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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Arista Networks | NYSE:ANET | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
4.99 | 1.96% | 260.20 | 262.06 | 253.7025 | 258.27 | 1,397,746 | 00:59:54 |
Cloud Networking Pace Drives Stellar Revenue and Record EPS
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 fourth quarter and year ended December 31, 2016.
Fourth Quarter Financial Highlights
"2016 was indeed a historic year for Arista, as we exceeded one billion dollars in annual sales within two years of becoming a public company,” stated Jayshree Ullal, Arista President and CEO. “Our customers are adopting cloud networking at an unprecedented pace.”
Full Year Financial Highlights
Commenting on the company's financial results for the quarter, Ita Brennan, Arista’s CFO, said, “We are pleased with our outstanding financial performance in the fourth quarter, reflecting strong customer demand and consistent execution.”
Fourth Quarter Company Highlights
2016 Company Highlights
Financial Outlook
For the first quarter of 2017, we expect:
Guidance for non-GAAP financial measures excludes legal expenses of approximately $12 million 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 (see further explanation below).
Prepared Materials and Conference Call Information
Arista executives will discuss fourth quarter and fiscal 2016 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 49206884.
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 first quarter of fiscal 2017, statements regarding the adoption of cloud networking by our customers at an unprecedented pace, and statements regarding the benefits from the introduction of Arista AlgoMatch™ and the Arista 7160 Series platforms. 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 risks associated with: Arista Networks’ limited operating history; risks associated with Arista Networks’ rapid growth; Arista Networks’ customer concentration; Arista Networks’ dispute with Cisco Systems, Inc. including Arista Networks’ ability to obtain a determination that alternative product implementations are not covered by remedial orders and our ability to manage our manufacturing and supply chain including the sourcing of components on commercially reasonable terms, if at all; risks associated with our customer’s adoption of our redesigned products and services and requests for more favorable terms and conditions; 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 evolution of the cloud networking market and the adoption by end customers of Arista Networks’ cloud networking solutions; Arista’s dispute with OptumSoft; and general market, political, economic and business conditions. Additional risks and uncertainties that could affect Arista Networks can be found in Arista’s Quarterly Reporting on Form 10-Q filed with the SEC on November 3, 2016, 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 certain non-GAAP financial measures that exclude stock-based compensation expense, expenses associated with the OptumSoft and Cisco litigation, and other non-recurring charges. 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. In addition, these measures are the primary indicators management uses as a basis for its planning and forecasting for future periods.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP net income, net income per diluted share, gross margin, or operating margin. Non-GAAP financial measures are subject to limitations, and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A description of these non-GAAP financial measures and 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.
The Company’s guidance for non-GAAP financial measures excludes stock-based compensation, expenses associated with the OptumSoft and Cisco litigation, and other non-recurring charges. The Company has not reconciled its non-GAAP gross margin or its non-GAAP operating margin guidance to GAAP gross margin or GAAP operating margin, because we do not provide guidance on GAAP gross margin or GAAP operating margin or the various reconciling cash and non-cash items between GAAP gross margin and GAAP operating margin and non-GAAP gross margin and non-GAAP operating margin. Stock-based compensation expense is impacted by the Company’s future hiring and retention needs, as well as the future fair market value of the Company’s common stock, all of which is difficult to predict and subject to constant change. The actual amount of stock-based compensation in the fiscal first quarter of 2017 will have a significant impact on the Company’s GAAP gross margin and GAAP operating margin. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
About Arista Networks
Arista Networks was founded to pioneer and deliver software-driven cloud networking solutions for large datacenter storage and computing environments. Arista’s award-winning platforms, ranging in Ethernet speeds from 10 to 100 gigabits per second, redefine scalability, agility and resilience. Arista has shipped more than ten million cloud networking ports worldwide with CloudVision and EOS, an advanced network operating system. Committed to open standards, Arista is a founding member of the 25/50GbE consortium. Arista Networks products are available worldwide directly and through partners.
