SAN
JOSE, Calif., Nov. 16,
2022 /PRNewswire/ --
News Summary:
- $13.6 billion in revenue, up 6%
year over year; GAAP EPS $0.65, down
7% year over year, and Non-GAAP EPS $0.86, up 5% year over year
- Continued progress on business model transformation:
-
-
- Total annualized recurring revenue (ARR) at $23.2 billion, up 7% year over year and product
ARR up 12% year over year
- Total software revenue up 5% year over year and software
subscription revenue up 11% year over year
- Remaining performance obligations (RPO) at $30.9 billion, up 3% year over year and product
RPO up 5% year over year
- Q1 FY 2023 Results:
-
- Revenue: $13.6
billion
-
- Increase of 6% year over year
- Earnings per Share: GAAP: $0.65; Non-GAAP: $0.86
-
- GAAP EPS decreased (7)% year over year
- Non-GAAP EPS increased 5% year over year
- Q2 FY 2023 Guidance:
-
- Revenue: 4.5% to 6.5% growth year over year
- Earnings per Share: GAAP: $0.59 to $0.64;
Non-GAAP: $0.84 to $0.86
- FY 2023 Guidance:
-
- Revenue: 4.5% to 6.5% growth year over year
- Earnings per Share: GAAP: $2.63 to $2.76;
Non-GAAP: $3.51 to $3.58
Cisco today reported first quarter results for the period ended
October 29, 2022. Cisco reported first quarter revenue of
$13.6 billion, net income on a
generally accepted accounting principles (GAAP) basis of
$2.7 billion or $0.65 per share, and non-GAAP net income of
$3.5 billion or $0.86 per share.
"Our fiscal 2023 is off to a good start as we delivered the
largest quarterly revenue and second highest quarterly non-GAAP
earnings per share in our history," said Chuck Robbins, chair and CEO of Cisco. "These
results demonstrate the relevance of our strategy, our
differentiated innovation, and our unique position to help our
customers become more resilient."
"We delivered strong results in Q1 and continued to make
progress on our business transformation," said Scott Herren, CFO of Cisco. "Our annualized
recurring revenue increased to more than $23
billion, with product ARR growing 12%. This, together with
our significant backlog, strong RPO, and easing supply situation,
provides us with great visibility and predictability, and supports
our increased full year guidance."
GAAP
Results
|
|
|
|
Q1 FY 2023
|
|
Q1 FY 2022
|
|
Vs. Q1 FY 2022
|
Revenue
|
|
$
13.6
|
billion
|
|
$
12.9
|
billion
|
|
6 %
|
Net Income
|
|
$
2.7
|
billion
|
|
$
3.0
|
billion
|
|
(10) %
|
Diluted Earnings per
Share (EPS)
|
|
$
0.65
|
|
|
$
0.70
|
|
|
(7) %
|
|
|
Non-GAAP
Results
|
|
|
|
Q1 FY 2023
|
|
Q1 FY 2022
|
|
Vs. Q1 FY 2022
|
Net Income
|
|
$
3.5
|
billion
|
|
$
3.5
|
billion
|
|
2 %
|
EPS
|
|
$
0.86
|
|
|
$
0.82
|
|
|
5 %
|
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."
Financial Summary
All comparative percentages are on a year-over-year basis
unless otherwise noted.
Q1 FY 2023 Highlights
Revenue -- Total revenue was up 6% at $13.6 billion, with product revenue up 8% and
service revenue was flat. Revenue by geographic segment was:
Americas up 5%, EMEA up 11%, and APJC was flat. Product revenue
performance was led by growth in Secure, Agile Networks up 12%,
End-to-End Security up 9%, and Optimized Application Experiences up
7%. Internet for the Future was down 5% and Collaboration was down
2%.
Gross Margin -- On a GAAP basis, total gross
margin, product gross margin, and service gross margin were 61.2%,
59.2%, and 67.3%, respectively, as compared with 62.4%, 61.5%, and
65.2%, respectively, in the first quarter of fiscal 2022.
On a non-GAAP basis, total gross margin, product gross margin,
and service gross margin were 63.0%, 61.0%, and 68.8%,
respectively, as compared with 64.5%, 63.8%, and 66.5%,
respectively, in the first quarter of fiscal 2022.
Total gross margins by geographic segment were: 63.0% for the
Americas, 63.3% for EMEA and 62.3% for APJC.
