EX-99.1 2 exhibit991q12015.htm EXHIBIT 99.1 Exhibit 99.1 Q1 2015


Exhibit 99.1

MRV Reports First-Quarter 2015 Results

- GAAP Net loss of $1.1 million improves $3.1 million compared to a year ago driven by higher gross margins and lower operating expenses -

CHATSWORTH, Calif.- May 7, 2015 -MRV Communications (NASDAQ: MRVC), a global supplier of packet and optical solutions that power the world’s largest networks and a provider of network integration services for communication service providers, reported financial results for the three months ended March 31, 2015.

Mark Bonney, president and chief executive officer of MRV, stated, “In the first quarter, we achieved significantly improved financial results, both sequentially and compared to the first quarter of 2014, with expanded gross margins and reduced operating expenses in each business. Our revenue declined due to the recent foreign exchange impact on the Euro on our Network Integration business, which is based in Italy. In constant currency, first quarter 2015 revenues would have been approximately the same as the first quarter of 2014.”

Mr. Bonney added, “Our Network Integration business continues to perform well, and we are exploring strategic alternatives for this business to help unlock and realize the value of our two independent and distinct lines of business.

“We are pleased with the positive trends in our Network Equipment business, and see significant growth opportunities in this segment as the products we have developed address the increasing bandwidth demand for cloud, mobility and video services. During the quarter, we achieved several significant milestones. OptiDriver® is gaining traction among service providers and data center operators, most notably in the Americas and EMEA, and the OptiDriver customer count rose to 59. Additionally, we achieved all of our OptiPacket® product development milestones and completed a successful trial in a Tier One account. We also secured our first OptiPacket order, which was a combined sale with OptiDriver and Pro-Vision®, our service orchestration software platform, to a North American service provider. This demonstrates our ability to provide an end-to-end solution for metro service edge networks,” concluded Mr. Bonney.

First Quarter 2015 Results as compared to First Quarter 2014
•
Total revenue amounted to $38.8 million, compared to $42.3 million. Network Equipment revenue was $22.3 million in both periods. Network Integration revenue was $16.6 million and when calculated on a constant currency basis would have been $20.2 million, compared to $20.1 million.
•
Consolidated gross margin was 35.8%, compared to 31.3%, reflecting increases in both segments and the impact of the greater contribution percentage from the higher gross margin Network Equipment business, which had gross margins of 52.0% in the first quarter of 2015.
•
Total GAAP operating expenses were $14.7 million, or 37.9% of total revenue, compared to $17.1 million, or 40.4% of total revenue. Network Equipment operating expenses were $1.9 million lower than 2014 as a result of the impact of cost reduction efforts implemented last year. Also, Corporate general and administrative expenses were $0.7 million lower than the 2014 corresponding period. The company’s current operating expense structure reflects improved efficiencies while maintaining the ongoing commitment to develop, market and support a product road map that is designed to expand existing customer relationships while increasing the total addressable market.
•
GAAP operating loss was $0.8 million, compared to $3.8 million.
•
GAAP net loss was $1.1 million, or $0.15 per share, compared to $4.2 million, or $0.58 per share.




•
Non-GAAP operating loss was $0.1 million, compared to $3.0 million.
•
Non-GAAP net loss was $0.5 million, or $0.07 per share, compared to $3.4 million, or $0.47 per share.

A reconciliation of the non-GAAP measures to GAAP measures is provided in the attached table.

Cash Flow Highlights
At March 31, 2015, the company had $14.2 million in cash and equivalents, compared to $22.4 million at December 31, 2014. The reduction in cash was planned as the company implemented its previously announced share repurchase program using $3.6 million to purchase 357,085 shares. Also, the reduction in the company’s short term debt was $3.3 million. Additionally, while operating results on a non-GAAP basis were close to break-even, the company used $1.1 million to fund operations, including its working capital changes that were affected by the timing of certain large accounts receivable that were collected following the conclusion of the quarter and the reduction of accounts payable. Further, the balance sheet value of cash in Euros was reduced by $0.6 million due to the change in the value of the Euro relative to the US Dollar.

Conference Call Information:
MRV Communication's first quarter 2015 financial results conference call is scheduled to take place on May 7, 2015 at 5:00 p.m. ET. The live audio webcast will be accessible at www.mrv-corporate.com in the Investor Relations section. To access the call in the U.S. please dial 888-503-8175, and for international calls dial 719-325-2362 approximately 10 minutes prior to the start of the conference. The conference ID is 3859231. 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 one business day, beginning two hours after the call. To listen to the replay, in the U.S. please dial 877-870-5176, and internationally dial 858-384-5517. The access code is 3859231.

About MRV Communications
MRV Communications is a global supplier of packet and optical solutions that empower the world’s largest networks 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.

