SAN
JOSE, Calif., Feb. 14,
2024 /PRNewswire/ --
News Summary:
- $12.8 billion in revenue, down 6%
year over year; GAAP EPS $0.65, down
3% year over year, and Non-GAAP EPS $0.87, down 1% year over year
- Revenue growth in security, collaboration and
observability
- Progress on business model transformation in Q2 FY 2024:
-
- Total software revenue was flat year over year and software
subscription revenue up 5% year over year
-
- Total annualized recurring revenue (ARR) at $24.7 billion, up 6% year over year and product
ARR up 9% year over year
-
- Remaining performance obligations (RPO) at $35.7 billion, up 12% year over year and product
RPO up 12% year over year
- Dividend increased by 3% to $0.40
per share
-
-
- Decrease of 6% year over year
-
- Earnings per Share: GAAP: $0.65; Non-GAAP: $0.87
-
-
- GAAP EPS decreased 3% year over year
-
-
- Non-GAAP EPS decreased 1% year over year
-
- Revenue: $12.1 billion to
$12.3 billion
-
- Earnings per Share: GAAP: $0.51 to $0.56;
Non-GAAP: $0.84 to $0.86
-
- Revenue: $51.5 billion to
$52.5 billion
-
- Earnings per Share: GAAP: $2.61 to $2.73;
Non-GAAP: $3.68 to $3.74
Cisco today reported second quarter results for the period ended
January 27, 2024. Cisco reported
second quarter revenue of $12.8
billion, net income on a generally accepted accounting
principles (GAAP) basis of $2.6
billion or $0.65 per share,
and non-GAAP net income of $3.5
billion or $0.87 per
share.
"We delivered a solid second quarter with strong operating
leverage and capital returns," said Chuck
Robbins, chair and CEO of Cisco. "We continue to align our
investments to future growth opportunities. Our innovation sits at
the center of an increasingly connected ecosystem and will play a
critical role as our customers adopt AI and secure their
organizations."
"Focused execution and operating discipline drove our solid top
and bottom-line results and strong margins in Q2," said
Scott Herren, CFO of Cisco. "We are
making good progress in our business model shift to more recurring
revenue while remaining focused on financial discipline, operating
leverage and shareholder returns, as evidenced by our increased
dividend."
GAAP
Results
|
|
|
|
Q2 FY 2024
|
|
Q2 FY 2023
|
|
Vs. Q2 FY 2023
|
Revenue
|
|
$ 12.8
billion
|
|
$
13.6 billion
|
|
(6) %
|
Net Income
|
|
$
2.6 billion
|
|
$
2.8 billion
|
|
(5) %
|
Diluted Earnings per
Share (EPS)
|
|
$
0.65
|
|
$
0.67
|
|
(3) %
|
Non-GAAP
Results
|
|
|
|
Q2 FY 2024
|
|
Q2 FY 2023
|
|
Vs. Q2 FY 2023
|
Net Income
|
|
$
3.5 billion
|
|
$
3.6 billion
|
|
(3) %
|
EPS
|
|
$
0.87
|
|
$
0.88
|
|
(1) %
|
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 Increases Quarterly Dividend
Cisco has declared a quarterly dividend of $0.40 per common share, a 1-cent increase or up 3%, over the previous
quarter's dividend, to be paid on April 24,
2024, to all stockholders of record as of the close of
business on April 4, 2024. Future
dividends will be subject to Board approval.
Financial Summary
All comparative percentages are on a year-over-year basis
unless otherwise noted.
Q2 FY 2024 Highlights
Revenue -- Total revenue was $12.8 billion, down 6%, with product revenue down
9% and service revenue up 4%. Revenue by geographic segment was:
Americas down 4%, EMEA down 7%, and APJC was down 12%. Product
revenue performance reflected growth in Security up 3%,
Collaboration up 3% and Observability up 16%. Networking was down
12%.
Gross Margin -- On a GAAP basis, total gross
margin, product gross margin, and service gross margin were 64.2%,
62.7%, and 68.2%, respectively, as compared with 62.0%, 60.2%, and
67.2%, respectively, in the second quarter of fiscal 2023.
On a non-GAAP basis, total gross margin, product gross margin,
and service gross margin were 66.7%, 65.2%, and 70.5%,
respectively, as compared with 63.9%, 62.1%, and 69.1%,
respectively, in the second quarter of fiscal 2023.
