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 22, 2014

 

 

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)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

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 28, 2014, Meru Networks, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended June 30, 2014. 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, 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 and the accompanying exhibit shall not be incorporated by reference in any registration statement or other document filed by the Company 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Amended and Restated 2014 Management Bonus Plan

On July 22, 2014, the Compensation Committee (the “Committee”) of the Board of Directors of the Company approved an Amended and Restated 2014 Management Bonus Plan (the “Amended Bonus Plan” in which each of the Company’s executive officers is eligible to participate. The Amended Bonus Plan amends and restates in its entirety the prior 2014 Bonus Plan approved by the Committee on January 28, 2014 (the “Original Plan”). A summary of the terms of the Amended Bonus Plan are as follows:

 

  •   No Revenue Bonus or Non-GAAP EBITA Bonus will be paid to any executive officer for first half (first quarter and second quarter) 2014 performance.

 

  •   Bonuses for the second half of 2014 are earned and paid based on achievement against goals for the second half of 2014 (less any amounts paid upon achievement of quarterly revenue targets).

 

  •   Target bonus levels for the second half of 2014 are 50% of a fixed percentage of the executive officer’s annual base salary as of December 31, 2014. The fixed percentages for the Revenue Bonus, Non-GAAP EBITA Bonus and MBO Bonus for each executive officer are unchanged from the Original Plan.

 

  •   Revenue Bonus. For achievement between 89.7% and 100% of the second half revenue target under the Company’s updated second half operating plan (the “Revenues Target”), the Revenue Bonus for each of the Company’s executive officers will start at a payout of 0% of the target Revenue Bonus amount and will increase on a straight-line basis according to the percentage of achievement up to 80%. For achievement above 100% and up to 105.2% of the Revenues Target, the Revenue Bonus will start at a payout of 80% of the target Revenue Bonus amount and will increase on a straight-line basis according to the percentage of achievement up to 100%. A portion of the Revenue Bonus, if any, is paid quarterly based on quarterly revenue targets following the Company’s earnings announcements.

 

  •   Non-GAAP EBITA Bonus. The minimum non-GAAP EBITA result (the “Minimum Threshold”) shall be $2.63 million less than the non-GAAP EBITA target set by the Committee (the “Second Half Target”). The amount of the Non-GAAP EBITA Bonus will be calculated on a straight-line basis starting at 0% of the target Non-GAAP EBITA Bonus upon achievement of the Minimum Threshold, and up to 80% of the target Non-GAAP EBITA Bonus upon achievement of 100% the Second Half Target under the Company’s updated second half operating plan. For achievement above 100% and up to 158.4% of the Target Non-GAAP EBITA Amount, the Non-GAAP EBITA Bonus will start at a payout of 80% of the target Non-GAAP EBITA Bonus and will increase on a straight-line basis according to the percentage of achievement up to 100% target Non-GAAP EBITA Bonus.

 

  •   MBO Bonus. Executives, other than the CEO, CFO and SVP Sales, are eligible to receive an MBO bonus which shall be tied to performance by the executive against management objectives.

 

  •   Up to 2/3rds of any bonus payable under the Amended Bonus Plan may be paid, in the discretion of the Committee, in fully vested restricted stock units (“RSUs”) with no uplift for liquidity.

 

2

The target and maximum bonuses for second half 2014 under the Amended Bonus Plan based on the current salaries for the named executive officers are as follows (subject to rounding):

 

Name

    Target Second Half*
Bonus as a
Percentage of
Annual Salary		     Target Second
Half*
Bonus Amount		      Maximum Amount
of All Potential
Bonuses under Amended
Plan		  

Bami Bastani, Ph.D.
President and CEO

      50 %   $ 225,000       $ 225,000   

Brian McDonald
Chief Financial and Administrative Officer

      25 %   $ 76,500       $ 76,500   

Larry Vaughan ,
SVP Worldwide Sales and
Field Operations

      59 %   $ 162,500       $ 162,500   

Sarosh Vesuna
VP and GM, Business Units

      22.5 %   $ 50,625       $ 50,625   

Ajay Malik
SVP, Engineering

      22.5 %   $ 61,875       $ 61,875   

 

* No bonus payments were made for first half performance.

 

3

The foregoing is a summary of the Amended and Restated 2014 Management Bonus Plan and does not purport to be complete. The foregoing is qualified in its entirety by reference to the Amended and Restated 2014 Management Bonus Plan, a copy of which is filed as Exhibit 10.01 to this Current Report on Form 8-Kand is incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
No.

