Cisco Reports Third Quarter Earnings
4:05 PM ET 5/13/20 | PR Newswire
| Related Quotes | | |  | | 4:00 PM ET 5/13/20 | | Symbol | Last | % Chg |
CSCO
| 41.95 | -2.94% | | Real time quote. | | |
-- Q3 Results:
-- Revenue: $12.0 billion
-- Decrease of (8)% year over year
-- Earnings per Share: GAAP: $0.65; Non-GAAP: $0.79
-- GAAP EPS decreased (6)% year over year
-- Non-GAAP EPS increased 1% year over year
-- Q4 Guidance:
-- Revenue: (8.5)% to (11.5)% decline year over year
-- Earnings per Share: GAAP: $0.57 to $0.62; Non-GAAP: $0.72 to $0.74
SAN JOSE, Calif., May 13, 2020 /PRNewswire/ -- Cisco today reported third quarter results for the period ended April 25, 2020. Cisco reported third quarter revenue of $12.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.8 billion or $0.65 per share, and non-GAAP net income of $3.4 billion or $0.79 per share.
"During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future," said Chuck Robbins, chairman and CEO of Cisco. "The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before. We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations."
GAAP Results
Q3 FY 2020 Q3 FY 2019 Vs. Q3 FY 2019
Revenue $ 12.0 billion $ 13.0 billion (8)%
Net Income $ 2.8 billion $ 3.0 billion (9)%
Diluted Earnings
per Share
(EPS) $ 0.65 $ 0.69 (6)%
Non-GAAP Results
Q3 FY 2020 Q3 FY 2019 Vs. Q3 FY 2019
Net Income $ 3.4 billion $ 3.5 billion (2)%
EPS $ 0.79 $ 0.78 1%
Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."
"We executed well in Q3 in a very challenging environment, delivering strong margins and non-GAAP EPS growth," said Kelly Kramer, CFO of Cisco. "The resiliency that we have been building into our business model is paying off, with software subscriptions now at 74% of our software revenue, up 9 points year over year. We are focused on driving long-term profitable growth while delivering shareholder value."
COVID-19 Pandemic Response
We have been focused on helping our employees, customers, partners and communities.
Employees
-- 95% of our global workforce working from home.
-- Seamless transition to work from home with a long-standing flexible work
policy, and we build the technologies that allow organizations to stay
connected, secure and productive.
-- For the 5% who must be in the office to perform their roles, we are
focused on their health and safety, and are taking all of the necessary
precautions.
Customer and Partners
-- Introduced a variety of free offers and trials for our Webex and security
technologies as they dramatically shifted entire workforces to be remote.
-- Announced $2.5 billion in financing with a new Business Resiliency
Program through Cisco Capital to offer financial flexibility and support
their business continuity. This will help customers and partners access
the technology they need now, invest for recovery, and defer most of the
payments until early 2021.
Communities
-- Committed nearly $300 million to date to support both global and local
pandemic response efforts.
-- Providing technology and financial support for non-profits, first
responders, and governments.
-- Donating personal protective equipment to hospital workers including N95
masks and face shields 3D-printed by Cisco volunteers around the world.
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q3 FY 2020 Highlights
Revenue -- Total revenue was $12.0 billion, down 8%, with product revenue down 12% and service revenue up 5%. Revenue by geographic segment was: Americas down 8%, EMEA down 7%, and APJC down 9%. Product revenue was led by growth in Security, up 6%. Infrastructure Platforms was down 15% and Applications was down 5%.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 64.9%, 63.7%, and 67.7%, respectively, as compared with 63.1%, 62.0%, and 66.3%, respectively, in the third quarter of fiscal 2019.
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 66.6%, 65.8%, and 68.9%, respectively, as compared with 64.6%, 63.7%, and 67.3%, respectively, in the third quarter of fiscal 2019.
Total gross margins by geographic segment were: 67.8% for the Americas, 65.7% for EMEA and 63.5% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $4.4 billion, down 6%, and were 36.4% of revenue. Non-GAAP operating expenses were $3.8 billion, down 9%, and were 31.8% of revenue.
