MRV COMMUNICATIONS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 2, 2017

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8-K - 8-K - MRV COMMUNICATIONS INCmrv20170630-8kearningsrele.htm


Exhibit 99.1

MRV Reports Second-Quarter Results

CHATSWORTH, Calif., August 2, 2017, MRV Communications Inc. (NASDAQ: MRVC), a provider of innovative network solutions for service providers, data center operators and enterprises, reported financial results for the three-and six-months ended June 30, 2017.

Financial Reporting
The Company uses certain non-GAAP financial measures and a reconciliation of the non-GAAP measures to GAAP measures is provided in the attached table.

Second Quarter 2017
•
Revenue was $19.7 million, compared to $21.6 million in Q2’16 and $21.2 million in Q1’17, reflecting lower European and North American product revenue slightly offset by increased service revenue.
•
GAAP gross margin was 51.5%, compared to 46.7% in Q2’16 and 50.6% in Q1’17. Non-GAAP gross margin was 51.6%, compared to 48.3% in Q2’16 and 50.6% in Q1’17. The increase was primarily due to greater service revenue at higher margins as well as the impact of geographic and product mix.
•
GAAP operating expenses were $12.1 million, compared to $12.1 million in Q2’16 and $11.5 million in Q1’17. Non-GAAP operating expenses were $10.5 million, compared to $11.8 million in Q2’16 and $10.9 million in Q1’17.
•
GAAP operating loss was $1.9 million, compared to $2.1 million in Q2’16 and $0.8 million in Q1’17. Non-GAAP operating loss was to $0.3 million, compared to $1.3 million in Q2’16 and $0.2 million in Q1’17.
•
GAAP net loss increased to $2.1 million, or $0.31 per share, compared to $2.0 million, or $0.29 per share, in Q2’16 and $1.0 million, or $0.15 per share, in Q1’17.
•
Non-GAAP net loss was $0.4 million , or $0.07 per share, compared to $1.3 million, or $0.19 per share, in Q2’16 and $0.5 million, or $0.08 per share, in Q1’17.

Six-months Ended June 30, 2017 Results as compared to Six-months Ended June 30, 2016
•
Revenue was $40.9 million, compared to $40.5 million.
•
GAAP gross margin was 51.0%, compared to 49.1%. Non-GAAP gross margin was 51.1%, compared to 50.1%.
•
GAAP net loss was $3.1 million, or $0.46 per share, compared to $5.9 million, or $0.84 per share.
•
Non-GAAP net loss improved to $1.0 million, or $0.14 per share, from $4.8 million, or $0.68 per share.

Due to the pending merger, management will not conduct a conference call.

The Offer and Merger
On July 2, 2017, MRV Communications entered into an Agreement and Plan of Merger (as it may be amended or supplemented from time to time, the “Merger Agreement”), among MRV, ADVA NA Holdings, Inc., a Delaware corporation (“Parent”), and Golden Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides that Merger Sub commence a cash tender offer (the “Offer”) to purchase all of the issued and outstanding shares of MRV common stock at a price per share equal to $10.00. Following completion of the Offer, Merger Sub will merge with and into the Company (the “Merger”), with MRV continuing as the surviving corporation and as a wholly owned subsidiary of Parent.

On July 17, 2017, pursuant to the Merger Agreement, the Offer was commenced and is scheduled to expire at midnight on August 11, 2017, unless extended. The completion of the Offer is conditional upon, among other things, the tender of at least a majority of the MRV’s common stock then outstanding. Additional information regarding the Offer and the Merger, including the conditions to their consummation, may be found in the Schedule 14D-9 (as amended) filed on July 17, 2017 by the Company with the U.S. Securities and Exchange Commission (the “SEC”) and the Schedule TO (as amended) filed on July 17, 2017 with the SEC by ADVA Optical Networking SE, Parent and Merger Sub.







About MRV Communications
MRV Communications (NASDAQ: MRVC) enables service providers, data center operators and enterprises to make their networks smarter, faster and easier to operate.  MRV’s end-to-end portfolio includes innovative packet, optical and software platforms designed for flexibility and reliability.  To learn more about MRV visit www.mrv.com and follow us on Twitter @MRVC.

Non-GAAP Measures
The company uses certain non-GAAP financial measures in this press release to supplement its consolidated financial statements, which are presented in accordance with GAAP. These non-GAAP measures include non-GAAP operating loss, non-GAAP net loss and non-GAAP basic and diluted loss per share. The company’s non-GAAP financial measures exclude the impact of stock-based compensation expense, litigation costs, severance and related transition costs, merger costs and costs related to the sale of Tecnonet S.p.A., which the company believes are not indicative of its core operating results. The company used these non-GAAP measures when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. These non-GAAP measures should not be viewed in isolation from or as a substitute for the company’s financial results in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is attached to this press release.

