ADVA AG Optical Networking
FRANKFURT : ADV

July 20, 2011 19:43 ET

ADVA Optical Networking Reports Q2 2011 Financial Results Above Guidance

MARTINSRIED, GERMANY and MUNICH, GERMANY--(Marketwire - Jul 20, 2011) -

ADVA AG Optical Networking / ADVA OPTICAL NETWORKING REPORTS Q2 2011 FINANCIAL RESULTS ABOVE GUIDANCE . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

Q2 2011 Revenues at EUR 77.8 Million

Q2 2011 IFRS Pro Forma Operating Income of EUR 3.5 Million (4.5% of Revenues)

Q3 2011 Revenues Expected to Range between EUR 73 Million and EUR 78 Million with IFRS Pro Forma Operating Income between 2% and 5% of Revenues

Norcross, Georgia, USA and Martinsried/Munich, Germany. July 21, 2011. ADVA Optical Networking announced Q2 2011 financial results for the quarter ended June 30, 2011, and prepared in accordance with International Financial Reporting Standards (IFRS).

Q2 2011 IFRS FINANCIAL RESULTS

Revenues in Q2 2011 at EUR 77.8 million were slightly above guidance of between EUR 72 million and EUR 77 million, up a sound 13.4% vs. EUR 68.6 million achieved in Q2 2010 and up 10.6% vs. EUR 70.4 million reported in Q1 2011. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 3.5 million or 4.5% of revenues in Q2 2011, also slightly above guidance of between 1% and 4% of revenues. This compares to EUR 1.9 million or 2.8% of revenues in Q2 2010 and EUR 0.9 million or 1.3% of revenues in Q1 2011. Both the year-on-year and the quarter-on-quarter increases of pro forma operating income are largely related to higher revenues.

The IFRS operating income rose to EUR 2.4 million in Q2 2011, after EUR 1.0 million in Q2 2010. The key driver for this improvement is the above- mentioned increase of pro forma operating income.

The IFRS net income amounted to EUR 0.8 million in Q2 2011, up from EUR 0.6 million in Q2 2010. The positive development of the operating income was mostly compensated by net foreign currency exchange losses of EUR 1.0 million in Q2 2011 after a gain of EUR 0.7 million in Q2 2010, and a loss of EUR 1.6 million in Q1 2011. Basic and diluted IFRS net earnings per share were EUR 0.02 each after EUR 0.01 each in Q2 2010.

"We are very pleased with our Q2 2011 revenues of EUR 77.8 million, which exceed guidance and are up 11% vs. the previous quarter and 13% vs. Q2 2010. The quarter-on-quarter rise is based on increased carrier infrastructure as well as enterprise business, reflecting continued network traffic growth driven by video applications and increasing adoption of cloud computing services. Year-on- year, in addition to the above, the pick-up is also due to higher demand for Ethernet access solutions. Our pro forma gross margin increased from 41.2% in Q1 2011 and 41.0% in Q2 2010 to 43.0% in Q2 2011. This improvement is due to changes in product and customer mix and positive effects of our cost reduction programs. With significant investment driven by our partnership with Juniper Networks and tight management of operational expenses, our pro forma operating income came in at 4.5% of revenues. Furthermore, cash and cash equivalents were at EUR 55.4 million at the end of Q2 2011, up a strong 24% from EUR 44.7 million at the end of the previous quarter. This sound development is driven by working capital improvements and results in a net liquidity improvement to EUR 27.3 million, up EUR 11.3 million or 70% vs. the end of the previous quarter. This represents a quarter-end all-time high and demonstrates our commitment to strongly managing our cash flows and balance sheet," commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking.


CONFERENCE CALL

In conjunction with the release of its Q2 2011 financial results on July 21, 2011, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEST / 9:00 a.m. EDT. Participating in the call will be ADVA Optical Networking's chief executive officer, Brian Protiva, and chief financial officer & chief operating officer, Jaswir Singh. Interested parties may dial in at +49 69 201744 210 or +1 877 423 0830, pin code 916221#, and download the corresponding presentation from ADVA Optical Networking's website, located on the "financial results" page under "conference calls" in the investor relations section of ADVA Optical Networking's website at www.advaoptical.com.

Q3 2011 OUTLOOK

With its sound business model, ADVA Optical Networking remains flexible and is able to respond quickly to continuous change in the global market. Although the global economic sentiment is still creating mixed messages, the Company expects Q3 2011 revenues of between EUR 73 million and EUR 78 million. Further, ADVA Optical Networking anticipates Q3 2011 pro forma operating income to range between 2% and 5% of revenues. ADVA Optical Networking notes that it will continue to perform detailed quarterly reviews of the expected business development with respect to all intangible assets, including capitalized research and development expenses. These reviews may result in non-cash impairment charges in Q3 2011 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will publish its Q3 2011 financial results on October 20, 2011.

