Delaware | 001-36468 | 20-1751121 | ||
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification Number) |
ITEM 2.02 | Results of Operations and Financial Condition |
Exhibit No. | Description |
99.1 | Press release issued by Arista Networks, Inc. dated November 3, 2016 |
ARISTA NETWORKS, INC. | ||
November 3, 2016 | /s/ ITA BRENNAN | |
Ita Brennan | ||
Chief Financial Officer | ||
(Principal Accounting and Financial Officer) |
Exhibit No. | Description |
99.1 | Press release issued by Arista Networks, Inc. dated November 3, 2016 |
• | Revenue of $290.3 million, an increase of 8.0% compared to the second quarter of 2016, and an increase of 33.4% from the third quarter of 2015. |
• | GAAP gross margin of 64.2%, compared to GAAP gross margin of 63.8% in the second quarter of 2016 and 65.2% in the third quarter of 2015. |
• | Non-GAAP gross margin of 64.6%, compared to non-GAAP gross margin of 64.2% in the second quarter of 2016 and 65.5% in the third quarter of 2015. |
• | GAAP net income of $51.3 million, or $0.69 per diluted share, compared to GAAP net income of $28.7 million, or $0.39 per diluted share, in the third quarter of 2015. |
• | Non-GAAP net income of $61.2 million, or $0.83 per diluted share, compared to non-GAAP net income of $42.4 million, or $0.59 per diluted share, in the third quarter of 2015. |
• | Introduced next-generation, real-time telemetry and analytics capabilities that leverage Arista EOS(R) and CloudVision(R) to deliver deep visibility into workloads, workflows, and workstreams on a network-wide basis, accelerating completion of day-to-day tasks and reducing operational costs. |
• | Entered an exciting new strategic partnership with Hewlett Packard Enterprise ("HPE") that expands on the existing HPE Converged Architecture agreement announced last June. HPE customers and partners will now have the ability to purchase Arista Networks switching products directly from HPE starting November 7, 2016, helping deliver on a common vision of secure Hybrid IT solutions and experiences built on industry-leading software-defined infrastructure. |
• | Revenue between $310 and $320 million. |
• | Non-GAAP gross margin between 61% to 64%, and |
• | Non-GAAP operating margin of approximately 26%. |
Media Contact Amanda Jaramillo Corporate Communications (408) 547-5798 amanda@arista.com | Investor Contact Chuck Elliott Product and Investor Advocacy (408) 547-5549 chuck@arista.com |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Product | $ | 254,238 | $ | 193,339 | $ | 702,329 | $ | 527,552 | |||||||
Service | 36,023 | 24,209 | 98,869 | 64,593 | |||||||||||
Total revenue | 290,261 | 217,548 | 801,198 | 592,145 | |||||||||||
Cost of revenue: | |||||||||||||||
Product | 94,777 | 67,990 | 261,711 | 182,443 | |||||||||||
Service | 9,064 | 7,810 | 26,526 | 22,310 | |||||||||||
Total cost of revenue | 103,841 | 75,800 | 288,237 | 204,753 | |||||||||||
Gross profit | 186,420 | 141,748 | 512,961 | 387,392 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 70,648 | 58,748 | 202,183 | 152,035 | |||||||||||
Sales and marketing | 33,216 | 26,508 | 92,566 | 77,776 | |||||||||||
General and administrative | 19,535 | 25,195 | 52,298 | 57,670 | |||||||||||
Total operating expenses | 123,399 | 110,451 | 347,047 | 287,481 | |||||||||||
Income from operations | 63,021 | 31,297 | 165,914 | 99,911 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (735 | ) | (753 | ) | (2,218 | ) | (2,406 | ) | |||||||
Other income (expense), net | 639 | 13 | 1,392 | (38 | ) | ||||||||||
