Q1 2018 snapshot		Contents
• Revenues of EUR 120.5 million		Q1 2018 snapshot	2
• IFRS pro forma operating income1 of EUR 2.2 million (1.9% of revenues)		Profile	2
• IFRS operating loss of EUR 0.4 IFRS net loss of EUR 2.4 million	million and	Contents	2
• Net liquidity2 of negative EUR	44.2 million at March 31, 2018	Q1 2018 IFRS financial highlights	3
Profile		Three-month group management report	3
succeed.	ADVA Optical Networking is a company founded on innovation and driven to help our customers	Forward-looking statements Business development and operational performance Net assets and financial position	4 4 7
	For over two decades our technology has empowered networks across the globe. We're continually developing breakthrough hardware and software that leads the networking industry and creates	Events after the balance sheet date Risk report Outlook	10 10 11
new business opportunities. It's these open connectivity solutions	that enable our customers to deliver the cloud and mobile services that are vital to today's society and for imagining new tomorrows.	Three-month IFRS consolidated financial statements Consolidated statement of financial position (unaudited)	13 13
Together, we're building a truly connected and sustainable future.		Consolidated income statement (unaudited) Consolidated statement of comprehensive income (unaudited)	13 15
		Consolidated cash flow statement (unaudited) Consolidated statement of changes in stockholders' equity (unaudited) Notes to the condensed interim consolidated financial statements (unaudited)	16 17 18
		Declaration of compliance with the German Corporate Governance Code Affirmative declaration of the legal representatives	37 37
		Shareholder information	38
		Corporate information	39

Unknown

Gelöscht: 4 Unknown

Unknown

Gelöscht: 36 Unknown

Gelöscht: 14 Unknown

Feldfunktion geändert ... [1]

Feldfunktion geändert ... [2]

Feldfunktion geändert ... [3]

Feldfunktion geändert ... [4]

Feldfunktion geändert ... [5]

Feldfunktion geändert ... [6]

Feldfunktion geändert ... [7]

Feldfunktion geändert ... [8]

Feldfunktion geändert ... [9]

Feldfunktion geändert ... [10]

Feldfunktion geändert ... [11]

Feldfunktion geändert ... [12]

Feldfunktion geändert ... [13]

Feldfunktion geändert ... [14]

Feldfunktion geändert ... [15]

Feldfunktion geändert ... [16]

Feldfunktion geändert ... [17]

Feldfunktion geändert ... [18]

Feldfunktion geändert ... [19]

Viona Brandt 18.5.2018 09:30

¹ Pro forma operating income is calculated prior to non-cash charges related to the stock compensation programs and amortization and impairment of goodwill and acquisition-related intangible assets. Additionally, non-recurring expenses related to restructuring measures are not included.

² Net liquidity is calculated by subtracting current and non-current financial liabilities as well as current and non-current finance lease obligations from cash and cash equivalents.

$\cdots$ Highlights	Management	·inancial	areholde 11d
	kenor			nro ation

Q1 2018 IFRS FINANCIAL HIGHLIGHTS

Quarterly income statement

(in thousands
of EUR, except earnings per
share)	Q1 2018	Q1 2017	Change
Revenues	120,538	141,835	-15%
Pro forma
cost of goods sold	-76,275	-95,712	20%
Pro forma
gross profit	44,263	46,123	-4%
Pro forma
S&M expenses	-15,348	-15,939	4%
Pro forma
G&A expenses	-8,853	-8,177	-8%
Pro forma
R&D expenses	-27,882	-27,324	-2%
Income from capitalization of
development expenses	7,973	10,748	-26%
Other operating income and
expenses, net	2,086	1,210	72%
Pro forma
operating income	2,239	6,641	-66%
Amortization of intangible
assets from acquisitions	-1,347	-782	-72%
Stock comp. exp.	-348	-358	3%
Restructuring exp	-968	-	-
Operating income	-424	5,501	-108%
Interest income and expenses,
net	-228	-191	-19%
Other financial
gains and losses, net	-1,894	-1,002	-89%
Income (loss)
before tax	-2,546	4,308	-159%
Income tax benefit (expense),
net	106	1,877	-94%%
Net income (loss)	-2,440	6,185	-139%
Earnings per share in EUR
basic	-0,05	0.12
diluted	-0,05	0.12

Balance sheet

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017	Change
Cash and cash equivalents	57,695	58,376	-1%
Inventories	73,048	81,694	-11%
Goodwill	67,186	68,167	-1%
Capitalized R&D expenses	86,481	85,175	2%
Other intangible assets	34,559	36,785	-6%
Total intangible assets	188,226	190,127	-1%
Other assets	52,385	52,495	0%
Total assets	458,260	464,019	-1%
Stockholders' equity	223,468	227,021	-2%

Cash flow statement

(in thousands of EUR)	Q1 2018	Q1 2017	Change
Cash flow from
operating activities	5,647	5,623	0%
Gross capital expenditures for
property, plant and equipment and
other intangible assets	-2,930	-5,220	44%

Ratios

(in thousands of EUR)		Dec. 31,
	Mar. 31, 2018	2017	Change

Net liquidity	-44,180	-38,185	-16%
Working capital3	122,505	123,828	44%


	Q1 20184	Q1 20174	Change
Days sales outstanding	64	61	5%
Inventory turn-over
(times/year)	4.1	5.3	-23%

Employees

Mar. 31, 2018	Dec. 31, 2017	Change
1,848	1,894	-2%

Three-month group management report

The numbers discussed in this unaudited interim group management report are based on the interim consolidated financial statements under IFRS (condensed as per IAS 34 Interim Financial Reporting).

³ Working capital is defined as trade accounts receivable plus inventories minus trade accounts payable.

⁴ Trailing twelve months.

Highlights
ഥവ

In the following, ADVA Optical Networking SE as a company is labeled "the company", "ADVA SE". "ADVA Optical Networking", "the group" or "ADVA group" always refer to the ADVA Optical Networking group.

Forward-looking statements

This interim group management report of ADVA Optical Networking SE contains forward-looking statements using words such as "believes", "anticipates" and "expects" to describe expected revenues and earnings, anticipated demand for optical networking solutions, internal estimates and liquidity. These forward-looking statements are based on the beliefs of the management board and respective assumptions made, and involve a number of unknown risks, uncertainties and other factors, many of which are beyond ADVA Optical Networking's control. If one or more of these uncertainties or risks materializes, or if the underlying assumptions of the management board prove incorrect, actual results can differ materially from those described in or inferred from forward-looking statements and information. Unknown risks and uncertainties are discussed in the "risk report" section of the group management report 2017.

Business development and operational performance

Revenues

Revenues represent one of the four key performance indicators for ADVA Optical Networking. The group's revenues in Q1 2018 amounted to EUR 120.5 million and were EUR 21.3 million or 15.0% below revenues of EUR 141.8 million in Q1 2017. Compared to revenues of EUR 117.2 million in Q4 2017, revenues in Q1 2018 increased by 2.8%. The revenue decline compared to Q1 2017 is still attributable to the significantly lower revenue stream from one major US customer in the ICP segment, which declined in Q3 2017. The increase in revenues from the previous quarter is driven by solid demand from all regions, both from network operators and large companies. The revenue contribution of internet content providers remained at a similar level as in Q4 2017.

In Q1 2018, Europe, the Middle East and Africa (EMEA) was once again the most important sales region, followed by America and Asia-Pacific. Year-on-year, sales in EMEA decreased to EUR 64.7 million in Q1 2018 compared to EUR 71.2 million in Q1 2017, where the year-ago quarter Q1 2017 was exceptionally strong in EMEA. ADVA Optical Networking continues to perform well in this region, and is thriving with a broad, loyal customer base and mature partnering strategy. Revenues in America declined significantly by 34.3% from EUR 62.8 million in Q1 2017 to EUR 41.3 million in Q1 2018. As already mentioned above, this decline resulted from the greatly reduced order volume from one of the major internet content providers. In the Asia-Pacific region, sales increased to EUR 14.6 million in Q1 2018 compared to EUR 7.8 million in Q1 2017, reflecting good business with MRV's customer base.

	$\sim$ nanem $\sim$ nent	ınancıal	olde	orno
Highlight		ement

Revenues by region

(in millions of EUR and relative to total revenues)

Since ADVA Optical Networking is only active in a single operating segment, which is the development, production and marketing of optical networking solutions, a further breakdown of revenues is not relevant.

Results of operations

(in millions of EUR,	Q1	Portion of	Q1	Portion of
except earnings per share)	2018	revenues	2017	revenues

Revenues	120.5	100.0%	141.8	100.0%
Cost of goods sold	-77.3	64.2%	-96.3	67.9%
Gross profit	43.2	35.8%	45.5	32.1%

Selling and marketing expenses	-16.0	13.3%	-16.2	11.5%
General and
administrative expenses	-9.0	7.4%	-8.3	5.8%
Research and
development expenses	-20.7	17.2%	-16.7	11.8%
Other operating income and expenses,
net	2.1	1.7%	1.2	0.9%
Operating income	-0.4	-0.4%	5.5	3.9%

Interest income and expenses, net	-0.2	0.2%	-0.2	0.1%
Other financial gains (losses), net	-1.9	1.6%	-1.0	0.7%
Income (loss) before tax	-2.5	-2.1%	4.3	3.1%
Income tax benefit (expense), net	0.1	0.1%	1.9	1.3%
Net income (loss)	-2.4	2.0%	6.2	4.4%

Earnings per share
in EUR
basic	-0.05		0.12
diluted	-0.05		0.12

Cost of goods sold decreased by EUR 19.0 million to EUR 77.3 million in Q1 2018 mainly due to a decline in revenues. Cost of goods sold includes amortization charges for capitalized development projects of EUR 6.9 million in Q1 2018 after EUR 5.7 million in Q1 2017.

