ANET

ARISTA NETWORKS INC

Technology | Mega Cap

$2.12

EPS Forecast

$1,814

Revenue Forecast

The company already released most recent quarter's earnings. We will publish our AI's next quarter's forecast around 2024-12-31
EX-99.1 2 ex991q421-earningsrelease.htm EX-99.1 Document

Exhibit 99.1
Arista Networks, Inc. Reports Fourth Quarter and Year End 2021 Financial Results
SANTA CLARA, Calif.- February 14, 2022 -- Arista Networks, Inc. (NYSE: ANET), an industry leader in data-driven, client to cloud networking for large data center, campus and routing environments, today announced financial results for its fourth quarter and the full year ended December 31, 2021.
Fourth Quarter Financial Results
•Revenue of $824.5 million, an increase of 10.1% compared to the third quarter of 2021, and an increase of 27.1% from the fourth quarter of 2020.
•GAAP gross margin of 63.4%, compared to GAAP gross margin of 63.9% in the third quarter of 2021 and 63.9% in the fourth quarter of 2020.
•Non-GAAP gross margin of 64.3%, compared to non-GAAP gross margin of 64.9% in the third quarter of 2021 and 65.0% in the fourth quarter of 2020.
•GAAP net income of $239.3 million, or $0.75 per diluted share, compared to GAAP net income of $183.0 million, or $0.58 per diluted share, in the fourth quarter of 2020.
•Non-GAAP net income of $262.4 million, or $0.82 per diluted share, compared to non-GAAP net income of $197.7 million, or $0.62 per diluted share, in the fourth quarter of 2020.
Full Year Financial Results
•Revenue of $2.95 billion, an increase of 27.2% compared to fiscal year 2020.
•GAAP gross margin of 63.8%, compared to GAAP gross margin of 63.9% in fiscal year 2020.
•Non-GAAP gross margin of 64.8%, compared to non-GAAP gross margin of 65.0% in fiscal year 2020.
•GAAP net income of $840.9 million, or $2.63 per diluted share, compared to GAAP net income of $634.6 million, or $2.00 per diluted share, in fiscal year 2020.
•Non-GAAP net income of $915.0 million or $2.87 per diluted share, compared to non-GAAP net income of $718.4 million or $2.26 per diluted share, in fiscal year 2020.
“I am delighted with Arista's record 2021 milestones in innovation, diversified customer momentum and earnings. We have executed well to establish Arista among the fastest growing networking companies in this decade," stated Jayshree Ullal, President and CEO of Arista Networks.
Commenting on the company's financial results, Ita Brennan, Arista’s CFO said, “The Arista team has shown great resilience and flexibility throughout 2021, maintaining operational excellence in the face of industry-wide challenges and delivering our first billion-dollar cash flow year.”
Fourth Quarter Company Highlights
•Arista Expands Extensible Operating System for Data-Driven Cloud Networking - Arista Networks announced the next major expansion of the Arista EOS® network stack with the introduction of the EOS Network Data Lake (NetDL™). Coupled with the AI/ML-driven Autonomous Virtual Assist (Arista AVA™) and a broad ecosystem of industry leaders, Arista is extending the EOS network stack architecture to provide a high-fidelity data lake capability for the next era of data-driven networking.
•Arista Expands 400G for Enterprise and Cloud Customers - Arista, a leader in data-driven networking, announced the next generation of the widely deployed 7050X and 7060X Series, providing performance and cost benefits for customers of all sizes as they transition to 400G networks.
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•Arista Joins Microsoft Intelligent Security Association for Integration with Microsoft Azure Sentinel to Help Improve Customer Security – Arista announced it has joined the Microsoft Intelligent Security Association (MISA), an ecosystem of independent software vendors and managed security service providers that have integrated solutions to better defend against a world of increasing threats. Arista was nominated based on an integration between Arista’s NDR platform and Microsoft Azure Sentinel. This integration enables faster remediation of threats by combining network context and threat detection with log-based and endpoint insights within Azure Sentinel.
Full Year Company Highlights
•Arista Networks delivers Multi-domain Segmentation for Zero Trust Enterprise - Simplified network segmentation with dynamic partner integrations.
•Arista Networks Expands its Cognitive Campus with the Latest Generation Wi-Fi 6E Solution - New access point extends the benefits of Arista’s cognitive unified edge to meet enterprise IoT and collaborative applications requirements.
•Arista Expands Extensible Operating System for Data-Driven Cloud Networking - EOS Network Data Lake architecture endorsed by Equinix, Palo Alto Networks, Red Hat, Slack, Splunk, VMware, and Zscaler.
•Arista Expands 400G for Enterprise and Cloud Customers - Next-generation 7050X and 7060X delivers two times the performance.
•KuppingerCole has recognized Arista NDR as a leader in the 2021 Leadership Compass for Network Detection and Response (NDR).
Financial Outlook
For the first quarter of 2022, we expect:
•Revenue between $840 million to $860 million;
•Non-GAAP gross margin of 63% to 64%; and
•Non-GAAP operating margin of approximately 38%.
Guidance for non-GAAP financial measures excludes stock-based compensation expense, amortization of acquisition-related intangible assets, and certain non-recurring items. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis (see further explanation below under “Non-GAAP Financial Measures”).
Prepared Materials and Conference Call Information
Arista's executives will discuss the fourth quarter and year end 2021 financial results on a conference call at 1:30 p.m. Pacific time today. To listen to the call via telephone, dial (888) 330-2502 in the United States or +1 (240) 789-2713 from international locations. The Conference ID is 5655862.
