News Column

MRV Reports First-Quarter 2014 Results

May 8, 2014

- Revenue increased 9% supported by 12% growth in Network Integration -

- Recently announced nationwide deployment with Tier 1 customer -

CHATSWORTH, Calif.--(BUSINESS WIRE)-- MRV Communications (NASDAQ: MRVC), a global provider of converged packet and optical solutions that empower the optical edge and network integration services for communications service providers, reported financial results for the three-months ended March 31, 2014.

David Stehlin, MRV's chief executive officer, stated, “We are encouraged by consolidated revenue growth of 9% as well as the growing customer reception to the new products that we have started to introduce to the market. The financial results for this quarter reflect the transition of the business and the investments we are making in higher value, next generation products that will be the key growth drivers for the future. We are confident these investments will enable us to increase the value we deliver to our customers and expand our opportunities in both existing and new target markets.”

First Quarter 2014 Results as compared to First Quarter 2013

  • Total revenue amounted to $42.3 million, up 9% from $38.9 million in the prior year.
  • Network Equipment revenue was $22.3 million, up 7% compared to the prior year period reflecting solid growth in Europe and Asia Pacific.
  • Network Integration revenue was $20.1 million, up 12% compared to the prior year primarily due to growth in both product and service revenues.
  • Consolidated gross margin was 31.3%, compared to 33.5% in the prior year. The decrease reflects a greater revenue contribution from the lower margin Network Integration business and a decline in Network Equipment gross margins.
  • Network Equipment gross margin was 48.2 %, compared to 51.4% in the prior year, reflecting a shift in revenue mix toward a higher proportion of revenue from European channel partners and larger customers that carry lower gross margins, and reduced pricing on certain mature products lines.
  • Network Integration gross margins were 12.4%, down slightly from 12.6% in the prior year.
  • Total operating expenses were $17.1 million, or 40% of total revenue, compared to $17.0, or 44% of total revenue million in the prior year. During the quarter, operating expenses were adversely impacted by $0.4 million related to the revaluation of warrants that were issued in connection with the litigation that was settled in 2013, $0.3 million related to the realignment of the Network Equipment sales organization and $0.5 million related to increased consulting costs for an enterprise system implementation and accounting support.
  • Network Equipment operating expenses were $13.6 million compared to $11.9 million in the prior year. This increase included investments of $0.9 million in product development and $0.5 million in our sales organization and back office support.
  • Network Integration operating expenses were $1.6 million, compared to $1.5 million in the prior year, reflecting cost of expanding the sales organization.
  • Corporate expenses were $1.9 million, down from $3.6 million in the prior year, primarily due to lower fees in legal, consulting and accounting, and lower executive headcount.
  • Total operating loss was $3.8 million, which included $1.2 million in the aforementioned warrant revaluation, sales realignment, and consulting costs. This compares to an operating loss of $4.0 million in the prior-year period.

    Stehlin added, “In April, we announced for the first time a nationwide deployment of our optical edge and management system products with a leading Asia Pacific Tier 1 service provider. We are executing initiatives to grow this relationship as well as those with other key customers. We are pleased with the operational benefits from the sales organization realignment we implemented in Europe, and we are implementing similar best practices in our Americas organization. In addition, our OptiDriver platform, released in late 2013, is gaining acceptance with carriers, data center operators, content delivery networks and cloud services providers. We are also planning another significant product launch in the second half of 2014.

    “Our target market continues to evolve toward high capacity, packet optical networking with increasing software control and service delivery. Strengthening the foundation we built in 2013, we are continuing to invest in the products, sales and infrastructure to support a compelling long-term growth opportunity. We believe we are well positioned to deliver the superior communications equipment and services our customers want.”

    Conference Call Information:

    MRV Communication's first quarter 2014 financial results conference call is scheduled to take place on May 8, 2014 at 5:00 p.m. ET. The live audio webcast will be accessible at www.mrv-corporate.com in the Investor Relations section. For access via telephone, please dial 877-359-9508, and for international calls dial 224-357-2393 approximately 10 minutes prior to the start of the conference. The conference ID is 35299522#. The conference call will also be broadcast live at www.mrv.com where it will be available for replay for 90 days. In addition, a replay will be available via telephone for three business days, beginning three hours after the call. To listen to the replay, in the U.S. please dial 855-859-2056, and internationally dial 404-537-3406. The access code is 35299522#.

    About MRV Communications

    MRV Communications is a global provider of converged packet and optical solutions that empower the optical edge and network integration services for leading communications service providers. For more than two decades, the most demanding service providers, Fortune 1000 companies and governments worldwide have trusted MRV to provide best-in-class solutions and services for their mission-critical networks. We help our customers overcome the challenge of orchestrating the ever-increasing need for capacity while improving service delivery and lowering network costs for critical applications such as cloud connectivity, high-capacity business services, mobile backhaul and data center connectivity. For more information please visit www.mrv.com.

    Forward Looking Statements

    This press release may contain statements regarding future financial and operating results of MRV, management's assessment of business trends, and other statements about management's future expectations, beliefs, goals, plans or prospects and those of the market segments in which MRV is engaged that are based on management's current expectations, estimates, forecasts and projections about MRV and its consolidated businesses and the respective market segments in which MRV's businesses operate, in addition to management's assumptions. Statements in this press release regarding MRV's future financial and operating results, which are not statements of historical facts, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "envisions," "estimates," "targets," "intends," "plans," "believes," "seeks," "should," "could," "forecasts," "projects," variations of such words and similar expressions, are intended to identify such forward-looking statements which are not statements of historical facts. These forward-looking statements are not guarantees of future performance nor guarantees that the events anticipated will occur or expected conditions will remain the same or improve. These statements involve certain risks, uncertainties and assumptions, the likelihood of which are difficult to assess and may not occur, including risks that each of its business segments may not make the expected progress in its respective market, or that management's long-term strategy may not achieve the expected results. Therefore, actual outcomes, performance and results may differ from what is expressed or forecast in such forward-looking statements, and such differences may vary materially from current expectations.