Total other income (expense), net | (96 | ) | (740 | ) | (826 | ) | (2,444 | ) | |||||||
Income before provision for income taxes | 62,925 | 30,557 | 165,088 | 97,467 | |||||||||||
Provision for income taxes | 11,668 | 1,867 | 39,682 | 20,289 | |||||||||||
Net income | $ | 51,257 | $ | 28,690 | $ | 125,406 | $ | 77,178 | |||||||
Net income attributable to common stockholders: | |||||||||||||||
Basic | $ | 50,962 | $ | 28,301 | $ | 124,475 | $ | 75,864 | |||||||
Diluted | $ | 50,980 | $ | 28,329 | $ | 124,531 | $ | 75,967 | |||||||
Net income per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.74 | $ | 0.42 | $ | 1.82 | $ | 1.16 | |||||||
Diluted | $ | 0.69 | $ | 0.39 | $ | 1.71 | $ | 1.07 | |||||||
Weighted-average shares used in computing net income per share attributable to common stockholders: | |||||||||||||||
Basic | 69,076 | 66,629 | 68,365 | 65,609 | |||||||||||
Diluted | 73,453 | 71,887 | 72,811 | 71,232 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
GAAP gross profit | $ | 186,420 | $ | 141,748 | $ | 512,961 | $ | 387,392 | ||||||||
GAAP gross margin | 64.2 | % | 65.2 | % | 64.0 | % | 65.4 | % | ||||||||
Stock-based compensation expense | 955 | 786 | 2,616 | 2,206 | ||||||||||||
Non-GAAP gross profit | $ | 187,375 | $ | 142,534 | $ | 515,577 | $ | 389,598 | ||||||||
Non-GAAP gross margin | 64.6 | % | 65.5 | % | 64.4 | % | 65.8 | % | ||||||||
GAAP income from operations | $ | 63,021 | $ | 31,297 | $ | 165,914 | $ | 99,911 | ||||||||
Stock-based compensation expense | 15,116 | 12,278 | 42,708 | 32,325 | ||||||||||||
Litigation expense | 9,025 | 15,889 | 23,624 | 32,468 | ||||||||||||
Non-GAAP income from operations | $ | 87,162 | $ | 59,464 | $ | 232,246 | $ | 164,704 | ||||||||
Non-GAAP operating margin | 30.0 | % | 27.3 | % | 29.0 | % | 27.8 | % | ||||||||
GAAP net income | $ | 51,257 | $ | 28,690 | $ | 125,406 | $ | 77,178 | ||||||||
Stock-based compensation expense | 15,116 | 12,278 | 42,708 | 32,325 | ||||||||||||
Litigation expense | 9,025 | 15,889 | 23,624 | 32,468 | ||||||||||||
Release of income tax reserve | (6,293 | ) | (6,376 | ) | (6,293 | ) | (6,376 | ) | ||||||||
Income tax effect on non-GAAP exclusions | (7,924 | ) | (8,064 | ) | (21,504 | ) | (18,868 | ) | ||||||||
Non-GAAP net income | $ | 61,181 | $ | 42,417 | $ | 163,941 | $ | 116,727 | ||||||||
Weighted-average shares used in computing diluted net income per share attributable to common stockholders | 73,453 | 71,887 | 72,811 | 71,232 | ||||||||||||
GAAP diluted net income per share attributable to common stockholders | $ | 0.69 | $ | 0.39 | $ | 1.71 | $ | 1.07 | ||||||||
Net income attributable to participating securities | — | 0.01 | 0.01 | 0.02 | ||||||||||||
Non-GAAP adjustments to net income | 0.14 | 0.19 | 0.53 | 0.55 | ||||||||||||
Non-GAAP adjustments to diluted shares | — | — | — | — | ||||||||||||
Non-GAAP diluted net income per share | $ | 0.83 | $ | 0.59 | $ | 2.25 | $ | 1.64 | ||||||||
Summary of Stock-Based Compensation Expense | ||||||||||||||||
Cost of revenue | $ | 955 | $ | 786 | $ | 2,616 | $ | 2,206 | ||||||||
Research and development | 8,010 | 7,037 | 23,062 | 18,344 | ||||||||||||
Sales and marketing | 3,947 | 2,864 | 11,374 | 8,138 | ||||||||||||
General and administrative | 2,204 | 1,591 | 5,656 | 3,637 | ||||||||||||
Total | $ | 15,116 | $ | 12,278 | $ | 42,708 | $ | 32,325 |
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 500,481 | $ | 687,326 | |||
Marketable securities | 299,667 | — | |||||
Accounts receivable | 210,243 | 144,263 | |||||
Inventories | 162,128 | 92,129 | |||||