Gross profit decreased from EUR 45.5 million in Q1 2017 to EUR 43.2 million in Q1 2018, while gross margins improved to 35.8% in Q1 2018 after 32.1% in Q1 2017. The increase in gross margin in Q1 2018 is driven by a disproportional decrease in cost of goods sold compared to revenue decrease mainly due to customer- and product-mix in the current quarter.

$\cdots$	rment	inan	nıne	norac.
Highlights	enoi		ation	ПF пог

Selling and marketing expenses in Q1 2018 were EUR 16.0 million, slightly down from EUR 16.2 million in Q1 2017, representing 13.3% and 11.5% of revenues, respectively. ADVA Optical Networking continues to invest in post-sales customer service and intensified direct-touch activities with those key customers served via indirect distribution channels. Establishing direct contact enables the group to work more closely with its end customers and better understand their specific requirements, which in turn helps in developing suitable products.

General and administrative expenses at EUR 9.0 million in Q1 2018 were up compared to EUR 8.3 reported in Q1 2017, representing 7.4% and 5.8% of revenues, respectively.

At EUR 20.7 million in Q1 2018, R&D expenses were significantly up compared to EUR 16.7 million seen in Q1 2017, comprising 17.2% and 11.8% of revenues, respectively. Gross R&D expenses increased to EUR 28.7 million in Q1 2018 compared to EUR 27.5 million reported in Q1 2017. At the same time, income from capitalization of development expenses decreased from EUR 10.8 million in Q1 2017 to EUR 8.0 million in Q1 2018. The capitalization rate in Q1 2018 amounted to 27.8%, significantly below the 39.1% reported in Q1 2017. The decrease in capitalization of development expenses mainly relates to the early closure and impairment of two development projects in the second half of 2017.

In Q1 2018, total operating costs of EUR 43.6 million increased by EUR 3.6 million from EUR 40.0 million in Q1 2017, representing 36.2% and 28.2% of revenues, respectively. The increase mainly relates to higher personnel and other expenses due to the integration of the MRV Communications group in the second half of 2017.

ADVA Optical Networking reported a significant decrease in operating income of EUR 5.9 million to an operating loss of EUR 0.4 million in Q1 2018. This decrease is largely due to the decline in revenues combined with a significant increase of operating expenses.

Pro forma operating income represents one of the four key performance indicators for ADVA Optical Networking. As pro forma operating income excludes non-cash charges related to stock compensation and business combinations as well as non-recurring expenses related to restructuring measures, the management board of ADVA Optical Networking believes that pro forma operating income is a more appropriate measure than operating income when benchmarking the group's operational performance against other telecommunications equipment providers. In Q1 2018 ADVA Optical Networking reported a pro forma operating income of EUR 2.2 million after EUR 6.6 million in Q1 2017, representing 1.9% and 4.7% of revenues, respectively.

Beyond the operating result, net interest expenses of EUR 0.2 million (Q1 2017: EUR 0.2 million) and net other financial losses of EUR 1.9 million (Q1 2017: net other financial losses of EUR 1.0 million) relating to the revaluation of foreign currency assets and liabilities and the result on hedging instruments, impacted the net income before tax in Q1 2018.

In Q1 2018, the group reported an income tax benefit of EUR 0.1 million after an income tax benefit of EUR 1.9 million in Q1 2017. The income tax benefit in Q1 2018 results from the application of the expected tax rate to the relevant income before tax of the respective entity of the ADVA Optical Networking Group. In Q1 2017, the income tax benefit mainly resulted from current tax benefits related to prior periods as well as deferred tax benefits on loss carry-forwards.

The decrease of operating result in the current year, combined with the recognition of a lower tax benefit compared to prior year, resulted in ADVA Optical Networking reporting a net loss of EUR 2.4 million in Q1 2018 after a net income of EUR 6.2 million in Q1 2017.

Summary: Business development and operational performance

In Q1 2018, ADVA Optical Networking reported decreased revenues while gross margin at the same time improved. However, due to increased operating cots mainly resulting from higher personnel expenses ADVA Optical Networking reported a net loss in Q1 2018.

	nem	ncia	renoide	morall
	101
זחחווו		mer	ιτιοτ

Net assets and financial position

Balance sheet structure

ADVA Optical Networking's total assets decreased by EUR 5.8 million from EUR 464.0 million at year-end 2017 to EUR 458.2 million at the end of March 2018.

(in millions of EUR)	Mar. 31, 2018	Dec. 31,
		2017
Current assets	229.0	232.6
Non-current assets	229.2	231.4
Total assets	458.2	464.0
Current liabilities	167.9	184.8
Non-current liabilities	66.8	52.2
Stockholders' equity	223.5	227.0
Total equity and liabilities	458.2	464.0

Current assets at EUR 229.0 million at the end of Q1 2018 were EUR 3.6 million lower than the EUR 232.6 million reported at the end of 2017 and comprised 50.0% of the balance sheet total after 50.1% at the end of 2017. The decrease in current assets is mainly driven by the reduction of EUR 8.6 million in inventories to EUR 73.0 million at the end of March 2018. Inventory turns remained stable at 4.1 times in Q1 2018 and 12M 2017. Moreover, cash and cash equivalents decreased by EUR 0.7 million to EUR 57.7 million at March 31, 2018. These effects were partly compensated by an increase of trade accounts receivable to EUR 86.9 million at the end of Q1 2018 after EUR 81.3 million reported on December, 31 2017. Days sales outstanding were at 62.8 days in Q1 2018, compared to the 60.5 days reported in 12M 2017.

Non-current assets decreased to EUR 229.2 million on March 31, 2018, after EUR 231.4 million reported at year-end 2017. Within non-current assets goodwill decreased by EUR 1.0 million due to foreign currency translation effects and other intangible assets decreased by EUR 2.2 million. At the same time, capitalized development projects increased by EUR 1.3 million to EUR 86.5 million at the end of Q1 2018. In addition, deferred tax assets increased by EUR 0.8 million to EUR 11.6 million, related to the recognition of taxes on losses carried forward.

Meaningful additional assets belonging to ADVA Optical Networking are the broad and global customer base of several hundred service providers and thousands of enterprises, the ADVA Optical Networking brand, the vendor and partner relationships and a highly motivated and skilled global team. These assets are not included in the balance sheet. Customer satisfaction as measured by the Net Promoter Score⁵ represents one of the group's four key performance indicators, highlighting the value of sustainable relationships with customers to ADVA Optical Networking.

On the equity and liabilities side, current liabilities decreased by EUR 16.9 million from EUR 184.8 million on December 31, 2017, to EUR 167.9 million on March 31, 2018, primarily related to lower current bank loans by EUR 9.1 million. Moreover, other current liabilities decreased by EUR 8.2 million to EUR 18.6 million at the end of March 2018, largely driven by variable compensation for prior periods paid out in Q1 2018. Trade accounts payable at EUR 37.4 million were below the EUR 39.2 million reported at the end of 2017. Days payable outstanding were at 44.6 days in Q1 2018 compared to 58.7 days in 12M 2017. The decrease in trade accounts payable is driven by the timing of material purchases. At the same time, current provisions increased by EUR 1.2 million as employees' variable compensation entitlement for 2018 has been included on a pro rata basis. Contract liabilities amount to EUR 16.7 million on March 31, 2018 and compare to EUR 15.1 million at year-end 2017. Due to the first-time adoption of IFRS 15 in 2018, this position besides deferred revenues includes other contractual obligation related to revenues amounting to EUR 1.1 million.

⁵ The Net Promoter Score is obtained by asking customers a single question on a 0 to 10 rating scale: "How likely is it that you would recommend our company to a friend or colleague?" Based on their responses, customers are categorized into one of three groups: promoters (9-10 rating), passives (7-8 rating), and detractors (0-6 rating). The percentage of detractors is then subtracted from the percentage of promoters to obtain a Net Promoter Score.

$\cdots$ $\cdots$	inagemen ^.	Financial	ereholde:	orporate
-liahliaht	$\lambda$	atement	prmation	Information

Non-current liabilities increased from EUR 52.2 million at year-end 2017 to EUR 66.8 million at the end of March 2018 mainly due to higher financial liabilities from bank loans. Due to the contracting of a new loan contracts as well as the refinancing of an existing loan contract the noncurrent portion of liabilities from bank loans increased by EUR 14.4 million. Moreover, deferred tax liabilities increased due to further capitalization of development expenses.

Stockholders' equity decreased from EUR 227.0 million reported on December 31, 2017, to EUR 223.5 million on March 31, 2018. The equity ratio was at 48.8% on March 31, 2018, after 48.9% on December 31, 2017, while the non-current assets ratio amounted to 97.5% and 98.1%, respectively with stockholders' equity largely covering the non-current assets.

Balance sheet ratios (in %)		Mar. 31, 2018	Dec. 31, 2017
Equity ratio	Stockholders' equity Total assets	48.8	48.9
Non-current asset ratio	Stockholders' equity Non-current assets	97.5	98.1
Liability structure	Current liabilities Total liabilities	71.5	78.0

Capital expenditures

Capital expenditures for additions to property, plant and equipment in Q1 2018 amounted to EUR 2.4 million, below the EUR 3.2 million seen in Q1 2017.

Capital expenditures for intangible assets of EUR 8.5 million in Q1 2018 were down from EUR 12.8 million in Q1 2017. This total mainly consists of capitalized development projects of EUR 8.0 million in Q1 2018 after EUR 10.7 million in Q1 2017 and capital expenditures for other intangible assets of EUR 0.5 million in Q1 2018 after EUR 2.1 million in Q1 2017.

