CSCO
$55.18
Cisco Systems
($.51)
(.92%)
Earnings Details
Quarter July 2021
Wednesday, August 18, 2021 4:05:00 PM
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Summary

Cisco Systems Misses

Cisco Systems (CSCO) reported Quarter July 2021 earnings of $0.84 per share on revenue of $13.1 billion. The consensus earnings estimate was $0.82 per share on revenue of $13.0 billion. The Earnings Whisper number was $0.85 per share. Revenue grew 8.0% on a year-over-year basis.

The company said it expects first quarter non-GAAP earnings of $0.79 to $0.81 per share on revenue of $12.82 billion to $13.06 billion. The current consensus earnings estimate is $0.81 per share on revenue of $12.84 billion for the quarter ending October 31, 2021. The company also said it expects fiscal 2022 non-GAAP earnings of $3.38 to $3.45 per share on revenue of $52.31 billion to $12.76 billion. The current consensus earnings estimate is $3.40 per share on revenue of $51.92 billion for the year ending July 31, 2022.

Cisco Systems Inc is engaged in designing, manufacturing and selling of Internet Protocol (IP) based networking products and services related to the communications and information technology (IT) industry.

Results
Reported Earnings
$0.84
Earnings Whisper
$0.85
Consensus Estimate
$0.82
Reported Revenue
$13.13 Bil
Revenue Estimate
$13.02 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cisco Reports Fourth Quarter And Fiscal Year 2021 Earnings

SAN JOSE, Calif., Aug. 18, 2021 /PRNewswire/ -- 

News Summary:

  • Cisco ended fiscal 2021 strong with Q4 performance of $13.1 billion in revenue (up 8% year over year) and fiscal year revenue of $49.8 billion
  • Double digit order growth across all customer markets and geographies, including product order growth of 31% - strongest year-over-year growth in over a decade
  • Continued momentum in transforming our business delivering more software and subscriptions - achieved $4 billion in software revenue in Q4 (an increase of 6% with subscription revenue up 9% year over year) and $15 billion for the year (an increase of 7% with subscription revenue up 15% year over year)
  • Q4 Results:
    • Revenue: $13.1 billion
      • Increase of 8% year over year
    • Earnings per Share: GAAP: $0.71; Non-GAAP: $0.84
      • GAAP EPS increased 15% year over year
      • Non-GAAP EPS increased 5% year over year
  • FY 2021 Results:
    • Revenue: $49.8 billion 
      • Increase of 1% year over year
    • Earnings per Share: GAAP: $2.50; Non-GAAP: $3.22
      • GAAP EPS decreased 5% year over year
      • Non-GAAP EPS was flat year over year
  • Q1 Guidance:
    • Revenue: 7.5% to 9.5% growth year over year
    • Earnings per Share: GAAP: $0.61 to $0.66; Non-GAAP: $0.79 to $0.81
  • FY 2022 Guidance:
    • Revenue: 5% to 7% growth year over year
    • Earnings per Share: GAAP: $2.72 to $2.84; Non-GAAP: $3.38 to $3.45

Cisco today reported fourth quarter and fiscal year results for the period ended July 31, 2021. Cisco reported fourth quarter revenue of $13.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.71 per share, and non-GAAP net income of $3.6 billion or $0.84 per share.

Cisco Logo (PRNewsfoto/Cisco)

"We continue to see great momentum in our business as customers are looking to modernize their organizations for agility and resiliency," said Chuck Robbins, Chair and CEO of Cisco. "The demand for Cisco technology is strong with our Q4 performance marking the highest product order growth in over a decade. With the power of our portfolio, we are well positioned to help our customers accelerate their digital transformation and thrive in a hybrid world."

"We executed exceptionally well delivering strong results across revenue, non-GAAP net income, non-GAAP EPS and record operating cash flow," said Scott Herren, CFO of Cisco. "Our performance reflects the impact of our investments in high growth opportunities resulting in our strong product order growth. As we continue to drive our business model transformation to more recurring revenue, we now have built up over $30 billion in remaining performance obligations."

