Meru Networks Reports Record Fourth Quarter and Fiscal 2012 Financial Results

Meru Networks Reports Record Fourth Quarter and Fiscal 2012 Financial Results

-- Fourth Quarter Revenue Increased by 21% Year?over?Year

-- Quarterly Operating Expenses Reduced for the Third Consecutive Quarter

-- Exited 2012 with a Total Customer Count Exceeding 7,400

PR Newswire

SUNNYVALE, Calif., Jan. 29, 2013

SUNNYVALE, Calif., Jan.29, 2013 /PRNewswire/ --Meru Networks Inc., (NASDAQ:
MERU), a leader in virtualized wireless LAN solutions, today announced its
financial results for the quarter and full year ended December31, 2012.

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

Fourth Quarter 2012 Financial Results

Total revenues for the fourth quarter of 2012 were $28.2million, up 21% from
$23.3million in the fourth quarter of 2011. Products revenues for the fourth
quarter of 2012 were $23.8million, up 20% from the $19.7million reported in
the fourth quarter of 2011.

Net loss as reported in accordance with GAAP was$4.3millionfor the fourth
quarter of 2012, or a net loss of$0.24 per basic and diluted share, compared
to net loss of$8.2million, or a net loss of$0.46 per basic and diluted
share, for the same period of 2011.

Meru reported fourth quarter 2012 non‑GAAP net loss of $2.5million, or
$0.13[loss] per basic and diluted share, compared to non‑GAAP net loss of
$5.4million, or $0.30[loss] per basic and diluted share, for the same period
of 2011. Non‑GAAP results for the fourth quarter of 2012 exclude the impact
of stock‑based compensation expense of $1.8million, amortization of
acquisition‑related intangibles and amortization of the fair value of a common
stock warrant issued in connection with debt financing totaling $0.1million.
Non‑GAAP results for the fourth quarter of 2011 exclude the impact of
stock‑based compensation expense of $1.6million and amortization of
acquisition‑related intangibles of $0.1million and chief executive officer
transition costs of $1.1million. Please refer to the reconciliation of
Meru's GAAP to non‑GAAP results provided at the end of this release.

2012 Financial Results

Revenues for the year ended December31, 2012 were $97.5million, an increase
of 8% from $90.5million in 2011. Products and services revenues (excluding
ratable revenues) for 2012 were $97.3million, up 12% from the $87.2million
reported in 2011. Products revenues for 2012 were $80.8 million, up 9% from
the $74.3 million reported in 2011.

Net loss as reported in accordance with GAAP for 2012 was $31.1million, or
$1.73 per basic and diluted share, compared to a net loss of $26.7million, or
$1.54 per basic and diluted share in 2011.

Non‑GAAP net loss for 2012 was $19.9million, or $1.11 loss per basic and
diluted share, compared to non‑GAAP net loss of $12.1million, or $0.69 loss
per basic and diluted share in 2011. Non‑GAAP results for 2012 exclude
stock‑based compensation expense of $7.5million, litigation reserve expense
of $2.4million, amortization of acquisition‑related intangibles and
amortization of the fair value of a common stock warrant issued in connection
with debt financing totaling $0.4million and chief executive officer
transition costs of $0.9million. Non‑GAAP results for 2011 exclude
stock‑based compensation expense of $6.2million, litigation reserve expense
of $7.3million, amortization of acquisition‑related intangibles of
$0.1million and chief executive officer transition costs of $1.1million.

"Q4 2012 was a new high water mark for Meru so far, where we saw our vertical
market‑focused transformation and solid execution produce positive results,"
said Dr.Bami Bastani, president and chief executive officer, Meru Networks.
"Our new products are being well received and we have laid the groundwork for
success in the rapidly developing 802.11ac market."

"Our fourth quarter results demonstrated strong year‑over‑year revenue growth
coupled with reduction in operating expenses for the third consecutive
quarter," said Brett White, chief financial officer, Meru Networks.

Fourth Quarter Business Highlights:

Technology

  oThe new AP332 access point and MC6000 controller began shipping in Q4.
  oA large university with Cisco wired and wireless infrastructure deployed
    Meru Identity Manager to automate BYOD onboarding and guest access for
    more than 15,000 users.
  oA large U.S. university deployed Meru Identity Manager for secure
    onboarding of BYOD guest devices on its Aruba stadium Wi‑Fi network.

Education

  oMeru launched the Meru Education Grade™ solution, or MEG™, at Educause.
  oMeru won a highly competitive bid at the fourth largest school district in
    the U.S. with more than 395 schools and 345,000 students.
  oMeru solutions were also deployed at a large school district in the U.K.,
    as well as major universities in Toronto, Illinois and Michigan.

