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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission File Number:
001-36468
 
Arista Networks, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
20-1751121
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
5453 Great America Parkway
,
Santa Clara
,
California
 
95054
(Address of principal executive offices)
 
(Zip Code)
(408)
547-5500
 
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
ANET
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
Accelerated filer
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of July 29, 2020 was 76,025,600.



ARISTA NETWORKS, INC.
TABLE OF CONTENTS
 
 
 
Page
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.
 
 
 


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
ARISTA NETWORKS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except par value)


June 30, 2020

December 31, 2019
ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$
800,182


$
1,111,286

Marketable securities

1,981,589


1,613,082

Accounts receivable, net of rebates and allowances of $1,780 and $6,160, respectively

383,225


391,987

Inventories

326,997


243,825

Prepaid expenses and other current assets

84,885


111,456

Total current assets

3,576,878


3,471,636

Property and equipment, net

35,263

 
39,273

Acquisition-related intangible assets, net

83,562

 
45,235

Goodwill

84,968

 
54,855

Investments

4,150

 
4,150

Operating lease right-of-use assets

79,283

 
87,770

Deferred tax assets

446,254

 
452,025

Other assets

25,493

 
30,346

TOTAL ASSETS

$
4,335,851


$
4,185,290

LIABILITIES AND STOCKHOLDERS’ EQUITY





CURRENT LIABILITIES:





Accounts payable

$
122,872


$
92,105

Accrued liabilities

100,070


140,249

Deferred revenue

328,525


312,668

Other current liabilities

88,714


52,052

Total current liabilities

640,181


597,074

Income taxes payable

45,971


55,485

Operating lease liabilities, non-current

74,259


83,022

Deferred revenue, non-current

248,986


262,620

Deferred tax liabilities, non-current

251,292


254,710

Other long-term liabilities

38,679


37,693

TOTAL LIABILITIES

1,299,368


1,290,604

Commitments and contingencies (Note 6)





STOCKHOLDERS’ EQUITY:





Preferred stock, $0.0001 par value—100,000 shares authorized and no shares issued and outstanding as of June 30, 2020 and December 31, 2019




Common stock, $0.0001 par value—1,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 75,964 and 76,389 shares issued and outstanding as of June 30, 2020 and December 31, 2019

8


8

Additional paid-in capital

1,185,093


1,106,305

Retained earnings

1,843,559


1,788,230

Accumulated other comprehensive income

7,823


143

TOTAL STOCKHOLDERS’ EQUITY

3,036,483


2,894,686

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
4,335,851


$
4,185,290

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)



Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019
Revenue:








Product

$
421,413


$
513,171


$
832,319


$
1,018,586

Service

119,157


95,150


231,280


185,159

Total revenue

540,570


608,321


1,063,599


1,203,745

Cost of revenue: 








Product

176,432


200,534


340,061


398,686

Service

20,049


17,596


41,198


34,298

Total cost of revenue

196,481


218,130


381,259


432,984

Gross profit

344,089


390,191


682,340


770,761

Operating expenses:








Research and development

111,544


114,295


224,698


233,964

Sales and marketing

51,237


53,040


108,323


104,093

General and administrative

14,319


16,019


32,668


31,525

Total operating expenses

177,100


183,354


365,689


369,582

Income from operations

166,989


206,837


316,651


401,179

Other income, net

8,256


13,811


20,413


26,144

Income before income taxes

175,245


220,648


337,064


427,323

Provision for income taxes

30,452


31,397


53,840


37,043

Net income

$
144,793


$
189,251


$
283,224


$
390,280

Net income attributable to common stockholders:








Basic

$
144,793


$
189,152


$
283,224


$
390,063

Diluted

$
144,793


$
189,158


$
283,224


$
390,076

Net income per share attributable to common stockholders:








Basic

$
1.91


$
2.47


$
3.72


$
5.12

Diluted

$
1.83


$
2.33


$
3.56


$
4.80

Weighted-average shares used in computing net income per share attributable to common stockholders:








Basic

75,808


76,552


76,036


76,238

Diluted

79,298


81,335


79,620


81,271


The accompanying notes are an integral part of these condensed consolidated financial statements.



