FREMONT, Calif., Sept. 5 - Avanex Corporation (Nasdaq: AVNX), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported financial results for its fourth quarter and fiscal year ended June 30, 2006.
Net revenue in the fourth quarter of fiscal 2006 was $45.5 million, a 13 percent increase over the prior quarter revenue of $40.1 million and a 6 percent increase over revenue of $42.7 million in the fourth quarter of the previous year. Fiscal year 2006 net revenue was $162.9 million, compared with $160.7 million in the prior fiscal year.
The company reported a net loss of $8.4 million or a net loss of $0.04 per share in the fourth quarter of fiscal 2006, compared with a net loss of $10.2 million or a net loss of $0.06 per share in the prior quarter and a net loss of $42.8 million or a net loss of $0.30 per share in the fourth quarter of the prior year.
Fiscal year 2006 net loss was $54.0 million, or a net loss of $0.33 per share, a $54.4 million or $0.42 per share improvement from the previous year's net loss of $108.4 million or a net loss of $0.75 per share. Gross margin in fiscal year 2006 was 5.3 percent, an increase of 8.1 percentage points over the prior year's gross margin of negative 2.8 percent.
Non-GAAP net loss in the fourth fiscal quarter of 2006 was $8.4 million or a non-GAAP net loss of $0.04 per share, compared with a non-GAAP net loss of $8.9 million or a non-GAAP net loss of $0.06 per share in the prior quarter and a 44 percent improvement over the non-GAAP net loss of $15.1 million or a non-GAAP net loss of $0.10 per share in the fourth fiscal quarter of the prior year.
$ Millions
Q4FY06 Q3FY06 Q4FY05
Non-GAAP Net Loss 8.4 8.9 15.1
Net Non-GAAP Exclusions 0.0 1.2 27.7
For the fourth quarter of fiscal 2006, GAAP and non-GAAP net loss were the same because net non-GAAP exclusions totaled zero. Non-GAAP net loss excludes share-based payments, amortization of intangibles, restructuring charges, and gains (loss) on the disposal of property and equipment. The third quarter of 2006 non-GAAP net loss also excludes an inventory provision related to non- RoHS (Restriction of Hazardous Substances) compliant product, and fourth quarter of 2005 non-GAAP net loss also excludes the write-off of a long-term investment.*
Combined cash balances, composed of cash, restricted cash, and short-term investments, totaled $74.3 million as of June 30, 2006. The company used $7.7 million in the fourth quarter of fiscal 2006, compared with $10.6 million in the third quarter of fiscal 2006 after consideration of $44.6 million net proceeds raised in the March 2006 equity stock offering.
Financial data for the fourth quarter and fiscal year 2006 are subject to finalization of pension accounting for foreign subsidiaries.
"We made considerable progress during fiscal 2006," said Jo Major, president and CEO of Avanex. "We completed a challenging restructuring plan, which contributed significantly to the improvements in our cost structure. We reduced our net loss by 50 percent and increased our gross margin by 8 percentage points over the previous year. On a quarterly basis, we evaluate the usability of our inventory, and determined this quarter that it was appropriate to increase our inventory reserves based upon our recent experiences in the contract manufacturing environment. We also noted a decrease in warranty costs following our manufacturing transitions and therefore adjusted the warranty provisions. In addition, our collections experience has been strong and we adjusted our bad debt allowance by $2.0 million, which favorably impacted general and administrative expenses in the quarter. Overall, we are very pleased with the manufacturing model and its impact on our financials."
"Additionally, as our team completed our manufacturing transitions in fiscal 2006, we launched a series of new products that have been very well received by our customers, and we are excited by the interest the industry is showing toward adopting and implementing new technologies," said Major. "In the fourth quarter, we launched three new products including an optical protection switch, an ultra-thin amplifier and an amplifier with built-in optical performance monitoring."
Q1 FY 2007 Outlook
Revenue is expected to be between $48 million and $50 million in the first fiscal quarter of 2007, ending Sept. 30, 2006.
Conference Call
Avanex will host a conference call today, Sept. 5, 2006, at 5:30 a.m. Pacific time; 8:30 a.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 in the Investors section on the company's website at http://www.avanex.com. An audio replay of the conference call will be available until Sept. 12, 2006 at 11:59 p.m. Pacific time. To access the audio replay, please dial 203-369-3218.
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: http://www.avanex.com.
Forward-looking Statements
This press release contains forward-looking statements including forward- looking statements regarding expected first fiscal quarter 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 integrating the businesses acquired from Alcatel, Corning and Vitesse Semiconductor, or in reducing the cost structure of the combined company, the company's inability to achieve the anticipated benefits of the acquired businesses, 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, 2005 and Quarterly Report on Form 10-Q filed with the SEC on May 10, 2006.
