What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 162 added, 132 removed, 421 unchanged (41% of the section changed)

3 unchanged sentences

(Unaudited, in thousands, except par value)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

CURRENT ASSETS:

1 unchanged sentence

Marketable securities 2,408,656 2,787,502

Accounts receivable, net of rebates and allowances of $ 3,923 and $ 5,088 , respectively

648,606 516,509

Accounts receivable, net 585,786 516,509

Inventories 852,810 650,117

24 unchanged sentences

STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.0001 par value— 100,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value— 1,000,000 shares authorized as of March 31, 2022 and December 31, 2021;

308,165 and 307,681 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Preferred stock, $ 0.0001 par value— 100,000 shares authorized and no shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.0001 par value— 1,000,000 shares authorized as of June 30, 2022 and December 31, 2021;

304,455 and 307,681 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Additional paid-in capital 1,638,787 1,530,046

7 unchanged sentences

(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2022 2021 2022 2021

Product $ 885,806 $ 566,467 $ 1,610,524 $ 1,105,612

12 unchanged sentences

Income from operations 362,853 219,365 640,840 425,657

Other income, net 31,480 1,575

Other income (expense), net ( 533 ) 1,719 30,947 3,294

Income before income taxes 362,320 221,084 671,787 428,951

7 unchanged sentences

Diluted 316,581 318,840 318,040 318,708

(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.

(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.

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income $ 299,099 $ 196,888 $ 571,358 $ 377,254

8 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

Common Stock Additional

1 unchanged sentence

Earnings Accumulated

Other Comprehensive Loss Total

Stockholders’ Equity Common Stock Additional

Paid-In Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders’

Shares Amount

Shares Amount Shares Amount

Balance at beginning of period 308,165 $ 31 $ 1,590,793 $ 2,592,854 $ ( 30,501 ) $ 4,153,177 307,681 $ 31 $ 1,530,046 $ 2,456,823 $ ( 8,300 ) $ 3,978,600

3 unchanged sentences

Issuance of common stock in connection with employee equity incentive plans 1,131 — 3,831 — — 3,831 2,858 — 22,991 — — 22,991

Tax withholding paid for net share settlement of equity awards ( 105 ) — ( 12,741 ) — — ( 12,741 )

Repurchase of common stock ( 4,783 ) ( 1 ) — ( 483,659 ) — ( 483,660 ) ( 5,954 ) ( 1 ) — ( 619,887 ) — ( 619,888 )

Tax withholding paid for net share settlement of equity awards ( 58 ) — ( 6,061 ) — — ( 6,061 ) ( 163 ) — ( 18,802 ) — — ( 18,802 )

Common stock issued for business acquisition — — — — — — 33 — 4,049 — — 4,049

Balance at end of period 304,455 $ 30 $ 1,638,787 $ 2,408,294 $ ( 41,319 ) $ 4,005,792 304,455 $ 30 $ 1,638,787 $ 2,408,294 $ ( 41,319 ) $ 4,005,792

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Common Stock Additional

Paid-In Capital (1) Retained

Earnings Accumulated Other Comprehensive Loss Total

Stockholders’

Equity Common Stock Additional

Paid-In Capital (1) Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders’

Shares (1) Amount (1)

Shares (1) Amount (1) Shares (1) Amount (1)

Balance at beginning of period 305,028 $ 30 $ 1,345,547 $ 2,106,625 $ ( 864 ) $ 3,451,338 304,696 $ 30 $ 1,292,409 $ 2,027,614 $ 238 $ 3,320,291

3 unchanged sentences

Issuance of common stock in connection with employee equity incentive plans 1,676 — 8,803 — — 8,803 3,512 — 26,884 — — 26,884

Tax withholding paid for net share settlement of equity awards ( 36 ) — ( 2,496 ) — — ( 2,496 )

Repurchase of common stock — — — — — — ( 1,468 ) — — ( 101,355 ) — ( 101,355 )

Tax withholding paid for net share settlement of equity awards ( 44 ) — ( 3,857 ) — — ( 3,857 ) ( 80 ) — ( 6,353 ) — — ( 6,353 )

Balance at end of period 306,660 $ 30 $ 1,395,437 $ 2,303,513 $ ( 1,139 ) $ 3,697,841 306,660 $ 30 $ 1,395,437 $ 2,303,513 $ ( 1,139 ) $ 3,697,841

(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.