Cash flow
(in millions of EUR)	Q1	Portion of	Q1	Portion of
	2018	cash	2017	cash

Operating cash flow	5.6	9.8%	5.6	8.1%
Investing cash flow	-10.8	18.8%	-15.8	22.7%
Financing cash flow	4.9	8.3%	-5.0	7.1%
Net effect of foreign currency
translation on cash and cash
equivalents	-0.4	0.6%	0.0	0.0%
Net change in cash and
cash equivalents	-0.7	1.2%	-15.2	21.7%
Cash and cash
equivalents at the
beginning of the period	58.4	101.2%	84.9	121.7%
Cash and cash equivalents
at the
end of the period	57.7	100.0%	69.7	100.0%

Cash flow from operating activities was positive EUR 5.6 million in Q1 2018, largely unchanged compared to Q1 2017, and mainly relates to non-cash depreciation charges. In Q1 2017 the positive operating cash flow was largely driven by income before tax.

	4anagement	Financial	Shareholder	nporal
lighlights	Renoi	ement.	nformation	'nformation

Cash flow from investing activities amounted to negative EUR 10.8 million in Q1 2018 after negative EUR 15.8 million in Q1 2017. The decreased use of funds for investing activities is largely due to lower investment in intangible assets.

Finally, net cash inflows of EUR 4.9 million were reported from financing activities in Q1 2018, after EUR 5.0 million cash outflows from financing activities in Q1 2017. In Q1 2018, the inflows mainly resulted from taking up new debt of EUR 10.0 million as well as offsetting effects from scheduled servicing of existing debts. The cash outflow in Q1 2017 was due to scheduled servicing of existing debt.

Overall, including the net effect of foreign currency translation of negative EUR 0.4 million in Q1 2018, cash and cash equivalents decreased by EUR 0.7 million, from EUR 58.4 million at the end of December 2017 to EUR 57.7 million on March 31, 2018.

Financing and liquidity

ADVA Optical Networking's financial management is performed centrally by ADVA Optical Networking SE. Its objective is to provide sufficient funds to ensure ongoing operations and to support the group's projected growth. Beyond the strong equity base appropriate for the business, ADVA Optical Networking finances its business by means of liabilities with maturities typically exceeding the life of the assets being financed. For any liability taken, ADVA Optical Networking is focused on minimizing related interest cost, if access to funds is not at risk. Excess funds are generally used to redeem.

Financial liabilities	Mar. 31, 2018	Dec. 31,
(in millions of EUR)		2017
Current financial liabilities	70.0	79.1
Non-current financial liabilities	31.9	17.5
Total financial liabilities	101.9	96.6

Total financial liabilities increased by EUR 5.3 million. While the current portion was down at EUR 70.0 million, the non-current portion increased to EUR 31.9 million at the end of March 2018 due to taking up of new debts.

On March 31, 2018, the group had available EUR 8.0 million of undrawn committed borrowing facilities (December 31, 2017: EUR 8.0 million).

Net liquidity represents one of the four key performance indicators for ADVA Optical Networking. Mainly due to the increase in financial liabilities ADVA Optical Networking's net liquidity decreased from negative EUR 38.2 million at year-end 2017 to negative EUR 44.2 million at the end of March 2018. Cash and cash equivalents on March 31, 2018, and on December 31, 2017, were invested mainly in EUR, USD and GBP. At the end of March 2018 and at the end of December 2017 EUR 0.1 million and EUR 0.3 million of cash and cash equivalents was restricted, respectively.

Net liquidity	Mar. 31,	Dec. 31,
(in millions of EUR)	2018	2017
Cash and cash equivalents	57.7	58.4
Financial liabilities
current	-70.0	-79.1
non-current	-31.9	-17.5
Net liquidity	-44.2	-38.2

$\cdots$	Management	mancial	enolde. Шd	orporate. -------
Highlights	$\ell$ enori		Information	itormati

ADVA Optical Networking's reports liquidity ratios as follows:

Financing ratios		Mar. 31, 2018	Dec. 31, 2017
Cash ratio	Cash and cash equivalents Current liabilities	0.34	0.32
Quick ratio	Monetary current assets* Current liabilities	0.86	0.76
Current ratio	Current assets Current liabilities	1.36	1.26

* Monetary current assets are defined as the sum of cash and cash equivalents, short-term investments and securities and trade accounts receivable.

Return on capital employed in Q1 2018 was at negative 0.6%, significantly down from positive 6.8% reported in Q1 2017. This development is mainly due to the decline in operating result in Q1 2018.

(base data in millions of EUR)	Return on capital employed (ROCE)	Q1 2018	Q1 2017
Operating income		-0.4	5.5
Average total assets*		461.1	465.9
Average current liabilities*		176.3	136.1
ROCE	Operating income, annualized Ø total assets - Ø current liabilities	-0.6%	6.8%

* Arithmetic average of the quarterly balance sheet values (Dec. 31 of the previous year and Mar. 31 of the year).

Transactions with related parties

Transactions with related individuals and legal entities are discussed in note (29) to the threemonth consolidated interim financial statements.

Summary: Net assets and financial position

The net assets and financial position of ADVA Optical Networking continues to be solid in Q1 2018, albeit the slightly lower levels of cash and cash equivalents as well as reduced net liquidity compared to year-end 2017.

Events after the balance sheet date

There were no events after the balance sheet date that impacted the financial position of the group on March 31, 2018, or its financial performance for the reporting period then ended. Similarly, there were no events considered material for disclosure.

Risk report

ADVA Optical Networking's future development is subject to various general and group-specific risks, which in certain cases can also endanger the group's continued existence. Unknown risks, uncertainties and other factors are discussed in the "risk report" section of the 2017 Annual Report.

Outlook

After the turnaround in Q4 2017 and a profitable start in the new business year 2018, the company aims to return to moderate revenue growth for full year 2018. In addition, the profitability of the group measured by pro forma operating income¹ as a percentage of revenues is expected to rise to a mid-single-digit level. The following factors, which are also described in the "Risk report" section of the 2017 annual report under "Opportunities", will play a decisive role:

The digitalization of society is progressing. More and more applications for daily life are migrating to the cloud. Thus, the strategic importance of a reliable, global and secure communication infrastructure is growing. The construction and expansion of fiberbased infrastructure is set to accelerate even further. Specialists in optical networking and transmission technology such as ADVA will benefit from this development.
The virtualization of network functions (network functions virtualization, NFV) is changing the business models of network operators. Thanks to NFV, network operators can now largely decouple their services portfolio from the underlying hardware. A universal and programmable infrastructure consisting of transmission technology and servers forms the future-proof foundation on which both current as well as future communication services can be mapped. Telecommunications and data services are added as virtual network functions on an as-needed-basis, independent of the deployed hardware. In the future, providers will be able to react quickly to customer inquiries, benefit from new trends and provide innovative, customer-optimized services in a timely manner and on a global scale. . In addition to the FSP 150 product family, it is ADVA's Ensemble software solution that provides additional market differentiation. NFV is driving convergence in the markets for access solutions and expanding ADVA's addressable market. The group sees potential for numerous new customer wins and a higher proportion of software sales in this area.
Security in information technology is becoming increasingly important and more stringent data protection requirements are impacting on the cloud. The company expects a regionalization in the technical implementation of the data centers and in the selection of the corresponding suppliers. ADVA is the leading European specialist in transmission technology and a reliable partner for thousands of companies. Its ConnectGuard™ security portfolio provides customers with comprehensive protection in different network scenarios and brings numerous competitive advantages. ADVA, as a European company with strong visibility and presence with data center and network operators worldwide, is well positioned in this field.
The strategic importance of synchronization technology continues to increase. The progressive expansion of mobile networks towards LTE-Advanced (4.5G), as well as the efforts of network operators to prepare for the fifth generation of mobile technology (5G), exacerbate requirements regarding time and frequency synchronization in networks. ADVA's Oscilloquartz product portfolio is industry-leading, winning numerous sync bid tenders in 2017, and promises to outperform revenue growth and margins in 2018.
The acquisition of MRV broadens ADVA's customer base worldwide and creates access to networks where the group was previously not present. With ADVA covering a much wider range of applications than MRV, the group can now offer more solutions to MRV customers. As a result, there is a chance that additional network applications in the MRV customer base can be addressed and thus more revenue generated. Overall, the number of network suppliers on the market has declined significantly in recent years. As a result of this market consolidation, ADVA's position in the global environment has improved, and the company's profile as a European specialist and reliable partner for innovative network technology is now even sharper.

In a predominantly positive global economy, digitalization continues to advance. The global megatrends cloud and mobility continue to drive demand for scalable, secure and environmentally sustainable communications infrastructure. ADVA's commitment to be a trusted partner for connecting, extending and assuring the cloud is positioning the company as an attractive supplier in important growth markets. The combination of application-optimized innovation, short development and delivery times, a broad and growing customer base, and a balanced distribution model distinguishes ADVA from comparable companies and ensures a profitable business model.

$\cdots$		$ -$ $\overline{1}$	וחומר
Highlights	≀enor	nman.

Based on these factors and considering planning parameters such as personnel and currency exchange rates, ADVA's management board expects the group to grow revenues in a moderate single digit percentage range. Under this assumption, the management board further expects its 2018 pro forma operating income¹ to increase in the mid-single-digit percentage range. The weaker US dollar against the euro and the slightly stronger British pound are having a positive effect in this regard. Net liquidity² in 2017 was reduced through the acquisition of MRV. The management board expects an increase from the current level with a gradual return to positive levels by early 2019. The group will continue to selectively invest in product development, technology and revenue-generating opportunities. In addition, the management board expects, due to the continued focus on innovation, quality and service, that customer satisfaction measured by 2018's Net Promoter Score³ will once again be at high positive levels of minimum 40%. Actual results may differ materially from expectations if risks materialize or the underlying assumptions prove unrealistic. The major risks facing ADVA are discussed in the "Risk report" section.

