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Form 8-K Arista Networks, Inc. For: Aug 01

August 1, 2022 4:14 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
____________________________

 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (date of earliest event reported): August 1, 2022
___________________________________________________
ARISTA NETWORKS, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________
Delaware 001-36468 20-1751121
(State or other jurisdiction of
incorporation)
 (Commission File No.) (IRS Employer Identification
No.)

5453 Great America Parkway
Santa Clara, CA 95054
(Address of principal executive offices) (Zip Code)
 
(408) 547-5500
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueANETNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 




ITEM 2.02    Results of Operations and Financial Condition
    On August 1, 2022, Arista Networks, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2022. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
    This information and Exhibit 99.1 are intended to be furnished under Item 2.02, “Results of Operations and Financial Condition,” and Item 9.01, “Financial Statements and Exhibits,” of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 9.01    Financial Statements and Exhibits
(d)    Exhibits

Exhibit No.Description
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL Document)




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


ARISTA NETWORKS, INC.
August 1, 2022
By: /s/ ITA BRENNAN
Ita Brennan
Chief Financial Officer
(Principal Accounting and Financial Officer)



Exhibit 99.1
Arista Networks, Inc. Reports Second Quarter 2022 Financial Results
SANTA CLARA, Calif.- August 1, 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 second quarter ended June 30, 2022.
“In Q2 2022, we achieved our first billion-dollar revenue quarter, despite the challenges of an uncertain supply chain environment,” said Jayshree Ullal, President and CEO of Arista Networks. “This record milestone further validates the customer value of Arista’s differentiated cloud networking platforms, now adopted by many of the largest cloud and enterprise customers around the world.”
Second Quarter Financial Highlights
Revenue of $1.052 billion, an increase of 20.0% compared to the first quarter of 2022, and an increase of 48.7% from the second quarter of 2021.
GAAP gross margin of 61.2%, compared to GAAP gross margin of 63.1% in the first quarter of 2022 and 64.2% in the second quarter of 2021.
Non-GAAP gross margin of 61.9%, compared to non-GAAP gross margin of 63.9% in the first quarter of 2022 and 65.2% in the second quarter of 2021.
GAAP net income of $299.1 million, or $0.94 per diluted share, compared to GAAP net income of $196.9 million, or $0.62 per diluted share in the second quarter of 2021.
Non-GAAP net income of $342.7 million, or $1.08 per diluted share, compared to non-GAAP net income of $216.8 million, or $0.68 per diluted share in the second quarter of 2021.
Commenting on the company's financial results, Ita Brennan, Arista’s CFO said, “We are pleased with overall business momentum in the quarter with strong revenue growth driving significant EPS upside and demonstrating the inherent operational leverage of the business model.”
Company Highlights
Arista Acquires Pluribus Networks – a leader in delivering unified cloud fabrics that provides agility, security, automation and visibility across all clouds.
Arista Introduces Edge as a Service with Cognitive Unified Edge Solution – Arista announces the next phase of Arista’s cognitive campus vision with the introduction of Arista CUE™ (Cognitive Unified Edge). CUE enables commercial and distributed branch customers to accelerate new services and technology innovations by consolidating multiple security and networking functions into an “edge as a service” cloud-managed solution.
Arista Expands EOS and CloudVision Software Platforms as a Foundation for High-Performance Media and Entertainment Networking - Arista announces the extension of its Arista EOS® (Extensible Operating System) and CloudVision® software to support high-performance switched networks for media and entertainment customers. Arista Media Control Service (MCS) makes broadcast workflows an integral function of the Arista network fabric providing customers with faster establishment of audio and video streams.
Arista Introduces Next Generation 7130 Series Systems for Converged Ultra Low Latency Networking - Arista announces the next generation of converged ultra low latency, highly programmable 7130 Series systems designed for demanding in-network applications. The new systems improve customer agility while consolidating multiple devices that reduce complexity, power and costs.
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Financial Outlook
For the third quarter of 2022, we expect:
Revenue between $1.025 billion to $1.075 billion;
Non-GAAP gross margin of 60% to 62%; and
Non-GAAP operating margin of approximately 39%
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 second quarter 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 third quarter of 2022, statements regarding Arista's business plans and its ability to execute such plans, 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 and extended lead times, the impact of the COVID-19 pandemic and related public safety measures on our business; 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; deferral, reduction or cancellation of orders from end customers; increased component costs including as a result of global inflationary pressures and the impact of the Russian/Ukrainian conflict; variability in our gross margins including as a result of changes in end customer mix or product mix; adverse global economic and geopolitical conditions and reduced information technology and network infrastructure spending; intense competition; expansion of our international sales and operations; investments in or acquisitions of other businesses; fluctuations in our results of operations including as a result of seasonality; our ability to attract new large end customers or sell products and services to existing end customers and dependence on large end customers; the timing of orders and their fulfillment; 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; insufficient, excess or obsolete inventory; a decline in end customer demand for our products or services; our ability to protect, defend and maintain our intellectual property rights; vulnerabilities in our products and failure of our products to detect security breaches; 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://
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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 an advanced network operating stack. For more information, visit www.arista.com.
ARISTA, EOS, CloudVision and Arista CUE 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.

