SAN
JOSE, Calif., May 17, 2023
/PRNewswire/ --
News Summary:
- $14.6 billion in revenue, up 14%
year over year; GAAP EPS $0.78, up 7%
year over year, and Non-GAAP EPS $1.00, up 15% year over year
- Q3 FY 2023 operating cash flow of $5.2
billion, up 43%
- Continued progress on business model transformation:
-
- Total software revenue up 18% year over year and software
subscription revenue up 17% year over year
- Total annualized recurring revenue (ARR) at $23.8 billion, up 6% year over year and product
ARR up 10% year over year
- Remaining performance obligations (RPO) at $32.1 billion, up 6% year over year and product
RPO up 9% year over year
- Q3 FY 2023 Results:
-
- Revenue: $14.6
billion
-
- Increase of 14% year over year
- Earnings per Share: GAAP: $0.78; Non-GAAP: $1.00
-
- GAAP EPS increased 7% year over year
- Non-GAAP EPS increased 15% year over year
- Q4 FY 2023 Guidance:
-
- Revenue: 14% to 16% growth year over year
- Earnings per Share: GAAP: $0.82 to $0.87;
Non-GAAP: $1.05 to $1.07
- FY 2023 Guidance:
-
- Revenue: 10% to 10.5% growth year over year
- Earnings per Share: GAAP: $2.93 to $2.98;
Non-GAAP: $3.80 to $3.82
Cisco today reported third quarter results for the period ended
April 29, 2023. Cisco reported third quarter revenue of
$14.6 billion, net income on a
generally accepted accounting principles (GAAP) basis of
$3.2 billion or $0.78 per share, and non-GAAP net income of
$4.1 billion or $1.00 per share.
"We once again delivered a strong quarter in a dynamic
environment," said Chuck Robbins,
chair and CEO of Cisco. "In Q3, we delivered record revenue and
double-digit growth in both software and subscription revenue. As
key technologies like cloud, AI and security continue to scale,
Cisco's long-established leadership in networking, and the breadth
of our portfolio position us well for the future."
"Our operational discipline and focused execution resulted in
strong top and bottom-line growth, margin expansion and record
operating cash flow," said Scott
Herren, CFO of Cisco. "Our healthy backlog, recurring
revenue streams and RPO, as well as the improving availability of
supply, underpin our confidence to increase full year
guidance."
GAAP
Results
|
|
|
|
Q3 FY 2023
|
|
Q3 FY 2022
|
|
Vs. Q3 FY 2022
|
Revenue
|
|
$
|
14.6 billion
|
|
$
|
12.8 billion
|
|
14 %
|
Net Income
|
|
$
|
3.2
billion
|
|
$
|
3.0
billion
|
|
6 %
|
Diluted Earnings per
Share (EPS)
|
|
$
|
0.78
|
|
$
|
0.73
|
|
7 %
|
Non-GAAP
Results
|
|
|
|
Q3 FY 2023
|
|
Q3 FY 2022
|
|
Vs. Q3 FY 2022
|
Net Income
|
|
$
|
4.1
billion
|
|
$
|
3.6
billion
|
|
13 %
|
EPS
|
|
$
|
1.00
|
|
$
|
0.87
|
|
15 %
|
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 $0.39 per common share to be paid on July 26, 2023, to all stockholders of record as
of the close of business on July 6,
2023. 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 2023 Highlights
Revenue -- Total revenue was up 14% at
$14.6 billion, with product revenue
up 17% and service revenue was up 3%. Revenue by geographic segment
was: Americas up 13%, EMEA up 16%, and APJC was up 11%. Product
revenue performance was led by growth in Secure, Agile Networks up
29%, Internet for the Future up 5%, End-to-End Security up 2%, and
Optimized Application Experiences up 12%. Collaboration was down
13%.
Gross Margin -- On a GAAP basis, total gross
margin, product gross margin, and service gross margin were 63.4%,
62.7%, and 65.4%, respectively, as compared with 63.3%, 61.8%, and
67.3%, respectively, in the third quarter of fiscal 2022.
