• 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 year
- Earnings 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
ended July 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 value customers see in our software and subscription offerings, and excellent execution across our customer segments and
geographies. Our strategy is working and we believe that are well-positioned to capture growth across our portfolio with our
pipeline of innovation.”
Q4 GAAP Results
| |
|
Q4 FY
2018 |
|
Q4 FY
2017 |
|
Vs. Q4 FY
2017 |
| Revenue |
|
$ |
12.8 |
billion |
|
$ |
12.1 |
billion |
|
6 |
% |
| Net Income |
|
$ |
3.8 |
billion |
|
$ |
2.4 |
billion |
|
57 |
% |
Diluted
Earnings
per
Share
(EPS) |
|
$ |
0.81 |
|
|
$ |
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
| |
|
Q4 FY
2018 |
|
Q4 FY
2017 |
|
Vs. Q4 FY
2017 |
| Net Income |
|
$ |
3.3 |
billion |
|
$ |
3.1 |
billion |
|
8 |
% |
| EPS |
|
$ |
0.70 |
|
|
$ |
0.61 |
|
|
15 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year GAAP Results
| |
|
FY 2018 |
|
FY 2017 |
|
Vs. FY 2017 |
| Revenue |
|
$ |
49.3 |
billion |
|
$ |
48.0 |
billion |
|
3 |
% |
| Net Income |
|
$ |
0.1 |
billion |
|
$ |
9.6 |
billion |
|
(99 |
)% |
| EPS |
|
$ |
0.02 |
|
|
$ |
1.90 |
|
|
(99 |
)% |
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 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 |
|
$ |
12.7 |
billion |
|
$ |
12.1 |
billion |
|
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 the
section 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
record quarterly revenue, up 6%, and non-GAAP EPS, up 15%,” said Kelly Kramer, CFO of Cisco. “We are seeing solid demand for our
products and 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 a percentage of total revenue was 32%, up 1 point year over year. Revenue by geographic segment was:
Americas up 5%, EMEA up 8%, and APJC up 6%. Product revenue performance was generally broad based with growth in Security, up 12%,
Applications, up 10%, and Infrastructure 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 operating income 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 to the 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 $3.3 billion, 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 for the 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 billion charge 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 foreign withholding 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 at the 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 and investments 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 software offers, and deferred service revenue was up 1%. The portion of deferred product revenue
related to recurring software and subscription offers 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 and dividends. Cisco declared and paid a cash dividend of $0.33 per common share, or $1.5
billion. Cisco repurchased approximately 138 million shares of common stock under its stock repurchase program at an average price
of $43.58 per share for an aggregate purchase price 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 cash dividends of $1.24 per common share, or $6.0 billion. Cisco repurchased approximately 432 million shares of common stock
under its stock repurchase program at an average price of $40.88 per share for an aggregate purchase price of $17.7 billion. The
remaining authorized 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 relationship intelligence platform. We also announced our intent to acquire July Systems, Inc., a privately held company
that provides enterprise-grade location platform through cloud-based subscription offerings. This acquisition closed in the first
quarter of fiscal 2019. In the fourth quarter of fiscal 2018, we announced an agreement to sell our Service Provider Video Software