Operating Expenses -- On a GAAP basis,
operating expenses were $4.8 billion,
up 4%, and were 35.3% of revenue. Non-GAAP operating expenses were
$4.2 billion, up 5%, and were 31.1%
of revenue.
Operating Income -- GAAP operating income was
$3.5 billion, up 3%, with GAAP
operating margin of 26.0%. Non-GAAP operating income was
$4.3 billion, up 1%, with non-GAAP
operating margin at 31.8%.
Provision for Income Taxes -- The GAAP tax
provision rate was 23.2%. The non-GAAP tax provision rate was
19.0%.
Net Income and EPS -- On a GAAP basis, net income
was $2.7 billion, a decrease of 10%,
and EPS was $0.65, a decrease of 7%.
On a non-GAAP basis, net income was $3.5
billion, an increase of 2%, and EPS was $0.86, an increase of 5%.
Cash Flow from Operating Activities --
$4.0 billion for the first quarter of
fiscal 2023, an increase of 16% compared with $3.4 billion for the first quarter of fiscal
2022.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments --
$19.8 billion at the end of the first
quarter of fiscal 2023, compared with $19.3
billion at the end of fiscal 2022.
Remaining Performance Obligations (RPO)
-- $30.9 billion, up 3%
in total, with 53% of this amount to be recognized as revenue over
the next 12 months. Product RPO were up 5% and service RPO were up
1%.
Deferred Revenue -- $23.0
billion, up 4% in total, with deferred product revenue up
7%. Deferred service revenue was up 2%.
Capital Allocation -- In the first quarter of
fiscal 2023, we returned $2.1 billion
to stockholders through share buybacks and dividends. We declared
and paid a cash dividend of $0.38 per
common share, or $1.6 billion, and
repurchased approximately 12 million shares of common stock under
our stock repurchase program at an average price of $43.76 per share for an aggregate purchase price
of $0.5 billion. The remaining
authorized amount for stock repurchases under the program is
$14.7 billion with no termination
date.
Guidance
Cisco expects to achieve the following results for the second
quarter of fiscal 2023:
Q2 FY 2023
|
|
|
Revenue
|
|
4.5% – 6.5% growth
Y/Y
|
Non-GAAP gross margin
rate
|
|
63% – 64%
|
Non-GAAP operating
margin rate
|
|
31.5% –
32.5%
|
Non-GAAP EPS
|
|
$0.84 –
$0.86
|
Cisco estimates that GAAP EPS will be $0.59 to $0.64 for the second quarter of fiscal
2023.
Cisco expects to achieve the following results for fiscal
2023:
FY 2023
|
|
|
Revenue
|
|
4.5% – 6.5% growth
Y/Y
|
Non-GAAP EPS
|
|
$3.51 –
$3.58
|
Cisco estimates that GAAP EPS will be $2.63 to $2.76 for fiscal 2023.
Our Q2 FY 2023 guidance assumes an effective tax provision rate
of 19% for GAAP and 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:
- Q1 fiscal year 2023 conference call to discuss Cisco's results
along with its guidance will be held on Wednesday,
November 16, 2022 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, November 16, 2022 to
4:00 p.m. Pacific Time,
November 23, 2022 at 1-800-835-5808 (United States) or 1-203-369-3353
(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, November 16, 2022.
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
|
|
October 29,
2022
|
|
October 30,
2021
|
REVENUE:
|
|
|
|
Product
|
$
10,245
|
|
$
9,529
|
Service
|
3,387
|
|
3,371
|
Total
revenue
|
13,632
|
|
12,900
|
COST OF SALES:
|
|
|
|
Product
|
4,179
|
|
3,673
|
Service
|
1,107
|
|
1,174
|
Total cost of
sales
|
5,286
|
|
4,847
|
GROSS MARGIN
|
8,346
|
|
8,053
|
OPERATING EXPENSES:
|
|
|
|
Research and
development
|
1,781
|
|
1,714
|
Sales and
marketing
|
2,391
|
|
2,261
|
General and
administrative
|
565
|
|
551
|
Amortization of
purchased intangible assets
|
71
|
|
84
|
Restructuring and
other charges
|
(2)
|
|
5
|
Total operating
expenses
|
4,806
|
|
4,615
|
OPERATING INCOME
|
3,540
|
|
3,438
|
Interest
income
|
169
|
|
121
|
Interest
expense
|
(100)
|
|
(89)
|
Other income (loss),
net
|
(134)
|
|
187
|
Interest and other
income (loss), net
|
(65)
|
|
219
|
INCOME BEFORE PROVISION FOR INCOME
TAXES
|
3,475
|
|
3,657
|
Provision for income
taxes
|
805
|
|
677
|
NET INCOME
|
$
2,670
|
|
$
2,980
|
|
|
|
|
Net income per
share:
|
|
|
|
Basic
|
$
0.65
|
|
$
0.71
|
Diluted
|
$
0.65
|
|
$
0.70
|
Shares used in
per-share calculation:
|
|
|
|
Basic
|
4,108
|
|
4,218
|
Diluted
|
4,116
|
|
4,243
|
CISCO SYSTEMS,
INC.
