Cisco Tops Forecasts - Guides Up
May 15, 2019
Cisco reported third quarter results for the period ended April 27, 2019. Cisco reported third quarter revenue of $13.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.69 per share, and non-GAAP net income of $3.5 billion or $0.78 per share.
Wall Street was only expecting 77 cents earnings per share, and revenue of $12.89 billion.
Cisco is looking for 4.5% to 6.5% Q4 revenue growth, and earnings of 80 cents to 82 cents per share.
were only expecting $13.29 billion in
revenue, or 3.5% revenue growth, and 81
cents per share in earnings.
"We executed well in Q3, delivering revenue growth of 6%, non-GAAP EPS growth of 18%, as well as strong margins and cash flow," said Kelly Kramer, CFO of Cisco. "We continue to invest in our innovation pipeline to drive long-term profitable growth, while successfully evolving our business model through software offerings and subscriptions and delivering value for shareholders."
Q3 FY 2019 Highlights
Revenue -- Total revenue was $13.0 billion, up 6%, with product revenue up 7% and service revenue up 3%. Revenue by geographic segment was: Americas up 9%, EMEA up 5%, and APJC down 4%. Product revenue performance was broad based with growth in Security, up 21%, Applications, up 9%, and Infrastructure Platforms, up 5%.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.1%, 62.0%, and 66.3%, respectively, as compared with 62.3%, 61.0%, and 65.8%, respectively, in the third quarter of fiscal 2018.
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 64.6%, 63.7%, and 67.3%, respectively, as compared with 64.5%, 63.7%, and 67.1%, respectively, in the third quarter of fiscal 2018.
Total gross margins by geographic segment were: 65.6% for the Americas, 64.5% for EMEA and 60.7% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $4.7 billion, up 1%. Non-GAAP operating expenses were $4.2 billion, up 6%, and were 32.4% of revenue.
Operating Income -- GAAP operating income was $3.5 billion, up 12%, with GAAP operating margin of 27.1%. Non-GAAP operating income was $4.2 billion, up 6%, with non-GAAP operating margin at 32.2%.
Provision for Income Taxes -- The GAAP tax provision rate was 15.8%. The non-GAAP tax provision rate was 19.0%.
Net Income and EPS -- On a GAAP basis, net income was $3.0 billion and EPS was $0.69. On a non-GAAP basis, net income was $3.5 billion, an increase of 8%, and EPS was $0.78, an increase of 18%.
Cash Flow from Operating Activities -- $4.3 billion for the third quarter of fiscal 2019, an increase of 79% compared with $2.4 billion for the third quarter of fiscal 2018. Operating cash flow for the third quarter of fiscal 2018 included the payment of $1.3 billion of one-time foreign taxes as related to the Tax Cuts and Jobs Act. Operating cash flow increased 16%, normalized for these tax payments.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $34.6 billion at the end of the third quarter of fiscal 2019, compared with $40.4 billion at the end of the second quarter of fiscal 2019, and compared with $46.5 billion at the end of fiscal 2018.
Deferred Revenue -- $17.5 billion, down 8% in total, with deferred product revenue down 23%. Deferred service revenue was up 3%.
Capital Allocation -- In the third quarter of fiscal 2019, we returned $7.5 billion to shareholders through share buybacks and dividends. We declared and paid a cash dividend of $0.35 per common share, or $1.5 billion, and repurchased approximately 116 million shares of common stock under our stock repurchase program at an average price of $52.14 per share for an aggregate purchase price of $6.0 billion. The remaining authorized amount for stock repurchases under the program is $18.0 billion with no termination date.