EX-99.1 2 d878533dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

Press Contact:      Investor Relations Contact:
Robyn Blum      Sami Badri
Cisco      Cisco
1 (408) 930-8548      1 (469) 420-4834
rojenkin@cisco.com      sambadri@cisco.com

CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2024 EARNINGS

News Summary:

 

   

Product order growth of 14% year over year; up 6% excluding Splunk

 

   

Revenue of $13.6 billion in Q4 FY 2024, above the high end of our guidance range

 

   

Strong margins:

 

   

Q4 FY 2024 GAAP gross margin of 64.4% and Non-GAAP gross margin of 67.9%

 

   

FY 2024 GAAP gross margin of 64.7% and Non-GAAP gross margin of 67.5%, the highest in 20 years

 

   

Solid growth in software and recurring metrics in FY 2024, enhanced by Splunk

 

   

Total subscription revenue of $27.4 billion including Splunk, representing 51% of total revenue

 

   

Total annualized recurring revenue (ARR) at $29.6 billion, including $4.3 billion from Splunk, up 22% year over year

 

   

Total software revenue at $18.4 billion, up 9% year over year, with software subscription revenue of $16.4 billion, up 15% year over year, making up 89% of total software revenue

 

 

Q4 FY 2024 Results:

 

   

Revenue: $13.6 billion

 

   

Decrease of 10% year over year

 

   

Earnings per Share: GAAP: $0.54; Non-GAAP: $0.87

 

   

GAAP EPS decreased 44% year over year

 

   

Non-GAAP EPS decreased 24% year over year

 

 

FY 2024 Results:

 

   

Revenue: $53.8 billion

 

   

Decrease of 6% year over year

 

   

Earnings per Share: GAAP: $2.54; Non-GAAP: $3.73

 

   

GAAP EPS decreased 17% year over year

 

   

Non-GAAP EPS decreased 4% year over year

 

 

Q1 FY 2025 Guidance:

 

   

Revenue: $13.65 billion to $13.85 billion

 

   

Earnings per Share: GAAP: $0.35 to $0.42; Non-GAAP: $0.86 to $0.88

 

 

FY 2025 Guidance:

 

   

Revenue: $55.0 billion to $56.2 billion

 

   

Earnings per Share: GAAP: $1.93 to $2.05; Non-GAAP: $3.52 to $3.58

 

1


SAN JOSE, Calif. — August 14, 2024 — Cisco today reported fourth quarter and fiscal year results for the period ended July 27, 2024. Cisco reported fourth quarter revenue of $13.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.54 per share, and non-GAAP net income of $3.5 billion or $0.87 per share.

“We delivered a strong close to fiscal 2024” said Chuck Robbins, chair and CEO of Cisco. “In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of AI.”

“Revenue, gross margin and EPS in Q4 were at the high end or above our guidance range, demonstrating our operating discipline” said Scott Herren, CFO of Cisco. “As we look to build on our performance, we remain laser focused on growth and consistent execution as we invest to win in AI, cloud and cybersecurity, while maintaining capital returns.”

Q4 GAAP Results

 

     Q4 FY 2024      Q4 FY 2023      Vs. Q4 FY 2023  

Revenue

   $ 13.6 billion      $ 15.2 billion        (10 )% 

Net Income

   $ 2.2 billion      $ 4.0 billion        (45 )% 

Diluted Earnings per Share (EPS)

   $ 0.54      $ 0.97        (44 )% 

The acquisition of Splunk, including financing costs, had a negative impact of $0.16 to GAAP EPS, for the fourth quarter of fiscal 2024.

Q4 Non-GAAP Results

 

     Q4 FY 2024      Q4 FY 2023      Vs. Q4 FY 2023  

Net Income

   $ 3.5 billion      $ 4.7 billion        (25 )% 

EPS

   $ 0.87      $ 1.14        (24 )% 

The acquisition of Splunk, including financing costs, had a negative impact of $0.04 to Non-GAAP EPS, for the fourth quarter of fiscal 2024.

Fiscal Year GAAP Results

 

     FY 2024      FY 2023      Vs. FY 2023  

Revenue

   $ 53.8 billion      $ 57.0 billion        (6 )% 

Net Income

   $ 10.3 billion      $ 12.6 billion        (18 )% 

EPS

   $ 2.54      $ 3.07        (17 )% 

The acquisition of Splunk, including financing costs, had a negative impact of $0.25 to GAAP EPS, for fiscal 2024.

