Meru Networks Reports Fourth Quarter and Full Year 2014 Financial Results

SUNNYVALE, Calif., Feb. 9, 2015 /PRNewswire/ -- Meru Networks, Inc. (NASDAQ:MERU), a leader in intelligent Wi-Fi networking and the only wireless LAN vendor to have received certification of OpenFlow™ conformance, today announced its financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter 2014 Financial Results
Total revenues for the fourth quarter of 2014 were $21.7 million, down 28% from $30.2 million in the fourth quarter of 2013.  Product revenues for the fourth quarter of 2014 were $16.9 million, down 33% from the $25.3 million reported in the fourth quarter of 2013.  

Net loss as reported in accordance with GAAP was $5.2 million for the fourth quarter of 2014, or a net loss of ($0.22) per basic and diluted share, compared to a net loss of $2.1 million, or a net loss of ($0.09) per basic and diluted share, for the same period of 2013.

Meru reported a fourth quarter 2014 non-GAAP net loss of $4.0 million, or ($0.17) loss per basic and diluted share, compared to a non-GAAP net loss of $0.1 million, or ($0.00) loss per basic and diluted share, for the same period of 2013. Non-GAAP results for the fourth quarter of 2014 exclude the impact of stock-based compensation expense of $1.2 million. Non-GAAP results for the fourth quarter of 2013 exclude the impact of stock-based compensation expense of $2.0 million and the 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.

Full Year 2014 Financial Results
Revenues for the year ended December 31, 2014 were $90.9 million, a decrease of 14% from $105.7 million in 2013.  Products revenues for 2014 were $72.0 million, down 17% from the $87.2 million reported in 2013.   Net loss as reported in accordance with GAAP for 2014 was $20.9 million, or ($0.89) per basic and diluted share, compared to a net loss of $12.4 million, or ($0.57) per basic and diluted share in 2013.

Non-GAAP net loss for 2014 was $14.4 million, or ($0.61) loss per basic and diluted share, compared to non-GAAP net loss of $5.4 million, or ($0.25) loss per basic and diluted share in 2013.  Non-GAAP results for 2014 exclude the impact of stock-based compensation expense of $5.6 million, restructuring costs of $0.7 million, and amortization of other intangibles and amortization of the fair value of a common stock warrant issued in connection with debt financing totaling $0.2 million. Non-GAAP results for 2013 exclude stock-based compensation expense of $6.5 million, and amortization of acquisition-related intangibles and amortization of the fair value of a common stock warrant issued in connection with debt financing totaling $0.4 million.

"2014 was a challenging year for Meru, impacted heavily by the lack of E-rate funding for K-12 schools in the U.S.  It was also a year of investment in new products and new services, designed to position us for growth," said Dr. Bami Bastani, president and CEO of Meru Networks. "To accelerate our path to profitability we have restructured the company, added Tier 1 distributors, and supplemented our product portfolio to appeal to the faster growing segments of the market.  We have the highest performing 802.11ac product portfolio, we recently announced the Meru app store, and tomorrow we will launch Meru XPress Cloud, serving the SME market." 

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its fourth quarter and full year 2014 results today, February 9, 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 62184717.

The live and archived webcast of the fourth 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 open-standards-based architecture is designed to enable unified management of wired and wireless networks. Its end-to-end application QoS enables enforceable service-level agreements. Meru provides top performance and high capacity in high-density environments. Visit www.merunetworks.com or call (408) 215-5300 for more information.

©2015 Meru Networks. Meru and Meru Networks are registered trademarks and the Meru logo is a trademark of Meru Networks, Inc. in the United States. OpenFlow™ is a trademark of the Open Networking Foundation.

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-Q filed with the SEC on October 30, 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.

Investor contact:
Ed Keaney
Market Street Partners
(415) 445-3238
[email protected]

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SOURCE Meru Networks, Inc.

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