NewsStock Market

Investor Relations – CISCO REPORTS THIRD QUARTER EARNINGS

SAN JOSE, Calif., May 15, 2024 /PRNewswire/ —

Cisco Logo (PRNewsfoto/Cisco)

News Summary:

  • $12.7 billion in revenue, down 13% year over year, in line with expectations and reflects our customers’ continued implementation of products on-hand
  • Strong profitability with GAAP gross margin of 65.1% and non-GAAP gross margin of 68.3%
  • Transformed business model, further enhanced by the Splunk acquisition:
    • Total subscription revenue of $6.9 billion including Splunk, representing 54% of total revenue
    • Total annualized recurring revenue (ARR) at $29.2 billion including $4.2 billion from Splunk, up 22% year over year, and product ARR at $15.5 billion, up 44% year over year
  • Gary Steele, former Splunk CEO, named president of Go-to-Market, effective immediately
  • Q3 FY 2024 Results:
    • Revenue: $12.7 billion
      • Decrease of 13% year over year
      • Splunk contributed $413 million in revenue
    • Earnings per Share: GAAP: $0.46; Non-GAAP: $0.88
      • GAAP EPS decreased 41% year over year, which includes a negative $0.09 impact from the Splunk acquisition
      • Non-GAAP EPS decreased 12% year over year, which includes a negative $0.01 impact from the Splunk acquisition
  • Q4 FY 2024 Guidance:
      
    • Revenue: $13.4 billion to $13.6 billion
    • Earnings per Share: GAAP: $0.46 to $0.51; Non-GAAP: $0.84 to $0.86
  • FY 2024 Guidance:
    • Revenue: $53.6 billion to $53.8 billion
    • Earnings per Share: GAAP: $2.46 to $2.51; Non-GAAP: $3.69 to $3.71

Cisco today reported third quarter results for the period ended April 27, 2024. Cisco reported third quarter revenue of $12.7 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.46 per share, and non-GAAP net income of $3.6 billion or $0.88 per share.

“We delivered a solid Q3 performance in what remains a dynamic environment” said Chuck Robbins, chair and CEO of Cisco. “Our unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era.”

“Revenue, gross margin and non-GAAP EPS in Q3 were at the high end or above our guidance range, both including and excluding Splunk, resulting in continued operating leverage,” said Scott Herren, CFO of Cisco. “Customers are consuming the equipment shipped over the last few quarters in line with our expectations and we are seeing stabilization of demand as a result. The addition of Splunk to our product line will be a catalyst for further growth.” 

Gary Steele Named President of Go-to-Market

Cisco has named Gary Steele as President of Go-to-Market, effective immediately. Steele is well known for his operational excellence, and in this new role, he will work closely with Robbins to set and execute against Cisco’s strategic plans and goals. He will continue to lead the Splunk team through the integration process to ensure a seamless integration into Cisco. 

Cisco also announced that Jeff Sharritts, Cisco’s Chief Customer and Partner Officer, will depart Cisco after a successful 24-year career at the company. Sharritts will remain with Cisco until mid-July to ensure a seamless transition.

GAAP Results

Q3 FY 2024

Q3 FY 2023

Vs. Q3 FY 2023

Revenue

$              12.7 billion

$              14.6 billion

(13) %

Net Income

$               1.9  billion

$               3.2  billion

(41) %

Diluted Earnings per Share (EPS)

$                     0.46

$                     0.78

(41) %

The acquisition of Splunk, including financing costs, had a negative impact of $0.09 to GAAP EPS, for the third quarter of fiscal 2024.

Non-GAAP Results

Q3 FY 2024

Q3 FY 2023

Vs. Q3 FY 2023

Net Income

$               3.6   billion

$               4.1   billion

(14) %

EPS

$                      0.88

$                      1.00

(12) %

The acquisition of Splunk, including financing costs, had a negative impact of $0.01 to Non-GAAP EPS, for the third quarter of fiscal 2024.

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled “Reconciliations of GAAP to non-GAAP Measures.”

Cisco Declares Quarterly Dividend

Cisco has declared a quarterly dividend of $0.40 per common share to be paid on July 24, 2024, to all stockholders of record as of the close of business on July 5, 2024. Future dividends will be subject to Board approval.

