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Meru Networks Reports Record Fourth Quarter and Full Year 2010 Financial Results

Feb 02, 2011 (03:02 PM EST)
URL: http://www.techweb.com/show-press-release/X828076/meru-networks-reports-record-fourth-quarter-and-full-year-2010-financial-results.html

Products and services revenue increased 44% in FY2010

SUNNYVALE, Calif., Feb. 2, 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 and full fiscal year ended December 31, 2010.

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

Fourth Quarter Financial and Operational Highlights

  • Products and services revenues (excluding ratable) of $20.5 million, up 34% year-over-year.
  • Our Non-GAAP gross margin of 65.2% improved 490 basis points year-over-year.
  • Total customer install base up approximately 50% year-over-year.

Fourth Quarter Fiscal Year 2010 Financial Results

Total revenues for the fourth quarter of fiscal year 2010 were $22.6 million, up 18% from $19.3 million in the fourth quarter of fiscal year 2009. Products and services revenues (excluding ratable) for the fourth quarter of fiscal year 2010 were $20.5 million, up 34% from the $15.3 million reported in the fourth quarter of fiscal year 2009.

Net loss as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $0.9 million for the fourth quarter of 2010, or $0.06 per basic share, compared to a net loss of $8.0 million, or $20.27 per basic share, for the same period of fiscal year 2009.

Meru reported fourth quarter fiscal year 2010 non-GAAP net income of $305,000, or $0.02 per fully diluted share, compared to $119,000, or $0.01 per fully diluted share, for the fourth quarter of fiscal year 2009.  Non-GAAP results for the fourth quarter of 2010 exclude stock-based compensation expense of $1.2 million.  Non-GAAP results for the fourth quarter of 2009 exclude stock-based compensation expense of $429,000 and a $7.6 million expense related to the adjustment to the fair value of the warrant liability. Please refer to the reconciliation of GAAP to non-GAAP results provided at the end of this release.

Fiscal Year 2010 Financial Results

Revenues for the fiscal year ended December 31, 2010 were $85.0 million, an increase of 22% from $69.5 million in fiscal year 2009.  Products and services revenues (excluding ratable) for fiscal year 2010 were $73.7 million, up 44% from the $51.1 million reported in fiscal year 2009. GAAP net loss for fiscal year 2010 was $36.6 million, or $3.06 per share, compared to a net loss of $17.2 million, or $45.15 per share in fiscal year 2009.  Non-GAAP net income for fiscal year 2010 was $859,000, or $0.05 per fully diluted share, compared to a net loss of $2.3 million, or $5.44 per fully diluted share in fiscal year 2009.  

"2010 was an outstanding year for Meru," said Ihab Abu-Hakima, president and chief executive officer, Meru Networks. "Throughout the year we were able to leverage our product differentiation and innovations to gain market share.  We delivered record revenues and expanded our gross margins as more organizations in more verticals around the world adopted Meru's virtualized wireless LAN solution to migrate their edge networking infrastructure to All Wireless networking environments."

Fourth Quarter Business Highlights

  • Introduced the AP1000i, the newest entry-level, high-value enterprise access point solution in Meru's product family with breakthrough connectivity, mobility and security and designed to be the industry's simplest to deploy and easiest to manage WLAN solution.
  • Notable fourth quarter wins and production deployments include:
    • Several top universities in the United States and Asia.
    • Two Fortune Global 500 Japanese consumer electronics manufacturers.
    • A Fortune 100 financial services insurance company.
    • A large regional medical center.
    • A world leading solar panel manufacturer.
  • Received four notable industry awards for leadership and innovation:
    • The 2010 CRN Specialist Vendor of the Year.
    • CRN's 2010 Top 100 Healthcare Vendor.
    • Tech & Learning's 2010 Award of Excellence, Product of the Year AP320i.
    • The "Coolest Product of 2010" Service Assurance Platform, by Health Management Technology.

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its fourth quarter and full fiscal year 2010 results, today, February 2nd at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).  To join the live call, please dial 1-877-852-2926 (domestic) and 1-253-237-1123 (international) and reference conference ID 35568742.

