DragonWave revenues up 75 per cent in fiscal 2015

Buoyed by the company's direct sales growth, executives at Ottawa’s DragonWave told investors on a conference call Wednesday morning they expect the firm to be cash-flow positive by the middle of fiscal 2016.

The supplier of packet microwave radio systems said its fourth-quarter revenues in fiscal 2015, which ended Feb. 28, were US$43.7 million, down from $47.3 million in the third quarter but up significantly from the $17.9 million the company posted in the same three-month period a year earlier.

“We have made progress in each quarter and took another strong stride forward in Q4,” CEO Peter Allen said.

DragonWave (TSX: DWI) reported overall revenues for fiscal 2015 of $157.8 million, an increase of 75 per cent over the previous fiscal year. The company’s net loss, meanwhile, shrunk from $34.2 million in fiscal 2014 to $21.5 million.

The company said its “sharpened focus” led to increased efficiencies and a higher gross margin, which rose to 19.4 per cent in the fourth quarter from 14.5 per cent last year.

CFO Russell Frederick said DragonWave is aiming to trim its average quarterly operating expenses from about $12 million in fiscal 2015 to $10 million this year, with the goal of being cash-flow positive by mid-2016.

The company’s fourth-quarter results brought it to within $1 million of the break-even point, Mr. Allen said, adding he expects double-digit year-over-year revenue growth in fiscal 2016 thanks to expanding direct sales agreements with top-tier mobile operators.

DragonWave is projecting revenues of between $30 million and $33 million for the first three months of fiscal 2016.

The company continues to see strong sales growth in India, which now accounts for 23 per cent of its overall revenues, Mr. Allen said. The firm recently inked a new deal with a major carrier in that country in addition to landing more orders with an existing Indian customer.

The company also announced it has bolstered its presence in the Middle East after signing a new sales agreement with Saudi Telecom, the largest network operator in Saudi Arabia.

Still, Mr. Allen acknowledged that DragonWave’s key partnership with Nokia represents a declining portion of the company’s revenues.

The Nokia channel brought in $20.1 million in the fourth quarter, accounting for 46 per cent of the company’s revenues. That compares with 50 per cent in the third quarter and 68 per cent in the last three months of fiscal 2014.

Last month, Nokia announced plans to buy ailing French telecom giant Alcatel-Lucent in a deal worth about $16.5 billion. Mr. Allen said it is still too early to tell how the transaction will impact DragonWave, but he said he thinks the Ottawa-based firm will remain Nokia’s primary supplier of packet microwave products.

“The microwave needs of operators are quite diverse, and I continue to believe that our products lead in their respective spaces,” he said.

There are “a wide range of factors” for the decline in the overall percentage of business DragonWave does with the Finnish-based company, Mr. Allen said, adding it could “swing very easily on a couple of deals.”