News Release

Cisco Reports Fourth Quarter And Fiscal Year 2022 Earnings

SAN JOSE, Calif., Aug. 17, 2022 --

News Summary :

  • Cisco ended fiscal 2022 with Q4 revenue at $13.1 billion, flat year over year and fiscal year revenue of $51.6 billion, up 3% year over year
  • Strong demand with record full year product orders and backlog
  • Progress on business model transformation with total Annualized Recurring Revenue (ARR) at $22.9 billion in the fourth quarter of fiscal 2022, up 8% year over year
  • Q4 FY 2022 Results:
    • Revenue: $13.1 billion
      • Flat year over year
  •  
    • Earnings per Share: GAAP: $0.68; Non-GAAP: $0.83
      • GAAP EPS decreased (4)% year over year
      • Non-GAAP EPS decreased (1)% year over year
  • FY 2022 Results:
    • Revenue: $51.6 billion
      • Increase of 3% year over year
    • Earnings per Share: GAAP: $2.82; Non-GAAP: $3.36
      • GAAP EPS increased 13% year over year
      • Non-GAAP EPS increased 4% year over year
  • Q1 FY 2023 Guidance:
    • Revenue: 2% to 4% growth year over year
    • Earnings per Share: GAAP: $0.64 to $0.68; Non-GAAP: $0.82 to $0.84
  • FY 2023 Guidance:
    • Revenue: 4% to 6% growth year over year
    • Earnings per Share: GAAP: $2.77 to $2.88; Non-GAAP: $3.49 to $3.56

 

Q4FY2022 Earnings Infographics

 

Cisco today reported fourth quarter and fiscal year results for the period ended July 30, 2022. Cisco reported fourth quarter revenue of $13.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.8 billion or $0.68 per share, and non-GAAP net income of $3.4 billion or $0.83 per share.

"We had a strong end to our fiscal year thanks to our Q4 performance. Our teams executed well in the midst of an incredibly dynamic environment, resulting in the highest full year non-GAAP earnings per share in the history of the company," said Chuck Robbins, chair and CEO of Cisco. "Full year product orders and backlog are both at record highs and reflect the strong demand we continue to see for our innovation and the overall value we bring to our customers as they accelerate their digital transformation."

"Total revenue exceeded our expectations in Q4, as a result of our strong execution and the numerous initiatives we have taken to reduce the impact of the global supply situation," said Scott Herren, CFO of Cisco. "Our operational discipline is reflected in our healthy operating margin and strong cash flow generation, enabling us to return nearly $4 billion to our shareholders in Q4. And we continue to make good progress in our business model transformation with RPO of over $31 billion, which, coupled with our record backlog, provide us with substantial visibility and confidence in our future revenue."

 

Q4 GAAP Results

 
   

Q4 FY 2022

 

Q4 FY 2021

 

Vs. Q4 FY 2021

Revenue

 

$             13.1

billion

 

$             13.1

billion

 

— %

Net Income

 

$               2.8

billion

 

$               3.0

billion

 

(6) %

Diluted Earnings per Share (EPS)

 

$             0.68

   

$             0.71

   

(4) %

 

Q4 Non-GAAP Results

 
   

Q4 FY 2022

 

Q4 FY 2021

 

Vs. Q4 FY 2021

Net Income

 

$               3.4

billion

 

$               3.6

billion

 

(3) %

EPS

 

$             0.83

   

$             0.84

   

(1) %

 

Fiscal Year GAAP Results

 
   

FY 2022

 

FY 2021

 

Vs. FY 2021

Revenue

 

$             51.6

billion

 

$             49.8

billion

 

3 %

Net Income

 

$             11.8

billion

 

$             10.6

billion

 

12 %

EPS

 

$             2.82

   

$             2.50

   

13 %

 

Fiscal Year Non-GAAP Results

 
   

FY 2022

 

FY 2021

 

Vs. FY 2021

Net Income

 

$             14.1

billion

 

$             13.6

billion

 

3 %

EPS

 

$             3.36

   

$             3.22

   

4 %

 

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."

