• Q3 Revenue: $12.5 billion

    • Increase of 4% year over year

    • Recurring revenue was 32% of total revenue, up 2 points year over year

  • Q3 Earnings per Share: $0.56 GAAP; $0.66 non-GAAP

  • Q4 FY 2018 Guidance:

    • Revenue: 4% to 6% growth year over year

    • Earnings per Share: GAAP: $0.55 to $0.60; Non-GAAP: $0.68 to $0.70

SAN JOSE, Calif., May 16, 2018 (GLOBE NEWSWIRE) -- Cisco today reported third quarter results for the period ended April 28, 2018. Cisco reported third quarter revenue of $12.5 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.7 billion or $0.56 per share, and non-GAAP net income of $3.2 billion or $0.66 per share.

“We are executing well against our strategy, our innovation pipeline has never been stronger, and we continue to make great progress in transforming towards more software and subscriptions,” said Chuck Robbins, Chairman and CEO, Cisco. “I am confident with our position in the industry and the impact we will continue to drive with our customers.”

 GAAP Results

  Q3 FY 2018 Q3 FY 2017 Vs. Q3 FY 2017
Revenue $12.5 billion $11.9 billion 4%
Net Income $2.7 billion $2.5 billion 7%
Diluted Earnings per Share (EPS) $0.56  $0.50  12%
            

Non-GAAP Results

  Q3 FY 2018 Q3 FY 2017 Vs. Q3 FY 2017
Net Income                                    $3.2 billion $3.0 billion 6%
EPS $0.66  $0.60  10%
            

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

“We delivered strong results in Q3 with solid revenue growth of 4% and non-GAAP EPS growth of 10%," said Kelly Kramer, CFO of Cisco.  "Our investment in innovation and continued execution are paying off.  We saw broad-based strength across our portfolio, while continuing to shift our business model and deliver value for shareholders.”  

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q3 FY 2018 Highlights

Revenue -- Total revenue was $12.5 billion, up 4%, with product revenue up 5% and service revenue up 3%. 32% of total revenue was from recurring offers, up 2 percentage points from the third quarter of fiscal 2017. Revenue by geographic segment was: Americas up 2%, EMEA up 9%, and APJC up 7%. Product revenue performance was broad based with growth in Infrastructure Platforms which increased by 2%, Applications which increased by 19%, and Security which increased by 11%.

Gross Margin -- On a GAAP basis, total gross margin and product gross margin were 62.3% and 61.0%, respectively. Product gross margin decreased compared with 61.7% in the third quarter of fiscal 2017.

Non-GAAP total gross margin and product gross margin were 63.9% and 62.9%, respectively. Non-GAAP product gross margin decreased compared with 63.2% in the third quarter of fiscal 2017. The decrease was primarily due to pricing and higher memory costs partially offset by improved productivity benefits.

GAAP service gross margin was 65.8% and non-GAAP service gross margin was 66.9%.

Total gross margins by geographic segment were: 64.4% for the Americas, 64.3% for EMEA and 61.7% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.6 billion, up 6%. Non-GAAP operating expenses were $4.0 billion, up 6%, and were 32.5% of revenue.

Operating Income -- GAAP operating income was $3.1 billion, down 1%, with GAAP operating margin of 25.1%. Non-GAAP operating income was $3.9 billion, up 2%, with non-GAAP operating margin of 31.5%.

Provision for Income Taxes -- The GAAP tax provision rate was 17.3%. The non-GAAP tax provision rate was 21.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.7 billion and EPS was $0.56. On a non-GAAP basis, net income was $3.2 billion, an increase of 6%, and EPS was $0.66, an increase of 10%.

Cash Flow from Operating Activities -- was $2.4 billion, a decrease of 28% compared with $3.4 billion for the third quarter of fiscal 2017. Operating cash flow includes the payment of $1.3 billion of one-time foreign taxes as related to the Tax Cuts and Jobs Act. Operating cash flow increased 11%, normalized for these tax payments.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- were $54.4 billion at the end of the third quarter of fiscal 2018, compared with $73.7 billion at the end of the second quarter of fiscal 2018, and compared with $70.5 billion at the end of fiscal 2017. The total cash and cash equivalents and investments available in the United States at the end of the third quarter of fiscal 2018 were $47.5 billion.