Solutions (SPVSS) business. We expect this transaction 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 and multi-factor authentication delivered through the cloud. The acquisition is expected to close in the first quarter of
fiscal 2019, subject to customary 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 both
transactions have not closed. We expect the SPVSS transaction to close in the first half of fiscal 2019 subject to customary
closing conditions 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
estimate to 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-GAAP Guidance 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 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 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 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 15, 2018. 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 28,
2018 |
|
July 29,
2017 |
|
July 28,
2018 |
|
July 29,
2017 |
| REVENUE: |
|
|
|
|
|
|
|
| Product |
$ |
9,642 |
|
|
$ |
9,027 |
|
|
$ |
36,709 |
|
|
$ |
35,705 |
|
| Service |
3,202 |
|
|
3,106 |
|
|
12,621 |
|
|
12,300 |
|
| Total revenue |
12,844 |
|
|
12,133 |
|
|
49,330 |
|
|
48,005 |
|
| COST OF SALES: |
|
|
|
|
|
|
|
| Product |
3,833 |
|
|
3,586 |
|
|
14,427 |
|
|
13,699 |
|
| Service |
1,089 |
|
|
1,001 |
|
|
4,297 |
|
|
4,082 |
|
| Total cost of sales |
4,922 |
|
|
4,587 |
|
|
18,724 |
|
|
17,781 |
|
| GROSS MARGIN |
7,922 |
|
|
7,546 |
|
|
30,606 |
|
|
30,224 |
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
| Research and development |
1,626 |
|
|
1,499 |
|
|
6,332 |
|
|
6,059 |
|
| Sales and marketing |
2,348 |
|
|
2,318 |
|
|
9,242 |
|
|
9,184 |
|
| General and administrative |
543 |
|
|
495 |
|
|
2,144 |
|
|
1,993 |
|
| Amortization of purchased intangible assets |
33 |
|
|
58 |
|
|
221 |
|
|
259 |
|
| Restructuring and other charges |
26 |
|
|
142 |
|
|
358 |
|
|
756 |
|
| Total operating expenses |
4,576 |
|
|
4,512 |
|
|
18,297 |
|
|
18,251 |
|
| OPERATING INCOME |
3,346 |
|
|
3,034 |
|
|
12,309 |
|
|
11,973 |
|
| Interest income |
353 |
|
|
360 |
|
|
1,508 |
|
|
1,338 |
|
| Interest expense |
(224 |
) |
|
(222 |
) |
|
(943 |
) |
|
(861 |
) |
| Other income (loss), net |
117 |
|
|
8 |
|
|
165 |
|
|
(163 |
) |
| Interest and other income (loss), net |
246 |
|
|
146 |
|
|
730 |
|
|
314 |
|
| INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES |
3,592 |
|
|
3,180 |
|
|
13,039 |
|
|
12,287 |
|
| Provision for (benefit from) income taxes (1) |
(211 |
) |
|
756 |
|
|
12,929 |
|
|
2,678 |
|
| NET INCOME |
$ |
3,803 |
|
|
$ |
2,424 |
|
|
$ |
110 |
|
|
$ |
9,609 |
|
| |
|
|
|
|
|
|
|
| Net income per share: |
|
|
|
|
|
|
|
| Basic |
$ |
0.81 |
|
|
$ |
0.49 |
|
|
$ |
0.02 |
|
|
$ |
1.92 |
|
| Diluted |
$ |
0.81 |
|
|
$ |
0.48 |
|
|
$ |
0.02 |
|
|
$ |
1.90 |
|
| Shares used in per-share calculation: |
|
|
|
|
|
|
|
| Basic |
4,672 |
|
|
4,993 |
|
|
4,837 |
|
|
5,010 |
|
| Diluted |
4,722 |
|
|
5,027 |
|
|
4,881 |
|
|
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 the Tax Cuts and Jobs Act. For fiscal year ended 2018, the provision for income taxes includes a $10.4
billion charge as related to the enactment of the Tax Cuts and Jobs Act.
CISCO SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except percentages)
| |
|
July 28, 2018 |
| |
|
Three Months Ended |
|
Fiscal Year Ended |
| |
|
Amount |
|
Y/Y
% |
|
Amount |
|
Y/Y
% |
| Revenue: |
|
|
|
|
|
|
|
|
| Americas |
|
$ |
7,555 |
|
|
5 |
% |
|
$ |
29,070 |
|
|
3 |
% |
| EMEA |
|
3,174 |
|
|
8 |
% |
|
12,425 |
|
|
4 |
% |
| APJC |
|
2,116 |
|
|
6 |
% |
|
7,834 |
|
|
2 |
% |
| Total |
|
$ |
12,844 |
|
|
6 |
% |
|
$ |
49,330 |
|
|
3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
GROSS MARGIN PERCENTAGE BY SEGMENT
(In percentages)
| |
|
July 28, 2018 |
| |
|
Three
Months Ended |
|
Fiscal
Year Ended |
| Gross Margin Percentage: |
|
|
|
|
| Americas |
|
64.1 |
% |
|
64.6 |
% |
| EMEA |
|
63.7 |
% |
|
63.9 |
% |
| APJC |
|
57.7 |
% |
|
60.3 |
% |
| |
|
|
|
|
|
|
CISCO SYSTEMS, INC.
REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES
(In millions, except percentages)
| |
|
July 28, 2018 |
| |
|
Three Months Ended |
|
Fiscal Year Ended |
| |
|
Amount |
|
Y/Y
% |
|
Amount |
|
Y/Y
% |
| Revenue: |
|
|
|
|
|
|
|
|
| Infrastructure Platforms |
|
$ |
7,443 |
|
|
7 |
% |
|
$ |
28,270 |
|
|
2 |
% |
| Applications |
|
1,339 |
|
|
10 |
% |
|
5,035 |
|
|
10 |
% |
| Security |
|
627 |
|
|
12 |
% |
|
2,353 |
|
|
9 |
% |
| Other Products |
|
232 |
|
|
(18 |
)% |
|
1,050 |
|
|
(13 |
)% |
| Total Product |
|
9,642 |
|
|
7 |
% |
|
36,709 |
|
|
3 |
% |
| Services |
|
3,202 |
|
|
3 |
% |
|
12,621 |
|
|
3 |
% |
| Total |
|
$ |
12,844 |
|
|
6 |
% |
|
$ |
49,330 |
|
|
3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
| |
July 28,
2018 |
|
July 29,
2017 |
| ASSETS |
|
|
|
| Current assets: |
|
|
|
| Cash and cash equivalents |
$ |
8,934 |
|
|
$ |
11,708 |
|
| Investments |
37,614 |
|
|
58,784 |
|
Accounts receivable, net of allowance for doubtful accounts
of $129 at July 28, 2018 and $211 at July 29, 2017 |
5,554 |
|
|
5,146 |
|
| Inventories |
1,846 |
|
|
1,616 |
|
| Financing receivables, net |
4,949 |
|
|
4,856 |
|
| Other current assets |
2,940 |
|
|
1,593 |
|
| Total current assets |
61,837 |
|
|
83,703 |
|
| Property and equipment, net |
3,006 |
|
|
3,322 |
|
| Financing receivables, net |
4,882 |
|
|
4,738 |
|
| Goodwill |
31,706 |
|
|
29,766 |
|
| Purchased intangible assets, net |
2,552 |
|
|
2,539 |
|
| Deferred tax assets |
3,219 |
|
|
4,239 |
|
| Other assets |
1,582 |
|
|
1,511 |
|
| TOTAL ASSETS |
$ |
108,784 |
|
|
$ |
129,818 |
|
| LIABILITIES AND EQUITY |
|
|
|
| Current liabilities: |
|
|
|
| Short-term debt |
$ |
5,238 |
|
|
$ |
7,992 |
|
| Accounts payable |
1,904 |
|
|
1,385 |
|
| Income taxes payable |
1,004 |
|
|
98 |
|
| Accrued compensation |
2,986 |
|
|
2,895 |
|
| Deferred revenue |
11,490 |
|
|
10,821 |
|
| Other current liabilities |
4,413 |
|
|
4,392 |
|
| Total current liabilities |
27,035 |
|
|
27,583 |
|
| Long-term debt |
20,331 |
|
|
25,725 |
|
| Income taxes payable |
8,585 |
|
|
1,250 |
|
| Deferred revenue |
8,195 |
|
|
7,673 |
|
| Other long-term liabilities |
1,434 |
|
|
1,450 |
|
| Total liabilities |
65,580 |
|
|
63,681 |
|
| Total equity |
43,204 |
|
|
66,137 |
|
| TOTAL LIABILITIES AND EQUITY |
$ |
108,784 |
|
|
$ |
129,818 |
|
| |
|
|
|
|
|
|
|
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| |
Fiscal Year Ended |
| |
July 28,
2018 |
|
July 29,
2017 |
| Cash flows from operating activities: |
|
|
|
| Net income |
$ |
110 |
|
|
$ |
9,609 |
|
| Adjustments to reconcile net income to net cash provided by operating
activities: |
|
|
|
| Depreciation, amortization, and other |
2,192 |
|
|
2,286 |
|
| Share-based compensation expense |
1,576 |
|
|
1,526 |
|
| Provision for receivables |
(134 |
) |
|
(8 |
) |
| Deferred income taxes |
900 |
|
|
(124 |
) |
| Excess tax benefits from share-based compensation |
— |
|
|
(153 |
) |
| (Gains) losses on divestitures, investments and other, net |
(322 |
) |
|
154 |
|
| Change in operating assets and liabilities, net of effects of
acquisitions and divestitures: |
|
|
|
| Accounts receivable |
(269 |
) |
|
756 |
|
| Inventories |
(244 |
) |
|
(394 |
) |
| Financing receivables |
(219 |
) |
|
(1,038 |
) |
| Other assets |
66 |