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 income (loss), non-GAAP net income (loss) and non-GAAP basic and diluted income (loss) per share. The company's non-GAAP financial measures exclude the impact of stock-based compensation expense, fair value adjustments, litigation costs, severance and related restructuring costs, and other non-recurring expenses, 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.





Certain revenue information is presented on a constant currency basis. The company supplementally presents this revenue information, because it believes doing so facilitates a comparison of its operating results from period to period without regard to changes resulting solely from fluctuations in currency rates. The company calculates constant currency revenue growth by comparing current-period revenues to prior-period revenues with both periods converted at the U.S. Dollar/local currency average foreign exchange rate for each month of the prior period for the currencies in which it does business.

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 May 7, 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.

IR Contact:
Cathy Mattison/Kirsten Chapman, 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 
 March 31,
 
2015
 
2014
 
 
 
 
Revenue:
 
 
 
Product revenue
$
28,331

 
$
31,544

Service revenue
10,442

 
10,774

Total revenue
38,773

 
42,318

Cost of Revenue:
 
 
 
cost of product
17,764

 
20,901

cost of services
7,133

 
8,166

Total cost of revenue
24,897

 
29,067

Gross profit
13,876

 
13,251

Operating expenses:
 
 
 
Product development and engineering
5,125

 
5,578

Selling, general and administrative
9,562

 
11,522

Total operating expenses
14,687

 
17,100

Operating loss
(811
)
 
(3,849
)
Interest expense
(49
)
 
(150
)
Other expense, net
(20
)
 
33

Loss before provision for income taxes
(880
)
 
(3,966
)
Provision for income taxes
188

 
251

Net Loss
$
(1,068
)
 
$
(4,217
)
 
 
 
 
Net loss per share — basic
$
(0.15
)
 
$
(0.58
)
Net loss per share — diluted
$
(0.15
)
 
$
(0.58
)
 
 
 
 
Weighted average number of shares:
 
 
 
Basic
7,131

 
7,283

Diluted
7,131

 
7,283








MRV Communications, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par values)
(unaudited)
 
March 31,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
14,215

 
$
22,422

Restricted time deposits
224

 
235

Accounts receivable, net
41,384

 
43,513

Other receivables
10,521

 
11,012

Inventories, net
17,497

 
21,683

Income taxes receivable
49

 
558

Deferred income taxes
705

 
535

Other current assets
6,975

 
5,454

Total current assets
91,570

 
105,412

Property and equipment, net
4,608

 
4,890

Deferred income taxes, net of current portion
1,973

 
2,105

Intangibles, net
1,336

 
1,364

Other assets
694

 
801

Total assets
$
100,181

 
$
114,572

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
2,116

 
$
5,402

Deferred consideration payable
233

 
233

Accounts payable
21,301

 
24,327

Accrued liabilities
14,217

 
14,545

Deferred revenue
13,058

 
13,527

Other current liabilities
325

 
297

Total current liabilities
51,250

 
58,331

Other long-term liabilities
4,956

 
5,271

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 — 8,250 shares in 2015 and 8,242 shares in 2014
 
 
 
Outstanding — 7,036 shares in 2015 and 7,386 in 2014
270

 
270

Additional paid-in capital
1,284,811

 
1,284,483

Accumulated deficit
(1,221,560
)
 
(1,220,492
)
Treasury stock — 1,214 shares in 2015 and 856 shares in 2014
(14,009
)
 
(10,412
)
Accumulated other comprehensive income
(5,537
)
 
(2,879
)
Total stockholders' equity
43,975

 
50,970

Total liabilities and stockholders' equity
$
100,181

 
$
114,572







MRV Communications, Inc.
Segmented Operating Data
(In thousands)
(unaudited)

 
Three Months Ended 
 March 31,
 
2015
 
2014
Revenue
 
 
 
Network Equipment
$
22,276

 
$
22,319

Network Integration
16,588

 
20,053

Before intersegment adjustments
38,864

 
42,372

Intersegment adjustments
(91
)
 
(54
)
Total
$
38,773

 
$
42,318


 
Three Months Ended 
 March 31,
 
2015
 
2014
Gross profit
 
 
 
Network Equipment
$
11,544

 
$
10,759

Network Integration
2,331

 
2,490

Before intersegment adjustments
13,875

 
13,249

Intersegment adjustments
1

 
2

Total
$
13,876

 
$
13,251


 
Three Months Ended 
 March 31,
 
2015
 
2014
Operating Expenses
 

 
 

Network Equipment
$
11,743

 
$
13,598

Network Integration
1,826

 
1,645

Before intersegment adjustments
13,569

 
15,243

Corporate unallocated operating expenses and adjustments
1,118

 
1,857

Total
$
14,687

 
$
17,100


 
Three Months Ended 
 March 31,
 
2015
 
2014
Operating Income
 
 
 
Network Equipment
$
(198
)
 
