News Release

Cisco Reports First Quarter Earnings

Cisco Press Release

SAN JOSE, Calif., Nov. 17, 2021 -- 

News Summary:

  • Overall performance: $12.9 billion in revenue, up 8% year over year, with broad-based strength across the business; GAAP EPS $0.70, up 37% year over year, and Non-GAAP EPS $0.82, up 8% year over year
  • Strong demand across the business with 33% year-over-year total product order growth
  • Solid progress on business model transformation: Total Annualized Recurring Revenue was $21.6 billion for the first quarter of fiscal 2022, up 10% year over year
     
  • Q1 Results:
    • Revenue: $12.9 billion
      • Increase of 8% year over year
    • Earnings per Share: GAAP: $0.70; Non-GAAP: $0.82
      • GAAP EPS increased 37% year over year
      • Non-GAAP EPS increased 8% year over year
  • Q2 Guidance:   
    • Revenue: 4.5% to 6.5% growth year over year
    • Earnings per Share: GAAP: $0.64 to $0.68; Non-GAAP: $0.80 to $0.82
  • FY 2022 Guidance:
    • Revenue: 5% to 7% growth year over year
    • Earnings per Share: GAAP: $2.77 to $2.89; Non-GAAP: $3.38 to $3.45

Q1FY22 Earnings Infographics

Cisco today reported first quarter results for the period ended October 30, 2021. Cisco reported first quarter revenue of $12.9 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.70 per share, and non-GAAP net income of $3.5 billion or $0.82 per share.

"In Q1, we had robust growth and continued strong demand despite the very dynamic supply environment," said Chuck Robbins, Chair and CEO of Cisco. "Cisco's technology sits at the heart of the accelerated digital transformation happening today. Our breakthrough innovation, strong demand, and the success of our business transformation position us well for another year of growth in fiscal 2022."

"Our teams executed well in a challenging environment, delivering balanced profitable growth with revenue and non-GAAP EPS both growing 8% year over year," said Scott Herren, CFO of Cisco. "We also continued to make significant progress in our business model transformation. Remaining performance obligations and annualized recurring revenue both grew 10% year over year with product ARR growth of 21% providing more predictability and visibility to our long-term growth."

GAAP Results

 
   

Q1 FY 2022

 

Q1 FY 2021

 

Vs. Q1 FY 2021

Revenue

 

$

12.9

 billion

 

$

11.9

 billion

 

8%

Net Income

 

$

3.0

 billion

 

$

2.2

 billion

 

37%

Diluted Earnings per Share (EPS)

 

$

0.70

   

$

0.51

   

37%

 
 

Non-GAAP Results

 
   

Q1 FY 2022

 

Q1 FY 2021

 

Vs. Q1 FY 2021

Net Income

 

$

3.5

  billion

 

$

3.2

  billion

 

8%

EPS

 

$

0.82

   

$

0.76

   

8%

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 2022 Highlights

Revenue -- Total revenue was up 8% at $12.9 billion, with product revenue up 11% and service revenue up 1%. Revenue by geographic segment was: Americas up 5%, EMEA up 11%, and APJC up 15%. Product revenue performance was led by growth in Secure, Agile Networks up 10%, Internet for the Future up 46%, End-to-End Security up 4%, and Optimized Application Experiences up 18%. Hybrid Work was down 7%.

Gross Margin --  On a GAAP basis, total gross margin, product gross margin, and service gross margin were 62.4%, 61.5%, and 65.2%, respectively, as compared with 63.6%, 62.7%, and 65.8%, respectively, in the first quarter of fiscal 2021.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 64.5%, 63.8%, and 66.5%, respectively, as compared with 65.8%, 65.3%, and 67.1%, respectively, in the first quarter of fiscal 2021.

Total gross margins by geographic segment were: 64.5% for the Americas, 64.4% for EMEA and 64.7% for APJC.

Operating Expenses --  On a GAAP basis, operating expenses were $4.6 billion, down 8%, and were 35.8% of revenue. Non-GAAP operating expenses were $4.0 billion, up 2%, and were 31.2% of revenue.

Operating Income -- GAAP operating income was $3.4 billion, up 34%, with GAAP operating margin of 26.7%. Non-GAAP operating income was $4.3 billion, up 10%, with non-GAAP operating margin at 33.3%.