Q4 GAAP Results




Q4 FY 2021


Q4 FY 2020


Vs. Q4 FY 2020

Revenue


$

13.1

  billion


$

12.2

  billion


8%

Net Income


$

3.0

  billion


$

2.6

  billion


14%

Diluted Earnings per Share (EPS)


$

0.71



$

0.62



15%























Q4 Non-GAAP Results














Q4 FY 2021


Q4 FY 2020


Vs. Q4 FY 2020

Net Income


$

3.6

  billion


$

3.4

  billion


5%

EPS


$

0.84



$

0.80



5%























Fiscal Year GAAP Results














FY 2021


FY 2020


Vs. FY 2020

Revenue


$

49.8

  billion


$

49.3

  billion


1%

Net Income


$

10.6

  billion


$

11.2

  billion


(6)%

EPS


$

2.50



$

2.64



(5)%























Fiscal Year Non-GAAP Results














FY 2021


FY 2020


Vs. FY 2020

Net Income


$

13.6

  billion


$

13.7

  billion


—%

EPS


$

3.22



$

3.21



—%

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 2021 Highlights 

Revenue -- Total revenue was $13.1 billion, up 8%, with product revenue up 10% and service revenue up 3%. Revenue by geographic segment was: Americas up 8%, EMEA up 6%, and APJC up 13%. Product revenue was led by growth in Infrastructure Platforms, up 13% and Security, up 1%. Applications was down 1%.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.6%, 62.7%, and 66.2%, respectively, as compared with 63.2%, 61.2%, and 68.7%, respectively, in the fourth quarter of fiscal 2020.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.6%, 65.0%, and 67.4%, respectively, as compared with 65.0%, 63.2%, and 69.8%, respectively, in the fourth quarter of fiscal 2020.

Total gross margins by geographic segment were: 66.2% for the Americas, 65.0% for EMEA and 64.4% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.8 billion, up 8%, and were 36.3% of revenue. Non-GAAP operating expenses were $4.2 billion, up 8%, and were 32.1% of revenue.

Operating Income -- GAAP operating income was $3.6 billion, up 10%, with GAAP operating margin of 27.2%. Non-GAAP operating income was $4.4 billion, up 10%, with non-GAAP operating margin at 33.5%.

Provision for Income Taxes -- The GAAP tax provision rate was 19.4%. The non-GAAP tax provision rate was 19.3%.

Net Income and EPS -- On a GAAP basis, net income was $3.0 billion, an increase of 14%, and EPS was $0.71, an increase of 15%. On a non-GAAP basis, net income was $3.6 billion, an increase of 5%, and EPS was $0.84, an increase of 5%. 

Cash Flow from Operating Activities -- $4.5 billion for the fourth quarter of fiscal 2021, an increase of 18% compared with $3.8 billion for the fourth quarter of fiscal 2020.

FY 2021 Highlights

Revenue -- Total revenue was $49.8 billion, an increase of 1%.

Net Income and EPS -- On a GAAP basis, net income was $10.6 billion, a decrease of 6%, and EPS was $2.50, a decrease of 5%. On a non-GAAP basis, net income was $13.6 billion, flat compared to fiscal 2020, and EPS was flat at $3.22.

Cash Flow from Operating Activities -- $15.5 billion for fiscal 2021, flat compared with fiscal 2020.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $24.5 billion at the end of the fourth quarter of fiscal 2021, compared with $23.6 billion at the end of the third quarter of fiscal 2021, and compared with $29.4 billion at the end of fiscal 2020.

Remaining Performance Obligations -- $30.9 billion, up 9% in total. Product remaining performance obligations were up 18% and service remaining performance obligations were up 3%.

Deferred Revenue -- $22.2 billion, up 8% in total, with deferred product revenue up 19%. Deferred service revenue was up 2%. 

Capital Allocation -- In the fourth quarter of fiscal 2021, we returned $2.4 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 15 million shares of common stock under our stock repurchase program at an average price of $53.30 per share for an aggregate purchase price of $791 million. The remaining authorized amount for stock repurchases under the program is $7.9 billion with no termination date.

