CSCO
$55.86
Cisco Systems
$.17
.31%
Earnings Details
3rd Quarter April 2021
Wednesday, May 19, 2021 4:05:00 PM
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Summary

Cisco Systems Misses

Cisco Systems (CSCO) reported 3rd Quarter April 2021 earnings of $0.83 per share on revenue of $12.8 billion. The consensus earnings estimate was $0.82 per share on revenue of $12.6 billion. The Earnings Whisper number was $0.85 per share. Revenue grew 6.8% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $0.81 to $0.83 per share on revenue of $12.88 billion to $13.12 billion. The current consensus earnings estimate is $0.85 per share on revenue of $12.82 billion for the quarter ending July 31, 2021.

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
$0.83
Earnings Whisper
$0.85
Consensus Estimate
$0.82
Reported Revenue
$12.80 Bil
Revenue Estimate
$12.57 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cisco Reports Third Quarter Earnings

SAN JOSE, Calif., May 19, 2021 /PRNewswire/ --

News Summary:

  • Overall performance: $12.8 billion in revenue, up 7% year over year with broad-based strength across the business; GAAP EPS $0.68 and Non-GAAP EPS $0.83, each up 5% year over year
  • 10% year-over-year total product order growth representing the strongest demand in nearly a decade
  • Continued momentum in transforming business to software and subscriptions: 81% of software revenue sold as a subscription, up from 76% last quarter

Q3 Results:

  • Revenue: $12.8 billion
    • Increase of 7% year over year
  • Earnings per Share: GAAP: $0.68; Non-GAAP: $0.83
    • GAAP EPS increased 5% year over year
    • Non-GAAP EPS increased 5% year over year

Q4 Guidance: 

  • Revenue: 6% to 8% growth year over year
  • Earnings per Share: GAAP: $0.64 to $0.69; Non-GAAP: $0.81 to $0.83

Cisco today reported third quarter results for the period ended May 1, 2021. Cisco reported third quarter revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.9 billion or $0.68 per share, and non-GAAP net income of $3.5 billion or $0.83 per share.

Cisco Logo (PRNewsfoto/Cisco)

"Cisco had a great quarter with strong demand across the business," said Chuck Robbins, chairman and CEO of Cisco. "We are confident in our strategy and our ability to lead the next phase of the recovery as our customers accelerate their adoption of hybrid work, digital transformation, cloud, and continued strong uptake of our subscription-based offerings."

"We executed well with strong product orders, and solid growth in revenue, net income, and EPS," said Scott Herren, CFO of Cisco.  "Our investments in innovation and accelerated shift to more software offerings and subscriptions led to double-digit growth in deferred revenue, remaining performance obligations and higher levels of recurring revenue."

GAAP Results




Q3 FY 2021


Q3 FY 2020


Vs. Q3 FY 2020

Revenue


$

12.8

 billion


$

12.0

 billion


7%

Net Income


$

2.9

 billion


$

2.8

 billion


3%

Diluted Earnings per Share (EPS)


$

0.68



$

0.65



5%



Non-GAAP Results




Q3 FY 2021


Q3 FY 2020


Vs. Q3 FY 2020

Net Income


$

3.5

  billion


$

3.4

  billion


4%

EPS


$

0.83



$

0.79



5%

The third quarter of fiscal 2021 had 14 weeks compared with 13 weeks in the third quarter of fiscal 2020.

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.

Q3 FY 2021 Highlights

Revenue -- Total revenue was up 7% at $12.8 billion, with product revenue up 6% and service revenue up 8%. Revenue by geographic segment was: Americas up 2%, EMEA up 11%, and APJC up 19%. Product revenue performance was broad-based with growth in Security, up 13%, Infrastructure Platforms up 6%, and Applications up 5%.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.9%, 62.6%, and 67.4%, respectively, as compared with 64.9%, 63.7%, and 67.7%, respectively, in the third quarter of fiscal 2020.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 66.0%, 64.9%, and 68.7%, respectively, as compared with 66.6%, 65.8%, and 68.9%, respectively, in the third quarter of fiscal 2020.

Total gross margins by geographic segment were: 66.5% for the Americas, 65.6% for EMEA and 64.7% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.7 billion, up 8%, and were 36.9% of revenue. Non-GAAP operating expenses were $4.1 billion, up 9%, and were 32.4% of revenue.