(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.

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

21 unchanged sentences

Purchases of marketable securities ( 641,979 ) ( 1,241,657 )

Business acquisitions, net of cash acquired ( 37,610 ) 18

Purchases of property and equipment ( 23,744 ) ( 9,567 )

Purchases of investments in privately-held companies ( 11,691 ) ( 2,000 )

Net cash used in investing activities ( 72,615 ) ( 217,949 )

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 securities 165,746 —

Net cash provided by (used in) investing activities 172,959 ( 436,082 )

CASH FLOWS FROM FINANCING ACTIVITIES:

5 unchanged sentences

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

( 127,546 ) 470

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period 625,050 897,454

19 unchanged sentences

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted.

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments of a normal recurring nature necessary for the fair presentation of our financial information.

The results for the three months ended March 31, 2022, are not necessarily indicative of the results expected for the full fiscal year.

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial information.

The results for the three and six months ended June 30, 2022, are not necessarily indicative of the results expected for the full fiscal year.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements.

7 unchanged sentences

Risks and Uncertainties

The global coronavirus ("COVID-19") pandemic as well as the Russian-Ukrainian conflict continue to evolve and have widespread and unpredictable impacts on the global economy and business activities.

Our contract manufacturers and suppliers have experienced workforce disruptions, delays in component sourcing, production and export of their products as well as component shortages and increased component costs, which have disrupted our supply chain and has impacted and will likely continue to impact our ability to supply products to our customers on a timely basis.

While we have experienced improvements in overall demand from customers in recent quarters, we believe ongoing supply disruptions combined with other supply chain related constraints, could impact our ability to fulfill this increased demand and as a result could negatively impact our business in future periods.

In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and may negatively impact our gross margin.

Although the overall economy continues to recover, several issues including inflation risk, supply chain bottlenecks, and COVID-19 variants have and may continue to impact the pace of the recovery.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including supply chain and labor shortages, inflation and monetary policy shifts, recession risks, the ongoing global coronavirus ("COVID-19") pandemic and potential disruptions from the Russia-Ukraine conflict.

Our contract manufacturers and suppliers have experienced workforce disruptions, delays in component sourcing, production and export of their products as well as component shortages and increased component costs, which have disrupted our supply chain and have impacted and will likely continue to impact our ability to supply products to our customers on a timely basis.

While we continue to experience strong overall demand from customers, we believe ongoing supply disruptions combined with other supply chain related constraints could impact our ability to fulfill this increased demand and as a result could negatively impact our business in future periods.

In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impacted, and may continue to negatively impact our gross margin.

The extent of the impact on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, and the impact of any initiatives and programs we may undertake to address financial and operational challenges, will depend on future developments, the impact to our customers, partners, employees, contract manufacturers and supply chain, as well as restrictions on travel and transport, all of which continue to evolve and are unpredictable.

continues to actively monitor the impact of the pandemic on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce.

As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Management continues to actively monitor the impact of these macroeconomic factors

on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce.

As of the date of issuance of these condensed consolidated financial statements, the extent to which these factors may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Recently Adopted Accounting Pronouncements

2 unchanged sentences

ASU 2021-08 requires companies to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination in accordance with ASC 606.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date.

Under previous GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date.

2021-08 results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606.

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The following tables summarize the fair value of these financial assets by significant investment category and their levels within the fair value hierarchy (in thousands):

As of March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

Level I Level II Level III Total Level I Level II Level III Total

2 unchanged sentences

Money market funds $ 274,754 $ — $ — $ 274,754 $ 221,382 $ — $ — $ 221,382

Commercial paper — 3,642 — 3,642 — — — —

274,754 3,642 — 278,396 221,382 — — 221,382

Marketable Securities:

12 unchanged sentences

______________________________________

(1) As of March 31, 2022 and December 31, 2021, all of our certificates of deposits were domestic deposits.

