EX-99.1 2 d198426dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

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

CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2021 EARNINGS

News Summary:

 

  •  

Cisco ended fiscal 2021 strong with Q4 performance of $13.1 billion in revenue (up 8% year over year) and fiscal year revenue of $49.8 billion

 

  •  

Double digit order growth across all customer markets and geographies, including product order growth of 31% - strongest year-over-year growth in over a decade

 

  •  

Continued momentum in transforming our business delivering more software and subscriptions - achieved $4 billion in software revenue in Q4 (an increase of 6% with subscription revenue up 9% year over year) and $15 billion for the year (an increase of 7% with subscription revenue up 15% year over year)

 

  •  

Q4 Results:

 

  •  

Revenue: $13.1 billion

 

  •  

Increase of 8% year over year

 

  •  

Earnings per Share: GAAP: $0.71; Non-GAAP: $0.84

 

  •  

GAAP EPS increased 15% year over year

 

  •  

Non-GAAP EPS increased 5% year over year

 

  •  

FY 2021 Results:

 

  •  

Revenue: $49.8 billion

 

  •  

Increase of 1% year over year

 

  •  

Earnings per Share: GAAP: $2.50; Non-GAAP: $3.22

 

  •  

GAAP EPS decreased 5% year over year

 

  •  

Non-GAAP EPS was flat year over year

 

  •  

Q1 Guidance:

 

  •  

Revenue: 7.5% to 9.5% growth year over year

 

  •  

Earnings per Share: GAAP: $0.61 to $0.66; Non-GAAP: $0.79 to $0.81

 

  •  

FY 2022 Guidance:

 

  •  

Revenue: 5% to 7% growth year over year

 

  •  

Earnings per Share: GAAP: $2.72 to $2.84; Non-GAAP: $3.38 to $3.45

SAN JOSE, Calif. — August 18, 2021 — Cisco today reported fourth quarter and fiscal year results for the period ended July 31, 2021. Cisco reported fourth quarter revenue of $13.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.71 per share, and non-GAAP net income of $3.6 billion or $0.84 per share.

“We continue to see great momentum in our business as customers are looking to modernize their organizations for agility and resiliency,” said Chuck Robbins, Chair and CEO of Cisco. “The demand for Cisco technology is strong with our Q4 performance marking the highest product order growth in over a decade. With the power of our portfolio, we are well positioned to help our customers accelerate their digital transformation and thrive in a hybrid world.”

“We executed exceptionally well delivering strong results across revenue, non-GAAP net income, non-GAAP EPS and record operating cash flow,” said Scott Herren, CFO of Cisco. “Our performance reflects the impact of our investments in high growth opportunities resulting in our strong product order growth. As we continue to drive our business model transformation to more recurring revenue, we now have built up over $30 billion in remaining performance obligations.”

 

1

Q4 GAAP Results

 

     Q4 FY 2021      Q4 FY 2020      Vs. Q4 FY 2020  

Revenue

    $ 13.1 billion      $ 12.2 billion        8 % 

Net Income

    $ 3.0 billion      $ 2.6 billion        14 % 

Diluted Earnings per Share (EPS)

    $ 0.71      $ 0.62        15 % 

Q4 Non-GAAP Results

 

     Q4 FY 2021      Q4 FY 2020      Vs. Q4 FY 2020  

Net Income

    $   3.6 billion      $   3.4 billion        5 % 

EPS

    $ 0.84      $ 0.80        5 % 

Fiscal Year GAAP Results

 

     FY 2021      FY 2020      Vs. FY 2020  

Revenue

    $ 49.8 billion      $ 49.3 billion        1 % 

Net Income

    $ 10.6 billion      $ 11.2 billion        (6 )% 

EPS

    $ 2.50      $ 2.64        (5 )% 

Fiscal Year Non-GAAP Results

 

     FY 2021      FY 2020      Vs. FY 2020  

Net Income

    $ 13.6 billion      $ 13.7 billion        —   % 

EPS

    $ 3.22      $ 3.21        —   % 

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.”

