ANET
$316.67
Arista Networks
$1.83
.58%
Earnings Details
Quarter December 2020
Thursday, February 18, 2021 4:05:00 PM
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Summary

Arista Networks Beats

Arista Networks (ANET) reported Quarter December 2020 earnings of $2.56 per share on revenue of $648.5 million. The consensus earnings estimate was $2.39 per share on revenue of $628.8 million. The Earnings Whisper number was $2.51 per share. Revenue grew 17.4% on a year-over-year basis.

The company said it expects first quarter revenue of $630.0 million to $650.0 million. The current consensus revenue estimate is $610.94 million for the quarter ending March 31, 2021.

Arista Networks Inc with its subsidiaries is a supplier of cloud networking solutions that use software innovations to address the needs of large-scale Internet companies, cloud service providers and next-generation enterprise.

Results
Reported Earnings
$2.56
Earnings Whisper
$2.51
Consensus Estimate
$2.39
Reported Revenue
$648.5 Mil
Revenue Estimate
$628.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Arista Networks, Inc. Reports Fourth Quarter and Year End 2020 Financial Results

SANTA CLARA, Calif.--(BUSINESS WIRE)--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

Full Year Company Highlights

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

 

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

Source: Arista Networks, Inc.