   

Exhibit Title or Description

10.01    Amended and Restated 2014 Management Bonus Plan.
99.1    Press release dated July 28, 2014.

 

4

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 28, 2014     By:  

/S/    Brian R. McDonald

      Brian R. McDonald
      Chief Financial and Administrative Officer

 

3

EXHIBIT INDEX

 

Exhibit
No.

   

Description

10.01    Amended and Restated 2014 Management Bonus Plan.
99.1    Press release dated July 28, 2014.

 

4

EX-10.01

Exhibit 10.01

AMENDED AND RESTATED 2014 MANAGEMENT BONUS PLAN

Effective as of July 22, 2014

The President and CEO, all executives who report to the President and CEO of Meru Networks, Inc. (the “Company”), and certain other executives who do not otherwise receive variable compensation will be eligible to participate in this cash bonus plan and who have been notified of their eligibility by the Committee (as defined below) (this “Amended Plan”). This Amended Plan amends and replaces in its entirety that certain 2014 Management Bonus Plan previously approved by the Committee.

 

A. ANNUAL CASH BONUS PLAN

The cash bonus available will be calculated for the second half based on a percentage of an executive’s base salary upon the Company’s achievement of revenue targets and non-GAAP EBITA targets, as described below, as well as, for executives other than the CEO, CFO and Senior Vice President of Worldwide Sales and Field Operations (“SVP Sales”), individual performance against objectives (collectively, the “Annual Cash Bonus”). Following the end of each quarter, the Revenue Bonus will be calculated and paid based on the Company’s achievement of quarterly revenue targets (or in some circumstances second half-to-date target achievement), with such payment not to exceed 100% of the executive’s targeted second half-to-date revenue bonus, subject to the terms described below and irrespective of whether the non-GAAP EBITA targets were met. Following the end of the second half, the annual cash bonus available is calculated and paid based upon the Company’s achievement of second half revenue targets and non-GAAP EBITA compared to the second half target objectives (without duplication of amounts previously paid for revenue achievement). The Revenue Bonus element of the Annual Cash Bonus will be awarded based on revenue performance irrespective of whether the Minimum Non-GAAP EBITA threshold has been met (subtracting amounts previously paid for the quarterly revenue achievement), and the Non-GAAP EBITA bonus will be awarded irrespective of whether the revenue target is achieved. In addition, except for the Company’s CEO, CFO and SVP Sales, a portion of the Annual Cash Bonus will be awarded based upon executive’s performance against certain objectives as reasonably determined by the Company’s CEO, and approved by the Company’s Compensation Committee (the “Committee”). The executive may earn more or less than his or her target bonus based on achievement of the performance goals; provided, however that the total bonus amount1 shall not exceed 100% of the executive’s targeted bonus value for second half performance. No payments were made for first half performance under this Amended Plan.

The following table provides the percentage of the executive’s base salary that is such executive’s targeted annual bonus value.

 

Executive Officer

    Percentage of Annual Salary  

President and Chief Executive Officer (CEO

      100 % 

Chief Financial Officer (CFO)

      50 % 

Senior Vice President Sales & Services

      118 % 

Senior Vice Presidents (includes GM’s and General Counsel)

      45 % 

Vice Presidents (Exec Level)

      40 % 

 

1  The total bonus amount equals the aggregate of the Revenue Bonus (as defined below), the Non-GAAP EBITA Bonus (as defined below), and for executives other than the CEO, CFO and SVP Sales, the Management Objective Bonus (as defined below). The Revenue Bonus and Non-GAAP EBITA Bonus shall not exceed 100% of the applicable target bonus value.

I. Revenue Bonus

50% of the overall target bonus award for the CEO and CFO, 60% of the overall target bonus award for the SVP Sales, and 40% of the overall target bonus award to the other executives, is tied to achievement of the revenue target as described in the Company’s operating plan as approved by the board of directors (the “Revenue Bonus”).

First Half (First Quarter and Second Quarter) Performance

No payment shall be made for Revenue Bonus for first half performance.

