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Press release from Business Wire

Aruba Networks Reports Record Fourth Quarter and Fiscal Year 2011 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Grew Fiscal Year Revenue 49 percent to $396.5 million</i> </li> <li class='bwlistitemmargb'> <i>Record Revenue of $113.8 Million in Q4 Increased 47 Percent Year-over-Year</i> </li> <li class='bwlistitemmargb'> <i>Added Over 1,500 New Customers in Q4 to Surpass 15,500 Cumulative Customers</i> </li> <li class='bwlistitemmargb'> <i>Cash and Short Term Investments Increased $23.2 Million in Q4 to $234.0 Million With No Debt</i> </li> </ul>

Thursday, August 25, 2011

Aruba Networks Reports Record Fourth Quarter and Fiscal Year 2011 Financial Results16:03 EDT Thursday, August 25, 2011 SUNNYVALE, Calif. (Business Wire) -- Aruba Networks, Inc. (NASDAQ: ARUN), a global leader in distributed enterprise network solutions, today released financial results for its fiscal fourth quarter and fiscal year ended July 31, 2011. Revenue for Q4'11 was $113.8 million, an increase of 47 percent from the $77.3 million reported in Q4'10. GAAP net income for Q4'11 was $68.2 million, or $0.57 per share, compared with net income of $0.4 million, or $0.00 per share, in Q4'10. As a result of our increasing operating profitability in fiscal 2011 and expectations for continued profits going forward, GAAP net income for the fourth quarter included a one-time tax benefit of $72.8 million, equivalent to $0.61 per share, due to the release of the company's valuation allowances and the recording of the associated net deferred tax assets on its balance sheet. This one-time event is in conjunction with the establishment of Aruba's international operating entities to optimize Aruba's long term tax structure. Non-GAAP net income for Q4'11 was $20.2 million, or $0.17 per share. This compares with $11.1 million, or $0.10 per share, in Q4'10. A reconciliation between GAAP and non-GAAP information is contained in the tables below. Fiscal year 2011 revenue was $396.5 million, an increase of 49 percent from the $266.5 million reported in fiscal year 2010. GAAP net income for fiscal year 2011 was $70.7 million, or $0.60 per share, compared with a net loss of $34.0 million, or $0.38 per share, in fiscal year 2010. Non-GAAP net income for fiscal year 2011 was $69.3 million, or $0.59 per share, compared with $30.0 million, or $0.29 per share, in fiscal year 2010. “Demand for our wireless LAN solutions continued to be strong throughout our fiscal fourth quarter, as revenue increased by 47 percent year-over-year and 8 percent sequentially,” said Dominic Orr, President and Chief Executive Officer of Aruba. “Mobile device adoption continues to accelerate resulting in proliferating demand for Enterprise mobility solutions. Revenue from the existing customer base remains strong and we are especially encouraged by our rapid new customer acquisitions adding over 4,500 customers in the last twelve months. With robust Q4 bookings and a solid pipeline for our wireless LAN solutions, we enter our fiscal 2012 confident in our ability to grow faster than the market and increase our market share.” “In addition to delivering a strong Q4, for the fiscal year, Aruba achieved record revenue, non-GAAP gross margin, operating margin and net income,” said Michael Galvin, Aruba's Chief Financial Officer. “We also generated nearly $58 million in cash flow from operations during the fiscal year.” Recent HighlightsProof of High-Density iPad Multimedia Performance over Aruba Wi-Fi - Validated by the University of Ottawa information technology (IT) department, six leading multimedia educational applications were delivered to a high density iPad environment, concurrently with100 percent of the iPads meeting the multimedia Service Level Agreement (SLA). Proven High Performance for Microsoft Lync Server 2010 over Wi-Fi – Aruba announced that its MOVE architecture for Wi-Fi networking enables wire-like performance for Microsoft Lync Server 2010, with tests showing up to 75 percent better performance for Microsoft Lync Server 2010 compared to an equivalent Cisco Wi-Fi network. Suite B Cryptography for Mobile Networks Introduced – Aruba announced the expansion of its secure mobility offerings by introducing Suite B cryptography on the Aruba Mobility Controller for use in classified government and high-security enterprise networks to ease government smartphone and tablet adoption. Conference Call Information Aruba will host a conference call for analysts and investors to discuss its fiscal fourth quarter and full year 2011 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 4463275. International parties can access the replay at +1-303-590-3030 and should enter passcode 4463275. Forward-Looking Statements This press release contains forward-looking statements, including statements about (1) our belief in the company's ability to grow faster than the market and increase market share and (2) our expectations regarding continued acceleration of mobility device adoption resulting in increased demand for enterprise mobility 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) business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; and (2) 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 third quarter ended April 30, 2011, which was filed with the SEC on June 7, 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, litigation reserves, and the release of the valuation allowance on deferred income tax assets. 