2

Table of Contents

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, in thousands)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Net income
 
$
144,793

 
$
189,251

 
$
283,224

 
$
390,280

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
1,193

 
(272
)
 
(1,546
)
 
(37
)
Net change in unrealized gains on available-for-sale securities
 
5,802

 
2,887

 
9,226

 
6,066

Other comprehensive income
 
6,995

 
2,615

 
7,680

 
6,029

Comprehensive income
 
$
151,788

 
$
191,866

 
$
290,904

 
$
396,309


The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Table of Contents

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Stockholders Equity
(Unaudited, in thousands)
 
 
Three Months Ended June 30, 2020
 
Six Months Ended June 30, 2020
 
 
Common Stock  
 
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other Comprehensive Income
 
Total
Stockholders’ Equity
 
Common Stock  
 
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Balance at beginning of period
 
75,655

 
$
8

 
$
1,149,224

 
$
1,698,766

 
$
828

 
$
2,848,826

 
76,389

 
$
8

 
$
1,106,305

 
$
1,788,230

 
$
143

 
$
2,894,686

Net income
 

 

 

 
144,793

 

 
144,793

 

 

 

 
283,224

 

 
283,224

Other comprehensive income, net of tax
 

 

 

 

 
6,995

 
6,995

 

 

 

 

 
7,680

 
7,680

Stock-based compensation
 

 

 
32,922

 

 

 
32,922

 

 

 
60,478

 

 

 
60,478

Issuance of common stock in connection with employee equity incentive plans
 
319

 

 
5,146

 

 

 
5,146

 
801

 

 
22,228

 
 
 
 
 
22,228

Tax withholding paid for net share settlement of equity awards
 
(10
)
 

 
(2,260
)
 

 

 
(2,260
)
 
(17
)
 

 
(4,000
)
 

 

 
(4,000
)
Vesting of early-exercised stock options
 

 

 
61

 

 

 
61

 

 

 
82

 

 

 
82

Repurchase of common stock
 

 

 

 

 

 

 
(1,209
)
 

 

 
(227,895
)
 

 
(227,895
)
Balance at end of period
 
75,964

 
$
8

 
$
1,185,093

 
$
1,843,559

 
$
7,823

 
$
3,036,483

 
75,964

 
$
8

 
$
1,185,093

 
$
1,843,559

 
$
7,823

 
$
3,036,483


 
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
 
 
Common Stock  
 
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
 
Common Stock  
 
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance at beginning of period
 
76,453

 
$
8

 
$
1,005,405

 
$
1,395,534

 
$
(580
)
 
$
2,400,367

 
75,668

 
$
8

 
$
956,572

 
$
1,190,803

 
$
(3,994
)
 
$
2,143,389

Cumulative-effect adjustment to beginning balance(1)
 

 

 

 

 

 

 

 

 

 
3,702

 

 
3,702

Net income
 

 

 

 
189,251

 

 
189,251

 

 

 

 
390,280

 

 
390,280

Other comprehensive income, net of tax
 

 

 

 

 
2,615

 
2,615

 

 

 

 

 
6,029

 
6,029

Stock-based compensation
 

 

 
24,297

 

 

 
24,297

 

 

 
48,588

 

 

 
48,588

Issuance of common stock in connection with employee equity incentive plans
 
521

 

 
11,781

 

 

 
11,781

 
1,312

 

 
38,104

 

 

 
38,104

Tax withholding paid for net share settlement of equity awards
 
(12
)
 

 
(2,812
)
 

 

 
(2,812
)
 
(18
)
 

 
(4,662
)
 

 

 
(4,662
)
Vesting of early-exercised stock options
 

 

 
69

 

 

 
69

 

 

 
138

 

 

 
138

Repurchase of common stock
 
(407
)
 

 

 
(100,008
)
 

 
(100,008
)
 
(407
)
 

 

 
(100,008
)
 

 
(100,008
)
Balance at end of period
 
76,555

 
$
8

 
$
1,038,740

 
$
1,484,777

 
$
2,035

 
$
2,525,560

 
76,555

 
$
8

 
$
1,038,740

 
$
1,484,777

 
$
2,035

 
$
2,525,560

_________________________________________
(1) On January 1, 2019, we adopted Accounting Standard Codification Topic 842 - Leases (“ASC 842”), which resulted in a cumulative-effect adjustment to the beginning balance of Retained Earnings for 2019. 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents

ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)


Six Months Ended June 30,


2020

2019
CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$
283,224


$
390,280

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation, amortization and other

21,170


16,757

Stock-based compensation

60,478


48,588

Noncash lease expense

8,223


7,955

Deferred income taxes

2,668


7,914

Gain on investments in privately-held companies



(1,150
)
Amortization (accretion) of investment premiums (discounts)

