TechWeb

Meru Networks Reports Fourth Quarter and Full Year 2011 Financial Results

Feb 01, 2012 (03:02 PM EST)
URL: http://www.techweb.com/show-press-release/X886701/meru-networks-reports-fourth-quarter-and-full-year-2011-financial-results.html

Products and services revenue increased 18% in FY2011

Total installed base of over 6,000 Customers

SUNNYVALE, Calif., Feb. 1, 2012 /PRNewswire/ -- Meru Networks, Inc., (NASDAQ:MERU), today announced its financial results for the quarter and full year ended December 31, 2011.

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

Fourth Quarter 2011 Financial Results

Total revenues for the fourth quarter of 2011 were $23.3 million, up 3% from $22.6 million in the fourth quarter of 2010. Products and services revenues (excluding ratable revenues) for the fourth quarter of 2010 were $23.3 million, up 13% from the $20.5 million reported in the fourth quarter of 2010.

Net loss as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $8.2 million for the fourth quarter of 2011, or $0.46 per basic and diluted share, compared to a net loss of $0.9 million, or $0.06 per basic and diluted share, for the same period of 2010. GAAP results for the fourth quarter of 2011 included stockbased compensation expense of $1.6 million, amortization of acquisitionrelated intangibles of $0.1 million and chief executive officer transition costs of $1.1 million.  GAAP results for the fourth quarter of 2010 included stockbased compensation expense of $1.2 million.  

Meru reported fourth quarter 2011 non-GAAP net loss of $5.4 million, or $0.30 loss per basic and diluted share, compared to non-GAAP net income of $305,000, or $0.02 income per diluted share, for the fourth quarter of 2010.  Please refer to the reconciliation of GAAP to non-GAAP results provided at the end of this release.

2011 Financial Results

Revenues for the year ended December 31, 2011 were $90.5 million, an increase of 6% from $85.0 million in 2010. Products and services revenues (excluding ratable revenues) for 2011 were $87.2 million, up 18% from the $73.7 million reported in 2010. GAAP net loss for 2011 was $26.7 million, or $1.54 per basic and diluted share, compared to a net loss of $36.6 million, or $3.06 per basic and diluted share in 2010. GAAP results for 2011 included stockbased compensation expense of $6.2 million, litigation reserve expense of $7.3 million, amortization of acquisitionrelated intangibles of $0.1 million and chief executive officer transition costs of $1.1 million.  GAAP results for 2010 included stockbased compensation expense of $3.8 million and $33.6 million for the adjustment to fair value of the warrant liability.  Non-GAAP net loss for 2011 was $12.1 million, or $0.69 loss per basic and diluted share, compared to non-GAAP net income of $859,000, or $0.05 income per diluted share in 2010.

"2011 was a year of building for Meru," said Ihab Abu-Hakima, president and chief executive officer, Meru Networks. "We have doubled our sales headcount from the end of 2010, with the majority of this headcount joining since the beginning of the fourth quarter.  In addition, we have significantly expanded our product portfolio, and increased our marketing investment.  We expect to reap the benefit of these investments beginning in the second half of 2012 as our expanded sales headcount begins to reach full productivity and the BYOD-driven, worldwide mobile workforce continues to expand, increasing the demand for seamless, secure, reliable access to enterprise wireless networks.  Meru's innovative approach is designed to enable organizations to meet the demands of their high density mobile environments where business-essential execution increasingly depends on all wireless mobile edge networks."

Fourth Quarter Business Highlights

  • Customer count now over 6,000 worldwide, an increase in the installed base of approximately 7% from the end of the prior quarter.
  • Announced broad product enhancements that included the new secure wireless LAN access solution, Smart Connect, and the next-generation wireless LAN platform that delivers breakthrough network scalability, capacity and performance.  
  • Notable fourth quarter wins and production deployments include:
    • A large name-brand hotel chain in the Western United States for deployment in 20 hotels.
    • A nationwide wireless LAN expansion for a multi-billion dollar global data center organization.
    • Two top 20 universities in the United Kingdom.
    • A multi-site warehouse deal with a logistics company in the United Kingdom.
    • One of the largest port services companies in Saudi Arabia.
    • One of the top 10 largest stadiums in the world located in Australia.

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its fourth quarter and full year 2011 results, today, February 1st 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 42269912.

