Arista Networks, Inc. (NYSE: ANET), an industry leader in
cognitive cloud networking for large datacenter and campus
environments, today announced financial results for its fourth
quarter and year ended December 31, 2020.
Fourth Quarter Financial Results
- Revenue of $648.5 million, an increase of 7.1% compared to the
third quarter of 2020, and an increase of 17.4% from the fourth
quarter of 2019.
- GAAP gross margin of 63.9%, compared to GAAP gross margin of
63.6% in the third quarter of 2020 and 64.5% in the fourth quarter
of 2019.
- Non-GAAP gross margin of 65.0%, compared to non-GAAP gross
margin of 64.6% in the third quarter of 2020 and 65.2% in the
fourth quarter of 2019.
- GAAP net income of $183.0 million, or $2.31 per diluted share,
compared to GAAP net income of $260.7 million, or $3.25 per diluted
share in the fourth quarter of 2019.
- Non-GAAP net income of $197.7 million, or $2.49 per diluted
share, compared to non-GAAP net income of $183.4 million, or $2.29
per diluted share in the fourth quarter of 2019.
Full Year Financial Results
- Revenue of $2.32 billion, a decrease of 3.9% compared to fiscal
year 2019.
- GAAP gross margin of 63.9%, compared to GAAP gross margin of
64.1% in fiscal year 2019.
- Non-GAAP gross margin of 65.0%, compared to non-GAAP gross
margin of 64.7% in fiscal year 2019.
- GAAP net income of $634.6 million, or $7.99 per diluted share,
compared to GAAP net income of $859.9 million, or $10.63 per
diluted share, in fiscal year 2019.
- Non-GAAP net income of $718.4 million or $9.04 per diluted
share, compared to non-GAAP net income of $786.8 million or $9.73
per diluted share, in fiscal year 2019.
“I am pleased with Arista's return to growth in Q4 2020. With
our laser focus on customer success, pristine financials and
transformative innovations, Arista is well positioned to continue
our momentum in the post pandemic era,” stated Jayshree Ullal,
President and CEO of Arista Networks.
Commenting on the company’s financial results, Ita Brennan,
Arista’s CFO said, “The Arista team showed great resilience and
flexibility throughout 2020, maintaining operational excellence,
while executing well on our market and product diversification
initiatives.”
Fourth Quarter Company Highlights
- Arista announced the 750 Series – Arista expands its Cognitive
Campus portfolio with the new 750 Series modular chassis for
enhanced security solutions and simplified automation
workflows.
- Arista Delivers Network Observability with DANZ Monitoring
Fabric - Arista announced a network observability software, DANZ
Monitoring Fabric (DMF), on Arista switching platforms for
enterprise-wide traffic visibility and contextual insights.
- Arista Unveils Attack Surface Assessment Service – Arista
announced an Attack Surface Assessment, an advanced security
service delivered through the recent acquisition of Awake
Security.
Full Year Company Highlights
- Arista Networks acquired Awake Security, a Network Detection
and Response (NDR) platform provider that combines artificial
intelligence (AI) with human expertise to autonomously hunt and
respond to insider and external threats.
- Arista Networks acquired Big Switch Networks, a network
monitoring and SDN (Software Defined Networking) pioneer.
- Arista Networks recognized as a leader in The Forrester Wave™:
Open, Programmable Switches for A Businesswide SDN, Q3 2020 with
the top score in the strategy category.
- Arista Networks Announced Optical Line System for 400G – The
Arista OSFP-LS is a highly compact, low power and cost-effective
solution for increasing bandwidth between data centers without the
need for external optical line systems.
- This is the sixth consecutive year Arista Networks has been
recognized in the Leaders Quadrant of the 2020 Gartner Magic
Quadrant for Data Center Networking published on 30 June 2020.
Financial Outlook
For the first quarter of 2021, we expect:
- Revenue between $630 million to $650 million;
- Non-GAAP gross margin of 63% to 65%; and
- Non-GAAP operating margin of approximately 37%
Guidance for non-GAAP financial measures excludes stock-based
compensation expense, amortization of acquisition-related
intangible assets, and certain non-recurring items. A
reconciliation of non-GAAP guidance measures to corresponding GAAP
measures is not available on a forward-looking basis (see further
explanation below under “Non-GAAP Financial Measures”).
Prepared Materials and Conference Call Information
Arista executives will discuss the fourth quarter and year end
2020 financial results on a conference call at 1:30 p.m. Pacific
time today. To listen to the call via telephone, dial (833)
968-2211 in the United States or +1 (778) 560-2896 from
international locations. The Conference ID is 9269847.
