01—Abstract
Summary
Summary of the 10-K filed September 5, 2019. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) reported a solid fiscal year ending July 27, 2019, with total revenue increasing by 5% to $51.9 billiona.
The company demonstrated growth across its key product categories, with Infrastructure Platforms up 7%b, Applications up 15%, and Security up 16%. This growth was supported by strategic priorities focused on accelerating innovation, increasing the value of the network through intent-based networking technologies, and transforming its business model towards software and subscription offerings. Despite a challenging and competitive market environment, Cisco showed improved profitability, with operating income increasing by 16% and operating income as a percentage of revenue improving to 27.4%.
The company returned significant capital to shareholders through stock repurchases and dividends, underscoring a commitment to shareholder value. While the service provider market presented ongoing uncertainty, Cisco's diversified revenue streams and strategic investments in growth areas position it for continued resilience and future growth.
02—Key points
Key Highlights
- Total revenue increased by 5% to $51.9 billion for the fiscal year ended July 27, 2019.
- Product revenue grew by 6%, driven by strong performance in Infrastructure Platforms (+7%), Applications (+15%), and Security (+16%).
- Operating income increased by 16% to $14.2 billion, with operating income as a percentage of revenue improving to 27.4%, reflecting improved profitability.
- The company continued to prioritize returning capital to shareholders, repurchasing approximately $20.6 billion of common stock and paying $6.0 billion in dividends during fiscal 2019.
- Cisco is transforming its business model to focus more on software and subscription-based offerings, which is expected to drive future recurring revenue.
- Despite a decline in product revenue in China (-16%), overall revenue growth was supported by strong performance in the Americas (+6%) and EMEA (+5%).
- The adoption of ASC 606 (Revenue from Contracts with Customers) impacted revenue recognition, generally accelerating it for certain software arrangements and sales to two-tier distributors.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Cisco Systems, Inc. kept $0.22.
- Revenue$51.90B100.0%
- Cost of revenue−$19.24B37.1%
- Gross profit$32.67B62.9%
- Operating costs−$18.45B35.5%
- Operating income$14.22B27.4%
- Interest, other & tax−$2.60B5.0%
- Net income$11.62B22.4%
Where FY2019 revenue went
$51.90B- Cost of revenue: $19.24B, 37% of revenue
- Other operating costs: $11.87B, 23% of revenue
- Net income: $11.62B, 22% of revenue
- R&D: $6.58B, 13% of revenue
- Interest, other & tax: $2.60B, 5.0% of revenue
Kept 22% as net incomeR&D $6.58B · 13%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed September 5, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $51.90B$49.33B | +5.2% |
| Cost of Revenue | $19.24B$18.72B | +2.7% |
| Gross Profit | $32.67B$30.61B | +6.7% |
| R&D Expenses | $6.58B$6.33B | +3.9% |
| Operating Expenses | $18.45B$18.30B | +0.8% |
| Operating Income | $14.22B$12.31B | +15.5% |
| Interest Expense | $859.00M$943.00M | −8.9% |
| Net Income | $11.62B$110.00M | +10464.5% |
| EPS (Basic) | $2.63$0.02 | +13050.0% |
| EPS (Diluted) | $2.61$0.02 | +12950.0% |
| Shares Outstanding (Basic) | 4.42B4.84B | −8.6% |
| Shares Outstanding (Diluted) | 4.45B4.88B | −8.8% |
05—Questions
Frequently Asked Questions
What were Cisco's key strategic priorities during fiscal year 2019?
Cisco's strategic priorities for fiscal year 2019 included accelerating its pace of innovation, increasing the value of the network for customers, and transforming its business model to focus more on software and subscription-based offerings.
How did Cisco's revenue performance vary across its product categories?
Cisco experienced strong revenue growth in its Applications segment (up 15%) and Security segment (up 16%), while its core Infrastructure Platforms segment saw a 7% increase. The 'Other Products' category saw a significant decrease, primarily due to the divestiture of the Service Provider Video Software Solutions business.
What was the impact of the Tax Cuts and Jobs Act (Tax Act) on Cisco's financial results?
The Tax Act had a significant impact, particularly in fiscal year 2018, where Cisco recorded a provisional tax expense of $10.4 billion. In fiscal year 2019, there was a $0.9 billion charge related to the reversal of a previously recorded benefit associated with the U.S. taxation of deemed foreign dividends due to a final U.S. Treasury regulation.
How did Cisco manage its capital allocation during fiscal year 2019?
Cisco returned a substantial amount of capital to shareholders, repurchasing approximately $20.6 billion of its common stock under its stock repurchase program and paying $6.0 billion in cash dividends. The company also invested in acquisitions, notably Duo Security and Luxtera.
06—Continue