Aruba Networks Reports Fiscal Third Quarter 2013 Financial Results

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 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 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 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 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 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, 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, and for the latest technical discussions on mobility and Aruba products visit Airheads Social at http://community.arubanetworks.com.

© 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

(Unaudited)

April 30,

July 31,

2013

2012

Assets

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)

(Unaudited)

Three months ended

Nine months ended

April 30,

April 30,

2013

2012

2013

2012

Revenue

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