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q3 FY 2024 Highlights

Revenue — Total revenue was $12.7 billion, down 13%, with product revenue down 19% and service revenue up 6%. Cisco completed the acquisition of Splunk Inc. (“Splunk”) in the third quarter of fiscal 2024. Splunk contributed $413 million of total revenue for the third quarter of fiscal 2024.

Revenue by geographic segment was: Americas down 15%, EMEA down 9%, and APJC down 12%. Product revenue performance reflected growth in Security up 36% and Observability up 27%. Networking was down 27%. Product revenue in Collaboration was flat. Security and Observability, excluding Splunk, grew 3% and 14%, respectively, in the third quarter of fiscal 2024.

Gross Margin — On a GAAP basis, total gross margin, product gross margin, and service gross margin were 65.1%, 63.5%, and 69.2%, respectively, as compared with 63.4%, 62.7%, and 65.4%, respectively, in the third quarter of fiscal 2023.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 68.3%, 66.9%, and 71.6%, respectively, as compared with 65.2%, 64.5%, and 67.3%, respectively, in the third quarter of fiscal 2023.

Total gross margins by geographic segment were: 67.9% for the Americas, 69.6% for EMEA and 67.4% for APJC.

Operating Expenses — On a GAAP basis, operating expenses were $6.1 billion, up 15%, and were 47.9% of revenue. Non-GAAP operating expenses were $4.3 billion, down 5%, and were 34.0% of revenue.

Operating Income — GAAP operating income was $2.2 billion, down 44%, with GAAP operating margin of 17.2%. Non-GAAP operating income was $4.3 billion, down 12%, with non-GAAP operating margin at 34.2%.

Provision for Income Taxes — The GAAP tax provision rate was 15.6%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS — On a GAAP basis, net income was $1.9 billion and EPS was $0.46, each a decrease of 41%. On a non-GAAP basis, net income was $3.6 billion, a decrease of 14%, and EPS was $0.88, a decrease of 12%.

Cash Flow from Operating Activities — $4.0 billion for the third quarter of fiscal 2024, a decrease of 24%, compared with $5.2 billion for the third quarter of fiscal 2023.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments — $18.8 billion at the end of the third quarter of fiscal 2024, compared with $26.1 billion at the end of fiscal 2023.

Remaining Performance Obligations (RPO) $38.8 billion, up 21% in total, with 52% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 29% and service RPO were up 14%.

Deferred Revenue — $27.5 billion, up 13% in total, with deferred product revenue up 18%. Deferred service revenue was up 9%.

Capital Allocation — In the third quarter of fiscal 2024, we returned $2.9 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.40 per common share, or $1.6 billion, and repurchased approximately 26 million shares of common stock under our stock repurchase program at an average price of $49.22 per share for an aggregate purchase price of $1.3 billion. The remaining authorized amount for stock repurchases under the program is $7.2 billion with no termination date.

Acquisitions

In the third quarter of fiscal 2024, we closed the following acquisitions:

  • Splunk Inc., a public cybersecurity and observability company
  • Isovalent, Inc., a privately held cloud native solutions company

Guidance

Cisco estimates the following results for the fourth quarter of fiscal 2024:

Q4 FY 2024

Revenue

$13.4 billion – $13.6 billion

Non-GAAP gross margin rate

66.5% – 67.5%

Non-GAAP operating margin rate

31.5% – 32.5%

Non-GAAP EPS

$0.84 – $0.86

Our Q4 FY 2024 guidance includes $950 million to $1 billion in revenue from Splunk and a negative impact to non-GAAP EPS of approximately ($0.03) as the interest impact from financing the acquisition more than offsets the operating benefit.

Cisco estimates that GAAP EPS will be $0.46 to $0.51 for the fourth quarter of fiscal 2024.

Cisco estimates the following results for fiscal 2024:

FY 2024

Revenue

$53.6 billion – $53.8 billion

Non-GAAP EPS

$3.69 – $3.71

Cisco estimates that GAAP EPS will be $2.46 to $2.51 for fiscal 2024.

Our Q4 FY 2024 guidance assumes an effective tax provision rate of approximately 18% for GAAP and non-GAAP results. Our FY 2024 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 19% for non-GAAP results.