Provision for Income Taxes -- The GAAP tax provision rate was 18.5%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $3.0 billion, an increase of 37%, and EPS was $0.70, an increase of 37%. On a non-GAAP basis, net income was $3.5 billion, an increase of 8%, and EPS was $0.82, an increase of 8%.

Cash Flow from Operating Activities -- $3.4 billion for the first quarter of fiscal 2022, a decrease of 16% compared with $4.1 billion for the first quarter of fiscal 2021.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $23.3 billion at the end of the first quarter of fiscal 2022, compared with $24.5 billion at the end of fiscal 2021.

Remaining Performance Obligations (RPO) -- $30.1 billion, up 10% in total, with 53% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 18% and service RPO were up 4%.

Deferred Revenue -- $22.1 billion, up 8% in total, with deferred product revenue up 19%. Deferred service revenue was flat.

Capital Allocation -- In the first quarter of fiscal 2022, we returned $1.8 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 5 million shares of common stock under our stock repurchase program at an average price of $56.49 per share for an aggregate purchase price of $256 million. The remaining authorized amount for stock repurchases under the program is $7.7 billion with no termination date.

Acquisitions

In the first quarter of fiscal 2022, we closed the acquisition of Epsagon Ltd., a privately held modern observability company with expertise in distributed tracing solutions for modern applications and technologies, including containers and serverless environments.

In addition, we announced our intent to acquire replex GmbH, a privately held enterprise software company based in Germany.

Guidance

Cisco expects to achieve the following results for the second quarter of fiscal 2022:

Q2 FY 2022

   

Revenue

 

4.5% - 6.5% growth Y/Y

Non-GAAP gross margin rate

 

63.5% - 64.5%

Non-GAAP operating margin rate

 

32.5% - 33.5%

Non-GAAP EPS

 

$0.80 - $0.82

Cisco estimates that GAAP EPS will be $0.64 to $0.68 for the second quarter of fiscal 2022.

Cisco expects to achieve the following results for fiscal 2022 (no change from our previous guidance):

FY 2022

   

Revenue

 

5% - 7% growth Y/Y

Non-GAAP EPS

 

$3.38 - $3.45

Cisco estimates that GAAP EPS will be $2.77 to $2.89 for fiscal 2022.

Our Q2 FY 2022 and FY 2022 guidance assumes an effective tax provision rate of 18% 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 2022 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, November 17, 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, November 17, 2021 to 4:00 p.m. Pacific Time, November 24, 2021 at 1-866-360-3304 (United States) or 1-203-369-0159 (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 17, 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

 

October 30,

2021

 

October 24,

2020

REVENUE:

     

Product

$

9,529

   

$

8,587

 

Service

3,371

   

3,342

 

Total revenue

12,900

   

11,929

 

COST OF SALES:

     

Product

3,673

   

3,206

 

Service

1,174

   

1,142

 

Total cost of sales

4,847

   

4,348

 

GROSS MARGIN

8,053

   

7,581

 

OPERATING EXPENSES:

     

Research and development

1,714

   

1,612

 

Sales and marketing

2,261

   

2,217

 

General and administrative

551

   

544

 

Amortization of purchased intangible assets

84

   

36

 

Restructuring and other charges

5

   

602

 

Total operating expenses

4,615

   

5,011

 

OPERATING INCOME

3,438

   

2,570

 

Interest income

121

   

174

 

Interest expense

(89)

   

(112)

 

Other income (loss), net

187

   

49

 

Interest and other income (loss), net

219

   

111

 

INCOME BEFORE PROVISION FOR INCOME TAXES

3,657

   

2,681

 

Provision for income taxes

677

   

507

 

NET INCOME

$

2,980

   

$

2,174

 
       

Net income per share:

     

Basic

$

0.71

   

$

0.51

 

Diluted

$

0.70

   

$

0.51

 

Shares used in per-share calculation:

     

Basic

4,218

   

4,230

 

Diluted

4,243

   

4,244

 

 

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

 
   

Three Months Ended

   

October 30, 2021

   

Amount

 

Y/Y %

Revenue:

       

Americas

 

$

7,561

   

5%

EMEA

 

3,303

   

11%

APJC

 