Total gross margins by geographic segment were: 65.7% for the
Americas, 68.1% for EMEA and 68.2% for APJC.
Operating Expenses -- On a GAAP basis,
operating expenses was flat at $5.1
billion, and were 40.0% of revenue. Non-GAAP operating
expenses were $4.3 billion, up 1%,
and were 33.8% of revenue.
Operating Income -- GAAP operating income was
$3.1 billion, down 6%, with GAAP
operating margin of 24.2%. Non-GAAP operating income was
$4.2 billion, down 4%, with non-GAAP
operating margin at 33.0%.
Provision for Income Taxes -- The GAAP tax
provision rate was 16.7%. The non-GAAP tax provision rate was
19.0%.
Net Income and EPS -- On a GAAP basis, net income
was $2.6 billion, a decrease of 5%,
and EPS was $0.65, a decrease of 3%.
On a non-GAAP basis, net income was $3.5
billion, a decrease of 3%, and EPS was $0.87, a decrease of 1%.
Cash Flow from Operating Activities --
$0.8 billion for the second quarter
of fiscal 2024, a decrease of 83% compared with $4.7 billion for the second quarter of fiscal
2023.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments --
$25.7 billion at the end of the
second quarter of fiscal 2024, compared with $26.1 billion at the end of fiscal 2023.
Remaining Performance Obligations (RPO)
-- $35.7 billion, up
12% in total, with 50% of this amount to be recognized as revenue
over the next 12 months. Product RPO and service RPO were each up
12%.
Deferred Revenue -- $25.8
billion, up 8% in total, with deferred product revenue up
9%. Deferred service revenue was up 7%.
Capital Allocation -- In the second quarter of
fiscal 2024, 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 $49.54 per share for an aggregate purchase price
of $1.3 billion. The remaining
authorized amount for stock repurchases under the program is
$8.4 billion with no termination
date.
Guidance
Cisco expects to achieve the following results for the third
quarter of fiscal 2024:
Q3 FY 2024
|
|
|
Revenue
|
|
$12.1 billion -
$12.3 billion
|
Non-GAAP gross margin
rate
|
|
66% – 67%
|
Non-GAAP operating
margin rate
|
|
33.5% –
34.5%
|
Non-GAAP EPS
|
|
$0.84 –
$0.86
|
Cisco estimates that GAAP EPS will be $0.51 to $0.56 for
the third quarter of fiscal 2024.
Cisco expects to achieve the following results for fiscal
2024:
FY 2024
|
|
|
Revenue
|
|
$51.5 billion -
$52.5 billion
|
Non-GAAP EPS
|
|
$3.68 –
$3.74
|
Cisco estimates that GAAP EPS will be $2.61 to $2.73 for fiscal 2024.
Our Q3 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:
- Q2 fiscal year 2024 conference call to discuss Cisco's results
along with its guidance will be held on Wednesday,
February 14, 2024 at 1:30 p.m. Pacific
Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847
(international).
- Conference call replay will be available from 4:00 p.m. Pacific Time, February 14, 2024 to
12:00 a.m. Pacific Time,
February 21, 2024 at 1-800-876-5258 (United States) or 1-203-369-3998
(international). The replay will also be available via webcast on
the Cisco Investor Relations website at
https://investor.cisco.com.
- Additional information regarding Cisco's financials, as well as
a webcast of the conference call with visuals designed to guide
participants through the call, will be available at 1:30 p.m. Pacific Time, February 14, 2024.
