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Press release from Business Wire

Aruba Networks Reports Record Fiscal First Quarter 2012 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Revenue Increased 44 percent in Q1 to a Record of $119.4 million</i> </li> <li class='bwlistitemmargb'> <i>Added Over 1,500 New Customers in Q1 to Surpass 17,000 Cumulative Customers</i> </li> <li class='bwlistitemmargb'> <i>Cash and Short Term Investments Increased $31.9 Million in Q1 to $265.8 Million</i> </li> <li class='bwlistitemmargb'> <i>Signed Definitive Agreement to Acquire Avenda Systems</i> </li> </ul>

Thursday, November 17, 2011

Aruba Networks Reports Record Fiscal First Quarter 2012 Financial Results16:05 EST Thursday, November 17, 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 first quarter 2012 ended October 31, 2011. Revenue for Q1'12 was $119.4 million, an increase of 44 percent from the $83.1 million reported in Q1'11. GAAP net loss for Q1'12 was $0.5 million, or $0.00 per share, compared with net income of $2.1 million, or $0.02 per share, in Q1'11. Non-GAAP net income for Q1'12 was $16.7 million, or $0.14 per share. During the quarter, the company incurred a 28.9 percent non-GAAP tax rate, higher than the top end of the company's projected tax rate, impacting EPS by approximately $0.01 per share. Q1'12 net income compares with $13.9 million, or $0.12 per share, in Q1'11. A reconciliation between GAAP and non-GAAP information is contained in the tables below. “First quarter revenue increased by 44 percent year-over-year, in part due to the proliferation of mobile devices, which continued to drive growth for our wireless LAN solutions,” said Dominic Orr, President and Chief Executive Officer of Aruba. “We believe that mobile device adoption will only increase, resulting in even more demand on the network edge for enterprise mobility solutions as employees continue to bring their mobile devices to work. With our MOVE architecture, scalability, and superior security, we believe we are well positioned to take advantage of this trend, and that our pending acquisition of Avenda Systems will enhance our solution and technology differentiation once it is completed.” “We delivered a strong Q1 with record revenue, strong gross margin and a record non-GAAP operating margin of 19.5 percent,” said Michael Galvin, Aruba's Chief Financial Officer. “We also generated $31.9 million in total cash, ending the quarter with $265.8 million in cash and short term investments.” Recent HighlightsMOVE on University Campuses – Aruba announced that the University of Massachusetts Amherst and the University of Tennessee at Knoxville selected Aruba's Mobile Virtual Enterprise (MOVE) architecture for their 802.11n wireless access networks to accommodate the proliferation of mobile devices and the resulting increase in high bandwidth video and audio traffic over the air. Expands Operations in Brazil– Aruba expanded its reach in Brazil with a new headquarters in Rio de Janeiro and a new sales office in Sao Paulo. The expansion will enable Aruba to proliferate solutions based on its MOVE architecture throughout the region. Signs Definitive Agreement to Acquire Avenda Systems – Aruba announced it had entered into a definitive agreement to acquire privately-held Avenda Systems, a leading developer of network security solutions that securely connect users and their consumer mobile devices to business networks. The acquisition is expected to close in the second quarter of fiscal 2012. 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 that mobility device adoption will increase resulting in increased demand for enterprise mobility solutions, and (2) our expectations regarding the timing of the closing of our acquisition of Avenda Systems and the resulting impact on our business and reaction of our customers. 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 Annual Report on Form 10-K for the fiscal year ended July 31, 2011, which was filed with the SEC on September 27, 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, and the change in the valuation of the contingent rights liability, less the related tax effects. 