Arista Networks, Inc.

Welcome to the second quarter 2020 Arista Networks Financial Results Earnings Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press the star followed by zero. As a reminder, this conference is being recorded and will be available for replay from the investor relations section at the Arista website following this call. I will now turn the call over to Mr. Curtis McKee, Director of Corporate and Investor Development.

Sir, you may begin. Thank you, Operator. Good afternoon, everyone, and thank you for joining us. With me on today's call are Jay Shrielal, Arista Network's President and Chief Executive Officer, and Ida Brennan, Arista's Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal second quarter ending June 30, 2020. If you would like a copy of the release, you can access it online at our website. During the course of this conference call, Arista Networks management will make forward-looking statements, including those relating to our financial outlook for the third quarter of 2020 fiscal year, longer-term financial outlooks, the potential impact of COVID-19 on our business, industry innovation, our market opportunity, the benefits of recent acquisitions, and the impact of litigation, which are subject to the risks and uncertainties that we will discuss in detail in our documents filed with the SEC, specifically in our most recent Form 10Q and Form 10K, and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings express release. With that, I will turn the call over to Jay Shreve.

Thank you, Curtis. Thank you, everyone, for joining us this afternoon for our second quarter 2020 earnings call. To start with, I would like to address the once-in-100-year coronavirus global pandemic and reiterate our commitment to employee safety and customer response. At Arista, we recognize our role and responsibility in supporting global communications and cloud infrastructure during these mission-critical times. We are adjusting to the new work-from-home norm and expect this will continue throughout 2020 until vaccines or therapeutics emerge. We are working closely with our supply chain and contract manufacturers to improve lead times and support our customers in their business continuity initiatives. Back to Q2 specifics. We delivered revenue of $540.6 million for the quarter with a non-GAAP earnings per share of $2.11. ACARE services and software support renewals contributed approximately 22% of revenue. Our non-GAAP gross margins were 64.7% influenced by software and services mix. We registered a record number of million dollar customers as a direct result of our enterprise vertical traction and continue to march towards our goal of one to two new customers a day in the second quarter. In Q2 2020, Cloud Titans was the largest vertical. The enterprise is once again our second largest performer, followed by Tier 2 cloud service providers and financials tied for third place, and service providers in fourth place. Our vertical mix in the second quarter was consistent with the prior trends that we shared with you in May. Cloud titans, approximately 40% of the mix, enterprises, including financial services, approximately 35% of the mix, and providers, approximately 25% of the mix. In terms of geography, international competition was 19%, with the Americas at 81%. Regional EMEA traction was slower than normal due to push-out of big customer decisions and reduced international cloud-type spend in the quarter. As we predicted, Arisker's cognitive campus portfolio met its first-year 100 million objective ending June 30, 2020. While we are pleased with the traction, we believe that our new enterprise prospects will take time in this COVID era. We remain hopeful and optimistic to double in the next five to six quarters to $200 million, of course, depending on market conditions. In terms of new innovations, last week, Arista introduced the cloud EOS router for the edge, supporting dynamic path selection services across all major cloud providers. Some of the key features include AWS Transit Gateway integration for seamless automated provisioning, elastic consumption of Cloud EOS across the three main cloud providers, AWS, Azure, and GCP, declarative provisioning of multi-cloud through HashiCorp's Terraform, and a dashboard based on Arista's Cloud Vision for centralized visibility of enterprise and cloud resources. As we review 2020 at the mid-year point, there are clearly macro issues outside our control. The number of confirmed COVID-19 cases has increased sharply in July. The economic recession is looming, and trade wars are escalating. Despite this, Arista experienced a cloud-tightened recovery and enterprise strength in Q2, offset by extended sales cycles in the campus sector. We're also pleased with the recent leaders' recognition in both Forrester's Wave for open programmable switches in business-wide SDN, with a top score in strategy category, and with Gartner's Magic Quadrant for data center and cloud networking. Gartner designated us a Magic Quadrant leader for the sixth consecutive year. These placements truly validate Arista's premier status in networking. I believe we are well positioned in cloud networking for data center, routing, campus, and new multi-cloud monitoring capabilities, enabling network migration from legacy to modern. In these unprecedented times, customers seek our compelling advantages, and we expect to emerge even stronger than many of our industry peers. We hope you're all being safe and well. I will now turn the call to our CFO, Ida Brennan, for financial details. Ida?