Q1 fy18 earnings slides no guidance
- 1. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Q1 Fiscal Year 2018 Conference Call November 15, 2017
- 2. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 2 Forward-Looking Statements This presentation contains projections and other forward-looking statements regarding future events or the future financial performance of Cisco, including future operating results. These projections and statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements. Please see Cisco’s filings with the SEC, including its most recent filings on Forms 10-K and 10-Q, for a discussion of important risk factors that could cause actual events or results to differ materially from those in the projections or other forward-looking statements. GAAP Reconciliation During this presentation references to financial measures of Cisco will include references to non-GAAP financial measures. Cisco provides a reconciliation between GAAP and non-GAAP financial information on our website at www.cisco.com under “Financial Info” in the “Investor Relations” section. http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx
- 3. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Business Momentum & Key Trends
- 4. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 4 Q1 FY 2018 Highlights • Solid quarter with revenue of $12.1B and non-GAAP EPS of $0.61 • All three geographic regions returned to order growth during Q1 • Working closely with Google to jointly develop a new hybrid cloud solution • Catalyst 9000 switching platform adopted by more than 1,100 customers in just over three months • Differentiated strategy drove 8% y/y revenue growth in Security; and 42% y/y deferred revenue growth in Security • Executed well against our strategic priorities…well positioned to capture long-term growth opportunities ahead
- 5. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Financial Overview
- 6. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 6 Product Category $M Y/Y % Change Infrastructure Platforms $6,970 (4%) Applications 1,203 6% Security 585 8% Other Products 296 (16%) Services 3,082 1% Total Cisco $12,136 (2%) Q1 FY 2018 Revenue Highlights Effective Q1 FY 2018, we began reporting our revenue in the following categories: Infrastructure Platforms, Applications, Security, Other Products and Services. This change better aligns our product categories with our evolving business model. The reclassified product category revenue by quarter for fiscal 2015 through fiscal 2017 as well as other information is available on Cisco's Investor Relations website at https://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx.
- 7. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 7 32% +3 pts y/y Q1 FY 2018 Business Transition Highlights Recurring Revenue as a % of Total Revenue Deferred Product Revenue from Recurring Software & Subscriptions Subscriptions as a % of Software Revenue 52%$5.2B +37% y/y
- 8. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 8 Q1 FY 2018 Product Orders Geographic Region Y/Y % Change Americas 1% EMEA 2% APJC 1% Customer Segment Y/Y % Change Enterprise (5%) Public Sector 3% Commercial 12% Service Provider (6%) Total Cisco: 1% Y/Y
- 9. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 9 Q1 FY 2018 Geographic Revenue and Total Gross Margin Revenue Total Gross Margin % $M (except percentages) Q1 FY’17 Q4 FY’17 Q1 FY’18 Q1 FY’17 Q4 FY’17 Q1 FY’18 Americas $7,443 $7,202 $7,350 64.9% 64.0% 64.2% EMEA 3,013 2,927 2,909 66.8% 63.8% 63.2% APJC 1,896 2,004 1,877 63.5% 62.1% 62.1% Geographic Total $12,352 $12,133 $12,136 65.2% 63.7% 63.7% Certain reclassifications have been made to the amounts for prior periods in order to conform to the current period’s presentation. Historical revenue and gross margin by segment is available on our website at http://investor.cisco.com under “Financial Info” in the “Investor Relations” section.
- 10. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 10 Q1 FY 2018 Non-GAAP Income Statement Highlights $M (except per-share amounts and percentages) Q1 FY 2017 Q4 FY 2017 Q1 FY 2018 Revenue $12,352 $12,133 $12,136 Year/Year Change Product Service (3%) $9,302 $3,050 (4%) $9,027 $3,106 (2%) $9,054 $3,082 Gross Margin 65.2% 63.7% 63.7% Product Gross Margin Service Gross Margin 64.8% 66.2% 61.9% 68.8% 63.0% 65.6% Operating Expenses $4,150 $3,906 $4,040 OPEX (% of Revenue) Operating Income (% of Revenue) 33.6% 31.6% 32.2% 31.5% 33.3% 30.4% Net Income $3,101 $3,081 $3,036 Year/Year Change 3% (3%) (2%) EPS (diluted) $0.61 $0.61 $0.61 Year/Year Change 3% (3%) 0%
- 11. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 11 Q1 FY 2018 GAAP Income Statement Highlights $M (except per-share amounts and percentages) Q1 FY 2017 Q4 FY 2017 Q1 FY 2018 Revenue $12,352 $12,133 $12,136 Year/Year Change Product Service (3%) $9,302 $3,050 (4%) $9,027 $3,106 (2%) $9,054 $3,082 Gross Margin 63.8% 62.2% 61.2% Product Gross Margin Service Gross Margin 63.4% 65.1% 60.3% 67.8% 60.1% 64.5% Operating Expenses $5,007 $4,512 $4,671 OPEX (% of Revenue) Operating Income (% of Revenue) 40.5% 23.3% 37.2% 25.0% 38.5% 22.7% Net Income $2,322 $2,424 $2,394 Year/Year Change (4%) (14%) 3% EPS (diluted) $0.46 $0.48 $0.48 Year/Year Change (4%) (14%) 4%
- 12. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 12 $M (except non-GAAP inventory turns) Q1 FY 2017 Q4 FY 2017 Q1 FY 2018 Cash, Cash Equivalents and Investments $70,968 $70,492 $71,588 Operating Cash Flow $2,730 $4,001 $3,080 Accounts Receivable $4,805 $5,146 $4,206 Inventory $1,176 $1,616 $1,693 Non-GAAP Inventory Turns 14.4 11.8 10.7 Inventory Purchase Commitments $3,920 $4,640 $4,205 Deferred Revenue $16,951 $18,494 $18,565 Service Deferred Revenue $10,424 $11,302 $10,991 Product Deferred Revenue Deferred revenue related to recurring software and subscription offers $3,801 $4,971 $5,213 Other product deferred revenue $2,726 $2,221 $2,361 Total Product Deferred Revenue $6,527 $7,192 $7,574 Q1 FY 2018 Key Financial Measures
- 13. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 13 Capital Allocation $M Q1 FY 2017 Q2 FY 2017 Q3 FY 2017 Q4 FY 2017 Q1 FY 2018 Share Repurchases $1,001 $1,001 $503 $1,201 $1,620 Dividends Paid 1,308 1,304 1,451 1,448 1,436 Total $2,309 $2,305 $1,954 $2,649 $3,056 Q1 FY 2017 Q2 FY 2017 Q3 FY 2017 Q4 FY 2017 Q1 FY 2018 Dividends Per Share $0.26 $0.26 $0.29 $0.29 $0.29 Share Repurchase Program* Amount Purchased ($M) Number of Shares (M) Avg. Price Per Share Q1 FY 2018 Purchases $1,620 51 $31.80 * Approximately $10.1B remaining authorized funds in repurchase program as of the end of Q1 FY 2018
- 14. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Q&A
- 15. © 2017 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 15 FORWARD-LOOKING STATEMENTS These presentation slides and the related conference call 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 continued execution on our strategy, the continued criticality of the network to business success, our ability to deliver more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business, and our ability to continue to execute well and return value to our shareholders) and the future financial performance of Cisco 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 report on Form 10-K filed on September 7, 2017. The financial information contained in these presentation slides and the related conference call should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent report on Form 10-K as it may be amended from time to time. Cisco’s results of operations for the three months ended October 28, 2017 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in these presentation slides and the related conference call 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 these presentation slides and the related conference call.