MRV Reports Fourth-Quarter and Full-Year 2014 Results

– Full-year revenue of $172.1 million, increasing 4% driven by Network Integration –

– Transformation progressing effectively as new products gain market momentum and enhance strategic value proposition –

CHATSWORTH, Calif.--()--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 twelve- months ended December 31, 2014.

Mark Bonney, president and chief executive officer of MRV, stated, “When I became CEO about 90 days ago, I brought a new vision to MRV, focused on ensuring that the investments we make in technology and product development not only advance our capabilities but are focused on delivering the correct solutions to the market. During this time I have traveled extensively to visit our operations and our customers. These visits confirmed how our products and services enhance our customers’ value propositions by enabling them to add new services and revenues while lowering their operating costs. This customer-centric culture and broader market view is enabling us to create greater strategic value as we are becoming more closely aligned with the market's evolving needs.”

Fourth-Quarter 2014 Results as compared to Fourth-Quarter 2013

  • Total revenue amounted to $43.4 million, compared to $50.7 million.
    • Network Equipment revenue was $20.6 million, compared to $25.9 million, primarily reflecting the decline of mature product revenues and the challenging capital spending environment in the North American telecommunications market.
    • Network Integration revenue was $22.9 million, compared to $24.9 million as fourth quarter 2013 benefited from a positive foreign exchange impact.
  • Consolidated gross margin was 30.0%, compared to 32.8%. The decrease reflects greater revenue contribution from the lower gross margin Network Integration business and volume and mix impacts on Network Equipment gross margins.
    • Network Equipment gross margin was 46.6%, compared to 50.6%. Fourth quarter gross margins were negatively affected by overhead cost variances due to the lower volume of material purchases, the impact of product mix and the impact of lower margins from Optical Transport products that are being phased out.
    • Network Integration gross margin was 15.0%, compared to 14.2%, due to improved product pricing for the quarter.
  • Total operating expenses were $15.4 million, or 35.4% of total revenue, compared to $16.5 million, or 32.5% of total revenue.
    • Network Equipment operating expenses were $11.4 million, compared to $13.5 million as a result of lower project related costs in R&D and cost reductions in sales, general and administrative expenses resulting from consolidating the administration of customer support activities.
    • Network Integration operating expenses were $2.2 million, compared to $1.8 million, primarily due to increased sales and promotional expenses to support an expanded sales effort.
    • Corporate expenses were $1.8 million, compared to $1.2 million, including certain accruals for severance and contingencies of approximately $0.5 million.
  • Total operating loss was $2.4 million, compared to an operating profit of $0.1 million.
  • Provision for income taxes was $2.6 million, compared to $1.1 million, as reevaluation of net operating loss carry forwards, available for future use, resulted in recording an allowance of approximately $1.9 million.
  • Total net loss was $4.6 million or $0.63 per diluted share, compared to a net loss of $1.3 million, or $0.17 per diluted share.

At December 31, 2014, the company had $22.4 million in cash and equivalents. In December, the board authorized an $8 million share repurchase plan. Since then through March 6, 2015, the company has bought 307,715 shares for approximately $3.2 million.

Full year December 31, 2014 Results as compared to Full year December 31, 2013

Total revenue amounted to $172.1 million, up 4% from $166.2 million. Network Equipment revenue was $86.7 million, down 4%, reflecting soft capital spending, particularly in the carrier market. Network Integration revenue was $85.5 million, up 13% from market share gains and certain project related revenue. Including the provision for income taxes of $4.3 million, total net loss was $12.2 million, or $1.66 per share, compared to a net loss of $6.8 million, or $0.91 per share, when the provision for taxes was $1.5 million.

Outlook

“As we look ahead in 2015, in Network Integration, we will continue to be opportunistic in an effort to further expand our market share offering new services into the broader market. In Network Equipment we will continue our product development investments and the transition of our packet and optical products to new software-intensive solutions that will enable agile, scalable and on-demand next-generation networks,” concluded Mr. Bonney.

Conference Call Information:

MRV Communication's fourth quarter 2014 financial results conference call is scheduled to take place on March 10, 2015 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 5063973#. 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 5063973#.