A reconciliation between the guidance on a GAAP and non-GAAP basis is provided in the tables entitled “GAAP to non-GAAP Guidance” located in the section entitled “Reconciliations of GAAP to non-GAAP Measures.”

Editor’s Notes:

  • Q3 fiscal year 2024 conference call to discuss Cisco’s results along with its guidance will be held on Wednesday, May 15, 2024 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).
  • Conference call replay will be available from 4:00 p.m. Pacific Time, May 15, 2024 to 4:00 p.m. Pacific Time, May 21, 2024 at 1-800-391-9851 (United States) or 1-203-369-3268 (international). The replay will also be available via webcast on the Cisco Investor Relations website at https://investor.cisco.com.
  • Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 15, 2024. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com.

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited) 

Three Months Ended

Nine Months Ended

April 27,
2024

April 29,
2023

April 27,
2024

April 29,
2023

REVENUE:

Product

$         9,024

$       11,092

$       29,395

$       31,492

Service

3,678

3,479

10,766

10,303

Total revenue

12,702

14,571

40,161

41,795

COST OF SALES:

Product

3,295

4,136

10,695

12,353

Service

1,134

1,203

3,419

3,437

Total cost of sales

4,429

5,339

14,114

15,790

GROSS MARGIN

8,273

9,232

26,047

26,005

OPERATING EXPENSES:

Research and development

1,948

1,962

5,804

5,598

Sales and marketing

2,559

2,526

7,523

7,301

General and administrative

736

641

2,050

1,788

Amortization of purchased intangible assets

297

70

430

212

Restructuring and other charges

542

87

677

328

Total operating expenses

6,082

5,286

16,484

15,227

OPERATING INCOME

2,191

3,946

9,563

10,778

Interest income

411

262

1,095

650

Interest expense

(357)

(109)

(588)

(316)

Other income (loss), net

(10)

(142)

(232)

(265)

Interest and other income (loss), net

44

11

275

69

INCOME BEFORE PROVISION FOR INCOME TAXES

2,235

3,957

9,838

10,847

Provision for income taxes

349

745

1,680

2,192

NET INCOME

$         1,886

$         3,212

$         8,158

$         8,655

Net income per share:

Basic

$           0.47

$           0.79

$           2.01

$           2.11

Diluted

$           0.46

$           0.78

$           2.00

$           2.11

Shares used in per-share calculation:

Basic

4,042

4,089

4,051

4,100

Diluted

4,060

4,110

4,071

4,111

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

April 27, 2024

Three Months Ended

Nine Months Ended

Amount

Y/Y %

Amount

Y/Y %

Revenue:

Americas

$         7,372

(15) %

$       23,904

(2) %

EMEA

3,458

(9) %

10,606

(5) %

APJC

1,873

(12) %

5,652

(9) %

Total

$       12,702

(13) %

$       40,161

(4) %

Amounts may not sum and percentages may not recalculate due to rounding.

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

April 27, 2024

Three Months Ended

Nine Months Ended

Gross Margin Percentage:

Americas

67.9 %

66.5 %

EMEA

69.6 %

69.1 %

APJC

67.4 %

67.5 %

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

April 27, 2024

Three Months Ended

Nine Months Ended

Amount

Y/Y %

Amount

Y/Y %

Revenue:

Networking

$         6,522

(27) %

$       22,425

(11) %

Security

1,304

36 %

3,288

14 %

Collaboration

987

— %

3,093

2 %

Observability

211

27 %

589

21 %

Total Product

9,024

(19) %

29,395

(7) %

Services

3,678

6 %

10,766

5 %

Total

$       12,702

(13) %

$       40,161

(4) %

Security and Observability, excluding Splunk, grew 3% and 14%, respectively, in the third quarter of fiscal 2024, and 3% and 17%, respectively, for the first nine months of fiscal 2024.

Amounts may not sum and percentages may not recalculate due to rounding.