On a non-GAAP basis, total gross margin, product gross margin,
and service gross margin were 65.2%, 64.5%, and 67.3%,
respectively, as compared with 65.3%, 64.1%, and 68.9%,
respectively, in the third quarter of fiscal 2022.
Total gross margins by geographic segment were: 64.2% for the
Americas, 66.6% for EMEA and 66.4% for APJC.
Operating Expenses -- On a GAAP basis,
operating expenses were $5.3 billion,
up 17%, and were 36.3% of revenue. Non-GAAP operating expenses were
$4.6 billion, up 16%, and were 31.3%
of revenue.
Operating Income -- GAAP operating income was
$3.9 billion, up 9%, with GAAP
operating margin of 27.1%. Non-GAAP operating income was
$4.9 billion, up 11%, with non-GAAP
operating margin at 33.9%.
Provision for Income Taxes -- The GAAP tax
provision rate was 18.8%. The non-GAAP tax provision rate was
19.0%.
Net Income and EPS -- On a GAAP basis, net income
was $3.2 billion, an increase of 6%,
and EPS was $0.78, an increase of 7%.
On a non-GAAP basis, net income was $4.1
billion, an increase of 13%, and EPS was $1.00, an increase of 15%.
Cash Flow from Operating Activities --
$5.2 billion for the third quarter of
fiscal 2023, an increase of 43% compared with $3.7 billion for the third quarter of fiscal
2022.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments --
$23.3 billion at the end of the third
quarter of fiscal 2023, compared with $19.3
billion at the end of fiscal 2022.
Remaining Performance Obligations (RPO)
-- $32.1 billion, up 6%
in total, with 53% of this amount to be recognized as revenue over
the next 12 months. Product RPO were up 9% and service RPO were up
4%.
Deferred Revenue -- $24.3
billion, up 9% in total, with deferred product revenue up
11%. Deferred service revenue was up 7%.
Capital Allocation -- In the third quarter of
fiscal 2023, we returned $2.9 billion
to stockholders through share buybacks and dividends. We declared
and paid a cash dividend of $0.39 per
common share, or $1.6 billion, and
repurchased approximately 25 million shares of common stock under
our stock repurchase program at an average price of $49.45 per share for an aggregate purchase price
of $1.3 billion. The remaining
authorized amount for stock repurchases under the program is
$12.2 billion with no termination
date.
Acquisitions
In the third quarter of fiscal 2023, we closed the acquisition
of Valtix, a privately held cloud network security company.
Guidance
Cisco expects to achieve the following results for the fourth
quarter of fiscal 2023:
Q4 FY 2023
|
|
|
Revenue
|
|
14% – 16% growth
Y/Y
|
Non-GAAP gross margin
rate
|
|
64.5% –
65.5%
|
Non-GAAP operating
margin rate
|
|
34% – 35%
|
Non-GAAP EPS
|
|
$1.05 –
$1.07
|
Cisco estimates that GAAP EPS will be $0.82 to $0.87 for the fourth quarter of fiscal
2023.
Cisco expects to achieve the following results for fiscal
2023:
FY 2023
|
|
|
Revenue
|
|
10% – 10.5% growth
Y/Y
|
Non-GAAP EPS
|
|
$3.80 –
$3.82
|
Cisco estimates that GAAP EPS will be $2.93 to $2.98 for fiscal 2023.
