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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-1751121
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.0001 par value
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New York Stock Exchange
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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•
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our ability to maintain an adequate rate of revenue growth and our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin and operating expenses;
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our belief that the cloud networking market is rapidly evolving and has a significant potential opportunity for growth;
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our ability to expand our leadership position in the network switch industry, including the areas of mobility, virtualization, cloud computing and cloud networks, and to develop new products and expand our business into new markets;
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our ability to satisfy the requirements for cloud networking solutions and to successfully anticipate technological shifts and market needs, innovate new products and bring them to market in a timely manner;
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our ability to integrate and realize the benefits of our recent and future acquisitions;
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our business plan and our ability to effectively manage our growth, including the reporting requirements and compliance obligations of a public company;
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costs associated with defending intellectual property infringement and other claims and the potential outcomes of such disputes, such as those claims discussed in “Legal Proceedings,” including the OptumSoft litigation matters;
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our ability to retain and increase sales to existing customers and attract new end customers, including large end customers;
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the budgeting cycles and purchasing practices of end customers, including large end customers who may receive lower pricing terms due to volume discounts;
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the growth and buying patterns of our large end customers in which large bulk purchases may or may not occur in certain quarters;
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our inability to fulfill our end customers’ orders due to supply chain delays, access to key commodities or technologies or events that impact our manufacturers or their suppliers;
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the deferral or cancellation of orders by end customers, warranty returns or delays in acceptance of our products;
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our ability to further penetrate our existing customer base and sell more complex and higher-performance configurations of our products;
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our ability to displace existing products in established markets;
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our belief that increasing channel leverage will extend and improve our engagement with a broad set of customers;
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our ability to timely and effectively scale and adapt our existing technology;
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the benefits realized by our customers in their use of our products and services including lower total cost of ownership;
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our ability to expand our business domestically and internationally;
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the effects of increased competition in our market and our ability to compete effectively;
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the effects of seasonal and cyclical trends on our results of operations;
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our expectations concerning relationships with third parties;
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the attraction and retention of qualified employees and key personnel;
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our ability to maintain, protect and enhance our brand and intellectual property;
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economic and industry trends;
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estimates and estimate methodologies used in preparing our financial statements;
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future trading prices of our common stock;
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our belief that we have adequately reserved for uncertain tax positions;
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global economic and political conditions that introduce instability into the U.S. economy;
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the impact of global and domestic tax reform, including the Tax Cuts and Jobs Act of 2017;
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the impact of tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs recently implemented and additional tariffs that have been proposed by the U.S. government on various imports from China;
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our belief that our existing cash and cash equivalents together with cash flow from operations will be sufficient to meet our working capital requirements and our growth strategies for the foreseeable future; and
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future acquisitions of or investments in complementary companies, products, services or technologies;
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Capacity, Performance and Scalability.
Cloud networks must have sufficient capacity to interconnect large numbers of servers, up to hundreds of thousands, with predictable network bandwidth.
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High Availability.
Cloud networks must overcome hardware and software failures for customers in order to avoid network outages that can result in lost revenue, dissatisfied customers and increased operational cost.
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Open and Programmable.
Cloud networks must be based on open protocols and be programmable to enable integration with leading network applications and management and data analysis tools.
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Workflow Automation.
Cloud networks must offer automated provisioning and configuration to enable fast service delivery and to minimize operational costs, avoiding time-consuming and error-prone manual processes for configuring, provisioning, monitoring and managing the network.
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Network Visibility.
Cloud networks must provide IT administrators with real-time in-depth visibility of network status to proactively monitor, detect and notify when issues arise.
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Security.
Cloud networks require dynamic security and services from physical-to-physical and physical-to-virtual workloads.
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Cost Performance.
Cloud networks must deliver high performance while lowering overall cost of ownership, including capital and operational costs.
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Purpose-Built Cloud Networking Platform.
We have developed a highly scalable cloud networking platform that uses software to address the needs of large-scale internet companies, cloud service providers, financial services organizations, government agencies and media and entertainment companies, including virtualization, big data and low-latency applications. As a result, our cloud networking platform does not have the inherent limitations of legacy network architectures.
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Broad and Differentiated Portfolio.
Using multiple silicon architectures, we deliver switches and routers with industry-leading capacity, low latency, port density and power efficiency and have innovated in areas such as deep packet buffers, embedded optics and reversible cooling. Our broad portfolio has allowed us to offer customers products that best match their specific requirements.
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Single Binary Image Software.
The single binary image of EOS software allows us to maintain feature consistency across our entire product portfolio and enables us to introduce new software innovations into the market that become available to our entire installed base without a “forklift upgrade” (i.e., a broad upgrade of the data center infrastructure).
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Rapid Development of New Features and Applications.
Our highly modular EOS software has allowed us to rapidly deliver new features and applications while preserving the structural integrity and quality of our network operating system. We believe our ability to deliver new features and capabilities more quickly than legacy switch/router operators, provides us with a strategic advantage given that the requirements in cloud and next-generation data center networking continue to evolve rapidly.
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Deep Understanding of Customer Requirements.
We have developed close working relationships with many of our largest customers that provide us with insights about their needs and future requirements. This has allowed us to develop and deliver products to market that meet customer demands and expectations as well as to rapidly grow sales to existing customers.
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Strong Management and Engineering Team with Significant Data Center Networking Expertise.
Our management and engineering team consists of networking veterans with extensive data center networking expertise. Our President and Chief Executive Officer, Jayshree Ullal, with 30+ years of networking expertise from silicon to systems companies. Andy Bechtolsheim, our Founder and Chief Development Officer, was previously a Founder and chief system architect at Sun Microsystems. Kenneth Duda, our Founder and Chief Technology Officer, led the software development effort of EOS.
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Significant Technology Lead.
We believe that our networking technology represents a fundamental advance in networking software. Our EOS software is state-driven and the result of more than 1,000 man-years of research and development investment over a ten-year period with 10+ million lines of code as a key cloud networking software stack.
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Centralized representation of distributed network state, allowing for a single point of integration and network-wide visibility and analytics;
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Controller agnostic support for physical and virtual workload orchestration through open APIs such as OVSDB, JSON and Openstack plugins;
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Turn-key automation for zero touch provisioning, configuration management and network-wide upgrades and rollback;
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Compliance Dashboard for Security, Audit and patch management;
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Real-time Streaming for Telemetry and Network Analytics, a modern approach to replace legacy polling per device;
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Provides visibility and troubleshooting for underlay and overlay networks; and
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Enables Macro-Segmentation Services which provides a dynamic and scalable network service to logically insert security devices into the path of traffic, regardless of whether the security device or workload is physical or virtual and with complete flexibility on placement of security devices and workloads.
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breadth of product offerings and features;
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reliability and product quality;
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ease of use;
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pricing;
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total cost of ownership, including automation, monitoring and integration costs;
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performance and scale;
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programmability and extensibility;
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interoperability with other products;
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ability to be bundled with other vendor offerings; and
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quality of service, support and fulfillment.
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Our ability to develop new products and services that address the customer requirements for these markets;
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Our ability to attract a customer base in markets in which we have less experience;
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Our successful development of new sales and marketing strategies to meet customer requirements;
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Our ability to compete with new and existing competitors in these adjacent markets, many of which may have more financial resources, market experience, brand recognition, relevant intellectual property rights, or established customer relationships than we currently do;
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Our ability to skillfully balance our investment in adjacent markets with investment in our existing products and services;
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our ability to increase sales to existing customers and attract new end customers, including large end customers;
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the budgeting cycles, purchasing practices and buying patterns of end customers, including large end customers who may receive lower pricing terms due to volume discounts and who may or may not make large bulk purchases in certain quarters;
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changes in end-customer, geographic or product mix;
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changes in growth rates of the networking market;
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the cost and potential outcomes of existing and future litigation, including the OptumSoft litigation matters;
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increased expenses resulting from the tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs recently implemented and additional tariffs that have been proposed by the U.S. government on various imports from China;
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changes in the sales and implementation cycles for our products including the qualification and testing of our products by our customers and any delays or cancellations of purchases caused by such activities;
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the rate of expansion and productivity of our sales force including any expansion into new markets;
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changes in our pricing policies, whether initiated by us or as a result of competition;
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our inability to fulfill our end customers’ orders due to the availability of inventory, supply chain delays, access to key commodities or technologies or events that impact our manufacturers or their suppliers;
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the amount and timing of operating costs and capital expenditures related to the operation and expansion of our business;
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changes in end-customer, distributor or reseller requirements or market needs;
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difficulty forecasting, budgeting and planning due to limited visibility beyond the first two quarters into the spending plans of current or prospective customers;
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deferral, reduction or cancellation of orders from end customers, including in anticipation of new products or product enhancements announced by us or our competitors, or warranty returns;
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the inclusion of any acceptance provisions in our customer contracts or any delays in acceptance of those products;
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the actual or rumored timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or end customers;
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our ability to successfully expand our business domestically and internationally;
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our ability to increase the size of our sales or distribution channel, any disruption in our sales or distribution channels, and/or termination of our relationship with important channel partners;
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decisions by potential end customers to purchase our networking solutions from larger, more established vendors, white box vendors or their primary network equipment vendors;
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price competition;
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insolvency or credit difficulties confronting our end customers, which could adversely affect their ability to purchase or pay for our products and services, or confronting our key suppliers, including our sole source suppliers, which could disrupt our supply chain;
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seasonality or cyclical fluctuations in our markets;
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future accounting pronouncements or changes in our accounting policies;
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stock-based compensation expense;
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our overall effective tax rate, including impacts caused by any reorganization in our corporate structure, any changes in our valuation allowance for domestic deferred tax assets and any new legislation or regulatory developments, including the Tax Cuts and Jobs Act of 2017 (the “Tax Act”);
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increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates, as an increasing portion of our expenses are incurred and paid in currencies other than the U.S. dollar;
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general economic conditions, both domestically and in foreign markets; and
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other risk factors described in this Annual Report on Form 10-K.