 

2

Financial Summary

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

Q4 FY 2021 Highlights

Revenue — Total revenue was $13.1 billion, up 8%, with product revenue up 10% and service revenue up 3%. Revenue by geographic segment was: Americas up 8%, EMEA up 6%, and APJC up 13%. Product revenue was led by growth in Infrastructure Platforms, up 13% and Security, up 1%. Applications was down 1%.

Gross Margin — On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.6%, 62.7%, and 66.2%, respectively, as compared with 63.2%, 61.2%, and 68.7%, respectively, in the fourth quarter of fiscal 2020.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.6%, 65.0%, and 67.4%, respectively, as compared with 65.0%, 63.2%, and 69.8%, respectively, in the fourth quarter of fiscal 2020.

Total gross margins by geographic segment were: 66.2% for the Americas, 65.0% for EMEA and 64.4% for APJC.

Operating Expenses — On a GAAP basis, operating expenses were $4.8 billion, up 8%, and were 36.3% of revenue. Non-GAAP operating expenses were $4.2 billion, up 8%, and were 32.1% of revenue.

Operating Income — GAAP operating income was $3.6 billion, up 10%, with GAAP operating margin of 27.2%. Non-GAAP operating income was $4.4 billion, up 10%, with non-GAAP operating margin at 33.5%.

Provision for Income Taxes — The GAAP tax provision rate was 19.4%. The non-GAAP tax provision rate was 19.3%.

Net Income and EPS — On a GAAP basis, net income was $3.0 billion, an increase of 14%, and EPS was $0.71, an increase of 15%. On a non-GAAP basis, net income was $3.6 billion, an increase of 5%, and EPS was $0.84, an increase of 5%.

Cash Flow from Operating Activities — $4.5 billion for the fourth quarter of fiscal 2021, an increase of 18% compared with $3.8 billion for the fourth quarter of fiscal 2020.

FY 2021 Highlights

Revenue — Total revenue was $49.8 billion, an increase of 1%.

Net Income and EPS — On a GAAP basis, net income was $10.6 billion, a decrease of 6%, and EPS was $2.50, a decrease of 5%. On a non-GAAP basis, net income was $13.6 billion, flat compared to fiscal 2020, and EPS was flat at $3.22.

Cash Flow from Operating Activities — $15.5 billion for fiscal 2021, flat compared with fiscal 2020.

 

3

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments — $24.5 billion at the end of the fourth quarter of fiscal 2021, compared with $23.6 billion at the end of the third quarter of fiscal 2021, and compared with $29.4 billion at the end of fiscal 2020.

Remaining Performance Obligations — $30.9 billion, up 9% in total. Product remaining performance obligations were up 18% and service remaining performance obligations were up 3%.

Deferred Revenue — $22.2 billion, up 8% in total, with deferred product revenue up 19%. Deferred service revenue was up 2%.

Capital Allocation — In the fourth quarter of fiscal 2021, we returned $2.4 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.37 per common share, or $1.6 billion, and repurchased approximately 15 million shares of common stock under our stock repurchase program at an average price of $53.30 per share for an aggregate purchase price of $791 million. The remaining authorized amount for stock repurchases under the program is $7.9 billion with no termination date.

Acquisitions

In the fourth quarter of fiscal 2021, we closed the following acquisitions:

 

  •  

Slido s.r.o., a privately held company that provides an audience interaction platform.

 

  •  

Sedonasys Systems Ltd., a privately held company which offers products that enable multi-vendor, multi-domain automation, and software-defined networking.

 

  •  

Kenna Security, Inc., a privately held cybersecurity company that provides risk-based vulnerability management technology which enables organizations to work cross-functionally to rapidly identify, prioritize and remediate cyber risks.

 

  •  

Involvio LLC, a privately held company that offers a suite of education-focused products that help colleges and universities improve student experience, engagement, and retention.

 

  •  

Socio Labs, Inc., a privately held company that offers a modern event technology platform designed to power the hybrid events of the future.

 

4

Guidance

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

 

Q1 FY 2022

     

Revenue

    7.5% to 9.5% growth Y/Y

Non-GAAP gross margin rate

    63.5% - 64.5%

Non-GAAP operating margin rate

    31.5% - 32.5%

Non-GAAP EPS

    $0.79 - $0.81

Cisco estimates that GAAP EPS will be $0.61 to $0.66 for the first quarter of fiscal 2022.