Fiscal Year Non-GAAP Results

 

     FY 2024      FY 2023      Vs. FY 2023  

Net Income

   $ 15.2 billion      $ 16.0 billion        (5 )% 

EPS

   $ 3.73      $ 3.89        (4 )% 

The acquisition of Splunk, including financing costs, had a negative impact of $0.04 to Non-GAAP EPS, for fiscal 2024.

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 $0.40 per common share to be paid on October 23, 2024, to all stockholders of record as of the close of business on October 2, 2024. Future dividends will be subject to Board approval.

 

2


Financial Summary

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

Q4 FY 2024 Highlights

Revenue — Total revenue was $13.6 billion, down 10%, with product revenue down 15% and services revenue up 6%. Splunk contributed approximately $960 million of total revenue for the fourth quarter of fiscal 2024.

Revenue by geographic segment was: Americas down 11%, EMEA down 11%, and APJC down 6%. Product revenue performance reflected growth in Security up 81% and Observability up 41%. Networking was down 28%. Product revenue in Collaboration was flat. Security and Observability, excluding Splunk, grew 6% and 12%, respectively, in the fourth quarter of fiscal 2024.

Gross Margin — On a GAAP basis, total gross margin, product gross margin, and services gross margin were 64.4%, 63.0%, and 67.8%, respectively, as compared with 64.1%, 63.6%, and 65.7%, respectively, in the fourth quarter of fiscal 2023.

On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 67.9%, 67.0%, and 70.3%, respectively, as compared with 65.9%, 65.5%, and 67.5%, respectively, in the fourth quarter of fiscal 2023.

Total gross margins by geographic segment were: 67.7% for the Americas, 69.2% for EMEA and 66.4% for APJC.

Operating Expenses — On a GAAP basis, operating expenses were $6.2 billion, up 12%, and were 45.2% of revenue. Non-GAAP operating expenses were $4.8 billion, up 4%, and were 35.4% of revenue.

Operating Income — GAAP operating income was $2.6 billion, down 38%, with GAAP operating margin of 19.2%. Non-GAAP operating income was $4.4 billion, down 17%, with non-GAAP operating margin at 32.5%.

Provision for Income Taxes — The GAAP tax provision rate was 9.8%. The non-GAAP tax provision rate was 16.6%.

Net Income and EPS — On a GAAP basis, net income was $2.2 billion, a decrease of 45%, and EPS was $0.54, a decrease of 44%. On a non-GAAP basis, net income was $3.5 billion, a decrease of 25%, and EPS was $0.87, a decrease of 24%.

Cash Flow from Operating Activities — $3.7 billion for the fourth quarter of fiscal 2024, a decrease of 37% compared with $6.0 billion for the fourth quarter of fiscal 2023.

FY 2024 Highlights

Revenue — Total revenue was $53.8 billion, a decrease of 6%. Splunk contributed approximately $1.4 billion of total revenue for fiscal 2024.

Net Income and EPS — On a GAAP basis, net income was $10.3 billion, a decrease of 18%, and EPS was $2.54, a decrease of 17%. On a non-GAAP basis, net income was $15.2 billion, a decrease of 5% compared to fiscal 2023, and EPS was $3.73, a decrease of 4%.

Cash Flow from Operating Activities — $10.9 billion for fiscal 2024, a decrease of 45% compared with $19.9 billion for fiscal 2023.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments — $17.9 billion at the end of the fourth quarter of fiscal 2024, compared with $18.8 billion at the end of the third quarter of fiscal 2024, and compared with $26.1 billion at the end of fiscal 2023.

Remaining Performance Obligations (RPO) $41.0 billion, up 18% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 27% and services RPO were up 10%.

Deferred Revenue — $28.5 billion, up 11% in total, with deferred product revenue up 15%. Deferred service revenue was up 9%.

Capital Allocation — In the fourth quarter of fiscal 2024, we returned $3.6 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.40 per common share, or $1.6 billion, and repurchased approximately 43 million shares of common stock under our stock repurchase program at an average price of $46.80 per share for an aggregate purchase price of $2.0 billion. The remaining authorized amount for stock repurchases under the program is $5.2 billion with no termination date.