The financial results conference call will also be available via
live webcast on our investor relations website at
https://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 quotations from
management, 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 year
2021, statements regarding the benefits of the introduction of new
products and our leadership in cloud networking, and statements
regarding Arista’s ability to continue its momentum in the post
pandemic era. Forward-looking statements are subject to known and
unknown risks, uncertainties, assumptions and other factors that
could cause actual results, performance or achievements to differ
materially from those anticipated in or implied by the
forward-looking statements including risks associated with: the
impact of the COVID-19 pandemic on our business; the rapid
evolution of the networking market; any failure to successfully
pursue new products and service offerings and expand into adjacent
markets; a decline in our revenue growth rate; unpredictability of
our results of operations; interruptions or delays in shipments;
adverse economic conditions or reduced information technology and
network infrastructure spending; intense competition; expansion of
our international sales and operations; investment or acquisition
in other businesses; seasonality; our ability to attract new large
end customers or sell products and services to existing end
customers; our ability to increase market awareness of our company
and new products and services; product quality problems; our
ability to anticipate technological shifts and develop products to
meet those technological shifts; insufficient component supply and
inventory; our ability to protect, defend and maintain our
intellectual property rights; vulnerabilities in our products and
failure of our products to detect security breaches our
intellectual property rights; and tax, tariff, import/export
restrictions; and other future events. Additional risks and
uncertainties that could affect us can be found in our most recent
filings with the Securities and Exchange Commission including, but
not limited to, its annual report on Form 10-K and quarterly
reports on Form 10-Q. You can locate these reports through our
website at https://investors.arista.com/ and on the SEC’s website
at https://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 we disclaim 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.
Gartner “Magic Quadrant for Data Center and Cloud Networking,”
Andrew Lerner, et al, 30 June 2020. Gartner does not endorse any
vendor, product or service depicted in its research publications,
and does not advise technology users to select only those vendors
with the highest ratings or other designation. Gartner research
publications consist of the opinions of Gartner's research
organization and should not be construed as statements of fact.
Gartner disclaims all warranties, expressed or implied, with
respect to this research, including any warranties of
merchantability or fitness for a particular purpose. The Gartner
content described herein, (the "Gartner content") represent(s)
research opinion or viewpoints published, as part of a syndicated
subscription service, by Gartner, Inc. ("Gartner"), and are not
representations of fact. Gartner Content speaks as of its original
publication date (and not as of the date of this earnings
announcement) and the opinions expressed in the Gartner Content are
subject to change without notice.
Non-GAAP Financial Measures
This press release and accompanying table contain certain
non-GAAP financial measures including non-GAAP gross profit,
non-GAAP gross margin, non-GAAP income from operations, non-GAAP
operating margins, non-GAAP net income and non-GAAP diluted net
income per share. These non-GAAP financial measures exclude
stock-based compensation expense, amortization of
acquisition-related intangible assets, certain non-recurring
charges or benefits, and the income tax effect of these non-GAAP
exclusions. In addition, non-GAAP financial measures exclude net
tax benefits associated with stock-based awards, which include
excess tax benefits, and other discrete indirect effects of such
awards. The company uses these non-GAAP financial measures
internally in analyzing its financial results and believes that
these non-GAAP financial measures are 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 the comparable GAAP financial
measures. 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.
Non-GAAP financial measures do not have any standardized meaning
and are therefore unlikely to be comparable to similarly titled
measures presented by other companies. 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 have 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 expense, amortization of
acquisition-related intangible assets, and other non-recurring
items. The company does not provide guidance on GAAP gross margin
or GAAP operating margin or the various reconciling items between
GAAP gross margin and GAAP operating margin and non-GAAP gross
margin and non-GAAP operating margin. A reconciliation of the
non-GAAP financial measures guidance to the corresponding GAAP
measures on a forward-looking basis is not available because
stock-based compensation expense is impacted by the company’s
future hiring and retention needs and the future fair market value
of the company’s common stock, all of which are difficult to
predict and subject to constant change. The actual amount of
stock-based compensation expense will have a significant impact on
the company’s GAAP gross margin and GAAP operating margin.
About Arista Networks
Arista Networks is an industry leader in cognitive cloud
networking solutions for large data center and campus environments.
Arista’s award-winning platforms deliver availability, agility,
automation analytics, and security through CloudVision® and Arista
EOS®, an advanced network operating system. For more information
visit www.arista.com.