Meiningen, April 24, 2018

Brian Protiva Christoph Glingener

Ulrich Dopfer Scott St. John

Highlights	Management	'-inancia.	phareholde	Corporate
	Repor	statements	Information	Information

Three-month IFRS consolidated financial statements

Consolidated statement of financial position (unaudited)

				(in thousands of EUR)	Note	Mar. 31,	Dec. 31,
(in thousands of EUR)	Note	Mar. 31,	Dec. 31,			2018	2017
		2018	2017	Equity and liabilities
Assets				Current liabilities
Current assets				Financial liabilities		70,000	79,061
Cash and cash equivalents	(8)	57,695	58,376	Trade accounts payable	(15)	37,449	39,193
Trade accounts receivable*)	(9)	86,906	81,327	Advance payments received*)		-	93
Contract Asset*)		248	-	Other provisions	(16)	23,165	21,994
Inventories	(10)	73,048	81,694	Tax liabilities		1,973	2,536
Tax assets		1,237	1,438	Contract liabilities*)	(17)	16,737	15,062
Other current assets	(11)	9,891	9,804	Other current liabilities	(15)	18,600	26,812
Total current assets		229,025	232,639
				Total current liabilities		167,924	184,751

				Non-current liabilities
				Financial liabilities		31,875	17,500
Non-current assets				Provisions for pensions and similar
Property, plant and				employee benefits		6,024	5,822
equipment	(12)	26,242	26,898	Other provisions	(16)	1,566	1,478
				Deferred tax liabilities		17,463	16,867
Goodwill		67,186	68,167	*) Contract liabilities	(17)	7,576	7,402
Capitalized development				Other non-current liabilities	(15)	2,364	3,178
projects	(13)	86,481	85,175	Total non-current liabilities		66,868	52,247
Intangible assets acquired in
business combinations	(13)	28,516	30,505	Total liabilities		234,792	236,998
Other intangible assets	(13)	6,043	6,280	Stockholders' equity entitled to the
Deferred tax assets		11,389	10,614	owners of the parent company	(18)
Other non-current assets	(11)	3,378	3,741	Share capital
Total non-current assets		229,235	231,380	(Conditional capital EUR 4,576 thousand;
				prior year EUR 4,576 thousand)		49,736	49,736
				Capital reserve		314,367	314,019
				Accumulated deficit		-131,371	-126,970
				Net income (loss)		-2,440	-4,228
Total assets		458,260	464,019	Accumulated other
				comprehensive income (loss)		-6,824	-5,536
*) In the course of first-time adoption of IFRS 15, the positions have been renamed from deferred revenues to contract liabilities.				Total stockholders' equity		223,468	227,021
Some items that have formerly been included net in trade accounts receivable or other balance sheet positions have been reclassified. Prior year information has not been adjusted accordingly. For further information on the first-time adoption of IFRS 15 please
refer to note (5) of the financial statements.				Total equity and liabilities		458,260	464,019

Consolidated income statement (unaudited)

(in thousands of EUR, except earnings per share and number of shares)	Note	Q1	Q1
		2018	2017
Revenues	(19)	120,538	141,835
Cost of goods sold		-77,362	-96,297

Gross profit			43,176	45,538
Selling and marketing expenses			-15,971	-16,235
General and administrative expenses			-8,969	-8,260
Research and development expenses			-20,746	-16,752
Other operating income		(20)	2,139	1,535
Other operating expenses		(20)	-53	-325
Operating income			-424	5,501

Interest income		(21)	81	32
Interest expenses		(21)	-309	-223
Other financial gains and losses, net		(22)	-1,894	-1,002
Income (loss) before tax			-2,546	4,308
Income tax benefit (expense), net		(23)	106	1,877
	Net income (loss) entitled to the owners of the parent company		-2,440	6,185

Earnings per share in EUR
basic			-0.05	0.12
diluted			-0.05	0.12
Weighted average number of shares for calculation of	earnings per share
basic			49,735,549	49,498,934
diluted			49,735,549	50,251,344

$\cdots$ $\cdots$	Management	-inancial	bhareholder	Corporate
Highlights	Report	Statements	$\cdots$ Information	Information

Consolidated statement of comprehensive income (unaudited)

	Q1	Q1
(in thousands of EUR)	2018	2017
Net income (loss) entitled to the owners of the parent company	-2,440	6,185

Items that possibly get reclassified to profit or loss in future periods
Exchange differences on translation of foreign operations	1,012	1,520
Items that not get reclassified to profit or loss in future periods
Remeasurement of defined benefit plans	-2,300	-2,544
Total comprehensive income (loss) entitled to the owners of the parent company	-3,728	5,161

Remeasurement of defined benefit plans is regularly done at year-end. Thus, in 3M 2018 no effects from remeasurement were recognized.

In Q1 2018 and Q1 2017, no items were reclassified (recycled) from comprehensive income to profit or loss.

$\cdots$ $\cdots$	Management	. -inancia	Shareholder	Lorporate
Highlights	Repor'	Statements	Information	Information

Consolidated cash flow statement (unaudited)

(in thousands of EUR)	Note	Q1 2018	Q1 2017
Cash flow from operating activities
Income (loss) before tax		-2,546	4,308

Adjustments to reconcile income
(loss) before tax to net cash
provided by operating activities

Non-cash adjustments
Amortization of non-
current assets		11,478	9,359
Loss from disposal of
property, plant and equipment and
intangible assets		12	106
Stock compensation
expenses	(28)	348	358
Other non-cash income
and expenses (net)		245	1,039

Foreign currency exchange differences		1,364	-523
Changes in assets and liabilities
Decrease (increase) in
trade accounts receivable		-6,000	-15,629
Decrease (increase) in
inventories		8,646	11,102
Decrease (increase) in
other assets		211	3,084
Increase (decrease) in
trade accounts payable		-1,744	-9,297
Increase (decrease) in
provisions		808	2,527
Increase (decrease) in
other liabilities		-6,836	-341
Income tax paid		-339	-470
Net cash provided by operating activities		5,647	5,623

(in thousands of EUR)	Note	Q1 2018	Q1 2017
Cash flow from investing activities
Proceeds from government grants		-	90
Investment in property,
plant and equipment	(12)	-2,437	-3,155
Investment in
intangible assets	(13)	-8,466	-12,813
Interest received		65	31
Net cash used in
investing activities		-10,838	-15,847

Cash flow from
financing activities
Payments received from financial liabilities	(14)	21,250	-
Cash repayment of
financial liabilities		-15,938	-4,688
Interest paid		-434	-278
Net cash provided by/ (used in)
financing activities		4,878	-4,966

Net effect of foreign currency
translation on cash and
cash equivalents		-368	28
Net change in
cash and cash equivalents		-681	-15,162

Cash and cash equivalents
at the beginning of the period		58,376	84,871
Cash and cash equivalents
at the end of the period		57,695	69,709

$\cdots$	Management	. -inancial .	bhareholder ۔ .	orporate .
Highlights	Repor	Statements	Informatior	Information

Consolidated statement of changes in stockholders' equity (unaudited)

(in thousands of EUR, except number of shares)	Share capital
	Number of shares	Par value	Capital reserve	Net income (loss) and accumulated deficit	Accumulated other comprehensive income (loss)	Total stockholders' equity entitled to the owners of the parent company
Balance on January 1, 2017	49,498,934	49,499	312,305	-126,970	4,113	238,947
Stock options outstanding			358			358
Net income Exchange differences on translation of foreign operations Remeasurement of defined benefit plans				6,185	1,520 -2,544	6,185 1,520 -2,544
Total comprehensive income				6,185	-1,024	5,161
Balance on March 31, 2017	49,498,934	49,499	312,663	-120,785	3,089	244,466
Balance on December 31, 2017	49,735,549	49,736	314,019	-131,198	-5,536	227,021
Transition effect from first-time adoption of IFRS 9				-173		-173
Balance on January 1, 2018	49,735,549	49,736	314,019	-131,371	-5,536	226,848
Stock options outstanding			348			348
Net loss Exchange differences on translation of foreign operations Remeasurement of defined benefit plans Total comprehensive income (loss)				-2,440 -2,440	1,012 -2,300 -1,288	-2,440 1,012 -2,300 -3,728
Balance on March 31, 2018	49,735,549	49,736	314,367	-133,811	-6,824	223,468

$\cdots$	,,,,,,,,,,,,,,,,,,	inancial .	A CONSTRUCTION OF CONSTRUCTION CONSTRUCTION	. START COMPANY
nliahti ,,,,				.

Notes to the condensed interim consolidated financial statements (unaudited)

(1) Information about the company and the group

ADVA Optical Networking SE (hereinafter referred to as "the company" or "ADVA SE"), Märzenquelle 1-3, 98617 Meiningen, Germany is a Societas Europaea, registered as HRB 508155 at the commercial register in Jena. The company's headquarters are in Fraunhoferstrasse 9a, 82152 Martinsried/Munich, Germany.

The ADVA Optical Networking group (hereinafter referred to as "ADVA Optical Networking", the "group" or "ADVA group") develops, manufactures and sells optical and Ethernet-based networking solutions to telecommunications carriers and enterprises to deliver data, storage, voice and video services.

