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CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2023 EARNINGS

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Cisco reported strong Q4 FY 2023 results with revenue of $15.2 billion, up 16% YoY. GAAP EPS increased 43% YoY to $0.97, while non-GAAP EPS increased 37% YoY to $1.14. The company achieved double-digit growth in software revenue and total annualized recurring revenue. Q1 FY 2024 guidance includes revenue of $14.5 billion to $14.7 billion and GAAP EPS of $0.79 to $0.84.
Positive
  • Cisco reported strong Q4 FY 2023 results with revenue up 16% YoY to $15.2 billion.
  • GAAP EPS increased 43% YoY to $0.97, while non-GAAP EPS increased 37% YoY to $1.14.
  • Total software revenue and total annualized recurring revenue achieved double-digit growth.
  • Q1 FY 2024 guidance includes revenue of $14.5 billion to $14.7 billion and GAAP EPS of $0.79 to $0.84.
Negative
  • None.

SAN JOSE, Calif., Aug. 16, 2023 /PRNewswire/ --

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

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.

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.

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.

 

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

 

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.

 

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

 

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

 

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

 

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

 

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.

 

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.

 

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.

 

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.

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.

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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Press Contact:


Investor Relations Contact:

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Cisco


Cisco

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SOURCE Cisco Systems, Inc.

FAQ

What were Cisco's Q4 FY 2023 revenue and EPS?

Cisco reported Q4 FY 2023 revenue of $15.2 billion, up 16% YoY, with GAAP EPS of $0.97 and non-GAAP EPS of $1.14.

What was the growth in software revenue and total annualized recurring revenue?

Cisco achieved double-digit growth in software revenue and total annualized recurring revenue.

What is Cisco's Q1 FY 2024 guidance?

Cisco's Q1 FY 2024 guidance includes revenue of $14.5 billion to $14.7 billion and GAAP EPS of $0.79 to $0.84.

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