A telephone replay will be available two hours following the conclusion of the call for a period of seven 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 35568742. The live and archived webcast of the fourth quarter and full fiscal year 2010 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 on this website, including statements regarding our future financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "might," "objective," "estimate," "continue," "anticipate," "project," "intend," "will," "should," "could," "plan," "future," "expect," "predict," "potential," or the negative of these terms or other similar expressions. These forward-looking statements include but are not limited to our expectations regarding the ability to leverage product differentiation and innovations to gain market share, organizations adopting Meru's virtualized wireless LAN solution and the migration of edge networking infrastructure to all wireless networking environments. 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. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, but not limited to, whether the market for our products and solutions continue to develop and grow, our limited operating history, our ability to compete effectively, our ability to increase market awareness of our brand and solutions and our ability to continue to utilize our technology and protect our intellectual property rights, and a number of other factors out of our control, that may cause our business, industry, strategy or actual results to differ materially from the forward-looking statements. The risks and uncertainties include those 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 November 5, 2010 and the company's other filings with the SEC.

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 and adjustments to the fair value of the warrant liability.  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 its 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.  Meru believes that all of these excluded expenses and income 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 do 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.

Media contact:

Investors contact:

Neila Matheny

Ingrid Ebeling or Elaine Chen

Engage PR

Market Street Partners

(510) 748-8200, ext. 215

(408) 215-5658

nmatheny@engagepr.com

ir@merunetworks.com



MERU NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)



December 31,


December 31,


2010


2009

ASSETS




CURRENT ASSETS:





Cash and cash equivalents 

$          62,270


$          21,283


Short-term investments 

4,999


-


Accounts receivable, net

8,796


5,967


Inventory

4,636


2,833


Deferred inventory costs, current portion

1,273


4,547


Prepaid expenses and other current assets

1,195


1,382


Total current assets

83,169


36,012





Property and equipment, net

763


698

Deferred inventory costs, net of current portion

77


1,419

Other assets 

359


283

TOTAL ASSETS

$          84,368


$          38,412





LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)








CURRENT LIABILITIES:





Accounts payable

$            4,302


$            3,310


Accrued liabilities

10,694


6,989


Long-term debt, current portion

2,808


11,447


Deferred revenue, current portion

12,723


18,864


Warrant liability

-


18,939


Total current liabilities

30,527


59,549





Long-term debt, net of current portion 

-


2,808

Deferred revenue, net of current portion

3,923


6,248


Total liabilities

34,450


68,605






Convertible preferred stock

-


125,255





STOCKHOLDERS’ EQUITY (DEFICIT):





Preferred stock

-


-


Common stock

8


1


Additional paid-in capital

245,160


3,211


Accumulated other comprehensive loss

(27)


(43)


Accumulated deficit

(195,223)


(158,617)



Total stockholders' equity (deficit)

49,918


(155,448)





TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

$          84,368


$          38,412



MERU NETWORKS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except for share and per share amounts)










Three months ended
December 31,


Years ended
December 31,


2010


2009


2010


2009

REVENUES:








 Products

$      17,470


$ 13,387


$      63,197


$  45,196

 Support and services

3,048


1,959


10,479


5,866

 Ratable products and services

2,128


3,906


11,328


18,432

         Total revenues

22,646


19,252


85,004


69,494









COSTS OF REVENUES:








 Products

6,148


5,080


22,060


17,332

 Support and services

715


281


2,297


876

 Ratable products and services

1,093


2,310


6,021


9,571

         Total costs of revenues *

7,956


7,671


30,378


27,779









         Gross profit

14,690


11,581


54,626


41,715









OPERATING EXPENSES:








 Research and development *

3,439


2,932


12,399


10,018

 Sales and marketing *

9,315


7,039


33,483


25,762

 General and administrative *

2,646


1,540


10,462


6,858

          Total operating expenses

15,400


11,511


56,344


42,638









Income (loss) from operations

(710)


70


(1,718)


(923)









Interest expense, net

(153)


(313)


(813)


(1,825)

Other income (expense), net

27


(7,670)


(33,821)


(14,447)

Loss before provision for income taxes

(836)


(7,913)


(36,352)


(17,195)









Provision for income taxes

59


44


254


191









Net loss

(895)


(7,957)


(36,606)


(17,386)









Accretion on convertible preferred stock

-


-


-


221

Net loss attributable to common stockholders

$         (895)


