MRVC Mrv Communications, Inc. (MM)

-10% revenue growth coupled with 19% SG&A reduction yields GAAP operating profit in Q4, 2013--Increased investment in new product development delivers OptiDriver optical transport platform and additional new products slated for release in 2014--Conference call to review results and vision scheduled for March 17, 2014 at 4:30 ET-

MRV Communications (OTC: MRVC), a global leader in 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, 2013.

“We have been successfully executing on a strategic plan that has returned MRV to profitability while accelerating our investment in new product development to drive our future growth,” said David Stehlin, MRV's chief executive officer. “Our initiatives to streamline operations and improve efficiencies have created both a lower cost structure and an infrastructure capable of supporting robust growth. At the same time, we have been making disciplined and focused investments in new products to support our customers’ evolving needs and broaden our reach into significant target markets key to our long-term growth.

“Launching our OptiDriver™ optical transport platform exemplifies our strategy to take advantage of the metro network transformation and capture the fast growing optical edge market segment. In late 2013, we introduced OptiDriver, the industry’s most compact, flexible and power-efficient optical transport and in February 2014, we expanded the product line to cost-effectively address bandwidth challenges and optimize 100G networks. The OptiDriver has been very well received among our customer base including communications service providers, content delivery networks and cloud services providers.

“We are proud of MRV’s recent accomplishments. In 2014, we expect continued revenue seasonality; typically revenue is the slowest in the first quarter and the strongest in the fourth quarter. Looking ahead, we believe we are well positioned to foster growth as we deliver superior communications equipment and services in a market that continues to evolve toward high capacity, packet optical networking with increasing software control and service delivery.”

Fourth Quarter Results: Three months ended Dec. 31, 2013 compared to Dec. 31, 2012

• Total revenue grew to $50.7 million, up 10% from $46.0 million in the prior year.
  • Network Equipment revenue was $25.9 million, up 15% compared to the prior year driven by wins in the Europe and Asia Pacific regions, partially offset by a decline in North America revenue due to the softness of the US telecommunications market.
  • Network Integration revenue was $24.9 million, up 6% compared to the prior year primarily due to favorable foreign currency rates.
• Total gross margin was 32.8%, compared to 32.2% in the prior year.
  • Network Equipment gross margins were 50.6%, compared to 48.9% in the prior year, reflecting favorable product mix.
  • Network Integration gross margins were 14.2%, down from 16.6% in the prior year as the difficult economic conditions in Italy resulted in pricing pressures that translated into lower margins on product revenues.
  • Consolidated gross margin benefitted from a higher proportion of Network Equipment revenue in the overall product mix.
• Total operating expenses were $16.5 million, decreasing from $17.6 million in the prior year.
  • Network Equipment operating expenses were $13.5 million, up from $10.3 million in the prior year, reflecting planned investments primarily in product development and engineering.
  • Network Integration operating expenses were $1.8 million, compared to $1.9 million in the prior year.
  • Corporate operating expenses were $1.2 million, down from $5.4 million in the prior year, due to the resolution of prior liabilities and to initiatives implemented to lower legal, consulting and accounting fees. The company expects to continue to benefit from the 2013 expense reduction.
• Total operating income was $0.1 million. The $3.0 million improvement from the prior year reflects the growth in revenue and profitable operations in both Network Equipment and Network Integration and lower corporate overhead.

Year-to-date Results: Twelve months ended Dec. 31, 2013 compared to Dec. 31, 2012

• Total revenue grew to $166.2 million in 2013, up 10% from $151.7 million in 2012, reflecting growth in both businesses as well as an elimination of $8.1 million in discontinued intersegment sales for the prior year. If 2012 revenue was adjusted to include discontinued operations, then the total 2013 revenue would be up 4% from the prior year.
  • Network Equipment revenue grew to $90.7 million in 2013, up $3.0 million from$87.7 million in 2012 including the aforementioned $8.1 million from sales of subsidiaries in the fourth quarter of 2012. The growth was driven by new and existing customers in North America, partially offset by declines in Asia-Pacific and Europe.
  • Network Integration revenue increased to $75.6 million in 2013, up of $3.2 million from $72.4 million in 2012, primarily due to favorable exchange rates and modest growth in services.
• Total operating loss was $4.4 million in 2013, an improvement of $5.4 million when compared to $9.8 million in 2012. This reflects reductions in SG&A partially offset by the planned investments in Network Equipment product development and engineering.

Liquidity at Dec. 31, 2013

During the fourth quarter, MRV repurchased 116,000 shares for $1.2 million, bringing the year-to-date buyback total to 389,000 shares for $3.9 million. Cash and cash equivalents plus restricted time deposits were $27.8 million, compared to $40.8 million at December 31, 2012. The decrease reflects $3.9 million in stock repurchases; $3.6 million for capital expenditures; a net $7.5 million increase in accounts receivable and other assets related to the move away from factoring of certain accounts receivables in Italy to lower financing costs; $1.1 million pay down in debt. These decreases in cash were partially offset by a $3.1 million increase in accounts payable and other changes in working capital.

Conference Call Information:

MRV Communications' fourth quarter 2013 financial results conference call is scheduled to take place on March 17, 2014 at 4:30 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 81829805#. 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 81829805#.

