• Q3 2012 revenues at EUR 82.3 million;
• Q3 2012 IFRS pro forma operating income of EUR 5.6 million (6.8% of revenues);
• Q4 2012 revenues expected to range between EUR 77 million and EUR 82 million with IFRS pro forma operating income between 2% and 6% of revenues.
Q3 2012 IFRS Financial Results
Revenues in Q3 2012 totaled EUR 82.3 million, up 3.7% year-on-year from EUR 79.3 million in Q3 2011. This result is in line with guidance of between EUR 82 million and EUR 87 million and down 4.2% from EUR 85.9 million achieved in Q2 2012. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 5.6 million or 6.8% of revenues, at the upper half of guidance of between 4% and 8% of revenues. This compares to Q3 2011 IFRS pro forma operating income of EUR 5.5 million or 6.9% of revenues, and to Q2 2012 IFRS pro forma operating income of EUR 6.8 million or 8.0% of revenues. The year-on-year as well as the quarter-on-quarter development of pro forma operating income is largely due to variations in revenues and gross margins.
The IFRS operating income rose to EUR 5.1 million in Q3 2012, after EUR 4.4 million in Q3 2011. Beyond the factors impacting pro forma operating income, this improvement is driven by a decrease in amortization of intangible assets from acquisitions, which amounted to EUR 0.2 million in Q3 2012 after EUR 0.6 million in Q3 2011.
The IFRS net income amounted to EUR 3.5 million in Q3 2012, down from EUR 9.7 million in Q3 2011. This reduction is largely driven by high net foreign currency exchange gains of EUR 3.0 million in Q3 2011 while respective gains amounted to nil in Q3 2012. Further, ADVA Optical Networking reported a tax expense of EUR 1.4 million in Q3 2012 after a tax benefit of EUR 2.7 million in Q3 2011. This tax benefit related to the initial recognition of deferred taxes in ADVA Optical Networking’s U.S. entity. Basic and diluted IFRS net earnings per share in Q3 2012 were EUR 0.07 each after EUR 0.21 and EUR 0.20 in Q3 2011.
“At EUR 82.3 million, our Q3 2012 revenues are in line with guidance and up 4% year-on-year. Quarter-on-quarter, the 4% revenue decline is due to temporarily weaker demand in the Americas and the Asia-Pacific regions. Our pro forma gross margin was at 39.3% in Q3 2012, after 40.9% in Q2 2012, and is up from 39.0% in Q3 2011. Pro forma operating margin came in at 6.8%, at the upper half of guidance, demonstrating our focus on managing operational costs. Furthermore, cash and cash equivalents were at EUR 70.3 million at the end of Q3 2012, up 1% from EUR 69.9 million at the end of the previous quarter and up 26% from EUR 56.0 million at the end of Q3 2011. Correspondingly, net liquidity increased to EUR 41.3 million, up 2% vs. the end of the previous quarter and up 47% vs. the end of Q3 2011. With this, cash and net liquidity levels at the end of Q3 2012 both reached quarter-end all-time highs, demonstrating our commitment to managing our working capital and strengthening our balance sheet,” commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking.
In conjunction with the release of its Q3 2012 financial results on October 23, 2012, ADVA Optical Networking (advaoptical.com) hosts a conference call for analysts and investors at 3:00 pm. CEST / 9:00 am. EDT. ADVA Optical Networking's chief executive officer, Brian Protiva, and chief financial officer & chief operating officer, Jaswir Singh, will participate in the call. Interested parties may dial in at +49 69 201744 210 or +1 877 423 0830, pin code 390 507#, and download the corresponding presentation, located on the “financial results” page under “conference calls” in the investor relations section of ADVA Optical Networking’s website.
Q4 2012 Outlook
ADVA Optical Networking has adapted rapidly to an unpredictable economic environment and remains confident that it will continue delivering profitable growth by matching its operational costs to both the Company’s growth and gross margin expansion capabilities and by winning new mobile backhauling customers. While the global economy continues to thwart expectations and magnify uncertainty, we are guiding Q4 2012 revenues of between EUR 77 million and EUR 82 million. Furthermore, we anticipate Q4 2012 pro forma operating income to range between 2% and 6% 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 research and development expenses. In case of highly adverse business prospects, these reviews may result in non-cash impairment charges in Q4 2012 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will publish its Q4 and full-year 2012 financial results on February 28, 2013.
“Albeit a weaker demand environment in H2 2012 than anticipated, ADVA Optical Networking has neither lost customers nor market share with existing customers. We continue to be a leader in innovation and have a broad and deep customer base. ADVA Optical Networking won several new customers over the last months which we believed would lead to stronger short-term growth. In review, operators’ business models remain challenged due to intense competition and regulation. In order to pave the way to generating new revenue streams, major mobile broadband upgrades, especially LTE rollouts, are absorbing much of the available capital and are fundamental to sustaining a profitable business model. Thus, network providers are currently under-investing and delaying project roll-outs in wireline activities based on capital market pressures. Nonetheless, due to further broadband growth, a rebound in wireline capital spending is inevitable. ADVA Optical Networking continues to weather the spending slowdown due to our increasing exposure to mobile backhauling wins, while many of our peers are experiencing a significant top-line squeeze,” stated Brian Protiva, chief executive officer of ADVA Optical Networking.