SOURCE: Aruba Networks, Inc.

Aruba Networks, Inc.

November 19, 2009 16:05 ET

Aruba Networks Reports Fiscal First Quarter 2010 Financial Results

SUNNYVALE, CA--(Marketwire - November 19, 2009) - Aruba Networks, Inc. (NASDAQ: ARUN)

--  Revenue Increases Sequentially by 8%, 10% Year over Year, to a Record
    $57.6 Million
--  Company Adds Over 600 New Customers In Fiscal Q1
--  GAAP Net Loss of $24.7 Million Includes $19.75 Million Litigation
    Settlement Expense
--  Non-GAAP Net Income Increases 206% Year-over-Year to a Record $4.1
    Million
--  Cash Increases by $12.5 Million Sequentially to a Record $135.6
    Million and No Debt
    

Aruba Networks, Inc. (NASDAQ: ARUN), a global leader in 802.11n wireless LANs and secure mobility solutions, today released financial results for its fiscal first quarter ended October 31, 2009.

Revenues for the fiscal first quarter of 2010 were $57.6 million, an increase of approximately 10% over the $52.4 million reported in the fiscal first quarter of 2009. In the first fiscal quarter, the Company had a $19.75 million litigation settlement expense. Including this cost, GAAP net loss for the fiscal first quarter of 2010 was $24.7 million, or $0.28 per share, compared to a net loss of $6.4 million, or $0.08 per share, in the fiscal first quarter of 2009. GAAP results for the fiscal first quarter of 2010 also included $7.8 million of non-cash stock-based expenses and $1.2 million of amortization expense of acquired intangible assets.

Non-GAAP net income for the fiscal first quarter of 2010 increased $2.8 million from the fiscal first quarter of 2009 to $4.1 million, or $0.04 per share, which compares to $1.4 million or $0.02 per share in the prior year period. Non-GAAP net income for these periods excludes the impact of non-cash stock-based expenses and amortization expenses of acquired intangible assets and, for the fiscal first quarter of 2010, the litigation settlement expense.

"We are pleased to report record revenues and both sequential and year-over-year revenue growth," said Dominic Orr, president and chief executive officer of Aruba. "Demand was robust across both our core verticals and the broader enterprise. We believe that we are continuing to gain market share, and expect to see further traction for our 802.11n products as a result of the recent introduction of our new value-priced, high-performance AP-105 802.11n Access Point. We continue to innovate and expand our product line to take advantage of many large opportunities ahead of us, and feel that our latest product offerings further strengthen our competitive position. This is reflected by the continued strong growth of our customer base, with over 600 new customers added during the quarter."

"In our first fiscal quarter, we were able to show strong improvements in revenues and gross margins on both a year-over-year and sequential basis," said Steffan Tomlinson, Aruba's chief financial officer. "We also generated operating cash flow of $10.5 million during the period, and ended the quarter with $135.6 million in cash and investments. The $19.75 million of cash related to the litigation settlement was paid in November 2009."

Recent Highlights

Recent highlights include:

--  Second Largest Enterprise Wireless LAN Vendor -- Aruba was ranked as
    the world's second largest enterprise wireless LAN vendor by Dell'Oro,
    Gartner, IDC, and Infonetics.  Solid shipment and revenue growth solidified
    Aruba's second place market share standing, further distancing it from
    lower ranked competitors.
--  Deloitte's Technology Fast 500 -- Aruba was ranked number 17 on
    Technology Fast 500™, Deloitte LLP's ranking of 500 of the fastest
    growing technology, media, telecommunications, life sciences and clean
    technology companies in North America. The ranking is based on fiscal year
    revenue growth during the five year period from 2004 to 2008. During this
    period Aruba's revenue grew to $178.26 million in 2008.
--  STAR Award For Service Excellence -- Aruba's Customer Advocacy Group
    won a Fall 2009 STAR Award for Service Excellence from the Technology
    Services Industry Association, the services industry's largest
    association.  The STAR Awards recognize technology companies that display
    exceptional leadership, innovation and commitment to the improvement of
    service and support, and Aruba was honored with the 'Continual Improvement'
    award.
--  Value-Priced, High-Performance 802.11n AP -- Aruba announced its new
    value-priced, high-performance AP-105 802.11n Access Point.  Aruba expects
    the AP-105 to accelerate adoption of 802.11n by offering enterprise-grade
    security, high-throughput, streaming video support, and other key features
    previously available only in more expensive devices.
--  "AirWave OnDemand" SaaS -- Aruba announced the release of AirWave
    OnDemand (AoD), an enterprise-class network management and monitoring
    solution that is deployed using the Software-as-a-Service (SaaS) model. The
    subscription-based service, housed at a secure Aruba data center, uses
    dedicated, virtual instances of Aruba's award-winning multi-vendor AirWave
    Wireless Management Suite (AWMS) to remotely manage and monitor enterprise
    wireless LANs. The full suite of AWMS features, including multi-vendor
    network management, is available through AoD.
--  World's First FIPS 140-2 Validated 802.11n Solution -- Aruba is the
    first wireless LAN vendor to have its 802.11n solution validated within the
    FIPS 140-2 Federal Information Processing Standard for cryptographic
    security. Newly enabled applications extend from foxholes to fortresses,
    and include secure network rightsizing -- replacing expensive wired
    Ethernet system with secure 802.11n wireless -- and linking users to a
    Secret Internet Protocol Router Network from a Non-Secret Internet Protocol
    Router Network via a secure wireless or remote access network.
--  Philips Healthcare -- Philips Healthcare obtained Aruba
    interoperability certification for operating its market-leading IntelliVue
    Patient Monitors on multi-use Aruba 802.11 wireless LANs.  Multi-use
    networks share wireless infrastructure among different healthcare voice,
    data, and video applications, and are increasingly popular because of their
    lower installed and operating costs. Interoperability certification is
    intended to simplify out-of-box deployment by minimizing incompatibilities
    and configuration issues that might otherwise result in improper system
    behavior.
--  Wins and Deployments -- New customer wins and/or deployments announced
    this quarter included Babson College, Xiamen Women and Children Hospital,
    Calgary Board of Education, NCC Sweden, London Business School, German-
    Jordanian University, Britthaven, Federal Deposit Insurance Corporation,
    University of Rhode Island, France's Arts de Metiers ParisTech, St.
    Joseph's Catholic College, Gloucestershire Hospitals NHS Foundation Trust,
    Post University, and Sport England's National Sports Centre at Bisham
    Abbey.
    

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 Web cast of the conference call will also be accessible from the "Investor Relations" section of the Company's Web site at www.arubanetworks.com. Following the Web cast, an archived version will be available on the Web site for twelve months. To hear the replay, parties in the United States and Canada should call 1-800-406-7325 and enter passcode 4180658. International parties can access the replay at +1-303-590-3030 and should enter passcode 4180658.

Forward-Looking Statements

This press release contains forward-looking statements, including statements that (1) we are gaining market share and expect to see further traction for our 802.11n products, as a result of, among other things, our latest product offerings, (2) we expect our latest product offerings to accelerate the adoption of 802.11n networks, and (3) other statements as to our future economic performance, financial condition or results of operations.

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; (4) our ability to establish and maintain successful relationships with our distribution partners; and (5) our ability to compete in our industry, 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 on July 31, 2009, which was filed with the SEC on October 6, 2009, 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, amortization expense of acquired intangible assets and litigation settlement expense. Aruba defines non-GAAP EPS as non-GAAP net income divided by the weighted average diluted shares outstanding. Aruba's management 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 non-cash charges, such as stock-based expenses, but also discrete cash charges that are infrequent in nature, such as litigation settlement expense. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FAS 123R, 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 litigation settlement expense, 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, that are recurring. Stock-based expenses 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

People move. Networks must follow. Aruba securely delivers networks to users, wherever they work or roam, using a combination of award-winning solutions:

--  Adaptive 802.11n Wi-Fi networks optimize themselves to ensure that
    users are always within reach of mission-critical information. Rightsizing
    expensive wired LANs by replacing them with high-speed 802.11n Wi-Fi
    reduces both capital and operating expenses;
--  Identity-based security assigns access policies to users, enforcing
    those policies whenever and wherever a network is accessed;
--  Remote networking solutions for branch offices, fixed telecommuters,
    and satellite facilities ensures uninterrupted remote access to
    applications;
--  Multi-vendor network management provides a single point of control
    while managing both legacy and new wireless networks from Aruba and its
    competitors.
    

The cost, convenience, and security benefits of our secure mobility solutions are fundamentally changing how and where we work. 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 at http://twitter.com/ArubaNetworks

© 2009 Aruba Networks, Inc. AirWave®, Aruba Networks®, Aruba Mobility Management System®, Bluescanner, For Wireless That Works®, Mobile Edge Architecture, People Move. Networks Must Follow., RFProtect, The All Wireless Workplace Is Now Open For Business, 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,
                                                     2009          2009
                                                  -----------  -----------
Assets

Current assets:
    Cash and cash equivalents                     $    44,056  $    41,298
    Short-term investments                             91,556       81,839
    Accounts receivable, net                           32,978       33,466
    Inventory                                           9,154        8,450
    Deferred costs                                      6,964        5,152
    Prepaids and other                                  3,201        2,350
                                                  -----------  -----------

