SAN JOSE, Calif., May 18, 2022 /PRNewswire/ --

Cisco Logo (PRNewsfoto/Cisco)

News Summary:

  • $12.8 billion in revenue, flat year over year; GAAP EPS $0.73, up 7% year over year, and Non-GAAP EPS $0.87, up 5% year over year
  • Solid demand with product order growth up 8% year over year
  • Progress on business model transformation with total Annualized Recurring Revenue (ARR) at $22.4 billion in the third quarter of fiscal 2022, up 11% year over year

  • Q3 Results:
    • Revenue: $12.8 billion
      • Flat year over year
    • Earnings per Share: GAAP: $0.73; Non-GAAP: $0.87
      • GAAP EPS increased 7% year over year
      • Non-GAAP EPS increased 5% year over year
  • Q4 Guidance:  
    • Revenue: (1)% to (5.5)% decline year over year
    • Earnings per Share: GAAP: $0.60 to $0.70; Non-GAAP: $0.76 to $0.84
  • FY 2022 Guidance:
    • Revenue: 2% to 3% growth year over year
    • Earnings per Share: GAAP: $2.75 to $2.85; Non-GAAP: $3.29 to $3.37

Cisco today reported third quarter results for the period ended April 30, 2022. Cisco reported third quarter revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.73 per share, and non-GAAP net income of $3.6 billion or $0.87 per share.

"We continued to see solid demand for our technologies and our business transformation is progressing well," said Chuck Robbins, chair and CEO of Cisco. "While Covid lockdowns in China and the war in Ukraine impacted our revenue in the quarter, the fundamental drivers across our business are strong and we remain confident in the long term."

"We delivered healthy earnings despite unanticipated disruptions through strong pricing and disciplined spend management," said Scott Herren, CFO of Cisco. "Our product backlog is well over $15 billion and product ARR and RPO again grew double digits. The continued progress in our business model transformation reflects the success of our strategy and underpins our long-term confidence."

 GAAP Results




Q3 FY 2022


Q3 FY 2021


Vs. Q3 FY 2021

Revenue


$       12.8 billion


$       12.8 billion


—%

Net Income


$        3.0  billion


$        2.9  billion


6%

Diluted Earnings per Share (EPS)


$              0.73


$              0.68


7%

 

Non-GAAP Results




Q3 FY 2022


Q3 FY 2021


Vs. Q3 FY 2021

Net Income


$      3.6   billion


$      3.5   billion


3%

EPS


$             0.87


$             0.83


5%

The third quarter of fiscal 2022 had 13 weeks compared with 14 weeks in the third quarter of fiscal 2021.

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.

Q3 FY 2022 Highlights

Revenue -- Total revenue was flat at $12.8 billion, with product revenue up 3% and service revenue down 8%. Revenue by geographic segment was: Americas up 5%, EMEA down 6%, and APJC down 6%. Product revenue performance was led by growth in Secure, Agile Networks up 4%, Internet for the Future up 6%, End-to-End Security up 7%, and Optimized Application Experiences up 8%. Collaboration was down 7%.

The third quarter of fiscal 2022 had 13 weeks compared with 14 weeks in the third quarter of fiscal 2021. The total additional  revenue associated with the extra week in the third quarter of fiscal 2021 was approximately 3% of revenue growth.

In March 2022, in connection with the Russian invasion of Ukraine, Cisco announced its intention to stop business operations in Russia and Belarus for the foreseeable future. The total negative impact to revenue was approximately $200 million in the third quarter of fiscal 2022. Historically, Russia, Belarus and Ukraine collectively, represented approximately 1% of our total revenue.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.3%, 61.8%, and 67.3%, respectively, as compared with 63.9%, 62.6%, and 67.4%, respectively, in the third quarter of fiscal 2021.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.3%, 64.1%, and 68.9%, respectively, as compared with 66.0%, 64.9%, and 68.7%, respectively, in the third quarter of fiscal 2021.

Total gross margins by geographic segment were: 64.8% for the Americas, 65.9% for EMEA and 66.4% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.5 billion, down 4%, and were 35.1% of revenue. Non-GAAP operating expenses were $3.9 billion, down 5%, and were 30.7% of revenue.

Operating Income -- GAAP operating income was $3.6 billion, up 4%, with GAAP operating margin of 28.1%. Non-GAAP operating income was $4.5 billion, up 4%, with non-GAAP operating margin at 34.7%.

Provision for Income Taxes -- The GAAP tax provision rate was 19.9%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $3.0 billion, an increase of 6%, and EPS was $0.73, an increase of 7%. On a non-GAAP basis, net income was $3.6 billion, an increase of 3%, and EPS was $0.87, an increase of 5%.

