Arista Networks, Inc. reports 26.2% Net Income decline in 2020 and 2.6 pp EBITDA Margin decline from 35.7% to 33.1%
02/18/2021 • About Arista Networks, Inc. (
$ANET) • By InTwits
Arista Networks, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Arista Networks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $44m in 2020, $54m in 2019, $153m in 2018, $78m in 2017, $53m in 2016
- The company has highly profitable business model: ROIC is 23.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Arista Networks, Inc.'s Revenue decreased on 3.9%. Annual revenue decline showed slowdown in 20Q4 - revenue jumped on 17.4%. Revenue decline was accelerating on average at -11.1 pp per annum in the last 5 years. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.6 pp from 35.7% to 33.1% in 2020.
Gross Margin showed almost no change in 2020. SG&A as a % of Revenue increased slightly on 1.3 pp from 11.4% to 12.8% in 2020. During the last 5 years SG&A as a % of Revenue bottomed in 2019 at 11.4%.
Net Income margin decreased on 8.3 pp from 35.7% to 27.4% in 2020.
Investments (CAPEX, working capital and M&A)
Arista Networks, Inc.'s CAPEX/Revenue was 0.66% in 2020. Arista Networks, Inc. showed almost no change in CAPEX/Revenue from 2017 to 2020. It's average level of CAPEX/Revenue for the last three years was 0.81%.
Return on investment
The company operates at high and attractive ROIC (23.5%) and ROE (20.4%). ROIC decreased on 9.8 pp from 33.3% to 23.5% in 2020. ROE dropped on 13.7 pp from 34.1% to 20.4% in 2020.
Leverage (Debt)
Debt level is -1.0x Net Debt / EBITDA and 0.1x Debt / EBITDA. Debt decreased on 9.0% while cash dropped on 19.6%.
Arista Networks, Inc. has no short term refinancing risk: cash is higher than short term debt (5,025.7%).
Valuation and dividends
Arista Networks, Inc.'s trades at EV/EBITDA 26.7x and P/E 33.6x.
Management team
Arista Networks, Inc.'s CEO Jayshree V Ullal has spent 12 years with the company. The company's CFO is Ita M Brennan. Ita M Brennan has 11 months years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Arista Networks, Inc. ($ANET) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,129 | 1,646 | 2,151 | 2,411 | 2,318 | -3.9% |
| Gross Profit | 723 | 1,062 | 1,373 | 1,544 | 1,482 | -4.0% |
| SG&A | 206 | 242 | 253 | 276 | 296 | 7.2% |
| EBITDA | 263 | 491 | 301 | 861 | 768 | -10.9% |
| EBIT | 243 | 470 | 273 | | | |
| Interest expence | 3 | 3 | 3 | | | |
| Tax | 58 | 52 | -39 | | | |
| Net Income | 184 | 423 | 328 | 860 | 635 | -26.2% |
| Stock Based Compensation | 59 | 75 | 91 | | | |
Balance Sheet
|
|---|
| Cash | 568 | 859 | 650 | 1,111 | 893 | -19.6% |
| Accounts Receivable | 253 | 247 | 332 | | | |
| Inventory | 236 | 306 | 265 | | | |
| Accounts Payable | 79 | 52 | 94 | | | |
| Short Term Debt | 2 | 2 | 2 | 16 | 18 | 10.7% |
| Long Term Debt | 40 | 38 | 35 | 83 | 72 | -12.8% |
Cash flow
|
|---|
| Capex | 21 | 15 | 24 | 16 | 15 | -2.3% |
| Acquisitions | | | 97 | | | |
Ratios
|
|---|
