Description
Q1 Fiscal Year 2013 Conference Call
Q1 Fiscal Year 2013 Conference Call
November 13, 2012
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 filing on Form 10-K , 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 “About Cisco” in the “Investor Relations” section. http://investor.cisco.com/financialstatements.cfm
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
2
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
3
Q1 FY’13 Takeaways
• Revenue growth of 6% in a very challenging market, where many
of our peers are reporting declines…
• Profitability growth in double digits, with solid expense
management, gross and operating margins exceeding guidance
• Service business continues to grow double digits as customers
ask Cisco to partner to build their technology and business architectures for the future.
• Generated $2.5B cash from operations this quarter…over 3%
dividend yield, continuing to drive shareholder value.
• Pleased with order growth in US Enterprise of 9%, US Service
Provider of 13%, and US Commercial of ~5%.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
4
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
5
Q1 FY’13 Geographic Revenue and Gross Margin
Gross Margin Net Sales
$M (except percentages)
Percentage Q1 FY’13 $7,023 2,841 2,012 $11,876 Q1 FY’12 63.1% 61.7% 60.8% 62.4% Q4 FY’12 62.7% 61.6% 59.6% 61.9% Q1 FY’13 63.6% 63.3% 58.5% 62.7%
Q1 FY’12 $6,588 2,845 1,823 $11,256
Q4 FY’12 $6,895 2,820 1,975 $11,690
Americas EMEA APJC Geographic Total
Historical product revenue is available on our website at http://investor.cisco.com under “Financial Reporting” in the “Investor Relations” section.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
6
Q1 FY’13 Key Financial Measures
Q1 FY’12
Cash and Cash Equivalents and Investments ($M) Operating Cash Flow ($M) Accounts Receivables ($M) Days Sales Outstanding Inventory ($M) Non-GAAP Inventory Turns Purchase Commitments ($M) $44,388 $2,333 $4,300 35 $1,622 10.9 $4,178
Q4 FY’12
$48,716 $3,088 $4,369 34 $1,663 11.3 $3,869
Q1 FY’13
$45,000 $2,465 $3,942 30 $1,709 10.5 $3,725
Deferred Revenue ($M)
Product Deferred Revenue ($M) Service Deferred Revenue ($M) Headcount
$12,396
$4,075 $8,321 63,465
$12,880
$3,707 $9,173 66,639
$12,623
$3,870 $8,753 72,360
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
7
Capital Allocation
Q1 FY’12 Q2 FY’12 Q3 FY’12 Q4 FY’12 Q1 FY’13
Share Repurchases ($M) Dividends paid ($M) Total ($M)
$1,544 $322 $1,866
Q1 FY’12
$466 $322 $788
Q2 FY’12
$550 $432 $982
Q3 FY’12
$1,800 $425 $2,225
Q4 FY’12
$253 $744 $997
Q1 FY’13
Dividends per Share
$0.06
$0.06
$0.08
Number of Shares (M)
$0.08
Avg. Price Per Share
$0.14
Share Repurchase Program*
Amount Purchased ($M)
Q1 FY’13 Purchases
$253
15
$16.44
* Approximately $5.6B remaining authorized funds in repurchase program as of the end of Q1 FY’13.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
8
Q1 FY’13 non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q1 FY’12 $11,256 5% 8,952 2,304 62.4% 61.3% 66.8%
Q4 FY’12 $11,690 4% 9,150 2,540 61.9% 60.4% 67.1%
Q1 FY’13 $11,876 6% 9,297 2,579 62.7% 61.5% 66.9%
Net Sales Year/Year Growth Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,080
36.2% 26.1% $2,322
4,022
34.4% 27.5% $2,527
4,128
34.8% 27.9% $2,569
Year/Year Growth
EPS (diluted) Year/Year Growth
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential
(4%)
$0.43 2%
15%
$0.47 18%
11%
$0.48 12%
9
Q1 FY’13 GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q1 FY’12 $11,256 8,952 2,304 61.2% 60.2% 65.1%
Q4 FY’12 $11,690 9,150 2,540 60.6% 59.2% 65.5%
Q1 FY’13 $11,876 9,297 2,579 61.0% 59.7% 65.5%
Net Sales Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,680
41.6% 19.6% $1,777
4,714
40.3% 20.3% $1,917
4,588
38.6% 22.3% $2,092
EPS (diluted)
$0.33
$0.36
$0.39
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
10
Q1 FY’13 GAAP to non-GAAP Reconciliation (Operating Income)
$M (except percentage)
Q1 FY’13 $2,651 309 256
GAAP Operating Income Share-based compensation expense Amortization of acquisition-related intangible assets Impact to cost of sales from purchase accounting adjustments to inventory