|
|
15 |
|
| Accounts payable |
504 |
|
|
311 |
|
| Income taxes, net |
8,118 |
|
|
60 |
|
| Accrued compensation |
100 |
|
|
(110 |
) |
| Deferred revenue |
1,205 |
|
|
1,683 |
|
| Other liabilities |
83 |
|
|
(697 |
) |
| Net cash provided by operating activities |
13,666 |
|
|
13,876 |
|
| Cash flows from investing activities: |
|
|
|
| Purchases of investments |
(14,285 |
) |
|
(42,702 |
) |
| Proceeds from sales of investments |
17,706 |
|
|
28,827 |
|
| Proceeds from maturities of investments |
15,769 |
|
|
12,143 |
|
| Acquisition of businesses, net of cash and cash equivalents
acquired |
(3,006 |
) |
|
(3,324 |
) |
| Proceeds from business divestitures |
27 |
|
|
— |
|
| Purchases of investments in privately held companies |
(267 |
) |
|
(222 |
) |
| Return of investments in privately held companies |
168 |
|
|
203 |
|
| Acquisition of property and equipment |
(834 |
) |
|
(964 |
) |
| Proceeds from sales of property and equipment |
59 |
|
|
7 |
|
| Other |
(13 |
) |
|
39 |
|
| Net cash provided by (used in) investing activities |
15,324 |
|
|
(5,993 |
) |
| Cash flows from financing activities: |
|
|
|
| Issuances of common stock |
623 |
|
|
708 |
|
| Repurchases of common stock - repurchase program |
(17,547 |
) |
|
(3,685 |
) |
| Shares repurchased for tax withholdings on vesting of restricted
stock units |
(703 |
) |
|
(619 |
) |
| Short-term borrowings, original maturities of 90 days or less,
net |
(2,502 |
) |
|
2,497 |
|
| Issuances of debt |
6,877 |
|
|
6,980 |
|
| Repayments of debt |
(12,375 |
) |
|
(4,151 |
) |
| Excess tax benefits from share-based compensation |
— |
|
|
153 |
|
| Dividends paid |
(5,968 |
) |
|
(5,511 |
) |
| Other |
(169 |
) |
|
(178 |
) |
| Net cash used in financing activities |
(31,764 |
) |
|
(3,806 |
) |
| Net (decrease) increase in cash and cash equivalents |
(2,774 |
) |
|
4,077 |
|
| Cash and cash equivalents, beginning of fiscal year |
11,708 |
|
|
7,631 |
|
| Cash and cash equivalents, end of fiscal year |
$ |
8,934 |
|
|
$ |
11,708 |
|
| |
|
|
|
| Supplemental cash flow information: |
|
|
|
| Cash paid for interest |
$ |
910 |
|
|
$ |
897 |
|
| Cash paid for income taxes, net |
$ |
3,911 |
|
|
$ |
2,742 |
|
| |
|
|
|
|
|
|
|
CISCO SYSTEMS, INC.
DEFERRED REVENUE
(In millions)
| |
July 28,
2018 |
|
April 28,
2018 |
|
July 29,
2017 |
| Deferred revenue: |
|
|
|
|
|
| Service |
$ |
11,431 |
|
|
$ |
10,960 |
|
|
$ |
11,302 |
|
| Product: |
|
|
|
|
|
| Deferred revenue related to recurring software and subscription
offers |
6,120 |
|
|
5,635 |
|
|
4,971 |
|
| Other product deferred revenue |
2,134 |
|
|
2,358 |
|
|
2,221 |
|
| Total product deferred revenue |
8,254 |
|
|
7,993 |
|
|
7,192 |
|
| Total |
$ |
19,685 |
|
|
$ |
18,953 |
|
|
$ |
18,494 |
|
| Reported as: |
|
|
|
|
|
| Current |
$ |
11,490 |
|
|
$ |
11,301 |
|
|
$ |
10,821 |
|
| Noncurrent |
8,195 |
|
|
7,652 |
|
|
7,673 |
|
| Total |
$ |
19,685 |
|
|
$ |
18,953 |
|
|
$ |
18,494 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
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 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 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 29, 2017 |
|
$ |
0.29 |
|
|
$ |
1,448 |
|
|
38 |
|
|
$ |
31.61 |
|
|
$ |
1,201 |
|
|
$ |
2,649 |
|
| April 29, 2017 |
|
$ |
0.29 |