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

April 27, 2024

July 29, 2023

ASSETS

Current assets:

Cash and cash equivalents

$                8,913

$              10,123

Investments

9,857

16,023

Accounts receivable, net of allowance of $81 at April 27, 2024 and $85 at July 29, 2023

5,127

5,854

Inventories

3,118

3,644

Financing receivables, net

3,443

3,352

Other current assets

5,428

4,352

Total current assets

35,886

43,348

Property and equipment, net

2,000

2,085

Financing receivables, net

3,251

3,483

Goodwill

58,633

38,535

Purchased intangible assets, net

11,819

1,818

Deferred tax assets

5,527

6,576

Other assets

5,882

6,007

TOTAL ASSETS

$            122,998

$            101,852

LIABILITIES AND EQUITY

Current liabilities:

Short-term debt

$              11,891

$                1,733

Accounts payable

2,054

2,313

Income taxes payable

1,867

4,235

Accrued compensation

3,211

3,984

Deferred revenue

15,751

13,908

Other current liabilities

5,334

5,136

Total current liabilities

40,108

31,309

Long-term debt

20,102

6,658

Income taxes payable

2,869

5,756

Deferred revenue

11,724

11,642

Other long-term liabilities

2,427

2,134

Total liabilities

77,230

57,499

Total equity

45,768

44,353

TOTAL LIABILITIES AND EQUITY

$            122,998

$            101,852

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine Months Ended

April 27,
2024

April 29,
2023

Cash flows from operating activities:

Net income

$              8,158

$              8,655

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization, and other

1,684

1,304

Share-based compensation expense

2,274

1,720

Provision for receivables

19

11

Deferred income taxes

(245)

(1,343)

(Gains) losses on divestitures, investments and other, net

224

243

Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

Accounts receivable

1,286

1,494

Inventories

530

(894)

Financing receivables

92

1,126

Other assets

(382)

(428)

Accounts payable

(300)

156

Income taxes, net

(5,223)

1,120

Accrued compensation

(1,092)

25

Deferred revenue

211

1,055

Other liabilities

(86)

(324)

Net cash provided by operating activities

7,150

13,920

Cash flows from investing activities:

Purchases of investments

(3,044)

(7,652)

Proceeds from sales of investments

3,874

802

Proceeds from maturities of investments

5,804

3,789

Acquisitions, net of cash and cash equivalents acquired

(25,874)

(96)

Purchases of investments in privately held companies

(82)

(162)

Return of investments in privately held companies

146

72

Acquisition of property and equipment

(472)

(616)

Other

(2)

(24)

Net cash used in investing activities

(19,650)

(3,887)

Cash flows from financing activities:

Issuances of common stock

347

316

Repurchases of common stock – repurchase program

(3,772)

(3,029)

Shares repurchased for tax withholdings on vesting of restricted stock units

(765)

(444)

Short-term borrowings, original maturities of 90 days or less, net

1,547

(602)

Issuances of debt

24,159

Repayments of debt

(2,195)

(500)

Repayments of Splunk convertible debt, net

(3,140)

Dividends paid

(4,778)

(4,713)

Other

(52)

(4)

Net cash provided by (used in) financing activities

11,351

(8,976)

Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and
restricted cash equivalents

(39)

(90)

Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents

(1,188)

967

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period

11,627

8,579

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

$           10,439

$              9,546

Supplemental cash flow information:

Cash paid for interest

$                 350

$                 306

Cash paid for income taxes, net

$              7,150

$              2,414

 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

April 27, 2024

January 27, 2024

April 29, 2023

Amount

Y/Y%

Amount

Y/Y%

Amount

Y/Y%

Product

$    18,876

29 %

$    16,249

12 %

$    14,681

9 %

Service

19,898

14 %

19,407

12 %

17,401

4 %

Total

$    38,774

21 %

$    35,656

12 %

$    32,082

6 %

We expect 52% of total RPO at April 27, 2024 will be recognized as revenue over the next 12 months.

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

April 27,
2024

January 27,
2024

April 29,
2023

Deferred revenue:

Product

$       12,856

$       11,640

$       10,895

Service

14,619

14,131

13,365

Total         

$       27,475

$       25,771

$       24,260

Reported as:

Current

$       15,751

$       14,011

$       13,249

Noncurrent

11,724

11,760

11,011

Total

$       27,475

$       25,771

$       24,260

 

CISCO SYSTEMS, INC.

