[November 05, 2015] |
|
Arista Networks, Inc. Reports Third Quarter 2015 Financial Results
Arista Networks, Inc. (NYSE: ANET), an industry leader in
software-driven cloud networking solutions for large data center and
computing environments, today announced financial results for its third
quarter ended September 30, 2015.
Third Quarter Financial Highlights
-
Revenue of $217.5 million, an increase of 40% compared to the third
quarter of 2014, and an increase of 11% from the second quarter of
2015.
-
Non-GAAP gross margin of 65.5%, compared to non-GAAP gross margin of
65.2% in the third quarter of 2014 and 65.8% in the second quarter of
2015.
-
GAAP gross margin of 65.2%, compared to GAAP gross margin of 64.9% in
the third quarter of 2014 and 65.4% in the second quarter of 2015.
-
Non-GAAP net income of $42.4 million, or $0.59 per diluted share,
compared to non-GAAP net income of $28.1 million, or $0.40 per diluted
share, in the third quarter of 2014.
-
GAAP net income of $28.7 million, or $0.39 per diluted share, compared
to GAAP net income of $21.9 million, or $0.30 per diluted share, in
the third quarter of 2014.
"Arista is witnessing the mainstream acceptance of open and programmable
cloud networking across the globe," stated Jayshree Ullal, Arista
President and CEO. "I am delighted by our customer traction across four
major verticals and our consistent profitable revenue growth."
Commenting on the company's financial results, Ita Brennan, Arista's
CFO, said, "We are pleased with yet another record revenue quarter, as
we grew our top line 40% year over year, with continued strong
profitability while funding significant product and technology
innovation."
Company Highlights
-
Announced a new service capability for CloudVision®
called Macro-Segmentation Service (MSS™). MSS provides
automated insertion of Security and other in-line L4-7 services within
any Software Driven Cloud Networking Infrastructure. MSS has been
endorsed by our technology alliance ecosystem partners VMware, Palo
Alto Networks, Check Point Software, Fortinet, and F5 Networks who are
each working with us to deliver MSS support for their platforms.
-
Introduced a new portfolio of data center switches that address the
demand for 25/50/100GbE switching. Arista
EOS (extensible operating system) features such as Smart
System Upgrade with hitless software upgrades, hitless speed
change and network rollback, provide customers with non-stop
operational tools for building cloud scale networks.
-
Demonstrated integration with HP OneView at VMworld 2015, as a joint
converged network offering.
Financial Outlook
For the fourth quarter of 2015, we expect:
-
Revenue between $238 and $242 million.
-
Non-GAAP gross margin between 62% to 65%, and
-
Non-GAAP operating margin of approximately 26%.
Guidance for non-GAAP financial measures excludes legal expenses
associated with the OptumSoft and Cisco litigation, stock-based
compensation and other non-recurring expenses. A reconciliation of
non-GAAP guidance measures to corresponding GAAP measures is not
available on a forward-looking basis.
Prepared Materials and Conference Call Information
Arista executives will discuss third quarter 2015 financial results on a
conference call at 1:30 p.m. Pacific time today. To listen to the call
via telephone, dial 1-877-201-0168 in the United States or
1-647-788-4901 from outside the US. The Conference ID is 50091413.
The financial results conference call will also be available via live
webcast on our investor relations website at investors.arista.com.
Shortly after the conclusion of the conference call, a replay of the
audio webcast will be available on Arista's Investor Relations website.
Forward-Looking Statements
This press release contains "forward-looking statements" regarding our
future performance, including statements in the section entitled
"Financial Outlook," such as estimates regarding revenue, non-GAAP gross
margin and non-GAAP operating margin for the fourth quarter of FY 2015.
