Cisco Reports Second Quarter Earnings
4:05 PM ET 2/13/19 | PR Newswire
| RELATED QUOTES | | |  | | 4:15 PM ET 2/13/19 | | Symbol | Last | % Chg |
CSCO
| 47.50 | -0.81% | | Real time quote. | | |
Cisco Reports Second Quarter Earnings
Dividend Increased 6 Percent, Additional $15 Billion Authorized for Stock Repurchase
-- Q2 Results:
-- Revenue: $12.4 billion
-- Growth of 7% year over year (normalized to exclude the divested SPVSS
business for Q2 FY 2018)
-- Earnings per Share: GAAP: $0.63; Non-GAAP: $0.73
-- Non-GAAP EPS increased 16% year over year
-- Q3 Guidance (normalized to exclude the divested SPVSS business for Q3 FY
2018):
-- Revenue: 4% to 6% growth year over year
-- Earnings per Share: GAAP: $0.63 to $0.68; Non-GAAP: $0.76 to $0.78
SAN JOSE, Calif., Feb. 13, 2019 /PRNewswire/ -- Cisco today reported second quarter results for the period ended January 26, 2019. Cisco reported second quarter revenue of $12.4 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.8 billion or $0.63 per share, and non-GAAP net income of $3.3 billion or $0.73 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 Q3 FY 2019 guidance have been normalized to exclude the SPVSS business from prior periods for comparative purposes.
"We are very pleased with our strong performance in the quarter," said Chuck Robbins, chairman and CEO of Cisco. "Our teams are executing incredibly well, aggressively transitioning to a software model and accelerating our pace of innovation. We are redefining and connecting every domain of the networking infrastructure to deliver the agility, operational efficiency and security our customers require to embrace multicloud, edge computing and digital transformation."
GAAP Results
Vs. Q2 FY
Q2 FY 2019 Q2 FY 2018 2018
Revenue (including
SPVSS business
for all periods) $ 12.4 billion $ 11.9 billion 5%
Revenue (excluding
SPVSS business
for all periods) $ 12.4 billion $ 11.7 billion 7%
(8.8)
Net Income (Loss) $ 2.8 billion $ billion NM
Earnings (Loss)
per Share $ 0.63 $ (1.78) NM
NM - Not meaningful
GAAP results for the second quarter of fiscal 2018 include a $11.1 billion charge related to the enactment of the Tax Cuts and Jobs Act.
Non-GAAP Results
Q2 FY 2019 Q2 FY 2018 Vs. Q2 FY 2018
Net Income
(excluding SPVSS
business for all
periods) $ 3.3 billion $ 3.1 billion 6%
Diluted Earnings
per Share (EPS)
(excluding SPVSS
business for all
periods) $ 0.73 $ 0.63 16%
Reconciliations between net income (loss), earnings (loss) per share, 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 Increases Quarterly Cash Dividend; Stock Repurchase Program Authorization Increased
Cisco has declared a quarterly dividend of $0.35 per common share, a 2-cent increase or up 6% over the previous quarter's dividend, to be paid on April 24, 2019 to all shareholders of record as of the close of business on April 5, 2019. Future dividends will be subject to Board approval.
Cisco's board of directors has also approved a $15 billion increase to the authorization of the stock repurchase program. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases including the additional authorization is approximately $24 billion.
"Q2 was a solid quarter with continued momentum across the business delivering revenue growth of 7% and non-GAAP EPS growth of 16%. I'm also very pleased with our revenue from software subscriptions which is now 65% of total software revenue," said Kelly Kramer, CFO of Cisco. "Our increased dividend and share repurchase authorization show confidence in the strength of our ongoing cash flows and reinforce our commitment to returning capital to our shareholders."
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 "Q2 FY 2019 Highlights" section are presented excluding the SPVSS business for all periods as it was divested during the second quarter on October 28, 2018.
Q2 FY 2019 Highlights
Revenue -- Total revenue was $12.4 billion, up 7%, with product revenue up 9% and service revenue up 1%. Revenue by geographic segment was: Americas up 7%, EMEA up 8%, and APJC up 5%. Product revenue performance was broad based with growth in Applications, up 24%, Security, up 18%, and Infrastructure Platforms, up 6%.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 62.5%, 61.0%, and 66.6%, respectively, as compared with 63.1%, 61.5%, and 67.4%, respectively, in the second quarter of fiscal 2018.
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 64.1%, 62.8%, and 67.7%, respectively, as compared with 65.1%, 63.8%, and 68.7%, respectively, in the second quarter of fiscal 2018.
Total gross margins by geographic segment were: 65.2% for the Americas, 64.2% for EMEA and 59.2% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $4.6 billion, up 3%. Non-GAAP operating expenses were $4.0 billion, up 3%, and were 31.9% of revenue.
Operating Income -- GAAP operating income was $3.2 billion, up 4%, with GAAP operating margin of 25.8%. Non-GAAP operating income was $4.0 billion, up 7%, with non-GAAP operating margin flat at 32.1%.
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 $2.8 billion and EPS was $0.63. On a non-GAAP basis, net income was $3.3 billion, an increase of 6%, and EPS was $0.73, an increase of 16%.
Cash Flow from Operating Activities -- $3.8 billion for the second quarter of fiscal 2019, a decrease of 7% compared with $4.1 billion for the second quarter of fiscal 2018. Operating cash flow includes the payment of $0.8 billion in relation to a transition tax payment as a result of the Tax Cuts and Jobs Act. Operating cash flow increased 12%, normalized for this payment.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $40.4 billion at the end of the second quarter of fiscal 2019, compared with $42.6 billion at the end of the first quarter of fiscal 2019, and compared with $46.5 billion at the end of fiscal 2018.
Deferred Revenue -- $17.3 billion, down 8% in total, with deferred product revenue down 23%. Deferred service revenue was up 3%.
Capital Allocation -- For the second quarter of fiscal 2019, we returned $6.5 billion to shareholders through share buybacks and dividends. We declared and paid a cash dividend of $0.33 per common share, or $1.5 billion, and repurchased approximately 111 million shares of common stock under our stock repurchase program at an average price of $45.09 per share for an aggregate purchase price of $5.0 billion.
Acquisitions
On December 18, 2018, we announced our intent to acquire Luxtera, Inc., a privately held semiconductor company. On January 30, 2019, we announced our intent to acquire Singularity Networks, a privately held network infrastructure analytics company. Both acquisitions closed in the third quarter of fiscal 2019.
Guidance for Q3 FY 2019
Cisco expects to achieve the following results for the third quarter of fiscal 2019 (normalized to exclude the divested SPVSS business): |