Deferred Revenue -- was $19.0 billion, up 9% in total, with deferred product revenue up 18%, driven largely by subscription-based and software offers, and deferred service revenue was up 4%. The portion of deferred product revenue related to recurring software and subscription offers increased 29%.

Capital Allocation -- In the third quarter of fiscal 2018, Cisco declared and paid a cash dividend of $0.33 per common share, or $1.6 billion. For the third quarter of fiscal 2018, Cisco repurchased approximately 140 million shares of common stock under its stock repurchase program at an average price of $42.83 per share for an aggregate purchase price of $6.0 billion. The remaining authorized amount for stock repurchases under the program is $25.1 billion with no termination date.

Acquisitions and Divestitures

On May 1, 2018, we announced our intent to acquire Accompany, a privately held company that provides an AI-driven relationship intelligence platform. The Accompany acquisition closed in the fourth quarter of fiscal 2018. We also announced an agreement to sell our Service Provider Video Software Solutions (SPVSS) business. We expect this transaction to close in the first quarter of fiscal 2019 subject to regulatory approvals and customary closing conditions.

In the third quarter of 2018, we closed our acquisition of BroadSoft, Inc., a publicly held company that offers cloud calling and contact center solutions. We also closed our acquisition of Skyport Systems, Inc., a privately held company providing cloud-managed, hyper-converged systems that run and protect business critical applications.

Guidance for Q4 FY 2018

Cisco expects to achieve the following results for the fourth quarter of fiscal 2018:

Q4 FY 2018  
Revenue 4% - 6% growth Y/Y
Non-GAAP gross margin rate 63% - 64%
Non-GAAP operating margin rate 29.5% - 30.5%
Non-GAAP tax provision rate 21%
Non-GAAP EPS $0.68 - $0.70

Cisco estimates that GAAP EPS will be $0.55 to $0.60 in the fourth quarter of fiscal 2018.

A reconciliation between the Guidance for Q4 FY 2018 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAP Guidance for Q4 FY 2018" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Editor's Notes:

  • Q3 fiscal year 2018 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, May 16, 2018 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

  • Conference call replay will be available from 4:00 p.m. Pacific Time, May 16, 2018 to 4:00 p.m. Pacific Time, May 23, 2018 at 1-888-568-0890 (United States) or 1-402-998-1566 (international). The replay will also be available via webcast on the Cisco Investor Relations website at https://investor.cisco.com.

  • Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 16, 2018. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com.

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)

 Three Months Ended Nine Months Ended
 April 28,
2018
 April 29,
2017
 April 28,
2018
 April 29,
2017
REVENUE:       
Product$9,304  $8,885  $27,067  $26,678 
Service3,159  3,055  9,419  9,194 
      Total revenue12,463  11,940  36,486  35,872 
COST OF SALES:       
Product3,625  3,405  10,594  10,113 
Service1,079  1,017  3,208  3,081 
     Total cost of sales4,704  4,422  13,802  13,194 
GROSS MARGIN7,759  7,518  22,684  22,678 
OPERATING EXPENSES:       
Research and development1,590  1,507  4,706  4,560 
Sales and marketing2,325  2,226  6,894  6,866 
General and administrative561  487  1,601  1,498 
Amortization of purchased intangible assets67  59  188  201 
Restructuring and other charges82  70  332  614 
     Total operating expenses4,625  4,349  13,721  13,739 
OPERATING INCOME3,134  3,169  8,963  8,939 
Interest income380  354  1,155  978 
Interest expense(237) (219) (719) (639)
Other income (loss), net(24) (113) 48  (171)
     Interest and other income (loss), net119  22  484  168 
INCOME BEFORE PROVISION FOR INCOME TAXES3,253  3,191  9,447  9,107 
Provision for income taxes (1)562  676  13,140  1,922 
NET INCOME (LOSS)$2,691  $2,515  $(3,693) $7,185 
        
Net income (loss) per share:       
Basic$0.56  $0.50  $(0.76) $1.43 
Diluted$0.56  $0.50  $(0.76) $1.42 
Shares used in per-share calculation:       
Basic4,791  5,005  4,892  5,015 
Diluted4,844  5,045  4,892  5,056 
        
Cash dividends declared per common share$0.33  $0.29  $0.91  $0.81 
 

(1) For the nine months ended April 28, 2018, the provision for income taxes includes an $11.1 billion charge as related to the enactment of the Tax Cuts and Jobs Act.

