EX-99.1 2 d511414dex991.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 2023 EARNINGS

News Summary:

 

  •  

Cisco ended fiscal 2023 with Q4 revenue at $15.2 billion, up 16% year over year; GAAP EPS $0.97, up 43% year over year, and Non-GAAP EPS $1.14, up 37% year over year

 

  •  

Q4 FY 2023 operating cash flow of $6.0 billion, up 62% year over year

 

  •  

Progress on business model transformation in Q4 FY 2023:

 

  •  

Total software revenue up 17% year over year and software subscription revenue up 20% year over year

 

  •  

Total annualized recurring revenue (ARR) at $24.3 billion, up 5% year over year and product ARR up 10% year over year

 

  •  

Remaining performance obligations (RPO) at $34.9 billion, up 11% year over year and product RPO up 12% year over year

 

•  

Q4 FY 2023 Results:

 

  •  

Revenue: $15.2 billion

 

  •  

Increase of 16% year over year

 

  •  

Earnings per Share: GAAP: $0.97; Non-GAAP: $1.14

 

  •  

GAAP EPS increased 43% year over year

 

  •  

Non-GAAP EPS increased 37% year over year

 

•  

FY 2023 Results:

 

  •  

Revenue: $57.0 billion

 

  •  

Increase of 11% year over year

 

  •  

Earnings per Share: GAAP: $3.07; Non-GAAP: $3.89

 

  •  

GAAP EPS increased 9% year over year

 

  •  

Non-GAAP EPS increased 16% year over year

 

•  

Q1 FY 2024 Guidance:

 

  •  

Revenue: $14.5 billion to $14.7 billion

 

  •  

Earnings per Share: GAAP: $0.79 to $0.84; Non-GAAP: $1.02 to $1.04

 

•  

FY 2024 Guidance:

 

  •  

Revenue: $57.0 billion to $58.2 billion

 

  •  

Earnings per Share: GAAP: $3.19 to $3.32; Non-GAAP: $4.01 to $4.08

 

1

SAN JOSE, Calif. — August 16, 2023 — Cisco today reported fourth quarter and fiscal year results for the period ended July 29, 2023. Cisco reported fourth quarter revenue of $15.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $4.0 billion or $0.97 per share, and non-GAAP net income of $4.7 billion or $1.14 per share.

“This past year was a milestone year for Cisco with record performance in both the full year and Q4,” said Chuck Robbins, chair and CEO of Cisco. “We are seeing solid customer demand, gaining market share, and innovating in key areas like AI, security, and cloud. This momentum gives us confidence in our ability to capture the many opportunities ahead.”

“We delivered double-digit growth in revenue and EPS, generating strong operating leverage in Q4,” said Scott Herren, CFO of Cisco. “Our business model transformation drove double-digit growth in software revenue, product ARR and total RPO, leading to greater visibility and predictability. We are committed to expanding operating leverage and increasing shareholder returns over the long term.”

Q4 GAAP Results

 

     Q4 FY 2023      Q4 FY 2022      Vs. Q4 FY 2022  

Revenue

    $ 15.2 billion      $ 13.1 billion        16 % 

Net Income

    $ 4.0 billion      $ 2.8 billion        41 % 

Diluted Earnings per Share (EPS)

    $ 0.97      $ 0.68        43 % 

Q4 Non-GAAP Results

 

     Q4 FY 2023      Q4 FY 2022      Vs. Q4 FY 2022  

Net Income

    $ 4.7 billion      $ 3.4 billion        36 % 

EPS

    $ 1.14      $ 0.83        37 % 

Fiscal Year GAAP Results

 

     FY 2023      FY 2022      Vs. FY 2022  

Revenue

    $ 57.0 billion      $ 51.6 billion        11 % 

Net Income

    $ 12.6 billion      $ 11.8 billion        7 % 

EPS

    $ 3.07      $ 2.82        9 % 

Fiscal Year Non-GAAP Results

 

     FY 2023      FY 2022      Vs. FY 2022  

Net Income

    $ 16.0 billion      $ 14.1 billion        13 % 

EPS

    $ 3.89      $ 3.36        16 % 

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled “Reconciliations of GAAP to non-GAAP Measures.”

Cisco Declares Quarterly Dividend

Cisco has declared a quarterly dividend of $0.39 per common share to be paid on October 25, 2023, to all stockholders of record as of the close of business on October 4, 2023. Future dividends will be subject to Board approval.