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greater name recognition and longer operating histories;
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larger sales and marketing budgets and resources;
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broader distribution and established relationships with channel partners and end customers;
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greater access to larger end-customer bases;
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greater end-customer support resources;
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greater manufacturing resources;
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the ability to leverage their sales efforts across a broader portfolio of products;
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the ability to leverage purchasing power with vendor subcomponents;
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the ability to bundle competitive offerings with other products and services;
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the ability to develop their own silicon chips;
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the ability to set more aggressive pricing policies including bundling of products that are competitive with ours with other products that we do not sell or with support service contracts;
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lower labor and development costs;
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greater resources to make acquisitions;
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larger intellectual property portfolios; and
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substantially greater financial, technical, research and development or other resources.
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greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;
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increased expenses incurred in establishing and maintaining our international operations;
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fluctuations in exchange rates between the U.S. dollar and foreign currencies where we do business;
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greater difficulty and costs in recruiting local experienced personnel;
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wage inflation in certain growing economies;
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general economic and political conditions in these foreign markets;
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economic uncertainty around the world as a result of sovereign debt issues;
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communication and integration problems resulting from cultural and geographic dispersion;
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limitations on our ability to access cash resources in our international operations;
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ability to establish necessary business relationships and to comply with local business requirements;
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risks associated with foreign legal requirements, including the importation, certification and localization of our products required in foreign countries;
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risks associated with U.S. government trade restrictions, including those which may impose restrictions, including prohibitions, on the exportation, reexportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons;
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greater risk of unexpected changes in regulatory practices, tariffs and tax laws and treaties, including the Tax Act;
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greater risk of unexpected changes in tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs recently implemented and additional tariffs that have been proposed by the U.S. government on various imports from China, Canada, Mexico and the EU, and by the governments of these jurisdictions on certain U.S. goods, and any other possible tariffs that may be imposed on services such as ours, the scope and duration of which, if implemented, remain uncertain;
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deterioration of political relations between the U.S. and Canada, the U.K., the EU and China, which could have a material adverse effect on our sales and operations in these countries;
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greater risk of changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;
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the uncertainty of protection for intellectual property rights in some countries;
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greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices; and
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heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements.
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changes in end-customer, geographic or product mix, including mix of configurations within each product group;
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increased price competition and changes in the actions of our competitors or their pricing strategies;
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introduction of new products, including products with price-performance advantages and new business models including the sale and delivery of more software and subscription solutions;
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increases in material or component costs including such increases caused by any restriction from sourcing components and manufacturing products internationally;
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our ability to reduce production costs;
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entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development;
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entry in markets with different pricing and cost structures;
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pricing discounts;
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increases in material costs in the event we are restricted from sourcing components and manufacturing products internationally.
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costs associated with defending intellectual property infringement and other claims and the potential outcomes of such disputes, such as those claims discussed in “Legal Proceedings,” including the OptumSoft litigation matters;
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excess inventory and inventory holding charges;
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obsolescence charges;
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changes in shipment volume;
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the timing of revenue recognition and revenue deferrals;
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increased cost, loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates;
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increased costs arising from the tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs recently implemented and additional tariffs that have been proposed by the U.S. government on various imports from China, Canada, Mexico and the E.U. and by the governments of these jurisdictions on certain U.S. goods;
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lower than expected benefits from value engineering;
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changes in distribution channels;
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increased warranty costs; and
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our ability to execute our strategy and operating plans.
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evolve or enhance our products and services;
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continue to expand our sales and marketing and research and development organizations;
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acquire complementary technologies, products or businesses;
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expand operations in the U.S. or internationally;
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hire, train and retain employees; or
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respond to competitive pressures or unanticipated working capital requirements.
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sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen;
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our electronic communications systems, including email and other methods, could be disrupted, and our ability to conduct our business operations could be seriously damaged until such systems can be restored;
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our ability to process customer orders and electronically deliver products and services could be degraded, and our distribution channels could be disrupted, resulting in delays in revenue recognition;
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defects and security vulnerabilities could be introduced into our software, thereby damaging the reputation and perceived reliability and security of our products and potentially making the data systems of our customers vulnerable to further data loss and cyber incidents; and
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personally identifiable data of our customers, employees and business partners could be compromised.
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actual or anticipated announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;
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forward-looking statements related to future revenue, gross margins and earnings per share;
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price and volume fluctuations in the overall stock market from time to time;
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changes in the growth rate of the networking market;
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litigation involving us, our industry, or both including events occurring in our litigation with OptumSoft;
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manufacturing, supply or distribution shortages or constraints, or challenges with adding or changing our manufacturing process or supply chain;