The financial results conference call will also be available via live webcast on Arista's investor relations website at https://investors.arista.com/. Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on Arista’s investor relations website.
Forward-Looking Statements
This press release contains “forward-looking statements” regarding our future performance, including quotations from management, statements in the section entitled “Financial Outlook,” such as estimates regarding revenue, non-GAAP gross margin and non-GAAP operating margin for the first quarter of 2022 and statements regarding the benefits of Arista's products. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance or achievements to differ materially from those anticipated in or implied by the forward-looking statements including risks associated with: the impact of
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the COVID-19 pandemic on our business; the impact of supply shortages and manufacturing constraints on our business including lead time and inventory purchases, increased costs of components, interruptions or delays in shipments; the rapid evolution of the networking market; any failure to successfully pursue new products and service offerings and expand into adjacent markets; a decline in our revenue growth rate; unpredictability of our results of operations; adverse economic conditions or reduced information technology and network infrastructure spending; excess inventory; deferral, reduction or cancellation of orders from end customers; intense competition; expansion of our international sales and operations; investment or acquisition in other businesses; seasonality; our ability to attract new large end customers or sell products and services to existing end customers; our ability to increase market awareness of our company and new products and services; product quality problems; our ability to anticipate technological shifts and develop products to meet those technological shifts; our ability to protect, defend and maintain our intellectual property rights; vulnerabilities in our products and failure of our products to detect security breaches our intellectual property rights; and tax, tariff, import/export restrictions; and other future events. Additional risks and uncertainties that could affect us can be found in our most recent filings with the Securities and Exchange Commission including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q. You can locate these reports through our website at https://investors.arista.com/ and on the SEC’s website at https://www.sec.gov/. All forward-looking statements in this press release are based on information available to the company as of the date hereof and we disclaim any obligation to publicly update or revise any forward-looking statement to reflect events that occur or circumstances that exist after the date on which they were made.
Non-GAAP Financial Measures
This press release and accompanying table contain certain non-GAAP financial measures including non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margins, non-GAAP net income and non-GAAP diluted net income per share. These non-GAAP financial measures exclude stock-based compensation expense, amortization of acquisition-related intangible assets, certain non-recurring charges or benefits, and the income tax effect of these non-GAAP exclusions. In addition, non-GAAP financial measures exclude net tax benefits associated with stock-based awards, which include excess tax benefits, and other discrete indirect effects of such awards. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes that these non-GAAP financial measures are useful to investors as an additional tool to evaluate ongoing operating results and trends. In addition, these measures are the primary indicators management uses as a basis for its planning and forecasting for future periods.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP financial measures. Non-GAAP financial measures are subject to limitations, and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. A description of these non-GAAP financial measures and a reconciliation of the company’s non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.
The company’s guidance for non-GAAP financial measures excludes stock-based compensation expense, amortization of acquisition-related intangible assets, and other non-recurring items. The company does not provide guidance on GAAP gross margin or GAAP operating margin or the various reconciling items between GAAP gross margin and GAAP operating margin and non-GAAP gross margin and non-GAAP operating margin. A reconciliation of the non-GAAP financial measures guidance to the corresponding GAAP measures on a forward-looking basis is not available because stock-based compensation expense is impacted by the company’s future hiring and retention needs and the future fair market value of the company’s common stock, all of which are difficult to predict and
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subject to constant change. The actual amount of stock-based compensation expense will have a significant impact on the company’s GAAP gross margin and GAAP operating margin.
About Arista Networks
Arista Networks is an industry leader in data-driven, client to cloud networking for large data center, campus and routing environments. Arista’s award-winning platforms deliver availability, agility, automation, analytics and security through CloudVision® and Arista EOS®, an advanced network operating system. For more information, visit www.arista.com.
ARISTA, CloudVision, CloudEOS and MSS are among the registered and unregistered trademarks of Arista Networks, Inc. in jurisdictions around the world. Other company names or product names may be trademarks of their respective owners. Additional information and resources can be found at www.arista.com.