        Total current assets                          187,909      172,555

Property and equipment, net                             7,026        7,426
Goodwill                                                7,656        7,656
Intangible assets, net                                 12,858       14,091
Deferred costs                                             13            9
Other assets                                            1,421        1,317
                                                  -----------  -----------

        Total other assets                             28,974       30,499
                                                  -----------  -----------

        Total assets                              $   216,883  $   203,054
                                                  ===========  ===========

Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable                              $     2,330  $       930
    Accrued liabilities                                40,244       20,722
    Income taxes payable                                  743          610
    Deferred revenue                                   39,973       34,654
                                                  -----------  -----------

        Total current liabilities                      83,290       56,916

Deferred revenue                                        9,543        8,524
Other long-term liabilities                               647           29
                                                  -----------  -----------

        Total other liabilities                        10,190        8,553
                                                  -----------  -----------

        Total liabilities                              93,480       65,469
                                                  -----------  -----------

Stockholders' equity
    Preferred Stock: $0.0001 par value; 10,000
     shares authorized at October 31, 2009 and
     July 31, 2009; no shares issued and
     outstanding at October 31, 2009 and July
     31, 2009                                               -            -
    Common Stock: $0.0001 par value;  350,000
     shares authorized at October 31, 2009 and
     July 31, 2009; 88,257 and 86,744 shares
     issued and outstanding at October 31, 2009
     and July 31, 2009, respectively                        9            9
    Additional paid-in capital                        289,492      279,026
    Accumulated other comprehensive income                210          182
    Accumulated deficit                              (166,308)    (141,632)
                                                  -----------  -----------

        Total stockholders' equity                    123,403      137,585
                                                  -----------  -----------

        Total liabilities and stockholders'
         equity                                   $   216,883  $   203,054
                                                  ===========  ===========





                           Aruba Networks, Inc.
                  Consolidated Statements of Operations
                            (On a GAAP basis)
                  (In thousands, except per share data)
                                (Unaudited)


                                                     Three months ended
                                                        October 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------
Revenues:
    Product                                       $    47,198  $    43,868
    Professional services and support                  10,143        8,137
    Ratable product and related professional
     services and support                                 255          441
                                                  -----------  -----------

        Total revenues                                 57,596       52,446

Cost of revenues:
    Product                                            16,432       16,605
    Professional services and support                   2,079        1,933
    Ratable product and related professional
     services and support                                  86          155
                                                  -----------  -----------

        Total cost of revenues                         18,597       18,693
                                                  -----------  -----------

          Gross profit                                 38,999       33,753
                                                  -----------  -----------

Operating expenses:
    Research and development                           11,796       10,423
    Sales and marketing                                24,740       24,661
    General and administrative                          7,132        5,285
    Litigation settlement                              19,750            -
                                                  -----------  -----------

        Total operating expenses                       63,418       40,369
                                                  -----------  -----------

        Operating loss                                (24,419)      (6,616)

Other income (expense), net
    Interest income                                       211          648
    Other income (expense), net                           (96)        (316)
                                                  -----------  -----------

        Total other income (expense), net                 115          332
                                                  -----------  -----------

        Loss before income tax provision              (24,304)      (6,284)

Income tax provision                                      372           93
                                                  -----------  -----------

        Net loss                                  $   (24,676) $    (6,377)
                                                  ===========  ===========

Shares used in computing net loss per common
 share, basic and diluted                              87,489       83,071

Net loss per common share, basic and diluted      $     (0.28) $     (0.08)





                           Aruba Networks, Inc.
                  Consolidated Statements of Operations
                    (GAAP to Non-GAAP Reconciliation)
                  (In thousands, except per share data)
                                (Unaudited)


                                                     Three months ended
                                                        October 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------

GAAP net loss                                     $   (24,676) $    (6,377)

Plus:
    a) Stock-based expenses                             7,819        6,493
    b) Amortization expense of acquired
       intangible assets                                1,233        1,234
    c) Litigation settlement                           19,750            -

                                                  -----------  -----------

Non-GAAP net income                               $     4,126  $     1,350
                                                  ===========  ===========


GAAP net loss per common share                    $     (0.28) $     (0.08)

Plus:
    a) Stock-based expenses                              0.09         0.08
    b) Amortization expense of acquired
       intangible assets                                 0.01         0.02
    c) Litigation settlement                             0.22            -

                                                  -----------  -----------

Non-GAAP net income per common share              $      0.04  $      0.02
                                                  ===========  ===========

Shares used in computing diluted GAAP net loss
 per common share                                      87,489       83,071

