- Q3 Results:
-
- Revenue: $13.0
billion
-
- Growth of 6% year over year (normalized to exclude the divested
SPVSS business for Q3 FY 2018)
- Earnings per Share: GAAP: $0.69; Non-GAAP: $0.78
-
- Non-GAAP EPS increased 18% year over year
- Q4 Guidance (normalized to exclude the divested SPVSS
business for Q4 FY 2018):
-
- Revenue: 4.5% to 6.5% growth year over year
- Earnings per Share: GAAP: $0.66 to $0.71;
Non-GAAP: $0.80 to $0.82
SAN JOSE, Calif., May 15,
2019 /PRNewswire/ -- Cisco today reported third quarter
results for the period ended April 27, 2019. Cisco reported
third quarter revenue of $13.0
billion, net income on a generally accepted accounting
principles (GAAP) basis of $3.0
billion or $0.69 per share,
and non-GAAP net income of $3.5
billion or $0.78 per
share.
As previously disclosed, Cisco completed the divestiture of the
Service Provider Video Software Solutions (SPVSS) business in the
second quarter of fiscal 2019 on October 28,
2018. Revenue, non-GAAP financial information, and Q4 FY
2019 guidance have been normalized to exclude the SPVSS business
from prior periods for comparative purposes.
"Our strong performance in the quarter was across the business,
reflecting our customers' confidence in our strategy, business
model and market-leading portfolio," said Chuck Robbins, chairman and CEO of Cisco.
"Technology is at the heart of our customers' strategies and we are
building the technology to help them achieve their business
objectives."
GAAP
Results
|
|
|
|
|
|
|
|
|
|
Q3 FY
2019
|
|
Q3 FY
2018
|
|
Vs. Q3 FY
2018
|
Revenue (including
SPVSS business for all periods)
|
|
$
|
13.0
billion
|
|
$
|
12.5
billion
|
|
4%
|
Revenue (excluding
SPVSS business for all periods)
|
|
$
|
13.0
billion
|
|
$
|
12.2
billion
|
|
6%
|
Net Income
|
|
$
|
3.0
billion
|
|
$
|
2.7
billion
|
|
13%
|
Diluted Earnings per
Share (EPS)
|
|
$
|
0.69
|
|
|
$
|
0.56
|
|
|
23%
|
Non-GAAP
Results
|
|
|
|
|
|
|
|
|
|
Q3 FY
2019
|
|
Q3 FY
2018
|
|
Vs. Q3 FY
2018
|
Net Income (excluding
SPVSS business for all periods)
|
|
$
|
3.5
billion
|
|
$
|
3.2
billion
|
|
8%
|
EPS (excluding SPVSS
business for all periods)
|
|
$
|
0.78
|
|
|
$
|
0.66
|
|
|
18%
|
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."
"We executed well in Q3, delivering revenue growth of 6%,
non-GAAP EPS growth of 18%, as well as strong margins and cash
flow," said Kelly Kramer, CFO of
Cisco. "We continue to invest in our innovation pipeline to drive
long-term profitable growth, while successfully evolving our
business model through software offerings and subscriptions and
delivering value for shareholders."
Financial Summary
All comparative percentages are on a year-over-year basis
unless otherwise noted.
All revenue, non-GAAP, and geographic financial information
in the "Q3 FY 2019 Highlights" section are presented excluding the
SPVSS business for all periods as it was divested during the second
quarter, on October 28, 2018.
Q3 FY 2019 Highlights
Revenue -- Total revenue was $13.0 billion, up 6%, with product revenue up 7%
and service revenue up 3%. Revenue by geographic segment was:
Americas up 9%, EMEA up 5%, and APJC down 4%. Product revenue
performance was broad based with growth in Security, up 21%,
Applications, up 9%, and Infrastructure Platforms, up 5%.
Gross Margin -- On a GAAP basis, total gross
margin, product gross margin, and service gross margin were 63.1%,
62.0%, and 66.3%, respectively, as compared with 62.3%, 61.0%, and
65.8%, respectively, in the third quarter of fiscal 2018.
On a non-GAAP basis, total gross margin, product gross margin,
and service gross margin were 64.6%, 63.7%, and 67.3%,
respectively, as compared with 64.5%, 63.7%, and 67.1%,
respectively, in the third quarter of fiscal 2018.
Total gross margins by geographic segment were: 65.6% for the
Americas, 64.5% for EMEA and 60.7% for APJC.
Operating Expenses -- On a GAAP basis, operating
expenses were $4.7 billion, up 1%.
Non-GAAP operating expenses were $4.2
billion, up 6%, and were 32.4% of revenue.
Operating Income -- GAAP operating income was
$3.5 billion, up 12%, with GAAP
operating margin of 27.1%. Non-GAAP operating income was
$4.2 billion, up 6%, with non-GAAP
operating margin at 32.2%.
Provision for Income Taxes -- The GAAP tax
provision rate was 15.8%. The non-GAAP tax provision rate was
19.0%.
Net Income and EPS -- On a GAAP basis, net income
was $3.0 billion and EPS was
$0.69. On a non-GAAP basis, net
income was $3.5 billion, an increase
of 8%, and EPS was $0.78, an increase
of 18%.
Cash Flow from Operating Activities --
$4.3 billion for the third quarter of
fiscal 2019, an increase of 79% compared with $2.4 billion for the third quarter of fiscal
2018. Operating cash flow for the third quarter of fiscal 2018
included the payment of $1.3 billion
of one-time foreign taxes as related to the Tax Cuts and Jobs Act.
Operating cash flow increased 16%, normalized for these tax
payments.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments --
$34.6 billion at the end of the third
quarter of fiscal 2019, compared with $40.4
billion at the end of the second quarter of fiscal 2019, and
compared with $46.5 billion at the
end of fiscal 2018.
