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Aruba Networks Reports Record First Quarter 2011 Financial Results
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  • Record Revenue of $83.1 Million in Q1 Increased 44% Year-over-Year and 8% Quarter-over-Quarter
  • Record Net Income of $2.1 million on a GAAP basis and $13.9 Million on a Non-GAAP Basis
  • Cash and Short Term Investments Increased by $19.0 Million in Q1 to $174.5 Million With No Debt
  • Company Added Over 800 New Customers in Q1 to Surpass 11,900 Cumulative Customers

SUNNYVALE, Calif., Nov 17, 2010 (BUSINESS WIRE) -- Aruba Networks, Inc. (NASDAQ: ARUN), a global leader in distributed enterprise network solutions, today released financial results for its fiscal 2011 first quarter ended October 31, 2010.

Revenues for Q1'11 were $83.1 million, an increase of 44% from the $57.6 million reported in Q1'10. GAAP net income for Q1'11 was $2.1 million, or $0.02 per share, compared to a net loss of $24.7 million, or $0.28 per share, in Q1'10.

Non-GAAP net income for Q1'11 was $13.9 million, or $0.12 per share. This compares to $4.1 million or $0.04 per share in Q1'10. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"The proliferation of mobile devices, such as iPads, tablet devices and smart phones, continues to rapidly increase, forcing companies to reconsider their approach to the network edge," said Dominic Orr, President and Chief Executive Officer of Aruba. "With our user-centric architecture, industry-leading security and proven scalability, we believe Aruba is uniquely positioned to take advantage of these trends, as evidenced by our fiscal first quarter results. First quarter revenues increased 44% year-over-year and 8% sequentially, driven by strong demand from our existing customer base across all of our key verticals, as well as from new customers, over 800 of which we added in the first quarter alone. We were most encouraged by our enterprise business which showed particular strength in the quarter, while our core education, healthcare and government verticals continued to perform well."

"Revenues, net income and earnings per share were all at record levels," said Steffan Tomlinson, Aruba's Chief Financial Officer. "While we continue to show significant operating margin expansion, we also are making strong investments in our Sales and Marketing and R&D organizations, as we look to take advantage of multiple opportunities in the marketplace and innovate ahead of our competition. Our balance sheet remains strong, as we generated cash flow from operations of $16.0 million in Q1, with DSOs of 47 days."

Recent Highlights

Recent highlights include:

  • Aruba Ranked Number 80 on Technology Fast 500 - The Technology Fast 500 is Deloitte's ranking of 500 of the fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America. Rankings are based on percentage of fiscal year revenue growth during the period from 2005-2009. Aruba Networks, Inc. grew 1,555 percent during this period.
  • ArubaOS 6.0 Availability - ArubaOS 6.0 is designed to improve over-the-air reliability and security in high-density smart phone and tablet environments. New software innovations for campus and branch office Mobility Controllers and design guidelines enable greatly enhanced performance, application fingerprinting, always on spectrum analysis and comprehensive wireless intrusion prevention.
  • Global Alliance with Honeywell Scanning and Mobility - Honeywell and Aruba announced that they are collaborating to offer complete wireless networking and mobile computing solutions and support services targeted at retail, healthcare, and logistics applications. As part of a global alliance, Honeywell Scanning & Mobility and Aruba will provide an end-to-end wireless solution for added data collection productivity, pairing industry-leading wireless LAN infrastructure with Honeywell's Dolphin 6000, 7000 and 9000 series of mobile computing devices.
  • Aruba Named Top Provider for WLANin Nemertes Research '2010 Pilothouse Awards' - Nemertes' awards are 100 percent based on the views and experiences of actual WLAN users and Nemertes' staff had no influence over how any given vendor performs. Nemertes asked IT professionals to rate WLAN providers in three areas: value, customer service and technology.
  • Completion of Acquisition of Azalea Networks - Aruba completed its acquisition of privately-held Azalea Networks, a leading supplier of outdoor mesh networks. Azalea Networks develops highly differentiated mesh products for critical outdoor industrial applications in the oil and gas, logistics, manufacturing, mining, petrochemical, public safety, smart grid and transportation sectors. These products enable Aruba to deliver secure mobility solutions that span from indoor carpeted spaces to the outdoor industrial enterprise.

Conference Call Information

Aruba will host a conference call for analysts and investors to discuss its fiscal first quarter results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the Company's website at http://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 4382368. International parties can access the replay at +1-303-590-3030 and should enter passcode 4382368.

Forward-Looking Statements

This press release contains forward-looking statements, including statements that proliferation of mobile devices will have a positive impact on our growth.