ARISTA, EOS, CloudVision, and AlgoMatch 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.
Consolidated Statements of Income
(Unaudited in thousands, except per share amounts)
Three Months Ended December 31, Year Ended December 31, 2016 2015 2016 2015 Revenue: Product $ 289,008 $ 217,325 $ 991,337 $ 744,877 Service 38,961 28,121 137,830 92,714 Total revenue 327,969 245,446 1,129,167 837,591 Cost of revenue: Product 108,057 81,142 369,768 263,585 Service 9,757 8,136 36,283 30,446 Total cost of revenue 117,814 89,278 406,051 294,031 Gross profit 210,155 156,168 723,116 543,560 Operating expenses: Research and development 71,398 57,413 273,581 209,448 Sales and marketing 38,321 31,308 130,887 109,084 General and administrative 22,941 18,050 75,239 75,720 Total operating expenses 132,660 106,771 479,707 394,252 Income from operations 77,495 49,397 243,409 149,308 Other income (expense), net: Interest expense (918 ) (746 ) (3,136 ) (3,152 ) Other income (expense), net 560 (109 ) 1,952 (147 ) Total other income (expense), net (358 ) (855 ) (1,184 ) (3,299 ) Income before provision for income taxes 77,137 48,542 242,225 146,009 Provision for income taxes 18,354 4,618 58,036 24,907 Net income $ 58,783 $ 43,924 $ 184,189 $ 121,102 Net income attributable to common stockholders: Basic $ 58,527 $ 43,431 $ 182,965 $ 119,115 Diluted $ 58,542 $ 43,464 $ 183,039 $ 119,264 Net income per share attributable to common stockholders: Basic $ 0.84 $ 0.65 $ 2.66 $ 1.81 Diluted $ 0.79 $ 0.60 $ 2.50 $ 1.67 Weighted-average shares used in computing net income per share attributable to common stockholders: Basic 69,980 67,111 68,771 65,964 Diluted 74,384 72,062 73,222 71,411ARISTA NETWORKS, INC.
Reconciliation of Selected GAAP to Non-GAAP Financial Measures
(Unaudited in thousands, except percentages and per share amounts)
Three Months Ended December 31, Year Ended December 31, 2016 2015 2016 2015 GAAP gross profit $ 210,155 $ 156,168 $ 723,116 $ 543,560 GAAP gross margin 64.1 % 63.6 % 64.0 % 64.9 % Stock-based compensation expense 1,004 842 3,620 3,048 Non-GAAP gross profit $ 211,159 $ 157,010 $ 726,736 $ 546,608 Non-GAAP gross margin 64.4 % 64.0 % 64.4 % 65.3 % GAAP income from operations $ 77,495 $ 49,397 $ 243,409 $ 149,308 Stock-based compensation expense 16,324 12,978 59,032 45,303 Litigation expense 12,209 8,956 35,833 41,424 Non-GAAP income from operations $ 106,028 $ 71,331 $ 338,274 $ 236,035 Non-GAAP operating margin 32.3 % 29.1 % 30.0 % 28.2 % GAAP net income $ 58,783 $ 43,924 $ 184,189 $ 121,102 Stock-based compensation expense 16,324 12,978 59,032 45,303 Litigation expense 12,209 8,956 35,833 41,424 Release of income tax reserve — (968 ) (6,293 ) (7,344 ) Income tax effect on non-GAAP exclusions (9,836 ) (7,424 ) (31,340 ) (26,292 ) Non-GAAP net income $ 77,480 $ 57,466 $ 241,421 $ 174,193 Weighted average shares used in computing GAAP diluted income per share attributable to common stockholders 74,384 72,062 73,222 71,411 GAAP diluted net income per share attributable to common stockholders $ 0.79 $ 0.60 $ 2.50 $ 1.67 Net income attributable to participating securities — 0.01 0.02 0.03 Non-GAAP adjustments to net income 0.25 0.19 0.78 0.74 Non-GAAP diluted net income per share $ 1.04 $ 0.80 $ 3.30 $ 2.44 Summary of Stock-Based Compensation Expense Cost of revenue $ 1,004 $ 842 $ 3,620 $ 3,048 Research and development 8,830 7,171 31,892 25,515 Sales and marketing 4,292 3,316 15,666 11,454 General and administrative 2,198 1,649 7,854 5,286 Total $ 16,324 $ 12,978 $ 59,032 $ 45,303ARISTA NETWORKS, INC.
