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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 September 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,California95054
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueANETNew 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 October 27, 2020 was 75,661,464.


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)
September 30, 2020December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $970,349 $1,111,286 
Marketable securities1,875,552 1,613,082 
Accounts receivable, net of rebates and allowances of $4,326 and $6,160, respectively
300,217 391,987 
Inventories 438,102 243,825 
Prepaid expenses and other current assets 69,647 111,456 
Total current assets 3,653,867 3,471,636 
Property and equipment, net32,670 39,273 
Acquisition-related intangible assets, net77,752 45,235 
Goodwill84,968 54,855 
Investments4,150 4,150 
Operating lease right-of-use assets79,929 87,770 
Deferred tax assets 443,229 452,025 
Other assets22,807 30,346 
TOTAL ASSETS $4,399,372 $4,185,290 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $163,102 $92,105 
Accrued liabilities 110,348 140,249 
Deferred revenue 321,290 312,668 
Other current liabilities 70,043 52,052 
Total current liabilities 664,783 597,074 
Income taxes payable 47,918 55,485 
Operating lease liabilities, non-current74,903 83,022 
Deferred revenue, non-current 241,014 262,620 
Deferred tax liabilities, non-current247,712 254,710 
Other long-term liabilities 39,165 37,693 
TOTAL LIABILITIES 1,315,495 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 September 30, 2020 and December 31, 2019
— — 
Common stock, $0.0001 par value—1,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 75,632 and 76,389 shares issued and outstanding as of September 30, 2020 and December 31, 2019
88 
Additional paid-in capital 1,240,1471,106,305 
Retained earnings 1,844,6561,788,230 
Accumulated other comprehensive income (loss)(934)143 
TOTAL STOCKHOLDERS’ EQUITY 3,083,877 2,894,686 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $4,399,372 $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 September 30,

Nine Months Ended September 30,
2020201920202019
Revenue:
Product$480,242 $555,066 $1,312,561 $1,573,652 
Service 125,189 99,349 356,469 284,508 
Total revenue605,431 654,415 1,669,030 1,858,160 
Cost of revenue:
Product199,465 218,220 539,526 616,906 
Service 21,004 18,921 62,202 53,219 
Total cost of revenue220,469 237,141 601,728 670,125 
Gross profit 384,962 417,274 1,067,302 1,188,035 
Operating expenses:
Research and development 128,049 118,732 352,747 352,696 
Sales and marketing 53,372 55,279 161,695 159,372 
General and administrative 15,146 14,657 47,814 46,182 
Total operating expenses 196,567 188,668 562,256 558,250 
Income from operations188,395 228,606 505,046 629,785 
Other income, net 13,224 19,169 33,637 45,313 
Income before income taxes201,619 247,775 538,683 675,098 
Provision for income taxes33,244 38,880 87,084 75,923 
Net income$168,375 $208,895 $451,599 $599,175 
Net income attributable to common stockholders:
Basic $168,375 $208,799 $451,599 $598,861 
Diluted $168,375 $208,804 $451,599 $598,880 
Net income per share attributable to common stockholders:
Basic $2.22 $2.73 $5.94 $7.85 
Diluted $2.12 $2.59 $5.68 $7.38 
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic 75,999 76,426 76,024 76,301 
Diluted 79,313 80,753 79,519 81,104 

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 September 30,Nine Months Ended September 30,
2020201920202019
Net income$168,375 $208,895 $451,599 $599,175 
Other comprehensive income, net of tax:
Foreign currency translation adjustments 1,065 (1,730)(481)(1,767)
       Available-for-sale investments:
Change in net unrealized gains (losses) on available-for-sale securities(390)(104)8,836 5,962 
Less: reclassification adjustment for net (gains) included in net income(9,432)— (9,432)— 
Net change(9,822)(104)(596)5,962 
Other comprehensive income (loss)(8,757)(1,834)(1,077)4,195 
Comprehensive income$159,618 $207,061 $450,522 $603,370 

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 September 30, 2020Nine Months Ended September 30, 2020
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
SharesAmountSharesAmount
Balance at beginning of period75,964 $8 $1,185,093 $1,843,559 $7,823 $3,036,483 76,389 $8 $1,106,305 $1,788,230 $143 $2,894,686 
Net income — — — 168,375 — 168,375 — — — 451,599 — 451,599 
Other comprehensive loss, net of tax — — — — (8,757)(8,757)— — — — (1,077)(1,077)
Stock-based compensation — — 36,469 — — 36,469 — — 96,947 — — 96,947 
