Cisco Systems(US:CSCO)2024-05-21 20:37Revenue Performance - Total revenue for the three months ended April 27, 2024, decreased by 13% to $12,702 million compared to $14,571 million for the same period in 2023[184]. - Total revenue for the nine months ended April 27, 2024, decreased by 4% to $40,161 million compared to $41,795 million for the same period in 2023[184]. - Total revenue decreased by 13% in the three months ended April 27, 2024, compared to the same period in 2023, with product revenue down 19% and service revenue up 6%[210]. - For the first nine months of fiscal 2024, total revenue decreased by 4%, with product revenue down 7% and service revenue up 5%[210]. - Americas revenue decreased by 15% in Q3 fiscal 2024, while EMEA and APJC revenues decreased by 9% and 12%, respectively[210]. Product and Service Revenue - Product revenue decreased by 19%, while service revenue increased by 6% in the third quarter of fiscal 2024[187]. - Total product revenue decreased by 19% to $9.024 billion for the three months ended April 27, 2024, compared to $11.092 billion for the same period last year[221]. - Service revenue increased by 6% to $3.678 billion for the three months ended April 27, 2024, compared to $3.479 billion for the same period last year[230]. - Total service revenue increased by 5% to $10.766 billion for the first nine months of fiscal 2024 compared to $10.303 billion for the same period last year[230]. - Security product revenue increased by 36% to $1.304 billion for the three months ended April 27, 2024, primarily driven by the contribution of Splunk offerings[224]. Income and Earnings - Net income for the three months ended April 27, 2024, was $1,886 million, a decrease of 41% compared to $3,212 million in the same period in 2023[184]. - Diluted earnings per share decreased by 41% to $0.46 for the three months ended April 27, 2024[184]. - Operating income for the third quarter of fiscal 2024 decreased by 44% to $2,191 million, with operating income as a percentage of revenue dropping to 17.2% from 27.1% in the same period last year[250]. - The company reported earnings per share of $0.40 for the quarter ended April 27, 2024, an increase from $0.39 in the previous quarter[262]. Expenses and Margins - Total gross margin increased by 1.7 percentage points to 65.1% for the three months ended April 27, 2024[184]. - Product gross margin for the three months ended April 27, 2024, was 63.5%, an increase of 0.8 percentage points from 62.7% in the prior year[234]. - Service gross margin for the three months ended April 27, 2024, increased to 69.2%, up from 65.4% in the same period last year, primarily due to lower headcount-related costs and higher sales volume[237]. - R&D expenses for the three months ended April 27, 2024, were $1,948 million, a decrease of 1% from $1,962 million in the prior year[241]. - Sales and marketing expenses for the three months ended April 27, 2024, increased to $2,559 million, up 1% from $2,526 million in the same period last year[241]. - General and administrative expenses for the three months ended April 27, 2024, rose to $736 million, a 15% increase from $641 million in the prior year[241]. Cash Flow and Debt - Cash provided by operating activities for the nine months ended April 27, 2024, was $7,150 million, down from $13,920 million in the same period in 2023[193]. - Free cash flow for the first nine months of fiscal 2024 was $6,678 million, down from $13,304 million in the same period last year[261]. - Total debt increased significantly to $31,993 million as of April 27, 2024, compared to $8,391 million as of July 29, 2023[193]. - Cash and cash equivalents decreased by $1,210 million to $8,913 million as of April 27, 2024, primarily due to a net outflow of $27.4 billion for the acquisition of Splunk[260]. Acquisitions and Investments - The acquisition of Splunk contributed $413 million to total revenue in the third quarter of fiscal 2024[187]. - The acquisition of Splunk contributed $221 million to product revenue in the Americas segment for the third quarter of fiscal 2024[215]. - The acquisition of Splunk contributed $76 million to product revenue in the EMEA segment for the third quarter of fiscal 2024[216]. - Amortization of purchased intangible assets increased to $551 million in the third quarter of fiscal 2024, primarily due to the acquisition of Splunk, which accounted for $187 million of this increase[248]. - The company plans to reinvest substantially all cost savings from restructuring plans into key priority areas, indicating a focus on strategic investments[249]. Tax and Interest - The effective tax rate was 15.6% for Q3 fiscal 2024, compared to 18.8% for Q3 fiscal 2023, and 17.1% for the first nine months of fiscal 2024, compared to 20.2% for the same period in fiscal 2023[204]. - Interest income for the third quarter of fiscal 2024 increased to $411 million, up from $262 million in the same period last year, driven by higher average cash balances and interest rates[253]. - The company expects lower interest income in future periods due to a decrease in cash balances and higher interest expenses from increased debt[253]. Stockholder Returns - Total cash returned to stockholders in the form of dividends and stock repurchases amounted to $8.6 billion in the first nine months of fiscal 2024[260]. - The company declared a quarterly dividend of $0.40 per common share, to be paid on July 24, 2024[262]. - The remaining authorized amount for stock repurchases is approximately $7.2 billion[262]. Inventory and Receivables - Accounts receivable decreased by approximately 12% to $5,127 million as of April 27, 2024, compared to $5,854 million at the end of fiscal 2023[262]. - Inventory decreased by 14% to $3,118 million as of April 27, 2024, from $3,644 million at the end of fiscal 2023[264]. - Financing receivables decreased by 2% to $6,694 million as of April 27, 2024, compared to $6,835 million at the end of fiscal 2023[266]. - The volume of channel partner financing was $6.1 billion for the third quarter of fiscal 2024, down from $8.3 billion in the same period of fiscal 2023[266]. Foreign Exchange and Market Conditions - Foreign currency fluctuations decreased combined R&D, sales and marketing, and G&A expenses by approximately $3 million, or 0.1%, in the third quarter of fiscal 2024 compared to the same period in fiscal 2023[244]. - Foreign currency fluctuations increased combined R&D, sales and marketing, and G&A expenses by approximately $46 million, or 0.3%, in the first nine months of fiscal 2024 compared to the same period in fiscal 2023[279]. - The company conducts business globally, with approximately 70% of operating expenses denominated in U.S. dollars[279]. - A hypothetical 50 basis points increase or decrease in market interest rates would change the fair value of fixed-rate debt by approximately $0.7 billion[277].