MRV Reports First Quarter 2006 Financial Results
Date: 4/26/2006 4:01:00 PM
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Optical Components Posts 43% Sequential Revenue Growth
Total Revenue Increases 25% Year-over-Year
CHATSWORTH, Calif., April 26 /PRNewswire-FirstCall/ -- MRV COMMUNICATIONS,
INC. (Nasdaq: MRVC), a leading provider of products and services for
out-of-band networking, WDM and optical transport, optical Ethernet and
optical components, today reported its results for the first quarter ended
March 31, 2006. The Company's GAAP results reflect the adoption of SFAS
123(R) regarding the expensing of non-cash share-based compensation.
Revenues for the first quarter of 2006 were $77.3 million, an increase of
25% over revenues of $62.0 million for the first quarter of 2005. GAAP net
loss for the first quarter of 2006 was $3.7 million, or $0.03 per share, a
reduction of 43% when compared to a GAAP net loss of $6.4 million, or $0.06
per share, for the first quarter of 2005. Non-GAAP net loss for the first
quarter of 2006, which excludes non-cash share-based compensation net of tax,
was $2.9 million, or $0.03 per share, as compared with non-GAAP net loss of
$6.4 million, or $0.06 per share, for the first quarter of 2005.
"Our strong first quarter results were driven by continued strength from
our optical component group which grew 43% sequentially, higher than our
previous expectations," commented Noam Lotan, President & CEO of MRV. "Growth
was primarily driven by FTTP deployment by Verizon and other providers and
gross margins in our optical component business showed continued improvement
to 21%, significantly ahead of last year's levels. In addition, our
networking business had a solid quarter despite normal seasonality, posting a
notable sequential margin improvement and showing good momentum going into the
next quarter. We also continued to make investments in our networking group
sales force which we believe will be instrumental in achieving our goal of
reaching sustainable profitability by the end of 2006."
Kevin Rubin, Chief Financial Officer of MRV, commented, "During the
quarter, we added to our cash position with net proceeds of $70 million from
the equity private placement offering we completed last month which
significantly strengthens our balance sheet and will be used in part to
support the expected continued growth in our business."
Operational Highlights
* The Company's optical component business unit, LuminentOIC, posted 43%
sequential revenue growth and continued to improve gross margin to 21%.
Demand was primarily driven by sales of its ONT Triplexer Transceiver
being used in Verizon's FTTP deployment. Sales also benefited by
demand for other fiber-optic components such as the DWDM transceiver
product line being used by major OEMs. LuminentOIC had four customers
ordering over $1 million of optical component products during the
period.
* The Company's core networking business (internally developed) benefited
from a strong quarter from sales of advanced networking products used
by the US Government, with sales to this segment increasing 26%
sequentially.
* The Company's systems integration business in Europe enjoyed another
strong quarter with a 25% year-over-year increase in revenue. Margins
also improved as the networking business posted gross margins of 37.5%
overall, a 670 basis point improvement from the preceding quarter.
Product Highlights
* In March, LuminentOIC announced it had surpassed the half million
milestone for shipments of its ONT Triplexer Transceiver. The Company
also announced the industry's first end-to-end G-PON Solution, as well
as the industry's first 200-km reach DWDM SFP transceivers.
* In February, the Company demonstrated its Virtual Private LAN Services
(VPLS) and MPLS Ethernet aggregation and Ethernet demarcation
interoperability on both its OptiSwitch Master 207 (OSM207) and
OptiSwitch 9000 (OS9000) series as part of the MPLS & Frame Relay
Alliance Interoperability Demonstration at MPLS World Congress, Paris
2006.
* In January, the Company announced the availability of the 4800 Power
Control Series. These new -48 VDC additions to MRV's out-of-band
networking product family offer carriers and utilities an intelligent
power distribution and remote power control solution to maximize
operational uptime.
Second Quarter 2006 Outlook
MRV currently estimates that revenues for the second quarter of 2006 will
be in the range of $82 million to $87 million. Net loss per share is
currently forecasted to be in the range of $0.01 to $0.02 per share on a non-
GAAP basis, which excludes the effect of SFAS 123(R) share-based compensation
expense. On a GAAP basis, net loss per share is currently forecasted to be in
the range of $0.02 to $0.03 per share.
