Edwin Prinsen, Managing Director Cisco Nederland: “We hebben een mooie start gemaakt in ons nieuwe boekjaar en op jaarbasis hebben we in Nederland een sterke groei gerealiseerd. Ik verwacht in het tweede kwartaal hetzelfde groeitempo te kunnen handhaven. Onze orderportefeuille geeft vertrouwen voor het hele jaar. In al onze marktsegmenten in Nederland draaien we solide. Met name onze oplossingen op basis van draadloze netwerken en datacenters laten een gezonde groei zien. Daarnaast zien we, en dat komt niet onverwacht, dat security steeds belangrijker wordt, wat we ook terugzien in de resultaten.”
Strong Results and Great Execution in Q1, Guided for Growth in Q2,
Amsterdam, 12 november 2015 – Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 24, 2015. Cisco reported first quarter revenue of $12.7 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 $3.0 billion or $0.59 per share.
“Q1 was a very strong quarter. We are accelerating our ability to deliver on growth opportunities, aggressively driving our cloud business, and delivering continued strength in our deferred product revenue, as we sell more of our portfolio in software and cloud models,” said Chuck Robbins, Cisco chief executive officer.
“We guided to solid growth in Q2. Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts. Despite these headwinds, I believe we are executing very well. We are moving very fast to capture new opportunities and I feel good about how we are positioned for the second half of the year.”
A reconciliation between net income and EPS on a GAAP and non-GAAP basis is provided in the table following the Consolidated Statements of Operations. Supplementary information related to other GAAP and non-GAAP measures is also provided in the tables below.
Financial Highlights for Q1 FY16
Revenue — Total revenue was $12.7 billion, up 4%. Product revenue increased by 4% and service revenue increased by 1%. Total revenue by geographic segment was: Americas up 4%, and each of EMEA and APJC up 3%. Product revenue growth was led by Data Center and Collaboration at 24% and 17%, respectively. Wireless and Security each grew 7%, Switching grew 5%, NGN Routing decreased 8%, and Service Provider Video decreased 2%.
Gross Margin — On a non-GAAP basis, total gross margin and product gross margin were 63.2% and 62.3% respectively. The increase in non-GAAP product gross margin as compared to the fourth quarter of fiscal 2015 was driven by continued productivity improvements, partially offset by pricing and to a lesser extent product mix. Non-GAAP service gross margin was 66.2%. Total gross margins by geographic segment were: 63.5% for the Americas, 64.2% for EMEA, and 60.0% for APJC. On a GAAP basis, total gross margin, product gross margin, and service gross margin were at 61.8%, 60.9% and 64.9%, respectively.
Operating Expenses — Non-GAAP operating expenses were $4.1 billion, down 1, and at 32.7% of revenue. Headcount increased from the fourth quarter of fiscal 2015 by 230 to 72,063, reflecting additional headcount from acquisitions and investments in key growth areas such as security, cloud and software. On a GAAP basis, operating expenses were $4.8 billion, down 5%.
Operating Income — Non-GAAP operating income was $3.9 billion, up 8%, with non-GAAP operating margin at 30.5%. GAAP operating income was $3.1 billion, up 31%, with GAAP operating margin of 24.3%.
Provision for Income Taxes — The non-GAAP tax provision rate was 23.0%. The GAAP tax provision rate was 22.5%.
Net Income and EPS — On a non-GAAP basis, net income was $3.0 billion, an increase of 8%, and EPS was $0.59, an increase of 9%. On a GAAP basis, net income was $2.4 billion and EPS was $0.48.
Cash Flow from Operating Activities — was $2.8 billion an increase of 11% compared with $2.5 billion for the first quarter of fiscal 2015.
Cash and Cash Equivalents and Investments — were $59.1 billion at the end of the first quarter of fiscal 2016, compared with $60.4 billion at the end of fiscal 2015. The total cash and cash equivalents and investments available in the United States at the end of the first quarter of fiscal 2016 was $5.0 billion.
Deferred Revenue — was $15.2 billion, up 10% in total, with deferred product revenue up 16%, driven largely by subscription based and software offerings, and deferred service revenue up 7%. Cisco continued to build a greater mix of recurring revenue as reflected in deferred revenue.
Days Sales Outstanding in Accounts Receivable (DSO) — was 34 days at the end of the first quarter of fiscal 2016, compared to 38 days at the end of the fourth quarter of fiscal 2015.
As of October 24, 2015, Cisco had repurchased and retired 4.5 billion shares of Cisco common stock at an average price of $20.92 per share for an aggregate purchase price of approximately $93.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $3.1 billion with no termination date.
“We delivered a strong first quarter as we executed on our financial model of driving profitable growth, managing our portfolio and delivering shareholder value,” said Kelly Kramer, Cisco executive vice president and chief financial officer. “Despite a challenging environment, we are executing very well and making the right investments that position us for future growth. We are continuing our commitment to shareholders as we returned $2.3 billion of our free cash flow back through dividends and share repurchases in Q1.”
Business Outlook for the Second Quarter of Fiscal Year 2016
Cisco expects to achieve the following results for the second quarter of fiscal year 2016:
The non-GAAP tax provision rate does not include any effects of a potential reinstatement of the U.S. federal R&D tax credit. If the U.S. federal R&D tax credit is reinstated, Cisco would reflect that benefit in the effective tax rate.
Cisco estimates that GAAP EPS will be lower than non-GAAP EPS by $0.10 to $0.14 cents per share in the second quarter of fiscal 2016 as follows:
Share-based compensation expense is expected to impact Cisco’s results of operations in similar proportions as the first quarter of fiscal 2016. Amortization of purchased intangible assets, and other acquisition-related/divestiture costs will be reported as GAAP operating expenses, cost of sales, or other income/(loss) as applicable.
The range for restructuring and other charges includes a pretax charge of up to $100 million as a result of the restructuring that Cisco announced in August 2014. During the first quarter of fiscal 2016, Cisco recognized pretax restructuring charges of $141 million to the GAAP financial statements related to these actions and expects that the total charges related to these actions will be approximately $700 million for this plan.
Except as noted above, this guidance does not include the effects of the divestiture of the CPE business, and any future acquisitions/divestitures, asset impairments, restructurings, and tax or other events, which may or may not be significant unless specifically stated.
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Strong Results and Great Execution in Q1, Guided for Growth in Q2, Well Positioned for Second Half
· Q1 Revenue: $12.7 billion (increase of 4% year over year)
· Q1 Earnings per Share: $0.48 GAAP; $0.59 non-GAAP
· Q2 Guidance (normalized to exclude SP Video CPE business):
o Revenue: 0%-2% growth year over year
o Non-GAAP Earnings per Share: $0.53 – $0.55