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8-K - FORM 8-K - ARUBA NETWORKS, INC.f59249e8vk.htm
Exhibit 99.1
ARUBA NETWORKS REPORTS RECORD THIRD QUARTER 2011 FINANCIAL RESULTS
    Record Revenue of $105.8 Million in Q3 Increased 53 Percent Year-over-Year and 13 Percent Quarter-over-Quarter
 
    Added Over 1,200 New Customers in Q3 to Surpass 14,000 Cumulative Customers
 
    Cash and Short Term Investments Increased $23.0 Million to $210.8 Million With No Debt
SUNNYVALE, Calif., May 19, 2011 — Aruba Networks, Inc. (NASDAQ: ARUN), a global leader in distributed enterprise network solutions, today released financial results for its fiscal 2011 third quarter ended April 30, 2011.
Revenue for Q3’11 was $105.8 million, an increase of 53 percent from the $69.0 million reported in Q3’10. GAAP net income for Q3’11 was $3.2 million, or $0.03 per share, compared with a net loss of $5.3 million, or $0.06 per share, in Q3’10.
Non-GAAP net income for Q3’11 was $18.8 million, or $0.16 per share. This compares with $8.5 million or $0.08 per share in Q3’10. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
“Aruba Networks is helping companies and organizations transform the network edge and move to a mobility-centric architecture,” said Dominic Orr, President and Chief Executive Officer of Aruba. “In the third quarter, we benefited from strong demand across all of our major geographies and increasing acceptance of our solutions in both the general enterprise and across our other verticals. Our continued innovation is a key factor in our rapid customer acquisition, as we added over 1,200 new customers in the third quarter, a record for the Company.”
“We are pleased with our financial performance this quarter,” said Michael Galvin, Aruba’s Interim Chief Financial Officer. “With 53 percent year-over-year revenue growth we delivered a strong quarter and generated $9.3 million in cash from operations.”
Recent Highlights
    Mobile Architecture — Aruba launched its Mobile Virtual Enterprise (MOVE) architecture designed to accelerate the enterprise network mobility revolution. Aruba MOVE provides context-aware networking for the post wired infrastructure era. Aruba MOVE delivers a comprehensive portfolio of thin network on-ramps. These on-ramps are enabled by Aruba Mobility Network Services, delivered centrally from the data center.
 
    New Outdoor WLAN Solutions — Aruba launched the Aruba AirMesh outdoor wireless solutions portfolio designed to be the most scalable and high-performance outdoor mesh portfolio available in the industry today. The Aruba AirMesh solution was deployed at the port of Yokohama in Japan to transfer its traffic from IP cameras, weather sensors, Z-Wave and other Wi-Fi enabled devices to the iPhones and iPads used by workers and security at the port.

 


 

    Mobile Device Access Control (MDAC) Solution — Aruba also announced the availability of its MDAC solution, providing easy, secure network access to facilitate the “Bring Your Own Device” (BYOD) phenomenon. This solution is designed for zero-touch, secure provisioning of Apple® iOS mobile devices. Due to strong market demand, Aruba also introduced its MDAC solution for customers with Cisco WLAN infrastructure.
 
    Industry Recognition — Gartner, Inc. positioned Aruba in the “Leaders” quadrant of its recently released “Magic Quadrant for Wireless LAN Infrastructure (Global)” report.* The Magic Quadrant evaluates vendors based on two criteria, “ability to execute” and “completeness of vision”. Aruba was also named to CRN’s 2011 Partner Programs Guide and was also awarded a 5-Star Partner rating. CRN’s Partner Programs Guide and 5-Star Partner ratings serve as the definitive list of vendors who have robust partner programs or products that service solution providers offer directly to the IT channel.
 