CISCO SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except percentages)

  April 28, 2018
  Three Months Ended Nine Months Ended
  Amount Y/Y% Amount Y/Y%
Revenue:        
Americas              $7,161  2% $21,515  2%
EMEA 3,281  9% 9,252  2%
APJC 2,021  7% 5,719  1%
     Total $12,463  4% $36,486  2%
 


CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT
(In percentages)

  April 28, 2018
  Three Months Ended Nine Months Ended
Gross Margin Percentage:    
Americas 64.4% 64.8%
EMEA 64.3% 64.0%
APJC 61.7% 61.3%
       


CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES
(In millions, except percentages)

  April 28, 2018
  Three Months Ended Nine Months Ended
  Amount Y/Y% Amount Y/Y%
Revenue:        
Infrastructure Platforms $7,163  2% $20,827  %
Applications 1,309  19% 3,696  10%
Security 583  11% 1,726  8%
Other Products 249  (6)% 818  (11)%
  Total Product 9,304  5% 27,067  1%
Services 3,159  3% 9,419  2%
  Total $12,463  4% $36,486  2%
 

CISCO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

 April 28, 2018 July 29, 2017
ASSETS   
Current assets:   
Cash and cash equivalents$6,719  $11,708 
Investments47,712  58,784 
Accounts receivable, net of allowance for doubtful accounts of $115 at April 28, 2018
and $211 at July 29, 2017
4,274  5,146 
Inventories1,900  1,616 
Financing receivables, net4,868  4,856 
Other current assets1,668  1,593 
      Total current assets67,141  83,703 
Property and equipment, net3,082  3,322 
Financing receivables, net4,915  4,738 
Goodwill31,654  29,766 
Purchased intangible assets, net2,681  2,539 
Deferred tax assets3,044  4,239 
Other assets1,491  1,511 
     TOTAL ASSETS$114,008  $129,818 
LIABILITIES AND EQUITY   
Current liabilities:   
Short-term debt$7,736  $7,992 
Accounts payable1,552  1,385 
Income taxes payable962  98 
Accrued compensation2,966  2,895 
Deferred revenue11,301  10,821 
Other current liabilities4,125  4,392 
     Total current liabilities28,642  27,583 
Long-term debt20,336  25,725 
Income taxes payable9,076  1,250 
Deferred revenue7,652  7,673 
Other long-term liabilities1,641  1,450 
     Total liabilities67,347  63,681 
Total equity46,661  66,137 
TOTAL LIABILITIES AND EQUITY$114,008  $129,818 
 

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 Nine Months Ended
 April 28,
 2018
 April 29,
 2017
Cash flows from operating activities:   
Net income (loss)$(3,693) $7,185 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
     Depreciation, amortization, and other1,676  1,708 
     Share-based compensation expense1,184  1,124 
     Provision for receivables(104) 20 
     Deferred income taxes1,013  (125)
     Excess tax benefits from share-based compensation  (125)
     (Gains) losses on divestitures, investments and other, net(159) 156 
     Change in operating assets and liabilities, net of effects of acquisitions and
     divestitures:
   
         Accounts receivable1,064  1,253 
         Inventories(289) (149)
         Financing receivables(165) (773)
         Other assets(135) 140 
         Accounts payable148  149 
         Income taxes, net8,795  (112)
         Accrued compensation53  (154)
         Deferred revenue415  592 
         Other liabilities(237) (1,014)
             Net cash provided by operating activities9,566  9,875 
Cash flows from investing activities:   
Purchases of investments(14,132) (35,562)
Proceeds from sales of investments12,422  24,414 
Proceeds from maturities of investments12,259  8,390 
Acquisition of businesses, net of cash and cash equivalents acquired(2,789) (3,211)
Proceeds from business divestitures27   
Purchases of investments in privately held companies(126) (172)
Return of investments in privately held companies163  168 
Acquisition of property and equipment(620) (756)
Proceeds from sales of property and equipment54  6 
Other(3) 35 
             Net cash provided by (used in) investing activities7,255  (6,688)
Cash flows from financing activities:   
Issuances of common stock318  418 
Repurchases of common stock - repurchase program(11,562) (2,516)
Shares repurchased for tax withholdings on vesting of restricted stock units(541) (497)
Short-term borrowings, original maturities of 90 days or less, net(2,502) 2,000 
Issuances of debt6,877  6,232 
Repayments of debt(9,875) (4,151)
Excess tax benefits from share-based compensation  125 
Dividends paid(4,433) (4,063)
Other(92) (250)
             Net cash used in financing activities(21,810) (2,702)
Net increase (decrease) in cash and cash equivalents(4,989) 485 
Cash and cash equivalents, beginning of period11,708  7,631 
Cash and cash equivalents, end of period$6,719  $8,116 
Supplemental cash flow information:   
Cash paid for interest$739  $727 
Cash paid for income taxes, net$3,332  $2,159 
        

