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Meru Networks Reports Third Quarter 2013 Financial Results



          Meru Networks Reports Third Quarter 2013 Financial Results

- Record quarterly non-GAAP gross margins of 66.0%

- Non-GAAP net loss reduced by over 45% year-over-year

- Cash balance increased by $2.7 million during the quarter to $34.7 million

PR Newswire

SUNNYVALE, Calif., Oct. 30, 2013

SUNNYVALE, Calif., Oct. 30, 2013 /PRNewswire/ -- Meru Networks, Inc., (NASDAQ:
MERU), a leader in Wi-Fi networking, today announced its financial results for
the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Results
Total revenues for the third quarter of 2013 were $24.4 million, down 3.9%
from $25.4 million in the third quarter of 2012.  Product revenues for the
third quarter of 2013 were $19.6 million, down 6.1% from the $20.9 million
reported in the third quarter of 2012.  

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

Net loss as reported in accordance with GAAP was $3.6 million for the third
quarter of 2013, or a net loss of $0.16 per basic and diluted share, compared
to a net loss of $5.8 million, or a net loss of $0.32 per basic and diluted
share, for the same period of 2012.

Meru reported a third quarter 2013 non-GAAP net loss of $2.1 million, or
$0.09 loss per basic and diluted share, compared to a non-GAAP net loss of
$3.9 million, or $0.22 loss per basic and diluted share, for the same period
of 2012. Non-GAAP results for the third quarter of 2013 exclude the impact of
stock-based compensation expense of $1.3 million and amortization of other
intangibles totaling $0.1 million. Non-GAAP results for the third quarter of
2012 exclude the impact of stock-based compensation expense of $1.8 million
and amortization of acquisition-related 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.

"This quarter was marked by our customers' initial adoption of 802.11ac and
demonstrated the traction that our product has in the market," said Dr. Bami
Bastani, president and CEO, Meru Networks. "With an improved financial and
technological foundation, we are well positioned as the industry transitions
to the new standard." 

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its
third quarter 2013 results today, October 30, 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 77229049.

The live and archived webcast of the third quarter 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.

© 2013 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
material risks and uncertainties that could cause actual results to differ
materially from those in the 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, among others:
business and economic conditions and growth trends in the networking industry,
our vertical markets and various geographic regions; competition in the
industry; changes in overall information technology spending; 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 August 12, 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:

  o 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.
  o 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.
  o 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:

  o 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.
  o 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.
  o 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.
  o 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)
                                        September 30,       December 31,
                                        2013                2012
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents             $           34,654  $           22,855
  Accounts receivable, net              10,592              15,040
  Inventory                             6,164               8,852
  Prepaid expenses and other current    1,679               884
assets
           Total current assets         53,089              47,631
Property and equipment, net             2,209               2,473
Goodwill                                1,658               1,658
Intangible assets, net                  193                 403
Other assets                            1,927               2,024
TOTAL ASSETS                            $           59,076  $           54,189
LIABILITIES AND STOCKHOLDERS' EQUITY 
CURRENT LIABILITIES:
  Accounts payable                      $            2,606  $            3,027
  Accrued liabilities                   12,035              13,053
  Long-term debt, current portion       3,581               3,197
  Deferred revenue, current portion     13,395              12,183
        Total current liabilities       31,617              31,460
Long-term debt, net of current portion  3,775               6,499
Deferred revenue, net of current        5,923               6,107
portion
Other liabilities                       1,128               530
        Total liabilities               42,443              44,596
STOCKHOLDERS' EQUITY:
  Preferred stock                       -                   -
  Common stock                          11                  9
  Additional paid-in capital            280,443             262,887
  Accumulated other comprehensive loss  (582)               (298)
  Accumulated deficit                   (263,239)           (253,005)
        Total stockholders' equity      16,633              9,593
TOTAL LIABILITIES AND STOCKHOLDERS'     $           59,076  $           54,189
EQUITY

 

 

MERU NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except for share and per share amounts)
                           Three months ended        Nine months ended
                           September 30,             September 30,
                           2013         2012         2013          2012
REVENUES:
  Products                 $            $            $     61,910  $    
                            19,634       20,910                    57,009
  Support and services     4,752        4,432        13,585        12,151
  Ratable products and     14           44           91            136
services
          Total revenues   24,400       25,386       75,586        69,296
COSTS OF REVENUES:
  Products                 6,567        7,191        21,251        19,791
  Support and services     1,853        1,764        5,517         4,737
  Ratable products and     8            24           47            79
services
          Total costs of   8,428        8,979        26,815        24,607
revenues *
          Gross margin     15,972       16,407       48,771        44,689
OPERATING EXPENSES:
  Research and development 3,726        4,072        11,388        11,611
*
  Sales and marketing *    12,306       13,830       36,074        44,383
  General and              3,036        3,496        9,614         11,729
administrative *
  Litigation reserve       -            -            -             2,350
           Total operating 19,068       21,398       57,076        70,073
expenses
Loss from operations       (3,096)      (4,991)      (8,305)       (25,384)
Interest expense, net *    (414)        (721)        (1,577)       (1,010)
Other income (expense),    24           35           (27)          49
net
Loss before provision for  (3,486)      (5,677)      (9,909)       (26,345)
income taxes
Provision for income taxes 97           119          324           410
Net loss                   $            $            $             $  
                           (3,583)      (5,796)       (10,233)      (26,755)
Net loss per share of      $            $            $             $      
common stock, basic and     (0.16)       (0.32)       (0.48)        (1.50)
diluted
Shares used in computing
net loss per share of      22,525,060   18,014,335   21,465,492    17,854,199
common stock, basic and
diluted
*Includes stock-based
compensation expense as
follows:
       Costs of revenues   $            $            $             $        
                            86           73           185           251
       Research and        175          300          545           909
development
       Sales and marketing 446          638          1,565         2,176
       General and         636          760          2,256         2,456
administrative
                           $            $            $             $      
                            1,343        1,771       4,551         5,792
*Includes amortization of
acquisition-related
intangible assets as
follows:
       Costs of revenues   $            $            $             $        
                            52           52           157           157
       Sales and           13           20           53            60
marketing 
                           $            $            $             $        
                            65           72           210           217
*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                         38           53           125          69

