SUNNYVALE, Calif.--(BUSINESS WIRE)--Aruba Networks, Inc. (NASDAQ:ARUN), a global leader in distributed enterprise network solutions, today released financial results for its fiscal 2011 second quarter ended January 31, 2011.
Revenues for Q2’11 were $93.9 million, an increase of 50% from the $62.7 million reported in Q2’10. GAAP net loss for Q2’11 was $2.8 million, or $0.03 per share, compared to a net loss of $4.4 million, or $0.05 per share, in Q2’10.
Non-GAAP net income for Q2’11 was $16.3 million, or $0.14 per share. This compares to $6.3 million or $0.06 per share in Q2’10. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
“We continue to see broad demand for our mobility solutions across all major geographies, as evidenced by our record revenues, 50% year-over-year growth and 13% sequential growth,” said Dominic Orr, President and Chief Executive Officer of Aruba. “Enterprises are facing intensified proliferation of tablet and smartphone devices, and IT’s ability to rapidly and affordably deliver secure mobile access for these devices is critical. This requires a user-, device- and application-centric approach to the network edge. We believe that the enterprise network is transitioning from a wired centric to a mobility centric architecture and the market is recognizing Aruba’s unique ability to address the requirements of this new architecture. During the quarter, we saw robust growth from the general enterprise and our core verticals, an increase in the number of larger potential deals in the pipeline, and the addition of a record 1,000+ new customers.”
“We had another strong quarter with record revenues and quarter over quarter and year over year gains in gross margins,” said Steffan Tomlinson, Aruba’s Chief Financial Officer. “During the quarter, we generated cash flow from operations of $10.7 million and ended the period with $187.8 million in cash.”
Recent Highlights
Recent highlights include:
- Completion of Amigopod Asset Purchase – Aruba announced the completion of its purchase of Sydney, Australia-based Amigopod's assets and technology, including its leading network authentication solutions that allow businesses to provide time- and policy-bound network access to visitors, contractors and employees.
- New Chief Marketing Officer – Aruba announced the appointment of Ben Gibson to the position of Chief Marketing Officer. Gibson brings more than 20 years of experience to the role. He most recently served as vice president of data center and virtualization marketing at Cisco. Prior to that, Gibson headed Cisco's enterprise mobility solutions marketing organization.
- New Wi-Fi Solutions – Aruba announced two new solutions -- a new Wi-Fi Solution for in-store mobile marketing, developed in partnership with Digby and Nearbuy Systems and the Multimedia-Grade Wi-Fi initiative, developed in partnership with the Multimedia Grade Working Group.
- Industry Awards - Aruba Operating System Release 5.0 (ArubaOS 5.0) won the UK's Computing Security Magazine's Wireless Security Product of the Year Award. The company was also named number 80 on Technology Fast 500™, Deloitte's ranking of 500 of the fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America.
- Large Public Venue Application - Tennis Australia expanded its secure mobile wireless network from Aruba in order to meet the increased demand for secure, flexible and scalable network access at its event sites like the Australian Open.
Conference Call Information
Aruba will host a conference call for analysts and investors to discuss its fiscal second 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 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 4402941. International parties can access the replay at +1-303-590-3030 and should enter passcode 4402941.
Forward-Looking Statements
This press release contains forward-looking statements, including statements about (1) our belief that the enterprise network is transitioning from a wired-centric to a mobility-centric architecture which will impact Aruba’s sales and (2) the size and number of deals in our pipeline.
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; and (3) changes in overall information technology spending; 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-Q for the fiscal first quarter ended October, 31, 2010, which was filed with the SEC on December 10, 2010, and is available on Aruba’s investor relations Web site at www.arubanetworks.com and on the SEC Web site at 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 and other acquisition related expenses, 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 and other acquisition related expenses, 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 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(R) 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.