Our Q4 FY 2023 guidance assumes an effective tax provision rate
of 18% for GAAP and 19% for non-GAAP results. Our FY 2023 guidance
assumes an effective tax provision rate of 20% for GAAP and 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 2023 conference call to discuss Cisco's results
along with its guidance will be held on Wednesday, May 17,
2023 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 17, 2023 to
4:00 p.m. Pacific Time, May 24,
2023 at 1-800-395-6236 (United
States) or 1-203-369-3270 (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 17, 2023. 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 29,
2023
|
|
April 30,
2022
|
|
April 29,
2023
|
|
April 30,
2022
|
REVENUE:
|
|
|
|
|
|
|
|
Product
|
$
11,092
|
|
$
9,448
|
|
$
31,492
|
|
$
28,330
|
Service
|
3,479
|
|
3,387
|
|
10,303
|
|
10,125
|
Total
revenue
|
14,571
|
|
12,835
|
|
41,795
|
|
38,455
|
COST OF SALES:
|
|
|
|
|
|
|
|
Product
|
4,136
|
|
3,606
|
|
12,353
|
|
10,848
|
Service
|
1,203
|
|
1,108
|
|
3,437
|
|
3,384
|
Total cost of
sales
|
5,339
|
|
4,714
|
|
15,790
|
|
14,232
|
GROSS MARGIN
|
9,232
|
|
8,121
|
|
26,005
|
|
24,223
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
Research and
development
|
1,962
|
|
1,708
|
|
5,598
|
|
5,092
|
Sales and
marketing
|
2,526
|
|
2,209
|
|
7,301
|
|
6,736
|
General and
administrative
|
641
|
|
517
|
|
1,788
|
|
1,612
|
Amortization of
purchased intangible assets
|
70
|
|
77
|
|
212
|
|
240
|
Restructuring and
other charges
|
87
|
|
—
|
|
328
|
|
8
|
Total operating
expenses
|
5,286
|
|
4,511
|
|
15,227
|
|
13,688
|
OPERATING INCOME
|
3,946
|
|
3,610
|
|
10,778
|
|
10,535
|
Interest
income
|
262
|
|
115
|
|
650
|
|
347
|
Interest
expense
|
(109)
|
|
(90)
|
|
(316)
|
|
(267)
|
Other income (loss),
net
|
(142)
|
|
166
|
|
(265)
|
|
446
|
Interest and other
income (loss), net
|
11
|
|
191
|
|
69
|
|
526
|
INCOME BEFORE PROVISION FOR INCOME
TAXES
|
3,957
|
|
3,801
|
|
10,847
|
|
11,061
|
Provision for income
taxes
|
745
|
|
757
|
|
2,192
|
|
2,064
|
NET INCOME
|
$
3,212
|
|
$
3,044
|
|
$
8,655
|
|
$
8,997
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.79
|
|
$
0.73
|
|
$
2.11
|
|
$
2.15
|
Diluted
|
$
0.78
|
|
$
0.73
|
|
$
2.11
|
|
$
2.14
|
Shares used in
per-share calculation:
|
|
|
|
|
|
|
|
Basic
|
4,089
|
|
4,152
|
|
4,100
|
|
4,184
|
Diluted
|
4,110
|
|
4,170
|
|
4,111
|
|
4,204
|
CISCO SYSTEMS,
INC.
REVENUE BY
SEGMENT
(In millions, except
percentages)
|
|
|
|
April 29,
2023
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
8,634
|
|
13 %
|
|
$
24,372
|
|
9 %
|
EMEA
|
|
3,806
|
|
16 %
|
|
11,209
|
|
11 %
|
APJC
|
|
2,131
|
|
11 %
|
|
6,214
|
|
4 %
|
Total
|
|
$
14,571
|
|
14 %
|
|
$
41,795
|
|
9 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
GROSS MARGIN
PERCENTAGE BY SEGMENT
(In
percentages)
|
|
|
|
April 29,
2023
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Gross Margin Percentage:
|
|
|
|
|
Americas
|
|
64.2 %
|
|
63.4 %
|
EMEA
|
|
66.6 %
|
|
65.4 %
|
APJC
|
|
66.4 %
|
|
64.2 %
|
CISCO SYSTEMS,
INC.
