ADVA Optical Networking reports Q1 2010 financial results above guidance

ADVA Optical Networking reports Q1 2010 financial results above guidance

Q1 2010 revenues at EUR 63.2 million

Q1 2010 IFRS pro forma operating income of EUR 2.7 million (4.3% of revenues)

Q2 2010 revenues expected to range between EUR 63 million and EUR 68 million with IFRS pro forma operating income between 1% and 5% of revenues

April 29, 2010.

ADVA Optical Networking announced Q1 2010 financial results for the quarter ended March 31, 2010, and prepared in accordance with International Financial Reporting Standards (IFRS).

Q1 2010 IFRS FINANCIAL RESULTS

Revenues in Q1 2010 at EUR 63.2 million were above guidance of between EUR 57 million and EUR 62 million, up a significant 10.9% vs. Q1 2009 at EUR 56.9 million and up 6.0% vs. EUR 59.6 million reported in Q4 2009. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 2.7 million or 4.3% of revenues in Q1 2010, slightly higher than guidance of between 0% and 4% of revenues. This compares to EUR -0.1 million or -0.1% of revenues in Q1 2009 and EUR 3.1 million or 5.2% of revenues in Q4 2009. Year-on-year, the pro forma operating income improvement is largely due to higher revenues and a stable development of pro forma operating expenses.

The IFRS operating income in Q1 2010 was EUR 1.9 million, after an operating loss of EUR 1.0 million in Q1 2009. The key driver for this improvement is the above-mentioned increase of pro forma operating income.

The IFRS net income amounted to EUR 2.4 million in Q1 2010, after a net loss of EUR 0.5 million in Q1 2009. This significant improvement was largely driven by the development of the operating result described above, as well as net foreign currency exchange gains of EUR 1.1 million in Q1 2010 after EUR 0.5 million in Q1 2009. Basic and diluted IFRS net earnings per share were EUR 0.05 each in Q1 2010 after EUR -0.01 each in Q1 2009.

CONFERENCE CALL

In conjunction with the release of its Q1 2010 IFRS financial results on April 29, 2010, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEDT / 9:00 a.m. EDT. 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 4035 9611 or +1 866 306 3455, and download the corresponding presentation from ADVA Optical Networking's website, located on the "financial results" page under "conference calls" in the investor relations section of ADVA Optical Networking's website at www.advaoptical.com.

Q2 2010 OUTLOOK

While ADVA Optical Networking has the potential to continue to grow revenues and aggressively drive cost efficiencies in its product platforms, the current global recovery seems to be in a phase unlike any other previously, enveloped in much uncertainty. In light of stronger market fundamentals, the Company expects Q2 2010 revenues of between EUR 63 million and EUR 68 million. Further, ADVA Optical Networking anticipates Q2 2010 pro forma operating income to range between 1% and 5% of revenues. ADVA Optical Networking notes that it will continue to perform detailed quarterly reviews of the expected business development with respect to all intangible assets, including capitalized research and development expenses. These reviews may result in non-cash impairment charges in Q2 2010 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will host its annual shareholders' meeting on June 9, 2010, in Meiningen, Germany, and will publish its Q2 2010 financial results on July 22, 2010.

THREE-MONTH IFRS CONSOLIDATED INCOME STATEMENT

(in thousands of EUR, except earnings per share)

Q1 2010

Q1 2009

Revenues

63,162

56,941

Pro forma cost of goods sold

-35,974

-32,378

Pro forma gross profit

27,188

24,563

Pro forma selling and marketing expenses

-9,473

-9,159

Pro forma general and administrative expenses

-5,532

-5,902

Pro forma research and development expenses

-11,860

-10,860

Income from capitalization of development expenses,
net of amortization for capitalized development projects

1,429

1,177

Other operating income (expenses), net

949

101

Pro forma operating income

2,701

-80

Amortization of intangible assets from acquisitions

-411

-632

Stock compensation expenses

-380

-296

Operating income (loss)

1,910

-1,008

Interest expense, net

-327

-293

Other income, net

1,134

518

Income (loss) before tax

2,717

-783

Income tax benefit (expense), net

-347

235

Net income (loss)

2,370

-548

Earnings per share in EUR

basic

0.05

-0.01

diluted

0.05

-0.01
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