Cisco Reports Second Quarter Earnings Dividend Increased 14
Percent, Additional $25 Billion Authorized for Stock Repurchase
- Q2
Revenue: $11.9 billion
- Increase of 3% year over
year
- Recurring revenue was 33% of total
revenue, up 2 points year over year
- Q2 Earnings (Loss) per
Share: $(1.78) GAAP; $0.63 non-GAAP
- GAAP results include an $11.1 billion charge
related to the enactment of the Tax Cuts and Jobs Act
- Q3 FY 2018
Guidance:
- Revenue: 3% to 5% growth year over
year
- Earnings per
Share: GAAP: $0.50 to $0.55; Non-GAAP: $0.64 to
$0.66
SAN JOSE, Calif., Feb. 14, 2018 (GLOBE NEWSWIRE)
-- Cisco (NASDAQ:CSCO) today reported second quarter results for
the period ended January 27, 2018. Cisco reported second
quarter revenue of $11.9 billion, net loss on a generally accepted
accounting principles (GAAP) basis of $(8.8) billion or $(1.78) per
share, and non-GAAP net income of $3.1 billion or $0.63 per
share.
"We had a great quarter which demonstrates that
our strategy is working. Our business is growing, we have a
fantastic innovation pipeline, our balance sheet is strong and we
have a team that's executing incredibly well," said Chuck Robbins,
Chairman and CEO, Cisco. "The network is more critical to business
success than ever, and our new intent-based networking portfolio
has great momentum including the fastest ramping new product in our
history."
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GAAP
Results |
|
|
|
|
|
|
|
|
|
Q2 FY 2018 |
|
Q2 FY 2017 |
|
Vs. Q2 FY 2017 |
Revenue |
|
$ |
11.9 |
billion |
|
$ |
11.6 |
billion |
|
3 |
% |
Net
Income (Loss) |
|
$ |
(8.8 |
) billion |
|
$ |
2.3 |
billion |
|
(474 |
)% |
Earnings (Loss) per Share |
|
$ |
(1.78 |
) |
|
$ |
0.47 |
|
|
(479 |
)% |
GAAP results include an $11.1 billion charge
related to the enactment of the Tax Cuts and Jobs Act comprised of
$9.0 billion for the U.S. transition tax, $1.2 billion for foreign
withholding tax and $0.9 billion for the re-measurement of net
deferred tax assets.
|
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|
|
|
|
Non-GAAP
Results |
|
|
|
|
|
|
|
|
|
Q2 FY 2018 |
|
Q2 FY 2017 |
|
Vs. Q2 FY 2017 |
Net
Income |
|
$ |
3.1 |
billion |
|
$ |
2.9 |
billion |
|
10 |
% |
Diluted Earnings per Share (EPS) |
|
$ |
0.63 |
|
|
$ |
0.57 |
|
|
11 |
% |
Reconciliations between net income (loss),
earnings (loss) per share, 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 Increases Quarterly
Cash Dividend; Stock Repurchase Program Authorization
Increased
Cisco has declared a quarterly dividend of $0.33
per common share, a 4-cent increase or up 14% over the previous
quarter's dividend, to be paid on April 25, 2018 to all
shareholders of record as of the close of business on April 5,
2018. Future dividends will be subject to Board approval.
Cisco's board of directors has also approved a $25
billion increase to the authorization of the stock repurchase
program. There is no fixed termination date for the repurchase
program. The remaining authorized amount for stock repurchases
including the additional authorization is approximately $31
billion.
"Q2 was a great quarter with 3% revenue growth and
strong margins and cash flow," said Kelly Kramer, CFO of Cisco. "We
continue to make progress as we shift the business toward more
software and recurring revenue. Our significant dividend increase
and additional share repurchase authorization reinforce our
commitment to returning capital to our shareholders and show
confidence in the strength of our ongoing cash flows."
Financial
Summary
All comparative percentages are
on a year-over-year basis unless otherwise noted.
Q2 FY 2018
Highlights
Revenue
-- Total revenue was $11.9 billion, up 3%, with
product revenue up 3% and service revenue up 3%. 33% of total
revenue was from recurring offers, up 2 percentage points from the
second quarter of fiscal 2017. Revenue by geographic segment was:
Americas up 5%, EMEA flat, and APJC down 2%. Product revenue
performance reflected solid growth in Applications and Security,
which each increased 6%. Infrastructure Platforms increased by
2%.
Gross
Margin -- On a GAAP basis, total gross margin and
product gross margin were 63.1% and 61.5%, respectively. Product
gross margin increased compared with 61.1% in the second quarter of
fiscal 2017.
Non-GAAP total gross margin and product gross
margin were 64.7% and 63.3%, respectively. Non-GAAP product gross
margin increased compared with 62.4% in the second quarter of
fiscal 2017. The increase was primarily due to improved
productivity benefits and to a lesser extent product mix, partially
offset by pricing.
GAAP service gross margin was 67.4% and non-GAAP
service gross margin was 68.5%.
