ADVA's Q2 revenue rises 11.6% to $117M on strong enterprise solutions sales

ADVA Optical Networking reported that second-quarter 2014 revenues rose to $117 million, up 11.2 year-over-year from $105.4 million and 11.6 percent sequentially from $105 million in the first quarter of 2014 due to an increase in enterprise sales.

The company said its results are in the upper half of its guidance of between $113 million and $120 million.

"The quarter-on-quarter increase of 11.6% is driven largely by investments in enterprise solutions, reflecting the continued network traffic growth due to the increasing adoption of cloud based services, coupled with rising demand for innovative enterprise network technology in a broad range of verticals," said Jaswir Singh, CFO and COO of ADVA Optical Networking, in the earnings release. "Year-on-year, the increase of 11.2% is primarily due to higher demand for carrier infrastructure solutions offering scalability and ease-of-use."

However, ADVA's pro forma gross margin declined sequentially from 35.4 percent in the first quarter of 2014 to 32.8 percent in the second quarter of 2014. Singh said the "reduction is largely related to the expansion into new verticals and one-time certification costs for next-gen technology."

Company IFRS pro forma operating income was .54 million or 0.5 percent of revenues in the second quarter of 2014, also in the upper half of guidance of between -2 percent and +2 percent of revenues. This compares to $2.02 million or 2.0 percent of revenues in the second quarter of 2013 and .53 million or 0.5 percent of revenues in the first quarter of 2014.

It attributes the year-on-year pro forma operating income reduction to the acquisition of Oscilloquartz in March, which initially has lower margin operations. Other factors that affected the results were the expansion of its customer base into new verticals and one-time certification costs for next-gen technology at one of its largest customers.

Looking toward the third quarter, ADVA Optical Networking has forecast revenues between $110 million and $117 million and anticipates pro forma operating income of between zero percent and 4 percent of revenues.

Similar to earlier quarters, the vendor said it "will continue to perform quarterly reviews of the expected business development with respect to all intangible assets, including capitalized development expenses."

Shares of ADVA Optical Networking were listed at $3.07, down 1.38 percent on the XETRA stock exchange on Friday morning.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the second quarter of 2014

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