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CISCO REPORTS THIRD QUARTER EARNINGS
Das Logo von Cisco Systems vor der Firmenzentrale in San José, Kalifornien.
© raisbeckfoto / iStock Unreleased / Getty Images Plus / Getty Images
PR Newswire
SAN JOSE, Calif., May 15, 2024
SAN JOSE, Calif., May 15, 2024 /PRNewswire/ --
News Summary:
- $12.7 billion in revenue, down 13% year over year, in line with expectations and reflects our customers' continued implementation of products on-hand
- Strong profitability with GAAP gross margin of 65.1% and non-GAAP gross margin of 68.3%
- Transformed business model, further enhanced by the Splunk acquisition:
- Total subscription revenue of $6.9 billion including Splunk, representing 54% of total revenue
- Total annualized recurring revenue (ARR) at $29.2 billion including $4.2 billion from Splunk, up 22% year over year, and product ARR at $15.5 billion, up 44% year over year
- Total subscription revenue of $6.9 billion including Splunk, representing 54% of total revenue
- Gary Steele, former Splunk CEO, named president of Go-to-Market, effective immediately
- Q3 FY 2024 Results:
- Revenue: $12.7 billion
- Decrease of 13% year over year
- Splunk contributed $413 million in revenue
- Decrease of 13% year over year
- Earnings per Share: GAAP: $0.46; Non-GAAP: $0.88
- GAAP EPS decreased 41% year over year, which includes a negative $0.09 impact from the Splunk acquisition
- Non-GAAP EPS decreased 12% year over year, which includes a negative $0.01 impact from the Splunk acquisition
- GAAP EPS decreased 41% year over year, which includes a negative $0.09 impact from the Splunk acquisition
- Revenue: $12.7 billion
- Q4 FY 2024 Guidance:
- Revenue: $13.4 billion to $13.6 billion
- Earnings per Share: GAAP: $0.46 to $0.51; Non-GAAP: $0.84 to $0.86
- Revenue: $13.4 billion to $13.6 billion
- FY 2024 Guidance:
- Revenue: $53.6 billion to $53.8 billion
- Earnings per Share: GAAP: $2.46 to $2.51; Non-GAAP: $3.69 to $3.71
- Revenue: $53.6 billion to $53.8 billion
Cisco today reported third quarter results for the period ended April 27, 2024. Cisco reported third quarter revenue of $12.7 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.46 per share, and non-GAAP net income of $3.6 billion or $0.88 per share.
"We delivered a solid Q3 performance in what remains a dynamic environment" said Chuck Robbins, chair and CEO of Cisco. "Our unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era."
"Revenue, gross margin and non-GAAP EPS in Q3 were at the high end or above our guidance range, both including and excluding Splunk, resulting in continued operating leverage," said Scott Herren, CFO of Cisco. "Customers are consuming the equipment shipped over the last few quarters in line with our expectations and we are seeing stabilization of demand as a result. The addition of Splunk to our product line will be a catalyst for further growth."
Gary Steele Named President of Go-to-Market
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Cisco has named Gary Steele as President of Go-to-Market, effective immediately. Steele is well known for his operational excellence, and in this new role, he will work closely with Robbins to set and execute against Cisco's strategic plans and goals. He will continue to lead the Splunk team through the integration process to ensure a seamless integration into Cisco.
Cisco also announced that Jeff Sharritts, Cisco's Chief Customer and Partner Officer, will depart Cisco after a successful 24-year career at the company. Sharritts will remain with Cisco until mid-July to ensure a seamless transition.
| GAAP Results | ||||||
| | ||||||
| | | Q3 FY 2024 | | Q3 FY 2023 | | Vs. Q3 FY 2023 |
| Revenue | | $ 12.7 billion | | $ 14.6 billion | | (13) % |
| Net Income | | $ 1.9 billion | | $ 3.2 billion | | (41) % |
| Diluted Earnings per Share (EPS) | | $ 0.46 | | $ 0.78 | | (41) % |
The acquisition of Splunk, including financing costs, had a negative impact of $0.09 to GAAP EPS, for the third quarter of fiscal 2024.
| Non-GAAP Results | ||||||
| | ||||||
| | | Q3 FY 2024 | | Q3 FY 2023 | | Vs. Q3 FY 2023 |
| Net Income | | $ 3.6 billion | | $ 4.1 billion | | (14) % |
| EPS | | $ 0.88 | | $ 1.00 | | (12) % |
The acquisition of Splunk, including financing costs, had a negative impact of $0.01 to Non-GAAP EPS, for the third quarter of 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 July 24, 2024, to all stockholders of record as of the close of business on July 5, 2024. Future dividends will be subject to Board approval.