CISCO SYSTEMS, INC.
DEFERRED REVENUE
(In millions)

 April 28,
2018
 January 27,
2018
 April 29,
2017
Deferred revenue:     
Service$10,960  $10,963  $10,532 
Product:     
     Deferred revenue related to recurring software and subscription offers5,635  5,451  4,352 
     Other product deferred revenue2,358  2,374  2,438 
     Total product deferred revenue7,993  7,825  6,790 
         Total$18,953  $18,788  $17,322 
Reported as:     
Current$11,301  $11,102  $10,344 
Noncurrent7,652  7,686  6,978 
         Total$18,953  $18,788  $17,322 
 


CISCO SYSTEMS, INC.

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK
(In millions, except per-share amounts)

  DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL
Quarter Ended Per Share Amount Shares Weighted-
Average Price
per Share
 Amount Amount
Fiscal 2018            
April 28, 2018 $0.33  $1,572  140  $42.83  $6,015  $7,587 
January 27, 2018 $0.29  $1,425  103  $39.07  $4,011  $5,436 
October 28, 2017 $0.29  $1,436  51  $31.80  $1,620  $3,056 
Fiscal 2017            
July 29, 2017 $0.29  $1,448  38  $31.61  $1,201  $2,649 
April 29, 2017 $0.29  $1,451  15  $33.71  $503  $1,954 
January 28, 2017 $0.26  $1,304  33  $30.33  $1,001  $2,305 
October 29, 2016 $0.26  $1,308  32  $31.12  $1,001  $2,309 
                        



CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME
(In millions, except per-share amounts)

 Three Months Ended Nine Months Ended
 April 28,
 2018
 April 29,
 2017
 April 28,
 2018
 April 29,
 2017
GAAP net income (loss)$2,691  $2,515  $(3,693) $7,185 
Adjustments to cost of sales:       
Share-based compensation expense57  56  168  163 
Amortization of acquisition-related intangible assets161  124  444  343 
Supplier component remediation charge (adjustment), net(9) (13) (41) (29)
Acquisition-related/divestiture costs2    4  1 
Legal and indemnification settlements    122   
Total adjustments to GAAP cost of sales211  167  697  478 
Adjustments to operating expenses:       
Share-based compensation expense342  349  1,010  963 
Amortization of acquisition-related intangible assets67  59  188  201 
Acquisition-related/divestiture costs89  43  195  157 
Significant asset impairments and restructurings82  70  332  614 
Total adjustments to GAAP operating expenses580  521  1,725  1,935 
Total adjustments to GAAP income (loss) before provision for
income taxes
791  688  2,422  2,413 
Income tax effect of non-GAAP adjustments(168) (177) (613) (612)
Significant tax matters (1)(119)   11,261   
Total adjustments to GAAP provision for income taxes(287) (177) 10,648  (612)
Non-GAAP net income$3,195  $3,026  $9,377  $8,986 
Net income (loss) per share: (2)       
GAAP$0.56  $0.50  $(0.76) $1.42 
Non-GAAP$0.66  $0.60  $1.90  $1.78 
 

(1) Cisco recorded charges relating to significant tax matters that were excluded from non-GAAP net income for the first nine months of fiscal 2018. $11.1 billion of these charges were provisional amounts related to the enactment of the Tax Cuts and Jobs Act comprised of $8.9 billion related to the U.S. transition tax, $1.2 billion related to foreign withholding tax and $1.0 billion related to the re-measurement of net deferred tax assets. The amounts are provisional based on Securities and Exchange Commission Staff Accounting Bulletin No. 118. The remaining $0.2 billion was related to other significant tax matters.

