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Meru Networks Reports Q1 2014 Financial Results

Companies mentioned in this article: 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.

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