Other Information
MRV will host a conference call to discuss its first quarter of 2006
financial results on Wednesday, April 26, 2006 at 4:30 p.m. Eastern Time
(1:30 p.m. Pacific Time). For parties in the United States and Canada, call
800-257-6607 to access the conference call. International parties can access
the call at 303-262-2125. A financial presentation designed to guide
participants through the call will also be available. MRV will offer its live
audio broadcast of the conference call, along with the financial presentation,
on the MRV Investor website at ir.mrv.com. For replay information,
please visit the MRV Investor website at ir.mrv.com.
Non-GAAP Financial Measures
MRV provides all financial information required in accordance with
accounting principles generally accepted in the United States ("GAAP"). In
the first quarter of 2006, MRV adopted Financial Accounting Standards Board
Statement No. 123(R), which requires companies to recognize the compensation
cost associated with share-based payments in their financial statements. As a
result, the financial statements for the first quarter of 2006 include the new
share-based compensation expense of $739,000; however, comparable prior year
periods are not required to be restated. Therefore, to supplement MRV's
financial statements presented in accordance with GAAP, MRV has provided
non-GAAP financial information, which is adjusted to exclude all share-based
compensation expense. This non-GAAP reporting provides for comparable
financial information and can enhance the understanding of the Company's
ongoing performance as a business. Therefore, MRV plans to use both GAAP and
non-GAAP reporting internally to evaluate and manage its business.
About MRV Communications, Inc.
MRV Communications, Inc. ("MRV") is a leading provider of network
equipment and services, and optical components. MRV's networking business
provides equipment used by commercial customers, governments and
telecommunications service providers, and includes switches, routers, physical
layer products and out-of-band management products as well as specialized
networking products for aerospace, defense and other applications including
voice and cellular communication. MRV's optical components business provides
optical communications components for metropolitan, access and
Fiber-to-the-Premises applications, through its wholly owned subsidiary
LuminentOIC, Inc. MRV markets and sells its products worldwide through a
variety of channels, including a dedicated direct sales force, manufacturers'
representatives, value-added-resellers, distributors and systems integrators.
MRV also has operations in Europe that provide network system design,
integration and distribution services that include products manufactured by
third-party vendors, as well as internally developed and manufactured
products. Publicly traded since 1992, MRV is listed on the NASDAQ National
Market under the symbol MRVC. For more information about MRV and its
products, please call (818) 773-0900 or visit our websites at www.mrv.com and
www.luminentoic.com.
Forward-Looking Statements
Statements in this release that are "forward-looking statements" are based
on current expectations and assumptions that are subject to risks and
uncertainties. For example, our statements regarding our expected revenues and
net loss for the second quarter of 2006 that ends on June 30, 2006 are
forward-looking statements. Actual results could differ materially because of
the following factors, among others, which may cause revenues and income
(loss) to fall short of anticipated levels: vigorous competition relating to
our entry into new markets or from our existing markets, market acceptance of
new products, continued acceptance of existing products and continued success
in selling the products of other companies, product price discounts, the
timing and amount of significant orders from customers, delays in product
development and related product release schedules; obsolete inventory or
product returns; warranty and other claims on products; technological shifts;
the availability of competitive products at prices below MRV's prices; the
continued ability to protect MRV's intellectual property rights; changes in
product mix; maturing product life cycles; product sale terms and conditions;
currency fluctuations; implementation of operating cost structures that align
with revenue growth; the financial condition of MRV's customers and vendors;
adverse results in litigation; the impact of legislative actions, higher
insurance costs and potential new accounting pronouncements; the effects of
terrorist activity and armed conflict such as disruptions in general economic
activity and changes in MRV's operations and security arrangements; the
effects of travel restrictions and quarantines associated with major health
problems, such as the Severe Acute Respiratory Syndrome, on general economic
activity; and continued softness in corporate information technology spending
or other changes in general economic conditions that affect demand for MRV's
products.
For further information regarding risks and uncertainties associated with
MRV's business, please refer to the "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and "Risk Factors" sections of
MRV's SEC filings, including, but not limited to, its annual report on Form
10-K and quarterly reports on Form 10-Q, copies of which may be obtained by
contacting MRV's investor relations department or at MRV's investor relations
website at ir.mrv.com.
All information in this release is as of April 26, 2006. MRV undertakes
no duty to update any forward-looking statement to conform the statement to
actual results or changes in MRV's expectations.
Investor Relations The Blueshirt Group for MRV
MRV Communications, Inc. Chris Danne, Rakesh Mehta
Investor Relations (415) 217-7722
(818) 886-MRVC (6782) chris@blueshirtgroup.com
ir@mrv.com rakesh@blueshirtgroup.com
MRV Communications, Inc.
