Share This Post

Business Wire

Arista Networks, Inc. Reports Fourth Quarter and Year End 2021 Financial Results

SANTA CLARA, Calif.–(BUSINESS WIRE)–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

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 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 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.

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,

 

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

667,955

 

$

518,281

 

$

2,377,727

 

$

1,830,842

Service

 

 

156,504

 

 

130,201

 

 

570,310

 

 

486,670

Total revenue

 

 

824,459

 

 

648,482

 

 

2,948,037

 

 

2,317,512

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

 

270,809

 

 

210,436

 

 

958,363

 

 

749,962

Service

 

 

30,936

 

 

23,462

 

 

108,895

 

 

85,664

Total cost of revenue

 

 

301,745

 

 

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, net

 

 

1,500

 

 

5,542

 

 

6,140

 

 

39,179

Income before income taxes

 

 

267,288

 

 

200,180

 

 

930,879

 

 

738,863

Provision for income taxes

 

 

27,993

 

 

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.

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,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

GAAP gross profit

 

$

522,714

 

 

$

414,584

 

 

$

1,880,779

 

 

$

1,481,886

 

GAAP gross margin

 

 

63.4

%

 

 

63.9

%

 

 

63.8

%

 

 

63.9

%

Stock-based compensation expense

 

 

2,246

 

 

 

1,554

 

 

 

7,444

 

 

 

6,272

 

Intangible asset amortization

 

 

5,464

 

 

 

5,464

 

 

 

21,857

 

 

 

17,480

 

Non-GAAP gross profit

 

$

530,424

 

 

$

421,602

 

 

$

1,910,080

 

 

$

1,505,638

 

Non-GAAP gross margin

 

 

64.3

%

 

 

65.0

%

 

 

64.8

%

 

 

65.0

%

 

 

 

 

 

 

 

 

 

GAAP income from operations

 

$

265,788

 

 

$

194,638

 

 

$

924,739

 

 

$

699,684

 

Stock-based compensation expense

 

 

51,243

 

 

 

40,095

 

 

 

186,875

 

 

 

137,042

 

Intangible asset amortization

 

 

7,159

 

 

 

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 margin

 

 

39.3

%

 

 

37.6

%

 

 

38.7

%

 

 

37.7

%

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

239,295

 

 

$

182,958

 

 

$

840,854

 

 

$

634,557

 

Stock-based compensation expense

 

 

51,243

 

 

 

40,095

 

 

 

186,875

 

 

 

137,042

 

Intangible asset amortization

 

 

7,159

 

 

 

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 income

 

 

0.07

 

 

 

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 development

 

 

27,097

 

 

 

23,184

 

 

 

99,770

 

 

 

79,913

 

Sales and marketing

 

 

12,388

 

 

 

11,188

 

 

 

46,521

 

 

 

34,944

 

General and administrative

 

 

9,512

 

 

 

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.

ARISTA NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

December 31, 2021

 

December 31, 2020

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

620,813

 

 

$

893,219

Marketable securities

 

 

2,787,502

 

 

 

1,979,649

Accounts receivable

 

 

516,509

 

 

 

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, net

 

 

78,634

 

 

 

32,231

Acquisition-related intangible assets, net

 

 

93,555

 

 

 

122,790

Goodwill

 

 

188,397

 

 

 

189,696

Investments

 

 

20,247

 

 

 

8,314

Operating lease right-of-use assets

 

 

65,182

 

 

 

77,288

Deferred tax assets

 

 

442,295

 

 

 

441,531

Other assets

 

 

33,443

 

 

 

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-current

 

 

56,527

 

 

 

72,397

Deferred revenue, non-current

 

 

335,734

 

 

 

254,568

Deferred tax liabilities, non-current

 

 

129,074

 

 

 

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.

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

 

 

Twelve Months Ended December 31,

 

 

 

2021

 

 

 

2020

 

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 other

 

 

50,334

 

 

 

44,590

 

Noncash lease expense

 

 

17,112

 

 

 

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 securities

 

 

1,455,465

 

 

 

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 period

 

 

897,454

 

 

 

1,115,515

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period

 

$

625,050

 

 

$

897,454

 

 

Contacts

Investor Contacts:

Arista Networks, Inc.

Liz Stine, 408-547-5885

Director, Investor Relations

liz@arista.com

Venk Nathamuni, 408-547-5959

Head of Corporate Finance, M&A, IR

venk@arista.com

Share This Post