10-QPeriod: Q1 FY2013

CISCO SYSTEMS, INC. Quarterly Report for Q1 Ended Oct 27, 2012

Filed November 20, 2012For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported its first quarter fiscal year 2013 results, showcasing a solid increase in revenue and profitability, driven by strong growth in its Service Provider Video, Data Center, and Wireless product categories. Net sales rose by 5.5% year-over-year to $11.88 billion, with product sales up 3.9% and service revenue climbing 11.9%. The acquisition of NDS Group Limited contributed significantly to the Service Provider Video segment's growth. Operating income as a percentage of revenue improved to 22.3% from 19.6% in the prior year, benefiting from revenue growth and effective expense management, including lower restructuring charges. Diluted earnings per share increased by 18.2% to $0.39. Despite a challenging global macroeconomic environment, particularly in Europe, Cisco demonstrated resilience by growing net income at a faster pace than revenue, underscoring its focus on operational excellence.

Financial Highlights

54 data points
Beta

Revenue

$11.88B

61.0% Gross Margin

Net Income

$2.09B

17.6% Net Margin

EPS (Diluted)

$0.39

Total Assets

$92.64B

Cash & Equivalents

$4.77B

Free Cash Flow

$2.20B

Financial Statements
Beta
Revenue$11.88B
Cost of Revenue$4.64B
Gross Profit$7.24B
Operating Expenses$4.59B
Operating Income$2.65B
Interest Expense$148.00M
Net Income$2.09B
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)5.30B
Shares Outstanding (Diluted)5.33B

Key Highlights

  • 1Net sales increased by 5.5% to $11.88 billion, with service revenue showing robust growth of 11.9%.
  • 2Operating income margin improved to 22.3% from 19.6% in the prior year due to revenue growth and expense management.
  • 3Diluted earnings per share (EPS) rose by 18.2% to $0.39.
  • 4The acquisition of NDS Group Limited was completed, contributing to growth in the Service Provider Video segment.
  • 5Data Center and Wireless product categories experienced strong year-over-year sales growth.
  • 6Cash provided by operating activities increased to $2.47 billion, up from $2.33 billion in the prior year period.
  • 7The company repurchased approximately $0.25 billion in stock under its repurchase program and paid $0.74 billion in dividends during the quarter.

Frequently Asked Questions

The acquisition of NDS Group Limited, completed in the first quarter of fiscal year 2013, contributed approximately 2 percentage points to the net sales increase and significantly boosted growth in the Service Provider Video product category. It also led to higher amortization expenses related to purchased intangible assets and increased headcount-related expenses in R&D and G&A.

Revenue growth was driven by a combination of factors including strong performance in service offerings, increased sales of Service Provider Video products (partly due to the NDS acquisition), and robust demand for Data Center and Wireless products. Geographically, the Americas and APJC segments showed solid growth, while EMEA remained flat.

Cisco demonstrated effective expense management, with R&D, sales and marketing, and G&A expenses collectively declining by 1.8 percentage points as a percentage of revenue. This was primarily due to lower sales and marketing expenses and a year-over-year decrease in share-based compensation expense.

Cisco indicated that it experienced a continuation of global macroeconomic challenges, including weakness in the European economy, which they expect to deteriorate further. They also noted lower global public sector spending and a conservative approach to IT-related capital spending by customers.