 

 

MERU NETWORKS, INC.
GAAP to Non-GAAP Reconciliation
(Unaudited)
(In thousands, except share and per share amounts)
                              Three months ended       Nine months ended
                              September 30,            September 30,
                              2013         2012        2013         2012
GAAP net loss                 $            $           $            $  
                              (3,583)       (5,796)     (10,233)     (26,755)
                                         .                        .
Plus:
 a) Stock-based compensation  1,343        1,771       4,551        5,792
 b) Litigation reserve        -            -           -            2,350
 c) Amortization of
 acquisition-related          65           72          210          217
 intangible assets
 d) Chief executive officer   -            -           -            911
 transition costs
 e) Amortization of common
 stock warrant issued  in     38           53          125          69
 connection with debt
 financing
Non-GAAP net loss             $            $           $            $  
                              (2,137)       (3,900)     (5,347)      (17,416)
GAAP net loss per share of    (0.16)       (0.32)      $            $      
common stock, basic                                    (0.48)       (1.50)
Plus:
 a) Stock-based compensation  0.06         0.10        0.21         0.33
 b) Litigation reserve        -            -           -            0.13
 c) Amortization of
 acquisition-related          0.01         -           0.01         0.01
 intangible assets
 d) Chief executive officer   -            -           -            0.05
 transition costs
 e) Amortization of common
 stock warrant issued  in     -            -           0.01         -
 connection with debt
 financing
Non-GAAP net loss per share   $            $           $            $      
of common stock, basic and     (0.09)       (0.22)     (0.25)       (0.98)
diluted
Shares used in computing
basic and diluted non-GAAP
net loss
 per share of common stock    22,525,060   18,014,335  21,465,492   17,854,199
GAAP gross margin             $            $           $            $    
                               15,972      16,407      48,771       44,689
Plus:
 Stock-based compensation     86           73          185          251
 Amortization of
 acquisition-related          52           52          157          157
 intangible assets
Non-GAAP gross margin         $            $           $            $    
                               16,110      16,532      49,113       45,097
GAAP loss from operations     $            $           $            $  
                              (3,096)       (4,991)     (8,305)      (25,384)
Plus stock-based
compensation:
 Costs of revenues            86           73          185          251
 Research and development     175          300         545          909
 Sales and marketing          446          638         1,565        2,176
 General and administrative   636          760         2,256        2,456
                              1,343        1,771       4,551        5,792
 Litigation reserve           -            -           -            2,350
 Amortization of
 acquisition-related          65           72          210          217
 intangible assets
 Chief executive officer      -            -           -            911
 transition costs
Non-GAAP loss from operations $            $           $            $  
                              (1,688)       (3,148)     (3,544)      (16,114)

 

 

MERU NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                                                  Nine months ended
                                                  September 30,
                                                  2013           2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                         $    (10,233)  $    (26,755)
 Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
      Depreciation and amortization               1,155          968
      Stock-based compensation                    4,551          5,792
      Accrued interest on long-term debt          673            414
      Amortization of issuance costs              178            98
      Provision for (recovery of) bad debt        (5)            25
      Changes in operating assets and
      liabilities:
           Accounts receivable, net               4,452          7,608
           Inventory                              2,688          (3,522)
           Prepaid expenses and other assets      (832)          (454)
           Accounts payable                       (421)          (3,146)
           Accrued liabilities                    (987)          (46)
           Deferred revenue                       1,027          1,257
                  Net cash  provided by (used in) 2,246          (17,761)
                  operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment              (832)          (2,343)
 Proceeds from maturities of short-term           -              5,000
 investments
                  Net cash provided by (used in)  (832)          2,657
                  investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from the issuance of common stock, net  12,574         -
 of offering costs
 Proceeds from long-term debt, net of issuance    -              11,489
 costs
 Proceeds from exercise of stock options          249            73
 Proceeds from employee stock purchase plan       358            279
 Taxes paid related to net share settlement of    (174)          (114)
 equity awards
 Repayment of long-term debt                      (2,517)        (788)
                  Net cash provided by financing  10,490         10,939
                  activities
 Effect of exchange rate changes on cash and cash (105)          3
 equivalents
NET INCREASE (DECREASE) IN CASH AND CASH          11,799         (4,162)
EQUIVALENTS
CASH AND CASH EQUIVALENTS -- Beginning of period  22,855         35,259
CASH AND CASH EQUIVALENTS -- End of period        $     34,654   $     31,097

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

SOURCE Meru Networks, Inc.

Website: http://www.merunetworks.com
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