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Meru Networks Reports Q4 Record Revenues & Full Year 2013 Financial Results

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SOURCE Meru Networks, Inc.

- Meru establishing momentum and product leadership in 802.11ac

- Achieved non-GAAP operating income profitability in Q4

SUNNYVALE, Calif., Feb. 10, 2014 /PRNewswire/ -- Meru Networks, Inc., (NASDAQ: MERU), a leader in Wi-Fi networking, today announced its financial results for the fourth quarter and full year ended December 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20100621/SF23611LOGO)

Fourth Quarter 2013 Financial Results
Total revenues for the fourth quarter of 2013 were $30.2 million, up 6.9% from $28.2 million in the fourth quarter of 2012.  Product revenues for the fourth quarter of 2013 were $25.3 million, up 6.3% from the $23.8 million reported in the fourth quarter of 2012.  

Net loss as reported in accordance with GAAP was $2.1 million for the fourth quarter of 2013, or a net loss of $0.09 per basic and diluted share, compared to a net loss of $4.3 million, or a net loss of $0.24 per basic and diluted share, for the same period of 2012.

Meru reported a fourth quarter 2013 non-GAAP net loss of $51,000, or ($0.00) loss per basic and diluted share, compared to a non-GAAP net loss of $2.5 million, or $0.13 loss per basic and diluted share, for the same period of 2012. Non-GAAP results for the fourth quarter of 2013 exclude the impact of stock-based compensation expense of $2.0 million and amortization of other intangibles totaling $0.1 million. Non-GAAP results for the fourth quarter of 2012 exclude the impact of stock-based compensation expense of $1.8 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.

2013 Financial Results
Revenues for the year ended December 31, 2013 were $105.7 million, an increase of 8.4% from $97.5 million in 2012.  Products and services revenues (excluding ratable revenues) for 2013 were $105.7 million, up 8.6% from the $97.3 million reported in 2012. Products revenues for 2013 were $87.2 million, up 7.9% from the $80.8 million reported in 2012. 

Net loss as reported in accordance with GAAP for 2013 was $12.4 million, or $0.57 per basic and diluted share, compared to a net loss of $31.1 million, or $1.73 per basic and diluted share in 2012.

Non-GAAP net loss for 2013 was $5.4 million, or $0.25 loss per basic and diluted share, compared to non-GAAP net loss of $19.9 million, or $1.11 loss per basic and diluted share in 2012.  Non-GAAP results for 2013 exclude the impact of stock-based compensation expense of $6.5 million and amortization of other intangibles and amortization of the fair value of a common stock warrant issued in connection with debt financing totaling $0.4 million. Non-GAAP results for 2012 exclude stock-based compensation expense of $7.5 million, litigation reserve expense of $2.4 million, 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 and chief executive officer transition costs of $0.9 million.

"Customer interest in our 802.11ac products surpassed all expectations, leading to record revenues and non-GAAP operating income profitability in the fourth quarter," said Dr. Bami Bastani, president and CEO, Meru Networks. "Our leadership in the newest Wi-Fi standard will be strengthened by our rollout of additional 802.11ac products. We expect this to lead to above-market growth in the second half of the year, with even greater financial discipline around operating expenses in 2014."

Conference Call Information
Meru will host a conference call for analysts and investors to discuss its fourth quarter and full year 2013 results today, February 10, 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 31395007.

The live and archived webcast of the fourth quarter and full year 2013 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 market leader in the development of mobile access and virtualized Wi-Fi solutions. Meru'sMobileFLEX wireless architecture addresses the ever-growing need for higher bandwidth and higher client densities. The Meru Identity Manager solution greatly simplifies secure device onboarding and the Company's unique Context-aware Application Layers (CALs) enable dedicated channel assignments for specific applications, devices and usage scenarios. Meru customers include Fortune 500 businesses as well as leaders in education, healthcare and hospitality. Founded in 2002, Meru is headquartered in Sunnyvale, Calif., with operations in North America, Europe, the Middle East, Asia Pacific and Japan. 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-Q filed with the SEC on November 1, 2013, 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.
  • 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.
  • Other Items. The Company excludes items such as litigation reserves expense, transition costs related to the previous chief executive officer and the amortization of a common stock warrant issued in connection with debt financing when evaluating the performance of its consolidated results. 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 followings:

  • 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, litigation reserves expense, amortization of intangible assets related to the Company's acquisition of Identity Networks, transition costs related to the previous chief executive officer 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, litigation reserves expense, amortization of intangible assets related to the Company's acquisition of Identity Networks, transition costs related to the previous chief executive officer 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, litigation reserves expense, amortization of intangible assets related to the Company's acquisition of Identity Networks and transition costs related to the previous chief executive officer.

