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CISCO SYSTEMS INC

Date Filed : Nov 17, 2021

EX-99.12d233827dex991.htmEX-99.1EX-99.1

Exhibit 99.1

 

LOGO

 

Press Contact:   Investor Relations Contact:
Robyn Blum   Marilyn Mora
Cisco   Cisco
1 (408) 930-8548   1 408) 527-7452
rojenkin@cisco.com   marilmor@cisco.com

CISCO REPORTS FIRST QUARTER EARNINGS

News Summary:

 

  

Overall performance: $12.9 billion in revenue, up 8% year over year, with broad-based strength across thebusiness; GAAP EPS $0.70, up 37% year over year, and Non-GAAP EPS $0.82, up 8% year over year

 

  

Strong demand across the business with 33% year-over-year total product order growth

 

  

Solid progress on business model transformation: Total Annualized Recurring Revenue was $21.6 billion for thefirst quarter of fiscal 2022, up 10% year over year

 

  

Q1 Results:

 

  

Revenue: $12.9 billion

 

  

Increase of 8% year over year

 

  

Earnings per Share: GAAP: $0.70; Non-GAAP: $0.82

 

  

GAAP EPS increased 37% year over year

 

  

Non-GAAP EPS increased 8% year over year

 

  

Q2 Guidance:

 

  

Revenue: 4.5% to 6.5% growth year over year

 

  

Earnings per Share: GAAP: $0.64 to $0.68; Non-GAAP: $0.80 to $0.82

 

  

FY 2022 Guidance:

 

  

Revenue: 5% to 7% growth year over year

 

  

Earnings per Share: GAAP: $2.77 to $2.89; Non-GAAP: $3.38 to $3.45

SAN JOSE, Calif. — November 17, 2021 — Cisco today reported first quarter results for the period ended October 30, 2021. Cisco reportedfirst quarter revenue of $12.9 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.70 per share, and non-GAAP net income of $3.5 billion or $0.82 per share.

“In Q1, we had robust growth and continued strong demand despite the very dynamic supply environment,” said Chuck Robbins, Chair and CEO of Cisco.“Cisco’s technology sits at the heart of the accelerated digital transformation happening today. Our breakthrough innovation, strong demand, and the success of our business transformation position us well for another year of growth infiscal 2022.”

“Our teams executed well in a challenging environment, delivering balanced profitable growth with revenue and non-GAAP EPS bothgrowing 8% year over year,” said Scott Herren, CFO of Cisco. “We also continued to make significant progress in our business model transformation. Remaining performance obligations and annualized recurring revenue both grew 10% year overyear with product ARR growth of 21% providing more predictability and visibility to our long-term growth.”

 

1


GAAP Results

 

   Q1 FY 2022   Q1 FY 2021   Vs. Q1 FY 2021 

Revenue

  $12.9 billion   $11.9 billion    8

Net Income

  $3.0 billion   $2.2 billion    37

Diluted Earnings per Share (EPS)

  $0.70  $0.51   37

Non-GAAP Results

 

   Q1 FY 2022   Q1 FY 2021   Vs. Q1 FY 2021 

Net Income

  $3.5 billion   $3.2 billion    8

EPS

  $0.82  $0.76   8

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

 

2


Financial Summary

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

Q1 FY 2022 Highlights

Revenue — Totalrevenue was up 8% at $12.9 billion, with product revenue up 11% and service revenue up 1%. Revenue by geographic segment was: Americas up 5%, EMEA up 11%, and APJC up 15%. Product revenue performance was led by growth in Secure, Agile Networks up10%, Internet for the Future up 46%, End-to-End Security up 4%, and Optimized Application Experiences up 18%. Hybrid Work was down 7%.

Gross Margin — On a GAAP basis, total gross margin, product gross margin, and service gross margin were 62.4%, 61.5%, and 65.2%,respectively, as compared with 63.6%, 62.7%, and 65.8%, respectively, in the first quarter of fiscal 2021.