Forward-looking statements are subject to a number of uncertainties and
risks that could cause actual results to differ materially from those
anticipated in the forward-looking statements including: Arista
Networks' limited operating history; risks associated with Arista
Networks' rapid growth; Arista Networks' customer concentration; the
dispute with Cisco Systems, Inc. and OptumSoft, Inc.; requests for more
favorable terms and conditions from our large end customers; declines in
the sales prices of our products and services; changes in customer order
patterns or customer mix; increased competition in our products and
service markets, including the data center market; dependence on the
introduction and market acceptance of new product offerings and
standards; rapid technological and market change; the evolution of the
cloud networking market and the adoption by end customers of Arista
Networks' cloud networking solutions; and general market, political,
economic and business conditions. Additional risks and uncertainties
that could affect Arista Networks can be found in Arista's Quarterly
Report on Form 10-Q filed with the SEC on August 7, 2015, and other
filings that the company makes to the SEC from time to time. You can
locate these reports through our website at http://investors.arista.com
and on the SEC's website at www.sec.gov.
All forward-looking statements in this press release are based on
information available to the company as of the date hereof and Arista
Networks disclaims any obligation to publicly update or revise any
forward-looking statement to reflect events that occur or circumstances
that exist after the date on which they were made.
Non-GAAP Financial Measures
The company reports certain non-GAAP financial measures that exclude
stock-based compensation expenses, expenses associated with the
OptumSoft and Cisco litigation, and other non-recurring charges. The
company uses these non-GAAP financial measures internally in analyzing
its financial results and believes that the use of these non-GAAP
financial measures is useful to investors as an additional tool to
evaluate ongoing operating results and trends. In addition, these
measures are the primary indicators management uses as a basis for its
planning and forecasting for future periods.
Non-GAAP financial measures are not meant to be considered in isolation
or as a substitute for comparable GAAP net income, net income per
diluted share, gross margin, or operating margin. Non-GAAP financial
measures are subject to limitations, and should be read only in
conjunction with the company's consolidated financial statements
prepared in accordance with GAAP. A description of these non-GAAP
financial measures and a reconciliation of the company's non-GAAP
financial measures to their most directly comparable GAAP measures has
been provided in the financial statement tables included in this press
release, and investors are encouraged to review the reconciliation.
About Arista Networks
Arista Networks was founded to pioneer and deliver software-driven cloud
networking solutions for large data center storage and computing
environments. Arista's award-winning platforms, ranging in Ethernet
speeds from 10 to 100 gigabits per second, redefine scalability, agility
and resilience. Arista has shipped more than five million cloud
networking ports worldwide with CloudVision and EOS, an advanced network
operating system. Committed to open standards, Arista is a founding
member of the 25/50GbE consortium. Arista Networks products are
available worldwide directly and through partners.
ARISTA, EOS, CloudVision and Spline are among the registered and
unregistered trademarks of Arista Networks, Inc. in jurisdictions around
the world. Other company names or product names may be trademarks of
their respective owners.