Cisco expects to achieve the following results for fiscal 2022:

 

FY 2022

     

Revenue

    5% to 7% growth Y/Y

Non-GAAP EPS

    $3.38 - $3.45

Cisco estimates that GAAP EPS will be $2.72 to $2.84 for fiscal 2022.

Our Q1 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:

 

  •  

Q4 fiscal year 2021 conference call to discuss Cisco’s results along with its guidance will be held on Wednesday, August 18, 2021 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, August 18, 2021 to 4:00 p.m. Pacific Time, August 25, 2021 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, August 18, 2021. 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.

 

5

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

 

     Three Months Ended     Fiscal Year Ended  
     July 31,
2021		     July 25,
2020		     July 31,
2021		     July 25,
2020		  

REVENUE:

         

Product

    $ 9,716   $ 8,832   $ 36,014   $ 35,978

Service

      3,410     3,322     13,804     13,323
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenue

      13,126     12,154     49,818     49,301
  

 

 

    

 

 

    

 

 

    

 

 

  

COST OF SALES:

         

Product

      3,628     3,429     13,300     13,199

Service

      1,154     1,041     4,624     4,419
  

 

 

    

 

 

    

 

 

    

 

 

  

Total cost of sales

      4,782     4,470     17,924     17,618
  

 

 

    

 

 

    

 

 

    

 

 

  

GROSS MARGIN

      8,344     7,684     31,894     31,683

OPERATING EXPENSES:

         

Research and development

      1,713     1,565     6,549     6,347

Sales and marketing

      2,448     2,218     9,259     9,169

General and administrative

      521     494     2,152     1,925

Amortization of purchased intangible assets

      79     33     215     141

Restructuring and other charges

      8     127     886     481
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      4,769     4,437     19,061     18,063
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING INCOME

      3,575     3,247     12,833     13,620

Interest income

      130     187     618     920

Interest expense

      (98 )      (119 )      (434 )      (585 ) 

Other income (loss), net

      128     (9 )      245     15
  

 

 

    

 

 

    

 

 

    

 

 

  

Interest and other income (loss), net

      160     59     429     350
  

 

 

    

 

 

    

 

 

    

 

 

  

INCOME BEFORE PROVISION FOR INCOME TAXES

      3,735     3,306     13,262     13,970

Provision for income taxes

      726     670     2,671     2,756
  

 

 

    

 

 

    

 

 

    

 

 

  

NET INCOME

    $ 3,009   $ 2,636   $ 10,591   $ 11,214
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income per share:

         

Basic

    $ 0.71   $ 0.62   $ 2.51   $ 2.65
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

    $ 0.71   $ 0.62   $ 2.50   $ 2.64
  

 

 

    

 

 

    

 

 

    

 

 

  

Shares used in per-share calculation:

         

Basic

      4,216     4,227     4,222     4,236
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

      4,238     4,244     4,236     4,254
  

 

 

    

 

 

    

 

 

    

 

 

  

 

6

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 

     July 31, 2021  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

           

Americas

    $ 7,731      8 %    $ 29,161      —   % 

EMEA

      3,297      6 %      12,951      2 % 

APJC

      2,098      13 %      7,706      5 % 
  

 

 

       

 

 

     

Total

    $ 13,126      8 %    $ 49,818      1 % 
  

 

 

       

 

 

     

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

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 

     July 31, 2021  
     Three Months Ended     Fiscal Year Ended  

Gross Margin Percentage:

     

Americas

      66.2 %      66.9 % 

EMEA

      65.0 %      65.4 % 

APJC

      64.4 %      64.2 % 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 

     July 31, 2021  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

           

Infrastructure Platforms

    $ 7,546      13 %    $ 27,109      —   % 

Applications

      1,344      (1 )%      5,504      (1 )% 

Security

      823      1 %      3,382      7 % 

Other Products

      4      (42 )%      19      (43 )% 
  

 

 