2,938


(4,260
)
Changes in operating assets and liabilities:




Accounts receivable, net

15,263


(11,303
)
Inventories

(82,891
)

(49,620
)
Prepaid expenses and other current assets

26,815


48,864

Other assets

5,360


(4,635
)
Accounts payable

31,473


(6,783
)
Accrued liabilities

(39,882
)

(9,476
)
Deferred revenue

(19,242
)

(85,009
)
Income taxes payable

16,820


14,399

Other liabilities

646


3,955

Net cash provided by operating activities

333,063


366,476

CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from maturities of marketable securities

875,213


552,512

Purchases of marketable securities

(1,236,477
)

(549,383
)
Business acquisitions, net of cash acquired

(66,317
)


Purchases of property and equipment

(5,178
)

(8,639
)
Net cash used in investing activities

(432,759
)

(5,510
)
CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from issuance of common stock under equity plans

22,228


38,104

Tax withholding paid on behalf of employees for net share settlement

(4,000
)

(4,662
)
Repurchase of common stock

(227,895
)

(100,008
)
Net cash provided used in financing activities

(209,667
)

(66,566
)
Effect of exchange rate changes

(1,663
)

72

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(311,026
)

294,472

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period

1,115,515


654,164

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period (1)

$
804,489


$
948,636

 
 
 
 
 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Right-of-use assets recognized upon the adoption of ASC 842
 
$

 
$
93,207

Right-of-use assets obtained in exchange for new operating lease liabilities
 

 
9,130

Property and equipment included in accounts payable and accrued liabilities
 
788

 
1,376

___________________________________________________
 
 
 
 
(1) See Note 4 of the accompanying notes for a reconciliation of the ending balance of cash, cash equivalents and restricted cash as shown in these condensed consolidated statements of cash flows.
The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents

ARISTA NETWORKS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    Organization and Summary of Significant Accounting Policies
Organization
Arista Networks, Inc. (together with our subsidiaries, “we,” “our,” "Arista," "Company" or “us”) 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. Our cloud networking solutions consist of our Extensible Operating System ("EOS"), a set of network applications and our 1/2.5/5/10/25/40/50/100/400 Gigabit Ethernet switching and routing platforms. We are incorporated in the state of Delaware. Our corporate headquarters are located in Santa Clara, California, and we have wholly-owned subsidiaries throughout the world, including North America, Europe, Asia and Australia.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Arista Networks, Inc. and its wholly owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial information. The results for the three and six months ended June 30, 2020, are not necessarily indicative of the results expected for the full fiscal year. The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. All significant inter-company accounts and transactions have been eliminated.
Our condensed consolidated financial statements and related financial information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 14, 2020.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, revenue recognition and deferred revenue; allowance for doubtful accounts, sales rebates and return reserves; valuation of goodwill and acquisition-related intangible assets, accounting for income taxes, including the valuation allowance on deferred tax assets and reserves for uncertain tax positions; estimate of useful lives of long-lived assets including intangible assets; valuation of inventory and contract manufacturer/supplier liabilities; and the recognition and measurement of contingent liabilities. We evaluate our estimates and assumptions based on historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates.
Risks and Uncertainties
The global coronavirus ("COVID-19") pandemic and resulting mitigation efforts by governments around the world to contain or slow its spread have negatively impacted the global economy, disrupted business, sales activities, global supply chains and workforce participation, including our own, and created significant volatility and disruption of financial markets.
Our contract manufacturers and suppliers have experienced and continue to experience delays in the production and export of their products, which have negatively impacted our supply chain and could negatively impact our business in the future. In addition, we expect that COVID-19 related disruptions may have a negative impact on demand from our customers in future periods and contribute to an expected year-over-year decline in revenues for the year ending December 31, 2020. However, the extent of the impact of COVID-19 on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, and the impact of any initiatives and programs we may undertake to address financial and operational challenges, will depend on future developments, including the duration and spread of the pandemic and related mitigation efforts, as well as restrictions on travel and transport, all of which are uncertain and cannot be predicted. Management is actively monitoring the impact of the pandemic on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

