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,
2022.
"Arista continues to help our customers deliver innovative
network transformation platforms for data-driven cloud networking.
Despite having to navigate industry wide supply chain challenges,
FY22 was a year of record performance exceeding expectations in
growth, revenue and profitability," stated Jayshree Ullal,
President and CEO of Arista Networks.
Full Year Financial Results
- Revenue of $4,381.3 million, an increase of 48.6% compared to
fiscal year 2021.
- GAAP gross margin of 61.1%, compared to GAAP gross margin of
63.8% in fiscal year 2021.
- Non-GAAP gross margin of 61.9%, compared to non-GAAP gross
margin of 64.8% in fiscal year 2021.
- GAAP net income of $1,352.4 million, or $4.27 per diluted
share, compared to GAAP net income of $840.9 million, or $2.63 per
diluted share, in fiscal year 2021.
- Non-GAAP net income of $1,448.3 million or $4.58 per diluted
share, compared to non-GAAP net income of $915.0 million or $2.87
per diluted share, in fiscal year 2021.
Fourth Quarter Financial Results
- Revenue of $1,275.6 million, an increase of 8.4% compared to
the third quarter of 2022, and an increase of 54.7% from the fourth
quarter of 2021.
- GAAP gross margin of 60.3%, compared to GAAP gross margin of
60.3% in the third quarter of 2022 and 63.4% in the fourth quarter
of 2021.
- Non-GAAP gross margin of 61.0%, compared to non-GAAP gross
margin of 61.2% in the third quarter of 2022 and 64.3% in the
fourth quarter of 2021.
- GAAP net income of $427.1 million, or $1.35 per diluted share,
compared to GAAP net income of $239.3 million, or $0.75 per diluted
share, in the fourth quarter of 2021.
- Non-GAAP net income of $445.1 million, or $1.41 per diluted
share, compared to non-GAAP net income of $262.4 million, or $0.82
per diluted share, in the fourth quarter of 2021.
Commenting on the company's financial results, Ita Brennan,
Arista’s CFO said, “Our outstanding fourth quarter financial
results epitomize our focus on profitable revenue growth,
leveraging R&D and go-to-market investments across the
business.”
Fourth Quarter Company Highlights
- Arista Delivers Continuous Integration Pipeline for Network as
a Service Automation - Arista announced a comprehensive network
automation solution with the Arista Continuous Integration (CI)
Pipeline. Built on Arista's EOS Network Data Lake (NetDL™), the
Arista CI Pipeline helps enterprise customers adopt a modern
network operating model. This approach delivers an agile,
data-driven change management process for the network, enabling
faster, more reliable deployment with reduced operational time and
expense.
- Arista Delivers Next Generation Switching for Compute and
Storage - Arista announced the expansion of its widely deployed
7050X4 Series, adding new 100G to 400G systems, providing longevity
and investment protection for enterprise compute and storage,
colocation providers (Colo) and managed services providers (MSPs).
Complementing the new 7050X4 Series, Arista also announced an
expansion of the 7060X5 Series with the addition of 800G, which
doubles the capacity of hyperscale backbones while reducing space
and power per gigabit.
- Arista Wins Best Company for Diversity awarded by Comparably
for 2022 – Arista is named amongst the Top 100 highest-rated
Companies for Diversity.
Full Year Company Highlights
- Arista Delivers Next Generation Cloud Routing – Expanded and
accelerated EOS routing validated for cloud, carrier, and
enterprise solutions.
- Arista Introduces Next Generation 7130 Series Systems for
Converged Ultra Low Latency Networking – The next generation of
converged ultra low latency, highly programmable systems.
- Arista Expands EOS and CloudVision Software Platforms as a
Foundation for High-Performance Media and Entertainment Networking
– Provides ultra-fast switching for multicast media and
entertainment workflows.
- Arista Introduces Edge as a Service with Cognitive Unified Edge
Solution – Delivers plug and play simplicity and workflows for
commercial workspaces.
- Arista Integrates Threat Detection and Response into the
Cognitive Campus – AVA solution bridges network and security
gap.
- The Next Frontier in AI Networking – Arista’s data-driven
network era powered by AI spines for next generation cloud
networking.
Financial Outlook
For the first quarter of 2023, we expect:
- Revenue between $1,275 million to $1,325 million;
- Non-GAAP gross margin of approximately 60%; and
- Non-GAAP operating margin of approximately 40%.
Guidance for non-GAAP financial measures excludes stock-based
compensation expense, amortization of acquisition-related
intangible assets, and other acquisition-related costs. A
reconciliation of non-GAAP guidance measures to corresponding GAAP
measures is not available on a forward- looking basis because these
exclusions can be uncertain or difficult to predict, including
stock-based compensation expense which is impacted by the company’s
future hiring and retention needs and the future fair market value
of the company’s common stock. The actual amount of these
exclusions will have a significant impact on the company’s GAAP
gross margin and GAAP operating margin.