Second Half (Third Quarter and Fourth Quarter) Performance

In order for any amounts to be payable under the Revenue Bonus for the second half, the revenue target must be met at a level of at least 89.7% of the target. For achievement between 89.7% and 100% of the revenue target, the Revenue Bonus will start at a payout of 0% of the target Revenue Bonus amount and will increase on a straight-line basis according to the percentage of achievement up to 80% of the target Revenue Bonus amount for each respective executive.2 The executives are also eligible to receive an increased Revenue Bonus if the Company’s revenue exceeds the revenue target as follows: for achievement above 100% and up to 105.2% of the revenue target, the Revenue Bonus will start at a payout of 80% of the target Revenue Bonus amount and will increase on a straight-line basis according to the percentage of achievement up to 100% of the target Revenue Bonus amount for each respective executive.3

A pro rata portion of the Revenue Bonus for the second half, if any is achieved, shall be paid quarterly following each of the Company’s quarterly earnings announcements for the third and fourth quarters, respectively, based on the second half-to-date achievement of the quarterly revenue plan. If the second half-to-date revenue threshold is not met for particular quarter(s), but in a subsequent quarter the cumulative second half-to-date threshold is achieved, then the pro rata second half Revenue Bonus payment shall be made based upon the second half-to-date percentage of attainment, with such payment not to exceed 100% of the executive’s targeted second half-to-date Revenue Bonus (less any Revenue Bonus already paid).4 Following the Company’s earnings announcement covering the full year 2014, the executives may receive a Revenue Bonus based on the criteria set forth above less the amount of any Revenue Bonus payments made pursuant to this paragraph.

 

II. Non-GAAP EBITA Bonus

50% of the overall target bonus award for the CEO and CFO and 40% of the overall target bonus award for each other executive is tied to non-GAAP EBITA5 (the “Non-GAAP EBITA Bonus”).

 

 

 

2  For example, in the event that the third quarter revenue is achieved at 94.8% of target level (which is the mid-point between 89.7% and 100%), the Revenue Bonuses for the third quarter will be paid at 40% of the target Revenue Bonus amount such that the quarterly payment for the Revenue Bonus for the Company’s Chief Financial Officer would equal 25% multiplied by 40% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary.
3  For example, in the event that the Company’s actual revenue is 105.2% of the second half revenue target, the Revenue Bonus will be paid at 100% of the target Revenue Bonus amount for the second half such that the Revenue Bonus paid to the Company’s Chief Financial Officer would equal 100% multiplied by 50% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary.
4  For example, in the third quarter if the quarterly revenue goal is achieved at 110%, the Company’s Chief Financial Officer will receive a quarterly payment for the Revenue Bonus equal to 25% multiplied by 80% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary.
5  After giving effect to (i) the Revenue Bonus, (ii) the Non-GAAP EBITA Bonus, and (iii) the MBO Bonus, each as adjusted for any applicable accelerator.

 

2

First Half (First Quarter and Second Quarter) Performance

No payment shall be made for Non-GAAP EBITA Bonus for first half performance.

Second Half (Third Quarter and Fourth Quarter) Performance

In order for the Non-GAAP EBITA Bonus to be paid for the second half of 2014, the Company must achieve the minimum Non-GAAP EBITA target as approved by the Committee (the “Minimum Non-GAAP EBITA Amount”)6. Upon achievement of the Minimum Non-GAAP EBITA for the second half of 2014, the amount of the Non-GAAP EBITA Bonus will be calculated on a straight line basis starting at 0% of the target Non-GAAP EBITA Bonus upon achievement of the Minimum Non-GAAP EBITA Amount and up to 80% of the target Non-GAAP EBITA Bonus upon achievement of 100% the Non-GAAP EBITA target under the Company’s updated operating plan for the second half (the “Target Non-GAAP EBITA Amount”).7

The executives are also eligible to receive an increased Non-GAAP EBITA Bonus if the Company’s non-GAAP EBITA exceeds the Target Non- GAAP EBITA Amount as follows: for achievement above 100% and up to 158.4% of the Target-Non-GAAP-EBITA Amount, the Non-GAAP EBITA Bonus will start at a payout of 80% of the target Non-GAAP EBITA Bonus and will increase on a straight-line basis according to the percentage of achievement up to 100% target Non-GAAP EBITA Bonus for each respective executive.8

 

III. Management Objective Bonus

20% of the overall target bonus award for eligible executives other than the CEO, CFO and SVP Sales shall be tied to performance by the executive against management objectives as reasonably determined in writing by the Company’s CEO and reported to the Chair of the Committee (each an “MBO Bonus”). The Company’s CEO shall determine achievement against the specific objectives, with such achievement to be approved by the Company’s Compensation Committee, and with such achievement not to exceed 100% for this portion of the Annual Cash Bonus.9

 

B. GENERAL

The Committee will be responsible for the general administration and interpretation of this Amended Plan and for carrying out its provisions, including the authority to construe and interpret the terms of this Amended Plan, determine the manner and time of payment of any Annual Cash Bonuses, prescribe any necessary procedures for distribution of Annual Cash Bonuses and adopt rules, regulations and to take such actions as it deems necessary or desirable for the proper administration of this Amended Plan. The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Amended Plan to one or more directors and/or officers of the Company.