ARISTA, CloudVision, CloudEOS and MSS 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 www.arista.com.
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Operations
(Unaudited in thousands,
except per share amounts)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Revenue:
Product
$
518,281
$
447,498
$
1,830,842
$
2,021,150
Service
130,201
105,048
486,670
389,556
Total revenue
648,482
552,546
2,317,512
2,410,706
Cost of revenue:
Product
210,436
175,476
749,962
792,382
Service
23,462
20,767
85,664
73,986
Total cost of revenue
233,898
196,243
835,626
866,368
Total gross profit
414,584
356,303
1,481,886
1,544,338
Operating expenses:
Research and development
133,847
110,063
486,594
462,759
Sales and marketing
67,671
54,535
229,366
213,907
General and administrative
18,428
15,716
66,242
61,898
Total operating expenses
219,946
180,314
782,202
738,564
Income from operations
194,638
175,989
699,684
805,774
Other income, net
5,542
11,183
39,179
56,496
Income before income taxes
200,180
187,172
738,863
862,270
Provision for (benefit from) income
taxes
17,222
(73,520
)
104,306
2,403
Net income
$
182,958
$
260,692
$
634,557
$
859,867
Net income attributable to common
stockholders:
Basic
$
182,958
$
260,589
$
634,557
$
859,444
Diluted
$
182,958
$
260,594
$
634,557
$
859,468
Net income per share attributable to
common stockholders:
Basic
$
2.41
$
3.41
$
8.35
$
11.26
Diluted
$
2.31
$
3.25
$
7.99
$
10.63
Weighted-average shares used in computing
net income per share attributable to common stockholders:
Basic
75,864
76,345
75,984
76,312
Diluted
79,261
80,261
79,465
80,879
ARISTA 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,
Twelve Months Ended
December 31,
2020
2019
2020
2019
GAAP gross profit
$
414,584
$
356,303
$
1,481,886
$
1,544,338
GAAP gross margin
63.9
%
64.5
%
63.9
%
64.1
%
Stock-based compensation expense
1,554
1,253
6,272
4,637
Intangible asset amortization
5,464
2,626
17,480
10,503
Non-GAAP gross profit
$
421,602
$
360,182
$
1,505,638
$
1,559,478
Non-GAAP gross margin
65.0
%
65.2
%
65.0
%
64.7
%
GAAP income from operations
$
194,638
$
175,989
$
699,684
$
805,774
Stock-based compensation expense
40,095
26,435
137,042
101,280
Litigation expense
—
333
—
2,295
Intangible asset amortization
7,562
3,084
24,086
13,375
Acquisition-related costs(1)
1,215
—
13,933
—
Non-GAAP income from operations
$
243,510
$
205,841
$
874,745
$
922,724
Non-GAAP operating margin
37.6
%
37.3
%
37.7
%
38.3
%
GAAP net income
$
182,958
$
260,692
$
634,557
$
859,867
Stock-based compensation expense
40,095
26,435
137,042
101,280
Litigation expense
—
333
—
2,295
Intangible asset amortization
7,562
3,084
24,086
13,375
Acquisition-related costs
1,215
—
13,933
—
Gain on investment in privately-held
companies
(4,164
)
—
(4,164
)
(5,427
)
Altera stock-based tax charge (2)
—
—
—
9,781
Tax benefit on intra-entity IP transfer
(3)
—
(85,819
)
—
(85,819
)
Tax benefit on stock-based awards
(19,802
)
(16,232
)
(60,880
)
(89,415
)
Income tax effect on non-GAAP
exclusions
(10,188
)
(5,045
)
(26,163
)
(19,093
)
Non-GAAP net income
$
197,676
$
183,448
$
718,411
$
786,844
GAAP diluted net income per share
attributable to common stockholders
$
2.31
$
3.25
$
7.99
$
10.63
Non-GAAP adjustments to net income
0.18
(0.96
)
1.05
(0.90
)
Non-GAAP diluted net income per share
$
2.49
$
2.29
$
9.04
$
9.73
Weighted-average shares used in computing
GAAP and Non-GAAP diluted net income per share attributable to
common stockholders
79,261
80,261
79,465
80,879
Summary of Stock-Based Compensation
Expense:
Cost of revenue
$
1,554
$
1,253
$
6,272
$
4,637
Research and development
23,184
13,897
79,913
53,068
Sales and marketing
11,188
7,705
34,944
29,168
General and administrative
4,169
3,580
15,913
14,407
Total
$
40,095
$
26,435
$
137,042
$
101,280
___________________
(1)
Represents non-recurring costs associated
with our acquisitions, which primarily include retention bonuses,
professional and consulting fees, and restructuring costs.