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significant volatility in the market price and trading volume of technology companies in general and of companies in the IT security industry in particular;
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fluctuations in the trading volume of our shares or the size of our public float;
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sales by our officers, directors or significant stockholders;
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actual or anticipated changes or fluctuations in our results of operations;
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adverse changes to our relationships with any of our channel partners;
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whether our results of operations or our financial outlook for future fiscal periods meet the expectations of securities analysts or investors;
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actual or anticipated changes in the expectations of investors or securities analysts;
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regulatory developments in the U.S., foreign countries or both;
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general economic conditions and trends;
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major catastrophic events;
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sales of large blocks of our common stock; or
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departures of key personnel.
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a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
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the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
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the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
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the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors, our president, our secretary or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
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the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
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the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
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advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
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Year Ended December 31,
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2018
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2017
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2016
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2015
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2014
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(in thousands)
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||||||||||||||||||
Cost of revenue
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|
$
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5,087
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|
|
$
|
4,353
|
|
|
$
|
3,620
|
|
|
$
|
3,048
|
|
|
$
|
1,535
|
|
Research and development
|
|
48,205
|
|
|
42,184
|
|
|
31,892
|
|
|
25,515
|
|
|
14,986
|
|
|||||
Sales and marketing
|
|
24,995
|
|
|
17,953
|
|
|
15,666
|
|
|
11,454
|
|
|
7,643
|
|
|||||
General and administrative
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|
12,915
|
|
|
10,937
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|
|
7,854
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|
|
5,286
|
|
|
3,455
|
|
|||||
Total stock-based compensation
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|
$
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91,202
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|
|
$
|
75,427
|
|
|
$
|
59,032
|
|
|
$
|
45,303
|
|
|
$
|
27,619
|
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2018
|
|
2017
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue
|
|
$
|
|
% of
Revenue
|
|
$
|
|
%
|
|||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
|
$
|
1,841,100
|
|
|
85.6
|
%
|
|
$
|
1,432,810
|
|
|
87.0
|
%
|
|
$
|
408,290
|
|
|
28.5
|
%
|
Service
|
|
310,269
|
|
|
14.4
|
|
|
213,376
|
|
|
13.0
|
|
|
96,893
|
|
|
45.4
|
|
|||
Total revenue
|
|
2,151,369
|
|
|
100.0
|
|
|
1,646,186
|
|
|
100.0
|
|
|
505,183
|
|
|
30.7
|
|
|||
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
|
720,584
|
|
|
33.5
|
|
|
538,035
|
|
|
32.7
|
|
|
182,549
|
|
|
33.9
|
|
|||
Service
|
|
57,408
|
|
|
2.7
|
|
|
46,382
|
|
|
2.8
|
|
|
11,026
|
|
|
23.8
|
|
|||
Total cost of revenue
|
|
777,992
|
|
|
36.2
|
|
|
584,417
|
|
|
35.5
|
|
|
193,575
|
|
|
33.1
|
|
|||
Gross profit
|
|
$
|
1,373,377
|
|
|
63.8
|
%
|
|
$
|
1,061,769
|
|
|
64.5
|
%
|
|
$
|
311,608
|
|
|
29.3
|
%
|
Gross margin
|
|
63.8
|
%
|
|
|
|
64.5
|
%
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
2018
|
|
% of Total
|
|
2017
|
|
% of Total
|
||||||
Americas
|
|
$
|
1,550,453
|
|
|
72.1
|
%
|
|
$
|
1,192,289
|
|
|
72.4
|
%
|
Europe, Middle East and Africa
|
|
414,069
|
|
|
19.2
|
|
|
299,547
|
|
|
18.2
|
|
||
Asia-Pacific
|
|
186,847
|
|
|
8.7
|
|
|
154,350
|
|
|
9.4
|
|
||
Total revenue
|
|
$
|
2,151,369
|
|
|
100.0
|
%
|
|
$
|
1,646,186
|
|
|
100.0
|
%
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2018
|
|
2017
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue |
|
$
|
|
% of
Revenue |
|
$
|
|
%
|
|||||||||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest expense
|
|
$
|
(2,701
|
)
|
|
(0.1
|
)%
|
|
$
|
(2,780
|
)
|
|
(0.2
|
)%
|
|
$
|
79
|
|
|
(2.8
|
)%
|
Other income (expense), net
|
|
18,155
|
|
|
0.8
|
|
|
7,268
|
|
|
0.4
|
|
|
10,887
|
|
|
149.8
|
|
|||
Total other income (expense), net
|
|
$
|
15,454
|
|
|
0.7
|
%
|
|
$
|
4,488
|
|
|
0.2
|
%
|
|
$
|
10,966
|
|
|
244.3
|
%
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2018
|
|
2017
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue |
|
$
|
|
% of
Revenue |
|
$
|
|
%
|
|||||||||
Provision for (benefit from) income taxes
|
|
$
|
(39,314
|
)
|
|
(1.9
|
)%
|
|
$
|
51,559
|
|
|
3.1
|
%
|
|
$
|
(90,873
|
)
|
|
(176.3
|
)
|
Effective tax rate
|
|
(13.6
|
)%
|
|
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2017
|
|
2016
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue
|
|
$
|
|
% of
Revenue
|
|
$
|
|
%
|
|||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
|
$
|
1,432,810
|
|
|
87.0
|
%
|
|
$
|
991,337
|
|
|
87.8
|
%
|
|
$
|
441,473
|
|
|
44.5
|
%
|
Service
|
|
213,376
|
|
|
13.0
|
|
|
137,830
|
|
|
12.2
|
|
|
75,546
|
|
|
54.8
|
|
|||
Total revenue
|
|
1,646,186
|
|
|
100.0
|
|
|
1,129,167
|
|
|
100.0
|
|
|
517,019
|
|
|
45.8
|
|
|||
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
|
538,035
|
|
|
32.7
|
|
|
369,768
|
|
|
32.8
|
|
|
168,267
|
|
|
45.5
|
|
|||
Service
|
|
46,382
|
|
|
2.8
|
|
|
36,283
|
|
|
3.2
|
|
|
10,099
|
|
|
27.8
|
|
|||
Total cost of revenue
|
|
584,417
|
|
|
35.5
|
|
|
406,051
|
|
|
36.0
|
|
|
178,366
|
|
|
43.9
|
|
|||
Gross profit
|
|
$
|
1,061,769
|
|
|
64.5
|
%
|
|
$
|
723,116
|
|
|
64.0
|
%
|
|
$
|
338,653
|
|
|
46.8
|
%
|
Gross margin
|
|
64.5
|
%
|
|
|
|
64.0
|
%
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
2017
|
|
% of Total
|
|
2016
|
|
% of Total
|
||||||
Americas
|
|
$
|
1,192,289
|
|
|
72.4
|
%
|
|
$
|
874,740
|
|
|
77.5
|
%
|
Europe, Middle East and Africa
|
|
299,547
|
|
|
18.2
|
|
|
168,789
|
|
|
14.9
|
|
||
Asia-Pacific
|
|
154,350
|
|
|
9.4
|
|
|
85,638
|
|
|
7.6
|
|
||
Total revenue
|
|
$
|
1,646,186
|
|
|
100.0
|
%
|
|
$
|
1,129,167
|
|
|
100.0
|
%
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2017
|
|
2016
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue
|
|
$
|
|
% of
Revenue
|
|
$
|
|
%
|
|||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
|
$
|
349,594
|
|
|
21.2
|
%
|
|
$
|
273,581
|
|
|
24.2
|
%
|
|
$
|
76,013
|
|
|
27.8
|
%
|
Sales and marketing
|
|
155,105
|
|
|
9.4
|
|
|
130,887
|
|
|
11.6
|
|
|
24,218
|
|
|
18.5
|
|
|||
General and administrative
|
|
86,798
|
|
|
5.3
|
|
|
75,239
|
|
|
6.7
|
|
|
11,559
|
|
|
15.4
|
|
|||
Total operating expenses
|
|
$
|
591,497
|
|
|
35.9
|
%
|
|
$
|
479,707
|
|
|
42.5
|
%
|
|
$
|
111,790
|
|
|
23.3
|
%
|
|
|
Year Ended December 31,
|
|
|
|||||||||||||||||
|
|
2017
|
|
2016
|
|
Change in
|
|||||||||||||||
|
|
$
|
|
% of
Revenue |
|
$
|
|
% of
Revenue |
|
$
|
|
%
|
|||||||||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest expense
|
|
$
|
(2,780
|
)
|
|
(0.2
|
)%
|
|
$
|
(3,136
|
)
|
|
(0.3
|
)%
|
|
$
|
356
|
|
|
(11.4
|
)%
|
Other income (expense), net
|
|
7,268
|
|
|
0.4
|
|
|
1,952
|
|
|
0.2
|
|
|
5,316
|
|
|
272.3
|
|
|||
Total other income (expense), net
|
|
$
|
4,488
|
|
|
0.2
|
%
|
|
$
|
(1,184
|
)
|
|
(0.1
|
)%
|
|
$
|
5,672
|
|
|
(479.1
|
)%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
As Adjusted
(1)
|
|
2016
As Adjusted (1) |
||||||
|
|
(in thousands)
|
||||||||||
Cash provided by operating activities
|
|
$
|
503,119
|
|
|
$
|
631,627
|
|
|
$
|
174,295
|
|
Cash used in investing activities
(1)
|
|
(755,113
|
)
|
|
(391,320
|
)
|
|
(325,775
|
)
|
|||
Cash provided by financing activities
|
|
42,851
|
|
|
51,469
|
|
|
32,745
|
|
|||
Effect of exchange rate changes
|
|
(1,390
|
)
|
|
753
|
|
|
(464
|
)
|
|||
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
|
$
|
(210,533
|
)
|
|
$
|
292,529
|
|
|
$
|
(119,199
|
)
|
__________________________
|
|
|
|
|
|
|||||||
(1) Cash used in investing activities for year ended December 31, 2017 and 2016 were adjusted as a result of our adoption of ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, in the first quarter of 2018. See Note 1.
Organization and Summary of Significant Accounting Policies
included in Part II, Item 8, of this Annual Report on Form 10-K for more information.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than
1 Year
|
|
1 to 3 Years
|
|
3 to 5 Years
|
|
More than
5 Years
|
||||||||||
Financing lease obligation
(1)
|
|
$
|
31,649
|
|
|
$
|
6,321
|
|
|
$
|
13,192
|
|
|
$
|
12,136
|
|
|
$
|
—
|
|
Operating lease obligations
|
|
103,351
|
|
|
12,789
|
|
|
28,077
|
|
|
26,616
|
|
|
35,869
|
|
|||||
Purchase commitments with contract manufacturers and suppliers
|
|
345,968
|
|
|
345,968
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other non-cancellable purchase obligations
|
|
43,254
|
|
|
43,254
|
|
|
—
|
|
|
—
|
|
|
|
||||||
Total
|
|
$
|
524,222
|
|
|
$
|
408,332
|
|
|
$
|
41,269
|
|
|
$
|
38,752
|
|
|
$
|
35,869
|
|
___________________
|
|
|
|
|
|
|
|
|
||||||||||||
(1)
Includes interest and land lease.