 

2

Financial Summary

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

Q4 FY 2023 Highlights

Revenue — Total revenue was up 16% at $15.2 billion, with product revenue up 20% and service revenue up 4%. Revenue by geographic segment was: Americas up 21%, EMEA up 10%, and APJC up 7%. Product revenue performance was led by growth in Secure, Agile Networks up 33%, Optimized Application Experiences up 15%, and Internet for the Future up 3%. Collaboration was down 12%. End-to-End Security was flat.

Gross Margin — On a GAAP basis, total gross margin, product gross margin, and service gross margin were 64.1%, 63.6%, and 65.7%, respectively, as compared with 61.3%, 59.1%, and 67.5%, respectively, in the fourth quarter of fiscal 2022.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.9%, 65.5%, and 67.5%, respectively, as compared with 63.3%, 61.3%, and 69.0%, respectively, in the fourth quarter of fiscal 2022.

Total gross margins by geographic segment were: 65.0% for the Americas, 68.4% for EMEA and 65.3% for APJC.

Operating Expenses — On a GAAP basis, operating expenses were $5.5 billion, up 20%, and were 36.1% of revenue. Non-GAAP operating expenses were $4.6 billion, up 15%, and were 30.6% of revenue.

Operating Income — GAAP operating income was $4.3 billion, up 24%, with GAAP operating margin of 28.0%. Non-GAAP operating income was $5.4 billion, up 27%, with non-GAAP operating margin at 35.4%.

Provision for Income Taxes — The GAAP tax provision rate was 11.5%. The non-GAAP tax provision rate was 15.5%.

Net Income and EPS — On a GAAP basis, net income was $4.0 billion, an increase of 41%, and EPS was $0.97, an increase of 43%. On a non-GAAP basis, net income was $4.7 billion, an increase of 36%, and EPS was $1.14, an increase of 37%.

Cash Flow from Operating Activities — $6.0 billion for the fourth quarter of fiscal 2023, an increase of 62% compared with $3.7 billion for the fourth quarter of fiscal 2022.

FY 2023 Highlights

Revenue — Total revenue was $57.0 billion, an increase of 11%.

Net Income and EPS — On a GAAP basis, net income was $12.6 billion, an increase of 7%, and EPS was $3.07, an increase of 9%. On a non-GAAP basis, net income was $16.0 billion, an increase of 13% compared to fiscal 2022, and EPS was $3.89, an increase of 16%.

Cash Flow from Operating Activities — $19.9 billion for fiscal 2023, an increase of 50% compared with $13.2 billion for fiscal 2022.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments — $26.1 billion at the end of the fourth quarter of fiscal 2023, compared with $23.3 billion at the end of the third quarter of fiscal 2023, and compared with $19.3 billion at the end of fiscal 2022.

Remaining Performance Obligations (RPO) — $34.9 billion, up 11% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 12% and service RPO were up 9%.

Deferred Revenue — $25.6 billion, up 10% in total, with deferred product revenue up 10%. Deferred service revenue was up 9%.

Capital Allocation — In the fourth quarter of fiscal 2023, we returned $2.8 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.39 per common share, or $1.6 billion, and repurchased approximately 25 million shares of common stock under our stock repurchase program at an average price of $50.49 per share for an aggregate purchase price of $1.3 billion. The remaining authorized amount for stock repurchases under the program is $10.9 billion with no termination date.

Acquisitions

In the fourth quarter of fiscal 2023, we closed the following acquisitions: Lightspin Technologies Ltd., a privately held cloud security software company; Smartlook, s.r.o., a privately held company that provides a digital experience and product analytics solution that monitors user engagement on websites and mobile applications in real time; and Armorblox, Inc., a privately held company focused on the use of Large Language Models and natural language understanding in cybersecurity.

 

3

Guidance

Cisco expects to achieve the following results for the first quarter of fiscal 2024:

 

Q1 FY 2024

     

Revenue

    $14.5 billion - $14.7 billion  

Non-GAAP gross margin rate

    65% - 66%

Non-GAAP operating margin rate

    34% - 35%

Non-GAAP EPS

    $1.02 - $1.04

Cisco estimates that GAAP EPS will be $0.79 to $0.84 for the first quarter of fiscal 2024.

Cisco expects to achieve the following results for fiscal 2024:

 

FY 2024

     

Revenue

    $57.0 billion - $58.2 billion  

Non-GAAP EPS

    $4.01 - $4.08

Cisco estimates that GAAP EPS will be $3.19 to $3.32 for fiscal 2024.

