Arista Networks, Inc. · NYSE:ANET
Arista Networks — BAML 2015 Conference
37 slides from Arista Networks's conference presentation, June 2015
Slide 1: The Age of Cloud Computing
The Age of Cloud Computing June 2015 1
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: Arista Networks Mission
Arista Networks Mission Deliver the best cloud networking solutions to address the needs of large-scale Internet / Web and next-generation enterprise data centers 3
Slide 4: The Move to the Cloud
The Move to the Cloud Cloud Virtualization Internet Environment Client Server Architecture Database Server Rise of the PC Server Client Client Client Client Client 100,000s of Servers Mainframe 1,000,000s of VMs 10,000s 1,000s 100s 10s 1970 1980 1990 2000 2010 2020 4
Slide 5: The Consumer is Already There
The Consumer is Already There Over 2 Billion Smartphones and 1 Billion Tablets 5
Slide 6: Enterprise Transition to Cloud
Enterprise Transition to Cloud Enterprise Applications => Cloud Services 6
Slide 7: IDC Cloud Services Forecast
ICD Cloud Services Forecast Source: IDC Research November 2014 7
Slide 8: Enterprise Cloud Adoption Status
2 % ( ' 6% Enterprise Cloud Adoption Status , *- (2" "7 " "#5 "77 " = " ""3"( T ! M" J */0"GE#" "E"I # M" "# "(2 "# 9 Source: Morgan Stanley CIO Survey April 2015 8 , (- TH7"%"3 "9 "$ "" = " """3"( T
Slide 9: Rise of Mega Cloud Datacenters
Rise of Mega Cloud Datacenters Facebook Altoona Iowa Datacenter 9
Slide 10: Inside a Mega Cloud Datacenter
Inside a Mega Cloud Datacenter
Slide 11: The Aerial View
ARISTA The Aerial View
Slide 12: Power and Operational Efficiency
Power and Operational Efficiency
Slide 13: Dramatic Increases in Cloud CAPEX
Dramatic Increases in Cloud CAPEX 12 6 2 9 4.5 1.5 6 3 1 3 1.5 0.5 0 0 0 2012 2013 2014 2012 2013 2014 2012 2013 2014 Source: Company filings
Slide 14: Cloud/Web CAPEX for 2015(E)
Cloud/Web CAPEX for 2015(E) Cloud/Web Portal 2015E CAPEX Spend GOOG $11-12B AMZN $5-6B MSFT $4-5B FB $2-3B EBAY $1B YHOO $0.4B TOTAL TOP 6 $25-25B Source: Deutsche Bank Data Networking Research Report 5/18/2015 14
Slide 15: NA Cloud vs NA Carrier CAPEX
Brian&Marshall&& NA Cloud vs NA Carrier CAPEX Top&N.A.&Carrier&CapEx&vs.&the&“Big&6”&Web&2.0&($mil)& bmarshall@isigrp.com/|/(415)/80080184/ $90,000/ $80,000/ $70,000/ $60,000/ ISI&estimates the&"Big&6"&Web&2.0&aggregate&Capex&will&be greater&than&the&Top&N/A&carrier&budgets&within&~5&years& $50,000/
Slide 16: Cloud Server Shipments
Cloud Server Shipments 100% Enterprise/ On-Premise 75% Percent of Units (%) 50% 25% Cloud 0% 08 09 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 Source: Dell'Oro Group Server Forecast, January 2015 16
Slide 17: Datacenter Switch Revenue
Datacenter Switch Revenue $16 Data Center Ethernet Switch Revenue Data Center Ethernet Switch Revenue Top 7 Cloud Providers Revenue in $ Billions Rest of Cloud and Telco SPs Enterprise and SMB $0 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 Source: Dell'Oro Group Ethernet Switch Forec
Slide 18: The Cloud Networking Opportunity
The Cloud Networking Opportunity Server Shipments Data Center Ethernet Switch Revenue 100% $16 Top 7 Cloud Providers Enterprise/ Premises 75% Revenue in $ Billions Percent of Units (%) Rest of Cloud and Telco SPs 50% 25% Cloud Enterprise and SMB 0% $0 10 11 12 13 14 15 16 17 18 19 08 09 10 11 12 13
Slide 19: Datacenter Switch Revenue by Speed
Datacenter Switch Revenue by Speed 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. We count all port
Slide 20: 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 Q4’2014 20
Slide 21: Gartner Magic Quadrant 2015
Gartner Magic Quadrant 2015 Data Center Networking CHALLENGERS LEADERS "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 NICHE PLAYERS VISIONARIES Source: Gartner May 2015 21
Slide 22: Arista Switching Portfolio
Arista Switching Portfolio Arista 7300 Family Arista 7500 Family Spline TM / Spine Arista 7050 Family Arista 7150/7280 Family Leaf Volume Value Single-Image Arista EOS across all platforms