REVENUE FOR GROUPS
OF SIMILAR PRODUCTS AND SERVICES
(In millions, except
percentages)
|
|
|
|
April 29,
2023
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Secure, Agile
Networks
|
|
$
7,550
|
|
29 %
|
|
$
20,980
|
|
18 %
|
Internet for the
Future
|
|
1,392
|
|
5 %
|
|
4,007
|
|
— %
|
Collaboration
|
|
985
|
|
(13) %
|
|
3,029
|
|
(8) %
|
End-to-End
Security
|
|
958
|
|
2 %
|
|
2,872
|
|
6 %
|
Optimized Application
Experiences
|
|
204
|
|
12 %
|
|
597
|
|
10 %
|
Other
Products
|
|
3
|
|
19 %
|
|
7
|
|
(7) %
|
Total
Product
|
|
11,092
|
|
17 %
|
|
31,492
|
|
11 %
|
Services
|
|
3,479
|
|
3 %
|
|
10,303
|
|
2 %
|
Total
|
|
$
14,571
|
|
14 %
|
|
$
41,795
|
|
9 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
April 29,
2023
|
|
July 30,
2022
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
8,044
|
|
$
7,079
|
Investments
|
15,244
|
|
12,188
|
Accounts receivable,
net of allowance of $83 as of each of April 29, 2023 and
July 30, 2022
|
5,104
|
|
6,622
|
Inventories
|
3,474
|
|
2,568
|
Financing receivables,
net
|
3,402
|
|
3,905
|
Other current
assets
|
4,682
|
|
4,355
|
Total current
assets
|
39,950
|
|
36,717
|
Property and equipment,
net
|
2,047
|
|
1,997
|
Financing receivables,
net
|
3,393
|
|
4,009
|
Goodwill
|
38,369
|
|
38,304
|
Purchased intangible
assets, net
|
1,966
|
|
2,569
|
Deferred tax
assets
|
5,817
|
|
4,449
|
Other assets
|
5,987
|
|
5,957
|
TOTAL ASSETS
|
$
97,529
|
|
$
94,002
|
LIABILITIES AND EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Short-term
debt
|
$
1,731
|
|
$
1,099
|
Accounts
payable
|
2,442
|
|
2,281
|
Income taxes
payable
|
3,132
|
|
961
|
Accrued
compensation
|
3,352
|
|
3,316
|
Deferred
revenue
|
13,249
|
|
12,784
|
Other current
liabilities
|
4,813
|
|
5,199
|
Total current
liabilities
|
28,719
|
|
25,640
|
Long-term
debt
|
6,663
|
|
8,416
|
Income taxes
payable
|
6,725
|
|
7,725
|
Deferred
revenue
|
11,011
|
|
10,480
|
Other long-term
liabilities
|
2,116
|
|
1,968
|
Total
liabilities
|
55,234
|
|
54,229
|
Total equity
|
42,295
|
|
39,773
|
TOTAL LIABILITIES AND EQUITY
|
$
97,529
|
|
$
94,002
|
CISCO SYSTEMS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
Nine Months
Ended
|
|
April 29,
2023
|
|
April 30,
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
8,655
|
|
$
8,997
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation,
amortization, and other
|
1,304
|
|
1,527
|
Share-based
compensation expense
|
1,720
|
|
1,407
|
Provision (benefit)
for receivables
|
11
|
|
49
|
Deferred income
taxes
|
(1,343)
|
|
(167)
|
(Gains) losses on
divestitures, investments and other, net
|
243
|
|
(470)
|
Change in operating
assets and liabilities, net of effects of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
