Meru Networks
MERU NETWORKS INC (Form: 8-K, Received: 07/27/2011 16:22:06)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

Form 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2011

 

 

Meru Networks, Inc.

(Exact name of registrant as specified in its charter)

 

 

001-34659

(Commission File Number)

 

Delaware   26-0049840

(State or other jurisdiction

of incorporation)

 

(I.R.S. Employer

Identification No.)

894 Ross Drive, Sunnyvale, California 94089

(Address of principal executive offices, with zip code)

(408) 215-5300

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On July 27, 2011, Meru Networks, Inc. issued a press release reporting its financial results for its second quarter ended June 30, 2011. A copy of the press release is furnished herewith as Exhibit 99.1.

The information in Item 2.02 of this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Item 2.02 shall not be incorporated by reference in any registration statement or other document filed by Meru Networks with the Securities and Exchange Commission, whether made before or after the date of this Current Report, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
No.

  

Description

99.1

   Press release dated July 27, 2011.

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  MERU NETWORKS, INC.
Date: July 27, 2011   By:  

/ S /  B RETT T. W HITE

    Brett T. White
    Chief Financial Officer

 

3


EXHIBIT INDEX

 

Exhibit
No.

  

Description

99.1

   Press release dated July 27, 2011.

 

4

Exhibit 99.1

 

Media contact:     Investors contact:
Elyce Ventura or Kelli Tejada     Ingrid Ebeling or Scott Morgan
Eastwick Communications     Market Street Partners
(650) 480-4054     (408) 215-5658
merunetworksteam@eastwick.com     ir@merunetworks.com

MERU NETWORKS REPORTS RECORD SECOND QUARTER 2011

FINANCIAL RESULTS

24% year-over-year increase in products revenues

Strengthened executive team with addition of proven sales and marketing leadership

SUNNYVALE, Calif., July 27, 2011 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

 

   

Record total revenues of $23.2 million, an increase of 11% year-over-year. Products revenues grew 24% year-over-year and 23% from the previous quarter.

 

   

Customer count now over 5,000 worldwide, an increase in the installed base of approximately 9% from the end of the prior quarter.

 

   

Reported non-GAAP gross margin of 64.5%, an improvement of 120 basis points from the prior quarter.

 

   

Days Sales Outstanding (DSO) was 40 days when excluding the impact of the ratable revenue element, an improvement of approximately 12 days from the prior quarter.

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

 

   

During the quarter, Meru expanded its executive leadership team with the appointment of two industry veterans: Larry Vaughan, Senior Vice President of Worldwide Sales, Service & Support; and Carl Gustin, Chief Marketing Officer.

 

   

Meru announced the AP400 mobile edge access point, an innovative product designed to deliver more than a gigabit per second data rate. IT organizations will use these access points to manage a smooth and accelerating transformation of their enterprise edge network from a wired Ethernet switch architecture to a new mobile edge.

 

   

Notable second quarter wins and production deployments include:

 

   

One of the top 10 largest school districts in the United States.

 

   

A five-star 1,400 room iconic, landmark hotel in New York City.

 

   

The parent company of some of the largest real estate brokerage networks in the world.

 

   

A leading provider of innovative network applications to government, healthcare, education and enterprise.

 

   

A worldwide leader in the development of advanced digital camera technology products for machine vision, industrial imaging, and computer vision applications.

“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.


MERU NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

     June 30,
2011
    December 31,
2010
 

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 53,552      $ 62,270   

Short-term investments

     4,999        4,999   

Accounts receivable, net

     9,693        8,796   

Inventory

     5,213        4,636   

Deferred inventory costs, current portion

     339        1,273   

Prepaid expenses and other current assets

     1,113        1,195   
                

Total current assets

     74,909        83,169   

Property and equipment, net

     978        763   

Deferred inventory costs, net of current portion

     50        77   

Other assets

     363        359   
                

TOTAL ASSETS

   $ 76,300      $ 84,368   
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable

   $ 4,153      $ 4,302   

Accrued liabilities

     8,999        10,694   

Litigation reserve

     7,250        —     

Long-term debt, current portion

     —          2,808   

Deferred revenue, current portion

     9,015        12,723   
                

Total current liabilities

     29,417        30,527   

Deferred revenue, net of current portion

     4,262        3,923   
                

Total liabilities

     33,679        34,450   
                

STOCKHOLDERS’ EQUITY:

    

Preferred stock

     —          —     

Common stock

     9        8   

Additional paid-in capital

     250,939        245,160   

Accumulated other comprehensive income (loss)

     37        (27

Accumulated deficit

     (208,364     (195,223
                

Total stockholders’ equity

     42,621        49,918   
                

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 76,300      $ 84,368   
                


MERU NETWORKS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

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

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2011     2010     2011     2010  

REVENUES:

        

Products

   $ 19,015      $ 15,279      $ 34,455      $ 29,017   

Support and services

     3,120        2,708        6,260        4,860   

Ratable products and services

     1,094        2,915        2,665        6,644   
                                

Total revenues

     23,229        20,902        43,380        40,521   
                                

COSTS OF REVENUES:

        

Products

     6,664        5,255        12,375        10,036   

Support and services

     1,043        618        1,940        971   

Ratable products and services

     639        1,517        1,491        3,617   
                                

Total costs of revenues *

     8,346        7,390        15,806        14,624   
                                

Gross profit

     14,883        13,512        27,574        25,897   
                                

OPERATING EXPENSES:

        

Research and development *

     3,393        3,059        6,815        5,836   

Sales and marketing *

     10,445        8,124        20,057        15,515   

General and administrative *

     3,426        2,670        6,344        5,015   

Litigation reserve

     7,250        —          7,250        —     
                                

Total operating expenses

     24,514        13,853        40,466        26,366   
                                

Loss from operations

     (9,631     (341     (12,892     (469

Interest expense, net

     (62     (224     (154     (478

Other income (expense), net

     13        1,523        68        (33,860
                                

(Loss) income before provision for income taxes

     (9,680     958        (12,978     (34,807

Provision for income taxes

     86        57        163        107   
                                

Net (loss) income

   $ (9,766   $ 901        (13,141     (34,914
                                

Net (loss) income per share of common stock, basic

   $ (0.56   $ 0.06      $ (0.76   $ (4.43
                                

Net (loss) income per share of common stock, diluted

   $ (0.56   $ 0.05      $ (0.76   $ (4.43
                                

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

     17,393,322        15,219,636        17,183,907        7,890,099   
                                

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

     17,393,322        18,196,368        17,183,907        7,890,099   
                                

*  Includes stock-based compensation expense as follows:

        

Costs of revenues

   $ 97      $ 62      $ 163      $ 74   

Research and development

     264        247        542        301   

Sales and marketing

     532        296        951        379   

General and administrative

     678        369        1,279        752   
                                
   $ 1,571      $ 974      $ 2,935      $ 1,506   
                                


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
June 30,
    Six months ended
June 30,
 
     2011     2010     2011     2010  

GAAP net (loss) income

   $ (9,766   $ 901      $ (13,141   $ (34,914

Plus:

        

a) Stock-based compensation

     1,571        974        2,935        1,506   

b) Adjustment of fair value of warrant liability

     —          (1,566     —          33,620   

c) Litigation reserve

     7,250        —          7,250        —     
                                

Non-GAAP net (loss) income

   $ (945   $ 309      $ (2,956   $ 212   
                                

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

   $ (0.56   $ 0.06      $ (0.76   $ (4.43

Plus:

        

a) Stock-based compensation

     0.09        0.06        0.17        0.19   

b) Adjustment of fair value of warrant liability

     —          (0.10     —          4.27   

c) Litigation reserve

     0.42        —          0.42        —     
                                

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

   $ (0.05   $ 0.02      $ (0.17   $ 0.03   
                                

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

   $ (0.05   $ 0.02      $ (0.17   $ 0.01   
                                

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

     17,393,322        15,219,636        17,183,907        7,890,099   

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

     17,393,322        18,196,368        17,183,907        15,375,545   

GAAP loss from operations

   $ (9,631   $ (341   $ (12,892   $ (469
                                

Plus stock-based compensation:

        

Costs of revenues

   $ 97      $ 62      $ 163      $ 74   

Research and development

     264        247        542        301   

Sales and marketing

     532        296        951        379   

General and administrative

     678        369        1,279        752   
                                
     1,571        974        2,935        1,506   
                                

Litigation reserve

     7,250        —          7,250        —     
                                

Non-GAAP (loss) income from operations

   $ (810   $ 633      $ (2,707   $ 1,037   
                                


MERU NETWORKS, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended
June 30,
 
     2011     2010  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net loss

   $ (13,141   $ (34,914

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

    

Depreciation and amortization

     291        283   

Stock-based compensation

     2,935        1,506   

Adjustment of fair value of warrant liability

     —          33,620   

Amortization of debt issuance costs

     44        58   

Bad debt expense

     9        (46

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (906     99   

Inventory

     (577     (301

Deferred inventory costs

     961        2,815   

Prepaid expenses and other assets

     78        (354

Accounts payable

     (149     (202

Accrued liabilities

     (1,648     1,641   

Litigation reserve

     7,250        —     

Deferred revenue

     (3,369     (6,698
                

Net cash used in operating activities

     (8,222     (2,493
                

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Purchases of property and equipment

     (506     (259

Purchases of short-term investments

     (4,997     —     

Proceeds from maturities of short-term investments

     5,000        —     
                

Net cash used in investing activities

     (503     (259
                

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from initial public offering, net

     —          57,234   

Proceeds from issuance of common stock

     2,835        170   

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     (11,344
                

Net cash (used in) provided by financing activities

     (17     51,762   
                

Effect of exchange rate changes on cash and cash equivalents

     24        (13
                

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (8,718     48,997   

CASH AND CASH EQUIVALENTS — Beginning of period

     62,270        21,283   
                

CASH AND CASH EQUIVALENTS — End of period

   $ 53,552      $ 70,280   
                


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.