Telecommunications service providers, private companies, universities and government agencies worldwide use the group's systems. ADVA Optical Networking sells its product portfolio both directly and through an international network of distribution partners.

(2) Basis of preparation and accounting policies

The group's consolidated interim financial statements for the period ended March 31, 2018, are prepared in accordance with IAS 34. The condensed interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the group's annual financial statements per December 31, 2017.

The condensed interim consolidated financial statements for the period ended March 31, 2018, have neither been audited nor subject to a limited review by the group auditor PricewaterhouseCoopers GmbH, Wirtschaftsprüfungsgesellschaft, Munich.

The condensed interim consolidated financial statements are presented in EUR. Unless otherwise stated, all amounts quoted are in thousands of EUR. The balance sheet is broken down into current and non-current assets and liabilities. The classification of income and expenses in the income statement is based on their function within the entity. Where items on the balance sheet and in the income statement are summarized in the interest of clarity, this is explained in the notes to the consolidated financial statements. The additional disclosure requirements to comply with section 315 e paragraph 1 of the German Commercial Code (Handelsgesetzbuch, HGB) are all met.

The interim financial statements of the individual subsidiaries of the holding company ADVA Optical Networking SE, as subsumed in the condensed interim consolidated financial statements, are all prepared using the same accounting and valuation policies and the same balance sheet date.

The result of the three-month period through March 31, 2018, cannot be extrapolated to the result of the full year 2018.

(3) Effects of new standards and interpretations

The accounting policies followed are consistent with those of the prior financial year, except for the adoption of new and amended IFRSs and interpretations (IFRICs) during Q1 2018.

Standards, amendments and interpretations applicable for the first time in 2018

In Q1 2018, following standards and interpretations have been adopted for the first time.

Standard	Topic	First-time adoption*	Expected impact on the financial position and performance
IFRS 9 (2014)	Financial Instruments	Jan. 1, 2018	See note (4)
IFRS 15 including relevant clarifications	Revenue from Contracts with Customers	Jan. 1, 2018	See note (5)
Amendments to IFRS 2	Share-based Payment	Jan. 1, 2018	none
Amendments to IFRS 4	Insurance Contracts regarding implementation of IFRS 9	Jan. 1, 2018	none
Annual improvements 2016	The improvements include changes to: IAS 28 – Investments in Associates and Joint Ventures IFRS 12 – Disclosure of Interests in Other Entities as well as editorial amendments to
	IFRS 1	Jan. 1, 2018,	none

New accounting requirements not yet endorsed by the EU

The IASB and the IFRIC have issued further Standards and Interpretations in 2018 and previous years that are not applicable for the financial year 2018 or for which the first-time adoption is still subject to endorsement by the EU.

Standard	Topic	First-time adoption*	Expected impact on the financial position and performance
IFRS 16	Leases	Jan. 1, 2019	under review
IFRS 17	Insurance contracts	Jan. 1, 2021	none
Amendments to IAS 40	Investment Property	Jan. 1, 2018	none
IFRIC 22	Foreign Currency Transactions and Advance Considerations	Jan. 1, 2018	none
Amendments to IFRS 9	Prepayment features with negative compensation	Jan. 1, 2019	none
Amendments to IAS 19	Plan amendment, curtailment or settlement	Jan. 1, 2019	none
Amendments to IAS 28	Long term interest in associates and joint ventures	Jan. 1, 2019	none
Annual improvements 2017	The improvements include changes to: IFRS 3/IFRS 11 – Business combinations/joint ventures IAS 12 – income taxes IAS 23 – Borrowing costs	Jan. 1, 2019	under review
IFRIC 23	Uncertainty over income tax	Jan. 1, 2019	under review

* To be applied in the first reporting period of a financial year beginning on or after this date.

Adjustments and changes due to the first-time adoption of IFRS 9 and IFRS 15 are explained in notes (4) and (5).

On January 13, 2016, the IASB published IFRS 16 Leases regarding accounting of lease contracts. The new standard will replace IAS 17 and all related interpretations and implements a consistent lease accounting model. Hence, lessees will have to recognize assets (right to use) and lease liabilities for all lease contracts with terms over 12 months. The current analysis showed that the group has facility and office rents as well as lease contracts for company cars that will have to be recognized as lease assets in the future. Furthermore, no multi-component contracts or other contracts requiring recognition according to IFRS 16 exist. The company does not intent to enter in any such contracts in the future. At present, ADVA Optical Networking reviews the potential impact of the application of IFRS 16 on its consolidated financial statements. The standard will be adopted for financial years starting January 1, 2019 and will apply the modified retrospective approach.

Besides the described standards, the adoption of new or revised standards and interpretations – from today's perspective – will not have a material impact on the financial position and performance of the group. The group does not plan an early adoption of these standards.

(4) Changes due to first-time adoption of IFRS 9

From 2018, the first-time application of IFRS 9 results in changes in the classification and valuation of other investments and trade accounts receivable. Prior year information has not been adjusted.

Investments currently classified as available for sale financial asset will be accounted for as financial asset at fair value through profit and loss in future reporting periods. The values reported according to IAS 39 regulations for available for sales instruments represent the fair value according to IFRS 9.

From 2018, trade accounts receivable that are subject to an agreement for sale of accounts receivable will also be recognized at fair value through profit and loss. They will be presented as a separate item in the notes to the financial statements. Due to the short-term nature of these receivables the carrying amount corresponds with the fair value at the reporting date.

Regarding financial liabilities no changes applied due to the first-time adoption of IFRS 9. Thus, no transition effects are reported regarding financial liabilities.

The following table highlights changes related to valuation categories of financial assets due to the first-time adoption of IFRS 9:

Valuation category		Carrying amount
IAS 39	IFRS 9	IAS 39	IFRS 9	difference
LaR*)	AC*)	58,376	58,376	-
	AC*)	79,828	79,655	-173
	FVTPL*)	1,499	1,499	-
LaR*)	AC*)	6,121	6,121	-
FVTPL*)	FVTPL*)	12	12	-
AfS*)	FVTPL*)	1,374	1,374	-
		147,210	147,037	-173
	LaR*)

*) LaR: loans and receivables; AC: at amortized cost; FVTPL: at fair value through profit or loss; AfS: available for sale

The carrying amounts of financial assets have been adjusted as follows:

In thousands of EUR		AfS at cost (only		Total financial
	AC (LaR 2017)	2017)	FVTPL	assets
Amount on Dec. 31, 2017 according to IAS 39	145,824	1,374	12	147.210
Revaluation according to IFRS 9	-173	-	-	-173
Reclassification from von LaR to FVTPL	-1,499		1,499	-
Reclassification from AfS at cost to FVTPL		-1,374	1,374	-
Amount on Jan. 1, 2018 according to IFRS 9	144,152	-	2.885	147,037

$\cdots$	Management	- - -mancial	Shareholder	corporate
Highlights	Repor	tatements	nformation	Information

The new impairment model changes the calculation of impairment from an incurred loss model to an expected credit loss model. ADVA Optical Networking calculates the impairment according to IFRS 9 based on the simplified approach on the basis of a Provisions Matrix.

Due to the first-time adoption of IFRS 9 impairment of trade accounts receivable as of January 1, 2018, have been increased by EUR 173 thousand. The transition effect has been reported in retained earnings.

In thousands of EUR
Impairment
As of Dec. 31, 2017, according to IAS 39	788
IFRS 9 transition effect	+173
As of Jan. 1, 2018, according to IFRS 9	961

As of January 1, 2018, no impairment charges applied for other financial assets and contract assets according to IFRS 15. Impairment charges at the current reporting date are explained in the notes to the respective assets if applicable.

(5) Changes due to the first-time adoption of IFRS 15

IFRS 15 requires separate presentation of contract assets and contract liabilities in the balance sheet. As of January 1, 2018, this resulted in reclassifications of receivables, in relation to service contracts and contract liabilities in relation to expected volume discounts, rights to return and a customer loyalty program which have formerly been included in other balance sheet line items. Following items were identified and illustrate reclassifications as of January 1, 2018:

1. Liabilities amounting to EUR 679 thousand in relation to expected volume discounts and refunds to customers previously presented as current provisions will be reclassified to contract liabilities.
2. Liabilities of EUR 284 thousand in relation to the customer loyalty program and outstanding credit notes previously presented as reduction from trade receivables will be presented as contract liabilities.
3. Liabilities amounting to EUR 22,464 thousand in relation to prepaid service contracts previously recognized as deferred revenue will be reclassified to contract liabilities.

(6) Significant accounting judgments, estimates and assumptions

The preparation of the group's interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities on the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Discussed below are the key judgments and assumptions concerning the future and other key sources of estimation of uncertainty on the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the current financial year.

Development expenses

Initial capitalization of costs is based on management's judgment that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. See note (13) for the carrying amounts involved.

Impairment of non-financial assets

The group assesses whether there are any indicators of impairment for all non-financial assets on each reporting date. Goodwill and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate to calculate the present value of these cash flows. See note (12) and (13) for the carrying amounts involved.

Employee benefits

Pension and similar post-employment obligations as well as the related expenses are recognized based on actuarial calculations. The actuarial valuation of the present value of pension obligations depends on several assumptions regarding the discount rate, the expected salary increases rate, the expected pension trend, and life expectancy. If changes in the assumptions regarding the valuation parameters are required, the future amounts of the pension obligations as well as the pension benefit costs may be affected materially.

Share-based compensation transactions

The group measures the cost of equity-settled and cash-settled transactions with employees by reference to the fair value of the equity instruments on the date at which they are granted or on the balance sheet date. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the expected life of the option, volatility and dividend yield, as well as further assumptions.

