Description
Q2 Fiscal Year 13 Conference Call 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
Q2 Fiscal Year 2013 Conference Call
February 13, 2013
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 Form 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 forwardlooking 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 & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
3
Q2 FY’13 Takeaways
• Very solid execution on our financial model …record revenue for
8th quarter in a row, record earnings per share, net income, and non-GAAP operating income; stable gross margins; and strong operating margins
• Driving strong results in most key technology transitions... Data
Center/ Cloud, Mobility, Video, Services…despite challenging environment
• See soft global recovery; see improvement in US Enterprise and
US Commercial…believe is likely early indicator of future GDP growth shareholders
• Committed to our capital return strategy to drive value to our • Seeing the results of our focus on innovation, portfolio
management and operational discipline …
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
4
• Opening Remarks
• Financial Overview
• Business Overview & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
5
Q2 FY’13 Geographic Revenue and Gross Margin
Gross Margin Net Sales
$M (except percentages)
Percentage Q2 FY’13 $7,136 3,093 1,869 $12,098 Q2 FY’12 62.7% 64.5% 57.5% 62.4% Q1 FY’13 63.6% 63.3% 58.5% 62.7% Q2 FY’13 61.8% 64.9% 60.0% 62.3%
Q2 FY’12 $6,552 3,250 1,725 $11,527
Q1 FY’13 $7,023 2,841 2,012 $11,876
Americas EMEA APJC Geographic Total
Historical product revenue is available on our website at http://investor.cisco.com under “Financial Reporting” in the “Investor Relations” section.
© 2012 Cisco and/or its affiliates. All rights reserved.
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6
Q2 FY’13 Tax Benefits
Tax Benefit Included In:
GAAP Amount ($M) EPS Non-GAAP Amount ($M) EPS
IRS Tax Settlement
Reinstatement of the R&D Tax Credit FY12 Benefit FY13 Benefit Total Total Tax Benefits Q2 FY’13 Effective Tax Rate
$794
$72 $60 $132 $926
$0.15
$0.01 $0.01 $0.02 $0.17
–
– $60 $60 $60 20.0%
–
– $0.01 $0.01 $0.01
(13.1)%
© 2012 Cisco and/or its affiliates. All rights reserved.
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7
Q2 FY’13 non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q2 FY’12
Q1 FY’13
Q2 FY’13
Net Sales
Year/Year Growth Product Service Gross Margin Product Gross Margin Service Gross Margin Operating Expenses
$11,527
11% 9,118 2,409 62.4% 60.9% 68.0% 3,922
$11,876
6% 9,297 2,579 62.7% 61.5% 66.9% 4,128
$12,098
5% 9,437 2,661 62.3% 60.9% 67.6% 4,129
OPEX (% of Revenue)
Operating Income (% of Revenue)
34.0%
28.4%
34.8%
27.9%
34.1%
28.2%
Net Income
Year/Year Growth
$2,563
23%
$2,569
11%
$2,722*
6%
EPS (diluted)
Year/Year Growth
federal research and development ("R&D") tax credit.
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential
$0.47
27%
$0.48
12%
$0.51*
9%
* Includes a tax benefit of approximately $60 million or $0.01 per share as a result of the reinstatement on January 2, 2013 of the U.S.
8
Q2 FY’13 GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q2 FY’12 $11,257 9,118 2,409 61.3% 60.0% 66.3%
Q1 FY’13 $11,876 9,297 2,579 61.0% 59.7% 65.5%
Q2 FY’13 $12,098 9,437 2,661 60.7% 59.1% 66.3%
Net Sales Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,331
37.6% 23.7% $2,182
4,588
38.6% 22.3% $2,092
4,554
37.6% 23.1% $3,143*
EPS (diluted)
related to the reinstatement of the U.S. federal R&D tax credit on January 2, 2013.
$0.40
$0.39
$0.59*
*Includes total tax benefits of $926 million or $0.17 per share related to a tax settlement with the Internal Revenue Service ("IRS") and
© 2012 Cisco and/or its affiliates. All rights reserved.
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9
Q2 FY’13 Key Financial Measures
Q2 FY’12
Cash and Cash Equivalents and Investments ($M) Operating Cash Flow ($M) Accounts Receivables ($M) Days Sales Outstanding Inventory ($M) Non-GAAP Inventory Turns Purchase Commitments ($M) $46,742 $3,101 $3,876 31 $1,590 10.8 $4,192
Q1 FY’13
$45,000 $2,465 $3,942 30 $1,709 10.5 $3,725
Q2 FY’13
$46,376 $3,349 $4,462 34 $1,574 11.1 $3,824
Deferred Revenue ($M)
Product Deferred Revenue ($M) Service Deferred Revenue ($M) Headcount
$12,462
$3,984 $8,478 63,870
$12,623
$3,870 $8,753 72,360
$13,321
$4,266 $9,055 73,482
© 2012 Cisco and/or its affiliates. All rights reserved.