Investor Contacts: 

Arista Networks, Inc.
Liz Stine, 408-547-5885
Investor Relations
liz@arista.com
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ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue:
Product$885,806 $566,467 $1,610,524 $1,105,612 
Service 166,085 140,852 318,433 269,269 
Total revenue1,051,891 707,319 1,928,957 1,374,881 
Cost of revenue:
Product375,634 225,779 669,443 444,212 
Service 32,992 27,362 62,404 51,219 
Total cost of revenue408,626 253,141 731,847 495,431 
Gross profit 643,265 454,178 1,197,110 879,450 
Operating expenses:
Research and development 178,158 143,293 350,164 275,780 
Sales and marketing 79,372 70,625 160,111 141,645 
General and administrative 22,882 20,895 45,995 36,368 
Total operating expenses 280,412 234,813 556,270 453,793 
Income from operations362,853 219,365 640,840 425,657 
Other income (loss), net (533)1,719 30,947 3,294 
Income before income taxes362,320 221,084 671,787 428,951 
Provision for income taxes63,221 24,196 100,429 51,697 
Net income$299,099 $196,888 $571,358 $377,254 
Net income per share (1):
Basic $0.98 $0.64 $1.86 $1.23 
Diluted $0.94 $0.62 $1.80 $1.18 
Weighted-average shares used in computing net income per share (1):
Basic 306,754 305,844 307,399 305,536 
Diluted 316,581 318,840 318,040 318,708 
_______________________
(1) Prior periods 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 June 30,
Six Months Ended June 30,
2022202120222021
GAAP gross profit$643,265 $454,178 $1,197,110 $879,450 
GAAP gross margin61.2 %64.2 %62.1 %64.0 %
Stock-based compensation expense2,312 1,796 3,621 3,196 
Intangible asset amortization6,012 5,465 11,733 10,929 
Non-GAAP gross profit$651,589 $461,439 $1,212,464 $893,575 
Non-GAAP gross margin61.9 %65.2 %62.9 %65.0 %
GAAP income from operations$362,853 $219,365 $640,840 $425,657 
Stock-based compensation expense50,224 44,944 100,503 82,497 
Intangible asset amortization7,708 7,365 15,019 14,795 
Acquisition-related costs (1)
4,691 — 4,691 — 
Non-GAAP income from operations$425,476 $271,674 $761,053 $522,949 
Non-GAAP operating margin40.4 %38.4 %39.5 %38.0 %
GAAP net income $299,099 $196,888 $571,358 $377,254 
Stock-based compensation expense50,224 44,944 100,503 82,497 
Intangible asset amortization7,708 7,365 15,019 14,795 
Acquisition-related costs (1)
4,691 — 4,691 — 
Unrealized loss (gain) on equity investments5,084 — (23,413)— 
Tax benefit on stock-based awards (17,725)(24,113)(48,689)(45,019)
Income tax effect on non-GAAP exclusions(6,401)(8,256)(8,281)(13,862)
Non-GAAP net income$342,680 $216,828 $611,188 $415,665 
GAAP diluted net income per share (2)
$0.94 $0.62 $1.80 $1.18 
Non-GAAP adjustments to net income 0.14 0.06 0.12 0.12 
Non-GAAP diluted net income per share$1.08 $0.68 $1.92 $1.30 
Weighted-average shares used in computing diluted net income per share (2)
316,581 318,840 318,040 318,708 
Summary of Stock-Based Compensation Expense:
Cost of revenue$2,312 $1,796 $3,621 $3,196 
Research and development28,449 23,139 56,025 45,121 
Sales and marketing12,827 11,368 25,936 21,453 
General and administrative6,636 8,641 14,921 12,727 
Total$50,224 $44,944 $100,503 $82,497 
___________________
(1) Represent non-recurring costs associated with business combinations, which primarily include retention bonuses, and professional and consulting fees.
(2) Prior periods 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)
June 30, 2022
December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $493,246 $620,813 
Marketable securities2,408,656 2,787,502 
Accounts receivable585,786 516,509 
Inventories 852,810 650,117 
Prepaid expenses and other current assets 388,697 237,735 
Total current assets 4,729,195 4,812,676 
Property and equipment, net91,823 78,634 
Acquisition-related intangible assets, net140,836 93,555 
Goodwill273,494 188,397 
Investments38,263 20,247 
Operating lease right-of-use assets61,869 65,182 
Deferred tax assets 442,455 442,295 
Other assets46,610 33,443 
TOTAL ASSETS $5,824,545 $5,734,429 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $275,093 $202,636 
Accrued liabilities 210,334 226,643 
Deferred revenue 697,762 593,578 
Other current liabilities 94,837 86,972 
Total current liabilities 1,278,026 1,109,829 
Income taxes payable 79,422 69,916 
Operating lease liabilities, non-current51,793 56,527 
Deferred revenue, non-current335,728 335,734 
Deferred tax liabilities, non-current13,447 129,074 
Other long-term liabilities 60,337 54,749 
TOTAL LIABILITIES 1,818,753 1,755,829 
STOCKHOLDERS’ EQUITY:
Common stock30 31 
Additional paid-in capital 1,638,787 1,530,046 
Retained earnings 2,408,294 2,456,823 
Accumulated other comprehensive income (loss)(41,319)(8,300)
TOTAL STOCKHOLDERS’ EQUITY 4,005,792 3,978,600 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $5,824,545 $5,734,429 