Acquisitions

In the fourth quarter of fiscal 2021, we closed the following acquisitions:

  • Slido s.r.o., a privately held company that provides an audience interaction platform.
  • Sedonasys Systems Ltd., a privately held company which offers products that enable multi-vendor, multi-domain automation, and software-defined networking.
  • Kenna Security, Inc., a privately held cybersecurity company that provides risk-based vulnerability management technology which enables organizations to work cross-functionally to rapidly identify, prioritize and remediate cyber risks.
  • Involvio LLC, a privately held company that offers a suite of education-focused products that help colleges and universities improve student experience, engagement, and retention.
  • Socio Labs, Inc., a privately held company that offers a modern event technology platform designed to power the hybrid events of the future.

Guidance

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

Q1 FY 2022



Revenue


7.5% to 9.5% growth Y/Y

Non-GAAP gross margin rate


63.5% - 64.5%

Non-GAAP operating margin rate


31.5% - 32.5%

Non-GAAP EPS


$0.79 - $0.81

Cisco estimates that GAAP EPS will be $0.61 to $0.66 for the first quarter of fiscal 2022.

Cisco expects to achieve the following results for fiscal 2022:

FY 2022



Revenue


5% to 7% growth Y/Y

Non-GAAP EPS


$3.38 - $3.45

Cisco estimates that GAAP EPS will be $2.72 to $2.84 for fiscal 2022.

Our Q1 FY 2022 and FY 2022 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 2021 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, August 18, 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, August 18, 2021 to 4:00 p.m. Pacific Time, August 25, 2021 at 1-800-388-4923 (United States) or 1-203-369-3800 (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 18, 2021. 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 31,

2021


July 25,

2020


July 31,

2021


July 25,

2020

REVENUE:








Product

$

9,716



$

8,832



$

36,014



$

35,978


Service

3,410



3,322



13,804



13,323


Total revenue

13,126



12,154



49,818



49,301


COST OF SALES:








Product

3,628



3,429



13,300



13,199


Service

1,154



1,041



4,624



4,419


Total cost of sales

4,782



4,470



17,924



17,618


GROSS MARGIN

8,344



7,684



31,894



31,683


OPERATING EXPENSES:








Research and development

1,713



1,565



6,549



6,347


Sales and marketing

2,448



2,218



9,259



9,169


General and administrative

521



494



2,152



1,925


Amortization of purchased intangible assets

79



33



215



141


Restructuring and other charges

8



127



886



481


Total operating expenses

4,769



4,437



19,061



18,063


OPERATING INCOME

3,575



3,247



12,833



13,620


Interest income

130



187



618



920


Interest expense

(98)



(119)



(434)



(585)


Other income (loss), net

128



(9)



245



15


Interest and other income (loss), net

160



59



429



350


INCOME BEFORE PROVISION FOR INCOME TAXES

3,735



3,306



13,262



13,970


Provision for income taxes

726



670



2,671



2,756


NET INCOME

$

3,009



$

2,636



$

10,591



$

11,214










Net income per share:








Basic

$

0.71



$

0.62



$

2.51



$

2.65


Diluted

$

0.71



$

0.62



$

2.50



$

2.64


Shares used in per-share calculation:








Basic

4,216



4,227



4,222



4,236


Diluted

4,238



4,244



4,236



4,254


 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)




July 31, 2021



Three Months Ended


Fiscal Year Ended



Amount


Y/Y%


Amount


Y/Y%

Revenue:









Americas


$

7,731



8%


$

29,161



—%

EMEA


3,297



6%


12,951



2%

APJC


2,098



13%


7,706



5%

Total


$

13,126



8%


$

49,818



1%


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

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)




July 31, 2021



Three Months Ended


Fiscal Year Ended

Gross Margin Percentage:





Americas


66.2%


66.9%

EMEA


65.0%


65.4%

APJC


64.4%


64.2%

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)




July 31, 2021



Three Months Ended


Fiscal Year Ended



Amount


Y/Y %


Amount


Y/Y %

Revenue:









Infrastructure Platforms


$

7,546



13%


$

27,109



—%

Applications


1,344



(1)%


5,504



(1)%

Security


823



1%


3,382



7%

Other Products


4



(42)%


19



(43)%

Total Product


9,716



10%


36,014



—%

Services


3,410



3%


13,804



4%

Total


$

13,126



8%


$

49,818



1%


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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)



July 31,

2021


July 25,

2020

ASSETS




Current assets:




Cash and cash equivalents

$

9,175



$

11,809


Investments

15,343



17,610


Accounts receivable, net of allowance for doubtful accounts of $109 at July 31, 2021 and $143 at July 25, 2020

5,766



5,472


Inventories

1,559



1,282


Financing receivables, net

4,380



5,051


Other current assets

2,889



2,349


Total current assets

39,112



43,573


Property and equipment, net

2,338



2,453


Financing receivables, net

4,884



5,714


Goodwill

38,168



33,806


Purchased intangible assets, net

3,619



1,576


Deferred tax assets

4,360



3,990


Other assets

5,016



3,741


TOTAL ASSETS

$

97,497



$

94,853


LIABILITIES AND EQUITY




Current liabilities:




Short-term debt

$

2,508



$

3,005


Accounts payable

2,362



2,218


Income taxes payable

801



839


Accrued compensation

3,818



3,122


Deferred revenue

12,148



11,406


Other current liabilities

4,620



4,741


Total current liabilities

26,257



25,331


Long-term debt

9,018



11,578


Income taxes payable

8,538



8,837


Deferred revenue

10,016



9,040


Other long-term liabilities

2,393



2,147


Total liabilities

56,222



56,933


Total equity

41,275



37,920


     TOTAL LIABILITIES AND EQUITY

$

97,497



$

94,853


 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



Fiscal Year Ended


July 31,

2021


July 25,

2020

Cash flows from operating activities:




Net income

$

10,591



$

11,214


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




Depreciation, amortization, and other

1,862



1,808


Share-based compensation expense

1,761



1,569


Provision (benefit) for receivables

(6)



93


Deferred income taxes

(384)



(38)


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

(354)



(138)


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




Accounts receivable

(107)



(107)


Inventories

(244)



84


Financing receivables

1,577



(797)


Other assets

(797)



96


Accounts payable

(53)



141


Income taxes, net

(549)



(322)


Accrued compensation

643



(78)


Deferred revenue

1,560



2,011


Other liabilities

(46)



(110)


Net cash provided by operating activities

15,454



15,426


Cash flows from investing activities:




Purchases of investments

(9,328)



(9,212)


Proceeds from sales of investments

3,373



5,631


Proceeds from maturities of investments

8,409



7,975


Acquisitions, net of cash and cash equivalents acquired and divestitures

(7,038)



(327)


Purchases of investments in privately held companies

(175)



(190)


Return of investments in privately held companies

194



224


Acquisition of property and equipment

(692)



(770)


Proceeds from sales of property and equipment

28



179


Other

(56)



(10)


Net cash (used in) provided by investing activities

(5,285)



3,500


Cash flows from financing activities:




Issuances of common stock

643



655


Repurchases of common stock - repurchase program

(2,877)



(2,659)


Shares repurchased for tax withholdings on vesting of restricted stock units

(636)



(727)


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

(5)



(3,470)


Repayments of debt

(3,000)



(6,720)


Dividends paid

(6,163)



(6,016)


Other

(1)



51


Net cash used in financing activities

(12,039)



(18,886)


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

(1,870)



40


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

11,812



11,772


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

$

9,942



$

11,812






Supplemental cash flow information:




Cash paid for interest

$

438



$

603


Cash paid for income taxes, net

$

3,604



$

3,116


 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)



July 31, 2021


May 1, 2021


July 25, 2020


Amount


Y/Y %


Amount


Y/Y %


Amount


Y/Y %

Product

$

13,270



18

%


$

11,903



15

%


$

11,261



17

%

Service

17,623



3

%


16,235



7

%


17,093



9

%

Total

$

30,893



9

%


$

28,138



10

%


$

28,354



12

%

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)