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
|
|
Six Months
Ended
|
|
January 27,
2024
|
|
January 28,
2023
|
|
January 27,
2024
|
|
January 28,
2023
|
REVENUE:
|
|
|
|
|
|
|
|
Product
|
$
9,232
|
|
$
10,155
|
|
$
20,371
|
|
$
20,400
|
Service
|
3,559
|
|
3,437
|
|
7,088
|
|
6,824
|
Total
revenue
|
12,791
|
|
13,592
|
|
27,459
|
|
27,224
|
COST OF SALES:
|
|
|
|
|
|
|
|
Product
|
3,443
|
|
4,038
|
|
7,400
|
|
8,217
|
Service
|
1,131
|
|
1,127
|
|
2,285
|
|
2,234
|
Total cost of
sales
|
4,574
|
|
5,165
|
|
9,685
|
|
10,451
|
GROSS MARGIN
|
8,217
|
|
8,427
|
|
17,774
|
|
16,773
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
Research and
development
|
1,943
|
|
1,855
|
|
3,856
|
|
3,636
|
Sales and
marketing
|
2,458
|
|
2,384
|
|
4,964
|
|
4,775
|
General and
administrative
|
642
|
|
582
|
|
1,314
|
|
1,147
|
Amortization of
purchased intangible assets
|
66
|
|
71
|
|
133
|
|
142
|
Restructuring and
other charges
|
12
|
|
243
|
|
135
|
|
241
|
Total operating
expenses
|
5,121
|
|
5,135
|
|
10,402
|
|
9,941
|
OPERATING INCOME
|
3,096
|
|
3,292
|
|
7,372
|
|
6,832
|
Interest
income
|
324
|
|
219
|
|
684
|
|
388
|
Interest
expense
|
(120)
|
|
(107)
|
|
(231)
|
|
(207)
|
Other income (loss),
net
|
(139)
|
|
11
|
|
(222)
|
|
(123)
|
Interest and other
income (loss), net
|
65
|
|
123
|
|
231
|
|
58
|
INCOME BEFORE PROVISION FOR INCOME
TAXES
|
3,161
|
|
3,415
|
|
7,603
|
|
6,890
|
Provision for income
taxes
|
527
|
|
642
|
|
1,331
|
|
1,447
|
NET INCOME
|
$
2,634
|
|
$
2,773
|
|
$
6,272
|
|
$
5,443
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.65
|
|
$
0.68
|
|
$
1.55
|
|
$
1.33
|
Diluted
|
$
0.65
|
|
$
0.67
|
|
$
1.54
|
|
$
1.32
|
Shares used in
per-share calculation:
|
|
|
|
|
|
|
|
Basic
|
4,055
|
|
4,103
|
|
4,056
|
|
4,105
|
Diluted
|
4,073
|
|
4,116
|
|
4,079
|
|
4,115
|
CISCO SYSTEMS,
INC.
REVENUE BY
SEGMENT
(In millions,
except percentages)
|
|
|
|
January 27,
2024
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
7,510
|
|
(4) %
|
|
$
16,532
|
|
5 %
|
EMEA
|
|
3,484
|
|
(7) %
|
|
7,148
|
|
(3) %
|
APJC
|
|
1,798
|
|
(12) %
|
|
3,779
|
|
(7) %
|
Total
|
|
$
12,791
|
|
(6) %
|
|
$
27,459
|
|
1 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
GROSS MARGIN
PERCENTAGE BY SEGMENT
(In
percentages)
|
|
|
|
January 27,
2024
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
Gross Margin Percentage:
|
|
|
|
|
Americas
|
|
65.7 %
|
|
65.9 %
|
EMEA
|
|
68.1 %
|
|
68.8 %
|
APJC
|
|
68.2 %
|
|
67.6 %
|
CISCO SYSTEMS,
INC.
REVENUE FOR GROUPS
OF SIMILAR PRODUCTS AND SERVICES
(In millions,
except percentages)
|
|
|
|
January 27,
2024
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Networking
|
|
$
7,081
|
|
(12) %
|
|
$
15,904
|
|
(1) %
|
Security
|
|
973
|
|
3 %
|
|
1,984
|
|
4 %
|
Collaboration
|
|
989
|
|
3 %
|
|
2,106
|
|
3 %
|
Observability
|
|
188
|
|
16 %
|
|
378
|
|
18 %
|
Total
Product
|
|
9,232
|
|
(9) %
|
|
20,371
|
|
— %
|
Services
|
|
3,559
|
|
4 %
|
|
7,088
|
|
4 %
|
Total
|
|
$
12,791
|
|
(6) %
|
|
$
27,459
|
|
1 %
|
|
Amounts may not sum and
percentages may not recalculate due to rounding.