 

3


Guidance

Cisco estimates the following results for the first quarter of fiscal 2025:

 

Q1 FY 2025

      

Revenue

   $ 13.65 billion - $13.85 billion  

Non-GAAP gross margin

     67% - 68%  

Non-GAAP operating margin

     32% - 33%  

Non-GAAP EPS

     $0.86 - $0.88  

Cisco estimates that GAAP EPS will be $0.35 to $0.42 for the first quarter of fiscal 2025.

Cisco estimates the following results for fiscal 2025:

 

FY 2025

      

Revenue

   $ 55.0 billion - $56.2 billion  

Non-GAAP EPS

     $3.52 - $3.58  

Cisco estimates that GAAP EPS will be $1.93 to $2.05 for fiscal 2025.

Our Q1 FY 2025 and FY 2025 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 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 2024 conference call to discuss Cisco’s results along with its guidance will be held on Wednesday, August 14, 2024 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

 

   

Conference call replay will be available from 4:00 p.m. Pacific Time, August 14, 2024 to 4:00 p.m. Pacific Time, August 20, 2024 at 1-866-510-4837 (United States) or 1-203-369-1943 (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 14, 2024. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com.

 

4


CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

 

     Three Months Ended     Fiscal Year Ended  
     July 27,
2024
    July 29,
2023
    July 27,
2024
    July 29,
2023
 

REVENUE:

        

Product

   $ 9,858     $ 11,650     $ 39,253     $ 43,142  

Services

     3,784       3,553       14,550       13,856  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     13,642       15,203       53,803       56,998  
  

 

 

   

 

 

   

 

 

   

 

 

 

COST OF SALES:

        

Product

     3,644       4,237       14,339       16,590  

Services

     1,217       1,218       4,636       4,655  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

     4,861       5,455       18,975       21,245  
  

 

 

   

 

 

   

 

 

   

 

 

 

GROSS MARGIN

     8,781       9,748       34,828       35,753  

OPERATING EXPENSES:

        

Research and development

     2,179       1,953       7,983       7,551  

Sales and marketing

     2,841       2,579       10,364       9,880  

General and administrative

     763       690       2,813       2,478  

Amortization of purchased intangible assets

     268       70       698       282  

Restructuring and other charges

     112       203       789       531  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     6,163       5,495       22,647       20,722  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     2,618       4,253       12,181       15,031  

Interest income

     270       312       1,365       962  

Interest expense

     (418     (111     (1,006     (427

Other income (loss), net

     (74     17       (306     (248
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other income (loss), net

     (222     218       53       287  
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

     2,396       4,471       12,234       15,318  

Provision for income taxes

     234       513       1,914       2,705  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 2,162     $ 3,958     $ 10,320     $ 12,613  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

        

Basic

   $ 0.54     $ 0.97     $ 2.55     $ 3.08  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.54     $ 0.97     $ 2.54     $ 3.07  
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per-share calculation:

        

Basic

     4,018       4,071       4,043       4,093  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     4,035       4,093       4,062       4,105  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

5


CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 

     July 27, 2024  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

          

Americas

   $ 8,068        (11 )%    $ 31,971        (4 )% 

EMEA

     3,511        (11 )%      14,117        (7 )% 

APJC

     2,064        (6 )%      7,716        (8 )% 
  

 

 

      

 

 

    

Total

   $ 13,642        (10 )%    $ 53,803        (6 )% 
  

 

 

      

 

 

    

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

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 

     July 27, 2024
     Three Months Ended   Fiscal Year Ended

Gross Margin Percentage:

    

Americas

   67.7%   66.8%

EMEA

   69.2%   69.1%

APJC

   66.4%   67.2%

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 

     July 27, 2024  
     Three Months Ended     Fiscal Year Ended  
     Amount      Y/Y%     Amount      Y/Y%  

Revenue:

          

Networking

   $ 6,804        (28 )%    $ 29,229        (15 )% 

Security

     1,787        81     5,075        32

Collaboration

     1,019            4,113        2

Observability

     248        41     837        27
  

 

 

      

 

 

    

Total Product

     9,858        (15 )%      39,253        (9 )% 

Services

     3,784        6     14,550        5
  

 

 

      

 

 

    

Total

   $ 13,642        (10 )%    $ 53,803        (6 )% 
  

 

 

      

 

 

    

Security and Observability, excluding Splunk, grew 6% and 12%, respectively, in the fourth quarter of fiscal 2024, and 4% and 15%, respectively, for fiscal 2024.