Total gross margins by geographic segment were:
65.9% for the Americas, 64.6% for EMEA and 60.1% for APJC.
Operating
Expenses -- On a GAAP basis, operating expenses were
$4.4 billion, up 1%. Non-GAAP operating expenses were $3.9 billion,
up 2%, and were 32.9% of revenue.
Operating
Income -- GAAP operating income was $3.1 billion, up
6%, with GAAP operating margin of 25.9%. Non-GAAP operating income
was $3.8 billion, up 5%, with non-GAAP operating margin of
31.7%.
Provision
for Income Taxes -- The GAAP tax provision rate was
371.6% which includes an $11.1 billion charge related to the
enactment of the Tax Cuts and Jobs Act. The non-GAAP tax provision
rate was 20.0%.
Net Income
(Loss) and Earnings (Loss) per Share -- On a GAAP
basis, net loss was $(8.8) billion and earnings (loss) per share
was $(1.78). On a non-GAAP basis, net income was $3.1 billion, an
increase of 10%, and EPS was $0.63, an increase of 11%.
Cash Flow
from Operating Activities -- was $4.1 billion, an
increase of 8% compared with $3.8 billion for the second quarter of
fiscal 2017.
Balance Sheet and Other
Financial Highlights
Cash and
Cash Equivalents and Investments -- were $73.7
billion at the end of the second quarter of fiscal 2018, compared
with $71.6 billion at the end of the first quarter of fiscal 2018,
and compared with $70.5 billion at the end of fiscal 2017. The
total cash and cash equivalents and investments available in the
United States at the end of the second quarter of fiscal 2018 were
$2.4 billion.
Deferred
Revenue -- was $18.8 billion, up 10% in total, with
deferred product revenue up 19%, driven largely by
subscription-based and software offers, and deferred service
revenue was up 4%. The portion of deferred product revenue related
to recurring software and subscription offers increased 36%.
Capital
Allocation -- In the second quarter of fiscal 2018,
Cisco declared and paid a cash dividend of $0.29 per common share,
or $1.4 billion. For the second quarter of fiscal 2018, Cisco
repurchased approximately 103 million shares of common stock under
its stock repurchase program at an average price of $39.07 per
share for an aggregate purchase price of $4.0 billion.
Acquisitions
In the first quarter of fiscal 2018, we announced
a definitive agreement to acquire BroadSoft, Inc., a publicly held
company that offers cloud calling and contact center solutions. The
BroadSoft acquisition closed in the third quarter of fiscal
2018.
On January 24, 2018, we announced our intent to
acquire Skyport Systems, Inc., a privately held company providing
cloud-managed, hyper-converged systems that run and protect
business critical applications. The Skyport acquisition closed in
the third quarter of fiscal 2018.
Guidance for Q3 FY
2018
Cisco expects to achieve the following results for
the third quarter of fiscal 2018:
|
|
|
Q3 FY 2018 |
|
|
Revenue |
|
3% - 5% growth Y/Y |
Non-GAAP gross margin rate |
|
63% - 64% |
Non-GAAP operating margin rate |
|
29.5% - 30.5% |
Non-GAAP tax provision rate |
|
21% |
|
Non-GAAP EPS |
|
$0.64 - $0.66 |
|
|
|
The impact of the BroadSoft
acquisition is factored into our guidance.
Cisco estimates that GAAP EPS will be
$0.50 to $0.55 in the third quarter of fiscal 2018.
A reconciliation between the Guidance
for Q3 FY 2018 on a GAAP and non-GAAP basis is provided in the
table entitled "GAAP to non-GAAP Guidance for Q3 FY 2018" located
in the section entitled "Reconciliations of GAAP to non-GAAP
Measures."
Editor's
Notes:
- Q2 fiscal year 2018 conference call to discuss
Cisco's results along with its guidance will be held on Wednesday,
February 14, 2018 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, February 14, 2018 to 4:00 p.m. Pacific
Time, February 21, 2018 at 1-800-391-9854 (United States) or
1-402-220-9828 (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, February 14, 2018. 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.