2,036

   

15%

Total

 

$

12,900

   

8%

 

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 30, 2021

Gross Margin Percentage:

   

Americas

 

64.5%

EMEA

 

64.4%

APJC

 

64.7%

 

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

 
   

Three Months Ended

   

October 30, 2021

   

Amount

 

Y/Y %

Revenue:

       

Secure, Agile Networks

 

$

5,967

   

10%

Hybrid Work

 

1,109

   

(7)%

End-to-End Security

 

895

   

4%

Internet for the Future

 

1,374

   

46%

Optimized Application Experiences

 

181

   

18%

Other Products

 

3

   

9%

Total Product

 

9,529

   

11%

Services

 

3,371

   

1%

Total

 

$

12,900

   

8%

 

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

Effective for the first quarter of fiscal 2022, we began reporting our revenue in the following categories: Secure, Agile Networks; Hybrid Work; End-to-End Security; Internet for the Future; Optimized Application Experiences; Other Products and Services. This change better aligns our product categories with our strategic priorities. The reclassified product category revenue by quarter for fiscal 2019 through fiscal 2021 as well as other information is available on Cisco's Investor Relations website at https://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx.

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
 

October 30, 2021

 

July 31, 2021

ASSETS

     

Current assets:

     

Cash and cash equivalents

$

7,619

   

$

9,175

 

Investments

15,727

   

15,343

 

Accounts receivable, net of allowance of $114 at October 30, 2021 and $109 at July 31, 2021

5,306

   

5,766

 

Inventories

1,832

   

1,559

 

Financing receivables, net

4,070

   

4,380

 

Other current assets

3,034

   

2,889

 

Total current assets

37,588

   

39,112

 

Property and equipment, net

2,238

   

2,338

 

Financing receivables, net

4,546

   

4,884

 

Goodwill

38,802

   

38,168

 

Purchased intangible assets, net

3,350

   

3,619

 

Deferred tax assets

4,198

   

4,360

 

Other assets

5,259

   

5,016

 

TOTAL ASSETS

$

95,981

   

$

97,497

 

LIABILITIES AND EQUITY

     

Current liabilities:

     

Short-term debt

$

506

   

$

2,508

 

Accounts payable

2,261

   

2,362

 

Income taxes payable

816

   

801

 

Accrued compensation

3,231

   

3,818

 

Deferred revenue

12,017

   

12,148

 

Other current liabilities

4,407

   

4,620

 

Total current liabilities

23,238

   

26,257

 

Long-term debt

8,996

   

9,018

 

Income taxes payable

8,553

   

8,538

 

Deferred revenue

10,055

   

10,016

 

Other long-term liabilities

2,438

   

2,393

 

Total liabilities

53,280

   

56,222

 

Total equity

42,701

   

41,275

 

TOTAL LIABILITIES AND EQUITY

$

95,981

   

$

97,497

 

 

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
 

Three Months Ended

 

October 30,

2021

 

October 24,

2020

Cash flows from operating activities:

     

Net income

$

2,980

   

$

2,174

 

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

     

Depreciation, amortization, and other

533

   

451

 

Share-based compensation expense

453

   

438

 

Provision (benefit) for receivables

1

   

13

 

Deferred income taxes

(98)

   

(120)

 

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

(211)

   

(59)

 

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

     

Accounts receivable

427

   

1,526

 

Inventories

(275)

   

(21)

 

Financing receivables

672

   

167

 

Other assets

(170)

   

(259)

 

Accounts payable

(93)

   

73

 

Income taxes, net

17

   

(84)

 

Accrued compensation

(585)

   

(165)

 

Deferred revenue

(95)

   

(45)

 

Other liabilities

(129)

   

7

 

Net cash provided by operating activities

3,427

   

4,096

 

Cash flows from investing activities:

     

Purchases of investments

(2,951)

   

(3,756)

 

Proceeds from sales of investments

580

   

657

 

Proceeds from maturities of investments

1,856

   

1,425

 

Acquisitions, net of cash and cash equivalents acquired and divestitures

(336)

   

(830)

 

Purchases of investments in privately held companies

(101)

   

(68)

 

Return of investments in privately held companies

53

   

29

 

Acquisition of property and equipment

(122)

   

(171)

 