Cash Flow from Operating Activities -- $3.7 billion for the third quarter of fiscal 2022, a decrease of 6% compared with $3.9 billion for the third quarter of fiscal 2021.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $20.1 billion at the end of the third quarter of fiscal 2022, compared with $24.5 billion at the end of fiscal 2021.

Remaining Performance Obligations (RPO) -- $30.2 billion, up 7% in total, with 54% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 13% and service RPO were up 3%.

Deferred Revenue -- $22.3 billion, up 7% in total, with deferred product revenue up 13%. Deferred service revenue was up 2%.

Capital Allocation -- In the third quarter of fiscal 2022, we returned $1.8 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 5 million shares of common stock under our stock repurchase program at an average price of $54.20 per share for an aggregate purchase price of $252 million. The remaining authorized amount for stock repurchases under the program is $17.6 billion with no termination date.

Acquisitions

In the third quarter of fiscal 2022, we closed the acquisition of Opsani, a privately held enterprise software company.

Guidance

Cisco expects to achieve the following results for the fourth quarter of fiscal 2022:

Q4 FY 2022



Revenue


(1)% - (5.5)% decline Y/Y

Non-GAAP gross margin rate


64% - 65%

Non-GAAP operating margin rate


31.5% - 33.5%

Non-GAAP EPS


$0.76 - $0.84

Cisco estimates that GAAP EPS will be $0.60 to $0.70 for the fourth quarter of fiscal 2022.

Cisco expects to achieve the following results for fiscal 2022:

FY 2022



Revenue


2% - 3% growth Y/Y

Non-GAAP EPS


$3.29 - $3.37

Cisco estimates that GAAP EPS will be $2.75 to $2.85 for fiscal 2022.

Our fiscal 2022 has 52 weeks compared with 53 weeks in fiscal 2021 which is reflected in the guidance.

Our Q4 FY 2022 and FY 2022 guidance assumes an effective tax provision rate of 19% for GAAP and 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 2022 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, May 18, 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, May 18, 2022 to 4:00 p.m. Pacific Time, May 25, 2022 at 1-800-388-4923 (United States) or 1-203-369-3800 (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 18, 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


Nine Months Ended


April 30, 2022


May 1, 2021


April 30, 2022


May 1, 2021

REVENUE:








     Product

$         9,448


$         9,139


$       28,330


$       26,298

     Service

3,387


3,664


10,125


10,394

          Total revenue

12,835


12,803


38,455


36,692

COST OF SALES:








     Product

3,606


3,422


10,848


9,672

     Service

1,108


1,196


3,384


3,470

          Total cost of sales

4,714


4,618


14,232


13,142

GROSS MARGIN

8,121


8,185


24,223


23,550

OPERATING EXPENSES:








     Research and development

1,708


1,697


5,092


4,836

     Sales and marketing

2,209


2,317


6,736


6,811

     General and administrative

517


603


1,612


1,631

     Amortization of purchased intangible assets

77


61


240


136

     Restructuring and other charges


42


8


878

          Total operating expenses

4,511


4,720


13,688


14,292

OPERATING INCOME

3,610


3,465


10,535


9,258

     Interest income

115


153


347


488

     Interest expense

(90)


(111)


(267)


(336)

     Other income (loss), net

166


84


446


117

          Interest and other income (loss), net

191


126


526


269

INCOME BEFORE PROVISION FOR INCOME TAXES

3,801


3,591


11,061


9,527

Provision for income taxes

757


728


2,064


1,945

     NET INCOME

$         3,044


$         2,863


$         8,997


$         7,582









Net income per share:








     Basic

$           0.73


$           0.68


$           2.15


$           1.79

     Diluted

$           0.73


$           0.68


$           2.14


$           1.79

Shares used in per-share calculation:








     Basic

4,152


4,219


4,184


4,224

     Diluted

4,170


4,238


4,204


4,237

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)




April 30, 2022



Three Months Ended


Nine Months Ended



Amount


Y/Y %


Amount


Y/Y%

Revenue:









     Americas


$         7,638


5%


$       22,344


4%

     EMEA


3,271


(6)%


10,138


5%

     APJC


1,926


(6)%


5,972


6%

          Total


$       12,835


—%


$       38,455


5%


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

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)




April 30, 2022



Three Months Ended


Nine Months Ended

Gross Margin Percentage:





     Americas


64.8%


64.6%

     EMEA


65.9%


65.7%

     APJC


66.4%


65.9%

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)