Prepared Materials and Conference Call Information
Arista's executives will discuss the fourth quarter and year end
2022 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 2023 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: interruptions or delays
in shipments; the impact of supply shortages and manufacturing
disruptions on our business including increased purchase
commitments, excess inventory and extended lead times; adverse
global economic and geopolitical conditions, including inflationary
pressures which result in increased component costs and reduced
information technology and network infrastructure spending, and the
Russia/Ukraine conflict; dependence on a limited number of
customers who represent a substantial portion of our revenue; 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;
fluctuations in our results of operations including as a result of
seasonality; variability in our gross margins including as a result
of changes in customer mix or product mix; intense competition;
expansion of our international sales and operations; investments in
or acquisitions of other businesses; fluctuations in currency
exchange rates; any failure to raise any needed capital; our
ability to attract new large end customers or sell products and
services to existing end customers and dependence on large end
customers; our ability to increase market awareness of our company
and new products and services; a decline in the sales prices of our
products and services; a decline in maintenance renewals by
customers; product quality problems; our ability to anticipate
technological shifts and develop products to meet those
technological shifts; the management of the supply of our products
and product components; our dependence on third-party manufacturers
to build our products; our ability to protect, defend and maintain
our intellectual property rights; vulnerabilities in our products
and failure of our products to detect security breaches; tax,
tariff, import/export restrictions or other trade barriers; 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 acquisition-related
costs, unrealized gains on equity investments, 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.
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
an advanced network operating stack. For more information, visit
https://www.arista.com.
ARISTA, EOS, CloudVision, NetDL and AVA 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,
2022
2021
2022
2021
Revenue:
Product
$
1,096,866
$
667,955
$
3,716,079
$
2,377,727
Service
178,686
156,504
665,231
570,310
Total revenue
1,275,552
824,459
4,381,310
2,948,037
Cost of revenue:
Product
471,617
270,809
1,573,629
958,363
Service
35,329
30,936
131,985
108,895
Total cost of revenue
506,946
301,745
1,705,614
1,067,258
Total gross profit
768,606
522,714
2,675,696
1,880,779
Operating expenses:
Research and development
190,423
157,879
728,394
586,752
Sales and marketing
85,443
74,786
326,955
286,171
General and administrative
23,821
24,261
93,241
83,117
Total operating expenses
299,687
256,926
1,148,590
956,040
Income from operations
468,919
265,788
1,527,106
924,739
Other income, net
16,926
1,500
54,690
6,140
Income before income taxes
485,845
267,288
1,581,796
930,879
Provision for income taxes
58,756
27,993
229,350
90,025
Net income
$
427,089
$
239,295
$
1,352,446
$
840,854
Earnings per share:
Basic
$
1.39
$
0.78
$
4.41
$
2.74
Diluted
$
1.35
$
0.75
$
4.27
$
2.63
Weighted-average common shares
outstanding:
Basic
306,162
307,521
306,473
306,512
Diluted
315,201
319,753
316,459
319,238
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,
2022
2021
2022
2021
GAAP gross profit
$
768,606
$
522,714
$
2,675,696
$
1,880,779
GAAP gross margin
60.3
%
63.4
%
61.1
%
63.8
%
Stock-based compensation expense
3,075
2,246
9,688
7,444
Intangible asset amortization
6,821
5,464
25,374
21,857
Non-GAAP gross profit
$
778,502
$
530,424
$
2,710,758
$
1,910,080
Non-GAAP gross margin
61.0
%
64.3
%
61.9
%
64.8
%
GAAP income from operations
$
468,919
$
265,788
$
1,527,106
$
924,739
Stock-based compensation expense
64,954
51,243
230,934
186,875
Intangible asset amortization
9,316
7,159
33,650
29,235
Acquisition-related costs(1)
—
—
4,691
—
Non-GAAP income from operations
$
543,189
$
324,190
$
1,796,381
$
1,140,849
Non-GAAP operating margin
42.6
%
39.3
%
41.0
%
38.7
%
GAAP net income
$
427,089
$
239,295
$
1,352,446
$
840,854
Stock-based compensation expense
64,954
51,243
230,934
186,875
Intangible asset amortization
9,316
7,159
33,650
29,235
Acquisition-related costs
—
—
4,691
—
Unrealized gain on equity investments
(3,358
)
—
(27,479
)
—
Tax benefit on stock-based awards
(37,177
)
(30,470
)
(113,502
)
(115,154
)
Income tax effect on non-GAAP
exclusions
(15,677
)
(4,814
)
(32,482
)
(26,813
)
Non-GAAP net income
$
445,147
$
262,413
$
1,448,258
$
914,997
GAAP diluted net income per share
$
1.35
$
0.75
$
4.27
$
2.63
Non-GAAP adjustments to net income
0.06
0.07
0.31
0.24
Non-GAAP diluted net income per share
$
1.41
$
0.82
$
4.58
$
2.87
Weighted-average shares used in computing
diluted net income per share
315,201
319,753
316,459
319,238
Summary of Stock-Based Compensation
Expense:
Cost of revenue
$
3,075
$
2,246
$
9,688
$
7,444
Research and development
37,174
27,097
130,897
99,770
Sales and marketing
15,532
12,388
57,571
46,521
General and administrative
9,173
9,512
32,778
33,140
Total
$
64,954
$
51,243
$
230,934
$
186,875
___________________
(1)
Represents one-time costs associated with
our acquisitions, which primarily include retention bonuses,
professional and consulting fees.