Our Q1 FY 2024 and FY 2024 guidance assumes an effective tax provision rate of 18% 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:

 

  •  

Q4 fiscal year 2023 conference call to discuss Cisco’s results along with its guidance will be held on Wednesday, August 16, 2023 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

 

  •  

Conference call replay will be available from 4:00 p.m. Pacific Time, August 16, 2023 to 4:00 p.m. Pacific Time, August 23, 2023 at 1-866-405-7294 (United States) or 1-203-369-0606 (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 16, 2023. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com.

 

4

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

 

     Three Months Ended     Fiscal Year Ended  
     July 29,
2023		     July 30,
2022		     July 29,
2023		     July 30,
2022		  

REVENUE:

         

Product

    $ 11,650     $ 9,688     $ 43,142     $ 38,018  

Service

      3,553       3,414       13,856       13,539  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenue

      15,203       13,102       56,998       51,557  
  

 

 

    

 

 

    

 

 

    

 

 

  

COST OF SALES:

         

Product

      4,237       3,966       16,590       14,814  

Service

      1,218       1,111       4,655       4,495  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total cost of sales

      5,455       5,077       21,245       19,309  
  

 

 

    

 

 

    

 

 

    

 

 

  

GROSS MARGIN

      9,748       8,025       35,753       32,248  

OPERATING EXPENSES:

         

Research and development

      1,953       1,682       7,551       6,774  

Sales and marketing

      2,579       2,349       9,880       9,085  

General and administrative

      690       489       2,478       2,101  

Amortization of purchased intangible assets

      70       73       282       313  

Restructuring and other charges

      203       (2 )      531       6  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      5,495       4,591       20,722       18,279  
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING INCOME

      4,253       3,434       15,031       13,969  

Interest income

      312       129       962       476  

Interest expense

      (111 )      (93 )      (427 )      (360 ) 

Other income (loss), net

      17       (54 )      (248 )      392  
  

 

 

    

 

 

    

 

 

    

 

 

  

Interest and other income (loss), net

      218       (18 )      287       508  
  

 

 

    

 

 

    

 

 

    

 

 

  

INCOME BEFORE PROVISION FOR INCOME TAXES

      4,471       3,416       15,318       14,477  

Provision for income taxes

      513       601       2,705       2,665  
  

 

 

    

 

 

    

 

 

    

 

 

  

NET INCOME

    $ 3,958     $ 2,815     $ 12,613     $ 11,812  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income per share:

         

Basic

    $ 0.97     $ 0.68     $ 3.08     $ 2.83  
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

    $ 0.97     $ 0.68     $ 3.07     $ 2.82  
  

 

 

    

 

 

    

 

 

    

 

 

  

Shares used in per-share calculation:

         

Basic

      4,071       4,128       4,093       4,170  
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

      4,093       4,137       4,105       4,192  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

5

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 

     July 29, 2023  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

           

Americas

    $ 9,075        21 %    $ 33,447        12 % 

EMEA

      3,926        10 %      15,135        10 % 

APJC

      2,203        7 %      8,417        5 % 
  

 

 

       

 

 

     

Total

    $ 15,203        16 %    $ 56,998        11 % 
  

 

 

       

 

 

     

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

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 

     July 29, 2023  
     Three Months Ended     Fiscal Year Ended  

Gross Margin Percentage:

     

Americas

      65.0%       63.8%  

EMEA

      68.4%       66.2%  

APJC

      65.3%       64.4%  

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 

     July 29, 2023  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

           

Secure, Agile Networks

    $ 8,125        33 %    $ 29,105        22 % 

Internet for the Future

      1,298        3 %      5,306        1 % 

Collaboration

      1,023        (12 )%      4,052        (9 )% 

End-to-End Security

      987        —   %      3,859        4 % 

Optimized Application Experiences

      214        15 %      811        11 % 

Other Products

      2        (33 )%      9        (15 )% 
  

 

 

       

 

 

     

Total Product

      11,650        20 %      43,142        13 % 

Services

      3,553        4 %      13,856        2 % 
  

 

 

       

 

 

     

Total

    $ 15,203        16 %    $ 56,998        11 % 
  

 

 

       

 

 

     

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

 

6

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

     July 29,
2023		      July 30,
2022		  

ASSETS

      

Current assets:

      