© 2011 Aruba Networks, Inc. Aruba Networks’ trademarks include AirWave®, Aruba Networks®, Aruba Wireless Networks®, the registered Aruba the Mobile Edge Company logo, Aruba Mobility Management System®, Mobile Edge Architecture®, People Move. Networks Must Follow®, RFProtect®, Green Island®. All rights reserved.
| Aruba Networks, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands, except per share data) | ||||||||
| (Unaudited) | ||||||||
| January 31, | July 31, | |||||||
| 2011 | 2010 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 49,258 | $ | 31,254 | ||||
| Short-term investments | 138,568 | 124,167 | ||||||
| Accounts receivable, net | 53,965 | 41,269 | ||||||
| Inventory | 18,091 | 15,159 | ||||||
| Deferred costs | 6,382 | 5,451 | ||||||
| Prepaids and other | 3,480 | 5,108 | ||||||
| Total current assets | 269,744 | 222,408 | ||||||
| Property and equipment, net | 12,367 | 9,919 | ||||||
| Goodwill | 33,143 | 7,656 | ||||||
| Intangible assets, net | 24,983 | 9,287 | ||||||
| Other assets | 2,175 | 1,437 | ||||||
| Total other assets | 72,668 | 28,299 | ||||||
| Total assets | $ | 342,412 | $ | 250,707 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,660 | $ | 8,082 | ||||
| Accrued liabilities | 52,464 | 36,458 | ||||||
| Income taxes payable | 549 | 519 | ||||||
| Deferred revenue | 47,516 | 43,422 | ||||||
| Total current liabilities | 109,189 | 88,481 | ||||||
| Deferred revenue | 11,452 | 10,976 | ||||||
| Other long-term liabilities | 585 | 595 | ||||||
| Total other liabilities | 12,037 | 11,571 | ||||||
| Total liabilities | 121,226 | 100,052 | ||||||
| Stockholders' equity | ||||||||
|
Common Stock: $0.0001 par value; 350,000 shares authorized at January 31, 2011, and July 31, 2010; 99,961 and 93,606 shares issued and outstanding at January 31, 2011, and July 31, 2010, respectively |
10 | 9 | ||||||
| Additional paid-in capital | 397,385 | 326,178 | ||||||
| Accumulated other comprehensive income | 119 | 98 | ||||||
| Accumulated deficit | (176,328 | ) | (175,630 | ) | ||||
| Total stockholders' equity | 221,186 | 150,655 | ||||||
| Total liabilities and stockholders' equity | $ | 342,412 | $ | 250,707 | ||||
| Aruba Networks, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (On a GAAP basis) | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenues: | ||||||||||||||||
| Product | $ | 79,100 | $ | 52,078 | $ | 148,304 | $ | 99,276 | ||||||||
| Professional services and support | 14,602 | 10,362 | 28,402 | 20,504 | ||||||||||||
| Ratable product and related professional services and support | 156 | 215 | 299 | 471 | ||||||||||||
| Total revenues | 93,858 | 62,655 | 177,005 | 120,251 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Product | 24,173 | 18,103 | 46,236 | 34,535 | ||||||||||||
| Professional services and support | 3,542 | 2,157 | 6,448 | 4,236 | ||||||||||||
| Ratable product and related professional services and support | - | 68 | 9 | 154 | ||||||||||||
| Total cost of revenues | 27,715 | 20,328 | 52,693 | 38,925 | ||||||||||||
| Gross profit | 66,143 | 42,327 | 124,312 | 81,326 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 21,608 | 12,042 | 38,722 | 23,838 | ||||||||||||
| Sales and marketing | 36,936 | 26,576 | 70,350 | 51,316 | ||||||||||||
| General and administrative | 10,183 | 7,628 | 17,371 | 14,760 | ||||||||||||
| Litigation reserves | - | 500 | - | 20,250 | ||||||||||||
| Total operating expenses | 68,727 | 46,746 | 126,443 | 110,164 | ||||||||||||
| Operating loss | (2,584 | ) | (4,419 | ) | (2,131 | ) | (28,838 | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Interest income | 240 | 187 | 474 | 398 | ||||||||||||