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ARISTA NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended June 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $571,358 $377,254 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other28,012 25,235 
Stock-based compensation 100,503 82,497 
Noncash lease expense9,161 8,410 
Deferred income taxes (105,937)(2,998)
Unrealized gain on equity investments(23,413)— 
Amortization of investment premiums 11,457 12,121 
Changes in operating assets and liabilities:
Accounts receivable, net (64,335)25,326 
Inventories (202,052)(63,531)
Prepaid expenses and other current assets (158,149)(44,356)
Other assets(5,543)(3,390)
Accounts payable 71,169 10,879 
Accrued liabilities (16,210)20,025 
Deferred revenue 91,201 95,263 
Income taxes payable 10,792 (9,144)
Other liabilities 221 (15,550)
Net cash provided by operating activities 318,235 518,041 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities829,714 819,807 
Purchases of marketable securities(641,979)(1,241,657)
Purchases of property and equipment (23,744)(9,567)
Business acquisitions, net of cash acquired(145,087)1,419 
Investments in privately-held companies and intangibles(11,691)(6,084)
Proceeds from sale of marketable securities165,746 — 
Net cash provided by (used in) investing activities 172,959 (436,082)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under equity plans22,991 26,884 
Tax withholding paid on behalf of employees for net share settlement(18,802)(6,353)
Repurchase of common stock(619,888)(101,355)
Net cash used in financing activities(615,699)(80,824)
Effect of exchange rate changes (3,041)(665)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(127,546)470 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period625,050 897,454 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period$497,504 $897,924 

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