|
|
$ |
1,451 |
|
|
15 |
|
|
$ |
33.71 |
|
|
$ |
503 |
|
|
$ |
1,954 |
|
| January 28, 2017 |
|
$ |
0.26 |
|
|
$ |
1,304 |
|
|
33 |
|
|
$ |
30.33 |
|
|
$ |
1,001 |
|
|
$ |
2,305 |
|
| October 29, 2016 |
|
$ |
0.26 |
|
|
$ |
1,308 |
|
|
32 |
|
|
$ |
31.12 |
|
|
$ |
1,001 |
|
|
$ |
2,309 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
| |
Three Months Ended |
|
Fiscal Year Ended |
| |
July 28,
2018 |
|
July 29,
2017 |
|
July 28,
2018 |
|
July 29,
2017 |
| GAAP net income |
$ |
3,803 |
|
|
$ |
2,424 |
|
|
$ |
110 |
|
|
$ |
9,609 |
|
| Adjustments to cost of sales: |
|
|
|
|
|
|
|
| Share-based compensation expense |
59 |
|
|
56 |
|
|
227 |
|
|
219 |
|
| Amortization of acquisition-related intangible assets |
134 |
|
|
140 |
|
|
578 |
|
|
483 |
|
| Supplier component remediation charge (adjustment), net |
(36 |
) |
|
(18 |
) |
|
(77 |
) |
|
(47 |
) |
| Acquisition-related/divestiture costs |
3 |
|
|
— |
|
|
7 |
|
|
1 |
|
| Legal and indemnification settlements |
— |
|
|
— |
|
|
122 |
|
|
— |
|
| Total adjustments to GAAP cost of sales |
160 |
|
|
178 |
|
|
857 |
|
|
656 |
|
| Adjustments to operating expenses: |
|
|
|
|
|
|
|
| Share-based compensation expense |
329 |
|
|
344 |
|
|
1,339 |
|
|
|
1,307 |
|
| Amortization of acquisition-related intangible assets |
33 |
|
|
58 |
|
|
221 |
|
|
259 |
|
| Acquisition-related/divestiture costs |
79 |
|
|
62 |
|
|
274 |
|
|
219 |
|
| Significant asset impairments and restructurings |
26 |
|
|
142 |
|
|
358 |
|
|
756 |
|
| Total adjustments to GAAP operating expenses |
467 |
|
|
606 |
|
|
2,192 |
|
|
2,541 |
|
| Total adjustments to GAAP income before provision for income
taxes |
627 |
|
|
784 |
|
|
3,049 |
|
|
3,197 |
|
| Income tax effect of non-GAAP adjustments |
(253 |
) |
|
(235 |
) |
|
(866 |
) |
|
(847 |
) |
| Significant tax matters (1) |
(851 |
) |
|
108 |
|
|
10,410 |
|
|
108 |
|
| Total adjustments to GAAP provision for income taxes |
(1,104 |
) |
|
(127 |
) |
|
9,544 |
|
|
(739 |
) |
| Non-GAAP net income |
$ |
3,326 |
|
|
$ |
3,081 |
|
|
$ |
12,703 |
|
|
$ |
12,067 |
|
| |
|
|
|
|
|
|
|
| Diluted net income per share: |
|
|
|
|
|
|
|
| GAAP |
$ |
0.81 |
|
|
$ |
0.48 |
|
|
$ |
0.02 |
|
|
$ |
1.90 |
|
| Non-GAAP |
$ |
0.70 |
|
|
$ |
0.61 |
|
|
$ |
2.60 |
|
|
$ |
2.39 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In the fourth quarter of fiscal 2018, Cisco recorded adjustments to the provisional amounts related to the U.S.
transition tax on accumulated earnings of foreign subsidiaries and re-measurement of net deferred tax assets. These adjustments
include an $863 million benefit to the U.S. transition tax provisional amount related to the U.S. taxation of deemed foreign
dividends after the date of enactment in the transition fiscal year.
For fiscal year 2018, Cisco recorded charges relating to significant tax matters that were excluded from non-GAAP net income.
$10.4 billion of these charges were provisional amounts related to the enactment of the Tax Cuts and Jobs Act comprised of $8.1
billion related to the U.S. transition tax, $1.2 billion related to foreign withholding tax and $1.1 billion related to the
re-measurement of net deferred tax assets. The amounts are provisional based on Securities and Exchange Commission Staff Accounting
Bulletin No. 118.