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|
CISCO
SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per-share
amounts)
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
January 27,
2018 |
|
January 28,
2017 |
|
January 27,
2018 |
|
January 28,
2017 |
REVENUE: |
|
|
|
|
|
|
|
Product |
$ |
8,709 |
|
|
$ |
8,491 |
|
|
$ |
17,763 |
|
|
$ |
17,793 |
|
Service |
3,178 |
|
|
3,089 |
|
|
6,260 |
|
|
6,139 |
|
Total revenue |
11,887 |
|
|
11,580 |
|
|
24,023 |
|
|
23,932 |
|
COST OF SALES: |
|
|
|
|
|
|
|
Product |
3,354 |
|
|
3,305 |
|
|
6,969 |
|
|
6,708 |
|
Service |
1,035 |
|
|
999 |
|
|
2,129 |
|
|
2,064 |
|
Total cost of sales |
4,389 |
|
|
4,304 |
|
|
9,098 |
|
|
8,772 |
|
GROSS MARGIN |
7,498 |
|
|
7,276 |
|
|
14,925 |
|
|
15,160 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Research and development |
1,549 |
|
|
1,508 |
|
|
3,116 |
|
|
3,053 |
|
Sales and marketing |
2,235 |
|
|
2,222 |
|
|
4,569 |
|
|
4,640 |
|
General and administrative |
483 |
|
|
456 |
|
|
1,040 |
|
|
1,011 |
|
Amortization of purchased intangible assets |
60 |
|
|
64 |
|
|
121 |
|
|
142 |
|
Restructuring and other charges |
98 |
|
|
133 |
|
|
250 |
|
|
544 |
|
Total operating expenses |
4,425 |
|
|
4,383 |
|
|
9,096 |
|
|
9,390 |
|
OPERATING INCOME |
3,073 |
|
|
2,893 |
|
|
5,829 |
|
|
5,770 |
|
Interest income |
396 |
|
|
329 |
|
|
775 |
|
|
624 |
|
Interest expense |
(247 |
) |
|
(222 |
) |
|
(482 |
) |
|
(420 |
) |
Other income (loss), net |
10 |
|
|
(37 |
) |
|
72 |
|
|
(58 |
) |
Interest and other income (loss),
net |
159 |
|
|
70 |
|
|
365 |
|
|
146 |
|
INCOME BEFORE PROVISION FOR INCOME
TAXES |
3,232 |
|
|
2,963 |
|
|
6,194 |
|
|
5,916 |
|
Provision for income taxes (1) |
12,010 |
|
|
615 |
|
|
12,578 |
|
|
1,246 |
|
NET INCOME (LOSS) |
$ |
(8,778 |
) |
|
$ |
2,348 |
|
|
$ |
(6,384 |
) |
|
$ |
4,670 |
|
|
|
|
|
|
|
|
|
Net
income (loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
(1.78 |
) |
|
$ |
0.47 |
|
|
$ |
(1.29 |
) |
|
$ |
0.93 |
|
Diluted |
$ |
(1.78 |
) |
|
$ |
0.47 |
|
|
$ |
(1.29 |
) |
|
$ |
0.92 |
|
Shares
used in per-share calculation: |
|
|
|
|
|
|
|
Basic |
4,924 |
|
|
5,015 |
|
|
4,942 |
|
|
5,021 |
|
Diluted |
4,924 |
|
|
5,040 |
|
|
4,942 |
|
|
5,054 |
|
|
|
|
|
|
|
|
|
Cash
dividends declared per common share |
$ |
0.29 |
|
|
$ |
0.26 |
|
|
$ |
0.58 |
|
|
$ |
0.52 |
|
(1) The
provision for income taxes includes an $11.1 billion charge as
related to the enactment of the Tax Cuts and Jobs Act.
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except
percentages) |
|
|
|
|
|
January 27, 2018 |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
Amount |
|
Y/Y % |
|
Amount |
|
Y/Y% |
Revenue: |
|
|
|
|
|
|
|
|
Americas |
|
$ |
7,004 |
|
|
5 |
% |
|
$ |
14,354 |
|
|
2 |
% |
EMEA |
|
3,062 |
|
|
- |
% |
|
5,971 |
|
|
(2 |
)% |
APJC |
|
1,821 |
|
|
(2 |
)% |
|
3,698 |
|
|
(1 |
)% |
Total |
|
$ |
11,887 |
|
|
3 |
% |
|
$ |
24,023 |
|
|
- |
% |
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
GROSS MARGIN PERCENTAGE BY
SEGMENT
(In percentages) |
|
|
|
|
|
January 27, 2018 |
|
|
Three Months Ended |
|
Six Months Ended |
Gross
Margin Percentage: |
|
|
|
|
Americas |
|
65.9% |
|
65.0% |
EMEA |
|
64.6% |
|
63.9% |
APJC |
|
60.1% |
|
61.1% |
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND
SERVICES
(In millions, except
percentages) |
|
|
|
|
|
January 27, 2018 |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
Amount |
|
Y/Y % |
|
Amount |
|
Y/Y% |
Revenue: |
|
|
|
|
|
|
|
|
Infrastructure Platforms |
|
$ |
6,694 |
|
|
2 |
% |
|
$ |
13,664 |
|
|
(1 |
)% |
Applications |
|
1,184 |
|
|
6 |
% |
|
2,387 |
|
|
6 |
% |
Security |
|
558 |
|
|
6 |
% |
|
1,143 |
|
|
7 |
% |
Other Products |
|
273 |
|
|
(10 |
