48524059 cisco-q2 fy11-earnings-slides
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Transcript of 48524059 cisco-q2 fy11-earnings-slides
Q2 Fiscal Year 2011 Conference Call9 February 2011
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 2
GAAP RECONCILIATIONDuring 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/results.cfm
FORWARD-LOOKING STATEMENTSThis 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 Form 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
forward-looking statements.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 3
Q2 Key Takeaways
• Overall strategy and architectural approach is on course and gaining momentum.
• Revenue growth in New Products category up 15% y/y, Data Center up 59%, Collaboration up 37% and Wireless up 34% y/y.
• Transition to next generation switching portfolio is going well.
• Strength in global Service Provider, Enterprise and Commercial segments.
• Services becoming a key and integral aspect to both sales and delivery capabilities.
• Strong balance sheet and cash position.
• Focused on execution and moving the business forward.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 4
Q2 FY’11 – Revenue Highlights
$M
Y/Y
Growth
%
Routers $1,672 4%
Switches 3,151 (7%)
New Products 3,202 15%
Other 211 7%
Services 2,171 18%
Total Cisco $10,407 6%
Y/Y Growth
%
New Products:
Video Connected Home (4%)
Collaboration 37%
Security (9%)
Wireless 34%
Data Center 59%
16%
30%
31%
2%
21%
Revenue % of Total
Routers
Switches
New Products
Other
Services
Certain immaterial reclassifications have been made to prior period product amounts.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 5
Q2 FY’11 Product Orders: Geography & Customer Market
Geographic Segment Y/Y Growth %
U.S. & Canada 7%
European Markets 2%
Emerging Markets 27%
Asia Pacific Markets 8%
Total Cisco 8%
Product Book to Bill Greater than 1
Customer Market Y/Y Growth %
Enterprise(excluding Public Sector)
10%
Public Sector 7%
Service Provider 9%
Commercial 11%
Consumer (15%)
Total Cisco 8%
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 6
Q2 FY’11 Non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages) Q2 FY’10 Q1 FY’11 Q2 FY’11
Net Sales 9,815 10,750 10,407
Year/Year Growth
Product
Service
8%
7,976
1,839
19%
8,700
2,050
6%
8,236
2,171
Gross Margin 65.6% 64.3% 62.4%
Product Gross Margin
Service Gross Margin
65.6%
65.9%
64.0%
65.7%
61.1%
67.0%
Operating Expenses 3,466 3,897 3,944
OPEX (% of Revenue) 35.3% 36.3% 37.9%
Operating Income (% of Revenue) 30.3% 28.1% 24.5%
Net Income 2,339 2,411 2,078
Year/Year Growth 25% 14% (11%)
EPS (diluted) $0.40 $0.42 $0.37
Year/Year Growth 25% 17% (8%)
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 7
Q2 FY’11 Geographic Revenue and Gross Margin
Gross Margin
Net Sales Percentage
$M (except percentages)
Q2
FY’10
Q1
FY’11
Q2
FY’11
Q2
FY’10
Q1
FY’11
Q2
FY’11
U.S. & Canada $5,324 $5,878 $5,546 64.5% 64.4% 62.2%
European Markets 1,939 2,018 2,112 68.2% 65.2% 65.0%
Emerging Markets 1,104 1,215 1,188 65.9% 62.3% 60.0%
Asia Pacific Markets 1,448 1,639 1,561 66.2% 64.3% 61.2%
Segment Total $9,815 $10,750 $10,407 65.6% 64.3% 62.4%
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 8
Q2 FY’11 Non-GAAP Income Statement Highlights
$M (except per-share amounts and percentages) Q2 FY’10 Q1 FY’11 Q2 FY’11
Net Sales 9,815 10,750 10,407
Year/Year Growth
Product
Service
8%
7,976
1,839
19%
8,700
2,050
6%
8,236
2,171
Gross Margin 65.6% 64.3% 62.4%
Product Gross Margin
Service Gross Margin
65.6%
65.9%
64.0%
65.7%
61.1%
67.0%
Operating Expenses 3,466 3,897 3,944
OPEX (% of Revenue) 35.3% 36.3% 37.9%
Operating Income (% of Revenue) 30.3% 28.1% 24.5%
Net Income 2,339 2,411 2,078
Year/Year Growth 25% 14% (11%)
EPS (diluted) $0.40 $0.42 $0.37
Year/Year Growth 25% 17% (8%)
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 9
Q2 FY’11 GAAP Income Statement Highlights
$M (except per-share amounts and percentages) Q2 FY’10 Q1 FY’11 Q2 FY’11
Net Sales 9,815 10,750 10,407
Product
Service
7,976
1,839
8,700
2,050
8,236
2,171
Gross Margin 64.5% 62.8% 60.2%
Product Gross Margin