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK

(In millions, except per-share amounts)

DIVIDENDS

STOCK REPURCHASE PROGRAM

TOTAL

Quarter Ended

Per Share

Amount

Shares

Weighted-Average
Price per Share

Amount

Amount

Fiscal 2024

April 27, 2024

$             0.40

$          1,615

26

$          49.22

$          1,256

$          2,871

January 27, 2024

$             0.39

$          1,583

25

$          49.54

$          1,254

$          2,837

October 28, 2023

$             0.39

$          1,580

23

$          54.53

$          1,252

$          2,832

Fiscal 2023

July 29, 2023

$             0.39

$          1,589

25

$          50.49

$          1,254

$          2,843

April 29, 2023

$             0.39

$          1,593

25

$          49.45

$          1,259

$          2,852

January 28, 2023

$             0.38

$          1,560

26

$          47.72

$          1,256

$          2,816

October 29, 2022

$             0.38

$          1,560

12

$          43.76

$             502

$          2,062

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GAAP TO NON-GAAP NET INCOME

(In millions)

Three Months Ended

Nine Months Ended

April 27,
2024

April 29,
2023

April 27,
2024

April 29,
2023

GAAP net income

$         1,886

$         3,212

$         8,158

$         8,655

Adjustments to cost of sales:

Share-based compensation expense

139

106

381

293

Amortization of acquisition-related intangible assets

249

156

605

462

Acquisition-related/divestiture costs

12

1

13

4

Total adjustments to GAAP cost of sales

400

263

999

759

Adjustments to operating expenses:

Share-based compensation expense

665

518

1,877

1,431

Amortization of acquisition-related intangible assets

297

70

430

212

Acquisition-related/divestiture costs

264

55

403

178

Russia-Ukraine war costs

(10)

2

(12)

7

Significant asset impairments and restructurings

542

87

677

328

Total adjustments to GAAP operating expenses

1,758

732

3,375

2,156

Adjustments to interest and other income (loss), net:

(Gains) and losses on investments

(7)

123

132

188

Total adjustments to GAAP interest and other income (loss), net

(7)

123

132

188

Total adjustments to GAAP income before provision for income taxes

2,151

1,118

4,506

3,103

Income tax effect of non-GAAP adjustments

(484)

(219)

(1,045)

(623)

Significant tax matters

164

Total adjustments to GAAP provision for income taxes

(484)

(219)

(1,045)

(459)

Non-GAAP net income

$         3,553

$         4,111

$       11,619

$       11,299

  

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GAAP TO NON-GAAP EPS

Three Months Ended

Nine Months Ended

April 27,
2024

April 29,
2023

April 27,
2024

April 29,
2023

GAAP EPS

$           0.46

$           0.78

$           2.00

$           2.11

Adjustments to GAAP:

Share-based compensation expense

0.20

0.15

0.55

0.42

Amortization of acquisition-related intangible assets

0.13

0.06

0.25

0.16

Acquisition-related/divestiture costs

0.07

0.01

0.10

0.04

Significant asset impairments and restructurings

0.13

0.02

0.17

0.08

(Gains) and losses on investments

0.03

0.03

0.05

Income tax effect of non-GAAP adjustments

(0.12)

(0.05)

(0.26)

(0.15)

Significant tax matters

0.04

Non-GAAP EPS

$           0.88

$           1.00

$           2.85

$           2.75

Amounts may not sum due to rounding.

 

CISCO SYSTEMS, INC.
GAAP TO NON-GAAP EPS

IMPACT OF SPLUNK ACQUISITION, INCLUDING FINANCING COSTS

Three Months Ended

April 27, 2024

GAAP EPS Impact

$                      (0.09)

Amortization of intangible assets

0.05

Acquisition-related costs

0.05

Income tax effect of non-GAAP adjustments

(0.02)

Non-GAAP EPS Impact

$                      (0.01)

Amounts may not sum due to rounding.