Hospitality

  oNew Meru users in the hospitality market include more than 20 properties
    at a leading global hotel chain in Europe and Asia.
  oA major luxury hotel chain deployed Meru in Mexico in Q4, as did multiple
    premier properties in the Middle East as well as a prominent five‑star
    hotel in Singapore.
  oContinued expansion via a service provider that manages 46 airports across
    Europe, and on‑ship deployments for one of the world's largest cruise
    lines.

Healthcare

  oMeru was deployed at one of the largest not‑for‑profit pediatric
    healthcare networks in the U.S.
  oReplaced Cisco WLAN at a large hospital in Japan.

In addition

  oA major municipality in Denmark selected Meru based on its ease of
    deployment and management.
  oThe company launched a substantive new channel program designed to
    strengthen and reward top partners in Q4.

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its
fourth quarter and fiscal 2012 results, today,January29at2:00 p.m. Pacific
Time(5:00 p.m. Eastern Time). To join the live call, please dial (877)
852‑2926 (domestic) and (253) 237‑1123 (international) and reference
conference ID 88027118.

The live and archived webcast of thefourth quarter 2012 financial results
conference call will also be available at the investor relations section of
Meru's website athttp://investors.merunetworks.com.

About Meru Networks, Inc.

Meru Networks(NASDAQ: MERU) designs, develops, and distributes virtualized
wireless LAN solutions that provide enterprises with the performance,
reliability, predictability and operational simplicity of a wired network with
the advantages of mobility.Meru Networkseliminates the deficiencies of
multichannel, client‑controlled architectures with its innovative,
single‑channel, virtualized network architecture that easily handles device
density and diversity. Meru wireless LAN solutions are deployed in major
vertical industries including Fortune 500 businesses, education, hospitality,
healthcare and retail supply chain. Founded in 2002, Meru is headquartered
inSunnyvale, Calif., with operations inNorth America,Europe, theMiddle
EastandAsia Pacific. Visitwww.merunetworks.comor call (408) 215‑5300 for
more information.

Cautionary Statement Regarding Forward Looking Statements

This press release contains forward‑looking statements and information. All
statements other than statements of historical facts that address activities,
events or developments that we expect, believe or anticipate will or may occur
in the future are forward‑looking statements. Such statements include, but
are not limited to, those statements regarding the company's belief that its
vertical market focused transformation and execution will produce positive
results, that the groundwork it has laid can produce success in the developing
802.11ac market, and the company's belief that its new channel program will
strengthen top partners. We have identified some of these forward‑looking
statements with words like "believe," "may," "will," "should," "expect,"
"intend," "plan," "predict," "anticipate," "estimate" or "continue" and other
words and terms of similar meaning. These forward‑looking statements involve
risks and uncertainties, including risks related to product and executive
transitions, that may further affect future operating periods. These
forward‑looking statements also involve assumptions that, if they do not fully
materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward‑looking statements. The risks
and uncertainties that could cause our results to differ materially from those
expressed or implied by such forward‑looking statements include our ability to
react to trends and challenges in our business and the markets in which we
operate; our ability to anticipate market needs and performance requirements
or develop new or enhanced products to meet those needs and requirements; the
adoption rate of our products; our ability to establish and maintain
successful relationships with our distribution partners; our ability to
compete in our industry; fluctuations in demand, sales cycles and prices for
our products and services; shortages or price fluctuations in our supply
chain; our ability to protect our intellectual property rights; general
political, economic and market conditions and events, including lengthening
sales cycles; and other risks and uncertainties described more fully in our
documents filed with or furnished to theSecurities and Exchange Commission
("SEC"). More information about these and other risks that may impactMeru
Networks' business are set forth in our Quarterly Report on Form10‑Q filed
with theSEConNovember 8, 2012, as well as subsequent reports filed with
theSEC. All forward‑looking statements in this press release are based on
information available to us as of the date hereof, and we assume no obligation
to update these forward‑looking statements.