Shares used in computing diluted Non-GAAP net
 income per common share                              100,299       88,836





                           Aruba Networks, Inc.
                  Consolidated Statements of Operations
                    As a Percentage of Total Revenues
                            (On a GAAP Basis)
                                (Unaudited)


                                                    Three months ended
                                                       October 31,
                                                 ------------------------
                                                     2009         2008
                                                 -----------  -----------
Revenues:
    Product                                             82.0%        83.7%
    Professional services and support                   17.6%        15.5%
    Ratable product and related professional
     services and support                                0.4%         0.8%
                                                 -----------  -----------

        Total revenues                                 100.0%       100.0%

Cost of revenues:
    Product                                             28.5%        31.6%
    Professional services and support                    3.6%         3.7%
    Ratable product and related professional
     services and support                                0.2%         0.3%
                                                 -----------  -----------

        Total cost of revenues                          32.3%        35.6%
                                                 -----------  -----------

          Gross profit                                  67.7%        64.4%
                                                 -----------  -----------

Operating expenses:
    Research and development                            20.5%        19.9%
    Sales and marketing                                 42.9%        47.0%
    General and administrative                          12.4%        10.1%
    Litigation settlement                               34.3%         0.0%
                                                 -----------  -----------

        Total operating expenses                       110.1%        77.0%
                                                 -----------  -----------

        Operating loss                                 (42.4%)      (12.6%)

Other income (expense), net
    Interest income                                      0.4%         1.2%
    Other income (expense), net                         (0.2%)       (0.6%)
                                                 -----------  -----------

        Total other income (expense), net                0.2%         0.6%
                                                 -----------  -----------

        Loss before income tax provision               (42.2%)      (12.0%)

Income tax provision                                     0.6%         0.2%
                                                 -----------  -----------

        Net loss                                       (42.8%)      (12.2%)
                                                 ===========  ===========





                           Aruba Networks, Inc.
                  Consolidated Statements of Cash Flows
                              (In thousands)
                                (Unaudited)


                                                     Three months ended
                                                        October 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------
Cash flows from operating activities
  Net loss                                        $   (24,676) $    (6,377)

  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Depreciation and amortization                       2,494        2,268
    Provision for doubtful accounts                        21           40
    Write downs for excess and obsolete inventory         446          851
    Compensation related to stock options and
     share awards                                       7,819        6,493
    Accretion/ (amortization) of purchase
     discounts on short-term investments                   81         (104)
    Loss/ (gain) on disposal of fixed assets                8          (20)
    Excess tax benefit associated with
     stock-based compensation                             (46)           -
    Changes in operating assets and liabilities:
        Accounts receivable                               467          358
        Inventory                                      (1,469)      (3,552)
        Prepaids and other                               (850)         754
        Deferred costs                                 (1,816)         201
        Other assets                                       36          219
        Accounts payable                                1,346        1,328
        Deferred revenue                                6,339        2,064
        Other current and noncurrent liabilities       20,107        1,028
        Income taxes payable                              179           24
                                                  -----------  -----------

          Net cash provided by operating
           activities                                  10,486        5,575
                                                  -----------  -----------

 Cash flows from investing activities
    Purchases of short-term investments               (15,730)     (11,446)
    Proceeds from sales and maturities of
     short-term investments                             5,820       12,241
    Purchases of property and equipment                  (497)      (1,070)
                                                  -----------  -----------

          Net cash used in investing activities       (10,407)        (275)
                                                  -----------  -----------

 Cash flows from financing activities
    Proceeds from issuance of common stock              2,631        3,134
    Repurchase of common stock under stock
     repurchase program                                     -         (991)
    Excess tax benefit associated with
     stock-based compensation                              46            -
                                                  -----------  -----------

          Net cash provided by financing
           activities                                   2,677        2,143
                                                  -----------  -----------

  Effect of exchange rate changes on cash and
   cash equivalents                                         2            -
                                                  -----------  -----------

          Net increase in cash and cash
           equivalents                                  2,758        7,443

  Cash and cash equivalents, beginning of period       41,298       37,602
                                                  -----------  -----------

  Cash and cash equivalents, end of period        $    44,056  $    45,045
                                                  ===========  ===========

Supplemental disclosure of cash flow information
Income taxes paid                                 $       281  $        48

Contact Information

  • IR Contacts
    Aruba Networks, Inc.
    Steffan Tomlinson
    Chief Financial Officer
    +1-408-754-3058
    ir@arubanetworks.com

    The Blueshirt Group, Investor Relations
    Chris Danne
    Jill Isenstadt
    +1-415-217-7722
    ir@arubanetworks.com