       

 

 

     

Total Product

      9,716      10 %      36,014      —   % 

Services

      3,410      3 %      13,804      4 % 
  

 

 

       

 

 

     

Total

    $ 13,126      8 %    $ 49,818      1 % 
  

 

 

       

 

 

     

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

 

7

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

     July 31,
2021		      July 25,
2020		  

ASSETS

      

Current assets:

      

Cash and cash equivalents

    $ 9,175    $ 11,809

Investments

      15,343      17,610

Accounts receivable, net of allowance for doubtful accounts

of $109 at July 31, 2021 and $143 at July 25, 2020

      5,766      5,472

Inventories

      1,559      1,282

Financing receivables, net

      4,380      5,051

Other current assets

      2,889      2,349
  

 

 

     

 

 

  

Total current assets

      39,112      43,573

Property and equipment, net

      2,338      2,453

Financing receivables, net

      4,884      5,714

Goodwill

      38,168      33,806

Purchased intangible assets, net

      3,619      1,576

Deferred tax assets

      4,360      3,990

Other assets

      5,016      3,741
  

 

 

     

 

 

  

TOTAL ASSETS

    $ 97,497    $ 94,853
  

 

 

     

 

 

  

LIABILITIES AND EQUITY

      

Current liabilities:

      

Short-term debt

    $ 2,508    $ 3,005

Accounts payable

      2,362      2,218

Income taxes payable

      801      839

Accrued compensation

      3,818      3,122

Deferred revenue

      12,148      11,406

Other current liabilities

      4,620      4,741
  

 

 

     

 

 

  

Total current liabilities

      26,257      25,331

Long-term debt

      9,018      11,578

Income taxes payable

      8,538      8,837

Deferred revenue

      10,016      9,040

Other long-term liabilities

      2,393      2,147
  

 

 

     

 

 

  

Total liabilities

      56,222      56,933

Total equity

      41,275      37,920
  

 

 

     

 

 

  

TOTAL LIABILITIES AND EQUITY

    $ 97,497    $ 94,853
  

 

 

     

 

 

  

 

8

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     Fiscal Year Ended  
     July 31,
2021		     July 25,
2020		  

Cash flows from operating activities:

     

Net income

    $ 10,591   $ 11,214

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

     

Depreciation, amortization, and other

      1,862     1,808

Share-based compensation expense

      1,761     1,569

Provision (benefit) for receivables

      (6 )      93

Deferred income taxes

      (384 )      (38 ) 

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

      (354 )      (138 ) 

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

     

Accounts receivable

      (107 )      (107 ) 

Inventories

      (244 )      84

Financing receivables

      1,577     (797 ) 

Other assets

      (797 )      96

Accounts payable

      (53 )      141

Income taxes, net

      (549 )      (322 ) 

Accrued compensation

      643     (78 ) 

Deferred revenue

      1,560     2,011

Other liabilities

      (46 )      (110 ) 
  

 

 

    

 

 

  

Net cash provided by operating activities

      15,454     15,426
  

 

 

    

 

 

  

Cash flows from investing activities:

     

Purchases of investments

      (9,328 )      (9,212 ) 

Proceeds from sales of investments

      3,373     5,631

Proceeds from maturities of investments

      8,409     7,975

Acquisitions, net of cash and cash equivalents acquired and divestitures

      (7,038 )      (327 ) 

Purchases of investments in privately held companies

      (175 )      (190 ) 

Return of investments in privately held companies

      194     224

Acquisition of property and equipment

      (692 )      (770 ) 

Proceeds from sales of property and equipment

      28     179

Other

      (56 )      (10 ) 
  

 

 

    

 

 

  

Net cash (used in) provided by investing activities

      (5,285 )      3,500
  

 

 

    

 

 

  

Cash flows from financing activities:

     

Issuances of common stock

      643     655

Repurchases of common stock - repurchase program

      (2,877 )      (2,659 ) 

Shares repurchased for tax withholdings on vesting of restricted stock units

      (636 )      (727 ) 

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

      (5 )      (3,470 ) 

Repayments of debt

      (3,000 )      (6,720 ) 