)% |
|
569 |
|
|
(13 |
)% |
Total Product |
|
8,709 |
|
|
3 |
% |
|
17,763 |
|
|
- |
% |
Services |
|
3,178 |
|
|
3 |
% |
|
6,260 |
|
|
2 |
% |
Total |
|
$ |
11,887 |
|
|
3 |
% |
|
$ |
24,023 |
|
|
- |
% |
|
|
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited) |
|
|
|
|
|
January 27, 2018 |
|
July 29, 2017 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
17,624 |
|
|
$ |
11,708 |
|
Investments |
56,059 |
|
|
58,784 |
|
Accounts receivable, net of allowance for doubtful
accounts of $181 at January 27, 2018 and $211 at July 29,
2017 |
3,963 |
|
|
5,146 |
|
Inventories |
1,896 |
|
|
1,616 |
|
Financing receivables, net |
4,925 |
|
|
4,856 |
|
Other current assets |
1,583 |
|
|
1,593 |
|
Total current assets |
86,050 |
|
|
83,703 |
|
Property and equipment, net |
3,113 |
|
|
3,322 |
|
Financing receivables, net |
4,913 |
|
|
4,738 |
|
Goodwill |
30,391 |
|
|
29,766 |
|
Purchased intangible assets, net |
2,474 |
|
|
2,539 |
|
Deferred tax assets |
3,097 |
|
|
4,239 |
|
Other
assets |
1,472 |
|
|
1,511 |
|
TOTAL
ASSETS |
$ |
131,510 |
|
|
$ |
129,818 |
|
LIABILITIES AND EQUITY |
|
|
|
Current liabilities: |
|
|
|
Short-term debt |
$ |
13,741 |
|
|
$ |
7,992 |
|
Accounts payable |
1,060 |
|
|
1,385 |
|
Income taxes payable |
2,204 |
|
|
98 |
|
Accrued compensation |
2,736 |
|
|
2,895 |
|
Deferred revenue |
11,102 |
|
|
10,821 |
|
Other current liabilities |
4,521 |
|
|
4,392 |
|
Total current liabilities |
35,364 |
|
|
27,583 |
|
Long-term debt |
25,625 |
|
|
25,725 |
|
Income
taxes payable |
9,185 |
|
|
1,250 |
|
Deferred revenue |
7,686 |
|
|
7,673 |
|
Other
long-term liabilities |
1,668 |
|
|
1,450 |
|
Total liabilities |
79,528 |
|
|
63,681 |
|
Total
equity |
51,982 |
|
|
66,137 |
|
TOTAL LIABILITIES AND
EQUITY |
$ |
131,510 |
|
|
$ |
129,818 |
|
|
|
|
|
CISCO
SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In millions)
(Unaudited) |
|
|
|
Six Months Ended |
|
January 27,
2018 |
|
January 28,
2017 |
Cash
flows from operating activities: |
|
|
|
Net income (loss) |
$ |
(6,384 |
) |
|
$ |
4,670 |
|
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
|
|
|
Depreciation, amortization, and
other |
1,112 |
|
|
1,148 |
|
Share-based compensation expense |
785 |
|
|
724 |
|
Provision for receivables |
(43 |
) |
|
4 |
|
Deferred income taxes |
1,021 |
|
|
(26 |
) |
Excess tax benefits from share-based
compensation |
- |
|
|
(101 |
) |
(Gains) losses on divestitures,
investments and other, net |
(174 |
) |
|
79 |
|
Change in operating assets and
liabilities, net of effects of acquisitions and divestitures: |
|
|
|
Accounts receivable |
1,236 |
|
|
1,396 |
|
Inventories |
(276 |
) |
|
(51 |
) |
Financing
receivables |
(156 |
) |
|
(764 |
) |
Other assets |
(15 |
) |
|
155 |
|
Accounts payable |
(338 |
) |
|
(98 |
) |
Income taxes, net |
10,246 |
|
|
(257 |
) |
Accrued
compensation |
(189 |
) |
|
(417 |
) |
Deferred revenue |
237 |
|
|
611 |
|
Other liabilities |
88 |
|
|
(571 |
) |
Net cash
provided by operating activities |
7,150 |
|
|
6,502 |
|
Cash
flows from investing activities: |
|
|
|
Purchases of investments |
(13,954 |
) |
|
(27,847 |
) |
Proceeds from sales of investments |
9,111 |
|
|
18,420 |
|
Proceeds from maturities of investments |
7,365 |
|
|
5,245 |
|
Acquisition of businesses, net of cash and cash
equivalents acquired |
(754 |
) |
|
(251 |
) |
Proceeds from business divestitures |
27 |
|
|
- |
|
Purchases of investments in privately held companies |
(89 |
) |
|
(142 |
) |
Return of investments in privately held companies |
124 |
|
|
108 |
|
Acquisition of property and equipment |
(379 |
) |
|
(526 |
) |
Proceeds from sales of property and equipment |
51 |
|
|
5 |
|
Other |
(7 |
) |
|
10 |
|
Net cash
