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8-K - 8-K - MRV COMMUNICATIONS INCa14-20028_18k.htm
EX-99.2 - EX-99.2 - MRV COMMUNICATIONS INCa14-20028_1ex99d2.htm

Exhibit 99.1

 

 

MRV Reports Second-Quarter 2014 Results

- Increased revenue 13% -

- Broadened Network Equipment reach with OptiPacket launch and

OptiDriver customer acceptances -

 

CHATSWORTH, Calif.— August 25, 2014 —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- and six- months ended June 30, 2014.

 

“The transformation of MRV continues and we believe we are now much better positioned to capitalize on the significant growth opportunities in packet and optical networking,” said David Stehlin, MRV’s chief executive officer. “As we announced separately today, Mark Bonney has joined the MRV management team as Executive Vice President and Chief Financial Officer, and brings a wealth of talent to help us improve operations and execute on our strategic growth initiatives.”

 

Mr. Stehlin continued, “We understand that this press release and the conference call scheduled for tomorrow, as described in more detail below, are occurring later than we would have wanted and later than our shareholders expect from us.  We would like to affirm our commitment to investor transparency, and reassure our investors that we intend to make future quarterly financial disclosures on a timely basis.

 

Mr. Stehlin continued further, “While MRV continues to navigate through short term challenges, we believe we have significant opportunities to grow and drive increasing shareholder value.  During the quarter, we successfully realigned our North American sales team to improve the marketing of our sophisticated, next generation optical communication products, which we believe to be the driver of MRV’s future revenue growth. Our new optical transport platform, OptiDriver™, increased its market presence, as we added ten new customers, notably half of whom are new to MRV. Additionally, in June, we introduced OptiPacket™ (OP-X), our ground breaking metro service edge packet optical solution, which unlocks new and exciting market opportunities for MRV.  We believe that our broader product line, which is being increasingly adopted by our customers, presents very attractive long term growth opportunities for MRV.”

 

Second Quarter 2014 Results as compared to Second Quarter 2013

 

·                  Total revenue amounted to $43.1 million, up 13% from $38.2 million.

·                  Network Equipment revenue was $21.8 million, up 3%, reflecting increases in carrier Ethernet access, optical transport and infrastructure management product sales partially offset by decrease in services revenue.

·                  Network Integration revenue was $21.4 million, up 25% primarily due to growth in product sales attributable to increased market share.

·                  Consolidated gross margin was 34.3%, compared to 35.0%. 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 51.2%, compared to 53.0% primarily due to a shift in product mix.

·                  Network Integration gross margin was 16.8%, increasing from 12.8%, reflecting an improvement in product revenue gross margins over the prior year.

·                  Total operating expenses were $15.9 million, or 37% of total revenue, compared to $13.9 million, or 36% of total revenue. The increase reflects continued investment in the development of more complex product solutions and investments in sales and marketing, partially offset by cost control initiatives. When comparing to the second quarter of 2013, it is important to note that in June 2013, the company benefited from a $1.0 million insurance recovery for legal fees, previously incurred during the derivative litigation.

·                  Network Equipment operating expenses were $12.7 million, compared to $11.5 million primarily due to investing in ongoing product development and sales.

·                  Network Integration operating expenses were $1.9 million, compared to $1.5 million, primarily due to increased sales costs to support revenue growth.

·                  Corporate expenses were $1.3 million, compared to $0.9 million, which included the $1.0 million insurance recovery.

·                  Total operating loss was $1.1 million, compared to an operating loss of $0.5 million, which included the $1.0 million insurance recovery.

·                  During the quarter we resolved an outstanding tax audit issue in Italy. The result, which is detailed more fully in our report on Form 10-Q for the three months ended June 30, 2014 filed on August 18, 2014, increased other expense by $0.2 million and income tax expense by $0.3 million.

·                  Total net loss was $2.3 million or $0.31 per diluted share, compared to a net loss of $0.9 million, or $0.13 per diluted share, which included the $1.0 million insurance recovery.