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q3 FY 2024 Highlights
Revenue -- Total revenue was $12.7 billion, down 13%, with product revenue down 19% and service revenue up 6%. Cisco completed the acquisition of Splunk Inc. ("Splunk") in the third quarter of fiscal 2024. Splunk contributed $413 million of total revenue for the third quarter of fiscal 2024.
Revenue by geographic segment was: Americas down 15%, EMEA down 9%, and APJC down 12%. Product revenue performance reflected growth in Security up 36% and Observability up 27%. Networking was down 27%. Product revenue in Collaboration was flat. Security and Observability, excluding Splunk, grew 3% and 14%, respectively, in the third quarter of fiscal 2024.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 65.1%, 63.5%, and 69.2%, respectively, as compared with 63.4%, 62.7%, and 65.4%, respectively, in the third quarter of fiscal 2023.
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 68.3%, 66.9%, and 71.6%, respectively, as compared with 65.2%, 64.5%, and 67.3%, respectively, in the third quarter of fiscal 2023.
Total gross margins by geographic segment were: 67.9% for the Americas, 69.6% for EMEA and 67.4% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $6.1 billion, up 15%, and were 47.9% of revenue. Non-GAAP operating expenses were $4.3 billion, down 5%, and were 34.0% of revenue.
Operating Income -- GAAP operating income was $2.2 billion, down 44%, with GAAP operating margin of 17.2%. Non-GAAP operating income was $4.3 billion, down 12%, with non-GAAP operating margin at 34.2%.
Provision for Income Taxes -- The GAAP tax provision rate was 15.6%. The non-GAAP tax provision rate was 19.0%.
Net Income and EPS -- On a GAAP basis, net income was $1.9 billion and EPS was $0.46, each a decrease of 41%. On a non-GAAP basis, net income was $3.6 billion, a decrease of 14%, and EPS was $0.88, a decrease of 12%.
Cash Flow from Operating Activities -- $4.0 billion for the third quarter of fiscal 2024, a decrease of 24%, compared with $5.2 billion for the third quarter of fiscal 2023.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $18.8 billion at the end of the third quarter of fiscal 2024, compared with $26.1 billion at the end of fiscal 2023.
Remaining Performance Obligations (RPO) -- $38.8 billion, up 21% in total, with 52% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 29% and service RPO were up 14%.
Deferred Revenue -- $27.5 billion, up 13% in total, with deferred product revenue up 18%. Deferred service revenue was up 9%.
Capital Allocation -- In the third quarter of fiscal 2024, we returned $2.9 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 26 million shares of common stock under our stock repurchase program at an average price of $49.22 per share for an aggregate purchase price of $1.3 billion. The remaining authorized amount for stock repurchases under the program is $7.2 billion with no termination date.
Acquisitions
In the third quarter of fiscal 2024, we closed the following acquisitions:
- Splunk Inc., a public cybersecurity and observability company
- Isovalent, Inc., a privately held cloud native solutions company
Guidance
Cisco estimates the following results for the fourth quarter of fiscal 2024:
| Q4 FY 2024 | | |
| Revenue | | $13.4 billion - $13.6 billion |
| Non-GAAP gross margin rate | | 66.5% – 67.5% |
| Non-GAAP operating margin rate | | 31.5% – 32.5% |
| Non-GAAP EPS | | $0.84 – $0.86 |
Our Q4 FY 2024 guidance includes $950 million to $1 billion in revenue from Splunk and a negative impact to non-GAAP EPS of approximately ($0.03) as the interest impact from financing the acquisition more than offsets the operating benefit.
Cisco estimates that GAAP EPS will be $0.46 to $0.51 for the fourth quarter of fiscal 2024.
Cisco estimates the following results for fiscal 2024:
| FY 2024 | | |
| Revenue | | $53.6 billion - $53.8 billion |
| Non-GAAP EPS | | $3.69 – $3.71 |
Cisco estimates that GAAP EPS will be $2.46 to $2.51 for fiscal 2024.
Our Q4 FY 2024 guidance assumes an effective tax provision rate of approximately 18% for GAAP and non-GAAP results. Our FY 2024 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:
- Q3 fiscal year 2024 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, May 15, 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, May 15, 2024 to 4:00 p.m. Pacific Time, May 21, 2024 at 1-800-391-9851 (United States) or 1-203-369-3268 (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, May 15, 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) | |||||||
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| | April 27, | | April 29, | | April 27, | | April 29, |
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