July 31,

2021


May 1,

2021


July 25,

2020

Deferred revenue:






Product

$

9,416



$

8,698



$

7,895


Service

12,748



12,191



12,551


Total

$

22,164



$

20,889



$

20,446


Reported as:






Current

$

12,148



$

11,492



$

11,406


Noncurrent

10,016



9,397



9,040


Total

$

22,164



$

20,889



$

20,446


 

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 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















Fiscal 2020













July 25, 2020


$

0.36



$

1,525





$



$



$

1,525


April 25, 2020


$

0.36



$

1,519



25



$

39.71



$

981



$

2,500


January 25, 2020


$

0.35



$

1,486



18



$

46.71



$

870



$

2,356


October 26, 2019


$

0.35



$

1,486



16



$

48.91



$

768



$

2,254


 

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 31,

2021


July 25,

2020


July 31,

2021


July 25,

2020

GAAP net income

$

3,009



$

2,636



$

10,591



$

11,214


Adjustments to cost of sales:








Share-based compensation expense

67



61



275



237


Amortization of acquisition-related intangible assets

199



157



698



611


Acquisition-related/divestiture costs

1





4



3


Legal and indemnification settlements/charges





43



4


Total adjustments to GAAP cost of sales

267



218



1,020



855


Adjustments to operating expenses:








Share-based compensation expense

357



332



1,460



1,307


Amortization of acquisition-related intangible assets

79



33



215



141


Acquisition-related/divestiture costs

109



55



288



246


Significant asset impairments and restructurings

8



127



886



481


Total adjustments to GAAP operating expenses

553



547



2,849



2,175


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








Acquisition-related/divestiture costs





4




(Gains) and losses on equity investments

(154)



2



(285)



(97)


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

(154)



2



(281)



(97)


Total adjustments to GAAP income before provision for income taxes

666



767



3,588



2,933


Income tax effect of non-GAAP adjustments

(199)



(175)



(702)



(722)


Significant tax matters

76



166



159



233


Total adjustments to GAAP provision for income taxes

(123)



(9)



(543)



(489)


Non-GAAP net income

$

3,552



$

3,394



$

13,636



$

13,658


 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES


GAAP TO NON-GAAP EPS



Three Months Ended


Fiscal Year Ended


July 31,

2021


July 25,

2020


July 31,

2021


July 25,

2020

GAAP EPS

$

0.71



$

0.62



$

2.50



$

2.64


Adjustments to GAAP:








Share-based compensation expense

0.10



0.09



0.41



0.36


Amortization of acquisition-related intangible assets

0.07



0.04



0.22



0.18


Acquisition-related/divestiture costs

0.03



0.01



0.07



0.06


Legal and indemnification settlements/charges





0.01




Significant asset impairments and restructurings



0.03



0.21



0.11


(Gains) and losses on equity investments

(0.04)





(0.07)



(0.02)


Income tax effect of non-GAAP adjustments

(0.05)



(0.04)



(0.17)



(0.17)


Significant tax matters

0.02



0.04



0.04



0.05


Non-GAAP EPS

$

0.84



$

0.80



$

3.22



$

3.21



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 31, 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

$

6,088



$

2,256



$

8,344



$

4,769



8%


$

3,575



10%


$

160



$

3,009



14%

% 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



8%


$

4,395



10%


$

6



$

3,552



5%

% of revenue

65.0

%


67.4

%


65.6

%


32.1

%




33.5

%




%


27.1

%



 


Three Months Ended


July 25, 2020


Product

Gross

Margin


Service

Gross

Margin


Total

Gross

Margin


Operating

Expenses


Operating

Income


Interest

and

other

income

(loss),

net


Net

Income

GAAP amount

$

5,403



$

2,281



$

7,684



$

4,437



$

3,247



$

59



$

2,636


% of revenue

61.2

%


68.7

%


63.2

%


36.5

%


26.7

%


0.5

%


21.7

%

Adjustments to GAAP amounts:














Share-based compensation expense

24



37



61



332



393





393


Amortization of acquisition-related intangible assets

157





157



33



190





190


Acquisition/divestiture-related costs







55



55





55


Significant asset impairments and restructurings







127



127





127


(Gains) and losses on equity investments











2



2


Income tax effect/significant tax matters













(9)


Non-GAAP amount

$

5,584



$

2,318



$

7,902



$

3,890



$

4,012



$

61



$

3,394


% of revenue

63.2

%


69.8

%


65.0

%


32.0

%


33.0

%


0.5

%


27.9

%


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 31, 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

$

22,714



$

9,180



$

31,894



$

19,061



6%


$

12,833



(6)%


$

429



$

10,591



(6)%

% 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



2%


$

16,702



—%


$

148



$

13,636



—%

% of revenue

65.4

%


67.8

%


66.1

%


32.5

%




33.5

%




0.3

%


27.4

%



 


Fiscal Year Ended


July 25, 2020


Product

Gross

Margin


Service

Gross

Margin


Total

Gross

Margin


Operating

Expenses


Operating

Income


Interest

and

other

income

(loss),

net


Net

Income

GAAP amount

$

22,779



$

8,904



$

31,683



$

18,063



$

13,620



$

350



$

11,214


% of revenue

63.3

%


66.8

%


64.3

%


36.6

%


27.6

%


0.7

%


22.7

%

Adjustments to GAAP amounts:














Share-based compensation expense

93



144



237



1,307



1,544





1,544


Amortization of acquisition-related intangible assets

611





611



141



752





752


Acquisition/divestiture-related costs



3



3



246



249





249


Legal and indemnification settlements

4





4





4





4


Significant asset impairments and restructurings







481



481





481


(Gains) and losses on equity investments











(97)



(97)


Income tax effect/significant tax matters













(489)


Non-GAAP amount

$

23,487



$

9,051



$

32,538



$

15,888



$

16,650



$

253



$

13,658


% of revenue

65.3

%


67.9

%


66.0

%


32.2

%


33.8

%


0.5

%


27.7

%


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 31,

2021


July 25,

2020


July 31,

2021


July 25,

2020

GAAP effective tax rate

19.4

%


20.3

%


20.1

%


19.7

%

Total adjustments to GAAP provision for income taxes

(0.1)

%


(3.6)

%


(1.0)

%


(0.5)

%

Non-GAAP effective tax rate

19.3

%


16.7

%


19.1

%


19.2

%

 

GAAP TO NON-GAAP GUIDANCE


Q1 FY 2022


Gross Margin

Rate


Operating Margin

Rate


Earnings per

Share (1)

GAAP


61.5% - 62.5%


25% - 26%


$0.61 - $0.66

Estimated adjustments for:







Share-based compensation expense


0.5%


3.5%


$0.08 - $0.09

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


1.5%


3.0%


$0.07 - $0.08

Significant asset impairments and restructurings




$0.00 - $0.01

Non-GAAP


63.5% - 64.5%


31.5% - 32.5%


$0.79 - $0.81









FY 2022


Earnings per

Share (1)

GAAP


$2.72 - $2.84

Estimated adjustments for:



Share-based compensation expense


$0.35 - $0.37

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


$0.26 - $0.28

Significant asset impairments and restructurings


$0.00 - $0.01

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 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 the continued momentum in our business, the demand for our technology, our ability to help the acceleration of our customers' digital transformation, and the continuation of our business model transformation to more recurring revenue) and the future financial performance of Cisco (including the guidance for Q1 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 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 infrastructure platforms and services; the timing of orders and manufacturing and customer lead times; 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; 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, 2021, and September 3, 2020, 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 31, 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 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, 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.

About Cisco

Cisco (Nasdaq: CSCO) is the worldwide leader in technology that powers the Internet. Cisco inspires new possibilities by reimagining your applications, securing your data, transforming your infrastructure, and empowering your teams for a global and inclusive future. Discover more at newsroom.cisco.com and follow us on Twitter at @Cisco.

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SOURCE Cisco Systems, Inc.