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 (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. The call ID for the replay is 42269912. The live and archived webcast of the fourth quarter and full year 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 provides a virtualized wireless LAN architecture that cost-effectively delivers the performance, reliability, predictability and operational simplicity of a wired network, with the advantages of mobility. Meru's solution represents an innovative, yet standards-based approach to wireless networking that utilizes virtualization technology to create an intelligent and self-monitoring wireless network, enabling enterprises to migrate their business-critical applications from wired networks to wireless networks, to become all-wireless enterprises.  Meru's solutions have been adopted in all major industry vertical markets, including Fortune 500 enterprises, healthcare, education, retail, manufacturing, hospitality and government. Meru is headquartered in Sunnyvale, California, and has operations in the Americas, Europe, the Middle East and Asia Pacific. For more information, visit Meru Investor Information or call (408) 215-5300.  

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 expectation that it will reap the benefit, beginning in the second half of 2012, of the increases in sales headcount, expanded product portfolio and marketing investment it made in 2011; the company's belief that driven by BYOD, the worldwide mobile workforce will continue to expand, resulting in increasing the demand for seamless, secure and reliable access to enterprise wireless networks;  Meru's belief that to meet the demands of high density environments where business-essential execution applications will continue and depends on all wireless mobile edge networks and that that the company's approach will enable organizations to do so.  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 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 and marketing 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 November 8, 2011, as well as additional reports filed with the SEC. 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),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, and other items outside the ordinary course of  business such as litigation reserves expense or adjustment to fair value of the warrant liability. 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,




2011


2010

ASSETS




CURRENT ASSETS:




 Cash and cash equivalents

$          35,259


$          62,270

 Short-term investments

5,000


4,999

 Accounts receivable, net

13,038


8,796

 Inventory

6,548


4,636

 Deferred inventory costs, current portion

86


1,273

 Prepaid expenses and other current assets

912


1,195

         Total current assets

60,843


83,169







Property and equipment, net

1,476


763

Goodwill

1,658


-

Intangible assets, net

693


-

Deferred inventory costs, net of current portion

26


77

Other assets

2,147


359

TOTAL ASSETS

$          66,843


$          84,368







LIABILITIES AND STOCKHOLDERS' EQUITY




  STOCKHOLDERS’ DEFICIT:




CURRENT LIABILITIES:





Accounts payable

$            5,733


$            4,302


Accrued liabilities

12,394


10,694


Long-term debt, current portion

-


2,808


Deferred revenue, current portion

11,764


12,723



Total current liabilities

29,891


30,527







Deferred revenue, net of current portion

4,481


3,923



Total liabilities

34,372


34,450







STOCKHOLDERS’ EQUITY:





Preferred stock

-


-


Common stock

9


8


Additional paid-in capital

254,576


245,160


Accumulated other comprehensive loss

(197)


(27)


Accumulated deficit

(221,917)


(195,223)



Total stockholders' equity

32,471


49,918







TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$          66,843


$          84,368



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,


2011


2010


2011


2010

REVENUES:








 Products

$      19,728


$      17,470


$      74,279


$      63,197

 Support and services

3,542


3,048


12,957


10,479

 Ratable products and services

63


2,128


3,235


11,328

         Total revenues

23,333


22,646


90,471


85,004









COSTS OF REVENUES:








 Products

6,801


6,148


26,415


22,060

 Support and services

1,450


715


4,581


2,297

 Ratable products and services

39


1,093


1,863


6,021

         Total costs of revenues *

8,290


7,956


32,859


30,378









         Gross profit

15,043


14,690


57,612


54,626









OPERATING EXPENSES:








 Research and development *

3,433


3,439


13,966


12,399

 Sales and marketing *

14,762


9,315


47,688


33,483

 General and administrative *

4,780


2,646


14,779


10,462

 Litigation reserve

-


-


7,250


-

          Total operating expenses

22,975


15,400


83,683


56,344









Loss from operations

(7,932)


(710)


(26,071)


(1,718)









Interest expense, net

(54)


(153)


(253)


(813)

Other income (expense), net

(45)


27


41


(33,821)

Loss before provision for income taxes

(8,031)


(836)


(26,283)


(36,352)









Provision for income taxes

150


59


411


254

Net loss

$      (8,181)


$         (895)


(26,694)


(36,606)









Net loss per share of common stock, basic and diluted

$        (0.46)


$        (0.06)


$        (1.54)


$        (3.06)









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

17,616,664


16,094,659


17,377,503


11,981,170

























*Includes stock-based compensation expense as follows:








      Costs of revenues

$             82


$             65


$           346


$           197

      Research and development

273


235


1,131


767

      Sales and marketing

630


298


2,217


985

      General and administrative

643


602


2,480


1,896


$        1,628


$        1,200


$        6,174


$        3,845









*Includes amortization of acquisition-related intangible assets as follows:








      Costs of revenues

$             52


$              -


$             70


$              -

      Sales and marketing

21


-


27


-


$             73


$              -


$             97


$              -









*Includes chief executive officer transition costs as follow:








      General and administrative

$        1,115


$              -


$        1,115


$              -



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,



2011


2010


2011


2010










GAAP net loss

$      (8,181)


$         (895)


$    (26,694)


$    (36,606)




.