Slide 23: EOS: the Industry's Most Advanced Network Operating System
EOS: the Industry’s Most Advanced Network Operating System CLI VXLAN SNMP VM Tracer SDN BGP APIs SysDB ASIC LAG Driver STP OSPF Unmodified Linux Shared State Modular / Resilient Merchant Silicon Cloud Scale Open and Availability Visibility Automation Architecture Programmable Accelerates Time to Ser
Slide 24: Arista's EOS Software Architecture
Arista’s EOS 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 Custom L
Slide 25: Proprietary vs Arista Open Cloud
Proprietary vs Arista Open Cloud Legacy Fabric Architecture Arista - Open Cloud Architecture Proprietary Open Interface Standard Proprietary Leaf-Spine Lock-in Standards Based Interfaces Forklift Hardware Upgrade Forwards and Backwards Compatible
Slide 26: Arista's Ecosystem: Open + Programmable
Arista’s Ecosystem: Open + 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 27: Arista Key Software Differentiators
Arista Key Software Differentiators d Cl k o ioa n n Ar ou o izal r t i o c d t ar w lk a t hite Sc Ne iro tu W V o m c t al e t u Au re nd le A b v a encling Op ramm a Big alysis e EOS An a Re f hea i -Da lab n sili e g Sel o ta i r l P i t Feature y Programmable Velocity & Open 27
Slide 28: Broad Customer Adoption
Broad Customer Adoption End Customers (Cumulative) 4000 3000+ 3000 2300+ 2000 1600+ 1000+ 1000 500+ 0 FY10 FY11 FY12 FY13 FY14 28
Slide 29: Pace of Cloud Networking Adoption
Pace of Cloud Networking Adoption Large Financial Services 550+ Customers Web1 115+ Customers Service Provider / High Tech Cloud Spend Cloud / Hosting 380+ Customers Government Media & 340+ Customers 160+ Entertainment 195+ Oil & Gas 30+ Education Business 220+ Services 225+ Research Labs 75+ Health
Slide 30: 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 3
Slide 31: Proven Land-and-Expand Model
Proven Land-and-Expand Model Initial Sale Additional Purchases Did Not Purchase 31
Slide 32: Arista Revenue Growth
Arista Revenue Growth Annual Revenue Quarterly Revenue $MM $MM $584 $179 $173 $155 $361 $138 $117 $193 $140 $72 FY10 FY11 FY12 FY13 FY14 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Notes 1.Quarterly numbers may not add up to Annual numbers due to rounding 32
Slide 33: Experienced Leadership Team
Experienced Leadership Team Executive Team Andy Bechtolsheim Kenneth Duda Jayshree Ullal President Founder, Chief Development Officer Founder, Chief Technology and CEO and Chairman Officer and SVP, Software Engineering Ita Brennan Mark Foss Anshul Sadana Mark Smith Chief Financial Officer SVP, Inter
Slide 34: Arista Networks Summary
Arista Networks Summary • Strong revenue and market share growth • Visibility from deep customer engagement • 3000+ customers across key verticals • Proven “land and expand” model • Sustainable technology differentiation • High feature velocity with EOS software • Experienced management team 34
Slide 35: Q1'15 Non-GAAP Income Statement ($M)
Q1’15 Non-GAAP Income Statement ($M) Q1’14 Q1’15 YoY Change % Revenue $117.2 $179.0 53% Product $106.5 $160.1 50% Service $10.7 $18.9 76% Gross Margin 69.6% 66.1% - Operating Income $26.8 $51.3 92% Operating Income (%) 22.8% 28.6% - Net Income $16.4 $35.5 117% EPS (Diluted) $0.25 $0.50 100% 35
Slide 36: Q1'15 Key Financial Measures ($M)
Q1’15 Key Financial Measures ($M) Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Cash & Equivalents $129.5 $397.2 $408.6 $240.0 $275.2 Marketable Securities $0.0 $0.0 $0.0 $209.4 $209.2 Operating Cash Flow $17.7 $46.3 $34.8 $33.2 $20.8 Accounts Receivables $63.0 $67.9 $84.1 $97.0 $113.1 Days Sales Outstanding 48 45
Slide 37: Appendix: GAAP to Non-GAAP Reconciliation
Appendix: GAAP to Non-GAAP Reconciliation In 000's except per share data Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 GAAP gross profit $ 53,901 $ 65,036 $ 77,473 $ 81,314 $ 93,380 $ 100,957 $ 116,440 $ 117,754 GAAP gross margin 64.6% 64.0% 67.5% 69.4% 67.7% 64.9% 67.1% 65.8% Stock compensation 8