Statements of Operations
(In thousands, except per share data)
Three Months Ended
March 31, March 31,
2006 2005
(Unaudited)
Revenue $77,262 $62,007
Cost of goods sold 51,477 40,963
Gross profit 25,785 21,044
Gross margin 33% 34%
Operating costs and expenses:
Product development and engineering 6,980 6,531
Selling, general and administrative 20,714 18,280
Total operating costs and expenses 27,694 24,811
Operating loss (1,909) (3,767)
Interest expense (1,056) (786)
Other income, net 616 485
Loss before taxes (2,349) (4,068)
Provision for taxes 1,332 2,369
Net loss (1) $(3,681) $(6,437)
Loss per share:
Basic and diluted $(0.03) $(0.06)
Weighted average number of shares:
Basic and diluted 107,714 104,144
(1) Net loss for the first quarter of 2006 included share-based
compensation expense related to employee stock options of $739,000
under SFAS 123(R). There was no share-based compensation expense
related to employee stock options under SFAS 123 in 2005 because the
Company did not adopt the recognition provisions of SFAS 123.
MRV Communications, Inc.
Non-GAAP Statements of Operations
(In thousands, except per share data)
Three Months Ended
March 31, March 31,
2006 2005
(Unaudited)
Revenue $77,262 $62,007
Cost of goods sold 51,405 40,963
Gross profit 25,857 21,044
Gross margin 34% 34%
Operating costs and expenses:
Product development and engineering 6,775 6,531
Selling, general and administrative 20,252 18,280
Total operating costs and expenses 27,027 24,811
Operating loss (1,170) (3,767)
Interest expense (1,056) (786)
Other income, net 616 485
Loss before taxes (1,610) (4,068)
Provision for taxes 1,332 2,369
Net loss $(2,942) $(6,437)
Loss per share:
Basic and diluted $(0.03) $(0.06)
Weighted average number of shares:
Basic and diluted 107,714 104,144
MRV Communications, Inc.
Reconciliation of GAAP to Non-GAAP Net Loss
(In thousands, except per share data)
Three Months Ended
March 31, March 31,
2006 2005
(Unaudited)
GAAP net loss $(3,681) $(6,437)
Share-based compensation expense (SFAS 123(R) 72 --
expense) included in
Cost of goods sold
Share-based compensation expense (SFAS 123(R) 205 --
expense) included in
Product development and engineering
Share-based compensation expense (SFAS 123(R) 462 --
expense) included in
Selling, general and administrative
Non-GAAP net loss $(2,942) $(6,437)
Loss per share:
GAAP loss per share - basic and diluted $(0.03) $(0.06)
Non-GAAP loss per share - basic and diluted $(0.03) $(0.06)
Weighted average number of shares:
Basic and diluted 107,714 104,144
MRV Communications, Inc.
Balance Sheets
(In thousands)
March 31, December 31,
2006 2005
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $130,780 $67,984
Time deposits 1,060 1,475
Accounts receivable, net 89,306 92,466
Inventories 54,974 42,216
Deferred income taxes 873 873
Other current assets 6,442 7,828
Total current assets 283,435 212,842
Property and equipment, net 14,250 14,065
Goodwill 29,965 29,965
Deferred income taxes 136 136
Other assets 4,361 4,478
$332,147 $261,486
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term obligations $28,393 $30,378
Accounts payable 48,449 45,372
Accrued liabilities 29,072 29,272
Deferred revenue 6,264 6,076
Other current liabilities 2,555 2,230
Total current liabilities 114,733 113,328
Convertible notes 23,000 23,000
Other long-term liabilities 6,898 6,694
Minority interest 5,171 5,151
Commitments and contingencies
Stockholders' equity 182,345 113,313
$332,147 $261,486
SOURCE MRV Communications, Inc.
-0- 04/26/2006
/CONTACT: Investors, Investor Relations of MRV Communications, Inc.,
+1-818-886-6782, ir@mrv.com; or Chris Danne, chris@blueshirtgroup.com, or
Rakesh Mehta, rakesh@blueshirtgroup.com, both of The Blueshirt Group,
+1-415-217-7722, for MRV Communications, Inc./
/Web site: mrv.com
luminentoic.com
ir.mrv.com /
(MRVC)
CO: MRV Communications, Inc.
ST: California
IN: CPR NET TLS
SU: ERN ERP CCA
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