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Published:
Aruba Networks Announces Fiscal Fourth Quarter and Full Year 2008 Financial ResultsQuarterly Revenues Increase by 13% Sequentially; Full Year Revenues Increase by 40%
Revenues for the fiscal fourth quarter of 2008 were $48.3 million, an increase of 16% from $41.7 million reported in the fiscal fourth quarter of 2007. GAAP net loss for the fiscal fourth quarter of 2008 was $6.8 million, or $0.08 per share, compared to a net loss of $3.4 million, or $0.04 per share, in the fiscal fourth quarter of 2007. GAAP results for the fiscal fourth quarter of 2008 included $5.7 million of non-cash stock-based expenses and $1.2 million of acquisition related expenses. Non-GAAP net income for the fiscal fourth quarter of 2008 was $0.2 million, or $0.00 per share, compared to non-GAAP net income of $2.0 million, or $0.02 per share, in the fiscal fourth quarter of 2007. Non-GAAP net income excludes the impact of non-cash stock-based expenses in all periods, as well as acquisition related expenses in the fiscal fourth quarter of 2008 and expenses related to in-process research and development in the fiscal fourth quarter of 2007. Revenues for the fiscal year ended July 31, 2008 were approximately $178.3 million, an increase of 40% from $127.5 million reported in the prior year. GAAP net loss for the full fiscal year 2008 was $17.1 million, or $0.22 per share, compared to a net loss of $24.4 million, or $0.70 per share in 2007. Non-GAAP net income for the full fiscal year was $4.0 million, or $0.04 per share, compared to a net loss of $2.0 million, or $0.06 per share in 2007. "Wireless LAN technology is increasingly becoming an integral part of IT networks for a broad range of organizations and corporations," said Dominic Orr, president and chief executive officer. "The strong sequential revenue growth in our fiscal fourth quarter was driven by increased demand from existing customers and a record number of new customer additions. During the period, we added over 700 new customers and now have over 5,000 cumulative customers. The quarter was notable for the strong performance of our education vertical and broad demand from a very wide range of other customers. Importantly, we have also won new contracts in our retail and government verticals, which gives us increased momentum in these challenging areas as we enter our new fiscal year." "Revenues increased by 13% on a sequential basis and total deferred revenue was up 18% over the same period," said Steffan Tomlinson, Aruba's chief financial officer. "Total operating expenses decreased as a percentage of revenues on sequential basis and non-GAAP gross margins remained strong at 68.7%, above our long-term target range. We ended the quarter with $101.7 million in cash and investments, representing a $3.9 million increase on a sequential basis." Recent Highlights Aruba's focus on providing secure mobility solutions that integrate seamlessly with existing legacy network infrastructure enabled the Company to accomplish several key objectives over the past three months. Some highlights include:
-- Techworld 2008 Wireless Security Product of the Year Award -- The
Wireless Security Product of the Year Award was presented by Techworld to
Aruba for its Remote Access Point (RAP) technology. Targeted at
organizations with teleworkers, traveling executives, branch offices, first
responder or disaster recovery requirements, RAP offers an instant-on, no
set-up remote connectivity solution.
-- First Security Accredited Wireless LAN in United Kingdom Defense
Network -- Aruba's products were incorporated into the first wireless
network to achieve high security RESTRICTED level certification for
connection to the U.K. Defense Fixed Network. In recognition of this
accomplishment, the U.K. Ministry of Defense Trading Fund's Defense Support
Group (DSG) selected Aruba as the sole supplier of wireless LAN
infrastructure at its Donnington workshop.
-- 2,000 Wi-Fi Hotspots For Hong Kong Government Premises -- Aruba
announced that it is supplying secure wireless equipment to PCCW-HKT
Network Services Limited (PCCW) for use at roughly 2,000 new Wi-Fi hot
spots serving roughly 350 Hong Kong Government premises. PCCW will be the
network service provider.
-- Wireless LAN Deployment at Microsoft Exceeds 11,000 Centrally Managed
Access Points -- Microsoft passed an important milestone this quarter
having deployed more than 11,000 centrally managed Aruba access points,
spanning virtually every continent, and making it one of the largest
enterprise wireless networks in the world.