Financial Summary

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

Q4 FY 2022 Highlights  

Revenue -- Total revenue was flat at $13.1 billion, with both product revenue and service revenue flat year over year. Revenue by geographic segment was: Americas down 3%, EMEA up 8%, and APJC down 2%. Product revenue performance was led by growth in End-to-End Security up 20%, Optimized Application Experiences up 8%, and Collaboration up 2%. Secure, Agile Networks was down 1% and Internet for the Future was down 10%.

Gross Margin --  On a GAAP basis, total gross margin, product gross margin, and service gross margin were 61.3%, 59.1%, and 67.5%, respectively, as compared with 63.6%, 62.7%, and 66.2%, respectively, in the fourth quarter of fiscal 2021.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 63.3%, 61.3%, and 69.0%, respectively, as compared with 65.6%, 65.0%, and 67.4%, respectively, in the fourth quarter of fiscal 2021.

Total gross margins by geographic segment were: 62.6% for the Americas, 64.4% for EMEA and 63.6% for APJC.

Operating Expenses --  On a GAAP basis, operating expenses were $4.6 billion, down 4%, and were 35.0% of revenue. Non-GAAP operating expenses were $4.1 billion, down 4%, and were 30.9% of revenue.

Operating Income -- GAAP operating income was $3.4 billion, down 4%, with GAAP operating margin of 26.2%. Non-GAAP operating income was $4.2 billion, down 4%, with non-GAAP operating margin at 32.4%.

Provision for Income Taxes -- The GAAP tax provision rate was 17.6%. The non-GAAP tax provision rate was 18.5%.

Net Income and EPS -- On a GAAP basis, net income was $2.8 billion, a decrease of 6%, and EPS was $0.68, a decrease of 4%. On a non-GAAP basis, net income was $3.4 billion, a decrease of 3%, and EPS was $0.83, a decrease of 1%. 

Cash Flow from Operating Activities -- $3.7 billion for the fourth quarter of fiscal 2022, a decrease of 18% compared with $4.5 billion for the fourth quarter of fiscal 2021.

FY 2022 Highlights

Revenue -- Total revenue was $51.6 billion, an increase of 3%.

Net Income and EPS -- On a GAAP basis, net income was $11.8 billion, an increase of 12%, and EPS was $2.82, an increase of 13%. On a non-GAAP basis, net income was $14.1 billion, an increase of 3% compared to fiscal 2021, and EPS was $3.36,  an increase of 4%.

Cash Flow from Operating Activities -- $13.2 billion for fiscal 2022, a decrease of 14% compared with fiscal 2021.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $19.3 billion at the end of the fourth quarter of fiscal 2022, compared with $20.1 billion at the end of the third quarter of fiscal 2022, and compared with $24.5 billion at the end of fiscal 2021.

Remaining Performance Obligations (RPO) -- $31.5 billion, up 2% in total, with 54% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 6% and service RPO were down 1%.

Deferred Revenue -- $23.3 billion, up 5% in total, with deferred product revenue up 11%. Deferred service revenue was up 1%. 

Capital Allocation -- In the fourth quarter of fiscal 2022, we returned $4.0 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.38 per common share, or $1.6 billion, and repurchased approximately 54 million shares of common stock under our stock repurchase program at an average price of $44.02 per share for an aggregate purchase price of $2.4 billion. The remaining authorized amount for stock repurchases under the program is $15.2 billion with no termination date.

Guidance

Cisco expects to achieve the following results for the first quarter of fiscal 2023:

Q1 FY 2023

   

Revenue

 

2% - 4% growth Y/Y

Non-GAAP gross margin rate

 

63% - 64%

Non-GAAP operating margin rate

 

31.5% - 32.5%

Non-GAAP EPS

 

$0.82 - $0.84

Cisco estimates that GAAP EPS will be $0.64 to $0.68 for the first quarter of fiscal 2023.

Cisco expects to achieve the following results for fiscal 2023:

FY 2023

   

Revenue

 

4% - 6% growth Y/Y

Non-GAAP EPS

 

$3.49 - $3.56

Cisco estimates that GAAP EPS will be $2.77 to $2.88 for fiscal 2023.

