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Press release from Business Wire

Aruba Networks Reports Record Fourth Quarter and Fiscal Year 2012 Financial Results

<ul> <li class='bwlistitemmargb'> <i>Fourth Quarter Revenue Increased by 22 Percent Year-Over-Year to $139.2 million</i> </li> <li class='bwlistitemmargb'> <i>Fiscal 2012 Revenue Grew by 30 Percent to $516.8 million</i> </li> <li class='bwlistitemmargb'> <i>Increased Cash and Short Term Investments to $346.2 million</i> </li> </ul>

Thursday, August 23, 2012

Aruba Networks Reports Record Fourth Quarter and Fiscal Year 2012 Financial Results16:03 EDT Thursday, August 23, 2012 SUNNYVALE, Calif. (Business Wire) -- Aruba Networks, Inc. (NASDAQ: ARUN) today released financial results for its fourth quarter and fiscal year ended July 31, 2012. Revenue for Q4'12 was $139.2 million, an increase of 22 percent from the $113.8 million reported in Q4'11. GAAP net loss for Q4'12 was $3.0 million, or $0.03 per share, compared with GAAP net income of $68.2 million, or $0.57 per share, in Q4'11. GAAP net income for the 2011 fiscal fourth quarter included a one-time tax benefit of $72.8 million, equivalent to $0.61 per share, related to the establishment of our international operating entity. Non-GAAP net income for Q4'12 was $22.1 million, or $0.18 per share, compared with non-GAAP net income of $20.2 million, or $0.17 per share, in Q4'11. Reconciliation between GAAP and non-GAAP information is contained in the tables below. Fiscal year 2012 revenue was $516.8 million, an increase of 30 percent from $396.5 million reported in fiscal year 2011. GAAP net loss for fiscal year 2012 was $8.9 million, or $0.08 per share, compared with net income of $70.7 million, or $0.60 per share, in fiscal year 2011. Non-GAAP net income for fiscal year 2012 was $77.5 million, or $0.64 per share, compared with $69.3 million, or $0.59 per share, in fiscal year 2011. “In the fourth quarter, we achieved our thirteenth consecutive quarter of record revenue, growing revenue 22 percent year-over-year and 6 percent sequentially,” said Dominic Orr, Aruba's president and chief executive officer. “Our traditional core verticals performed well in the quarter and we saw continued growth among the general enterprise. We believe that demand for wireless LAN networks remains solid. Our differentiated mobile-centric approach to the access network and value proposition continues to resonate with customers as the global proliferation of mobile devices and the BYOD trend fundamentally change how users securely connect to their enterprise resources.” Commenting on the company's financial results, Michael Galvin, Aruba's chief financial officer, added, “We are pleased with our operating performance for fiscal 2012 as we demonstrated strong improvement in gross margin and operating margin for both the year and our fiscal fourth quarter. During the fourth quarter we generated $42.1 million in cash flow from operations, purchased 1.4 million shares of common stock under our share repurchase program and ended the year with $346.2 million in cash, cash equivalents and short-term investments.” Recent HighlightsAruba's MOVE Architecture Achieved First Wi-Fi Qualification on Microsoft Lync Certification Program. The program ensures that products comply with Microsoft's guidelines for voice and video quality of service delivery.Qualified products deliver a more consistent unified communications experience to end users while resellers benefit from fewer deployment issues and service call backs. Tests showed that Aruba Wi-Fi provides up to 75 percent better performance for Microsoft Lync Server 2010 compared to an equivalent Cisco Wi-Fi network. The degree of improvement was calculated from mean opinion scores (MOS) after testing by Aruba and Microsoft, using Microsoft testing and evaluation criteria. Aruba Positioned in Leaders Quadrant in Gartner, Inc.'s New Report. In its inaugural version of Gartner Inc.'s new, “Magic Quadrant for the Wired and Wireless LAN Infrastructure” report, Aruba was positioned in the