• Quarterly revenues of EUR 170.5 million up by 18.0% compared to year-ago quarter
• Pro forma EBIT at EUR 7.8 million (4.6% of revenues)
• Outlook fiscal year 2022: Revenues EUR 650 - 700 million; Pro forma EBIT 6.0% - 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 financial results for Q1 2022 ended on March 31, 2022. The results have been prepared in accordance with International Financial Reporting Standards (IFRS).

Q1 2022 IFRS financial results

Revenues in Q1 2022 reached EUR 170.5 million, up by 8.1% from EUR 157.7 million in Q4 2021, also considerably up by 18.0% compared to EUR 144.5 million in Q1 2021. The increase in revenues for Q1 2022 is predominantly driven by a growth in demand from communication service providers (CSPs) and internet content providers (ICPs).

Pro forma gross profit in Q1 2022 decreased by 4.8%, reaching EUR 53.4 million (31.3% of revenues) compared to EUR 56.1 million (35.6% of revenues) in Q4 2021 and decreased by 3.5% compared to EUR 55.3 million (38.3% of revenues) reported in Q1 2021. The reduction in gross profit in relation to revenues is mainly attributable to increased purchasing costs due to the semiconductor crisis and a stronger US Dollar.

Pro forma EBIT for Q1 2022 was EUR 7.8 million (4.6% of revenues) and decreased by 45.6% compared to EUR 14.4 million (9.1% of revenues) reported in Q4 2021 and declined by 39.3% from EUR 12.9 million (8.9% of revenues) in Q1 2021.

Operating income for Q1 2022 of EUR 6.0 million decreased by 46.6% from EUR 11.2 million reported for Q4 2021 and decreased by 48.4% from EUR 11.6 million in Q1 2021. Operating income for Q1 2022 was impacted by extraordinary expenses in connection with the announced merger with Adtran, amounting to EUR 0.5 million (Q4 2021: EUR 1.6 million and Q1 2021: EUR 0).

Net income reached EUR 6.2 million in Q1 2022 and significantly decreased by 64.7% from EUR 17.5 million in Q4 2021 and decreased by 45.0% from EUR 11.2 million in Q1 2021.

The company’s cash and cash equivalents totaled EUR 73.0 million, representing a significant decrease of EUR 36.0 million compared to EUR 109.0 million at the end of Q4 2021. Year-over-year cash and cash equivalents decreased by EUR 6.1 million from EUR 79.1 million at the end of Q1 2021. The company invested non-operating cash in measures to secure delivery.

Net cash at the end of Q1 2022 stood at EUR 0.8 million compared to a net cash position of EUR 36.2 million at the end of Q4 2021 and a net debt position of EUR 10.6 million at the end of Q1 2021.

At quarter-end, net working capital totaled EUR 164.4 million and increased by EUR 35.4 million compared to EUR 129.0 million at the end of Q4 2021 and increased by EUR 38.6 million compared to EUR 125.8 million at the end of Q1 2021. The higher net working capital compared to the year-ago quarter is mainly attributable to increased inventory levels to secure the supply chain.

Management commentary

“We have good momentum and started well in this new business year. The expansion of communications networks is progressing rapidly and is fueled by public funding programs in many regions and countries. This environment should continue to positively impact demand for our products for the foreseeable future,” said Brian Protiva, CEO of ADVA. “Our investments in innovation in recent years have provided us with an outstanding, differentiated portfolio of solutions with which we will gain market share. The transformation of our business towards growth markets with a higher proportion of software and services and more verticalization is progressing well. In addition, the merger with Adtran will open up completely new opportunities for us in the USA, Europe and the global market.”

“Considering the extremely difficult external conditions, the past quarter was a strong start to the new 2022 financial year. We were able to increase our revenues by an exceptional 18% compared to the year-ago quarter; unfortunately, however, our success was limited by the ongoing semiconductor crisis. We certainly feel the, in parts, extreme cost increase of components as well as the global inflation in general. Nevertheless, we were able to achieve comparatively good profitability with a pro forma EBIT margin of 4.6%,” commented Uli Dopfer, CFO of ADVA. “Our exceptional solid balance sheet has enabled us to invest non-operating cash in our inventories, securing the supply chain. Further component shortages and higher costs are expected as the year progresses. However, we are confident that we also will master this challenge well.

2022 financial outlook

For the fiscal year 2022, ADVA expects revenues to be in the range of EUR 650 million and 700 million and a pro forma EBIT of between 6.0% and 10.0% of revenues.

The company will publish its financial results for Q2 2022 on July 28, 2022.