News Release

Cisco Reports First Quarter FY21 Earnings

Cisco Press Release
  • Q1 Results:
    • Revenue: $11.9 billion
      • Decrease of (9)% year over year
    • Earnings per Share: GAAP: $0.51; Non-GAAP: $0.76
      • GAAP EPS decreased (25)% year over year
      • Non-GAAP EPS decreased (10)% year over year
  • Q2 Guidance:
    • Revenue: 0% to (2)% decline year over year
    • Earnings per Share: GAAP: $0.55 to $0.60; Non-GAAP: $0.74 to $0.76

Q1FY21 Earnings Infographics

SAN JOSE, Calif., Nov. 12, 2020 /PRNewswire/ -- Cisco today reported first quarter results for the period ended October 24, 2020. Cisco reported first quarter revenue of $11.9 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.51 per share, and non-GAAP net income of $3.2 billion or $0.76 per share.

"Cisco is off to a solid start in fiscal 2021 and we are encouraged by the signs of improvement in our business as we continue to navigate the pandemic and other macro uncertainties," said Chuck Robbins, chairman and CEO of Cisco. "Our focus is on winning with a differentiated innovative portfolio, long-term growth and being a trusted technology partner offering choice and flexibility to our customers.  We see many great opportunities ahead as every company in every industry is accelerating its digital-first strategy."

GAAP Results

 
   

Q1 FY 2021

 

Q1 FY 2020

 

Vs. Q1 FY 2020

Revenue

 

$

11.9

 billion

 

$

13.2

 billion

 

(9)%

Net Income

 

$

2.2

 billion

 

$

2.9

 billion

 

(26)%

Diluted Earnings per Share (EPS)

 

$

0.51

   

$

0.68

   

(25)%

 
 

Non-GAAP Results

 
   

Q1 FY 2021

 

Q1 FY 2020

 

Vs. Q1 FY 2020

Net Income

 

$

3.2

  billion

 

$

3.6

  billion

 

(11)%

EPS

 

$

0.76

   

$

0.84

   

(10)%

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."

"Our Q1 results reflect good execution with strong margins in a challenging environment," said Kelly Kramer, CFO of Cisco.  "We continued to transform our business through more software offerings and subscriptions, driving 10% year over year growth in remaining performance obligations. We delivered strong growth in operating cash flow and returned $2.3 billion to shareholders."

Financial Summary

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

Q1 FY 2021 Highlights

Revenue -- Total revenue was $11.9 billion, down 9%, with product revenue down 13% and service revenue up 2%. Revenue by geographic segment was: Americas down 10%, EMEA down 10%, and APJC down 7%. Product revenue was led by growth in Security, up 6%.  Infrastructure Platforms was down 16% and Applications was down 8%.

Gross Margin --  On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.6%, 62.7%, and 65.8%, respectively, as compared with 64.3% for each in the first quarter of fiscal 2020.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.8%, 65.3%, and 67.1%, respectively, as compared with 65.9%, 66.1%, and 65.4%, respectively, in the first quarter of fiscal 2020.

Total gross margins by geographic segment were: 67.3% for the Americas, 63.9% for EMEA and 63.0% for APJC.

Operating Expenses --  On a GAAP basis, operating expenses were $5.0 billion, up 3%, and were 42.0% of revenue. Non-GAAP operating expenses were $4.0 billion, down 7%, and were 33.1% of revenue.

Operating Income -- GAAP operating income was $2.6 billion, down 28%, with GAAP operating margin of 21.5%. Non-GAAP operating income was $3.9 billion, down 12%, with non-GAAP operating margin at 32.7%.

Provision for Income Taxes -- The GAAP tax provision rate was 18.9%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.2 billion, a decrease of 26%, and EPS was $0.51, a decrease of 25%. On a non-GAAP basis, net income was $3.2 billion, a decrease of 11%, and EPS was $0.76, a decrease of 10%.

Cash Flow from Operating Activities -- $4.1 billion for the first quarter of fiscal 2021, an increase of 14% compared with $3.6 billion for the first quarter of fiscal 2020.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $30.0 billion at the end of the first quarter of fiscal 2021, compared with $29.4 billion at the end of fiscal 2020.

Deferred Revenue -- $20.5 billion, up 10% in total, with deferred product revenue up 15%. Deferred service revenue was up 7%.

Remaining Performance Obligations -- $27.5 billion at the end of the first quarter of fiscal 2021, up 10%.

Capital Allocation -- In the first quarter of fiscal 2021, we returned $2.3 billion to shareholders through share buybacks and dividends. We declared and paid a cash dividend of $0.36 per common share, or $1.5 billion, and repurchased approximately 20 million shares of common stock under our stock repurchase program at an average price of $40.44 per share for an aggregate purchase price of $800 million. The remaining authorized amount for stock repurchases under the program is $10.0 billion with no termination date.

Guidance for Q2 FY 2021

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

Q2 FY 2021

   

Revenue

 

0% - (2)% decline 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

 

$0.74 - $0.76

Cisco estimates that GAAP EPS will be $0.55 to $0.60 in the second quarter of fiscal 2021.

A reconciliation between the Guidance for Q2 FY 2021 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAP Guidance for Q2 FY 2021" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Editor's Notes:

  • Q1 fiscal year 2021 conference call to discuss Cisco's results along with its guidance will be held on Thursday, November 12, 2020 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 12, 2020 to 4:00 p.m. Pacific Time, November 19, 2020 at 1-800-879-5193 (United States) or 1-203-369-3562 (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 12, 2020. 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 24,

2020

 

October 26,

2019

REVENUE:

     

Product

$

8,587

   

$

9,878

 

Service

3,342

   

3,281

 

Total revenue

11,929

   

13,159

 

COST OF SALES:

     

Product

3,206

   

3,524

 

Service

1,142

   

1,171

 

Total cost of sales

4,348

   

4,695

 

GROSS MARGIN

7,581

   

8,464

 

OPERATING EXPENSES:

     

Research and development

1,612

   

1,666

 

Sales and marketing

2,217

   

2,480

 

General and administrative

544

   

519

 

Amortization of purchased intangible assets

36

   

36

 

Restructuring and other charges

602

   

184

 

Total operating expenses

5,011

   

4,885

 

OPERATING INCOME

2,570

   

3,579

 

Interest income

174

   

273

 

Interest expense

(112)

   

(178)

 

Other income (loss), net

49

   

12

 

Interest and other income (loss), net

111

   

107

 

INCOME BEFORE PROVISION FOR INCOME TAXES

2,681

   

3,686

 

Provision for income taxes

507

   

760

 

NET INCOME

$

2,174

   

$

2,926

 
       

Net income per share:

     

Basic

$

0.51

   

$

0.69

 

Diluted

$

0.51

   

$

0.68

 

Shares used in per-share calculation:

     

Basic

4,230

   

4,246

 

Diluted

4,244

   

4,273

 

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 
   

Three Months Ended

   

October 24, 2020

   

Amount

 

Y/Y %

Revenue:

       

Americas

 

$

7,198

   

(10)%

EMEA

 

2,964

   

(10)%

APJC

 

1,767

   

(7)%

Total

 

$

11,929

   

(9)%

 

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 24, 2020

Gross Margin Percentage:

   

Americas

 

67.3%

EMEA

 

63.9%

APJC

 

63.0%

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 
   

Three Months Ended

   

October 24, 2020

   

Amount

 

Y/Y %

Revenue:

       

Infrastructure Platforms

 

$

6,341

   

(16)%

Applications

 

1,380

   

(8)%

Security

 

861

   

6%

Other Products

 

5

   

(56)%

Total Product

 

8,587

   

(13)%

Services

 

3,342

   

2%

                    Total

 

$

11,929

   

(9)%

 

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

 

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
 

October 24, 2020

 

July 25, 2020

ASSETS

     

Current assets:

     

Cash and cash equivalents

$

10,822

   

$

11,809

 

Investments

19,190

   

17,610

 

Accounts receivable, net of allowance for doubtful accounts of $125 at October 24, 2020 and $143 at July 25, 2020

3,980

   

5,472

 

Inventories

1,303

   

1,282

 

Financing receivables, net

5,105

   

5,051

 

Other current assets

2,589

   

2,349

 

Total current assets

42,989

   

43,573

 

Property and equipment, net

2,412

   

2,453

 

Financing receivables, net

5,516

   

5,714

 

Goodwill

34,535

   

33,806

 

Purchased intangible assets, net

1,581

   

1,576

 

Deferred tax assets

4,138

   

3,990

 

Other assets

3,832

   

3,741

 

TOTAL ASSETS

$

95,003

   

$

94,853

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term debt

$

5,002

   

$

3,005

 

Accounts payable

2,294

   

2,218

 

Income taxes payable

810

   

839

 

Accrued compensation

2,978

   

3,122

 

Deferred revenue

11,271

   

11,406

 

Other current liabilities

4,636

   

4,741

 

Total current liabilities

26,991

   

25,331

 

Long-term debt

9,564

   

11,578

 

Income taxes payable

8,786

   

8,837

 

Deferred revenue

9,202

   

9,040

 

Other long-term liabilities

2,303

   

2,147

 

Total liabilities

56,846

   

56,933

 

Total equity

38,157

   

37,920

 

TOTAL LIABILITIES AND EQUITY

$

95,003

   

$

94,853

 

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
 

Three Months Ended

 

October 24,

2020

 

October 26,

2019

Cash flows from operating activities:

     

Net income

$

2,174

   

$

2,926

 

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

     

Depreciation, amortization, and other

451

   

461

 

Share-based compensation expense

438

   

395

 

Provision (benefit) for receivables

13

   

50

 

Deferred income taxes

(120)

   

81

 

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

(59)

   

(8)

 

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

     

Accounts receivable

1,526

   

515

 

Inventories

(21)

   

34

 

Financing receivables

167

   

146

 

Other assets

(259)

   

59

 

Accounts payable

73

   

(45)

 

Income taxes, net

(84)

   

(330)

 

Accrued compensation

(165)

   

(473)

 

Deferred revenue

(45)

   

158

 

Other liabilities

7

   

(382)

 

Net cash provided by operating activities

4,096

   

3,587

 

Cash flows from investing activities:

     

Purchases of investments

(3,756)

   

(2,028)

 

Proceeds from sales of investments

657

   

2,342

 

Proceeds from maturities of investments

1,425

   

1,966

 

Acquisitions and divestitures

(830)

   

(163)

 

Purchases of investments in privately held companies

(68)

   

(54)

 

Return of investments in privately held companies

29

   

57

 

Acquisition of property and equipment

(171)

   

(202)

 

Proceeds from sales of property and equipment

4

   

4

 

Net cash (used in) provided by investing activities

(2,710)

   

1,922

 

Cash flows from financing activities:

     

Issuances of common stock

1

   

2

 

Repurchases of common stock - repurchase program

(800)

   

(784)

 

Shares repurchased for tax withholdings on vesting of restricted stock units

(89)

   

(194)

 

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

   

(3,470)

 

Repayments of debt

   

(2,720)

 

Dividends paid

(1,520)

   

(1,486)

 

Other

35

   

(16)

 

Net cash used in financing activities

(2,373)

   

(8,668)

 

Net decrease in cash, cash equivalents, and restricted cash

(987)

   

(3,159)

 

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

11,812

   

11,772

 

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

$

10,825

   

$

8,613

 

Supplemental cash flow information:

     

Cash paid for interest

$

160

   

$

204

 

Cash paid for income taxes, net

$

710

   

$

1,009

 

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 
 

October 24,

2020

 

July 25,

2020

 

October 26,

2019

Deferred revenue:

         

Product

$

8,139

   

$

7,895

   

$

7,105

 

Service

12,334

   

12,551

   

11,497

 

           Total

$

20,473

   

$

20,446

   

$

18,602

 

Reported as:

         

Current

$

11,271

   

$

11,406

   

$

10,646

 

Noncurrent

9,202

   

9,040

   

7,956

 

           Total

$

20,473

   

$

20,446

   

$

18,602

 

 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 
 

October 24, 2020

 

July 25, 2020

 

October 26, 2019

 

Amount

 

Y/Y%

 

Amount

 

Y/Y%

 

Amount

 

Y/Y%

Product

$

11,340

   

15

%

 

$

11,261

   

17

%

 

$

9,878

   

28

%

Service

16,129

   

8

%

 

17,093

   

9

%

 

14,991

   

3

%

Total

$

27,469

   

10

%

 

$

28,354

   

12

%

 

$

24,869

   

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

                     

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

 

October 24,

2020

 

October 26,

2019

GAAP net income

$

2,174

   

$

2,926

 

Adjustments to cost of sales:

     

Share-based compensation expense

65

   

57

 

Amortization of acquisition-related intangible assets

163

   

150

 

Acquisition-related/divestiture costs

1

   

1

 

Legal and indemnification settlements/charges

43

   

4

 

Total adjustments to GAAP cost of sales

272

   

212

 

Adjustments to operating expenses:

     

Share-based compensation expense

362

   

333

 

Amortization of acquisition-related intangible assets

36

   

36

 

Acquisition-related/divestiture costs

59

   

72

 

Significant asset impairments and restructurings

602

   

184

 

Total adjustments to GAAP operating expenses

1,059

   

625

 

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

     

(Gains) and losses on equity investments

(48)

   

(13)

 

Total adjustments to GAAP income before provision for income taxes

1,283

   

824

 

Income tax effect of non-GAAP adjustments

(246)

   

(209)

 

Significant tax matters

   

67

 

Total adjustments to GAAP provision for income taxes

(246)

   

(142)

 

Non-GAAP net income

$

3,211

   

$

3,608

 

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

GAAP TO NON-GAAP EPS

 
 

Three Months Ended

 

October 24,

2020

 

October 26,

2019

GAAP EPS

$

0.51

   

$

0.68

 

Adjustments to GAAP:

     

Share-based compensation expense

0.10

   

0.09

 

Amortization of acquisition-related intangible assets

0.05

   

0.04

 

Acquisition-related/divestiture costs

0.01

   

0.02

 

Legal and indemnification settlements/charges

0.01

   

 

Significant asset impairments and restructurings

0.14

   

0.04

 

(Gains) and losses on equity investments

(0.01)

   

 

Income tax effect of non-GAAP adjustments

(0.06)

   

(0.05)

 

Significant tax matters

   

0.02

 

Non-GAAP EPS

$

0.76

   

$

0.84

 
 

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

 

October 24, 2020

 

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

$

5,381

   

$

2,200

   

$

7,581

   

$

5,011

   

3%

 

$

2,570

   

(28)%

 

$

111

   

$

2,174

   

(26)%

% of revenue

62.7

%

 

65.8

%

 

63.6

%

 

42.0

%

     

21.5

%

     

0.9

%

 

18.2

%

   

Adjustments to GAAP amounts:

                               

Share-based compensation expense

24

   

41

   

65

   

362

       

427

       

   

427

     

Amortization of acquisition-related intangible assets

163

   

   

163

   

36

       

199

       

   

199

     

Acquisition/divestiture-related costs

   

1

   

1

   

59

       

60

       

   

60

     

Legal and indemnification settlements/charges

43

   

   

43

   

       

43

       

   

43

     

Significant asset impairments and restructurings

   

   

   

602

       

602

       

   

602

     

(Gains) and losses on equity investments

   

   

   

       

       

(48)

   

(48)

     

Income tax effect/significant tax matters

   

   

   

       

       

   

(246)

     

Non-GAAP amount

$

5,611

   

$

2,242

   

$

7,853

   

$

3,952

   

(7)%

 

$

3,901

   

(12)%

 

$

63

   

$

3,211

   

(11)%

% of revenue

65.3

%

 

67.1

%

 

65.8

%

 

33.1

%

     

32.7

%

     

0.5

%

 

26.9

%

   

 

 

Three Months Ended

 

October 26, 2019

 

Product

Gross

Margin

 

Service

Gross

Margin

 

Total Gross

Margin

 

Operating

Expenses

 

Operating

Income

 

Interest and

other

income

(loss), net

 

Net

Income

GAAP amount

$

6,354

   

$

2,110

   

$

8,464

   

$

4,885

   

$

3,579

   

$

107

   

$

2,926

 

% of revenue

64.3

%

 

64.3

%

 

64.3

%

 

37.1

%

 

27.2

%

 

0.8

%

 

22.2

%

Adjustments to GAAP amounts:

                         

Share-based compensation expense

23

   

34

   

57

   

333

   

390

   

   

390

 

Amortization of acquisition-related intangible assets

150

   

   

150

   

36

   

186

   

   

186

 

Legal and indemnification settlements/charges

4

   

   

4

   

   

4

   

   

4

 

Acquisition/divestiture-related costs

   

1

   

1

   

72

   

73

   

   

73

 

Significant asset impairments and restructurings

   

   

   

184

   

184

   

   

184

 

(Gains) and losses on equity investments

   

   

   

   

   

(13)

   

(13)

 

Income tax effect/significant tax matters

   

   

   

   

   

   

(142)

 

Non-GAAP amount

$

6,531

   

$

2,145

   

$

8,676

   

$

4,260

   

$

4,416

   

$

94

   

$

3,608

 

% of revenue

66.1

%

 

65.4

%

 

65.9

%

 

32.4

%

 

33.6

%

 

0.7

%

 

27.4

%

 

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

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

 

EFFECTIVE TAX RATE

(In percentages)

 
 

Three Months Ended

 

October 24,

2020

 

October 26,

2019

GAAP effective tax rate

18.9

%

 

20.6

%

Total adjustments to GAAP provision for income taxes

0.1

%

 

(0.6)

%

Non-GAAP effective tax rate

19.0

%

 

20.0

%

 

GAAP TO NON-GAAP GUIDANCE FOR Q2 FY 2021

 

Q2 FY 2021

Gross Margin

Rate

 

Operating Margin

Rate

 

Tax Provision

Rate

 

Earnings per

Share (2)

GAAP

62% - 63%

 

24.5%- 25.5%

 

19%

 

$0.55 - $0.60

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%

 

2.0%

 

 

$0.04 - $0.05

Significant asset impairments and restructurings (1)

 

2.0%

 

 

$0.04 - $0.05

Income tax effect of non-GAAP adjustments

       

   

Non-GAAP

64% - 65%

 

32% - 33%

 

19%

 

$0.74 - $0.76

 

(1) In the first quarter of fiscal 2021, we initiated a restructuring plan, which includes a voluntary early retirement program, in order to realign the organization and enable further investment in key priority areas with total estimated pretax charges of approximately $900 million consisting of severance and other one-time termination benefits, and other costs. We recognized $602 million of these charges during the first quarter of fiscal 2021. We expect to recognize approximately $200 million of these charges in the second quarter of fiscal 2021 with the remaining amount to be recognized during the rest of the fiscal year.

(2) 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 improvement in our business as we continue to navigate the pandemic and other macro uncertainties, our ability to execute on our strategy to focus on winning with a differentiated innovative portfolio, long-term growth and being a trusted technology partner offering choice and flexibility to our customers, our future opportunities as every company in every industry is accelerating its digital-first strategy, our ability to continue to transform our business through more software offerings and subscriptions, and our ability to continue to deliver strong growth in operating cash flow and return value to our shareholders) and the future financial performance of Cisco (including the guidance for Q2 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, intellectual property, antitrust, shareholder and other matters, and governmental investigations; our ability to achieve the benefits of the announced 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 report on Form 10-K filed on September 3, 2020. 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 report on Form 10-K as it may be amended from time to time. Cisco's results of operations for the three months ended October 24, 2020 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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Release Contacts

Robyn Blum press
+1 408 930 8548 rojenkin@cisco.com
Marilyn Mora investor
+1 (408) 527-7452 marilmor@cisco.com