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 first
quarter ended March 31, 2015.
First Quarter Financial Highlights
-
Revenue of $179.0 million, an increase of 52.8% compared to the first
quarter of 2014, and an increase of 3.2% from the fourth quarter of
2014.
-
Non-GAAP gross margin of 66.1%, compared to Non-GAAP gross margin of
69.6% in the first quarter of 2014 and 67.4% in the fourth quarter of
2014.
-
GAAP gross margin of 65.8%, compared to GAAP gross margin of 69.4% in
the first quarter of 2014 and 67.1% in the fourth quarter of 2014.
-
Non-GAAP net income of $35.5 million, or $0.50 per diluted share,
compared to non-GAAP net income of $16.4 million, or $0.25 per diluted
share, in the first quarter of 2014.
-
GAAP net income of $24.5 million, or $0.34 per diluted share, compared
to GAAP net income of $12.3 million, or $0.20 per diluted share, in
the first quarter of 2014.
-
Operating cash flow of $20.8 million, compared to $17.7 million of
operating cash flow in the first quarter of 2014.
"I am pleased with our Q1 2015 results, as we made strides in our top
four verticals,” stated Jayshree Ullal, Arista President and CEO. “Our
customer momentum in cloud networking, combined with our profitable
growth and disruptive product innovations positions us well for the
year."
Commenting on the company's financial results, Andy Bechtolsheim,
Arista’s Chairman and Interim CFO, said, "We continued to execute
strongly in Q1 2015 and achieved record revenue, a record non-GAAP
operating margin of 28.6%, and doubled our non-GAAP earnings per share
year-over-year.”
Company Highlights
-
Arista Networks has been recognized as a leader in Gartner’s 2015
Magic Quadrant for Data Center Networking.
-
Announced Arista EOS as a Subscription (EaaS) service, a disaggregated
offering that aligns to new cloud business models.
-
Converged solutions with Supermicro to deliver converged compute
networking for cloud scale data centers for EVO.
-
Technology alliances with Infinera to deliver high performance
metro-area cloud networks, and Lawo for IP-based broadcast
Infrastructure.
-
Certification from ServiceNow of the Arista cloud networking
portfolio, for comprehensive operations and management of the network.
In addition, President and CEO Jayshree Ullal will be speaking with the
financial community at the William Blair Growth Stock Conference in
Chicago, Illinois on Wednesday, June 10, 2015 at 8:00am CT. A live audio
webcast of the event will be accessible from the "Investors" section of
Arista Networks website at investors.arista.com.
Financial Outlook
For the second quarter of 2015, we expect:
-
Revenue between $183 and $191 million.
-
Non-GAAP gross margin in the range of 63% to 65% and
-
Non-GAAP operating margin in the range of 23% to 25%.
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 first 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 21647872.
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 second quarter of FY 2015
and statements regarding being well positioned for future periods.
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;
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 dispute with Cisco Systems, Inc. and OptumSoft, Inc.; 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 Annual Report on Form 10-K that was filed with the SEC on March
12, 2015 for the year ended December 31, 2014, 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 non-GAAP results for gross margins, net income and
net income per share in addition to, and not as a substitute for,
financial measures calculated in accordance with GAAP. 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.
Non-GAAP financial measures are not meant to be considered in isolation
or as a substitute for comparable GAAP financial measures, and should be
read only in conjunction with the company's consolidated financial
statements prepared in accordance with GAAP. 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.
Arista Networks defines non-GAAP gross margins as total gross profit,
excluding stock-based compensation expenses, divided by total revenue.
Arista Networks defines non-GAAP net income as net income, excluding
stock based compensation expense, expenses associated with the OptumSoft
and Cisco litigation and the related income tax effect of these
exclusions. Arista Networks defines non-GAAP net income per share as
non-GAAP net income divided by the diluted weighted average shares
outstanding on a pro forma basis. In order to evaluate per share
information on a comparative basis, the company believes it is
meaningful to provide a non-GAAP financial measure that gives pro forma
effect to the conversion of the preferred shares and notes payable into
common shares and the issuance of common shares in connection with the
company’s initial public offering as if each happened at the beginning
of each period presented.