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, AND NET INCOME
(In millions, except percentages)
| |
Three Months Ended |
| |
July 28, 2018 |
| |
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income |
|
Y/Y |
| GAAP amount |
$ |
5,809 |
|
|
$ |
2,113 |
|
|
$ |
7,922 |
|
|
$ |
4,576 |
|
|
1 |
% |
|
$ |
3,346 |
|
|
10 |
% |
|
$ |
3,803 |
|
|
57 |
% |
| % of revenue |
60.2 |
% |
|
66.0 |
% |
|
61.7 |
% |
|
35.6 |
% |
|
|
|
26.1 |
% |
|
|
|
29.6 |
% |
|
|
| Adjustments to GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
24 |
|
|
35 |
|
|
59 |
|
|
329 |
|
|
|
|
388 |
|
|
|
|
388 |
|
|
|
| Amortization of acquisition-related intangible assets |
134 |
|
|
— |
|
|
134 |
|
|
33 |
|
|
|
|
167 |
|
|
|
|
167 |
|
|
|
| Supplier component remediation charge (adjustment), net |
(36 |
) |
|
— |
|
|
(36 |
) |
|
— |
|
|
|
|
(36 |
) |
|
|
|
(36 |
) |
|
|
| Acquisition/divestiture-related costs |
2 |
|
|
1 |
|
|
3 |
|
|
79 |
|
|
|
|
82 |
|
|
|
|
82 |
|
|
|
| Significant asset impairments and restructurings |
— |
|
|
— |
|
|
— |
|
|
26 |
|
|
|
|
26 |
|
|
|
|
26 |
|
|
|
| Income tax effect/significant tax matters (1) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
(1,104 |
) |
|
|
| Non-GAAP amount |
$ |
5,933 |
|
|
$ |
2,149 |
|
|
$ |
8,082 |
|
|
$ |
4,109 |
|
|
5 |
% |
|
$ |
3,973 |
|
|
4 |
% |
|
$ |
3,326 |
|
|
8 |
% |
| % of revenue |
61.5 |
% |
|
67.1 |
% |
|
62.9 |
% |
|
32.0 |
% |
|
|
|
30.9 |
% |
|
|
|
25.9 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes an $863 million benefit as related to the Tax Cuts and Jobs Act.
| |
|
| |
Three Months Ended |
| |
July 29, 2017 |
| |
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income |
|
Y/Y |
| GAAP amount |
$ |
5,441 |
|
|
$ |
2,105 |
|
|
$ |
7,546 |
|
|
$ |
4,512 |
|
|
(3 |
)% |
|
$ |
3,034 |
|
|
(8 |
)% |
|
$ |
2,424 |
|
|
(14 |
)% |
| % of revenue |
60.3 |
% |
|
67.8 |
% |
|
62.2 |
% |
|
37.2 |
% |
|
|
|
25.0 |
% |
|
|
|
20.0 |
% |
|
|
| Adjustments to GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
23 |
|
|
33 |
|
|
56 |
|
|
344 |
|
|
|
|
400 |
|
|
|
|
400 |
|
|
|
| Amortization of acquisition-related intangible assets |
140 |
|
|
— |
|
|
140 |
|
|
58 |
|
|
|
|
198 |
|
|
|
|
198 |
|
|
|
| Supplier component remediation charge (adjustment), net |
(18 |
) |
|
— |
|
|
(18 |
) |
|
— |
|
|
|
|
(18 |
) |
|
|
|
(18 |
) |
|
|
| Acquisition/divestiture-related costs |
— |
|
|
— |
|
|
— |
|
|
62 |
|
|
|
|
62 |
|
|
|
|
62 |
|
|
|
| Significant asset impairments and restructurings |
— |
|
|
— |
|
|
— |
|
|
142 |
|
|
|
|
142 |
|
|
|
|
142 |
|
|
|
| Income tax effect/significant tax matters |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
(127 |
) |
|
|
| Non-GAAP amount |
$ |
5,586 |
|
|
$ |
2,138 |
|
|
$ |
7,724 |
|
|
$ |
3,906 |
|
|
(7 |
)% |
|
$ |
3,818 |
|
|
(4 |
)% |
|
$ |
3,081 |
|
|
(3 |
)% |
| % of revenue |
61.9 |
% |
|
68.8 |
% |
|
63.7 |
% |
|
32.2 |
% |
|
|
|
31.5 |
% |
|
|
|
25.4 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, AND NET INCOME
(In millions, except percentages)
| |
Fiscal Year Ended |
| |
July 28, 2018 |
| |
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income |
|
Y/Y |
| GAAP amount |
$ |
22,282 |
|
|
$ |
8,324 |
|
|
$ |
30,606 |
|
|
$ |
18,297 |
|
|
— |
% |
|
$ |
12,309 |
|
|
3 |
% |
|
$ |
110 |
|
|
(99 |
)% |
| % of revenue |
60.7 |
% |
|
66.0 |
% |
|
62.0 |
% |
|
37.1 |
% |
|
|
|
25.0 |