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.
http://www.avanex.com
Avanex Corporation
Consolidated Balance Sheets
In thousands
(Unaudited) As of As of As of
June 30, March 31, June 30,
2006 2006 2005
ASSETS
Current assets:
Cash, restricted cash and short-term
investments $74,335 $82,064 $73,905
Accounts receivable, net 26,768 22,979 22,788
Inventories, net 18,251 30,059 36,014
Due from related party 10,404 10,285 15,357
Other current assets 15,862 15,100 20,645
Total current assets 145,620 160,487 168,709
Property and equipment, net 5,668 6,143 8,612
Intangibles, net 3,246 4,147 8,686
Goodwill 9,408 9,408 9,408
Other assets 1,839 1,826 4,241
Total assets $165,781 $182,011 $199,656
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $38,276 $34,944 $28,251
Accrued compensation 6,872 7,557 10,741
Accrued warranty 2,248 4,413 5,268
Due to related party 4,475 4,589 1,549
Other accrued expenses and deferred
revenue 4,168 8,311 12,230
Current portion of long-term
obligations 823 1,074 2,910
Current portion of accrued
restructuring 6,321 11,335 32,040
Total current liabilities 63,183 72,223 92,989
Accrued restructuring, less current
portion 13,252 12,549 14,137
Long term convertible notes 4,569 6,124 29,408
Other long-term obligations, less
current portion 10,470 11,610 9,374
Total liabilities 91,474 102,506 145,908
Stockholders' equity:
Common stock 204 201 145
Additional paid-in capital 742,951 738,584 667,923
Deferred compensation - - (353)
Accumulated other comprehensive income 4,602 5,798 5,478
Accumulated deficit (673,450) (665,078) (619,445)
Total stockholders' equity 74,307 79,505 53,748
Total liabilities and
stockholders' equity $165,781 $182,011 $199,656
Shares of common stock issued and
outstanding 204,362 201,044 144,940
Avanex Corporation
Consolidated Statements of Operations
In thousands (except per share data)
(Unaudited)
Three Three Three Fiscal Fiscal
Months Months Months Year Year
Ended Ended Ended Ended Ended
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
GAAP GAAP GAAP GAAP GAAP
Revenue $45,458 $40,128 $42,712 $162,944 $160,695
Cost of revenue 43,471 38,485 42,826 154,270 165,258
Gross profit 1,987 1,643 (114) 8,674 (4,563)
Gross margin 4.4% 4.1% (0.3%) 5.3% (2.8%)
Operating expenses:
Research and development 5,411 5,189 8,179 23,179 33,124
Sales and marketing 3,688 2,988 3,747 13,247 16,803
General and
administrative 3,154 4,191 4,327 16,460 17,458
Amortization of
intangibles 912 1,386 2,000 5,448 5,723
Restructuring (1,225) 155 21,229 1,912 29,272
(Gain) loss on disposal
of property and
equipment (1,810) (2,486) 36 (5,064) (1,850)
Merger costs - - - - 300
Total operating expenses 10,130 11,423 39,518 55,182 100,830
Loss from operations (8,143) (9,780) (39,632) (46,508) (105,393)
Interest and other
income 644 1,213 1,938 2,787 3,607
Interest and other
expense (873) (1,600) (5,118) (10,284) (6,585)
Net loss $(8,372) $(10,167) $(42,812) $(54,005) $(108,371)
Net loss per share -
basic and diluted $(0.04) $(0.06) $(0.30) $(0.33) $(0.75)
Weighted average common
shares outstanding -
basic and diluted 204,040 158,246 144,822 163,242 144,253
Avanex Corporation
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
In thousands
(Unaudited)
Three Three Three Fiscal Fiscal
Months Months Months Year Year
Ended Ended Ended Ended Ended
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
Net loss, GAAP $(8,372) $(10,167) $(42,812) $(54,005) $(108,371)
Items reconciling GAAP
net loss to non-GAAP
net loss:
Related to cost of
revenue:
Share-based payments 283 110 - 422 -
Obsolete inventory
provision related to
RoHS product compliance - 951 - 951 -
Total related to cost of
sales 283 1,061 - 1,373 -
Related to operating
expenses:
Research and development
- share-based payments 612 416 36 1,321 193
Sales and marketing -
share-based payments 232 130 15 451 61
General and
administrative - share-
based payments 996 571 22 2,189 112
Amortization of
intangibles 912 1,386 2,000 5,448 5,723
Restructuring:
Share-based payments 27 15 - 69 -
All other (1,252) 140 21,229 1,843 29,272
(Gain) loss on disposal
of property and
equipment (1,810) (2,486) 36 (5,064) (1,850)
Total related to
operating expenses (283) 172 23,338 6,257 33,511
Total related to loss
from operations - 1,233 23,338 7,630 33,511
Related to interest and
other expense:
Write-off of long-term
investment - - 4,400 - 4,400
Loss on debt refinancing - - - 4,525 -
Total related to
interest and other
expense - - 4,400 4,525 4,400
Total related to net loss - 1,233 27,738 12,155 37,911
Non-GAAP net loss $(8,372) $(8,934) $(15,074) $(41,850) $(70,460)
Non-GAAP net loss per
share - basic and
diluted $(0.04) $(0.06) $(0.10) $(0.26) $(0.49)
Weighted average common
shares outstanding -
basic and diluted 204,040 158,246 144,822 163,242 144,253