| Other income (expense), net | (61 | ) | (148 | ) | 1,583 | (244 | ) | |||||||||
| Total other income (expense), net | 179 | 39 | 2,057 | 154 | ||||||||||||
| Loss before income tax provision | (2,405 | ) | (4,380 | ) | (74 | ) | (28,684 | ) | ||||||||
| Income tax provision | 428 | 47 | 624 | 419 | ||||||||||||
| Net loss | $ | (2,833 | ) | $ | (4,427 | ) | $ | (698 | ) | $ | (29,103 | ) | ||||
| Shares used in computing net loss per common share, basic and diluted | 98,795 | 88,572 | 97,416 | 88,030 | ||||||||||||
| Net loss per common share, basic and diluted | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.33 | ) | ||||
| Aruba Networks, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (GAAP to Non-GAAP Reconciliation) | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| GAAP net loss | $ | (2,833 | ) | $ | (4,427 | ) | $ | (698 | ) | $ | (29,103 | ) | ||||
| Plus: | ||||||||||||||||
| a) Stock-based expenses | 17,378 | 9,004 | 29,224 | 16,823 | ||||||||||||
| b) Amortization expense of acquired intangible assets and other acquisition related expenses | 2,122 | 1,233 | 3,799 | 2,465 | ||||||||||||
| c) Change in valuation of contingent rights liability | (327 | ) | - | (2,104 | ) | - | ||||||||||
| d) Litigation reserves | - | 500 | - | 20,250 | ||||||||||||
| Non-GAAP net income | $ | 16,340 | $ | 6,310 | $ | 30,221 | $ | 10,435 | ||||||||
| GAAP net loss per common share | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.33 | ) | ||||
| Plus: | ||||||||||||||||
| a) Stock-based expenses | 0.15 | 0.09 | 0.26 | 0.19 | ||||||||||||
| b) Amortization expense of acquired intangible assets and other acquisition related expenses | 0.02 | 0.01 | 0.03 | 0.02 | ||||||||||||
| c) Change in valuation of contingent rights liability | - | - | (0.02 | ) | - | |||||||||||
| d) Litigation reserves | - | 0.01 | - | 0.22 | ||||||||||||
| Non-GAAP net income per common share | $ | 0.14 | $ | 0.06 | $ | 0.26 | $ | 0.10 | ||||||||
| Shares used in computing diluted GAAP net loss per common share | 98,795 | 88,572 | 97,416 | 88,030 | ||||||||||||
| Shares used in computing diluted Non-GAAP net income per common share | 116,230 | 101,991 | 114,750 | 101,145 | ||||||||||||
| Aruba Networks, Inc. | ||||||||
| Consolidated Statements of Operations | ||||||||
| As a Percentage of Total Revenues | ||||||||
| (On a GAAP Basis) | ||||||||
| (Unaudited) | ||||||||
| Three months ended | Six months ended | |||||||
| January 31, | January 31, | |||||||
| 2011 | 2010 | 2011 | 2010 | |||||
| Revenues: | ||||||||
| Product | 84.3% | 83.1% | 83.8% | 82.6% | ||||
| Professional services and support | 15.5% | 16.5% | 16.0% | 17.0% | ||||
| Ratable product and related professional services and support | 0.2% | 0.4% | 0.2% | 0.4% | ||||
| Total revenues | 100.0% | 100.0% | 100.0% | 100.0% | ||||
| Cost of revenues: | ||||||||
| Product | 25.7% | 28.9% | 26.1% | 28.7% | ||||
| Professional services and support | 3.8% | 3.4% | 3.7% | 3.5% | ||||
| Ratable product and related professional services and support | 0.0% | 0.1% | 0.0% | 0.2% | ||||
| Total cost of revenues | 29.5% | 32.4% | 29.8% | 32.4% | ||||
| Gross profit | 70.5% | 67.6% | 70.2% | 67.6% | ||||
| Operating expenses: | ||||||||
| Research and development | 23.0% | 19.2% | 21.9% | 19.8% | ||||
| Sales and marketing | 39.4% | 42.5% | 39.7% | 42.7% | ||||
| General and administrative | 10.9% | 12.2% | 9.8% | 12.3% | ||||
| Litigation reserves | 0.0% | 0.8% | 0.0% | 16.8% | ||||
| Total operating expenses | 73.3% | 74.7% | 71.4% | 91.6% | ||||