Issuance of common stock in connection with employee equity incentive plans 480 — 20,476 — — 20,476 1,281 — 42,704 42,704 
Tax withholding paid for net share settlement of equity awards(9)— (1,932)— — (1,932)(26)— (5,932)— — (5,932)
Vesting of early-exercised stock options— — 41 — — 41 — — 123 — — 123 
Repurchase of common stock(803)— — (167,278)— (167,278)(2,012)— — (395,173)— (395,173)
Balance at end of period75,632 $8 $1,240,147 $1,844,656 $(934)$3,083,877 75,632 $8 $1,240,147 $1,844,656 $(934)$3,083,877 
Three Months Ended September 30, 2019Nine Months Ended September 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
SharesAmountSharesAmount
Balance at beginning of period76,555 $8 $1,038,740 $1,484,777 $2,035 $2,525,560 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 — — — 208,895 — 208,895 — — — 599,175 — 599,175 
Other comprehensive income (loss), net of tax — — — — (1,834)(1,834)— — — — 4,195 4,195 
Stock-based compensation — — 26,257 — — 26,257 — — 74,845 — — 74,845 
Issuance of common stock in connection with employee equity incentive plans 336 — 14,073 — — 14,073 1,648 — 52,177 52,177 
Tax withholding paid for net share settlement of equity awards(11)— (2,407)— — (2,407)(29)— (7,069)— — (7,069)
Vesting of early-exercised stock options— — 69 — — 69 — — 207 — — 207 
Repurchase of common stock(512)— — (114,609)— (114,609)(919)— — (214,617)— (214,617)
Balance at end of period76,368 $8 $1,076,732 $1,579,063 $201 $2,656,004 76,368 $8 $1,076,732 $1,579,063 $201 $2,656,004 
_________________________________________
(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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ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine Months Ended September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$451,599 $599,175 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other31,975 24,948 
Stock-based compensation 96,947 74,845 
Noncash lease expense12,606 12,007 
Deferred income taxes 3,261 10,945 
Gain on sale of marketable securities(9,432)— 
Gain on investments in privately-held companies— (5,427)
Amortization (accretion) of investment premiums (discounts)6,030 (6,032)
Changes in operating assets and liabilities:
Accounts receivable, net98,271 (115,475)
Inventories(193,996)24,951 
Prepaid expenses and other current assets38,654 59,388 
Other assets7,850 (7,009)
Accounts payable71,803 (14,361)
Accrued liabilities(29,811)5,731 
Deferred revenue(34,449)(58,216)
Income taxes payable(1,667)29,808 
Other liabilities(1,451)595 
Net cash provided by operating activities548,190 635,873 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities1,183,601 806,519 
Purchases of marketable securities(2,216,436)(840,098)
Business acquisitions, net of cash acquired(66,317)(1,365)
Purchases of property and equipment (7,701)(13,319)
Proceeds from investments in privately-held companies 3,399 28,220 
Proceeds from sale of marketable securities 772,978 — 
Net cash used in investing activities (330,476)(20,043)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under equity plans 42,704 52,177 
Tax withholding paid on behalf of employees for net share settlement(5,932)(7,069)
Repurchase of common stock(395,173)(214,617)
Net cash provided used in financing activities(358,401)(169,509)
Effect of exchange rate changes (246)(994)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(140,933)445,327 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period 1,115,515 654,164 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period (1)
$974,582 $1,099,491 
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 liabilities5,031 10,948 
Property and equipment included in accounts payable and accrued liabilities456 684 
___________________________________________________
(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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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 nine months ended September 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 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 assets49,040 
Goodwill29,926 
     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 ValueEstimated Useful Life
Developed technology $31,040 5 years
Customer relationships13,150 7 years
Non-compete agreements4,060 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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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):
September 30, 2020
Amortized CostUnrealized GainsUnrealized LossesFair ValueLevel ILevel IILevel III
Financial Assets:
Cash Equivalents:
Money market funds $478,702 $— $— $478,702 $478,702 $— $— 
U.S. Treasuries73,656 — — 73,656 73,656 — — 