Provisions

Significant estimates are involved in the determination of provisions related to warranty costs and legal proceedings. The estimate of warranty claims is based on historic data and is extrapolated into the future. Legal proceedings often involve complex legal issues and are subject to substantial uncertainties. Accordingly, management exercises considerable judgment in determining whether there is a present obligation because of a past event at the end of the reporting period, whether it is more likely than not that such a proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. Other provisions are described in note (16).

Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expenses already recorded. The group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective group company's domicile.

Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available to utilize these losses. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

(7) Changes in scope of consolidation

In Q1 2018, the preliminary purchase price allocation from the acquisition of MRV Communications group has been adjusted to align the valuation of obligation for outstanding vacation days as of the acquisition date (August 12, 2017) with the valuation method generally applied by ADVA Optical Networking group. This resulted in an increase of the liability for outstanding vacation days of EUR 324 thousand and a respective increase in goodwill from the acquisition.

(8) Cash and cash equivalents

Cash and cash equivalents include the following amounts to which ADVA Optical Networking has only limited access:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Amounts pledged as security	132	277

On March 31, 2018, cash of EUR 1,238 thousand (December 31, 2017: EUR 1,491 thousand) is held in China and is subject to local exchange control regulations. These local exchange control regulations provide for restrictions on exporting capital from the country, other than through normal dividends.

Cash at banks earns interest at floating rates based on daily bank deposit rates.

Cash equivalents are invested for varying periods of between one day and three months, depending on the immediate cash requirements of the group, and earn interest at the respective short-term deposit rates.

On March 31, 2018, the group had EUR 8,000 thousand available (on December 31, 2017: EUR 8,000 thousand) of undrawn committed borrowing facilities in respect of which all conditions had been met.

(9) Trade accounts receivable

The development of the bad debt allowance for trade accounts receivable, that are not subject to factoring, is as follows:

(in thousands of EUR)
As of Dec.31, 2017, according to IAS 39	788
IFRS 9 transition effect	173
As of Jan. 1, 2018, according to IFRS 9	961
Increase	22
Release	-35
Exchange rate differences	6
As of Mar. 31, 2018	954

In Q1 2018, additions to the bad debt allowance amounting to EUR 22 thousand are reported in selling and marketing expenses in the income statement. Releases are included in other operating income.

On March 31, 2018 and December 31, 2017 there were no material off balance sheet credit risks.

On March 31, 2018, trade accounts receivables amounting to EUR 2,561 thousand are included, for which an agreement for the sale of accounts receivable exists (December 31, 2017: EUR 1,684 thousand). As a result of this agreement, interest expenses of EUR 45 thousand were incurred in Q1 2018 (Q1 2017: EUR 40 thousand).

(10) Inventories

In Q1 2018, write-downs amounting to EUR 2,842 thousand (Q1 2017: EUR 2,293 thousand) were recognized as expense within costs of goods sold. This amount includes reversals of earlier writedowns in the amount of EUR 729 thousand (Q1 2017: EUR 515 thousand) due to higher selling and input prices.

In Q1 2018 and Q1 2017, material costs of EUR 55,669 thousand and EUR 75,157 thousand, respectively, have been recognized.

(11) Other current and non-current assets

On March 31, other current assets can be analyzed as follows:

(in thousands of EUR)	Mar. 31,	Dec. 31,
	2018	2017
Non-financial assets
Prepaid expenses	4,392	3,723
Receivables due from tax authorities	1,546	1,881
Other	652	408
Total current non-financial assets	6,590	6,012
Financial assets Government grant allowances
for research projects	2,419	2,630
Positive fair values of derivative financial instruments	-	12
Other	882	1,150
Total current financial assets	3,301	3,792
	9,891	9,804

Other current assets are non-interest-bearing and are generally due within 0 to 60 days.

Further disclosures on derivative financial instruments are given in note (22).

	Management	Fir
Highlights	Report	Stat

On March 31, other non-current assets can be analyzed as follows:

(in thousands of EUR)	Mar. 31,	Dec. 31,
	2018	2017
Non-financial assets
Other	32	26
Total non-current non-financial assets	32	26
Financial assets Investments Government grant allowances	1,374	1,374
for research projects Other	550 1,422	618 1,723
Total non-current financial assets	3,346	3,715
	3,378	3,741

On March 31, 2018, and December 31, 2017, no impairment charges were considered regarding current and non-current financial assets.

Investments relate to 7.9% of the shares of Saguna Networks Ltd. Nesher, Israel, held by ADVA Optical Networking SE (prior year: 9% of the shares). The investment is recognized at cost as this according to current information corresponds to the fair value of the investment.

On March 31, 2018 and December 31, 2017, government grants for thirteen research projects are recognized. These public grants relate to programs promoted by the EU and national governments. The commitments are partly subject to standard conditions that have been met to date.

(12) Property, plant and equipment

Property, plant and equipment can be analyzed as follows:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Land and buildings	6,629	6,941
Technical equipment and machinery	16,959	17,102
Factory and office equipment	2,355	2,615
Assets under construction	299	240
	26,242	26,898

In Q1 2018 and Q1 2017, there were neither impairments nor write-backs of property, plant and equipment impaired in prior years.

In Q1 2018, the group received no cash payments for government grants related to purchases (Q1 2017: EUR 90 thousand ). Based on grant notifications no historical costs have been deducted in Q1 2018 (Q1 2017: nil).

(13) Capitalized development projects, intangible assets acquired in business combinations and other intangible assets

The table below summarizes the carrying amounts:

(in thousands of EUR)	Mar. 31,	Dec. 31,
	2018	2017
Capitalized development projects Intangible assets acquired in business	86,481	85,175
combinations	28,516	30,505
Other intangible assets	6,043	6,280
	121,040	121,960

In Q1 2018, borrowing costs of EUR 96 thousand (Q1 2017: EUR 84 thousand) were capitalized related to development projects with an expected duration of more than 12 months. Borrowing costs were capitalized at the weighted average rate of the financial liabilities of 1.7%.

Intangible assets acquired in business combinations can be analyzed as follows:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Purchased technology FiSEC	629	702
Purchased hardware technology Overture	1,938	2,203
Purchased software technology Overture	3,053	3,226
Purchased hardware MRV	7,664	8,239
Brand Ensemble	117	128
Purchased customer relationships OSA	67	85
Purchased customer relationships Overture	3,655	3,917
Purchased customer relationships MRV	11,393	12,005
	28,516	30,505

Amortization of intangible assets

Amortization of intangible assets with a finite useful life comprises:

(in thousands of EUR)	Q1 2018	Q1 2017
Capitalized development projects	6,676	5,699
Intangible assets acquired in business combinations	1,347	782
Other intangible assets	715	439
	8,738	6,920

Amortization of intangible assets acquired in business combinations can be analyzed as follows:

(in thousands of EUR)	Q1 2018	Q1 2017

Purchased technology Biran	-	28
Purchased technology Time4 Systems	-	32
Purchased technology FiSEC	73	73
Purchased hardware technology Overture	264	264
Purchased software technology Overture	173	173
Purchased technology MRV	357	-
Brand Ensemble	11	11
Purchased customer relationships OSA	17	19
Purchased customer relationships Overture	158	182
Purchased customer relationships MRV	294	-
	1,347	782
	47

In the income statement, amortization and impairment of capitalized development projects and amortization of purchased technology is included in cost of goods sold. Amortization and impairment of purchased customer relationship assets is included in selling and marketing expenses.

In Q1 2018 and Q1 2017, no impairment of intangible assets with finite useful economic lives was recognized.

(14) Financial liabilities

In Q1 2018, ADVA Optical Networking signed a new loan contract with Bayerische Landesbank amounting to EUR 10,000 thousand. A variable interest rate of EURIBOR plus 1.25% applies for the loan. The loan principal will be repaid in 6 mainly equal semi-annual instalments of EUR 1,667 thousand starting from June 2019.

Furthermore in Q1 2018, ADVA Optical Networking signed another loan with IKB (Industriekreditbank) amounting to EUR 11,250 thousand. The loan will be repaid in 12 equal quarterly instalments from Q2 2019. A fixed interest rate of 1.4% applies.

In addition, the loan agreement with HSBC amounting EUR 11,250 thousand has been fully repaid in March 2018.

$\cdots$	1anagement	-inancial	Shareholder	orporate
Highlights	Repor'	tatements	Information	information

On March 31, 2018, the net book value and fair value of the total loans amount to EUR 101,875 thousand and EUR 101,945 thousand, respectively. For all other financial assets and liabilities included in the balance sheet at March 31, 2018, the fair value corresponds with the book value of the respective positions. The classification of financial assets and liabilities is in line with the disclosure in the Group's annual financial statements per December 31, 2017.

(15) Trade accounts payable and other current and non-current liabilities

The trade accounts payable are non-interest-bearing and generally due within 30 to 90 days.

Other current liabilities can be analyzed as follows:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Non-financial liabilities
Liabilities to employees for vacation	5,548	3,295
Liabilities due to withheld wage income tax and
social security contribution	3,112	2,788
Liabilities due to tax authorities	2,214	1,441
Obligations from
subsidized research projects	2,492	2,750
Other	484	470
Total current non-financial liabilities	13,850	10,744
Financial liabilities
Negative fair value of derivative financial instruments	118	-
Liabilities to employees for variable compensation and payroll	3,052	14,118
Liabilities from stock appreciation rights	145	145
Other	1,435	1,805
Total current financial liabilities	4,750	16,068
	18,600	26,812

$\cdots$	Management	-inancial	bhareholder	Corporate
Highlights	Report	Statements	Information	Information

Other non-current liabilities include:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Non-financial liabilities
Obligations from subsidized research projects	1,188	1,226
Other	871	1,006
Total non-current non-financial liabilities	2,059	2,232
Financial liabilities
Other	305	946
Total non-current financial liabilities	305	946
	2,364	3,178

On March 31, 2018, other non-current non-financial liabilities primarily include deferred rental expense of EUR 854 thousand (December 31, 2017: EUR 980 thousand).