| Operating loss | (2.8%) | (7.1%) | (1.2%) | (24.0%) | ||||
| Other income (expense), net | ||||||||
| Interest income | 0.3% | 0.3% | 0.3% | 0.3% | ||||
| Other income (expense), net | (0.1)% | (0.2)% | 0.9% | (0.2)% | ||||
| Total other income (expense), net | 0.2% | 0.1% | 1.2% | 0.1% | ||||
| Loss before income tax provision | (2.6%) | (7.0%) | 0.0% | (23.9%) | ||||
| Income tax provision | 0.4% | 0.1% | 0.4% | 0.3% | ||||
| Net loss | (3.0%) | (7.1%) | (0.4%) | (24.2%) | ||||
| Aruba Networks, Inc. | |||||||||||
| Consolidated Statements of Cash Flows | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Six months ended | |||||||||||
| January 31, | |||||||||||
| 2011 | 2010 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (698 | ) | $ | (29,103 | ) | |||||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||||||
| Depreciation and amortization | 7,198 | 5,006 | |||||||||
| Provision for (benefit from) doubtful accounts | (26 | ) | 222 | ||||||||
| Write downs for excess and obsolete inventory | 1,386 | 917 | |||||||||
| Compensation related to stock options and share awards | 28,233 | 16,823 | |||||||||
| Accretion of purchase discounts on short-term investments | 668 | 203 | |||||||||
| Loss (gain) on disposal of fixed assets | (6 | ) | 28 | ||||||||
| Change in carrying value of contingent liability | (2,105 | ) | - | ||||||||
| Excess tax benefit associated with stock-based compensation | (231 | ) | (161 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (10,144 | ) | (495 | ) | |||||||
| Inventory | (3,110 | ) | (5,795 | ) | |||||||
| Prepaids and other | (136 | ) | (1,145 | ) | |||||||
| Deferred costs | (930 | ) | (1,872 | ) | |||||||
| Other assets | (479 | ) | 181 | ||||||||
| Accounts payable | (2,922 | ) | 346 | ||||||||
| Deferred revenue | 3,230 | 7,794 | |||||||||
| Other current and noncurrent liabilities | 5,499 | 11,334 | |||||||||
| Income taxes payable | 104 | 225 | |||||||||
| Net cash provided by operating activities | 25,531 | 4,508 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of short-term investments | (59,188 | ) | (32,922 | ) | |||||||
| Proceeds from sales of short-term investments | 17,384 | - | |||||||||
| Proceeds from maturities of short-term investments | 26,480 | 23,820 | |||||||||
| Net realized gain on short-term investments | (8 | ) | - | ||||||||
| Purchases of property and equipment | (4,277 | ) | (2,428 | ) | |||||||
| Proceeds from sales of property and equipment | 14 | - | |||||||||
| Cash paid in purchase acquisitions, net of cash acquired | (4,303 | ) | - | ||||||||
| Net cash used in investing activities | (23,898 | ) | (11,530 | ) | |||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from issuance of common stock | 16,138 | 3,974 | |||||||||
| Excess tax benefit associated with stock-based compensation | 231 | 161 | |||||||||
| Net cash provided by financing activities | 16,369 | 4,135 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 2 | - | |||||||||
| Net increase (decrease) in cash and cash equivalents | 18,004 | (2,887 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 31,254 | 41,298 | |||||||||
| Cash and cash equivalents, end of period | $ | 49,258 | $ | 38,411 | |||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Income taxes paid | $ | 590 | $ | 478 | |||||||
| Supplemental disclosure of non-cash investing and financing activities | |||||||||||
| Common stock issued in purchase acquisitions | $ | 30,691 | $ | - | |||||||
| Contingent rights issued in purchase acquisition | $ | 9,486 | $ | - | |||||||
| Advance on purchase price in connection with acquisition | $ | 2,000 | $ | - | |||||||