On a non-GAAP basis, totalgross margin, product gross margin, and service gross margin were 64.5%, 63.8%, and 66.5%, respectively, as compared with 65.8%, 65.3%, and 67.1%, respectively, in the first quarter of fiscal 2021.

Total gross margins by geographic segment were: 64.5% for the Americas, 64.4% for EMEA and 64.7% for APJC.

Operating Expenses — On a GAAP basis, operating expenses were $4.6 billion, down 8%, and were 35.8% of revenue. Non-GAAP operating expenseswere $4.0 billion, up 2%, and were 31.2% of revenue.

Operating Income — GAAP operating income was $3.4 billion, up 34%,with GAAP operating margin of 26.7%. Non-GAAP operating income was $4.3 billion, up 10%, with non-GAAP operating margin at 33.3%.

Provision for Income Taxes — The GAAP tax provision rate was 18.5%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS — On a GAAP basis, net income was $3.0 billion, an increase of 37%, and EPS was $0.70, an increase of 37%. On a non-GAAPbasis, net income was $3.5 billion, an increase of 8%, and EPS was $0.82, an increase of 8%.

Cash Flow from Operating Activities— $3.4 billion for the first quarter of fiscal 2022, a decrease of 16% compared with $4.1 billion for the first quarter of fiscal 2021.

Balance Sheet and Other Financial Highlights

Cashand Cash Equivalents and Investments — $23.3 billion at the end of the first quarter of fiscal 2022, compared with $24.5 billion at the end of fiscal 2021.

Remaining Performance Obligations (RPO) — $30.1 billion, up 10% in total, with 53% of this amount to be recognized as revenue over the next12 months. Product RPO were up 18% and service RPO were up 4%.

Deferred Revenue — $22.1 billion, up 8% in total, withdeferred product revenue up 19%. Deferred service revenue was flat.

Capital Allocation — In the first quarter of fiscal2022, we returned $1.8 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.37 per common share, or $1.6 billion, and repurchased approximately 5 million shares of common stock under our stockrepurchase program at an average price of $56.49 per share for an aggregate purchase price of $256 million. The remaining authorized amount for stock repurchases under the program is $7.7 billion with no termination date.

Acquisitions

In the first quarter of fiscal 2022, weclosed the acquisition of Epsagon Ltd., a privately held modern observability company with expertise in distributed tracing solutions for modern applications and technologies, including containers and serverless environments.

In addition, we announced our intent to acquire replex GmbH, a privately held enterprise software company based in Germany.

 

3


Guidance

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

 

Q2 FY 2022

   

Revenue

  4.5% - 6.5% growth Y/Y

Non-GAAP gross margin rate

  63.5% - 64.5%

Non-GAAP operating margin rate

  32.5% - 33.5%

Non-GAAP EPS

  $0.80 - $0.82

Cisco estimates that GAAP EPS will be $0.64 to $0.68 for the second quarter of fiscal 2022.

Cisco expects to achieve the following results for fiscal 2022 (no change from our previous guidance):

 

FY 2022

   

Revenue

  5% - 7% growth Y/Y

Non-GAAP EPS

  $3.38 - $3.45

Cisco estimates that GAAP EPS will be $2.77 to $2.89 for fiscal 2022.

Our Q2 FY 2022 and FY 2022 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 thesection entitled “Reconciliations of GAAP to non-GAAP Measures.”

Editor’s Notes:

 

  

Q1 fiscal year 2022 conference call to discuss Cisco’s results along with its guidance will be held onWednesday, November 17, 2021 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

 

  

Conference call replay will be available from 4:00 p.m. Pacific Time, November 17, 2021 to 4:00 p.m. PacificTime, November 24, 2021 at 1-866-360-3304 (United States) or 1-203-369-0159 (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 withvisuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, November 17, 2021. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. Thewebcast 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 athttps://investor.cisco.com.