|
CISCO SYSTEMS,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
January 27,
2024
|
|
July 29,
2023
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
13,715
|
|
$
10,123
|
Investments
|
11,956
|
|
16,023
|
Accounts receivable,
net of allowance of $79 at January 27, 2024 and $85 at
July 29, 2023
|
4,884
|
|
5,854
|
Inventories
|
3,209
|
|
3,644
|
Financing receivables,
net
|
3,476
|
|
3,352
|
Other current
assets
|
4,887
|
|
4,352
|
Total current
assets
|
42,127
|
|
43,348
|
Property and equipment,
net
|
2,005
|
|
2,085
|
Financing receivables,
net
|
3,364
|
|
3,483
|
Goodwill
|
39,087
|
|
38,535
|
Purchased intangible
assets, net
|
1,678
|
|
1,818
|
Deferred tax
assets
|
7,338
|
|
6,576
|
Other assets
|
5,575
|
|
6,007
|
TOTAL ASSETS
|
$
101,174
|
|
$
101,852
|
LIABILITIES AND EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Short-term
debt
|
$
4,936
|
|
$
1,733
|
Accounts
payable
|
1,848
|
|
2,313
|
Income taxes
payable
|
1,876
|
|
4,235
|
Accrued
compensation
|
3,216
|
|
3,984
|
Deferred
revenue
|
14,011
|
|
13,908
|
Other current
liabilities
|
4,964
|
|
5,136
|
Total current
liabilities
|
30,851
|
|
31,309
|
Long-term
debt
|
6,669
|
|
6,658
|
Income taxes
payable
|
3,390
|
|
5,756
|
Deferred
revenue
|
11,760
|
|
11,642
|
Other long-term
liabilities
|
2,253
|
|
2,134
|
Total
liabilities
|
54,923
|
|
57,499
|
Total equity
|
46,251
|
|
44,353
|
TOTAL LIABILITIES AND EQUITY
|
$
101,174
|
|
$
101,852
|
CISCO SYSTEMS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
Six Months
Ended
|
|
January
27,
2024
|
|
January
28,
2023
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
6,272
|
|
$
5,443
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation,
amortization, and other
|
823
|
|
853
|
Share-based
compensation expense
|
1,463
|
|
1,097
|
Provision (benefit)
for receivables
|
12
|
|
6
|
Deferred income
taxes
|
(816)
|
|
(845)
|
(Gains) losses on
divestitures, investments and other, net
|
205
|
|
109
|
Change in operating
assets and liabilities, net of effects of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
941
|
|
1,393
|
Inventories
|
442
|
|
(569)
|
Financing
receivables
|
(33)
|
|
834
|
Other
assets
|
(403)
|
|
(210)
|
Accounts
payable
|
(476)
|
|
42
|
Income taxes,
net
|
(4,656)
|
|
118
|
Accrued
compensation
|
(763)
|
|
(146)
|
Deferred
revenue
|
293
|
|
633
|
Other
liabilities
|
(125)
|
|
(57)
|
Net cash provided by
operating activities
|
3,179
|
|
8,701
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(2,253)
|
|
(3,797)
|
Proceeds from sales of
investments
|
2,484
|
|
587
|
Proceeds from
maturities of investments
|
4,044
|
|
2,316
|
Acquisitions, net of
cash and cash equivalents acquired
|
(878)
|
|
(3)
|
Purchases of
investments in privately held companies
|
(50)
|
|
(70)
|
Return of investments
in privately held companies
|
123
|
|
39
|
Acquisition of
property and equipment
|
(304)
|
|
(346)
|
Other
|
(1)
|
|
(19)
|
Net cash provided by
(used in) provided by investing activities
|
3,165
|
|
(1,293)
|
Cash flows from
financing activities:
|
|
|
|
Issuances of common
stock
|
349
|
|
316
|
Repurchases of common
stock - repurchase program
|
(2,504)
|
|
(1,760)
|
Shares repurchased for
tax withholdings on vesting of restricted stock units
|
(581)
|
|
(310)
|
Short-term borrowings,
original maturities of 90 days or less, net
|
1,398
|
|
(602)
|
Issuances of
debt
|
2,537
|
|
—
|
Repayments of
debt
|
(750)
|
|
—
|
Dividends
paid
|
(3,163)
|
|
(3,120)
|
Other
|
(7)
|
|
(5)
|
Net cash used in
financing activities
|
(2,721)
|
|
(5,481)
|
Effect of foreign
currency exchange rate changes on cash, cash equivalents,
restricted cash and restricted cash equivalents
|
(32)
|
|
3
|
Net increase in cash,
cash equivalents, restricted cash and restricted cash
equivalents
|
3,591
|
|
1,930
|
Cash, cash equivalents,
restricted cash and restricted cash equivalents, beginning of
period
|
11,627
|
|
8,579
|
Cash, cash equivalents,
restricted cash and restricted cash equivalents, end of
period
|
$
15,218
|
|
$
10,509
|
Supplemental cash flow
information:
|
|
|
|
Cash paid for
interest
|
$
203
|
|
$
178
|
Cash paid for income
taxes, net
|
$
6,804
|
|
$
2,172
|
CISCO SYSTEMS,
INC.
