Cisco Reports Fourth Quarter and Fiscal Year 2018 Earnings

•

Q4 Results:

Revenue: $12.8 billion

  • ▪Increase of 6% year over year

  • ▪Recurring revenue was 32% of total revenue, up 1 point year over year

Earnings per Share:GAAP: $0.81; Non-GAAP: $0.70

  • ▪Non-GAAP EPS increased 15% year over year

•

FY 2018 Results:

Revenue:$49.3 billion; increase of 3% year over yearEarnings per Share:GAAP: $0.02; Non-GAAP: $2.60

  • ▪Non-GAAP EPS increased 9% year over year

  • ▪GAAP results include a $10.4 billion charge related to the enactment of the Tax Cuts and Jobs Acts

•

Q1 FY 2019 Guidance:

Revenue:5% to 7% growth year over year

Earnings per Share:GAAP: $0.69 to $0.74; Non-GAAP: $0.70 to $0.72

SAN JOSE, Calif., Aug. 15, 2018 (GLOBE NEWSWIRE)--Cisco today reported fourth quarter and fiscal year results for the period endedJuly 28, 2018. Cisco reported fourth quarter revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP)basis of $3.8 billion or $0.81 per share, and non-GAAP net income of $3.3 billion or $0.70 per share.

"We had a very strong finish to a great year and generated our highest quarterly revenue of $12.8 billion," said Chuck Robbins, Chairman and CEO of Cisco. "Our results demonstrate a combination of strong customer adoption of our latest innovations, the ongoing valuecustomers see in our software and subscription offerings, and excellent execution across our customer segments and geographies. Ourstrategy is working and we believe that are well-positioned to capture growth across our portfolio with our pipeline of innovation."

Q4 GAAP ResultsQ4 FY 2018

Q4 FY 2017

Vs. Q4 FY 2017

RevenueNet IncomeDilutedEarningsperShare(EPS)

$ $ $

12.8billion3.8billion0.81

$ $ $

12.1billion6%

2.4billion57%

0.48 69%Q4 GAAP results include an $863 million benefit related to the Tax Cuts and Jobs Act. Non-GAAP results exclude this benefit.

Q4 Non-GAAP Results

$ $

Fiscal Year GAAP Results

FY 2017

$ $ $

48.0billion9.6billion1.90

Fiscal year GAAP results include a $10.4 billion charge related to the enactment of the Tax Cuts and Jobs Act comprised of $8.1 billion for

Q4 FY 2018

Q4 FY 2017

Vs. Q4 FY 2017

Net Income

$

3.3billion

3.1billion

8%

EPS

$

0.70

0.61

15%

FY 2018

Vs. FY 2017

Revenue

$

49.3billion

3%

Net Income

$

0.1billion

(99)%

EPS

$

0.02

(99)%

the U.S. transition tax, $1.2 billion for foreign withholding tax and $1.1 billion for the re-measurement of net deferred tax assets.

Fiscal Year Non-GAAP Results

FY 2018

FY 2017

Vs. FY 2017

Net Income

$

12.7billion

$

12.1billion

5%

EPS

$

2.60

$

2.39

9%

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in thesection entitled "Reconciliations of GAAP to non-GAAP Measures."

"Q4 was another quarter of broad-based strength across our portfolio reflecting our strong execution and momentum. We delivered recordquarterly revenue, up 6%, and non-GAAP EPS, up 15%," said Kelly Kramer, CFO of Cisco. "We are seeing solid demand for our productsand solutions while continuing to make progress in transforming our business model and driving long-term shareholder value."

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q4 FY 2018 Highlights

Revenue--Total revenue was $12.8 billion, up 6%, with product revenue up 7% and service revenue up 3%. Recurring revenue as apercentage of total revenue was 32%, up 1 point year over year. Revenue by geographic segment was: Americas up 5%, EMEA up 8%, andAPJC up 6%. Product revenue performance was generally broad based with growth in Security, up 12%, Applications, up 10%, andInfrastructure Platforms, up 7%.