 

 

6  The Minimum Non-GAAP EBITA Amount for the second half shall equal $2.63 million less than the Target Non-GAAP EBITA Amount.
7  For example, in the event that second half non-GAAP EBITA is achieved at the midway point between the Minimum Non-GAAP EBITA Amount and the Target Non-GAAP EBITA Amount, the Non-GAAP EBITA Bonus will be paid at 40% of the target Non-GAAP EBITA Bonus amount, such that the Non-GAAP EBITA Bonus paid to the Company’s Chief Financial Officer for second half performance would equal 40% multiplied by 50% multiplied by 50% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary.
8  For example, in the event that the Company’s actual second half non-GAAP EBITA is 158.4% of Target Non-GAAP EBITA Amount, the Non-GAAP EBITA Bonus will be paid at 100% of the target Non-GAAP EBITA Bonus for the second half, such that the Non-GAAP EBITA Bonus paid to the Company’s Chief Financial Officer would equal 100% multiplied by 50% multiplied by 50% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary.
9  For example, in the event that the Management Objectives are reached at a level of 75%, the Management Objective Bonus paid to the Company’s General Counsel would equal 75% multiplied by 20% multiplied by 45% multiplied by the General Counsel’s annual salary.

 

3

Any rule or decision by the Committee or its delegate(s) that is not inconsistent with the provisions of this Amended Plan shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.

The Committee may amend, modify, suspend or terminate this Amended Plan, in whole or in part, at any time, including the adoption of amendments deemed necessary or desirable to correct any defect or to supply omitted data or to reconcile any inconsistency in this Amended Plan or in any Annual Cash Bonus awarded hereunder. Moreover, the Committee may pay up to 2/3rd of any bonus described under this Amended Plan in fully vested restricted stock units (“RSUs”).

Notwithstanding any other provision hereof or any other agreement between the Company and any participant, the Company may, in its sole discretion, implement any recoupment or clawback policies or make any changes to any of the Company’s existing recoupment or clawback policies, as the Company deems necessary or advisable in order to comply with applicable law or regulatory guidance (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules of the SEC or a stock exchange or similar body implemented pursuant thereto that is applicable to the Company), and any Annual Cash Bonuses (including, for avoidance of doubt, any quarterly portion) awarded under this Amended Plan is subject to the terms and conditions of any such recoupment or clawback policies (as as may be adopted, amended or restated from time to time).

 

4

EX-99.1

Exhibit 99.1

 

LOGO

Meru Networks Reports Q2 2014 Financial Results

 

  •   Revenues grew 14% sequentially

 

  •   802.11ac sales grew 63% sequentially

 

  •   Meru Networks first to receive OPENFLOW SDN certification for wireless networking

SUNNYVALE, Calif., July 28, 2014 -- Meru Networks, Inc., (NASDAQ:MERU), a leader in intelligent Wi-Fi networking, today announced its financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Financial Results

Total revenues for the second quarter of 2014 were $23.6 million, down 10.9% from $26.5 million in the second quarter of 2013. Product revenues for the second quarter of 2014 were $18.8 million, down 13.3% from the $21.7 million reported in the second quarter of 2013.

Net loss as reported in accordance with GAAP was $4.2 million for the second quarter of 2014, or a net loss of ($0.18) per basic and diluted share, compared to a net loss of $3.1 million, or a net loss of ($0.14) per basic and diluted share, for the same period of 2013.

Meru reported a second quarter 2014 non-GAAP net loss of $3.0 million, or ($0.13) loss per basic and diluted share, compared to a non-GAAP net loss of $1.2 million, or ($0.05) loss per basic and diluted share, for the same period of 2013. Non-GAAP results for the second quarter of 2014 exclude the impact of stock-based compensation expense of $1.2 million and amortization of other intangibles totaling $0.1 million. Non-GAAP results for the second quarter of 2013 exclude the impact of stock-based compensation expense of $1.8 million and amortization of other intangibles of $0.1 million. Please refer to the reconciliation of Meru’s GAAP to non-GAAP results provided at the end of this release.