|
•
|
Identification of the contract, or contracts, with a customer
|
•
|
Identification of the performance obligations in the contract
|
•
|
Determination of the transaction price
|
•
|
Allocation of the transaction price to the performance obligations in the contract
|
•
|
Recognition of revenue when (or as) we satisfy the performance obligation
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
|
||||
CURRENT ASSETS:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
649,950
|
|
|
$
|
859,192
|
|
Marketable securities
|
|
1,306,197
|
|
|
676,363
|
|
||
Accounts receivable, net of rebates and allowances of
$9,120
and $7,535, respectively
|
|
331,777
|
|
|
247,346
|
|
||
Inventories
|
|
264,557
|
|
|
306,198
|
|
||
Prepaid expenses and other current assets
|
|
162,321
|
|
|
177,330
|
|
||
Total current assets
|
|
2,714,802
|
|
|
2,266,429
|
|
||
Property and equipment, net
|
|
75,355
|
|
|
74,279
|
|
||
Acquisition-related intangible assets, net
|
|
58,610
|
|
|
—
|
|
||
Goodwill
|
|
53,684
|
|
|
—
|
|
||
Investments
|
|
30,336
|
|
|
36,136
|
|
||
Deferred tax assets
|
|
126,492
|
|
|
65,125
|
|
||
Other assets
|
|
22,704
|
|
|
18,891
|
|
||
TOTAL ASSETS
|
|
$
|
3,081,983
|
|
|
$
|
2,460,860
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
CURRENT LIABILITIES:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
93,757
|
|
|
$
|
52,200
|
|
Accrued liabilities
|
|
123,254
|
|
|
133,827
|
|
||
Deferred revenue
|
|
358,586
|
|
|
327,706
|
|
||
Other current liabilities
|
|
30,907
|
|
|
16,172
|
|
||
Total current liabilities
|
|
606,504
|
|
|
529,905
|
|
||
Income taxes payable
|
|
36,167
|
|
|
34,067
|
|
||
Lease financing obligations, non-current
|
|
35,431
|
|
|
37,673
|
|
||
Deferred revenue, non-current
|
|
228,641
|
|
|
187,556
|
|
||
Other long-term liabilities
|
|
31,851
|
|
|
9,745
|
|
||
TOTAL LIABILITIES
|
|
938,594
|
|
|
798,946
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|||
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
||||
Preferred stock, $0.0001 par value—100,000 shares authorized and no shares issued and outstanding as of December 31, 2018 and 2017
|
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value—1,000,000 shares authorized as of December 31, 2018 and 2017; 75,668 and 73,706 shares issued and outstanding as of December 31, 2018 and 2017
|
|
8
|
|
|
7
|
|
||
Additional paid-in capital
|
|
956,572
|
|
|
804,731
|
|
||
Retained earnings
|
|
1,190,803
|
|
|
859,114
|
|
||
Accumulated other comprehensive loss
|
|
(3,994)
|
|
|
(1,938
|
)
|
||
TOTAL STOCKHOLDERS’ EQUITY
|
|
2,143,389
|
|
|
1,661,914
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
3,081,983
|
|
|
$
|
2,460,860
|
|
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Product
|
|
$
|
1,841,100
|
|
|
$
|
1,432,810
|
|
|
$
|
991,337
|
|
Service
|
|
310,269
|
|
|
213,376
|
|
|
137,830
|
|
|||
Total revenue
|
|
2,151,369
|
|
|
1,646,186
|
|
|
1,129,167
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Product
|
|
720,584
|
|
|
538,035
|
|
|
369,768
|
|
|||
Service
|
|
57,408
|
|
|
46,382
|
|
|
36,283
|
|
|||
Total cost of revenue
|
|
777,992
|
|
|
584,417
|
|
|
406,051
|
|
|||
Gross profit
|
|
1,373,377
|
|
|
1,061,769
|
|
|
723,116
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Research and development
|
|
442,468
|
|
|
349,594
|
|
|
273,581
|
|
|||
Sales and marketing
|
|
187,142
|
|
|
155,105
|
|
|
130,887
|
|
|||
General and administrative
|
|
65,420
|
|
|
86,798
|
|
|
75,239
|
|
|||
Legal settlement (Note 14)
|
|
405,000
|
|
|
—
|
|
|
—
|
|
|||
Total operating expenses
|
|
1,100,030
|
|
|
591,497
|
|
|
479,707
|
|
|||
Income from operations
|
|
273,347
|
|
|
470,272
|
|
|
243,409
|
|
|||
Other income (expense), net:
|
|
|
|
|
|
|
||||||
Interest expense
|
|
(2,701
|
)
|
|
(2,780
|
)
|
|
(3,136
|
)
|
|||
Other income (expense), net
|
|
18,155
|
|
|
7,268
|
|
|
1,952
|
|
|||
Total other income (expense), net
|
|
15,454
|
|
|
4,488
|
|
|
(1,184
|
)
|
|||
Income before income taxes
|
|
288,801
|
|
|
474,760
|
|
|
242,225
|
|
|||
Provision for (benefit from) income taxes
|
|
(39,314
|
)
|
|
51,559
|
|
|
58,036
|
|
|||
Net income
|
|
$
|
328,115
|
|
|
$
|
423,201
|
|
|
$
|
184,189
|
|
Net income attributable to common stockholders:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
327,926
|
|
|
$
|
422,400
|
|
|
$
|
182,965
|
|
Diluted
|
|
$
|
327,941
|
|
|
$
|
422,468
|
|
|
$
|
183,039
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
4.39
|
|
|
$
|
5.85
|
|
|
$
|
2.66
|
|
Diluted
|
|
$
|
4.06
|
|
|
$
|
5.35
|
|
|
$
|
2.50
|
|
Weighted-average shares used in computing net income per share attributable to common stockholders:
|
|
|
|
|
|
|
||||||
Basic
|
|
74,750
|
|
|
72,258
|
|
|
68,771
|
|
|||
Diluted
|
|
80,844
|
|
|
78,977
|
|
|
73,222
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income
|
|
$
|
328,115
|
|
|
$
|
423,201
|
|
|
$
|
184,189
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
|
(2,069
|
)
|
|
672
|
|
|
(348
|
)
|
|||
Net change in unrealized gains (losses) on available-for-sale marketable securities
|
|
13
|
|
|
(1,135
|
)
|
|
(452
|
)
|
|||
Other comprehensive loss
|
|
(2,056
|
)
|
|
(463
|
)
|
|
(800
|
)
|
|||
Comprehensive income
|
|
$
|
326,059
|
|
|
$
|
422,738
|
|
|
$
|
183,389
|
|
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Total
Stockholders’ Equity |
|||||||||||||
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance — December 31, 2015
|
|
68,132
|
|
|
$
|
7
|
|
|
$
|
537,904
|
|
|
$
|
250,916
|
|
|
$
|
(675
|
)
|
|
$
|
788,152
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184,189
|
|
|
—
|
|
|
184,189
|
|
|||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(800
|
)
|
|
(800
|
)
|
|||||
Tax benefit for equity incentive plans
|
|
—
|
|
|
—
|
|
|
42,084
|
|
|
—
|
|
|
—
|
|
|
42,084
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
59,032
|
|
|
—
|
|
|
—
|
|
|
59,032
|
|
|||||
Issuance of common stock in connection with employee equity incentive plans
|
|
2,694
|
|
|
—
|
|
|
35,181
|
|
|
—
|
|
|
—
|
|
|
35,181
|
|
|||||
Tax withholding paid for net share settlement of equity awards
|
|
(15
|
)
|
|
—
|
|
|
(1,100
|
)
|
|
—
|
|
|
—
|
|
|
(1,100
|
)
|
|||||
Vesting of early exercised stock options and restricted stock
|
|
—
|
|
|
—
|
|
|
1,082
|
|
|
—
|
|
|
—
|
|
|
1,082
|
|
|||||
Balance — December 31, 2016
|
|
70,811
|
|
|
7
|
|
|
674,183
|
|
|
435,105
|
|
|
(1,475
|
)
|
|
1,107,820
|
|
|||||
Cumulative-effect adjustment to beginning balance
(1)
|
|
—
|
|
|
—
|
|
|
1,471
|
|
|
808
|
|
|
—
|
|
|
2,279
|
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
423,201
|
|
|
|
|
423,201
|
|
||||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(463
|
)
|
|
(463
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
75,427
|
|
|
—
|
|
|
—
|
|
|
75,427
|
|
|||||
Issuance of common stock in connection with employee equity incentive plans
|
|
2,918
|
|
|
—
|
|
|
57,111
|
|
|
—
|
|
|
—
|
|
|
57,111
|
|
|||||
Tax withholding paid for net share settlement of equity awards
|
|
(23
|
)
|
|
—
|
|
|
(4,025
|
)
|
|
—
|
|
|
—
|
|
|
(4,025
|
)
|
|||||
Vesting of early-exercised stock options
|
|
—
|
|
|
—
|
|
|
564
|
|
|
—
|
|
|
—
|
|
|
564
|
|
|||||
Balance — December 31, 2017
|
|
73,706
|
|
|
7
|
|
|
804,731
|
|
|
859,114
|
|
|
(1,938
|
)
|
|
1,661,914
|
|
|||||
Cumulative-effect adjustment to beginning balance
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,574
|
|
|
—
|
|
|
3,574
|
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
328,115
|
|
|
—
|
|
|
328,115
|
|
|||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,056
|
)
|
|
(2,056
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
91,202
|
|
|
—
|
|
|
—
|
|
|
91,202
|
|
|||||
Issuance of common stock in connection with employee equity incentive plans
|
|
1,918
|
|
|
1
|
|
|
53,657
|
|
|
—
|
|
|
—
|
|
|
53,658
|
|
|||||
Tax withholding paid for net share settlement of equity awards
|
|
(36
|
)
|
|
—
|
|
|
(8,878
|
)
|
|
—
|
|
|
—
|
|
|
(8,878
|
)
|
|||||
Vesting of early-exercised stock options
|
|
—
|
|
|
—
|
|
|
305
|
|
|
—
|
|
|
—
|
|
|
305
|
|
|||||
Common stock issued for business acquisition
|
|
80
|
|
|
—
|
|
|
15,555
|
|
|
—
|
|
|
—
|
|
|
15,555
|
|
|||||
Balance — December 31, 2018
|
|
75,668
|
|
|
$
|
8
|
|
|
$
|
956,572
|
|
|
$
|
1,190,803
|
|
|
$
|
(3,994
|
)
|
|
$
|
2,143,389
|
|
_________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(1) During our first fiscal quarter of 2017, we adopted ASU 2016-09,
Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. See Note 1 of the accompanying notes for further details. This adoption resulted in a cumulative-effect adjustment to the beginning balance of Additional Paid-in Capital and Retained Earnings for 2017.