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) our ability to react to trends and challenges in our business and the markets in which we operate; (2) business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; (3) changes in overall information technology spending; and (4) our ability to establish and maintain successful relationships with our partners including Honeywell; 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 report on Form 10-K for the fiscal year ended July 31, 2010, which was filed with the SEC on September 24, 2010, and is available on Aruba's investor relations Web site at http://www.arubanetworks.com and on the SEC Web site at http://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.

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 expense of acquired intangible assets, the change in the valuation of the contingent rights liability and litigation reserves. 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, such as litigation reserves. 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, the change in the valuation of the contingent rights liability and litigation reserves, 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 evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. The accompanying tables have more details on these non-GAAP financial measures, including 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' Web site at http://www.arubanetworks.com.

About Aruba Networks

Aruba is a global leader in distributed enterprise networks. Its award-winning portfolio of campus, branch/teleworker, and mobile solutions simplify operations and secure access to all corporate applications and services - regardless of the user's device, location, or network. This dramatically improves productivity and lowers 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 or Facebook.

© 2010 Aruba Networks, Inc. AirWave®, Aruba Networks®, Aruba Mobility Management System®, Bluescanner, For Wireless That Works®, Mobile Edge Architecture®, People Move. Networks Must Follow®, The All-Wireless Workplace Is Now Open For Business, RFprotect®, Green Island, and The Mobile Edge Company®are trademarks of Aruba Networks, Inc. All rights reserved. All other trademarks are the property of their respective owners.

Aruba Networks, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
October 31, July 31,
2010 2010
Assets
Current assets:
Cash and cash equivalents $ 54,384 $ 31,254
Short-term investments 120,071 124,167
Accounts receivable, net 42,980 41,269
Inventory 18,072 15,159
Deferred costs 4,672 5,451
Prepaids and other 3,742 5,108
Total current assets 243,921 222,408
Property and equipment, net 10,617 9,919
Goodwill 32,498 7,656
Intangible assets, net 24,610 9,287
Other assets 1,673 1,437
Total other assets 69,398 28,299
Total assets $ 313,319 $ 250,707
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,647 $ 8,082
Accrued liabilities 49,048 36,458
Income taxes payable 575 519
Deferred revenue 43,247 43,422
Total current liabilities 97,517 88,481
Deferred revenue 13,730 10,976
Other long-term liabilities 596 595
Total other liabilities 14,326 11,571
Total liabilities 111,843 100,052
Stockholders' equity

Common Stock: $0.0001 par value; 350,000 shares authorized at
October 31, and July 31, 2010; 97,592 and 93,606 shares issued
and outstanding at October 31, and July 31, 2010, respectively

