Meru Networks, Inc., (NASDAQ:MERU), a leader in 802.11n
virtualized wireless LAN solutions for enterprise networking, today
announced its financial results for the quarter ended March 31,
2010.
First Quarter Financial Highlights
- First quarter revenues of $19.6
million, up 28% year-over-year
- Products and services revenues
of $15.9 million, up 62% year-over-year
- Successfully completed initial
public offering, raising $59.1 million in new capital
First Quarter Business Highlights
- Increased customer installed
base by almost 10%, adding over 250 customers during Q1, including:
- One of the fastest growing
specialty retailers in Japan,
- One of the world’s largest tire
manufacturers,
- Multiple five-star, luxury
hospitality properties globally,
- 20 new hospitals and
- The largest telco and the
largest cellular operator in Korea.
- Key new product and solution
announcements during the quarter were:
- Introduction of the Service
Assurance Program for enterprise wireless LANs. Designed to support
enterprises that are increasingly running mission critical
applications on their wireless LAN infrastructure, the Meru Service
Assurance Program is designed to deliver 99.99% wireless network
availability with up to 30% fewer access points than legacy
wireless systems, as well as the industry’s best quality of service
(QOS) for WiFi voice users.
- Introduction and shipment of the
i-Series 802.11n access points. A new line of innovative high
performance 802.11n wireless access points featuring the industry’s
first Orthogonal Array Beam Forming™ (OABF) antenna system. The
first product in the i-Series line, the AP320i, is designed for
enterprise environments that demand the most from products'
aesthetics yet expect the highest performance and best end-user
experience.
“We continue to see market dynamics shift towards Meru’s highly
differentiated virtualized wireless LAN solution, driven by the
growing adoption of 802.11n, increasing proliferation of wireless
devices and network right sizing initiatives," said Ihab
Abu-Hakima, President and Chief Executive Officer. “We believe
Meru’s unique technology and value proposition, coupled with our
expanding market presence enables us to continue executing on our
disciplined and systematic plan to enable enterprise organizations
to upgrade their legacy microcell wireless architectures with
Meru’s next generation solutions.”
“I am pleased with our strong first quarter financial results,”
said Brett White, Chief Financial Officer. “After successfully
completing our IPO earlier this quarter, we have strengthened our
financial foundation, which makes us better positioned to
capitalize on the significant market opportunity in front of
us.”
First Quarter Fiscal Year 2010 Financial Results
Total revenues for the first quarter of fiscal year 2010 were
$19.6 million, up 28% from $15.3 million in the first quarter of
fiscal year 2009. Products and services revenues for the first
quarter of fiscal year 2010 were $15.9 million, up 62% from the
$9.8 million reported in the first quarter of fiscal year 2009.
Net loss attributable to common stockholders as reported in
accordance with U.S. generally accepted accounting principles
(GAAP) was $35.8 million for the first quarter of 2010, or $74.19
per share, compared to a net loss attributable to common
stockholders of $1.9 million, or $5.14 per share, for the same
period of fiscal year 2009. GAAP results for the first quarter of
2010 included charges of $532,000 for stock-based compensation
expense and $35.2 million for the adjustment to fair value of the
warrant liability. As of the closing of the Company’s IPO on April
6th, the warrants will be adjusted to their fair value and
reclassified to equity. After that date, no additional fair value
adjustments will be incurred for the warrants. GAAP results for the
first quarter of 2009 included stock-based compensation expense of
$146,000, and a $3,000 benefit from the adjustment of fair value of
the warrant liability.
Meru reported a first quarter fiscal year 2010 non-GAAP net loss
of $97,000 or $0.20 per share, compared to a non-GAAP net loss of
$2.0 million, or non-GAAP loss per share of $4.76, for the first
quarter of fiscal year 2009. Non-GAAP results for both periods
exclude the impact of stock-based compensation and adjustments to
fair value of the warrant liability. Please refer to the
reconciliation of our non-GAAP to GAAP results.