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)










December 31,


December 31,




2013


2012

ASSETS




CURRENT ASSETS:




  Cash and cash equivalents

$           30,938


$           22,855

  Accounts receivable, net

17,088


15,040

  Inventory

7,230


8,852

  Prepaid expenses and other current assets

998


884

           Total current assets

56,254


47,631







Property and equipment, net

2,451


2,473

Goodwill

1,658


1,658

Intangible assets, net

140


403

Other assets

1,934


2,024

TOTAL ASSETS

$           62,437


$           54,189







LIABILITIES AND STOCKHOLDERS' EQUITY 









CURRENT LIABILITIES:





Accounts payable

$             6,139


$             3,027


Accrued liabilities

12,535


13,053


Long-term debt, current portion

3,718


3,197


Deferred revenue, current portion

13,730


12,183



Total current liabilities

36,122


31,460







Long-term debt, net of current portion

2,797


6,499

Deferred revenue, net of current portion

5,876


6,107

Other liabilities

1,387


530



Total liabilities

46,182


44,596







STOCKHOLDERS' EQUITY:





Preferred stock

-


-


Common stock

11


9


Additional paid-in capital

282,168


262,887


Accumulated other comprehensive loss

(553)


(298)


Accumulated deficit

(265,371)


(253,005)



Total stockholders' equity

16,255


9,593







TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$           62,437


$           54,189

 

MERU NETWORKS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

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










Three months ended


Years ended


December 31,


December 31,


2013


2012


2013


2012

REVENUES:








  Products

$     25,269


$     23,761


$     87,179


$     80,770

  Support and services

4,891


4,410


18,476


16,561

  Ratable products and services

1


43


92


179

          Total revenues 

30,161


28,214


105,747


97,510









COSTS OF REVENUES:








  Products

9,009


9,088


30,260


28,879

  Support and services

1,631


1,726


7,148


6,463

  Ratable products and services

-


24


47


103

          Total costs of revenues *

10,640


10,838


37,455


35,445









          Gross margin

19,521


17,376


68,292


62,065









OPERATING EXPENSES:








  Research and development *

4,331


3,442


15,719


15,053

  Sales and marketing *

13,554


14,376


49,628


58,759

  General and administrative *

3,242


3,115


12,856


14,844

  Litigation reserve

-


-


-


2,350

           Total operating expenses

21,127


20,933


78,203


91,006









Loss from operations

(1,606)


(3,557)


(9,911)


(28,941)









Interest expense, net *

(433)


(646)


(2,010)


(1,656)

Other income (expense), net

25


9


(2)


58

Loss before provision for income taxes

(2,014)


(4,194)


(11,923)


(30,539)









Provision for income taxes

119


139


443


549

Net loss

$     (2,133)


$     (4,333)


$    (12,366)


$    (31,088)









Net loss per share of common stock, basic and diluted

$       (0.09)


$       (0.24)


$       (0.57)


$       (1.73)









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

22,793,555


18,307,063


21,800,236


17,968,034

























*Includes stock-based compensation expense as follows:








       Costs of revenues

$         116


$           69


$         301


$         320

       Research and development

294


217


839


1,126

       Sales and marketing

744


538


2,309


2,714

       General and administrative

841


933


3,097


3,389


$      1,995


$      1,757


$      6,546


$      7,549









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








       Costs of revenues

$           53


$           53


$         210


$         210

       Sales and marketing 

-


20


53


80


$           53


$           73


$         263


$         290









*Includes chief executive officer transition costs as follows:








       General and administrative

$              -


$              -


$              -


$         911









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

       Interest expense, net

 

$           34


 

$           50


 

$         159


 

$         119

 

MERU NETWORKS, INC.