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. Further, Aruba's management excludes from non-GAAP net income the tax effects of these non-GAAP financial measures, as without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on the Company's operating results. 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, and the change in the valuation of the contingent rights liability, less the related tax effects, 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, Africa and Asia Pacific regions. To learn more, visit Aruba at http://www.arubanetworks.com. For real-time news updates follow Aruba on Twitter and Facebook. © 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)     October 31,   July 31,20112011 Assets   Current assets: Cash and cash equivalents $ 81,241 $ 80,773 Short-term investments 184,587 153,185 Accounts receivable, net 67,244 68,598 Inventory 25,738 29,895 Deferred costs 10,989 6,999 Prepaids and other 11,922 5,097 Deferred income tax assets   36,496     53,310     Total current assets 418,217 397,857   Property and equipment, net 16,770 14,772 Goodwill 33,143 33,143 Intangible assets, net 19,018 20,863 Deferred income tax assets 23,595 20,143 Other assets   16,867     2,093     Total other assets   109,393     91,014     Total assets $ 527,610   $ 488,871     Liabilities and Stockholders' Equity   Current liabilities: Accounts payable $ 5,218 $ 11,278 Accrued liabilities 42,450 61,461 Income taxes payable 2,411 767 Deferred income tax liability 41 - Deferred revenue   75,776     54,451     Total current liabilities 125,896 127,957   Deferred income tax liability 6 815 Deferred revenue 15,505 14,000 Other long-term liabilities   1,025     757     Total other liabilities   16,536     15,572     Total liabilities   142,432     143,529     Stockholders' equity   Common Stock: $0.0001 par value; 350,000 shares authorized at October 31, and July 31, 2011; 106,997 and 104,905 shares issued and outstanding at October 31, and July 31, 2011, respectively 11 10 Additional paid-in capital 490,241 450,147 Accumulated other comprehensive income 335 127 Accumulated deficit   (105,409 )   (104,942 )   Total stockholders' equity   385,178     345,342     Total liabilities and stockholders' equity $ 527,610   $ 488,871     Aruba Networks, Inc.Consolidated Statements of Operations(On a GAAP basis)(In thousands, except per share data)(Unaudited)     Three months endedOctober 31,2011   2010 Revenues: Product $ 101,131 $ 69,204 Professional services and support 18,083 13,800 Ratable product and related professional services and support   137     143   Total revenues 119,351 83,147   Cost of revenues: Product 32,068 22,063 Professional services and support 4,546 2,905 Ratable product and related professional services and support   -     10   Total cost of revenues   36,614     24,978   Gross profit   82,737     58,169   Operating expenses: Research and development 24,468 17,113 Sales and marketing 45,615 33,415 General and administrative   11,100     7,188   Total operating expenses   81,183     57,716   Operating income 1,554 453   Other income (expense), net Interest income 276 233 Other income (expense), net   827     1,645   Total other income (expense), net   1,103     1,878   Income before income tax provision 2,657 2,331   Income tax provision   3,124     196   Net income (loss) $ (467 ) $ 2,135   Shares used in computing net income (loss) per common share, basic 105,937 96,037   Net income (loss) per common share, basic $ 0.00 $ 0.02   Shares used in computing net income (loss) per common share, diluted 105,937 113,271   Net income (loss) per common share, diluted $ 0.00 $ 0.02   Aruba Networks, Inc.Consolidated Statements of Operations(GAAP to Non-GAAP Reconciliation)(In thousands, except per share data)(Unaudited)     Three months endedOctober 31,2011   2010   GAAP net income (loss) $ (467 ) $ 2,135   Plus: a) Stock-based compensation expenses 19,265 11,568 b) Payroll taxes on stock-based compensation expenses 505 278 c) Amortization expense of acquired intangible assets and other acquisition related expenses 1,988 1,677 d) Change in valuation of contingent rights liability (918 ) (1,777 ) e) Income tax effect of non-GAAP exclusions (3,658 ) -       Non-GAAP net income $ 16,715   $ 13,881       GAAP net income (loss) per common share $ 0.00 $ 0.02   Plus: a) Stock-based compensation expenses 0.16 0.11 b) Payroll taxes on stock-based compensation expenses - - c) Amortization expense of acquired intangible assets and other acquisition related expenses 0.02 0.01 d) Change in valuation of contingent rights liability (0.01 ) (0.02 ) e) Income tax effect of non-GAAP exclusions (0.03 ) -       Non-GAAP net income per common share $ 0.14   $ 0.12     Shares used in computing diluted GAAP net income (loss) per common share 105,937 113,271   Shares used in computing diluted non-GAAP net income per common share 118,470 113,271   Aruba Networks, Inc.Consolidated Statements of OperationsAs a Percentage of Total Revenues(On a GAAP Basis)(Unaudited)     Three months endedOctober 31,2011   2010 Revenues: Product 84.7 % 83.2 % Professional services and support 15.2 % 16.6 % Ratable product and related professional services and support 0.1 % 0.2 %   Total revenues 100.0 % 100.0 %   Cost of revenues: Product 26.9 % 26.5 % Professional services and support 3.8 % 3.5 % Ratable product and related professional services and support 0.0 % 0.0 %   Total cost of revenues 30.7 % 30.0 %   Gross profit 69.3 % 70.0 %   Operating expenses: Research and development 20.5 % 20.6 % Sales and marketing 38.2 % 40.2 % General and administrative 9.3 % 8.7 %   Total operating expenses 68.0 % 69.5 %   Operating income 1.3 % 0.5 %   Other income (expense), net Interest income 0.2 % 0.3 % Other income (expense), net 0.7 % 2.0 %   Total other income (expense), net 0.9 % 2.3 %   Income before income tax provision 2.2 % 2.8 %   Income tax provision 2.6 % 0.2 %   Net income (loss) (0.4 %) 2.6 %   Aruba Networks, Inc.Consolidated Statements of Cash Flows(In thousands)(Unaudited)           Three months endedOctober 31,   2011       2010   Cash flows from operating activities Net income (loss) $ (467 ) $ 2,135   Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,079 3,299 Provision for doubtful accounts 12 (8 ) Write downs for excess and obsolete inventory 1,403 661 Compensation related to stock options and share awards 19,265 11,568 Accretion of purchase discounts on short-term investments 308 334 Loss (gain) on disposal of fixed assets - (8 ) Change in carrying value of contingent rights liability (918 ) (1,777 ) Deferred income taxes 13,362 - Recovery of escrow funds (702 ) - Excess tax benefit associated with stock-based compensation (8,318 ) (55 ) Changes in operating assets and liabilities: Accounts receivable 590 822 Inventory 2,345 (1,996 ) Prepaids and other (6,849 ) (304 ) Deferred costs (3,990 ) 780 Other assets (14,727 ) (85 ) Accounts payable (6,206 ) (5,190 ) Deferred revenue 22,830 1,239 Other current and noncurrent liabilities (14,693 ) 4,701 Income taxes payable   9,220     (82 )   Net cash provided by operating activities   16,544     16,034     Cash flows from investing activities Purchases of short-term investments (53,351 ) (28,159 ) Proceeds from sales of short-term investments 7,523 7,376 Proceeds from maturities of short-term investments 14,000 24,480 Purchases of property and equipment (3,417 ) (2,861 ) Proceeds from sales of property and equipment - 14 Cash paid in purchase acquisitions, net of cash acquired   -     (1,258 )   Net cash used in investing activities   (35,245 )   (408 )   Cash flows from financing activities Proceeds from issuance of common stock 10,856 7,447 Excess tax benefit associated with stock-based compensation   8,318     55     Net cash provided by financing activities   19,174     7,502     Effect of exchange rate changes on cash and cash equivalents   (5 )   2     Net increase in cash and cash equivalents 468 23,130   Cash and cash equivalents, beginning of period   80,773     31,254     Cash and cash equivalents, end of period $ 81,241   $ 54,384     Supplemental disclosure of cash flow information Income taxes paid $ 453 $ 409   Supplemental disclosure of non-cash investing and financing activities Common stock issued in purchase acquisitions $ - $ 28,691 Contingent rights issued in purchase acquisition $ - $ 9,486 IR ContactsAruba Networks, Inc.Michael GalvinChief Financial Officerir@arubanetworks.comorThe Blueshirt Group, Investor RelationsChris Danne or Maria Riley, +1-415-217-7722ir@arubanetworks.com