“The accelerating 11ac momentum represents a huge opportunity for Meru,” said Dr. Bami Bastani, president and CEO, Meru Networks. “In addition, being first to market with OPENFLOW™ certification for wireless networking positions Meru as a leader in SDN-enabled unified wired and wireless networking and expands our addressable market.”

Conference Call Information

Meru will host a conference call for analysts and investors to discuss its second quarter 2014 results today, July 28, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To join the live call, individuals may do so by dialing (877) 852-2926 for domestic callers and (253) 237-1123 for international callers. The conference ID for the call is 70474316.

LOGO

 

The live and archived webcast of the second quarter 2014 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

Meru Networks (NASDAQ: MERU) is a leader in intelligent 802.11ac Wi-Fi solutions, delivering uninterrupted user experience for education, healthcare, hospitality and enterprise. The Meru MobileFLEX architecture is designed to enable seamless roaming with traffic separation for critical applications, providing top performance and high capacity in high-density environments. Visit www.merunetworks.com or call (408) 215-5300 for more information.

© 2014 Meru Networks, Inc. Meru Networks and Meru are registered trademarks of Meru Networks, Inc. in the United States. OPENFLOW™ is a trademark of the Open Networking Foundation.

Cautionary Statement Regarding Forward Looking Statements

All statements other than statements of historical facts are statements that can be deemed forward-looking statements, including any statements of expectations or beliefs. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, among others: business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; competition in the industry; our future capital needs may change; changes in overall information technology spending; failure to develop new products; and those risks and uncertainties described in documents filed with or furnished to the Securities and Exchange Commission (“SEC”) by Meru, including under the caption “Risk Factors” in Meru’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2014, and any subsequent reports filed with the SEC. All forward-looking statements in this press release are based on information available to Meru as of the date hereof, and Meru assumes no obligation to update these forward-looking statements, except as required by law.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company believes it is appropriate to report certain non-GAAP financial measures.

LOGO

 

The Company’s non-GAAP financial measures include the adjustments as follows:

 

  •   Stock-Based Compensation. When evaluating the performance of its consolidated results, Meru does not consider stock-based compensation charges. Likewise, the Meru management team excludes stock-based compensation expense from its operating plans. In contrast, the Meru 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 places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants. Meru 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.

 

  •   Restructuring Costs. The Company excludes restructuring costs because such charges are isolated one-time charges and the Company does not expect them to recur in the ordinary course of its business. The Company further believes those charges are not directly related to its ongoing business results and do not reflect expected future operating expenses.

 

  •   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.

 

  •   Amortization of a common stock warrant issued in connection with debt financing. The Company excludes amortization of a common stock warrant issued in connection with debt financing when evaluating the performance of its consolidated results because 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.

LOGO

 

The Company’s non-GAAP financial measures include the following:

 

  •   Non-GAAP net loss - Non-GAAP net loss is net loss as reported on the Company’s condensed consolidated statements of operations, excluding the impact of stock-based compensation expense, restructuring costs, amortization of intangible assets related to the Company’s acquisition of Identity Networks and amortization of the fair value of a common stock warrant issued in connection with debt financing.

 

  •   Non-GAAP net loss per share of common stock, basic and diluted - Non-GAAP net loss per share of common stock, basic and diluted is net loss per share of common stock, basic, as reported on the Company’s condensed consolidated statements of operations excluding the impact of stock-based compensation expense, restructuring costs, amortization of intangible assets related to the Company’s acquisition of Identity Networks, and amortization of the fair value of a common stock warrant issued in connection with debt financing.

 

  •   Non-GAAP Gross margin - Non-GAAP Gross margin is gross margin as reported on the Company’s condensed consolidated statements of operations excluding the impact of stock-based compensation expense and amortization of intangible assets related to the Company’s acquisition of Identity Networks.

 

  •   Non-GAAP loss from operations - Non-GAAP loss from operations is loss from operations as reported on the Company’s condensed consolidated statements of operations, excluding impact of stock-based compensation expense, restructuring costs, and amortization of intangible assets related to the Company’s acquisition of Identity Networks.

