Arista Networks, Inc. Q4 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Q4 2020 revenue was $648.5 million, up 17.4% year-over-year (vs. Q4 2019) and above guidance of $615–$635 million.
  • Non-GAAP EPS was $2.49, up about 9% year-over-year.
  • Non-GAAP gross margin reached 65%, at the high end of the 63%–65% guidance range, driven by stronger enterprise and software mix.
  • Service and software support renewals were ~20% of revenue, slightly below Q3 at 21%.
  • International revenue was 26% (vs. 25% in Q3).
  • Operating income was $243.5 million (37.6% of revenue).
  • Net income reached $197.7 million (30.5% of revenue).

Full-Year 2020 Highlights

  • Cash and investments ended at $2.87 billion.
  • $735 million generated in operating cash flow; $395 million returned via share repurchases.
  • Two acquisitions completed in 2020 totaling $227 million in cash: Big Switch (DMS technology) and Awake Security (AI-driven NDR).
  • Deferred revenue increased to $651 million, driven mainly by service renewals.
  • Enterprise momentum accelerated with record new customers and million-dollar customer additions; total customer count passed 7,200.
  • Microsoft remained the only >10% customer at 21.5% of 2020 revenue.
  • Cloud Titan revenue declined year-over-year due to volatility and delayed 400G qualifications.

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Operator: Welcome to the Fourth Quarter 2020 Arista Networks Financial Results Earnings Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] 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. Charles Yager, Director of Product and Investor Advocacy. Sir, you may begin. Charles Yager: Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me on today’s call are Jayshree Ullal, Arista Networks’ President and Chief Executive Officer; and Ita Brennan, Arista’s Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal fourth quarter ending December 31, 2020. If you would like a copy of the release, you can access it online at 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 first quarter of the 2020 fiscal year, longer term financial outlooks, our total addressable market and strategy for addressing these market opportunities, the potential impact of COVID-19 on our business, our product innovation and the benefits of recent acquisitions, which are subject to

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