News Details

CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2024 EARNINGS

August 14, 2024

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 billion


$

15.2 billion



(10) %

Net Income


$

2.2 billion


$

4.0 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 Income


$

3.5 billion


$

4.7 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 billion


$

57.0 billion


(6) %

Net Income


$

10.3 billion


$

12.6 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 Income


$

15.2 billion


$

16.0 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,
2024


July 29,
2023


July 27,
2024


July 29,
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,
2024


July 29,
2023

ASSETS




Current assets:




Cash and cash equivalents

$          7,508


$        10,123

Investments

10,346


16,023

Accounts receivable, net of allowance

of $87 at July 27, 2024 and $85 at July 29, 2023

6,685


5,854

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,
2024


July 29,
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
cash equivalents

(31)


(105)

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,
2024


April 27,
2024


July 29,
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-
Average Price
per Share


Amount


Amount

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,
2024


July 29,
2023


July 27,
2024


July 29,
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
taxes

1,839


1,070


6,345


4,173

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,
2024


July 29,
2023


July 27,
2024


July 29,
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 Ended


Fiscal Year 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
Gross
Margin


Services
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

$ 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
expense

57


76


133


660




793





793



Amortization of acquisition-
related intangible assets

331



331


268




599





599



Acquisition/divestiture-related
costs

5


16


21


297




318





318



Russia-Ukraine war costs










49


49



Significant asset impairments
and restructurings




112




112





112



(Gains) and losses on
investments










(32)


(32)



Income tax effect/significant tax
matters











(470)



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
Gross
Margin


Services
Gross
Margin


Total
Gross
Margin


Operating
Expenses


Operating

Income


Interest
and
other
income
(loss),
net


Net

Income

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
Gross
Margin


Services
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

$ 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
expense

214


300


514


2,537




3,051





3,051



Amortization of acquisition-
related intangible assets

936



936


698




1,634





1,634



Acquisition/divestiture-related
costs

10


24


34


700




734





734



Russia-Ukraine war costs




(12)




(12)




49


37



Significant asset impairments and
restructurings




789




789





789



(Gains) and losses on investments










100


100



Income tax effect/significant tax
matters











(1,515)



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
Gross
Margin


Services
Gross
Margin


Total
Gross
Margin


Operating
Expenses


Operating

Income


Interest
and
other
income
(loss),
net


Net

Income

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),
net

(9)



(9)



(9)



(9)

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 27,
2024


July 29,
2023


July 27,
2024


July 29,
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 Margin


Earnings 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
costs


2.5 %


6.5 %


$0.17 - $0.18

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

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SOURCE Cisco Systems, Inc.