provided by (used in) investing activities |
1,495 |
|
|
(4,978 |
) |
Cash
flows from financing activities: |
|
|
|
Issuances of common stock |
302 |
|
|
386 |
|
Repurchases of common stock - repurchase program |
(5,457 |
) |
|
(1,991 |
) |
Shares repurchased for tax withholdings on vesting of
restricted stock units |
(433 |
) |
|
(432 |
) |
Short-term borrowings, original maturities of 90 days or
less, net |
5,095 |
|
|
300 |
|
Issuances of debt |
6,877 |
|
|
6,232 |
|
Repayments of debt |
(6,230 |
) |
|
(1 |
) |
Excess tax benefits from share-based compensation |
- |
|
|
101 |
|
Dividends paid |
(2,861 |
) |
|
(2,612 |
) |
Other |
(22 |
) |
|
(240 |
) |
Net cash
provided by (used in) financing activities |
(2,729 |
) |
|
1,743 |
|
Net
increase (decrease) in cash and cash equivalents |
5,916 |
|
|
3,267 |
|
Cash
and cash equivalents, beginning of period |
11,708 |
|
|
7,631 |
|
Cash
and cash equivalents, end of period |
$ |
17,624 |
|
|
$ |
10,898 |
|
Supplemental cash flow information: |
|
|
|
Cash
paid for interest |
$ |
454 |
|
|
$ |
419 |
|
Cash
paid for income taxes, net |
$ |
1,311 |
|
|
$ |
1,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
DEFERRED REVENUE
(In millions) |
|
|
|
|
|
|
|
January 27,
2018 |
|
October 28,
2017 |
|
January 28,
2017 |
Deferred revenue: |
|
|
|
|
|
Service |
$ |
10,963 |
|
|
$ |
10,991 |
|
|
$ |
10,525 |
|
Product: |
|
|
|
|
|
Deferred revenue related to recurring
software and subscription offers |
5,451 |
|
|
5,213 |
|
|
3,997 |
|
Other product deferred revenue |
2,374 |
|
|
2,361 |
|
|
2,564 |
|
Total product deferred revenue |
7,825 |
|
|
7,574 |
|
|
6,561 |
|
Total |
$ |
18,788 |
|
|
$ |
18,565 |
|
|
$ |
17,086 |
|
Reported as: |
|
|
|
|
|
Current |
$ |
11,102 |
|
|
$ |
10,920 |
|
|
$ |
10,243 |
|
Noncurrent |
7,686 |
|
|
7,645 |
|
|
6,843 |
|
Total |
$ |
18,788 |
|
|
$ |
18,565 |
|
|
$ |
17,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
January 27, 2018 |
|
$ |
0.29 |
|
|
$ |
1,425 |
|
|
103 |
|
|
$ |
39.07 |
|
|
$ |
4,011 |
|
|
$ |
5,436 |
|
October 28, 2017 |
|
$ |
0.29 |
|
|
$ |
1,436 |
|
|
51 |
|
|
$ |
31.80 |
|
|
$ |
1,620 |
|
|
$ |
3,056 |
|
Fiscal
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
July 29, 2017 |
|
$ |
0.29 |
|
|
$ |
1,448 |
|
|
38 |
|
|
$ |
31.61 |
|
|
$ |
1,201 |
|
|
$ |
2,649 |
|
April 29, 2017 |
|
$ |
0.29 |
|
|
$ |
1,451 |
|
|
15 |
|
|
$ |
33.71 |
|
|
$ |
503 |
|
|
$ |
1,954 |
|
January 28, 2017 |
|
$ |
0.26 |
|
|
$ |
1,304 |
|
|
33 |
|
|
$ |
30.33 |
|
|
$ |
1,001 |
|
|
$ |
2,305 |
|
October 29, 2016 |
|
$ |
0.26 |
|
|
$ |
1,308 |
|
|
32 |
|
|
$ |
31.12 |
|
|
$ |
1,001 |
|
|
$ |
2,309 |
|
|
|
|
|
|
|
|
|
CISCO
SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES
GAAP NET INCOME (LOSS) TO NON-GAAP NET
INCOME
(In millions, except per-share
amounts) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
January 27,
2018 |
|
January 28,
2017 |
|
January 27,
2018 |
|
January 28,
2017 |
GAAP
net income (loss) |
$ |
(8,778 |
) |
|
$ |
2,348 |
|
|
$ |
(6,384 |
) |
|
$ |
4,670 |
|
Adjustments to cost of sales: |
|
|
|
|
|
|
|
Share-based compensation expense |
54 |
|
|
53 |
|
|
111 |
|
|
107 |
|
Amortization of acquisition-related intangible assets |
144 |
|
|
107 |
|
|
283 |
|
|
219 |
|
Supplier component remediation charge (adjustment),
net |
(13 |
) |
|
(16 |
) |
|
(32 |
) |
|
(16 |
) |
Acquisition-related/divestiture costs |
2 |
|
|
1 |
|
|
2 |
|
|
1 |
|
Legal and indemnification settlements |
- |
|
|
- |
|
|
122 |
|
|
- |
|
Total adjustments to GAAP cost of sales |
187 |
|
|
145 |
|
|
486 |
|
|
311 |
|
Adjustments to operating expenses: |
|
|
|
|
|
|
|
Share-based compensation expense |
333 |
|
|
299 |
|
|
668 |
|
|
614 |
|
Amortization of acquisition-related intangible assets |