Prepaid expenses and other current assets | 151,659 | 50,610 | |||||
Total current assets | 1,324,178 | 974,328 | |||||
Property and equipment, net | 78,147 | 79,706 | |||||
Investments | 36,136 | 36,636 | |||||
Deferred tax assets | 62,221 | 48,429 | |||||
Other assets | 18,398 | 20,791 | |||||
TOTAL ASSETS | $ | 1,519,080 | $ | 1,159,890 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 77,048 | $ | 43,966 | |||
Accrued liabilities | 77,163 | 60,971 | |||||
Deferred revenue | 191,094 | 122,049 | |||||
Other current liabilities | 9,777 | 8,025 | |||||
Total current liabilities | 355,082 | 235,011 | |||||
Income taxes payable | 11,896 | 14,060 | |||||
Lease financing obligations, non-current | 40,041 | 41,210 | |||||
Deferred revenue, non-current | 93,741 | 74,759 | |||||
Other long-term liabilities | 6,900 | 6,698 | |||||
TOTAL LIABILITIES | 507,660 | 371,738 | |||||
STOCKHOLDERS’ EQUITY: | |||||||
Common stock | 7 | 7 | |||||
Additional paid-in capital | 636,074 | 537,904 | |||||
Retained earnings | 376,322 | 250,916 | |||||
Accumulated other comprehensive loss | (983 | ) | (675 | ) | |||
TOTAL STOCKHOLDERS’ EQUITY | 1,011,420 | 788,152 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,519,080 | $ | 1,159,890 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 125,406 | $ | 77,178 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 14,807 | 9,724 | |||||
Stock-based compensation | 42,708 | 32,325 | |||||
Deferred income taxes | (13,720 | ) | (15,483 | ) | |||
Excess tax benefit on stock-based compensation | (30,043 | ) | (32,381 | ) | |||
Amortization of investment premiums | 994 | 1,332 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (65,980 | ) | (63,248 | ) | |||
Inventories | (69,998 | ) | (31,915 | ) | |||
Prepaid expenses and other current assets | (98,050 | ) | (19,352 | ) | |||
Other assets | 3,208 | (3,092 | ) | ||||
Accounts payable | 35,510 | (145 | ) | ||||
Accrued liabilities | 15,913 | 18,102 | |||||
Deferred revenue | 88,027 | 84,238 | |||||
Income taxes payable | 27,275 | 24,759 | |||||
Other liabilities | 2,628 | 1,980 | |||||
Net cash provided by operating activities | 78,685 | 84,022 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Proceeds from maturity of marketable securities | 41,917 | 58,200 | |||||
Purchases of marketable securities | (342,484 | ) | — | ||||
Purchases of property and equipment | (15,787 | ) | (13,974 | ) | |||
Investment in privately-held companies | (2,500 | ) | — | ||||
Changes in restricted cash | — | (4,039 | ) | ||||
Purchases of intangible assets | (697 | ) | (743 | ) | |||
Net cash (used in) provided by investing activities | (319,551 | ) | 39,444 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Principal payments of lease financing obligations | (960 | ) | (778 | ) | |||
Proceeds from issuance of common stock upon exercising options, net of repurchases | 15,556 | 14,562 | |||||
Minimum tax withholding paid on behalf of employees for net share settlement | (811 | ) | — | ||||
Proceeds from issuance of common stock, employee stock purchase plan | 10,326 | 9,366 | |||||
Excess tax benefit on stock-based compensation | 30,043 | 32,381 | |||||
Issuance costs from initial public offering | — | (261 | ) | ||||
Net cash provided by financing activities | 54,154 | 55,270 | |||||
Effect of exchange rate changes | (133 | ) | (267 | ) | |||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (186,845 | ) | 178,469 | ||||
CASH AND CASH EQUIVALENTS—Beginning of year | 687,326 | 240,031 | |||||
CASH AND CASH EQUIVALENTS—End of year | $ | 500,481 | $ | 418,500 |