Avanex Announces Q3 2007 Financial Results
Thursday May 3, 4:02 pm ET
Revenue Increases 37 Percent Year-Over-Year
Net Loss Sequentially Improves 22 Percent
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 third quarter of fiscal 2007 ended March 31, 2007.
Net revenue in the third quarter of fiscal 2007 was $55.1 million, compared with $55.6 million in the prior quarter and $40.1 million in the third quarter of the previous year. Net revenue in the third quarter of fiscal 2007 includes $3.2 million from certain product lines of Avanex France S.A. that were divested on April 16, 2007.
Jo Major, chairman, president and CEO, said, "I am very pleased with our performance this quarter. Divesting our semiconductor fabs in France marks the final step in our major restructuring efforts. We have succeeded in evolving our operating structure into a low-cost, flexible model that has the ability to react quickly to market demand and provide us with a solid foundation for growth. Following an exceptionally strong growth quarter, we maintained our revenue level although it was impacted by annual pricing negotiations. The continued focus on improving our cost structure generated further net loss improvements and achieving non-GAAP EBITDA (earnings before interest, taxes, depreciation and amortization) breakeven no later than the September quarter remains our top priority.
"We remain confident in the long-term strength and growth of our markets. The demand for video services and broadband access are the underlying trends fueling market growth. The factors indicating the strength of our markets include the announcements of multiple large capital spending programs at the carrier level, increasing installation trends for fiber and solid booking trends announced by our customers. We are laying the groundwork for our next wave of growth by developing innovative technologies and strengthening our market presence in key growth segments within the overall telecommunications market. In the near-term our sales will be impacted by cyclical deployment patterns of large capacity expansion projects but we anticipate that we will return to growth in the latter part of the calendar year," continued Major.
The company reported a net loss of $6.7 million or a loss of $0.03 per share in the third quarter of fiscal 2007, compared with a net loss of $8.6 million or a loss of $0.04 per share in the prior quarter and a net loss of $10.2 million or a loss of $0.06 per share in the third quarter of the prior year.
Non-GAAP net loss in the third quarter of fiscal 2007 was $3.0 million or a loss of $0.01 per share, compared with a non-GAAP net loss of $3.5 million or a loss of $0.02 per share in the prior quarter and a non-GAAP net loss of $8.9 million or a loss of $0.06 per share in the third 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 2007 also excludes legal, accounting and consulting expenses related to transactions that were not completed, and non-GAAP net loss for the third quarter of fiscal 2006 also excluded an inventory provision related to non-RoHS (Restriction of Hazardous Substances) compliant product.(1)
Gross margin in the third quarter of fiscal 2007 was 19 percent, compared with 19 percent in the previous quarter and 4 percent in the third quarter of fiscal 2006.
"In the third quarter, we continued to improve the fundamentals of our cost structure and flexibility of our operating model," said Marla Sanchez, senior vice president and chief financial officer. "The improvements from the margin expansion programs we launched three quarters ago offset annual pricing adjustments, allowing us to sequentially maintain our gross margin, reduce our operating expenses and improve our net loss."
Q4 FY 2007 Outlook
The company expects revenue in the fourth quarter of fiscal 2007 to be between $47.0 million and $52.0 million due to continued cyclical deployment patterns of large capacity expansion projects. The company expects gross margin for the fourth quarter to be between 20 percent and 25 percent. The company expects to reach non-GAAP EBITDA breakeven by its first quarter of fiscal 2008 ending September 30, 2007. Non-GAAP EBITDA adjustments would remove the effect of non-recurring events, including certain costs associated with the French divestiture and stock-based compensation.(1)
Conference Call
Avanex will host a conference call today, May 3 at 1:30 p.m. Pacific time; 4:30 p.m. Eastern time. The number for the conference call is 706-679-8764, 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 May 11 at 8:59 p.m. Pacific time and can be accessed by dialing 706-645-9291 and entering passcode 4923648.
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 statements regarding expected fourth quarter of fiscal 2007 outlook and operating results, future profitability and non-GAAP EBITDA, market and growth trends for our products and our strategies. 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 problems or delays in realizing the benefits of the divestiture in France, the company's ability to effect its restructuring goals, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, general economic conditions, the pace of spending in the telecommunications industry and in particular the optical networks industry, market demand and price of our products, the company's ability to sufficiently anticipate market needs and develop products and enhancements that achieve market acceptance, problems or delays in reducing the cost structure of the company, any slowdown or deferral of orders for products or the application of accounting or tax principles in an unanticipated manner.
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 Feb. 7, 2007 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. The reconciliation for anticipated non-GAAP EBITDA is not available.
