Arista Networks, Inc. (NYSE:ANET) Q4 2019 Earnings Conference Call - Final Transcript

Feb 13, 2020 • 04:30 pm ET


Arista Networks, Inc. (NYSE:ANET) Q4 2019 Earnings Conference Call - Final Transcript


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Welcome to the Fourth Quarter 2019 Arista Networks Financial Results Earnings Conference Call. [Operator Instructions] 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, Director of Corporate and Investor Development. Sir, you may begin.

Curtis Mckee

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; 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, 2019. If you'd like a copy of this release, you can access it online on the company's 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, industry innovation, our market opportunity, the benefits of recent acquisitions and the impact of litigation, which are subject to the risks and uncertainties that we discuss in detail in 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 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 on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings press release.

And with that, I'll turn it over to Jayshree.

Jayshree V. Ullal

Thank you, Curtis, and welcome to your first Arista earnings call, and thank you, everyone, for joining us this afternoon for our fourth quarter 2019 earnings call. We delivered a non-GAAP revenue of $552.5 million, with a non-GAAP earnings per share of $2.29. Services contributed approximately 19% of the revenue consistent with the typically higher renewals at the year-end. Our non-GAAP gross margins was 65.2%, influenced by a strong performance of the enterprise vertical and associated software-attached products. Overall, our 2019 gross margin came in at 64.7%. We registered a record number of million dollar customers in Q4 as a direct result of our enterprise momentum. By the end of 2019, we have acquired over 6,300 customers cumulatively, with Microsoft at 23% of total revenue and Facebook at 16.6%.

In Q4 2019 and actually much throughout the year, cloud titans was the largest vertical. The enterprise segment is now consistently the second largest and strongest segment followed by the financials in third place, Tier two cloud specialty providers in fourth and service providers in fifth place. Both service providers and Tier two cloud providers have been slow for us. Arista, as you know in terms of geography, 2019 international contribution