$
(2,839
)
Network Integration
505

 
845

Before intersegment adjustments
307

 
(1,994
)
Corporate unallocated and adjustments
(1,118
)
 
(1,855
)
Total
$
(811
)
 
$
(3,849
)




Non-GAAP reconciliation
Three Months Ended March 31, 2015 and 2014
(Unaudited, in thousands except per share data)
 
Consolidated amounts
Network Equipment
 
Network Integration
 
2015
2014
 
2015
2014
 
2015
2014
Revenue:
 
 
 
 
 
 
 
 
  GAAP revenue
$
38,773

$
42,318

 
$
22,185

$
22,265

 
$
16,588

$
20,053

Cost of revenue
 
 
 
 
 
 
 
 
  GAAP cost of revenue
24,897

29,067

 
10,640

11,504

 
14,257

17,563

  Stock-based charges
(30
)
(20
)
 
(30
)
(19
)
 
—

(1
)
   Non-GAAP adjusted cost of revenue
$
24,867

$
29,047

 
$
10,610

$
11,485

 
$
14,257

$
17,562

 
 
 
 
 
 
 
 
 
Gross profit:
 
 
 
 
 
 
 
 
  GAAP gross profit
$
13,876

$
13,251

 
$
11,545

$
10,761

 
$
2,331

$
2,490

  Stock-based charges
30

20

 
30

19

 
—

1

   Non-GAAP adjusted gross profit
$
13,906

$
13,271

 
$
11,575

$
10,780

 
$
2,331

$
2,491

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
  GAAP Product development and engineering
$
5,125

$
5,578

 
$
5,125

$
5,578

 
$
—

$
—

  Stock-based charges
(49
)
(23
)
 
(49
)
(23
)
 
—

—

    Non-GAAP Product development and engineering
$
5,076

$
5,555

 
$
5,076

$
5,555

 
$
—

$
—

  GAAP Selling, general & administrative
8,445

9,663

 
6,619

8,018

 
1,826

1,645

  Stock-based charges
(50
)
(27
)
 
(44
)
(35
)
 
(6
)
8

  Severance
(90
)
(261
)
 
(90
)
(261
)
 
—

—

    Non-GAAP Selling, general & administrative
$
8,305

$
9,375

 
$
6,485

$
7,722

 
$
1,820

$
1,653

  GAAP Corporate charges
1,117

1,858

 
1,117

1,858

 
—

—

  Stock-based charges
(83
)
(77
)
 
(83
)
(77
)
 
—

—

  Litigation costs
(434
)
—

 
—

—

 
(434
)
—

  Warrant revaluation charges
—

(406
)
 
—

(406
)
 
—

—

    Non-GAAP Corporate charges
$
600

$
1,375

 
$
1,034

$
1,375

 
$
(434
)
$
—

    GAAP operating expenses
$
14,687

$
17,099

 
$
12,861

$
15,454

 
$
1,826

$
1,645

    Non-GAAP operating expenses
$
13,981

$
16,305

 
$
12,595

$
14,652

 
$
1,386

$
1,653

 
 
 
 
 
 
 
 
 
  GAAP operating income
$
(811
)
$
(3,848
)
 
(1,316
)
(4,693
)
 
$
505

$
845

  Stock-based charges
212

147

 
206

154

 
6

(7
)
  Severance
90

261

 
90

261

 
—

—

  Litigation costs
434

—

 
—

—

 
434

—

  Warrant revaluation charges
—

406

 
—

406

 
—

—

    Non-GAAP adjusted operating income
$
(75
)
$
(3,034
)
 
$
(1,020
)
$
(3,872
)
 
$
945

$
838

 
 
 
 
 
 
 
 
 












Non-GAAP reconciliation
(continued)
Three Months Ended March 31, 2015 and 2014
(Unaudited, in thousands except per share data)
 
Consolidated amounts
Network Equipment
 
Network Integration
 
2015
2014
 
2015
2014
 
2015
2014
Net Income
 
 
 
 
 
 
 
 
  GAAP net income
$
(1,068
)
$
(4,217
)
 
$
(1,265
)
$
(4,537
)
 
$
197

$
320

  Stock-based charges
212

147

 
206

154

 
6

(7
)
  Severance
90

261

 
90

261

 
—

—

  Litigation costs
434

—

 
—

—

 
434

—

  Warrant revaluation charges
—

406

 
—

406

 
—

—

  Income tax impact
(174
)
—

 
—

—

 
(174
)
—

    Non-GAAP adjusted net income
$
(506
)
$
(3,403
)
 
$
(969
)
$
(3,716
)
 
$
463

$
313

 
 
 
 
 
 
 
 
 
Weighted average number of shares
7,131

7,283

 
 
 
 
 
 
GAAP EPS - Basic and Diluted
$
(0.15
)
$
(0.58
)
 
 
 
 
 
 
Non-GAAP EPS - Basic and Diluted
$
(0.07
)
$
(0.47
)