Investor Contacts: 
Arista Networks, Inc.
Liz Stine, 408-547-5885Venk Nathamuni, 408-547-5959
Director, Investor RelationsHead of Corporate Finance, M&A, IR
liz@arista.comvenk@arista.com
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ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended December 31,Twelve Months Ended December 31,
2021202020212020
Revenue:
Product$667,955 $518,281 $2,377,727 $1,830,842 
Service 156,504 130,201 570,310 486,670 
Total revenue824,459 648,482 2,948,037 2,317,512 
Cost of revenue:
Product270,809 210,436 958,363 749,962 
Service 30,936 23,462 108,895 85,664 
Total cost of revenue301,745 233,898 1,067,258 835,626 
Total gross profit 522,714 414,584 1,880,779 1,481,886 
Operating expenses:
Research and development 157,879 133,847 586,752 486,594 
Sales and marketing 74,786 67,671 286,171 229,366 
General and administrative 24,261 18,428 83,117 66,242 
Total operating expenses 256,926 219,946 956,040 782,202 
Income from operations 265,788 194,638 924,739 699,684 
Other income, net1,500 5,542 6,140 39,179 
Income before income taxes267,288 200,180 930,879 738,863 
Provision for income taxes27,993 17,222 90,025 104,306 
Net income$239,295 $182,958 $840,854 $634,557 
Net income attributable to common stockholders:
Basic $239,295 $182,958 $840,854 $634,557 
Diluted $239,295 $182,958 $840,854 $634,557 
Net income per share attributable to common stockholders (1):
Basic $0.78 $0.60 $2.74 $2.09 
Diluted $0.75 $0.58 $2.63 $2.00 
Weighted-average shares used in computing net income per share attributable to common stockholders (1):
Basic 307,521 303,456 306,512 303,936 
Diluted 319,753 317,044 319,238 317,860 
_____________________
(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2021.
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ARISTA NETWORKS, INC.
Reconciliation of Selected GAAP to Non-GAAP Financial Measures
(Unaudited, in thousands, except percentages and per share amounts)
Three Months Ended
December 31,		Twelve Months Ended
December 31,
2021202020212020
GAAP gross profit$522,714 $414,584 $1,880,779 $1,481,886 
GAAP gross margin63.4 %63.9 %63.8 %63.9 %
Stock-based compensation expense2,246 1,554 7,444 6,272 
Intangible asset amortization5,464 5,464 21,857 17,480 
Non-GAAP gross profit$530,424 $421,602 $1,910,080 $1,505,638 
Non-GAAP gross margin64.3 %65.0 %64.8 %65.0 %
GAAP income from operations$265,788 $194,638 $924,739 $699,684 
Stock-based compensation expense51,243 40,095 186,875 137,042 
Intangible asset amortization7,159 7,562 29,235 24,086 
Acquisition-related costs(1)
— 1,215 — 13,933 
Non-GAAP income from operations$324,190 $243,510 $1,140,849 $874,745 
Non-GAAP operating margin39.3 %37.6 %38.7 %37.7 %
GAAP net income$239,295 $182,958 $840,854 $634,557 
Stock-based compensation expense51,243 40,095 186,875 137,042 
Intangible asset amortization7,159 7,562 29,235 24,086 
Acquisition-related costs— 1,215 — 13,933 
Gain on investment in privately-held companies— (4,164)— (4,164)
Tax benefit on stock-based awards (30,470)(19,802)(115,154)(60,880)
Income tax effect on non-GAAP exclusions(4,814)(10,188)(26,813)(26,163)
Non-GAAP net income$262,413 $197,676 $914,997 $718,411 
GAAP diluted net income per share attributable to common stockholders (2)$0.75 $0.58 $2.63 $2.00 
Non-GAAP adjustments to net income0.07 0.04 0.24 0.26 
Non-GAAP diluted net income per share$0.82 $0.62 $2.87 $2.26 
Weighted-average shares used in computing diluted net income per share (2)319,753 317,044 319,238 317,860 
Summary of Stock-Based Compensation Expense:
Cost of revenue$2,246 $1,554 $7,444 $6,272 
Research and development27,097 23,184 99,770 79,913 
Sales and marketing12,388 11,188 46,521 34,944 
General and administrative9,512 4,169 33,140 15,913 
Total$51,243 $40,095 $186,875 $137,042 
___________________
(1) Represents non-recurring costs associated with our acquisitions, which primarily include retention bonuses, professional and consulting fees, and restructuring costs.
(2) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2021.
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ARISTA NETWORKS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
December 31, 2021December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $620,813 $893,219 
Marketable securities2,787,502 1,979,649 
Accounts receivable516,509 389,540 
Inventories 650,117 479,668 
Prepaid expenses and other current assets 237,735 94,922 
Total current assets 4,812,676 3,836,998 
Property and equipment, net78,634 32,231 
Acquisition-related intangible assets, net93,555 122,790 
Goodwill188,397 189,696 
Investments20,247 8,314 
Operating lease right-of-use assets65,182 77,288 
Deferred tax assets 442,295 441,531 
Other assets33,443 30,071 
TOTAL ASSETS $5,734,429 $4,738,919 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $202,636 $134,235 
Accrued liabilities 226,643 143,357 
Deferred revenue 593,578 396,259 
Other current liabilities 86,972 94,392 
Total current liabilities 1,109,829 768,243 
Income taxes payable 69,916 53,053 
Operating lease liabilities, non-current56,527 72,397 
Deferred revenue, non-current335,734 254,568 
Deferred tax liabilities, non-current129,074 227,936 
Other long-term liabilities 54,749 42,431 
TOTAL LIABILITIES 1,755,829 1,418,628 
STOCKHOLDERS’ EQUITY:
Common stock (1)31 30 
Additional paid-in capital (1)1,530,046 1,292,409 
Retained earnings 2,456,823 2,027,614 
Accumulated other comprehensive income (8,300)238 
TOTAL STOCKHOLDERS’ EQUITY 3,978,600 3,320,291 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $5,734,429 $4,738,919 
______________________
(1) Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2021.