Cash and cash equivalents

    $ 10,123      $ 7,079  

Investments

      16,023        12,188  

Accounts receivable, net of allowance of $85 at July 29, 2023 and $83 at July 30, 2022

      5,854        6,622  

Inventories

      3,644        2,568  

Financing receivables, net

      3,352        3,905  

Other current assets

      4,352        4,355  
  

 

 

     

 

 

  

Total current assets

      43,348        36,717  

Property and equipment, net

      2,085        1,997  

Financing receivables, net

      3,483        4,009  

Goodwill

      38,535        38,304  

Purchased intangible assets, net

      1,818        2,569  

Deferred tax assets

      6,576        4,449  

Other assets

      6,007        5,957  
  

 

 

     

 

 

  

TOTAL ASSETS

    $ 101,852      $ 94,002  
  

 

 

     

 

 

  

LIABILITIES AND EQUITY

      

Current liabilities:

      

Short-term debt

    $ 1,733      $ 1,099  

Accounts payable

      2,313        2,281  

Income taxes payable

      4,235        961  

Accrued compensation

      3,984        3,316  

Deferred revenue

      13,908        12,784  

Other current liabilities

      5,136        5,199  
  

 

 

     

 

 

  

Total current liabilities

      31,309        25,640  

Long-term debt

      6,658        8,416  

Income taxes payable

      5,756        7,725  

Deferred revenue

      11,642        10,480  

Other long-term liabilities

      2,134        1,968  
  

 

 

     

 

 

  

Total liabilities

      57,499        54,229  

Total equity

      44,353        39,773  
  

 

 

     

 

 

  

TOTAL LIABILITIES AND EQUITY

    $ 101,852      $ 94,002  
  

 

 

     

 

 

  

 

7

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     Fiscal Year Ended  
     July 29,
2023		     July 30,
2022		  

Cash flows from operating activities:

     

Net income

    $ 12,613     $ 11,812  

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

     

Depreciation, amortization, and other

      1,726       1,957  

Share-based compensation expense

      2,353       1,886  

Provision (benefit) for receivables

      31       55  

Deferred income taxes

      (2,085 )      (309 ) 

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

      206       (453 ) 

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

     

Accounts receivable

      734       (1,009 ) 

Inventories

      (1,069 )      (1,030 ) 

Financing receivables

      1,102       1,241  

Other assets

      5       (1,615 ) 

Accounts payable

      27       (55 ) 

Income taxes, net

      1,218       (690 ) 

Accrued compensation

      651       (427 ) 

Deferred revenue

      2,326       1,328  

Other liabilities

      48       535  
  

 

 

    

 

 

  

Net cash provided by operating activities

      19,886       13,226  
  

 

 

    

 

 

  

Cash flows from investing activities:

     

Purchases of investments

      (10,871 )      (6,070 ) 

Proceeds from sales of investments

      1,054       2,660  

Proceeds from maturities of investments

      5,978       5,686  

Acquisitions, net of cash and cash equivalents acquired and divestitures

      (301 )      (373 ) 

Purchases of investments in privately held companies

      (185 )      (186 ) 

Return of investments in privately held companies

      90       237  

Acquisition of property and equipment

      (849 )      (477 ) 

Proceeds from sales of property and equipment

      3       91  

Other

      (26 )      (15 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      (5,107 )      1,553  
  

 

 

    

 

 

  

Cash flows from financing activities:

     

Issuances of common stock

      700       660  

Repurchases of common stock - repurchase program

      (4,293 )      (7,689 ) 

Shares repurchased for tax withholdings on vesting of restricted stock units

      (597 )      (692 ) 

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

      (602 )      606  

Issuances of debt

      —         1,049  

Repayments of debt

      (500 )      (3,550 ) 

Dividends paid

      (6,302 )      (6,224 ) 

Other

      (32 )      (122 ) 
  

 

 

    

 

 

  

Net cash used in financing activities

      (11,626 )      (15,962 ) 
  

 

 

    

 

 

  

Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents

      (105 )      (180 ) 
  

 

 

    

 

 

  

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

      3,048       (1,363 ) 

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

      8,579       9,942  
  

 

 

    

 

 

  

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

    $ 11,627     $ 8,579  
  

 

 

    

 

 

  

Supplemental cash flow information:

     

Cash paid for interest

    $ 376     $ 355  

Cash paid for income taxes, net

    $ 3,571     $ 3,663  

 

8

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 

     July 29, 2023     April 29, 2023     July 30, 2022  
     Amount      Y/Y%     Amount      Y/Y%     Amount      Y/Y%  

Product

    $ 15,802        12 %    $ 14,681        9 %    $ 14,090        6 % 

Service

      19,066        9 %      17,401        4 %      17,449        (1 )% 
  

 

 

       

 

 

       

 

 

     

Total

    $ 34,868        11 %    $ 32,082        6 %    $ 31,539        2 % 
  

 

 

       

 

 

       

 

 

     

We expect 51% of total RPO at July 29, 2023 will be recognized as revenue over the next 12 months.

