8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):August 6, 2015

ARISTA NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36468	20-1751121
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification Number)

5453 Great America Parkway

Santa Clara, CA 95054

(Address of principal executive offices)

(408) 547-5500

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 Results of Operations and Financial Condition

On August 6, 2015, Arista Networks, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2015. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

This information and Exhibit 99.1 are intended to be furnished under Item 2.02, “Results of Operations and Financial Condition,” and Item 9.01, “Financial Statements and Exhibits,” of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01Financial Statements and Exhibits

(d)    Exhibits

Exhibit No.	Description
99.1	Press release issued by Arista Networks, Inc. dated August 6, 2015

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARISTA NETWORKS, INC.
August 6, 2015	By: /s/ Ita Brennan
	Ita Brennan
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued by Arista Networks, Inc. dated August 6, 2015

EX-99.1

Exhibit 99.1

Arista Networks, Inc. Reports Second Quarter 2015 Financial Results

Cloud Networking Adoption Drives Record Revenue and non-GAAP Net Income

SANTA CLARA, Calif., August 6, 2015 - 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 second quarter ended June 30, 2015.

Second Quarter Financial Highlights

• Revenue of $195.6 million, an increase of 41.8% compared to the second quarter of 2014, and an increase of 9.2% from the first quarter of 2015.

• Non-GAAP gross margin of 65.8%, compared to non-GAAP gross margin of 67.9% in the second quarter of 2014 and 66.1% in the first quarter of 2015.

• GAAP gross margin of 65.4%, compared to GAAP gross margin of 67.7% in the second quarter of 2014 and 65.8% in the first quarter of 2015.

• Non-GAAP net income of $38.8 million, or $0.54 per diluted share, compared to non-GAAP net income of $23.7 million, or $0.35 per diluted share, in the second quarter of 2014.

• GAAP net income of $24.0 million, or $0.33 per diluted share, compared to GAAP net income of $21.6 million, or $0.34 per diluted share, in the second quarter of 2014.

• Operating cash flow of $52.6 million, compared to $46.3 million of operating cash flow in the second quarter of 2014.

"Arista has now shipped a cumulative five million cloud networking ports worldwide,” stated Jayshree Ullal, Arista President and CEO. “I am pleased with this important milestone for the company combined with our continued Q2 2015 customer momentum and solid profitable growth."

Commenting on the company's financial results, Ita Brennan, Arista’s CFO, said, "We continued to execute well in Q2 2015, achieving record revenue with strong growth from our cloud and service provider customers, while increasing non-GAAP diluted earnings per share by more than 50% year-over-year.”

Company Highlights

• Announced CloudVision^®, a network-wide approach for workload orchestration and workflow automation delivering a turnkey solution for cloud networking. This enables enterprises to more easily realize the benefits of cloud-class automation.

• Partnership with HP for a converged cloud networking solution; delivering a path to cloud economics and agility, via the integration of the Arista Extensible Operating System (EOS^®) based 7000 series, with HP OneView.

• CloudVision was endorsed by many leading partners including VMware, Microsoft, Dell, F5, HP, Infinera, Nuage, Palo Alto Networks, Rackspace and Supermicro, Inc.

Financial Outlook

For the third quarter of 2015, we expect:

• Revenue between $208 and $212 million.

• Non-GAAP gross margin in the range of 63% to 65%, and

• Non-GAAP operating margin of approximately 25%.

Guidance for non-GAAP financial measures excludes legal expenses 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.

Prepared Materials and Conference Call Information

Arista executives will discuss second quarter 2015 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 79004789.

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 third quarter of FY 2015. 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: Arista Networks’ limited operating history; risks associated with Arista Networks’ rapid growth; Arista Networks’ customer concentration; requests for more favorable terms and conditions from our large end customers; 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 dispute with Cisco Systems, Inc. and OptumSoft, Inc.; the evolution of the cloud networking market and the adoption by end customers of Arista Networks’ cloud networking solutions; and general market, political, economic and business conditions. Additional risks and uncertainties that could affect Arista Networks can be found in Arista’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2015, 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 expenses, 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.

