Aruba Networks Reports Fourth Quarter and Fiscal Year 2013 Financial Results

Aruba Networks Reports Fourth Quarter and Fiscal Year 2013 Financial Results

SUNNYVALE, Calif.--(BUSINESS WIRE)-- Aruba Networks, Inc. (NAS: ARUN) today released financial results for its fourth quarter and fiscal year ended July 31, 2013.

Revenue for Q4'13 was $153.1 million, compared with $139.2 million reported in Q4'12. GAAP net loss in Q4'13 was $16.3 million, or $0.14 per share, compared with a GAAP net loss of $3.0 million, or $0.03 per share, in Q4'12.


Non-GAAP net income for Q4'13 was $15.1 million, or $0.12 per diluted share, compared with Q4'12 non-GAAP net income of $22.1 million, or $0.18 per diluted share. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

Fiscal year 2013 revenue was $600.0 million, an increase of 16 percent from $516.8 million reported in fiscal year 2012. GAAP net loss for fiscal year 2013 was $32.3 million, or $0.29 per share, compared with a net loss of $8.9 million, or $0.08 per share, in fiscal year 2012. Non-GAAP net income for fiscal year 2013 was $78.5 million, or $0.63 per diluted share, compared with non-GAAP net income of $77.5 million, or $0.64 per diluted share, in fiscal year 2012.

"We exceeded our fourth quarter revenue expectations and added a record number of new customers," said Dominic Orr, Aruba's president and chief executive officer. "This performance was driven by strong execution, improvements across most of our geographical theatres and increased demand in our core verticals globally. Looking forward, we are confident in our strong growth drivers including our 802.11ac products, ClearPass, public facing enterprise solutions and Aruba Instant."

Michael Galvin, Aruba's chief financial officer, added, "In fiscal 2013, we achieved a record $600 million in revenue while our gross margin remained strong. Throughout the fiscal year, we continued our strong working capital management, generated $153 million in cash flow from operations and ended the year with approximately $415 million in cash and short-term investments. We completed our initial stock repurchase program by purchasing $86 million of our common stock in fiscal 2013 and subsequently expanded our share repurchase program by another $100 million."

Recent Highlights

  • In the fourth quarter, the company purchased $55.7 million of its common stock. Additionally, Aruba's Board of Directors authorized an increase of $100 million to its share repurchase program.

  • Launched Aruba's flagship 802.11ac solution, the first in the industry to deliver gigabit Wi-Fi combined with the device density and application intelligence required by today's Wi-Fi networks. The Aruba 220 Series APs are purpose-built for the 802.11ac standard, resulting in time and cost savings for enterprises. Aruba's patented ClientMatch technology resolves the issue of "sticky clients" and dynamically optimizes Wi-Fi client performance by putting the Wi-Fi infrastructure in control of client connection and roaming decisions.

Conference Call Information

Aruba will host a conference call for analysts and investors to discuss its fourth quarter and fiscal year 2013 results today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Open to the public, interested parties 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 dial 1-800-406-7325 and enter passcode 4629617. International parties may access the replay by dialing +1-303-590-3030 and entering the passcode 4629617.

Forward-Looking Statements

This press release may be deemed to contain forward-looking statements regarding our product strategy, market opportunity, market share and investments.

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 Discussion and Analysis" in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission, or SEC, on October 11, 2012 and June 6, 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 Annual Report on Form 10-K 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 Aruba's GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in its 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 expense of acquired intangible assets and other acquisition related expenses, non-recurring patent-infringement settlements, and the change in the valuation of the contingent rights liability, less the related tax effects. During the current period, Aruba has modified the non-GAAP reporting of tax effects related to the internal transfer of intellectual property (IP) in 2012 as part of its new corporate organization structure. Aruba management determined to exclude these tax effects in fiscal 2013 to align its non-GAAP reporting with the initial up-front buy-in for that IP. 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, non-recurring patent-infringement settlements 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 in the news releases section 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

(In thousands)

(Unaudited)

July 31,

July 31,

2013

2012

Assets

Current assets

Cash and cash equivalents

$

144,919

$

133,629

Short-term investments

269,882

212,601

Accounts receivable, net

93,191

80,190

Inventory, net

28,895

22,202

Deferred cost of revenue

12,657

11,241

Prepaids and other

20,090

18,996

Deferred income tax assets, current

28,801

34,584

Total current assets

598,435

513,443

Property and equipment, net

27,536

19,901

Goodwill

67,242

56,947

Intangible assets, net

26,937

27,036

Deferred income tax assets, non-current

19,788

20,664

Other non-current assets

6,530

10,905

Total non-current assets

148,033

135,453

Total assets

$

746,468

$

648,896

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable and accrued liabilities

$

119,523

$

74,879

Income taxes payable, current

694

2,032

Deferred revenue, current

109,765

80,602

Total current liabilities

229,982

157,513

Deferred revenue, non-current

31,578

22,375

Other non-current liabilities

8,990

2,118

Total non-current liabilities

40,568

24,493

Total liabilities

270,550

182,006

Stockholders' equity

Common stock

11

11

Additional paid-in capital

623,554

582,077

Accumulated other comprehensive loss

(1,540

)

(1,405

)

Accumulated deficit

(146,107

)

(113,793

)

Total stockholders' equity

475,918

466,890

Total liabilities and stockholders' equity

$

746,468

$

648,896

Aruba Networks, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amount)

(Unaudited)

Three months ended

Years ended

July 31

July 31

2013

2012

2013

2012

Revenue

Product

$

125,025

$

117,101

$

496,343

$

434,733

Professional services and support

28,039

22,148

103,701

82,036

Total revenue

153,064

139,249

600,044

516,769

Cost of revenue

Product

38,505

33,912

149,113

130,446

Professional services and support

7,228

5,919

27,366

20,992

Total cost of revenue

45,733

39,831

176,479

151,438

Gross profit

107,331

99,418

423,565

365,331

Operating expenses

Research and development

38,112

29,671

139,746

109,448

Sales and marketing

62,289

53,064

230,805

198,373

General and administrative

13,275

11,254

51,030

46,775

Legal settlement

14,000

-

14,000

-

Total operating expenses

127,676

93,989

435,581

354,596

Operating income (loss)

(20,345

)

5,429

(12,016

)

10,735

Other income (loss), net

Interest income

263

318

1,138

1,194

Other income (loss), net

(487

)

(1,252

)

653

1,631

Total other income (loss), net

(224

)

(934

)

1,791

2,825

Income (loss) before income taxes

(20,569

)

4,495

(10,225

)

13,560

Provision for (benefit from) income taxes

(4,282

)

7,525

22,089

22,411

Net loss

$

(16,287

)

$

(3,030

)

$

(32,314

)

$

(8,851

)

Shares used in computing net loss per common share, basic

114,202

111,419

113,284

108,774

Net loss per common share, basic

$

(0.14

)

$

(0.03

)

$

(0.29

)

$

(0.08

)

Shares used in computing net loss per common share, diluted

114,202

111,419

113,284

108,774

Net loss per common share, diluted

$

(0.14

)

$

(0.03

)

$

(0.29

)

$

(0.08

)

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

Aruba Networks, Inc.

Condensed Consolidated Statements of Operations

(GAAP to Non-GAAP Reconciliation)

(In thousands, except per share amounts)

(Unaudited)