$ (7,957)


$    (36,606)


$ (17,165)









Net loss per share of common stock, basic and diluted

$        (0.06)


$ (20.27)


$        (3.06)


$   (45.15)









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

16,094,659


392,517


11,981,170


380,179

























*Includes stock-based compensation expense as follows:








      Costs of revenues

$             65


$        30


$           197


$         71

      Research and development

235


117


767


187

      Sales and marketing

298


124


985


312

      General and administrative

602


158


1,896


297


$        1,200


$      429


$        3,845


$       867



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 December 31,


Years ended
December 31,




2010


2009


2010


2009












GAAP net loss 

$         (895)


$      (7,957)


$    (36,606)


$ (17,386)












Plus:










a) Stock-based compensation

1,200


429


3,845


867



b) Adjustment of fair value of warrant liability

-


7,647


33,620


14,230












Non-GAAP net income (loss)

$          305


$          119


$          859


$   (2,289)












GAAP net loss per share of common stock, basic 

$        (0.06)


$      (20.27)


$        (3.06)


$   (45.15)

*











Plus:










a) Stock-based compensation

0.08


1.09


0.32


2.28



b) Adjustment of fair value of warrant liability

-


19.48


2.81


37.43












Non-GAAP net income (loss) per share of common stock, basic

$         0.02


$         0.30


$         0.07


$    (5.44)

*











Non-GAAP net income (loss) per share of common stock, diluted

$         0.02


$         0.01


$         0.05


$    (5.44)

*











Shares used in computing basic net income (loss) per share of common stock

16,094,659


392,517


11,981,170


380,179












Shares used in computing diluted Non-GAAP net income (loss) per share of common stock

18,266,607


11,748,959


16,677,558


380,179










































GAAP income (loss) from operations

$         (710)


$           70


$      (1,718)


$     (923)












Plus stock-based compensation:










Costs of revenues

65


30


197


71



Research and development

235


117


767


187



Sales and marketing

298


124


985


312



General and administrative

602


158


1,896


297




1,200


429


3,845


867












Non-GAAP income (loss) from operations

$          490


$          499


$       2,127


$       (56)






















* Per share calculation reflects $221K accretion on convertible preferred stock in Q1 2009. 



MERU NETWORKS, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)














Years ended December 31,






2010


2009

CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$    (36,606)


$    (17,386)










Adjustments to reconcile net loss to net cash used in operating activities:






Depreciation and amortization

615


551



Stock-based compensation

3,845


867



Adjustment of fair value of warrant liability

33,620


14,230



Accrued interest on convertible promissory notes

-


201



Amortization of debt issuance costs

107


134



Bad debt expense

(61)


80



Changes in operating assets and liabilities:







Accounts receivable, net

(2,768)


69




Inventory

(1,803)


749




Deferred inventory costs

4,616


8,040




Prepaid expenses and other assets

(560)


(775)




Accounts payable

992


1,160




Accrued liabilities

4,350


1,522




Deferred revenue

(8,466)


(15,125)













Net cash used in operating activities

(2,119)


(5,683)









CASH FLOWS FROM INVESTING ACTIVITIES:





Purchases of property and equipment

(680)


(203)


Purchases of short-term investments

(4,998)


-













Net cash used in investing activities

(5,678)


(203)









CASH FLOWS FROM FINANCING ACTIVITIES:





Proceeds from initial public offering, net

57,059


-


Proceeds from issuance of common stock

2,539


161


Proceeds from exercise of convertible preferred stock warrants

716


-


Proceeds from issuance of convertible preferred stock and warrants, net of issuance costs

-


20,632


Proceeds from issuance of convertible promissory notes

-


3,170


Proceeds from long-term debt and line of credit

4,986


23,016


Repayment of long-term debt and line of credit

(16,540)


(24,996)













Net cash provided by financing activities

48,760


21,983










Effect of exchange rate changes on cash and cash equivalents

24


14









NET INCREASE IN CASH AND CASH EQUIVALENTS

40,987


16,111









CASH AND CASH EQUIVALENTS -- Beginning of period

21,283


5,172









CASH AND CASH EQUIVALENTS -- End of period

$     62,270


$     21,283



SOURCE Meru Networks