(16) Other provisions
(in thousands of EUR)	Mar. 31,	Dec. 31,
	2018	2017
Current provisions
Warranty provision	2,582	3,040
Personnel provisions	5,184	1,911
Other current provisions	15,399	17,043
	23,165	21,994
Non-current provisions
Warranty provision	1,475	1,449
Other non-current provisions	91	29
	1,566	1,478
	24,731	23,472

The estimated expenses related to warranty claims reflect both past experience and current developments and are based on a percentage of sales revenues. Any differences between actual amounts and anticipated amounts are treated as changes in accounting estimates and affect earnings in the period in which the change occurs.

Current personnel provisions mainly include variable compensation payments, expenses for employee's accident insurance and other expenses resulting from legal requirements. For year-end reporting, variable compensation payments are reclassified to other liabilities.

Other current provisions primarily include provisions for outstanding invoices of uncertain amount and timing and provisions for potential obligations from existing contracts.

(17) Contract liabilities

Due to the first-time adoption of IFRS 15, following liabilities are included in the new balance sheet positions current and non-current contract liabilities. Prior year disclosure has not been adjusted.

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Current contract liabilities
Outstanding credit notes	265	-
Advance payments received	82	-
Other provisions related to deliveries	799	-
Current deferred revenues	15,591	14,296
	16,737	14,296
Non-current contract liabilities
Non-current deferred revenues	7,576	10,511
	7,576	10,511
	24,313	24,807

(18) Stockholders' Equity

On March 31, 2018, and on December 31, 2017, the share capital amounts to EUR 49,736 thousand, respectively.

Further details on stockholders' equity are included in the Consolidated Statement of Changes in Stockholders' Equity.

(19) Revenues

In Q1 2018 and Q1 2017, revenues included EUR 15,712 thousand and EUR 14,266 thousand for services, respectively. The remaining revenues relate mainly to product sales.

A summary of revenues by geographic region is provided in the section on segment reporting under note (25).

(20) Other operating income and expenses

(in thousands of EUR)	Q1	Q1
	2018	2017
Other operating income
Government grants received	388	302
Income for the supply of development services	164	38
Release of bad debt allowances	35	173
Release of provisions	380	215
Other	1,172	807
	2,139	1,535
Other operating expenses
Impairments on trade accounts receivable	-6	-
Other	-47	-325
	-53	-325
Other operating income and
expenses, net	2,086	1,210

(21) Interest Income and Expenses

Interest income primarily includes interest from daily bank deposits and from other short-term deposits with maturities between one day and three months.

Interest expenses are primarily incurred on financial liabilities and on the sale of receivables. Refer to note (9) for further details.

(22) Other financial gains (losses), net, and derivative financial instruments

Other financial gains (losses), net, mainly comprise the following:

(in thousands of EUR)	Q1 2018	Q1 2017
Foreign currency exchange gains	1,649	1,395
thereof: gains from forward rate agreements	12	-
Foreign currency exchange losses	-3,543	-2,397
thereof: losses from forward rate agreements	-267	-325
	-1,894	-1,002

Forward rate agreements

Between November 2, 2017, and March 28, 2018, the group entered into 15 forward rate agreements to hedge foreign currency exposure. These agreements mature between April 5 and July 3, 2018. In Q1 2018, net unrealized losses of EUR 154 thousand have been reported (Q1 2017: an unrealized losses from one forward rate agreement of EUR 69 thousand).

In Q1 2018, 14 forward rate agreements signed between October 4 and December 27, 2017, matured. A net result of negative EUR 101 thousand has been reported in Q1 2018 (Q1 2017: loss from one forward rate agreement of EUR 256 thousand).

Fair value disclosures

On March 31, 2018, and December 31, 2017, the group held the following financial instruments measured at fair value:

(in thousands of EUR)	Fair value		Nominal value
	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2018	Dec. 31, 2017
Forward rate agreements	-118	12	13,449	15,108

The nominal value is the accounting value from which payments are derived (underlying transaction). Since the nominal value itself is not at risk, the hedged item relates to the potential for changes in foreign exchange rates, interest rates and prices.

The fair value reflects the credit risk of the instrument. Since the group only uses standard, marketable instruments for its hedges, the fair value is determined using market prices and is not netted against any contrary trend in the value of underlying transactions.

The fair value of these transactions is presented within other current liabilities in the statement of financial position.

Highlights	Management Report	Financial itatements	Shareholder Information	Prporate nformation

(23) Income taxes

The tax expenses in Q1 2018 result from the application of the expected tax rate of the group to the current IFRS result. The expected tax rate is calculated based on a tax planning for the financial year,.

(24) Restructuring expenses

In Q1 2018, restructuring expenses including , severance payments as well as related legal costs amounting to EUR 968 thousand have been recognized (Q1 2017: nil). The allocation to functional areas in the consolidated income statement is included in note (25).

(25) Segment reporting

In accordance with IFRS 8 operating segments are identified based on the way information is reported internally to the chief operating decision maker and regularly reviewed to make decisions about resources to be allocated to the segment and assess its performance. Within the ADVA Optical Networking group, management decisions are based on pro forma operating results. Pro forma financial information excludes non-cash charges related to share-based compensation plans and amortization and impairment of goodwill and acquisition-related intangible assets. Additionally, from Q3 2017 onwards expenses related to restructuring measures are not included. Income from capitalization of development expenses is shown as a separate line item and not deducted from research and development expenses.

Highlights	Management	-inancial .	Shareholder	Corporale
	k eport	tement:	Information	rmation

Segment information on March 31, 2018 is analyzed as follows:

	Pro forma financial	Intangible assets		Compensation	Restructuring	Disclosure of R&D	Consolidated financial
(in thousands of EUR)	information	from acquisitions	Goodwill	expenses	costs	expenses	information

Revenues	120,538						120,538
Cost of goods sold	-76,275	-867	-	-15	-205		-77,362
Gross profit	44,263	-867	-	-15	-205		43,176
Gross margin	36.7%						35.8%

Selling and marketing expenses	-15,348	-480	-	-108	-35		-15,971
General and administrative expenses	-8,853	-	-	-85	-31		-8,969
Research and development expenses	-27,882	-	-	-140	-697	7,973	-20,746
Income from capitalization of development	7,973	-	-	-	-	-7,973	-
expenses
Other operating income	2,139	-	-	-	-	-	2,139
Other operating expenses	-53	-	-	-	-	-	-53
Operating income	2,239	-1,347	-	-348	-968	-	-424
Operating margin	1.9%						0.4%
Segment assets	362,558	28,516	67,186	-	-	-	458,260

Segment information on March 31, 2017 is analyzed as follows:

	Pro forma financial		Intangible assets		Compensation	Restructuring	Disclosure of R&D	Consolidated financial
(in thousands of EUR)	information		from acquisitions	Goodwill	expenses	costs	expenses	information

Revenues	141,835		-	-	-	-	-	141,835
Cost of goods sold	-95,712		-570	-	-15	-	-	-96,297
Gross profit	46,123		-570	-	-15	-	-	45,538
Gross margin	32.5%							32.1%

Selling and marketing expenses	-15,939		-212	-	-84	-	-	-16,235
General and administrative expenses	-8,177		-	-	-83	-	-	-8,260
Research and development expenses	-27,324		-	-	-176	-	10,748	-16,752
Income from capitalization of development expenses	10,748		-	-	-	-	-10,748	-
Other operating income	1,535		-	-	-	-	-	1,535
Other operating expenses	-325		-	-	-	-	-	-325
Operating income	6,641		-782	-	-358	-	-	5,501
Operating margin	4.7%							3.9%
Segment assets	409,276		13,413	41,127	-	-	-	463,816
Additional information by geographical regions:					Rest of Europe,
					Middle East and Africa		34,720	36,821
(in thousands of EUR)		Q1	Q1	Americas			41,297	62,848
		2018	2017		Asia-Pacific		14,581	7,800
Revenues
Germany		29,940	34,366				120,538	141,835

	*MAYBERT MAY A WAY*	- TildilCidl	reholde .	Corporac. .
Highlights	Renc	:ement	nation	Infr mation

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017
Non-current assets
Germany	113,680	113,186
Rest of Europe,
Middle East and Africa	16,102	16,221
Americas	82,532	85,433
Asia-Pacific	2,154	2,185
	214,468	217,025

Revenue information is based on the shipment location of the customers.

In Q1 2018, the share of revenues allocated to major end customers was EUR 12,890 thousand (Q1 2017: EUR 30,553 thousand). In Q1 2018, revenues with one major customer exceeded 10% of total revenues (Q1 2017: revenues with two major customers).

Non-current assets are attributed based on the location of the respective group company. Noncurrent assets for the purpose of segment reporting consist of property, plant and equipment, intangible assets and finance lease equipment.

(26) Other financial obligations and financial commitments

Lease commitments

The group has non-cancellable operating leases, primarily for buildings and cars.

The future minimum lease payments due on operating leases are listed in the table below:

(in thousands of EUR)	Mar. 31, 2018	Dec. 31, 2017

Up to one year	8,261	6,938
One to five years	10,044	11,045
More than five years	3,490	3,844
	21,795	21,827

Other obligations

On March 31, 2018, the group had purchase commitments totaling EUR 28,227 thousand in respect to suppliers (on December 31, 2017: EUR 31,206 thousand).