Our Q1 FY 2023 and FY 2023 guidance assumes an effective tax provision rate of 19% for GAAP and 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 2022 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, August 17, 2022 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 17, 2022 to 4:00 p.m. Pacific Time, August 24, 2022 at 1-866-517-3736 (United States) or 1-203-369-2047 (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 17, 2022. 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 30,
2022

 

July 31,
2021

 

July 30,
2022

 

July 31,
2021

REVENUE:

             

Product

$         9,688

 

$         9,716

 

$      38,018

 

$       36,014

Service

3,414

 

3,410

 

13,539

 

13,804

Total revenue

13,102

 

13,126

 

51,557

 

49,818

COST OF SALES:

             

Product

3,966

 

3,628

 

14,814

 

13,300

Service

1,111

 

1,154

 

4,495

 

4,624

Total cost of sales

5,077

 

4,782

 

19,309

 

17,924

GROSS MARGIN

8,025

 

8,344

 

32,248

 

31,894

OPERATING EXPENSES:

             

Research and development

1,682

 

1,713

 

6,774

 

6,549

Sales and marketing

2,349

 

2,448

 

9,085

 

9,259

General and administrative

489

 

521

 

2,101

 

2,152

Amortization of purchased intangible assets

73

 

79

 

313

 

215

Restructuring and other charges

(2)

 

8

 

6

 

886

Total operating expenses

4,591

 

4,769

 

18,279

 

19,061

OPERATING INCOME

3,434

 

3,575

 

13,969

 

12,833

Interest income

129

 

130

 

476

 

618

Interest expense

(93)

 

(98)

 

(360)

 

(434)

Other income (loss), net

(54)

 

128

 

392

 

245

Interest and other income (loss), net

(18)

 

160

 

508

 

429

INCOME BEFORE PROVISION FOR INCOME TAXES

3,416

 

3,735

 

14,477

 

13,262

Provision for income taxes

601

 

726

 

2,665

 

2,671

NET INCOME

$         2,815

 

$         3,009

 

$      11,812

 

$       10,591

               

Net income per share:

             

Basic

$           0.68

 

$           0.71

 

$           2.83

 

$           2.51

Diluted

$           0.68

 

$           0.71

 

$           2.82

 

$           2.50

Shares used in per-share calculation:

             

Basic

4,128

 

4,216

 

4,170

 

4,222

Diluted

4,137

 

4,238

 

4,192

 

4,236

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 
   

July 30, 2022

   

Three Months Ended

 

Fiscal Year Ended

   

Amount

 

Y/Y%

 

Amount

 

Y/Y%

Revenue :

               

Americas

 

$         7,470

 

(3) %

 

$       29,814

 

2 %

EMEA

 

3,577

 

8 %

 

13,715

 

6 %

APJC

 

2,055

 

(2) %

 

8,027

 

4 %

Total

 

$       13,102

 

— %

 

$       51,557

 

3 %

 

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

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 
   

July 30, 2022

   

Three Months Ended

 

Fiscal Year Ended

Gross Margin Percentage :

       

Americas

 

62.6 %

 

64.1 %

EMEA

 

64.4 %

 

65.4 %

APJC

 

63.6 %

 

65.3 %

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 
   

July 30, 2022

   

Three Months Ended

 

Fiscal Year Ended

   

Amount

 

Y/Y %

 

Amount

 

Y/Y %

Revenue :

               

Secure, Agile Networks

 

$         6,094

 

(1) %

 

$       23,829

 

5 %

Internet for the Future

 

1,257

 

(10) %

 

5,278

 

17 %

Collaboration

 

1,164

 

2 %

 

4,472

 

(5) %

End-to-End Security

 

984

 

20 %

 

3,699

 

9 %

Optimized Application Experiences

 

185

 

8 %

 

729

 

11 %

Other Products

 

3

 

(22) %

 

11

 

(29) %

Total Product

 

9,688

 

— %

 

38,018

 

6 %

Services

 

3,414

 

— %

 

13,539

 

(2) %

Total

 

$       13,102

 

— %

 

$       51,557

 

3 %

 

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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
 

July 30,
2022

 

July 31,
2021

ASSETS

     