 

4


CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited) 

 

   Three Months Ended 
   October 30,
2021
  October 24,
2020
 

REVENUE:

   

Product

  $9,529 $8,587

Service

   3,371  3,342
  

 

 

  

 

 

 

Total revenue

   12,900  11,929
  

 

 

  

 

 

 

COST OF SALES:

   

Product

   3,673  3,206

Service

   1,174  1,142
  

 

 

  

 

 

 

Total cost of sales

   4,847  4,348
  

 

 

  

 

 

 

GROSS MARGIN

   8,053  7,581

OPERATING EXPENSES:

   

Research and development

   1,714  1,612

Sales and marketing

   2,261  2,217

General and administrative

   551  544

Amortization of purchased intangible assets

   84  36

Restructuring and other charges

   5  602
  

 

 

  

 

 

 

Total operating expenses

   4,615  5,011
  

 

 

  

 

 

 

OPERATING INCOME

   3,438  2,570

Interest income

   121  174

Interest expense

   (89  (112

Other income (loss), net

   187  49
  

 

 

  

 

 

 

Interest and other income (loss), net

   219  111
  

 

 

  

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

   3,657  2,681

Provision for income taxes

   677  507
  

 

 

  

 

 

 

NET INCOME

  $2,980 $2,174
  

 

 

  

 

 

 

Net income per share:

   

Basic

  $0.71 $0.51
  

 

 

  

 

 

 

Diluted

  $0.70 $0.51
  

 

 

  

 

 

 

Shares used in per-share calculation:

   

Basic

   4,218  4,230
  

 

 

  

 

 

 

Diluted

   4,243  4,244
  

 

 

  

 

 

 

 

5


CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(Inmillions, except percentages)

 

   Three Months Ended
October 30, 2021
 
   Amount   Y/Y % 

Revenue:

    

Americas

  $7,561   5

EMEA

   3,303   11

APJC

   2,036   15
  

 

 

   

Total

  $12,900   8
  

 

 

   

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

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 

   Three Months Ended
October 30, 2021

Gross Margin Percentage:

   

Americas

    64.5%

EMEA

    64.4%

APJC

    64.7%

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 

   Three Months Ended
October 30, 2021
 
   Amount   Y/Y % 

Revenue:

    

Secure, Agile Networks

  $5,967   10

Hybrid Work

   1,109   (7)% 

End-to-End Security

   895   4

Internet for the Future

   1,374   46

Optimized Application Experiences

   181   18

Other Products

   3   9
  

 

 

   

Total Product

   9,529   11

Services

   3,371   1
  

 

 

   

Total

  $12,900   8
  

 

 

   

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

Effective for the first quarter of fiscal 2022, we began reporting our revenue in the following categories: Secure, Agile Networks; Hybrid Work; End-to-EndSecurity; Internet for the Future; Optimized Application Experiences; Other Products and Services. This change better aligns our product categories with our strategic priorities. The reclassified product category revenue by quarter for fiscal 2019through fiscal 2021 as well as other information is available on Cisco’s Investor Relations website at https://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx.

 

6


CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

   October 30, 2021   July 31, 2021 

ASSETS

    

Current assets:

    

Cash and cash equivalents

  $7,619  $9,175

Investments

   15,727   15,343

Accounts receivable, net of allowance of $114 at October 30, 2021 and $109 at July 31,2021

   5,306   5,766

Inventories

   1,832   1,559

Financing receivables, net

   4,070   4,380

Other current assets

   3,034   2,889
  

 

 

   

 

 

 

Total current assets

   37,588   39,112

Property and equipment, net

   2,238   2,338

Financing receivables, net

   4,546   4,884

Goodwill

   38,802   38,168

Purchased intangible assets, net

   3,350   3,619

Deferred tax assets

   4,198   4,360

Other assets

   5,259   5,016
  

 

 

   

 

 

 

TOTAL ASSETS

  $95,981  $97,497
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Short-term debt

  $506  $2,508

Accounts payable

   2,261   2,362

Income taxes payable

   816   801

Accrued compensation

   3,231   3,818

Deferred revenue

   12,017   12,148

Other current liabilities

   4,407   4,620
  

 

 

   

 

 

 