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET,
AND NET INCOME

(In millions, except percentages)

Three Months Ended

April 27, 2024

Product
Gross Margin

Service
Gross Margin

Total
Gross Margin

Operating
Expenses

Y/Y

Operating
Income

Y/Y

Interest and
other income
(loss), net

Net Income

Y/Y

GAAP amount

$ 5,729

$ 2,544

$ 8,273

$ 6,082

15 %

$ 2,191

(44) %

$    44

$ 1,886

(41) %

% of revenue

63.5 %

69.2 %

65.1 %

47.9 %

17.2 %

0.3 %

14.8 %

Adjustments to GAAP amounts:

Share-based compensation expense

57

82

139

665

804

804

Amortization of acquisition-related intangible assets

249

249

297

546

546

Acquisition/divestiture-related costs

4

8

12

264

276

276

Significant asset impairments and restructurings

542

542

542

Russia-Ukraine war costs

(10)

(10)

(10)

(Gains) and losses on investments

(7)

(7)

Income tax effect/significant tax matters

(484)

Non-GAAP amount

$ 6,039

$ 2,634

$ 8,673

$ 4,324

(5) %

$ 4,349

(12) %

$    37

$ 3,553

(14) %

% of revenue

66.9 %

71.6 %

68.3 %

34.0 %

34.2 %

0.3 %

28.0 %

               

Three Months Ended

April 29, 2023

Product
Gross Margin

Service
Gross Margin

Total
Gross Margin

Operating
Expenses

Operating

Income

Interest and
other income
(loss), net

Net

Income

GAAP amount

$   6,956

$   2,276

$   9,232

$   5,286

$   3,946

$        11

$   3,212

% of revenue

62.7 %

65.4 %

63.4 %

36.3 %

27.1 %

0.1 %

22.0 %

Adjustments to GAAP amounts:

Share-based compensation expense

40

66

106

518

624

624

Amortization of acquisition-related intangible assets

156

156

70

226

226

Acquisition/divestiture-related costs

1

1

55

56

56

Significant asset impairments and restructurings

87

87

87

Russia-Ukraine war costs

2

2

2

(Gains) and losses on investments

123

123

Income tax effect/significant tax matters

(219)

Non-GAAP amount

$   7,153

$   2,342

$   9,495

$   4,554

$   4,941

$      134

$   4,111

% of revenue

64.5 %

67.3 %

65.2 %

31.3 %

33.9 %

0.9 %

28.2 %

Amounts may not sum and percentages may not recalculate due to rounding.

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET,
AND NET INCOME

(In millions, except percentages)

Nine Months Ended

April 27, 2024

Product
Gross Margin

Service
Gross Margin

Total
Gross Margin

Operating
Expenses

Y/Y

Operating
Income

Y/Y

Interest and
other income
(loss), net

Net Income

Y/Y

GAAP amount

$ 18,700

$ 7,347

$ 26,047

$ 16,484

8 %

$ 9,563

(11) %

$  275

$ 8,158

(6) %

% of revenue

63.6 %

68.2 %

64.9 %

41.0 %

23.8 %

0.7 %

20.3 %

Adjustments to GAAP amounts:

Share-based compensation expense

157

224

381

1,877

2,258

2,258

Amortization of acquisition-related intangible assets

605

605

430

1,035

1,035

Acquisition/divestiture-related costs

5

8

13

403

416

416

Significant asset impairments and restructurings

677

677

677

Russia-Ukraine war costs

(12)

(12)

(12)

(Gains) and losses on investments

132

132

Income tax effect/significant tax matters

(1,045)

Non-GAAP amount

$ 19,467

$ 7,579

$ 27,046

$ 13,109

— %

$ 13,937

2 %

$  407

$ 11,619

3 %

% of revenue

66.2 %

70.4 %

67.3 %

32.6 %

34.7 %

1.0 %

28.9 %

 

Nine Months Ended

April 29, 2023

Product
Gross Margin

Service
Gross Margin

Total
Gross Margin

Operating
Expenses

Operating

Income

Interest and
other income
(loss), net

Net

Income

GAAP amount

$ 19,139

$   6,866

$ 26,005

$ 15,227

$ 10,778

$        69

$   8,655

% of revenue

60.8 %

66.6 %

62.2 %

36.4 %

25.8 %

0.2 %

20.7 %

Adjustments to GAAP amounts:

Share-based compensation expense

111

182

293

1,431

1,724

1,724

Amortization of acquisition-related intangible assets

462

462

212

674

674

Acquisition/divestiture-related costs

4

4

178

182

182

Significant asset impairments and restructurings

328

328

328

Russia-Ukraine war costs

7

7

7

(Gains) and losses on investments

188

188

Income tax effect/significant tax matters

(459)

Non-GAAP amount

$ 19,716

$   7,048

$ 26,764

$ 13,071

$ 13,693

$      257

$ 11,299

% of revenue

62.6 %

68.4 %

64.0 %

31.3 %

32.8 %

0.6 %

27.0 %

Amounts may not sum and percentages may not recalculate due to rounding.