(2) GAAP net loss per share for the nine months ended April 28, 2018 is calculated using basic shares of 4,892 million, due to the net loss resulting from the tax charge as discussed in footnote (1). Non-GAAP net income per share for the period is calculated using diluted shares of 4,936 million, as the Company had non-GAAP net income for this period.

CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, AND NET INCOME
(In millions, except percentages)

 Three Months Ended
 April 28, 2018
 Product
Gross
Margin
 Service
Gross
Margin
 Total
Gross
Margin
 Operating
Expenses
 Y/Y Operating
Income
 Y/Y Net
Income
 Y/Y
GAAP amount$5,679  $2,080  $7,759  $4,625  6% $3,134  (1)% $2,691  7%
% of revenue61.0% 65.8% 62.3% 37.1%   25.1%   21.6%  
Adjustments to GAAP amounts:                 
Share-based compensation expense24  33  57  342    399    399   
Amortization of acquisition-related
intangible assets
161    161  67    228    228   
Supplier component remediation charge
(adjustment), net
(9)   (9)     (9)   (9)  
Acquisition/divestiture-related costs1  1  2  89    91    91   
Significant asset impairments and
restructurings
      82    82    82   
Income tax effect/significant tax
matters
              (287)  
Non-GAAP amount$5,856  $2,114  $7,970  $4,045  6% $3,925  2% $3,195  6%
% of revenue62.9% 66.9% 63.9% 32.5%   31.5%   25.6%  
                        


 Three Months Ended
 April 29, 2017
 Product
Gross
Margin
 Service
Gross
Margin
 Total
Gross
Margin
 Operating
Expenses
 Operating
Income
 Net
Income
GAAP amount$5,480  $2,038  $7,518  $4,349  $3,169  $2,515 
% of revenue61.7% 66.7% 63.0% 36.4% 26.5% 21.1%
Adjustments to GAAP amounts:           
Share-based compensation expense22  34  56  349  405  405 
Amortization of acquisition-related
intangible assets
124    124  59  183  183 
Supplier component remediation
charge (adjustment), net
(13)   (13)   (13) (13)
Acquisition/divestiture-related costs      43  43  43 
Significant asset impairments and
restructurings
      70  70  70 
Income tax effect          (177)
Non-GAAP amount$5,613  $2,072  $7,685  $3,828  $3,857  $3,026 
% of revenue63.2% 67.8% 64.4% 32.1% 32.3% 25.3%
                  


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, AND NET INCOME (LOSS)
(In millions, except percentages)

 Nine Months Ended
 April 28, 2018
 Product
Gross
Margin
 Service
Gross
Margin
 Total
Gross
Margin
 Operating
Expenses
 Y/Y Operating
Income
 Y/Y Net
Income
(Loss)
 Y/Y
GAAP amount$16,473  $6,211  $22,684  $13,721  % $8,963  % $(3,693) (151)%
% of revenue60.9% 65.9% 62.2% 37.6%   24.6%   (10.1)%  
Adjustments to GAAP amounts:                 
Share-based compensation expense70  98  168  1,010    1,178    1,178   
Amortization of acquisition-related
intangible assets
444    444  188    632    632   
Supplier component remediation
charge (adjustment), net
(41)   (41)     (41)   (41)  
Legal and indemnification
settlements
122    122      122    122   
Acquisition/divestiture-related
costs
1  3  4  195    199    199   
Significant asset impairments and
restructurings
      332    332    332   
Income tax effect/significant tax
matters (1)
              10,648 (1) 
Non-GAAP amount$17,069  $6,312  $23,381  $11,996  2% $11,385  % $9,377  4%
% of revenue63.1% 67.0% 64.1% 32.9%   31.2%   25.7%  
                        

(1) Includes an $11.1 billion charge as related to the enactment of the Tax Cuts and Jobs Act.