| Revenue growth | 34.8% | 45.8% | 30.7% | 12.1% | -3.9% | |
| EBITDA growth | 61.5% | 86.5% | -38.7% | 186.1% | -10.9% | |
|
|---|
| Gross Margin | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% | -0.1% |
| EBITDA Margin | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% | -2.6% |
| EBIT Margin | 21.6% | 28.6% | 12.7% | | |
| SG&A, % of revenue | 18.3% | 14.7% | 11.7% | 11.4% | 12.8% | 1.3% |
| SBC, % of revenue | 5.2% | 4.6% | 4.2% | | |
| Net Income Margin | 16.3% | 25.7% | 15.3% | 35.7% | 27.4% | -8.3% |
| CAPEX, % of revenue | 1.9% | 0.9% | 1.1% | 0.7% | 0.7% | 0.0% |
|
|---|
| ROIC | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% | -9.8% |
| ROE | 19.4% | 30.6% | 17.2% | 34.1% | 20.4% | -13.7% |
| Net Debt/EBITDA | -2.0x | -1.7x | -2.0x | -1.2x | -1.0x | 0.1x |
| Interest expence / Average debt | 7.6% | 6.9% | 7.0% | | | |
People
|
|---|
| Insider ownership | 22.6% | 22.6% | 22.6% | | | |
| Employees | 1,500 | 1,800 | 2,300 | | | |
| Revenue/Employee, th. $ | 753 | 915 | 935 | | | |
Arista Networks, Inc. ($ANET) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 523 | 541 | 605 | 648 | | -12.2% | -11.1% | -7.5% | 17.4% |
| EBITDA | 160 | 178 | 199 | 207 | | -23.2% | -19.4% | -17.9% | 9.3% |
| Net Income | 138 | 145 | 168 | 183 | | -31.1% | -23.5% | -19.4% | -29.8% |
Balance Sheet
|
|---|
| Cash | 761 | 800 | 970 | 893 | | -5.9% | -15.3% | -11.4% | -19.6% |
| Short Term Debt | 0 | 0 | 0 | 18 | | -100.0% | -100.0% | -100.0% | 10.7% |
| Long Term Debt | 79 | 74 | 75 | 72 | | -16.1% | -17.2% | -14.0% | -12.8% |
Ratios
|
|---|
| Gross Margin | 64.7% | 63.7% | 63.6% | 63.9% | | 0.8% | -0.5% | -0.2% | -0.6% |
| EBITDA Margin | 30.6% | 32.9% | 32.9% | 32.0% | | -4.4% | -3.4% | -4.2% | -2.3% |
| Net Income Margin | 26.5% | 26.8% | 27.8% | 28.2% | | -7.3% | -4.3% | -4.1% | -19.0% |
Peers in Communications Equipment
Below you can find Arista Networks, Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.1% | 2.8% | 3.7% | 4.4% |
|---|
| Arista Networks, Inc. ($ANET) | - | 45.8% | 30.7% | 12.1% | -3.9% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| EchoStar Corporation ($SATS) | 59.9% | 59.8% | 62.7% | 58.3% | 60.6% |
| |
|---|
| Median (33 companies) | 43.7% | 41.0% | 40.5% | 43.2% | 44.9% |
|---|
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| AudioCodes Ltd. ($AUDC) | 8.0% | 8.1% | 10.8% | 0.3% | 18.4% |
| |
|---|
| Median (32 companies) | 5.5% | 6.0% | 4.6% | 3.1% | 8.8% |
|---|
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 2.0% | 1.9% | 1.7% | 2.5% | 2.2% |
|---|
| Arista Networks, Inc. ($ANET) | 1.9% | 0.9% | 1.1% | 0.7% | 0.7% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| Ciena Corporation ($CIEN) | 7.9% | 8.3% | 7.6% | 11.9% | 15.5% |
| |
|---|
| Median (35 companies) | 2.2% | 2.1% | 0.3% | -1.6% | 1.9% |
|---|
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| |
|---|
| Median (24 companies) | -0.8x | -0.6x | 0.2x | -0.1x | -0.3x |
|---|
| Arista Networks, Inc. ($ANET) | -2.0x | -1.7x | -2.0x | -1.2x | -1.0x |
