CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2023 EARNINGS
- 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.
- None.
News Summary:
- Cisco ended fiscal 2023 with Q4 revenue at
, up$15.2 billion 16% year over year; GAAP EPS , up$0.97 43% year over year, and Non-GAAP EPS , up$1.14 37% year over year - Q4 FY 2023 operating cash flow of
, up$6.0 billion 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 up20% year over year - Total annualized recurring revenue (ARR) at
, up$24.3 billion 5% year over year and product ARR up10% year over year - Remaining performance obligations (RPO) at
, up$34.9 billion 11% year over year and product RPO up12% year over year - Q4 FY 2023 Results:
- Revenue:
$15.2 billion - Increase of
16% year over year - Earnings per Share: GAAP:
; Non-GAAP:$0.97 $1.14 - GAAP EPS increased
43% year over year - Non-GAAP EPS increased
37% year over year - FY 2023 Results:
- Revenue:
billion$57.0 - Increase of
11% year over year - Earnings per Share: GAAP:
; Non-GAAP:$3.07 $3.89 - GAAP EPS increased
9% year over year - Non-GAAP EPS increased
16% year over year - Q1 FY 2024 Guidance:
- Revenue:
to$14.5 billion .7 billion$14 - Earnings per Share: GAAP:
to$0.79 ; Non-GAAP:$0.84 to$1.02 $1.04 - FY 2024 Guidance:
- Revenue:
to$57.0 billion .2 billion$58 - Earnings per Share: GAAP:
to$3.19 ; Non-GAAP:$3.32 to$4.01 $4.08
Cisco today reported fourth quarter and fiscal year results for the period ended July 29, 2023. Cisco reported fourth quarter revenue of
"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
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q4 FY 2023 Highlights
Revenue -- Total revenue was up
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were
Total gross margins by geographic segment were:
Operating Expenses -- On a GAAP basis, operating expenses were
Operating Income -- GAAP operating income was
Provision for Income Taxes -- The GAAP tax provision rate was
Net Income and EPS -- On a GAAP basis, net income was
Cash Flow from Operating Activities --
FY 2023 Highlights
Revenue -- Total revenue was
Net Income and EPS -- On a GAAP basis, net income was
Cash Flow from Operating Activities --
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments --
Remaining Performance Obligations (RPO) --
Deferred Revenue --
Capital Allocation -- In the fourth quarter of fiscal 2023, we returned
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 | ||
Non-GAAP gross margin rate | ||
Non-GAAP operating margin rate | ||
Non-GAAP EPS |
Cisco estimates that GAAP EPS will be
Cisco expects to achieve the following results for fiscal 2024:
FY 2024 | ||
Revenue | ||
Non-GAAP EPS |
Cisco estimates that GAAP EPS will be
Our Q1 FY 2024 and FY 2024 guidance assumes an effective tax provision rate of
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, | July 30, | July 29, | July 30, | ||||
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: | ||||||||
$ 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: | ||||
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, | July 30, | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 10,123 | $ 7,079 | |
Investments | 16,023 | 12,188 | |
Accounts receivable, net of allowance of | 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, | July 30, | ||
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 | (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 |
CISCO SYSTEMS, INC. DEFERRED REVENUE (In millions) | |||||
July 29, | April 29, | July 30, | |||
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 | 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, | July 30, | July 29, | July 30, | ||||
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 | |||
— | 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 | |||
(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, | July 30, | July 29, | July 30, | ||||
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 | |||
— | 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, (In millions, except percentages) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
July 29, 2023 | |||||||||||||||||||
Product Gross | Service Gross | Total Gross | Operating | Y/Y | Operating | Y/Y | Interest and | Net | Y/Y | ||||||||||
GAAP amount | 20 % | 24 % | 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 | 168 | — | 168 | 70 | 238 | — | 238 | ||||||||||||
Acquisition/divestiture-related costs | 14 | — | 14 | 63 | 77 | — | 77 | ||||||||||||
— | — | — | (7) | (7) | — | (7) | |||||||||||||
Supplier component remediation charge | (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 | 15 % | 27 % | 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 | Service Gross | Total Gross | Operating | Operating Income | Interest and | Net Income | |||||||
GAAP amount | |||||||||||||
% 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 | 162 | — | 162 | 73 | 235 | — | 235 | ||||||
Acquisition/divestiture-related costs | 24 | — | 24 | 45 | 69 | — | 69 | ||||||
— | 2 | 2 | 22 | 24 | — | 24 | |||||||
Significant asset impairments and restructurings | — | — | — | (2) | (2) | — | (2) | ||||||
Income tax effect/significant tax matters | — | — | — | — | — | — | (181) | ||||||
Non-GAAP amount | |||||||||||||
% 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, (In millions, except percentages) | |||||||||||||||||||
Fiscal Year Ended | |||||||||||||||||||
July 29, 2023 | |||||||||||||||||||
Product Gross | Service Gross | Total Gross | Operating | Y/Y | Operating | Y/Y | Interest and | Net | Y/Y | ||||||||||
GAAP amount | 13 % | 8 % | 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 | 630 | — | 630 | 282 | 912 | — | 912 | ||||||||||||
Acquisition/divestiture-related costs | 18 | — | 18 | 241 | 259 | — | 259 | ||||||||||||
Supplier component remediation charge | (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 | 11 % | 10 % | 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 | Service Gross | Total Gross | Operating | Operating Income | Interest and | Net Income | |||||||
GAAP amount | |||||||||||||
% 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 | 733 | — | 733 | 328 | 1,061 | — | 1,061 | ||||||
Acquisition/divestiture-related costs | 27 | — | 27 | 306 | 333 | — | 333 | ||||||
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 | $ 30 | ||||||||||||
% 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 | ||||||
Estimated adjustments for: | ||||||
Share-based compensation expense | 1.0 % | 4.0 % | ||||
Amortization of acquisition-related intangible assets | 1.0 % | 2.0 % | ||||
Significant asset impairments and restructurings | — | 1.0 % | ||||
Non-GAAP | ||||||
FY 2024 | Earnings per Share (1) | |
GAAP | ||
Estimated adjustments for: | ||
Share-based compensation expense | ||
Amortization of acquisition-related intangible assets | ||
Significant asset impairments and restructurings | ||
Non-GAAP | ||
(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,
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,
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.
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