Conference Call Information
Meru will host a conference call for analysts and investors to
discuss its first quarter results, today, May 11th 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) or 1-253-237-1123
(international) and reference conference ID 70678400. A replay of
the call will be made available shortly after the conclusion of the
live call and can be accessed by dialing 1-800-642-1687 (domestic)
or 1-706-645-9291 (international). A live webcast of the conference
call will be available on the Investor Relations section of the
Company’s website at http://investors.merunetworks.com. The
recording of the webcast will be available on this site following
the webinar.
About Meru Networks
Founded in 2002, Meru Networks 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, Calif., and has
operations in the Americas, Europe, the Middle East and Asia
Pacific. For more information, visit www.merunetworks.com.
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 market demand for our
products and services, our expectations regarding our business
strategy, position, and future business and financial performance,
our belief that we will continue to take market share away from the
legacy microcell architectures, and our ability to provide the
industry’s best quality of service for WiFi voice users. 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. These risk and uncertainties
may also include those discussed under the section titled “Risk
Factors” and elsewhere in the Company’s prospectus files with the
Securities and Exchange Commission pursuant to Rule 424(b) on March
31, 2010 and other factors that may not be known to us.
These forward-looking statements reflect our current views with
respect to future events and are based on assumptions and subject
to risk and uncertainties. You should not rely upon forward-looking
statements as predictions of future events. The events and
circumstances reflected in the forward-looking statements may not
be achieved or occur. We cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any
other person assume responsibility for the accuracy and
completeness of the forward-looking statements. Any forward-looking
statement speaks only as of its date. Except as required by law, we
undertake no obligation to update publicly any forward-looking
statements for any reason to conform these statements to actual
results or to changes in our expectations.
Non-GAAP Financial Measurements
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, Meru reports
non-GAAP net loss, which excludes stock-based compensation expense
and adjustments to the fair value of warrants. Meru believes that
its non-GAAP net 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 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.
MERU NETWORKS, INC. Consolidated Balance Sheets
(Unaudited) (In thousands, except for share and per share
amounts) March 31, December 31,
2010 2009 ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 14,974 $ 21,283
Accounts receivable, net 6,018 5,967 Receivable from initial public
offering 59,051 - Inventory 2,747 2,833 Deferred inventory costs,
current portion 3,559 4,547 Prepaid expenses and other current
assets 669 1,382 Total current assets
87,018 36,012 Property and equipment, net 656 698 Deferred
inventory costs, net of current portion 851 1,419 Other assets
297 283 TOTAL ASSETS $ 88,822 $
38,412
LIABILITIES, CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT STOCKHOLDERS’
DEFICIT:
CURRENT LIABILITIES: Accounts payable $ 4,219 $ 3,310
Accrued liabilities 7,533 6,989 Long-term debt, current portion
7,784 11,447 Deferred revenue, current portion 16,358 18,864
Warrant liability 50,590 18,939 Total
current liabilities 86,484 59,549 Long-term debt, net of
current portion 1,427 2,808 Deferred revenue, net of current
portion 5,051 6,248 Total liabilities
92,962 68,605
Convertible preferred stock,
$0.0005 par value -- 118,476,760 shares authorized; 103,776,161 and
110,032,788 shares issued and outstanding as of March 31, 2010 and
December 31, 2009
123,278 125,255 STOCKHOLDERS’ DEFICIT:
Common stock, $0.0005 par value --
150,000,000 and 19,230,769 shares authorized as of March 31, 2010
and December 31, 2009; 5,469,607 and 414,118 shares issued and
outstanding as of March 31, 2010 and December 31, 2009
3 1 Additional paid-in capital 67,034 3,211 Accumulated other
comprehensive loss (23 ) (43 ) Accumulated deficit (194,432
) (158,617 ) Total stockholders' deficit (127,418 )
(155,448 ) TOTAL LIABILITIES, CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT $ 88,822 $ 38,412
MERU NETWORKS, INC. Consolidated Statements of
Operations (Unaudited) (In thousands, except for
share and per share amounts) Three months
ended March 31, 2010 2009
REVENUES: Products $ 13,738 $ 8,824 Support and services
2,152 993 Ratable products and services 3,729
5,506 Total revenues 19,619 15,323
COSTS OF REVENUES: Products 4,781 3,494 Support and
services 353 93 Ratable products and services 2,100
2,639 Total costs of revenues * 7,234
6,226 Gross profit 12,385
9,097 OPERATING EXPENSES: Research and development *
2,777 2,385 Sales and marketing * 7,391 6,359 General and
administrative * 2,345 1,668 Total
operating expenses 12,513 10,412
Loss from operations (128 ) (1,315 ) Interest expense, net
(254 ) (704 ) Other expense, net (35,383 ) (72 ) Loss
before provision for income taxes (35,765 ) (2,091 )
Provision for income taxes 50 49 Net Loss (35,815 )
(2,140 ) Accretion on convertible preferred stock -
221 Net loss attributable to common
stockholders $ (35,815 ) $ (1,919 ) Net loss per share of
common stock, basic and diluted $ (74.19 ) $ (5.14 ) Shares
used in computing net loss per share of common stock, basic and
diluted 482,778 373,064
*Includes stock-based compensation expense as follows: Costs of
revenues $ 12 $ 13 Research and development 54 21 Sales and
marketing 83 68 General and administrative 383
44 $ 532 $ 146
MERU NETWORKS, INC.
