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ADVA Optical Networking reports tenth consecutive quarter of growth in Q2 2006


Q2 2006 revenues up 26% on Q2 2005 and up 11% on Q1 2006 to reach a new all-time high of EUR 41.2 million

August 8, 2006. Martinsried/Munich, Germany, and Mahwah, New Jersey, USA. ADVA Optical Networking today announced Q2 2006 financial results for the quarter ended June 30, 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.

In Q2 2006 revenues totaled EUR 41.2 million, up 26% compared to EUR 32.7 million in Q2 2005 and up 11% compared to EUR 37.1 million in Q1 2006, respectively. IFRS pro forma operating income, excluding stock-based compensation and amortization and impairment of goodwill and acquisition-related intangible assets, was at EUR 3.5 million in Q2 2006 after EUR 3.8 million in Q2 2005, driven by higher revenues and significantly expanded selling & marketing and research & development expenses. IFRS pro forma quarterly net profit was at EUR 2.2 million in Q2 2006 after EUR 3.0 million in Q2 2005, with diluted pro forma net earnings per share of EUR 0.06 in Q2 2006 after EUR 0.08 in Q2 2005. Q2 2006 IFRS actual net profit amounted to EUR 1.4 million after EUR 2.5 million in Q2 2005. Diluted net earnings per share were EUR 0.04 in Q2 2006 and EUR 0.07 in Q2 2005. Andreas G. Rutsch, ADVA’s chief financial officer, comments: “With Q2 2006, ADVA concluded ten consecutive quarters of growth in revenues since Q1 2004, reflecting the strong and sustainable underlying market growth and, in contrast to many competitors, our excellence in steadily growing our business. IFRS pro forma operating income in Q2 2006 at EUR 3.5 million or 8% of revenues was within our guidance, but also reflected component shortages and resulting order backlog for Q3 2006, increased working capital requirements and higher selling and marketing expenses related to one-off promotional and marketing campaign activities.”

Based on the same revenue figures quoted under IFRS, ADVA’s U.S. GAAP actual net profit for Q2 2006 was EUR 0.9 million, or EUR 0.5 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 Six-Month Report 2006, available in the investor relations section of the corporate web site,


* ADVA adds three new carriers to its customer base to achieve a carrier end-customer base of 135 at the end of Q2 2006.
* ADVA acquires Movaz Networks, a U.S.-based leading optical equipment provider, helping to advance ADVA’s WDM market leadership and ROADM product portfolio.
* ADVA announces the deployment of the FSP 2000 and FSP 3000 platforms at Italy’s FASTWEB to help deliver data, voice and Europe’s first video-on-demand service.
* ADVA announces the deployment of the FSP 2000 platform for Northeast Utilities’ new data center.
* ADVA and iNOC announce that a U.S. Top 10 cable company deployed an iNOC service, using ADVA’s FSP 150 products.
* ADVA launches enhanced FSP 150 capabilities with the introduction of the FSP 150CCs.

In conjunction with the release of its Q2 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, August 8, 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

Currently ADVA expects its market for optical WDM and Ethernet access solutions for metro networks to grow by 20% to 25% in 2006, based on the expectation of ongoing strong demand for metro infrastructure deployments and enterprise solutions. Given the consolidation of Movaz from July 1, 2006, onwards, for ADVA, this will result in full year 2006 revenues between EUR 189 million and EUR 205 million or between 44% and 56% above 2005 levels. For Q3 2006, ADVA projects revenues to range between EUR 51 million and EUR 57 million, and for Q4 2006 between EUR 60 million and EUR 70 million. Further, ADVA projects its full year 2006 IFRS pro forma operating margin between 7% and 8% of revenues. For Q3 2006, this margin is expected to range at nonrecurring levels between 0% and 2% of revenues, driven by considerable ADVA-Movaz integration activity, which is a major catalyst for the realization of future synergies, and Movaz’s current gross margins ranging substantially below ADVA’s. Due to the first results of its integration efforts, ADVA is confident to see rapid improvements in gross margins and operating expenses and projects its Q4 2006 IFRS pro forma operating margin to range between 6% and 10% of revenues. ADVA will release its financial results for the quarter ending September 30, 2006, on November 9, 2006.

“ADVA continues to invest, building a solid foundation for future growth. Ongoing ADVA-Movaz integration efforts are currently a critical focus point because this acquisition is key to allowing ADVA to capitalize on the vast opportunities in the optical networking industry. Early results from these efforts will lift our pro forma operating margin back to higher levels in Q4 2006. The Movaz integration will help us achieve higher revenues and deliver more innovative features. In addition, it will provide solid profitability by increased Movaz gross margins and the realization of operational synergies over the next year. The rise in Movaz gross margins will be driven by the implementation of ADVA’s order management processes and increased supply chain leverage. Together, all elements of the integration will accelerate ADVA’s growth strategy over the long-term,” stated Brian L. Protiva, chief executive officer of ADVA.


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