Meru Networks Reports Record First Quarter 2013 Results

           Meru Networks Reports Record First Quarter 2013 Results

- Product Revenue Growth of 30% Year-over-Year

- Quarterly Operating Expenses Reduced for the Fourth Consecutive Quarter

- Positive Cash Flow from Operations

PR Newswire

SUNNYVALE, Calif., April 30, 2013

SUNNYVALE, Calif., April30, 2013 /PRNewswire/ --Meru Networks Inc.,
(NASDAQ:MERU), a leader in virtualized wireless LAN solutions, today announced
its financial results for the quarter ended March31, 2013.

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

First Quarter 2013 Financial Results
Total revenues for the first quarter of 2013 were $24.7million, up 27% from
$19.4millionin the first quarter of 2012. Products revenues for the first
quarter of 2013 were $20.6million, up 30% from the $15.8million reported in
the first quarter of 2012. 

Net loss as reported in accordance with GAAP was$3.6millionfor the first
quarter of 2013, or a net loss of$0.18 per basic and diluted share, compared
to a net loss of$14.5million, or a net loss of$0.82 per basic and diluted
share, for the same period of 2012.

Meru reported a first quarter 2013 non-GAAP net loss of $2.0million, or $0.10
loss per basic and diluted share, compared to a non-GAAP net loss of
$8.9million, or $0.50 loss per basic and diluted share, for the same period
of 2012. Non-GAAP results for the first quarter of 2013 exclude the impact of
stock-based compensation expense of $1.5million, 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 first quarter of 2012 exclude the
impact of stock-based compensation expense of $2.2million, amortization of
acquisition-related intangibles of $0.1 million, chief executive officer
transition costs of $0.9million and a litigation reserve expense of $2.4
million. Please refer to the reconciliation of Meru's GAAP to non-GAAP results
provided at the end of this release.

"We are very pleased to have delivered record first quarter revenues," said
Dr.Bami Bastani, president and chief executive officer, Meru Networks.
"Meru's strategy of focusing on three verticals – education, healthcare and
hospitality – combined with ongoing cost controls, continues to be successful
in driving the company's turnaround."

"Our first quarter results and our highly successful secondary offering of
common stock demonstrate our continued execution against the financial
objectives we outlined last year," said Brett White, chief financial officer,
Meru Networks.

First Quarter Business Highlights

Technology

  oIntroduced MobileFLEX Architecture, an innovative new context-aware
    architecture. MobileFLEX unites all Meru hardware and software solutions
    and introduces Meru's Context-aware Application Layers (CALs), Apple
    Bonjour support, enhanced multi-vendor policy enforcement, cloud-focused
    enhancements and 802.11ac-readiness.

Education

  oWon network expansion projects at major universities in North Carolina and
    Texas and an 802.11n upgrade at an existing higher education customer in
    Ohio.
  oContinued expansion at the fourth largest school district in the U.S.,
    with more than 395 schools and 345,000 students.
  oDeployed by a large private university in Japan.

Healthcare

  oIntroduced the innovative Uninterrupted Care Network (UCN) at HIMSS 2013.
  oDisplaced a competitive vendor in a major healthcare center in Germany.
  oDeployed at a major hospital in Japan.
  oWon network expansion project at a healthcare center in Canada and an
    802.11n network upgrade at a hospital in the UK.

Hospitality & Retail

  oSelected by a major exhibition center in France.
  oWon a highly competitive bid at a prominent four-star hotel property in
    Dubai.
  oSelected by major hotel chains in Turkey, South Africa, Singapore and
    Germany.
  oDeployed by the largest clothing retailer in Japan.

Financial

  oStrengthened balance sheet by raising $12.8m proceeds (net of underwriter
    fees) in a public offering of 3,450,000 shares of Meru common stock.

Conference Call Information
Meru will host a conference call for analysts and investors to discuss its
first quarter results, today,April30at2:00 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 32466889.

The live and archived webcast of the first quarter 2013 financial results
conference call will also be available at the investor relations section of
Meru's website athttp://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's MobileFLEX 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.

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
material risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements. These risks and
uncertainties are described in documents filed with or furnished to
theSecurities and Exchange Commission ("SEC") by Meru, including under the
caption "Risk Factors" in Meru's Annual Report on Form10‑K filed with
theSEConMarch 20, 2013, and any subsequent reports filed with theSEC.
All forward‑looking statements in this press release are based on information
available to Meru as of the date hereof, and Meru assume no obligation to
update these forward‑looking statements, except as required by law.

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), non‑GAAP income (loss) from operations and non‑GAAP net loss per
common share, basic and diluted each of which 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 reserve expense. 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
typically 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 the inclusion
of these excluded expenses does 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,
                                        2013                2012
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents             $      35,620  $      22,855
 Accounts receivable, net              10,070              15,040
 Inventory                             8,147               8,852
 Deferred inventory costs, current     79                  55
portion
 Prepaid expenses and other current    619                 829
assets
 Total current assets         54,535              47,631
Property and equipment, net             2,325               2,473
Goodwill                                1,658               1,658
Intangible assets, net                  331                 403
Other assets                            2,024               2,024
TOTAL ASSETS                            $      60,873  $      54,189
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                      $      2,923  $      3,027
  Accrued liabilities                   10,966              13,053
  Long-term debt, current portion       3,321               3,197
  Deferred revenue, current portion     11,454              12,183
        Total current liabilities       28,664              31,460
Long-term debt, net of current portion  5,625               6,499
Deferred revenue, net of current        5,651               6,107
portion
Other liabilities                       740                 530
        Total liabilities               40,680              44,596
STOCKHOLDERS' EQUITY:
  Preferred stock                       -                   -
  Common stock                          11                  9
  Additional paid-in capital            277,061             262,887
  Accumulated other comprehensive loss  (291)               (298)
  Accumulated deficit                   (256,588)           (253,005)
        Total stockholders' equity      20,193              9,593
TOTAL LIABILITIES AND STOCKHOLDERS'     $      60,873  $      54,189
EQUITY