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 "anticipate," "appear," "believe," "estimate," "expect," "intend," "may," "should," "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 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, 2014, 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 March 10, 2015 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 Statements of Operations
(In thousands, except per share data)
 
 

Three Months ended
December 31,

 

Year ended
December 31,

2014
(unaudited)

   

2013
(unaudited)

 

2014

  2013
Revenue:
Product revenue $ 31,066 $ 37,356 $ 124,477 $ 118,911
Service revenue 12,378   13,380   47,579   47,290  
Total revenue 43,444 50,736 172,056 166,201
Cost of sales 30,415   34,116   116,278   108,208  
Gross profit 13,029 16,620 55,778 57,993
Operating expenses:
Product development and engineering 4,803 5,652 20,833 19,381
Selling, general and administrative 10,577   10,840   42,695   42,993  
Total operating expenses 15,380   16,492   63,528   62,374  
Operating loss (2,351 ) 128 (7,750 ) (4,381 )
Interest expense (23 ) (112 ) (329 ) (526 )
Other income (expense), net 387   (190 ) 227   (407 )
Loss before income taxes (1,987 ) (174 ) (7,852 ) (5,314 )
Provision for income taxes 2,644   1,075   4,303   1,508  
Net loss $ (4,631 ) $ (1,249 ) $ (12,155 ) $ (6,822 )
 
Net loss per share — basic $ (0.63 ) $ (0.17 ) $ (1.66 ) $ (0.91 )
Net loss per share — diluted $ (0.63 ) $ (0.17 ) $ (1.66 ) $ (0.91 )
Weighted average number of shares:
Basic 7,368 7,443 7,344 7,484
Diluted 7,368 7,443 7,344 7,484
 
 
MRV Communications, Inc.
Consolidated Balance Sheets
(In thousands, except par values)
 
  December 31,
2014
  December 31,
2013
Assets
Current assets:
Cash and cash equivalents $ 22,422 $ 27,591
Restricted time deposits 235 249
Accounts receivable, net 43,513 49,990
Other receivables 11,012 8,220
Inventories, net 21,683 22,981
Income taxes receivable 558 1,256
Deferred income taxes 535 1,219
Other current assets 5,454   5,664  
Total current assets 105,412 117,170
Property and equipment, net 4,890 5,555
Deferred income taxes 2,105 3,694
Intangible asset, net 1,364 873
Other assets 801   655  
Total assets $ 114,572   $ 127,947  
 
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 5,402 $ 4,320
Deferred consideration payable 233 233
Accounts payable 24,327 23,991
Accrued liabilities 14,545 19,463
Deferred revenue 13,527 10,557
Other current liabilities 297   357  
Total current liabilities 58,331 58,921
Other long-term liabilities 5,271 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 — 8,242 shares in 2014 and 8,143 shares in 2013
Outstanding — 7,386 shares in 2014 and 7,286 in 2013 270 270
Additional paid-in capital 1,284,483 1,281,883
Accumulated deficit (1,220,492 ) (1,208,337 )
Treasury stock — 856 shares in 2014 and 2013 (10,412 ) (10,412 )
Accumulated other comprehensive (loss) income (2,879 ) 386  
Total stockholders' equity 50,970   63,790  
Total liabilities and stockholders' equity $ 114,572   $ 127,947  
 
 
MRV Communications, Inc.
Segmented Operating Data
(In thousands)
 
 

Three Months ended
December 31,

  Year ended
December 31,
2014
(unaudited)
  2013
(unaudited)
2014   2013
Revenue                        
Network Equipment $ 20,575 $ 25,859 $ 86,705 $ 90,711
Network Integration 22,874   24,935   85,518   75,636  
Before intersegment adjustments 43,449 50,794 172,223 166,347
Intersegment adjustments (5 ) (58 ) (167 ) (146 )
Total   $ 43,444     $ 50,736     $ 172,056     $ 166,201  
 
 
Gross profit                        
Network Equipment $ 9,594 $ 13,079 $ 42,601 $ 47,069
Network Integration 3,434   3,539   13,176   10,917  
Before intersegment adjustments 13,028 16,618 55,777 57,986

Intersegment adjustments

1   2   1   7  
Total   $ 13,029     $ 16,620     $ 55,778     $ 57,993  
 
 
Operating Expense                        
Network Equipment $ 11,372 $ 13,450 $ 49,674 $ 48,768
Network Integration 2,184   1,811   7,615   6,297  
Before intersegment adjustments 13,556 15,261 57,289 55,065
Corporate unallocated operating expenses and adjustments 1,824   1,231   6,239   7,309  
Total   $ 15,380     $ 16,492     $ 63,528     $

62,374

 
 
 
Operating income (loss)                        
Network Equipment $ (1,779 ) $ (371 ) $ (7,074 ) $ (1,699 )
Network Integration 1,250   1,729   5,562   4,620  
Before intersegment adjustments (529 ) 1,358 (1,512 ) 2,921
Corporate unallocated and adjustments (1,822 ) (1,230 ) (6,238 ) (7,302 )
Total   $ (2,351 )   $ 128     $ (7,750 )   $ (4,381 )
 

Contacts

IR Contact:
LHA
Monica Chang/Kirsten Chapman, 415-433-3777
ir@mrv.com

Contacts

IR Contact:
LHA
Monica Chang/Kirsten Chapman, 415-433-3777
ir@mrv.com