-- Wins and Deployments -- Among the quarter's many design wins were a
major overseas utility company, a multi-national professional services
company, a leading investment management company, a market-leading retailer
and a leading cellular carrier. Deployments announced by Aruba this quarter
included Caltech, the Norwegian Ministry of Foreign Affairs, Ryerson
University, Hitachi Systems, and Clancy & Theys Construction Company.
Conference Call Information Aruba will host a conference call for analysts and investors to discuss its fiscal fourth quarter and full year 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 Web site at www.arubanetworks.com. Following the Webcast, 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 800-405-2236 and enter passcode 11118288. International parties can access the replay at +1-303-590-3000 and should enter passcode 11118288. Forward-Looking Statements This press release contains forward-looking statements, including statements relating to our expectations regarding (1) momentum in our retail and government verticals, (2) growth in the adoption of WLAN technology across a broad range of organizations and in the business corporations, and sales of our products, including our 802.11n solution, (3) industry trends and market demand for our products, and (4) 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 our ability to react to trends and challenges in our business and the markets in which we operate; business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; changes in customer order patterns or customer mix; overall information technology spending; our ability to establish and maintain successful relationships with our distribution partners; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; rapid technological and market change; and our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies, 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 third quarter ended April 30, 2008, which was filed with the SEC on June 6, 2008, and is available on Aruba's investor relations website at www.arubanetworks.com and on the SEC website 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, for the fiscal fourth quarter of 2008, acquisition-related expenses, and, for the fiscal fourth quarter of 2007, expenses related to in process research and development. 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 non-cash expenses. 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 these non-GAAP financial measures 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 in process research and development and acquisition-related expenses, Aruba's management believes that investors can better understand the impact of such expenses on the Company's continuing 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 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 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. Our unified mobility solutions include Wi-Fi networks, identity-based security, remote access and cellular services, and centralized multi-vendor network management to enable the Follow-Me Enterprise that moves in lock-step with users:
-- Follow-Me Connectivity: Adaptive 802.11a/b/g/n Wi-Fi networks optimize
themselves to ensure that users are always within reach of mission-critical
information;
-- Follow-Me Security: Identity-based security assigns access policies to
users, enforcing those policies whenever and wherever a network is
accessed;
-- Follow-Me Applications: Remote access solutions and cellular network
integration ensure uninterrupted access to applications as users move;
-- Follow-Me Management: Multi-vendor network management provides a
single point of control while managing both legacy and new wireless
networks from both Aruba and its competitors.
The cost, convenience, and security benefits of our unified 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. © 2008 Aruba Networks, Inc. AirWave®, Aruba Networks®, Aruba obility Management System®, Bluescanner, For Wireless That Works®, obile Edge Architecture, People Move. Networks Must Follow., RFProtect, The All Wireless Workplace Is Now Open For Business, Green Island, and The obile 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)
July 31, July 31,
2008 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 37,602 $ 42,570
Short-term investments 64,130 62,430
Accounts receivable, net 32,679 23,722
Inventory 11,644 8,991
Deferred costs 4,317 3,217
Prepaids and other 3,196 2,432
--------- ---------
Total current assets 153,568 143,362
Property and equipment, net 7,181 3,709
Goodwill 7,656 -
Intangible assets, net 19,027 3,912
Deferred costs 239 722
Other assets 1,130 428
--------- ---------
Total other assets 35,233 8,771
--------- ---------
Total assets $ 188,801 $ 152,133
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,844 $ 2,201
Accrued liabilities 16,908 15,317
Income taxes payable 576 281
Deferred revenue 27,143 16,067
--------- ---------
Total current liabilities 50,471 33,866
Deferred revenue 7,338 5,780
Other long-term liabilities 117 -
--------- ---------
Total other liabilities 7,455 5,780
--------- ---------
Total liabilities 57,926 39,646
--------- ---------
Stockholders' equity
Preferred Stock: $0.0001 par value; 10,000 shares
authorized at July 31, 2008 and 2007; no shares
issued and outstanding at July 31, 2008 and 2007 - -
Common Stock: $0.0001 par value; 350,000 shares
authorized at July 31, 2008 and 2007; 82,836 and
76,927 shares issued and outstanding at July 31,
2008 and 2007 8 8
Additional paid-in capital 249,131 213,545
Accumulated other comprehensive income (loss) (45) 29
Accumulated deficit (118,219) (101,095)
--------- ---------
Total stockholders' equity 130,875 112,487
--------- ---------
Total liabilities and stockholders' equity $ 188,801 $ 152,133
========= =========
Aruba Networks, Inc.
Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share data)
(Unaudited)
Three months ended Years ended
July 31, July 31,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues:
Product $ 40,444 $ 36,394 $ 148,550 $ 107,939
Professional services and
support 7,136 4,254 26,244 12,847
Ratable product and related
professional services and
support 699 1,038 3,466 6,713
--------- --------- --------- ---------
Total revenues 48,279 41,686 178,260 127,499
Cost of revenues:
Product 14,049 11,251 48,126 36,035
Professional services and
support 1,908 1,420 7,761 4,863
Ratable product and related
professional services and
support 242 382 1,228 2,470
--------- --------- --------- ---------
Total cost of revenues 16,199 13,053 57,115 43,368
--------- --------- --------- ---------
Gross profit 32,080 28,633 121,145 84,131
--------- --------- --------- ---------
Operating expenses:
Research and development 10,245 7,902 37,393 25,654
Sales and marketing 24,252 20,921 86,008 60,115
General and administrative 4,416 3,703 17,740 14,600
In-process research and
development - 632 - 632
Acquisition related
severance expense - - 197 -
--------- --------- --------- ---------
Total operating
expenses 38,913 33,158 141,338 101,001
--------- --------- --------- ---------
Operating loss (6,833) (4,525) (20,193) (16,870)
Other income (expense), net
Interest income 609 1,345 4,083 2,221
Interest expense - (3) - (88)
Other expense, net (305) (85) (47) (9,270)
--------- --------- --------- ---------
Total other income
(expense), net 304 1,257 4,036 (7,137)
--------- --------- --------- ---------
Loss before income tax
provision (6,529) (3,268) (16,157) (24,007)
Income tax provision 255 82 967 375
--------- --------- --------- ---------
Net loss $ (6,784) $ (3,350) $ (17,124) $ (24,382)
========= ========= ========= =========
Shares used in computing net
loss per common share, basic
and diluted 82,147 75,612 79,467 34,808
Net loss per common share,
basic and diluted $ (0.08) $ (0.04) $ (0.22) $ (0.70)
Aruba Networks, Inc.
Consolidated Statements of Operations
(GAAP to Non-GAAP Reconciliation)
(In thousands, except per share data)
(Unaudited)
Three months ended Years ended
-------------------- --------------------
July 31, July 31, July 31, July 31,
2008 2007 2008 2007
--------- --------- --------- ---------
GAAP net loss $ (6,784) $ (3,350) $ (17,124) $ (24,382)
Plus:
a) Stock-based expenses 5,727 4,754 19,277 12,717
b) Revaluation of warrants
to fair-value - - (715) 8,992
c) In-process research and
development - 632 - 632
d) Acquisition related
expenses (see Note 1) 1,234 - 2,582 -
--------- --------- --------- ---------
Non-GAAP net income (loss) $ 177 $ 2,036 $ 4,020 $ (2,041)
========= ========= ========= =========
GAAP net loss per common share $ (0.08) $ (0.04) $ (0.22) $ (0.70)
Plus:
a) Stock-based expenses per
common share 0.07 0.05 0.24 0.36
b) Revaluation of warrants
to fair-value per common
share - - (0.01) 0.26
c) In-process research and
development per common
share - 0.01 - 0.02
d) Acquisition related
expenses per common share
(see Note 1) 0.01 - 0.03 -
--------- --------- --------- ---------
Non-GAAP net income (loss) per
common share $ - $ 0.02 $ 0.04 $ (0.06)
========= ========= ========= =========
Shares used in computing
diluted GAAP net loss per
common share 82,147 75,612 79,467 34,808
Shares used in computing
diluted Non-GAAP net income
(loss) per common share 88,880 93,496 90,403 34,808
Note 1: Acquisition related expenses include severance expense and
amortization of acquired intangible assets.
Aruba Networks, Inc.
