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Meru Networks Reports Record Second Quarter 2011 Financial Results
Jul 27, 2011 (04:07 PM EDT)
24% year-over-year increase in products revenues
Strengthened executive team with addition of proven sales and marketing leadership
SUNNYVALE, Calif., July 27, 2011 /PRNewswire/ -- Meru Networks, Inc., (NASDAQ:MERU), the leader in 802.11n virtualized wireless LAN solutions for enterprise networking, today announced its financial results for the quarter ended June 30, 2011.
Second Quarter Financial and Operational Highlights
Second Quarter Fiscal Year 2011 Financial Results
Total revenues for the second quarter of 2011 were $23.2 million, up 11% from $20.9 million in the second quarter of 2010. Products and services revenues (excluding ratable revenues) for the second quarter of 2011 were $22.1 million, up 23% from the $18.0 million reported in the second quarter of 2010. Products revenues for the second quarter of 2011 were $19.0 million, up 24% from the $15.3 million in the second quarter of 2010.
Net loss as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $9.8 million for the second quarter of 2011, or a net loss of $0.56 per basic and diluted share, compared to net income of $901,000, or $0.05 per diluted share, for the same period of 2010. GAAP results for the second quarter of 2011 included stock-based compensation expense of $1.6 million and a litigation reserve expense of $7.3 million. GAAP results for the second quarter of 2010 included stock-based compensation expense of $974,000, and $1.6 million in income related to the adjustment to fair value of the warrant liability.
Meru reported second quarter fiscal year 2011 non-GAAP net loss of $945,000, or a net loss of $0.05 per basic and diluted share, compared to non-GAAP net income of $309,000, or $0.02 per basic and diluted share, for the same period of fiscal year 2010. Non-GAAP results exclude the impact of stock-based compensation for both periods, a litigation reserve expense in the second quarter of fiscal year 2011, and adjustments to fair value of the warrant liability for the second quarter of fiscal year 2010. Please refer to the reconciliation of Meru's GAAP to non-GAAP results provided at the end of this release.
Second Quarter Business Highlights
"We are pleased with our performance this quarter. We achieved record revenues, surpassed 5,000 customers, and expanded our international footprint, further strengthening our competitive position," said Ihab Abu-Hakima, president and chief executive officer of Meru Networks. "We believe the demand for our platforms further validates our ability to meet the challenges of density, diversity and cost for environments where uncompromising wireless services are essential. We are well positioned to capitalize on what we believe will be inevitable shifts as organizations strive to support the onslaught of wireless devices and meet the expectation of ubiquitous WiFi access by mobile users."
"We reported a solid financial performance in the second quarter delivering revenues above the high end of our guidance," said Brett White, Chief Financial Officer of Meru Networks. "We also delivered strong quarterly sequential improvement in our gross margin and DSOs, and exited the quarter debt free."
Conference Call Information
Meru will host a conference call for analysts and investors to discuss its second quarter results, today, July 27th at 2:00 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 80966605.
A telephone replay will be available two hours following the conclusion of the call for a period of 7 days and can be accessed by dialing (800) 642-1687 for domestic callers and (706) 645-9291 for international callers. The call ID for the replay is 80966605. The live and archived webcast of the second quarter 2011 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, Inc.
Founded in 2002, Meru Networks, Inc. provides a virtualized wireless LAN solution that cost-effectively optimizes the enterprise network to deliver the performance, reliability, predictability and operational simplicity of a wired network, with the advantages of mobility. Meru's solution represents an innovative approach to wireless networking that utilizes virtualization technology to create an intelligent and self-monitoring wireless network, and enables enterprises to migrate their business-critical applications from wired networks to wireless networks, and become all-wireless enterprises. Meru is headquartered in Sunnyvale, CA, and has operations in the Americas, Europe, the Middle East and Asia Pacific. For more information, visit www.merunetworks.com.
Cautionary Statement Regarding Forward Looking Statements
This press release contains forward-looking statements and information. All statements other than statements of historical facts, including those statements regarding the company's ability to strengthen its competitive position, the ability of IT organizations to manage a transformation of their enterprise edge network from a wired Ethernet switch to Meru's mobile edge products, the belief the demand for the company's solutions validates the ability to meet challenges of density, diversity and costs, that the company is well positioned to capitalize on the efforts of organizations to support an onslaught of wireless devices and meet the expectation of ubiquitous WiFi access by mobile users, the company's belief that it is experiencing momentum on many fronts, and that the company will expand in new geographies. These forward-looking statements involve risks and uncertainties, including the risk that the market for Meru's solutions may not grow as the company expects; risks related to a lengthening customer approval processes, including lengthening of budget approval processes and funding uncertainty for domestic education customers; the risk that continuing investment in sales coverage and capacity will fail to diversify the company's customer mix or mitigate against the uncertainty of governmental funding; and the other risks and uncertainties described under the caption "Risk Factors" in Meru Networks' quarterly report on Form 10-Q filed with the Securities and Exchange Commission, or the SEC, on May 6, 2011, as well as additional reports filed with the Securities and Exchange Commission. 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. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial conditions, results of operations, business strategy and financial needs. 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 or revise these forward-looking statements, whether as a result of new information, new developments or otherwise.
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), which excludes stock-based compensation expense, adjustments to the fair value of a warrant liability, and the litigation reserve expense incurred in the second fiscal quarter of 2011. Meru believes that its non-GAAP net income (loss) provides 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 litigation reserve expense 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.
Use of Non-GAAP Financial Information
In addition to the reasons stated above, which are generally applicable to each of the items Meru Networks excludes 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, Meru Networks does not consider stock-based compensation charges. Likewise, the Meru Networks management team excludes stock-based compensation expense from its operating plans. In contrast, the Meru Networks 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 Networks places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants. Meru Networks 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.
Adjustments to the Fair Value of Warrant Liability. When evaluating the performance of its consolidated results, Meru Networks does not consider the adjustment to the fair value of the warrant liability made in the first quarter of 2010. Meru Networks management team does not consider the non-cash income / expense relevant when comparing its recent performance to the periods in which such income / expense was recorded. Meru Networks believes it is useful to provide a non-GAAP financial measure that excludes the adjustment to fair value of warrant liability in order to better understand the long-term performance of its business.
Litigation Reserve Expense. When evaluating the performance of its consolidated results, Meru Networks does not consider the litigation reserve expense incurred in the second quarter of 2011. Meru Networks management team does not consider this charge relevant when comparing its performance to prior periods. Meru Networks believes it is useful to provide a non-GAAP financial measure that excludes the litigation reserve expense as such a charge is an event that Meru does not believe is reflective of the performance of the company.
SOURCE Meru Networks, Inc.