GAAP to Non-GAAP Reconciliation

(Unaudited)

(In thousands, except share and per share amounts)












Three months ended


Years ended



December 31,


December 31,



2013


2012


2013


2012










GAAP net loss

$      (2,133)


$      (4,333)


$    (12,366)


$    (31,088)








.


Plus:









a) Stock-based compensation

1,995


1,757


6,546


7,549


b) Litigation reserve

-


-


-


2,350


c) Amortization of acquisition-related intangible assets

53


73


263


290


d) Chief executive officer transition costs

-


-


-


911


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

34


50


159


119

Non-GAAP net loss

$          (51)


$      (2,453)


$      (5,398)


$    (19,869)










GAAP net loss per share of common stock, basic

(0.09)


(0.24)


$        (0.57)


$        (1.73)










Plus:









a) Stock-based compensation

0.09


0.10


0.30


0.42


b) Litigation reserve

-


-


-


0.13


c) Amortization of acquisition-related intangible assets

-


0.01


0.01


0.01


d) Chief executive officer transition costs

-


-


-


0.05


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

-


-


0.01


0.01










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

$               -


$        (0.13)


$        (0.25)


$        (1.11)










Shares used in computing basic and diluted non-GAAP net loss per share of common stock

22,793,555


18,307,063


21,800,236


17,968,034



















GAAP gross margin

$     19,521


$     17,376


$     68,292


$     62,065










Plus:









Stock-based compensation

116


69


301


320


Amortization of acquisition-related intangible assets

53


53


210


210









Non-GAAP gross margin

$      19,690


$      17,498


$      68,803


$      62,595



















GAAP loss from operations

$      (1,606)


$      (3,557)


$      (9,911)


$    (28,941)










Plus stock-based compensation:









Costs of revenues

116


69


301


320


Research and development

294


217


839


1,126


Sales and marketing

744


538


2,309


2,714


General and administrative

841


933


3,097


3,389



1,995


1,757


6,546


7,549











Litigation reserve

-


-


-


2,350


Amortization of acquisition-related intangible assets

53


73


263


290


Chief executive officer transition costs

-


-


-


911










Non-GAAP income (loss) from operations

$          442


$      (1,727)


$      (3,102)


$    (17,841)

 

MERU NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)














Years ended






December 31,






2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$    (12,366)


$    (31,088)










Adjustments to reconcile net loss to net cash used in operating activities:






Depreciation and amortization

1,551


1,211



Stock-based compensation

6,546


7,549



Accrued interest on long-term debt

839


631



Amortization of issuance costs

226


169



Provision for (recovery of) bad debt

22


(10)



Changes in operating assets and liabilities:







Accounts receivable, net

(2,089)


(1,991)




Inventory

1,622


(2,304)




Prepaid expenses and other assets

(128)


220




Accounts payable

3,112


(2,706)




Accrued liabilities

(995)


903




Deferred revenue

1,315


2,045













Net cash used in operating activities

(345)


(25,371)









CASH FLOWS FROM INVESTING ACTIVITIES:





Purchases of property and equipment

(1,403)


(1,942)


Proceeds from maturities of short-term investments

-


5,000


Net cash paid in purchase of business

-


(300)













Net cash provided by (used in) investing activities

(1,403)


2,758









CASH FLOWS FROM FINANCING ACTIVITIES:





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

12,574


-


Proceeds from long-term debt, net of issuance costs

-


11,489


Proceeds from exercise of stock options 

255


74


Proceeds from employee stock purchase plan

786


566


Taxes paid related to net share settlement of equity awards

(268)


(262)


Repayment of long-term debt 

(3,407)


(1,578)













Net cash provided by financing activities

9,940


10,289










Effect of exchange rate changes on cash and cash equivalents

(109)


(80)









NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

8,083


(12,404)









CASH AND CASH EQUIVALENTS -- Beginning of period

22,855


35,259









CASH AND CASH EQUIVALENTS -- End of period

$     30,938


$     22,855

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

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