Arista Networks, Inc. · NYSE:ANET
Arista Networks — Q3 2015 Earnings Presentation
28 slides from Arista Networks's earnings presentation, Nov 5, 2015
Slide 1: Q3'2015 Highlights
Q3’2015 Highlights! November 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 $12 100% Percent of Server Shipments Enterprises Top 7 Cloud Revenue in $ Billions Providers Rest of Cloud and all Service Providers 50% Rest of Market (Enterprise and SMB) Cloud and SP 0% $0 Source: Dell’Oro
Slide 5: Growth of Cloud Providers
ARISTA Growth of Cloud Providers Cloud Infrastructure Services (laaS, PaaS, Private & Hybrid services Big Four: Amazon AWS Microsoft IBM Q2 2015 Big Four Q2 2014 Big Four Q2 2013 0 1,000 2,000 3,000 Quarterly Revenues ($m) Source: Synergy Research Group
Slide 6: 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. 6
Slide 7: Market Potential by Speed
Market Potential by Speed Data Center Revenue ($Bn) $12 Software Revenue in $ Billions 100 GE 40 GE 10 GE 25/50 GE 1 GE $0 *During the next several years, almost all 25/50GE servers ports are expected to connect to 100 GE switch ports. 7
Slide 8: 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 8
Slide 9: Arista Platform Delivers Software Driven Cloud Networking
Arista Platform Delivers Software Driven Cloud Networking Extensible Operating System (EOS) Cloud Purposed Operating System CLI VXLAN VM SNMP Tracer + SDN BGP SysDB APIs ASIC 1101010 LAG Driver 0101110 STP OSPF Unmodified Open/ Linux Shared State Modular/Resilient Programmable High Performance, Merc
Slide 10: 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 11: Arista Key Differentiators of Software Driven Cloud Networks
Arista Key Differentiators of Software Driven Cloud Networks EOS Programmable & Open 11
Slide 12: Arista Portfolio
Arista Portfolio 7300X & 7320X Series 7500E Series Spline/Spine 7050X & 7060X Series 7150 & 7280 Series Leaf Volume Value Single-Image Arista EOS Across All Platforms 12
Slide 13: Arista CloudVision: Platform for Automation and Visibility
Arista CloudVision: Platform for Automation and Visibility ü P r o v i s i o n i n g ! ü C o m p l i a n c e ! ü C h a n g e M a n a g e m e n t ! ü P / V I n t e g r a t i o n ! Cloud Overlay Network Cloud Orchestrators Controllers Security Services • EOS Network Wide Services • Single network
Slide 14: Security in a Physical and Virtual World
Security in a Physical and Virtual World Traditional Perimeter North/South only Universal Cloud Network Macro-Segmentation L3 + ECMP + VXLAN Physical to Physical Physical to Virtual East/West Non virtualized Storage Bare Metal Micro-segmentation APP APP APP APP APP Servers Arrays OS OS OS OS OS VM t
Slide 15: Arista Macro-Segmentation
Arista Macro-Segmentation Cloud Overlay Network Cloud • Dynamic! Orchestrators Controllers Security Services Insert security between any data center physical and virtual workload Automatic & seamless service insertion Follows host and application throughout the network Network State-sync • Open! Spi
Slide 16: 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 | Automati
Slide 17: NSX Integration – Arista
NSX Integration – Arista Brocade Cumulus/ Juniper/ Integration with NSX Platform Arista /Legacy Linux Contrail Hardware VTEP ✓ ✓ ✓ ✓ VTEP High Availability ✓ ✗ ✓ ✓ Single Point of Integration ✓ ✗ ✗ ✓ Logical & Physical Correlation & Visibility ✗ ✗ ✗ ✓ Selective VNI monitoring ✗ ✗ ✗ ✓ Event Correlati
Slide 18: 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! 18
Slide 19: Pace of Cloud Networking Adoption
Pace of Cloud Networking Adoption Large Financial Services Web1 590+ Customers 125+ Customers Service Provider / High Tech Cloud Spend Cloud / Hosting 430+ Customers Government Media & 170+ 375+ Customers Entertainment 225+ Oil & Gas 35+ Education Business 250+ Services 245+ Research Labs 80+ Health
Slide 20: 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 – Billings Begin data center / core 12-24 Months Proof of Concept – likely 1-2 applications 7-12 Months Sales Cycle 0-6 Months Time 20
Slide 21: Proven Land-and-Expand Model
Proven Land-and-Expand Model Top 25 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Customers 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 • EOS software
Slide 22: Arista in Q3'15
Arista in Q3’15 Key Highlights Financial Results (non-GAAP)1 Introduced new 25/50/100GbE Leaf Q3’15 Revenue: $217.5M Switches; 7060X, 7260X, 7320X CloudVision Macro-Segmentation Q3’14-Q3’15 YOY Revenue Growth: 40% Services (MSS) with security leaders Sustainable EOS software advantage Q3’15 Gross Ma
Slide 23: Strong Revenue Growth
Strong Revenue Growth Annual Revenue Quarterly Revenue $M $M $218 2010-2014 $584 CAGR: 68.9% $196 $179 $173 $155 $361 $193 $140 $72 FY10 FY11 FY12 FY13 FY14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 23
Slide 24: Financial Highlights
Financial Highlights1 $250 Revenue Gross Margin Millions 80% $200 70% 67.6% 69.6% 67.9% 67.4% 66.1% 65.8% 65.5% 64.1% 65.2% 60% $150 50% 40% $100 30% $50 20% 10% 102 115 117 138 155 173 179 196 218 $0 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Slide 25: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet $600 Cash, Cash Eq. & Marketable Securities AR and DSO Millions Millions $180 80 AR $500 DSO (R) 68 $160 70 $140 57 57 $400 60 50 51 $120 50 $300 $100 40 $80 $200 30 $60 20 $40 $100 $20 10 409 449 484 552 569 84 97 113 122 160 $0 $0 0 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q3'14 Q
Slide 26: Arista vs. Select Peers – GAAP
Arista vs. Select Peers – GAAP (In 000s except per share data) Q4’14 Q1’15 Q2’15 Q3’15 Q/E Oct 2014 Q/E Jan 2015 Q/E Apr 2015 Q/E Jul 2015 Revenue 173,489 179,045 195,552 217,548 192,346 217,655 234,172 283,879 qoq% 11.6% 3.2% 9.2% 11.2% 7.9% 13.2% 7.6% 21.2% yoy% 51.2% 52.8% 41.8% 39.9% 50.1% 54.3%
Slide 27: 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 27
Slide 28: 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 Q3'15 GAAP gross profit $ 65,036 $ 77,473 $ 81,314 $ 93,380 $ 100,957 $ 116,440 $ 117,754 $ 127,890 $ 141,748 GAAP gross margin 64.0% 67.5% 69.4% 67.7% 64.9% 67.1% 65.8% 65.4% 65.