1,494
|
|
(134)
|
Inventories
|
(894)
|
|
(683)
|
Financing
receivables
|
1,126
|
|
1,431
|
Other
assets
|
(428)
|
|
(1,295)
|
Accounts
payable
|
156
|
|
(54)
|
Income taxes,
net
|
1,120
|
|
(730)
|
Accrued
compensation
|
25
|
|
(730)
|
Deferred
revenue
|
1,055
|
|
292
|
Other
liabilities
|
(324)
|
|
109
|
Net cash provided by
operating activities
|
13,920
|
|
9,549
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(7,652)
|
|
(5,383)
|
Proceeds from sales of
investments
|
802
|
|
2,488
|
Proceeds from
maturities of investments
|
3,789
|
|
4,308
|
Acquisitions, net of
cash and cash equivalents acquired and divestitures
|
(96)
|
|
(373)
|
Purchases of
investments in privately held companies
|
(162)
|
|
(158)
|
Return of investments
in privately held companies
|
72
|
|
149
|
Acquisition of
property and equipment
|
(616)
|
|
(338)
|
Proceeds from sales of
property and equipment
|
2
|
|
6
|
Other
|
(26)
|
|
(15)
|
Net cash (used in)
provided by investing activities
|
(3,887)
|
|
684
|
Cash flows from
financing activities:
|
|
|
|
Issuances of common
stock
|
316
|
|
306
|
Repurchases of common
stock - repurchase program
|
(3,029)
|
|
(5,347)
|
Shares repurchased for
tax withholdings on vesting of restricted stock units
|
(444)
|
|
(546)
|
Short-term borrowings,
original maturities of 90 days or less, net
|
(602)
|
|
9
|
Issuances of
debt
|
—
|
|
1,049
|
Repayments of
debt
|
(500)
|
|
(3,050)
|
Dividends
paid
|
(4,713)
|
|
(4,657)
|
Other
|
(4)
|
|
(108)
|
Net cash used in
financing activities
|
(8,976)
|
|
(12,344)
|
Effect of foreign
currency exchange rate changes on cash, cash equivalents,
restricted cash and restricted cash equivalents
|
(90)
|
|
(122)
|
Net increase (decrease)
in cash, cash equivalents, restricted cash and restricted cash
equivalents
|
967
|
|
(2,233)
|
Cash, cash equivalents,
restricted cash and restricted cash equivalents, beginning of
period
|
8,579
|
|
9,942
|
Cash, cash equivalents,
restricted cash and restricted cash equivalents, end of
period
|
$
9,546
|
|
$
7,709
|
Supplemental cash flow
information:
|
|
|
|
Cash paid for
interest
|
$
306
|
|
$
292
|
Cash paid for income
taxes, net
|
$
2,414
|
|
$
2,960
|
CISCO SYSTEMS,
INC.
REMAINING
PERFORMANCE OBLIGATIONS
(In millions, except
percentages)
|
|
|
April 29,
2023
|
|
January 28,
2023
|
|
April 30,
2022
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
Product
|
$
14,681
|
|
9 %
|
|
$
14,517
|
|
7 %
|
|
$
13,416
|
|
13 %
|
Service
|
17,401
|
|
4 %
|
|
17,255
|
|
2 %
|
|
16,789
|
|
3 %
|
Total
|
$
32,082
|
|
6 %
|
|
$
31,772
|
|
4 %
|
|
$
30,205
|
|
7 %
|
|
We expect 53% of total
RPO at April 29, 2023 will be recognized as revenue over the
next 12 months.
|
CISCO SYSTEMS,
INC.