REMAINING
PERFORMANCE OBLIGATIONS
(In millions,
except percentages)
|
|
|
January 27,
2024
|
|
October 28,
2023
|
|
January 28,
2023
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
|
Amount
|
|
Y/Y%
|
Product
|
$
16,249
|
|
12 %
|
|
$
16,011
|
|
14 %
|
|
$
14,517
|
|
7 %
|
Service
|
19,407
|
|
12 %
|
|
18,742
|
|
11 %
|
|
17,255
|
|
2 %
|
Total
|
$
35,656
|
|
12 %
|
|
$
34,753
|
|
12 %
|
|
$
31,772
|
|
4 %
|
|
We expect 50% of total
RPO at January 27, 2024 will be recognized as revenue over the
next 12 months.
|
CISCO SYSTEMS,
INC.
DEFERRED
REVENUE
(In
millions)
|
|
|
January 27,
2024
|
|
October 28,
2023
|
|
January 28,
2023
|
Deferred
revenue:
|
|
|
|
|
|
Product
|
$
11,640
|
|
$
11,689
|
|
$
10,679
|
Service
|
14,131
|
|
13,970
|
|
13,248
|
Total
|
$
25,771
|
|
$
25,659
|
|
$
23,927
|
Reported as:
|
|
|
|
|
|
Current
|
$
14,011
|
|
$
13,812
|
|
$
13,109
|
Noncurrent
|
11,760
|
|
11,847
|
|
10,818
|
Total
|
$
25,771
|
|
$
25,659
|
|
$
23,927
|
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 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
January 27,
2024
|
|
$
0.39
|
|
$
1,583
|
|
25
|
|
$
49.54
|
|
$
1,254
|
|
$
2,837
|
October 28,
2023
|
|
$
0.39
|
|
$
1,580
|
|
23
|
|
$
54.53
|
|
$
1,252
|
|
$
2,832
|
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
|
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
GAAP TO NON-GAAP
NET INCOME
(In
millions)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
January
27,
2024
|
|
January
28,
2023
|
|
January
27,
2024
|
|
January
28,
2023
|
GAAP net
income
|
$
2,634
|
|
$
2,773
|
|
$
6,272
|
|
$
5,443
|
Adjustments to cost of
sales:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
139
|
|
106
|
|
242
|
|
187
|
Amortization of
acquisition-related intangible assets
|
175
|
|
153
|
|
356
|
|
306
|
Acquisition-related/divestiture costs
|
1
|
|
1
|
|
1
|
|
3
|
Total adjustments to
GAAP cost of sales
|
315
|
|
260
|
|
599
|
|
496
|
Adjustments to
operating expenses:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
662
|
|
498
|
|
1,212
|
|
913
|
Amortization of
acquisition-related intangible assets
|
66
|
|
71
|
|
133
|
|
142
|
Acquisition-related/divestiture costs
|
64
|
|
48
|
|
139
|
|
123
|
Russia-Ukraine war
costs
|
—
|
|
2
|
|
(2)
|
|
5
|
Significant asset
impairments and restructurings
|
12
|
|
243
|
|
135
|
|
241
|
Total adjustments to
GAAP operating expenses
|
804
|
|
862
|
|
1,617
|
|
1,424
|
Adjustments to
interest and other income (loss), net:
|
|
|
|
|
|
|
|
(Gains) and losses on
investments
|
88
|
|
(44)
|
|
139
|
|
65
|
Total adjustments to
GAAP interest and other income (loss), net
|
88
|
|
(44)
|
|
139
|
|
65
|
Total adjustments to
GAAP income before provision for income taxes
|
1,207
|
|
1,078
|
|
2,355
|
|
1,985
|
Income tax effect of
non-GAAP adjustments
|
(303)
|
|
(212)
|
|
(561)
|
|
(404)
|
Significant tax
matters
|
—
|
|
—
|
|
—
|
|
164
|
Total adjustments to
GAAP provision for income taxes
|
(303)
|
|
(212)
|
|
(561)
|
|
(240)
|
Non-GAAP net
income
|
$
3,538
|
|
$
3,639
|
|
$
8,066
|
|
$
7,188
|
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
GAAP TO NON-GAAP
EPS
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
January
27,
2024
|
|
January
28,
2023
|
|
January
27,
2024
|
|
January
28,
2023
|
GAAP EPS
|
$
0.65
|
|
$
0.67
|
|
$
1.54
|
|
$
1.32
|
Adjustments to
GAAP:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
0.20
|
|
0.15
|
|
0.36
|
|
0.27
|
Amortization of
acquisition-related intangible assets
|
0.06
|
|
0.05
|
|
0.12