Proceeds from sales of property and equipment

1

   

4

 

Net cash used in investing activities

(1,020)

   

(2,710)

 

Cash flows from financing activities:

     

Issuances of common stock

   

1

 

Repurchases of common stock - repurchase program

(273)

   

(800)

 

Shares repurchased for tax withholdings on vesting of restricted stock units

(133)

   

(89)

 

Repayments of debt

(2,000)

   

 

Dividends paid

(1,561)

   

(1,520)

 

Other

(3)

   

35

 

Net cash used in financing activities

(3,970)

   

(2,373)

 

Net decrease in cash, cash equivalents, and restricted cash

(1,563)

   

(987)

 

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

9,942

   

11,812

 

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

$

8,379

   

$

10,825

 

Supplemental cash flow information:

     

Cash paid for interest

$

124

   

$

160

 

Cash paid for income taxes, net

$

758

   

$

710

 

 

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)

 
 

October 30, 2021

 

July 31, 2021

 

October 24, 2020

 

Amount

 

Y/Y%

 

Amount

 

Y/Y%

 

Amount

 

Y/Y%

Product

$

13,384

   

18

%

 

$

13,270

   

18

%

 

$

11,340

   

15

%

Service

16,751

   

4

%

 

17,623

   

3

%

 

16,129

   

8

%

Total

$

30,135

   

10

%

 

$

30,893

   

9

%

 

$

27,469

   

10

%

We expect 53% of total RPO at October 30, 2021 will be recognized as revenue over the next 12 months.

 

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)

 
 

October 30,

2021

 

July 31,

2021

 

October 24,

2020

Deferred revenue:

         

Product

$

9,681

   

$

9,416

   

$

8,139

 

Service

12,391

   

12,748

   

12,334

 

           Total

$

22,072

   

$

22,164

   

$

20,473

 

Reported as:

         

Current

$

12,017

   

$

12,148

   

$

11,271

 

Noncurrent

10,055

   

10,016

   

9,202

 

           Total

$

22,072

   

$

22,164

   

$

20,473

 

 

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 2022

                       

October 30, 2021

 

$

0.37

   

$

1,561

   

5

   

$

56.49

   

$

256

   

$

1,817

 

Fiscal 2021

                       

July 31, 2021

 

$

0.37

   

$

1,562

   

15

   

$

53.30

   

$

791

   

$

2,353

 

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

 

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP NET INCOME

(In millions)

 
 

Three Months Ended

 

October 30,

2021

 

October 24,

2020

GAAP net income

$

2,980

   

$

2,174

 

Adjustments to cost of sales:

     

Share-based compensation expense

69

   

65

 

Amortization of acquisition-related intangible assets

198

   

163

 

Acquisition-related/divestiture costs

1

   

1

 

Legal and indemnification settlements/charges

   

43

 

Total adjustments to GAAP cost of sales

268

   

272

 

Adjustments to operating expenses:

     

Share-based compensation expense

383

   

362

 

Amortization of acquisition-related intangible assets

84

   

36

 

Acquisition-related/divestiture costs

112

   

59

 

Significant asset impairments and restructurings

5

   

602

 

Total adjustments to GAAP operating expenses

584

   

1,059

 

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

     

(Gains) and losses on equity investments

(219)

   

(48)

 

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

(219)

   

(48)

 

Total adjustments to GAAP income before provision for income taxes

633

   

1,283

 

Income tax effect of non-GAAP adjustments

(138)

   

(246)

 

Total adjustments to GAAP provision for income taxes

(138)

   

(246)

 

Non-GAAP net income

$

3,475

   

$

3,211

 

 

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP TO NON-GAAP EPS

 
 

Three Months Ended

 

October 30,

2021

 

October 24,

2020

GAAP EPS

$

0.70

   

$

0.51

 

Adjustments to GAAP:

     

Share-based compensation expense

0.11

   

0.10

 

Amortization of acquisition-related intangible assets

0.07

   

0.05

 

Acquisition-related/divestiture costs

0.03

   

0.01

 

Legal and indemnification settlements/charges

   

0.01

 

Significant asset impairments and restructurings

   

0.14

 

(Gains) and losses on equity investments

(0.05)

   

(0.01)

 