Additional information and resources can be found at: http://www.arista.com.
|
ARISTA NETWORKS, INC.
|
Condensed Consolidated Statements of Income
|
(Unaudited in thousands, except per share amounts)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenue:
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
193,339
|
|
|
$
|
141,455
|
|
|
$
|
527,552
|
|
|
$
|
374,338
|
|
Service
|
|
24,209
|
|
|
14,008
|
|
|
64,593
|
|
|
36,279
|
|
Total revenue
|
|
217,548
|
|
|
155,463
|
|
|
592,145
|
|
|
410,617
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Product
|
|
67,990
|
|
|
49,633
|
|
|
182,443
|
|
|
122,692
|
|
Service
|
|
7,810
|
|
|
4,873
|
|
|
22,310
|
|
|
12,274
|
|
Total cost of revenue
|
|
75,800
|
|
|
54,506
|
|
|
204,753
|
|
|
134,966
|
|
Total gross profit
|
|
141,748
|
|
|
100,957
|
|
|
387,392
|
|
|
275,651
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
58,748
|
|
|
36,231
|
|
|
152,035
|
|
|
104,565
|
|
Sales and marketing
|
|
26,508
|
|
|
20,956
|
|
|
77,776
|
|
|
60,322
|
|
General and administrative
|
|
25,195
|
|
|
9,896
|
|
|
57,670
|
|
|
24,253
|
|
Total operating expenses
|
|
110,451
|
|
|
67,083
|
|
|
287,481
|
|
|
189,140
|
|
Income from operations
|
|
31,297
|
|
|
33,874
|
|
|
99,911
|
|
|
86,511
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
Interest expense-related party
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(782
|
)
|
Interest expense
|
|
(753
|
)
|
|
(764
|
)
|
|
(2,406
|
)
|
|
(4,730
|
)
|
Other income (expense), net
|
|
13
|
|
|
(824
|
)
|
|
(38
|
)
|
|
2,426
|
|
Total other income (expense), net
|
|
(740
|
)
|
|
(1,588
|
)
|
|
(2,444
|
)
|
|
(3,086
|
)
|
Income before provision for income taxes
|
|
30,557
|
|
|
32,286
|
|
|
97,467
|
|
|
83,425
|
|
Provision for income taxes
|
|
1,867
|
|
|
10,420
|
|
|
20,289
|
|
|
27,612
|
|
Net income
|
|
$
|
28,690
|
|
|
$
|
21,866
|
|
|
$
|
77,178
|
|
|
$
|
55,813
|
|
Net income attributable to common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
28,301
|
|
|
$
|
21,185
|
|
|
$
|
75,864
|
|
|
$
|
40,556
|
|
Diluted
|
|
$
|
28,329
|
|
|
$
|
21,255
|
|
|
$
|
75,967
|
|
|
$
|
41,909
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.42
|
|
|
$
|
0.34
|
|
|
$
|
1.16
|
|
|
$
|
0.93
|
|
Diluted
|
|
$
|
0.39
|
|
|
$
|
0.30
|
|
|
$
|
1.07
|
|
|
$
|
0.85
|
|
Weighted-average shares used in computing net income per share
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
66,629
|
|
|
62,402
|
|
|
65,609
|
|
|
43,453
|
|
Diluted
|
|
71,887
|
|
|
69,737
|
|
|
71,232
|
|
|
49,323
|
|
|
ARISTA NETWORKS, INC.
|
Reconciliation of Selected GAAP to Non-GAAP Financial Measures
|
(Unaudited in thousands, except percentages and per share amounts)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
GAAP gross profit
|
|
$
|
141,748
|
|
|
$
|
100,957
|
|
|
$
|
387,392
|
|
|
$
|
275,651
|
|
GAAP gross margin
|
|
65.2
|
%
|
|
64.9
|
%
|
|
65.4
|
%
|
|
67.1
|
%
|
Stock-based compensation expense
|
|
786
|
|
|
480
|
|
|
2,206
|
|
|
992
|
|
Non-GAAP gross profit
|
|
$
|
142,534
|
|
|
$
|
101,437
|
|
|
$
|
389,598
|
|
|
$
|
276,643
|
|
Non-GAAP gross margin
|
|
65.5
|
%
|
|
65.2
|
%
|
|
65.8
|
%
|
|
67.4
|
%
|
|
|
|
|
|
|
|
|
|
GAAP income from operations
|
|
$
|
31,297
|
|
|
$
|
33,874
|
|
|
$
|
99,911
|
|
|
$
|
86,511
|
|
Stock-based compensation expense
|
|
12,278
|
|
|
8,082
|
|
|
32,325
|
|
|
19,569
|
|
Litigation expense
|
|
15,889
|
|
|
-
|
|
|
32,468
|
|
|
-
|
|
Non-GAAP income from operations
|
|
$
|
59,464
|
|
|
$
|
41,956
|
|
|
$
|
164,704
|
|
|
$
|
106,080
|
|
Non-GAAP operating margin
|
|
27.3
|
%
|
|
27.0
|
%
|
|
27.8
|
%
|
|
25.8
|
%
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
28,690
|
|
|
$
|
21,866
|
|
|
$
|
77,178
|
|
|
$
|
55,813
|
|
Stock-based compensation expense
|
|
12,278
|
|
|
8,082
|
|
|
32,325
|
|
|
19,569
|
|
Release of income tax reserve