60 |
|
|
64 |
|
|
121 |
|
|
142 |
|
Acquisition-related/divestiture costs |
23 |
|
|
61 |
|
|
106 |
|
|
114 |
|
Significant asset impairments and restructurings |
98 |
|
|
133 |
|
|
250 |
|
|
544 |
|
Total adjustments to GAAP operating expenses |
514 |
|
|
557 |
|
|
1,145 |
|
|
1,414 |
|
Total adjustments to GAAP income (loss) before provision
for income taxes |
701 |
|
|
702 |
|
|
1,631 |
|
|
1,725 |
|
Income tax effect of non-GAAP adjustments |
(157 |
) |
|
(191 |
) |
|
(445 |
) |
|
(435 |
) |
Significant tax matters (1) |
11,380 |
|
|
- |
|
|
11,380 |
|
|
- |
|
Total adjustments to GAAP provision for income taxes |
11,223 |
|
|
(191 |
) |
|
10,935 |
|
|
(435 |
) |
Non-GAAP net income |
$ |
3,146 |
|
|
$ |
2,859 |
|
|
$ |
6,182 |
|
|
$ |
5,960 |
|
Net
income (loss) per share: (2) |
|
|
|
|
|
|
|
GAAP |
$ |
(1.78 |
) |
|
$ |
0.47 |
|
|
$ |
(1.29 |
) |
|
$ |
0.92 |
|
Non-GAAP |
$ |
0.63 |
|
|
$ |
0.57 |
|
|
$ |
1.24 |
|
|
$ |
1.18 |
|
(1) During the
second quarter of fiscal 2018, Cisco recorded charges relating to
significant tax matters that were excluded from non-GAAP net income
for the second quarter and first six months of fiscal 2018. $11.1
billion of these charges were provisional amounts related to the
enactment of the Tax Cuts and Jobs Act comprised of $9.0 billion
related to the U.S. transition tax, $1.2 billion related to foreign
withholding tax and $0.9 billion related to the re-measurement of
net deferred tax assets. The amounts are provisional based on
Securities and Exchange Commission Staff Accounting Bulletin No.
118. The remaining $0.3 billion was related to other significant
tax matters.
(2) GAAP net
loss per share for the three and six months ended January 27, 2018
is calculated using basic shares of 4,924 million and 4,942 million
respectively, due to the net loss resulting from the tax charge as
discussed in footnote (1). Non-GAAP net income per share for the
respective periods is calculated using diluted shares of 4,966
million and 4,982 million, as the Company had non-GAAP net income
for these periods.
|
|
|
|
CISCO
SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES
GROSS MARGINS, OPERATING EXPENSES,
OPERATINGMARGINS,
AND NET
INCOME (LOSS)
(In millions, except
percentages) |
|
|
|
Three Months Ended |
|
January 27, 2018 |
|
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income
(Loss) |
|
Y/Y |
GAAP
amount |
$ |
5,355 |
|
|
$ |
2,143 |
|
|
$ |
7,498 |
|
|
$ |
4,425 |
|
|
1 |
% |
|
$ |
3,073 |
|
|
6 |
% |
|
$ |
(8,778 |
) |
|
(474 |
)% |
% of
revenue |
61.5 |
% |
|
67.4 |
% |
|
63.1 |
% |
|
37.2 |
% |
|
|
|
25.9 |
% |
|
|
|
(73.8 |
)% |
|
|
Adjustments
to
GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
23 |
|
|
31 |
|
|
54 |
|
|
333 |
|
|
|
|
387 |
|
|
|
|
387 |
|
|
|
Amortization
of
acquisition-related intangible assets |
144 |
|
|
- |
|
|
144 |
|
|
60 |
|
|
|
|
204 |
|
|
|
|
204 |
|
|
|
Supplier component remediation charge (adjustment),
net |
(13 |
) |
|
- |
|
|
(13 |
) |
|
- |
|
|
|
|
(13 |
) |
|
|
|
(13 |
) |
|
|
Acquisition/
divestiture-related costs |
- |
|
|
2 |
|
|
2 |
|
|
23 |
|
|
|
|
25 |
|
|
|
|
25 |
|
|
|
Significant asset impairments and restructurings |
- |
|
|
- |
|
|
- |
|
|
98 |
|
|
|
|
98 |
|
|
|
|
98 |
|
|
|
Income tax effect/
significant
tax matters (1) |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
|
11,223 |
|
(1 |
) |
|
Non-GAAP amount |
$ |
5,509 |
|
|
$ |
2,176 |
|
|
$ |
7,685 |
|
|
$ |
3,911 |
|
|
2 |
% |
|
$ |
3,774 |
|
|
5 |
% |
|
$ |
3,146 |
|
|
10 |
% |
% of revenue |
63.3 |
% |
|
68.5 |
% |
|
64.7 |
% |
|
32.9 |
% |
|
|
|
31.7 |
% |
|
|
|
26.5 |
% |
|
|
(1) Includes an
$11.1 billion charge as related to the enactment of the Tax Cuts
and Jobs Act.
