Q2 2012 revenues at EUR 85.9 million

Q2 2012 IFRS pro forma operating income of EUR 6.8 million (8.0% of revenues)

Q3 2012 revenues expected to range between EUR 82 million and EUR 87 million with IFRS pro forma operating income between 4% and 8% of revenues

Martinsried/Munich, Germany. July 19, 2012. ADVA Optical Networking announced Q2 2012 financial results for the quarter ended on June 30, 2012, and prepared in accordance with International Financial Reporting Standards (IFRS).

Q2 2012 IFRS FINANCIAL RESULTS

Revenues in Q2 2012 rose to a record high of EUR 85.9 million, up 10.3% vs. EUR 77.8 million in Q2 2011 and up 5.2% vs. EUR 81.7 million achieved in Q1 2012. This result is at the upper end of guidance of between EUR 81 million and EUR 86 million. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 6.8 million or 8.0% of revenues in Q2 2012, above guidance of between 3% and 7% of revenues. This compares to EUR 3.5 million or 4.5% of revenues in Q2 2011 and EUR 4.5 million or 5.5% of revenues in Q1 2012. Both the year-on-year and the quarter-on-quarter increases of pro forma operating income are largely due to higher revenues and gross margins.

The IFRS operating income rose to EUR 5.9 million in Q2 2012, after EUR 2.4 million in Q2 2011. The key driver for this improvement is the above-mentioned increase of pro forma operating income.

The IFRS net income amounted to EUR 5.1 million in Q2 2012, up from EUR 0.8 million in Q2 2011. Beyond the improvement of the operating income, net foreign currency exchange gains of EUR 1.9 million, after a loss of EUR 1.0 million in Q2 2011, drove the increase in net income. In part, this effect was offset by higher tax expenses of EUR 2.4 million in Q2 2012 after EUR 0.2 million in Q2 2011. Basic and diluted IFRS net earnings per share in Q2 2012 were EUR 0.11 and EUR 0.10 after EUR 0.02 each in Q2 2011.

“We are very pleased with our Q2 2012 revenues of EUR 85.9 million, which are at the upper end of guidance and are up 5.2% vs. our previous quarter and 10.3% vs. Q2 2011. The quarter-on-quarter increase is driven largely by investments in carrier infrastructure and enterprise solutions, reflecting the continued network traffic growth due to video applications and the increasing adoption of cloud computing services, coupled with rising demand for innovative enterprise network technology in a broad range of verticals. Year-on-year, the pick-up is mostly related to higher demand for Ethernet transport solutions for mobile backhaul and enterprise access applications. Our pro forma gross margin increased to 40.9% in Q2 2012, up from 39.5% in Q1 2012 and 38.1% in Q2 2011. Excluding amortization for capitalized development projects, our Q2 2012 pro forma gross margin amounted to 45.4%, up from 43.6% in Q1 2012 and 43.0% in Q2 2011. This improvement is due to changes in product and customer mix and positive effects of our cost reduction programs. Our pro forma operating income was at 8.0% of revenues in Q2 2012 and came in above guidance, driven mostly by the strong revenue and gross margin development. Furthermore, cash and cash equivalents were at EUR 69.9 million at the end of Q2 2012, up 9% from EUR 64.0 million at the end of the previous quarter and up 26% from EUR 55.4 million at the end of Q2 2011. Correspondingly, net liquidity increased to EUR 40.8 million, up EUR 6.0 million or 17% vs. the end of the previous quarter and up EUR 13.5 million or 49% vs. the end of Q2 2011. With this, cash and net liquidity levels at the end of Q2 2012 both reached quarter-end all-time highs, demonstrating our commitment to manage our working capital and strengthen our balance sheet,” commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking.

CONFERENCE CALL

In conjunction with the release of its Q2 2012 financial results on July 19, 2012, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEST / 9:00 a.m. EDT. Participating in the call will be ADVA Optical Networking’s chief executive officer, Brian Protiva, and chief financial officer & chief operating officer, Jaswir Singh. Interested parties may dial in at +49 69 201744 210 or +1 877 423 0830, pin code 616 608#, and download the corresponding presentation from ADVA Optical Networking’s website, located on the “financial results” page under “conference calls” in the investor relations section of ADVA Optical Networking’s website at www.advaoptical.com.

Q3 2012 OUTLOOK

With its sound business model, ADVA Optical Networking remains flexible and is able to respond quickly to continuous change in the global market. Although the global economic sentiment continues to be very challenging, the Company expects Q3 2012 revenues of between EUR 82 million and EUR 87 million. Further, ADVA Optical Networking anticipates Q3 2012 pro forma operating income to range between 4% and 8% of revenues. ADVA Optical Networking notes that it will continue to perform quarterly reviews of the expected business development with respect to all intangible assets, including capitalized research and development expenses. These reviews may result in non-cash impairment charges in Q3 2012 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will publish its Q3 2012 financial results on October 23, 2012.

“While the Optical+Ethernet transport market has developed slowly in 2012, ADVA Optical Networking’s revenues have grown nicely, distancing ourselves from many of our competitors. Continued core network traffic growth as well as higher demand for Ethernet transport solutions for mobile backhaul and enterprise access applications should drive further profitable growth. These effects as well as shifts in product mix, further investments in advanced innovation and continued operational efficiencies should also support gross margin improvements. Furthermore, we have expanded our customer base quickly due to the success of our innovative mobile backhauling FSP 150EG-X platform for carrier Ethernet access and due to our 100G transport technology for the metro market. Data center interconnections and forward-looking cloud computing applications remain key drivers of growth for the use of our 100G, control plane and encryption features. These drivers should create further value for shareholders,” stated Brian Protiva, chief executive officer of ADVA Optical Networking.

SIX-MONTH IFRS CONSOLIDATED INCOME STATEMENT

^* Research and development expenses include income from capitalization of development expenses. From 2012, amortization for capitalized development projects is presented as cost of goods sold. Prior period information has been adjusted accordingly, by reclassification of amortization from research and development expenses to cost of goods sold. The effect on cost of goods sold amounted to EUR 3,902/7,222 thousand and EUR 3,747/7,270 thousand in Q2/6M 2012 and Q2/6M 2011, respectively.

About ADVA Optical Networking

ADVA Optical Networking is a global provider of intelligent telecommunications infrastructure solutions. With software-automated Optical+Ethernet transmission technology, the Company builds the foundation for high-speed, next-generation networks. The Company’s FSP product family adds scalability and intelligence to customers’ networks while removing complexity and cost. With a flexible and fast-moving organization, ADVA Optical Networking forges close partnerships with its customers to meet the growing demand for data, storage, voice and video services. Thanks to reliable performance for more than 15 years, the Company has become a trusted partner for more than 250 carriers and 10,000 enterprises across the globe. For more information, please visit us at www.advaoptical.com.