10-KPeriod: FY2019

CISCO SYSTEMS, INC. Annual Report, Year Ended Jul 27, 2019

Filed September 5, 2019For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported a solid fiscal year ending July 27, 2019, with total revenue increasing by 5% to $51.9 billion. The company demonstrated growth across its key product categories, with Infrastructure Platforms up 7%, 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.

Financial Highlights

58 data points
Beta

Revenue

$51.90B

62.9% Gross Margin

Net Income

$11.62B

22.4% Net Margin

EPS (Diluted)

$2.61

Total Assets

$97.79B

Cash & Equivalents

$11.77B

Free Cash Flow

$14.92B

Financial Statements
Beta
Revenue$51.90B
Cost of Revenue$19.24B
Gross Profit$32.67B
R&D Expenses$6.58B
Operating Expenses$18.45B
Operating Income$14.22B
Interest Expense$859.00M
Net Income$11.62B
EPS (Basic)$2.63
EPS (Diluted)$2.61
Shares Outstanding (Basic)4.42B
Shares Outstanding (Diluted)4.45B

Key Highlights

  • 1Total revenue increased by 5% to $51.9 billion for the fiscal year ended July 27, 2019.
  • 2Product revenue grew by 6%, driven by strong performance in Infrastructure Platforms (+7%), Applications (+15%), and Security (+16%).
  • 3Operating income increased by 16% to $14.2 billion, with operating income as a percentage of revenue improving to 27.4%, reflecting improved profitability.
  • 4The 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.
  • 5Cisco is transforming its business model to focus more on software and subscription-based offerings, which is expected to drive future recurring revenue.
  • 6Despite a decline in product revenue in China (-16%), overall revenue growth was supported by strong performance in the Americas (+6%) and EMEA (+5%).
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.