Avanex Corporation
CONSOLIDATED BALANCE SHEET
In thousands
(Unaudited)
March 31, Dec. 31, June 30,
2007 2006 2006
---------- ---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 30,902 $ 37,360 $ 28,963
Restricted cash and investments 5,935 5,891 6,676
Short-term investments 30,269 14,638 38,696
Accounts receivable, net 33,425 34,587 26,768
Inventories, net 21,184 21,893 18,417
Due from related party 19,280 17,972 10,404
Other current assets 8,018 13,477 15,473
---------- ---------- ----------
Total current assets 149,013 145,818 145,397
Property and equipment, net 6,223 6,064 5,668
Intangibles, net 1,155 1,749 3,246
Goodwill 9,408 9,408 9,408
Other assets 1,593 2,228 1,839
---------- ---------- ----------
Total assets $ 167,392 $ 165,267 $ 165,558
---------- ---------- ----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 35,452 $ 47,998 $ 38,276
Accrued compensation 6,975 7,581 6,872
Accrued warranty 1,973 1,742 1,799
Due to related party 3,513 4,750 4,475
Other accrued expenses and deferred
revenue 9,747 9,472 4,467
Current portion of long-term
obligations 1,616 976 823
Current portion of accrued
restructuring 6,257 6,359 6,321
---------- ---------- ----------
Total current liabilities 65,533 78,878 63,033
Long-term liabilities:
Accrued restructuring 10,954 11,122 13,252
Convertible notes - 4,438 4,569
Other long-term obligations 11,259 11,446 11,366
---------- ---------- ----------
Total liabilities 87,746 105,884 92,220
---------- ---------- ----------
Stockholders' equity:
Common stock 225 208 204
Additional paid-in capital 774,476 747,955 742,951
Accumulated other comprehensive
income 4,369 3,991 4,687
Accumulated deficit (699,424) (692,771) (674,504)
---------- ---------- ----------
Total stockholders' equity 79,646 59,383 73,338
---------- ---------- ----------
Total liabilities and stockholders'
equity $ 167,392 $ 165,267 $ 165,558
---------- ---------- ----------
Avanex Corporation
CONSOLIDATED STATEMENT OF OPERATIONS
In thousands, except per share data
(Unaudited)
Three Months Ended
-----------------------------
March 31, Dec. 31, March 31,
2007 2006 2006
--------- --------- ---------
Net revenue:
Third parties $ 38,339 $ 40,325 $ 30,652
Related parties 16,804 15,298 9,476
--------- --------- ---------
Total net revenue 55,143 55,623 40,128
Cost of revenue:
Cost of revenue except for purchases
from related parties 44,546 44,968 38,392
Purchases from related parties 299 159 93
--------- --------- ---------
Total cost of revenue 44,845 45,127 38,485
--------- --------- ---------
Gross profit 10,298 10,496 1,643
Operating expenses:
Research and development 6,263 5,832 5,189
Sales and marketing 4,043 3,891 2,988
General and administrative:
Third parties 4,384 9,148 4,612
Related parties 699 (73) (421)
Amortization of intangibles 531 656 1,386
Restructuring 1,155 436 155
(Gain) loss on disposal of property
and equipment 5 (28) (2,486)
--------- --------- ---------
Total operating expenses 17,080 19,862 11,423
--------- --------- ---------
Loss from operations (6,782) (9,366) (9,780)
Interest and other income 403 1,121 1,213
Interest and other expense (274) (308) (1,600)
--------- --------- ---------
Net loss $ (6,653) $ (8,553) $(10,167)
--------- --------- ---------
Basic and diluted net loss per common
share $ (0.03) $ (0.04) $ (0.06)
--------- --------- ---------
Weighted-average number of shares used
in computing basic and diluted net loss
per common share 214,034 206,873 158,246
--------- --------- ---------
Avanex Corporation
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
In thousands, except for per share data
(Unaudited)
Three Months Ended
-----------------------------
March 31, Dec. 31, March 31,
2007 2006 2006
--------- --------- ---------
Net loss, GAAP $ (6,653) $ (8,553) $(10,167)
Items reconciling GAAP net loss to non-
GAAP net loss:
Related to cost of revenue:
Share-based payments 341 234 110
Obsolete inventory provision related
to RoHS product compliance - - 951
--------- --------- ---------
Total related to cost of sales 341 234 1,061
--------- --------- ---------
Related to operating expenses:
Research and development - share-based
payments 508 597 416
Sales and marketing - share-based
payments 245 191 130
General and administrative - share-
based payments 896 788 571
Amortization of intangibles 531 656 1,386
Restructuring:
Share-based payments 3 3 15
All other 1,152 433 140
(Gain) loss on disposal of property
and equipment 5 (28) (2,486)
Due diligence expenses related to
abandoned acquisition activity - 2,146 -
--------- --------- ---------
Total related to operating expenses 3,340 4,786 172
--------- --------- ---------
Total related to net loss 3,681 5,020 1,233
--------- --------- ---------
Non-GAAP net loss $ (2,972) $ (3,533) $ (8,934)
--------- --------- ---------
Basic and diluted non-GAAP net loss per
common share $ (0.01) $ (0.02) $ (0.06)
--------- --------- ---------
Weighted-average number of shares used
in computing basic and diluted non-GAAP
net loss per common share 214,034 206,873 158,246
--------- --------- ---------
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