DEFERRED
REVENUE
(In
millions)
|
|
|
April 29,
2023
|
|
January 28,
2023
|
|
April 30,
2022
|
Deferred
revenue:
|
|
|
|
|
|
Product
|
$
10,895
|
|
$
10,679
|
|
$
9,835
|
Service
|
13,365
|
|
13,248
|
|
12,458
|
Total
|
$
24,260
|
|
$
23,927
|
|
$
22,293
|
Reported as:
|
|
|
|
|
|
Current
|
$
13,249
|
|
$
13,109
|
|
$
12,249
|
Noncurrent
|
11,011
|
|
10,818
|
|
10,044
|
Total
|
$
24,260
|
|
$
23,927
|
|
$
22,293
|
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 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
Fiscal 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30,
2022
|
|
$
0.38
|
|
$
1,567
|
|
54
|
|
$
44.02
|
|
$
2,402
|
|
$
3,969
|
April 30,
2022
|
|
$
0.38
|
|
$
1,555
|
|
5
|
|
$
54.20
|
|
$
252
|
|
$
1,807
|
January 29,
2022
|
|
$
0.37
|
|
$
1,541
|
|
82
|
|
$
58.36
|
|
$
4,824
|
|
$
6,365
|
October 30,
2021
|
|
$
0.37
|
|
$
1,561
|
|
5
|
|
$
56.49
|
|
$
256
|
|
$
1,817
|
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 29,
2023
|
|
April 30,
2022
|
|
April 29,
2023
|
|
April 30,
2022
|
GAAP net
income
|
$
3,212
|
|
$
3,044
|
|
$
8,655
|
|
$
8,997
|
Adjustments to cost of
sales:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
106
|
|
83
|
|
293
|
|
233
|
Amortization of
acquisition-related intangible assets
|
156
|
|
176
|
|
462
|
|
571
|
Acquisition-related/divestiture costs
|
1
|
|
1
|
|
4
|
|
3
|
Russia-Ukraine war
costs
|
—
|
|
5
|
|
—
|
|
5
|
Total adjustments to
GAAP cost of sales
|
263
|
|
265
|
|
759
|
|
812
|
Adjustments to
operating expenses:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
518
|
|
394
|
|
1,431
|
|
1,173
|
Amortization of
acquisition-related intangible assets
|
70
|
|
92
|
|
212
|
|
255
|
Acquisition-related/divestiture costs
|
55
|
|
29
|
|
178
|
|
261
|
Russia-Ukraine war
costs
|
2
|
|
62
|
|
7
|
|
62
|
Significant asset
impairments and restructurings
|
87
|
|
—
|
|
328
|
|
8
|
Total adjustments to
GAAP operating expenses
|
732
|
|
577
|
|
2,156
|
|
1,759
|
Adjustments to
interest and other income (loss), net:
|
|
|
|
|
|
|
|
(Gains) and losses on
investments
|
123
|
|
(159)
|
|
188
|
|
(478)
|
Total adjustments to
GAAP interest and other income (loss), net
|
123
|
|
(159)
|
|
188
|
|
(478)
|
Total adjustments to
GAAP income before provision for income taxes
|
1,118
|
|
683
|
|
3,103
|
|
2,093
|
Income tax effect of
non-GAAP adjustments
|
(219)
|
|
(95)
|
|
(623)
|
|
(435)
|
Significant tax
matters
|
—
|
|
—
|
|
164
|
|
—
|
Total adjustments to
GAAP provision for income taxes
|
(219)
|
|
(95)
|
|
(459)
|
|
(435)
|
Non-GAAP net
income
|
$
4,111
|
|
$
3,632
|
|
$
11,299
|
|
$
10,655
|
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
GAAP TO NON-GAAP
EPS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 29,
2023
|
|
April 30,
2022
|
|
April 29,
2023
|
|
April 30,
2022
|
GAAP EPS
|
$
0.78
|
|
$
0.73
|
|
$
2.11
|
|
$
2.14
|
Adjustments to
GAAP:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
0.15
|
|
0.11
|
|
0.42
|
|
0.33
|
Amortization of
acquisition-related intangible assets
|
0.06
|
|
0.06
|
|
0.16
|
|
0.20
|
Acquisition-related/divestiture costs
|
0.01
|
|
0.01
|
|
0.04
|
|
0.06
|
Russia-Ukraine war
costs
|
—
|
|
0.02
|
|
—
|
|
0.02
|
Significant asset
impairments and restructurings
|
0.02
|
|
—
|
|
0.08
|
|
—
|
(Gains) and losses on
investments
|
0.03
|
|
(0.04)
|
|
0.05
|
|
(0.11)
|
Income tax effect of
non-GAAP adjustments
|
(0.05)
|
|
(0.02)
|
|
(0.15)
|
|
(0.10)
|
Significant tax