MERU NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except for share and per share amounts)
                                            Three months ended March 31,
                                            2013              2012
REVENUES:
 Products                                  $   20,590     $   15,803
 Support and services                      4,103             3,558
 Ratable products and services             42                50
 Total revenues                   24,735            19,411
COSTS OF REVENUES:
 Products                                  7,317             5,454
 Support and services                      1,776             1,455
 Ratable products and services             22                31
 Total costs of revenues *         9,115             6,940
 Gross margin                      15,620            12,471
OPERATING EXPENSES:
 Research and development *                3,688             3,871
 Sales and marketing *                     11,420            15,574
 General and administrative *              3,285             5,033
 Litigation reserve                        -                 2,350
 Total operating expenses         18,393            26,828
Loss from operations                        (2,773)           (14,357)
Interest expense, net                       (610)             (29)
Other income (expense), net                 (62)              28
Loss before provision for income taxes      (3,445)           (14,358)
Provision for income taxes                  138               129
Net loss                                    $   (3,583)    $   (14,487)
Net loss per share of common stock, basic   $    (0.18)   $     (0.82)
and diluted
Shares used in computing net loss per share 19,570,769        17,701,126
of common stock, basic and diluted
*Includes stock-based compensation expense
as follows:
 Costs of revenues                    $      45   $       96
 Research and development             158               355
 Sales and marketing                  537               855
 General and administrative           714               926
                                            $    1,454     $    2,232
*Includes amortization of
acquisition-related intangible assets as
follows:
 Costs of revenues                    $      52   $      52
 Sales and marketing                 20                20
                                            $      72   $      72
*Includes chief executive officer
transition costs as follows:
 General and administrative           $       -  $     911



MERU NETWORKS, INC.
Condensed Consolidated Statements of Operations
(GAAP to Non-GAAP Reconciliation)
(Unaudited)
(In thousands, except share and per share amounts)
                                           Three months ended March 31,
                                           2013               2012
GAAP net loss                              $    (3,583)    $   (14,487)
                                                            .
Plus:
 a) Stock-based compensation               1,454              2,232
 b) Litigation reserve                     -                  2,350
 c) Amortization of acquisition-related    72                 72
 intangible assets
 d) Chief executive officer transition     -                  911
 costs
 e) Amortization of fair value of a common
 stock warrant issued
  in connection with debt financing  45                 -
Non-GAAP net loss                          $    (2,012)    $    (8,922)
GAAP net loss per share of common stock,   $     (0.18)   $     (0.82)
basic
Plus:
 a) Stock-based compensation               0.08               0.13
 b) Litigation reserve                     -                  0.14
 c) Amortization of acquisition-related    -                  -
 intangible assets
 d) Chief executive officer transition     -                  0.05
 costs
 e) Amortization of fair value of a common
 stock warrant issued
  in connection with debt financing  -                  -
Non-GAAP net loss per share of common      $    (0.10)    $    (0.50)
stock, basic and diluted
Shares used in computing basic and diluted
non-GAAP net loss
 per share of common stock                 19,570,769         17,701,126
GAAP loss from operations                  $   (2,773)     $  (14,357)
Plus stock-based compensation:
 Costs of revenues                         $      45    $      96
 Research and development                  158                355
 Sales and marketing                       537                855
 General and administrative                714                926
                                           1,454              2,232
 Litigation reserve                        -                  2,350
 Amortization of acquisition-related       72                 72
 intangible assets
 Chief executive officer transition costs  -                  911
Non-GAAP loss from operations              $   (1,247)     $   (8,792)



MERU NETWORKS, INC.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(In thousands)
                                                 Three months ended March 31,
                                                 2013            2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                        $   (3,583)  $  (14,487)
 Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
      Depreciation and amortization              378             265
      Stock-based compensation                   1,454           2,232
      Accrued interest on long-term debt         302             -
      Amortization of debt issuance costs        64              -
      Bad debt expense                           33              41
      Changes in operating assets and
      liabilities:
           Accounts receivable, net              4,937           1,938
           Inventory                             705             (1,069)
           Deferred inventory costs              (24)            40
           Prepaid expenses and other assets     212             46
           Accounts payable                      (104)           (1,893)
           Accrued liabilities                   (2,155)         3,578
           Deferred revenue                      (1,183)         (806)
                 Net cash provided by (used in)  1,036           (10,115)
                 operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment             (156)           (375)
 Proceeds from maturities of short-term          -               5,000
 investments
                 Net cash provided by (used in)  (156)           4,625
                 investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from the issuance of common stock, net 12,556          -
 of offering costs
 Proceeds from exercise of stock options        191             5
 Taxes paid related to net share settlement of   (25)            (66)
 equity awards
 Proceeds from line of credit                    -               6,850
 Repayment of long-term debt                    (814)           -
                 Net cash provided by financing  11,908          6,789
                 activities
 Effect of exchange rate changes on cash and     (23)            (3)
 cash equivalents
NET INCREASE IN CASH AND CASH EQUIVALENTS        12,765          1,296
CASH AND CASH EQUIVALENTS -- Beginning of period 22,855          35,259
CASH AND CASH EQUIVALENTS -- End of period       $   35,620    $   36,555

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
 
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