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 

     July 29,
2023		      April 29,
2023		      July 30,
2022		  

Deferred revenue:

         

Product

    $ 11,505      $ 10,895      $ 10,427  

Service

      14,045        13,365        12,837  
  

 

 

     

 

 

     

 

 

  

Total

    $ 25,550      $ 24,260      $ 23,264  
  

 

 

     

 

 

     

 

 

  

Reported as:

         

Current

    $ 13,908      $ 13,249      $ 12,784  

Noncurrent

      11,642        11,011        10,480  
  

 

 

     

 

 

     

 

 

  

Total

    $ 25,550      $ 24,260      $ 23,264  
  

 

 

     

 

 

     

 

 

  

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

                  

July 29, 2023

    $ 0.39      $ 1,589        25      $ 50.49      $ 1,254      $ 2,843  

April 29, 2023

    $ 0.39      $ 1,593        25      $ 49.45      $ 1,259      $ 2,852  

January 28, 2023

    $ 0.38      $ 1,560        26      $ 47.72      $ 1,256      $ 2,816  

October 29, 2022

    $ 0.38      $ 1,560        12      $ 43.76      $ 502      $ 2,062  

Fiscal 2022

                  

July 30, 2022

    $ 0.38      $ 1,567        54      $ 44.02      $ 2,402      $ 3,969  

April 30, 2022

    $ 0.38      $ 1,555        5      $ 54.20      $ 252      $ 1,807  

January 29, 2022

    $ 0.37      $ 1,541        82      $ 58.36      $ 4,824      $ 6,365  

October 30, 2021

    $ 0.37      $ 1,561        5      $ 56.49      $ 256      $ 1,817  

 

9

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 29,
2023		     July 30,
2022		     July 29,
2023		     July 30,
2022		  

GAAP net income

    $ 3,958     $ 2,815     $ 12,613     $ 11,812  

Adjustments to cost of sales:

         

Share-based compensation expense

      103       78       396       311  

Amortization of acquisition-related intangible assets

      168       162       630       733  

Acquisition-related/divestiture costs

      14       24       18       27  

Russia-Ukraine war costs

      —         2       —         7  

Supplier component remediation charge (adjustment), net

      (9 )      —         (9 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP cost of sales

      276       266       1,035       1,078  
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjustments to operating expenses:

         

Share-based compensation expense

      520       401       1,951       1,574  

Amortization of acquisition-related intangible assets

      70       73       282       328  

Acquisition-related/divestiture costs

      63       45       241       306  

Russia-Ukraine war costs

      (7 )      22       —         84  

Significant asset impairments and restructurings

      203       (2 )      531       6  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP operating expenses

      849       539       3,005       2,298  
  

 

 

    

 

 

    

 

 

    

 

 

  

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

         

(Gains) and losses on investments

      (55 )      —         133       (478 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      (55 )      —         133       (478 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP income before provision for income taxes

      1,070       805       4,173       2,898  
  

 

 

    

 

 

    

 

 

    

 

 

  

Income tax effect of non-GAAP adjustments

      (215 )      (181 )      (838 )      (616 ) 

Significant tax matters

      (133 )      —         31       —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjustments to GAAP provision for income taxes

      (348 )      (181 )      (807 )      (616 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net income

    $ 4,680     $ 3,439     $ 15,979     $ 14,094  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

10

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP EPS

 

     Three Months Ended     Fiscal Year Ended  
     July 29,
2023		     July 30,
2022		     July 29,
2023		     July 30,
2022		  

GAAP EPS

    $ 0.97     $ 0.68     $ 3.07     $ 2.82  

Adjustments to GAAP:

         

Share-based compensation expense

      0.15       0.12       0.57       0.45  

Amortization of acquisition-related intangible assets

      0.06       0.06       0.22       0.25  

Acquisition-related/divestiture costs

      0.02       0.02       0.06       0.08  

Russia-Ukraine war costs

      —         0.01       —         0.02  

Significant asset impairments and restructurings

      0.05       —         0.13       —    

(Gains) and losses on investments

      (0.01 )      —         0.03       (0.11 ) 

Income tax effect of non-GAAP adjustments

      (0.05 )      (0.04 )      (0.20 )      (0.15 ) 

Significant tax matters

      (0.03 )      —         0.01       —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP EPS

    $ 1.14     $ 0.83     $ 3.89     $ 3.36  
  

 

 

    

 

 

    

 

 

    

 

 

  

Amounts may not sum due to rounding.