% |
|
|
|
0.2 |
% |
|
|
| Adjustments to GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
94 |
|
|
133 |
|
|
227 |
|
|
1,339 |
|
|
|
|
1,566 |
|
|
|
|
1,566 |
|
|
|
| Amortization of acquisition-related intangible assets |
578 |
|
|
— |
|
|
578 |
|
|
221 |
|
|
|
|
799 |
|
|
|
|
799 |
|
|
|
| Supplier component remediation charge (adjustment), net |
(77 |
) |
|
— |
|
|
(77 |
) |
|
— |
|
|
|
|
(77 |
) |
|
|
|
(77 |
) |
|
|
| Legal and indemnification settlements |
122 |
|
|
— |
|
|
122 |
|
|
— |
|
|
|
|
122 |
|
|
|
|
122 |
|
|
|
| Acquisition/divestiture-related costs |
3 |
|
|
4 |
|
|
7 |
|
|
274 |
|
|
|
|
281 |
|
|
|
|
281 |
|
|
|
| Significant asset impairments and restructurings |
— |
|
|
— |
|
|
— |
|
|
358 |
|
|
|
|
358 |
|
|
|
|
358 |
|
|
|
| Income tax effect/significant tax matters (1) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
9,544 |
|
(1 |
) |
|
| Non-GAAP amount |
$ |
23,002 |
|
|
$ |
8,461 |
|
|
$ |
31,463 |
|
|
$ |
16,105 |
|
|
3 |
% |
|
$ |
15,358 |
|
|
1 |
% |
|
$ |
12,703 |
|
|
5 |
% |
| % of revenue |
62.7 |
% |
|
67.0 |
% |
|
63.8 |
% |
|
32.6 |
% |
|
|
|
31.1 |
% |
|
|
|
25.8 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes a $10.4 billion charge as related to the enactment of the Tax Cuts and Jobs Act.
| |
Fiscal Year Ended |
| |
July 29, 2017 |
| |
Product
Gross
Margin |
|
Service
Gross
Margin |
|
Total
Gross
Margin |
|
Operating
Expenses |
|
Y/Y |
|
Operating
Income |
|
Y/Y |
|
Net
Income |
|
Y/Y |
| GAAP amount |
$ |
22,006 |
|
|
$ |
8,218 |
|
|
$ |
30,224 |
|
|
$ |
18,251 |
|
|
— |
% |
|
$ |
11,973 |
|
|
(5 |
)% |
|
$ |
9,609 |
|
|
(11 |
)% |
| % of revenue |
61.6 |
% |
|
66.8 |
% |
|
63.0 |
% |
|
38.0 |
% |
|
|
|
24.9 |
% |
|
|
|
20.0 |
% |
|
|
| Adjustments to GAAP amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
85 |
|
|
134 |
|
|
219 |
|
|
1,307 |
|
|
|
|
1,526 |
|
|
|
|
1,526 |
|
|
|
| Amortization of acquisition-related intangible assets |
483 |
|
|
— |
|
|
483 |
|
|
259 |
|
|
|
|
742 |
|
|
|
|
742 |
|
|
|
| Supplier component remediation charge (adjustment), net |
(47 |
) |
|
— |
|
|
(47 |
) |
|
— |
|
|
|
|
(47 |
) |
|
|
|
(47 |
) |
|
|
| Acquisition/divestiture-related costs |
— |
|
|
1 |
|
|
1 |
|
|
219 |
|
|
|
|
220 |
|
|
|
|
220 |
|
|
|
| Significant asset impairments and restructurings |
— |
|
|
— |
|
|
— |
|
|
756 |
|
|
|
|
756 |
|
|
|
|
756 |
|
|
|
| Income tax effect/significant tax matters |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
(739 |
) |
|
|
| Non-GAAP amount |
$ |
22,527 |
|
|
$ |
8,353 |
|
|
$ |
30,880 |
|
|
$ |
15,710 |
|
|
(4 |
)% |
|
$ |
15,170 |
|
|
— |
% |
|
$ |
12,067 |
|
|
— |
% |
| % of revenue |
63.1 |
% |
|
67.9 |
% |
|
64.3 |
% |
|
32.7 |
% |
|
|
|
31.6 |
% |
|
|
|
25.1 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
EFFECTIVE TAX RATE
(In percentages)
| |
|
|
|
| |
Three Months Ended |
|
Fiscal Year Ended |
| |
July 28,
2018 |
|
July 29,
2017 |
|
July 28,
2018 |
|
July 29,
2017 |
| GAAP effective tax rate (1) |
(5.9)% |
|
|
23.8% |
|
|
99.2% |
|
|
21.8% |
|
| Total adjustments to GAAP provision for income taxes |
27.1% |
|
|
(1.5)% |
|
|
(78.2)% |
|
|
0.3% |
|
| Non-GAAP effective tax rate |
21.2% |
|
|
22.3% |
|
|
21.0% |
|
|
22.1% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
(1) The three months ended July 28, 2018 includes an $863 million benefit as related to the Tax Cuts and Jobs Act.