(2) On January 1, 2018, we adopted ASC 606 and ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory , which resulted in a cumulative-effect adjustment to the beginning balance of Retained Earnings for 2018. See Note 1 of the accompanying notes for further details. |
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
As Adjusted
(1)
|
|
2016
As Adjusted
(1)
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
328,115
|
|
|
$
|
423,201
|
|
|
$
|
184,189
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation, amortization and other
|
|
27,671
|
|
|
20,640
|
|
|
19,749
|
|
|||
Stock-based compensation
|
|
91,202
|
|
|
75,427
|
|
|
59,032
|
|
|||
Deferred income taxes
|
|
(57,896
|
)
|
|
8,426
|
|
|
(21,720
|
)
|
|||
Loss on investments in privately-held companies, net
|
|
13,800
|
|
|
—
|
|
|
—
|
|
|||
Amortization (accretion) of investment premiums (discounts)
|
|
(3,360
|
)
|
|
1,452
|
|
|
1,493
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
(77,916
|
)
|
|
5,773
|
|
|
(108,856
|
)
|
|||
Inventories
|
|
51,054
|
|
|
(69,708
|
)
|
|
(144,361
|
)
|
|||
Prepaid expenses and other current assets
|
|
21,411
|
|
|
(11,645
|
)
|
|
(115,074
|
)
|
|||
Other assets
|
|
(3,389
|
)
|
|
907
|
|
|
2,866
|
|
|||
Accounts payable
|
|
39,337
|
|
|
(30,104
|
)
|
|
38,678
|
|
|||
Accrued liabilities
|
|
(14,786
|
)
|
|
43,535
|
|
|
30,629
|
|
|||
Deferred revenue
|
|
70,533
|
|
|
142,327
|
|
|
176,126
|
|
|||
Income taxes payable
|
|
(112
|
)
|
|
19,921
|
|
|
42,650
|
|
|||
Other liabilities
|
|
17,455
|
|
|
1,475
|
|
|
8,894
|
|
|||
Net cash provided by operating activities
|
|
503,119
|
|
|
631,627
|
|
|
174,295
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from maturities of marketable securities
|
|
547,797
|
|
|
206,332
|
|
|
137,855
|
|
|||
Purchases of marketable securities
|
|
(1,174,259
|
)
|
|
(585,373
|
)
|
|
(439,711
|
)
|
|||
Business acquisitions, net of cash acquired
|
|
(96,821
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(23,830
|
)
|
|
(15,279
|
)
|
|
(21,419
|
)
|
|||
Proceeds from repayment of notes receivable
|
|
2,000
|
|
|
3,000
|
|
|
—
|
|
|||
Investments in privately-held companies
|
|
(8,000
|
)
|
|
—
|
|
|
(2,500
|
)
|
|||
Other investing activities
|
|
(2,000
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash used in investing activities
(1)
|
|
(755,113
|
)
|
|
(391,320
|
)
|
|
(325,775
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Principal payments of lease financing obligations
|
|
(1,929
|
)
|
|
(1,617
|
)
|
|
(1,336
|
)
|
|||
Proceeds from issuance of common stock under equity plans
|
|
53,658
|
|
|
57,111
|
|
|
35,181
|
|
|||
Tax withholding paid on behalf of employees for net share settlement
|
|
(8,878
|
)
|
|
(4,025
|
)
|
|
(1,100
|
)
|
|||
Net cash provided by financing activities
|
|
42,851
|
|
|
51,469
|
|
|
32,745
|
|
|||
Effect of exchange rate changes
|
|
(1,390
|
)
|
|
753
|
|
|
(464
|
)
|
|||
NET INCREASE
/(DECREASE)
IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
(210,533
|
)
|
|
292,529
|
|
|
(119,199
|
)
|
|||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period
|
|
864,697
|
|
|
572,168
|
|
|
691,367
|
|
|||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period
(2)
|
|
$
|
654,164
|
|
|
$
|
864,697
|
|
|
$
|
572,168
|
|
|
|
|
|
|
|
|
||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
||||||
Cash paid for income taxes, net of refunds
|
|
$
|
17,573
|
|
|
$
|
44,216
|
|
|
$
|
39,638
|
|
Cash paid for interest — lease financing obligation
|
|
2,692
|
|
|
2,814
|
|
|
2,916
|
|
|||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
|
|
|
|
|
|
|
||||||
Common stock issued for business acquisition
|
|
$
|
15,555
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Property and equipment included in accounts payable and accrued liabilities
|
|
2,340
|
|
|
3,811
|
|
|
869
|
|
|||
Vesting of early exercised stock options and restricted stock awards
|
|
305
|
|
|
564
|
|
|
1,082
|
|
|||
___________________________________________________
|
|
|
|
|
|
|
||||||
(1) Net cash used in investing activities for the years ended December 31 of 2017 and 2016, respectively, was adjusted as a result of our adoption of ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, in the first quarter of 2018. See Note 1 of the accompanying notes for details of the adjustments.
(2) See Note 4 of the accompanying notes for a reconciliation of the ending balance of cash, cash equivalents and restricted cash as shown in this consolidated statements of cash flows. |
•
|
Identification of the contract, or contracts, with a customer
|
•
|
Identification of the performance obligations in the contract
|
•
|
Determination of the transaction price
|
•
|
Allocation of the transaction price to the performance obligations in the contract
|
•
|
Recognition of revenue when (or as) we satisfy the performance obligation
|
|
|
Purchase Price Allocation
|
||
Cash and cash equivalents
|
|
$
|
4,953
|
|
Other tangible assets
|
|
23,677
|
|
|
Liabilities
|
|
(28,706
|
)
|
|
Intangible assets
|
|
63,720
|
|
|
Goodwill
|
|
53,684
|
|
|
Net assets acquired
|
|
$
|
117,328
|
|
|
|
Acquisition Date Fair Value
|
|
Estimated Useful Life
|
||
Developed technology
|
|
$
|
52,510
|
|
|
5 years
|
Customer relationships
|
|
7,080
|
|
|
7 years
|
|
Trade name
|
|
2,470
|
|
|
3 years
|
|
Others
|
|
1,660
|
|
|
1 year
|
|
Total intangible assets acquired
|
|
$
|
63,720
|
|
|
|
|
|
December 31, 2017
|
||||||||||||||||||||||||||
|
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
|
Level I
|
|
Level II
|
|
Level III
|
||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash Equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Money market funds
|
|
$
|
701,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
701,145
|
|
|
$
|
701,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Agency securities
|
|
12,728
|
|
|
—
|
|
|
—
|
|
|
12,728
|
|
|
|
|
12,728
|
|
|
—
|
|
||||||||
|
|
713,873
|
|
|
—
|
|
|
—
|
|
|
713,873
|
|
|
701,145
|
|
|
12,728
|
|
|
—
|
|
|||||||
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Commercial paper
|
|
11,924
|
|
|
—
|
|
|
—
|
|
|
11,924
|
|
|
—
|
|
|
11,924
|
|
|
—
|
|
|||||||
U.S. government notes
|
|
137,025
|
|
|
—
|
|
|
(378
|
)
|
|
136,647
|
|
|
136,647
|
|
|
—
|
|
|
—
|
|
|||||||
Corporate bonds
|
|
313,080
|
|
|
20
|
|
|
(616
|
)
|
|
312,484
|
|
|
—
|
|
|
312,484
|
|
|
—
|
|
|||||||
Agency securities
|
|
215,923
|
|
|
2
|
|
|
(617
|
)
|
|
215,308
|
|
|
—
|
|
|
215,308
|
|
|
—
|
|
|||||||
|
|
677,952
|
|
|
22
|
|
|
(1,611
|
)
|
|
676,363
|
|
|
136,647
|
|
|
539,716
|
|
|
—
|
|
|||||||
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Money market funds - restricted
|
|
5,505
|
|
|
—
|
|
|
—
|
|
|
5,505
|
|
|
5,505
|
|
|
—
|
|
|
—
|
|
|||||||
Total Financial Assets
|
|
$
|
1,397,330
|
|
|
$
|
22
|
|
|
$
|
(1,611
|
)
|
|
$
|
1,395,741
|
|
|
$
|
843,297
|
|
|
$
|
552,444
|
|
|
$
|
—
|
|
|
|
December 31, 2018
|
||
Due in 1 year or less
|
|
$
|
875,498
|
|
Due in 1 year through 2 years
|
|
430,699
|
|
|
Total marketable securities
|
|
$
|
1,306,197
|
|
|
|
December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash and cash equivalents
|
|
$
|
649,950
|
|
|
$
|
859,192
|
|
|