(2)
Represents a discrete income tax expense
related to stock-based compensation as a result of an opinion on
Altera Corporation and Subsidiaries vs. Commissioner on Internal
Revenue issued by the Court of Appeals for the Ninth Circuit on
June 7, 2019.
(3)
Represents a one-time tax benefit of $85.8
million upon completion of an intra-entity transaction to sell our
non-Americas economic and beneficial intellectual property rights
in the current quarter.
ARISTA NETWORKS, INC.
Condensed Consolidated Balance
Sheets
(Unaudited, in
thousands)
December 31, 2020
December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
893,219
$
1,111,286
Marketable securities
1,979,649
1,613,082
Accounts receivable
389,540
391,987
Inventories
479,668
243,825
Prepaid expenses and other current
assets
94,922
111,456
Total current assets
3,836,998
3,471,636
Property and equipment, net
32,231
39,273
Acquisition-related intangible assets,
net
122,790
45,235
Goodwill
189,696
54,855
Investments
8,314
4,150
Operating lease right-of-use assets
77,288
87,770
Deferred tax assets
441,531
452,025
Other assets
30,071
30,346
TOTAL ASSETS
$
4,738,919
$
4,185,290
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
134,235
$
92,105
Accrued liabilities
143,357
140,249
Deferred revenue
396,259
312,668
Other current liabilities
94,392
52,052
Total current liabilities
768,243
597,074
Income taxes payable
53,053
55,485
Operating lease liabilities,
non-current
72,397
83,022
Deferred revenue, non-current
254,568
262,620
Deferred tax liabilities, non-current
227,936
254,710
Other long-term liabilities
42,431
37,693
TOTAL LIABILITIES
1,418,628
1,290,604
STOCKHOLDERS’ EQUITY:
Common stock
8
8
Additional paid-in capital
1,292,431
1,106,305
Retained earnings (1)
2,027,614
1,788,230
Accumulated other comprehensive income
238
143
TOTAL STOCKHOLDERS’ EQUITY
3,320,291
2,894,686
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
4,738,919
$
4,185,290
(1)
We adopted new lease accounting guidance
under Accounting Standard Codification Topic 842 - Leases (“ASC
842”), which resulted in a cumulative-effect adjustment of $3.7
million to retained earnings as of January 1, 2019.
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Twelve Months Ended December
31,
2020
2019
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
634,557
$
859,867
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and other
44,590
32,849
Noncash lease expense
16,970
16,179
Stock-based compensation
137,042
101,280
Deferred income taxes
(9,144
)
(75,741
)
Gain on investments in privately-held
companies, net
(4,164
)
(5,427
)
Gain on sale of marketable securities
(9,432
)
—
Amortization (accretion) of investment
premiums (discounts)
10,381
(6,771
)
Changes in operating assets and
liabilities:
Accounts receivable, net
10,673
(60,210
)
Inventories
(235,318
)
20,927
Prepaid expenses and other current
assets
13,846
54,259
Other assets
4,965
(8,112
)
Accounts payable
41,161
(1,937
)
Accrued liabilities
2,728
16,366
Deferred revenue
50,352
(11,939
)
Income taxes payable
8,805
23,523
Other liabilities
17,102
7,921
Net cash provided by operating
activities
735,114
963,034
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of marketable
securities
1,545,689
1,208,717
Purchases of marketable securities
(2,688,064
)
(1,503,893
)
Business combinations, net of cash
acquired
(227,420
)
(1,365
)
Purchases of property, equipment and
intangible assets
(15,384
)
(15,751
)
Investments in privately-held
companies
3,399
28,220
Proceeds from sale of marketable
securities
772,978
—
Net cash used in investing activities
(608,802
)
(284,072
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock
under equity plans
57,556
57,378
Tax withholding paid on behalf of
employees for net share settlement
(8,722
)
(9,200
)
Repurchase of common stock
(395,173
)
(266,142
)
Net cash used in financing activities
(346,339
)
(217,964
)
Effect of exchange rate changes
1,966
353
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(218,061
)
461,351
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—Beginning of period
1,115,515
654,164
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—End of period
$
897,454
$
1,115,515
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210218005919/en/
Investor Contacts:
Arista Networks, Inc. Charles Yager, 408-547-5892 Product and
Investor Advocacy cyager@arista.com or Curtis McKee, 408-547-5549
Corporate and Investor Development curtism@arista.com
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