Meru Networks Reports Q1 2014 Financial Results

- 802.11ac access point unit shipments up 12% sequentially

- Meru broadens 802.11ac product portfolio with two new access points

- 802.11ac represented approximately half of Q1 access point shipments

Apr 28, 2014, 16:05 ET from Meru Networks, Inc.

SUNNYVALE, Calif., April 28, 2014 /PRNewswire/ -- Meru Networks, Inc., (NASDAQ: MERU), a leader in intelligent Wi-Fi solutions, today announced its financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Financial Results Total revenues for the first quarter of 2014 were $20.6 million, down 16.7% from $24.7 million in the first quarter of 2013.  Product revenues for the first quarter of 2014 were $15.8 million, down 23.1% from the $20.6 million reported in the first quarter of 2013.  

Net loss as reported in accordance with GAAP was $8.1 million for the first quarter of 2014, or a net loss of ($0.35) per basic and diluted share, compared to a net loss of $3.6 million, or a net loss of ($0.18) per basic and diluted share, for the same period of 2013.

Meru reported a first quarter 2014 non-GAAP net loss of $5.4 million, or ($0.23) loss per basic and diluted share, compared to a non-GAAP net loss of $2.0 million, or ($0.10) loss per basic and diluted share, for the same period of 2013. Non-GAAP results for the first quarter of 2014 exclude the impact of stock-based compensation expense of $1.8 million, restructuring expense of $0.7 million and amortization of other intangibles totaling $0.1 million. Non-GAAP results for the first quarter of 2013 exclude the impact of stock-based compensation expense of $1.5 million and amortization of other intangibles of $0.1 million. Please refer to the reconciliation of Meru's GAAP to non-GAAP results provided at the end of this release.

"We continue to invest in the company as demonstrated by the expansion of our 802.11ac product portfolio with the two new access points and software releases," said Dr. Bami Bastani, president and CEO, Meru Networks, "These new products open Meru to a much broader mid-range market and should drive further growth in our core verticals. Moving forward, we believe our technology leadership in 802.11ac, strong execution and unique competitive differentiation positions us for growth as we move into the second half of the year."

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its first quarter 2014 results today, April 28, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To join the live call, individuals may do so by dialing (877) 852-2926 for domestic callers and (253) 237-1123 for international callers. The conference ID for the call is 27030774.

The live and archived webcast of the first quarter 2014 financial results conference call will also be available at the investor relations section of Meru's website at http://investors.merunetworks.com.

About Meru Networks

Meru Networks (NASDAQ: MERU) is a leader in intelligent 802.11ac Wi-Fi solutions, delivering uninterrupted user experience for education, healthcare, hospitality and enterprise. The Meru MobileFLEX architecture is designed to enable seamless roaming with traffic separation for critical applications, providing top performance and high capacity in high-density environments. Visit www.merunetworks.com or call (408) 215-5300 for more information.

© 2014 Meru Networks, Inc. Meru Networks and Meru are registered trademarks of Meru Networks, Inc. in the United States.

Cautionary Statement Regarding Forward Looking Statements

All statements other than statements of historical facts are statements that can be deemed forward-looking statements, including any statements of expectations or beliefs. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, among others: business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; competition in the industry; our future capital needs may change; changes in overall information technology spending; failure to develop new products; and those risks and uncertainties described in documents filed with or furnished to the Securities and Exchange Commission ("SEC") by Meru, including under the caption "Risk Factors" in Meru's Quarterly Report on Form 10-K filed with the SEC on February 28, 2014, and any subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to Meru as of the date hereof, and Meru assumes no obligation to update these forward-looking statements, except as required by law.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company believes it is appropriate to report certain non-GAAP financial measures.

The Company's non-GAAP financial measures include the adjustments as follows:

  • Stock‑Based Compensation. When evaluating the performance of its consolidated results, Meru does not consider stock‑based compensation charges. Likewise, the Meru management team excludes stock‑based compensation expense from its operating plans. In contrast, the Meru management team is held accountable for cash‑based compensation and such amounts are included in its operating plans. Further, when considering the impact of equity award grants, Meru places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants. Meru believes it is useful to provide a non‑GAAP financial measure that excludes stock‑based compensation in order to better understand the long‑term performance of its business.
  • Restructuring Costs. The Company excludes restructuring costs because such charges are isolated one-time charges and the Company does not expect them to recur in the ordinary course of its business. The Company further believes those charges are not directly related to its ongoing business results and do not reflect expected future operating expenses.
  • Amortization of intangible assets. The Company excludes amortization of acquired intangible assets because it is non‑cash in nature and because the Company believes that the non‑GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from various non‑GAAP measures facilitates internal comparisons to historical operating results and comparisons to competitors' operating results.
  • Amortization of a common stock warrant issued in connection with debt financing.  The Company excludes  amortization of a common stock warrant issued in connection with debt financing when evaluating the performance of its consolidated results because the Company believes these costs are unusual in nature and the Company does not expect them to recur in the ordinary course of its business.  The Company further believes these costs are unrelated to the ongoing operation of the business in the ordinary course.  