 

11

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 29, 2023		  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Y/Y     Operating
Income		     Y/Y     Interest
and
other
income
(loss),
net		     Net
Income		     Y/Y  

GAAP amount

    $ 7,413     $ 2,335     $ 9,748     $ 5,495       20 %    $ 4,253       24 %    $ 218     $ 3,958       41 % 

% of revenue

      63.6 %      65.7 %      64.1 %      36.1 %        28.0 %        1.4 %      26.0 %   

Adjustments to GAAP amounts:

                     

Share-based compensation expense

      40       63       103       520         623         —         623    

Amortization of acquisition-related intangible assets

      168       —         168       70         238         —         238    

Acquisition/divestiture-related costs

      14       —         14       63         77         —         77    

Russia-Ukraine war costs

      —         —         —         (7 )        (7 )        —         (7 )   

Supplier component remediation charge (adjustment), net

      (9 )      —         (9 )      —           (9 )        —         (9 )   

Significant asset impairments and restructurings

      —         —         —         203         203         —         203    

(Gains) and losses on investments

      —         —         —         —           —           (55 )      (55 )   

Income tax effect/significant tax matters

      —         —         —         —           —           —         (348 )   
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

Non-GAAP amount

    $ 7,626     $ 2,398     $ 10,024     $ 4,646       15 %    $ 5,378       27 %    $ 163     $ 4,680       36 % 
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

% of revenue

      65.5 %      67.5 %      65.9 %      30.6 %        35.4 %        1.1 %      30.8 %   

 

     Three Months Ended
July 30, 2022		  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Operating
Income		     Interest
and
other
income
(loss),
net		     Net
Income		  

GAAP amount

    $ 5,722     $ 2,303     $ 8,025     $ 4,591     $ 3,434     $ (18 )    $ 2,815  

% of revenue

      59.1 %      67.5 %      61.3 %      35.0 %      26.2 %      (0.1 )%      21.5 % 

Adjustments to GAAP amounts:

               

Share-based compensation expense

      28       50       78       401       479       —         479  

Amortization of acquisition-related intangible assets

      162       —         162       73       235       —         235  

Acquisition/divestiture-related costs

      24       —         24       45       69       —         69  

Russia-Ukraine war costs

      —         2       2       22       24       —         24  

Significant asset impairments and restructurings

      —         —         —         (2 )      (2 )      —         (2 ) 

Income tax effect/significant tax matters

      —         —         —         —         —         —         (181 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP amount

    $ 5,936     $ 2,355     $ 8,291     $ 4,052     $ 4,239     $ (18 )    $ 3,439  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% of revenue

      61.3 %      69.0 %      63.3 %      30.9 %      32.4 %      (0.1 )%      26.2 % 

Amounts may not sum and percentages may not recalculate 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)

 

     Fiscal Year Ended
July 29, 2023		  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Y/Y     Operating
Income		     Y/Y     Interest
and
other
income
(loss),
net		     Net
Income		     Y/Y  

GAAP amount

    $ 26,552     $ 9,201     $ 35,753     $ 20,722       13 %    $ 15,031       8 %    $ 287     $ 12,613       7 % 

% of revenue

      61.5 %      66.4 %      62.7 %      36.4 %        26.4 %        0.5 %      22.1 %   

Adjustments to GAAP amounts:

                     

Share-based compensation expense

      151       245       396       1,951         2,347         —         2,347    

Amortization of acquisition-related intangible assets

      630       —         630       282         912         —         912    

Acquisition/divestiture-related costs

      18       —         18       241         259         —         259    

Supplier component remediation charge (adjustment), net

      (9 )      —         (9 )      —           (9 )        —         (9 )   