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

 

6


CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

     July 27,
2024
     July 29,
2023
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 7,508      $ 10,123  

Investments

     10,346        16,023  

Accounts receivable, net of allowance of $87 at July 27, 2024 and $85 at July 29, 2023

     6,685        5,854  

Inventories

     3,373        3,644  

Financing receivables, net

     3,338        3,352  

Other current assets

     5,612        4,352  
  

 

 

    

 

 

 

Total current assets

     36,862        43,348  

Property and equipment, net

     2,090        2,085  

Financing receivables, net

     3,376        3,483  

Goodwill

     58,660        38,535  

Purchased intangible assets, net

     11,219        1,818  

Deferred tax assets

     6,262        6,576  

Other assets

     5,944        6,007  
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 124,413      $ 101,852  
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term debt

   $ 11,341      $ 1,733  

Accounts payable

     2,304        2,313  

Income taxes payable

     1,439        4,235  

Accrued compensation

     3,608        3,984  

Deferred revenue

     16,249        13,908  

Other current liabilities

     5,643        5,136  
  

 

 

    

 

 

 

Total current liabilities

     40,584        31,309  

Long-term debt

     19,621        6,658  

Income taxes payable

     3,985        5,756  

Deferred revenue

     12,226        11,642  

Other long-term liabilities

     2,540        2,134  
  

 

 

    

 

 

 

Total liabilities

     78,956        57,499  

Total equity

     45,457        44,353  
  

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 124,413      $ 101,852  
  

 

 

    

 

 

 

 

7


CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     Fiscal Year Ended  
     July 27,
2024
    July 29,
2023
 

Cash flows from operating activities:

    

Net income

   $ 10,320     $ 12,613  

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

    

Depreciation, amortization, and other

     2,507       1,726  

Share-based compensation expense

     3,074       2,353  

Provision for receivables

     34       31  

Deferred income taxes

     (972     (2,085

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

     215       206  

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

    

Accounts receivable

     (289     734  

Inventories

     275       (1,069

Financing receivables

     76       1,102  

Other assets

     (671     5  

Accounts payable

     (90     27  

Income taxes, net

     (4,539     1,218  

Accrued compensation

     (696     651  

Deferred revenue

     1,220       2,326  

Other liabilities

     416       48  
  

 

 

   

 

 

 

Net cash provided by operating activities

     10,880       19,886  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of investments

     (4,230     (10,871

Proceeds from sales of investments

     4,136       1,054  

Proceeds from maturities of investments

     6,367       5,978  

Acquisitions, net of cash and cash equivalents acquired

     (25,994     (301

Purchases of investments in privately held companies

     (284     (185

Return of investments in privately held companies

     202       90  

Acquisition of property and equipment

     (670     (849

Other

     (5     (23
  

 

 

   

 

 

 

Net cash used in investing activities

     (20,478     (5,107
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Issuances of common stock

     714       700  

Repurchases of common stock - repurchase program

     (5,787     (4,293

Shares repurchased for tax withholdings on vesting of restricted stock units

     (992     (597

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

     478       (602

Issuances of debt

     31,818       —   

Repayments of debt

     (9,826     (500

Repayments of Splunk convertible debt, net

     (3,140     —   

Dividends paid

     (6,384     (6,302

Other

     (37     (32
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     6,844       (11,626
  

 

 

   

 

 

 

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

     (31     (105
  

 

 

   

 

 

 

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

     (2,785     3,048  

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

     11,627       8,579  
  

 

 

   

 

 

 

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

   $ 8,842     $ 11,627  
  

 

 

   

 

 

 

Supplemental cash flow information:

    

Cash paid for interest

   $ 583     $ 376  

Cash paid for income taxes, net

   $ 7,426     $ 3,571  

 

8


CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 

     July 27, 2024     April 27, 2024     July 29, 2023  
     Amount      Y/Y%     Amount      Y/Y%     Amount      Y/Y%  

Product

   $ 20,055        27   $ 18,876        29   $ 15,802        12

Services

     20,993        10     19,898        14     19,066        9
  

 

 

      

 

 

      

 

 

    

Total

   $ 41,048        18   $ 38,774        21   $ 34,868        11
  

 

 

      

 

 

      

 

 

    

We expect 51% of total RPO at July 27, 2024 will be recognized as revenue over the next 12 months.