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

EFFECTIVE TAX RATE

(In percentages)

Three Months Ended

Nine Months Ended

April 27,
2024

April 29,
2023

April 27,
2024

April 29,
2023

GAAP effective tax rate

15.6 %

18.8 %

17.1 %

20.2 %

Total adjustments to GAAP provision for income taxes

3.4 %

0.2 %

1.9 %

(1.2) %

Non-GAAP effective tax rate

19.0 %

19.0 %

19.0 %

19.0 %

 

GAAP TO NON-GAAP GUIDANCE

Q4 FY 2024

Gross Margin
Rate

Operating Margin
Rate

Earnings per
Share (1)

GAAP

63% – 64%

18.5% – 19.5%

$0.46 – $0.51

Estimated adjustments for:

Share-based compensation expense

1.0 %

6.0 %

$0.15 – $0.16

Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs

2.5 %

6.5 %

$0.19 – $0.20

Significant asset impairments and restructurings

0.5 %

$0.01 – $0.02

Non-GAAP

66.5% – 67.5%

31.5% – 32.5%

$0.84 – $0.86

 

FY 2024

Earnings per
Share (1)

GAAP

$2.46 – $2.51

Estimated adjustments for:

Share-based compensation expense

$0.58 – $0.59

Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs                                                            

$0.46 – $0.47

Significant asset impairments and restructurings

$0.13 – $0.14

(Gains) and losses on investments

$0.03

Non-GAAP

$3.69 – $3.71

(1) Estimated adjustments to GAAP earnings per share are shown after income tax effects.

Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, asset impairments, Russia-Ukraine war costs, restructurings, (gains) and losses on investments and significant tax matters or other events, which may or may not be significant unless specifically stated.

Forward Looking Statements, Non-GAAP Information and Additional Information

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our ability to bring together networking, security, observability, and data to enable us to offer digital resilience to our customers, the stabilization of demand for our products, and the addition of Splunk to our product line as a catalyst for future growth) and the future financial performance of Cisco (including the guidance for Q4 FY 2024 and full year FY 2024) that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; our development and use of artificial intelligence; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain priorities, key growth areas, and in certain geographical locations, as well as maintaining leadership in Networking and services; the timing of orders and manufacturing and customer lead times; supply constraints; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, other intellectual property, antitrust, stockholder and other matters, and governmental investigations; our ability to achieve the benefits of restructurings and possible changes in the size and timing of related charges; cyber attacks, data breaches or other incidents; vulnerabilities and critical security defects; our ability to protect personal data; evolving regulatory uncertainty; terrorism; natural catastrophic events (including as a result of global climate change); any pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Forms 10-Q and 10-K filed on February 20, 2024 and September 7, 2023, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three and nine months ended April 27, 2024 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP interest and other income (loss), net, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco’s results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations.

For its internal budgeting process, Cisco’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on investments, the income tax effects of the foregoing and significant tax matters. Cisco’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Annualized recurring revenue represents the annualized revenue run-rate of active subscriptions, term licenses, operating leases and maintenance contracts at the end of a reporting period, net of rebates to customers and partners as well as certain other revenue adjustments. Includes both revenue recognized ratably as well as upfront on an annualized basis.

About Cisco

Cisco (Nasdaq: CSCO) is the worldwide technology leader that securely connects everything to make anything possible. Our purpose is to power an inclusive future for all by helping our customers reimagine their applications, power hybrid work, secure their enterprise, transform their infrastructure, and meet their sustainability goals. Discover more at newsroom.cisco.com and follow us on X at @Cisco.

Copyright © 2024 Cisco and/or its affiliates. All rights reserved. Cisco and the Cisco logo are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

RSS Feed for Cisco: 

Cision View original content to download multimedia:

SOURCE Cisco Systems, Inc.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button