Gartner, Magic Quadrant for Data Center Networking, Mark Fabbi | Andrew
Lerner, 11 May 2015 Gartner does not endorse any vendor, product or
service depicted in its research publications, and does not advise
technology users to select only those vendors with the highest ratings
or other designation. Gartner research publications consist of the
opinions of Gartner's research organization and should not be construed
as statements of fact. Gartner disclaims all warranties, expressed or
implied, with respect to this research, including any warranties of
merchantability or fitness for a particular purpose.
About Arista Networks
Arista Networks was founded to deliver software-driven cloud networking
solutions for large data center and computing environments. Arista’s
award-winning 10/40/100 GbE switches redefine scalability, robustness,
and price-performance. At the core of Arista’s platform is EOS, an
advanced network operating system. Arista Networks products are
available worldwide through distribution partners, systems integrators
and resellers.
ARISTA, EOS 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 March 31,
|
|
|
2015
|
|
2014
|
Revenue:
|
|
|
|
|
Product
|
|
$
|
160,141
|
|
|
$
|
106,493
|
|
Service
|
|
|
18,904
|
|
|
10,714
|
|
Total Revenue
|
|
|
179,045
|
|
|
117,207
|
|
Cost of revenue:
|
|
|
|
|
Product
|
|
|
54,439
|
|
|
33,027
|
|
Service
|
|
|
6,852
|
|
|
2,866
|
|
Total cost of revenue
|
|
|
61,291
|
|
|
35,893
|
|
Total gross profit
|
|
|
117,754
|
|
|
81,314
|
|
Operating expenses:
|
|
|
|
|
Research and development
|
|
|
43,340
|
|
|
33,446
|
|
Sales and marketing
|
|
|
24,587
|
|
|
18,655
|
|
General and administrative
|
|
|
14,072
|
|
|
7,231
|
|
Total operating expenses
|
|
|
81,999
|
|
|
59,332
|
|
Income from operations
|
|
|
35,755
|
|
|
21,982
|
|
Other income (expense), net:
|
|
|
|
|
Interest expense—related party
|
|
|
—
|
|
|
(432
|
)
|
Interest expense
|
|
|
(821
|
)
|
|
(2,111
|
)
|
Other income (expense), net
|
|
|
(468
|
)
|
|
8
|
|
Total other income (expense), net
|
|
|
(1,289
|
)
|
|
(2,535
|
)
|
Income before provision for income taxes
|
|
|
34,466
|
|
|
19,447
|
|
Provision for income taxes
|
|
|
9,974
|
|
|
7,118
|
|
Net income
|
|
$
|
24,492
|
|
|
$
|
12,329
|
|
Net income attributable to common stockholders:
|
|
|
|
|
Basic
|
|
$
|
24,032
|
|
|
$
|
6,362
|
|
Diluted
|
|
$
|
24,071
|
|
|
$
|
6,816
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
Basic
|
|
$
|
0.37
|
|
|
$
|
0.22
|
|
Diluted
|
|
$
|
0.34
|
|
|
$
|
0.20
|
|
Weighted-average shares used in computing net income per share
attributable to common stockholders:
|
|
|
|
|
Basic
|
|
|
64,635
|
|
|
29,124
|
|
Diluted
|
|
|
70,722
|
|
|
33,816
|
|
ARISTA NETWORKS, INC.