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 

     July 27,
2024
     April 27,
2024
     July 29,
2023
 

Deferred revenue:

        

Product

   $ 13,219      $ 12,856      $ 11,505  

Services

     15,256        14,619        14,045  
  

 

 

    

 

 

    

 

 

 

Total

   $ 28,475      $ 27,475      $ 25,550  
  

 

 

    

 

 

    

 

 

 

Reported as:

        

Current

   $ 16,249      $ 15,751      $ 13,908  

Noncurrent

     12,226        11,724        11,642  
  

 

 

    

 

 

    

 

 

 

Total

   $ 28,475      $ 27,475      $ 25,550  
  

 

 

    

 

 

    

 

 

 

CISCO SYSTEMS, INC.

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK

(In millions, except per-share amounts)

 

     DIVIDENDS      STOCK REPURCHASE PROGRAM      TOTAL  

Quarter Ended

   Per Share      Amount      Shares      Weighted-
Average Price
per Share
     Amount      Amount  

Fiscal 2024

                 

July 27, 2024

   $ 0.40      $ 1,606        43      $ 46.80      $ 2,002      $ 3,608  

April 27, 2024

   $ 0.40      $ 1,615        26      $ 49.22      $ 1,256      $ 2,871  

January 27, 2024

   $ 0.39      $ 1,583        25      $ 49.54      $ 1,254      $ 2,837  

October 28, 2023

   $ 0.39      $ 1,580        23      $ 54.53      $ 1,252      $ 2,832  

Fiscal 2023

                 

July 29, 2023

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

April 29, 2023

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

January 28, 2023

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

October 29, 2022

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

 

9


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP NET INCOME

(In millions)

 

     Three Months Ended      Fiscal Year Ended  
     July 27,
2024
     July 29,
2023
     July 27,
2024
     July 29,
2023
 

GAAP net income

   $ 2,162      $ 3,958      $ 10,320      $ 12,613  

Adjustments to cost of sales:

           

Share-based compensation expense

     133        103        514        396  

Amortization of acquisition-related intangible assets

     331        168        936        630  

Acquisition-related/divestiture costs

     21        14        34        18  

Supplier component remediation charge (adjustment), net

     —         (9      —         (9
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments to GAAP cost of sales

     485        276        1,484        1,035  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjustments to operating expenses:

           

Share-based compensation expense

     660        520        2,537        1,951  

Amortization of acquisition-related intangible assets

     268        70        698        282  

Acquisition-related/divestiture costs

     297        63        700        241  

Russia-Ukraine war costs

     —         (7      (12      —   

Significant asset impairments and restructurings

     112        203        789        531  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments to GAAP operating expenses

     1,337        849        4,712        3,005  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

           

Russia-Ukraine war costs

     49        —         49        —   

(Gains) and losses on investments

     (32      (55      100        133  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     17        (55      149        133  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments to GAAP income before provision for income taxes

     1,839        1,070        6,345        4,173  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax effect of non-GAAP adjustments

     (315      (215      (1,360      (838

Significant tax matters

     (155      (133      (155      31  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjustments to GAAP provision for income taxes

     (470      (348      (1,515      (807
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income

   $ 3,531      $ 4,680      $ 15,150      $ 15,979  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

10


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP EPS

 

     Three Months Ended      Fiscal Year Ended  
     July 27,
2024
     July 29,
2023
     July 27,
2024
     July 29,
2023
 

GAAP EPS

   $ 0.54      $ 0.97      $ 2.54      $ 3.07  

Adjustments to GAAP:

           

Share-based compensation expense

     0.20        0.15        0.75        0.57  

Amortization of acquisition-related intangible assets

     0.15        0.06        0.40        0.22  

Acquisition-related/divestiture costs

     0.08        0.02        0.18        0.06  

Russia-Ukraine war costs

     0.01        —         0.01        —   

Significant asset impairments and restructurings

     0.03        0.05        0.19        0.13  

(Gains) and losses on investments

     (0.01      (0.01      0.02        0.03  

Income tax effect of non-GAAP adjustments

     (0.08      (0.05      (0.33      (0.20

Significant tax matters

     (0.04      (0.03      (0.04      0.01  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP EPS

   $ 0.87      $ 1.14      $ 3.73      $ 3.89  
  

 

 

    

 

 

    

 

 

    

 

 

 

Amounts may not sum or recalculate due to rounding.

