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ADVA Optical Networking Reports Audited 2012 IFRS Financial Results In Line with Expectations

Q4 2012 revenues at EUR 80.3 million, IFRS pro forma operating income of EUR 4.8 million (6.0% of revenues)

MARTINSRIED, GERMANY and MUNICH, GERMANY -- (Marketwire) -- 02/27/13 -- ADVA Optical Networking announced Q4 and audited full-year 2012 financial results for the period ended December 31, 2012, and prepared in accordance with International Financial Reporting Standards (IFRS).


Revenues totaled EUR 80.3 million in Q4 2012 and were in the upper half of guidance of between EUR 77 million and EUR 82 million. Revenues are down 3.8% vs. Q4 2011 at EUR 83.4 million and down 2.4% vs. Q3 2012 at EUR 82.3 million. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 4.8 million in Q4 2012 or 6.0% of revenues, at the upper end of guidance of between 2% and 6% of revenues. This compares to Q4 2011 IFRS pro forma operating income of EUR 7.4 million or 8.9% of revenues, and to Q3 2012 IFRS pro forma operating income of EUR 5.6 million or 6.8% of revenues. These developments are largely due to lower revenues and increased selling and marketing expenses.

The IFRS operating income in Q4 2012 was EUR 4.3 million, down from EUR 6.7 million in Q4 2011. This is due to the above-mentioned reasons for lower pro forma operating income.

The IFRS net income in Q4 2012 amounted to EUR 4.1 million after EUR 8.7 million in Q4 2011. Beyond the reduced operating income, net foreign currency exchange losses of EUR 0.1 million in Q4 2012 after gains of EUR 1.9 million in Q4 2011 contributed to this decrease. Basic and diluted IFRS net earnings per share were EUR 0.09 and EUR 0.08, respectively, down from EUR 0.18 each in Q4 2011.


Driven by increased Ethernet access business, revenues rose to a record high of EUR 330.1 million in 2012, 6.2% above the EUR 310.9 million reported in 2011. IFRS pro forma operating income increased from EUR 17.3 million or 5.6% of revenues in 2011 to EUR 21.8 million or 6.6% of revenues in 2012. This improvement is largely due to revenue and gross margin growth.

2012 IFRS operating income at EUR 18.8 million also increased significantly from EUR 13.2 million in 2011. The main reason for this positive development is the above-mentioned increase in pro forma operating income and a reduction in amortization of intangible assets from acquisitions from EUR 2.5 million in 2011 to EUR 1.6 million in 2012.

Finally, IFRS net income amounted to EUR 16.7 million in 2012, slightly down vs. EUR 16.9 million in 2011. The positive operating income development was mostly compensated by income tax expenses of EUR 1.8 million after income tax benefits of EUR 2.9 million in 2011. Furthermore, net foreign currency exchange gains of EUR 0.8 million in 2012 were lower than the EUR 2.3 million recorded in 2011. Basic and diluted IFRS net earnings per share were EUR 0.35 and EUR 0.34 in 2012, slightly down from EUR 0.36 and EUR 0.35, respectively, in 2011.

"We are very pleased with our Q4 2012 results which were achieved in a very volatile macro-economic environment. At EUR 80.3 million, our Q4 2012 revenues are in the upper half of guidance. Our pro forma gross margin strengthened from 39.3% in Q3 2012 and 40.0% in Q4 2011, to 41.8% in Q4 2012. Prior to amortization of capitalized development expenses, pro forma gross margin increased from 44.5% in Q3 2012 and 43.9% in Q4 2011, to 46.7% in Q4 2012. We achieved pro forma operating income of 6.0% of revenues in Q4 2012, at the upper end of guidance, demonstrating our focus on managing operational costs. In addition, cash and cash equivalents were at another record high of EUR 70.6 million at the end of Q4 2012, slightly up from EUR 70.3 million at the end of the previous quarter. Throughout the year, ADVA Optical Networking maintained financial strength, with an equity ratio in excess of 50% and record high net liquidity at the end of every quarter. At year-end 2012, net liquidity was at an all-time high of EUR 41.6 million, up from EUR 41.3 million at the end of Q3 2012. For the full year 2012, through a combination of revenue growth, increased gross margins, and enhanced operational excellence, we were able to further grow profitability. Pro forma operating income grew by 26%, from EUR 17.3 million or 5.6% of revenues in 2011 to EUR 21.8 million or 6.6% of revenues in 2012," commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking.