10 9
Additional paid-in capital 374,787 326,178
Accumulated other comprehensive income 174 98
Accumulated deficit (173,495 ) (175,630 )
Total stockholders' equity 201,476 150,655
Total liabilities and stockholders' equity $ 313,319 $ 250,707
Aruba Networks, Inc.
Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share data)
(Unaudited)
Three months ended
October 31,
2010 2009
Revenues:
Product $ 69,204 $ 47,198
Professional services and support 13,800 10,143
Ratable product and related professional services and support 143 255
Total revenues 83,147 57,596
Cost of revenues:
Product 22,063 16,432
Professional services and support 2,905 2,079
Ratable product and related professional services and support 10 86
Total cost of revenues 24,978 18,597
Gross profit 58,169 38,999
Operating expenses:
Research and development 17,113 11,796
Sales and marketing 33,415 24,740
General and administrative 7,188 7,132
Litigation reserves - 19,750
Total operating expenses 57,716 63,418
Operating income (loss) 453 (24,419 )
Other income (expense), net
Interest income 233 211
Other income (expense), net 1,645 (96 )
Total other income (expense), net 1,878 115
Income (loss) before income tax provision 2,331 (24,304 )
Income tax provision 196 372
Net income (loss) $ 2,135 $ (24,676 )
Shares used in computing net income (loss) per common share, basic 96,037 87,489
Net income (loss) per common share, basic $ 0.02 $ (0.28 )
Shares used in computing net income (loss) per common share, diluted 113,271 87,489
Net income (loss) per common share, diluted $ 0.02 $ (0.28 )
Aruba Networks, Inc.
Consolidated Statements of Operations
(GAAP to Non-GAAP Reconciliation)
(In thousands, except per share data)
(Unaudited)
Three months ended
October 31,
2010 2009
GAAP net income (loss) $ 2,135 $ (24,676 )
Plus:
a) Stock-based expenses 11,846 7,819
b) Amortization expense of acquired intangible assets 1,677 1,233
c) Change in valuation of contingent rights liability (1,777 ) -
d) Litigation reserves - 19,750
Non-GAAP net income $ 13,881 $ 4,126
GAAP net income (loss) per common share $ 0.02 $ (0.28 )
Plus:
a) Stock-based expenses 0.11 0.09
b) Amortization expense of acquired intangible assets 0.01 0.01
c) Change in valuation of contingent rights liability (0.02 ) -
d) Litigation reserves - 0.22
Non-GAAP net income per common share $ 0.12 $ 0.04
Shares used in computing diluted GAAP net income (loss) per common share 96,037 87,489
Shares used in computing diluted Non-GAAP net income per common share 113,271 100,299
Aruba Networks, Inc.
Consolidated Statements of Operations
As a Percentage of Total Revenues
(On a GAAP Basis)
(Unaudited)
Three months ended
October 31,
2010 2009
Revenues:
Product 83.2 % 82.0 %
Professional services and support 16.6 % 17.6 %
Ratable product and related professional services and support 0.2 % 0.4 %
Total revenues 100.0 % 100.0 %
Cost of revenues:
Product 26.5 % 28.5 %
Professional services and support 3.5 % 3.6 %
Ratable product and related professional services and support 0.0 % 0.2 %
Total cost of revenues 30.0 % 32.3 %
Gross profit 70.0 % 67.7 %
Operating expenses:
Research and development 20.6 % 20.5 %
Sales and marketing 40.2 % 42.9 %
General and administrative 8.7 % 12.4 %
Litigation reserves 0.0 % 34.3 %
Total operating expenses 69.5 % 110.1 %
Operating income (loss) 0.5 % (42.4 %)
Other income (expense), net
Interest income 0.3 % 0.4 %
Other income (expense), net 2.0 % (0.2 )%
Total other income (expense), net 2.3 % 0.2 %
Income (loss) before income tax provision 2.8 % (42.2 %)
Income tax provision 0.2 % 0.6 %
Net income (loss) 2.6 % (42.8 %)
Aruba Networks, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
October 31,
2010 2009
Cash flows from operating activities
Net income (loss) $ 2,135 $ (24,676 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 3,299 2,494
Provision for (benefit from) doubtful accounts (8 ) 21
Write downs for excess and obsolete inventory 661 446
Compensation related to stock options and share awards 11,568 7,819
Accretion of purchase discounts on short-term investments 334 81
Loss (gain) on disposal of fixed assets (8 ) 8
Change in carrying value of contingent liability (1,777 ) -
Excess tax benefit associated with stock-based compensation (55 ) (46 )
Changes in operating assets and liabilities:
Accounts receivable 822 467
Inventory (1,996 ) (1,469 )
Prepaids and other (304 ) (850 )
Deferred costs 780 (1,816 )
Other assets (85 ) 36
Accounts payable (5,190 ) 1,346
Deferred revenue 1,239 6,339
Other current and noncurrent liabilities 4,701 20,107
Income taxes payable (82 ) 179
Net cash provided by operating activities 16,034 10,486
Cash flows from investing activities
Purchases of short-term investments (28,159 ) (15,730 )
Proceeds from sales of short-term investments 7,384 -
Proceeds from maturities of short-term investments 24,480 5,820
Net realized gain on short-term investments (8 ) -
Purchases of property and equipment (2,861 ) (497 )
Proceeds from sales of property and equipment 14 -
Cash paid in purchase acquisition, net of cash acquired (1,258 ) -
Net cash used in investing activities (408 ) (10,407 )
Cash flows from financing activities
Proceeds from issuance of common stock 7,447 2,631
Excess tax benefit associated with stock-based compensation 55 46
Net cash provided by financing activities 7,502 2,677
Effect of exchange rate changes on cash and cash equivalents 2 2
Net increase in cash and cash equivalents 23,130 2,758
Cash and cash equivalents, beginning of period 31,254 41,298
Cash and cash equivalents, end of period $ 54,384 $ 44,056
Supplemental disclosure of cash flow information
Income taxes paid $ 408 $ 281
Supplemental disclosure of non-cash investing and financing activities
Common stock issued in purchase acquisition $ 28,691 $ -
Contingent rights issued in purchase acquisition $ 9,486 $ -
Loan forgiveness in connection with purchase acquisition $ 2,000 $ -

SOURCE: Aruba Networks, Inc.

Aruba Networks, Inc.
Steffan Tomlinson
Chief Financial Officer
+1-408-754-3058
ir@arubanetworks.com
or
The Blueshirt Group, Investor Relations
Chris Danne, Nicole Gunderson
+1-415-217-7722
ir@arubanetworks.com