Leaders quadrant, demonstrating its completeness of vision and ability to execute. Aruba Commenced a $100 Million Share Repurchase Program. Aruba's Board of Directors authorized a share repurchase program of up to $100 million for its outstanding common stock. In the fiscal fourth quarter of 2012, Aruba purchased 1.4 million shares of common stock under its stock repurchase program at an average price of $14.10 per share for an aggregate purchase price of approximately $20 million. Texas A&M University Replaced Cisco Wireless Network with Aruba 802.11n. After extensive testing among a variety of vendors, the University replaced its legacy Cisco wireless network with a campus-wide Aruba 802.11n mobile network based on Aruba's Mobile Virtual Enterprise (MOVE) architecture to better support its 50,000 students and 2,700 faculty, each with between two and five mobile devices in regular use. Alabama A&M University Enabled Campus-wide Mobile Access Network Based on MOVE. The new wireless network is being deployed in three phases using the Aruba Networks 6000 Series Mobility Controller, with approximately 260 Aruba AP-105 access points and the Aruba AirWave Management system, designed to provide users with pervasive fast access across the entire campus using their desktops, laptops, tablets and smartphones. NCR and Aruba Networks Signed Global Services Agreement. Aruba resellers with multinational customers can now leverage NCR globally to extend their market reach, reduce costs and increase customer loyalty. The agreement builds on NCR's existing Aruba ServiceEdge partner status, where NCR provides Aruba deployment services, to now authorize NCR to deliver a full range of wireless networking services to Aruba channel partners, ranging from planning and design to site surveys, installation, and moves, adds and changes. Conference Call Information Aruba will host a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2012 results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Open to the public, investors may access the call by dialing +1-480-629-9712. 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 4557961. International parties can access the replay at +1-303-590-3030 and should enter passcode 4557961. Forward-Looking Statements This press release contains forward-looking statements, including statements about our expectation that the demand for wireless LAN networks remains solid and employees will continue to bring their own devices to work, resulting in increased demand for our enterprise mobility solutions, and expansion of our product portfolio. 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 Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2012, which was filed with the SEC on June 7, 2012, and is available on Aruba's investor relations website at www.arubanetworks.com and on the SEC's website 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 to reflect events that occur or circumstances that exist after the date on which they were made. 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 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 evaluates these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. The accompanying tables provide 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' website at www.arubanetworks.com. About Aruba Networks, Inc. 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 enables IT organizations and users to securely address the Bring Your Own Device (BYOD) phenomenon, dramatically improving productivity and lowering 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 http://www.arubanetworks.com. For real-time news updates follow Aruba on Twitter and Facebook. © 2012 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.Condensed Consolidated Balance Sheets(Unaudited)   July 31,     July 31,2012   2011 Assets   Current assets: Cash and cash equivalents $ 133,629 $ 80,773 Short-term investments 212,601 153,185 Accounts receivable, net 80,190 68,598 Inventory 22,202 29,895 Deferred costs 11,241 6,999 Prepaids and other 18,996 5,097 Deferred income tax