CISCO SYSTEMS, INC.

GAAP TO NON-GAAP EPS

IMPACT OF SPLUNK ACQUISITION, INCLUDING FINANCING COSTS

 

     July 27, 2024  
     Three Months
Ended
     Fiscal Year
Ended
 

GAAP EPS Impact

   $ (0.16    $ (0.25

Amortization of acquisition-related intangible assets

     0.09        0.14  

Acquisition-related costs

     0.06        0.11  

Income tax effect of non-GAAP adjustments

     (0.03      (0.05
  

 

 

    

 

 

 

Non-GAAP EPS Impact

   $ (0.04    $ (0.04
  

 

 

    

 

 

 

Amounts may not sum due to rounding.

 

11


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

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

(In millions, except percentages)

 

     Three Months Ended  
     July 27, 2024  
     Product
Gross
Margin
    Services
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

   $ 6,214     $ 2,567     $ 8,781     $ 6,163       12   $ 2,618       (38 )%    $ (222   $ 2,162       (45 )% 

% of revenue

     63.0     67.8     64.4     45.2       19.2       (1.6 )%      15.8  

Adjustments to GAAP amounts:

                    

Share-based compensation expense

     57       76       133       660         793         —        793    

Amortization of acquisition-related intangible assets

     331       —        331       268         599         —        599    

Acquisition/divestiture-related costs

     5       16       21       297         318         —        318    

Russia-Ukraine war costs

     —        —        —        —          —          49       49    

Significant asset impairments and restructurings

     —        —        —        112         112         —        112    

(Gains) and losses on investments

     —        —        —        —          —          (32     (32  

Income tax effect/significant tax matters

     —        —        —        —          —          —        (470  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

Non-GAAP amount

   $ 6,607     $ 2,659     $ 9,266     $ 4,826       4   $ 4,440       (17 )%    $ (205   $ 3,531       (25 )% 
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

% of revenue

     67.0     70.3     67.9     35.4       32.5       (1.5 )%      25.9  

 

     Three Months Ended  
     July 29, 2023  
     Product
Gross
Margin
    Services
Gross
Margin
    Total
Gross
Margin
    Operating
Expenses
    Operating
Income
    Interest
and
other
income
(loss),
net
    Net
Income
 

GAAP amount

   $ 7,413     $ 2,335     $ 9,748     $ 5,495     $ 4,253     $ 218     $ 3,958  

% 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     $ 5,378     $ 163     $ 4,680  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of revenue

     65.5     67.5     65.9     30.6     35.4     1.1     30.8

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

 

12


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

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

(In millions, except percentages)

 

     Fiscal Year Ended
July 27, 2024
 
     Product
Gross
Margin
    Services
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

   $ 24,914     $ 9,914     $ 34,828     $ 22,647       9   $ 12,181       (19 )%    $ 53     $ 10,320       (18 )% 

% of revenue

     63.5     68.1     64.7     42.1       22.6       0.1     19.2  

Adjustments to GAAP amounts:

                    

Share-based compensation expense

     214       300       514       2,537         3,051         —        3,051    

Amortization of acquisition-related intangible assets

     936       —        936       698         1,634         —        1,634    

Acquisition/divestiture-related costs

     10       24       34       700         734         —        734    

Russia-Ukraine war costs

     —        —        —        (12       (12       49       37    

Significant asset impairments and restructurings

     —        —        —        789         789         —        789    

(Gains) and losses on investments

     —        —        —        —          —          100       100    

Income tax effect/significant tax matters

     —        —        —        —          —          —        (1,515  
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