$
|
567,923
|
|
Restricted cash included in other assets
|
|
4,214
|
|
|
5,505
|
|
|
4,245
|
|
|||
Total cash, cash equivalents and restricted cash
|
|
$
|
654,164
|
|
|
$
|
864,697
|
|
|
$
|
572,168
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Accounts receivable
|
|
$
|
340,897
|
|
|
$
|
254,881
|
|
Allowance for doubtful accounts
|
|
(507
|
)
|
|
(112
|
)
|
||
Product sales rebate and returns reserve
|
|
(8,613
|
)
|
|
(7,423
|
)
|
||
Accounts receivable, net
|
|
$
|
331,777
|
|
|
$
|
247,346
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at the beginning of year
|
|
$
|
112
|
|
|
$
|
204
|
|
|
$
|
963
|
|
Additions (deductions) charged (credited) to expense
|
|
368
|
|
|
17
|
|
|
(292
|
)
|
|||
Addition in connection with business acquisitions
|
|
132
|
|
|
—
|
|
|
—
|
|
|||
Deductions/write-offs
|
|
(105
|
)
|
|
(109
|
)
|
|
(467
|
)
|
|||
Balance at the end of year
|
|
$
|
507
|
|
|
$
|
112
|
|
|
$
|
204
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at the beginning of year
|
|
$
|
7,423
|
|
|
$
|
1,317
|
|
|
$
|
566
|
|
Additions charged against revenue
|
|
4,269
|
|
|
17,371
|
|
|
5,122
|
|
|||
Consumption
|
|
(3,079
|
)
|
|
(11,265
|
)
|
|
(4,371
|
)
|
|||
Balance at the end of year
|
|
$
|
8,613
|
|
|
$
|
7,423
|
|
|
$
|
1,317
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Raw materials
|
|
$
|
76,795
|
|
|
$
|
69,673
|
|
Finished goods
|
|
187,762
|
|
|
236,525
|
|
||
Total inventories
|
|
$
|
264,557
|
|
|
$
|
306,198
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Inventory deposit
|
|
$
|
14,639
|
|
|
$
|
34,141
|
|
Prepaid income taxes
|
|
38,636
|
|
|
38,134
|
|
||
Other current assets
|
|
95,730
|
|
|
96,215
|
|
||
Other prepaid expenses and deposits
|
|
13,316
|
|
|
8,840
|
|
||
Total prepaid expenses and other current assets
|
|
$
|
162,321
|
|
|
$
|
177,330
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Equipment and machinery
|
|
$
|
55,912
|
|
|
$
|
47,711
|
|
Computer hardware and software
|
|
30,566
|
|
|
22,124
|
|
||
Furniture and fixtures
|
|
3,697
|
|
|
3,020
|
|
||
Leasehold improvements
|
|
36,447
|
|
|
30,548
|
|
||
Building
|
|
35,154
|
|
|
35,154
|
|
||
Construction-in-process
|
|
3,591
|
|
|
4,742
|
|
||
Property and equipment, gross
|
|
165,367
|
|
|
143,299
|
|
||
Less: accumulated depreciation
|
|
(90,012
|
)
|
|
(69,020
|
)
|
||
Property and equipment, net
|
|
$
|
75,355
|
|
|
$
|
74,279
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Accrued payroll related costs
|
|
$
|
70,755
|
|
|
$
|
56,626
|
|
Accrued manufacturing costs
|
|
31,336
|
|
|
35,703
|
|
||
Accrued product development costs
|
|
6,988
|
|
|
21,201
|
|
||
Accrued warranty costs
|
|
5,362
|
|
|
7,415
|
|
||
Accrued professional fees
|
|
5,678
|
|
|
7,086
|
|
||
Accrued taxes
|
|
839
|
|
|
794
|
|
||
Other
|
|
2,296
|
|
|
5,002
|
|
||
Total accrued liabilities
|
|
$
|
123,254
|
|
|
$
|
133,827
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Warranty accrual, beginning of year
|
|
$
|
7,415
|
|
|
$
|
6,744
|
|
Liabilities accrued for warranties issued during the year
|
|
3,565
|
|
|
5,542
|
|
||
Warranty costs incurred during the year
|
|
(5,618
|
)
|
|
(4,871
|
)
|
||
Warranty accrual, end of year
|
|
$
|
5,362
|
|
|
$
|
7,415
|
|
|
|
Year Ended December 31, 2018
|
||
Contract assets, beginning balance
|
|
$
|
—
|
|
Contract assets, ending balance
|
|
$
|
6,341
|
|
|
|
Year Ended December 31, 2018
|
||
Contract liabilities, beginning balance
|
|
$
|
16,521
|
|
Less: Revenue recognized from beginning balance
|
|
(7,561
|
)
|
|
Less: Beginning balance reclassified to deferred revenue
|
|
(371
|
)
|
|
Add: Contract liabilities recognized
|
|
24,006
|
|
|
Contract liabilities, ending balance
|
|
$
|
32,595
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Interest income
|
|
$
|
31,666
|
|
|
$
|
8,093
|
|
|
$
|
2,995
|
|
Interest expense
|
|
(2,701
|
)
|
|
(2,780
|
)
|
|
(3,136
|
)
|
|||
Loss on investments in privately-held companies, net
|
|
(13,800
|
)
|
|
—
|
|
|
—
|
|
|||
Other income (expense)
|
|
289
|
|
|
(825
|
)
|
|
(1,043
|
)
|
|||
Total other income (expense), net
|
|
$
|
15,454
|
|
|
$
|
4,488
|
|
|
$
|
(1,184
|
)
|
|
|
December 31, 2018
|
||||||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Remaining Useful Life
(In Years)
|
||||||
Developed technology
|
|
$
|
52,510
|
|
|
$
|
(3,824
|
)
|
|
$
|
48,686
|
|
|
4.6
|
Customer relationships
|
|
7,080
|
|
|
(375
|
)
|
|
6,705
|
|
|
6.6
|
|||
Trade name
|
|
2,470
|
|
|
(289
|
)
|
|
2,181
|
|
|
2.7
|
|||
Others
|
|
1,660
|
|
|
(622
|
)
|
|
1,038
|
|
|
0.6
|
|||
Total
|
|
$
|
63,720
|
|
|
$
|
(5,110
|
)
|
|
$
|
58,610
|
|
|
4.7
|
Years Ending December 31,
|
|
|
||
2019
|
|
$
|
12,789
|
|
2020
|
|
13,769
|
|
|
2021
|
|
14,308
|
|
|
2022
|
|
14,291
|
|
|
2023
|
|
12,325
|
|
|
Thereafter
|
|
35,869
|
|
|
Total minimum future lease payments
|
|
$
|
103,351
|
|
Years Ending December 31,
|
|
|
||
2019
|
|
$
|
6,321
|
|
2020
|
|
6,506
|
|
|
2021
|
|
6,686
|
|
|
2022
|
|
6,871
|
|
|
2023
|
|
5,265
|
|
|
Thereafter
|
|
—
|
|
|
Total payments
|
|
31,649
|
|
|
Less: interest and land lease expense
|
|
(17,536
|
)
|
|
Total payments under lease financing obligations
|
|
14,113
|
|
|
Property reverting to landlord
|
|
23,630
|
|
|
Present value of obligations
|
|
37,743
|
|
|
Less: current portion
|
|
(2,312
|
)
|
|
Lease financing obligations, non-current
|
|
$
|
35,431
|
|
|
|
Number of
Shares Underlying
Outstanding Options
|
|
Weighted-
Average Exercise Price per Share |
|
Weighted-
Average Remaining Contractual Term (In Years) |
|
Aggregate
Intrinsic Value |
|||||
Balance—December 31, 2017
|
|
7,024
|
|
|
$
|
33.05
|
|
|
6.1
|
|
$
|
1,422,637
|
|
Options granted
|
|
113
|
|
|
241.92
|
|
|
|
|
|
|||
Options exercised
|
|
(1,189
|
)
|
|
32.24
|
|
|
|
|
|
|||
Options canceled
|
|
(49
|
)
|
|
49.53
|
|
|
|
|
|
|||
Balance—December 31, 2018
|
|
5,899
|
|
|
$
|
37.09
|
|
|
5.2
|
|
$
|
1,027,741
|
|
Vested and exercisable—December 31, 2018
|
|
3,097
|
|
|
$
|
25.22
|
|
|
4.7
|
|
$
|
574,392
|
|
|
|
Number of
Shares |
|
Weighted-
Average Grant Date Fair Value Per Share |
|
Weighted-Average
Remaining
Contractual Term (In Years)
|
|
Aggregate Intrinsic Value
|
|||||
Unvested balance—December 31, 2017
|
|
1,537
|
|
|
$
|
104.29
|
|
|
1.6
|
|
$
|
362,119
|
|
RSUs granted
|
|
378
|
|
|
257.91
|
|
|
|
|
|
|||
RSUs vested
|
|
(538
|
)
|
|
96.49
|
|
|
|
|
|
|||
RSUs forfeited/canceled
|
|
(69
|
)
|
|
129.00
|
|
|
|
|
|
|||
Unvested balance—December 31, 2018
|
|
1,308
|
|
|
$
|
150.60
|
|
|
1.5
|
|
$
|
275,638
|
|
|
|
Number of Shares
|
|
Balance—December 31, 2017
|
|
13,512
|
|
Authorized
|
|
2,211
|
|
Options granted
|
|
(113
|
)
|
RSUs granted
|
|
(378
|
)
|
Options canceled
|
|
49
|
|
RSUs forfeited
|
|
69
|
|
Shares traded for taxes
|
|
36
|
|
Balance—December 31, 2018
|
|
15,386
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
|
$
|
5,087
|
|
|
$
|
4,353
|
|
|
$
|
3,620
|
|
Research and development
|
|
48,205
|
|
|
42,184
|
|
|
31,892
|
|
|||
Sales and marketing
|
|
24,995
|
|
|
17,953
|
|
|
15,666
|
|
|||
General and administrative
|
|
12,915
|
|
|
10,937
|
|
|
7,854
|
|
|||
Total stock-based compensation
|
|
$
|
91,202
|
|
|
$
|
75,427
|
|
|
$
|
59,032
|
|
|
|
