With network operators having detailed how the COVID-19 coronavirus pandemic has effected network bandwidth demands, it’s now time to start hearing from optical communications technology vendors. A string of such companies, both at the systems and component/subsystems level, are slated to announce quarterly financial performance, including the months of February and March when the pandemic began to spread. Optical transport platform company ADVA (ISIN: DE0005103006) was among the first of these, announcing fiscal first quarter 2020 results April 23. And in a scenario that will likely be repeated by other companies as they release their results, the quarter showed a mix of positives and negatives – and enough uncertainty to make ADVA executive decide that forecasting future results is fruitless.
On the plus side, revenues of 132,686,000 euros showed a 3.5% year-on-year improvement. Sequentially, ADVA suffered a sequential revenue decline of 12.2%, but such a step downward between the fourth quarter of the previous year and the first quarter of the new year is typical in the communications technology space. Demand for the company’s products “developed positively” during the quarter, in the words of a company press release.
However, the pandemic negatively affected other financial facets. Company management estimates they lost out on about 10 million euros due to the coronavirus. Pro forma gross profit of 42,275,000 euros was down 6.3% from the year-ago quarter and 22.6% from 4Q19; gross profit in the quarter would have been higher by 4.1 million euros absent the effects of the pandemic, the company indicated in slide delivered along with the results. Operating income was -1,671,00 euros. “The decline in profitability is mainly due to the lockdown in Wuhan at the beginning of the first quarter and to significant project-related shifts in the product and customer mix in Q1 2020,” the company stated. ADVA also reported one-time expenses that included “selective head count reduction” and site closures. The company did not say how many employees lost their jobs.
“We have developed a very agile and flexible supply chain, and our development and distribution centers have so far largely avoided the crisis,” commented ADVA CEO Brian Protiva via the release. However, the company nevertheless noted that “increased risks in maintaining the ability to supply” remain, as does the potential for a recession-inspired downturn in product demand. The company therefore has withdrawn its previous guidance for the year, which included an increase in revenues to more than 580 million euros and growth in pro forma operating income of more than 5% of revenues. Management also declined to issue new guidance, even for the next quarter.
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