    ArubaEdge Partner Program — Aruba announced the ArubaEdge Partner Program. This program certifies and promotes end-to-end mobility solutions from an ecosystem of technology partners leveraging the Aruba MOVE architecture. Ecosystem partners participating in the ArubaEdge include Avaya, Citrix, Dell, Microsoft, Polycom and many more.
Conference Call Information
Aruba will host a conference call for analysts and investors to discuss its fiscal third quarter results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the “Investor Relations” section of the Company’s website at www.arubanetworks.com. Following the webcast, an archived version will be available on the website for twelve months. To hear the replay, parties in the United States and Canada should call 1-800-406-7325 and enter passcode 4436777. International parties can access the replay at +1-303-590-3030 and should enter passcode 4436777.
Forward-Looking Statements
This press release contains forward-looking statements, including statements about (1) our belief that the enterprise network is transitioning from a wired-centric to a mobility-centric architecture which will impact Aruba’s sales and (2) our expectations regarding customer adoption of our MOVE architecture and our AirMesh and MDAC solutions.
These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause Aruba’s results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include: (1) our ability to react to trends and challenges in our business and the markets in which we operate; (2) business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; and (3) changes in overall information technology spending; as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Aruba’s report on Form 10-Q for the fiscal second quarter ended January 31, 2011, which was filed with the SEC on March 11, 2011, and is available on Aruba’s investor relations Web site at www.arubanetworks.com and on the SEC Web site at www.sec.gov. 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 these forward-looking statements.
Non-GAAP Financial Measures
In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP net income and non-GAAP earnings per share (EPS). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Non-GAAP net income and EPS. Aruba defines non-GAAP net income as net income plus stock-based expenses and related payroll taxes, amortization expense of acquired intangible assets and other acquisition related expenses, the change in the valuation of the contingent rights liability and litigation reserves. Aruba defines non-GAAP EPS as non-GAAP net income divided by the weighted average diluted shares outstanding. Aruba’s management regularly uses these non-GAAP financial measures to understand and manage its business and believes that these non-GAAP financial measures provide meaningful supplemental information regarding the company’s performance by excluding certain expenses that may not be indicative of Aruba’s “recurring operating results,” meaning its operating performance excluding not only stock-based expenses and related payroll taxes, but also discrete charges that are infrequent in nature, such as litigation reserves. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use, Aruba’s management believes that providing non-GAAP financial measures that exclude stock-based expenses allows investors to compare these results with those of other companies, as well as providing management with an important tool for financial and operational decision making and for evaluating the company’s operating results over different periods of time. Similarly, by excluding amortization expense of acquired intangible assets and other acquisition related expenses, the change in the valuation of the contingent rights liability and litigation reserves, Aruba’s management believes that investors can better understand and measure the company’s recurring operating results.
There are a number of limitations related to the use of non-GAAP net income and EPS versus net income and EPS calculated in accordance with GAAP. First, these non-GAAP financial measures exclude some costs, namely stock-based expenses and related payroll taxes, that are recurring. Stock-based expenses and related payroll taxes have been and will continue to be for the foreseeable future a significant recurring expense in Aruba’s business. Second, stock-based awards are an important part of Aruba’s employees’ compensation and impacts their performance. Third, the components of the costs that Aruba excludes in its calculation of non-GAAP net income may differ from the components that its peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. The accompanying tables have more details on these non-GAAP financial measures, including reconciliations between these financial measures and their most directly comparable GAAP equivalents.
A copy of this press release can be found on the investor relations page of Aruba Networks’ Web site at www.arubanetworks.com.
# # #
*Gartner “Magic Quadrant for Wireless LAN Infrastructure (Global)” by Michael J. King and Tim Zimmerman, March 3, 2011.