Forward Looking Statements
This press release may contain statements, including statements related to the transactions contemplated by the Merger Agreement, 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 "will likely result," "are expected to," " is anticipated," "appear," "believe," "could," "estimate," "expect," "intend," "may," "should," "outlook," "plan," "project," "contemplate," "target," "foresee," "goal," "likely," "will," and "would" or 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 units 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.

With respect to the transactions contemplated by the Merger Agreement, there is no assurance that the transactions will be consummated. Potential risks and uncertainties related to such transactions include, among others, the impact of the announcement of the pending transactions on the Company's business, its financial and operating results and its employees, suppliers and customers; factors affecting the feasibility and timing of the consummation of the transactions, including, without limitation, the ability to satisfy the conditions to closing contained in the Merger Agreement and Offer; and risks related to realization of the expected benefits of these transactions to the Company and its stockholders.





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, 2016 and its quarterly report on Form 10-Q for the quarter ended March 31, 2017, 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 2, 2017 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: Cathy Mattison/Kirsten Chapman, LHA Investor Relations, (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,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Product revenue
$
16,283

 
$
18,658

 
$
34,408

 
$
34,665

Service revenue
3,442

 
2,926

 
6,492

 
5,801

Total revenue
19,725

 
21,584

 
40,900

 
40,466

Cost of Revenue:
 
 
 
 
 
 
 
Cost of product
8,666

 
10,285

 
17,935

 
17,880

Cost of services
902

 
1,228

 
2,104

 
2,712

Total cost of revenue
9,568

 
11,513

 
20,039

 
20,592

Gross profit
10,157

 
10,071

 
20,861

 
19,874

Operating expenses:
 
 
 
 
 
 
 
Product development and engineering
4,610

 
5,125

 
9,338

 
10,469

Selling, general and administrative
7,455

 
7,007

 
14,223

 
15,024

Total operating expenses
12,065

 
12,132

 
23,561

 
25,493

Operating loss
(1,908
)
 
(2,061
)
 
(2,700
)
 
(5,619
)
Other income (expense), net
(155
)
 
74

 
(358
)
 
(203
)
Loss before provision for income taxes
(2,063
)
 
(1,987
)
 
(3,058
)
 
(5,822
)
Provision for income taxes
34

 
36

 
80

 
97

Net loss
$
(2,097
)
 
$
(2,023
)
 
$
(3,138
)
 
$
(5,919
)
 
 
 
 
 
 
 
 
Net loss per share — basic
$
(0.31
)
 
$
(0.29
)
 
$
(0.46
)
 
$
(0.84
)
Net loss per share — diluted
$
(0.31
)
 
$
(0.29
)
 
$
(0.46
)
 
$
(0.84
)
 
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Basic
6,786

 
7,092

 
6,784

 
7,042

Diluted
6,786

 
7,092

 
6,784

 
7,042








MRV Communications, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(unaudited)
 
June 30,
2017
 
December 31,
2016
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
24,333

 
$
25,116

Restricted cash and time deposits
4,918

 
272

Accounts receivable, net
16,926

 
14,295

Inventories
9,374

 
9,657

Other current assets
2,177

 
2,378

Total current assets
57,728

 
51,718

Property and equipment, net
2,985

 
3,130

Intangible assets, net
893

 
1,064

Other assets
264

 
348

Total assets
$
61,870

 
$
56,260

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Deferred consideration payable
$
233

 
$
233

Accounts payable
9,296

 
8,353

Accrued liabilities
9,974

 
9,195

Deferred revenue
7,223

 
6,146

Other current liabilities
4,778

 
156

Total current liabilities
31,504

 
24,083

Other long-term liabilities
3,968

 
3,478

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 — 8,435 shares in 2017 and 8,425 shares in 2016
 
 
 
Outstanding — 6,812 shares in 2017 and 6,802 shares in 2016
270

 
270

Additional paid-in capital
1,288,135

 
1,287,336

Accumulated deficit
(1,242,501
)
 
(1,239,308
)
Treasury stock — 1,623 shares in 2017 and 2016
(18,098
)
 
(18,098
)
Accumulated other comprehensive loss
(1,408
)
 
(1,501
)
Total stockholders' equity
26,398

 
28,699

Total liabilities and stockholders' equity
$
61,870

 
$
56,260








MRV Communications, Inc.
Consolidated Non-GAAP reconciliation
(Unaudited, in thousands except per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Three Months Ended March 31,
 
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
  GAAP revenue
 
$
19,725

 
$
21,584

 
$
40,900

 
$
40,466

 
$
21,175

 
Cost of revenue
 
 
 
 
 
 
 
 
 
 
 
GAAP cost of revenue
 
9,568

 
11,513

 
20,039

 
20,592

 
10,471

 
Stock-based charges
 
(21
)
 
