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,
20132012
Assets
 
Current assets
Cash and cash equivalents$144,919$133,629
Short-term investments269,882212,601
Accounts receivable, net93,19180,190
Inventory, net28,89522,202
Deferred cost of revenue12,65711,241
Prepaids and other20,09018,996
Deferred income tax assets, current 28,801  34,584 

 

Total current assets598,435513,443
 
Property and equipment, net27,53619,901
Goodwill67,24256,947
Intangible assets, net26,93727,036
Deferred income tax assets, non-current19,78820,664
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, current6942,032
Deferred revenue, current 109,765  80,602 
 
Total current liabilities229,982157,513
 
Deferred revenue, non-current31,57822,375
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 stock1111
Additional paid-in capital623,554582,077
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 endedYears ended
July 31July 31
2013201220132012
Revenue
Product$125,025$117,101$496,343$434,733
Professional services and support 28,039  22,148  103,701  82,036 
 
Total revenue153,064139,249600,044516,769
 
Cost of revenue
Product38,50533,912149,113130,446
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 development38,11229,671139,746109,448
Sales and marketing62,28953,064230,805198,373
General and administrative13,27511,25451,03046,775
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 income2633181,1381,194
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, basic114,202111,419113,284108,774
 
Net loss per common share, basic$(0.14)$(0.03)$(0.29)$(0.08)
 
Shares used in computing net loss per common share, diluted114,202111,419113,284108,774
 
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)
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