matters
|
—
|
|
—
|
|
0.04
|
|
—
|
Non-GAAP EPS
|
$
1.00
|
|
$
0.87
|
|
$
2.75
|
|
$
2.53
|
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 29,
2023
|
|
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
|
$ 6,956
|
|
$ 2,276
|
|
$ 9,232
|
|
$ 5,286
|
|
17 %
|
|
$ 3,946
|
|
9 %
|
|
$
11
|
|
$ 3,212
|
|
6 %
|
% 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
|
|
16 %
|
|
$ 4,941
|
|
11 %
|
|
$ 134
|
|
$ 4,111
|
|
13 %
|
% of revenue
|
64.5 %
|
|
67.3 %
|
|
65.2 %
|
|
31.3 %
|
|
|
|
33.9 %
|
|
|
|
0.9 %
|
|
28.2 %
|
|
|
|
Three Months
Ended
|
|
April 30,
2022
|
|
Product
Gross
Margin
|
|
Service
Gross
Margin
|
|
Total
Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Interest
and
other
income
(loss), net
|
|
Net
Income
|
GAAP amount
|
$
5,842
|
|
$
2,279
|
|
$
8,121
|
|
$
4,511
|
|
$
3,610
|
|
$ 191
|
|
$
3,044
|
% of revenue
|
61.8 %
|
|
67.3 %
|
|
63.3 %
|
|
35.1 %
|
|
28.1 %
|
|
1.5 %
|
|
23.7 %
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
30
|
|
53
|
|
83
|
|
394
|
|
477
|
|
—
|
|
477
|
Amortization of
acquisition-related intangible assets
|
176
|
|
—
|
|
176
|
|
92
|
|
268
|
|
—
|
|
268
|
Acquisition/divestiture-related costs
|
1
|
|
—
|
|
1
|
|
29
|
|
30
|
|
—
|
|
30
|
Russia-Ukraine war
costs
|
4
|
|
1
|
|
5
|
|
62
|
|
67
|
|
—
|
|
67
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(159)
|
|
(159)
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(95)
|
Non-GAAP
amount
|
$
6,053
|
|
$
2,333
|
|
$
8,386
|
|
$
3,934
|
|
$
4,452
|
|
$
32
|
|
$
3,632
|
% of revenue
|
64.1 %
|
|
68.9 %
|
|
65.3 %
|
|
30.7 %
|
|
34.7 %
|
|
0.2 %
|
|
28.3 %
|
|
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 29,
2023
|
|
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
|
$ 19,139
|
|
$ 6,866
|
|
$ 26,005
|
|
$ 15,227
|
|
11 %
|
|
$ 10,778
|
|
2 %
|
|
$
69
|
|
$ 8,655
|
|
(4) %
|
% 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
|
|
10 %
|
|
$ 13,693
|
|
4 %
|
|
$ 257
|
|
$ 11,299
|
|
6 %
|
% of revenue
|
62.6 %
|
|
68.4 %
|
|
64.0 %
|
|
31.3 %
|
|
|
|
32.8 %
|
|
|
|
0.6 %
|
|
27.0 %
|
|
|
|
Nine Months
Ended
|
|
April 30,
2022
|
|
Product
Gross
Margin
|
|
Service
Gross
Margin
|
|
Total
Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Interest
and
other
income
(loss), net
|
|
Net
Income
|
GAAP amount
|
$ 17,482
|
|
$
6,741
|
|
$ 24,223
|
|
$ 13,688
|
|
$ 10,535
|
|
$ 526
|
|
$
8,997
|
% of revenue
|
61.7 %
|
|
66.6 %
|
|
63.0 %
|
|
35.6 %
|
|
27.4 %
|
|
1.4 %
|
|
23.4 %
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
84
|
|
149
|
|
233
|
|
1,173
|
|
1,406
|
|
—
|
|
1,406
|
Amortization of
acquisition-related intangible assets
|
571
|
|
—
|
|
571
|
|
255
|
|
826
|
|
—
|
|
826
|
Acquisition/divestiture-related costs
|
3
|
|
—
|
|
3
|
|
261
|
|
264
|
|
—
|
|
264
|
Russia-Ukraine war
costs
|
4
|
|
1
|
|
5
|
|
62
|
|
67
|
|
—
|
|
67
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
8
|
|
8
|
|
—
|
|
8
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(478)
|
|
(478)
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(435)
|
Non-GAAP
amount
|
$ 18,144
|
|
$
6,891
|
|
$ 25,035
|
|
$ 11,929
|
|
$ 13,106
|
|
$
48
|
|
$ 10,655
|
% of revenue
|
64.0 %
|
|
68.1 %
|
|
65.1 %
|
|
31.0 %
|
|
34.1 %
|
|
0.1 %
|
|
27.7 %
|
|
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 29,
2023
|
|
April 30,
2022
|
|
April 29,
2023
|
|
April 30,
2022
|
GAAP effective tax
rate
|
18.8 %
|
|
19.9 %
|
|
20.2 %
|
|
18.7 %
|