Current assets:

     

Cash and cash equivalents

$           7,079

 

$           9,175

Investments

12,188

 

15,343

Accounts receivable, net of allowance

of $83 at July 30, 2022 and $109 at July 31, 2021

6,622

 

5,766

Inventories

2,568

 

1,559

Financing receivables, net

3,905

 

4,380

Other current assets

4,355

 

2,889

Total current assets

36,717

 

39,112

Property and equipment, net

1,997

 

2,338

Financing receivables, net

4,009

 

4,884

Goodwill

38,304

 

38,168

Purchased intangible assets, net

2,569

 

3,619

Deferred tax assets

4,449

 

4,360

Other assets

5,957

 

5,016

TOTAL ASSETS

$         94,002

 

$         97,497

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term debt

$           1,099

 

$           2,508

Accounts payable

2,281

 

2,362

Income taxes payable

961

 

801

Accrued compensation

3,316

 

3,818

Deferred revenue

12,784

 

12,148

Other current liabilities

5,199

 

4,620

Total current liabilities

25,640

 

26,257

Long-term debt

8,416

 

9,018

Income taxes payable

7,725

 

8,538

Deferred revenue

10,480

 

10,016

Other long-term liabilities

1,968

 

2,393

Total liabilities

54,229

 

56,222

Total equity

39,773

 

41,275

TOTAL LIABILITIES AND EQUITY

$         94,002

 

$         97,497

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
 

Fiscal Year Ended

 

July 30,
2022

 

July 31,
2021

Cash flows from operating activities:

     

Net income

$      11,812

 

$      10,591

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

     

Depreciation, amortization, and other

1,957

 

1,862

Share-based compensation expense

1,886

 

1,761

Provision (benefit) for receivables

55

 

(6)

Deferred income taxes

(309)

 

(384)

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

(453)

 

(354)

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

     

Accounts receivable

(1,009)

 

(107)

Inventories

(1,030)

 

(244)

Financing receivables

1,241

 

1,577

Other assets

(1,615)

 

(797)

Accounts payable

(55)

 

(53)

Income taxes, net

(690)

 

(549)

Accrued compensation

(427)

 

643

Deferred revenue

1,328

 

1,560

Other liabilities

535

 

(46)

Net cash provided by operating activities

13,226

 

15,454

Cash flows from investing activities:

     

Purchases of investments

(6,070)

 

(9,328)

Proceeds from sales of investments

2,660

 

3,373

Proceeds from maturities of investments

5,686

 

8,409

Acquisitions, net of cash and cash equivalents acquired and divestitures

(373)

 

(7,038)

Purchases of investments in privately held companies

(186)

 

(175)

Return of investments in privately held companies

237

 

194

Acquisition of property and equipment

(477)

 

(692)

Proceeds from sales of property and equipment

91

 

28

Other

(15)

 

(56)

Net cash provided by (used in) investing activities

1,553

 

(5,285)

Cash flows from financing activities:

     

Issuances of common stock

660

 

643

Repurchases of common stock - repurchase program

(7,689)

 

(2,877)

Shares repurchased for tax withholdings on vesting of restricted stock units

(692)

 

(636)

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

606

 

(5)

Issuances of debt

1,049

 

Repayments of debt

(3,550)

 

(3,000)

Dividends paid

(6,224)

 

(6,163)

Other

(302)

 

(1)

Net cash used in financing activities

(16,142)

 

(12,039)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents

(1,363)

 

(1,870)

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

9,942

 

11,812

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

$        8,579

 

$        9,942

       

Supplemental cash flow information:

     

Cash paid for interest

$            355

 

$            438

Cash paid for income taxes, net

$        3,663

 

$        3,604

 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 
 

July 30, 2022

 

April 30, 2022

 

July 31, 2021

 

Amount

 

Y/Y %

 

Amount

 

Y/Y %

 

Amount

 

Y/Y %

Product

$    14,090

 

6 %

 

$    13,416

 

13 %

 

$    13,270

 

18 %

Service

17,449

 

(1) %

 

16,789

 

3 %

 

17,623

 

3 %

Total

$    31,539

 

2 %

 

$    30,205

 

7 %

 

$    30,893

 

9 %

 

We expect 54% of total RPO at July 30, 2022 will be recognized as revenue over the next 12 months.

