Arista Networks, Inc.

Welcome to the first quarter 2021 Arista Network's financial results earnings conference call. During the call, all participants will be in a listen-only mode. After the presentation, you will conduct a question and answer session. Instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press star followed by zero. As a reminder, this conference is being recorded and will be available for replay from the investor relations section at the Arista website following this call. I will now turn the call over to Mr. Curtis McKee, AVP, Corporate and Investor Development. Sir, you may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us. With me on today's call are Jay Shriolal, Arista Networks President and Chief Executive Officer, and Ida Brennan, Arista's Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results of the fiscal first quarter ending March 31, 2021. If you would like a copy of the release, you can access it online on our website. During the course of this conference call, Arista Networks Management will make forward-looking statements, including those relating to our financial outlook for the second quarter of the 2021 fiscal year, longer-term financial outlooks for 2021 and beyond, our total addressable market and strategy for addressing these market opportunities, the potential impact of COVID-19 on our business and product innovation, and the benefits of recent acquisitions which are subject to the risks and uncertainties that we will discuss in detail on our documents filed with the SEC, specifically in our most recent Form 10-Q and Form 10-K, and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements as of today are – these are forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Also, please note that certain financial measures we use on this call are expressed in a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations for these non-GAAP financial measures to GAAP financial measures in our earnings press release. With that, I will turn the call over to Jayshree.

Thank you, Curtis. Thank you, everyone, for joining us this afternoon for our first quarter 2021 earnings call. I hope you're all being safe and vaccinated in these pandemic times. At Arista, we're especially deeply concerned by the heightened COVID crisis in India. We're taking steps to assist our local teams as best we can and know. Back to Q121 specifics. We delivered revenues of $667.6 million for the quarter with a non-GAAP earnings per share of $2.50. ACARE services, EOS renewals, and subscription software contributed approximately 21.4% of the revenue. Our non-GAAP gross margins at 64.7% was influenced by software and services mix, as well as higher enterprise and CloudTitan contributions for the quarter. We continue to experience good customer traction and growth with new customer logos and increasing million-dollar customers in the enterprises. In the quarter, CloudTitans was our largest vertical. Enterprise was a close second. followed by financials and specialty cloud providers tied at third place, and service providers at fourth place. International contribution is 25%, and the Americas were at 75% in the quarter. In terms of sector and product trends, we will report the specifics annually. They are consistent with the ranges we have already provided in our investor relations deck. To reiterate, our cloud titans are in the 35% to 39% range, The enterprises are in the 35 to 39% range also, and the providers in the 25 to 30% range. Our product line forecast annually is expected to be 60 to 65% for core data center, 10 to 15% for adjacent campus and routing, and 20 to 25% for software and services. In light of the industry-wide chip and supply chain shortages, I'd like to shed more light on this topic, especially as it pertains to Arista. First and foremost, we are pleased with the healthy demand we are experiencing and Arista is resonating well with customers and prospects as they are driving our multi-year growth projections. We share a preferred status with many of our top 100 and more customers and work intimately with them. However, the supply chain has never been so constrained in Arista history. To put this in perspective, we now have to plan for many components with 52 weekly times. COVID has resulted in substrate and wafer shortages and reduced assembly capacity. Our contract manufacturers have experienced significant volatility due to country-specific COVID orders. Naturally, we're working more closely with our strategic suppliers to improve planning and delivery. Customer demand and visibility, though, has improved in the past few months. We are working with our customers to understand the timing of their deployment needs. We do not believe at this time that our customers are pre-ordering. However, we do think they're exercising prudent planning for second half of 2021 and even into 2022. With this as a backdrop, we believe supply chain will remain a pain point for the balance of this year as a result of all these shortages. Therefore, Arista is taking decisive steps to invest in increased inventory and manufacturing capacity. I'm often asked why customers, especially risk-averse enterprises, choose Arista. Arista's recent enterprise momentum spans many vertical markets and includes a suite of data center, campus, routing, and software products. Our customers are aligned with our software-driven, data-centric approach to building their cloud architecture, their cloud operations, and their cloud experience. A key part of our enterprise traction is addressing the CIO's pain points to build a cloud-first and a data-driven network spanning client to cloud networking. Historically, disparate functions and data sets into routers, security, switches, and network management functions can now be integrated by Arista into a seamless network architecture with programmability, state, and AI-driven characteristics. Let me try to illustrate a few enterprise examples to highlight this. A recent data center customer win was in the hospitality sector. They chose us because of our single EOS software image across multiple leaves and spine platforms. Using Cloud Vision for automation, for zero touch provisioning, easy upgrades, telemetry and compliance was only feasible because of Arista. Arista's deep buffer spine switches also enhanced their availability. A second example is in the international retail customer for data center and routing applications. A million-dollar customer, this was based on EVPN and VXLAN, modern leaf spine design, and once again leveraged Cloud Vision and EOS for improved automation, programmability, and change control. NetOps and DevOps automation with Ansible integration was another key deliverable for their distribution center. A third enterprise win was in campus in Europe. The 720 XP was differentiated as a PoE platform with multi-gig capability across campus workspaces for both chassis and 1RU form factor. The 7050CX pine and spline brought lower power, low footprint, and high density as an alternative to the chassis. The campus customer also implemented unified wired and Wi-Fi cognitive capabilities, and this played a key role. Migrating from manual operations, once again, cloud vision with streaming telemetry was a key factor. In all these three examples, there were some common themes. The customer was very fatigued with legacy issues and embraced our US software and our cloud vision as key differentiators and advantages. They also have much confidence in Arista's support, quality, and continued innovation. They embraced our strategy and built upon our differentiated state-driven and programmable software foundation to deliver our cognitive five A's of agility, availability, analytics, automation, and AI and API-driven architecture. Switching to our popular Cloud Titans, we are pleased to also state that we now see increased visibility across 100 gig, 200 gig, and 400 gig demand from our Cloud Titan customers. While this business can be volatile, We have enjoyed a preferred partnership status, with many of them deploying us in diverse use cases and deployments, consistent with the overall CapEx reported recently. I'd like to invite Anshu, our Chief Operating Officer, to elaborate more on this. Anshu?