Operating Income -- GAAP operating income was $3.5 billion, up 1%, with GAAP operating margin of 27.1%. Non-GAAP operating income was $4.3 billion, up 3%, with non-GAAP operating margin at 33.6%.

Provision for Income Taxes -- The GAAP tax provision rate was 20.3%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.9 billion, an increase of 3%, and EPS was $0.68, an increase of 5%. On a non-GAAP basis, net income was $3.5 billion, an increase of 4%, and EPS was $0.83, an increase of 5%.

Cash Flow from Operating Activities -- $3.9 billion for the third quarter of fiscal 2021, a decrease of 8% compared with $4.2 billion for the third quarter of fiscal 2020.

Balance Sheet and Other Financial Highlights

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

Deferred Revenue -- $20.9 billion, up 12% in total, with deferred product revenue up 20%. Deferred service revenue was up 7%.

Remaining Performance Obligations -- $28.1 billion at the end of the third quarter of fiscal 2021, up 10%.

Capital Allocation -- In the third quarter of fiscal 2021, we returned $2.1 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 10 million shares of common stock under our stock repurchase program at an average price of $48.71 per share for an aggregate purchase price of $510 million. The remaining authorized amount for stock repurchases under the program is $8.7 billion with no termination date.

Acquisitions

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

  • Acacia Communications, Inc., a public fabless semiconductor company that develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform communications networks through improvements in performance, capacity and cost.
  • IMImobile PLC, a United Kingdom-based publicly-traded cloud communications software and services company.
  • Dashbase, Inc., an enterprise software company.

In the fourth quarter of fiscal 2021, we closed the acquisition of Slido s.r.o, a privately held company that provides an audience interaction platform.

Guidance for Q4 FY 2021

Cisco expects to achieve the following results for the fourth quarter of fiscal 2021:

Q4 FY 2021



Revenue


6% - 8% growth Y/Y

Non-GAAP gross margin rate


64% - 65%

Non-GAAP operating margin rate


32% - 33%

Non-GAAP tax provision rate


19%

Non-GAAP EPS


$0.81 - $0.83

Cisco estimates that GAAP EPS will be $0.64 to $0.69 in the fourth quarter of fiscal 2021.

A reconciliation between the Guidance for Q4 FY 2021 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAP Guidance for Q4 FY 2021" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Editor's Notes:

  • Q3 fiscal year 2021 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, May 19, 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, May 19, 2021 to 4:00 p.m. Pacific Time, May 26, 2021 at 1-866-461-2738 (United States) or 1-203-369-1354 (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, May 19, 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


Nine Months Ended


May 1, 2021


April 25,

2020


May 1, 2021


April 25,

2020

REVENUE:








Product

$

9,139



$

8,597



$

26,298



$

27,146


Service

3,664



3,386



10,394



10,001


Total revenue

12,803



11,983



36,692



37,147


COST OF SALES:








Product

3,422



3,120



9,672



9,770


Service

1,196



1,092



3,470



3,378


Total cost of sales

4,618



4,212



13,142



13,148


GROSS MARGIN

8,185



7,771



23,550



23,999


OPERATING EXPENSES:








Research and development

1,697



1,546



4,836



4,782


Sales and marketing

2,317



2,192



6,811



6,951


General and administrative

603



457



1,631



1,431


Amortization of purchased intangible assets

61



34



136



108


Restructuring and other charges

42



128



878



354


Total operating expenses

4,720



4,357



14,292



13,626


OPERATING INCOME

3,465



3,414



9,258



10,373


Interest income

153



218



488



733


Interest expense

(111)



(130)



(336)



(466)


Other income (loss), net

84



(58)



117



24


Interest and other income (loss), net

126



30



269



291


INCOME BEFORE PROVISION FOR INCOME TAXES

3,591



3,444



9,527



10,664


Provision for income taxes

728



670



1,945



2,086


NET INCOME

$

2,863



$

2,774



$

7,582



$

8,578










Net income per share:








Basic

$

0.68



$

0.66



$

1.79



$

2.02


Diluted

$

0.68



$

0.65



$

1.79



$

2.01


Shares used in per-share calculation:








Basic

4,219



4,230



4,224



4,239


Diluted

4,238



4,243



4,237



4,258


 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)




May 1, 2021



Three Months Ended


Nine Months Ended



Amount


Y/Y %


Amount


Y/Y %

Revenue:









Americas


$

7,262



2%


$

21,430



(3)%

EMEA


3,483



11%


9,654



1%

APJC


2,057



19%


5,608



2%

Total


$

12,803



7%


$

36,692



(1)%


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

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)




May 1, 2021



Three Months Ended


Nine Months Ended

Gross Margin Percentage:





Americas


66.5%


67.1%

EMEA


65.6%


65.5%

APJC


64.7%


64.2%

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)




May 1, 2021



Three Months Ended


Nine Months Ended



Amount


Y/Y %


Amount


Y/Y %

Revenue:









Infrastructure Platforms


$

6,832



6%


$

19,564



(5)%

Applications


1,426



5%


4,160



(1)%

Security


876



13%


2,559



9%

Other Products


6



(34)%


15



(44)%

Total Product


9,139



6%


26,298



(3)%

Services


3,664



8%


10,394



4%

Total


$

12,803



7%


$

36,692



(1)%


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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)



May 1, 2021


July 25, 2020

ASSETS




Current assets:




Cash and cash equivalents

$

7,350



$

11,809


Investments

16,229



17,610


Accounts receivable, net of allowance for doubtful accounts of $110 at May 1, 2021 and $143 at July 25, 2020

4,425



5,472


Inventories

1,579



1,282


Financing receivables, net

4,648



5,051


Other current assets

2,829



2,349


Total current assets

37,060



43,573


Property and equipment, net

2,367



2,453


Financing receivables, net

5,068



5,714


Goodwill

37,690



33,806


Purchased intangible assets, net

3,716



1,576


Deferred tax assets

4,070



3,990


Other assets

3,925



3,741


TOTAL ASSETS

$

93,896



$

94,853


LIABILITIES AND EQUITY




Current liabilities:




Short-term debt

$

2,000



$

3,005


Accounts payable

2,440



2,218


Income taxes payable

753



839


Accrued compensation

3,327



3,122


Deferred revenue

11,492



11,406


Other current liabilities

4,250



4,741


Total current liabilities

24,262



25,331


Long-term debt

9,532



11,578


Income taxes payable

8,247



8,837


Deferred revenue

9,397



9,040


Other long-term liabilities

2,253



2,147


Total liabilities

53,691



56,933


Total equity

40,205



37,920


TOTAL LIABILITIES AND EQUITY

$

93,896



$

94,853


 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



Nine Months Ended


May 1,

2021


April 25,

2020

Cash flows from operating activities:




Net income

$

7,582



$

8,578


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




Depreciation, amortization, and other

1,373



1,364


Share-based compensation expense

1,337



1,170


Provision (benefit) for receivables

(4)



60


Deferred income taxes

(89)



103


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

(201)



(185)


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




Accounts receivable

1,250



774


Inventories

(260)



143


Financing receivables

1,160



380


Other assets

(233)



145


Accounts payable

24



324


Income taxes, net

(828)



(700)


Accrued compensation

145



(220)


Deferred revenue

263



333


Other liabilities

(569)



(645)


Net cash provided by operating activities

10,950



11,624


Cash flows from investing activities:




Purchases of investments

(7,855)



(6,880)


Proceeds from sales of investments

2,724



4,737


Proceeds from maturities of investments

6,445



5,708


Acquisitions, net of cash and cash equivalents acquired and divestitures

(6,333)



(237)


Purchases of investments in privately held companies

(138)



(143)


Return of investments in privately held companies

96



213


Acquisition of property and equipment

(530)



(562)


Proceeds from sales of property and equipment

14



175


Other

(56)



(10)


Net cash (used in) provided by investing activities

(5,633)



3,001


Cash flows from financing activities:




Issuances of common stock

307



335


Repurchases of common stock - repurchase program

(2,096)



(2,659)


Shares repurchased for tax withholdings on vesting of restricted stock units

(419)



(519)


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



(3,470)


Repayments of debt

(3,000)



(5,220)


Dividends paid

(4,601)



(4,491)


Other

39



(3)


Net cash used in financing activities

(9,770)



(16,027)


Net decrease in cash, cash equivalents, and restricted cash

(4,453)



(1,402)


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

11,812



11,772


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

$

7,359



$

10,370


Supplemental cash flow information:




Cash paid for interest

$

377



$

519


Cash paid for income taxes, net

$

2,862



$

2,683


 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)



May 1,

2021


January 23,

2021


April 25,

2020

Deferred revenue:






Product

$

8,698



$

8,332



$

7,225


Service

12,191



12,514



11,423


            Total

$

20,889



$

20,846



$

18,648














Reported as:






Current

$

11,492



$

11,552



$

10,710


Noncurrent

9,397



9,294



7,938


            Total

$

20,889



$

20,846



$

18,648


 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)



May 1, 2021


January 23, 2021


April 25, 2020


Amount


Y/Y%


Amount


Y/Y%


Amount


Y/Y%

Product

$

11,903



15

%


$

11,666



17

%


$

10,387



25

%

Service

16,235



7

%


16,512



10

%


15,141



3

%

Total

$

28,138



10

%


$

28,178



13

%


$

25,528



11

%

 

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













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


Nine Months Ended


May 1,

2021


April 25,

2020


May 1,

2021


April 25,

2020

GAAP net income

$

2,863



$

2,774



$

7,582



$

8,578


Adjustments to cost of sales:








Share-based compensation expense

75



60



208



176


Amortization of acquisition-related intangible assets

184



154



499



454


Acquisition-related/divestiture costs

1



1



3



3


Legal and indemnification settlements/charges





43



4


Total adjustments to GAAP cost of sales

260



215



753



637


Adjustments to operating expenses:








Share-based compensation expense

383



322



1,103



975


Amortization of acquisition-related intangible assets

61



34



136



108


Acquisition-related/divestiture costs

86



66



179



191


Significant asset impairments and restructurings

42



128



878



354


Total adjustments to GAAP operating expenses

572



550



2,296



1,628


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








Acquisition-related/divestiture costs

6





4




(Gains) and losses on equity investments

(96)



1



(131)



(99)


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

(90)



1



(127)



(99)


Total adjustments to GAAP income before provision for income taxes

742



766



2,922



2,166


Income tax effect of non-GAAP adjustments

(95)



(172)



(503)



(547)


Significant tax matters





83



67


Total adjustments to GAAP provision for income taxes

(95)



(172)



(420)



(480)


Non-GAAP net income

$

3,510



$

3,368



$

10,084



$

10,264


 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES


GAAP TO NON-GAAP EPS



Three Months Ended


Nine Months Ended


May 1,

2021


April 25,

2020


May 1,

2021


April 25,

2020

GAAP EPS

$

0.68



$

0.65



$

1.79



$

2.01


Adjustments to GAAP:








Share-based compensation expense

0.11



0.09



0.31



0.27


Amortization of acquisition-related intangible assets

0.06



0.04



0.15



0.13


Acquisition-related/divestiture costs

0.02



0.02



0.04



0.05


Legal and indemnification settlements/charges





0.01




Significant asset impairments and restructurings

0.01



0.03



0.21



0.08


(Gains) and losses on equity investments

(0.02)





(0.03)



(0.02)


Income tax effect of non-GAAP adjustments

(0.02)



(0.04)



(0.12)



(0.13)


Significant tax matters





0.02



0.02


Non-GAAP EPS

$

0.83



$

0.79



$

2.38



$

2.41



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


May 1, 2021


Product

Gross

Margin


Service

Gross

Margin


Total

Gross

Margin


Operating

Expenses


Y/Y


Operating

Income


Y/Y


Interest

and other

income

(loss),

net


Net

Income


Y/Y

GAAP amount

$

5,717



$

2,468



$

8,185



$

4,720



8%


$

3,465



1%


$

126



$

2,863



3%

% of revenue

62.6

%


67.4

%


63.9

%


36.9

%




27.1

%




1.0

%


22.4

%



Adjustments to GAAP amounts:
























Share-based compensation expense

26



49



75



383





458







458




Amortization of acquisition-related intangible assets

184





184



61





245







245




Acquisition/divestiture-related costs

1





1



86





87





6



93




Significant asset impairments and restructurings







42





42







42




(Gains) and losses on equity investments















(96)



(96)




Income tax effect/significant tax matters

















(95)




Non-GAAP amount

$

5,928



$

2,517



$

8,445



$

4,148



9%


$

4,297



3%


$

36



$

3,510



4%

% of revenue

64.9

%


68.7

%


66.0

%


32.4

%




33.6

%




0.3

%


27.4

%








Three Months Ended


April 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

$

5,477



$

2,294



$

7,771



$

4,357



$

3,414



$

30



$

2,774


% of revenue

63.7

%


67.7

%


64.9

%


36.4

%


28.5

%


0.3

%


23.1

%

Adjustments to GAAP amounts:














Share-based compensation expense

23



37



60



322



382





382


Amortization of acquisition-related intangible assets

154





154



34



188





188


Acquisition/divestiture-related costs



1



1



66



67





67


Significant asset impairments and restructurings







128



128





128


(Gains) and losses on equity investments











1



1


Income tax effect/significant tax matters













(172)


Non-GAAP amount

$

5,654



$

2,332



$

7,986



$

3,807



$

4,179



$

31



$

3,368


% of revenue

65.8

%


68.9

%


66.6

%


31.8

%


34.9

%


0.3

%


28.1

%


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)



Nine Months Ended


May 1, 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

$

16,626



$

6,924



$

23,550



$

14,292



5%


$

9,258



(11)%


$

269



$

7,582



(12)%

% of revenue

63.2

%


66.6

%


64.2

%


39.0

%




25.2

%




0.7

%


20.7

%



Adjustments to GAAP amounts:
























Share-based compensation expense

75



133



208



1,103





1,311







1,311




Amortization of acquisition-related intangible assets

499





499



136





635







635




Acquisition/divestiture-related costs

2



1



3



179





182





4



186




Legal and indemnification settlements/charges

43





43







43







43




Significant asset impairments and restructurings







878





878







878




(Gains) and losses on equity investments















(131)



(131)




Income tax effect/significant tax matters

















(420)




Non-GAAP amount

$

17,245



$

7,058



$

24,303



$

11,996



—%


$

12,307



(3)%


$

142



$

10,084



(2)%

% of revenue

65.6

%


67.9

%


66.2

%


32.7

%




33.5

%




0.4

%


27.5

%








Nine Months Ended


April 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

$

17,376



$

6,623



$

23,999



$

13,626



$

10,373



$

291



$

8,578


% of revenue

64.0

%


66.2

%


64.6

%


36.7

%


27.9

%


0.8

%


23.1

%

Adjustments to GAAP amounts:














Share-based compensation expense

69



107



176



975



1,151





1,151


Amortization of acquisition-related intangible assets

454





454



108



562





562


Acquisition/divestiture-related costs



3



3



191



194





194


Legal and indemnification settlements

4





4





4





4


Significant asset impairments and restructurings







354



354





354


(Gains) and losses on equity investments











(99)



(99)


Income tax effect/significant tax matters













(480)


Non-GAAP amount

$

17,903



$

6,733



$

24,636



$

11,998



$

12,638



$

192



$

10,264


% of revenue

66.0

%


67.3

%


66.3

%


32.3

%


34.0

%


0.5

%


27.6

%


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


Nine Months Ended


May 1, 2021


April 25,

2020


May 1, 2021


April 25,

2020

GAAP effective tax rate

20.3

%


19.4

%


20.4

%


19.6

%

Total adjustments to GAAP provision for income taxes

(1.3)

%


0.6

%


(1.4)

%


0.4

%

Non-GAAP effective tax rate

19.0

%


20.0

%


19.0

%


20.0

%

 

GAAP TO NON-GAAP GUIDANCE FOR Q4 FY 2021


Q4 FY 2021


Gross Margin

Rate


Operating Margin

Rate


Tax Provision

Rate


Earnings per

Share (1)

GAAP


62% - 63%


25.5%- 26.5%


19%


$0.64 - $0.69

Estimated adjustments for:









Share-based compensation expense


0.5%


3.5%



$0.07 - $0.08

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


1.5%


2.5%



$0.07 - $0.08

Significant asset impairments and restructurings



0.5%



$0.00 - $0.01

Income tax effect of non-GAAP adjustments








Non-GAAP


64% - 65%


32% - 33%


19%


$0.81 - $0.83


(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 continued execution of our strategy, our ability to lead the next phase of the recovery as our customers accelerate their adoption of hybrid work, digital transformation, cloud, continued strong uptake of our subscription-based offerings, our investments in innovation, and accelerated shift to more software offerings and subscriptions) and the future financial performance of Cisco (including the guidance for Q4 FY 2021) 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; 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 routing, switching 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 the restructuring and possible changes in the size and timing of the 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 February 16, 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 and nine months ended May 1, 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.

Copyright © 2021 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.

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SOURCE Cisco Systems, Inc.