24 15 59
$663 $3,314 27.9%
Other acquisition-related costs Significant asset impairments and restructurings
Total non-GAAP adjustments Non-GAAP Operating Income % of Revenue
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
11
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
12
Q1 FY’13 – Revenue Highlights
Y/Y Growth $M %
22% Switching 30% NGN Routing
Revenue % of Total
Switching NGN Routing Service Provider Video Collaboration Wireless Data Center Security Other Product
$3,616 2,052 1,148 1,020 486 417 338 220
(2%) (2%) 30% (8%) 38% 61% 6% (12%)
2% 3% 3% 4% 9% 10%
SP Video
Collaboration Wireless Data Center Security Other 17% Service
Service
Total Cisco
2,579
$11,876
12%
6%
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
13
Q1 FY’13 Product Orders: Geographic Regions & Customer Segments
Geographic Region Americas EMEA APJC Total Cisco
Y/Y Growth %
Customer Segment Enterprise Public Sector
Y/Y Growth %
2% (10%) 7% 0%
(1%) (6%)
Commercial*
Service Provider Total Cisco
1%
3% 0%
Product Book to Bill
Slightly under 1
* Includes Consumer
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
14
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 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 statements regarding our innovation engine and operational strategies, operational discipline and execution, the evolution of our industry, major market transitions and our position with respect to such transitions) 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 Internetbased 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, including our foundational priorities, and in certain geographical locations; 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; 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; 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 12, 2012. 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 27, 2012 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.
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 16
doc_940626270.pdf
Q1 Fiscal Year 2013 Conference Call
Q1 Fiscal Year 2013 Conference Call
November 13, 2012
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 filing on Form 10-K , 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 “About Cisco” in the “Investor Relations” section. http://investor.cisco.com/financialstatements.cfm
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
2
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
3
Q1 FY’13 Takeaways
• Revenue growth of 6% in a very challenging market, where many
of our peers are reporting declines…
• Profitability growth in double digits, with solid expense
management, gross and operating margins exceeding guidance
• Service business continues to grow double digits as customers
ask Cisco to partner to build their technology and business architectures for the future.
• Generated $2.5B cash from operations this quarter…over 3%
dividend yield, continuing to drive shareholder value.
• Pleased with order growth in US Enterprise of 9%, US Service
Provider of 13%, and US Commercial of ~5%.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
4
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
5
Q1 FY’13 Geographic Revenue and Gross Margin
Gross Margin Net Sales
$M (except percentages)
Percentage Q1 FY’13 $7,023 2,841 2,012 $11,876 Q1 FY’12 63.1% 61.7% 60.8% 62.4% Q4 FY’12 62.7% 61.6% 59.6% 61.9% Q1 FY’13 63.6% 63.3% 58.5% 62.7%
Q1 FY’12 $6,588 2,845 1,823 $11,256
Q4 FY’12 $6,895 2,820 1,975 $11,690
Americas EMEA APJC Geographic Total
Historical product revenue is available on our website at http://investor.cisco.com under “Financial Reporting” in the “Investor Relations” section.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
6
Q1 FY’13 Key Financial Measures
Q1 FY’12
Cash and Cash Equivalents and Investments ($M) Operating Cash Flow ($M) Accounts Receivables ($M) Days Sales Outstanding Inventory ($M) Non-GAAP Inventory Turns Purchase Commitments ($M) $44,388 $2,333 $4,300 35 $1,622 10.9 $4,178
Q4 FY’12
$48,716 $3,088 $4,369 34 $1,663 11.3 $3,869
Q1 FY’13
$45,000 $2,465 $3,942 30 $1,709 10.5 $3,725