Consolidated Statements of Operations (GAAP to Non-GAAP
Reconciliation) (Unaudited) (In thousands, except
share and per share amounts) Three months
ended March 31, 2010 2009
GAAP Net Loss $ (35,815 ) $ (2,140 )
Plus: a) Stock-based compensation 532 146 b) Adjustment of fair
value of warrant liability 35,186 (3 )
Non-GAAP
net loss $ (97 ) $ (1,997 )
GAAP net loss per share
of common stock $ (74.19 ) $ (5.14 )
* Plus: a)
Stock-based compensation 1.10 0.39 b) Adjustment of fair value of
warrant liability 72.89 (0.01 )
Non-GAAP net loss per share of common stock $ (0.20 ) $
(4.76 )
* Shares used in computing diluted GAAP net
loss per share of common stock 482,778 373,064 Shares used
in computing diluted Non-GAAP net income (loss) per share of common
stock 482,778 373,064
GAAP loss from operations $ (128 ) $ (1,315 ) Plus
stock-based compensation: Costs of revenues 12 13 Research and
development 54 21 Sales and marketing 83 68 General and
administrative 383 44 532 146
Non-GAAP income (loss) from operations $ 404 $ (1,169
)
* Per share calculation
reflects $221K accretion on convertible preferred stock in Q1 2009.
MERU NETWORKS, INC. Consolidated Statement of Cash
Flows (Unaudited) (In thousands)
Three months ended March
31,
2010 2009 CASH FLOWS FROM
OPERATING ACTIVITIES: Net loss $ (35,815 ) $ (2,140 )
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization 139 140 Stock-based
compensation 532 146 Adjustment of fair value of warrant liability
35,186 (3 ) Accrued interest on convertible promissory notes - 201
Amortization of debt issuance costs 29 34 Bad debt expense (46 ) 23
Changes in operating assets and liabilities:
Accounts receivable, net
(5 ) (430 )
Inventory
86 406
Deferred inventory costs
1,556 2,216
Prepaid expenses and other
assets
(1,145 ) (104 )
Accounts payable
909 80
Accrued liabilities
551 (33 )
Deferred revenue
(3,703 ) (4,114 )
Net cash used in operating
activities
(1,726 ) (3,578 ) CASH FLOWS FROM INVESTING
ACTIVITIES: Purchase of property and equipment (97 )
-
Net cash used in investing
activities
(97 ) - CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from exercise of stock options 97 26 Proceeds
from exercise of convertible preferred stock warrants 513 -
Proceeds from issuance of convertible preferred stock and warrants,
net of issuance costs - 14,067 Proceeds from issuance of
convertible promissory notes - 3,170 Proceeds from long-term debt
2,486 8,411 Repayment of long-term debt (7,559 )
(9,670 )
Net cash (used in) provided by
financing activities
(4,463 ) 16,004 Effect of exchange rate
changes on cash and cash equivalents (23 ) 10
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,309
) 12,436 CASH AND CASH EQUIVALENTS -- Beginning of period
21,283 5,172 CASH AND CASH EQUIVALENTS -- End of
period $ 14,974 $ 17,608
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