"While the Optical+Ethernet transport market in H1 2011 developed slowly, ADVA Optical Networking's revenues in Q2 2011 grew nicely. Citing growth in mobile backhaul and business Ethernet as key reasons for our market leadership, Infonetics Research confirms that we continue to dominate the Ethernet Access Device (EAD) market for the fifth consecutive year. Over the past several years, ADVA Optical Networking has focused extensively on streamlining and developing its business effectively, from daily operations to the consolidation of our product platform and investment in our engineering and services teams. This has proven to be key in achieving agility and flexibility during swift changes in the economic landscape. Our current market position is a strong basis from which we will drive profitability and revenue growth beyond market growth rates. Over time, we will see gross margin improvements, based on the development of our product mix, further effects from the consolidation of our product portfolio to two hardware platforms, and our cost reduction focus. These drivers should create further value for shareholders. We are excited about creatively shaping a market which is projected to accelerate rapidly due to rising data traffic and emergence of new applications and devices," stated Brian Protiva, chief executive officer of ADVA Optical Networking.

SIX-MONTH IFRS CONSOLIDATED INCOME STATEMENT

(in thousands of EUR,                            Q2      Q2      6M      6M
except earnings per share)                     2011    2010    2011    2010



Revenues                                     77,837  68,611 148,188 131,773

Pro forma cost of goods sold                -44,399 -40,513 -85,767 -76,487
---------------------------------------------------------------------------
Pro forma gross profit                       33,438  28,098  62,421  55,286

Pro forma selling and marketing expenses    -11,099 -10,885 -21,132 -20,358

Pro forma general and administrative
expenses                                     -6,183  -5,921 -12,269 -11,453

Pro forma research and development
expenses                                    -14,094 -12,235 -28,453 -24,095

Income from capitalization of development
expenses, net of amortization for capitalized
development projects                          1,160     863   2,848   2,292

Other operating income (expense), net           277   1,969     991   2,918
---------------------------------------------------------------------------
Pro forma operating income                    3,499   1,889   4,406   4,590

Amortization of intangible assets
from acquisitions                              -607    -435  -1,239    -846

Stock compensation expenses                    -479    -443  -1,061    -823
---------------------------------------------------------------------------
Operating income                              2,413   1,011   2,106   2,921

Interest income (expense), net                 -409    -327    -751    -654

Other income (expense), net                    -988     717  -2,597   1,851
---------------------------------------------------------------------------
Income (loss) before tax                      1,016   1,401  -1,242   4,118

Income tax benefit (expense), net              -179    -816    -235  -1,163
---------------------------------------------------------------------------
Net income (loss)                               837     585  -1,477   2,955



Earnings per share in EUR

   basic                                       0.02    0.01   -0.03    0.06

   diluted                                     0.02    0.01   -0.03    0.06

# # #


ABOUT ADVA OPTICAL NETWORKING

ADVA Optical Networking (FSE: ADV) is a global provider of intelligent telecommunications infrastructure solutions. With software-automated Optical+Ethernet transmission technology, the Company builds the foundation for high-speed, next-generation networks. The Company's FSP product family adds scalability and intelligence to customers' networks while removing complexity and cost. With a flexible and fast-moving organization, ADVA Optical Networking forges close partnerships with its customers to meet the growing demand for data, storage, voice and video services. Thanks to reliable performance for more than 15 years, the Company has become a trusted partner for more than 250 carriers and 10,000 enterprises across the globe. For more information, please visitwww.advaoptical.com.

The economic projections and forward-looking statements contained in this document relate to future facts. Such projections and forward-looking statements are subject to risks which cannot be foreseen and which are beyond the control of ADVA Optical Networking. ADVA Optical Networking is therefore not in a position to make any representation as to the accuracy of economic projections and forward-looking statements or their impact on the financial situation of ADVA Optical Networking or the market in the shares of ADVA Optical Networking.

ADVA Optical Networking provides consolidated pro forma financial results in this press release solely as supplemental financial information to help investors and the financial community make meaningful comparisons of ADVA Optical Networking's operating results from one financial period to another. ADVA Optical Networking believes that these pro forma consolidated financial results are helpful because they exclude non-cash charges related to the stock option programs and amortization and impairment of goodwill and acquisition- related intangible assets, which are not reflective of the Company's operating results for the period presented. This pro forma information is not prepared in accordance with IFRS and should not be considered a substitute for historical information presented in accordance with IFRS.

PUBLISHED BY:
ADVA AG Optical Networking, Martinsried/Munich and Meiningen, Germany
ADVA Optical Networking North America, Inc., Norcross, Georgia, USA
ADVA Optical Networking (Shenzhen) Ltd., Shenzhen, China
 www.advaoptical.com 

FOR PRESS:
Gareth Spence
t +1 408 778 2024 (U.S.)
t +44 1904 699 358 (Europe)
t +86 755 8621 7400 (Asia)
public-relations(at)advaoptical.com

FOR INVESTORS:
Wolfgang Guessgen
t +1 201 940 7212 (U.S.)
t +49 89 89 0665 940 (Europe)
t +86 755 8621 7400 (Asia)
investor-relations(at)advaoptical.com

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ADVA AG Optical Networking
Campus Martinsried, Fraunhoferstr. 9a Martinsried/Munich Germany

WKN: 510300;ISIN: DE0005103006;
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Contact Information

  • FOR PRESS:
    Gareth Spence
    t +1 408 778 2024 (U.S.)
    t +44 1904 699 358 (Europe)
    t +86 755 8621 7400 (Asia)
    public-relations(at)advaoptical.com

    FOR INVESTORS:
    Wolfgang Guessgen
    t +1 201 940 7212 (U.S.)
    t +49 89 89 0665 940 (Europe)
    t +86 755 8621 7400 (Asia)
    investor-relations(at)advaoptical.com