Service Gross Margin
64.7%
63.7%
62.7%
63.6%
58.9%
64.8%
Operating Expenses 3,962 4,404 4,577
OPEX (% of Revenue) 40.4% 41.0% 44.0%
Operating Income (% of Revenue) 24.1% 21.9% 16.2%
Net Income 1,853 1,930 1,521
EPS (diluted) $0.32 $0.34 $0.27
Q2’11 Net Income includes impairment charges of $155 million related to purchased intangibles,
with $63 million recorded in product cost of sales and $92 million in operating expenses.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 10
Q2 FY’11 Key Financial MeasuresQ2 FY’10 Q1 FY’11 Q2 FY’11
Cash and Cash Equivalents and
Investments ($M)
39,638 38,925 40,229
Operating Cash Flow ($M) 2,486 1,667 2,609
Accounts Receivables ($M) 4,237 4,471 4,620
Days Sales Outstanding 39 38 40
Inventory ($M) 1,215 1,523 1,602
Non-GAAP Inventory Turns 11.7 10.8 10.0
Purchase Commitments ($M) 3,027 4,048 3,875
Deferred Revenue ($M) 9,657 10,736 11,807
Headcount 65,874 72,605 72,935
Share Repurchase Program*Amount
Purchased ($M)
Number of
Shares (M)
Avg. Price Per
Share
Q2 FY’11 Purchases $1,791 89 $20.15
*Approximately $12.7B remaining authorized funds in repurchase program as of the end of Q2 FY’11.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 11
Cisco Capital Financing PortfolioJanuary 29, 2011
Financing Receivables ($M) (1) Financing Guarantees ($M)
TotalLease
Receivables
Financed
Service
Contracts
and Other
Loan
ReceivablesSubtotal
Channel
Partner
End-User
CustomersSubtotal
Gross
amount less
unearned
income
$2,512 $2,284 $1,295 $6,091 $383 $300 $683 $6,774
Allowances
for credit
loss
(233) (27) (84) (344) - - - (344)
Deferred
revenue(131) (1,757) (294) (2,182) (258) (273) (531) (2,713)
Total $2,148 $500 $917 $3,565 $125 $27 $152 $3,717
(1) The losses we have incurred historically with respect to financing receivables have been immaterial, consistent
with the performance of an investment grade portfolio.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 12
GAAP Reconciliation Guidance for Q3 FY’11
Q3 FY’11
Impact of share-based expense $0.05 - $0.06
Impact of ongoing amortization of purchased intangible assets and other acquisition-related costs $0.03 - $0.04
Total impact to GAAP EPS $0.08 - $0.10
Share-based expense is expected to be recorded to the various line items of the GAAP income statement in similar proportions as Q2 FY’11.
Ongoing amortization of purchased intangible assets and other acquisition-related costs will be reported as GAAP operating expenses, cost of sales, or other income (loss) as applicable.
Guidance assumes no additional acquisitions, asset impairments,
restructurings, tax or other events, which may or may not be significant.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 13
Q2 Summary
• Overall strategy and architectural approach is on course and gaining momentum.
• Revenue growth in New Products category up 15% y/y, Data Center up 59%, Collaboration up 37% and Wireless up 34% y/y.
• Transition to next generation switching portfolio is going well.
• Strength in global Service Provider, Enterprise and Commercial segments.
• Services becoming a key and integral aspect to both sales and delivery capabilities.
• Strong balance sheet and cash position.
• Focused on execution and moving the business forward.
© 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 14
Forward-Looking StatementsThese 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 future growth, strategy, operations, and
results, and developments in our geographic, customer and product markets) 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 market adjacencies and 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; increased competition in our product and service markets, including the
datacenter; 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 and engineering 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 Form 10-K and Form 10-Q. 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
Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco’s results of
operations for the three and six months ended January 29, 2011 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.