(2) The $ 21.8 million represents the fair value of marketable equity securities as of March 31, 2022.

This amount includes $ 8.3 million that was reclassified from Investments on our condensed consolidated balance sheet following the commencement of public market trading of the issuer in the current quarter, in addition to unrealized gains of $ 13.5 million recorded during the current quarter.

The unrealized gains are included in Other income, net on the Condensed Consolidated Statements of Operations.

(1) As of June 30, 2022 and December 31, 2021, all of our certificates of deposits were domestic deposits.

(2) The $ 16.7 million represents the fair value of marketable equity securities as of June 30, 2022.

This publicly-traded equity investment generated an unrealized gain of $ 8.4 million for the six months ended June 30, 2022, and an unrealized loss of $ 5.1 million for the three months ended June 30, 2022.

The unrealized gains and losses are included in Other income (expense), net on the Condensed Consolidated Statements of Operations.

Refer to Note 3.

Financial Statement Details.

During the three months ended on March 31, 2022, the Company did not make any transfers between the levels of the fair value hierarchy.

Financial Statements Details.

During the three and six months ended on June 30, 2022, the Company did not make any transfers between the levels of the fair value hierarchy.

Marketable debt securities

The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities at fair value on a recurring basis (in thousands):

As of March 31, 2022 As of December 31, 2021

The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities measured at fair value on a recurring basis (in thousands):

As of June 30, 2022 As of December 31, 2021

Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Commercial paper $ 18,462 $ — $ — $ 18,462 $ 141,274 $ — $ — $ 141,274

government notes 1,106,454 16 ( 12,549 ) 1,093,921 1,060,716 3 ( 2,909 ) 1,057,810

government 1,098,360 — ( 16,276 ) 1,082,084 1,060,716 3 ( 2,909 ) 1,057,810

Corporate bonds 1,083,803 6 ( 17,224 ) 1,066,585 1,255,149 105 ( 3,028 ) 1,252,226

1 unchanged sentence

Total $ 2,415,312 $ 7 $ ( 36,420 ) $ 2,378,899 $ 2,748,697 $ 144 $ ( 6,270 ) $ 2,742,571

We invest in marketable securities that have maximum maturities of two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies.

For debt securities in unrealized loss positions, it is not likely that we will be required to sell such securities before recovery of their amortized cost basis nor do we have the intent to sell such securities before maturity;

we invest in debt securities that have maximum maturities of two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies.

The longer the duration of these marketable securities, the more susceptible they are to changes in market interest rates and bond yields.

We expect to realize the full value of these investments upon maturity and do not expect to sell the debt securities prior to maturity;

therefore, we do not consider any of our marketable securities to be impaired as of March 31, 2022.

We did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable securities for the three months ended March 31, 2022.

The following is an analysis of our marketable securities in unrealized loss positions for a period of less than twelve months.

As of March 31, 2022, there are no unrealized loss positions with a duration equal to or greater than twelve months (in thousands):

As of March 31, 2022

Unrealized Losses within 12 months

Fair Value Unrealized Losses

Given the short-term and conservative nature of our portfolio, the unrealized losses are not related to credit risk;

therefore, we did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable debt securities for the three and six months ended June 30, 2022.

All unrealized losses were recognized in other comprehensive income (loss).

Realized losses were immaterial for the three and six months ended June 30, 2022.

The following table is an analysis of our marketable debt securities in unrealized loss positions (in thousands):

As of June 30, 2022

Unrealized Losses within 12 months Unrealized Losses 12 months or greater Total

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

government notes $ 1,082,084 $ ( 16,276 ) $ — $ — $ 1,082,084 $ ( 16,276 )

2 unchanged sentences

Total $ 2,284,623 $ ( 35,271 ) $ 65,373 $ ( 1,149 ) $ 2,349,996 $ ( 36,420 )

As of March 31, 2022, we had no marketable debt securities with contractual maturities that exceed 24 months.

As of June 30, 2022, we had no marketable debt securities with contractual maturities that exceed 24 months.

