Ad hoc: ADVA OPTICAL NETWORKING REPORTS Q1 2008 FINANCIAL RESULTS AND MEETS EXPECTATIONS

 

 

 

 

Norcross, Georgia, USA and Martinsried/Munich, Germany. May 8, 2008. ADVA Optical Networking  announces Q1 2008 financial results for the quarter ended March 31, 2008, and prepares in accordance with International Financial Reporting Standards (IFRS).

 

In line with guidance provided in March 2008 of between EUR 51 million and EUR 55 million, revenues in Q1 2008 totaled EUR 54.0 million after EUR 68.7 million in Q1 2007 and EUR 53.8 million in Q4 2007. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, came in at negative EUR 2.0 million in Q1 2008 or -3.8% of revenues and exceeded guidance of between -8% and -4%. In Q1 2007, IFRS pro forma operating income had amounted to positive EUR 4.7 million. The Q1 2008 number included charges of EUR 0.9 million related to a previously announced restructuring initiative implying total one-off charges of around EUR 3.0 million between Q1 and Q3 2008. Excluding this restructuring charge, pro forma operating income was at -2.0% of revenues in Q1 2008. Year-on-year, the pro forma operating income reduction was primarily driven by significantly decreased revenue contribution by one major U.S. distribution channel. These effects were partially offset by higher income from capitalization of development expenses, net of depreciation for capitalized development projects, of EUR 2.5 million in Q1 2008 after EUR 0.8 million in Q1 2007.

 

The IFRS operating loss in Q1 2008 was EUR 3.8 million, after an operating income of EUR 1.3 million in Q1 2007. The key driver for this development is the above-mentioned decline of pro forma operating income. The decline in part is offset by lower scheduled amortization of intangible assets from acquisitions and lower stock compensation expenses. These items amounted to EUR 1.2 million and EUR 0.5 million in Q1 2008 after EUR 2.4 million and EUR 0.9 million in Q1 2007, respectively.

 

The IFRS net loss in Q1 2008 amounted to EUR 4.4 million, after a net loss of EUR 0.8 million in Q1 2007. In Q1 2008, net foreign currency exchange losses of EUR 1.3 million after respective gains of EUR 0.1 million in Q1 2007 contributed to the net loss. In part, this effect was offset by a tax benefit of EUR 0.9 million in Q1 2008 related to deferred tax adjustments on tax losses carried forward. In contrast, based on positive income before taxes, there was a tax expense of EUR 1.8 million in Q1 2007. Basic and diluted IFRS net earnings per share were EUR -0.10 each in Q1 2008 after EUR -0.02 each in Q1 2007.

Conference call and webcast

In conjunction with the release of its Q1 2008 IFRS financial results today, May 8, 2008, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEDT/10:00 a.m. EST. Participating in the call will be ADVA Optical Networking's Chief Executive Officer, Brian Protiva, and Chief Financial Officer, Jaswir Singh. Interested parties may dial in at +49 69 2711 3400 or +1 877 527 5884, and listen live via webcast on ADVA Optical Networking's website, located on the 'financial results' page in the investor relations section of ADVA Optical Networking's website at www.advaoptical.com.

 

ADVA Optical Networking expects Q2 2008 revenues to range between EUR 55 million and EUR 59 million, based on carrier infrastructure business picking up following two quarters of temporary weak demand. Further, we anticipate pro forma operating income, of between -2% and +1% of revenues in Q2 2008, including restructuring charges of EUR 1.4 million. Without these charges, we anticipate Q2 2008 pro forma operating income of between 0% and +3% of revenues. In December 2007, ADVA Optical Networking made the decision to restructure the Company to adjust its cost base to a temporarily challenging market environment. The restructuring initiative was implemented immediately, leading to an overall reduction of 7% of employees and a one-off restructuring charge of around EUR 3.0 million through Q3 2008. EUR 0.9 million of this charge has been included in the pro forma operating income for Q1 2008. ADVA Optical Networking will host its annual shareholders' meeting on June 11, 2008, in Meiningen, Germany, and will publish its Q2 2008 financial results on August 5, 2008.

 

 

(in thousands of EUR, except earnings per share)	Q1 2008	Q1 20071
Revenues	54,028	68,679
Pro forma cost of goods sold	-32,877	-41,025
Pro forma gross profit	21,151	27,654
Pro forma selling and marketing expenses	-7,978	-8,168
Pro forma general and administrative expenses	-6,119	-5,641
Pro forma research and development expenses	-10,920	-10,101
Income from capitalization of development expenses, net of amortization for capitalized development projects	2,482	816
Restructuring expenses	-949	0
Other operating income (expenses), net	304	110
Pro forma operating income	-2,029	4,670
Amortization of intangible assets from acquisitions	-1,192	-2,439
Stock compensation expenses	-548	-905
Operating income (loss)	-3,769	1,326
Interest income (expense), net	-166	-206
Other income (expense), net	-1,321	-156
Income (loss) before tax	-5,256	964
Income tax benefit (expense), net	879	-1,812
Net income (loss)	-4,377	-848
Earnings per share in EUR
basic	-0.10	-0.02
diluted	-0.10	-0.02

 

1 For select revenues in Q1 2007, cost of goods sold amounting to EUR 2,258 thousand had not been recognized in Q1, but only in Q2 2007. Pro forma gross profit, pro forma operating income, operating income, income before tax, net income (loss) and earnings per share have been restated accordingly.

 

  

 

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

 

Christine Keck

t +1 201 258 8293 (U.S.)

t +44 1904 699 358 (Europe)

t +86 755 8621 7400 (Asia)

 

Wolfgang Guessgen

t +1 201 258 8302 (U.S.)

t +49 89 89 0665 940 (Europe)

t +86 755 8621 7400 (Asia)