Gross Margin --On a GAAP basis, total gross margin, product gross margin, and service gross margin were 61.7%, 60.2%, and 66.0%,respectively, as compared with 62.2%, 60.3%, and 67.8%, respectively, in the fourth quarter of 2017.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 62.9%, 61.5%, and 67.1%, respectively,as compared with 63.7%, 61.9%, and 68.8%, respectively, in the fourth quarter of 2017.

Total gross margins by geographic segment were: 64.1% for the Americas, 63.7% for EMEA and 57.7% for APJC.

Operating Expenses--On a GAAP basis, operating expenses were $4.6 billion, up 1%. Non-GAAP operating expenses were $4.1 billion,up 5%, and were 32.0% of revenue.

Operating Income --GAAP operating income was $3.3 billion, up 10%, with GAAP operating margin of 26.1%. Non-GAAP operatingincome was $4.0 billion, up 4%, with non-GAAP operating margin at 30.9%.

Provision for (benefit from) Income Taxes --The GAAP tax provision rate was (5.9)%, which includes an $863 million benefit related tothe Tax Cuts and Jobs Act. The non-GAAP tax provision rate was 21.2%.

Net Income and EPS --On a GAAP basis, net income was $3.8 billion and EPS was $0.81. On a non-GAAP basis, net income was $3.3billion, an increase of 8%, and EPS was $0.70, an increase of 15%.

Cash Flow from Operating Activities --$4.1 billion for the fourth quarter of fiscal 2018, an increase of 2% compared with $4.0 billion forthe fourth quarter of fiscal 2017.

FY 2018 Highlights

Revenue--Total revenue was $49.3 billion, an increase of 3%.

Net Income and EPS --On a GAAP basis, net income was $0.1 billion and EPS was $0.02. GAAP net income includes a $10.4 billioncharge related to the enactment of the Tax Cuts and Jobs Act comprised of $8.1 billion for the U.S. transition tax, $1.2 billion for foreignwithholding tax and $1.1 billion for the re-measurement of net deferred tax assets.

On a non-GAAP basis, net income was $12.7 billion, up 5% compared to fiscal 2017, and EPS was $2.60, an increase of 9%.

Cash Flow from Operating Activities --$13.7 billion for fiscal 2018, compared with $13.9 billion for fiscal 2017, a decrease of 2%.Operating cash flow for fiscal 2018 includes the payments of $1.4 billion of one-time foreign taxes as related to the Tax Cuts and Jobs Act.Operating cash flow increased 8%, normalized for these tax payments.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments--$46.5 billion at the end of the fourth quarter of fiscal 2018, compared with $54.4 billion atthe end of the third quarter of fiscal 2018, and compared with $70.5 billion at the end of fiscal 2017. The total cash and cash equivalents andinvestments available in the United States at the end of the fourth quarter of fiscal 2018 were $40.4 billion.

Deferred Revenue --$19.7 billion, up 6% in total, with deferred product revenue up 15%, driven largely by subscription-based and softwareoffers, and deferred service revenue was up 1%. The portion of deferred product revenue related to recurring software and subscriptionoffers increased 23%.

Product Backlog--$6.6 billion at the end of fiscal 2018, an increase of 38% compared with the balance at the end of fiscal 2017.

Capital Allocation--For the fourth quarter of fiscal 2018, Cisco returned $7.5 billion to shareholders through share buybacks anddividends. Cisco declared and paid a cash dividend of $0.33 per common share, or $1.5 billion. Cisco repurchased approximately 138million shares of common stock under its stock repurchase program at an average price of $43.58 per share for an aggregate purchaseprice of $6.0 billion.