Dividends paid

      (6,163 )      (6,016 ) 

Other

      (1 )      51
  

 

 

    

 

 

  

Net cash used in financing activities

      (12,039 )      (18,886 ) 
  

 

 

    

 

 

  

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

      (1,870 )      40

Cash, cash equivalents, and restricted cash, beginning of fiscal year

      11,812     11,772
  

 

 

    

 

 

  

Cash, cash equivalents, and restricted cash, end of fiscal year

    $ 9,942   $ 11,812
  

 

 

    

 

 

  

Supplemental cash flow information:

     

Cash paid for interest

    $ 438   $ 603

Cash paid for income taxes, net

    $ 3,604   $ 3,116

 

9

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 

     July 31, 2021     May 1, 2021     July 25, 2020  
     Amount      Y/Y%     Amount      Y/Y%     Amount      Y/Y%  

Product

    $ 13,270      18 %    $ 11,903      15 %    $ 11,261      17 % 

Service

      17,623      3 %      16,235      7 %      17,093      9 % 
  

 

 

       

 

 

       

 

 

     

Total

    $ 30,893      9 %    $ 28,138      10 %    $ 28,354      12 % 
  

 

 

       

 

 

       

 

 

     

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 

     July 31,
2021		      May 1,
2021		      July 25,
2020		  

Deferred revenue:

         

Product

    $ 9,416    $ 8,698    $ 7,895

Service

      12,748      12,191      12,551
  

 

 

     

 

 

     

 

 

  

Total

    $ 22,164    $ 20,889    $ 20,446
  

 

 

     

 

 

     

 

 

  

Reported as:

         

Current

    $ 12,148    $ 11,492    $ 11,406

Noncurrent

      10,016      9,397      9,040
  

 

 

     

 

 

     

 

 

  

Total

    $ 22,164    $ 20,889    $ 20,446
  

 

 

     

 

 

     

 

 

  

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 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

Fiscal 2020

                  

July 25, 2020

    $ 0.36    $ 1,525      —        $ —      $ —      $ 1,525

April 25, 2020

    $ 0.36    $ 1,519      25    $ 39.71    $ 981    $ 2,500

January 25, 2020

    $ 0.35    $ 1,486      18    $ 46.71    $ 870    $ 2,356

October 26, 2019

    $ 0.35    $ 1,486      16    $ 48.91    $ 768    $ 2,254

 

10

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP NET INCOME

(In millions)

 

     Three Months Ended     Fiscal Year Ended  
     July 31,
2021		     July 25,
2020		     July 31,
2021		     July 25,
2020		  

GAAP net income

    $ 3,009   $ 2,636   $ 10,591   $ 11,214

Adjustments to cost of sales:

         

Share-based compensation expense

      67     61     275     237

Amortization of acquisition-related intangible assets

      199     157     698     611

Acquisition-related/divestiture costs

      1     —         4     3

Legal and indemnification settlements/charges

      —         —         43     4
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP cost of sales

      267     218     1,020     855
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments to operating expenses:

         

Share-based compensation expense

      357     332     1,460     1,307

Amortization of acquisition-related intangible assets

      79     33     215     141

Acquisition-related/divestiture costs

      109     55     288     246

Significant asset impairments and restructurings

      8     127     886     481
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP operating expenses

      553     547     2,849     2,175
  

 

 

    

 

 

    

 

 

    

 

 

  

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

         

Acquisition-related/divestiture costs

      —         —         4     —    

(Gains) and losses on equity investments

      (154 )      2     (285 )      (97 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      (154 )      2     (281 )      (97 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP income before provision for income taxes

      666     767     3,588     2,933
  

 

 

    

 

 

    

 

 

    

 

 

  

Income tax effect of non-GAAP adjustments

      (199 )      (175 )      (702 )      (722 ) 

Significant tax matters

      76     166     159     233
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP provision for income taxes

      (123 )      (9 )      (543 )      (489 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net income

    $ 3,552   $ 3,394   $ 13,636   $ 13,658
  

 

 

    

 

 

    

 

 

    

 

 

  

 

11

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP EPS

 

