Aruba Networks Reports Fiscal Third Quarter 2013 Financial Results

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Aruba Networks Reports Fiscal Third Quarter 2013 Financial Results

SUNNYVALE, Calif.--(BUSINESS WIRE)-- Aruba Networks, Inc. (NAS: ARUN) today released financial results for its third quarter of fiscal year 2013 ended April 30, 2013.

Revenue for Q3'13 of $147.1 million grew 12 percent from the $131.9 million reported in Q3'12. GAAP net loss for Q3'13 was $20.2 million, or $0.18 per diluted share, compared with GAAP net income of $6.0 million, or $0.05 per diluted share, in Q3'12.

Non-GAAP net income for Q3'13 was $14.0 million, or $0.11 per diluted share, compared with Q3'12 non-GAAP net income of $19.4 million, or $0.16 per diluted share. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"While we are disappointed with our third quarter financial results and are cautious about the near-term spending environment, the secular trends driving our markets are strong," said Dominic Orr, Aruba's president and chief executive officer. "The proliferation of mobile devices and applications as well as BYOD is changing access networking and Aruba's application-aware MOVE architecture is at the forefront of this technology shift."

Commenting on the company's financial results, Michael Galvin, Aruba's chief financial officer, added, "While the revenue shortfall impacted our operating results, gross margin remained strong and within our target range. During the quarter, we continued our strong working capital management, generating $25.3 million in cash flow from operations and ending the quarter with $440.9 million in cash, cash equivalents and short-term investments."

Recent Highlights

  • Extended our mobility solution portfolio with the announcement to acquire Meridian Apps, Inc., a Portland, Oregon based mobile-software company that helps location-based businesses engage with their visitors.
  • Introduced Aruba WorkSpace, a component of the ClearPass Access Management System with more than 40 applications at launch and for the first time, Network Access Control (NAC), Mobile Device Management (MDM) and Mobile Application Management (MAM) systems are a part of one solution that work together to secure company data and reduce BYOD helpdesk costs.
  • Introduced Aruba Networks HybridControl Wi-Fi architecture with the Aruba 7200 Mobility Controller, bringing unprecedented scale, savings and enterprise-class capabilities for service providers increasingly looking to deploy dual-purpose Wi-Fi infrastructure for cellular offload and managed services.

Conference Call Information

Aruba will host a conference call for analysts and investors to discuss its third quarter of fiscal year 2013 results today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Open to the public, investors may access the call by dialing +1-480-629-9664. A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at 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 4614156. International parties can access the replay at +1-303-590-3030 and should enter passcode 4614156.

Forward-Looking Statements

This press release may be deemed to contain forward-looking statements regarding our expected strategies, markets and product positions, performance and results.

These forward-looking statements involve risks and uncertainties, as well as assumptions, which if they do not fully materialize or prove incorrect, could cause our 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, among others: business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; changes in overall information technology spending; and those risks and uncertainties included under the captions "Risk Factors" and "Management's Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission, or SEC, on October 11, 2012 and March 7, 2013, respectively, and available on the investor relations portion of our website at and on the SEC's website at

All forward-looking statements in this press release are based on information available to us as of the date of this release, and we do not assume any obligation to update these forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.

The financial statements that follow should be read in conjunction with the notes set forth in our Quarterly Report on Form 10-Q when filed with the SEC.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. 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. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

Non-GAAP net income and EPS. Aruba defines non-GAAP net income as net income plus stock-based compensation 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 compensation 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 compensation 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 compensation expenses and related payroll taxes, that are recurring. Stock-based compensation 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 impact 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

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, Africa and Asia Pacific regions. To learn more, visit Aruba at For real-time news updates follow Aruba on Twitter and Facebook, and for the latest technical discussions on mobility and Aruba products visit Airheads Social at

© 2013 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
      April 30,       July 31,
  2013     2012  
Current assets
Cash and cash equivalents $ 177,446 $ 133,629
Short-term investments 263,436 212,601
Accounts receivable, net 71,014 80,190
Inventory, net 27,873 22,202
Deferred cost of revenue 8,148 11,241
Prepaids and other 20,665 18,996
Deferred income tax assets, current   36,064     34,584  
Total current assets 604,646 513,443
Property and equipment, net 26,607 19,901
Goodwill 56,947 56,947

Intangible assets, net

21,341 27,036
Deferred income tax assets, non-current 15,062 20,664

Other non-current assets

  6,417     10,905  
Total non-current assets   126,374     135,453  
Total assets $ 731,020   $ 648,896  
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 73,506 $ 74,879
Income taxes payable 4,428 2,032
Deferred revenue, current   89,342     80,602  
Total current liabilities 167,276 157,513
Deferred revenue, non-current 29,108 22,375
Other non-current liabilities   7,544     2,118  
Total non-current liabilities   36,652     24,493  
Total liabilities   203,928     182,006  
Stockholders' equity
Common stock 12 11
Additional paid-in capital 658,402 582,077
Accumulated other comprehensive loss (1,502 ) (1,405 )
Accumulated deficit   (129,820 )   (113,793 )
Total stockholders' equity   527,092     466,890  
Total liabilities and stockholders' equity $ 731,020   $ 648,896  

Note: Certain prior year amounts have been reclassified to conform to the current year presentation.

Aruba Networks, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended Nine months ended
April 30, April 30,
  2013     2012     2013     2012  
Product $ 121,195 $ 110,531 $ 371,318 $ 317,632
Professional services and support   25,941     21,363     75,662     59,889  
Total revenue 147,136 131,894 446,980 377,521
Cost of revenue
Product 36,782 34,014 110,608 96,535
Professional services and support   7,190     5,497     20,138     15,073  
Total cost of revenue   43,972     39,511     130,746     111,608  
Gross profit   103,164     92,383     316,234     265,913  
Operating expenses
Research and development 34,983 27,383 101,634 79,776
Sales and marketing 57,199 49,974 168,516 145,309
General and administrative   13,405     11,723     37,755     35,521  
Total operating expenses   105,587     89,080     307,905     260,606  
Operating income (loss) (2,423 ) 3,303 8,329 5,307
Other income (loss), net
Interest income 266 301 875 876
Other income (loss), net   (114 )   (675 )   1,140     2,883  
Total other income (loss), net   152     (374 )   2,015     3,759  
Income (loss) before income taxes (2,271 ) 2,929 10,344 9,066
Provision for (benefit from) income taxes   17,920     (3,099 )   26,371     14,887  
Net income (loss) $ (20,191
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