The fiscal year ended July 28, 2018 includes a $10.4 billion charge as related to the enactment of the Tax Cuts and Jobs Act.
GAAP TO NON-GAAP GUIDANCE FOR Q1 FY 2019
| |
|
|
|
|
|
|
|
|
| Q1 FY 2019 |
|
Gross Margin
Rate |
|
Operating Margin
Rate |
|
Tax Provision
Rate |
|
Earnings per
Share (4) |
| GAAP |
|
61.5% - 62.5% |
|
27.5% - 28.5% |
|
9% |
|
$0.69 - $0.74 |
| Estimated adjustments for: |
|
|
|
|
|
|
|
|
| Share-based compensation expense |
|
0.5 |
% |
|
3.0 |
% |
|
|
|
$0.04 - $0.05 |
| Amortization of purchased intangible assets and other
acquisition-related/divestiture costs |
|
1.0 |
% |
|
2.0 |
% |
|
|
|
$0.04 - $0.05 |
| Restructuring and other charges (1) |
|
— |
|
|
0.5 |
% |
|
|
|
$0.01 |
| Legal settlements (2) |
|
— |
|
|
(3.0 |
)% |
|
|
|
|
($0.07) |
| Significant tax matters (3) |
|
|
|
|
|
|
|
|
|
($0.03) - ($0.04) |
| Income tax effect of non-GAAP adjustments |
|
|
|
|
|
|
|
10% |
|
|
| Non-GAAP |
|
63% - 64% |
|
30% - 31% |
|
19% |
|
$0.70 - $0.72 |
| |
|
|
|
|
|
|
|
|
(1) In the third quarter of fiscal 2018, we initiated a restructuring plan in order to realign the organization and
enable further investment in key priority areas. The total pretax cash charges to the GAAP financial results is estimated to be
approximately $300 million consisting of severance and other one-time benefits, and other associated costs. During fiscal 2018, we
have recognized pretax charges of approximately $108 million to our GAAP financial results in relation to this restructuring plan.
We expect to recognize up to $70 million of these charges in the first quarter of fiscal 2019 with the remaining amount to be
recognized during the rest of the fiscal year.
(2) In the first quarter of fiscal 2019, we entered into a binding term sheet with Arista Networks, settling most of
the outstanding litigation between the companies, which will result in a payment to Cisco of $400 million. We will recognize this
benefit in our GAAP financial results in the first quarter of fiscal 2019. The remaining litigation will not have a financial
impact on Cisco.
(3) We will recognize net indirect benefits to our GAAP provision for income taxes related to intercompany
adjustments upon adoption of ASC 606.
(4) Estimated adjustments to GAAP earnings per share are shown after income tax effects.
The guidance includes our SPVSS business that we recently agreed to sell and excludes the Duo Security acquisition since both
transactions have not closed. We expect the SPVSS transaction to close in the first half of fiscal 2019 subject to customary
closing conditions and regulatory approvals.
At the beginning of fiscal 2019, we 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
estimate to be a benefit of about 1% year over year.
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 execution on our strategy, the ability to grow across our portfolio with our pipeline of innovation, continued
customer adoption of our innovations and continued solid demand for our products and solutions, continued progress in transforming
our business model and the ongoing value customers see in our software and subscription offerings, execution across our customer
segments and geographies, continued broad-based strength across our portfolio, continued strong execution and momentum, and our
ability to deliver profitable growth and drive long-term shareholder value) and the future financial performance of Cisco
(including the guidance for Q1 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; man-made problems such as cyber-attacks, data protection breaches, computer viruses or
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 May 22, 2018 and September 7, 2017, 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 28, 2018 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, 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, significant 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.
About Cisco
Cisco (NASDAQ: CSCO) is the worldwide technology leader that has been making the Internet work since 1984. Our people, products
and partners help society securely connect and seize tomorrow's digital opportunity today. Discover more at thenetwork.cisco.com
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