10-QPeriod: Q3 FY2014

Arista Networks, Inc. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 7, 2014For Securities:ANET

Summary

Arista Networks, Inc. (ANET) filed its quarterly report for the period ending September 29, 2014. As an "emerging growth company" under the JOBS Act, Arista is taking advantage of certain regulatory exemptions, including reduced executive compensation disclosures and auditor attestation requirements. The company has opted out of the extended transition period for new accounting standards, committing to adopt them on the standard schedule. Investors should be aware of potential risks. The company's stock price and trading volume could be negatively impacted by inaccurate or unfavorable analyst reports. Furthermore, Arista's charter documents and Delaware law contain provisions that could deter takeover attempts and entrench management, such as a classified board and restrictions on stockholder actions. The potential issuance of additional stock in future financings or acquisitions could also dilute existing stockholders' ownership.

Financial Highlights

48 data points
Beta

Revenue

$155.46M

64.9% Gross Margin

Net Income

$21.87M

14.1% Net Margin

EPS (Diluted)

$0.02

Total Assets

$691.88M

Cash & Equivalents

$408.60M

Free Cash Flow

$32.55M

Financial Statements
Beta
Revenue$155.46M
Cost of Revenue$54.51M
Gross Profit$100.96M
R&D Expenses$36.23M
Operating Expenses$67.08M
Operating Income$33.87M
Net Income$21.87M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)998.43M
Shares Outstanding (Diluted)1.12B

Key Highlights

  • 1Arista Networks is an "emerging growth company" utilizing JOBS Act exemptions, implying potentially less stringent reporting requirements for now.
  • 2The company has chosen to comply with new accounting standards on the standard schedule, rather than taking advantage of extended transition periods.
  • 3Potential negative impact on stock price and trading volume from inaccurate or unfavorable analyst research reports is a noted risk.
  • 4Arista's corporate structure includes provisions designed to deter hostile takeovers and entrench current management, which could limit shareholder influence.
  • 5The company disclosed a potential contingent liability related to possible violations of the Securities Act of 1933 concerning communications made for a terminated directed share program during its IPO.
  • 6Arista completed its IPO on June 6, 2014, raising approximately $259.6 million in gross proceeds, with net proceeds of $238.9 million after expenses.
  • 7There have been no unregistered sales of equity securities since the IPO.

Frequently Asked Questions

Arista Networks is currently classified as an "emerging growth company" under the JOBS Act. This allows them to take advantage of certain exemptions from regulatory requirements applicable to larger public companies, such as reduced disclosure obligations for executive compensation and exemptions from certain auditor attestation requirements.

By opting out of the extended transition period for new or revised accounting standards, Arista Networks has committed to adopting these standards on the same schedule as non-emerging growth companies. This means investors can expect the company's financial statements to reflect the latest accounting principles in a timely manner, without delay.

Arista Networks has disclosed a potential contingent liability arising from communications made to potential participants in a directed share program for their IPO, which was later terminated. There's a possibility these communications may have violated Section 5 of the Securities Act of 1933. If a violation is found, the company could be required to repurchase shares from affected participants at the original price plus interest, and could face an SEC enforcement action.

Arista Networks' charter documents and Delaware law include provisions such as a classified board of directors, the ability for the board to issue preferred stock without stockholder approval, and restrictions on stockholder actions by written consent. These measures are designed to make the company more resistant to takeover attempts and could potentially entrench management, which may limit the ability of shareholders to effect changes or influence corporate control.