REVENUE BY
SEGMENT
(In millions, except
percentages)
|
|
|
|
Three Months
Ended
|
|
|
October 29,
2022
|
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
Americas
|
|
$
7,914
|
|
5 %
|
EMEA
|
|
3,675
|
|
11 %
|
APJC
|
|
2,043
|
|
— %
|
Total
|
|
$
13,632
|
|
6 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
GROSS MARGIN
PERCENTAGE BY SEGMENT
(In
percentages)
|
|
|
|
Three Months
Ended
|
|
|
October 29,
2022
|
Gross Margin Percentage:
|
|
|
Americas
|
|
63.0 %
|
EMEA
|
|
63.3 %
|
APJC
|
|
62.3 %
|
CISCO SYSTEMS,
INC.
REVENUE FOR GROUPS
OF SIMILAR PRODUCTS AND SERVICES
(In millions, except
percentages)
|
|
|
|
Three Months
Ended
|
|
|
October 29,
2022
|
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
Secure, Agile
Networks
|
|
$
6,684
|
|
12 %
|
Internet for the
Future
|
|
1,310
|
|
(5) %
|
Collaboration
|
|
1,086
|
|
(2) %
|
End-to-End
Security
|
|
971
|
|
9 %
|
Optimized Application
Experiences
|
|
193
|
|
7 %
|
Other
Products
|
|
2
|
|
(47) %
|
Total
Product
|
|
10,245
|
|
8 %
|
Services
|
|
3,387
|
|
— %
|
Total
|
|
$
13,632
|
|
6 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
October 29,
2022
|
|
July 30,
2022
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
7,292
|
|
$
7,079
|
Investments
|
12,492
|
|
12,188
|
Accounts receivable,
net of allowance of $88 at October 29, 2022 and $83 at
July 30,
2022
|
5,439
|
|
6,622
|
Inventories
|
2,664
|
|
2,568
|
Financing receivables,
net
|
3,683
|
|
3,905
|
Other current
assets
|
4,571
|
|
4,355
|
Total current
assets
|
36,141
|
|
36,717
|
Property and equipment,
net
|
1,972
|
|
1,997
|
Financing receivables,
net
|
3,618
|
|
4,009
|
Goodwill
|
38,160
|
|
38,304
|
Purchased intangible
assets, net
|
2,360
|
|
2,569
|
Deferred tax
assets
|
4,891
|
|
4,449
|
Other assets
|
5,912
|
|
5,957
|
TOTAL ASSETS
|
$
93,054
|
|
$
94,002
|
LIABILITIES AND EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Short-term
debt
|
$
1,249
|
|
$
1,099
|
Accounts
payable
|
2,316
|
|
2,281
|
Income taxes
payable
|
890
|
|
961
|
Accrued
compensation
|
2,907
|
|
3,316
|
Deferred
revenue
|
12,578
|
|
12,784
|
Other current
liabilities
|
4,956
|
|
5,199
|
Total current
liabilities
|
24,896
|
|
25,640
|
Long-term
debt
|
7,629
|
|
8,416
|
Income taxes
payable
|
7,835
|
|
7,725
|
Deferred
revenue
|
10,441
|
|
10,480
|
Other long-term
liabilities
|
1,981
|
|
1,968
|
Total
liabilities
|
52,782
|
|
54,229
|
Total equity
|
40,272
|
|
39,773
|
TOTAL LIABILITIES AND EQUITY
|
$
93,054
|
|
$
94,002
|
CISCO SYSTEMS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
Three Months
Ended
|
|
October
29,
2022
|
|
October
30,
2021
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
2,670
|
|
$
2,980
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation,
amortization, and other
|
415
|
|