|
Three Months Ended |
|
January 28, 2017 |
|
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Operating
Income |
|
Net
Income |
GAAP
amount |
$ |
5,186 |
|
|
$ |
2,090 |
|
|
$ |
7,276 |
|
|
$ |
4,383 |
|
|
$ |
2,893 |
|
|
$ |
2,348 |
|
% of revenue |
61.1 |
% |
|
67.7 |
% |
|
62.8 |
% |
|
37.8 |
% |
|
25.0 |
% |
|
20.3 |
% |
Adjustments to
GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
19 |
|
|
34 |
|
|
53 |
|
|
299 |
|
|
352 |
|
|
352 |
|
Amortization of acquisition-related intangible assets |
107 |
|
|
- |
|
|
107 |
|
|
64 |
|
|
171 |
|
|
171 |
|
Supplier component remediation charge (adjustment),
net |
(16 |
) |
|
- |
|
|
(16 |
) |
|
- |
|
|
(16 |
) |
|
(16 |
) |
Acquisition/divestiture-related costs |
- |
|
|
1 |
|
|
1 |
|
|
61 |
|
|
62 |
|
|
62 |
|
Significant asset impairments and restructurings |
- |
|
|
- |
|
|
- |
|
|
133 |
|
|
133 |
|
|
133 |
|
Income tax effect |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(191 |
) |
Non-GAAP amount |
$ |
5,296 |
|
|
$ |
2,125 |
|
|
$ |
7,421 |
|
|
$ |
3,826 |
|
|
$ |
3,595 |
|
|
$ |
2,859 |
|
% of revenue |
62.4 |
% |
|
68.8 |
% |
|
64.1 |
% |
|
33.0 |
% |
|
31.0 |
% |
|
24.7 |
% |
|
|
|
|
CISCO
SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES
GROSS MARGINS, OPERATING EXPENSES, OPERATING
MARGINS,
AND NET
INCOME (LOSS)
(In millions, except
percentages) |
|
|
|
Six Months Ended |
|
January 27, 2018 |
|
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income
(Loss) |
|
Y/Y |
GAAP
amount |
$ |
10,794 |
|
|
$ |
4,131 |
|
|
$ |
14,925 |
|
|
$ |
9,096 |
|
|
(3 |
)% |
|
$ |
5,829 |
|
|
1 |
% |
|
$ |
(6,384 |
) |
|
(237 |
)% |
% of
revenue |
60.8 |
% |
|
66.0 |
% |
|
62.1 |
% |
|
37.9 |
% |
|
|
|
24.3 |
% |
|
|
|
(26.6 |
)% |
|
|
Adjustments
to
GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensa-
tion expense |
46 |
|
|
65 |
|
|
111 |
|
|
668 |
|
|
|
|
779 |
|
|
|
|
779 |
|
|
|
Amortization
of acquisition-related intangible assets |
283 |
|
|
- |
|
|
283 |
|
|
121 |
|
|
|
|
404 |
|
|
|
|
404 |
|
|
|
Supplier component remediation charge (adjustment),
net |
(32 |
) |
|
- |
|
|
(32 |
) |
|
- |
|
|
|
|
(32 |
) |
|
|
|
(32 |
) |
|
|
Legal and indemnifica-
tion settlements |
122 |
|
|
- |
|
|
122 |
|
|
- |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
Acquisition/
divestiture-related costs |
- |
|
|
2 |
|
|
2 |
|
|
106 |
|
|
|
|
108 |
|
|
|
|
108 |
|
|
|
Significant asset impairments and restructu-
rings |
- |
|
|
- |
|
|
- |
|
|
250 |
|
|
|
|
250 |
|
|
|
|
250 |
|
|
|
Income
tax effect/
significant
tax matters (1) |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
|
10,935 |
|
(1 |
) |
|
Non-GAAP
amount |
$ |
11,213 |
|
|
$ |
4,198 |
|
|
$ |
15,411 |
|
|
$ |
7,951 |
|
|
- |
% |
|
$ |
7,460 |
|
|
- |
% |
|
$ |
6,182 |
|
|
4 |
% |
% of
revenue |
63.1 |
% |
|
67.1 |
% |
|
64.2 |
% |
|
33.1 |
% |
|
|
|
31.1 |
% |
|
|
|
25.7 |
% |
|
|
(1) Includes an
$11.1 billion charge as related to the enactment of the Tax Cuts
and Jobs Act.
