MRV Reports Second-Quarter Results

News provided by

MRV Communications LTD.

Aug 02, 2017, 09:05 ET

CHATSWORTH, California, Aug. 2, 2017 /PRNewswire/ --MRV Communications (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 Results

  • 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 Results

  • 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, transaction 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.

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)

IR Contact: 
Cathy Mattison/Kirsten Chapman
LHA Investor Relations
(415) 433-3777
ir@mrv.com

SOURCE MRV Communications LTD.