533
|
Share-based
compensation expense
|
496
|
|
453
|
Provision (benefit)
for receivables
|
7
|
|
1
|
Deferred income
taxes
|
(366)
|
|
(98)
|
(Gains) losses on
divestitures, investments and other, net
|
131
|
|
(211)
|
Change in operating
assets and liabilities, net of effects of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
1,119
|
|
427
|
Inventories
|
(108)
|
|
(275)
|
Financing
receivables
|
556
|
|
672
|
Other
assets
|
(316)
|
|
(170)
|
Accounts
payable
|
42
|
|
(93)
|
Income taxes,
net
|
20
|
|
17
|
Accrued
compensation
|
(384)
|
|
(585)
|
Deferred
revenue
|
(78)
|
|
(95)
|
Other
liabilities
|
(242)
|
|
(129)
|
Net cash provided by
operating activities
|
3,962
|
|
3,427
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(1,943)
|
|
(2,951)
|
Proceeds from sales of
investments
|
407
|
|
580
|
Proceeds from
maturities of investments
|
971
|
|
1,856
|
Acquisitions, net of
cash and cash equivalents acquired and divestitures
|
—
|
|
(336)
|
Purchases of
investments in privately held companies
|
(48)
|
|
(101)
|
Return of investments
in privately held companies
|
10
|
|
53
|
Acquisition of
property and equipment
|
(176)
|
|
(122)
|
Proceeds from sales of
property and equipment
|
—
|
|
1
|
Other
|
(20)
|
|
—
|
Net cash used in
investing activities
|
(799)
|
|
(1,020)
|
Cash flows from
financing activities:
|
|
|
|
Repurchases of common
stock - repurchase program
|
(556)
|
|
(273)
|
Shares repurchased for
tax withholdings on vesting of restricted stock units
|
(108)
|
|
(133)
|
Short-term borrowings,
original maturities of 90 days or less, net
|
(602)
|
|
—
|
Repayments of
debt
|
—
|
|
(2,000)
|
Dividends
paid
|
(1,560)
|
|
(1,561)
|
Other
|
(29)
|
|
(3)
|
Net cash used in
financing activities
|
(2,855)
|
|
(3,970)
|
Effect of foreign
currency exchange rate changes on cash, cash equivalents,
restricted cash and restricted cash equivalents
|
(95)
|
|
—
|
Net increase (decrease)
in cash, cash equivalents, restricted cash and restricted cash
equivalents
|
213
|
|
(1,563)
|
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
|
$
8,792
|
|
$
8,379
|
Supplemental cash flow
information:
|
|
|
|
Cash paid for
interest
|
$
114
|
|
$
124
|
Cash paid for income
taxes, net
|
$
1,150
|
|
$
758
|
CISCO SYSTEMS,
INC.
REMAINING
PERFORMANCE OBLIGATIONS
(In millions, except
percentages)
|
|
|
October 29,
2022
|
|
July 30,
2022
|
|
October 30,
2021
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
Product
|
$
14,013
|
|
5 %
|
|
$
14,090
|
|
6 %
|
|
$
13,384
|
|
18 %
|
Service
|
16,897
|
|
1 %
|
|
17,449
|
|
(1) %
|
|
16,751
|
|
4 %
|
Total
|
$
30,910
|
|
3 %
|
|
$
31,539
|
|
2 %
|
|
$
30,135
|
|
10 %
|
|
We expect 53% of total
RPO at October 29, 2022 will be recognized as revenue over the
next 12 months.
|
CISCO SYSTEMS,
INC.