 

Out-of-period Accounting Adjustments

 

During the second quarter, the company recorded an immaterial out-of-period accounting adjustment to defer previously recognized revenue of $2.0 million in the Network Integration segment that resulted in an increase to after-tax net loss of $0.1 million for the three and six months ended June 30, 2014. Greater detail can be found in the company’s quarterly report on Form 10-Q for the three months ended June 30, 2014.

 

Year-to-date June 30, 2014 Results as compared to Year-to-date June 30, 2013

 

Total revenue amounted to $85.4 million, up 11% from $77.1 million. Network Equipment revenue was $44.2 million, up 5%. Network Integration revenue was $41.4 million, up 18%. Total net loss was $6.5 million, or $0.89 per diluted share, compared to a net loss of $5.4 million, or $0.72 per diluted share.

 

Stehlin added, “The optical edge or metro segment of the network is entering a phase of significant change and projected dramatic growth. Our product development strategy is well aligned to capitalize on the need for greater capacity, flexibility and intelligence. We are encouraged by the initial responses to OP-X and the steadily growing customer adoption of OptiDriver.  Our new OP-X and OptiDriver combined with our OptiSwitch® carrier Ethernet switches and ProVision® management system form a powerful solution set and the foundation for our growth as they target the fast expanding market segments that make up the optical edge.”

 



 

Conference Call Information:

 

MRV Communication’s second quarter 2014 financial results conference call is scheduled to take place on August 26, 2014 at 5:00 p.m. ET. David Stehlin, CEO, and Mark Bonney, EVP and CFO, will host the call and will be available for questions after the prepared remarks. 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 75579998#.  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 75579998#.

 

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 quarterly report on Form 10-Q for the quarter ended June 30, 2014, its quarterly report on Form 10-Q for the quarter ended March 31, 2014 and 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 August 26, 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.

 

IR Contact:

 

Kirsten Chapman/Monica Chang, LHA, (415) 433-3777, ir@mrv.com

 



 

MRV Communications, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Revenue:

 

 

 

 

 

 

 

 

 

Product revenue

 

$

30,671

 

$

26,432

 

$

62,215

 

$

54,504

 

Service revenue

 

12,453

 

11,743

 

23,227

 

22,576

 

Total revenue

 

43,124

 

38,175

 

85,442

 

77,080

 

Cost of sales

 

28,342

 

24,803

 

57,409

 

50,681

 

Gross profit

 

14,782

 

13,372

 

28,033

 

26,399

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Product development and engineering

 

5,392

 

4,454

 

10,970

 

9,102

 

Selling, general and administrative

 

10,516

 

9,453

 

22,038

 

21,845

 

Total operating expenses

 

15,908

 

13,907

 

33,008

 

30,947

 

Operating loss

 

(1,126

)

(535

)

(4,975

)

(4,548

)

Interest expense

 

(40

)

(241

)

(190

)

(373

)

Other income, net

 

(420

)

(102

)

(387

)

(85

)

Loss before provision for income taxes

 

(1,586

)

(878

)

(5,552

)

(5,006

)

Provision for income taxes

 

681

 

115

 

932

 

421

 

Net Loss

 

$

(2,267

)

$

(993

)

$

(6,484

)

$

(5,427

)

 

 

 

 

 

 

 

 

 

 

Net loss per share — basic

 

$

(0.31

)

$

(0.13

)

$

(0.89

)

$

(0.72

)

Net loss per share — diluted

 

$

(0.31

)

$

(0.13

)

$

(0.89

)

$

(0.72

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

Basic

 

7,360

 

7,585

 

7,322

 

7,570

 

Diluted

 

7,360

 

7,585

 

7,322

 

7,570

 

 


(1) Amounts may not add due to rounding.