Year Ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected term (in years)
|
|
7.0
|
|
|
6.3
|
|
|
6.7
|
|
Risk-free interest rate
|
|
2.9
|
%
|
|
2.1
|
%
|
|
1.5
|
%
|
Expected volatility
|
|
44.6
|
%
|
|
38.9
|
%
|
|
38.9
|
%
|
Dividend rate
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
Year Ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected term (in years)
|
|
1.1
|
|
|
1.2
|
|
|
1.2
|
|
Risk-free interest rate
|
|
2.4
|
%
|
|
1.1
|
%
|
|
0.6
|
%
|
Expected volatility
|
|
41.9
|
%
|
|
31.7
|
%
|
|
31.8
|
%
|
Dividend rate
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
December 31, 2018
|
||||||||||||||
|
|
Stock Option
|
|
RSU
|
|
ESPP
|
|
Restricted Stock
|
||||||||
Unrecognized stock-based compensation expense
|
|
$
|
56,441
|
|
|
$
|
177,382
|
|
|
$
|
6,474
|
|
|
$
|
5,387
|
|
Weighted-average amortization period
|
|
3.6 years
|
|
|
3.3 years
|
|
|
1.0 year
|
|
|
3.7 years
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
328,115
|
|
|
$
|
423,201
|
|
|
$
|
184,189
|
|
Less: undistributed earnings allocated to participating securities
|
|
(189
|
)
|
|
(801
|
)
|
|
(1,224
|
)
|
|||
Net income available to common stockholders, basic
|
|
$
|
327,926
|
|
|
$
|
422,400
|
|
|
$
|
182,965
|
|
Diluted:
|
|
|
|
|
|
|
||||||
Net income attributable to common stockholders, basic
|
|
$
|
327,926
|
|
|
$
|
422,400
|
|
|
$
|
182,965
|
|
Add: undistributed earnings allocated to participating securities
|
|
15
|
|
|
68
|
|
|
74
|
|
|||
Net income attributable to common stockholders, diluted
|
|
$
|
327,941
|
|
|
$
|
422,468
|
|
|
$
|
183,039
|
|
Denominator:
|
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
|
||||||
Weighted-average shares used in computing net income per share available to common stockholders, basic
|
|
74,750
|
|
|
72,258
|
|
|
68,771
|
|
|||
Diluted:
|
|
|
|
|
|
|
||||||
Weighted-average shares used in computing net income per share available to common stockholders, basic
|
|
74,750
|
|
|
72,258
|
|
|
68,771
|
|
|||
Add weighted-average effect of dilutive securities:
|
|
|
|
|
|
|
||||||
Stock options, RSUs and RSAs
|
|
6,083
|
|
|
6,599
|
|
|
4,408
|
|
|||
Employee stock purchase plan
|
|
11
|
|
|
120
|
|
|
43
|
|
|||
Weighted-average shares used in computing net income per share available to common stockholders, diluted
|
|
80,844
|
|
|
78,977
|
|
|
73,222
|
|
|||
Net income per share attributable to common stockholders:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
4.39
|
|
|
$
|
5.85
|
|
|
$
|
2.66
|
|
Diluted
|
|
$
|
4.06
|
|
|
$
|
5.35
|
|
|
$
|
2.50
|
|
|
|
Year Ended December 31,
|
|||||||
|
|
2018
|
|
2017
|
|
2016
|
|||
Stock options and RSUs to purchase common stock
|
|
140
|
|
|
58
|
|
|
2,594
|
|
Employee stock purchase plan
|
|
71
|
|
|
—
|
|
|
—
|
|
Total
|
|
211
|
|
|
58
|
|
|
2,594
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Domestic
|
|
$
|
136,818
|
|
|
$
|
373,221
|
|
|
$
|
196,202
|
|
Foreign
|
|
151,983
|
|
|
101,539
|
|
|
46,023
|
|
|||
Income before income taxes
|
|
$
|
288,801
|
|
|
$
|
474,760
|
|
|
$
|
242,225
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current provision for income taxes:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
6,113
|
|
|
$
|
31,935
|
|
|
$
|
64,594
|
|
State
|
|
2,018
|
|
|
3,645
|
|
|
10,529
|
|
|||
Foreign
|
|
10,451
|
|
|
7,322
|
|
|
4,675
|
|
|||
Total current
|
|
18,582
|
|
|
42,902
|
|
|
79,798
|
|
|||
Deferred taxes benefit:
|
|
|
|
|
|
|
||||||
Federal
|
|
(57,726
|
)
|
|
12,795
|
|
|
(18,579
|
)
|
|||
State
|
|
(4,164
|
)
|
|
(3,404
|
)
|
|
(3,564
|
)
|
|||
Foreign
|
|
3,994
|
|
|
(734
|
)
|
|
381
|
|
|||
Total deferred
|
|
(57,896
|
)
|
|
8,657
|
|
|
(21,762
|
)
|
|||
Total provision for (benefit from) income taxes
|
|
$
|
(39,314
|
)
|
|
$
|
51,559
|
|
|
$
|
58,036
|
|
•
|
The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our controlled foreign corporations (“CFCs”). In 2018, we recorded a Transition Tax expense of
$6.1 million
in addition to the provisional Transition Tax obligation of
$18.8 million
recorded in 2017.
|
•
|
The Tax Act reduces the corporate tax rate to
21 percent
, effective January 1, 2018. For the year ended December 31, 2017, we recorded a provisional decrease of
$33.0 million
for our net deferred tax assets, with a corresponding net adjustment to deferred income tax expense. There was no material change to this provision in 2018.
|
•
|
The Tax Act creates a new requirement to provide U.S. tax on foreign earnings, global intangible low taxed income (“GILTI”). Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). We selected the deferred method of accounting. As a result we recorded a discrete deferred tax benefit of
$11.0 million
for the year ended December 31, 2018 to record the associated basis differences anticipated to influence prospective GILTI calculations.
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Property and equipment
|
|
$
|
1,890
|
|
|
$
|
1,942
|
|
Stock-based compensation
|
|
19,186
|
|
|
22,050
|
|
||
Reserves and accruals not currently deductible
|
|
77,373
|
|
|
41,024
|
|
||
Net operating losses
|
|
11,052
|
|
|
2,432
|
|
||
Tax credits
|
|
57,793
|
|
|
30,831
|
|
||
Capitalized R&D expenses
|
|
30,027
|
|
|
—
|
|
||
Other
|
|
2,053
|
|
|
2,115
|
|
||
Gross deferred tax assets
|
|
199,374
|
|
|
100,394
|
|
||
Valuation allowance
|
|
(56,724
|
)
|
|
(35,132
|
)
|
||
Total deferred tax assets
|
|
142,650
|
|
|
65,262
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Acquired intangibles
|
|
(13,401
|
)
|
|
—
|
|
||
Accrued liabilities
|
|
(5,190
|
)
|
|
(2,006
|
)
|
||
Other
|
|
(1,320
|
)
|
|
(9
|
)
|
||
Total deferred tax liabilities
|
|
(19,911
|
)
|
|
(2,015
|
)
|
||
Net deferred tax assets
|
|
$
|
122,739
|
|
|
$
|
63,247
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets, non-current
|
|
$
|
126,492
|
|
|
$
|
65,125
|
|
Deferred tax liabilities, non-current
|
|
(3,753
|
)
|
|
(1,878
|
)
|
||
Total net deferred tax assets
|
|
$
|
122,739
|
|
|
|
$63,247
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Gross unrecognized tax benefits—beginning balance
|
|
$
|
48,835
|
|
|
$
|
26,915
|
|
|
$
|
22,239
|
|
Increases related to tax positions taken in a prior year
|
|
330
|
|
|
1,243
|
|
|
46
|
|
|||
Increases related to tax positions taken during current year
|
|
27,413
|
|
|
22,202
|
|
|
11,359
|
|
|||
Decreases related to tax positions taken in a prior year
|
|
(675
|
)
|
|
(21
|
)
|
|
(426
|
)
|
|||
Decreases related to settlements with taxing authorities
|
|
—
|
|
|
—
|
|
|
(432
|
)
|
|||
Decreases related to lapse of statute of limitations
|
|
(2,173
|
)
|
|
(1,504
|
)
|
|
(5,871
|
)
|
|||
Adjustment for acquisition
|
|
706
|
|
|
—
|
|
|
—
|
|
|||
Gross unrecognized tax benefits—ending balance
|
|
$
|
74,436
|
|
|
$
|
48,835
|
|
|
$
|
26,915
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Americas
|
|
$
|
1,550,453
|
|
|
$
|
1,192,289
|
|
|
$
|
874,740
|
|
Europe, Middle East and Africa
|
|
414,069
|
|
|
299,547
|
|
|
168,789
|
|
|||
Asia Pacific
|
|
186,847
|
|
|
154,350
|
|
|
85,638
|
|
|||
Total revenue
|
|
$
|
2,151,369
|
|
|
$
|
1,646,186
|
|
|
$
|
1,129,167
|
|
1.
|
Consolidated Financial Statements
|
2.
|
Financial Statement Schedules
|
3.