Meru believes that its non-GAAP measures 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

LOGO

 

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)

 

     June 30,
2014		     December 31,
2013		  

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

    $ 19,413      $ 30,938   

Accounts receivable, net

      12,649        17,088   

Inventory

      6,629        7,230   

Prepaid expenses and other current assets

      1,710        998   
  

 

 

    

 

 

  

Total current assets

      40,401        56,254   

Property and equipment, net

      2,244        2,451   

Goodwill

      1,658        1,658   

Intangible assets, net

      35        140   

Other assets

      1,983        1,934   
  

 

 

    

 

 

  

TOTAL ASSETS

    $ 46,321      $ 62,437   
  

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

CURRENT LIABILITIES:

     

Accounts payable

    $ 4,738      $ 6,139   

Accrued liabilities

      8,559        12,535   

Long-term debt, current portion

      4,004        3,718   

Deferred revenue, current portion

      12,090        13,730   
  

 

 

    

 

 

  

Total current liabilities

      29,391        36,122   

Long-term debt, net of current portion

      725        2,797   

Deferred revenue, net of current portion

      6,574        5,876   

Other liabilities

      1,658        1,387   
  

 

 

    

 

 

  

Total liabilities

      38,348        46,182   
  

 

 

    

 

 

  

STOCKHOLDERS’ EQUITY:

     

Preferred stock

      —          —     

Common stock

      12        11   

Additional paid-in capital

      286,152        282,168   

Accumulated other comprehensive loss

      (520 )      (553 ) 

Accumulated deficit

      (277,671 )      (265,371 ) 
  

 

 

    

 

 

  

Total stockholders’ equity

      7,973        16,255   
  

 

 

    

 

 

  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $ 46,321      $ 62,437   
  

 

 

    

 

 

  

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,		  
     2014     2013     2014     2013  

REVENUES:

         

Products

    $ 18,809      $ 21,686      $ 34,642      $ 42,276   

Support and services

      4,762        4,730        9,529        8,833   

Ratable products and services

      —          35        —          77   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      23,571        26,451        44,171        51,186   
  

 

 

    

 

 

    

 

 

    

 

 

  

COSTS OF REVENUES:

         

Products

      6,846        7,367        12,721        14,684   

Support and services

      1,955        1,888        3,857        3,664   

Ratable products and services

      —          17        —          39   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total costs of revenues *

      8,801        9,272        16,578        18,387   
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross margin

      14,770        17,179        27,593        32,799   
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING EXPENSES:

         

Research and development *

      4,921        3,974        10,373        7,662   

Sales and marketing *

      10,778        12,348        22,407        23,768   

General and administrative *

      2,859        3,293        6,157        6,578   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      18,558        19,615        38,937        38,008   
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss from operations

      (3,788 )      (2,436 )      (11,344 )      (5,209 ) 

Interest expense, net *

      (329 )      (553 )      (707 )      (1,163 ) 

Other income (expense), net

      15        11        (1 )      (51 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss before provision for income taxes

      (4,102 )      (2,978 )      (12,052 )      (6,423 ) 

Provision for income taxes

      136        89        248        227   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

    $ (4,238 )    $ (3,067 )    $ (12,300 )    $ (6,650 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per share of common stock, basic and diluted

    $ (0.18 )    $ (0.14 )    $ (0.53 )    $ (0.32 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      23,373,165        22,268,180        23,221,958        20,926,926   
  

 

 

    

 

 

    

 

 

    

 

 

  

*  Includes stock-based compensation expense (1) as follows:

     

      

Costs of revenues

    $ 63      $ 54      $ 172      $ 99   

Research and development

      170        212        508        370   

Sales and marketing

      345        582        1,156        1,119   

General and administrative

      608        906        1,323        1,620   
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ 1,186      $ 1,754      $ 3,159      $ 3,208   
  

 

 

    

 

 

    

 

 

    

 

 

  

(1)    This table includes $147,000 of stock-based compensation related to restructuring in the quarter ended March 31, 2014.

       

*  Includes restructuring costs (2) as follows:

     

      

Research and development

    $ —        $ —        $ 43      $ —     

Sales and marketing

      —          —          355        —     

General and administrative

      —          —          140        —     
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ —        $ —        $ 538      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

  

(2)    This table excludes $147,000 of stock-based compensation related to restructuring in the quarter ended March 31, 2014.