|
|
0.11
|
Acquisition-related/divestiture costs
|
0.02
|
|
0.01
|
|
0.03
|
|
0.03
|
Significant asset
impairments and restructurings
|
—
|
|
0.06
|
|
0.03
|
|
0.06
|
(Gains) and losses on
investments
|
0.02
|
|
(0.01)
|
|
0.03
|
|
0.02
|
Income tax effect of
non-GAAP adjustments
|
(0.07)
|
|
(0.05)
|
|
(0.14)
|
|
(0.10)
|
Significant tax
matters
|
—
|
|
—
|
|
—
|
|
0.04
|
Non-GAAP EPS
|
$
0.87
|
|
$
0.88
|
|
$
1.98
|
|
$
1.75
|
|
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
|
|
January 27,
2024
|
|
Product
Gross
Margin
|
|
Service
Gross
Margin
|
|
Total
Gross
Margin
|
|
Operating
Expenses
|
|
Y/Y
|
|
Operating
Income
|
|
Y/Y
|
|
Interest
andother
income
(loss), net
|
|
Net
Income
|
|
Y/Y
|
GAAP amount
|
$ 5,789
|
|
$ 2,428
|
|
$ 8,217
|
|
$ 5,121
|
|
— %
|
|
$ 3,096
|
|
(6) %
|
|
$
65
|
|
$ 2,634
|
|
(5) %
|
% of revenue
|
62.7 %
|
|
68.2 %
|
|
64.2 %
|
|
40.0 %
|
|
|
|
24.2 %
|
|
|
|
0.5 %
|
|
20.6 %
|
|
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
58
|
|
81
|
|
139
|
|
662
|
|
|
|
801
|
|
|
|
—
|
|
801
|
|
|
Amortization of
acquisition-related intangible assets
|
175
|
|
—
|
|
175
|
|
66
|
|
|
|
241
|
|
|
|
—
|
|
241
|
|
|
Acquisition/divestiture-related costs
|
1
|
|
—
|
|
1
|
|
64
|
|
|
|
65
|
|
|
|
—
|
|
65
|
|
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
12
|
|
|
|
12
|
|
|
|
—
|
|
12
|
|
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
88
|
|
88
|
|
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(303)
|
|
|
Non-GAAP
amount
|
$ 6,023
|
|
$ 2,509
|
|
$ 8,532
|
|
$ 4,317
|
|
1 %
|
|
$ 4,215
|
|
(4) %
|
|
$ 153
|
|
$ 3,538
|
|
(3) %
|
% of revenue
|
65.2 %
|
|
70.5 %
|
|
66.7 %
|
|
33.8 %
|
|
|
|
33.0 %
|
|
|
|
1.2 %
|
|
27.7 %
|
|
|
|
Three Months
Ended
|
|
January 28,
2023
|
|
Product
Gross
Margin
|
|
Service
Gross
Margin
|
|
Total
Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Interest
and other
income
(loss), net
|
|
Net
Income
|
GAAP amount
|
$
6,117
|
|
$
2,310
|
|
$
8,427
|
|
$
5,135
|
|
$
3,292
|
|
$ 123
|
|
$
2,773
|
% of revenue
|
60.2 %
|
|
67.2 %
|
|
62.0 %
|
|
37.8 %
|
|
24.2 %
|
|
0.9 %
|
|
20.4 %
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
40
|
|
66
|
|
106
|
|
498
|
|
604
|
|
—
|
|
604
|
Amortization of
acquisition-related intangible assets
|
153
|
|
—
|
|
153
|
|
71
|
|
224
|
|
—
|
|
224
|
Acquisition/divestiture-related costs
|
1
|
|
—
|
|
1
|
|
48
|
|
49
|
|
—
|
|
49
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
243
|
|
243
|
|
—
|
|
243
|
Russia-Ukraine war
costs
|
—
|
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
2
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(44)
|
|
(44)
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(212)
|
Non-GAAP
amount
|
$
6,311
|
|
$
2,376
|
|
$
8,687
|
|
$
4,273
|
|
$
4,414
|
|
$
79
|
|
$
3,639
|
% of revenue
|
62.1 %
|
|
69.1 %
|
|
63.9 %
|
|
31.4 %
|
|
32.5 %
|
|
0.6 %
|
|
26.8 %
|
|
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)
|
|
|
Six Months
Ended
|
|
January 27,
2024
|
|
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
|
$ 12,971
|
|
$ 4,803
|
|
$ 17,774
|
|
$ 10,402
|
|
5 %
|
|
$ 7,372
|
|
8 %
|
|
$ 231
|
|
$ 6,272
|
|
15 %
|
% of revenue
|
63.7 %
|
|
67.8 %
|
|
64.7 %
|
|
37.9 %
|
|
|
|
26.8 %
|
|
|
|
0.8 %
|
|
22.8 %
|
|
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
100
|
|
142
|
|
242
|
|
1,212
|
|
|
|
1,454
|
|
|
|
—
|
|
1,454
|
|
|
Amortization of
acquisition-related intangible assets
|
356
|
|
—
|
|
356
|
|
133
|
|
|
|
489
|
|
|
|
—
|
|
489
|
|
|
