Avanex announces Q3 results, cites 'significant' debt reduction

May 9, 2006 Fremont, CA -- Avanex, a provider of intelligent photonic devices for optical networks, reported financial results for its third fiscal quarter, ended March 31, 2006. Net revenue in the third quarter of fiscal 2006 was $40.1 million, compared with $36.1 million in the prior quarter and $40.3 million in the third fiscal quarter of the prior year.

May 9, 2006 Fremont, CA -- Avanex, a provider of intelligent photonic devices for optical networks, reported financial results for its third fiscal quarter, ended March 31, 2006. Net revenue in the third quarter of fiscal 2006 was $40.1 million, compared with $36.1 million in the prior quarter and $40.3 million in the third fiscal quarter of the prior year.

The company reported a net loss of $10.2 million or a net loss of $0.06 per share in the third fiscal quarter of 2006, a 45.2 percent improvement over the net loss of $18.5 million or the net loss of $0.13 per share in the prior quarter, and a 46.2 percent improvement over the net loss of $18.9 million or the net loss of $0.13 per share in the third fiscal quarter of the prior year.

Non-GAAP net loss for the third fiscal quarter of 2006 was $8.9 million or a non-GAAP net loss of $0.06 per share, a 9.4 percent improvement over the non-GAAP net loss of $9.9 million or the non-GAAP net loss of $0.07 per share in the prior quarter and a 50.3 percent improvement over the non-GAAP net loss of $18.0 million or the non-GAAP net loss of $0.12 per share in the third fiscal quarter of the prior year. Non-GAAP exclusions from GAAP net loss collectively totaled $1.2 million in the third quarter of fiscal 2006, $8.7 million in the second quarter of fiscal 2006, and $0.9 million in the third quarter of fiscal 2005.

Non-GAAP net loss excludes share-based payments, amortization of intangibles, restructuring charges, gains on the disposal of property and equipment, an inventory provision of $1.0 million related to non-RoHS (Restriction of Hazardous Substances) compliant product in the third fiscal quarter of 2006, and a loss on debt refinancing in the second quarter of fiscal 2006. Separate from non-GAAP exclusions, a $1.3 million inventory provision was taken in the third quarter of fiscal 2006 related to the cessation of manufacturing at our New York facility.

"I am pleased with the progress the company has made," comments Jo Major, president and CEO of Avanex. "We achieved a 45 percent reduction in net loss from the second fiscal quarter of this year, and we achieved a similar reduction in net loss from the third fiscal quarter of last year. We continued to meet our restructuring objectives and reached important milestones, including becoming RoHS-compliant and returning to revenue growth. As we complete the transition of our manufacturing operations, we are able to focus more on generating revenue, increasing our market share, and launching industry leading new products.

According to a press release, the company's fiscal third quarter highlights included: raising net proceeds of $44.7 million in an equity stock offering and ending the quarter with $82.1 million in cash and short-term investments; $21.4 million of long term convertible notes converted into equity; a 45.2 percent reduction in net loss over the second fiscal quarter 2006; launching eight new products including the company's Xenpak Compatible Hot-Pluggable EDFA and Optical Performance Monitoring platform; meeting RoHS-compliance requirements across all product lines; and on-schedule completion of planned manufacturing transfers from Italy and France.

"In addition to the steady progress that we are showing on our income statement, our balance sheet also substantially improved," adds Major. "During the third fiscal quarter, $21.4 million was converted from debt into equity and we raised net proceeds of $44.7 million in an equity stock offering."

The company's revenue is expected to be between $42 million and $45 million in the fourth fiscal quarter of 2006. Gross margin for the fourth fiscal quarter of 2006 is expected to increase over the third fiscal quarter of 2006.


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