ARISTA NETWORKS, INC.
Condensed Consolidated Balance
Sheets
(Unaudited, in
thousands)
December 31, 2022
December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
671,707
$
620,813
Marketable securities
2,352,022
2,787,502
Accounts receivable
923,096
516,509
Inventories
1,289,706
650,117
Prepaid expenses and other current
assets
314,217
237,735
Total current assets
5,550,748
4,812,676
Property and equipment, net
95,009
78,634
Acquisition-related intangible assets,
net
122,205
93,555
Goodwill
265,924
188,397
Investments
39,468
20,247
Operating lease right-of-use assets
53,390
65,182
Deferred tax assets
574,912
442,295
Other assets
73,754
33,443
TOTAL ASSETS
$
6,775,410
$
5,734,429
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
232,572
$
202,636
Accrued liabilities
292,487
226,643
Deferred revenue
637,432
593,578
Other current liabilities
131,040
86,972
Total current liabilities
1,293,531
1,109,829
Income taxes payable
89,839
69,916
Operating lease liabilities,
non-current
43,964
56,527
Deferred revenue, non-current
403,814
335,734
Deferred tax liabilities, non-current
42
129,074
Other long-term liabilities
58,400
54,749
TOTAL LIABILITIES
1,889,590
1,755,829
STOCKHOLDERS’ EQUITY:
Common stock
31
31
Additional paid-in capital
1,780,714
1,530,046
Retained earnings
3,138,983
2,456,823
Accumulated other comprehensive income
(loss)
(33,908
)
(8,300
)
TOTAL STOCKHOLDERS’ EQUITY
4,885,820
3,978,600
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
6,775,410
$
5,734,429
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Twelve Months Ended December
31,
2022
2021
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
1,352,446
$
840,854
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and other
62,700
50,334
Noncash lease expense
18,648
17,112
Stock-based compensation
230,934
186,875
Deferred income taxes
(244,382
)
(99,290
)
Unrealized gain on equity investments
(27,479
)
—
Amortization of investment premiums
12,767
26,847
Changes in operating assets and
liabilities:
Accounts receivable, net
(401,531
)
(126,969
)
Inventories
(638,948
)
(170,449
)
Prepaid expenses and other current
assets
(85,166
)
(126,002
)
Other assets
(32,299
)
(4,220
)
Accounts payable
31,436
66,681
Accrued liabilities
66,586
83,524
Deferred revenue
98,957
278,485
Income taxes, net
44,026
(2,589
)
Other liabilities
4,118
(5,337
)
Net cash provided by operating
activities
492,813
1,015,856
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of marketable
securities
1,643,824
1,455,465
Purchases of marketable securities
(1,418,857
)
(2,317,264
)
Business combinations, net of cash
acquired
(145,087
)
—
Purchases of property, equipment and
intangible assets
(44,644
)
(64,736
)
Escrow receipts from past business
acquisitions
—
1,299
Investments and notes receivable in
privately-held companies
(12,691
)
(19,933
)
Proceeds from sale of marketable
securities
193,782
19,607
Net cash provided by (used in) investing
activities
216,327
(925,562
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock
under equity plans
48,411
67,245
Tax withholding paid on behalf of
employees for net share settlement
(32,725
)
(16,482
)
Repurchase of common stock
(670,287
)
(411,645
)
Net cash used in financing activities
(654,601
)
(360,882
)
Effect of exchange rate changes
(3,611
)
(1,816
)
NET INCREASE/(DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
50,928
(272,404
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—Beginning of period
625,050
897,454
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—End of period
$
675,978
$
625,050
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230213005500/en/
Investor Contacts: Arista Networks, Inc. Liz Stine,
408-547-5885 Director, Investor Relations liz@arista.com
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