Deferred Revenue ($M)
Product Deferred Revenue ($M) Service Deferred Revenue ($M) Headcount
$12,396
$4,075 $8,321 63,465
$12,880
$3,707 $9,173 66,639
$12,623
$3,870 $8,753 72,360
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
7
Capital Allocation
Q1 FY’12 Q2 FY’12 Q3 FY’12 Q4 FY’12 Q1 FY’13
Share Repurchases ($M) Dividends paid ($M) Total ($M)
$1,544 $322 $1,866
Q1 FY’12
$466 $322 $788
Q2 FY’12
$550 $432 $982
Q3 FY’12
$1,800 $425 $2,225
Q4 FY’12
$253 $744 $997
Q1 FY’13
Dividends per Share
$0.06
$0.06
$0.08
Number of Shares (M)
$0.08
Avg. Price Per Share
$0.14
Share Repurchase Program*
Amount Purchased ($M)
Q1 FY’13 Purchases
$253
15
$16.44
* Approximately $5.6B remaining authorized funds in repurchase program as of the end of Q1 FY’13.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
8
Q1 FY’13 non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q1 FY’12 $11,256 5% 8,952 2,304 62.4% 61.3% 66.8%
Q4 FY’12 $11,690 4% 9,150 2,540 61.9% 60.4% 67.1%
Q1 FY’13 $11,876 6% 9,297 2,579 62.7% 61.5% 66.9%
Net Sales Year/Year Growth Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,080
36.2% 26.1% $2,322
4,022
34.4% 27.5% $2,527
4,128
34.8% 27.9% $2,569
Year/Year Growth
EPS (diluted) Year/Year Growth
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential
(4%)
$0.43 2%
15%
$0.47 18%
11%
$0.48 12%
9
Q1 FY’13 GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q1 FY’12 $11,256 8,952 2,304 61.2% 60.2% 65.1%
Q4 FY’12 $11,690 9,150 2,540 60.6% 59.2% 65.5%
Q1 FY’13 $11,876 9,297 2,579 61.0% 59.7% 65.5%
Net Sales Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,680
41.6% 19.6% $1,777
4,714
40.3% 20.3% $1,917
4,588
38.6% 22.3% $2,092
EPS (diluted)
$0.33
$0.36
$0.39
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
10
Q1 FY’13 GAAP to non-GAAP Reconciliation (Operating Income)
$M (except percentage)
Q1 FY’13 $2,651 309 256
GAAP Operating Income Share-based compensation expense Amortization of acquisition-related intangible assets Impact to cost of sales from purchase accounting adjustments to inventory
24 15 59
$663 $3,314 27.9%
Other acquisition-related costs Significant asset impairments and restructurings
Total non-GAAP adjustments Non-GAAP Operating Income % of Revenue
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
11
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
12
Q1 FY’13 – Revenue Highlights
Y/Y Growth $M %
22% Switching 30% NGN Routing
Revenue % of Total
Switching NGN Routing Service Provider Video Collaboration Wireless Data Center Security Other Product
$3,616 2,052 1,148 1,020 486 417 338 220
(2%) (2%) 30% (8%) 38% 61% 6% (12%)
2% 3% 3% 4% 9% 10%
SP Video
Collaboration Wireless Data Center Security Other 17% Service
Service
Total Cisco
2,579
$11,876
12%
6%
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
13
Q1 FY’13 Product Orders: Geographic Regions & Customer Segments
Geographic Region Americas EMEA APJC Total Cisco
Y/Y Growth %
Customer Segment Enterprise Public Sector
Y/Y Growth %
2% (10%) 7% 0%
(1%) (6%)
Commercial*
Service Provider Total Cisco
1%
3% 0%
Product Book to Bill
Slightly under 1
* Includes Consumer
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
14
• Opening Remarks
• Financial Overview
• Business Overview and Strategy
• Guidance
• Summary and Q&A
© 2012 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 statements regarding our innovation engine and operational strategies, operational discipline and execution, the evolution of our industry, major market transitions and our position with respect to such transitions) 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 Internetbased 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, including our foundational priorities, and in certain geographical locations; 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; 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; 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 12, 2012. 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 27, 2012 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.
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 16
doc_940626270.pdf