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Cisco Reports $13.4B Q4 Revenue Up 6% YoY

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8/14/2019
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  • Q4 Results:
    • Revenue: $13.4 billion
      • Growth of 6% year over year
    • Earnings per Share: GAAP: $0.51; Non-GAAP: $0.83
      • Non-GAAP EPS increased 19% year over year
  • FY 2019 Results:
    • Revenue: $51.7 billion
      • Growth of 7% year over year
    • Earnings per Share:GAAP: $2.61; Non-GAAP: $3.10
      • Non-GAAP EPS increased 20% year over year
  • Q1 Guidance:
    • Revenue: 0% to 2% growth year over year
    • Earnings per Share: GAAP: $0.64 to $0.69; Non-GAAP: $0.80 to $0.82 Normalized to exclude the divested SPVSS business

SAN JOSE, Calif. – Cisco today reported fourth quarter and fiscal year results for the period ended July 27, 2019. Cisco reported fourth quarter revenue of $13.4 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.51 per share, and non-GAAP net income of $3.6 billion or $0.83 per share.

As previously disclosed, Cisco completed the divestiture of the Service Provider Video Software Solutions (SPVSS) business in the second quarter of fiscal 2019 on October 28, 2018. Revenue, non-GAAP financial information, and Q1 FY 2020 guidance have been normalized to exclude the SPVSS business from prior periods for comparative purposes.

"Our Q4 results marked a strong end to a great year. We are executing well in a dynamic environment, delivering tremendous innovation across our portfolio and extending our market leadership," said Chuck Robbins, chairman and CEO of Cisco. "We are committed to providing our customers ongoing value through differentiated solutions, and we are well positioned to take advantage of the long-term growth opportunities ahead."

"We are pleased with our solid execution and performance in Q4, delivering revenue growth of 6%, non-GAAP EPS growth of 19%, and strong margins," said Kelly Kramer, CFO of Cisco. "We continue to transform our business model with software subscriptions now at 70% of our software revenue. The returns on our investments in key strategic areas position Cisco for long-term growth and shareholder value."

Financial Summary

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

All revenue, non-GAAP, and geographic financial information in the "Q4 FY 2019 Highlights" and "FY 2019 Highlights" sections are presented excluding the SPVSS business for all periods as it was divested during the second quarter, on October 28, 2018.

Q4 FY 2019 Highlights

Revenue – Total revenue was $13.4 billion, up 6%, with product revenue up 7% and service revenue up 4%. Revenue by geographic segment was: Americas up 9%, EMEA up 7%, and APJC down 4%. Product revenue performance was broad based with growth in Security, up 14%, Applications, up 11%, and Infrastructure Platforms, up 6%.

Gross Margin – On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.9%, 62.9%, and 66.8%, respectively, as compared with 61.7%, 60.2%, and 66.0%, respectively, in the fourth quarter of 2018.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.5%, 64.7%, and 67.9%, respectively, as compared with 63.2%, 61.9%, and 67.2%, respectively, in the fourth quarter of 2018.

Total gross margins by geographic segment were: 66.8% for the Americas, 65.2% for EMEA and 60.8% for APJC.

Operating Expenses –On a GAAP basis, operating expenses were $4.9 billion, up 7%. Non-GAAP operating expenses were $4.4 billion, up 9%, and were 32.8% of revenue.

Operating Income –GAAP operating income was $3.7 billion, up 10%, with GAAP operating margin of 27.5%. Non-GAAP operating income was $4.4 billion, up 11%, with non-GAAP operating margin at 32.6%.

Provision for Income Taxes –The GAAP tax provision rate was 40.4%, which includes a $0.9 billion charge related to the Tax Cuts and Jobs Act. The non-GAAP tax provision rate was 18.8%.

Net Income and EPS –On a GAAP basis, net income was $2.2 billion and EPS was $0.51. On a non-GAAP basis, net income was $3.6 billion, an increase of 9%, and EPS was $0.83, an increase of 19%.

Cash Flow from Operating Activities –$3.9 billion for the fourth quarter of fiscal 2019, a decrease of 4% compared with $4.1 billion for the fourth quarter of fiscal 2018.

FY 2019 Highlights

Revenue – Total revenue was $51.7 billion, an increase of 7%.

Net Income and EPS – On a GAAP basis, net income was $11.6 billion and EPS was $2.61. On a non-GAAP basis, net income was $13.8 billion, up 9% compared to fiscal 2018, and EPS was $3.10, an increase of 20%.

Cash Flow from Operating Activities –$15.8 billion for fiscal 2019 compared with $13.7 billion for fiscal 2018, an increase of 16%. Operating cash flow for fiscal 2019 and 2018 include payments of $0.8 billion and $1.4 billion, respectively, related to the Tax Cuts and Jobs Act. Fiscal 2019 also includes the receipt of $0.4 billion related to a litigation settlement with Arista Networks. Operating cash flow increased 8%, normalized for these items.

Guidance for Q1 FY 2020 Cisco expects to achieve the following results for the first quarter of fiscal 2020 (normalized to exclude the divested SPVSS business):

Revenue for the divested SPVSS business for the first quarter of fiscal 2019 was $168 million.

Cisco estimates that GAAP EPS will be $0.64 to $0.69 in the first quarter of fiscal 2020.

Cisco Systems Inc. (Nasdaq: CSCO)

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