 


 

About Aruba Networks
Aruba is a global leader in distributed enterprise networks. Its award-winning portfolio of campus, branch/teleworker, and mobile solutions simplify operations and secure access to all corporate applications and services — regardless of the user’s device, location, or network. This dramatically improves productivity and lowers capital and operational costs.
Listed on the NASDAQ and Russell 2000(R) Index, Aruba is based in Sunnyvale, California, and has operations throughout the Americas, Europe, Middle East, and Asia Pacific regions. To learn more, visit Aruba at http://www.arubanetworks.com. For real-time news updates follow Aruba on Twitter or Facebook.
# # #
     
IR Contacts
   
Aruba Networks, Inc.
  The Blueshirt Group, Investor Relations
Michael Galvin
  Chris Danne, Maria Riley
Interim Principal Financial and Accounting Officer
  +1-415-217-7722
+1-408-227-4500
  ir@arubanetworks.com
ir@arubanetworks.com
   
© 2011 Aruba Networks, Inc. Aruba Networks’ trademarks include the design mark for AirWave, Aruba Networks®, Aruba Wireless Networks®, the registered Aruba the Mobile Edge Company logo, the registered AirWave logo, Aruba Mobility Management System®, Mobile Edge Architecture®, People Move. Networks Must Follow®, RFProtect®, Green Island®. All rights reserved. All other trademarks are the property of their respective owners.

 


 

Aruba Networks, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
                 
    April 30,     July 31,  
    2011     2010  
Assets
               
 
               
Current assets:
               
Cash and cash equivalents
  $ 77,245     $ 31,254  
Short-term investments
    133,553       124,167  
Accounts receivable, net
    67,464       41,269  
Inventory
    20,685       15,159  
Deferred costs
    6,703       5,451  
Prepaids and other
    4,311       5,108  
 
           
 
               
Total current assets
    309,961       222,408  
 
               
Property and equipment, net
    12,530       9,919  
Goodwill
    33,143       7,656  
Intangible assets, net
    22,915       9,287  
Other assets
    2,140       1,437  
 
           
 
               
Total other assets
    70,728       28,299  
 
           
 
               
Total assets
  $ 380,689     $ 250,707  
 
           
 
               
Liabilities and Stockholders’ Equity
               
 
               
Current liabilities:
               
Accounts payable
  $ 10,486     $ 8,082  
Accrued liabilities
    48,840       36,458  
Income taxes payable
    819       519  
Deferred revenue
    49,848       43,422  
 
           
 
               
Total current liabilities
    109,993       88,481  
 
               
Deferred revenue
    12,340       10,976  
Other long-term liabilities
    750       595  
 
           
 
               
Total other liabilities
    13,090       11,571  
 
           
 
               
Total liabilities
    123,083       100,052  
 
           
 
               
Stockholders’ equity
               
Common Stock: $0.0001 par value; 350,000 shares authorized at April 30, 2011, and July 31, 2010; 103,819 and 93,606 shares issued and outstanding at April 30, 2011, and July 31, 2010, respectively
    10       9  
Additional paid-in capital
    430,564       326,178  
Accumulated other comprehensive income
    159       98  
Accumulated deficit
    (173,127 )     (175,630 )
 
           
 
               
Total stockholders’ equity
    257,606       150,655  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 380,689     $ 250,707  
 
           

 


 

Aruba Networks, Inc.
Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share data)
(Unaudited)
                                 
    Three months ended     Nine months ended  
    April 30,     April 30,  
    2011     2010     2011     2010  
Revenues:
                               
Product
  $ 89,415     $ 56,634     $ 237,719     $ 155,909  
Professional services and support
    16,186       12,167       44,588       32,672  
Ratable product and related professional services and support
    150       156       449       627  
 
                       
 
                               
Total revenues
    105,751       68,957       282,756       189,208  
 
                               
Cost of revenues:
                               
Product
    29,964       19,911       76,199       54,446  
Professional services and support
    4,167       2,201       10,615       6,437  
Ratable product and related professional services and support
          46       10       199  
 
                       
 
                               
Total cost of revenues
    34,131       22,158       86,824       61,082  
 
                       
 
                               
Gross profit
    71,620       46,799       195,932       128,126  
 
                       
 
                               
Operating expenses:
                               
Research and development
    22,799       13,874       61,521       37,713  
Sales and marketing
    40,916       27,697       111,266       79,013  
General and administrative
    10,319       8,840       27,690       23,600  
Litigation reserves
          1,650             21,900  
 
                       
 