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ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Twelve Months Ended December 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $840,854 $634,557 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other50,334 44,590 
Noncash lease expense17,112 16,970 
Stock-based compensation 186,875 137,042 
Deferred income taxes (99,290)(9,144)
(Gain) on investments in privately-held companies, net— (4,164)
(Gain) on sale of marketable securities — (9,432)
Amortization of investment premiums 26,847 10,381 
Changes in operating assets and liabilities:
Accounts receivable, net (126,969)10,673 
Inventories (170,449)(235,318)
Prepaid expenses and other current assets (134,814)13,846 
Other assets(4,220)4,965 
Accounts payable 66,681 41,161 
Accrued liabilities 83,524 2,728 
Deferred revenue 278,485 50,352 
Income taxes payable 6,223 8,805 
Other liabilities(5,337)17,102 
Net cash provided by operating activities 1,015,856 735,114 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities1,455,465 1,545,689 
Purchases of marketable securities(2,317,264)(2,688,064)
Business combinations, net of cash acquired— (227,420)
Purchases of property, equipment and intangible assets(64,736)(15,384)
Escrow receipts from past business acquisitions 1,299 — 
Investments and notes receivable in privately-held companies(19,933)3,399 
Proceeds from sale of marketable securities 19,607 772,978 
Net cash used in investing activities (925,562)(608,802)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under equity plans 67,245 57,556 
Tax withholding paid on behalf of employees for net share settlement(16,482)(8,722)
Repurchase of common stock(411,645)(395,173)
Net cash used in financing activities(360,882)(346,339)
Effect of exchange rate changes (1,816)1,966 
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(272,404)(218,061)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period897,454 1,115,515 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period$625,050 $897,454 
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