The fair values of marketable debt securities, by remaining contractual maturities, are as follows (in thousands):

As of March 31, 2022

As of June 30, 2022

Due in 1 year or less $ 1,700,701

Due in 1 year through 2 years 964,038

Due in 1 to 2 years 678,198

Total debt securities $ 2,378,899

The weighted-average remaining duration of our marketable debt securities is approximately 0.8 years as of March 31, 2022.

The weighted-average remaining duration of our marketable debt securities is approximately 0.8 years as of June 30, 2022.

As we view these marketable debt securities as available to support current operations, we classify marketable debt securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.

6 unchanged sentences

In addition, the valuation requires management judgment due to the absence of market price and lack of liquidity.

We did not record any realized gains or losses for our non-marketable equity securities measured at fair value on a non-recurring basis during the three months ended March 31, 2022 and March 31, 2021.

We recorded an unrealized gain of $ 15.0 million on non-marketable equity securities based on observable price changes from orderly transactions of identical or similar securities of the same issuer in the three months ended March 31, 2022, but did not record any unrealized losses or further unrealized gains in the three months ended March 31, 2022 and March 31, 2021.

We did not record any realized gains or losses for our non-marketable equity securities measured at fair value on a non-recurring basis during the three and six months ended June 30, 2022 and June 30, 2021.

We recorded an unrealized gain of $ 15.0 million on non-marketable equity securities based on observable price changes from orderly transactions of identical or similar securities of the same issuer in the six months ended June 30, 2022, but did not record any unrealized losses or additional unrealized gains in the three months ended June 30, 2022 and the three and six months ended June 30, 2021.

We evaluate our non-marketable equity securities for impairment at each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which our investees operate, and other publicly-available information that affected the value of the its non-marketable equity securities.

The following table summarizes the activity related to our non-marketable equity securities as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

The following table summarizes the activity related to our non-marketable equity securities as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Cost of investments (1) $ 23,263 $ 14,933

2 unchanged sentences

Carrying amount of investments $ 38,263 $ 20,247

(1) During the three months ended March 31, 2022, $ 3.0 million previously included in the Cost of investments and $ 5.3 million previously included in the Cumulative upward adjustment, or $ 8.3 million in aggregate, were reclassified from Investments to Marketable securities on our condensed consolidated balance sheet following the commencement of public market trading of the issuer.

(1) During the six months ended June 30, 2022, $ 3.0 million previously included in the Cost of investments and $ 5.3 million previously included in the Cumulative upward adjustment, or $ 8.3 million in aggregate, were reclassified from Investments to Marketable securities on our condensed consolidated balance sheet following the commencement of public market trading of the issuer.

There was no such activity in the three months ended June 30, 2022.

Financial Statements Details

Cash, Cash Equivalents and Restricted Cash

The reconciliation of cash, cash equivalents and restricted cash reported in the accompanying unaudited condensed consolidated balance sheets to the total of the same such amounts in the accompanying unaudited condensed consolidated statements of cash flows is as follows (in thousands):

March 31, 2022 December 31, 2021

The reconciliation of cash, cash equivalents and restricted cash reported on the unaudited condensed consolidated balance sheets to the total of the same such amounts in the unaudited condensed consolidated statements of cash flows is as follows (in thousands):

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 493,246 $ 620,813

3 unchanged sentences

Accounts receivable, net consists of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accounts receivable $ 598,380 $ 521,597

3 unchanged sentences

Inventories consist of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Raw materials $ 462,396 $ 316,737

3 unchanged sentences

Prepaid expenses and other current assets consist of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Inventory deposits $ 98,099 $ 46,311

5 unchanged sentences

Property and equipment, net consists of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Land $ 40,485 $ 40,145

1 unchanged sentence

Computer hardware and software 47,376 44,083

Furniture and fixtures 3,638 3,634

Leasehold improvements

30,208 30,502

Furniture and fixtures 3,612 3,634

Construction-in-process 2,207 2,378

2 unchanged sentences

Property and equipment, net $ 91,823 $ 78,634

Depreciation expense was $ 5.6 million and $ 4.9 million for the three months ended March 31, 2022 and 2021, respectively.