|
Six Months Ended |
|
January 28, 2017 |
|
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Operating
Income |
|
Net
Income |
GAAP
amount |
$ |
11,085 |
|
|
$ |
4,075 |
|
|
$ |
15,160 |
|
|
$ |
9,390 |
|
|
$ |
5,770 |
|
|
$ |
4,670 |
|
% of revenue |
62.3 |
% |
|
66.4 |
% |
|
63.3 |
% |
|
39.2 |
% |
|
24.1 |
% |
|
19.5 |
% |
Adjustments to GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense. |
40 |
|
|
67 |
|
|
107 |
|
|
614 |
|
|
721 |
|
|
721 |
|
Amortization of acquisition-related intangible assets |
219 |
|
|
- |
|
|
219 |
|
|
142 |
|
|
361 |
|
|
361 |
|
Supplier component remediation charge (adjustment),
net |
(16 |
) |
|
- |
|
|
(16 |
) |
|
- |
|
|
(16 |
) |
|
(16 |
) |
Acquisition/divestiture-related costs |
- |
|
|
1 |
|
|
1 |
|
|
114 |
|
|
115 |
|
|
115 |
|
Significant asset impairments and restructurings |
- |
|
|
- |
|
|
- |
|
|
544 |
|
|
544 |
|
|
544 |
|
Income tax effect/significant tax matters |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(435 |
) |
Non-GAAP amount |
$ |
11,328 |
|
|
$ |
4,143 |
|
|
$ |
15,471 |
|
|
$ |
7,976 |
|
|
$ |
7,495 |
|
|
$ |
5,960 |
|
% of revenue |
63.7 |
% |
|
67.5 |
% |
|
64.6 |
% |
|
33.3 |
% |
|
31.3 |
% |
|
24.9 |
% |
|
|
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CISCO
SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES
EFFECTIVE TAX RATE
(In percentages) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
January 27,
2018 |
|
January 28,
2017 |
|
January 27,
2018 |
|
January 28,
2017 |
GAAP
effective tax rate (1) |
371.6 |
% |
|
20.8 |
% |
|
203.1 |
% |
|
21.1 |
% |
Total adjustments to GAAP provision for income taxes |
(351.6 |
)% |
|
1.2 |
% |
|
(182.1 |
)% |
|
0.9 |
% |
Non-GAAP effective tax rate |
20.0 |
% |
|
22.0 |
% |
|
21.0 |
% |
|
22.0 |
% |
(1) Includes an
$11.1 billion charge as related to the enactment of the Tax Cuts
and Jobs Act.
GAAP TO
NON-GAAP GUIDANCE FOR Q3 FY 2018 |
|
Q3 FY
2018 |
|
Gross Margin
Rate |
|
Operating Margin
Rate |
|
Tax Provision
Rate |
|
Earnings per
Share (2) |
GAAP |
|
61.5% - 62.5% |
|
24%- 25% |
|
22% |
|
$0.50 - $0.55 |
Estimated adjustments for: |
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
0.5 |
% |
|
3.5 |
% |
|
- |
|
$0.06 - $0.07 |
Amortization of purchased intangible assets and other
acquisition-related/divestiture costs |
|
1.0 |
% |
|
2.0 |
% |
|
- |
|
$0.05 - $0.06 |
Restructuring and other charges (1) |
|
- |
|
|
- |
|
|
- |
|
$0.00 - $0.01 |
Income
tax effect of non-GAAP adjustments |
|
- |
|
|
- |
|
|
(1)% |
|
|
Non-GAAP |
|
63% - 64% |
|
29.5% - 30.5% |
|
21% |
|
$0.64 - $0.66 |
|
|
|
|
|
|
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|
(1) In August
2016, we began taking action under a restructuring plan in order to
reinvest in our key priority areas. We have incurred charges of
approximately $1.0 billion in relation to this plan since its
inception through Q2 FY2018. We have a small amount of charges that
remain which will be recognized over the remainder of the fiscal
year.
(2) Estimated
adjustments to GAAP earnings per share are shown after income tax
effects.
The impact of the BroadSoft
acquisition is factored into our guidance.
Except as noted above, this guidance
does not include the effects of any future
acquisitions/divestitures, asset impairments, restructurings 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 continued
execution on our strategy, our ability to continue to innovate and
grow our business, the continued criticality of the network to the
business success of our customers, the momentum of our intent-based
networking portfolio, continued progress in shifting our business
toward more software and recurring revenue, and our ability to
continue to execute well, deliver profitable growth and return
capital to our shareholders) and the future financial performance
of Cisco (including the guidance for Q3 FY 2018) 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; 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
routing, switching and services; the timing of orders and
manufacturing and customer lead times; 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, intellectual property, antitrust, shareholder and other
matters, and governmental investigations; our ability to achieve
the benefits of the announced restructuring and possible changes in
the size and timing of the related charges; man-made problems such
as cyber-attacks, data protection breaches, computer viruses or
terrorism; natural catastrophic events; a 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 November 21, 2017 and September 7, 2017,
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 six months
ended January 27, 2018 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,
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, significant 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.
About
Cisco
Cisco (NASDAQ:CSCO) is the worldwide
technology leader that has been making the Internet work since
1984. Our people, products and partners help society securely
connect and seize tomorrow's digital opportunity today. Discover
more at thenetwork.cisco.com and follow us on Twitter at
@Cisco.
Copyright © 2018 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.
|
|
Press Contact: |
Investor Relations Contact: |
Robyn
Blum |
Marilyn Mora |
Cisco |
Cisco |
1
(408) 853-9848 |
1
(408) 527-7452 |
rojenkin@cisco.com |
marilmor@cisco.com |
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