    For further information regarding risks and uncertainties associated with MRV's businesses, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of MRV's SEC filings, including, but not limited to its annual report on Form 10-K for the year ended December 31, 2013, copies of which may be obtained by contacting MRV's investor relations department or by visiting MRV's website at http://www.mrv-corporate.com or the SEC's EDGAR website at http://www.sec.gov.

    All information in this release is as of May 8, 2014 unless otherwise stated. MRV undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in MRV's expectations.

       

    MRV Communications, Inc

    Condensed Consolidated Statement of Operations

    (In thousands, except per share data)

     
     
     
    Three Months Ended March 31,
     
    2014 2013
    (unaudited) (unaudited)
    Revenue:
    Product revenue $31,544 $ 28,072
    Service revenue   10,774     10,833  
    Total revenue$42,318 $ 38,905
    Cost of goods sold   29,067     25,878  
    Gross profit13,251 13,027
    Operating expenses:
    Product development and engineering 5,578 4,648
    Selling, general and administrative   11,522     12,392  
    Total operating expenses   17,100     17,040  
    Operating loss(3,849) (4,013 )
    Interest expense (150) (132 )
    Other income   33     17  
    Loss before taxes(3,966) (4,128 )
    Provision for income taxes   251     306  
    Net loss$(4,217) $ (4,434 )
     
    Net loss per share - basic$(0.58) $ (0.59 )
     
    Net loss per share - diluted$(0.58) $ (0.59 )
     
    Weighted average number of shares:
    Basic 7,283 7,568
    Diluted 7,283 7,568
     
     
     

    (1) Amounts may not add due to rounding.

     
       
    MRV Communications, Inc
    Balance Sheet

    (In thousands, except par values)

     
    March 31,December 31,
    20142013
    (unaudited)  
    Assets
    Current assets:
    Cash and cash equivalents $23,214 $ 27,591
    Restricted time deposits 244 249
    Accounts receivable, net 51,127 49,990
    Other receivables 6,503 8,220
    Inventories, net 25,435 22,981
    Income tax refunds receivable 1,002 1,256
    Deferred income taxes 1,185 1,219
    Other current assets   6,156     5,664  
    Total current assets114,866 117,170
    Property and equipment, net5,391 5,555
    Deferred income taxes, net of current portion3,756 3,694
    Intangibles, net762 873
    Other assets   601     655  
    Total assets$125,376   $ 127,947  
     
    Liabilities and stockholders' equity
    Current liabilities:
    Short-term debt $6,794 $ 4,320
    Deferred consideration payable 233 233
    Accounts payable 24,430 23,991
    Accrued liabilities 15,780 19,463
    Deferred revenue 10,925 10,557
    Other current liabilities   642     357  
    Total current liabilities58,804 58,921
    Other long-term liabilities5,303 5,236
    Commitments and contingencies- -
     
    Stockholders' equity:

    Preferred Stock, $0.01 par value, 1,000 shares authorized, no shares issued or outstanding

    - -
    Common Stock, $0.0017 par value, 16,000 shares authorized,
    Issued — 8,136 shares in 2014 and 8,143 shares in 2013
    Outstanding — 7,280 shares in 2014 and 7,286 shares in 2013 270 270
    Additional paid-in capital 1,283,626 1,281,883
    Accumulated deficit (1,212,554) (1,208,337 )
    Treasury stock — 856 shares in 2014 and 856 shares in 2013 (10,412) (10,412 )
    Accumulated other comprehensive income   339     386  
    Total stockholders' equity   61,269     63,790  
    Total liabilities and stockholders' equity$125,376   $ 127,947  

     

       
    MRV Communications, Inc
    Segment Data

    (In thousands)

     
     
     

    Three Months Ended

    March 31,

     
    2014 2013
    (unaudited) (unaudited)
     
    Revenue
    Network Equipment $22,319 $ 20,946
    Network Integration   20,053     17,982  
    Before intersegment adjustments   42,372     38,928  
    Intersegment adjustments   (54)   (23 )
    Total $42,318   $ 38,905  
     
     
    Gross Profit
    Network Equipment $10,759 $ 10,766
    Network Integration   2,490     2,257  
    Before intersegment adjustments   13,249     13,023  
    Intersegment adjustments   2     4  
    Total $13,251   $ 13,027  
     
     
    Operating Expenses
    Network Equipment $13,598 $ 11,884
    Network Integration   1,645     1,567  
    Before intersegment adjustments   15,243     13,451  

    Corporate unallocated operating expenses and adjustments

      1,857     3,589  
    Total $17,100   $ 17,040  
     
     
    Operating Income
    Network Equipment $(2,839) $ (1,119 )
    Network Integration   845     691  
    Before intersegment adjustments   (1,994)   (428 )

    Corporate unallocated and adjustments

      (1,855)   (3,585 )
    Total $(3,849) $ (4,013 )





    LHA

    IR Contact:

    Kirsten Chapman, 415-433-3777

    ir@mrv.com

    Source: MRV Communications


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