Non-GAAP amount

   $ 26,074     $ 10,238     $ 36,312     $ 17,935       1   $ 18,377       (4 )%    $ 202     $ 15,150       (5 )% 
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

% of revenue

     66.4     70.4     67.5     33.3       34.2       0.4     28.2  

 

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

GAAP amount

   $ 26,552     $ 9,201     $ 35,753     $ 20,722     $ 15,031     $ 287     $ 12,613  

% 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     $ 19,071     $ 420     $ 15,979  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of revenue

     63.4     68.2     64.5     31.1     33.5     0.7     28.0

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

 

13


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

EFFECTIVE TAX RATE

(In percentages)

 

     Three Months Ended     Fiscal Year Ended  
     July 27,
2024
    July 29,
2023
    July 27,
2024
    July 29,
2023
 

GAAP effective tax rate

     9.8     11.5     15.6     17.7

Total adjustments to GAAP provision for income taxes

     6.8     4.0     2.9     0.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP effective tax rate

     16.6     15.5     18.5     18.0
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP TO NON-GAAP GUIDANCE

 

Q1 FY 2025

   Gross Margin     Operating Margin     Earnings per
Share (2)
 

GAAP

     63.5% - 64.5%       14% - 15%     $ 0.35 - $0.42  

Estimated adjustments for:

      

Share-based compensation expense

     1.0%       6.0%     $ 0.16 - $0.17  

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

     2.5%       6.5%     $ 0.17 - $0.18  

Significant asset impairments and restructurings (1)

     —        5.5%     $ 0.13 - $0.16  
  

 

 

   

 

 

   

 

 

 

Non-GAAP

     67% - 68%       32% - 33%     $ 0.86 - $0.88  
  

 

 

   

 

 

   

 

 

 

 

FY 2025

   Earnings per
Share (2)
 

GAAP

   $ 1.93 - $2.05  

Estimated adjustments for:

  

Share-based compensation expense

   $ 0.74 - $0.76  

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

   $ 0.60 - $0.62  

Significant asset impairments and restructurings (1)

   $ 0.19 - $0.21  
  

 

 

 

Non-GAAP

   $ 3.52 - $3.58  
  

 

 

 

 

(1) 

On August 14, 2024, Cisco announced a restructuring plan to allow it to invest in key growth opportunities and drive more efficiencies in its business. In connection with this restructuring plan, Cisco currently estimates that it will recognize pre-tax charges of up to $1 billion consisting of severance and other one-time termination benefits, and other costs. Cisco expects to recognize approximately $700 million to $800 million of these charges in the first quarter of fiscal 2025 with the remaining amount expected to be recognized during the rest of the fiscal year.

(2) 

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

Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on investments, significant tax matters, or other items, which may or may not be significant.

 

14


Forward Looking Statements, Non-GAAP Information and Additional Information

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our customers’ reliance on Cisco to connect and protect their organizations in the era of AI and our focus on growth and consistent execution as we invest in AI, cloud and cybersecurity, while maintaining capital returns) and the future financial performance of Cisco (including the guidance for Q1 FY 2025 and full year FY 2025) that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; our development and use of artificial intelligence; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market, cloud, enterprise and other customer markets; the return on our investments in certain priorities, key growth areas, and in certain geographical locations, as well as maintaining leadership in Networking and services; the timing of orders and manufacturing and customer lead times; supply constraints; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and services markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, other intellectual property, antitrust, stockholder and other matters, and governmental investigations; our ability to achieve the benefits of restructurings and possible changes in the size and timing of related charges; cyber attacks, data breaches or other incidents; vulnerabilities and critical security defects; our ability to protect personal data; evolving regulatory uncertainty; terrorism; natural catastrophic events (including as a result of global climate change); any pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Forms 10-Q and 10-K filed on May 21, 2024 and September 7, 2023, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three months and the year ended July 27, 2024 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

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

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles (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.

 

15


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 technology leader that securely connects everything to make anything possible. Our purpose is to power an inclusive future for all by helping our customers reimagine their applications, power hybrid work, secure their enterprise, transform their infrastructure, and meet their sustainability goals. Discover more at newsroom.cisco.com and follow us on X at @Cisco.

Copyright © 2024 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.

RSS Feed for Cisco: https://newsroom.cisco.com/rss-feeds

 

16