April 30, 2022



Three Months Ended


Nine Months Ended



Amount


Y/Y %


Amount


Y/Y%

Revenue:









     Secure, Agile Networks


$         5,869


4%


$       17,735


7%

     Internet for the Future


1,324


6%


4,021


29%

     Collaboration


1,132


(7)%


3,308


(8)%

     End-to-End Security


938


7%


2,716


6%

     Optimized Application Experiences


183


8%


544


13%

     Other Products


2


(58)%


7


(32)%

          Total Product


9,448


3%


28,330


8%

     Services


3,387


(8)%


10,125


(3)%

               Total


$       12,835


—%


$       38,455


5%


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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)



April 30, 2022


July 31, 2021

ASSETS




Current assets:




     Cash and cash equivalents

$                6,952


$                9,175

     Investments

13,156


15,343

     Accounts receivable, net of allowance of $78 at April 30, 2022 and $109 at July 31, 2021

5,783


5,766

     Inventories

2,231


1,559

     Financing receivables, net

3,804


4,380

     Other current assets

4,055


2,889

          Total current assets

35,981


39,112

Property and equipment, net

2,046


2,338

Financing receivables, net

3,959


4,884

Goodwill

38,452


38,168

Purchased intangible assets, net

2,811


3,619

Deferred tax assets

4,276


4,360

Other assets

5,272


5,016

          TOTAL ASSETS

$              92,797


$              97,497

LIABILITIES AND EQUITY




Current liabilities:




     Short-term debt

$                1,000


$                2,508

     Accounts payable

2,289


2,362

     Income taxes payable

852


801

     Accrued compensation

3,032


3,818

     Deferred revenue

12,249


12,148

     Other current liabilities

4,728


4,620

          Total current liabilities

24,150


26,257

Long-term debt

8,418


9,018

Income taxes payable

7,689


8,538

Deferred revenue

10,044


10,016

Other long-term liabilities

2,096


2,393

          Total liabilities

52,397


56,222

Total equity

40,400


41,275

          TOTAL LIABILITIES AND EQUITY

$              92,797


$              97,497

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



Nine Months Ended


April 30,
2022


May 1,
2021

Cash flows from operating activities:




     Net income

$              8,997


$              7,582

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




          Depreciation, amortization, and other

1,527


1,373

          Share-based compensation expense

1,407


1,337

          Provision (benefit) for receivables

49


(4)

          Deferred income taxes

(167)


(89)

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

(470)


(201)

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




               Accounts receivable

(134)


1,250

               Inventories

(683)


(260)

               Financing receivables

1,431


1,160

               Other assets

(1,295)


(233)

               Accounts payable

(54)


24

               Income taxes, net

(730)


(828)

               Accrued compensation

(730)


145

               Deferred revenue

292


263

               Other liabilities

109


(569)

                    Net cash provided by operating activities

9,549


10,950

Cash flows from investing activities:




     Purchases of investments

(5,383)


(7,855)

     Proceeds from sales of investments

2,488


2,724

     Proceeds from maturities of investments

4,308


6,445

     Acquisitions, net of cash and cash equivalents acquired and divestitures

(373)


(6,333)

     Purchases of investments in privately held companies

(158)


(138)

     Return of investments in privately held companies

149


96

     Acquisition of property and equipment

(338)


(530)

     Proceeds from sales of property and equipment

6


14

     Other

(15)


(56)

                    Net cash provided by (used in) investing activities

684


(5,633)

Cash flows from financing activities:




     Issuances of common stock

306


307

     Repurchases of common stock - repurchase program

(5,347)


(2,096)

     Shares repurchased for tax withholdings on vesting of restricted stock units

(546)


(419)

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

9


     Issuances of debt

1,049


     Repayments of debt

(3,050)


(3,000)

     Dividends paid

(4,657)


(4,601)

     Other

(230)


39

                    Net cash used in financing activities

(12,466)


(9,770)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents

(2,233)


(4,453)

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

9,942


11,812

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

$              7,709


$              7,359

Supplemental cash flow information:




Cash paid for interest

$                 292


$                 377

Cash paid for income taxes, net

$              2,960


$              2,862

 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)



April 30, 2022


January 29, 2022


May 1, 2021


Amount


Y/Y%


Amount


Y/Y%


Amount


Y/Y%

Product          

$    13,416


13 %


$    13,532


16 %


$    11,903


15 %

Service

16,789


3 %


16,986


3 %


16,235


7 %

     Total

$    30,205


7 %


$    30,518


8 %


$    28,138


10 %


We expect 54% of total RPO at April 30, 2022 will be recognized as revenue over the next 12 months.

