Avanex Announces Record Revenue and Gross Margin for Q2 2007
Tuesday February 6, 4:05 pm ET
Revenue Increases 54 Percent Year-over-Year
FREMONT, Calif.--(BUSINESS WIRE)--Avanex Corporation (NASDAQ:AVNX - News), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported financial results for the second quarter of fiscal 2007 ended Dec. 31, 2006.
Net revenue in the second quarter of fiscal 2007 was a record $55.6 million, a 9 percent increase over the prior quarter revenue of $50.9 million and a 54 percent increase over revenue of $36.1 million in the second quarter of the previous year.
"The second quarter was exceptionally strong and we are very pleased to report the highest revenue and gross margin in the history of Avanex," said Jo Major, chairman, president and chief executive officer of Avanex. "Our team generated solid revenue growth while significantly improving the financial performance of the company."
"In the metro and long haul markets we expect flat market demand in the first half of 2007, due to the delay of certain capacity expansion projects and we anticipate the market to return to growth in the second half of the year," said Major.
The company reported a net loss of $8.6 million or a loss of $0.04 per share in the second quarter of fiscal 2007, compared with a net loss of $9.7 million or a loss of $0.05 per share in the prior quarter and a net loss of $18.5 million or a loss of $0.13 per share in the second quarter of the prior year.
Non-GAAP net loss in the second quarter of fiscal 2007 decreased by 50 percent to $3.5 million or a loss of $0.02 per share, compared with a non-GAAP net loss of $7.1 million or a loss of $0.03 per share in the prior quarter and a non-GAAP net loss of $9.9 million or a loss of $0.07 per share in the second quarter of the prior year. Non-GAAP net loss excludes share-based payments, amortization of intangibles, restructuring charges, and gains (loss) on the disposal of property and equipment. Non-GAAP net loss in the second quarter of fiscal 2006 also excludes a loss on debt refinancing. Non-GAAP net loss in the second quarter of fiscal 2007 also excludes legal, accounting and consulting expenses related to transactions that were not completed.(1)
Gross margin in the second quarter of fiscal 2007 increased to 19 percent, compared with 10 percent in the previous quarter and 8 percent in the second quarter of fiscal 2006.
Marla Sanchez, senior vice president and chief financial officer said, "We are pleased with the significant improvement in gross margin due to the programs we implemented two quarters ago aimed at reducing inventory charges, improving our supply chain, increasing manufacturing yields and managing our product portfolio. Execution of these programs significantly expanded our gross margin and we expect to realize further improvements in our cost structure."
Q3 FY 2007 Outlook
The company expects revenue in the third quarter of fiscal 2007 to be between $54.0 million and $57.0 million and expects gross margin to be between 17 percent and 21 percent.
Conference Call
Avanex will host a conference call today, Feb. 6 at 1:30 p.m. Pacific time; 4:30 p.m. Eastern time. The number for the conference call is 706-679-9682, and the password is "Avanex." A live webcast of the conference call will be available on the Investors section on the company's web site at www.avanex.com. An audio replay of the conference call will be available until Feb. 13 at 11:59 p.m. Pacific time. To access the audio replay, please dial 706-645-9291.
About Avanex
Avanex Corporation is a leading global provider of Intelligent Photonic Solutions(TM) to meet the needs of fiber optic communications networks for greater capacity, longer distance transmissions, improved connectivity, higher speeds and lower costs. These solutions enable or enhance optical wavelength multiplexing, dispersion compensation, switching and routing, transmission, amplification, and include network-managed subsystems. Avanex was incorporated in 1997 and is headquartered in Fremont, Calif. Avanex also maintains facilities in Horseheads, N.Y.; Shanghai; Nozay, France; San Donato, Italy; and Bangkok. To learn more about Avanex, visit our Web site at: www.avanex.com.
Forward-looking Statements
This press release contains forward-looking statements including forward-looking statements regarding expected third quarter of fiscal 2007 outlook and operating results, market trends for the metro and long haul markets and the realization of improvements in our cost structure. Actual results could differ materially from those projected in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include general economic conditions, the pace of spending and timing of economic recovery in the telecommunications industry and in particular the optical networks industry, the company's inability to sufficiently anticipate market needs and develop products and product enhancements that achieve market acceptance, problems or delays in reducing the cost structure of the company, the company's inability to effect its restructuring goals or to successfully transfer operations to lower cost regions, any slowdown or deferral of new orders for products, higher than anticipated expenses the company may incur in future quarters or the inability to identify expenses which can be eliminated.
Finally, please refer to the risk factors contained in the company's SEC filings including the company's Annual Report on Form 10-K filed with the SEC on Sept. 28, 2006, Quarterly Report filed on Form 10-Q on Nov. 9, 2006 and subsequent filings with the SEC.
Avanex assumes no obligation and does not intend to update any forward-looking statements, whether as a result of new information, future events or otherwise.
(1) Details on the items excluded from non-GAAP net loss and non-GAAP net loss per share are available in the table entitled, "Reconciliation of GAAP Net Loss to Non-GAAP Net Loss," following the accompanying financial statements.