assets, current   34,584     53,310     Total current assets 513,443 397,857   Property and equipment, net 19,901 14,772 Goodwill 56,947 33,143 Intangible assets, net 27,036 20,863 Deferred income tax assets, non-current 20,664 19,328 Other non-current assets   10,905     2,093     Total non-current assets   135,453     90,199     Total assets $ 648,896   $ 488,056     Liabilities and Stockholders' Equity   Current liabilities: Accounts payable and accrued liabilities $ 74,879 $ 72,739 Income taxes payable 2,032 767 Deferred revenue, current   80,602     54,451     Total current liabilities 157,513 127,957   Deferred revenue, non-current 22,375 14,000 Other non-current liabilities   2,118     757     Total non-current liabilities   24,493     14,757     Total liabilities   182,006     142,714     Stockholders' equity   Common Stock 11 10 Additional paid-in capital 582,077 450,147 Accumulated other comprehensive income (loss) (1,405 ) 127 Accumulated deficit   (113,793 )   (104,942 )   Total stockholders' equity   466,890     345,342     Total liabilities and stockholders' equity $ 648,896   $ 488,056     Aruba Networks, Inc.Condensed Consolidated Statements of Operations(In thousands, except per share data)(Unaudited)           Three months endedYears endedJuly 31,July 31,2012201120122011 Revenue: Product $ 117,101 $ 97,141 $ 434,733 $ 334,860 Professional services and support 21,900 16,475 81,185 61,063 Ratable product and related professional services and support   248     142     851     591     Total revenue 139,249 113,758 516,769 396,514   Cost of revenue: Product 33,912 31,620 130,446 107,820 Professional services and support 5,878 4,259 20,938 14,873 Ratable product and related professional services and support   41     -     54     10     Total cost of revenue   39,831     35,879     151,438     122,703     Gross profit   99,418     77,879     365,331     273,811     Operating expenses: Research and development 29,671 23,370 109,448 84,890 Sales and marketing 53,064 42,972 198,373 154,239 General and administrative   11,254     11,741     46,775     39,431     Total operating expenses   93,989     78,083     354,596     278,560     Operating income (loss) 5,429 (204 ) 10,735 (4,749 )   Other income (expense), net Interest income 318 260 1,194 1,018 Other income (expense), net   (1,252 )   (4,407 )   1,631     2,784     Total other income (expense), net   (934 )   (4,147 )   2,825     3,802     Income (loss) before income taxes 4,495 (4,351 ) 13,560 (947 )   Provision for (benefits from) income taxes   7,525     (72,536 )   22,411     (71,635 )   Net income (loss) $ (3,030 ) $ 68,185   $ (8,851 ) $ 70,688     Shares used in computing net income (loss) per common share, basic 111,419 104,310 108,774 100,299   Net income (loss) per common share, basic $ (0.03 ) $ 0.65 $ (0.08 ) $ 0.70   Shares used in computing net income (loss) per common share, diluted 111,419 119,600 108,774 117,117   Net income (loss) per common share, diluted $ (0.03 ) $ 0.57 $ (0.08 ) $ 0.60   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 31,2012201120122011   GAAP net income (loss) $ (3,030 ) $ 68,185 $ (8,851 ) $ 70,688   Plus: a) Stock-based compensation expenses 21,939 17,924 83,912 63,751 b) Payroll taxes on stock-based compensation expenses 224 402 2,653 3,088 c) Amortization expense of acquired intangible assets and other acquisition related expenses 2,609 2,193 9,955 8,203 d) Change in valuation of contingent rights liability 673 4,394 (2,319 ) (3,596 ) e) Income tax effect of non-GAAP exclusions (333 ) (72,848 ) (7,816 ) (72,848 )           Non-GAAP net income $ 22,082   $ 20,250   $ 77,534   $ 69,286       GAAP net income (loss) per common share $ (0.03 ) $ 0.57 $ (0.08 ) $ 0.60   Plus: a) Stock-based compensation expenses 0.18 0.15 0.70 0.54 b) Payroll taxes on stock-based compensation expenses - - 0.02 0.03 c) Amortization expense of acquired intangible assets and other acquisition related expenses 0.02 0.02 0.08 0.07 d) Change in valuation of contingent rights liability 0.01 0.04 (0.02 ) (0.03 ) e) Income tax effect of non-GAAP