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Recently Adopted Accounting Pronouncements
Credit Losses of Financial Instruments 
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. For trade receivables, we are required to estimate lifetime expected credit losses. For available-for-sale debt securities, we are required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. We adopted the new guidance in our first quarter of 2020 under a modified retrospective approach, and there was no material impact to our financial statements upon adoption. In addition, we do not anticipate that it will have a material impact on our consolidated statement of operations or consolidated statements of cash flows going forward.
2.    Business Combinations
On February 5, 2020, the Company completed its acquisition of Big Switch Networks, Inc. (“Big Switch”) a network monitoring and software-defined networking pioneer headquartered in Santa Clara, California. With the acquisition of Big Switch, we expect to expand our data center networking solutions and further strengthen our network monitoring and observability suite delivered through Arista’s software platform CloudVision and DANZ (DataANalyZer) capabilities.
We paid an aggregate of $73.3 million in cash for the acquisition, of which $5.3 million in severance and other costs was accounted for as post-combination expense and was excluded from the purchase consideration. We also incurred certain acquisition-related expenses and restructuring costs of $6.6 million, which primarily consisted of retention bonuses to continuing employees, professional and consulting fees, and facilities restructuring costs. The following table summarizes the purchase consideration of $68.0 million, and the preliminary purchase price allocation based on the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):
 
 
Preliminary Purchase Price Allocation
Tangible assets
 
$
13,376

Liabilities
 
(24,346
)
Intangible assets
 
49,040

Goodwill
 
29,926

     Net assets acquired
 
$
67,996


We continue the process of identifying and evaluating pending escrow claims related to tax and other liabilities. Accordingly, the preliminary values reflected in the table above are subject to potential measurement period adjustments.
The acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. The following table shows the valuation of the intangible assets acquired (in thousands) along with their estimated useful lives.
 
 
Acquisition Date Fair Value
 
Estimated Useful Life
Developed technology
 
$
31,040

 
5 years
Customer relationships
 
13,150

 
7 years
Non-compete agreements
 
4,060

 
2 years
Trade name
 
790

 
1 year
         Total intangible assets acquired
 
$
49,040

 
 

Goodwill of $29.9 million is primarily attributable to the expected synergies created by incorporating the solutions of the acquired businesses into our technology platform, and the value of the assembled workforce. Goodwill is not deductible for income taxes purposes. In addition, the acquisition of Big Switch did not have a material impact on our revenue and net income for the current period, and therefore pro forma financial information has not been presented.

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Table of Contents


3.    Fair Value Measurements
Assets and liabilities recorded at fair value on a recurring basis on the accompanying condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. We use a fair value hierarchy to measure fair value, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The three-tiers of the fair value hierarchy are as follows:
Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level II - Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level III - Unobservable inputs that are supported by little or no market data for the related assets or liabilities and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
We measure and report our cash equivalents, restricted cash, and available-for-sale marketable securities at fair value on a recurring basis. The following tables summarize the amortized costs, unrealized gains and losses and fair value of these financial assets by significant investment category and their level within the fair value hierarchy (in thousands):
 
 
June 30, 2020
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
Level I
 
Level II
 
Level III
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
355,353

 
$

 
$

 
$
355,353

 
$
355,353

 
$

 
$

Marketable Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial paper
 
68,865

 

 

 
68,865

 

 
68,865

 

Certificate of deposits(1)
 
3,000

 

 

 
3,000

 

 
3,000

 

U.S. government notes
 
607,806

 
5,271

 
(6
)
 
613,071

 
613,071

 

 

Corporate bonds
 
928,562

 
7,901

 
(175
)
 
936,288

 

 
936,288

 

Agency securities
 
359,923

 
460

 
(18
)
 
360,365

 

 
360,365

 

 
 
1,968,156

 
13,632

 
(199
)
 
1,981,589

 
613,071

 
1,368,518

 

Other Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds - restricted
 
4,307

 

 

 
4,307

 
4,307

 

 

Total Financial Assets
 
$
2,327,816

 
$
13,632

 
$
(199
)
 
$
2,341,249

 
$
972,731

 
$
1,368,518

 
$



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Table of Contents

 
 
December 31, 2019
 
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
Level I
 
Level II
 
Level III
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
562,580

 
$

 
$

 
$
562,580

 
$
562,580

 
$

 
$

Certificate of deposits(1)
 
4,001

 
 
 
 
 
4,001

 
 
 
4,001

 
 
 
 
566,581

 

 

 
566,581

 
562,580

 
4,001

 

Marketable Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial paper
 
66,717

 

 

 
66,717

 

 
66,717

 

Certificate of deposits(1)
 