Depreciation expense was $ 6.2 million and $ 4.8 million for the three months ended June 30, 2022 and 2021, respectively, and $ 11.8 million and $ 9.7 million for the six months ended June 30, 2022 and 2021, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accrued payroll related costs $ 78,066 $ 99,571

6 unchanged sentences

The following table summarizes the activity related to our accrued liability for estimated future warranty costs (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Warranty accrual, beginning of period $ 10,414 $ 9,314

4 unchanged sentences

The following table summarizes the beginning and ending balances of our contract assets included in "Prepaid and other current assets" on the condensed consolidated balance sheets (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Contract assets, beginning balance $ 24,388

Contract assets, ending balance 29,237

Contract Liabilities, Deferred Revenue and Other Performance Obligations

Contract Liabilities

1 unchanged sentence

The following table summarizes the activity related to our contract liabilities (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Contract liabilities, beginning balance $ 98,422 $ 80,465 $ 93,382 $ 85,957

3 unchanged sentences

Contract liabilities, ending balance $ 101,600 $ 83,354 $ 101,600 $ 83,354

As of March 31, 2022 and December 31, 2021, $ 40.8 million and $ 38.7 million of our contract liabilities, respectively, were included in "Other current liabilities" with the remaining balances in "Other long-term liabilities" on the condensed consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, $ 41.4 million and $ 38.7 million of our contract liabilities, respectively, were included in "Other current liabilities" with the remaining balances included in "Other long-term liabilities" on the condensed consolidated balance sheets.

Deferred Revenue

1 unchanged sentence

The following table summarizes the activity related to our deferred revenue (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Deferred revenue, beginning balance

4 unchanged sentences

Other Performance Obligations

Other performance obligations include unbilled contract revenue for services and product that will be recognized in future periods.

As of March 31, 2022, other performance obligations of $ 180.0 million were comprised mainly of unbilled multi-year PCS contract amounts.

Other performance obligations include unbilled contract revenue for services and products that will be recognized in future periods.

As of June 30, 2022, other performance obligations of $ 178.1 million were comprised mainly of unbilled multi-year PCS contract amounts that will be recognized as revenue in future periods.

In addition, as of June 30, 2022 the company had entered into $ 762.7 million of binding contractual agreements with certain customers that are primarily related to future product shipments.

Revenue from Total Remaining Performance Obligations

Revenue from total remaining performance obligations represents contract liabilities, deferred revenue and other performance obligations.

As of March 31, 2022, approximately $ 1,402.2 million of revenue is expected to be recognized from remaining performance obligations, of which approximately 83 % is expected to be recognized over the next two years and approximately 17 % is expected to be recognized during the third to the fifth year.

Other Income, net

Other income, net consists of the following (in thousands):

Three Months Ended March 31,

Revenue from total remaining performance obligations represents contract liabilities, deferred revenue and unbilled contract revenue that will be recognized in future periods.

As of June 30, 2022, approximately $ 1,313.3 million of revenue is expected to be recognized from remaining performance obligations, of which approximately 83 % is expected to be recognized over the next two years and approximately 17 % is expected to be recognized during the third to the fifth year.

These amounts do not include the $ 762.7 million of binding contractual agreements related primarily to future product shipments outlined above.

As of June 30, 2022, it is expected that the majority of the amounts allocated to these specific performance obligations will be recognized as revenue upon product shipment over the next two years ;

however, given the current uncertain supply chain environment and industry wide supply constraints, we may experience manufacturing and shipment delays or cancellations related to these performance obligations, which could impact revenue recognition.

Other Income (Expense), net

Other income (expense), net consists of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Interest income $ 4,427 $ 1,872 $ 6,855 $ 3,917

Unrealized gain on equity investments 28,497 —

Unrealized gain (loss) on equity investments ( 5,084 ) — 23,413 —

Other income (expense), net 124 ( 153 ) 679 ( 623 )

1 unchanged sentence

Acquisition, Goodwill and Acquisition-Related Intangible Assets

Acquisition and Goodwill

In January 2022, we completed an acquisition of a privately-held technology company in the United States for a total consideration of $ 47.0 million with both cash and common stock.