Reconciliation of Selected GAAP to Non-GAAP Financial Measures
(Unaudited in thousands, except percentages and per share
amounts)
|
|
|
|
Three Months Ended March 31,
|
|
|
2015
|
|
2014
|
GAAP gross profit
|
|
$
|
117,754
|
|
|
$
|
81,314
|
|
GAAP gross margin
|
|
65.8
|
%
|
|
69.4
|
%
|
Stock-based compensation expense
|
|
636
|
|
|
211
|
|
Non-GAAP gross profit
|
|
$
|
118,390
|
|
|
$
|
81,525
|
|
Non-GAAP gross margin
|
|
66.1
|
%
|
|
69.6
|
%
|
|
|
|
|
|
GAAP income from operations
|
|
$
|
35,755
|
|
|
$
|
21,982
|
|
Stock-based compensation expense
|
|
8,839
|
|
|
4,782
|
|
Litigation expense
|
|
6,670
|
|
|
—
|
|
Non-GAAP income from operations
|
|
$
|
51,264
|
|
|
$
|
26,764
|
|
Non-GAAP operating margin
|
|
28.6
|
%
|
|
22.8
|
%
|
|
|
|
|
|
GAAP net income
|
|
$
|
24,492
|
|
|
$
|
12,329
|
|
Stock-based compensation expense
|
|
8,839
|
|
|
4,782
|
|
Litigation expense
|
|
6,670
|
|
|
—
|
|
Income tax effect on non-GAAP exclusions
|
|
(4,469
|
)
|
|
(705
|
)
|
Non-GAAP net income
|
|
$
|
35,532
|
|
|
$
|
16,406
|
|
|
|
|
|
|
Weighted average shares used in computing GAAP diluted income per
share attributable to common stockholders
|
|
70,722
|
|
|
33,816
|
|
Additional weighted average dilutive shares1
|
|
—
|
|
|
32,282
|
|
Non-GAAP weighted average diluted shares
|
|
70,722
|
|
|
66,098
|
|
|
|
|
|
|
GAAP diluted net income per share attributable to common stockholders
|
|
$
|
0.34
|
|
|
$
|
0.20
|
|
Net income attributable to participating securities
|
|
—
|
|
|
0.16
|
|
Non-GAAP adjustments to net income
|
|
0.16
|
|
|
0.12
|
|
Non-GAAP adjustments to diluted shares
|
|
—
|
|
|
(0.23
|
)
|
Non-GAAP diluted net income per share
|
|
$
|
0.50
|
|
|
$
|
0.25
|
|
Summary of Stock-Based Compensation Expense
|
|
|
|
|
Cost of revenue
|
|
$
|
636
|
|
|
$
|
211
|
|
Research and development
|
|
4,928
|
|
|
2,467
|
|
Sales and marketing
|
|
2,409
|
|
|
1,428
|
|
General and administrative
|
|
866
|
|
|
676
|
|
Total
|
|
$
|
8,839
|
|
|
$
|
4,782
|
|
______________________________
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)
|
|
|
|
March 31, 2015
|
|
December 31, 2014
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
275,186
|
|
|
$
|
240,031
|
|
Marketable securities
|
|
|
209,153
|
|
|
|
209,426
|
|
Accounts receivable, net
|
|
|
113,057
|
|
|
|
96,982
|
|
Inventories
|
|
|
91,225
|
|
|
|
80,519
|
|
Deferred tax assets
|
|
|
9,801
|
|
|
|
12,252
|
|
Prepaid expenses and other current assets
|
|
|
37,622
|
|
|
|
40,269
|
|
Total current assets
|
|
|
736,044
|
|
|
|
679,479
|
|
Property and equipment, net
|
|
|
72,787
|
|
|
|
71,558
|
|
Investments
|
|
|
36,636
|
|
|
|
36,636
|
|
Deferred tax assets
|
|
|
12,291
|
|
|
|
11,510
|
|
Other assets
|
|
|
17,334
|
|
|
|
11,840
|
|
TOTAL ASSETS
|
|
$
|
875,092
|
|
|
$
|
811,023
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
29,123
|
|
|
$
|
32,428
|
|
Accrued liabilities
|
|
|
28,920
|
|
|
|
40,369
|
|
Deferred revenue
|
|
|
81,826
|
|
|
|
60,327
|
|
Other current liabilities
|
|
|
8,462
|
|
|
|
11,249
|
|
Total current liabilities
|
|
|