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 
 

July 30,
2022

 

April 30,
2022

 

July 31,
2021

Deferred revenue:

         

Product

$       10,427

 

$         9,835

 

$         9,416

Service

12,837

 

12,458

 

12,748

Total

$       23,264

 

$       22,293

 

$       22,164

Reported as:

         

Current

$       12,784

 

$       12,249

 

$       12,148

Noncurrent

10,480

 

10,044

 

10,016

Total

$       23,264

 

$       22,293

 

$       22,164

 

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

                       

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

                         

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

 

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 30,
2022

 

July 31,
2021

 

July 30,
2022

 

July 31,
2021

GAAP net income

$        2,815

 

$        3,009

 

$      11,812

 

$      10,591

Adjustments to cost of sales:

             

Share-based compensation expense

78

 

67

 

311

 

275

Amortization of acquisition-related intangible assets

162

 

199

 

733

 

698

Acquisition-related/divestiture costs

24

 

1

 

27

 

4

Russia-Ukraine war costs

2

 

 

7

 

Legal and indemnification settlements/charges

 

 

 

43

Total adjustments to GAAP cost of sales

266

 

267

 

1,078

 

1,020

Adjustments to operating expenses:

             

Share-based compensation expense

401

 

357

 

1,574

 

1,460

Amortization of acquisition-related intangible assets

73

 

79

 

328

 

215

Acquisition-related/divestiture costs

45

 

109

 

306

 

288

Russia-Ukraine war costs

22

 

 

84

 

Significant asset impairments and restructurings

(2)

 

8

 

6

 

886

Total adjustments to GAAP operating expenses

539

 

553

 

2,298

 

2,849

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

             

Acquisition-related/divestiture costs

 

 

 

4

(Gains) and losses on equity investments

 

(154)

 

(478)

 

(285)

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

 

(154)

 

(478)

 

(281)

Total adjustments to GAAP income before provision for income taxes

805

 

666

 

2,898

 

3,588

Income tax effect of non-GAAP adjustments

(181)

 

(199)

 

(616)

 

(702)

Significant tax matters

 

76

 

 

159

Total adjustments to GAAP provision for income taxes

(181)

 

(123)

 

(616)

 

(543)

Non-GAAP net income

$        3,439

 

$        3,552

 

$      14,094

 

$      13,636

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GAAP TO NON-GAAP EPS

 
 

Three Months Ended

 

Fiscal Year Ended

 

July 30,
2022

 

July 31,
2021

 

July 30,
2022

 

July 31,
2021

GAAP EPS

$           0.68

 

$           0.71

 

$           2.82

 

$           2.50

Adjustments to GAAP:

             

Share-based compensation expense

0.12

 

0.10

 

0.45

 

0.41

Amortization of acquisition-related intangible assets

0.06

 

0.07

 

0.25

 

0.22

Acquisition-related/divestiture costs

0.02

 

0.03

 

0.08

 

0.07

Russia-Ukraine war costs

0.01

 

 

0.02

 

Legal and indemnification settlements/charges

 

 

 

0.01

Significant asset impairments and restructurings

 

 

 

0.21

(Gains) and losses on equity investments

 

(0.04)

 

(0.11)

 

(0.07)

Income tax effect of non-GAAP adjustments

(0.04)

 

(0.05)

 

(0.15)

 

(0.17)

Significant tax matters

 

0.02

 

 

0.04

Non-GAAP EPS

$           0.83

 

$           0.84

 

$           3.36

 

$           3.22

 

Amounts may not sum due to rounding.