Income tax effect of non-GAAP adjustments

(0.03)

   

(0.06)

 

Non-GAAP EPS

$

0.82

   

$

0.76

 
 

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 30, 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

$

5,856

   

$

2,197

   

$

8,053

   

$

4,615

   

(8)%

 

$

3,438

   

34%

 

$

219

   

$

2,980

   

37%

% of revenue

61.5

%

 

65.2

%

 

62.4

%

 

35.8

%

     

26.7

%

     

1.7

%

 

23.1

%

   

Adjustments to GAAP amounts:

                               

Share-based compensation expense

25

   

44

   

69

   

383

       

452

       

   

452

     

Amortization of acquisition-related intangible assets

198

   

   

198

   

84

       

282

       

   

282

     

Acquisition/divestiture-related costs

1

   

   

1

   

112

       

113

       

   

113

     

Significant asset impairments and restructurings

   

   

   

5

       

5

       

   

5

     

(Gains) and losses on equity investments

   

   

   

       

       

(219)

   

(219)

     

Income tax effect/significant tax matters

   

   

   

       

       

   

(138)

     

Non-GAAP amount

$

6,080

   

$

2,241

   

$

8,321

   

$

4,031

   

2%

 

$

4,290

   

10%

 

$

   

$

3,475

   

8%

% of revenue

63.8

%

 

66.5

%

 

64.5

%

 

31.2

%

     

33.3

%

     

%

 

26.9

%

   
   
   
 

Three Months Ended

 

October 24, 2020

 

Product

Gross

Margin

 

Service

Gross

Margin

 

Total Gross

Margin

 

Operating

Expenses

 

Operating

Income

 

Interest and

other

income

(loss), net

 

Net

Income

GAAP amount

$

5,381

   

$

2,200

   

$

7,581

   

$

5,011

   

$

2,570

   

$

111

   

$

2,174

 

% 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

   

$

3,901

   

$

63

   

$

3,211

 

% of revenue

65.3

%

 

67.1

%

 

65.8

%

 

33.1

%

 

32.7

%

 

0.5

%

 

26.9

%

 

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 30,

2021

 

October 24,

2020

GAAP effective tax rate

18.5

%

 

18.9

%

Total adjustments to GAAP provision for income taxes

0.5

%

 

0.1

%

Non-GAAP effective tax rate

19.0

%

 

19.0

%

 

GAAP TO NON-GAAP GUIDANCE

 

Q2 FY 2022

 

Gross Margin

Rate

 

Operating Margin

Rate

 

Earnings per

Share (1)

GAAP

 

61.5% - 62.5%

 

26% - 27%

 

$0.64 - $0.68

Estimated adjustments for:

           

Share-based compensation expense

 

0.5%

 

4.0%

 

$0.08 - $0.09

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

 

1.5%

 

2.5%

 

$0.06 - $0.07

Non-GAAP

 

63.5% - 64.5%

 

32.5% - 33.5%

 

$0.80 - $0.82

 
 

FY 2022

 

Earnings per

Share (1)

GAAP

 

$2.77 - $2.89

Estimated adjustments for:

   

Share-based compensation expense

 

$0.34 - $0.36

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

 

$0.26 - $0.28

Significant asset impairments and restructurings

 

$0.00 - $0.01

(Gains) and losses on equity investments

 

($0.04)

Non-GAAP

 

$3.38 - $3.45

 

(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, (gains) and losses on equity investments 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 our ability to innovate, the demand for our technology, the continued success of our business transformation, the growth of our business, and the continued progress in our business model transformation to more recurring revenue) and the future financial performance of Cisco (including the guidance for Q2 FY 2022 and full year FY 2022) 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 and related public health measures; 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 Secure, Agile Networks 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 restructurings and possible changes in the size and timing of related charges; cyber-attacks, data breaches or malware; vulnerabilities and critical security defects; terrorism; natural catastrophic events (including as a result of global climate change); 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 9, 2021. 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 30, 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.

Annualized Recurring Revenue represents the annualized revenue run-rate of active subscriptions, term licenses, and maintenance contracts at the end of a reporting period, net of rebates to customers and partners as well as certain other revenue adjustments. Includes both revenue recognized ratably as well as upfront on an annualized basis.

About Cisco

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Release Contacts

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