Non‑GAAP Financial Measurements

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, Meru reports non‑GAAP net income
(loss), and non‑GAAP income (loss) from operations which both exclude
stock‑based compensation expense, amortization of intangible assets related to
the company's acquisition of Identity Networks in the third fiscal quarter of
2011, chief executive officer transition costs, amortization of the fair value
of a common stock warrant issued in connection with debt financing and other
items outside the ordinary course of business such as litigation reserves
expense, plus non‑GAAP net loss per common share, basic and diluted. Meru
believes that its non‑GAAP net income (loss) and non‑GAAP income (loss) from
operations 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,
                                            2012              2011
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                 $     22,855  $     35,259
 Short-term investments                    -                 5,000
 Accounts receivable, net                  15,040            13,038
 Inventory                                 8,852             6,548
 Deferred inventory costs, current portion 55                86
 Prepaid expenses and other current assets 829               912
 Total current assets             47,631            60,843
Property and equipment, net                 2,473             1,476
Goodwill                                    1,658             1,658
Intangible assets, net                      403               693
Deferred inventory costs, net of current    -                 26
portion
Other assets                                2,024             2,147
TOTAL ASSETS                                $     54,189  $     66,843
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                         $     3,027  $     5,733
   Accrued liabilities                      13,053            12,394
   Long-term debt, current portion          3,197             -
   Deferred revenue, current portion        12,183            11,764
           Total current liabilities        31,460            29,891
Long-term debt, net of current portion      6,499             -
Deferred revenue, net of current portion    6,107             4,481
Other long-term liabilities                 530               -
           Total liabilities                44,596            34,372
STOCKHOLDERS' EQUITY:
   Preferred stock                          -                 -
   Common stock                             9                 9
   Additional paid-in capital               262,887           254,576
   Accumulated other comprehensive loss     (298)             (197)
   Accumulated deficit                      (253,005)         (221,917)
           Total stockholders' equity       9,593             32,471
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $     54,189  $     66,843



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,
                         2012          2011          2012          2011
REVENUES:
 Products               $   23,761  $   19,728  $   80,770  $  
                                                                   74,279
 Support and services   4,410         3,542         16,561        12,957
 Ratable products and   43            63            179           3,235
services
 Total          28,214        23,333        97,510        90,471
revenues
COSTS OF REVENUES:
 Products               9,088         6,801         28,879        26,415
 Support and services   1,726         1,450         6,463         4,581
 Ratable products and   24            39            103           1,863
services
 Total costs of 10,838        8,290         35,445        32,859
revenues *
 Gross margin   17,376        15,043        62,065        57,612
OPERATING EXPENSES:
 Research and           3,442         3,433         15,053        13,966
development *
 Sales and marketing *  14,376        14,762        58,759        47,688
 General and            3,115         4,780         14,844        14,779
administrative *
 Litigation reserve     -             -             2,350         7,250
 Total         20,933        22,975        91,006        83,683
operating expenses
Loss from operations     (3,557)       (7,932)       (28,941)      (26,071)
Interest expense, net *  (646)         (54)          (1,656)       (253)
Other income (expense),  9             (45)          58            41
net
Loss before provision    (4,194)       (8,031)       (30,539)      (26,283)
for income taxes
Provision for income     139           150           549           411
taxes
Net loss                 $           $           $            $ 
                         (4,333)       (8,181)       (31,088)     (26,694)
Net loss per share of    $          $          $          $   
common stock, basic and  (0.24)        (0.46)        (1.73)        (1.54)
diluted
Shares used in computing
net loss per share of    18,307,063    17,616,664    17,968,034    17,377,503
common stock, basic and
diluted
*Includes stock-based
compensation expense as
follows:
 Costs of revenues $        $        $         $    
                         69            82            320           346
 Research and      217           273           1,126         1,131
development
 Sales and         538           630           2,714         2,217
marketing
 General and       933           643           3,389         2,480
administrative
                         $   1,757  $   1,628  $   7,549  $  
                                                                   6,174
*Includes amortization
of acquisition-related
intangible assets as
follows:
 Costs of revenues $        $        $         $     
                         53            52            210           70
 Sales and         20            21            80            27
marketing
                         $        $        $         $     
                         73            73            290           97
*Includes chief
executive officer
transition costs as
follows:
 General and       $        $   1,115  $         $  
administrative            -                        911           1,115
*Includes amortization
of the fair value of a
common stock warrant
issuedin connection
with debt financing as
follows:
 Interest expense, $        $        $         $     
net                      50             -          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,
                            2012          2011         2012         2011
GAAP net loss               $           $          $           $ 
                            (4,333)      (8,181)     (31,088)    (26,694)
                                        .                         .
Plus:
 a) Stock-based             1,757         1,628        7,549        6,174
 compensation
 b) Litigation reserve      -             -            2,350        7,250
 c) Amortization of
 acquisition-related        73            73           290          97
 intangible assets
 d) Chief executive officer -             1,115        911          1,115
 transition costs
 e) Amortization of the
 fair value of a common
 stock warrant issuedin    50            -            119          -
 connection with debt
 financing
Non-GAAP net loss           $           $          $           $ 
                            (2,453)      (5,365)     (19,869)    (12,058)
GAAP net loss per share of  (0.24)        $         $         $   
common stock, basic                       (0.46)      (1.73)      (1.54)
Plus:
 a) Stock-based             0.10          0.09         0.42         0.36
 compensation
 b) Litigation reserve      -             -            0.13         0.42
 c) Amortization of
 acquisition-related        0.01          0.01         0.01         0.01
 intangible assets
 d) Chief executive officer -             0.06         0.05         0.06
 transition costs
 e) Amortization of the
 fair value of a common
 stock warrant issuedin    -             -            0.01         -
 connection with debt
 financing
Non-GAAP net loss per share $          $         $         $   
of common stock, basic and  (0.13)       (0.30)      (1.11)      (0.69)
diluted
Shares used in computing
basic and diluted non-GAAP  18,307,063    17,616,664   17,968,034   17,377,503
net loss per share of
common stock
GAAP loss from operations   $           $          $           $ 
                            (3,557)      (7,932)     (28,941)    (26,071)
Plus stock-based
compensation:
 Costs of revenues          $        $       $        $    
                            69            82           320         346
 Research and development   217           273          1,126        1,131
 Sales and marketing        538           630          2,714        2,217
 General and administrative 933           643          3,389        2,480
                            1,757         1,628        7,549        6,174
 Litigation reserve         -             -            2,350        7,250
 Amortization of
 acquisition-related        73            73           290          97
 intangible assets
 Chief executive officer    -             1,115        911          1,115
 transition costs
Non-GAAP loss from          $           $          $           $ 
operations                  (1,727)      (5,116)     (17,841)    (11,435)