 

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

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

(In millions, except percentages)

 
 

Three Months Ended

 

July 30, 2022

 

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

$ 5,722

 

$ 2,303

 

$ 8,025

 

$ 4,591

 

(4) %

 

$ 3,434

 

(4) %

 

$  (18)

 

$ 2,815

 

(6) %

% of revenue

59.1 %

 

67.5 %

 

61.3 %

 

35.0 %

     

26.2 %

     

(0.1) %

 

21.5 %

   

Adjustments to GAAP amounts:

                                     

Share-based compensation
expense

28

 

50

 

78

 

401

     

479

     

 

479

   

Amortization of acquisition-
related intangible assets

162

 

 

162

 

73

     

235

     

 

235

   

Acquisition/divestiture-related
costs

24

 

 

24

 

45

     

69

     

 

69

   

Russia-Ukraine war costs

 

2

 

2

 

22

     

24

     

 

24

   

Significant asset impairments
and restructurings

 

 

 

(2)

     

(2)

     

 

(2)

   

(Gains) and losses on equity
investments

 

 

 

     

     

 

   

Income tax effect/significant tax
matters

 

 

 

     

     

 

(181)

   

Non-GAAP amount

$ 5,936

 

$ 2,355

 

$ 8,291

 

$ 4,052

 

(4) %

 

$ 4,239

 

(4) %

 

$  (18)

 

$ 3,439

 

(3) %

% of revenue

61.3 %

 

69.0 %

 

63.3 %

 

30.9 %

     

32.4 %

     

(0.1) %

 

26.2 %

   

 

 

Three Months Ended

 

July 31, 2021

 

Product
Gross
Margin

 

Service
Gross
Margin

 

Total
Gross
Margin

 

Operating
Expenses

 

Operating

Income

 

Interest
and
other
income
(loss),
net

 

Net

Income

GAAP amount

$ 6,088

 

$ 2,256

 

$ 8,344

 

$ 4,769

 

$ 3,575

 

$ 160

 

$ 3,009

% of revenue

62.7 %

 

66.2 %

 

63.6 %

 

36.3 %

 

27.2 %

 

1.2 %

 

22.9 %

Adjustments to GAAP amounts:

                         

Share-based compensation expense

24

 

43

 

67

 

357

 

424

 

 

424

Amortization of acquisition-related intangible assets

199

 

 

199

 

79

 

278

 

 

278

Acquisition/divestiture-related costs

1

 

 

1

 

109

 

110

 

 

110

Significant asset impairments and restructurings

 

 

 

8

 

8

 

 

8

(Gains) and losses on equity investments

 

 

 

 

 

(154)

 

(154)

Income tax effect/significant tax matters

 

 

 

 

 

 

(123)

Non-GAAP amount

$ 6,312

 

$ 2,299

 

$ 8,611

 

$ 4,216

 

$ 4,395

 

$     6

 

$ 3,552

% of revenue

65.0 %

 

67.4 %

 

65.6 %

 

32.1 %

 

33.5 %

 

— %

 

27.1 %

 

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

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

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

(In millions, except percentages)

 
 

Fiscal Year Ended

 

July 30, 2022

 

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

$ 23,204

 

$ 9,044

 

$ 32,248

 

$ 18,279

 

(4) %

 

$ 13,969

 

9 %

 

$ 508

 

$ 11,812

 

12 %

% of revenue

61.0 %

 

66.8 %

 

62.5 %

 

35.5 %

     

27.1 %

     

1.0 %

 

22.9 %

   

Adjustments to GAAP amounts:

                                     

Share-based compensation
expense

112

 

199

 

311

 

1,574

     

1,885

     

 

1,885

   

Amortization of acquisition-
related intangible assets

733

 

 

733

 

328

     

1,061

     

 

1,061

   

Acquisition/divestiture-related
costs

27

 

 

27

 

306

     

333

     

 

333

   

Russia-Ukraine war costs

4

 

3

 

7

 

84

     

91

     

 

91

   

Significant asset impairments and
restructurings

 

 

 

6

     

6

     

 

6

   

(Gains) and losses on equity
investments

 

 

 

     

     

(478)

 

(478)

   

Income tax effect/significant tax
matters

 

 

 

     

     

 

(616)

   

Non-GAAP amount

$ 24,080

 

$ 9,246

 

$ 33,326

 

$ 15,981

 

(1) %

 

$ 17,345

 

4 %

 

$   30

 

$ 14,094

 

3 %

% of revenue

63.3 %

 

68.3 %

 