                               
Total operating expenses
    74,034       52,061       200,477       162,226  
 
                       
 
                               
Operating loss
    (2,414 )     (5,262 )     (4,545 )     (34,100 )
 
                               
Other income (expense), net
                               
Interest income
    284       218       758       616  
Other income (expense), net
    5,608       (189 )     7,191       (432 )
 
                       
 
                               
Total other income (expense), net
    5,892       29       7,949       184  
 
                       
 
                               
Income (loss) before income tax provision
    3,478       (5,233 )     3,404       (33,916 )
 
                               
Income tax provision
    277       85       901       504  
 
                       
 
                               
Net income (loss)
  $ 3,201     $ (5,318 )   $ 2,503     $ (34,420 )
 
                       
 
                               
Shares used in computing net income (loss) per common share, basic
    102,055       90,874       98,962       88,978  
 
                               
Net income (loss) per common share, basic
  $ 0.03     $ (0.06 )   $ 0.03     $ (0.39 )
 
                               
Shares used in computing net income (loss) per common share, diluted
    119,367       90,874       116,289       88,978  
 
                               
Net income (loss) per common share, diluted
  $ 0.03     $ (0.06 )   $ 0.02     $ (0.39 )

 


 

Aruba Networks, Inc.
Consolidated Statements of Operations
(GAAP to Non-GAAP Reconciliation)
(In thousands, except per share data)
(Unaudited)
                                 
    Three months ended     Nine months ended  
    April 30,     April 30,  
    2011     2010     2011     2010  
GAAP net income (loss)
  $ 3,201     $ (5,318 )   $ 2,503     $ (34,420 )
 
Plus:
                               
a) Stock-based expenses
    19,289       10,947       48,513       27,769  
b) Amortization expense of acquired intangible assets and other acquisition related expenses
    2,211       1,193       6,010       3,659  
c) Change in valuation of contingent rights liability
    (5,887 )           (7,991 )      
d) Litigation reserves
          1,650             21,900  
 
                       
 
Non-GAAP net income
  $ 18,814     $ 8,472     $ 49,035     $ 18,908  
 
                       
 
GAAP net income (loss) per common share
  $ 0.03     $ (0.06 )   $ 0.02     $ (0.39 )
 
Plus:
                               
a) Stock-based expenses
    0.16       0.12       0.42       0.30  
b) Amortization expense of acquired intangible assets and other acquisition related expenses
    0.02       0.01       0.05       0.04  
c) Change in valuation of contingent rights liability
    (0.05 )           (0.07 )      
d) Litigation reserves
          0.01             0.23  
 
                       
 
Non-GAAP net income per common share
  $ 0.16     $ 0.08     $ 0.42     $ 0.18  
 
                       
 
Shares used in computing diluted GAAP net income (loss) per common share
    119,367       90,874       116,289       88,978  
 
Shares used in computing diluted Non-GAAP net income per common share
    119,367       106,548       116,289       102,946  

 


 

Aruba Networks, Inc.
Consolidated Statements of Operations
As a Percentage of Total Revenues
(On a GAAP Basis)
(Unaudited)
                                 
    Three months ended     Nine months ended  
    April 30,     April 30,  
    2011     2010     2011     2010  
Revenues:
                               
Product
    84.6 %     82.1 %     84.1 %     82.4 %
Professional services and support
    15.3 %     17.7 %     15.8 %     17.3 %
Ratable product and related professional services and support
    0.1 %     0.2 %     0.1 %     0.3 %
 
                       
 
Total revenues
    100.0 %     100.0 %     100.0 %     100.0 %
 
Cost of revenues:
                               
Product
    28.3 %     28.8 %     26.9 %     28.8 %
Professional services and support
    4.0 %     3.2 %     3.8 %     3.4 %
Ratable product and related professional services and support
    0.0 %     0.1 %     0.0 %     0.1 %
 
                       
 
Total cost of revenues
    32.3 %     32.1 %     30.7 %     32.3 %
 
                       
 
