Press Release

Cisco Reports First Quarter Earnings

Cisco Reports First Quarter Earnings

SAN JOSE, Calif. Nov. 16, 2022

News Summary:

  • $13.6 billion in revenue, up 6% year over year; GAAP EPS $0.65, down 7% year over year, and Non-GAAP EPS $0.86, up 5% year over year
  • Continued progress on business model transformation:
  •  
    • Total annualized recurring revenue (ARR) at $23.2 billion, up 7% year over year and product ARR up 12% year over year
    • Total software revenue up 5% year over year and software subscription revenue up 11% year over year
    • Remaining performance obligations (RPO) at $30.9 billion, up 3% year over year and product RPO up 5% year over year
 
  • Q1 FY 2023 Results:
    • Revenue: $13.6 billion
      • Increase of 6% year over year
    • Earnings per Share: GAAP: $0.65; Non-GAAP: $0.86
      • GAAP EPS decreased (7)% year over year
      • Non-GAAP EPS increased 5% year over year
  • Q2 FY 2023 Guidance:  
    • Revenue: 4.5% to 6.5% growth year over year
    • Earnings per Share: GAAP: $0.59 to $0.64; Non-GAAP: $0.84 to $0.86 
  • FY 2023 Guidance:
    • Revenue: 4.5% to 6.5% growth year over year
    • Earnings per Share: GAAP: $2.63 to $2.76; Non-GAAP: $3.51 to $3.58 

 

Q1FY2023 Earnings Infographics

 

Cisco today reported first quarter results for the period ended October 29, 2022. Cisco reported first quarter revenue of $13.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.7 billion or $0.65 per share, and non-GAAP net income of $3.5 billion or $0.86 per share.

"Our fiscal 2023 is off to a good start as we delivered the largest quarterly revenue and second highest quarterly non-GAAP earnings per share in our history," said Chuck Robbins, chair and CEO of Cisco. "These results demonstrate the relevance of our strategy, our differentiated innovation, and our unique position to help our customers become more resilient."

"We delivered strong results in Q1 and continued to make progress on our business transformation," said Scott Herren, CFO of Cisco. "Our annualized recurring revenue increased to more than $23 billion, with product ARR growing 12%. This, together with our significant backlog, strong RPO, and easing supply situation, provides us with great visibility and predictability, and supports our increased full year guidance."

GAAP Results

 
   

Q1 FY 2023

 

Q1 FY 2022

 

Vs. Q1 FY 2022

Revenue

 

$               13.6

billion

 

$               12.9

billion

 

6 %

Net Income

 

$                 2.7

billion

 

$                 3.0

billion

 

(10) %

Diluted Earnings per Share (EPS)

 

$               0.65

   

$               0.70

   

(7) %

 
 

Non-GAAP Results

 
   

Q1 FY 2023

 

Q1 FY 2022

 

Vs. Q1 FY 2022

Net Income

 

$               3.5

billion

 

$               3.5

billion

 

2 %

EPS

 

$             0.86

   

$             0.82

   

5 %

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.

Q1 FY 2023 Highlights

Revenue -- Total revenue was up 6% at $13.6 billion, with product revenue up 8% and service revenue was flat. Revenue by geographic segment was: Americas up 5%, EMEA up 11%, and APJC was flat. Product revenue performance was led by growth in Secure, Agile Networks up 12%, End-to-End Security up 9%, and Optimized Application Experiences up 7%. Internet for the Future was down 5% and Collaboration was down 2%.

Gross Margin --  On a GAAP basis, total gross margin, product gross margin, and service gross margin were 61.2%, 59.2%, and 67.3%, respectively, as compared with 62.4%, 61.5%, and 65.2%, respectively, in the first quarter of fiscal 2022.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 63.0%, 61.0%, and 68.8%, respectively, as compared with 64.5%, 63.8%, and 66.5%, respectively, in the first quarter of fiscal 2022.

Total gross margins by geographic segment were: 63.0% for the Americas, 63.3% for EMEA and 62.3% for APJC.

Operating Expenses --  On a GAAP basis, operating expenses were $4.8 billion, up 4%, and were 35.3% of revenue. Non-GAAP operating expenses were $4.2 billion, up 5%, and were 31.1% of revenue.

Operating Income -- GAAP operating income was $3.5 billion, up 3%, with GAAP operating margin of 26.0%. Non-GAAP operating income was $4.3 billion, up 1%, with non-GAAP operating margin at 31.8%.

Provision for Income Taxes -- The GAAP tax provision rate was 23.2%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.7 billion, a decrease of 10%, and EPS was $0.65, a decrease of 7%. On a non-GAAP basis, net income was $3.5 billion, an increase of 2%, and EPS was $0.86, an increase of 5%.

Cash Flow from Operating Activities -- $4.0 billion for the first quarter of fiscal 2023, an increase of 16% compared with $3.4 billion for the first quarter of fiscal 2022.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $19.8 billion at the end of the first quarter of fiscal 2023, compared with $19.3 billion at the end of fiscal 2022.

Remaining Performance Obligations (RPO) -- $30.9 billion, up 3% in total, with 53% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 5% and service RPO were up 1%.

Deferred Revenue -- $23.0 billion, up 4% in total, with deferred product revenue up 7%. Deferred service revenue was up 2%.

Capital Allocation -- In the first quarter of fiscal 2023, we returned $2.1 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 12 million shares of common stock under our stock repurchase program at an average price of $43.76 per share for an aggregate purchase price of $0.5 billion. The remaining authorized amount for stock repurchases under the program is $14.7 billion with no termination date.

Guidance

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

Q2 FY 2023

   

Revenue

 

4.5% – 6.5% growth Y/Y

Non-GAAP gross margin rate

 

63% – 64%

Non-GAAP operating margin rate

 

31.5% – 32.5%

Non-GAAP EPS

 

$0.84 – $0.86

Cisco estimates that GAAP EPS will be $0.59 to $0.64 for the second quarter of fiscal 2023.

Cisco expects to achieve the following results for fiscal 2023:

FY 2023

   

Revenue

 

4.5% – 6.5% growth Y/Y

Non-GAAP EPS

 

$3.51 – $3.58

Cisco estimates that GAAP EPS will be $2.63 to $2.76 for fiscal 2023.

Our Q2 FY 2023 guidance assumes an effective tax provision rate of 19% for GAAP and non-GAAP results. Our FY 2023 guidance assumes an effective tax provision rate of 20% for GAAP and 19% for non-GAAP results.

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

 

Editor's Notes:

  • Q1 fiscal year 2023 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, November 16, 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, November 16, 2022 to 4:00 p.m. Pacific Time, November 23, 2022 at 1-800-835-5808 (United States) or 1-203-369-3353 (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, November 16, 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

 

October 29,
2022

 

October 30,
2021

REVENUE:

     

Product

$       10,245

 

$         9,529

Service

3,387

 

3,371

Total revenue

13,632

 

12,900

COST OF SALES:

     

Product

4,179

 

3,673

Service

1,107

 

1,174

Total cost of sales

5,286

 

4,847

GROSS MARGIN

8,346

 

8,053

OPERATING EXPENSES:

     

Research and development

1,781

 

1,714

Sales and marketing

2,391

 

2,261

General and administrative

565

 

551

Amortization of purchased intangible assets

71

 

84

Restructuring and other charges

(2)

 

5

Total operating expenses

4,806

 

4,615

OPERATING INCOME

3,540

 

3,438

Interest income

169

 

121

Interest expense

(100)

 

(89)

Other income (loss), net

(134)

 

187

Interest and other income (loss), net

(65)

 

219

INCOME BEFORE PROVISION FOR INCOME TAXES

3,475

 

3,657

Provision for income taxes

805

 

677

NET INCOME

$         2,670

 

$         2,980

       

Net income per share:

     

Basic

$           0.65

 

$           0.71

Diluted

$           0.65

 

$           0.70

Shares used in per-share calculation:

     

Basic

4,108

 

4,218

Diluted

4,116

 

4,243

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 
   

Three Months Ended

   

October 29, 2022

   

Amount

 

Y/Y %

Revenue :

       

Americas

 

$           7,914

 

5 %

EMEA

 

3,675

 

11 %

APJC

 

2,043

 

— %

Total

 

$         13,632

 

6 %

 

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

 

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

 
   

Three Months Ended

   

October 29, 2022

Gross Margin Percentage :

   

Americas

 

63.0 %

EMEA

 

63.3 %

APJC

 

62.3 %

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 
   

Three Months Ended

   

October 29, 2022

   

Amount

 

Y/Y %

Revenue :

       

Secure, Agile Networks

 

$           6,684

 

12 %

Internet for the Future

 

1,310

 

(5) %

Collaboration

 

1,086

 

(2) %

End-to-End Security

 

971

 

9 %

Optimized Application Experiences

 

193

 

7 %

Other Products

 

2

 

(47) %

Total Product

 

10,245

 

8 %

Services

 

3,387

 

— %

Total

 

$         13,632

 

6 %

 

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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
 

October 29, 2022

 

July 30, 2022

ASSETS

     

Current assets:

     

Cash and cash equivalents

$                7,292

 

$                7,079

Investments

12,492

 

12,188

Accounts receivable, net of allowance of $88 at October 29, 2022 and $83 at July 30,
2022

5,439

 

6,622

Inventories

2,664

 

2,568

Financing receivables, net

3,683

 

3,905

Other current assets

4,571

 

4,355

Total current assets

36,141

 

36,717

Property and equipment, net

1,972

 

1,997

Financing receivables, net

3,618

 

4,009

Goodwill

38,160

 

38,304

Purchased intangible assets, net

2,360

 

2,569

Deferred tax assets

4,891

 

4,449

Other assets

5,912

 

5,957

TOTAL ASSETS

$              93,054

 

$              94,002

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term debt

$                1,249

 

$                1,099

Accounts payable

2,316

 

2,281

Income taxes payable

890

 

961

Accrued compensation

2,907

 

3,316

Deferred revenue

12,578

 

12,784

Other current liabilities

4,956