|
Exhibits
|
|
|
|
|
Incorporated by Reference
|
||||||||
Exhibit Number
|
|
Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
3.1
|
|
|
10-Q
|
|
001-36468
|
|
3.1
|
|
8/8/2014
|
|
|
|
3.2
|
|
|
10-Q
|
|
001-36468
|
|
3.2
|
|
8/8/2014
|
|
|
|
4.1
|
|
|
S-1/A
|
|
333-194899
|
|
4.1
|
|
4/21/2014
|
|
|
|
4.2
|
|
|
S-1
|
|
333-194899
|
|
4.2
|
|
3/31/2014
|
|
|
|
4.3
|
|
|
S-1
|
|
333-194899
|
|
4.3
|
|
3/31/2014
|
|
|
|
10.1
|
|
|
S-1/A
|
|
333-194899
|
|
10.1
|
|
5/2/2014
|
|
|
|
10.2 †
|
|
|
S-1
|
|
333-194899
|
|
10.2
|
|
3/31/2014
|
|
|
|
10.3 †
|
|
|
S-1
|
|
333-194899
|
|
10.3
|
|
3/31/2014
|
|
|
|
10.4 †
|
|
|
S-1/A
|
|
333-194899
|
|
10.4
|
|
5/27/2014
|
|
|
|
10.5 †
|
|
|
10-K
|
|
001-36468
|
|
10.5
|
|
3/12/2015
|
|
|
|
10.6 †
|
|
|
S-1
|
|
333-194899
|
|
10.6
|
|
3/31/2014
|
|
|
|
10.7 †
|
|
|
S-1
|
|
333-194899
|
|
10.7
|
|
3/31/2014
|
|
|
|
10.8 †
|
|
|
S-1
|
|
333-194899
|
|
10.8
|
|
3/31/2014
|
|
|
|
10.9 †
|
|
|
S-1
|
|
333-194899
|
|
10.9
|
|
3/31/2014
|
|
|
|
10.10 †
|
|
|
S-1
|
|
333-194899
|
|
10.10
|
|
3/31/2014
|
|
|
|
10.11
|
|
|
S-1
|
|
333-194899
|
|
10.15
|
|
3/31/2014
|
|
|
|
10.12
|
|
|
10-Q
|
|
001-36468
|
|
10.1
|
|
8/8/2014
|
|
|
|
10.13
|
|
|
S-1
|
|
333-194899
|
|
10.16
|
|
3/31/2014
|
|
|
|
10.14‡
|
|
|
S-1
|
|
333-194899
|
|
10.17
|
|
3/31/2014
|
|
|
|
10.15 †
|
|
|
S-1/A
|
|
333-194899
|
|
10.21
|
|
4/21/2014
|
|
|
|
10.16 †
|
|
|
8-K
|
|
001-36468
|
|
10.1
|
|
5/14/2015
|
|
|
|
10.17 †
|
|
|
8-K
|
|
001-36468
|
|
10.2
|
|
5/14/2015
|
|
|
|
10.18 †
|
|
|
10-Q
|
|
001-36468
|
|
10.3
|
|
5/5/2016
|
|
|
|
10.19 †
|
|
|
10-Q
|
|
001-36468
|
|
10.1
|
|
5/8/2017
|
|
|
|
10.20 †
|
|
|
10-Q
|
|
001-36468
|
|
10.2
|
|
5/8/2017
|
|
|
|
|
|
|
Incorporated by Reference
|
||||||||
Exhibit Number
|
|
Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
10.21 †
|
|
|
10-Q
|
|
001-36468
|
|
10.3
|
|
5/8/2017
|
|
|
|
10.22 †
|
|
|
10-Q
|
|
001-36468
|
|
10.4
|
|
5/8/2017
|
|
|
|
10.23 ‡
|
|
|
10-Q
|
|
001-36468
|
|
10.1
|
|
11/5/2018
|
|
|
|
10.24 ‡
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
10.25 †
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
10.26 †
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
31.2
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
32.1*
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arista Networks, Inc.
|
|
|
|
(Registrant)
|
Dated:
|
February 15, 2019
|
By:
|
/s/ JAYSHREE ULLAL
|
|
|
|
Jayshree Ullal
|
|
|
|
President, Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
Signature
|
|
Title
|
|
Date
|
/s/ JAYSHREE ULLAL
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
February 15, 2019
|
Jayshree Ullal
|
|
|
|
|
/s/ ITA BRENNAN
|
|
Chief Financial Officer (Principal Accounting and Financial Officer)
|
|
February 15, 2019
|
Ita Brennan
|
|
|
|
|
/s/ ANDY BECHTOLSHEIM
|
|
Founder, Chief Development Officer and Director
|
|
February 15, 2019
|
Andy Bechtolsheim
|
|
|
|
|
/s/ CHARLES GIANCARLO
|
|
Director
|
|
February 15, 2019
|
Charles Giancarlo
|
|
|
|
|
/s/ ANN MATHER
|
|
Director
|
|
February 15, 2019
|
Ann Mather
|
|
|
|
|
/s/ DAN SCHEINMAN
|
|
Director
|
|
February 15, 2019
|
Dan Scheinman
|
|
|
|
|
/s/ MARK TEMPLETON
|
|
Director
|
|
February 15, 2019
|
Mark Templeton
|
|
|
|
|
/s/ NIKOS THEODOSOPOULOS
|
|
Director
|
|
February 15, 2019
|
Nikos Theodosopoulos
|
|
|
|
1.21
|
“Monetary Payment”
shall mean the payment in accordance with Section 7.1.
|
3.5
|
Successors and Tolling.
|
4.1
|
Non-Infringement of Redesigned Products.
|
5.2
|
Modified CLI
.
|
5.3
|
Future CLI Elements.
|
5.4
|
CLI Dispute Resolution Process.
|
For Arista:
Marc Taxay General Counsel
Arista Networks, Inc.
5453 Great America Parkway Santa Clara, CA 95054 Email: mtaxay@arista.com
|
For Cisco:
General Counsel Cisco Systems, Inc. 170 W. Tasman Drive San Jose, CA 95134
United States of America
Email: litigation_attorneys@cisco.com
|
And copy to:
|
And a copy to:
|
Sean Christofferson
|
Vice President, Litigation
|
Deputy General Counsel
|
Cisco Systems, Inc.
|
Arista Networks, Inc.
|
170 West Tasman Drive
|
5453 Great America Parkway
|
San Jose, CA 95134
|
Santa Clara, CA 95054
|
United States of America
|
Email: schristofferson@arista.com
|
Email: litigation_attorneys@cisco.com
|
ARISTA NETWORKS, INC.
|
|
|
|
CISCO SYSTEMS, INC.
|
||
|
|
|
|
|
|
|
By:
|
/s/ Ita Brennan
|
|
|
|
By:
|
/s/ Kelly A. Kramer
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Name:
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Ita Brennan
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Name:
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Kelly A. Kramer
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Title
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Chief Financial Officer
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Title
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EVP & CFO
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5470 Great America Parkway
Santa Clara, CA 95054
www.aristanetworks.com
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5470 Great America Parkway
Santa Clara, CA 95054
www.aristanetworks.com
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Accepted:
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/s/ Manuel Rivelo
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Date:
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12/22/2017
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3.
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Severance Benefits
.
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4.
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Conditions to Receipt of Severance
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(c)
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Section 409A
.
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(a)
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delivered in full, or
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(b)
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delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code,
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(a)
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Cause
. “
Cause
” will mean:
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(iii)
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Executive’s gross misconduct;
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7.
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Successors
.
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8.
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Notice
.
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10.
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Miscellaneous Provisions
.
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COMPANY
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ARISTA NETWORKS, INC.
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By:
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Title:
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Date:
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EXECUTIVE
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By:
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/s/ Manuel Rivelo
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Title:
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Manuel Rivelo
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Date:
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12/22/2017
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Name of Subsidiary
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Jurisdiction of Incorporation
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Arista Networks Australia Pty Ltd
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Australia
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Arista Acquisition Australia Pty Limited
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Australia
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Metamako Holding Pty Ltd
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Australia
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Metamako Group Pty Ltd
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Australia
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Metamako General Pty Ltd
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Australia
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Metamako LP
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Australia
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Metamako Technology LP
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Australia
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Arista Networks Austria GmbH
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Austria
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Arista Networks Canada Ltd.
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Canada
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Arista Networks ULC
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Canada
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Arista Networks (Shanghai) Co., Ltd.
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China
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Arista Technology Limited
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Cayman Islands
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Arista Networks Cyprus Ltd
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Cyprus
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Arista Networks EURL
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France
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Arista Networks GmbH
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Germany
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Arista Networks Hong Kong Limited
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Hong Kong
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Arista Networks India Private Limited
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India
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Mojo Networks Private Limited
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India
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Arista Networks Limited
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Ireland
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Arista Networks International Limited
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Ireland
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Arista Networks Israel Ltd
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Israel
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Arista Networks Japan Ltd.
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Japan
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Arista Networks Korea, LLC
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Korea
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Arista Networks Malaysia Sdn. Bhd.
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Malaysia
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Arista Networks Mexico S. de R.L. de C.V.
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Mexico
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Arista Networks B.V.
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The Netherlands
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Arista Networks Singapore Private Ltd.
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Singapore
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Arista Networks Sweden AB
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Sweden
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Arista Networks Taiwan Limited
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Taiwan
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Arista Networks Middle East DMCC
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United Arab Emirates
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Arista Networks UK Ltd
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United Kingdom
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Metamako Europe Limited
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United Kingdom
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ANET LLC
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United States
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Arista Networks Holding Corporation
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United States
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Metamako America LLC
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United States
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Mojo Networks, LLC
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United States
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Skylark Partners, LLC
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United States
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1.
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I have reviewed this Annual Report on Form 10-K of Arista Networks, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ JAYSHREE ULLAL
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Jayshree Ullal
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President, Chief Executive Officer and Director
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(Principal Executive Officer)
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1.
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I have reviewed this Annual Report on Form 10-K of Arista Networks, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ ITA BRENNAN
|
Ita Brennan
|
Chief Financial Officer
|
(Principal Accounting and Financial Officer)
|
By:
|
/s/ JAYSHREE ULLAL
|
Name:
|
Jayshree Ullal
|
Title:
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
By:
|
/s/ ITA BRENNAN
|
Name:
|
Ita Brennan
|
Title:
|
Chief Financial Officer
|
|
(Principal Accounting and Financial Officer)
|