Operating Income -- GAAP operating income was $3.4 billion, down 3%, with GAAP operating margin of 28.5%. Non-GAAP operating income was flat at $4.2 billion, with non-GAAP operating margin at 34.9%.
Provision for Income Taxes -- The GAAP tax provision rate was 19.4%. The non-GAAP tax provision rate was 20.0%.
Net Income and EPS -- On a GAAP basis, net income was $2.8 billion, a decrease of 9%, and EPS was $0.65, a decrease of 6%. On a non-GAAP basis, net income was $3.4 billion, a decrease of 2%, and EPS was $0.79, an increase of 1%.
Cash Flow from Operating Activities -- $4.2 billion for the third quarter of fiscal 2020, a decrease of 2% compared with $4.3 billion for the third quarter of fiscal 2019.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $28.6 billion at the end of the third quarter of fiscal 2020, compared with $33.4 billion at the end of fiscal 2019.
Deferred Revenue -- $18.6 billion, up 7% in total, with deferred product revenue up 17%. Deferred service revenue was up 1%.
Remaining Performance Obligations -- $25.5 billion at the end of the third quarter of fiscal 2020, up 11%.
Capital Allocation -- In the third quarter of fiscal 2020, we returned $2.5 billion to shareholders through share buybacks and dividends. We declared and paid a cash dividend of $0.36 per common share, or $1.5 billion, and repurchased approximately 25 million shares of common stock under our stock repurchase program at an average price of $39.71 per share for an aggregate purchase price of $981 million. The remaining authorized amount for stock repurchases under the program is $10.8 billion with no termination date.
Acquisitions
In the third quarter of fiscal 2020, we closed the acquisition of Exablaze, a privately held designer and manufacturer of advanced network devices aimed at reducing latency and improving network performance.
Guidance for Q4 FY 2020
Cisco expects to achieve the following results for the fourth quarter of fiscal 2020:
Q4 FY 2020
Revenue (8.5)% - (11.5)% decline Y/Y
Non-GAAP gross margin rate 64% - 65%
Non-GAAP operating margin rate 31.5% - 32.5%
Non-GAAP tax provision rate 20%
Non-GAAP EPS $0.72 - $0.74
Cisco estimates that GAAP EPS will be $0.57 to $0.62 in the fourth quarter of fiscal 2020.
A reconciliation between the Guidance for Q4 FY 2020 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAP Guidance for Q4 FY 2020" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."
Editor's Notes:
-- Q3 fiscal year 2020 conference call to discuss Cisco's results along with
its guidance will be held on Wednesday, May 13, 2020 at 1:30 p.m. Pacific
Time. Conference call number is 1-888-848-6507 (United States) or
1-212-519-0847 (international).
-- Conference call replay will be available from 4:00 p.m. Pacific Time, May
13, 2020 to 4:00 p.m. Pacific Time, May 20, 2020 at 1-800-391-9847
(United States) or 1-402-220-3093 (international). The replay will also
be available via webcast on the Cisco Investor Relations website at
investor.cisco.com.
-- Additional information regarding Cisco's financials, as well as a webcast
of the conference call with visuals designed to guide participants
through the call, will be available at 1:30 p.m. Pacific Time, May 13,
2020. 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
investor.cisco.com.
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
April 25, April 27, April 25, April 27,
2020 2019 2020 2019
REVENUE:
Product $ 8,597 $ 9,722 $ 27,146 $ 28,885
Service 3,386 3,236 10,001 9,591
Total revenue 11,983 12,958 37,147 38,476
COST OF SALES:
Product 3,120 3,693 9,770 11,106
Service 1,092 1,092 3,378 3,278
Total cost of
sales 4,212 4,785 13,148 14,384
GROSS MARGIN 7,771 8,173 23,999 24,092
OPERATING
EXPENSES:
Research and
development 1,546 1,659 4,782 4,824
Sales and
marketing 2,192 2,403 6,951 7,084
General and
administrative 457 541 1,431 1,261
Amortization of
purchased
intangible
assets 34 39 108 112 |