The purchase price included $ 19.0 million of intangible assets, $ 28.5 million of goodwill and $ 0.5 million of net liabilities assumed.

The changes in the carrying values of goodwill for the three months ended March 31, 2022 are as follows (in thousands):

Balance at December 31, 2021 $ 188,397

Additions related to one acquisition 28,518

Balance at March 31, 2022 $ 216,915

Acquisition-Related Intangible Assets

The following table presents details of our acquisition-related intangible assets as of March 31, 2022 and December 31, 2021 (in thousands, except for years):

March 31, 2022

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life

During the six months ended June 30, 2022, we completed two acquisitions of private companies for total consideration of $ 158.9 million including $ 4.0 million in common stock and the remainder in cash.

The purchase prices included $ 62.3 million of intangible assets, $ 85.1 million of goodwill and $ 11.5 million of net assets acquired.

We also incurred certain acquisition-related expenses of $ 4.7 million, which primarily consisted of retention bonuses to continuing employees as well as professional and consulting fees.

The intangible assets are amortized on a straight-line basis over their estimated useful lives, as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed.

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except years):

Acquisition Date Fair Value Weighted Average Estimated Useful Life (in years)

Developed technology $ 30,200 5.7

1 unchanged sentence

Trade name 3,400 3.0

Others 5,720 ( 5,720 ) — 0.0

Total $ 184,360 $ ( 79,116 ) $ 105,244 4.8

December 31, 2021

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life

Total intangible assets acquired $ 62,300

The changes in the carrying values of goodwill for the three and six months ended June 30, 2022 are as follows (in thousands):

Balance at December 31, 2021 $ 188,397

Additions related to the acquisition completed in January, 2022 28,518

Balance at March 31, 2022 $ 216,915

Additions related to the acquisition completed in June, 2022 56,530

Measurement-period adjustments to the acquisition completed in January, 2022 49

Balance at June 30, 2022 $ 273,494

Acquisition-Related Intangible Assets

Acquisition-related intangible assets were as follows (in thousands, except years):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life (in years)

December 31, 2021 Additions June 30, 2022 December 31, 2021 Amortization June 30, 2022 December 31, 2021 June 30, 2022

Developed technology $ 124,730 $ 30,200 $ 154,930 $ ( 53,663 ) $ ( 11,732 ) $ ( 65,395 ) $ 71,067 $ 89,535 4.7

3 unchanged sentences

Total $ 165,360 $ 62,300 $ 227,660 $ ( 71,805 ) $ ( 15,019 ) $ ( 86,824 ) $ 93,555 $ 140,836 5.1

For intangible assets acquired and purchased during the three months ended March 31, 2022, developed technology has a weighted-average useful life of 7.0 years, customer relationships has a weighted-average useful life of 7.0 years, and trade name has a weighted-average useful life of 3.0 years.

Amortization expense related to acquisition-related intangible assets was $ 7.3 million, and $ 7.4 million for the three months ended March 31, 2022, and 2021, respectively.

As of March 31, 2022, future estimated amortization expense related to the acquired-related intangible assets is as follows (in thousands):

Amortization expense related to acquisition-related intangible assets was $ 7.7 million, and $ 7.4 million for the three months ended June 30, 2022 and 2021, and $ 15.0 million and $ 14.8 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, future estimated amortization expense related to the acquisition-related intangible assets is as follows (in thousands):

Future Amortization Expense

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We outsource most of our manufacturing and supply chain management operations to third-party contract manufacturers, who procure components and assemble products on our behalf.

A significant portion of our purchase orders to our contract manufacturers for finished products consists of non-cancellable purchase commitments.

In addition, we purchase strategic component inventory from certain suppliers under non-cancellable purchase commitments, including integrated circuits, which are consigned to our contract manufacturers.

As of March 31, 2022, we had non-cancellable purchase commitments of $ 4,318.9 million, with $ 2,427.7 million with confirmed receipt dates within 12 months, $ 850.2 million with confirmed receipt dates greater than 12 months and the remaining $ 1,041 million with the receipt dates to be confirmed.