Consolidated Balance Sheets
(Unaudited in thousands)
December 31, 2016 2015 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 567,923 $ 687,326 Marketable securities 299,910 — Accounts receivable 253,119 144,263 Inventories 236,490 92,129 Prepaid expenses and other current assets 168,684 50,610 Total current assets 1,526,126 974,328 Property and equipment, net 76,961 79,706 Investments 36,136 36,636 Deferred tax assets 70,960 48,429 Other assets 18,824 20,791 TOTAL ASSETS $ 1,729,007 $ 1,159,890 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 79,457 $ 43,966 Accrued liabilities 90,951 60,971 Deferred revenue 273,350 122,049 Other current liabilities 15,795 8,025 Total current liabilities 459,553 235,011 Income taxes payable 14,498 14,060 Lease financing obligations, non-current 39,593 41,210 Deferred revenue, non-current 99,585 74,759 Other long-term liabilities 7,958 6,698 TOTAL LIABILITIES 621,187 371,738 Commitments and contingencies STOCKHOLDERS’ EQUITY: Common stock 7 7 Additional paid-in capital 674,183 537,904 Retained earnings 435,105 250,916 Accumulated other comprehensive loss (1,475 ) (675 ) TOTAL STOCKHOLDERS’ EQUITY 1,107,820 788,152 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,729,007 $ 1,159,890ARISTA NETWORKS, INC.
Consolidated Statements of Cash Flows
(Unaudited in thousands)
Year Ended December 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 184,189 $ 121,102 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,749 13,671 Stock-based compensation 59,032 45,303 Deferred income taxes (21,720 ) (24,409 ) Excess tax benefit on stock based-compensation (42,855 ) (37,251 ) Amortization of investment premiums 1,493 1,471 Changes in operating assets and liabilities: Accounts receivable (108,856 ) (47,281 ) Inventories (144,361 ) (14,123 ) Prepaid expenses and other current assets (115,074 ) (7,827 ) Other assets 2,866 (3,087 ) Accounts payable 38,678 9,037 Accrued liabilities 30,629 20,398 Deferred revenue 176,126 90,340 Income taxes payable 42,650 32,018 Other liabilities 8,894 1,171 Net cash provided by operating activities 131,440 200,533 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from marketable securities 137,855 208,200 Purchases of marketable securities (439,711 ) — Purchases of property and equipment (21,419 ) (19,989 ) Other investing activities (2,500 ) — Change in restricted cash (204 ) (4,041 ) Net cash provided by (used) in investing activities (325,979 ) 184,170 CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of lease financing obligations (1,336 ) (1,086 ) Proceeds from issuance of common stock upon exercising options, net of repurchases 24,855 17,835 Minimum tax withholding paid on behalf of employees for net share settlement (1,100 ) — Proceeds from issuance of common stock, employee stock purchase plan 10,326 9,366 Excess tax benefit on stock-based compensation 42,855 37,251 Issuance costs from initial public offering — (261 ) Net cash provided by financing activities 75,600 63,105 Effect of exchange rate changes (464 ) (513 ) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (119,403 ) 447,295 CASH AND CASH EQUIVALENTS—Beginning of year 687,326 240,031 CASH AND CASH EQUIVALENTS—End of year $ 567,923 $ 687,326
View source version on businesswire.com: http://www.businesswire.com/news/home/20170216006185/en/
Arista Networks, Inc.Investor Contact:Chuck Elliott, 408-547-5549Business and Investor Developmentelliott@arista.comorCharles Yager, 408-547-5892Product and Investor Advocacycyager@arista.com
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