     Three Months Ended      Fiscal Year Ended  
     July 31,
2021		      July 25,
2020		      July 31,
2021		      July 25,
2020		  

GAAP EPS

    $ 0.71    $ 0.62    $ 2.50    $ 2.64

Adjustments to GAAP:

            

Share-based compensation expense

      0.10      0.09      0.41      0.36

Amortization of acquisition-related intangible assets

      0.07      0.04      0.22      0.18

Acquisition-related/divestiture costs

      0.03      0.01      0.07      0.06

Legal and indemnification settlements/charges

      —          —          0.01      —    

Significant asset impairments and restructurings

      —          0.03      0.21      0.11

(Gains) and losses on equity investments

      (0.04 )       —          (0.07 )       (0.02 ) 

Income tax effect of non-GAAP adjustments

      (0.05 )       (0.04 )       (0.17 )       (0.17 ) 

Significant tax matters

      0.02      0.04      0.04      0.05
  

 

 

     

 

 

     

 

 

     

 

 

  

Non-GAAP EPS

    $ 0.84    $ 0.80    $ 3.22    $ 3.21
  

 

 

     

 

 

     

 

 

     

 

 

  

Amounts may not sum due to rounding.

 

12

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  
     July 31, 2021  
     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

    $ 6,088   $ 2,256   $ 8,344   $ 4,769     8 %    $ 3,575     10 %    $ 160   $ 3,009     14 % 

% of revenue

      62.7 %      66.2 %      63.6 %      36.3 %        27.2 %        1.2 %      22.9 %   

Adjustments to GAAP amounts:

                     

Share-based compensation expense

      24     43     67     357       424       —         424  

Amortization of acquisition-related intangible assets

      199     —         199     79       278       —         278  

Acquisition/divestiture-related costs

      1     —         1     109       110       —         110  

Significant asset impairments and restructurings

      —         —         —         8       8       —         8  

(Gains) and losses on equity investments

      —         —         —         —           —           (154 )      (154 )   

Income tax effect/significant tax matters

      —         —         —         —           —           —         (123 )   
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

Non-GAAP amount

    $ 6,312   $ 2,299   $ 8,611   $ 4,216     8 %    $ 4,395     10 %    $ 6   $ 3,552     5 % 
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

% of revenue

      65.0 %      67.4 %      65.6 %      32.1 %        33.5 %        —   %      27.1 %   

 

     Three Months Ended  
     July 25, 2020  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Operating
Income		     Interest
and other
income
(loss), net		     Net
Income		  

GAAP amount

    $ 5,403   $ 2,281   $ 7,684   $ 4,437   $ 3,247   $ 59   $ 2,636

% of revenue

      61.2 %      68.7 %      63.2 %      36.5 %      26.7 %      0.5 %      21.7 % 

Adjustments to GAAP amounts:

               

Share-based compensation expense

      24     37     61     332     393     —         393

Amortization of acquisition-related intangible assets

      157     —         157     33     190     —         190

Acquisition/divestiture-related costs

      —         —         —         55     55     —         55

Significant asset impairments and restructurings

      —         —         —         127     127     —         127

(Gains) and losses on equity investments

      —         —         —         —         —         2     2

Income tax effect/significant tax matters

      —         —         —         —         —         —         (9 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP amount

    $ 5,584   $ 2,318   $ 7,902   $ 3,890   $ 4,012   $ 61   $ 3,394
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% of revenue

      63.2 %      69.8 %      65.0 %      32.0 %      33.0 %      0.5 %      27.9 % 

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

 

13

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)

 

     Fiscal Year Ended  
     July 31, 2021  
     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

    $ 22,714   $ 9,180   $ 31,894   $ 19,061     6 %    $ 12,833     (6 )%    $ 429   $ 10,591     (6 )% 

% of revenue

      63.1 %      66.5 %      64.0 %      38.3 %        25.8 %        0.9 %      21.3 %   

Adjustments to GAAP amounts:

                     