Significant asset impairments and restructurings

      —         —         —         531         531         —         531    

(Gains) and losses on investments

      —         —         —         —           —           133       133    

Income tax effect/significant tax matters

      —         —         —         —           —           —         (807 )   
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

Non-GAAP amount

    $ 27,342     $ 9,446     $ 36,788     $ 17,717       11 %    $ 19,071       10 %    $ 420     $ 15,979       13 % 
  

 

 

    

 

 

    

 

 

    

 

 

      

 

 

      

 

 

    

 

 

    

% of revenue

      63.4 %      68.2 %      64.5 %      31.1 %        33.5 %        0.7 %      28.0 %   

 

     Fiscal Year Ended
July 30, 2022		  
     Product
Gross
Margin		     Service
Gross
Margin		     Total
Gross
Margin		     Operating
Expenses		     Operating
Income		     Interest
and
other
income
(loss),
net		     Net
Income		  

GAAP amount

    $ 23,204     $ 9,044     $ 32,248     $ 18,279     $ 13,969     $ 508     $ 11,812  

% of revenue

      61.0 %      66.8 %      62.5 %      35.5 %      27.1 %      1.0 %      22.9 % 

Adjustments to GAAP amounts:

               

Share-based compensation expense

      112       199       311       1,574       1,885       —         1,885  

Amortization of acquisition-related intangible assets

      733       —         733       328       1,061       —         1,061  

Acquisition/divestiture-related costs

      27       —         27       306       333       —         333  

Russia-Ukraine war costs

      4       3       7       84       91       —         91  

Significant asset impairments and restructurings

      —         —         —         6       6       —         6  

(Gains) and losses on investments

      —         —         —         —         —         (478 )      (478 ) 

Income tax effect/significant tax matters

      —         —         —         —         —         —         (616 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP amount

    $ 24,080     $ 9,246     $ 33,326     $ 15,981     $ 17,345     $ 30     $ 14,094  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% of revenue

      63.3 %      68.3 %      64.6 %      31.0 %      33.6 %      0.1 %      27.3 % 

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

 

13

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

EFFECTIVE TAX RATE

(In percentages)

 

     Three Months Ended     Fiscal Year Ended  
     July 29,
2023		     July 30,
2022		     July 29,
2023		     July 30,
2022		  

GAAP effective tax rate

      11.5 %      17.6 %      17.7 %      18.4 % 

Total adjustments to GAAP provision for income taxes

      4.0 %      0.9 %      0.3 %      0.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP effective tax rate

      15.5 %      18.5 %      18.0 %      18.9 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP TO NON-GAAP GUIDANCE

 

Q1 FY 2024

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

GAAP

    63% - 64%    27% - 28%    $0.79 - $0.84

Estimated adjustments for:

         

Share-based compensation expense

    1.0%    4.0%    $0.12 - $0.13

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

    1.0%    2.0%    $0.06 - $0.07

Significant asset impairments and restructurings

    —    1.0%    $0.02 - $0.03
  

 

   

 

   

 

Non-GAAP

    65% - 66%    34% - 35%    $1.02 - $1.04
  

 

   

 

   

 

 

FY 2024

    Earnings per
Share (1)		  

GAAP

    $ 3.19 - $3.32  

Estimated adjustments for:

   

Share-based compensation expense

    $ 0.54 - $0.56  

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

    $ 0.20 - $0.22  

Significant asset impairments and restructurings

    $ 0.02 - $0.04  
  

 

 

  

Non-GAAP

    $ 4.01 - $4.08  
  

 

 

  

 

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

 

14

Forward Looking Statements, Non-GAAP Information and Additional Information

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as continued strong customer demand, gains in market share, innovations in AI, security, and cloud, our ability to capture future opportunities, and our commitment to the expansion of operating leverage and increase of shareholder returns over the long term) and the future financial performance of Cisco (including the guidance for Q1 FY 2024 and full year FY 2024) 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 May 24, 2023 and September 8, 2022, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three months and the year ended July 29, 2023 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP interest and other income (loss), net, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles (GAAP) and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco’s results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations.

For its internal budgeting process, Cisco’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on investments, the income tax effects of the foregoing and significant tax matters. Cisco’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

 

15

Annualized recurring revenue represents the annualized revenue run-rate of active subscriptions, term licenses, operating leases and maintenance contracts at the end of a reporting period, net of rebates to customers and partners as well as certain other revenue adjustments. Includes both revenue recognized ratably as well as upfront on an annualized basis.

About Cisco

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 © 2023 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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