10-KPeriod: FY2017

CISCO SYSTEMS, INC. Annual Report, Year Ended Jul 29, 2017

Filed September 7, 2017For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported its fiscal year 2017 results, concluding July 29, 2017. The company experienced a revenue decline of 2.5% year-over-year to $48.0 billion, largely driven by weaker performance in its Switching and NGN Routing segments, as well as a slowdown in the service provider market and emerging countries. Despite the top-line pressure, Cisco demonstrated resilience in its profitability, with operating income as a percentage of revenue largely stable and a strong focus on operational efficiencies and cost management, including restructuring efforts. Key strategic initiatives for fiscal year 2017 included accelerating innovation in areas like intent-based networking with the launch of the Catalyst 9000 series, strengthening its security portfolio, and shifting towards software and subscription-based offerings. The company continued to invest in growth areas such as Security and Wireless, which showed positive revenue growth. Cisco also maintained a strong liquidity position, generating substantial operating cash flow and returning significant capital to shareholders through dividends and stock repurchases.

Financial Highlights

59 data points
Beta

Revenue

$48.01B

63.0% Gross Margin

Net Income

$9.61B

20.0% Net Margin

EPS (Diluted)

$1.90

Total Assets

$129.82B

Cash & Equivalents

$11.71B

Free Cash Flow

$12.91B

Financial Statements
Beta
Revenue$48.01B
Cost of Revenue$17.78B
Gross Profit$30.22B
R&D Expenses$6.06B
Operating Expenses$18.25B
Operating Income$11.97B
Interest Expense$861.00M
Net Income$9.61B
EPS (Basic)$1.92
EPS (Diluted)$1.90
Shares Outstanding (Basic)5.01B
Shares Outstanding (Diluted)5.05B

Key Highlights

  • 1Total revenue for fiscal year 2017 decreased by 2.5% to $48.0 billion, reflecting challenges in key segments like Switching and NGN Routing, and weakness in the service provider market.
  • 2Product revenue declined by 4.2%, while service revenue saw a modest increase of 2.6%, indicating a continued shift towards services.
  • 3Despite revenue pressures, gross margin remained strong at 63.0% for the year, with product gross margin at 61.6% and service gross margin at 66.8%.
  • 4Research and Development (R&D) expenses decreased slightly by 3.8% year-over-year, while Sales and Marketing expenses decreased by 4.5%, demonstrating cost control measures.
  • 5The company announced a significant restructuring plan in August 2016, incurring $756 million in charges during fiscal year 2017, aimed at reinvesting in priority growth areas.
  • 6Cisco continued its strategic focus on innovation, highlighting the introduction of the Catalyst 9000 series and advancements in security and wireless technologies.
  • 7The company generated strong operating cash flow of $13.9 billion and returned $9.2 billion to shareholders through dividends and stock repurchases, underscoring its commitment to capital return.

Frequently Asked Questions

In fiscal year 2017, Cisco Systems reported a total revenue of $48.0 billion, a decrease of 2.5% compared to the previous year. While product revenue saw a decline of 4.2%, service revenue grew by 2.6%. The company maintained strong profitability with a gross margin of 63.0% and generated robust operating cash flow of $13.9 billion. Cisco also continued to execute on its strategic priorities, including innovation and a shift towards software and subscriptions.

The most significant revenue declines were seen in the Service Provider Video segment, down 45.4%, largely due to the divestiture of the SP Video CPE Business. Switching revenue decreased by 5.1%, and NGN Routing revenue decreased by 3.7%. Conversely, Security revenue grew by 9.3%, and Wireless revenue increased by 4.8%, indicating growth in these strategic areas.

Cisco's strategy focuses on accelerating innovation, increasing the value of the network, and delivering technology in ways that customers prefer. Key initiatives include developing intent-based networking with the Catalyst 9000 series, enhancing security offerings, and transitioning to more software and subscription-based models. The company is investing in growth areas like Security, IoT, Collaboration, Data Center, and Cloud to drive long-term profitable growth.

Cisco demonstrated a strong commitment to returning capital to shareholders in fiscal year 2017. The company returned $9.2 billion to shareholders through dividends ($5.5 billion) and stock repurchases ($3.7 billion). This aligns with its capital allocation strategy of returning a minimum of 50% of its free cash flow annually to shareholders.