The Company's non-GAAP financial measures include the following:

  • Non‑GAAP net loss - Non-GAAP net loss is net loss as reported on the Company's condensed consolidated statements of operations, excluding the impact of stock‑based compensation expense, restructuring costs, amortization of intangible assets related to the Company's acquisition of Identity Networks and amortization of the fair value of a common stock warrant issued in connection with debt financing.
  • Non-GAAP net loss per share of common stock, basic and diluted - Non-GAAP net loss per share of common stock, basic and diluted is net loss per share of common stock, basic, as reported on the Company's condensed consolidated statements of operations excluding the impact of stock‑based compensation expense, restructuring costs, amortization of intangible assets related to the Company's acquisition of Identity Networks, and amortization of the fair value of a common stock warrant issued in connection with debt financing.
  • Non-GAAP Gross margin - Non-GAAP Gross margin is gross margin as reported on the Company's condensed consolidated statements of operations excluding the impact of stock‑based compensation expense and amortization of intangible assets related to the Company's acquisition of Identity Networks.
  • Non‑GAAP loss from operations - Non-GAAP loss from operations is loss from operations as reported on the Company's condensed consolidated statements of operations, excluding impact of stock‑based compensation expense, restructuring costs, and amortization of intangible assets related to the Company's acquisition of Identity Networks.

Meru believes that its non‑GAAP measures provide useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Meru also believes the non‑GAAP measures provide useful supplemental information for investors to evaluate its operating results in the same manner as the research analysts that follow Meru, all of whom will present non‑GAAP projections in their published reports. As such, the non‑GAAP measures provided by Meru facilitate a more direct comparison of its performance with the financial projections published by the analysts as well as its competitors, many of whom report financial results on a non‑GAAP basis. The economic substance behind Meru's decision to use such non‑GAAP measures is that such measures approximate its controllable operating performance more closely than the most directly comparable GAAP financial measures. For example, Meru's management has no control over certain variables that have a major influence in the determination of stock‑based compensation such as the volatility of its stock price and changing interest rates. In addition, Meru's management does not consider the amortization of intangible assets related to the Company's acquisition of Identity Networks relevant when comparing its performance to prior periods. Meru believes that all of these excluded expenses do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though these excluded items may be incurred and reflected in Meru's GAAP financial results.

The material limitation associated with the use of non‑GAAP financial measures is that the non‑GAAP measures may not reflect the full economic impact of Meru's activities. Meru's non‑GAAP measures may be calculated differently than non‑GAAP financial information disclosed by other companies. Accordingly, investors are cautioned not to place undue reliance on non‑GAAP information.

MERU NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

March 31,

December 31,

2014

2013

ASSETS

CURRENT ASSETS:

  Cash and cash equivalents

$           25,664

$           30,938

  Accounts receivable, net

10,226

17,088

  Inventory

7,937

7,230

  Prepaid expenses and other current assets

908

998

           Total current assets

44,735

56,254

Property and equipment, net

2,455

2,451

Goodwill

1,658

1,658

Intangible assets, net

88

140

Other assets

1,972

1,934

TOTAL ASSETS

$           50,908

$           62,437

LIABILITIES AND STOCKHOLDERS' EQUITY 

CURRENT LIABILITIES:

Accounts payable

$            4,356

$            6,139

Accrued liabilities

10,217

12,535

Long-term debt, current portion

3,858

3,718

Deferred revenue, current portion

13,164

13,730

Total current liabilities

31,595

36,122

Long-term debt, net of current portion

1,780

2,797

Deferred revenue, net of current portion

5,750

5,876

Other liabilities

1,511

1,387

Total liabilities

40,636

46,182

STOCKHOLDERS' EQUITY:

Preferred stock

-

-

Common stock

11

11

Additional paid-in capital

284,195

282,168

Accumulated other comprehensive loss

(501)

(553)

Accumulated deficit

(273,433)

(265,371)

Total stockholders' equity

10,272

16,255

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$           50,908

$           62,437

MERU NETWORKS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except for share and per share amounts)

Three months ended

March 31,

2014

2013

REVENUES:

  Products

$      15,833

$      20,590

  Support and services

4,767

4,103

  Ratable products and services

-

42

          Total revenues 

20,600

24,735

COSTS OF REVENUES:

  Products

5,875

7,317

  Support and services

1,902

1,776

  Ratable products and services

-

22

          Total costs of revenues *

7,777

9,115

          Gross margin

12,823

15,620

OPERATING EXPENSES:

  Research and development *

5,452

3,688

  Sales and marketing *

11,629

11,420

  General and administrative *

3,298

3,285

           Total operating expenses

20,379

18,393

Loss from operations

(7,556)

(2,773)

Interest expense, net *

(378)

(610)

Other expense, net

(16)

(62)

Loss before provision for income taxes

(7,950)

(3,445)

Provision for income taxes

112

138

Net loss

$       (8,062)

$       (3,583)

Net loss per share of common stock, basic and diluted

$        (0.35)

$        (0.18)

Shares used in computing net loss per share of common stock, basic and diluted

23,069,260

19,570,769

*Includes stock-based compensation expense (1) as follows:

       Costs of revenues

$          109

$            45

       Research and development

338

158

       Sales and marketing

811

537

       General and administrative

715

714

$        1,973

$        1,454

   (1) This table includes $147,000 of stock-based compensation related to restructuring in the quarter ended March 31, 2014.

*Includes restructuring costs (2) as follows:

       Research and development

$            43

$            -

       Sales and marketing

405

-

       General and administrative

140

-

$          588

$             -

  (2) This table excludes $147,000 of stock-based compensation related to restructuring in the quarter ended March 31, 2014. 

*Includes amortization of acquisition-related intangible assets as follows:

       Costs of revenues

$            52

$            52

       Sales and marketing 

-

20

$            52

$            72

*Includes amortization of common stock warrant issued in connection with debt financing as follows:

       Interest expense, net

$            29

$            45

MERU NETWORKS, INC.

GAAP to Non-GAAP Reconciliation

(Unaudited)

(In thousands, except share and per share amounts)

Three months ended

March 31,

2014

2013

GAAP net loss

$      (8,062)

$     (3,583)

.

Plus:

a) Stock-based compensation

1,826

1,454

b) Stock-based compensation associated with restructuring

147

-

c) Restructuring costs

588

-

d) Amortization of acquisition-related intangible assets

52

72

e) Amortization of common stock warrant issued  in connection with debt financing

29

45

Non-GAAP net loss

$      (5,420)

$     (2,012)

GAAP net loss per share of common stock, basic

(0.35)

(0.18)

Plus:

a) Stock-based compensation

0.08

0.08

b) Stock-based compensation associated with restructuring

0.01

-

c) Restructuring costs

0.03

-

d) Amortization of acquisition-related intangible assets

-

-

e) Amortization of common stock warrant issued  in connection with debt financing

-

-

Non-GAAP net loss per share of common stock, basic and diluted

$        (0.23)

$       (0.10)

Shares used in computing basic and diluted non-GAAP net loss

per share of common stock

23,069,260

19,570,769

GAAP gross margin

$      12,823

$     15,620

Plus:

Stock-based compensation

109

45

Amortization of acquisition-related intangible assets

52

52

Non-GAAP gross margin

$      12,984

$     15,717

GAAP loss from operations

$      (7,556)

$     (2,773)

Plus:

Stock-based compensation

1,826

1,454

Stock-based compensation associated with restructuring

147

-

Restructuring costs

588

-

Amortization of acquisition-related intangible assets

52

72

Non-GAAP loss from operations

$      (4,943)

$      (1,247)

MERU NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three months ended

March 31,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$     (8,062)

$     (3,583)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

416

378

Stock-based compensation

1,973

1,454

Accrued interest on long-term debt

214

302

Amortization of issuance costs

41

64

Provision for bad debt

35

33

Changes in operating assets and liabilities:

Accounts receivable, net

6,825

4,937

Inventory

(707)

705

Prepaid expenses and other assets

81

188

Accounts payable

(1,783)

(104)

Accrued liabilities

(2,121)

(2,155)

Deferred revenue

(692)

(1,183)

Net cash provided by (used in) operating activities

(3,780)

1,036

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(333)

(156)

Net cash used in investing activities

(333)

(156)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the issuance of common stock, net of offering costs

-

12,556

Proceeds from exercise of stock options 

164

191

Taxes paid related to net share settlement of equity awards

(406)

(25)

Repayment of long-term debt 

(918)

(814)

Net cash provided by (used in) financing activities

(1,160)

11,908

Effect of exchange rate changes on cash and cash equivalents

(1)

(23)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(5,274)

12,765

CASH AND CASH EQUIVALENTS -- Beginning of period

30,938

22,855

CASH AND CASH EQUIVALENTS -- End of period

$    25,664

$    35,620

 

Investor contact:  Ed Keaney  Market Street Partners  (415) 445-3238 ir@merunetworks.com

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SOURCE Meru Networks, Inc.



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