DEFERRED
REVENUE
(In
millions)
|
|
|
October 29,
2022
|
|
July 30,
2022
|
|
October 30,
2021
|
Deferred
revenue:
|
|
|
|
|
|
Product
|
$
10,404
|
|
$
10,427
|
|
$
9,681
|
Service
|
12,615
|
|
12,837
|
|
12,391
|
Total
|
$
23,019
|
|
$
23,264
|
|
$
22,072
|
Reported as:
|
|
|
|
|
|
Current
|
$
12,578
|
|
$
12,784
|
|
$
12,017
|
Noncurrent
|
10,441
|
|
10,480
|
|
10,055
|
Total
|
$
23,019
|
|
$
23,264
|
|
$
22,072
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
October
29,
2022
|
|
October
30,
2021
|
GAAP net
income
|
$
2,670
|
|
$
2,980
|
Adjustments to cost of
sales:
|
|
|
|
Share-based
compensation expense
|
81
|
|
69
|
Amortization of
acquisition-related intangible assets
|
153
|
|
198
|
Acquisition-related/divestiture costs
|
2
|
|
1
|
Total adjustments to
GAAP cost of sales
|
236
|
|
268
|
Adjustments to
operating expenses:
|
|
|
|
Share-based
compensation expense
|
415
|
|
383
|
Amortization of
acquisition-related intangible assets
|
71
|
|
84
|
Acquisition-related/divestiture costs
|
75
|
|
112
|
Russia-Ukraine war
costs
|
3
|
|
—
|
Significant asset
impairments and restructurings
|
(2)
|
|
5
|
Total adjustments to
GAAP operating expenses
|
562
|
|
584
|
Adjustments to
interest and other income (loss), net:
|
|
|
|
(Gains) and losses on
equity investments
|
109
|
|
(219)
|
Total adjustments to
GAAP interest and other income (loss), net
|
109
|
|
(219)
|
Total adjustments to
GAAP income before provision for income taxes
|
907
|
|
633
|
Income tax effect of
non-GAAP adjustments
|
(192)
|
|
(138)
|
Significant tax
matters
|
164
|
|
—
|
Total adjustments to
GAAP provision for income taxes
|
(28)
|
|
(138)
|
Non-GAAP net
income
|
$
3,549
|
|
$
3,475
|
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
GAAP TO NON-GAAP
EPS
|
|
|
Three Months
Ended
|
|
October
29,
2022
|
|
October
30,
2021
|
GAAP EPS
|
$
0.65
|
|
$
0.70
|
Adjustments to
GAAP:
|
|
|
|
Share-based
compensation expense
|
0.12
|
|
0.11
|
Amortization of
acquisition-related intangible assets
|
0.05
|
|
0.07
|
Acquisition-related/divestiture costs
|
0.02
|
|
0.03
|
(Gains) and losses on
equity investments
|
0.03
|
|
(0.05)
|
Income tax effect of
non-GAAP adjustments
|
(0.05)
|
|
(0.03)
|
Significant tax
matters
|
0.04
|
|
—
|
Non-GAAP EPS
|
$
0.86
|
|
$
0.82
|
|
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
|
|
October 29,
2022
|
|
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
|
$ 6,066
|
|
$ 2,280
|
|
$ 8,346
|
|
$ 4,806
|
|
4 %
|
|
$ 3,540
|
|
3 %
|
|
$
(65)
|
|
$ 2,670
|
|
(10) %
|
% of revenue
|
59.2 %
|
|
67.3 %
|
|
61.2 %
|
|
35.3 %
|
|
|
|
26.0 %
|
|
|
|
(0.5) %
|
|
19.6 %
|
|
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
31
|
|
50
|
|
81
|
|
415
|
|
|
|
496
|
|
|
|
—
|
|
496
|
|
|
Amortization of
acquisition-related intangible assets
|
153
|
|
—
|
|
153
|
|
71
|
|
|
|
224
|
|
|
|
—
|
|
224
|
|
|
Acquisition/divestiture-related costs
|
2
|
|
—
|
|
2
|
|
75
|
|
|
|
77
|
|
|
|
—
|
|
77
|
|
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
(2)
|
|
|
|
(2)
|
|
|
|
—
|
|
(2)
|
|
|
Russia-Ukraine war
costs
|
—
|
|
—
|
|
—
|
|
3
|
|
|
|
3
|
|
|
|
—
|
|
3
|
|
|
(Gains) and losses on
equity investments
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
109
|
|
109
|
|
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(28)
|
|
|
Non-GAAP
amount
|
$ 6,252
|
|
$ 2,330
|
|
$ 8,582
|
|
$ 4,244
|
|
5 %
|
|
$ 4,338
|
|
1 %
|
|
$
44
|
|
$ 3,549
|
|
2 %
|
% of revenue
|
61.0 %
|
|
68.8 %
|
|
63.0 %
|
|
31.1 %
|
|
|
|
31.8 %
|
|
|
|
0.3 %
|
|
26.0 %
|
|
|
|
Three Months
Ended
|
|
October 30,
2021
|
|
Product Gross
Margin
|
|
Service Gross
Margin
|
|
Total Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Interest and other
income (loss), net
|
|
Net
Income
|
GAAP amount
|
$
5,856
|
|
$
2,197
|
|
$
8,053
|
|
$
4,615
|
|
$
3,438
|
|
$ 219
|
|
$
2,980
|
% of revenue
|
61.5 %
|
|
65.2 %
|
|
62.4 %
|
|
35.8 %
|
|