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)



April 30, 2022


January 29, 2022


May 1, 2021

Deferred revenue:






     Product

$         9,835


$         9,767


$         8,698

     Service

12,458


12,546


12,191

          Total

$       22,293


$       22,313


$       20,889

Reported as:






     Current

$       12,249


$       12,268


$       11,492

     Noncurrent

10,044


10,045


9,397

          Total

$       22,293


$       22,313


$       20,889

 

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 2022













     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

Fiscal 2021













     July 31, 2021


$             0.37


$          1,562


15


$          53.30


$              791


$          2,353

     May 1, 2021


$             0.37


$          1,560


10


$          48.71


$              510


$          2,070

     January 23, 2021


$             0.36


$          1,521


19


$          42.82


$              801


$          2,322

     October 24, 2020


$             0.36


$          1,520


20


$          40.44


$              800


$          2,320

 

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 30,
2022


May 1,
2021


April 30,
2022


May 1,
2021

GAAP net income

$         3,044


$         2,863


$         8,997


$         7,582

     Adjustments to cost of sales:








          Share-based compensation expense

83


75


233


208

          Amortization of acquisition-related intangible assets

176


184


571


499

          Acquisition-related/divestiture costs

1


1


3


3

          Russia-Ukraine war costs

5



5


          Legal and indemnification settlements/charges




43

     Total adjustments to GAAP cost of sales

265


260


812


753

     Adjustments to operating expenses:








          Share-based compensation expense

394


383


1,173


1,103

          Amortization of acquisition-related intangible assets

92


61


255


136

          Acquisition-related/divestiture costs

29


86


261


179

          Russia-Ukraine war costs

62



62


          Significant asset impairments and restructurings


42


8


878

     Total adjustments to GAAP operating expenses

577


572


1,759


2,296

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








          Acquisition-related/divestiture costs


6



4

          (Gains) and losses on equity investments

(159)


(96)


(478)


(131)

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

(159)


(90)


(478)


(127)

     Total adjustments to GAAP income before provision for income taxes

683


742


2,093


2,922

          Income tax effect of non-GAAP adjustments

(95)


(95)


(435)


(503)

          Significant tax matters




83

     Total adjustments to GAAP provision for income taxes

(95)


(95)


(435)


(420)

Non-GAAP net income

$         3,632


$         3,510


$       10,655


$       10,084

  

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES


GAAP TO NON-GAAP EPS



Three Months Ended


Nine Months Ended


April 30,
2022


May 1,
2021


April 30,
2022


May 1,
2021

GAAP EPS

$           0.73


$           0.68


$           2.14


$           1.79

     Adjustments to GAAP:








          Share-based compensation expense

0.11


0.11


0.33


0.31

          Amortization of acquisition-related intangible assets

0.06


0.06


0.20


0.15

          Acquisition-related/divestiture costs

0.01


0.02


0.06


0.04

          Russia-Ukraine war costs

0.02



0.02


          Legal and indemnification settlements/charges




0.01

          Significant asset impairments and restructurings


0.01



0.21

          (Gains) and losses on equity investments

(0.04)


(0.02)


(0.11)


(0.03)

          Income tax effect of non-GAAP adjustments

(0.02)


(0.02)


(0.10)


(0.12)

          Significant tax matters




0.02

Non-GAAP EPS

$           0.87


$           0.83


$           2.53


$           2.38


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 30, 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

$ 5,842


$ 2,279


$ 8,121


$ 4,511


(4)%


$ 3,610


4%


$  191


$ 3,044


6%

% 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 equity investments










(159)


(159)



     Income tax effect/significant tax matters











(95)



Non-GAAP amount

$ 6,053


$ 2,333


$ 8,386


$ 3,934


(5)%


$ 4,452


4%


$    32


$ 3,632


3%

% of revenue

64.1 %


68.9 %


65.3 %


30.7 %




34.7 %




0.2 %


28.3 %



 


Three Months Ended


May 1, 2021


Product
Gross
Margin


Service
Gross
Margin


Total
Gross
Margin


Operating
Expenses


Operating

Income


Interest
and
other
income
(loss),
net


Net

Income

GAAP amount

$   5,717


$   2,468


$   8,185


$   4,720


$   3,465


$      126


$   2,863

% of revenue

62.6 %


67.4 %


63.9 %


36.9 %


27.1 %


1.0 %


22.4 %

Adjustments to GAAP amounts:














     Share-based compensation expense

26


49


75


383


458



458

     Amortization of acquisition-related intangible assets

184



184


61


245



245

     Acquisition/divestiture-related costs

1



1


86


87


6


93

     Significant asset impairments and restructurings




42


42



42

     (Gains) and losses on equity investments






(96)


(96)

     Income tax effect/significant tax matters







(95)

Non-GAAP amount

$   5,928


$   2,517


$   8,445


$   4,148


$   4,297


$        36


$   3,510

% of revenue

64.9 %


68.7 %


66.0 %


32.4 %


33.6 %


0.3 %


27.4 %


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 30, 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

$ 17,482


$ 6,741


$ 24,223


$ 13,688


(4)%


$ 10,535


14%


$  526


$ 8,997


19%

% 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 equity investments










(478)


(478)



     Income tax effect/significant tax matters











(435)



Non-GAAP amount

$ 18,144


$ 6,891


$ 25,035


$ 11,929


(1)%


$ 13,106


6%


$    48


$ 10,655


6%

% of revenue

64.0 %


68.1 %


65.1 %


31.0 %




34.1 %




0.1 %


27.7 %



 


Nine Months Ended


May 1, 2021


Product
Gross
Margin


Service
Gross
Margin


Total
Gross
Margin


Operating
Expenses


Operating

Income


Interest
and
other
income
(loss),
net


Net

Income

GAAP amount

$ 16,626


$   6,924


$ 23,550


$ 14,292


$   9,258


$      269


$   7,582

% of revenue

63.2 %


66.6 %


64.2 %


39.0 %


25.2 %


0.7 %


20.7 %

Adjustments to GAAP amounts:














     Share-based compensation expense

75


133


208


1,103


1,311



1,311

     Amortization of acquisition-related intangible assets

499



499


136


635



635

     Acquisition/divestiture-related costs

2


1


3


179


182


4


186

     Legal and indemnification settlements/charges

43



43



43



43

     Significant asset impairments and restructurings




878


878



878

     (Gains) and losses on equity investments






(131)


(131)

     Income tax effect/significant tax matters







(420)

Non-GAAP amount

$ 17,245


$   7,058


$ 24,303


$ 11,996


$ 12,307


$      142


$ 10,084

% of revenue

65.6 %


67.9 %


66.2 %


32.7 %


33.5 %


0.4 %


27.5 %


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 30, 2022


May 1, 2021


April 30, 2022


May 1, 2021

GAAP effective tax rate

19.9 %


20.3 %


18.7 %


20.4 %

     Total adjustments to GAAP provision for income taxes

(0.9) %


(1.3) %


0.3 %


(1.4) %

Non-GAAP effective tax rate

19.0 %


19.0 %


19.0 %


19.0 %

 

 

GAAP TO NON-GAAP GUIDANCE






Q4 FY 2022


Gross Margin Rate


Operating Margin Rate


Earnings per Share (1)

GAAP


62% - 63%


25% - 27%


$0.60 - $0.70

Estimated adjustments for:







     Share-based compensation expense


0.5%


4.0%


$0.08 - $0.09

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


1.5%


2.5%


$0.06 - $0.07

Non-GAAP


64% - 65%


31.5% - 33.5%


$0.76 - $0.84







FY 2022




Earnings per
Share (1)

GAAP




$2.75 - $2.85

Estimated adjustments for:





     Share-based compensation expense




$0.33 - $0.34

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




$0.27 - $0.28

     Russia-Ukraine war costs




$0.01

     (Gains) and losses on equity investments




($0.09)

Non-GAAP




 $3.29 - $3.37



(1)

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

Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, asset impairments, Russia-Ukraine war costs, restructurings, (gains) and losses on 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 our ability to manage through ongoing supply constraints, the success of our strategy and confidence in our long-term growth, the fundamental drivers across our business being strong, the strong demand resulting in record backlogs, our business transformation shifting to more software and subscriptions, and our strategic investments in innovation to capitalize on significant growth opportunities and expanding addressable markets) and the future financial performance of Cisco (including the guidance for Q4 FY 2022 and full year FY 2022) 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 22, 2022 and September 9, 2021, 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 30, 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.

About Cisco

Cisco (Nasdaq: CSCO) is the worldwide leader in 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 newsroom.cisco.com and follow us on Twitter at @Cisco.

Copyright © 2022 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.

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Press Contact:


Investor Relations Contact:

Robyn Blum


Marilyn Mora

Cisco


Cisco

1 (408) 930-8548


1 (408) 527-7452

rojenkin@cisco.com


marilmor@cisco.com

 

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