News Release

Cisco Reports Third Quarter FY21 Earnings

Cisco Press Release

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

Q3FY21 Earnings Infographics

SAN JOSE, Calif., May 19, 2021 -- 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 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 condition