 Nine Months Ended
 April 29, 2017
 Product
Gross
Margin
 Service
Gross
Margin
 Total
Gross
Margin
 Operating
Expenses
 Operating
Income
 Net
Income
GAAP amount$16,565  $6,113  $22,678  $13,739  $8,939  $7,185 
% of revenue62.1% 66.5% 63.2% 38.3% 24.9% 20.0%
Adjustments to GAAP amounts:           
Share-based compensation expense62  101  163  963  1,126  1,126 
Amortization of acquisition-related
intangible assets
343    343  201  544  544 
Supplier component remediation
charge (adjustment), net
(29)   (29)   (29) (29)
Acquisition/divestiture-related costs  1  1  157  158  158 
Significant asset impairments and
restructurings
      614  614  614 
Income tax effect          (612)
Non-GAAP amount$16,941  $6,215  $23,156  $11,804  $11,352  $8,986 
% of revenue63.5% 67.6% 64.6% 32.9% 31.6% 25.1%
                  


CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

EFFECTIVE TAX RATE
(In percentages)

 Three Months Ended Nine Months Ended
 April 28,
2018
 April 29,
2017
 April 28,
2018
 April 29,
2017
GAAP effective tax rate (1)  17.3%   21.2%    139.1%   21.1%
Total adjustments to GAAP provision for income taxes3.7% 0.8% (118.1)% 0.9%
Non-GAAP effective tax rate21.0% 22.0% 21.0% 22.0%
 

(1) Includes an $11.1 billion charge as related to the enactment of the Tax Cuts and Jobs Act for the nine months ended April 28, 2018.

GAAP TO NON-GAAP GUIDANCE FOR Q4 FY 2018

Q4 FY 2018 Gross Margin Rate Operating Margin Rate Tax Provision Rate Earnings per Share (2)
GAAP 61.5% - 62.5% 24%- 25% 20% $0.55 - $0.60
Estimated adjustments for:        
Share-based compensation expense 0.5% 3.0%  $0.05 - $0.06
Amortization of purchased intangible assets and other acquisition-related/divestiture costs 1.0% 2.5%  $0.05 - $0.06
Restructuring and other charges (1)    $0.00 - $0.01
Income tax effect of non-GAAP adjustments   1%  
Non-GAAP 63% - 64% 29.5% - 30.5% 21% $0.68 - $0.70
         

(1)  In the third quarter of fiscal 2018, Cisco initiated a restructuring plan in order to realign the organization and enable further investment in key priority areas. The total pre-tax cash charges to the GAAP financial results is estimated to be approximately $300 million consisting of severance and other one-time benefits, and other associated costs. We expect to recognize up to $50 million of these charges in the fourth quarter of fiscal 2018 with the remaining amount to be recognized through fiscal 2019.

(2) Estimated adjustments to GAAP earnings per share are shown after income tax effects.

Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, asset impairments, restructurings and significant tax matters or other events, which may or may not be significant unless specifically stated.

Forward Looking Statements, Non-GAAP Information and Additional Information

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as execution on our strategy, our investment in innovation and ability to continue to build a strong innovation pipeline, continued progress in transforming our business toward more software and subscriptions, our ability to maintain our position in the industry and the impact we will continue to drive with our customers, continued broad-based strength across our portfolio, and our ability to continue to execute well, deliver profitable growth and return capital to our shareholders) and the future financial performance of Cisco (including the guidance for Q4 FY 2018) that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain priorities, key growth areas, and in certain geographical locations, as well as maintaining leadership in routing, switching and services; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; our ability to achieve the benefits of the announced restructuring and possible changes in the size and timing of the related charges; man-made problems such as cyber-attacks, data protection breaches, computer viruses or terrorism; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Forms 10-Q and 10-K filed on February 20, 2018 and September 7, 2017, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three and nine months ended April 28, 2018 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations.

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, significant gains and losses on investments, the income tax effects of the foregoing and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

About Cisco

Cisco (NASDAQ:CSCO) is the worldwide technology leader that has been making the Internet work since 1984. Our people, products and partners help society securely connect and seize tomorrow's digital opportunity today. Discover more at thenetwork.cisco.com and follow us on Twitter at @Cisco.

Copyright © 2018 Cisco and/or its affiliates. All rights reserved. Cisco and the Cisco logo are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

Press Contact: Investor Relations Contact:
Robyn Blum Marilyn Mora
Cisco Cisco
1 (408) 853-9848 1 (408) 527-7452
rojenkin@cisco.com marilmor@cisco.com