MERU NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                                                          Years ended
                                                          December 31,
                                                          2012       2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                 $(31,088)  $(26,694)
 Adjustments to reconcile net loss to net cash used in
 operating activities:
    Depreciation and amortization                         1,211      724
    Stock-based compensation                              7,549      6,174
    Accrued interest on long-term debt                    631        -
    Amortization of issuance costs                        169        44
    Provision for (recovery of) bad debt                  (10)       143
    Changes in operating assets and liabilities:
         Accounts receivable, net                         (1,991)    (4,292)
         Inventory                                        (2,304)    (1,912)
         Deferred inventory costs                         57         1,238
         Prepaid expenses and other assets                163        (325)
         Accounts payable                                 (2,705)    1,431
         Accrued liabilities                              603        1,483
         Deferred revenue                                 2,045      (416)
              Net cash used in operating activities       (25,670)   (22,402)
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment                      (1,942)    (1,360)
 Purchases of short-term investments                      -          (9,996)
 Proceeds from maturities of short-term investments       5,000      10,000
 Investment in non-marketable securities                 -          (1,250)
 Net cash paid in purchase of business                    -          (2,217)
              Net cash provided by (used in) investing    3,058      (4,823)
              activities
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term debt, net of issuance costs      11,489     -
 Proceeds from issuance of common stock                   73         2,078
 Proceeds from employee stock purchase plan               566        1,306
 Taxes paid related to net share settlement of equity     (262)      (151)
 awards
 Repayment of long-term debt                             (1,578)    (2,852)
              Net cash provided by financing activities   10,288     381
 Effect of exchange rate changes on cash and cash         (80)       (167)
 equivalents
NET DECREASE IN CASH AND CASH EQUIVALENTS                 (12,404)   (27,011)
CASH AND CASH EQUIVALENTS -- Beginning of period          35,259     62,270
CASH AND CASH EQUIVALENTS -- End of period                $ 22,855   $ 35,259

Use of Non‑GAAP Financial Information

In addition to the reasons stated above, which are generally applicable to
each of the itemsMeruexcludes from its non‑GAAP financial measures, the
company believes it is appropriate to exclude certain items for the following
reasons:

Stock‑Based Compensation.When evaluating the performance of its consolidated
results,Merudoes not consider stock‑based compensation charges when
operating its business (rather, when considering the impact of equity award
grants, the company places a greater emphasis on overall stockholder
dilution). Likewise, theMeru management team excludes stock‑based
compensation expense from its operating plans and is held accountable for
cash‑based compensation. Meru excludes stock‑based compensation charges from
its non‑GAAP financial measures primarily because they are non‑cash expenses
that it does not consider part of ongoing operating results when assessing the
performance of our business, and the exclusion of these expenses facilitates
the comparison of results and business outlook for future periods with results
for prior periods 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.

Chief Executive Officer transition costs.The company excludes the chief
executive officer transition costs 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. 

Other Items. The company excludes items such as litigation reserves expense
and the amortization of the fair value 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.

Investors contact:
Steve Pasko
Market Street Partners
(415) 445‑3238
ir@merunetworks.com

SOURCE Meru Networks, Inc.

Website: http://www.merunetworks.com
 
Press spacebar to pause and continue. Press esc to stop.