|
|
(6,376
|
)
|
|
-
|
|
|
(6,376
|
)
|
|
-
|
|
Litigation expense
|
|
15,889
|
|
|
-
|
|
|
32,468
|
|
|
-
|
|
Unrealized gain on note receivable
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,000
|
)
|
Income tax effect on non-GAAP exclusions
|
|
(8,064
|
)
|
|
(1,876
|
)
|
|
(18,868
|
)
|
|
(3,181
|
)
|
Non-GAAP net income
|
|
$
|
42,417
|
|
|
$
|
28,072
|
|
|
$
|
116,727
|
|
|
$
|
68,201
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing GAAP diluted income per
share attributable to common stockholders
|
|
71,887
|
|
|
69,737
|
|
|
71,232
|
|
|
49,323
|
|
Additional weighted average dilutive shares1
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,447
|
|
Non-GAAP weighted average diluted shares
|
|
71,887
|
|
|
69,737
|
|
|
71,232
|
|
|
67,770
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted net income per share attributable to common stockholders
|
|
$
|
0.39
|
|
|
$
|
0.30
|
|
|
$
|
1.07
|
|
|
$
|
0.85
|
|
Net income attributable to participating securities
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
|
0.28
|
|
Non-GAAP adjustments to net income
|
|
0.19
|
|
|
0.09
|
|
|
0.55
|
|
|
0.25
|
|
Non-GAAP adjustments to diluted shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(0.37
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
0.59
|
|
|
$
|
0.40
|
|
|
$
|
1.64
|
|
|
$
|
1.01
|
|
Summary of Stock-Based Compensation Expense
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
786
|
|
|
$
|
480
|
|
|
$
|
2,206
|
|
|
$
|
992
|
|
Research and development
|
|
7,037
|
|
|
4,304
|
|
|
18,344
|
|
|
10,298
|
|
Sales and marketing
|
|
2,864
|
|
|
2,387
|
|
|
8,138
|
|
|
5,746
|
|
General and administrative
|
|
1,591
|
|
|
911
|
|
|
3,637
|
|
|
2,533
|
|
Total
|
|
$
|
12,278
|
|
|
$
|
8,082
|
|
|
$
|
32,325
|
|
|
$
|
19,569
|
|
______________________________
1Includes weighted average shares from the issuance of
shares upon our IPO and the assumed conversion of preferred stock
and notes payable at the beginning of the quarter.
|
|
ARISTA NETWORKS, INC.
|
Condensed Consolidated Balance Sheets
|
(Unaudited in thousands)
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2015
|
|
2014
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
418,500
|
|
|
$
|
240,031
|
|
Marketable securities
|
|
150,117
|
|
|
209,426
|
|
Accounts receivable, net
|
|
160,230
|
|
|
96,982
|
|
Inventories
|
|
109,921
|
|
|
78,006
|
|
Deferred tax assets
|
|
20,197
|
|
|
12,252
|
|
Prepaid expenses and other current assets
|
|
62,135
|
|
|
42,782
|
|
Total current assets
|
|
921,100
|
|
|
679,479
|
|
Property and equipment, net
|
|
75,248
|
|
|
71,558
|
|
Investments
|
|
36,636
|
|
|
36,636
|
|
Deferred tax assets
|
|
19,047
|
|
|
11,510
|
|
Other assets
|
|
20,861
|
|
|
11,840
|
|
TOTAL ASSETS
|
|
$
|
1,072,892
|
|
|
$
|
811,023
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
31,487
|
|
|
$
|
32,428
|
|
Accrued liabilities
|
|
58,979
|
|
|
40,369
|
|
Deferred revenue
|
|
124,740
|
|
|
60,327
|
|
Other current liabilities
|
|
9,760
|
|
|
11,249
|
|
Total current liabilities
|
|
224,966
|
|
|
144,373
|
|
Income taxes payable
|
|
11,188
|
|
|
17,323
|
|
Lease financing obligations, non-current
|
|
41,587
|
|
|
42,547
|
|
Deferred revenue, non-current
|
|
65,966
|
|
|
46,141
|
|
Other long-term liabilities
|
|
6,011
|
|
|
4,981
|
|
TOTAL LIABILITIES
|
|
349,718
|
|
|
255,365
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
Preferred stock
|
|
-
|
|
|
-
|
|
Common stock
|
|
7
|
|
|
7
|
|
Additional paid-in capital
|
|
516,607
|
|
|
426,171
|
|
Retained earnings
|
|
206,991
|
|
|
129,814
|
|
Accumulated other comprehensive loss
|
|
(431
|
)
|
|
(334
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
723,174
|
|
|
555,658
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
1,072,892
|
|
|
$
|
811,023
|
|
|
ARISTA NETWORKS, INC.