.


Plus:









a) Stock-based compensation

1,628


1,200


6,174


3,845


b) Adjustment of fair value of warrant liability

-


-


-


33,620


c) Litigation reserve

-


-


7,250


-


d) Amortization of acquisition-related intangible assets

73


-


97


-


e) Chief executive officer transition costs

1,115


-


1,115


-

Non-GAAP net (loss) income

$      (5,365)


$          305


$    (12,058)


$          859










GAAP net loss per share of common stock, basic

(0.46)


$        (0.06)


$        (1.54)


$        (3.06)










Plus:









a) Stock-based compensation

0.09


0.08


0.36


0.32


b) Adjustment of fair value of warrant liability

-


-


-


2.81


c) Litigation reserve

-


-


0.42


-


d) Amortization of acquisition-related intangible assets

0.01


-


0.01


-


e) Chief executive officer transition costs

0.06


-


0.06


-










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

$        (0.30)


$         0.02


$        (0.69)


$         0.07










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

$        (0.30)


$         0.02


$        (0.69)


$         0.05










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

17,616,664


16,094,659


17,377,503


11,981,170










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

17,616,664


18,266,607


17,377,503


16,677,558























































GAAP loss from operations

$      (7,932)


$         (710)


$    (26,071)


$      (1,718)










Plus stock-based compensation:









Costs of revenues

$           82


$           65


$          346


$          197


Research and development

273


235


1,131


767


Sales and marketing

630


298


2,217


985


General and administrative

643


602


2,480


1,896



1,628


1,200


6,174


3,845











Litigation reserve

-


-


7,250


-


Amortization of acquisition-related intangible assets

73


-


97


-


Chief executive officer transition costs

1,115


-


1,115


-










Non-GAAP (loss) income from operations

$      (5,116)


$          490


$    (11,435)


$       2,127



MERU NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)














Years ended

December 31,






2011


2010

CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$    (26,694)


$    (36,606)










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






Depreciation and amortization

724


615



Stock-based compensation

6,174


3,845



Adjustment of fair value of warrant liability

-


33,620



Amortization of debt issuance costs

44


107



Bad debt expense

143


(61)



Changes in operating assets and liabilities:







Accounts receivable, net

(4,292)


(2,768)




Inventory

(1,912)


(1,803)




Deferred inventory costs

1,238


4,616




Prepaid expenses and other assets

(325)


(560)




Accounts payable

1,431


992




Accrued liabilities

1,483


4,350




Deferred revenue

(416)


(8,466)













Net cash used in operating activities

(22,402)


(2,119)









CASH FLOWS FROM INVESTING ACTIVITIES:





Purchases of property and equipment

(1,360)


(680)


Purchases of short-term investments

(9,996)


(4,998)


Proceeds from maturities of short-term investments

10,000


-


Investment in non-marketable securities

(1,250)


-


Net cash paid in purchase of business

(2,217)


-













Net cash used in investing activities

(4,823)


(5,678)









CASH FLOWS FROM FINANCING ACTIVITIES:





Proceeds from initial public offering, net

-


57,059


Proceeds from issuance of common stock

3,233


2,539


Proceeds from exercise of convertible preferred stock warrants

-


716


Proceeds from long-term debt and line of credit

-


4,986


Repayment of long-term debt and line of credit

(2,852)


(16,540)













Net cash provided by financing activities

381


48,760










Effect of exchange rate changes on cash and cash equivalents

(167)


24









NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(27,011)


40,987









CASH AND CASH EQUIVALENTS -- Beginning of period

62,270


21,283

CASH AND CASH EQUIVALENTS -- End of period

$     35,259


$     62,270











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.

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 or adjustment to fair value of the warrant liability 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.  

Media contact:

Investors contact:

Elyce Ventura or Kelli Tejada

Steve Pasko or Scott Morgan

Eastwick Communications

Market Street Partners

(650) 480-4054

(408) 215-5658

merunetworksteam@eastwick.com

ir@merunetworks.com



SOURCE Meru Networks, Inc.