26.7 %
|
|
1.7 %
|
|
23.1 %
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
25
|
|
44
|
|
69
|
|
383
|
|
452
|
|
—
|
|
452
|
Amortization of
acquisition-related intangible assets
|
198
|
|
—
|
|
198
|
|
84
|
|
282
|
|
—
|
|
282
|
Acquisition/divestiture-related costs
|
1
|
|
—
|
|
1
|
|
112
|
|
113
|
|
—
|
|
113
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
5
|
|
5
|
|
—
|
|
5
|
(Gains) and losses on
equity investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(219)
|
|
(219)
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(138)
|
Non-GAAP
amount
|
$
6,080
|
|
$
2,241
|
|
$
8,321
|
|
$
4,031
|
|
$
4,290
|
|
$
—
|
|
$
3,475
|
% of revenue
|
63.8 %
|
|
66.5 %
|
|
64.5 %
|
|
31.2 %
|
|
33.3 %
|
|
— %
|
|
26.9 %
|
|
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
|
|
October 29,
2022
|
|
October 30,
2021
|
GAAP effective tax
rate
|
23.2 %
|
|
18.5 %
|
Total adjustments to
GAAP provision for income taxes
|
(4.2) %
|
|
0.5 %
|
Non-GAAP effective tax
rate
|
19.0 %
|
|
19.0 %
|
GAAP TO NON-GAAP
GUIDANCE
|
|
Q2 FY 2023
|
|
Gross Margin
Rate
|
|
Operating Margin
Rate
|
|
Earnings per Share
(2)
|
GAAP
|
|
61% – 62%
|
|
22.5% –
23.5%
|
|
$0.59 –
$0.64
|
Estimated adjustments
for:
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
1.0 %
|
|
4.5 %
|
|
$0.12 –
$0.13
|
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)
|
|
—
|
|
2.5 %
|
|
$0.05 –
$0.06
|
Non-GAAP
|
|
63% – 64%
|
|
31.5% –
32.5%
|
|
$0.84 –
$0.86
|
FY 2023
|
|
Earnings per Share
(2)
|
GAAP
|
|
$2.63 –
$2.76
|
Estimated adjustments
for:
|
|
|
Share-based
compensation expense
|
|
$0.46 –
$0.48
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
$0.21 –
$0.23
|
Significant asset
impairments and restructurings (1)
|
|
$0.09 –
$0.11
|
(Gains) and losses on
equity investments
|
|
$0.02
|
Significant tax
matters
|
|
$0.04
|
Non-GAAP
|
|
$3.51 –
$3.58
|
(1) On November 16,
2022, Cisco announced a restructuring plan in order to
rebalance the organization and enable further investment in key
priority areas. This rebalancing will include talent movement
options and restructuring. Additionally, Cisco will optimize its
real estate portfolio, aligned to the broader hybrid work strategy.
Cisco will take action under this plan beginning in the second
quarter of fiscal 2023. Cisco currently estimates that it will
recognize pre-tax charges to its GAAP financial results of
approximately $600 million consisting
of severance and other one-time termination benefits, real
estate-related charges, and other costs. These charges are
primarily cash-based. Cisco expects to recognize approximately
$300 million of these charges in the
second quarter of fiscal 2023, approximately $200 million of these charges during the second
half of fiscal 2023, and the remaining amount of these charges
primarily through the first quarter of fiscal 2024.
(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 equity 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 the relevance of our
strategy, our differentiated innovation, our ability to help our
customers become more resilient, our continued progress on our
business model transformation, and the visibility and
predictability provided by backlog, RPO, easing of the supply
situation and the growth of annualized recurring revenue) and the
future financial performance of Cisco (including the guidance for
Q2 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 report on Form 10-K filed on September 8, 2022. 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 report on Form 10-K as it may be amended from
time to time. Cisco's results of operations for the three months
ended October 29, 2022 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 equity
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, 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.
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