Avanex Corporation
CONSOLIDATED BALANCE SHEET
In thousands, except for per share data
(Unaudited)
December 31, September 30, June 30,
2006 2006 2006
------------ ------------- ----------
Assets
Current assets:
Cash and cash equivalents $ 37,360 $ 16,358 $ 28,963
Restricted cash and
investments 5,891 6,715 6,676
Short-term investments 14,638 38,798 38,696
Accounts receivable, net 34,587 31,608 26,768
Inventories, net 21,893 16,951 18,417
Due from related party 17,972 18,151 10,404
Other current assets 13,477 12,687 15,473
------------ ------------- ----------
Total current assets 145,818 141,268 145,397
Property and equipment, net 6,064 6,040 5,668
Intangibles, net 1,749 2,335 3,246
Goodwill 9,408 9,408 9,408
Other assets 2,228 1,853 1,839
------------ ------------- ----------
Total assets $ 165,267 $ 160,904 $ 165,558
------------ ------------- ----------
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $ 47,998 $ 40,768 $ 38,276
Accrued compensation 7,581 7,088 6,872
Accrued warranty 1,742 1,745 1,799
Due to related party 4,750 3,914 4,475
Other accrued expenses and
deferred revenue 9,472 5,802 4,467
Current portion of long-term
obligations 976 543 823
Current portion of accrued
restructuring 6,359 6,224 6,321
------------ ------------- ----------
Total current liabilities 78,878 66,084 63,033
Long-term liabilities:
Accrued restructuring 11,122 12,006 13,252
Convertible notes 4,438 4,282 4,569
Other long-term obligations 11,446 11,960 11,366
------------ ------------- ----------
Total liabilities 105,884 94,332 92,220
------------ ------------- ----------
Stockholders' equity:
Common stock 208 207 204
Additional paid-in capital 747,955 745,992 742,951
Accumulated other
comprehensive income 3,991 4,591 4,687
Accumulated deficit (692,771) (684,218) (674,504)
------------ ------------- ----------
Total stockholders' equity 59,383 66,572 73,338
------------ ------------- ----------
Total liabilities and
stockholders' equity $ 165,267 $ 160,904 $ 165,558
------------ ------------- ----------
Avanex Corporation
CONSOLIDATED STATEMENT OF OPERATIONS
In thousands, except for per share data
(Unaudited)
Three Months Ended
---------------------------------------
December 31, September 30, December 31,
2006 2006 2005
------------ ------------- ------------
Net revenue:
Third parties $ 40,325 $ 37,354 $ 25,475
Related parties 15,298 13,537 10,650
------------ ------------- ------------
Total net revenue 55,623 50,891 36,125
Cost of revenue:
Cost of revenue except for
purchases from related
parties 44,968 45,574 32,287
Purchases from related
parties 159 5 920
------------ ------------- ------------
Total cost of revenue 45,127 45,579 33,207
------------ ------------- ------------
Gross profit 10,496 5,312 2,918
Operating expenses:
Research and development 5,832 5,625 5,452
Sales and marketing 3,891 3,548 2,783
General and administrative:
Third parties 9,148 5,662 3,694
Related parties (73) (11) 147
Amortization of intangibles 656 852 1,385
Restructuring 436 (63) 2,942
Gain on disposal of property
and equipment (28) (20) (775)
------------ ------------- ------------
Total operating expenses 19,862 15,593 15,628
------------ ------------- ------------
Loss from operations (9,366) (10,281) (12,710)
Interest and other income 1,121 839 379
Interest and other expense (308) (272) (6,212)
------------ ------------- ------------
Net loss $ (8,553) $ (9,714) $(18,543)
------------ ------------- ------------
Basic and diluted net loss per
common share $ (0.04) $ (0.05) $ (0.13)
------------ ------------- ------------
Weighted-average number of
shares used in computing
basic and diluted net loss
per common share 206,873 205,389 145,215
------------ ------------- ------------
Avanex Corporation
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
In thousands, except for per share data
(Unaudited)
Three Months Ended
---------------------------------------
December 31, September 30, December 31,
2006 2006 2005
------------ ------------- ------------
Net loss, GAAP $ (8,553) $ (9,714) $(18,543)
Items reconciling GAAP net
loss to non-GAAP net loss:
Related to cost of revenue:
Share-based payments 234 278 29
Related to operating
expenses:
Research and development -
share-based payments 597 614 178
Sales and marketing -
share-based payments 191 208 55
General and administrative
- share-based payments 788 781 340
Amortization of
intangibles 656 852 1,385
Restructuring:
Share-based payments 3 7 16
All other 433 (70) 2,926
(Gain) loss on disposal of
property and equipment (28) (20) (775)
Loss on debt refinancing - - 4,525
Due diligence expenses
related to abandoned
acquisition activity 2,146 - -
------------ ------------- ------------
Total related to
operating expenses 4,786 2,372 8,650
------------ ------------- ------------
Total related to net
loss 5,020 2,650 8,679
------------ ------------- ------------
Non-GAAP net loss $ (3,533) $ (7,064) $ (9,864)
------------ ------------- ------------
Basic and diluted non-GAAP net
loss per common share $ (0.02) $ (0.03) $ (0.07)
------------ ------------- ------------
Weighted-average number of
shares used in computing
basic and diluted non-GAAP
net loss per common share 206,873 205,389 145,215
------------ ------------- ------------
Contact:
Avanex Corporation
Maria Riley, 510-897-4188
Director of Communications
maria_riley@avanex.com
--------------------------------------------------------------------------------
Source: Avanex Corporation
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