Exhibit 99.1
www.avanex.com
Avanex Announces Record Revenue for Q1 Fiscal 2007
FREMONT, Calif. – Nov. 2, 2006 – Avanex Corporation (NASDAQ: AVNX), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported financial results for the first quarter of fiscal 2007 ended Sept. 30, 2006.
Net revenue in the first quarter of fiscal 2007 was a record $50.9 million, a 12 percent increase over the prior quarter revenue of $45.5 million and a 23 percent increase over revenue of $41.2 million in the first quarter of the previous year.
The company reported a net loss of $9.8 million or a loss of $0.05 per share in the first quarter of fiscal 2007, compared with a net loss of $9.1 million or a loss of $0.04 per share in the prior quarter and a net loss of $16.9 million or a loss of $0.12 per share in the first quarter of the prior year.
Non-GAAP net loss in the first quarter of fiscal 2007 was $7.2 million or a loss of $0.03 per share, compared with a non-GAAP net loss of $9.1 million or a loss of $0.04 per share in the prior quarter and a non-GAAP net loss of $14.7 million or a loss of $0.10 per share in the first 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.*
Gross margin in the first quarter of fiscal 2007 was 9 percent, an increase of five percentage points over the prior quarter gross margin of 4 percent.
Financial results for the first quarter of fiscal 2007 are subject to review of the accounting for cost reductions from the company’s contract manufacturer, which may affect cost of goods sold.
“I am very pleased with our performance this quarter as it marks the company’s third consecutive quarter of double-digit revenue growth,” said Jo Major, chairman and chief executive officer of Avanex.
“During the quarter, we saw strong growth from new products we announced including our amplifier with integrated optical monitoring capability developed for next-generation deployments that provide the network backbone for the delivery of high-bandwidth triple play services. Also during the quarter, our supply chain initiatives started to take hold, helping reduce our overall product cost. Our operational metrics including yield, on-time shipments and return rates continued to recover following last year’s manufacturing transition,” said Major.
Q2 FY 2007 Outlook
The company expects revenue in the second quarter of fiscal 2007 to be between $52 million and $55 million and expects gross margin to improve.
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Conference Call
Avanex will host a conference call today, Nov. 2 at 1:30 p.m. Pacific time; 4:30 p.m. Eastern time. The number for the conference call is 210-835-2510, 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 Nov. 10 at 11:59 p.m. Pacific time. To access the audio replay, please dial 203-369-3364.
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 second quarter of fiscal 2007 operating results and market reception for new products. 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 achieve the anticipated benefits of previous acquisitions, to effect its restructuring goals or to successfully transfer manufacturing 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.
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.
| * | 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. |
Contact Information
Maria Riley
Director of Communications
maria_riley@avanex.com
Avanex Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except for per share data
(Unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | |
| | | September 30, 2006 | | | June 30, 2006 | | | September 30, 2005 | |
Net revenue: | | | | | | | | | | | | |
Third parties | | $ | 37,354 | | | $ | 35,016 | | | $ | 27,911 | |
Related parties | | | 13,537 | | | | 10,442 | | | | 13,322 | |
| | | | | | | | | | | | |
Total net revenue | | | 50,891 | | | | 45,458 | | | | 41,233 | |
| | | |
Cost of revenue: | | | | | | | | | | | | |
Cost of revenue except for purchases from related parties | | | 46,168 | | | | 43,460 | | | | 37,619 | |
Purchases from related parties | | | 5 | | | | 225 | | | | 1,488 | |
| | | | | | | | | | | | |
Total cost of revenue | | | 46,173 | | | | 43,685 | | | | 39,107 | |
| | | | | | | | | | | | |
Gross profit | | | 4,718 | | | | 1,773 | | | | 2,126 | |
| | | |
Operating expenses: | | | | | | | | | | | | |
Research and development | | | 5,625 | | | | 5,703 | | | | 7,127 | |
Sales and marketing | | | 3,548 | | | | 3,677 | | | | 3,788 | |
General and administrative: | | | | | | | | | | | | |
Third parties | | | 5,687 | | | | 3,666 | | | | 3,729 | |
Related parties | | | (11 | ) | | | (320 | ) | | | 1,545 | |
Amortization of intangibles | | | 852 | | | | 912 | | | | 1,765 | |
Restructuring | | | (63 | ) | | | (1,225 | ) | | | 40 | |
(Gain) loss on disposal of property and equipment | | | (20 | ) | | | (1,810 | ) | | | 7 | |
| | | | | | | | | | | | |
