Arista Networks, Inc. · NYSE:ANET
Arista Networks — Q2 2015 Earnings Presentation
24 slides from Arista Networks's earnings presentation, Aug 6, 2015
Slide 1: 2015 Highlights
ARISTA 2015 Highlights August 2015
Slide 2: Safe Harbor
Safe Harbor This presentation and the accompanying oral presentation contain forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements other than statements of historic
Slide 3: Paradigm Shift – Data Center Moving to the Cloud
Paradigm Shift – Data Center Moving to the Cloud Cloud Virtualization Internet Environment Client Server Architecture Database Server Rise of the PC Server Petabytes of Storage Client Client Client Client Client 100,000s of Servers Mainframe 1,000,000s of VMs 10,000s 1,000s 100s 10s 1970 1980 1990 2
Slide 4: Arista's Cloud Networking Opportunity
Arista’s Cloud Networking Opportunity Server Shipments Data Center Ethernet Switch Revenue 100% $16 Top 7 Cloud Providers Percent of Units (%) Enterprise/ Premises Revenue in $ Billions 75% Rest of Cloud and Telco SPs 50% $8 25% Cloud Enterprise and SMB 0% $0 Source: Dell'Oro Group Server Forecast,
Slide 5: Arista Market Share vs Cisco
Arista Market Share vs Cisco High Speed Data Center Switching Market Share in Ports (10/40/100GbE) Arista Cisco Source: Crehan Research Datacenter Switch Market Share Report Q2’2015. Arista 2011 ports based on management estimates. Note: Excludes blade switches. 5
Slide 6: Market Potential by Speed
Market Potential by Speed Data Center Revenue ($Bn) Source: Dell’Oro, Ethernet Switch Deployment Location April 2015 Notes: 1. Dell’Oro recognizes that servers with 25/50 Gbps ports will connect to 100 Gbps switch ports with a splitter cable. Our 25/50 Gbps port shipments are only native 25/50 Gbps.
Slide 7: Gartner Magic Quadrant 2015
Gartner Magic Quadrant 2015 Data Center Networking "We see Arista, in essence, being very open and agnostic and almost acting as an arms dealer in the SDN race," Lerner said. Andrew Lerner, Gartner May 2015 Source: Gartner May 2015 7
Slide 8: Arista Platform Delivers Software Driven Cloud Networking
Arista Platform Delivers Software Driven Cloud Networking + EOS Merchant Silicon Cloud Scale Open and Availability Visibility Automation Architecture Programmable Accelerates Time to Service and Reduces TCO Higher Feature Velocity 8
Slide 9: Arista's Cloud Scale Software Architecture
Arista’s Cloud Scale Software Architecture Legacy – Spaghetti Code Arista Programmable EOS Notify OTV MSDP PIM IGMP PIM SNMP BGP LC IGMP ACL IPQOS FIB Snoop Publish Driver SysDB IGMP STP U4RIB U6RIB CoPP STP eAPI BGP RIP OSPF EIGRP ISIS MLAG Susceptible to Process Failure Processes are Self-Healing
Slide 10: Arista Key Differentiators of Software Driven Cloud Networks
Arista Key Differentiators of Software Driven Cloud Networks EOS Programmable & Open 10
Slide 11: Arista Portfolio
Arista Portfolio 7300 Series 7500E Series Spline/Spine 7050 Series 7150 & 7280 Series Leaf Volume Value Single-Image Arista EOS Across All Platforms 11
Slide 12: Arista's Ecosystem: Open and Programmable
Arista’s Ecosystem: Open and Programmable Hypervisor/Virtualization Management, Automation, Orchestration Network Services EOS Application Programming Interfaces (APIs) JSON | XMPP | CLI | Python | CloudVision EOS Extensible Operating System Scalability | Availability | Programmability | Automation
Slide 13: Broad Customer Adoption
Broad Customer Adoption End Customers (Cumulative) 3500 3000+ 3000 2500 2300+ 2000 1600+ 1500 1000+ 1000 500+ 500 0 FY10 FY11 FY12 FY13 FY14 13
Slide 14: Pace of Cloud Networking Adoption