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 and releases of valuation allowances. 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, litigation reserves and the release of the valuation allowance on deferred income tax assets, 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. About Aruba Networks Aruba Networks is a leading provider of next-generation network access solutions for the mobile enterprise. The company's Mobile Virtual Enterprise (MOVE) architecture unifies wired and wireless network infrastructures into one seamless access solution for corporate headquarters, mobile business professionals, remote workers and guests. This unified approach to access networks dramatically improves productivity and lowers capital and operational costs. Listed on the NASDAQ and Russell 2000® 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 www.arubanetworks.com. For news and real-time updates, please visit one of Aruba's community sites. © 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 respectiveowners. Aruba Networks, Inc.Consolidated Balance Sheets(In thousands, except per share data)(Unaudited)     July 31,July 31,20112010 Assets   Current assets: Cash and cash equivalents $ 80,773 $ 31,254 Short-term investments 153,185 124,167 Accounts receivable, net 68,598 41,269 Inventory 29,895 15,159 Deferred costs 6,999 5,451 Prepaids and other 5,097 5,108 Deferred income tax assets   53,310     -     Total current assets 397,857 222,408   Property and equipment, net 14,772 9,919 Goodwill 33,143 7,656 Intangible assets, net 20,863 9,287 Deferred income tax assets 20,143 - Other assets   2,093     1,437     Total other assets   91,014     28,299     Total assets $ 488,871   $ 250,707     Liabilities and Stockholders' Equity   Current liabilities: Accounts payable $ 11,278 $ 8,082 Accrued liabilities 61,461 36,458 Income taxes payable 767 519 Deferred revenue   54,451     43,422     Total current liabilities 127,957 88,481   Deferred income tax liability 815 - Deferred revenue 14,000 10,976 Other long-term liabilities   757     595     Total other liabilities   15,572     11,571     Total liabilities   143,529     100,052     Stockholders' equity Common Stock: $0.0001 par value; 350,000 shares authorized at July 31, 2011 and 2010; 104,905 and 93,606 shares issued and outstanding at July 31, 2011 and 2010, respectively 10 9 Additional paid-in capital 450,147 326,178 Accumulated other comprehensive income 127 98 Accumulated deficit   (104,942 )   (175,630 )   Total stockholders' equity   345,342     150,655     Total liabilities and stockholders' equity $ 488,871   $ 250,707     Aruba Networks, Inc.Consolidated Statements of Operations(On a GAAP basis)(In thousands, except per share data)(Unaudited)         Three months endedYears endedJuly 31,July 31,2011201020112010 Revenues: Product $ 97,141 $ 65,564 $ 334,860 $ 221,474 Professional services and support 16,475 11,651 61,063 44,323 Ratable product and related professional services and support   142     111     591     737     Total revenues 113,758 77,326 396,514 266,534   Cost of revenues: Product 31,620 22,624 107,820 77,070 Professional services and support 4,259 2,338 14,873 8,775 Ratable product and related professional services and support   -     29     10     229     Total cost of revenues   35,879     24,991     122,703     86,074     Gross profit   77,879     52,335     273,811     180,460     Operating expenses: Research and development 23,370 13,907 84,890 51,619 Sales and marketing 42,972 30,380 154,239 109,393 General and administrative 11,741 7,353 39,431 30,953 Litigation reserves   -     -     -     21,900     Total operating expenses   78,083     51,640     278,560     213,865     Operating income (loss) (204 ) 695 (4,749 ) (33,405 )   Other income (expense), net Interest income 260 218 1,018 834 Other income (expense), net   (4,407 )   (266 )   2,784     (699 )   Total other income (expense), net   (4,147 )   (48 )   3,802     135     Income (loss) before income tax provision (4,351 ) 647 (947 ) (33,270 )   Income tax provision (benefit)   (72,536 )   224     (71,635 )   728     Net income (loss) $ 68,185   $ 423   $ 70,688   $ (33,998 )   Shares used in computing net income (loss) per common share, basic 104,310 92,977 100,299 89,978   Net income (loss) per common share, basic $ 0.65 $ 0.00 $ 0.70 $ (0.38 )   Shares used in computing net income (loss) per common share, diluted 119,600 108,814 117,117 89,978   Net income (loss) per common share, diluted $ 0.57 $ 0.00 $ 0.60 $ (0.38 )   Aruba Networks, Inc.Consolidated Statements of Operations(GAAP to Non-GAAP Reconciliation)(In thousands, except per share data)(Unaudited)       Three months endedYears endedJuly 31,July 31,2011201020112010   GAAP net income (loss) $ 68,185 $ 423 $ 70,688 $ (33,998 )   Plus: a) Stock-based expenses 18,326 9,528 66,839 37,298 b) Amortization expense of acquired intangible assets and other acquisition related expenses 2,193 1,145 8,204 4,804 c) Change in valuation of contingent rights liability 4,394 - (3,597 ) - d) Litigation reserves - - - 21,900 e) Release of valuation allowance on deferred income tax assets   (72,848 )   -   (72,848 )   -     Non-GAAP net income $ 20,250   $ 11,096 $ 69,286   $ 30,004       GAAP net income (loss) per common share $ 0.57 $ 0.00 $ 0.60 $ (0.38 )   Plus: a) Stock-based expenses 0.15 0.09 0.57 0.39 b) Amortization expense of acquired intangible assets and other acquisition related expenses 0.02 0.01 0.07 0.05 c) Change in valuation of contingent rights liability 0.04 - (0.03 ) - d) Litigation reserves - - - 0.23 e) Release of valuation allowance on deferred income tax assets (0.61 ) - (0.62 ) -           Non-GAAP net income per common share $ 0.17   $ 0.10 $ 0.59   $ 0.29     Shares used in computing diluted GAAP net income (loss) per common share 119,600 108,814 117,117 89,978   Shares used in computing diluted Non-GAAP net income per common share 119,600 108,814 117,117 104,413   Aruba Networks, Inc.Consolidated Statements of OperationsAs a Percentage of Total Revenues(On a GAAP Basis)(Unaudited)         Three months endedYears endedJuly 31,July 31,2011201020112010 Revenues: Product 85.4 % 84.8 % 84.5 % 83.1 % Professional services and support 14.5 % 15.1 % 15.4 % 16.6 % Ratable product and related professional services and support 0.1 % 0.1 % 0.1 % 0.3 %   Total revenues 100.0 % 100.0 % 100.0 % 100.0 %   Cost of revenues: Product 27.8 % 29.3 % 27.2 % 28.9 % Professional services and support 3.7 % 3.0 % 3.7 % 3.3 % Ratable product and related professional services and support 0.0 % 0.0 % 0.0 % 0.1 %   Total cost of revenues 31.5 % 32.3 % 30.9 % 32.3 %   Gross profit 68.5 % 67.7 % 69.1 % 67.7 %   Operating expenses: Research and development 20.5 % 18.0 % 21.4 % 19.4 % Sales and marketing 37.8 % 39.3 % 38.9 % 41.0 % General and administrative 10.4 % 9.5 % 10.0 % 11.6 % Litigation reserves 0.0 % 0.0 % 0.0 % 8.2 %   Total operating expenses 68.7 % 66.8 % 70.3 % 80.2 %   Operating income (loss) (0.2 %) 0.9 % (1.2 %) (12.5 %)   Other income (expense), net Interest income 0.2 % 0.2 % 0.2 % 0.3 % Other income (expense), net (3.8 )% (0.3 )% 0.7 % (0.3 )%   Total other income (expense), net (3.6 %) (0.1 %) 0.9 % 0.0 %   Income (loss) before income tax provision (3.8 %) 0.8 % (0.3 %) (12.5 %)   Income tax provision (benefit) (63.8 %) 0.3 % (18.1 %) 0.3 %   Net income (loss) 60.0 % 0.5 % 17.8 % (12.8 %)   Aruba Networks, Inc.Consolidated Statements of Cash Flows(In thousands)(Unaudited)     Years endedJuly 31,20112010Cash flows from operating activities Net income (loss) 70,688 (33,998 )   Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 15,042 10,091 Provision for doubtful accounts 16 265 Write downs for excess and obsolete inventory 2,647 2,949 Compensation related to stock options and share awards 63,750 36,081 Accretion of purchase discounts on short-term investments 1,290 837 Loss (gain) on disposal of fixed assets (3 ) (3 ) Change in carrying value of contingent rights liability (3,597 ) - Deferred income taxes (72,638 ) - Excess tax benefit associated with stock-based compensation 194 (107 ) Changes in operating assets and liabilities: Accounts receivable (24,821 ) (8,069 ) Inventory (16,900 ) (10,653 ) Prepaids and other (1,658 ) (2,757 ) Deferred costs (1,548 ) (290 ) Other assets (240 ) 50 Accounts payable (167 ) 5,937 Deferred revenue 12,713 11,220 Other current and noncurrent liabilities 13,331 14,360 Income taxes payable   (109 )   (79 )   Net cash provided by operating activities   57,990     25,834     Cash flows from investing activities Purchases of short-term investments (144,512 ) (122,750 ) Proceeds from sales of short-term investments 28,927 10,419 Proceeds from maturities of short-term investments 84,870 69,007 Purchases of property and equipment (9,909 ) (5,299 ) Proceeds from sales of property and equipment 11 42 Cash paid in purchase acquisitions, net of cash acquired   (4,303 )   -     Net cash used in investing activities   (44,916 )   (48,581 )   Cash flows from financing activities Proceeds from issuance of common stock 36,640 12,631 Repurchases of unvested common stock - (36 ) Excess tax benefit associated with stock-based compensation   (194 )   107     Net cash provided by financing activities   36,446     12,702     Effect of exchange rate changes on cash and cash equivalents   (1 )   1     Net increase (decrease) in cash and cash equivalents 49,519 (10,044 )   Cash and cash equivalents, beginning of period   31,254     41,298     Cash and cash equivalents, end of period $ 80,773   $ 31,254     Supplemental disclosure of cash flow information Income taxes paid $ 1,152 $ 899   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 $ -   Aruba Networks, Inc.Michael Galvin, +1-408-227-4500Chief Financial Officerir@arubanetworks.comorThe Blueshirt Group, Investor RelationsChris Danne or Maria Riley, +1-415-217-7722ir@arubanetworks.com