Guarantees

Group entities have issued guarantees in favor of customers. On March 31, 2018, performance bonds with a maximum guaranteed amount of EUR 3,210 thousand were issued (on December 31, 2017: EUR 3,206 thousand). At the end of Q1 2018, ADVA Optical Networking does not expect claims from these guarantees.

(27) Contingent liabilities

In the normal course of business, claims may be asserted, or lawsuits filed against the company and its subsidiaries from time to time. On March 31, 2018, ADVA Optical Networking does not expect that potential titles or litigations in detail or in total will have a material impact on its financial position or operating performance.

Highlights	Management	Financial	shareholder	Corporate
	Report	Statements	Information	Information

(28) Stock option programs

Changes in the number of options rights outstanding and similar rights are detailed in the table below:

	Stock Option Program 2003	Stock Option Program 2003 for the management board	Stock Appreciation Rights	Stock Option Program 2011	Stock Option Program 2011 for the management board	Stock Appreciation Rights
	Plan IX	Plan IXb	Plan XI	Plan XIV	Plan XIVa	Plan XV
Options outstanding at Jan. 1, 2017
	20,856	75,000	9,000	1,853,677	841,667	55,400
Granted options	-	-	-	754,000	150,000	-
Exercised options	-20,856	-	-1,000	-215,759	-	-15,200
Forfeited options	-	-	-	-322,500	-	-
	-	-75,000	-8,000	-	-	-
Options outstanding at Dec. 31, 2017	-	-	-	2,069,418	991,667	40,200
Forfeited options	-	-	-	-34,700	-	-
Options outstanding at
Mar. 31, 2018	-	-	-	2,034,718	991,667	40,200
Of which exercisable	-	-	-	396,918	230,000	40,200

(29) Related party transactions

Teleios Capital Partners LLC Zug, Switzerland, EGORA Holding GmbH, Martinsried/Munich, and its subsidiaries (the EGORA group), Saguna Networks Ltd., Nesher, Israel, Arista Networks, Santa Clara, USA, Fraunhofer Heinz Hertz Institute, Berlin, Harmonic Inc., San Jose, USA., and all members of the company's governing bodies and their relatives qualify as related parties to ADVA Optical Networking on March 31, 2018, in the sense of IAS 24.

Teleios Capital Partners LLC is an investment company based in Zug, Switzerland. On March 31, 2018, Teleios Capital Partners LLC held a 15.02% share in the equity of ADVA Optical Networking. No business relations existed with Teleios Capital Partners LLC.

On March 31, 2018, the EGORA group held a 14.99% share in the equity of ADVA Optical Networking.

ADVA Optical Networking SE holds 7.9% of the shares of Saguna Networks Ltd. A service agreement with Saguna Networks Ltd. exists regarding the provision of development services for the companies of ADVA Optical Networking group.

In Q1 2018, ADVA Optical Networking acquired components with an amount of EUR 3 thousand from the EGORA group (Q1 2017: EUR 5 thousand). In Q1 2018 and Q1 2017, ADVA Optical Networking did not sell any products to the EGORA group.

ADVA Optical Networking has entered into several agreements with the EGORA group under which ADVA Optical Networking is entitled to make use of certain facilities and services of the EGORA group. In Q1 2018 and Q1 2017, these agreements were not utilized.

On March 31, 2018, trade accounts payable with an amount of EUR 1 thousand existed in respect to EGORA group (December 31, 2017: nil).

In Q1 2018 and Q1 2017, Saguna Networks Ltd. has not performed development services for the group.

In Q1 2018 and Q1 2017, ADVA Optical Networking acquired no components from Arista Networks, Inc. On March 31, 2018, no trade accounts payable and provisions existed in respect to Arista Networks, Inc. (December 31, 2017: nil).

ADVA Optical Networking entered a service agreement with Fraunhofer Heinz Hertz Institute. In Q1 2018 and Q1 2017, ADVA Optical Networking acquired no services. On March 31, 2018, no trade accounts payable existed in respect to Fraunhofer Hertz Institute (December 31, 2017: EUR 86 thousand).

In Q1 2018 and Q1 2017, Harmonic Inc. acquired no products from ADVA Optical Networking (2016: nil). On March 31, 2018, no trade receivables existed in respect to Harmonic Inc. (December 31, 2017: EUR 2 thousand).

On March 31, 2018 and December 31, 2017 no provision existed in respect to related parties.

All transactions with related parties are conducted on an arm's-length basis.

See note (30) for detailed information about compensation of the management board and the supervisory board.

(30) Governing boards

Management board

The members of the management board held the following shares and/or had been granted the following stock options:

	Shares		Stock options
	Mar. 31,	Dec. 31,	Mar. 31,	Dec. 31,
	2018	2017	2018	2017
Brian Protiva
Chief executive officer	401,030	401,030	260,000	260,000
Christoph Glingener
Chief technology officer & chief
operating officer	-	-	325,000	325,000
Ulrich Dopfer
Chief financial officer	500	500	259,667	259,667
Scott St. John
Chief marketing & sales officer
(since October 1, 2017)	-	-	150,000	150,000

The options to members of the management board were granted out of Plan XIV and Plan XIVa. Additionally, Ulrich Dopfer holds options from Plan XIV that were granted before he joined the ADVA Optical Networking management board. The option rights authorize the management board to purchase the said number of common shares in the company once the qualifying period has elapsed. Plan XIVa includes a profit limit of EUR 20.00 per option, whereas Plan XIV has no profit limitations.

The strike price for these option rights is

EUR 5.05 for 103,000 options granted on August 15, 2012,
EUR 3.90 for 130,000 options granted on November 15, 2013,
EUR 3.19 for 60,000 options granted on May 15, 2014,
EUR 5.15 for 150,000 options granted on May 15, 2015,
EUR 8.70 for 401,667 options granted on May 15, 2016,
EUR 4.98 for 150.000 options granted on November 15, 2017, respectively.

Supervisory board

On March 31, 2018, no shares or stock options were held by members of the supervisory board (December 31, 2017: none).

(31) Events after the balance sheet date

Declaration of compliance with the German Corporate Governance Code Pursuant to Section 161 of the German Stock Corporation Law (AktG), the management board and the supervisory board have issued a declaration of compliance with the German Corporate Governance Code. This declaration is published on the group's website (www.advaoptical.com).		Affirmative declaration of the legal representatives We, the members of the management board of ADVA Optical Networking SE, to the best of our knowledge affirm that, in accordance with the applicable reporting principles, the unaudited interim group management report and the interim consolidated financial statements of the ADVA Optical Networking group represent a true and fair view of the net assets, financial position and performance of the group, together with a description of the principal opportunities and risks associated with the expected development of the group.
Meiningen, April 24, 2018		Meiningen, April 24, 2018
Brian Protiva	Christoph Glingener	Brian Protiva	Christoph Glingener
Ulrich Dopfer	Scott St. John	Ulrich Dopfer	Scott St. John

Shareholder information
Stock information6		Financial calendar
Trade name Symbol Exchange	ISIN DE0005103006/WKN 510300 ADV Prime Standard Segment Frankfurt Stock Exchange	Jefferies Technology Conference William Blair Private Technology Company	May 9, 2018 in Los Angeles, USA May 10, 2018 in San Francisco, USA
Sector Industry	Technology Communications Technology	Growth Conference dbAccess Conference	June 6, 2018 in Berlin, Germany
Number of shares outstanding on March 31, 2018 Price on December 29, 2017 Price on March 29, 2018	49,735,549 EUR 6.04 EUR 5.35	Annual Shareholders' Meeting	June 13, 2018 in Meiningen, Germany

(until March 29, 2018) -11.4% Market capitalization

on March 29, 2018 EUR 266.1m

Publication of Six-Month Report July 19, 2018 Martinsried/Munich, Germany

Shareholder structure

Share price performance YTD

⁶ Price information is based on Xetra closing prices

Corporate information

Corporate headquarters

ADVA Optical Networking SE Campus Martinsried Fraunhoferstrasse 9a 82152 Martinsried/Munich Germany

t +49 89 89 06 65 0

Registered head office

Maerzenquelle 1-3 98617 Meiningen-Dreissigacker Germany

t +49 3693 450 0

Americas office

ADVA Optical Networking North America, Inc. 5755 Peachtree Industrial Boulevard Norcross, Georgia 30092 USA

t +1 678 728 8600

Asia-Pacific office

ADVA Optical Networking (Shenzhen) Ltd. 18/F, Maoye Times Square Haide 2nd Road Nanshan District Shenzhen 518054 China

t +86 755 8621 7400

ADVA Optical Networking on the web

More information about ADVA Optical Networking, including solutions, technologies and products, can be found on the company's website at www.advaoptical.com.

PDF files of this quarterly report, as well as previous quarterly and annual reports, presentations and general investor information, are also located on the company's website and can be downloaded in both English and German. Quarterly conference calls are conducted on the day of earnings announcements. Related PDF, audio and transcript files are available for download in the investor relations section of the company's website, www.advaoptical.com.

Investor communication

To receive an investor packet, request other information, ask specific questions, or be placed on the distribution list, please contact:

Stephan Rettenberger SVP Marketing & Investor Relations Campus Martinsried Fraunhoferstrasse 9a 82152 Martinsried/Munich Germany

t + 49 89 89 06 65 901 [email protected]

Auditor

• PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, Germany

Legal counsels

• Hogan Lovells, Munich, Germany

Tax advisers

• Deloitte, Munich, Germany

AI Terminal

ADVA Optical Networking SE

17_10-q_2018-05-18_a4ecf965-6b53-4532-98dd-14fc7d144eda.pdf