 



 

MRV Communications, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)

 

 

 

June 30,
2014

 

December 31,
2013

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

22,320

 

$

27,591

 

Restricted time deposits

 

250

 

249

 

Accounts receivable, net

 

49,122

 

49,990

 

Other receivables

 

10,353

 

8,220

 

Inventories, net

 

28,485

 

22,981

 

Income tax refunds receivable

 

814

 

1,256

 

Deferred income taxes

 

1,144

 

1,219

 

Other current assets

 

6,263

 

5,664

 

Total current assets

 

118,751

 

117,170

 

Property and equipment, net

 

5,248

 

5,555

 

Deferred income taxes, net of current portion

 

3,801

 

3,694

 

Intangibles, net

 

762

 

873

 

Other assets

 

577

 

655

 

Total assets

 

$

129,139

 

$

127,947

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term debt

 

$

6,370

 

$

4,320

 

Deferred consideration payable

 

233

 

233

 

Accounts payable

 

27,990

 

23,991

 

Accrued liabilities

 

15,541

 

19,463

 

Deferred revenue

 

13,755

 

10,557

 

Other current liabilities

 

371

 

357

 

Total current liabilities

 

64,260

 

58,921

 

Other long-term liabilities

 

5,509

 

5,236

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred Stock, $0.01 par value: Authorized — 1,000 shares; no shares issued or outstanding

 

 

 

Common Stock, $0.0017 par value:

 

 

 

 

 

Authorized — 16,000 shares

 

 

 

 

 

Issued — 8,222 shares in 2014 and 8,143 shares in 2013

 

 

 

 

 

Outstanding — 7,365 shares in 2014 and 7,286 in 2013

 

270

 

270

 

Additional paid-in capital

 

1,284,113

 

1,281,883

 

Accumulated deficit

 

(1,214,821

)

(1,208,337

)

Treasury stock — 856 shares in 2014 and 856 shares in 2013

 

(10,412

)

(10,412

)

Accumulated other comprehensive income

 

220

 

386

 

Total stockholders’ equity

 

59,370

 

63,790

 

Total liabilities and stockholders’ equity

 

$

129,139

 

$

127,947

 

 



 

MRV Communications, Inc.

Segmented Operating Data

(In thousands)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Revenue

 

 

 

 

 

 

 

 

 

Network Equipment

 

$

21,833

 

$

21,100

 

$

44,152

 

$

42,046

 

Network Integration

 

21,355

 

17,135

 

41,408

 

35,117

 

Before intersegment adjustments

 

43,188

 

38,235

 

85,560

 

77,163

 

Intersegment adjustments

 

(64

)

(60

)

(118

)

(83

)

Total

 

$

43,124

 

$

38,175

 

$

85,442

 

$

77,080

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Gross profit

 

 

 

 

 

 

 

 

 

Network Equipment

 

$

11,185

 

$

11,183

 

$

21,944

 

$

21,949

 

Network Integration

 

3,598

 

2,187

 

6,088

 

4,444

 

Before intersegment adjustments

 

14,783

 

13,370

 

28,032

 

26,393

 

Intersegment adjustments

 

(1

)

2

 

1

 

6

 

Total

 

$

14,782

 

$

13,372

 

$

28,033

 

$

26,399

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Network Equipment

 

$

12,688

 

$

11,480

 

$

26,287

 

$

23,364

 

Network Integration

 

1,894

 

1,511

 

3,538

 

3,078

 

Before intersegment adjustments

 

14,582

 

12,991

 

29,825

 

26,442

 

Corporate unallocated operating expenses and adjustments

 

1,326

 

916

 

3,183

 

4,505

 

Total

 

$

15,908

 

$

13,907

 

$

33,008

 

$

30,947

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Operating Income

 

 

 

 

 

 

 

 

 

Network Equipment

 

$

(1,503

)

$

(296

)

$

(4,343

)

$

(1,415

)

Network Integration

 

1,704

 

675

 

2,550

 

1,366

 

Before intersegment adjustments

 

201

 

379

 

(1,793

)

(49

)

Corporate unallocated and adjustments

 

(1,327

)

(914

)

(3,182

)

(4,499

)

Total

 

$

(1,126

)

$

(535

)

$

(4,975

)

$

(4,548

)