This summary is based on the first quarter fiscal 2009 earnings call conducted by Cisco Systems Inc. (CSCO) on November 5, 2008.
Management:
SVP of Corporate Communications: Blair Christie
Chairman and CEO: John Chambers
CFO: Frank Calderoni
SVP of Corporate Development and Consumer Group: Ned Hooper
SVP and General Manager of Service Provider Group: Pankaj Patel
Key Investors Issues
- EPS were 37 cents a share compared to 35 cents a share last year.
- Net income was $2.2 billion compared to a net profit of $2.2 billion for the year-earlier period.
- Revenue was $10.3 billion, up from $9.6 billion last year.
First Quarter Highlights
Total revenue was $10.3 billion, an increase of approximately 8% year over year, in line with guidance.
- Searching revenue was $3.6 billion an increase of 8% year over year, driven by growth in both modular and port folio.
- Routing revenue was $1.9 billion up 1% year over year - against technologies revenue totaled $2.7 billion representing an increase of 17% year over year with strong performance in unified communications of 22% year over year growth.
- The video systems growth of approximately 21% year over year, securities with growth of approximately 19%, wireless land growth of approximately 21% and application networking services growth of approximately 25%.
- Other product revenue totaled $442 million, a decrease of 13% year over year - related to obstacle and cable businesses quarter.
- Total service revenue was $1.7 billion up 10% year over year with solid growth in emerging markets.
- Total revenue by geography ranged from 1% year over year in the US and Canada to a high of 41% in emerging markets. Emerging markets revenue growth were higher than the order growth rate due to some increased shipments - recognition of previously deferred revenue and the affect of reserves from the first quarter of fiscal 2008.
Total non-GAAP gross margin was 65.6% up 7/10ths of a point quarter over quarter and up 4/10ths of a point year over year.
- For product only non-GAAP gross margin was 66.2% up a percentage point quarter over quarter and up 6/10ths of a point year over year.
- The quarter over quarter improvement was driven by higher cost savings partially offset by product mix. The year over year improvement was driven by higher cost savings partially offset by higher product discounts as well as mix.
- Non-GAAP service margin was 62.4% down from 63.1% last quarter and 63.5% in fiscal year 2008. The service margin will typically experience some variability over time due to various factors, such as the changes in mix between technical support services and advanced services as well as the timing of support contract initiations as well as renewal.
- Total gross margin by geography range from 63.4% for emerging market to 69% in Japan. Across the geographies the margins have remained relatively stable over the last few quarters.
- Non-GAAP operating expenses as a percentage of revenue for approximately 35.8% relatively consistent with the 35.7% fiscal year 2008.
- Foreign exchange impact was $46 million when compared to the same period last year which added approximately 4/10ths of a point to this ratio. Excluding foreign exchange non-GAAP operating expenses were at 7% year over year.
- Interest and other income were $123 million which includes the recognition of realized gains, losses, as well as impairment.
- Non-GAAP tax provision rate was 22% down approximately 2 points from fiscal year 2008. This decline in the affected tax rate was driven primarily by the renewal of US Federal R&D tax credits which occurred last month in a more favorable mix of foreign earnings at lower tax rates. Non-GAAP net income was $2.5 billion which was flat year over year. As a reminder in the first quarter fiscal year 2008 the company did record a onetime tax benefit of $162 million. Non-GAAP earnings per share on a fully basis were 42 cents per share up from 40 cents per share in the first quarter of fiscal year 2008 - a 5% increase year over year and highest earnings per share to date.
- The onetime tax benefit in fiscal year 2008 was approximately 3 cents per share. Non-GAAP net income was $2.2 billion dollars flat compared to $2.2 billion dollars in the first quarter - in fiscal year 2008. GAAP net earnings per share on a fully basis was 37 cents per share that was up from 35 cents per share in the same quarter of fiscal year 2008.
The total of cash, cash equivalent and investments was $26.8 billion up $528 million from the fourth quarter of fiscal year 2008.
- The company generated $2.7 billion dollars in cash flow from operations as well as $224 million in proceeds from stock option exercises.
- The company re-purchased $1 billion of common stock or 46 million shares of stock at an average price of $21.95 cents per share. The company ended the quarter with approximately $7.4 billion remaining in the current stock re-purchasing authorization.
- In accounts receivable, the company ended the quarter at $3.3 billion which was down 14% in the fourth quarter of fiscal year 2008.
- Days sales outstanding or DSO was 29 days compared to 34 days in the fourth quarter of fiscal year 2008 driven by lower service billing due to seasonality as well as improved collection.
- Total inventory was $1.2 billion that was flat quarter over quarter. Non-GAAP interim returns for 11.6 which was flat from last quarter.
- Inventory purchase commitment and the end of 2/1 were $2.9 billion up 5% from the end of the fourth quarter of fiscal year 2008.
- Deferred revenue was $8.8 billion, an increase of approximately 24% year over year. The third product revenue was $2.9 billion up approximately 18% from last year. While the third service revenue was $6 billion up approximately 28% year over year.
- Head count totaled 67,647 a net increase of approximately 1,518 from the fourth quarter of fiscal year 2008 of which more than 50% were college hires which the company normally experiences in the first quarter each year. Separate from college hires the company added 722 to head count this quarter which were mostly engineering, sales, and services. In mid October the company did implement a pause in external hiring while it did assess the changing macroeconomic environment.
Japan continued their solid momentum with growth of approximately 20%.
Leading the way was service provider with growth of approximately 45% year over year, which represents approximately half of total business in Japan. Public sector grew in the mid-teens, enterprise and commercial were relatively flat.