About Arista Networks

Arista Networks was founded to deliver software-driven cloud networking solutions for large data center and computing environments. Arista’s award-winning 10/40/100 GbE switches redefine scalability, robustness, and price-performance. At the core of Arista’s platform is EOS, an advanced network operating system. Arista Networks products are available worldwide through distribution partners, systems integrators and resellers.

ARISTA, EOS, CloudVision and Spline 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.

Media Contact Amanda Jaramillo Corporate Communications (408) 547-5798 amanda@arista.com Investor Contact Chuck Elliott Product and Investor Advocacy (408) 547-5549 chuck@arista.com

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Income

(Unaudited in thousands, except per share amounts)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2015			2014			2015			2014
Revenue:
Product	$	174,072		$	126,390		$	334,213		$	232,883
Service	21,480			11,557			40,384			22,271
Total revenue	195,552			137,947			374,597			255,154
Cost of revenue:
Product	60,014			40,032			114,453			73,059
Service	7,648			4,535			14,500			7,401
Total cost of revenue	67,662			44,567			128,953			80,460
Total gross profit	127,890			93,380			245,644			174,694
Operating expenses:
Research and development	49,947			34,888			93,287			68,334
Sales and marketing	26,681			20,711			51,268			39,366
General and administrative	18,403			7,126			32,475			14,357
Total operating expenses	95,031			62,725			177,030			122,057
Income from operations	32,859			30,655			68,614			52,637
Other income (expense), net:
Interest expense—related party	—			(350		)	—			(782		)
Interest expense	(832		)	(1,854		)	(1,653		)	(3,965		)
Other income (expense), net	417			3,241			(51		)	3,249
Total other income (expense), net	(415		)	1,037			(1,704		)	(1,498		)
Income before provision for income taxes	32,444			31,692			66,910			51,139
Provision for income taxes	8,448			10,074			18,422			17,192
Net income	$	23,996		$	21,618		$	48,488		$	33,947
Net income attributable to common stockholders:
Basic	$	23,607		$	14,212		$	47,594		$	19,985
Diluted	$	23,638		$	14,851		$	47,667		$	21,121
Net income per share attributable to common stockholders:
Basic	$	0.36		$	0.37		$	0.73		$	0.59
Diluted	$	0.33		$	0.34		$	0.67		$	0.54
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic	65,524			38,491			65,018			33,834
Diluted	71,215			44,057			70,919			38,962

ARISTA NETWORKS, INC.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(Unaudited in thousands, except percentages and per share amounts)

	Three Months Ended   June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
GAAP gross profit	$	127,890		$	93,380		$	245,644		$	174,694
GAAP gross margin	65.4		%	67.7		%	65.6		%	68.5		%
Stock-based compensation expense	784			301			1,420			512
Non-GAAP gross profit	$	128,674		$	93,681		$	247,064		$	175,206
Non-GAAP gross margin	65.8		%	67.9		%	66.0		%	68.7		%
GAAP income from operations	$	32,859		$	30,655		$	68,614		$	52,637
Stock-based compensation expense	11,208			6,705			20,047			11,487
Litigation expense	9,909			—			16,579			—
Non-GAAP income from operations	$	53,976		$	37,360		$	105,240		$	64,124
Non-GAAP operating margin	27.6		%	27.1		%	28.1		%	25.1		%
GAAP net income	$	23,996		$	21,618		$	48,488		$	33,947
Stock-based compensation expense	11,208			6,705			20,047			11,487
Litigation expense	9,909			—			16,579			—
Unrealized gain on note receivable	—			(4,000		)	—			(4,000		)
Income tax effect on non-GAAP exclusions	(6,335		)	(600		)	(10,804		)	(1,305		)
Non-GAAP net income	$	38,778		$	23,723		$	74,310		$	40,129
Weighted average shares used in computing GAAP diluted income per share attributable to common stockholders	71,215			44,057			70,919			38,962
Additional weighted average dilutive shares1	—			23,413			—			27,823
Non-GAAP weighted average diluted shares	71,215			67,470			70,919			66,785
GAAP diluted net income per share attributable to common stockholders	$	0.33		$	0.34		$	0.67		$	0.54
Net income attributable to participating securities	—			0.15			0.01			0.33
Non-GAAP adjustments to net income	0.21			0.05			0.37			0.16
Non-GAAP adjustments to diluted shares	—			(0.19		)	—			(0.43		)
Non-GAAP diluted net income per share	$	0.54		$	0.35		$	1.05		$	0.60
Summary of Stock-Based Compensation Expense
Cost of revenue	$	784		$	301		$	1,420		$	512
Research and development	6,379			3,527			11,307			5,994
Sales and marketing	2,865			1,931			5,274			3,359
General and administrative	1,180			946			2,046			1,622
Total	$	11,208		$	6,705		$	20,047		$	11,487

