ADVA manages supply constraints and grows revenues and profitability in Q3 2021

• Quarterly revenues up 3.5% year-over-year to EUR 151.8 million
• Pro forma operating income substantially up by 17.7% to EUR 13.0 million (8.6% of revenues)
• Outlook fiscal year 2021 unchanged: Revenues EUR 580 - 610 million; Pro forma operating income 7.0% - 10.0% of revenues

ADVA (ISIN: DE0005103006, FSE: ADV), a leading provider of open networking solutions for the delivery of cloud and mobile services, reported its financial results for Q3 2021 ended on September 30, 2021. The results have been prepared in accordance with International Financial Reporting Standards (IFRS).

Q3 2021 IFRS financial results

Revenues in Q3 2021 reached EUR 151.8 million, up by 1.6% from EUR 149.4 million in Q2 2021, also up by 3.5% compared to EUR 146.7 million in Q3 2020. The increase in revenues is predominantly driven by a growth in demand from communication service providers (CSPs).

Pro forma gross profit in Q3 2021 decreased by 8.9%, reaching EUR 52.2 million (34.4% of revenues) compared to EUR 57.3 million (38.3% of revenues) in Q2 2021 and increased by 0.4% compared to EUR 51.9 million (35.4% of revenues) reported in Q3 2020. The reduction in gross profit compared to the previous quarter is mainly attributable to the semiconductor crisis, which led to increased purchasing costs.

Pro forma operating income for Q3 2021 was EUR 13.0 million (8.6% of revenues) and decreased by 9.7% compared to EUR 14.4 million (9.7% of revenues) reported in Q2 2021. Compared to Q3 2020, pro forma operating income improved substantially by 17.7% from EUR 11.1 million (7.5% of revenues).

Operating income for Q3 2021 of EUR 9.5 million decreased substantially by 27.2% from EUR 13.0 million reported for Q2 2021 and slightly decreased by 2.8% from EUR 9.8 million in Q3 2020. Operating income for Q3 2021 was impacted by extraordinary expenses in connection with the announced merger with ADTRAN amounting to EUR 2.1 million.

Net income reached EUR 18.5 million in Q3 2021, substantially up by 54.0% from EUR 12.0 million in Q2 2021, and significantly up by 177.0% from EUR 6.7 million in Q3 2020. The significant increase in net income is mainly due to a tax benefit of EUR 8.8 million resulting from increased deferred tax assets.

The company’s cash and cash equivalents totaled EUR 100.5 million, representing an increase of EUR 15.5 million compared to EUR 85.0 million at the end of Q2 2021. Year-over-year cash and cash equivalents substantially increased by EUR 32.2 million from EUR 68.3 million at the end of Q3 2020.

Net cash at the end of Q3 2021 stood at EUR 20.6 million compared to a net cash position of EUR 3.9 million at the end of Q2 2021 or a net debt position of EUR 35.0 million at the end of Q3 2020.

Net working capital at quarter-end was EUR 130.8 million and decreased by EUR 2.0 million compared to EUR 132.8 million at the end of Q2 2021 and increased by EUR 6.8 million compared to EUR 124.0 million at the end of Q3 2020.

Our industry is in the early stages of an unprecedented investment cycle in fiber expansion Brian Protiva, CEO, ADVA

Management commentary

“Customer demand for our solutions remains strong and we’re fighting hard to overcome the current supply chain challenges,” said Brian Protiva, CEO, ADVA. “We’re also looking forward to the planned business combination with ADTRAN. Our industry is in the early stages of an unprecedented investment cycle in fiber expansion propelled by the goal of delivering high-speed connectivity to all homes, businesses and the future 5G infrastructure. This expansion of the digital infrastructure requires new, innovative solutions and drives convergence at the network edge. Together with ADTRAN, we’re creating a market and innovation leader in this space that offers the industry’s most comprehensive and unique portfolio of solutions based on openness, scalability, security and software-controlled automation.”

“In view of the global semiconductor crisis, the third quarter was definitely challenging. Nevertheless, we managed to grow and generate solid margins. In addition, we were able to generate cash, and with more than EUR 100 million cash and a net cash position of around EUR 21 million, we further improved our level of financial flexibility,” said Uli Dopfer, CFO, ADVA. “The semiconductor crisis will last longer than we originally assumed, and the coming weeks and months will certainly be demanding again. Nevertheless, we are confident that with these strong numbers and order books at a record level, we will be able to overcome these supply challenges and close the year with good results within our outlook.”

Financial outlook 2021

For the fiscal year 2021, ADVA still expects revenues to be in the range of EUR 580 million and EUR 610 million and a pro forma operating income of between 7.0% and 10.0% of revenues.

The company will publish its financial results for Q4 and the full fiscal year 2021 on February 24, 2022.