Total operating expenses | | | 15,618 | | | | 10,603 | | | | 18,001 | |
| | | | | | | | | | | | |
Loss from operations | | | (10,900 | ) | | | (8,830 | ) | | | (15,875 | ) |
Interest and other income | | | 1,334 | | | | 644 | | | | 551 | |
Interest and other expense | | | (272 | ) | | | (873 | ) | | | (1,599 | ) |
| | | | | | | | | | | | |
Net loss | | $ | (9,838 | ) | | $ | (9,059 | ) | | $ | (16,923 | ) |
| | | | | | | | | | | | |
Basic and diluted net loss per common share | | $ | (0.05 | ) | | $ | (0.04 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | |
Weighted-average number of shares used in computing basic and diluted net loss per common share | | | 205,389 | | | | 204,040 | | | | 145,182 | |
| | | | | | | | | | | | |
Avanex Corporation
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
In thousands, except for per share data
(Unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | |
| | | September 30, 2006 | | | June 30, 2006 | | | September 30,
2005 | |
Net loss, GAAP | | $ | (9,838 | ) | | $ | (9,059 | ) | | $ | (16,923 | ) |
| | | |
Items reconciling GAAP net loss to non-GAAP net loss: | | | | | | | | | | | | |
Related to cost of revenue: | | | | | | | | | | | | |
Share-based payments | | | 278 | | | | 283 | | | | — | |
Related to operating expenses: | | | | | | | | | | | | |
Research and development - share-based payments | | | 614 | | | | 612 | | | | 115 | |
Sales and marketing - share-based payments | | | 208 | | | | 232 | | | | 34 | |
General and administrative - share-based payments | | | 781 | | | | 996 | | | | 282 | |
Amortization of intangibles | | | 852 | | | | 912 | | | | 1,765 | |
Restructuring: | | | | | | | | | | | | |
Share-based payments | | | 7 | | | | 27 | | | | 11 | |
All other | | | (70 | ) | | | (1,252 | ) | | | 29 | |
(Gain) loss on disposal of property and equipment | | | (20 | ) | | | (1,810 | ) | | | 7 | |
| | | | | | | | | | | | |
Total related to operating expenses | | | 2,372 | | | | (283 | ) | | | 2,243 | |
| | | | | | | | | | | | |
Total related to net loss | | | 2,650 | | | | — | | | | 2,243 | |
| | | | | | | | | | | | |
Non-GAAP net loss | | $ | (7,188 | ) | | $ | (9,059 | ) | | $ | (14,680 | ) |
| | | | | | | | | | | | |
Basic and diluted non-GAAP net loss per common share | | $ | (0.03 | ) | | $ | (0.04 | ) | | $ | (0.10 | ) |
| | | | | | | | | | | | |
Weighted-average number of shares used in computing basic and diluted non-GAAP net loss per common share | | | 205,389 | | | | 204,040 | | | | 145,182 | |
| | | | | | | | | | | | |
Avanex Corporation
CONSOLIDATED BALANCE SHEET
In thousands, except for share quantities
(Unaudited)
| | | | | | | | |
| | | September 30, 2006 | | | June 30, 2006 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 16,358 | | | $ | 28,963 | |
Restricted cash and investments | | | 6,715 | | | | 6,676 | |
Short-term investments | | | 38,798 | | | | 38,696 | |
Accounts receivable, net | | | 31,608 | | | | 26,768 | |
Inventories, net | | | 16,951 | | | | 18,417 | |
Due from related party | | | 18,151 | | | | 10,404 | |
Other current assets | | | 12,078 | | | | 15,473 | |
| | | | | | | | |
Total current assets | | | 140,659 | | | | 145,397 | |
Property and equipment, net | | | 6,040 | | | | 5,668 | |
Intangibles, net | | | 2,335 | | | | 3,246 | |
Goodwill | | | 9,408 | | | | 9,408 | |
Other assets | | | 1,853 | | | | 1,839 | |
| | | | | | | | |
Total assets | | $ | 160,295 | | | $ | 165,558 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 40,768 | | | $ | 38,276 | |
Accrued compensation | | | 7,088 | | | | 6,872 | |
Accrued warranty | | | 1,745 | | | | 1,799 | |
Due to related party | | | 3,914 | | | | 4,475 | |
Other accrued expenses and deferred revenue | | | 5,804 | | | | 4,467 | |
Current portion of long-term obligations | | | 543 | | | | 823 | |
Current portion of accrued restructuring | | | 6,224 | | | | 6,321 | |
| | | | | | | | |
Total current liabilities | | | 66,086 | | | | 63,033 | |
| | |
Long-term liabilities: | | | | | | | | |
Accrued restructuring, less current portion | | | 12,006 | | | | 13,252 | |
Convertible notes | | | 4,282 | | | | 4,569 | |
Other long-term obligations, less current portion | | | 11,474 | | | | 11,366 | |
| | | | | | | | |
Total liabilities | | | 93,848 | | | | 92,220 | |
| | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Common stock, $0.001 par value, 300,000,000 shares authorized; 206,715,014 and 204,361,846 shares outstanding (net of 157,656 treasury shares) at September 30, 2006 and June 30, 2006, respectively | | | 207 | | | | 204 | |
Additional paid-in capital | | | 745,992 | | | | 742,951 | |
Accumulated other comprehensive income | | | 4,590 | | | | 4,687 | |
Accumulated deficit | | | (684,342 | ) | | | (674,504 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 66,447 | | | | 73,338 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 160,295 | | | $ | 165,558 | |
| | | | | | | | |