(28
)
 
(36
)
 
(70
)
 
(15
)
 
Severance and transition costs
 
—

 
(325
)
—

—

 
(325
)
 
—

 
Non-GAAP adjusted cost of revenue
 
9,547

 
11,160

 
20,003

 
20,197

 
10,456

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit:
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
10,157

 
10,071

 
20,861

 
19,874

 
10,704

 
Stock-based charges
 
21

 
28

 
36

 
70

 
15

 
Severance and transition costs
 
—

 
325

 
—

 
325

 
—

 
Non-GAAP adjusted gross profit
 
10,178

 
10,424

 
20,897

 
20,269

 
10,719

 
Non-GAAP Gross Margin %
 
51.6
%
 
48.3
%
 
51.1
%
 
50.1
%
 
50.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  GAAP Product development and engineering
 
4,610

 
5,125

 
9,338

 
10,469

 
4,728

 
Stock-based charges
 
(39
)
 
(63
)
 
(98
)
 
(139
)
 
(59
)
 
    Non-GAAP Product development and engineering
 
4,571

 
5,062

 
9,240

 
10,330

 
4,669

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Selling, general & administrative:
 
7,455

 
7,007

 
14,223

 
15,024

 
6,768

 
Stock-based charges
 
(329
)
 
(259
)
 
(670
)
 
(488
)
 
(341
)
 
Severance and transition costs
 
(167
)
 
—

 
(186
)
 
—

 
(19
)
 
Litigation costs
 
126

 
(56
)
 
(8
)
 
(91
)
 
(134
)
 
Divestiture costs
 
—

 
—

 
(5
)
 
(68
)
 
(5
)
 
Merger costs
 
(1,174
)
 
—

 
(1,174
)
 
—

 
—

 
Non-GAAP Selling, general & administrative
 
5,911

 
6,692

 
12,180

 
14,377

 
6,269

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating expenses:
 
12,065

 
12,132

 
23,561

 
25,493

 
11,496

 
Stock-based charges
 
(368
)
 
(322
)
 
(768
)
 
(627
)
 
(400
)
 
Severance and transition costs
 
(167
)
 
—

 
(186
)
 
—

 
(19
)
 
Litigation costs
 
126

 
(56
)
 
(8
)
 
(91
)
 
(134
)
 
Divestiture costs
 
—

 
—

 
(5
)
 
(68
)
 
(5
)
 
Merger costs
 
(1,174
)
 
—

 
(1,174
)
 
—

 
—

 
Non-GAAP operating expenses
 
$
10,482

 
$
11,754

 
$
21,420

 
$
24,707

 
$
10,938

 














MRV Communications, Inc.
Consolidated Non-GAAP reconciliation
(continued)
(Unaudited, in thousands except per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Three Months Ended March 31,
 
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating loss:
 
$
(1,908
)
 
$
(2,061
)
 
$
(2,700
)
 
$
(5,619
)
 
$
(792
)
 
Stock-based charges
 
389

 
350

 
804

 
697

 
415

 
Severance and transition costs
 
167

 
325

 
186

 
325

 
19

 
Litigation costs
 
(126
)
 
56

 
8

 
91

 
134

 
Divestiture costs
 
—

 
—

 
5

 
68

 
5

 
Merger costs
 
1,174

 
—

 
1,174

 
—

 
—

 
Non-GAAP operating loss
 
(304
)
 
(1,330
)
 
(523
)
 
(4,438
)
 
(219
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss:
 
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
(2,097
)
 
(2,023
)
 
(3,138
)
 
(5,919
)
 
(1,041
)
 
Stock-based charges
 
389

 
350

 
804

 
697

 
415

 
Severance and transition costs
 
167

 
325

 
186

 
325

 
19

 
Litigation costs
 
(126
)
 
56

 
8

 
91

 
134

 
Divestiture costs
 
—

 
—

 
5

 
68

 
5

 
Income tax impact
 
50

 
(22
)
 
(3
)
 
(36
)
 
(54
)
 
Merger costs
 
1,174

 
—

 
1,174

 
—

 
—

 
Non-GAAP adjusted net loss
 
$
(443
)
 
$
(1,314
)
 
$
(964
)
 
$
(4,774
)
 
$
(522
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares - Basic and Diluted
 
6,786

 
7,092

 
6,784

 
7,042

 
6,802

 
GAAP EPS - Basic and Diluted
 
$
(0.31
)
 
$
(0.29
)
 
$
(0.46
)
 
$
(0.84
)
 
$
(0.15
)
 
Non-GAAP EPS - Basic and Diluted
 
$
(0.07
)
 
$
(0.19
)
 
$
(0.14
)
 
$
(0.68
)
 
$
(0.08
)
 




MRV COMMUNICATIONS INC Reports