       

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

     

      

Costs of revenues

    $ 53      $ 53      $ 105      $ 105   

Sales and marketing

      —          20        —          40   
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ 53      $ 73      $ 105      $ 145   
  

 

 

    

 

 

    

 

 

    

 

 

  

*  Includes amortization of common stock warrant issued in connection with debt financing as follows:

     

Interest expense, net

    $ 25      $ 42      $ 54      $ 87   

MERU NETWORKS, INC.

GAAP to Non-GAAP Reconciliation

(Unaudited)

(In thousands, except share and per share amounts)

 

     Three months ended
June 30,		     Six months ended
June 30,		  
     2014     2013     2014     2013  

GAAP net loss

    $ (4,238 )    $ (3,067 )    $ (12,300 )    $ (6,650 ) 

Plus:

         

a) Stock-based compensation

      1,186        1,754        3,012        3,208   

b) Stock-based compensation associated with restructuring

      —          —          147        —     

c) Restructuring costs

      —          —          538        —     

d) Amortization of acquisition-related intangible assets

      53        73        105        145   

e) Amortization of common stock warrant issued in connection with debt financing

      25        42        54        87   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net loss

    $ (2,974 )    $ (1,198 )    $ (8,444 )    $ (3,210 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP net loss per share of common stock, basic

      (0.18 )      (0.14 )    $ (0.53 )    $ (0.32 ) 

Plus:

         

a) Stock-based compensation

      0.05        0.08        0.13        0.15   

b) Stock-based compensation associated with restructuring

      —          —          0.01        —     

c) Restructuring costs

      —          —          0.02        —     

d) Amortization of acquisition-related intangible assets

      —          0.01        0.01        0.01   

e) Amortization of common stock warrant issued in connection with debt financing

      —          —          —          0.01   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net loss per share of common stock, basic and diluted

    $ (0.13 )    $ (0.05 )    $ (0.36 )    $ (0.15 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Shares used in computing basic and diluted non-GAAP net loss per share of common stock

      23,373,165        22,268,180        23,221,958        20,926,926   

GAAP gross margin

    $ 14,770      $ 17,179      $ 27,593      $ 32,799   
  

 

 

    

 

 

    

 

 

    

 

 

  

Plus:

         

Stock-based compensation

      63        54        172        99   

Amortization of acquisition-related intangible assets

      53        53        105        105   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP gross margin

    $ 14,886      $ 17,286      $ 27,870      $ 33,003   
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP loss from operations

    $ (3,788 )    $ (2,436 )    $ (11,344 )    $ (5,209 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Plus:

         

Stock-based compensation

      1,186        1,754        3,012        3,208   

Stock-based compensation associated with restructuring

      —          —          147        —     

Restructuring costs

      —          —          538        —     

Amortization of acquisition-related intangible assets

      53        73        105        145   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP loss from operations

    $ (2,549 )    $ (609 )    $ (7,542 )    $ (1,856 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

MERU NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Six months ended
June 30,		  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net loss

    $ (12,300 )    $ (6,650 ) 

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

     

Depreciation and amortization

      835        762   

Stock-based compensation

      3,159        3,208   

Accrued interest on long-term debt

      345        493   

Amortization of issuance costs

      77        123   

Provision for bad debt

      96        29   

Changes in operating assets and liabilities:

     

Accounts receivable, net

      4,343        909   

Inventory

      601        2,074   

Prepaid expenses and other assets

      (756 )      (517 ) 

Accounts payable

      (1,401 )      574   

Accrued liabilities and other liabilities

      (3,541 )      (2,004 ) 

Deferred revenue

      (942 )      (775 ) 
  

 

 

    

 

 

  

Net cash used in operating activities

      (9,484 )      (1,774 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Purchases of property and equipment

      (476 )      (442 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (476 )      (442 ) 
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Proceeds from the issuance of common stock, net of offering costs

      —          12,565   

Proceeds from exercise of stock options

      319        237   

Proceeds from employee stock purchase plan

      506        358   

Taxes paid related to net share settlement of equity awards

      (521 )      (86 ) 

Repayment of long-term debt

      (1,862 )      (1,652 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      (1,558 )      11,422   
  

 

 

    

 

 

  

Effect of exchange rate changes on cash and cash equivalents

      (7 )      (107 ) 
  

 

 

    

 

 

  

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

      (11,525 )      9,099   

CASH AND CASH EQUIVALENTS — Beginning of period

      30,938        22,855   
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS — End of period

    $ 19,413      $ 31,954   
  

 

 

    

 

 

  

Investor contact:

Ed Keaney

Market Street Partners

(415) 445-3238

ir@merunetworks.com