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10
Capital Allocation
Q2 FY’12 Q3 FY’12 Q4 FY’12 Q1 FY’13 Q2 FY’13
Share Repurchases ($M) Dividends paid ($M) Total ($M)
$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
$500 $743 $1,243
Q2 FY’13
Dividends per Share
$0.06
$0.08
$0.08
Number of Shares (M)
$0.14
Avg. Price Per Share
$0.14
Share Repurchase Program*
Amount Purchased ($M)
Q2 FY’13 Purchases
$500
25
$20.15
* Approximately $5.1B remaining authorized funds in repurchase program as of the end of Q2 FY’13.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
11
• Opening Remarks
• Financial Overview
• Business Overview & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
12
Q2 FY’13 – Revenue Highlights
Y/Y Growth $M %
22% Switching
Revenue % of Total
Switching NGN Routing Service Provider Video Collaboration Data Center Wireless Security Other Product
3,724 1,946 1,220 945 548 520 336 198
3% (6%) 20% (11%) 65% 27% 1% (29%)
2% 3% 4% 4% 8% 10%
31%
NGN Routing
SP Video
Collaboration Data Center Wireless Security Other 16% Service
Service
Total Cisco
2,661
$12,098
10%
5%
© 2012 Cisco and/or its affiliates. All rights reserved.
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13
Q2 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% (6%) 3% 0%
1% 0%
Commercial*
Service Provider Total Cisco
1%
(1%) 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 & Key Trends
• 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 innovation, value to shareholders, the goal of becoming the #1 IT company, the future of the intelligent network, Cisco’s ability to help customers deliver business results, strategic investment opportunities and industry leadership) 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, 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 reports on Forms 10-Q and 10-K filed on November 20, 2012 and September 12, 2012, respectively. 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 reports on Forms 10-Q and 10-K, as each may be amended from time to time. Cisco’s results of operations for the three and six months ended January 26, 2013 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_505621636.pdf
Q2 Fiscal Year 13 Conference Call 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
Q2 Fiscal Year 2013 Conference Call
February 13, 2013
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 Form 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 forwardlooking 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 & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
3
Q2 FY’13 Takeaways
• Very solid execution on our financial model …record revenue for
8th quarter in a row, record earnings per share, net income, and non-GAAP operating income; stable gross margins; and strong operating margins
• Driving strong results in most key technology transitions... Data
Center/ Cloud, Mobility, Video, Services…despite challenging environment
• See soft global recovery; see improvement in US Enterprise and
US Commercial…believe is likely early indicator of future GDP growth shareholders
• Committed to our capital return strategy to drive value to our • Seeing the results of our focus on innovation, portfolio
management and operational discipline …
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
4
• Opening Remarks
• Financial Overview
• Business Overview & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
5
Q2 FY’13 Geographic Revenue and Gross Margin
Gross Margin Net Sales
$M (except percentages)
Percentage Q2 FY’13 $7,136 3,093 1,869 $12,098 Q2 FY’12 62.7% 64.5% 57.5% 62.4% Q1 FY’13 63.6% 63.3% 58.5% 62.7% Q2 FY’13 61.8% 64.9% 60.0% 62.3%
Q2 FY’12 $6,552 3,250 1,725 $11,527
Q1 FY’13 $7,023 2,841 2,012 $11,876
Americas EMEA APJC Geographic Total
Historical product revenue is available on our website at http://investor.cisco.com under “Financial Reporting” in the “Investor Relations” section.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
6
Q2 FY’13 Tax Benefits
Tax Benefit Included In:
GAAP Amount ($M) EPS Non-GAAP Amount ($M) EPS
IRS Tax Settlement
Reinstatement of the R&D Tax Credit FY12 Benefit FY13 Benefit Total Total Tax Benefits Q2 FY’13 Effective Tax Rate
$794
$72 $60 $132 $926
$0.15
$0.01 $0.01 $0.02 $0.17
–
– $60 $60 $60 20.0%
–
– $0.01 $0.01 $0.01
(13.1)%
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
7
Q2 FY’13 non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q2 FY’12
Q1 FY’13
Q2 FY’13
Net Sales
Year/Year Growth Product Service Gross Margin Product Gross Margin Service Gross Margin Operating Expenses
$11,527
11% 9,118 2,409 62.4% 60.9% 68.0% 3,922
$11,876
6% 9,297 2,579 62.7% 61.5% 66.9% 4,128
$12,098
5% 9,437 2,661 62.3% 60.9% 67.6% 4,129
OPEX (% of Revenue)
Operating Income (% of Revenue)
34.0%
28.4%
34.8%
27.9%
34.1%
28.2%
Net Income
Year/Year Growth
$2,563
23%
$2,569
11%
$2,722*
6%
EPS (diluted)
Year/Year Growth
federal research and development ("R&D") tax credit.
© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential
$0.47
27%
$0.48
12%
$0.51*
9%
* Includes a tax benefit of approximately $60 million or $0.01 per share as a result of the reinstatement on January 2, 2013 of the U.S.
8
Q2 FY’13 GAAP Income Statement Highlights
$M (except per-share amounts and percentages)
Q2 FY’12 $11,257 9,118 2,409 61.3% 60.0% 66.3%
Q1 FY’13 $11,876 9,297 2,579 61.0% 59.7% 65.5%
Q2 FY’13 $12,098 9,437 2,661 60.7% 59.1% 66.3%
Net Sales Product Service Gross Margin Product Gross Margin Service Gross Margin
Operating Expenses
OPEX (% of Revenue) Operating Income (% of Revenue) Net Income
4,331
37.6% 23.7% $2,182
4,588
38.6% 22.3% $2,092
4,554
37.6% 23.1% $3,143*
EPS (diluted)
related to the reinstatement of the U.S. federal R&D tax credit on January 2, 2013.
$0.40
$0.39
$0.59*
*Includes total tax benefits of $926 million or $0.17 per share related to a tax settlement with the Internal Revenue Service ("IRS") and
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
9
Q2 FY’13 Key Financial Measures
Q2 FY’12
Cash and Cash Equivalents and Investments ($M) Operating Cash Flow ($M) Accounts Receivables ($M) Days Sales Outstanding Inventory ($M) Non-GAAP Inventory Turns Purchase Commitments ($M) $46,742 $3,101 $3,876 31 $1,590 10.8 $4,192
Q1 FY’13
$45,000 $2,465 $3,942 30 $1,709 10.5 $3,725
Q2 FY’13
$46,376 $3,349 $4,462 34 $1,574 11.1 $3,824
Deferred Revenue ($M)
Product Deferred Revenue ($M) Service Deferred Revenue ($M) Headcount
$12,462
$3,984 $8,478 63,870
$12,623
$3,870 $8,753 72,360
$13,321
$4,266 $9,055 73,482
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
10
Capital Allocation
Q2 FY’12 Q3 FY’12 Q4 FY’12 Q1 FY’13 Q2 FY’13
Share Repurchases ($M) Dividends paid ($M) Total ($M)
$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
$500 $743 $1,243
Q2 FY’13
Dividends per Share
$0.06
$0.08
$0.08
Number of Shares (M)
$0.14
Avg. Price Per Share
$0.14
Share Repurchase Program*
Amount Purchased ($M)
Q2 FY’13 Purchases
$500
25
$20.15
* Approximately $5.1B remaining authorized funds in repurchase program as of the end of Q2 FY’13.
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
11
• Opening Remarks
• Financial Overview
• Business Overview & Key Trends
• Guidance
• Summary and Q&A
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
12
Q2 FY’13 – Revenue Highlights
Y/Y Growth $M %
22% Switching
Revenue % of Total
Switching NGN Routing Service Provider Video Collaboration Data Center Wireless Security Other Product
3,724 1,946 1,220 945 548 520 336 198
3% (6%) 20% (11%) 65% 27% 1% (29%)
2% 3% 4% 4% 8% 10%
31%
NGN Routing
SP Video
Collaboration Data Center Wireless Security Other 16% Service
Service
Total Cisco
2,661
$12,098
10%
5%
© 2012 Cisco and/or its affiliates. All rights reserved.
Cisco Confidential
13
Q2 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% (6%) 3% 0%
1% 0%
Commercial*
Service Provider Total Cisco
1%
(1%) 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 & Key Trends
• 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 innovation, value to shareholders, the goal of becoming the #1 IT company, the future of the intelligent network, Cisco’s ability to help customers deliver business results, strategic investment opportunities and industry leadership) 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, 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 reports on Forms 10-Q and 10-K filed on November 20, 2012 and September 12, 2012, respectively. 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 reports on Forms 10-Q and 10-K, as each may be amended from time to time. Cisco’s results of operations for the three and six months ended January 26, 2013 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_505621636.pdf