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ADVA Optical Networking reports audited 2005 IFRS financial results and confirms 2006 growth


- 31% y-o-y Q4 revenue growth to EUR 35.8 million; IFRS pro forma operating income of EUR 5.1 million, or 14% of revenues

- 29% y-o-y 2005 revenue growth to EUR 131.3 million; IFRS pro forma operating income of EUR 19.1 million, or 15% of revenues

- Confirmed Q1 revenue growth to between EUR 36 and EUR 38 million

March 9, 2006, Martinsried/Munich, Germany, and Mahwah, New Jersey, USA, ADVA Optical Networking today announced fourth quarter and audited full-year 2005 financial results for the period ended December 31, 2005, and for the first time 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 previous financial statements

In Q4 2005 revenues totaled EUR 35.8 million, compared to EUR 33.7 million in Q3 2005 and EUR 27.3 million in Q4 2004, respectively. U.S. GAAP pro forma operating income, excluding stock-based compensation and amortization and impairment of goodwill and acquisition-related intangible assets, was at EUR 4.0 million in Q4 2005, up 8.3% from EUR 3.7 million in Q3 2005, driven by higher revenues and an increased gross margin. U.S. GAAP pro forma quarterly net profit was at EUR 2.9 million in Q4 2005 after EUR 2.8 million in the previous quarter, with diluted pro forma net earnings per share unchanged at EUR 0.08.

Q4 2005 U.S. GAAP actual net profit amounted to EUR 2.7 million after EUR 1.6 million in Q3 2005, largely due to EUR 1.0 million higher stock-based compensation expenses in Q3 2005. Diluted net earnings per share in Q4 2005 were EUR 0.08, compared to EUR 0.05 in Q3 2005.


- ADVA announces the acquisition of Covaro Networks, a U.S.-based company enabling carriers to offer Ethernet services over a multitude of media.
- ADVA added six new carriers to its customer base to achieve a carrier end-customer base of 124 at the end of 2005.
- ADVA announces the deployment of FSP 3000 and FSP 2000 DWDM platforms at ZTV, one of Japan’s largest local cable operators.
- ADVA announces the deployment of its FSP 1500 platform in the pan-European network of Neo Telecoms, an Internet service provider based in Paris.
- ADVA extends its OEM relationship with FNC with the addition of the FSP 150 platform to the Fujitsu FLASHWAVEÒ portfolio, where the solution is branded as the FLASHWAVE 5150 Ethernet access platform.
- ADVA announces the availability of its FSP 2000 platform through EMC’s Select Program to provide geographic extension of storage channels and Ethernet over private dark fiber.
- ADVA receives the International Engineering Consortium’s InfoVision Award 2005 for its FSP 150 Ethernet access platform in the “Metro Network Technologies and Services” category.
- Light Reading names ADVA best investment potential finalist in industry awards competition.
- WestLB names ADVA a member of a 13-strong excellence portfolio derived from a universe of 119 listed German companies.

Revenues increased 28.5% from EUR 102.1 million in 2004 to EUR 131.3 million in 2005. U.S. GAAP pro forma operating income increased 13.4% from EUR 12.3 million in 2004 to EUR 14.0 million in 2005, largely driven by increased revenues and – partially balancing our additional investments in selling & marketing and research & development - improvements in our cost structure and operating efficiencies. U.S. GAAP pro forma net income was EUR 10.6 million in 2005 after EUR 11.3 million in 2004, impacted by higher tax expenses in 2005 (EUR 0.30 and EUR 0.32 U.S. GAAP pro forma diluted net earnings per share, respectively). U.S. GAAP actual net income increased from EUR 6.7 million in 2004 to EUR 8.7 million in 2005, impacted by higher acquisition-related expense charges in 2004. U.S. GAAP actual diluted net earnings per share improved from EUR 0.19 in 2004 to EUR 0.25 in 2005.

“Today’s announcement confirmed the earlier publication of our preliminary Q4 and full-year 2005 U.S. GAAP financial results. 2005 was a year of strong growth for ADVA across all areas. In January 2006, we completed the acquisition of Covaro Networks, increasing the number of ADVA employees to over 600 and adding valuable development and selling resources to our organization,” commented Andreas G. Rutsch, chief financial officer of ADVA.

Based on the same revenues figure as quoted under U.S. GAAP, ADVA’s IFRS net profit for Q4 2005 was EUR 3.1 million, which is EUR 0.4 million more than EUR 2.7 million under U.S. GAAP. For full-year 2005, ADVA reports IFRS net profit of EUR 11.9 million, EUR 3.2 million more than EUR 8.7 million under U.S. GAAP. These differences are largely attributable to the capitalization under IFRS of part of the company’s develop¬ment costs, higher valuation of inventories and a different valuation method for stock options outstanding. Further details on IFRS financial numbers are provided in ADVA’s Annual Report 2005, available in the investor relations section of the corporate web site, Going forward, IFRS will be the primary accounting framework of ADVA; the company will continue to provide key financial information under U.S. GAAP for the time being.

In conjunction with the release of its full-year 2005 audited IFRS financial results today, March 9, 2006, ADVA will host a tour for analysts and investors at its CeBIT booth C69 in hall 12 at 2:30 p.m. CET in Hanover, Germany, and provide an update on its technology solutions and product portfolio. At this location, ADVA will thereafter also host a conference call for analysts and investors at 3:00 p.m. CET/9:00 a.m. EST. Participating in the call will be ADVA’s chief executive officer, Brian L. Protiva, and chief financial officer, Andreas G. Rutsch. 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

ADVA confirms guidance of sequential revenue growth to between EUR 36 and EUR 38 million in Q1 2006 and full-year 2005 revenue growth of 20% to 30%. 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. These factors are expected to result in IFRS pro forma operating income margins between 10% and 13% for the full-year 2006. For Q1 2006 ADVA expects respective margins of 10% to 13% as well. Since development expenses to be capitalized under IFRS may be volatile initially and hence may lead to unsteady financial results, ADVA is broadening the forecast range under IFRS vis-à-vis the U.S. GAAP framework applied to date. ADVA will publish its Q1 2006 financial results on May 9, 2006, and host its annual shareholders meeting on June 13, 2006, in Meiningen, Germany.

“In 2005, we expanded our global market leadership in metropolitan area optical networking transport equipment and built a substantial position in Ethernet access for carriers. We will continue to do so in 2006. In an overall positive industry environment with less volatility than seen in 2004, ADVA benefited from steadily increasing demand for bandwidth, driven by higher volumes of existing data applications and from continued demand from end-users for new types of applications and services from carriers. In this environment, the combination of our people, Optical+Ethernet innovation and speed for customers has been the unique differentiation for ADVA to provide a strong and profitable business model for the benefit of our shareholders and customers,” stated Brian L. Protiva, chief executive officer of ADVA.


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