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Packet-Optical

MRV Revenue Shrinks as Firm Refocuses

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.

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. o 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.

MRV Communications Inc. (Nasdaq: MRVC)

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