Pace of Cloud Networking Adoption Large Financial Services Web1 560+ Customers 125+ Customers Service Provider / High Tech Cloud Spend Cloud / Hosting 410+ Customers Government Media & 165+ 360+ Customers Entertainment 210+ Oil & Gas Education Business 30+ 230+ Services 230+ Research Labs 75+ Health
Slide 15: Illustrative Customer Purchase Pattern
Illustrative Customer Purchase Pattern Continue to address incremental spend – build-out or replacement $ Value of Purchase Thereafter Deployment into critical path – data center / core Billings Begin 12-24 Months Proof of Concept – likely 1-2 applications 7-12 Months Sales Cycle 0-6 Months Time 15
Slide 16: Proven Land-and-Expand Model
Proven Land-and-Expand Model Average: All Customers (1)(2)(3) 11.9x • EOS software drives 9.3x repeat purchases • EOS software 1.0x organically enables additional use-cases Initial Sale Lifetime Value - 2013 Lifetime Value - 2014 All Customers Excluding Top 10 (1)(2)(3) 6.7x 400 350 5.2x 300 250 200
Slide 17: Arista in Q2'15
Arista in Q2’15 Compelling Attributes Financial Results (non-GAAP)1 Talented team, technology Q2’15 Revenue: $195.6M and results Large and expanding Q2’14-Q2’15 YOY Revenue Growth: 41.8% market opportunity Sustainable software advantage Q2’15 Gross Margin: 65.8% Disruptive technology enabling Q2’15
Slide 18: Strong Revenue Growth
Strong Revenue Growth Annual Revenue Quarterly Revenue $M $M $196 2010-2014 $584 $179 CAGR: 68.9% $173 $155 $138 $361 $193 $140 $72 FY10 FY11 FY12 FY13 FY14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 18
Slide 19: Financial Highlights
Financial Highlights1 $250 Revenue Gross Margin Millions 80% $200 70% 67.6% 69.6% 67.9% 67.4% 66.1% 65.8% 64.1% 65.2% 60% $150 50% 40% $100 30% $50 20% 10% 102 115 117 138 155 173 179 196 $0 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 35% Operat
Slide 20: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet ($ In Ms) Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Cash and Cash Equivalents $397.2 $408.6 $240.0 $275.2 $343.0 3. Marketable Securities $0.0 $0.0 $209.4 $209.2 $208.8 Cash Flow From Operations $46.3 $34.8 $33.2 $20.8 $52.6 Accounts Receivable $67.9 $84.1 $97.0 $113.1 $122.3 DSO 45
Slide 21: Arista vs. Select Peers – GAAP
Arista vs. Select Peers – GAAP (In 000s except per share data) Q3’14 Q4’14 Q1’15 Q2’15 Q/E Jul 2014 Q/E Oct 2014 Q/E Jan 2015 Q/E Apr 2015 Revenue 155,463 173,489 179,045 195,552 178,231 192,346 217,655 234,172 qoq% 12.7% 11.6% 3.2% 9.2% 18.3% 7.9% 13.2% 7.6% yoy% 53.0% 51.2% 52.8% 41.8% 58.6% 50.1%
Slide 22: Arista Evolution
Arista Evolution People 6 100 250 500 750+ 1,000+ EOS 7500 VXLAN 7050 7150 7500E 7300 EOS+ Cloud Products 7100S Best of Interop Best of VMworld Best of Interop 7000X 7280E Vision High Tech Enterprise Web Customers Financial 50+% 1000+ SP/Cloud 3000+ Financial H UK India Germany Hong Kong Sweden Comp
Slide 23: 2015 Summary
2015 Summary • Strong revenue and market share growth driven by broad customer adoption • Visibility from deep customer engagement • Diverse and growing customer base across key verticals • Proven land and expand model • Good margins supported by differentiated technology advantage 23
Slide 24: Appendix: GAAP to Non-GAAP Reconciliation
Appendix: GAAP to Non-GAAP Reconciliation In 000's except per share data Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2'15 GAAP gross profit $ 65,036 $ 77,473 $ 81,314 $ 93,380 $ 100,957 $ 116,440 $ 117,754 $ 127,890 GAAP gross margin 64.0% 67.5% 69.4% 67.7% 64.9% 67.1% 65.8% 65.4% Stock compensation