CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2024 EARNINGS
SAN JOSE, Calif., Aug. 14, 2024 /PRNewswire/ --
News Summary:
-- Product order growth of 14% year over year; up 6% excluding Splunk
-- Revenue of $13.6 billion in Q4 FY 2024, above the high end of our
guidance range
-- Strong margins:
-- Q4 FY 2024 GAAP gross margin of 64.4% and Non-GAAP gross margin of
67.9%
-- FY 2024 GAAP gross margin of 64.7% and Non-GAAP gross margin of
67.5%, the highest in 20 years
-- Solid growth in software and recurring metrics in FY 2024, enhanced by
Splunk
-- Total subscription revenue of $27.4 billion including Splunk,
representing 51% of total revenue
-- Total annualized recurring revenue (ARR) at $29.6 billion, including
$4.3 billion from Splunk, up 22% year over year
-- Total software revenue at $18.4 billion, up 9% year over year, with
software subscription revenue of $16.4 billion, up 15% year over
year, making up 89% of total software revenue
-- Q4 FY 2024 Results:
-- Revenue: $13.6 billion
-- Decrease of 10% year over year
-- Earnings per Share: GAAP: $0.54; Non-GAAP: $0.87
-- GAAP EPS decreased 44% year over year
-- Non-GAAP EPS decreased 24% year over year
-- FY 2024 Results:
-- Revenue: $53.8 billion
-- Decrease of 6% year over year
-- Earnings per Share: GAAP: $2.54; Non-GAAP: $3.73
-- GAAP EPS decreased 17% year over year
-- Non-GAAP EPS decreased 4% year over year
-- Q1 FY 2025 Guidance:
-- Revenue: $13.65 billion to $13.85 billion
-- Earnings per Share: GAAP: $0.35 to $0.42; Non-GAAP: $0.86 to $0.88
-- FY 2025 Guidance:
-- Revenue: $55.0 billion to $56.2 billion
-- Earnings per Share: GAAP: $1.93 to $2.05; Non-GAAP: $3.52 to $3.58
Cisco today reported fourth quarter and fiscal year results for the period ended July 27, 2024. Cisco reported fourth quarter revenue of $13.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.54 per share, and non-GAAP net income of $3.5 billion or $0.87 per share.
"We delivered a strong close to fiscal 2024," said Chuck Robbins, chair and CEO of Cisco. "In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of AI."
"Revenue, gross margin and EPS in Q4 were at the high end or above our guidance range, demonstrating our operating discipline," said Scott Herren, CFO of Cisco. "As we look to build on our performance, we remain laser focused on growth and consistent execution as we invest to win in AI, cloud and cybersecurity, while maintaining capital returns."
Q4 GAAP Results
Q4 FY 2024 Q4 FY 2023 Vs. Q4 FY 2023
Revenue
$ 13.6
$ 15.2
billion billion (10) %
Net Income
$ 2.2
$ 4.0
billion billion (45) %
Diluted Earnings per Share (EPS) $
0.54 $
0.97 (44) %
The acquisition of Splunk, including financing costs, had a negative impact of $0.16 to GAAP EPS, for the fourth quarter of fiscal 2024.
Q4 Non-GAAP Results
Q4 FY 2024 Q4 FY 2023 Vs. Q4 FY
2023
Net
$ 3.5
$ 4.7
Income billion billion (25) %
EPS $
0.87 $
1.14 (24) %
The acquisition of Splunk, including financing costs, had a negative impact of $0.04 to Non-GAAP EPS, for the fourth quarter of fiscal 2024.
Fiscal Year GAAP Results
FY 2024 FY 2023 Vs. FY 2023
Revenue
$ 53.8
$ 57.0
billion billion (6) %
Net
$ 10.3
$ 12.6
Income billion billion (18) %
EPS $
2.54 $
3.07 (17) %
The acquisition of Splunk, including financing costs, had a negative impact of $0.25 to GAAP EPS, for fiscal 2024.
Fiscal Year Non-GAAP Results
FY 2024 FY 2023 Vs. FY 2023
Net
$ 15.2
$ 16.0
Income billion billion (5) %
EPS $
3.73 $
3.89 (4) %
The acquisition of Splunk, including financing costs, had a negative impact of $0.04 to Non-GAAP EPS, for fiscal 2024.
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."
Cisco Declares Quarterly Dividend
Cisco has declared a quarterly dividend of $0.40 per common share to be paid on October 23, 2024, to all stockholders of record as of the close of business on October 2, 2024. Future dividends will be subject to Board approval.
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q4 FY 2024 Highlights
Revenue -- Total revenue was $13.6 billion, down 10%, with product revenue down 15% and services revenue up 6%. Splunk contributed approximately $960 million of total revenue for the fourth quarter of fiscal 2024.
Revenue by geographic segment was: Americas down 11%, EMEA down 11%, and APJC down 6%. Product revenue performance reflected growth in Security up 81% and Observability up 41%. Networking was down 28%. Product revenue in Collaboration was flat. Security and Observability, excluding Splunk, grew 6% and 12%, respectively, in the fourth quarter of fiscal 2024.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and services gross margin were 64.4%, 63.0%, and 67.8%, respectively, as compared with 64.1%, 63.6%, and 65.7%, respectively, in the fourth quarter of fiscal 2023.
On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 67.9%, 67.0%, and 70.3%, respectively, as compared with 65.9%, 65.5%, and 67.5%, respectively, in the fourth quarter of fiscal 2023.
Total gross margins by geographic segment were: 67.7% for the Americas, 69.2% for EMEA and 66.4% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $6.2 billion, up 12%, and were 45.2% of revenue. Non-GAAP operating expenses were $4.8 billion, up 4%, and were 35.4% of revenue.
Operating Income -- GAAP operating income was $2.6 billion, down 38%, with GAAP operating margin of 19.2%. Non-GAAP operating income was $4.4 billion, down 17%, with non-GAAP operating margin at 32.5%.
Provision for Income Taxes -- The GAAP tax provision rate was 9.8%. The non-GAAP tax provision rate was 16.6%.
Net Income and EPS -- On a GAAP basis, net income was $2.2 billion, a decrease of 45%, and EPS was $0.54, a decrease of 44%. On a non-GAAP basis, net income was $3.5 billion, a decrease of 25%, and EPS was $0.87, a decrease of 24%.
Cash Flow from Operating Activities -- $3.7 billion for the fourth quarter of fiscal 2024, a decrease of 37% compared with $6.0 billion for the fourth quarter of fiscal 2023.
FY 2024 Highlights
Revenue -- Total revenue was $53.8 billion, a decrease of 6%. Splunk contributed approximately $1.4 billion of total revenue for fiscal 2024.
Net Income and EPS -- On a GAAP basis, net income was $10.3 billion, a decrease of 18%, and EPS was $2.54, a decrease of 17%. On a non-GAAP basis, net income was $15.2 billion, a decrease of 5% compared to fiscal 2023, and EPS was $3.73, a decrease of 4%.
Cash Flow from Operating Activities -- $10.9 billion for fiscal 2024, a decrease of 45% compared with $19.9 billion for fiscal 2023.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $17.9 billion at the end of the fourth quarter of fiscal 2024, compared with $18.8 billion at the end of the third quarter of fiscal 2024, and compared with $26.1 billion at the end of fiscal 2023.
Remaining Performance Obligations (RPO) -- $41.0 billion, up 18% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 27% and services RPO were up 10%.
Deferred Revenue -- $28.5 billion, up 11% in total, with deferred product revenue up 15%. Deferred service revenue was up 9%.
Capital Allocation -- In the fourth quarter of fiscal 2024, we returned $3.6 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.40 per common share, or $1.6 billion, and repurchased approximately 43 million shares of common stock under our stock repurchase program at an average price of $46.80 per share for an aggregate purchase price of $2.0 billion. The remaining authorized amount for stock repurchases under the program is $5.2 billion with no termination date.
Guidance
Cisco estimates the following results for the first quarter of fiscal 2025:
Q1 FY 2025
---
Revenue
$13.65 billion - $13.85 billion
Non-GAAP gross margin 67% - 68%
Non-GAAP operating margin 32% - 33%
Non-GAAP EPS
$0.86 - $0.88
Cisco estimates that GAAP EPS will be $0.35 to $0.42 for the first quarter of fiscal 2025.
Cisco estimates the following results for fiscal 2025:
FY 2025
---
Revenue
$55.0 billion - $56.2 billion
Non-GAAP EPS
$3.52 - $3.58
Cisco estimates that GAAP EPS will be $1.93 to $2.05 for fiscal 2025.
Our Q1 FY 2025 and FY 2025 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 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:
-- Q4 fiscal year 2024 conference call to discuss Cisco's results along
with its guidance will be held on Wednesday, August 14, 2024 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,
August 14, 2024 to 4:00 p.m. Pacific Time, August 20, 2024 at
1-866-510-4837 (United States) or 1-203-369-1943 (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, August 14, 2024. 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 Fiscal Year Ended
July 27, July 29, July 27, July 29,
2024 2023 2024 2023
REVENUE:
Product $9,858 $11,650 $39,253 $43,142
Services 3,784 3,553 14,550 13,856
Total revenue 13,642 15,203 53,803 56,998
COST OF SALES:
Product 3,644 4,237 14,339 16,590
Services 1,217 1,218 4,636 4,655
Total cost of sales 4,861 5,455 18,975 21,245
GROSS MARGIN 8,781 9,748 34,828 35,753
OPERATING EXPENSES:
Research and development 2,179 1,953 7,983 7,551
Sales and marketing 2,841 2,579 10,364 9,880
General and administrative 763 690 2,813 2,478
Amortization of purchased intangible assets 268 70 698 282
Restructuring and other charges 112 203 789 531
Total operating expenses 6,163 5,495 22,647 20,722
OPERATING INCOME 2,618 4,253 12,181 15,031
Interest income 270 312 1,365 962
Interest expense (418) (111) (1,006) (427)
Other income (loss), net (74) 17 (306) (248)
Interest and other income (loss), net (222) 218 53 287
INCOME BEFORE PROVISION FOR INCOME TAXES 2,396 4,471 12,234 15,318
Provision for income taxes 234 513 1,914 2,705
NET INCOME $2,162 $3,958 $10,320 $12,613
Net income per share:
Basic $0.54 $0.97 $2.55 $3.08
Diluted $0.54 $0.97 $2.54 $3.07
Shares used in per-share calculation:
Basic 4,018 4,071 4,043 4,093
Diluted 4,035 4,093 4,062 4,105
CISCO SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except percentages)
July 27, 2024
Three Months Ended Fiscal Year Ended
Amount Y/Y% Amount Y/Y%
Revenue
:
---
Americas $8,068 (11) % $31,971 (4) %
EMEA 3,511 (11) % 14,117 (7) %
APJC 2,064 (6) % 7,716 (8) %
Total $13,642 (10) % $53,803 (6) %
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
GROSS MARGIN PERCENTAGE BY SEGMENT
(In percentages)
July 27, 2024
Three Months Ended Fiscal Year
Ended
Gross Margin Percentage
:
---
Americas 67.7 % 66.8 %
EMEA 69.2 % 69.1 %
APJC 66.4 % 67.2 %
CISCO SYSTEMS, INC.
REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES
(In millions, except percentages)
July 27, 2024
Three Months Ended Fiscal Year Ended
Amount Y/Y % Amount Y/Y %
Revenue
:
---
Networking $6,804 (28) % $29,229 (15) %
Security 1,787 81 % 5,075 32 %
Collaboration 1,019 - % 4,113 2 %
Observability 248 41 % 837 27 %
Total Product 9,858 (15) % 39,253 (9) %
Services 3,784 6 % 14,550 5 %
Total $13,642 (10) % $53,803 (6) %
Security and Observability, excluding Splunk, grew 6% and 12%, respectively, in the fourth quarter of fiscal 2024, and 4% and 15%, respectively, for fiscal 2024.
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
July 27, July 29,
2024 2023
ASSETS
Current assets:
Cash and cash equivalents $7,508 $10,123
Investments 10,346 16,023
Accounts receivable, net of allowance 6,685 5,854
of $87 at July 27, 2024 and $85 at July 29, 2023
Inventories 3,373 3,644
Financing receivables, net 3,338 3,352
Other current assets 5,612 4,352
Total current assets 36,862 43,348
Property and equipment, net 2,090 2,085
Financing receivables, net 3,376 3,483
Goodwill 58,660 38,535
Purchased intangible assets, net 11,219 1,818
Deferred tax assets 6,262 6,576
Other assets 5,944 6,007
TOTAL ASSETS $124,413 $101,852
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $11,341 $1,733
Accounts payable 2,304 2,313
Income taxes payable 1,439 4,235
Accrued compensation 3,608 3,984
Deferred revenue 16,249 13,908
Other current liabilities 5,643 5,136
Total current liabilities 40,584 31,309
Long-term debt 19,621 6,658
Income taxes payable 3,985 5,756
Deferred revenue 12,226 11,642
Other long-term liabilities 2,540 2,134
Total liabilities 78,956 57,499
Total equity 45,457 44,353
TOTAL LIABILITIES AND EQUITY $124,413 $101,852
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Fiscal Year Ended
July 27, July 29,
2024 2023
Cash flows from operating activities:
Net income $10,320 $12,613
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 2,507 1,726
Share-based compensation expense 3,074 2,353
Provision for receivables 34 31
Deferred income taxes (972) (2,085)
(Gains) losses on divestitures, investments and other, net 215 206
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable (289) 734
Inventories 275 (1,069)
Financing receivables 76 1,102
Other assets (671) 5
Accounts payable (90) 27
Income taxes, net (4,539) 1,218
Accrued compensation (696) 651
Deferred revenue 1,220 2,326
Other liabilities 416 48
Net cash provided by operating activities 10,880 19,886
Cash flows from investing activities:
Purchases of investments (4,230) (10,871)
Proceeds from sales of investments 4,136 1,054
Proceeds from maturities of investments 6,367 5,978
Acquisitions, net of cash and cash equivalents acquired (25,994) (301)
Purchases of investments in privately held companies (284) (185)
Return of investments in privately held companies 202 90
Acquisition of property and equipment (670) (849)
Other (5) (23)
Net cash used in investing activities (20,478) (5,107)
Cash flows from financing activities:
Issuances of common stock 714 700
Repurchases of common stock - repurchase program (5,787) (4,293)
Shares repurchased for tax withholdings on vesting of restricted stock units (992) (597)
Short-term borrowings, original maturities of 90 days or less, net 478 (602)
Issuances of debt 31,818
Repayments of debt (9,826) (500)
Repayments of Splunk convertible debt, net (3,140)
Dividends paid (6,384) (6,302)
Other (37) (32)
Net cash provided by (used in) financing activities 6,844 (11,626)
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted (31) (105)
cash equivalents
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (2,785) 3,048
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of fiscal year 11,627 8,579
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of fiscal year $8,842 $11,627
Supplemental cash flow information:
Cash paid for interest $583 $376
Cash paid for income taxes, net $7,426 $3,571
CISCO SYSTEMS, INC.
REMAINING PERFORMANCE OBLIGATIONS
(In millions, except percentages)
July 27, 2024 April 27, 2024 July 29, 2023
Amount Y/Y % Amount Y/Y % Amount Y/Y %
Product $20,055 27 % $18,876 29 % $15,802 12 %
Services 20,993 10 % 19,898 14 % 19,066 9 %
Total $41,048 18 % $38,774 21 % $34,868 11 %
We expect 51% of total RPO at July 27, 2024 will be recognized as revenue over the next 12 months.
CISCO SYSTEMS, INC.
DEFERRED REVENUE
(In millions)
July 27, April 27, July 29,
2024 2024 2023
Deferred revenue:
Product $13,219 $12,856 $11,505
Services 15,256 14,619 14,045
Total $28,475 $27,475 $25,550
Reported as:
Current $16,249 $15,751 $13,908
Noncurrent 12,226 11,724 11,642
Total $28,475 $27,475 $25,550
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- Amount Amount
Average
Price
per Share
---
Fiscal 2024
July 27, 2024 $0.40 $1,606 43 $46.80 $2,002 $3,608
April 27, 2024 $0.40 $1,615 26 $49.22 $1,256 $2,871
January 27, 2024 $0.39 $1,583 25 $49.54 $1,254 $2,837
October 28, 2023 $0.39 $1,580 23 $54.53 $1,252 $2,832
Fiscal 2023
July 29, 2023 $0.39 $1,589 25 $50.49 $1,254 $2,843
April 29, 2023 $0.39 $1,593 25 $49.45 $1,259 $2,852
January 28, 2023 $0.38 $1,560 26 $47.72 $1,256 $2,816
October 29, 2022 $0.38 $1,560 12 $43.76 $502 $2,062
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GAAP TO NON-GAAP NET INCOME
(In millions)
Three Months Ended Fiscal Year Ended
July 27, July 29, July 27, July 29,
2024 2023 2024 2023
GAAP net income $2,162 $3,958 $10,320 $12,613
Adjustments to cost of sales:
Share-based compensation expense 133 103 514 396
Amortization of acquisition-related intangible assets 331 168 936 630
Acquisition-related/divestiture costs 21 14 34 18
Supplier component remediation charge (adjustment), net - (9) (9)
Total adjustments to GAAP cost of sales 485 276 1,484 1,035
Adjustments to operating expenses:
Share-based compensation expense 660 520 2,537 1,951
Amortization of acquisition-related intangible assets 268 70 698 282
Acquisition-related/divestiture costs 297 63 700 241
Russia-Ukraine war costs - (7) (12)
Significant asset impairments and restructurings 112 203 789 531
Total adjustments to GAAP operating expenses 1,337 849 4,712 3,005
Adjustments to interest and other income (loss), net:
Russia-Ukraine war costs 49 49
(Gains) and losses on investments (32) (55) 100 133
Total adjustments to GAAP interest and other income (loss), net 17 (55) 149 133
Total adjustments to GAAP income before provision for income 1,839 1,070 6,345 4,173
taxes
Income tax effect of non-GAAP adjustments (315) (215) (1,360) (838)
Significant tax matters (155) (133) (155) 31
Total adjustments to GAAP provision for income taxes (470) (348) (1,515) (807)
Non-GAAP net income $3,531 $4,680 $15,150 $15,979
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GAAP TO NON-GAAP EPS
Three Months Ended Fiscal Year Ended
July 27, July 29, July 27, July 29,
2024 2023 2024 2023
GAAP EPS $0.54 $0.97 $2.54 $3.07
Adjustments to GAAP:
Share-based compensation expense 0.20 0.15 0.75 0.57
Amortization of acquisition-related intangible assets 0.15 0.06 0.40 0.22
Acquisition-related/divestiture costs 0.08 0.02 0.18 0.06
Russia-Ukraine war costs 0.01 0.01
Significant asset impairments and restructurings 0.03 0.05 0.19 0.13
(Gains) and losses on investments (0.01) (0.01) 0.02 0.03
Income tax effect of non-GAAP adjustments (0.08) (0.05) (0.33) (0.20)
Significant tax matters (0.04) (0.03) (0.04) 0.01
Non-GAAP EPS $0.87 $1.14 $3.73 $3.89
Amounts may not sum or recalculate due to rounding.
CISCO SYSTEMS, INC.
GAAP TO NON-GAAP EPS
IMPACT OF SPLUNK ACQUISITION, INCLUDING FINANCING COSTS
July 27, 2024
Three Months Fiscal Year
Ended Ended
GAAP EPS Impact $(0.16) $(0.25)
Amortization of acquisition-related intangible assets 0.09 0.14
Acquisition-related costs 0.06 0.11
Income tax effect of non-GAAP adjustments (0.03) (0.05)
Non-GAAP EPS Impact $(0.04) $(0.04)
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
July 27, 2024
Product Services Total Operating Y/Y Operating Y/Y Interest Net Y/Y
Gross Gross Gross Expenses Income and Income
Margin Margin Margin other
income
(loss),
net
GAAP amount $6,214 $2,567 $8,781 $6,163 12 % $2,618 (38) % $(222) $2,162 (45) %
% of revenue 63.0 % 67.8 % 64.4 % 45.2 % 19.2 % (1.6) % 15.8 %
Adjustments to GAAP amounts:
Share-based compensation 57 76 133 660 793 793
expense
Amortization of acquisition- 331 331 268 599 599
related intangible assets
Acquisition/divestiture-related 5 16 21 297 318 318
costs
Russia-Ukraine war costs - 49 49
Significant asset impairments - 112 112 112
and restructurings
(Gains) and losses on - (32) (32)
investments
Income tax effect/significant tax - (470)
matters
Non-GAAP amount $6,607 $2,659 $9,266 $4,826 4 % $4,440 (17) % $(205) $3,531 (25) %
% of revenue 67.0 % 70.3 % 67.9 % 35.4 % 32.5 % (1.5) % 25.9 %
Three Months Ended
July 29, 2023
Product Services Total Operating Operating Interest Net
Gross Gross Gross Expenses and
Margin Margin Margin Income other Income
income
(loss),
net
GAAP amount $7,413 $2,335 $9,748 $5,495 $4,253 $218 $3,958
% of revenue 63.6 % 65.7 % 64.1 % 36.1 % 28.0 % 1.4 % 26.0 %
Adjustments to GAAP amounts:
Share-based compensation expense 40 63 103 520 623 623
Amortization of acquisition-related intangible assets 168 168 70 238 238
Acquisition/divestiture-related costs 14 14 63 77 77
Russia-Ukraine war costs (7) (7) (7)
Supplier component remediation charge (adjustment), net (9) (9) (9) (9)
Significant asset impairments and restructurings 203 203 203
(Gains) and losses on investments (55) (55)
Income tax effect/significant tax matters (348)
Non-GAAP amount $7,626 $2,398 $10,024 $4,646 $5,378 $163 $4,680
% of revenue 65.5 % 67.5 % 65.9 % 30.6 % 35.4 % 1.1 % 30.8 %
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)
Fiscal Year Ended
July 27, 2024
Product Services Total Operating Y/Y Operating Y/Y Interest Net Y/Y
Gross Gross Gross Expenses Income and Income
Margin Margin Margin other
income
(loss),
net
GAAP amount $24,914 $9,914 $34,828 $22,647 9 % $12,181 (19) % $53 $10,320 (18) %
% of revenue 63.5 % 68.1 % 64.7 % 42.1 % 22.6 % 0.1 % 19.2 %
Adjustments to GAAP amounts:
Share-based compensation 214 300 514 2,537 3,051 3,051
expense
Amortization of acquisition- 936 936 698 1,634 1,634
related intangible assets
Acquisition/divestiture-related 10 24 34 700 734 734
costs
Russia-Ukraine war costs - (12) (12) 49 37
Significant asset impairments and - 789 789 789
restructurings
(Gains) and losses on investments - 100 100
Income tax effect/significant tax - (1,515)
matters
Non-GAAP amount $26,074 $10,238 $36,312 $17,935 1 % $18,377 (4) % $202 $15,150 (5) %
% of revenue 66.4 % 70.4 % 67.5 % 33.3 % 34.2 % 0.4 % 28.2 %
Fiscal Year Ended
July 29, 2023
Product Services Total Operating Operating Interest Net
Gross Gross Gross Expenses and
Margin Margin Margin Income other Income
income
(loss),
net
GAAP amount $26,552 $9,201 $35,753 $20,722 $15,031 $287 $12,613
% of revenue 61.5 % 66.4 % 62.7 % 36.4 % 26.4 % 0.5 % 22.1 %
Adjustments to GAAP amounts:
Share-based compensation expense 151 245 396 1,951 2,347 2,347
Amortization of acquisition-related intangible assets 630 630 282 912 912
Acquisition/divestiture-related costs 18 18 241 259 259
Supplier component remediation charge (adjustment), (9) (9) (9) (9)
net
Significant asset impairments and restructurings 531 531 531
(Gains) and losses on investments 133 133
Income tax effect/significant tax matters (807)
Non-GAAP amount $27,342 $9,446 $36,788 $17,717 $19,071 $420 $15,979
% of revenue 63.4 % 68.2 % 64.5 % 31.1 % 33.5 % 0.7 % 28.0 %
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 Fiscal Year Ended
July July July July
27, 29, 27, 29,
2024 2023 2024 2023
GAAP effective tax rate 9.8 % 11.5 % 15.6 % 17.7 %
Total adjustments to GAAP provision for income taxes 6.8 % 4.0 % 2.9 % 0.3 %
Non-GAAP effective tax rate 16.6 % 15.5 % 18.5 % 18.0 %
GAAP TO NON-GAAP GUIDANCE
Q1 FY 2025 Gross Margin Operating Earnings
Margin per
Share (2)
---
GAAP 63.5% -
64.5% 14% - 15%
$0.35 - $0.42
Estimated adjustments for:
Share-based compensation expense 1.0 % 6.0 %
$0.16 - $0.17
Amortization of acquisition-related intangible assets and acquisition/divestiture-related 2.5 % 6.5 %
$0.17 - $0.18
costs
Significant asset impairments and restructurings(1) 5.5 %
$0.13 - $0.16
Non-GAAP 67% - 68% 32% - 33%
$0.86 - $0.88
FY 2025 Earnings
per
Share (2)
---
GAAP
$1.93 - $2.05
Estimated adjustments for:
Share-based compensation expense
$0.74 - $0.76
Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs
$0.60 - $0.62
Significant asset impairments and restructurings (1)
$0.19 - $0.21
Non-GAAP
$3.52 - $3.58
((1)) On August 14, 2024, Cisco announced a restructuring plan to allow it to invest in key growth opportunities and drive more efficiencies in its business. In connection with this restructuring plan, Cisco currently estimates that it will recognize pre-tax charges of up to $1 billion consisting of severance and other one-time termination benefits, and other costs. Cisco expects to recognize approximately $700 million to $800 million of these charges in the first quarter of fiscal 2025 with the remaining amount expected 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, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on investments, significant tax matters, or other items, which may or may not be significant.
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 customers' reliance on Cisco to connect and protect their organizations in the era of AI and our focus on growth and consistent execution as we invest in AI, cloud and cybersecurity, while maintaining capital returns) and the future financial performance of Cisco (including the guidance for Q1 FY 2025 and full year FY 2025) 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: 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; our development and use of artificial intelligence; 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, cloud, enterprise 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 Networking and services; the timing of orders and manufacturing and customer lead times; supply constraints; 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 services 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 other incidents; vulnerabilities and critical security defects; our ability to protect personal data; evolving regulatory uncertainty; terrorism; natural catastrophic events (including as a result of global climate change); any 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 reports on Forms 10-Q and 10-K filed on May 21, 2024 and September 7, 2023, respectively. 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 reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three months and the year ended July 27, 2024 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 (GAAP) 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, Russia-Ukraine war costs, gains and losses on 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, operating leases 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
Cisco (Nasdaq: CSCO) is the worldwide technology leader that securely connects everything to make anything possible. Our purpose is to power an inclusive future for all by helping our customers reimagine their applications, power hybrid work, secure their enterprise, transform their infrastructure, and meet their sustainability goals. Discover more at newsroom.cisco.com and follow us on X at @Cisco.
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SOURCE Cisco Systems, Inc.