Acquisition/divestiture-related costs
|
1
|
|
—
|
|
1
|
|
139
|
|
|
|
140
|
|
|
|
—
|
|
140
|
|
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
135
|
|
|
|
135
|
|
|
|
—
|
|
135
|
|
|
Russia-Ukraine war
costs
|
—
|
|
—
|
|
—
|
|
(2)
|
|
|
|
(2)
|
|
|
|
—
|
|
(2)
|
|
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
139
|
|
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(561)
|
|
|
Non-GAAP
amount
|
$ 13,428
|
|
$ 4,945
|
|
$ 18,373
|
|
$ 8,785
|
|
3 %
|
|
$ 9,588
|
|
10 %
|
|
$ 370
|
|
$ 8,066
|
|
12 %
|
% of revenue
|
65.9 %
|
|
69.8 %
|
|
66.9 %
|
|
32.0 %
|
|
|
|
34.9 %
|
|
|
|
1.3 %
|
|
29.4 %
|
|
|
|
Six Months
Ended
|
|
January 28,
2023
|
|
Product
Gross
Margin
|
|
Service
Gross
Margin
|
|
Total
Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Interest
and other
income
(loss), net
|
|
Net
Income
|
GAAP amount
|
$ 12,183
|
|
$
4,590
|
|
$ 16,773
|
|
$
9,941
|
|
$
6,832
|
|
$
58
|
|
$
5,443
|
% of revenue
|
59.7 %
|
|
67.3 %
|
|
61.6 %
|
|
36.5 %
|
|
25.1 %
|
|
0.2 %
|
|
20.0 %
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
71
|
|
116
|
|
187
|
|
913
|
|
1,100
|
|
—
|
|
1,100
|
Amortization of
acquisition-related intangible assets
|
306
|
|
—
|
|
306
|
|
142
|
|
448
|
|
—
|
|
448
|
Acquisition/divestiture-related costs
|
3
|
|
—
|
|
3
|
|
123
|
|
126
|
|
—
|
|
126
|
Significant asset
impairments and restructurings
|
—
|
|
—
|
|
—
|
|
241
|
|
241
|
|
—
|
|
241
|
Russia-Ukraine war
costs
|
—
|
|
—
|
|
—
|
|
5
|
|
5
|
|
—
|
|
5
|
(Gains) and losses on
investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
65
|
|
65
|
Income tax
effect/significant tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(240)
|
Non-GAAP
amount
|
$ 12,563
|
|
$
4,706
|
|
$ 17,269
|
|
$
8,517
|
|
$
8,752
|
|
$ 123
|
|
$
7,188
|
% of revenue
|
61.6 %
|
|
69.0 %
|
|
63.4 %
|
|
31.3 %
|
|
32.1 %
|
|
0.5 %
|
|
26.4 %
|
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
|
|
Six Months
Ended
|
|
January 27,
2024
|
|
January 28,
2023
|
|
January 27,
2024
|
|
January 28,
2023
|
GAAP effective tax
rate
|
16.7 %
|
|
18.8 %
|
|
17.5 %
|
|
21.0 %
|
Total adjustments to
GAAP provision for income taxes
|
2.3 %
|
|
0.2 %
|
|
1.5 %
|
|
(2.0) %
|
Non-GAAP effective tax
rate
|
19.0 %
|
|
19.0 %
|
|
19.0 %
|
|
19.0 %
|
GAAP TO NON-GAAP
GUIDANCE
|
|
Q3 FY 2024
|
|
Gross Margin
Rate
|
|
Operating Margin
Rate
|
|
Earnings per
Share (2)
|
GAAP
|
|
63.5% –
64.5%
|
|
20.5% –
21.5%
|
|
$0.51 –
$0.56
|
Estimated adjustments
for:
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
1.0 %
|
|
6.5 %
|
|
$0.15 –
$0.16
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
1.5 %
|
|
2.0 %
|
|
$0.05 –
$0.06
|
Significant asset
impairments and restructurings (1)
|
|
—
|
|
4.5 %
|
|
$0.10 –
$0.11
|
Non-GAAP
|
|
66% – 67%
|
|
33.5% –
34.5%
|
|
$0.84 –
$0.86
|
FY 2024
|
|
Earnings per
Share (2)
|
GAAP
|
|
$2.61 –
$2.73
|
Estimated adjustments
for:
|
|
|
Share-based
compensation expense
|
|
$0.59 –
$0.61
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
$0.23 –
$0.25
|
Significant asset
impairments and restructurings (1)
|
|
$0.16 –
$0.18
|
(Gains) and losses on
investments
|
|
$0.03
|
Non-GAAP
|
|
$3.68 –
$3.74
|
(1) On February 14,
2024, Cisco announced a restructuring plan in order to
realign the organization and enable further investment in key
priority areas. This restructuring plan will impact approximately 5
percent of Cisco's global workforce. Cisco currently estimates that
it will recognize pre-tax charges to its GAAP financial results of