552,358 — — 552,358 552,358 — — 
Marketable Securities:
Commercial paper51,926 — — 51,926 — 51,926 — 
Certificate of deposits(1)
21,218 — — 21,218 — 21,218 — 
U.S. government notes522,044 412 (6)522,450 522,450 — — 
Corporate bonds824,132 2,079 (401)825,810 — 825,810 — 
Agency securities453,773 387 (12)454,148 — 454,148 — 
1,873,093 2,878 (419)1,875,552 522,450 1,353,102 — 
Other Assets:
Money market funds - restricted4,233 — — 4,233 4,233 — — 
Total Financial Assets$2,429,684 $2,878 $(419)$2,432,143 $1,079,041 $1,353,102 $— 
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December 31, 2019
Amortized CostUnrealized GainsUnrealized LossesFair ValueLevel ILevel IILevel 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 paper66,717 — — 66,717 — 66,717 — 
Certificate of deposits(1)
3,000 — — 3,000 — 3,000 — 
U.S. government notes518,884 414 (20)519,278 519,278 — — 
Corporate bonds787,741 2,392 (73)790,060 — 790,060 — 
Agency securities233,491 577 (41)234,027 — 234,027 — 
1,609,833 3,383 (134)1,613,082 519,278 1,093,804 — 
Other Assets:
Money market funds - restricted4,229 — — 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 September 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 September 30, 2020, and December 31, 2019. As of September 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 nine months ended September 30, 2020.
    As of September 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):
September 30, 2020
Due in 1 year or less$1,161,664 
Due in over 1 year through 2 years713,888 
      Total marketable securities
$1,875,552 
    The weighted-average remaining duration of our current marketable securities is approximately 0.9 years as of September 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):
September 30, 2020September 30, 2019
Cash and cash equivalents$970,349 $1,095,265 
Restricted cash included in Other assets4,233 4,226 
    Total cash, cash equivalents and restricted cash$974,582 $1,099,491 
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    Restricted cash, which was included in "Other assets" on the accompanying condensed consolidated balance sheets as of September 30, 2020 and September 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):
September 30, 2020December 31, 2019
Accounts receivable $304,543 $398,147 
Allowance for doubtful accounts (541)(638)
Product sales rebate and returns reserve(3,785)(5,522)
   Accounts receivable, net $300,217 $391,987 
Inventories
    Inventories consist of the following (in thousands):
September 30, 2020December 31, 2019
Raw materials $223,423 $96,712 
Finished goods 214,679 147,113 
   Total inventories $438,102 $243,825 
Prepaid Expenses and Other Current Assets
    Prepaid expenses and other current assets consist of the following (in thousands):
September 30, 2020December 31, 2019
Prepaid income taxes$564 $20,153 
Inventory deposit10,024 13,716 
Other current assets43,311 64,464 
Other prepaid expenses and deposits15,748 13,123 
   Total prepaid expenses and other current assets$69,647 $111,456 
Property and Equipment, Net
    Property and equipment, net consists of the following (in thousands):
September 30, 2020December 31, 2019
Equipment and machinery $67,978 $64,748 
Computer hardware and software 39,335 36,627 
Leasehold improvements
31,309 31,235 
Furniture and fixtures 3,754 3,774 
Construction-in-process 308 265 
    Property and equipment, gross 142,684 136,649 
Less: accumulated depreciation (110,014)(97,376)
    Property and equipment, net $32,670 $39,273 
    Depreciation expense was $4.9 million and $4.8 million for the three months ended September 30, 2020 and 2019, respectively, and $15.1 million and $14.3 million for the nine months ended September 30, 2020 and 2019, respectively.
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Accrued Liabilities
    Accrued liabilities consist of the following (in thousands):
September 30, 2020December 31, 2019
Accrued payroll related costs$44,920 $80,133 
Accrued manufacturing costs30,154 31,920 
Accrued product development costs16,983 11,410 
Accrued professional fees5,152 6,335 
Accrued warranty costs6,732 6,742 
Accrued taxes1,866 1,716 
Other4,541 1,993 
   Total accrued liabilities $110,348 $140,249 
Warranty Accrual
    The following table summarizes the activity related to our accrued liability for estimated future warranty costs (in thousands):
Nine Months Ended September 30,
20202019
Warranty accrual, beginning of period$6,742 $5,362 
Liabilities accrued for warranties issued during the period 4,507 3,887 
Warranty costs incurred during the period(4,517)(3,841)
Warranty accrual, end of period$