10-QPeriod: Q3 FY2019

Arista Networks, Inc. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 1, 2019For Securities:ANET

Summary

Arista Networks, Inc. (ANET) reported strong financial results for the nine months ended September 30, 2019. Total revenue increased by 19.4% year-over-year to $1.86 billion, driven by a 17.6% rise in product revenue and a 30.6% surge in service revenue. Net income saw a significant increase of 280% to $599.2 million, largely due to a substantial legal settlement expense in the prior year that did not recur. The company's balance sheet remains robust, with total assets growing to $3.62 billion and a strong cash position of over $1 billion in cash and cash equivalents. Operating cash flow was healthy at $635.9 million for the nine-month period. Management noted some volatility in demand from large end customers, contributing to slower revenue growth in certain periods, and expects this trend could continue in the near term. However, the company continues to invest in research and development and sales and marketing to drive future growth, particularly in campus switching and WiFi networking markets. The company also authorized a $1 billion stock repurchase program, demonstrating a commitment to returning value to shareholders.

Financial Highlights

53 data points
Beta

Revenue

$654.41M

63.8% Gross Margin

Net Income

$208.90M

31.9% Net Margin

EPS (Diluted)

$0.16

Total Assets

$3.62B

Cash & Equivalents

$1.10B

Free Cash Flow

$264.72M

Financial Statements
Beta
Revenue$654.41M
Cost of Revenue$237.14M
Gross Profit$417.27M
R&D Expenses$118.73M
Operating Expenses$188.67M
Operating Income$228.61M
Interest Expense$0
Net Income$208.90M
EPS (Basic)$0.17
EPS (Diluted)$0.16
Shares Outstanding (Basic)1.22B
Shares Outstanding (Diluted)1.29B

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2019, increased by 19.4% to $1.86 billion compared to the prior year.
  • 2Net income for the nine months ended September 30, 2019, surged by 280% to $599.2 million, significantly boosted by the absence of a large legal settlement expense from the prior year.
  • 3Gross margin remained strong, albeit with a slight decrease to 63.9% for the nine months, primarily due to increased product transition costs and inventory-related charges.
  • 4Operating cash flow was robust, with $635.9 million generated for the nine months ended September 30, 2019.
  • 5The company ended the period with a strong liquidity position, holding $1.1 billion in cash and cash equivalents and $1.35 billion in marketable securities as of September 30, 2019.
  • 6A $1 billion stock repurchase program was authorized in April 2019, with approximately $785.4 million remaining as of September 30, 2019.
  • 7Management highlighted demand volatility from certain large end customers and anticipates this could impact near-term revenue growth.

Frequently Asked Questions

Arista Networks reported a 19.4% increase in total revenue to $1.86 billion for the nine months ended September 30, 2019, compared to the same period in 2018. Net income saw substantial growth, increasing by 280% to $599.2 million. This significant increase in net income was largely attributable to the absence of a $405 million legal settlement expense that impacted the prior year's results.

The company maintained a strong financial position with $1.1 billion in cash and cash equivalents and $1.35 billion in marketable securities as of September 30, 2019. Total assets grew to $3.62 billion, indicating a healthy balance sheet. Operating cash flow was strong at $635.9 million for the nine-month period.

Yes, management noted some volatility in demand from certain large end customers, which contributed to slower overall revenue growth during the nine-month period. They expect this trend of reduced demand from these large customers could continue into the fourth quarter of 2019, potentially impacting near-term revenue growth.

Arista Networks authorized a $1 billion stock repurchase program in April 2019. As of September 30, 2019, approximately $785.4 million remained available under this program, demonstrating a commitment to share repurchases and shareholder returns.