approximately $800 million consisting
of severance and other one-time termination benefits and other
costs. These charges are primarily cash-based. Cisco expects to
take the majority of these actions in the third quarter of fiscal
2024 and recognize approximately $500
million of these charges. Cisco expects approximately
$150 million of these charges to be
recognized in the fourth quarter of fiscal 2024, and the remaining
amount of these charges primarily through the first half of fiscal
2025.
(2) Estimated adjustments to GAAP earnings per share
are shown after income tax effects.
Except as noted above, this guidance does not include the
effects of any future acquisitions/divestitures, asset impairments,
Russia-Ukraine war costs, restructurings, (gains) and
losses on investments and significant tax matters or other events,
which may or may not be significant unless specifically stated.
Forward Looking Statements, Non-GAAP Information and
Additional Information
This release may be deemed to contain
forward-looking statements, which are subject to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among other things,
statements regarding future events (such as the alignment of our
investments to future growth opportunities, the role that our
innovation plays as our customers adopt AI and secure their
organizations, the progress in our business model shift to more
recurring revenue while remaining focused on financial discipline,
operating leverage and shareholder returns) and the future
financial performance of Cisco (including the guidance for Q3 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: 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; our development and use of artificial intelligence;
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 Networking and services; the timing of
orders and manufacturing and customer lead times; 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 other incidents;
vulnerabilities and critical security defects; our ability to
protect personal data; evolving regulatory uncertainty; terrorism;
natural catastrophic events (including as a result of global
climate change); any pandemic or epidemic; our ability to achieve
the benefits anticipated from our investments in sales,
engineering, service, marketing and manufacturing activities; our
ability to recruit and retain key personnel; our ability to manage
financial risk, and to manage expenses during economic downturns;
risks related to the global nature of our operations, including our
operations in emerging markets; currency fluctuations and other
international factors; changes in provision for income taxes,
including changes in tax laws and regulations or adverse outcomes
resulting from examinations of our income tax returns; potential
volatility in operating results; and other factors listed in
Cisco's most recent reports on Forms 10-Q and 10-K filed on
November 21, 2023 and September 7, 2023, respectively. The financial
information contained in this release should be read in conjunction
with the consolidated financial statements and notes thereto
included in Cisco's most recent reports on Forms 10-Q and 10-K as
each may be amended from time to time. Cisco's results of
operations for the three and six months ended January 27, 2024
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
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, 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
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