Gross profit
    67.7 %     67.9 %     69.3 %     67.7 %
 
                       
 
Operating expenses:
                               
Research and development
    21.5 %     20.1 %     21.8 %     19.9 %
Sales and marketing
    38.7 %     40.2 %     39.3 %     41.8 %
General and administrative
    9.8 %     12.8 %     9.8 %     12.4 %
Litigation reserves
    0.0 %     2.4 %     0.0 %     11.6 %
 
                       
 
Total operating expenses
    70.0 %     75.5 %     70.9 %     85.7 %
 
                       
 
Operating loss
    (2.3 %)     (7.6 %)     (1.6 %)     (18.0 %)
 
Other income (expense), net
                               
Interest income
    0.3 %     0.3 %     0.3 %     0.3 %
Other income (expense), net
    5.3 %     (0.3 )%     2.5 %     (0.2 )%
 
                       
 
Total other income (expense), net
    5.6 %     0.0 %     2.8 %     0.1 %
 
                       
 
Income (loss) before income tax provision
    3.3 %     (7.6 %)     1.2 %     (17.9 %)
 
Income tax provision
    0.3 %     0.1 %     0.3 %     0.3 %
 
                       
Net income (loss)
    3.0 %     (7.7 %)     0.9 %     (18.2 %)
 
                       

 


 

Aruba Networks, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                 
    Nine months ended  
    April 30,  
    2011     2010  
Cash flows from operating activities
               
Net income (loss)
    2,503       (34,420 )
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
Depreciation and amortization
    11,201       7,493  
Provision for doubtful accounts
    4       259  
Write downs for excess and obsolete inventory
    2,445       1,476  
Compensation related to stock options and share awards
    45,828       26,765  
Accretion of purchase discounts on short-term investments
    997       482  
Loss (gain) on disposal of fixed assets
    (6 )     19  
Change in carrying value of contingent liability
    (7,991 )      
Excess tax benefit associated with stock-based compensation
    (15 )      
Changes in operating assets and liabilities:
               
Accounts receivable
    (23,674 )     1,523  
Inventory
    (7,211 )     (9,123 )
Prepaids and other
    (1,111 )     (1,147 )
Deferred costs
    (1,252 )     (960 )
Other assets
    (426 )     107  
Accounts payable
    (1,099 )     4,145  
Deferred revenue
    6,451       6,555  
Other current and noncurrent liabilities
    8,009       12,493  
Income taxes payable
    138       (220 )
 
           
 
Net cash provided by operating activities
    34,791       15,447  
 
           
 
Cash flows from investing activities
               
Purchases of short-term investments
    (81,511 )     (79,766 )
Proceeds from sales of short-term investments
    19,876       3,001  
Proceeds from maturities of short-term investments
    51,030       42,965  
Purchases of property and equipment
    (5,776 )     (3,378 )
Proceeds from sales of property and equipment
    14       23  
Cash paid in purchase acquisitions, net of cash acquired
    (4,303 )      
 
           
 
Net cash used in investing activities
    (20,670 )     (37,155 )
 
           
 
Cash flows from financing activities
               
Proceeds from issuance of common stock
    31,856       9,957  
Repurchases of unvested common stock
          (36 )
Excess tax benefit associated with stock-based compensation
    15        
 
           
 
Net cash provided by financing activities
    31,871       9,921  
 
           
 
Effect of exchange rate changes on cash and cash equivalents
    (1 )     (1 )
 
           
 
Net increase (decrease) in cash and cash equivalents
    45,991       (11,788 )
 
Cash and cash equivalents, beginning of period
    31,254       41,298  
 
           
 
Cash and cash equivalents, end of period
  $ 77,245     $ 29,510  
 
           
Supplemental disclosure of cash flow information
               
Income taxes paid
  $ 781     $ 768  
 
Supplemental disclosure of non-cash investing and financing activities
               
Common stock issued in purchase acquisitions
  $ 30,691     $  
Contingent rights issued in purchase acquisition
  $ 9,486     $