Total current liabilities

   23,238   26,257

Long-term debt

   8,996   9,018

Income taxes payable

   8,553   8,538

Deferred revenue

   10,055   10,016

Other long-term liabilities

   2,438   2,393
  

 

 

   

 

 

 

Total liabilities

   53,280   56,222
  

 

 

   

 

 

 

Total equity

   42,701   41,275
  

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

  $95,981  $97,497
  

 

 

   

 

 

 

 

7


CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

   Three Months Ended 
   October 30,
2021
  October 24,
2020
 

Cash flows from operating activities:

   

Net income

  $2,980 $2,174

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

   

Depreciation, amortization, and other

   533  451

Share-based compensation expense

   453  438

Provision (benefit) for receivables

   1  13

Deferred income taxes

   (98  (120

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

   (211  (59

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

   

Accounts receivable

   427  1,526

Inventories

   (275  (21

Financing receivables

   672  167

Other assets

   (170  (259

Accounts payable

   (93  73

Income taxes, net

   17  (84

Accrued compensation

   (585  (165

Deferred revenue

   (95  (45

Other liabilities

   (129  7
  

 

 

  

 

 

 

Net cash provided by operating activities

   3,427  4,096
  

 

 

  

 

 

 

Cash flows from investing activities:

   

Purchases of investments

   (2,951  (3,756

Proceeds from sales of investments

   580  657

Proceeds from maturities of investments

   1,856  1,425

Acquisitions, net of cash and cash equivalents acquired and divestitures

   (336  (830

Purchases of investments in privately held companies

   (101  (68

Return of investments in privately held companies

   53  29

Acquisition of property and equipment

   (122  (171

Proceeds from sales of property and equipment

   1  4
  

 

 

  

 

 

 

Net cash used in investing activities

   (1,020  (2,710
  

 

 

  

 

 

 

Cash flows from financing activities:

   

Issuances of common stock

   —    1

Repurchases of common stock - repurchase program

   (273  (800

Shares repurchased for tax withholdings on vesting of restricted stock units

   (133  (89

Repayments of debt

   (2,000  —  

Dividends paid

   (1,561  (1,520

Other

   (3  35
  

 

 

  

 

 

 

Net cash used in financing activities

   (3,970  (2,373
  

 

 

  

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

   (1,563  (987

Cash, cash equivalents, and restricted cash, beginning of period

   9,942  11,812
  

 

 

  

 

 

 

Cash, cash equivalents, and restricted cash, end of period

  $8,379 $10,825
  

 

 

  

 

 

 

Supplemental cash flow information:

   

Cash paid for interest

  $124 $160

Cash paid for income taxes, net

  $758 $710

 

8


CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 

   October 30, 2021  July 31, 2021  October 24, 2020 
   Amount   Y/Y%  Amount   Y/Y%  Amount   Y/Y% 

Product

  $13,384   18  $13,270   18  $11,340   15 

Service

   16,751     17,623     16,129   
  

 

 

    

 

 

    

 

 

   

Total

  $30,135   10  $30,893    $27,469   10 
  

 

 

    

 

 

    

 

 

   

We expect 53% of total RPO at October 30, 2021 will be recognized as revenue over the next 12 months.

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(Inmillions)

 

   October 30,
2021
   July 31,
2021
   October 24,
2020
 

Deferred revenue:

      

Product

  $9,681  $9,416  $8,139

Service

   12,391   12,748   12,334
  

 

 

   

 

 

   

 

 

 

Total

  $22,072  $22,164  $20,473
  

 

 

   

 

 

   

 

 

 

Reported as:

      

Current

  $12,017  $12,148  $11,271

Noncurrent

   10,055   10,016   9,202
  

 

 

   

 

 

   

 

 

 

Total

  $22,072  $22,164  $20,473
  

 

 

   

 

 

   

 

 

 

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 2022

      

October 30, 2021

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

Fiscal 2021

      

July 31, 2021

  $0.37  $1,562   15  $53.30  $791  $2,353

May 1, 2021

  $0.37  $1,560   10  $48.71  $510  $2,070

January 23, 2021

  $0.36  $1,521   19  $42.82  $801  $2,322

October 24, 2020

  $0.36  $1,520   20  $40.44  $800  $2,320

 