148,331
|
|
|
|
144,373
|
|
Income taxes payable
|
|
|
17,502
|
|
|
|
17,323
|
|
Lease financing obligations, non-current
|
|
|
42,232
|
|
|
|
42,547
|
|
Deferred revenue, non-current
|
|
|
50,998
|
|
|
|
46,141
|
|
Other long-term liabilities
|
|
|
5,558
|
|
|
|
4,981
|
|
TOTAL LIABILITIES
|
|
|
264,621
|
|
|
|
255,365
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
Preferred stock
|
|
|
—
|
|
|
|
—
|
|
Common stock
|
|
|
7
|
|
|
|
7
|
|
Additional paid-in capital
|
|
|
456,509
|
|
|
|
426,171
|
|
Retained earnings
|
|
|
154,306
|
|
|
|
129,814
|
|
Accumulated other comprehensive loss
|
|
|
(351
|
)
|
|
|
(334
|
)
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
610,471
|
|
|
|
555,658
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
875,092
|
|
|
$
|
811,023
|
|
ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited in thousands)
|
|
|
|
Three Months Ended March 31,
|
|
|
2015
|
|
2014
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
|
24,492
|
|
|
$
|
12,329
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
2,893
|
|
|
2,285
|
|
Stock-based compensation
|
|
8,839
|
|
|
4,782
|
|
Deferred income taxes
|
|
1,670
|
|
|
2,110
|
|
Provision for bad debts
|
|
201
|
|
|
43
|
|
Amortization of debt discount
|
|
—
|
|
|
292
|
|
Excess tax benefit on stock based-compensation
|
|
(10,569
|
)
|
|
(311
|
)
|
Other
|
|
487
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
(16,276
|
)
|
|
14,950
|
|
Inventories
|
|
(10,706
|
)
|
|
(5,619
|
)
|
Prepaid expenses and other current assets
|
|
2,613
|
|
|
(3,349
|
)
|
Other assets
|
|
(3,502
|
)
|
|
(2,794
|
)
|
Accounts payable
|
|
(1,936
|
)
|
|
(5,904
|
)
|
Accrued liabilities
|
|
(12,358
|
)
|
|
27
|
|
Deferred revenue
|
|
26,356
|
|
|
(2,797
|
)
|
Interest payable
|
|
—
|
|
|
1,110
|
|
Interest payable—related party
|
|
—
|
|
|
370
|
|
Income taxes payable
|
|
8,985
|
|
|
109
|
|
Other liabilities
|
|
(422
|
)
|
|
56
|
|
Net cash provided by operating activities
|
|
20,767
|
|
|
17,689
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Purchases of property and equipment
|
|
(5,136
|
)
|
|
(3,103
|
)
|
Other investing activities
|
|
(667
|
)
|
|
—
|
|
Net cash used in investing activities
|
|
(5,803
|
)
|
|
(3,103
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Principal payments of lease financing obligations
|
|
(255
|
)
|
|
(133
|
)
|
Payments—offering costs
|
|
(261
|
)
|
|
(775
|
)
|
Proceeds from issuance of common stock upon exercising options, net
of repurchases
|
|
5,322
|
|
|
1,861
|
|
Proceeds from issuance of common stock under employee stock purchase
plan
|
|
4,856
|
|
|
—
|
|
Excess tax benefit on stock-based compensation
|
|
10,569
|
|
|
311
|
|
Net cash provided by financing activities
|
|
20,231
|
|
|
1,264
|
|
Effect of exchange rate changes
|
|
(40
|
)
|
|
10
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
35,155
|
|
|
15,860
|
|
CASH AND CASH EQUIVALENTS—Beginning of period
|
|
240,031
|
|
|
113,664
|
|
CASH AND CASH EQUIVALENTS—End of period
|
|
$
|
275,186
|
|
|
$
|
129,524
|
|
Copyright Business Wire 2015