Consolidated Statements of Operations
As a Percentage of Total Revenues
(On a GAAP Basis)
(Unaudited)
Three months
ended Years ended
July 31, July 31,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
Revenues:
Product 83.8% 87.3% 83.3% 84.6%
Professional services and support 14.8% 10.2% 14.7% 10.1%
Ratable product and related
professional services and support 1.4% 2.5% 2.0% 5.3%
------- ------- ------- -------
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Product 29.1% 27.0% 27.0% 28.3%
Professional services and support 4.0% 3.4% 4.4% 3.8%
Ratable product and related
professional services and support 0.5% 0.9% 0.6% 1.9%
------- ------- ------- -------
Total cost of revenues 33.6% 31.3% 32.0% 34.0%
------- ------- ------- -------
Gross profit 66.4% 68.7% 68.0% 66.0%
------- ------- ------- -------
Operating expenses:
Research and development 21.2% 18.9% 21.0% 20.1%
Sales and marketing 50.2% 50.2% 48.2% 47.1%
General and administrative 9.2% 8.9% 10.0% 11.5%
In-process research and development - 1.5% - 0.5%
Acquisition related severance
expense - - 0.1% -
------- ------- ------- -------
Total operating expenses 80.6% 79.5% 79.3% 79.2%
------- ------- ------- -------
Operating loss (14.2%) (10.8%) (11.3%) (13.2%)
Other income (expense), net
Interest income 1.2% 3.2% 2.2% 1.7%
Interest expense - - - (0.1%)
Other expense, net (0.6%) (0.2%) - (7.2%)
------- ------- ------- -------
Total other income (expense),
net 0.6% 3.0% 2.2% (5.6%)
------- ------- ------- -------
Loss before income tax
provision (13.6%) (7.8%) (9.1%) (18.8%)
Income tax provision 0.5% 0.2% 0.5% 0.3%
------- ------- ------- -------
Net loss (14.1%) (8.0%) (9.6%) (19.1%)
======= ======= ======= =======
Aruba Networks, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Years ended
July 31,
--------------------
2008 2007
--------- ---------
Cash flows from operating activities
Net loss $ (17,124) $ (24,382)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,640 2,008
Provision for doubtful accounts 283 199
Write downs for excess and obsolete
inventory 1,209 1,110
Compensation related to stock options and
share awards 19,277 11,302
Stock issued to charitable foundation - 1,415
Non-cash interest expense - 44
Accretion of purchase discounts on
short-term investments (2,428) (388)
Change in carrying value of preferred stock
warrants (715) 8,992
Loss on disposal of fixed assets 51 5
In-process research and development - 632
Excess tax benefits associated with stock
based compensation (52) -
Changes in operating assets and liabilities,
net of acquisition:
Accounts receivable (8,352) (10,550)
Inventory (5,092) (3,955)
Prepaids and other (660) (774)
Deferred costs (617) 1,381
Other assets (701) (112)
Accounts payable 3,394 (2,184)
Deferred revenue 10,957 3,322
Other current and noncurrent liabilities 1,925 7,522
Income taxes payable 347 65
--------- ---------
Net cash provided by (used in)
operating activities 7,342 (4,348)
--------- ---------
Cash flows from investing activities
Purchases of short-term investments (119,855) (67,757)
Proceeds from sales and maturities of
short-term investments 120,508 5,744
Purchases of property and equipment (5,408) (3,737)
Cash paid in purchase acquisition, net of
cash acquired (16,030) (4,600)
--------- ---------
Net cash used in investing activities (20,785) (70,350)
--------- ---------
Cash flows from financing activities
Repayments on equipment loan obligations - (654)
Cash received under stock issuance agreement - 2,130
Proceeds from issuance of redeemable
convertible preferred stock, net - 10,597
Proceeds from initial public offering, net - 91,809
Proceeds from issuance of common stock 10,560 4,038
Repurchase of common stock under stock
repurchase program (2,142) -
Excess tax benefits associated with stock
based compensation 52 -
--------- ---------
Net cash provided by financing
activities 8,470 107,920
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 5 85
--------- ---------
Net increase (decrease) in cash and
cash equivalents (4,968) 33,307
Cash and cash equivalents, beginning of period 42,570 9,263
--------- ---------
Cash and cash equivalents, end of period $ 37,602 $ 42,570
========= =========
Supplemental disclosure of cash flow information
Income taxes paid $ 652 $ 294
Interest paid $ - $ 37
Supplemental disclosure of non-cash investing and
financing activities
Reclassification of warrant liability to equity upon
initial public offering $ - $ 9,933
Reclassification of non-current liability to equity
upon initial public offering $ - $ 3,500
Common stock issued in purchase acquisition $ 7,852 $ -
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