Cisco Reports Fourth Quarter and Fiscal Year 2017 Earnings

-- SAN JOSE, CA -- Aug 16, 2017 - Cisco (NASDAQ: CSCO)

Q4 Revenue: $12.1 billion

Decrease of (4)% year over year

Recurring revenue was 31% of total revenue, up 4 pts year over year

Q4 Earnings per Share: $0.48 GAAP; $0.61 non-GAAP

FY 2017 Earnings per Share: $1.90 GAAP; $2.39 non-GAAP

Q1 FY 2018 Outlook:

Revenue: (3)% to (1)% decline year over year

Earnings per Share: GAAP: $0.48 to $0.53; Non-GAAP: $0.59 to $0.61

Cisco today reported fourth quarter and fiscal year results for the period ended July 29, 2017. Cisco reported fourth quarter revenue of $12.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.4 billion or $0.48 per share, and non-GAAP net income of $3.1 billion or $0.61 per share.

Earnings History

Cisco Reports Q3FY17 Earnings

We had another strong quarter and a transformative year. We made tremendous progress transitioning our business to more software and recurring revenue and delivered on our commitment to accelerate innovation in our core and across the portfolio, said Chuck Robbins, CEO, Cisco. The network has never been more critical to business success and we are building the network of the future.

Q4 GAAP Results

Q4 FY 2017 Q4 FY 2016 Vs. Q4 FY 2016

Revenue $ 12.1 billion $ 12.6 billion (4)%

Net Income $ 2.4 billion $ 2.8 billion (14)%

Diluted Earnings per Share (EPS) $ 0.48 $ 0.56 (14)%

Q4 Non-GAAP Results

Q4 FY 2017 Q4 FY 2016 Vs. Q4 FY 2016

Net Income $ 3.1 billion $ 3.2 billion (3)%

EPS $ 0.61 $ 0.63 (3)%

Fiscal Year GAAP Results

FY 2017 FY 2016 Vs. FY 2016

Revenue (excluding SP Video CPE Business for all periods) $ 48.0 billion $ 48.7 billion (2)%

Revenue (including SP Video CPE Business for all periods) $ 48.0 billion $ 49.2 billion (3)%

Net Income $ 9.6 billion $ 10.7 billion (11)%

EPS $ 1.90 $ 2.11 (10)%

Fiscal Year Non-GAAP Results

FY 2017 FY 2016 Vs. FY 2016

Net Income (excluding SP Video CPE Business for all periods) $ 12.1 billion $ 12.0 billion --%

EPS (excluding SP Video CPE Business for all periods) $ 2.39 $ 2.36 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 delivered another solid quarter and fiscal year. We executed well, drove solid profitability, strong cash flow, and we continued to deliver on our strategic growth priorities, said Kelly Kramer, CFO, Cisco. We will continue to focus on making the right bets to offer the most innovative technologies to our customers in the way they want to consume it and deliver value to our shareholders.

Financial Summary

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

Q4 FY 2017 Highlights

Revenue -- Total revenue was $12.1 billion, down 4%, with product revenue down 5% and service revenue up 1%. 31% of total revenue was from recurring offers, up 4 percentage points from the fourth quarter of fiscal 2016. Revenue by geographic segment was: Americas down 6%, EMEA down 6%, and APJC up 6%. Product revenue performance was led by Wireless and Security which increased 5% and 3%, respectively. NGN Routing and Switching revenue each decreased 9%. Service Provider Video, Data Center, and Collaboration revenue decreased 10%, 4%, and 3%, respectively.

Gross Margin -- On a GAAP basis, total gross margin and product gross margin were 62.2% and 60.3%, respectively. The decrease in the product gross margin compared with 62.2% in the fourth quarter of fiscal 2016 was primarily due to pricing, partially offset by productivity improvements and to a lesser extent product mix.

Non-GAAP total gross margin and product gross margin were 63.7% and 61.9%, respectively. The decrease in non-GAAP product gross margin compared with 63.9% in the fourth quarter of fiscal 2016 was also primarily due to pricing, partially offset by continued productivity improvements and to a lesser extent product mix.

GAAP service gross margin was 67.8% and non-GAAP service gross margin was 68.8%.

Total gross margins by geographic segment were: 64.0% for the Americas, 63.8% for EMEA and 62.1% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.5 billion, down 3%. Non-GAAP operating expenses were $3.9 billion, down 7%, and were 32.2% of revenue.

Operating Income -- GAAP operating income was $3.0 billion, down 8%, with GAAP operating margin of 25.0%. Non-GAAP operating income was $3.8 billion, down 4%, with non-GAAP operating margin at 31.5%.

Provision for Income Taxes -- The GAAP tax provision rate was 23.8%. The non-GAAP tax provision rate was 22.3%.

Net Income and EPS -- On a GAAP basis, net income was $2.4 billion and EPS was $0.48. On a non-GAAP basis, net income was $3.1 billion, a decrease of 3%, and EPS was $0.61, a decrease of 3%.

Cash Flow from Operating Activities -- was $4.0 billion for the fourth quarter of fiscal 2017, an increase of 5% compared with $3.8 billion for the fourth quarter of fiscal 2016.

FY 2017 Highlights

The revenue and non-GAAP information in this section is presented excluding the SP Video CPE Business for fiscal 2016 as it was divested during the second quarter of fiscal 2016 on November 20, 2015.

Revenue -- Total revenue was $48.0 billion, a decrease of 2%.

Net Income and EPS -- On a GAAP basis, net income was $9.6 billion and EPS was $1.90. On a non-GAAP basis, net income was $12.1 billion, flat compared to fiscal 2016, and EPS was $2.39, an increase of 1%.

Cash Flow from Operating Activities -- was $13.9 billion for fiscal 2017, compared with $13.6 billion for fiscal 2016, an increase of 2%.

Balance Sheet and Other Financial Highlights

Cash

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