Aruba Networks' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Aruba Networks (ARUN)

Q2 2012 Earnings Call

February 16, 2012 5:00 pm ET

Executives

Maria Riley - Director

Dominic P. Orr - Chairman, Chief Executive Officer, President and Chairman of Corporate Development Committee

Michael M. Galvin - Chief Financial Officer and Principal Accounting Officer

Keerti Melkote - Co-Founder, Chief Technology Officer and Director

Hitesh Sheth - Chief Operating Officer

Analysts

Kent Schofield - Goldman Sachs Group Inc., Research Division

Ryan Hutchinson - Lazard Capital Markets LLC, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Jeffrey T. Kvaal - Barclays Capital, Research Division

Brian T. Modoff - Deutsche Bank AG, Research Division

George C. Notter - Jefferies & Company, Inc., Research Division

Jack Monti - UBS Investment Bank, Research Division

William H. Choi - Janney Montgomery Scott LLC, Research Division

Sanjiv Wadhwani - Stifel, Nicolaus & Co., Inc., Research Division

Rohit N. Chopra - Wedbush Securities Inc., Research Division

Erik Suppiger - JMP Securities LLC, Research Division

Rajesh Ghai - ThinkEquity LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by, welcome to the Aruba Networks' Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Thursday, February 16, 2012. I would now like to turn the conference over to Ms. Maria Riley of Investor Relations. Please go ahead, ma'am.

Maria Riley

Good afternoon, and thank you for joining us on today's conference call to discuss Aruba Networks' fiscal second quarter 2012 results. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of the Aruba network website at www.arubanetworks.com. With me on today's call are Dominic Orr, Aruba's President and Chief Executive Officer; Mike Galvin, Aruba's Chief Financial Officer; Keerti Melkote, Aruba's Co-Founder and Chief Strategy Officer; and Hitesh Sheth, Aruba's Chief Operating Officer. After the market close today, Aruba Networks issued a press release announcing the results for its fiscal second quarter, ended January 31, 2012. If you would like a copy of the release, you can access it online at the company's website or you can call The Blueshirt Group at (415) 217-7722, and we will fax or e-mail you a copy.

We would like to remind you that during the course of this conference call, Aruba Networks' management will make forward-looking statements, including statements regarding the company's expectations regarding the rapid proliferation of mobile devices, BYOD and IT spend; customer adoption of our MOVE architecture, Mobility Access Switches and software solutions; and the company's future economic performance, pipelines, financial conditions, tax rates and results of operations. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future, and we undertake no obligation to update these statements after this call. For a more detailed description of these risks and uncertainties, please refer to our quarterly report on Form 10-Q filed with the SEC on December 8, 2011, as well as our earnings release posted a few minutes ago on our website. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website.

Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in the Investor Relations section of our website located at www.arubanetworks.com and in our earnings press release.

Before I turn the call over to Dominic, I'd like to invite you to attend our 2012 Analyst Day in New York City on March 28. If you would like to attend, please RSVP by e-mailing me at maria@blueshirtgroup.com. I'll now introduce Dominic Orr, President and Chief Executive Officer of Aruba Networks. Dominic?

Dominic P. Orr

Thank you. Good afternoon, and thank you for taking the time to attend our second quarter fiscal 2012 conference call. We achieved our 11th consecutive quarter of record revenue in Q2. The rapid proliferation of mobile devices and BYOD or bring-your-own-device in the workplace continues to fuel Aruba's growth. Q2 revenue grew 35% year-over-year and 6% sequentially to $126.3 million, and we delivered the highest non-GAAP gross margin and operating margin in the company's history.

During the quarter, we had strong sequential bookings across all theaters. Our key verticals performed well in the quarter. In addition, over the last couple of years, the group mobile general enterprise business has been a key driver for our growth in general and this continued in Q2. Our software solutions, including AirWave and Amigopod also performed well in the quarter. And while it is still very early, we have seen some significant design wins involving our Mobility Access Switches, and are encouraged by the interest we see across our install base.

In Q2, we added over 1,500 new customers, one of our strongest quarters ever of new customer acquisitions, bringing our cumulative customer total to over 19,000. Recent key wins included: A substantial software solution win featuring Amigopod and AirWave with one of the world's largest technology companies; a wireless and wired installation enabling BYOD on a massive scale for one of the world's largest media conglomerates; adoption of a wireless and wired architecture in a large university in the United States; an outdoor mesh installation for a major port in the Pacific Northwest; a large installation of our virtual controller solution, Aruba Instant, in over 1,000 stores for a large retail chain; and a substantial managed services win with one of the largest service providers in the world.

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