9


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP NET INCOME

(In millions)

 

   Three Months Ended 
   October 30,
2021
  October 24,
2020
 

GAAP net income

  $2,980 $2,174

Adjustments to cost of sales:

   

Share-based compensation expense

   69  65

Amortization of acquisition-related intangible assets

   198  163

Acquisition-related/divestiture costs

   1  1

Legal and indemnification settlements/charges

   —    43
  

 

 

  

 

 

 

Total adjustments to GAAP cost of sales

   268  272
  

 

 

  

 

 

 

Adjustments to operating expenses:

   

Share-based compensation expense

   383  362

Amortization of acquisition-related intangible assets

   84  36

Acquisition-related/divestiture costs

   112  59

Significant asset impairments and restructurings

   5  602
  

 

 

  

 

 

 

Total adjustments to GAAP operating expenses

   584  1,059
  

 

 

  

 

 

 

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

   

(Gains) and losses on equity investments

   (219  (48
  

 

 

  

 

 

 

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

   (219  (48
  

 

 

  

 

 

 

Total adjustments to GAAP income before provision for income taxes

   633  1,283
  

 

 

  

 

 

 

Income tax effect of non-GAAP adjustments

   (138  (246
  

 

 

  

 

 

 

Total adjustments to GAAP provision for income taxes

   (138  (246
  

 

 

  

 

 

 

Non-GAAP net income

  $3,475 $3,211
  

 

 

  

 

 

 

 

10


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP EPS

 

   Three Months Ended 
   October 30,
2021
  October 24,
2020
 

GAAP EPS

  $0.70 $0.51

Adjustments to GAAP:

   

Share-based compensation expense

   0.11  0.10

Amortization of acquisition-related intangible assets

   0.07  0.05

Acquisition-related/divestiture costs

   0.03  0.01

Legal and indemnification settlements/charges

   —    0.01

Significant asset impairments and restructurings

   —    0.14

(Gains) and losses on equity investments

   (0.05  (0.01

Income tax effect of non-GAAP adjustments

   (0.03  (0.06
  

 

 

  

 

 

 

Non-GAAP EPS

  $0.82 $0.76
  

 

 

  

 

 

 

Amounts may not sum due to rounding.

 

11


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME

(In millions, except percentages)

 

   Three Months Ended
October 30, 2021
 
   Product
Gross
Margin
  Service
Gross
Margin
  Total
Gross
Margin
  Operating
Expenses
  Y/Y  Operating
Income
  Y/Y  Interest
and other
income
(loss),
net
  Net
Income
  Y/Y 

GAAP amount

  $5,856 $2,197 $8,053 $4,615  (8)%  $3,438  34 $219 $2,980  37

% of revenue

   61.5   65.2   62.4   35.8    26.7    1.7   23.1  

Adjustments to GAAP amounts:

           

Share-based compensation expense

   25  44  69  383   452   —     452 

Amortization of acquisition-related intangible assets

   198  —     198  84   282   —     282 

Acquisition/divestiture-related costs

   1  —     1  112   113   —     113 

Significant asset impairments and restructurings

   —     —     —     5   5   —     5 

(Gains) and losses on equity investments

   —     —     —     —      —      (219  (219 

Income tax effect/significant tax matters

   —     —     —     —      —      —     (138 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

Non-GAAP amount

  $6,080 $2,241 $8,321 $4,031  2 $4,290  10 $—    $3,475  8
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

% of revenue

   63.8   66.5   64.5   31.2    33.3    
—  
 
  26.9  

 

   Three Months Ended
October 24, 2020
 
   Product
Gross
Margin
  Service
Gross
Margin
  Total Gross
Margin
  Operating
Expenses
  Operating
Income
  Interest and
other
income
(loss), net
  Net
Income
 

GAAP amount

  $5,381 $2,200 $7,581 $5,011 $2,570 $111 $2,174

% of revenue

   62.7   65.8   63.6   42.0   21.5   0.9   18.2 

Adjustments to GAAP amounts:

        

Share-based compensation expense

   24  41  65  362  427  —     427

Amortization of acquisition-related intangible assets

   163  —     163  36  199  —     199

Acquisition/divestiture-related costs

   —     1  1  59  60  —     60

Legal and indemnification settlements/charges

   43  —     43  —     43  —     43

Significant asset impairments and restructurings

   —     —     —     602  602  —     602

(Gains) and losses on equity investments

   —     —     —     —     —     (48  (48

Income tax effect/significant tax matters

   —     —     —     —     —     —     (246
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP amount

  $5,611 $2,242 $7,853 $3,952 $3,901 $63 $3,211
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

% of revenue

   65.3   67.1   65.8   33.1   32.7   0.5   26.9 

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

 

12


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

EFFECTIVE TAX RATE

(Inpercentages)

 

   Three Months Ended 
   October 30,
2021
  October 24,
2020
 

GAAP effective tax rate

   18.5   18.9 

Total adjustments to GAAP provision for income taxes

   0.5   0.1 
  

 

 

  

 

 

 

Non-GAAP effective tax rate

   19.0   19.0 
  

 

 

  

 

 

 

GAAP TO NON-GAAP GUIDANCE

 

Q2 FY 2022

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

GAAP

   61.5% - 62.5%   26% - 27%  $0.64 - $0.68 

Estimated adjustments for:

    

Share-based compensation expense

   0.5%   4.0%  $0.08 - $0.09 

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

   1.5%   2.5%  $0.06 - $0.07 
  

 

 

  

 

 

  

 

 

 

Non-GAAP

   63.5% - 64.5%   32.5% -33.5%  $0.80 - $0.82 
  

 

 

  

 

 

  

 

 

 

 

FY 2022

  Earnings per
Share (1)

GAAP

   $2.77 - $2.89

Estimated adjustments for:

   

Share-based compensation expense

   $0.34 - $0.36

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

   $0.26 - $0.28

Significant asset impairments and restructurings

   $0.00 - $0.01

(Gains) and losses on equity investments

    ($0.04)
   

 

 

 

Non-GAAP

   $3.38 - $3.45
   

 

 

 

 

(1) 

Estimated adjustments to GAAP earnings per share are shown after income tax effects.

Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, asset impairments, restructurings, (gains) andlosses on equity investments and significant tax matters or other events, which may or may not be significant unless specifically stated.

 

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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 ReformAct of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our ability to innovate, the demand for our technology, the continued success of our business transformation, the growth of ourbusiness, and the continued progress in our business model transformation to more recurring revenue) and the future financial performance of Cisco (including the guidance for Q2 FY 2022 and full year FY 2022) that involve risks and uncertainties.Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: the impact of the COVID-19 pandemic and related public healthmeasures; 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 informationtechnology 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 customermarkets; 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 leadtimes; 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 acquirebusinesses 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 thedata 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, databreaches 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 ourinvestments 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 globalnature 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 fromexaminations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent report on Form 10-K filed on September 9, 2021. The financial information contained in this release shouldbe read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent report on Form 10-K as it may be amended from time to time. Cisco’s results of operations for the three months endedOctober 30, 2021 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although anysuch 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 thisrelease.

This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAPeffective 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 anon-GAAP basis.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally acceptedaccounting 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 havelimitations 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 inconjunction with the corresponding GAAP measures.

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

For its internal budgeting process, Cisco’s management uses financial statements that do not include, when applicable, share-based compensation expense,amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, gains and losses on equity investments, theincome 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, Ciscohas 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 itsfinancial 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.

 

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Annualized Recurring Revenue represents the annualized revenue run-rate of active subscriptions, termlicenses, 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 worldwideleader in technology that powers the Internet. Cisco inspires new possibilities by reimagining your applications, securing your data, transforming your infrastructure, and empowering your teams for a global and inclusive future.Discover more at newsroom.cisco.com and follow us on Twitter at @Cisco.

Copyright © 2021 Ciscoand/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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