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
- Revenue: $13.6 billion
- 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
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, |
October 30, |
||
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, |
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 |
5,199 |
|
Total current liabilities |
24,896 |
25,640 |
|
Long-term debt |
7,629 |
8,416 |
|
Income taxes payable |
7,835 |
7,725 |
|
Deferred revenue |