______________________________

¹Includes weighted average shares from the issuance of shares upon our IPO and the assumed conversion of preferred stock and notes payable at the beginning of the quarter.

ARISTA NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited in thousands)

	June 30, 2015		December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	342,958	$	240,031
Marketable securities	208,805		209,426
Accounts receivable, net	122,342		96,982
Inventories	100,304		78,006
Deferred tax assets	12,268		12,252
Prepaid expenses and other current assets	63,535		42,782
Total current assets	850,212		679,479
Property and equipment, net	73,178		71,558
Investments	36,636		36,636
Deferred tax assets	13,760		11,510
Other assets	17,053		11,840
TOTAL ASSETS	$	990,839	$	811,023
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	43,831	$	32,428
Accrued liabilities	43,347		40,369
Deferred revenue	107,245		60,327
Other current liabilities	8,075		11,249
Total current liabilities	202,498		144,373
Income taxes payable	17,850		17,323
Lease financing obligations, non-current	41,912		42,547
Deferred revenue, non-current	57,198		46,141
Other long-term liabilities	5,839		4,981
TOTAL LIABILITIES	325,297		255,365
STOCKHOLDERS’ EQUITY:
Preferred stock	—		—
Common stock	7		7
Additional paid-in capital	487,376		426,171
Retained earnings	178,302		129,814
Accumulated other comprehensive loss	(143)		(334		)
TOTAL STOCKHOLDERS’ EQUITY	665,542		555,658
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	990,839	$	811,023

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited in thousands)

	Six Months Ended   June 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	48,488		$	33,947
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,246			4,713
Stock-based compensation	20,047			11,487
Deferred income taxes	(2,266		)	703
Provision for bad debts	481			374
Excess tax benefit on stock based-compensation	(22,975		)	(459		)
Amortization of investment premiums	883			—
Unrealized gain on notes receivable	—			(4,000		)
Amortization of debt discount	—			527
Write-off of debt discount on notes payable	—			680
Changes in operating assets and liabilities:
Accounts receivable	(25,841		)	9,678
Inventories	(22,297		)	2,291
Prepaid expenses and other current assets	(20,747		)	(5,621		)
Other assets	(3,257		)	(596		)
Accounts payable	11,822			4,789
Accrued liabilities	3,082			626
Deferred revenue	57,975			2,779
Income taxes payable	21,846			372
Other liabilities	(114		)	2,616
Interest payable	—			(1,630		)
Interest payable—related party	—			670
Net cash provided by operating activities	73,373			63,946
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(8,768		)	(8,579		)
Change in restricted cash	—			4,040
Purchases of intangible assets	(705		)	—
Net cash used in investing activities	(9,473		)	(4,539		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of lease financing obligations	(514		)	(335		)
Payments—deferred offering costs	(261		)	—
Proceeds from issuance of common stock upon exercising options, net of repurchases	11,991			2,078
Proceeds from issuance of common stock under employee stock purchase plan	4,856			—
Excess tax benefit on stock-based compensation	22,975			459
Proceeds from initial public offering, net of issuance cost	—			241,862
Repayment on notes payable	—			(20,000		)
Net cash provided by financing activities	39,047			224,064
Effect of exchange rate changes	(20		)	63
NET INCREASE IN CASH AND CASH EQUIVALENTS	102,927			283,534
CASH AND CASH EQUIVALENTS—Beginning of period	240,031			113,664
CASH AND CASH EQUIVALENTS—End of period	$	342,958		$	397,198