Total adjustments to
GAAP provision for income taxes
|
0.2 %
|
|
(0.9) %
|
|
(1.2) %
|
|
0.3 %
|
Non-GAAP effective tax
rate
|
19.0 %
|
|
19.0 %
|
|
19.0 %
|
|
19.0 %
|
GAAP TO NON-GAAP
GUIDANCE
|
|
Q4 FY 2023
|
|
Gross Margin
Rate
|
|
Operating Margin
Rate
|
|
Earnings per
Share (2)
|
GAAP
|
|
62.5% –
63.5%
|
|
26.5% –
27.5%
|
|
$0.82 –
$0.87
|
Estimated adjustments
for:
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
1.0 %
|
|
4.0 %
|
|
$0.11 –
$0.12
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
1.0 %
|
|
2.0 %
|
|
$0.05 –
$0.06
|
Significant asset
impairments and restructurings (1)
|
|
—
|
|
1.5 %
|
|
$0.04 –
$0.05
|
Non-GAAP
|
|
64.5% –
65.5%
|
|
34% – 35%
|
|
$1.05 –
$1.07
|
FY 2023
|
|
Earnings per
Share (2)
|
GAAP
|
|
$2.93 –
$2.98
|
Estimated adjustments
for:
|
|
|
Share-based
compensation expense
|
|
$0.45 –
$0.46
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
$0.22 –
$0.23
|
Significant asset
impairments and restructurings (1)
|
|
$0.10 –
$0.11
|
(Gains) and losses on
investments
|
|
$0.03
|
Significant tax
matters
|
|
$0.04
|
Non-GAAP
|
|
$3.80 –
$3.82
|
|
|
(1)
|
On November 16, 2022,
Cisco announced a restructuring plan in order to rebalance the
organization and enable further investment in key priority areas.
We expect to recognize approximately $200 million of restructuring
charges in the fourth quarter of fiscal 2023.
|
(2)
|
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 key technologies like cloud, AI
and security continuing to scale, our continued leadership in
networking, the breadth of our portfolio to position us well for
the future, our healthy backlog, recurring revenue streams, RPO and
the continued improving availability of supply) and the future
financial performance of Cisco (including the guidance for Q4 FY
2023 and full year FY 2023) 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: the
impact of the COVID-19 pandemic and related public health measures;
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; 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 Secure, Agile
Networks and services; the timing of orders and manufacturing and
customer lead times; significant 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
malware; vulnerabilities and critical security defects; terrorism;
natural catastrophic events (including as a result of global
climate change); any other 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 21, 2023 and September 8, 2022, 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 29, 2023
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
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technology that powers the Internet. Cisco inspires new
possibilities by reimagining your applications, securing your data,
transforming your infrastructure, and empowering your
teams for a global and inclusive future. Discover more at
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of the word partner does not imply a partnership relationship
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Information.
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Contact:
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|
Investor Relations
Contact:
|
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|
|
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|
Cisco
|
|
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|
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