For the full fiscal year, Cisco returned $23.6 billion to shareholders through share buybacks and dividends. Cisco declared and paid cashdividends of $1.24 per common share, or $6.0 billion. Cisco repurchased approximately 432 million shares of common stock under itsstock repurchase program at an average price of $40.88 per share for an aggregate purchase price of $17.7 billion. The remainingauthorized amount for stock repurchases under the program is approximately $19.0 billion with no termination date.

Acquisitions and Divestitures

In the fourth quarter of fiscal 2018, we closed the acquisition of Accompany, a privately held company that provides an AI-driven relationshipintelligence platform. We also announced our intent to acquire July Systems, Inc., a privately held company that provides enterprise-gradelocation platform through cloud-based subscription offerings. This acquisition closed in the first quarter of fiscal 2019. In the fourth quarter offiscal 2018, we announced an agreement to sell our Service Provider Video Software Solutions (SPVSS) business. We expect thistransaction to close in the first half of fiscal 2019 subject to customary closing conditions and regulatory approvals.

On August 2, 2018, we announced our intent to acquire Duo Security, a privately held company that provides unified access security andmulti-factor authentication delivered through the cloud. The acquisition is expected to close in the first quarter of fiscal 2019, subject tocustomary closing conditions and regulatory approvals.

Guidance for Q1 FY 2019

Cisco expects to achieve the following results for the first quarter of fiscal 2019:

Q1 FY 2019

Revenue

5% to 7% growth Y/Y

Non-GAAP gross margin rate

63%-64%

Non-GAAP operating margin rate

30%-31%

Non-GAAP tax provision rate

19%

Non-GAAP EPS

$0.70-$0.72

The guidance includes our SPVSS business that we recently agreed to sell and excludes the Duo Security acquisition since bothtransactions have not closed. We expect the SPVSS transaction to close in the first half of fiscal 2019 subject to customary closingconditions and regulatory approvals.

At the beginning of fiscal 2019, Cisco adopted the Financial Accounting Standards Board new standard on revenue recognition (ASC 606)using the modified retrospective method. The revenue guidance in the preceding table includes the impact of ASC 606 which we estimateto be a benefit of about 1% year over year.

Cisco estimates that GAAP EPS will be $0.69 to $0.74 in the first quarter of fiscal 2019.

A reconciliation between the Guidance for Q1 FY 2019 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAPGuidance for Q1 FY 2019" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Editor's Notes:

Q4 fiscal year 2018 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, August 15, 2018 at1:30 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 15, 2018 to 4:00 p.m. Pacific Time, August 22, 2018 at 1-866-417-5767 (United States) or 1-203-369-0735 (international). The replay will also be available via webcast on the Cisco InvestorRelations website athttps://investor.cisco.com.

Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guideparticipants through the call, will be available at 1:30 p.m. Pacific Time, August 15, 2018. Text of the conference call's preparedremarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and thequestion-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on theCisco Investor Relations website athttps://investor.cisco.com.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

Three Months EndedFiscal Year Ended

July 28,July 29,July 28,July 29,

2018

2017

2018

2017

REVENUE:

ProductService

Total revenueCOST OF SALES:

ProductService

Total cost of salesGROSS MARGINOPERATING EXPENSES:

Research and developmentSales and marketingGeneral and administrative

Amortization of purchased intangible assetsRestructuring and other charges

Total operating expensesOPERATING INCOME

Interest incomeInterest expense

Other income (loss), net

Interest and other income (loss), net

INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES

Provision for (benefit from) income taxes(1)

NET INCOME

Net income per share:

Basic

Diluted

Shares used in per-share calculation:

$

9,642 3,202 12,844

$

9,027 3,106 12,133

$

36,709

  • $ 35,705

    • 12,621 12,300

    49,330

    48,005

    3,833 1,089 4,922

    3,586 1,001 4,587

    • 14,427 13,699

    • 4,297 4,082

    18,724

    17,781

    7,922

    7,546

    30,606 30,224

    1,626

    1,499

    6,332 6,059

    2,348

    2,318

    9,242 9,184

    543

    495

    2,144 1,993

    33

    58

    221 259

    26

    142

    358 756

    4,576

    4,512

    18,297

    18,251

    3,346

    • 3,034 12,309 11,973

      353

    • 360 1,508 1,338

    (224)