3,000

 

 

 
3,000

 

 
3,000

 

U.S. government notes
 
518,884

 
414

 
(20
)
 
519,278

 
519,278

 

 

Corporate bonds
 
787,741

 
2,392

 
(73
)
 
790,060

 

 
790,060

 

Agency securities
 
233,491

 
577

 
(41
)
 
234,027

 

 
234,027

 

 
 
1,609,833

 
3,383

 
(134
)
 
1,613,082

 
519,278

 
1,093,804

 

Other Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds - restricted
 
4,229

 

 

 
4,229

 
4,229

 

 

Total Financial Assets
 
$
2,180,643

 
$
3,383

 
$
(134
)
 
$
2,183,892

 
$
1,086,087

 
$
1,097,805

 
$


______________________
(1) As of June 30, 2020 and December 31, 2019, all of our certificates of deposits were domestic deposits.
The unrealized losses associated with our marketable securities were immaterial as of June 30, 2020, and December 31, 2019. As of June 30, 2020 and December 31, 2019, we did not have any marketable securities that have been in a continuous unrealized loss position for more than twelve months. We invest in marketable securities that have maximum maturities of up to two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies. We did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable securities during the three and six months ended June 30, 2020.
As of June 30, 2020, the contractual maturities of our investments did not exceed 24 months. The fair values of available-for-sale marketable securities, by remaining contractual maturity, are as follows (in thousands):
 
 
June 30, 2020
Due in 1 year or less
 
$
1,340,607

Due in 1 year through 2 years
 
640,982

      Total marketable securities
 
$
1,981,589

The weighted-average remaining duration of our current marketable securities is approximately 0.8 years as of June 30, 2020. As we view these securities as available to support current operations, we classify securities with maturities beyond 12 months as current assets under the caption marketable securities on the accompanying unaudited condensed consolidated balance sheets.

4.    Financial Statements Details
Cash, Cash Equivalents and Restricted Cash
The following table is a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets that sum to the total of the same such amounts shown in the accompanying condensed consolidated statements of cash flows (in thousands):
 
 
June 30, 2020
 
June 30, 2019
Cash and cash equivalents
 
$
800,182

 
$
944,414

Restricted cash included in Other assets
 
4,307

 
4,222

    Total cash, cash equivalents and restricted cash
 
$
804,489

 
$
948,636



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Table of Contents

Restricted cash, which was included in "Other assets" on the accompanying condensed consolidated balance sheets as of June 30, 2020 and June 30, 2019, primarily consisted of $4.0 million pledged as collateral representing a security deposit required for a facility lease.
Accounts Receivable, Net
Accounts receivable, net consists of the following (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Accounts receivable
 
$
385,005

 
$
398,147

Allowance for doubtful accounts
 
(501
)
 
(638
)
Product sales rebate and returns reserve
 
(1,279
)
 
(5,522
)
   Accounts receivable, net
 
$
383,225

 
$
391,987


Inventories
Inventories consist of the following (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Raw materials
 
$
171,346

 
$
96,712

Finished goods
 
155,651

 
147,113

   Total inventories
 
$
326,997

 
$
243,825


Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Prepaid income taxes
 
$
490

 
$
20,153

Inventory deposit
 
11,740

 
13,716

Other current assets
 
56,980

 
64,464

Other prepaid expenses and deposits
 
15,675

 
13,123

   Total prepaid expenses and other current assets
 
$
84,885

 
$
111,456


Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Equipment and machinery
 
$
65,950

 
$
64,748

Computer hardware and software
 
39,104

 
36,627

Leasehold improvements 
 
31,217

 
31,235

Furniture and fixtures
 
3,733

 
3,774

Construction-in-process
 
488

 
265

    Property and equipment, gross
 
140,492

 
136,649

Less: accumulated depreciation
 
(105,229
)
 
(97,376
)
    Property and equipment, net
 
$
35,263

 
$
39,273


Depreciation expense was $5.1 million and $4.8 million for the three months ended June 30, 2020 and 2019, respectively, and $10.3 million and $9.5 million for the six months ended June 30, 2020 and 2019, respectively.

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Table of Contents

Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Accrued payroll related costs
 
$
44,230

 
$
80,133

Accrued manufacturing costs
 
27,345

 
31,920

Accrued product development costs
 
10,620

 
11,410

Accrued professional fees
 
5,418

 
6,335

Accrued warranty costs
 
6,071

 
6,742