As of June 30, 2022, we had non-cancellable purchase commitments of $ 4,472.2 million, out of which $ 2,937.6 million have confirmed receipt dates within 12 months, and $ 1,534.6 million have confirmed receipt dates greater than 12 months.

These open purchase orders are considered enforceable and legally binding, and while we may have some limited ability to reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services, this can only occur with the agreement of the related supplier.

We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $ 98.4 million and $ 49.1 million as of March 31, 2022 and December 31, 2021, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the accompanying consolidated balance sheets.

We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $ 100.8 million and $ 49.1 million as of June 30, 2022 and December 31, 2021, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the condensed consolidated balance sheets.

We have entered into agreements with some of our direct customers and channel partners that contain indemnification provisions relating to potential situations where claims could be alleged that our products infringe the intellectual property rights of a third party.

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On November 5, 2021, the case was transferred to the Northern District of California.

trial has been set for October 23, 2023.

On March 30, 2022, WSOU dismissed one of the patents with prejudice, removing Arista wireless products from those accused of infringement.

On July 1, 2022, the court stayed the case pending the resolution of an inter partes review of one of the patents-in-suit.

We intend to vigorously defend against the claims brought against us by WSOU;

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We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

As of March 31, 2022, provisions recorded for contingent losses related to other claims and matters have not been significant.

Based on currently available information, management does not believe that any liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable, and believes these other matters are not likely, individually and in the aggregate, to have a material adverse effect on our financial position, results of operations or cash flows.

As of June 30, 2022, provisions recorded for contingent losses related to other claims and matters have not been significant.

Based on currently-available information, management does not believe that any additional liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable, and believes these other matters are not likely, individually and in the aggregate, to have a material adverse effect on our financial position, results of operations or cash flows;

however, litigation is subject to inherent uncertainties and our view of these matters may change in the future.

Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods.

Were an unfavorable outcome to occur, there exists the possibility of a material adverse

impact on our financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods.

Stockholders’ Equity and Stock-Based Compensation

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The New Repurchase Program does not obligate us to acquire any of our common stock, and may be suspended or discontinued by us at any time without prior notice.

As of March 31, 2022, the remaining authorized amount for stock repurchases under this program was approximately $ 790.8 million.

A summary of the stock repurchase activity under the New Repurchase Program is as follows (in thousands, except per share amounts):

Three Months Ended

March 31, 2022

As of June 30, 2022, the remaining authorized amount for stock repurchases under this program was approximately $ 307.2 million.

A summary of the stock repurchase activity under the New Repurchase Program for the six months ended June 30, 2022 is as follows (in thousands, except per share amounts):

Six Months Ended

June 30, 2022

Aggregate purchase price $ 619,888

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Average price paid per share $ 104.11

The aggregate purchase price of repurchased shares of our common stock is recorded as a reduction to retained earnings.

The aggregate purchase price of repurchased shares of our common stock is recorded as a reduction to retained earnings in our condensed consolidated statements of stockholders' equity.

All shares repurchased have been retired.

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Awards granted under the 2014 Plan could be in the form of Incentive Stock Options (“ISOs”), Nonstatutory Stock Options (“NSOs”), Restricted Stock Units (“RSUs”), Restricted Stock Awards (“RSAs”) or Stock Appreciation Rights (“SARs”).

The number of shares available for grant and issuance under the 2014 Plan increases automatically on January 1 of each year commencing with 2016 by the number of shares equal to 3 % of the outstanding shares of our common stock on the immediately preceding December 31, but not exceed 50,000,000 shares (the “2014 Plan Evergreen Increase”), unless our board of directors, in its discretion, determines to make a smaller increase.

The number of shares available for grant and issuance under the 2014 Plan increases automatically on January 1 of each year commencing with 2016 by the number of shares equal to 3 % of the outstanding shares of our common stock on the immediately preceding December 31, but not to exceed 50,000,000 shares (the “2014 Plan Evergreen Increase”), unless our board of directors, in its discretion, determines to make a smaller increase.

Effective January 1, 2022, our board of directors authorized an increase of 9,230,434 shares to the shares available for issuance under the 2014 Plan.