    117

    246

    (222)

    8 146

    (943)165 730

    (861)(163)314

    3,592

    • 3,180 13,039 12,287

      (211)

    • 756 12,929 2,678

    • $ 3,803

      • $ 2,424

        • $ 110

  • $ 9,609

    • $ 0.81

      • $ 0.49

        • $ 0.02

  • $ 1.92

    Basic

    Diluted

    • $ 0.81 4,672 4,722

      • $ 0.48 4,993 5,027

        • $ 0.02 4,837 4,881

  • $ 1.90 5,010 5,049

    Cash dividends declared per common share

    • $ 0.33

    • $ 0.29

    • $ 1.24

  • $ 1.10

(1)For the three months ended July 28, 2018, the provision for (benefit from) income taxes includes an $863 million benefit as related to theTax Cuts and Jobs Act. For fiscal year ended 2018, the provision for income taxes includes a $10.4 billion charge as related to theenactment of the Tax Cuts and Jobs Act.

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)

Three Months EndedAmount

Revenue:

Y/Y %

AmericasEMEAAPJCTotal

$

7,555 3,174 2,116

$

12,844

5%8%6%6%

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

July 28, 2018

CISCO SYSTEMS, INC.

Fiscal Year Ended

$

$

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)

July 28, 2018

Amount

Y/Y %

29,070 3%

12,425 4%

7,834 2%

49,3303%

Three Months Ended

Fiscal Year Ended

Gross Margin Percentage:

Americas

64.1%

64.6%

EMEA

63.7%

63.9%

APJCRevenue:

Infrastructure PlatformsApplications

Security

Other ProductsTotal ProductServices

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)

Three Months EndedAmount

$

7,443

1,339

627

232

9,642

3,202

Total

$

12,844

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

ASSETSCurrent assets:

Cash and cash equivalents

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

57.7%

Investments

Accounts receivable, net of allowance for doubtful accounts

of $129 at July 28, 2018 and $211 at July 29, 2017

Inventories

Financing receivables, net

Other current assets

Total current assets

Property and equipment, netFinancing receivables, netGoodwill

Purchased intangible assets, netDeferred tax assets

Other assets

TOTAL ASSETS LIABILITIES AND EQUITYCurrent liabilities:

Short-term debt

Accounts payable

Income taxes payable

Accrued compensation

Deferred revenue

Other current liabilities

Total current liabilitiesLong-term debt

Income taxes payableDeferred revenue

Other long-term liabilities

Total liabilities

Total equity

TOTAL LIABILITIES AND EQUITY

CISCO SYSTEMS, INC.

July 28, 2018

Y/Y %

60.3%

Fiscal Year EndedAmount

Y/Y %

7%

$

28,270 2%

10%

5,035 10%

12%

2,353 9%

(18)%

1,050(13)%

7%

36,709 3%

3%

12,621 3%

6%

$

49,3303%

July 28,2018

July 29,2017

$

8,934 $ 11,708

37,614 58,784

5,554 5,146

1,846 1,616

4,949 4,856

2,940 1,593

61,837 83,703

3,006 3,322

4,882 4,738

31,706 29,766

2,552 2,539

3,219 4,239

1,582 1,511

  • $ 108,784

    $ 129,818

    $

    5,238 $ 7,992

    1,904 1,385

    1,004 98

    2,986 2,895

    11,490 10,821

    4,413 4,392

    27,035 27,583

    20,331 25,725

    8,585 1,250

    8,195 7,673

    1,434 1,450

    65,580 63,681

    43,204 66,137

  • $ 108,784

$ 129,818

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Cisco Systems Inc. published this content on 15 August 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 15 August 2018 20:25:06 UTC