindrances to the company’s restructuring plans.

Mr. Allen said in regards to its restructuring discussions with Alvarez & Marsal that the firm is “open to solving the problem in any way possible.”