In conjunction with the release of its full-year 2012 audited IFRS financial results on February 28, 2013, ADVA Optical Networking will 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 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 997 939#, and download the corresponding presentation from ADVA Optical Networking's website, www.advaoptical.com, located in the "About Us / Investor Relations" section on the "Financial Results" page under "Conference Calls".


In Q1 2013, ADVA Optical Networking expects revenues to range between EUR 72 million and EUR 77 million, and anticipates pro forma operating income of between -2% and +2% of revenues. As a matter of caution, ADVA Optical Networking notes that it will continue to perform quarterly reviews of the expected business development with respect to all intangible assets, including capitalized development expenses. In case of highly adverse business prospects, these reviews may result in non-cash impairment charges in Q1 2013 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will publish its Q1 2013 financial results on April 25, 2013.

"Despite the difficult macro-economic environment, we achieved our goal to grow profitably. ADVA Optical Networking successfully recognizes and targets rapidly changing technology trends and growth markets. We continue to be the multi-year global market leader in Ethernet Access Devices with a market share of more than 20%, and remain a strong competitor in EMEA for metro optical transport solutions. Although long-term growth perspectives continue to be strong, for 2013 we are likely to face significant volatility in our market. Current carrier investment plans draw a mixed picture. However, an increasing share of the carriers' spending will flow into the migration to LTE projects which should translate into incremental business for ADVA Optical Networking. Beyond potential full-year revenue growth, our focus on innovation and strategic technology partnerships will result in an expanding share of higher- margin, software-heavy applications as well as expanded service offerings, supporting our long-term profitability commitment," stated Brian Protiva, chief executive officer of ADVA Optical Networking.


(in thousands of EUR,                         Q4      Q4        FY       FY
except earnings per share)                  2012    2011      2012     2011

Revenues                                  80,268  83,432   330,069  310,945

Pro forma cost of goods sold(*)          -46,711 -50,099  -196,820 -191,560
Pro forma gross profit(*)                 33,557  33,333   133,249  119,385

Pro forma
selling and marketing expenses           -12,995 -11,296   -46,259  -43,411

Pro forma
general and administrative expenses       -6,114  -5,465   -25,725  -24,007

Pro forma
research and development
expenses                                 -15,515 -16,848   -65,055  -60,083

Income from capitalization of
development expenses(*)                    5,064   7,397    23,529   23,648

Other operating income and expenses, net     840     291     2,059    1,751
Pro forma operating income                 4,837   7,412    21,798   17,283

Amortization of
intangible assets from acquisitions         -145    -640    -1,620   -2,493
Stock compensation expenses                 -404     -98    -1,344   -1,583
Operating income                           4,288   6,674    18,834   13,207

Interest income and expenses, net           -298    -378    -1,163   -1,531

Other financial gains and losses, net       -138   1,937       834    2,328
Income before tax                          3,852   8,233    18,505   14,004

Income tax benefit (expense), net            249     451    -1,783    2,935
Net income                                 4,101   8,684    16,722   16,939

Earnings per share in EUR

   Basic                                     0.09    0.18      0.35    0.36

   Diluted                                   0.08    0.18      0.34    0.35

(*) Research and development expenses include income from capitalization of development expenses. From 2012, amortization for capitalized development projects is presented as cost of goods sold. Prior period information has been adjusted accordingly, by reclassification of amortization from research and development expenses to cost of goods sold. The effect on cost of goods sold amounted to EUR 3,917/15,394 thousand and EUR 3,267/14,131 thousand in Q4/12M 2012 and Q4/12M 2011, respectively.

About ADVA Optical Networking

ADVA Optical Networking 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 two decades, the Company has become a trusted partner for more than 250 carriers and 10,000 enterprises across the globe. For more information, please visit us at www.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 Optical Networking SE, Martinsried/Munich and Meiningen, Germany www.advaoptical.com

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: ADVA Optical Networking SE via Thomson Reuters ONE


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