About MRV Communications

MRV Communications is a global leader in 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 reports on Form 10-Q for the quarters ended September 30, 2013, June 30, 2013, and March 31, 2013 and 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 March 17, 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 Statements of Operations

(In thousands, except per share data)

                 

Three Months Ended

December 31,

Year Ended

December 31,

                2013 2012 2013 2012   (unaudited)     (unaudited)      

 

        Product revenue $ 37,356 $ 32,462 $ 118,911 $ 106,447 Service revenue   13,380     13,492     47,290     45,214   Revenue $ 50,736 $ 45,954 $ 166,201 $ 151,661 Cost of goods sold   34,116     31,167     108,208     96,509   Gross profit 16,620 14,787 57,993 55,152   Operating expenses: Product development and engineering 5,652 4,233 19,381 15,344 Selling, general and administrative 10,840 13,391 42,993 48,599 Impairment of goodwill   -     -     -     1,056   Total operating expenses   16,492     17,624     62,374     64,999   Operating income (loss) 128 (2,837 ) (4,381 ) (9,847 )   Interest Expense (112 ) (150 ) (526 ) (601 ) Gain from settlement of deferred consideration obligation - - - 2,314 Other income (loss), net   (190 )   (117 )   (407 )   (54 ) Income (loss) from continuing operations before taxes (174 ) (3,104 ) (5,314 ) (8,188 )         Provision (benefit) for income taxes   1,075     1,077     1,508     (1,013 ) Net income (loss) of continuing operations (1,249

)

(4,181 ) (6,822 ) (7,175 )   Income (loss) from discontinued operations, net of income taxes of $0 in 2013 and $4,588 in 2012   -     10,675     -     12,839   Net income (loss)   (1,249 )   6,494     (6,822 )   5,664     Net income (loss) per share - basic: From continuing operations: $ (0.17 ) $ (0.54 ) $ (0.91 ) $ (0.92 ) From discontinued operations: $ -   $ 1.38   $ -   $ 1.64   Net income (loss) per share - basic (1) $ (0.17 ) $ 0.84 $ (0.91 ) $ 0.72   Net income (loss) per share - diluted: From continuing operations: $ (0.17 ) $ (0.54 ) $ (0.91 ) $ (0.92 ) From discontinued operations: $ -   $ 1.38   $ -   $ 1.64   Net income (loss) per share - diluted (1) $ (0.17 ) $ 0.84 $ (0.91 ) $ 0.72   Weighted average number of shares: Basic 7,443 7,760 7,484 7,813 Diluted 7,443 7,760 7,484 7,817

________________________________________(1) Amounts may not add due to rounding.

             

MRV Communications, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)

  December 31, December 31,   2013     2012   Assets

 

Current assets: Cash and cash equivalents $ 27,591 $ 40,609 Restricted time deposits 249 240 Accounts receivable, net 49,990 32,237 Other receivables 8,220 18,287 Inventories 22,981 22,444 Income taxes receivable 1,256 Deferred income taxes 1,219 1,145 Other current assets   5,664     4,629   Total current assets 117,170 119,591 Property and equipment, net 5,555 3,735 Deferred income taxes, net of current portion 3,694 3,711 Intangibles, net 873 400 Other assets   655     1,128   Total assets $ 127,947   $ 128,565     Liabilities and stockholders' equity Current liabilities: Short-term debt $ 4,320 $ 5,267 Deferred consideration payable 233 233 Accounts payable 23,991 20,478 Accrued liabilities 19,463 16,652 Deferred revenue 10,557 7,290 Other current liabilities   357     560   Total current liabilities 58,921 50,480 Other long-term liabilities 5,236 5,184 Commitments and contingencies   Stockholders' equity: Issued — 8,143 shares in 2013 and 8,061 shares in 2012 Outstanding — 7,286 shares in 2013 and 7,594 shares in 2012 270 270 Additional paid-in capital 1,281,883 1,281,170 Accumulated deficit (1,208,337 ) (1,201,515 ) Treasury stock — 856 shares in 2013 and 467 shares in 2012 (10,412 ) (6,528 ) Accumulated other comprehensive income   386     (496 ) Total stockholders' equity   63,790     72,901   Total liabilities and stockholders' equity $ 127,947   $ 128,565                

MRV Communications, Inc.

Segmented Operating Data

(In thousands, except par values)

  Three Months Ended

December 31,

Year Ended

December 31,

    2013         2012     2013         2012     Revenue Network Equipment $ 25,859 $ 22,479 $ 90,711 $ 87,727 Network Integration   24,935     23,529     75,636     72,421   Before intersegment adjustments   50,794     46,008     166,347     160,148   Intersegment adjustments   (58 )   (54 )   (146 )   (8,487 ) Total $ 50,736   $ 45,954   $ 166,201   $ 151,661       Gross Profit Network Equipment $ 13,079 $ 10,983 $ 47,069 $ 43,325 Network Integration   3,539     3,909     10,917     11,832   Before intersegment adjustments   16,618     14,892     57,986     55,157   Intersegment adjustments   2     (105 )   7     (5 ) Total $ 16,620   $ 14,787   $ 57,993   $ 55,152       Operating Expenses Network Equipment $ 13,450 $ 10,282 $ 48,768 $ 42,228 Network Integration   1,811     1,904     6,297     7,318   Before intersegment adjustments   15,261     12,186     55,065     49,546   Intersegment adjustments   1,231     5,438     7,309     15,453   Total $ 16,492   $ 17,624   $ 62,374   $ 64,999     Operating Income Network Equipment ($371 ) $ 700 ($1,699 ) $ 1,096 Network Integration   1,729     2,005     4,620     4,514   Before intersegment adjustments   1,358     2,705     2,921     5,610   Intersegment adjustments   (1,230 )   (5,542 )   (7,302 )   (15,457 ) Total $ 128     ($2,837 )   ($4,381 )   ($9,847 )

LHAIR Contact:Kirsten Chapman, 415-433-3777ir@mrv.com