ADVA Optical Networking reports Q1 2006 record revenues and IFRS pro forma operating income above guidance

Q1 2006 revenues up 27% on Q1 2005 to reach a new all-time high of EUR 37.1 million

EUR 5.7 million in IFRS pro forma Q1 operating income (15% of revenues) exceeds guidance

Forecasted full year 2006 revenues increased and pro forma operating income confirmed

May 9, 2006. Martinsried/Munich, Germany, and Mahwah, New Jersey, USA. ADVA Optical Networking today announced Q1 2006 financial results for the quarter ended March 31, 2006, and prepared in accordance with International Financial Reporting Standards (IFRS). ADVA today also published key financials as per U.S. Generally Accepted Accounting Principles (U.S. GAAP), the accounting framework applied in financial statements published prior to the release of the annual report 2005.

Q1 2006 IFRS FINANCIAL RESULTS
In Q1 2006 revenues totaled EUR 37.1 million, compared to EUR 35.8 million in Q4 2005 and EUR 29.1 million in Q1 2005, respectively. IFRS pro forma operating income, excluding stock-based compensation and amortization and impairment of goodwill and acquisition-related intangible assets, was at EUR 5.7 million in Q1 2006, up 23.3% from EUR 4.6 million in Q1 2005, driven by higher revenues and the continued high capitalization of development expenses. IFRS pro forma quarterly net profit was at EUR 3.8 million in Q1 2006 after EUR 3.2 million in Q1 2005, with diluted pro forma net earnings per share of EUR 0.10 in Q1 2006 after EUR 0.09 in Q1 2005. Due to the first-time consolidation of Covaro, the number of shares outstanding increased by 2.0 million in Q1 2006. Therefore the increase in pro forma net profit did not fully translate in a respective increase of pro forma net earnings per share.

Q1 2006 IFRS actual net profit amounted to EUR 3.0 million after EUR 2.7 million in Q1 2005. Diluted net earnings per share in both Q1 2006 and Q1 2005 were EUR 0.08.

Andreas G. Rutsch, ADVA’s chief financial officer, explains: “ADVA can look back on a highly successful Q1 2006. Although typically Q1 sales in our industry tend to come in below the preceding Q4 sales, we also topped our Q4 2005 revenues of EUR 35.8 million by 3.7% in Q1 2006. The momentum behind these achievements is underscored by nine consecutive quarters of growth in revenues, since Q1 2004. IFRS pro forma operating income in Q1 2006 was at EUR 5.7 million and exceeded our guidance. This strong result is mainly due to our ongoing cost optimization efforts and the capitalization of EUR 1.9 million of our development expenses related to pre-marketing activities for our new FSP 3000 R7 platform, versus only EUR 0.6 million capitalized development expenses in Q1 2005.”

INFORMATION ON Q1 2006 U.S. GAAP RESULTS
Based on the same revenue figures quoted under IFRS, ADVA’s U.S. GAAP net profit for Q1 2006 was EUR 1.5 million or EUR 1.5 million less than the figure reported under IFRS. This difference is largely attributable to the capitalization under IFRS of part of the company’s development costs and a lower valuation of inventories under U.S. GAAP. Further details on key U.S. GAAP financial numbers are provided in the Three-Month Report 2006, available in the investor relations section of the corporate web site, www.advaoptical.com

Q1 2006 HIGHLIGHTS
ADVA adds eight new carriers to its customer base to achieve a carrier end-customer base of 132 at the end of Q1 2006.
ADVA releases significant new features for the FSP 3000 product line.
ADVA announces deployment of FSP 2000 platform at Telekom Austria to offer managed storage services.
ADVA announces the extension of the Polish PIONIER network, one of Europe’s largest research networks, based on the FSP 3000 platform.
ADVA and Spirent® Communications announce that they team to deliver end-to-end Ethernet service assurance.
ADVA launches its new global “ADVANCE” marketing campaign.
ADVA announces closing of the acquisition of Covaro Networks, a U.S.-based Ethernet solutions company.
Major ADVA shareholder JDS Uniphase sells its full 4.3-million-share stake in ADVA in a private placement.

CONFERENCE CALL AND WEBCAST
In conjunction with the release of its Q1 2006 financial results, ADVA’s chief executive officer, Brian L. Protiva, and chief financial officer, Andreas G. Rutsch, will host a conference call for analysts and investors at 3:00 p.m. CEDT/9:00 a.m. EDT today, May 9, 2006. Investors may listen live via webcast on ADVA’s website, located on the ‘earnings webcasts’ page under ‘financial results’ in the investor relations section of ADVA’s website at www.advaoptical.com

ANNUAL SHAREHOLDERS’ MEETING
ADVA will host its annual shareholders’ meeting on Tuesday, June 13, 2005, in Meiningen, Germany.

Q2 AND FULL-YEAR 2006 OUTLOOK
ADVA expects revenues of between EUR 39 and EUR 44 million and an IFRS pro forma operating income margin of between 8% and 12% in Q2 2006. As for full-year 2006, we increase our previous guidance of revenue growth to levels of 24% to 32% above 2005 revenues and confirm our previous guidance of IFRS pro forma operating income margins between 10% and 13% of revenues. The company’s strategy targets to increase global market share, to build its Optical+Ethernet business, to expand its focus on North America and to drive procurement and development activities in China. ADVA plans continued investments throughout the year in the areas of research & development and sales & marketing, and also anticipates additional capital expenditures, including the expansion of its R&D and production facility in Meiningen. ADVA will release its financial results for the quarter ending June 30, 2005 on August 8, 2006.

“ADVA is positioned better than ever to ride the growth wave in our industry and to outperform the overall market. At current, ADVA is one of the very few companies in our market segment driving innovation. In addition, we continue to invest by scaling our focused and very committed team to address global coverage and technology leadership. With the right people and philosophy, Optical+Ethernet innovation and a passionate focus on the customer, ADVA will continue to advance the possibilities for the network communications industry,” stated Brian L. Protiva, chief executive officer of ADVA.

Contact Information

Christine Keck

Press Contact

ADVA Optical Networking

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