Share-based compensation expense

      99     176     275     1,460       1,735       —         1,735  

Amortization of acquisition-related intangible assets

      698     —         698     215       913       —         913  

Acquisition/divestiture-related costs

      3     1     4     288       292       4     296  

Legal and indemnification settlements/charges

      43     —         43     —           43       —         43  

Significant asset impairments and restructurings

      —         —         —         886       886       —         886  

(Gains) and losses on equity investments

      —         —         —         —           —           (285 )      (285 )   

Income tax effect/significant tax matters

      —         —         —         —           —           —         (543 )   
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

Non-GAAP amount

    $ 23,557   $ 9,357   $ 32,914   $ 16,212     2 %    $ 16,702     —   %    $ 148   $ 13,636     —   % 
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

% of revenue

      65.4 %      67.8 %      66.1 %      32.5 %        33.5 %        0.3 %      27.4 %   

 

     Fiscal Year Ended  
     July 25, 2020  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Operating
Income		     Interest and
other
income
(loss), net		     Net
Income		  

GAAP amount

    $ 22,779   $ 8,904   $ 31,683   $ 18,063   $ 13,620   $ 350   $ 11,214

% of revenue

      63.3 %      66.8 %      64.3 %      36.6 %      27.6 %      0.7 %      22.7 % 

Adjustments to GAAP amounts:

               

Share-based compensation expense

      93     144     237     1,307     1,544     —         1,544

Amortization of acquisition-related intangible assets

      611     —         611     141     752     —         752

Acquisition/divestiture-related costs

      —         3     3     246     249     —         249

Legal and indemnification settlements

      4     —         4     —         4     —         4

Significant asset impairments and restructurings

      —         —         —         481     481     —         481

(Gains) and losses on equity investments

      —         —         —         —         —         (97 )      (97 ) 

Income tax effect/significant tax matters

      —         —         —         —         —         —         (489 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP amount

    $ 23,487   $ 9,051   $ 32,538   $ 15,888   $ 16,650   $ 253   $ 13,658
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% of revenue

      65.3 %      67.9 %      66.0 %      32.2 %      33.8 %      0.5 %      27.7 % 

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

 

14

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

EFFECTIVE TAX RATE

(In percentages)

 

     Three Months Ended     Fiscal Year Ended  
     July 31,
2021		     July 25,
2020		     July 31,
2021		     July 25,
2020		  

GAAP effective tax rate

      19.4 %      20.3 %      20.1 %      19.7 % 

Total adjustments to GAAP provision for income taxes

      (0.1 )%      (3.6 )%      (1.0 )%      (0.5 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP effective tax rate

      19.3 %      16.7 %      19.1 %      19.2 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP TO NON-GAAP GUIDANCE

 

Q1 FY 2022

    Gross Margin Rate   Operating Margin
Rate		   Earnings per
Share (1)

GAAP

    61.5% - 62.5%   25% - 26%   $0.61 - $0.66  

Estimated adjustments for:

       

Share-based compensation expense

    0.5%   3.5%   $0.08 - $0.09  

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

    1.5%   3.0%   $0.07 - $0.08  

Significant asset impairments and restructurings

    —     —     $0.00 - $0.01  
  

 

  

 

  

 

Non-GAAP

    63.5% - 64.5%   31.5% - 32.5%   $0.79 - $0.81  
  

 

  

 

  

 

 

FY 2022

    Earnings per
Share (1)		  

GAAP

    $ 2.72 - $2.84    

Estimated adjustments for:

   

Share-based compensation expense

    $ 0.35 - $0.37    

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

    $ 0.26 - $0.28    

Significant asset impairments and restructurings

    $ 0.00 - $0.01    
  

 

 

  

Non-GAAP

    $ 3.38 - $3.45    
  

 

 

  

 

(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, restructurings and significant tax matters or other events, which may or may not be significant unless specifically stated.

 

15

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 continued momentum in our business, the demand for our technology, our ability to help the acceleration of our customers’ digital transformation, and the continuation of our business model transformation to more recurring revenue) and the future financial performance of Cisco (including the guidance for Q1 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 infrastructure platforms 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, 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; 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 May 25, 2021, and September 3, 2020, 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 months and the year ended July 31, 2021 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, 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.

 

16

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 © 2021 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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