|
Condensed Consolidated Statements of Cash Flows
|
(Unaudited in thousands)
|
|
|
|
Nine Months Ended September 30,
|
|
|
2015
|
|
2014
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
|
77,178
|
|
|
$
|
55,813
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
9,724
|
|
|
7,366
|
|
Stock-based compensation
|
|
32,325
|
|
|
19,569
|
|
Deferred income taxes
|
|
(15,483
|
)
|
|
(782
|
)
|
Provision for bad debts
|
|
650
|
|
|
593
|
|
Excess tax benefit on stock based-compensation
|
|
(32,381
|
)
|
|
(841
|
)
|
Amortization of investment premiums
|
|
1,332
|
|
|
-
|
|
Unrealized gain on notes receivable
|
|
-
|
|
|
(4,000
|
)
|
Amortization of debt discount
|
|
-
|
|
|
527
|
|
Write-off of debt discount on notes payable
|
|
-
|
|
|
680
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
(63,898
|
)
|
|
(6,657
|
)
|
Inventories
|
|
(31,915
|
)
|
|
4,507
|
|
Prepaid expenses and other current assets
|
|
(19,352
|
)
|
|
(8,755
|
)
|
Other assets
|
|
(3,092
|
)
|
|
(2,142
|
)
|
Accounts payable
|
|
(145
|
)
|
|
5,600
|
|
Accrued liabilities
|
|
18,102
|
|
|
7,733
|
|
Deferred revenue
|
|
84,238
|
|
|
18,787
|
|
Income taxes payable
|
|
24,759
|
|
|
501
|
|
Other liabilities
|
|
1,980
|
|
|
1,165
|
|
Interest payable
|
|
-
|
|
|
(1,630
|
)
|
Interest payable-related party
|
|
-
|
|
|
670
|
|
Net cash provided by operating activities
|
|
84,022
|
|
|
98,704
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Proceeds from maturity of marketable securities
|
|
58,200
|
|
|
-
|
|
Purchases of property and equipment
|
|
(13,974
|
)
|
|
(10,789
|
)
|
Change in restricted cash
|
|
(4,039
|
)
|
|
4,040
|
|
Purchases of intangible assets
|
|
(743
|
)
|
|
(4,451
|
)
|
Investment in private companies
|
|
-
|
|
|
(15,000
|
)
|
Net cash provided by (used in) investing activities
|
|
39,444
|
|
|
(26,200
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Principal payments of lease financing obligations
|
|
(778
|
)
|
|
(554
|
)
|
Payments-deferred offering costs
|
|
(261
|
)
|
|
-
|
|
Proceeds from issuance of common stock upon exercising options, net
of repurchases
|
|
14,562
|
|
|
2,578
|
|
Proceeds from issuance of common stock under employee stock purchase
plan
|
|
9,366
|
|
|
-
|
|
Excess tax benefit on stock-based compensation
|
|
32,381
|
|
|
841
|
|
Proceeds from initial public offering, net of issuance cost
|
|
-
|
|
|
239,643
|
|
Repayment on notes payable
|
|
-
|
|
|
(20,000
|
)
|
Net cash provided by financing activities
|
|
55,270
|
|
|
222,508
|
|
Effect of exchange rate changes
|
|
(267
|
)
|
|
(80
|
)
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
178,469
|
|
|
294,932
|
|
CASH AND CASH EQUIVALENTS-Beginning of period
|
|
240,031
|
|
|
113,664
|
|
CASH AND CASH EQUIVALENTS-End of period
|
|
$
|
418,500
|
|
|
$
|
408,596
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151105006571/en/
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