64.6 %

 

31.0 %

     

33.6 %

     

0.1 %

 

27.3 %

   

 

 

Fiscal Year Ended

 

July 31, 2021

 

Product
Gross
Margin

 

Service
Gross
Margin

 

Total
Gross
Margin

 

Operating
Expenses

 

Operating

Income

 

Interest
and
other
income
(loss),
net

 

Net

Income

GAAP amount

$ 22,714

 

$ 9,180

 

$ 31,894

 

$ 19,061

 

$ 12,833

 

$ 429

 

$ 10,591

% of revenue

63.1 %

 

66.5 %

 

64.0 %

 

38.3 %

 

25.8 %

 

0.9 %

 

21.3 %

Adjustments to GAAP amounts:

                         

Share-based compensation expense

99

 

176

 

275

 

1,460

 

1,735

 

 

1,735

Amortization of acquisition-related intangible assets

698

 

 

698

 

215

 

913

 

 

913

Acquisition/divestiture-related costs

3

 

1

 

4

 

288

 

292

 

4

 

296

Legal and indemnification settlements/charges

43

 

 

43

 

 

43

 

 

43

Significant asset impairments and restructurings

 

 

 

886

 

886

 

 

886

(Gains) and losses on equity investments

 

 

 

 

 

(285)

 

(285)

Income tax effect/significant tax matters

 

 

 

 

 

 

(543)

Non-GAAP amount

$ 23,557

 

$ 9,357

 

$ 32,914

 

$ 16,212

 

$ 16,702

 

$ 148

 

$ 13,636

% of revenue

65.4 %

 

67.8 %

 

66.1 %

 

32.5 %

 

33.5 %

 

0.3 %

 

27.4 %

 

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

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

EFFECTIVE TAX RATE

(In percentages)

 
 

Three Months Ended

 

Fiscal Year Ended

 

July 30,
2022

 

July 31,
2021

 

July 30,
2022

 

July 31,
2021

GAAP effective tax rate

17.6 %

 

19.4 %

 

18.4 %

 

20.1 %

Total adjustments to GAAP provision for income taxes

0.9 %

 

(0.1) %

 

0.5 %

 

(1.0) %

Non-GAAP effective tax rate

18.5 %

 

19.3 %

 

18.9 %

 

19.1 %

 

GAAP TO NON-GAAP GUIDANCE

 

Q1 FY 2023

 

Gross Margin
Rate

 

Operating Margin
Rate

 

Earnings per
Share (1)

GAAP

 

61% - 62%

 

25.5% - 26.5%

 

$0.64 - $0.68

Estimated adjustments for:

           

Share-based compensation expense

 

1.0 %

 

4.0 %

 

$0.10 - $0.11

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

 

1.0 %

 

2.0 %

 

$0.06 - $0.07

Non-GAAP

 

63% - 64%

 

31.5% - 32.5%

 

$0.82 - $0.84

             

 

FY 2023

 

Earnings per
Share (1)

GAAP

 

$2.77 - $2.88

Estimated adjustments for:

   

Share-based compensation expense

 

$0.46 - $0.48

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

 

$0.22 - $0.24

Non-GAAP

 

$3.49 - $3.56

     
 

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

 

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

Forward Looking Statements, Non-GAAP Information and Additional Information
This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our ability to execute in an incredibly dynamic environment, the success of numerous initiatives we have taken to reduce the impact of the global supply situation, the success of our strategy and confidence in our long-term growth, the fundamental drivers across our business being strong, strong demand for our innovation and the solutions we bring to our customers as they accelerate their digital transformation resulting in record backlogs, continued progress on our business model transformation shifting to more software and subscriptions, and our commitment to returning excess capital to our shareholders and confidence in our ongoing cash flows) and the future financial performance of Cisco (including the guidance for Q1 FY 2023 and full year FY 2023) 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 25, 2022 and September 9, 2021, 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 30, 2022 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

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

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

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

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on equity 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, and maintenance contracts at the end of a reporting period, net of rebates to customers and partners as well as certain other revenue adjustments. Includes both revenue recognized ratably as well as upfront on an annualized basis.

About Cisco

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