exclusions - (0.61 ) (0.06 ) (0.62 )           Non-GAAP net income per common share $ 0.18   $ 0.17   $ 0.64   $ 0.59     Shares used in computing diluted GAAP net income (loss) per common share 111,419 119,600 108,774 117,117   Shares used in computing diluted non-GAAP net income (loss) per common share 120,370 119,600 120,762 117,117           Aruba Networks, Inc.Condensed Consolidated Statements of OperationsAs a Percentage of Total Revenues(Unaudited)   Three months endedYears endedJuly 31,July 31,2012201120122011 Revenue: Product 84.1 % 85.4 % 84.1 % 84.5 % Professional services and support 15.7 % 14.5 % 15.7 % 15.4 % Ratable product and related professional services and support 0.2 % 0.1 % 0.2 % 0.1 %   Total revenue 100.0 % 100.0 % 100.0 % 100.0 %   Cost of revenue: Product 24.4 % 27.8 % 25.2 % 27.2 % Professional services and support 4.2 % 3.7 % 4.1 % 3.7 % Ratable product and related professional services and support 0.0 % 0.0 % 0.0 % 0.0 %   Total cost of revenue 28.6 % 31.5 % 29.3 % 30.9 %   Gross profit 71.4 % 68.5 % 70.7 % 69.1 %   Operating expenses: Research and development 21.3 % 20.5 % 21.2 % 21.4 % Sales and marketing 38.1 % 37.8 % 38.4 % 38.9 % General and administrative 8.1 % 10.4 % 9.0 % 10.0 %   Total operating expenses 67.5 % 68.7 % 68.6 % 70.3 %   Operating income (loss) 3.9 % (0.2 %) 2.1 % (1.2 %)   Other income (expense), net Interest income 0.2 % 0.2 % 0.2 % 0.2 % Other income (expense), net (0.9 %) (3.8 %) 0.3 % 0.7 %   Total other income (expense), net (0.7 %) (3.6 %) 0.5 % 0.9 %   Income (loss) before income taxes 3.2 % (3.8 %) 2.6 % (0.3 %)   Provision for (beneifts from) income taxes 5.4 % (63.8 %) 4.3 % (18.1 %)   Net income (loss) (2.2 %) 60.0 % (1.7 %) 17.8 %   Aruba Networks, Inc.Condensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)             Years endedJuly 31,20122011Cash flows from operating activities Net income (loss) $ (8,851 ) $ 70,688   Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 19,123 15,042 Provision for doubtful accounts 125 17 Write downs for excess and obsolete inventory 4,113 2,647 Stock-based compensation expenses 83,912 63,750 Accretion of purchase discounts on short-term investments 1,142 1,290 Loss (gain) on disposal of fixed assets 544 (3 ) Change in carrying value of contingent rights liability (2,319 ) (3,598 ) Deferred income taxes 15,369 (72,638 ) Recovery of escrow funds (702 ) - Excess tax benefit associated with stock-based compensation (21,572 ) 194 Changes in operating assets and liabilities: Accounts receivable (11,374 ) (24,821 ) Inventory 1,615 (16,900 ) Prepaids and other (14,594 ) (1,658 ) Deferred costs (4,658 ) (1,548 ) Other assets (8,131 ) (240 ) Deferred revenue 34,522 12,713 Accounts payable and other liabilities 4,456 13,164 Income taxes payable   20,141     (109 )   Net cash provided by operating activities   112,861     57,990     Cash flows from investing activities Purchases of short-term investments (189,218 ) (144,512 ) Proceeds from sales of short-term investments 55,790 28,927 Proceeds from maturities of short-term investments 72,650 84,870 Purchases of property and equipment (13,044 ) (9,909 ) Proceeds from sales of property and equipment - 11 Cash paid in purchase acquisitions, net of cash acquired   (22,505 )   (4,303 )   Net cash used in investing activities   (96,327 )   (44,916 )   Cash flows from financing activities Proceeds from issuance of common stock 34,779 36,640 Repurchase of common stock (19,884 ) - Excess tax benefit associated with stock-based compensation   21,572     (194 )   Net cash provided by financing activities   36,467     36,446     Effect of exchange rate changes on cash and cash equivalents   (145 )   (1 )   Net increase in cash and cash equivalents 52,856 49,519   Cash and cash equivalents, beginning of period   80,773     31,254     Cash and cash equivalents, end of period $ 133,629   $ 80,773   IR ContactsAruba Networks, Inc.Michael GalvinChief Financial Officerir@arubanetworks.comorThe Blueshirt Group, Investor RelationsChris Danne, Maria Riley+1-415-217-7722ir@arubanetworks.com