Deferred Revenue -- $17.5
billion, down 8% in total, with deferred product revenue
down 23%. Deferred service revenue was up 3%.
Capital Allocation -- In the third quarter of
fiscal 2019, we returned $7.5 billion
to shareholders through share buybacks and dividends. We declared
and paid a cash dividend of $0.35 per
common share, or $1.5 billion, and
repurchased approximately 116 million shares of common stock under
our stock repurchase program at an average price of $52.14 per share for an aggregate purchase price
of $6.0 billion. The remaining
authorized amount for stock repurchases under the program is
$18.0 billion with no termination
date.
Acquisitions
In the third quarter of fiscal 2019, we closed the acquisitions
of Luxtera, Inc., a privately held semiconductor company, and
Singularity Networks, a privately held network infrastructure
analytics company.
Guidance for Q4 FY 2019
Cisco expects to achieve the following results for the fourth
quarter of fiscal 2019 (normalized to exclude the divested SPVSS
business):
Q4 FY
2019
|
|
|
Revenue
|
|
4.5% - 6.5% growth
Y/Y
|
Non-GAAP gross margin
rate
|
|
64% - 65%
|
Non-GAAP operating
margin rate
|
|
31% - 32%
|
Non-GAAP tax
provision rate
|
|
19%
|
Non-GAAP
EPS
|
|
$0.80 -
$0.82
|
Revenue for the divested SPVSS business for the fourth quarter
of fiscal 2018 was $206 million.
Cisco estimates that GAAP EPS will be $0.66 to $0.71 in
the fourth quarter of fiscal 2019.
A reconciliation between the Guidance for Q4 FY 2019 on a GAAP
and non-GAAP basis is provided in the table entitled "GAAP to
non-GAAP Guidance for Q4 FY 2019" located in the section entitled
"Reconciliations of GAAP to non-GAAP Measures."
Editor's Notes:
- Q3 fiscal year 2019 conference call to discuss Cisco's results
along with its guidance will be held on Wednesday, May 15, 2019 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 15, 2019 to 4:00 p.m.
Pacific Time, May 22, 2019 at
1-888-446-2545 (United States) or
1-402-998-1344 (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 15, 2019. 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 is hosting Cisco Live, its premier annual customer and
partner conference June 9-13 in
San Diego, Calif. Register now for
keynotes, hands-on learnings experiences, expert demos and
networking.
CISCO SYSTEMS,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions,
except per-share amounts)
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 27,
2019
|
|
April 28,
2018
|
|
April 27,
2019
|
|
April 28,
2018
|
REVENUE:
|
|
|
|
|
|
|
|
Product
|
$
|
9,722
|
|
|
$
|
9,304
|
|
|
$
|
28,885
|
|
|
$
|
27,067
|
|
Service
|
3,236
|
|
|
3,159
|
|
|
9,591
|
|
|
9,419
|
|
Total
revenue
|
12,958
|
|
|
12,463
|
|
|
38,476
|
|
|
36,486
|
|
COST OF
SALES:
|
|
|
|
|
|
|
|
Product
|
3,693
|
|
|
3,625
|
|
|
11,106
|
|
|
10,594
|
|
Service
|
1,092
|
|
|
1,079
|
|
|
3,278
|
|
|
3,208
|
|
Total cost of
sales
|
4,785
|
|
|
4,704
|
|
|
14,384
|
|
|
13,802
|
|
GROSS
MARGIN
|
8,173
|
|
|
7,759
|
|
|
24,092
|
|
|
22,684
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
Research and
development
|
1,659
|
|
|
1,590
|
|
|
4,824
|
|
|
4,706
|
|
Sales and
marketing
|
2,403
|
|
|
2,325
|
|
|
7,084
|
|
|
6,894
|
|
General and
administrative
|
541
|
|
|
561
|
|
|
1,261
|
|
|
1,601
|
|
Amortization of
purchased intangible assets
|
39
|
|
|
67
|
|
|
112
|
|
|
188
|
|
Restructuring and
other charges
|
18
|
|
|
82
|
|
|
282
|
|
|
332
|
|
Total operating
expenses
|
4,660
|
|
|
4,625
|
|
|
13,563
|
|
|
13,721
|
|
OPERATING
INCOME
|
3,513
|
|
|
3,134
|
|
|
10,529
|
|
|
8,963
|
|
Interest
income
|
331
|
|
|
380
|
|
|
1,003
|
|
|
1,155
|
|
Interest
expense
|
(211)
|
|
|
(237)
|
|
|
(655)
|
|
|
(719)
|
|
Other income (loss),
net
|
(18)
|
|
|
(24)
|
|
|
(10)
|
|
|
48
|
|
Interest and other
income (loss), net
|
102
|
|
|
119
|
|
|
338
|
|
|
484
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES
|
3,615
|
|
|
3,253
|
|
|
10,867
|
|
|
9,447
|
|
Provision for income
taxes (1)
|
571
|
|
|
562
|
|
|
1,452
|
|
|
13,140
|
|
NET INCOME
(LOSS)
|
$
|
3,044
|
|
|
$
|
2,691
|
|
|
$
|
9,415
|
|
|
$
|
(3,693)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
|
$
|
0.56
|
|
|
$
|
2.11
|
|
|
$
|
(0.76)
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.56
|
|
|
$
|
2.09
|
|
|
$
|
(0.76)
|
|
Shares used in
per-share calculation:
|
|
|
|
|
|
|
|
Basic
|
4,370
|
|
|
4,791
|
|
|
4,468
|
|
|
4,892
|
|
Diluted
|
4,415
|
|
|
4,844
|
|
|
4,509
|
|
|
4,892
|
|
The Consolidated Statements of Operations include the results of
the SPVSS business prior to its divestiture during the second
quarter of fiscal 2019 on October 28,
2018. Accordingly, the nine months ended April 27, 2019 includes three months of financial
results for this business.
(1) The provision for income taxes for the nine
months ended April 28, 2018 includes
an $11.1 billion charge related to
the enactment of the Tax Cuts and Jobs Act.
CISCO SYSTEMS,
INC.
REVENUE BY
SEGMENT
(In millions,
except percentages)
|
|
|
|
|
|
April 27,
2019
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Including SPVSS
business for all periods:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
7,695
|
|
|
7%
|
|
$
|
22,798
|
|
|
6%
|
EMEA
|
|
3,356
|
|
|
2%
|
|
9,803
|
|
|
6%
|
APJC
|
|
1,907
|
|
|
(6)%
|
|
5,875
|
|
|
3%
|
Total
|
|
$
|
12,958
|
|
|
4%
|
|
$
|
38,476
|
|
|
5%
|
Excluding SPVSS
business for all periods:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
7,695
|
|
|
9%
|
|
$
|
22,721
|
|
|
7%
|
EMEA
|
|
3,356
|
|
|
5%
|
|
9,737
|
|
|
8%
|
APJC
|
|
1,907
|
|
|
(4)%
|
|
5,851
|
|
|
5%
|
Total
|
|
$
|
12,958
|
|
|
6%
|
|
$
|
38,309
|
|
|
7%
|
Amounts may not sum and percentages may not recalculate due to
rounding.
During the second quarter of fiscal 2019 on October 28, 2018, we completed the divestiture of
the SPVSS business. SPVSS business revenue for the three months
ended April 28, 2018 was $219 million and for the nine months ended
April 27, 2019 and April 28, 2018 was $168
million and $697 million,
respectively.
CISCO SYSTEMS,
INC.
GROSS MARGIN
PERCENTAGE BY SEGMENT
(In
percentages)
|
|
|
|
|
|
April 27,
2019
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Gross Margin
Percentage:
|
|
|
|
|
Including SPVSS
business for all periods:
|
|
|
|
|
Americas
|
|
65.6%
|
|
65.4%
|
EMEA
|
|
64.5%
|
|
64.3%
|
APJC
|
|
60.7%
|
|
59.0%
|
Excluding SPVSS
business for all periods (1):
|
|
|
|
|
Americas
|
|
65.6%
|
|
65.6%
|
EMEA
|
|
64.5%
|
|
64.4%
|
APJC
|
|
60.7%
|
|
59.1%
|
(1) During the second quarter of fiscal 2019 on
October 28, 2018, we completed the
divestiture of the SPVSS business.
CISCO SYSTEMS,
INC.
REVENUE FOR GROUPS
OF SIMILAR PRODUCTS AND SERVICES
(In millions,
except percentages)
|
|
|
|
|
|
April 27,
2019
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
Amount
|
|
Y/Y %
|
|
Amount
|
|
Y/Y %
|
Revenue:
|
|
|
|
|
|
|
|
|
Including SPVSS
business for all periods:
|
|
|
|
|
|
|
|
|
Infrastructure
Platforms
|
|
$
|
7,545
|
|
|
5%
|
|
$
|
22,315
|
|
|
7%
|
Applications
|
|
1,431
|
|
|
9%
|
|
4,315
|
|
|
17%
|
Security
|
|
707
|
|
|
21%
|
|
2,016
|
|
|
17%
|
Other
Products
|
|
39
|
|
|
(83)%
|
|
239
|
|
|
(69)%
|
Total
Product
|
|
9,722
|
|
|
4%
|
|
28,885
|
|
|
7%
|
Services
|
|
3,236
|
|
|
2%
|
|
9,591
|
|
|
2%
|
Total
|
|
$
|
12,958
|
|
|
4%
|
|
$
|
38,476
|
|
|
5%
|
Excluding SPVSS
business for all periods:
|
|
|
|
|
|
|
|
|
Infrastructure
Platforms
|
|
$
|
7,545
|
|
|
5%
|
|
$
|
22,315
|
|
|
7%
|
Applications
|
|
1,431
|
|
|
9%
|
|
4,315
|
|
|
17%
|
Security
|
|
707
|
|
|
21%
|
|
2,016
|
|
|
17%
|
Other
Products
|
|
39
|
|
|
3%
|
|
93
|
|
|
(39)%
|
Total
Product
|
|
9,722
|
|
|
7%
|
|
28,739
|
|
|
9%
|
Services
|
|
3,236
|
|
|
3%
|
|
9,570
|
|
|
2%
|
Total
|
|
$
|
12,958
|
|
|
6%
|
|
$
|
38,309
|
|
|
7%
|
Amounts may not sum and percentages may not recalculate due to
rounding.
During the second quarter of fiscal 2019 on October 28, 2018, we completed the divestiture of
the SPVSS business. SPVSS business revenue for the three months
ended April 28, 2018 was $219 million and for the nine months ended
April 27, 2019 and April 28, 2018 was $168
million and $697 million,
respectively.
CISCO SYSTEMS,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
|
|
|
April 27,
2019
|
|
July 28,
2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
10,251
|
|
|
$
|
8,934
|
|
Investments
|
24,392
|
|
|
37,614
|
|
Accounts receivable,
net of allowance for doubtful accounts of $124 at April 27, 2019
and $129 at July 28, 2018
|
3,795
|
|
|
5,554
|
|
Inventories
|
1,513
|
|
|
1,846
|
|
Financing
receivables, net
|
5,029
|
|
|
4,949
|
|
Other current
assets
|
2,331
|
|
|
2,940
|
|
Total current
assets
|
47,311
|
|
|
61,837
|
|
Property and
equipment, net
|
2,834
|
|
|
3,006
|
|
Financing
receivables, net
|
4,862
|
|
|
4,882
|
|
Goodwill
|
33,544
|
|
|
31,706
|
|
Purchased intangible
assets, net
|
2,398
|
|
|
2,552
|
|
Deferred tax
assets
|
4,023
|
|
|
3,219
|
|
Other
assets
|
2,315
|
|
|
1,582
|
|
TOTAL
ASSETS
|
$
|
97,287
|
|
|
$
|
108,784
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Short-term
debt
|
$
|
7,777
|
|
|
$
|
5,238
|
|
Accounts
payable
|
2,022
|
|
|
1,904
|
|
Income taxes
payable
|
953
|
|
|
1,004
|
|
Accrued
compensation
|
2,872
|
|
|
2,986
|
|
Deferred
revenue
|
10,117
|
|
|
11,490
|
|
Other current
liabilities
|
4,172
|
|
|
4,413
|
|
Total current
liabilities
|
27,913
|
|
|
27,035
|
|
Long-term
debt
|
15,921
|
|
|
20,331
|
|
Income taxes
payable
|
8,038
|
|
|
8,585
|
|
Deferred
revenue
|
7,339
|
|
|
8,195
|
|
Other long-term
liabilities
|
1,272
|
|
|
1,434
|
|
Total
liabilities
|
60,483
|
|
|
65,580
|
|
Total
equity
|
36,804
|
|
|
43,204
|
|
TOTAL LIABILITIES
AND EQUITY
|
$
|
97,287
|
|
|
$
|
108,784
|
|
CISCO SYSTEMS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
|
Nine Months
Ended
|
|
April 27,
2019
|
|
April 28,
2018
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
9,415
|
|
|
$
|
(3,693)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation,
amortization, and other
|
1,433
|
|
|
1,676
|
|
Share-based
compensation expense
|
1,166
|
|
|
1,184
|
|
Provision (benefit)
for receivables
|
32
|
|
|
(104)
|
|
Deferred income
taxes
|
(281)
|
|
|
1,013
|
|
(Gains) losses on
divestitures, investments and other, net
|
(79)
|
|
|
(159)
|
|
Change in operating
assets and liabilities, net of effects of acquisitions and
divestitures:
|
|
|
|
Accounts
receivable
|
1,560
|
|
|
1,064
|
|
Inventories
|
(1)
|
|
|
(289)
|
|
Financing
receivables
|
(112)
|
|
|
(165)
|
|
Other
assets
|
(736)
|
|
|
(135)
|
|
Accounts
payable
|
52
|
|
|
148
|
|
Income taxes,
net
|
(759)
|
|
|
8,795
|
|
Accrued
compensation
|
(68)
|
|
|
53
|
|
Deferred
revenue
|
421
|
|
|
415
|
|
Other
liabilities
|
(154)
|
|
|
(237)
|
|
Net cash provided by
operating activities
|
11,889
|
|
|
9,566
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(1,176)
|
|
|
(14,132)
|
|
Proceeds from sales
of investments
|
5,391
|
|
|
12,422
|
|
Proceeds from
maturities of investments
|
10,797
|
|
|
12,259
|
|
Acquisitions and
divestitures
|
(2,175)
|
|
|
(2,762)
|
|
Purchases of
investments in privately held companies
|
(118)
|
|
|
(126)
|
|
Return of investments
in privately held companies
|
127
|
|
|
163
|
|
Acquisition of
property and equipment
|
(701)
|
|
|
(620)
|
|
Proceeds from sales
of property and equipment
|
15
|
|
|
54
|
|
Other
|
(12)
|
|
|
(16)
|
|
Net cash provided by
investing activities
|
12,148
|
|
|
7,242
|
|
Cash flows from
financing activities:
|
|
|
|
Issuances of common
stock
|
321
|
|
|
318
|
|
Repurchases of common
stock - repurchase program
|
(16,042)
|
|
|
(11,562)
|
|
Shares repurchased
for tax withholdings on vesting of restricted stock
units
|
(601)
|
|
|
(541)
|
|
Short-term
borrowings, original maturities of 90 days or less, net
|
1,723
|
|
|
(2,502)
|
|
Issuances of
debt
|
1,530
|
|
|
6,877
|
|
Repayments of
debt
|
(5,250)
|
|
|
(9,875)
|
|
Dividends
paid
|
(4,489)
|
|
|
(4,433)
|
|
Other
|
51
|
|
|
(92)
|
|
Net cash used in
financing activities
|
(22,757)
|
|
|
(21,810)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
1,280
|
|
|
(5,002)
|
|
Cash, cash
equivalents, and restricted cash, beginning of period
|
8,993
|
|
|
11,773
|
|
Cash, cash
equivalents, and restricted cash, end of period
|
$
|
10,273
|
|
|
$
|
6,771
|
|
Supplemental cash
flow information:
|
|
|
|
Cash paid for
interest
|
$
|
690
|
|
|
$
|
739
|
|
Cash paid for income
taxes, net
|
$
|
2,491
|
|
|
$
|
3,332
|
|
Prior period information has been retrospectively adjusted due
to the adoption of ASU 2016-18, Statement of Cash Flows, Restricted
Cash at the beginning of the first quarter of fiscal 2019.
CISCO SYSTEMS,
INC.
DEFERRED
REVENUE
(In
millions)
|
|
|
|
|
|
|
|
April 27,
2019
|
|
January 26,
2019
|
|
April 28,
2018
|
Deferred
revenue:
|
|
|
|
|
|
Service
|
$
|
11,297
|
|
|
$
|
11,246
|
|
|
$
|
10,960
|
|
Product
|
6,159
|
|
|
6,015
|
|
|
7,993
|
|
Total
|
$
|
17,456
|
|
|
$
|
17,261
|
|
|
$
|
18,953
|
|
Reported
as:
|
|
|
|
|
|
Current
|
$
|
10,117
|
|
|
$
|
9,976
|
|
|
$
|
11,301
|
|
Noncurrent
|
7,339
|
|
|
7,285
|
|
|
7,652
|
|
Total
|
$
|
17,456
|
|
|
$
|
17,261
|
|
|
$
|
18,953
|
|
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
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
April 27,
2019
|
|
$
|
0.35
|
|
|
$
|
1,519
|
|
|
116
|
|
|
$
|
52.14
|
|
|
$
|
6,020
|
|
|
$
|
7,539
|
|
January 26,
2019
|
|
$
|
0.33
|
|
|
$
|
1,470
|
|
|
111
|
|
|
$
|
45.09
|
|
|
$
|
5,016
|
|
|
$
|
6,486
|
|
October 27,
2018
|
|
$
|
0.33
|
|
|
$
|
1,500
|
|
|
109
|
|
|
$
|
46.01
|
|
|
$
|
5,026
|
|
|
$
|
6,526
|
|
Fiscal
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
July 28,
2018
|
|
$
|
0.33
|
|
|
$
|
1,535
|
|
|
138
|
|
|
$
|
43.58
|
|
|
$
|
6,015
|
|
|
$
|
7,550
|
|
April 28,
2018
|
|
$
|
0.33
|
|
|
$
|
1,572
|
|
|
140
|
|
|
$
|
42.83
|
|
|
$
|
6,015
|
|
|
$
|
7,587
|
|
January 27,
2018
|
|
$
|
0.29
|
|
|
$
|
1,425
|
|
|
103
|
|
|
$
|
39.07
|
|
|
$
|
4,011
|
|
|
$
|
5,436
|
|
October 28,
2017
|
|
$
|
0.29
|
|
|
$
|
1,436
|
|
|
51
|
|
|
$
|
31.80
|
|
|
$
|
1,620
|
|
|
$
|
3,056
|
|
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
GAAP NET INCOME
(LOSS) TO NON-GAAP NET INCOME
(In millions,
except per-share amounts)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 27,
2019
|
|
April 28,
2018
|
|
April 27,
2019
|
|
April 28,
2018
|
GAAP net income
(loss)
|
$
|
3,044
|
|
|
$
|
2,691
|
|
|
$
|
9,415
|
|
|
$
|
(3,693)
|
|
Adjustments to cost
of sales:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
54
|
|
|
57
|
|
|
163
|
|
|
168
|
|
Amortization of
acquisition-related intangible assets
|
141
|
|
|
161
|
|
|
418
|
|
|
444
|
|
Supplier component
remediation charge (adjustment), net
|
—
|
|
|
(9)
|
|
|
(1)
|
|
|
(41)
|
|
Acquisition-related/divestiture costs
|
2
|
|
|
2
|
|
|
9
|
|
|
4
|
|
Legal and
indemnification settlements
|
—
|
|
|
—
|
|
|
5
|
|
|
122
|
|
Total adjustments to
GAAP cost of sales
|
197
|
|
|
211
|
|
|
594
|
|
|
697
|
|
Adjustments to
operating expenses:
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
322
|
|
|
342
|
|
|
974
|
|
|
1,010
|
|
Amortization of
acquisition-related intangible assets
|
39
|
|
|
67
|
|
|
112
|
|
|
188
|
|
Acquisition-related/divestiture costs
|
78
|
|
|
89
|
|
|
238
|
|
|
195
|
|
Legal and
indemnification settlements
|
(1)
|
|
|
—
|
|
|
(396)
|
|
|
—
|
|
Significant asset
impairments and restructurings
|
18
|
|
|
82
|
|
|
282
|
|
|
332
|
|
Total adjustments to
GAAP operating expenses
|
456
|
|
|
580
|
|
|
1,210
|
|
|
1,725
|
|
Adjustments to GAAP
interest and other income (loss), net:
|
|
|
|
|
|
|
|
(Gains) and losses on
equity investments
|
(4)
|
|
|
—
|
|
|
(77)
|
|
|
—
|
|
Total adjustments to
GAAP income (loss) before provision for income taxes
|
649
|
|
|
791
|
|
|
1,727
|
|
|
2,422
|
|
Income tax effect of
non-GAAP adjustments
|
(160)
|
|
|
(168)
|
|
|
(554)
|
|
|
(613)
|
|
Significant tax
matters (1)
|
(79)
|
|
|
(119)
|
|
|
(387)
|
|
|
11,261
|
|
Total adjustments to
GAAP provision for income taxes
|
(239)
|
|
|
(287)
|
|
|
(941)
|
|
|
10,648
|
|
Non-GAAP net
income
|
$
|
3,454
|
|
|
$
|
3,195
|
|
|
$
|
10,201
|
|
|
$
|
9,377
|
|
Net income (loss) per
share (2):
|
|
|
|
|
|
|
|
GAAP
|
$
|
0.69
|
|
|
$
|
0.56
|
|
|
$
|
2.09
|
|
|
$
|
(0.76)
|
|
Non-GAAP
|
$
|
0.78
|
|
|
$
|
0.66
|
|
|
$
|
2.26
|
|
|
$
|
1.90
|
|
(1) For the first nine months of fiscal 2018, we
recorded charges relating to significant tax matters that were
excluded from non-GAAP net income. $11.1
billion of these charges were provisional amounts related to
the enactment of the Tax Cuts and Jobs Act comprised of
$8.9 billion related to the U.S.
transition tax, $1.2 billion related
to foreign withholding tax and $1.0
billion related to the re-measurement of net deferred tax
assets. The amounts were provisional based on Securities and
Exchange Commission Staff Accounting Bulletin No. 118. The
remaining $0.2 billion was related to
other significant tax matters.
(2) GAAP net loss per share for the nine months ended
April 28, 2018 was calculated using
basic shares of 4,892 million, due to the net loss resulting from
the tax charge as discussed in footnote (1). Non-GAAP net income
per share for the period was calculated using diluted shares of
4,936 million, as we had non-GAAP net income for this period.
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
|
|
April 27,
2019
|
|
Product Gross
Margin
|
|
Service Gross
Margin
|
|
Total Gross
Margin
|
|
Operating
Expenses
|
|
Y/Y
|
|
Operating
Income
|
|
Y/Y
|
|
Interest and other
income (loss), net
|
|
Y/Y
|
|
Net Income
|
|
Y/Y
|
GAAP
amount
|
$
|
6,029
|
|
|
$
|
2,144
|
|
|
$
|
8,173
|
|
|
$
|
4,660
|
|
|
1%
|
|
$
|
3,513
|
|
|
12%
|
|
$
|
102
|
|
|
(14)%
|
|
$
|
3,044
|
|
|
13%
|
% of
revenue
|
62.0
|
%
|
|
66.3
|
%
|
|
63.1
|
%
|
|
36.0
|
%
|
|
|
|
27.1
|
%
|
|
|
|
0.8
|
%
|
|
|
|
23.5
|
%
|
|
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
22
|
|
|
32
|
|
|
54
|
|
|
322
|
|
|
|
|
376
|
|
|
|
|
—
|
|
|
|
|
376
|
|
|
|
Amortization of
acquisition-related intangible assets
|
141
|
|
|
—
|
|
|
141
|
|
|
39
|
|
|
|
|
180
|
|
|
|
|
—
|
|
|
|
|
180
|
|
|
|
Legal and
indemnification settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
|
(1)
|
|
|
|
Acquisition/divestiture-related costs
|
1
|
|
|
1
|
|
|
2
|
|
|
78
|
|
|
|
|
80
|
|
|
|
|
—
|
|
|
|
|
80
|
|
|
|
Significant asset
impairments and restructurings
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
|
|
18
|
|
|
|
|
—
|
|
|
|
|
18
|
|
|
|
(Gains) and losses on
equity investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(4)
|
|
|
|
|
(4)
|
|
|
|
Income tax
effect/significant tax matters
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(239)
|
|
|
|
Non-GAAP
amount
|
$
|
6,193
|
|
|
$
|
2,177
|
|
|
$
|
8,370
|
|
|
$
|
4,204
|
|
|
6%
|
|
$
|
4,166
|
|
|
6%
|
|
$
|
98
|
|
|
(18)%
|
|
$
|
3,454
|
|
|
8%
|
% of
revenue
|
63.7
|
%
|
|
67.3
|
%
|
|
64.6
|
%
|
|
32.4
|
%
|
|
|
|
32.2
|
%
|
|
|
|
0.8
|
%
|
|
|
|
26.7
|
%
|
|
|
Amounts may not sum and percentages may not recalculate due to
rounding.
During the second quarter of fiscal 2019 on October 28, 2018, we completed the divestiture of
the SPVSS business. Accordingly, the non-GAAP growth rates are
normalized to exclude the SPVSS business for the third quarter of
fiscal 2018.
|
Three Months
Ended
|
|
April 28,
2018
|
|
Product Gross
Margin
|
|
Service Gross
Margin
|
|
Total Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Net
Income
|
GAAP
amount
|
$
|
5,679
|
|
|
$
|
2,080
|
|
|
$
|
7,759
|
|
|
$
|
4,625
|
|
|
$
|
3,134
|
|
|
$
|
2,691
|
|
% of
revenue
|
61.0
|
%
|
|
65.8
|
%
|
|
62.3
|
%
|
|
37.1
|
%
|
|
25.1
|
%
|
|
21.6
|
%
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
24
|
|
|
33
|
|
|
57
|
|
|
342
|
|
|
399
|
|
|
399
|
|
Amortization of
acquisition-related intangible assets
|
161
|
|
|
—
|
|
|
161
|
|
|
67
|
|
|
228
|
|
|
228
|
|
Supplier component
remediation charge (adjustment), net
|
(9)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
(9)
|
|
|
(9)
|
|
Acquisition/divestiture-related costs
|
1
|
|
|
1
|
|
|
2
|
|
|
89
|
|
|
91
|
|
|
91
|
|
Significant asset
impairments and restructurings
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|
82
|
|
|
82
|
|
Income tax
effect/significant tax matters
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(287)
|
|
Non-GAAP
amount
|
$
|
5,856
|
|
|
$
|
2,114
|
|
|
$
|
7,970
|
|
|
$
|
4,045
|
|
|
$
|
3,925
|
|
|
$
|
3,195
|
|
Less: SPVSS business
(1)
|
(56)
|
|
|
(11)
|
|
|
(66)
|
|
|
(61)
|
|
|
(5)
|
|
|
(4)
|
|
Non-GAAP amount
(excluding SPVSS business)
|
$
|
5,800
|
|
|
$
|
2,103
|
|
|
$
|
7,903
|
|
|
$
|
3,984
|
|
|
$
|
3,919
|
|
|
$
|
3,191
|
|
% of
revenue
|
63.7
|
%
|
|
67.1
|
%
|
|
64.5
|
%
|
|
32.5
|
%
|
|
32.0
|
%
|
|
26.1
|
%
|
Amounts may not sum and percentages may not recalculate due to
rounding.
(1) Reflects three months of operations for the
SPVSS business.
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 (LOSS)
(In millions,
except percentages)
|
|
|
|
Nine Months
Ended
|
|
April 27,
2019
|
|
Product Gross
Margin
|
|
Service Gross
Margin
|
|
Total Gross
Margin
|
|
Operating
Expenses
|
|
Y/Y
|
|
Operating
Income
|
|
Y/Y
|
|
Interest and other
income (loss), net
|
|
Y/Y
|
|
Net Income
|
|
Y/Y
|
GAAP
amount
|
$
|
17,779
|
|
|
$
|
6,313
|
|
|
$
|
24,092
|
|
|
$
|
13,563
|
|
|
(1)%
|
|
$
|
10,529
|
|
|
17%
|
|
$
|
338
|
|
|
(30)%
|
|
$
|
9,415
|
|
|
NM
|
% of
revenue
|
61.6
|
%
|
|
65.8
|
%
|
|
62.6
|
%
|
|
35.3
|
%
|
|
|
|
27.4
|
%
|
|
|
|
0.9
|
%
|
|
|
|
24.5
|
%
|
|
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
67
|
|
|
96
|
|
|
163
|
|
|
974
|
|
|
|
|
1,137
|
|
|
|
|
—
|
|
|
|
|
1,137
|
|
|
|
Amortization of
acquisition-related intangible assets
|
418
|
|
|
—
|
|
|
418
|
|
|
112
|
|
|
|
|
530
|
|
|
|
|
—
|
|
|
|
|
530
|
|
|
|
Supplier component
remediation charge (adjustment), net
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
|
(1)
|
|
|
|
Legal and
indemnification settlements
|
5
|
|
|
—
|
|
|
5
|
|
|
(396)
|
|
|
|
|
(391)
|
|
|
|
|
—
|
|
|
|
|
(391)
|
|
|
|
Acquisition/divestiture-related costs
|
4
|
|
|
5
|
|
|
9
|
|
|
238
|
|
|
|
|
247
|
|
|
|
|
—
|
|
|
|
|
247
|
|
|
|
Significant asset
impairments and restructurings
|
—
|
|
|
—
|
|
|
—
|
|
|
282
|
|
|
|
|
282
|
|
|
|
|
—
|
|
|
|
|
282
|
|
|
|
(Gains) and losses on
equity investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(77)
|
|
|
|
|
(77)
|
|
|
|
Income tax
effect/significant tax matters
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(941)
|
|
|
|
Non-GAAP
amount
|
$
|
18,272
|
|
|
$
|
6,414
|
|
|
$
|
24,686
|
|
|
$
|
12,353
|
|
|
|
|
$
|
12,333
|
|
|
|
|
$
|
261
|
|
|
|
|
$
|
10,201
|
|
|
|
% of
revenue
|
63.3
|
%
|
|
66.9
|
%
|
|
64.2
|
%
|
|
32.1
|
%
|
|
|
|
32.1
|
%
|
|
|
|
0.7
|
%
|
|
|
|
26.5
|
%
|
|
|
Less: SPVSS business
(1)
|
(52)
|
|
|
(9)
|
|
|
(61)
|
|
|
(59)
|
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
|
(1)
|
|
|
|
Non-GAAP amount
(excluding SPVSS business)
|
$
|
18,220
|
|
|
$
|
6,405
|
|
|
$
|
24,625
|
|
|
$
|
12,293
|
|
|
4%
|
|
$
|
12,332
|
|
|
9%
|
|
$
|
261
|
|
|
(46)%
|
|
$
|
10,200
|
|
|
9%
|
% of
revenue
|
63.4
|
%
|
|
66.9
|
%
|
|
64.3
|
%
|
|
32.1
|
%
|
|
|
|
32.2
|
%
|
|
|
|
0.7
|
%
|
|
|
|
26.6
|
%
|
|
|
NM — Not meaningful
(1) Reflects three months of operations for the SPVSS
business.
Amounts may not sum and percentages may not recalculate due to
rounding.
During the second quarter of fiscal 2019 on October 28, 2018, we completed the divestiture of
the SPVSS business. Accordingly, the non-GAAP growth rates are
normalized to exclude the SPVSS business for the first nine months
of fiscal 2018.
|
Nine Months
Ended
|
|
April 28,
2018
|
|
Product Gross
Margin
|
|
Service Gross
Margin
|
|
Total Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Income
|
|
Net
Income
(Loss)
|
GAAP
amount
|
$
|
16,473
|
|
|
$
|
6,211
|
|
|
$
|
22,684
|
|
|
$
|
13,721
|
|
|
$
|
8,963
|
|
|
$
|
(3,693)
|
|
% of
revenue
|
60.9
|
%
|
|
65.9
|
%
|
|
62.2
|
%
|
|
37.6
|
%
|
|
24.6
|
%
|
|
(10.1)
|
%
|
Adjustments to GAAP
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
70
|
|
|
98
|
|
|
168
|
|
|
1,010
|
|
|
1,178
|
|
|
1,178
|
|
Amortization of
acquisition-related intangible assets
|
444
|
|
|
—
|
|
|
444
|
|
|
188
|
|
|
632
|
|
|
632
|
|
Supplier component
remediation charge (adjustment), net
|
(41)
|
|
|
—
|
|
|
(41)
|
|
|
—
|
|
|
(41)
|
|
|
(41)
|
|
Legal and
indemnification settlements
|
122
|
|
|
—
|
|
|
122
|
|
|
—
|
|
|
122
|
|
|
122
|
|
Acquisition/divestiture-related costs
|
1
|
|
|
3
|
|
|
4
|
|
|
195
|
|
|
199
|
|
|
199
|
|
Significant asset
impairments and restructurings
|
—
|
|
|
—
|
|
|
—
|
|
|
332
|
|
|
332
|
|
|
332
|
|
Income tax
effect/significant tax matters (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,648
|
|
Non-GAAP
amount
|
$
|
17,069
|
|
|
$
|
6,312
|
|
|
$
|
23,381
|
|
|
$
|
11,996
|
|
|
$
|
11,385
|
|
|
$
|
9,377
|
|
Less: SPVSS business
(2)
|
(200)
|
|
|
(27)
|
|
|
(226)
|
|
|
(192)
|
|
|
(34)
|
|
|
(27)
|
|
Non-GAAP amount
(excluding SPVSS business)
|
$
|
16,870
|
|
|
$
|
6,284
|
|
|
$
|
23,154
|
|
|
$
|
11,805
|
|
|
$
|
11,349
|
|
|
$
|
9,348
|
|
% of
revenue
|
63.8
|
%
|
|
67.3
|
%
|
|
64.7
|
%
|
|
33.0
|
%
|
|
31.7
|
%
|
|
26.1
|
%
|
Amounts may not sum and percentages may not recalculate due to
rounding.
(1) Includes an $11.1
billion charge related to the enactment of the Tax Cuts and
Jobs Act.
(2) Reflects nine months of operations for the SPVSS
business.
CISCO SYSTEMS,
INC.
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
|
EFFECTIVE TAX
RATE
(In
percentages)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April 27,
2019
|
|
April 28,
2018
|
|
April 27,
2019
|
|
April 28,
2018
|
GAAP effective tax
rate (1)
|
15.8
|
%
|
|
17.3
|
%
|
|
13.4
|
%
|
|
139.1
|
%
|
Total adjustments to
GAAP provision for income taxes
|
3.2
|
%
|
|
3.7
|
%
|
|
5.6
|
%
|
|
(118.1)
|
%
|
Non-GAAP effective
tax rate
|
19.0
|
%
|
|
21.0
|
%
|
|
19.0
|
%
|
|
21.0
|
%
|
(1) Includes an $11.1
billion charge related to the enactment of the Tax Cuts and
Jobs Act for the nine months ended April 28,
2018.
GAAP TO NON-GAAP
GUIDANCE FOR Q4 FY 2019
|
|
|
|
|
|
|
|
|
|
Q4 FY 2019
|
|
Gross Margin
Rate
|
|
Operating Margin
Rate
|
|
Tax Provision
Rate
|
|
Earnings per Share
(1)
|
GAAP
|
|
62.5% -
63.5%
|
|
26% - 27%
|
|
17%
|
|
$0.66 -
$0.71
|
Estimated adjustments
for:
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
0.5%
|
|
3.0%
|
|
—
|
|
$0.06 -
$0.07
|
Amortization of
acquisition-related intangible assets and
acquisition/divestiture-related costs
|
|
1.0%
|
|
2.0%
|
|
—
|
|
$0.05 -
$0.06
|
Significant asset
impairments and restructurings
|
|
—
|
|
0.0%
|
|
—
|
|
$0.00 -
$0.01
|
Income tax effect of
non-GAAP adjustments
|
|
|
|
|
|
2%
|
|
|
Non-GAAP
|
|
64% - 65%
|
|
31% - 32%
|
|
19%
|
|
$0.80 -
$0.82
|
(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 our customers' confidence in
our strategy, business model and market-leading portfolio, our
ability to build the technology to help our customers achieve their
business objectives, our investment in our innovation pipeline to
drive long-term profitable growth, our ability to successfully
evolve our business model through software offerings and
subscriptions and our ability to deliver value to our shareholders)
and the future financial performance of Cisco (including the
guidance for Q4 FY 2019) 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; overall information technology spending; the growth
and evolution of the Internet and levels of capital spending on
Internet-based systems; variations in customer demand for products
and services, including sales to the service provider market and
other customer markets; the return on our investments in certain
priorities, key growth areas, and in certain geographical
locations, as well as maintaining leadership in routing, switching
and services; the timing of orders and manufacturing and customer
lead times; changes in customer order patterns or customer mix;
insufficient, excess or obsolete inventory; variability of
component costs; variations in sales channels, product costs or mix
of products sold; our ability to successfully acquire businesses
and technologies and to successfully integrate and operate these
acquired businesses and technologies; our ability to achieve
expected benefits of our partnerships; increased competition in our
product and service markets, including the data center market;
dependence on the introduction and market acceptance of new product
offerings and standards; rapid technological and market change;
manufacturing and sourcing risks; product defects and returns;
litigation involving patents, intellectual property, antitrust,
shareholder and other matters, and governmental investigations; our
ability to achieve the benefits of the announced restructuring and
possible changes in the size and timing of the related charges;
cyber-attacks, data breaches or malware; vulnerabilities and
critical security defects; terrorism; natural catastrophic events;
a 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 February 19, 2019 and
September 6, 2018, 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 Form 10-K as each may
be amended from time to time. Cisco's results of operations for the
three and nine months ended April 27, 2019 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.
Cisco divested its Service Provider Video Software Solutions
business (SPVSS) during the second quarter of fiscal 2019 on
October 28, 2018. This release
includes, where indicated, financial measures that exclude the
SPVSS business. Cisco believes that the presentation of these
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
because the SPVSS business will not be part of Cisco on a go
forward basis. Cisco's management also uses the financial measures
excluding the SPVSS business in reviewing the financial results of
Cisco.
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