As of March 31, 2022, there remained approximately 95.7 million shares available for issuance under the 2014 Plan.

As of June 30, 2022, there remained approximately 94.7 million shares available for issuance under the 2014 Plan.

2014 Employee Stock Purchase Plan

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Effective January 1, 2022, our board of directors authorized an increase of 3,076,811 shares to the shares available for issuance under our 2014 Employee Stock Purchase Plan (the “ESPP”).

During the three months ended March 31, 2022, we issued 240,394 shares at a weighted-average purchase price of $ 48.75 per share under the ESPP.

As of March 31, 2022, there remained 20.8 million shares available for issuance under the ESPP.

During the six months ended June 30, 2022, we issued 240,394 shares at a weighted-average purchase price of $ 48.75 per share under the ESPP.

As of June 30, 2022, there remained approximately 20.8 million shares available for issuance under the ESPP.

Stock Option Activities

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Price per Share Weighted-

Term (Years) Aggregate

Term (in years) Aggregate

Balance—December 31, 2021 8,685 $ 12.45 2.8 $ 1,140,369

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Options canceled ( 164 ) 16.44

Balance—March 31, 2022 7,827 $ 12.58 2.6 $ 989,294

Vested and exercisable—March 31, 2022 6,304 $ 10.07 2.2 $ 812,692

Balance—June 30, 2022 7,291 $ 12.91 2.4 $ 589,386

Vested and exercisable—June 30, 2022 6,145 $ 10.58 2.0 $ 511,007

Restricted Stock Unit (RSU) Activities

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RSUs forfeited/canceled ( 272 ) 74.77

Unvested balance—March 31, 2022 7,729 $ 75.24 1.6 $ 1,074,204

Unvested balance—June 30, 2022 9,048 $ 81.16 1.9 $ 848,123

Stock-Based Compensation Expense

The following table summarizes the stock-based compensation expense related to our equity awards (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Cost of revenue $ 2,312 $ 1,796 $ 3,621 $ 3,196

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Total stock-based compensation $ 50,224 $ 44,944 $ 100,503 $ 82,497

As of March 31, 2022, there were $ 501.4 million of unamortized compensation costs related to all unvested awards.

As of June 30, 2022, there were $ 643.6 million of unamortized compensation costs related to all unvested awards.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 3.6 years.

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The following table sets forth the computation of our basic and diluted net income per share (in thousands, except per share amounts):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 (1) 2022 2021 (1)

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The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because their effect would have been anti-dilutive for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 (1) 2022 2021 (1)

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Employee stock purchase plan — 80 8 60

Total 781 484 431 520

(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.

Three Months Ended March 31,

(in thousands, except percentages)

Income Taxes (in thousands, except percentages)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Income before income taxes $ 362,320 $ 221,084 $ 671,787 $ 428,951

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Effective tax rate 17.4 % 10.9 % 14.9 % 12.1 %

The effective tax rates above reflect tax expense recorded on pre-tax income in the three months ended March 31, 2022 and March 31, 2021.

The change in effective tax rate in the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to a favorable change in jurisdictional mix in earnings.

The increase in the effective tax rates in the three and six months ended June 30, 2022, as compared to the same periods in 2021, was primarily due to a decrease in the proportion of tax benefits attributable to stock-based compensation versus total pre-tax income.

Geographical Information

We operate as one reportable segment.

We operate in one reportable segment.

The following table represents revenue based on customers’ shipping addresses (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Americas $ 845,055 $ 514,149 $ 1,509,432 $ 1,016,021

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Total revenue $ 1,051,891 $ 707,319 $ 1,928,957 $ 1,374,881

Long-lived assets, excluding intercompany receivables, investments in subsidiaries, privately-held equity investments and deferred tax assets, net by location are summarized as follows (in thousands):

March 31, 2022 December 31, 2021

Long-lived assets, net, excluding intercompany receivables, investments in subsidiaries, privately-held equity investments and deferred tax assets, by location are summarized as follows (in thousands):

June 30, 2022 December 31, 2021

United States $ 70,216 $ 62,163

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements