Kelly kramer shareholder value draft final

Investor Relations

ircisco
  • Driving Shareholder Value Kelly Kramer Executive Vice President, Chief Financial Officer June 9, 2015
  • This presentation contains projections and other forward-looking statements regarding future events or the future financial performance of Cisco, including future operating results. These projections and statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements. Please see Cisco’s filings with the SEC, including its most recent filings on Form 10-K and Form 10-Q, for a discussion of important risk factors that could cause actual events or results to differ materially from those in the projections or other forward-looking statements. During this presentation references to historical financial measures of Cisco will include references to non-GAAP financial measures. Cisco provides a reconciliation between GAAP and non-GAAP financial information on our website at www.cisco.com under “Financial Info” in the “Investor Relations” section. http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx Non-GAAP measures for future periods would not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, acquisition- related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements, the income tax effects of the foregoing, significant tax matters, and other items that Cisco may exclude from time to time in the future, such as significant gains or losses from contingencies. Forward-looking Statements GAAP Reconciliation Cisco and/or its affiliates. All rights reserved. Cisco Public 2 Investor Day 2015 http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Profitable Growth Strategic Investments Capital Return Core Financial Values Cisco and/or its affiliates. All rights reserved. Cisco Public 3 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Leading Market Share #1 = 9 | #2 = 2 50% 46% 45% 31% 34% 14% 77% 53% 67% 50% 39% #1 ENT Routing #1 Wireless LAN #1 Switching: Modular / Fixed #1 Voice #1 SP Routing #2 Storage: Area Networks #1 TelePresence #1 Web Conferencing #2 X86 Blade Servers #1 Network Security #1 Cloud Infrastructure* Cisco and/or its affiliates. All rights reserved. Cisco Public 4 Investor Day 2015 Source: Dell’Oro, Synergy, Infonetics, ACG; Q1’CY15 Market share data Cisco Network Security share DOES include Sourcefire; Web Conferencing is SaaS * Q4’CY14 Synergy data
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Cisco Competitive Advantage Source: Dell’Oro, Synergy, Infonetics, ACG; Q1’CY15 Market share data Cisco Network Security share DOES include Sourcefire; Web Conferencing is SaaS Competitors listed above are not the only competitors in these markets and share shown is relative share versus listed competitors * Q4’CY14 Synergy data Cisco Huawei HP Juniper Brocade Rest of Market Cisco Alcatel-Lucent Juniper Ericsson Huawei Rest of Market Cisco HP Huawei Juniper Arista Rest of Market Cisco Avaya Mitel Unify Microsoft Rest of Market Cisco Aruba Ruckus HP Rest of Market Cisco Brocade HP Qlogic Rest of Market Cisco Polycom Huawei Logitech Vidyo Rest of Market Cisco Citrix Microsoft Adobe Intercall Rest of Market Cisco Checkpoint PAN Fortinet Dell Juniper McAfee Rest of Market Cisco HP Lenovo Dell Hitachi Rest of Market Cisco HP Microsoft Dell IBM #1 ENT Routing #1 Wireless LAN #1 Switching: Modular / Fixed #1 Voice #1 SP Routing #2 Storage: Area Networks #1 TelePresence #1 Web Conferencing #2 X86 Blade Servers #1 Network Security #1 Cloud Infrastructure* Cisco and/or its affiliates. All rights reserved. Cisco Public 5 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Performance Against Our Financial Strategy Revenue $B CAGR = 3%  Delivering EPS growth with expanding Operating Margins  Executing portfolio trade-offs to fund growth areas  Enhancing software and service offerings to drive growth and profitability $1.62 $1.85 $2.02 $2.06 $2.18 FY11 FY12 FY13 FY14 FY15E Non-GAAP EPS $ CAGR = 8% $43 $46 $49 $47 $49 26% 28% 28% 28% 29% FY11 FY12 FY13 FY14 FY15E Revenue Non-GAAP Operating Margin FY15E assumes mid-point of Q4’15 guidance Cisco and/or its affiliates. All rights reserved. Cisco Public 6 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Product Orders Growth… Tale of Two Cities  Executing well in Commercial, Enterprise and Public Sector  Increasing relevance with SPs driving wallet share  When SP and/or EM return to growth… ~1-3pts on total product orders (4%) 1% 1% 1% 5% 2% 0% 6% 9% 9% 10% 8% (8)% (5)% (9)% (9)% (1)% (5)% (4%) 3% (12)% Total Product SP & Emerging Markets Rest of Business Cisco and/or its affiliates. All rights reserved. Cisco Public 7 Investor Day 2015 YoY Growth Rates
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Business Becoming More Predictable  Product Deferred growth driven by subscription businesses (41% of total, up from 22% in FY11) - Meraki, Security, Collaboration - Software, ELAs  Product Subscription Deferred 4-yr CAGR >25%  ~20% of NTM secured and ~10% of following year  Driving more software as well as recurring revenue FY11 FY15E $12 $15 4-yr CAGR 5% 9% 4% Service Product Deferred Revenue The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. $B Cisco and/or its affiliates. All rights reserved. Cisco Public 8 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Operational Excellence Incremental Growth  $0.08 of Opex for every $1.00 of Incremental Revenue Growth  Disciplined Opex Management  Rigorous portfolio management  Driving efficiencies to create capacity to invest  Investing in strategic long-term growth areas $43.2 $48.7 $16.0 $16.4 FY11 LTM Revenue Non-GAAP Opex $5.5B $0.4B $B Cisco and/or its affiliates. All rights reserved. Cisco Public 9 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 70% 30% Material Shift of R&D Portfolio to Fuel Profitable Growth 78% 22% FY14 R&D $5.4B FY15E R&D ~$5.5B Security, Software, & Cloud Security, Software, & Cloud  Disciplined and deliberate portfolio planning  Shifting investment to key growth areas – Meraki, Security, Collab, Cloud, Virtualization, SDN  Within Core – dynamic shifts… over $1B – To Web 2.0 accounts – Packet Optical Non-GAAP R&D Cisco and/or its affiliates. All rights reserved. Cisco Public 10 Investor Day 2015 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Strong Cash Flow Generation FY05 FY07 FY09 FY11 FY13 FY15E Operating Cash Flow Acquisitions 10-year CAGR = 5% $8 ~$13 Cisco and/or its affiliates. All rights reserved. Cisco Public 11 Investor Day 2015 $B Acquisitions Capital Expenditures Share Repurchase Dividend Primary Uses of Cash FY05-FY15E The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Strong Shareholder Returns $0.24 $0.32 $0.68 $0.76 $0.84 FY11 FY12 FY13 FY14 FY15 Annualized Dividend per Share CAGR = 37% FY02 FY06 FY10 FY14 Reduction in Share Count Share Repurchase # Shares Outstanding % FCF Returned ($B) 7.4B Diluted shares outstanding YTD 5.2B 31% reduction; 2.3B shares FY11 $7 84% FY12 $6 57% FY13 $6 52% FY14 $13 120% FY15E ~$8 ~72% Dividends per share is Q4 annualized Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 12 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 FY11 FY12 FY13 FY14 3Q’15YTD Rev Growth 8% 7% 6% (3)% 4% GM % 63% 62% 63% 62% 63% Opex % Rev 37% 35% 34% 34% 34% Op Margin % 26% 28% 28% 28% 29% EPS Growth 1% 14% 9% 2% 7% Div Payout Ratio 15% 17% 34% 37% 39% Our Scorecard  Strong Execution and Discipline  Back to growth  Steady Gross Margins  Driving efficiencies  Expanding Margins  Growing faster than Rev  Growing with Earnings Annualized dividend per share divided by Non-GAAP EPS All numbers Non-GAAP except revenue growth 13
  • Future Growth and Profitability
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $25B FY15E 3-5 Years ~2-4% CAGR Revenue $B  Large Market … maintaining leadership position  Strong track record of managing price / performance  Continued innovation  Leading with Solutions… VMS, IOT, Connected Lighting, IWAN  Refresh cycle in Campus, WAN, Branch, Wireless Wave 2  Great traction with Nexus 9K and ACI  Maximizing 10G / 40G / 100G transition FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Switching, Wireless and Routing Driving Solid Growth Cisco and/or its affiliates. All rights reserved. Cisco Public 15 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $3B FY15E 3-5 years ~20-25% CAGR Accelerating Data Center FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Public, Private, Hybrid Clouds driving opportunity  Driving Converged Infrastructure for Data Centers  Delivering solutions: Big Data, Analytics, VDI  Developing New Technology stacks for the digital world: OpenStack… Metacloud, Piston  Innovating portfolio of new offerings with UCS Mini, modular servers and storage optimized servers Cisco and/or its affiliates. All rights reserved. Cisco Public 16 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Enabling Cloud $5B FY15E 3-5 years Cloud Applications Security Collaboration Video Cloud Infrastructure Networking Servers Services ~20-30% CAGR Revenue $B CIMK v1.0 FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Industry Leading Cloud Infrastructure Portfolio  Accelerating our Cloud Based Applications and Services  Growing Hybrid Cloud Ecosystem and Innovation… Intercloud  Secure workload portability across private and public clouds Cisco and/or its affiliates. All rights reserved. Cisco Public 17 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 ~10-15% CAGR Revenue $B FY15E 3-5 years Differentiating with Security $2B FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Solving customers #1 challenge… Cybersecurity  Broad portfolio across the attack continuum – Before, During and After  Security Services – Advisory, integration, managed  Integration across the broader Cisco portfolio – ACI, Routing /Switching, IoT  Accelerated Services and AMP growth  Driving Portfolio to Software and Recurring Revenue Cisco and/or its affiliates. All rights reserved. Cisco Public 18 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Enhancing Growth and Margins through Software  Unlocking software value and building a recurring revenue business  Higher software mix with shift from a la carte features to full solution suites (Cisco One)  Drive strategic multi-year customer relationships via ELAs  Expanding TAM into adjacent markets such as Data & Analytics  Increasing growth via on-prem and cloud subscriptions in Security, Collaboration, Meraki  Software offerings drive increased infrastructure spend FY12 FY15E 3-5 years $6 $9 ~10-15% CAGR FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Cisco and/or its affiliates. All rights reserved. Cisco Public 19 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 IoE win… Connected Factory 3 Wallet Share Gain in Security, Switching & Routing 2 Enterprise Wide ELA  Multi-year deal to license Cisco's full software portfolio  Selling solutions vs. boxes drives increased stickiness with customer  Drove share of wallet and new TAM into IoE  Significant ROI generated for customer… technology protection, security  Drives greater speed and flexibility to drive business value Use Case… One Year On… Enterprise Wide ELA Scope: Software - OS, Application S/W S/W Upgrades and Maintenance Support Term: 6 Years Solving Customers IT problems vs. Vendor 1 20
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $11B FY15E 3-5 years Services as a Platform for Growth ~4-7% CAGR FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Expanding our Portfolio of Service Offers  Enhance and Optimize Customers’ Investments Through Smart Analytics  Land, Adopt, Expand, Renew  Delivering Solutions Linked to Customers’ Business Outcomes  IoE drive incremental opportunity Cisco and/or its affiliates. All rights reserved. Cisco Public 21 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Acquisitions… Focused on Cloud, Security and Software * *Announced but not closed Cisco and/or its affiliates. All rights reserved. Cisco Public 22 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Future Long-term Value for Shareholders  Network at the core of the digital age  Capture growth opportunities  Drive recurring revenue model  Driving value through software, solutions and services  Wildcards Service Providers/Emerging Markets Growth over 3-5 Years FY15E 3-5 years $49B Total CAGR ~3% - 6% Growth Drivers (CAGR) Switching, Wireless, Routing 2% - 4% Data Center 20% - 25% Services 4% - 7% Security 10% - 15% Collab, SP Video and Other 0% - 3% FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Cisco and/or its affiliates. All rights reserved. Cisco Public 23 Investor Day 2015
  • Future Growth and Profitability 24
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Gross Margin Stability Levers  Digitization  Acceleration of innovation  Investing for growth  Integrated architectures  Software  Pricing excellence  Solutions at scale  Value engineering  Commodity price management  Optimizing variable costs Sustainable Differentiation Cost Savings Cisco and/or its affiliates. All rights reserved. Cisco Public 25 Investor Day 2015 Technology Innovation
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 FY 14 FY15E 3-5 years Driving Operating Margin ~ 30% 29% 28% Non-GAAP Operating Margin % of Revenue 34% 34% FY14 FY15E 3-5 years Low 30s Non-GAAP Opex as a % of Revenue  Securing Profitability Through Portfolio Management & Disciplined Operational Excellence  Emphasis on Maintaining Profitable Growth FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. 26
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Shareholder Value Approach Shareholder Value 14% 16% FY14 FY15E ROE % 37% 39% FY14 FY15E Dividend Payout % Non-GAAP EPS $ $2.06 $2.18 FY14 FY15E Profitable Growth Driving ROE Ongoing Return of Capital FY15E assumes mid-point of Q4’15 guidance Based on Non-GAAP EPS and annualized dividend per share This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. 27
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Profitable Growth Strategic Investments Capital Return In Summary 3-6% Revenue Growth… 5-7% Non-GAAP EPS Growth… >50% FCF Returned to Shareholders Profitable Growth Strategic Investments Capital Return Cisco and/or its affiliates. All rights reserved. Cisco Public 28 Investor Day 2015 This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • These presentation slides and related webcast 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 statements regarding our growth and strategy) and the future financial performance of Cisco 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, including our foundational priorities, and in certain geographical locations; 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; 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; 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 Form 10-K and Form 10-Q. The financial information contained in these presentation slides and related webcast should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco’s results of operations for prior periods are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in these presentation slides and related webcast 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 these presentation slides and related webcast. Forward-looking Statements
  • Thank You.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 GAAP Reconciliation Guidance for Q4’FY15 Q4 FY’15 Share-based compensation expense $0.05 – 0.06 Amortization of purchased intangible assets and other acquisition-related/divestiture costs 0.04 – 0.05 Subtotal $0.09 – 0.11 Restructuring and other charges 0.01 – 0.02 Total impact to GAAP EPS $0.10 – 0.13 Share-based compensation expense is expected to be recorded to the various line items of the GAAP income statement in similar proportions as Q3’FY15. Amortization of purchased intangible assets, other acquisition/divestiture-related costs, and restructuring and other charges will be reported as GAAP operating expenses, cost of sales, or other income (loss) as applicable. Guidance assumes no additional acquisitions, asset impairments, restructurings, tax or other events, which may or may not be significant.
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  • Driving Shareholder Value Kelly Kramer Executive Vice President, Chief Financial Officer June 9, 2015
  • This presentation contains projections and other forward-looking statements regarding future events or the future financial performance of Cisco, including future operating results. These projections and statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements. Please see Cisco’s filings with the SEC, including its most recent filings on Form 10-K and Form 10-Q, for a discussion of important risk factors that could cause actual events or results to differ materially from those in the projections or other forward-looking statements. During this presentation references to historical financial measures of Cisco will include references to non-GAAP financial measures. Cisco provides a reconciliation between GAAP and non-GAAP financial information on our website at www.cisco.com under “Financial Info” in the “Investor Relations” section. http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx Non-GAAP measures for future periods would not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, acquisition- related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements, the income tax effects of the foregoing, significant tax matters, and other items that Cisco may exclude from time to time in the future, such as significant gains or losses from contingencies. Forward-looking Statements GAAP Reconciliation Cisco and/or its affiliates. All rights reserved. Cisco Public 2 Investor Day 2015 http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx http://investor.cisco.com/investor-relations/financial-information/Financial-Results/default.aspx
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Profitable Growth Strategic Investments Capital Return Core Financial Values Cisco and/or its affiliates. All rights reserved. Cisco Public 3 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Leading Market Share #1 = 9 | #2 = 2 50% 46% 45% 31% 34% 14% 77% 53% 67% 50% 39% #1 ENT Routing #1 Wireless LAN #1 Switching: Modular / Fixed #1 Voice #1 SP Routing #2 Storage: Area Networks #1 TelePresence #1 Web Conferencing #2 X86 Blade Servers #1 Network Security #1 Cloud Infrastructure* Cisco and/or its affiliates. All rights reserved. Cisco Public 4 Investor Day 2015 Source: Dell’Oro, Synergy, Infonetics, ACG; Q1’CY15 Market share data Cisco Network Security share DOES include Sourcefire; Web Conferencing is SaaS * Q4’CY14 Synergy data
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Cisco Competitive Advantage Source: Dell’Oro, Synergy, Infonetics, ACG; Q1’CY15 Market share data Cisco Network Security share DOES include Sourcefire; Web Conferencing is SaaS Competitors listed above are not the only competitors in these markets and share shown is relative share versus listed competitors * Q4’CY14 Synergy data Cisco Huawei HP Juniper Brocade Rest of Market Cisco Alcatel-Lucent Juniper Ericsson Huawei Rest of Market Cisco HP Huawei Juniper Arista Rest of Market Cisco Avaya Mitel Unify Microsoft Rest of Market Cisco Aruba Ruckus HP Rest of Market Cisco Brocade HP Qlogic Rest of Market Cisco Polycom Huawei Logitech Vidyo Rest of Market Cisco Citrix Microsoft Adobe Intercall Rest of Market Cisco Checkpoint PAN Fortinet Dell Juniper McAfee Rest of Market Cisco HP Lenovo Dell Hitachi Rest of Market Cisco HP Microsoft Dell IBM #1 ENT Routing #1 Wireless LAN #1 Switching: Modular / Fixed #1 Voice #1 SP Routing #2 Storage: Area Networks #1 TelePresence #1 Web Conferencing #2 X86 Blade Servers #1 Network Security #1 Cloud Infrastructure* Cisco and/or its affiliates. All rights reserved. Cisco Public 5 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Performance Against Our Financial Strategy Revenue $B CAGR = 3%  Delivering EPS growth with expanding Operating Margins  Executing portfolio trade-offs to fund growth areas  Enhancing software and service offerings to drive growth and profitability $1.62 $1.85 $2.02 $2.06 $2.18 FY11 FY12 FY13 FY14 FY15E Non-GAAP EPS $ CAGR = 8% $43 $46 $49 $47 $49 26% 28% 28% 28% 29% FY11 FY12 FY13 FY14 FY15E Revenue Non-GAAP Operating Margin FY15E assumes mid-point of Q4’15 guidance Cisco and/or its affiliates. All rights reserved. Cisco Public 6 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Product Orders Growth… Tale of Two Cities  Executing well in Commercial, Enterprise and Public Sector  Increasing relevance with SPs driving wallet share  When SP and/or EM return to growth… ~1-3pts on total product orders (4%) 1% 1% 1% 5% 2% 0% 6% 9% 9% 10% 8% (8)% (5)% (9)% (9)% (1)% (5)% (4%) 3% (12)% Total Product SP & Emerging Markets Rest of Business Cisco and/or its affiliates. All rights reserved. Cisco Public 7 Investor Day 2015 YoY Growth Rates
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Business Becoming More Predictable  Product Deferred growth driven by subscription businesses (41% of total, up from 22% in FY11) - Meraki, Security, Collaboration - Software, ELAs  Product Subscription Deferred 4-yr CAGR >25%  ~20% of NTM secured and ~10% of following year  Driving more software as well as recurring revenue FY11 FY15E $12 $15 4-yr CAGR 5% 9% 4% Service Product Deferred Revenue The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. $B Cisco and/or its affiliates. All rights reserved. Cisco Public 8 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Operational Excellence Incremental Growth  $0.08 of Opex for every $1.00 of Incremental Revenue Growth  Disciplined Opex Management  Rigorous portfolio management  Driving efficiencies to create capacity to invest  Investing in strategic long-term growth areas $43.2 $48.7 $16.0 $16.4 FY11 LTM Revenue Non-GAAP Opex $5.5B $0.4B $B Cisco and/or its affiliates. All rights reserved. Cisco Public 9 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 70% 30% Material Shift of R&D Portfolio to Fuel Profitable Growth 78% 22% FY14 R&D $5.4B FY15E R&D ~$5.5B Security, Software, & Cloud Security, Software, & Cloud  Disciplined and deliberate portfolio planning  Shifting investment to key growth areas – Meraki, Security, Collab, Cloud, Virtualization, SDN  Within Core – dynamic shifts… over $1B – To Web 2.0 accounts – Packet Optical Non-GAAP R&D Cisco and/or its affiliates. All rights reserved. Cisco Public 10 Investor Day 2015 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Strong Cash Flow Generation FY05 FY07 FY09 FY11 FY13 FY15E Operating Cash Flow Acquisitions 10-year CAGR = 5% $8 ~$13 Cisco and/or its affiliates. All rights reserved. Cisco Public 11 Investor Day 2015 $B Acquisitions Capital Expenditures Share Repurchase Dividend Primary Uses of Cash FY05-FY15E The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Strong Shareholder Returns $0.24 $0.32 $0.68 $0.76 $0.84 FY11 FY12 FY13 FY14 FY15 Annualized Dividend per Share CAGR = 37% FY02 FY06 FY10 FY14 Reduction in Share Count Share Repurchase # Shares Outstanding % FCF Returned ($B) 7.4B Diluted shares outstanding YTD 5.2B 31% reduction; 2.3B shares FY11 $7 84% FY12 $6 57% FY13 $6 52% FY14 $13 120% FY15E ~$8 ~72% Dividends per share is Q4 annualized Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 12 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 FY11 FY12 FY13 FY14 3Q’15YTD Rev Growth 8% 7% 6% (3)% 4% GM % 63% 62% 63% 62% 63% Opex % Rev 37% 35% 34% 34% 34% Op Margin % 26% 28% 28% 28% 29% EPS Growth 1% 14% 9% 2% 7% Div Payout Ratio 15% 17% 34% 37% 39% Our Scorecard  Strong Execution and Discipline  Back to growth  Steady Gross Margins  Driving efficiencies  Expanding Margins  Growing faster than Rev  Growing with Earnings Annualized dividend per share divided by Non-GAAP EPS All numbers Non-GAAP except revenue growth 13
  • Future Growth and Profitability
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $25B FY15E 3-5 Years ~2-4% CAGR Revenue $B  Large Market … maintaining leadership position  Strong track record of managing price / performance  Continued innovation  Leading with Solutions… VMS, IOT, Connected Lighting, IWAN  Refresh cycle in Campus, WAN, Branch, Wireless Wave 2  Great traction with Nexus 9K and ACI  Maximizing 10G / 40G / 100G transition FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Switching, Wireless and Routing Driving Solid Growth Cisco and/or its affiliates. All rights reserved. Cisco Public 15 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $3B FY15E 3-5 years ~20-25% CAGR Accelerating Data Center FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Public, Private, Hybrid Clouds driving opportunity  Driving Converged Infrastructure for Data Centers  Delivering solutions: Big Data, Analytics, VDI  Developing New Technology stacks for the digital world: OpenStack… Metacloud, Piston  Innovating portfolio of new offerings with UCS Mini, modular servers and storage optimized servers Cisco and/or its affiliates. All rights reserved. Cisco Public 16 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Enabling Cloud $5B FY15E 3-5 years Cloud Applications Security Collaboration Video Cloud Infrastructure Networking Servers Services ~20-30% CAGR Revenue $B CIMK v1.0 FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Industry Leading Cloud Infrastructure Portfolio  Accelerating our Cloud Based Applications and Services  Growing Hybrid Cloud Ecosystem and Innovation… Intercloud  Secure workload portability across private and public clouds Cisco and/or its affiliates. All rights reserved. Cisco Public 17 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 ~10-15% CAGR Revenue $B FY15E 3-5 years Differentiating with Security $2B FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Solving customers #1 challenge… Cybersecurity  Broad portfolio across the attack continuum – Before, During and After  Security Services – Advisory, integration, managed  Integration across the broader Cisco portfolio – ACI, Routing /Switching, IoT  Accelerated Services and AMP growth  Driving Portfolio to Software and Recurring Revenue Cisco and/or its affiliates. All rights reserved. Cisco Public 18 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Enhancing Growth and Margins through Software  Unlocking software value and building a recurring revenue business  Higher software mix with shift from a la carte features to full solution suites (Cisco One)  Drive strategic multi-year customer relationships via ELAs  Expanding TAM into adjacent markets such as Data & Analytics  Increasing growth via on-prem and cloud subscriptions in Security, Collaboration, Meraki  Software offerings drive increased infrastructure spend FY12 FY15E 3-5 years $6 $9 ~10-15% CAGR FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Cisco and/or its affiliates. All rights reserved. Cisco Public 19 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 IoE win… Connected Factory 3 Wallet Share Gain in Security, Switching & Routing 2 Enterprise Wide ELA  Multi-year deal to license Cisco's full software portfolio  Selling solutions vs. boxes drives increased stickiness with customer  Drove share of wallet and new TAM into IoE  Significant ROI generated for customer… technology protection, security  Drives greater speed and flexibility to drive business value Use Case… One Year On… Enterprise Wide ELA Scope: Software - OS, Application S/W S/W Upgrades and Maintenance Support Term: 6 Years Solving Customers IT problems vs. Vendor 1 20
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 $11B FY15E 3-5 years Services as a Platform for Growth ~4-7% CAGR FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.  Expanding our Portfolio of Service Offers  Enhance and Optimize Customers’ Investments Through Smart Analytics  Land, Adopt, Expand, Renew  Delivering Solutions Linked to Customers’ Business Outcomes  IoE drive incremental opportunity Cisco and/or its affiliates. All rights reserved. Cisco Public 21 Investor Day 2015 Revenue $B
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Acquisitions… Focused on Cloud, Security and Software * *Announced but not closed Cisco and/or its affiliates. All rights reserved. Cisco Public 22 Investor Day 2015
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Future Long-term Value for Shareholders  Network at the core of the digital age  Capture growth opportunities  Drive recurring revenue model  Driving value through software, solutions and services  Wildcards Service Providers/Emerging Markets Growth over 3-5 Years FY15E 3-5 years $49B Total CAGR ~3% - 6% Growth Drivers (CAGR) Switching, Wireless, Routing 2% - 4% Data Center 20% - 25% Services 4% - 7% Security 10% - 15% Collab, SP Video and Other 0% - 3% FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. Cisco and/or its affiliates. All rights reserved. Cisco Public 23 Investor Day 2015
  • Future Growth and Profitability 24
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Driving Gross Margin Stability Levers  Digitization  Acceleration of innovation  Investing for growth  Integrated architectures  Software  Pricing excellence  Solutions at scale  Value engineering  Commodity price management  Optimizing variable costs Sustainable Differentiation Cost Savings Cisco and/or its affiliates. All rights reserved. Cisco Public 25 Investor Day 2015 Technology Innovation
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 FY 14 FY15E 3-5 years Driving Operating Margin ~ 30% 29% 28% Non-GAAP Operating Margin % of Revenue 34% 34% FY14 FY15E 3-5 years Low 30s Non-GAAP Opex as a % of Revenue  Securing Profitability Through Portfolio Management & Disciplined Operational Excellence  Emphasis on Maintaining Profitable Growth FY15E assumes mid-point of Q4’15 guidance This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. 26
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Shareholder Value Approach Shareholder Value 14% 16% FY14 FY15E ROE % 37% 39% FY14 FY15E Dividend Payout % Non-GAAP EPS $ $2.06 $2.18 FY14 FY15E Profitable Growth Driving ROE Ongoing Return of Capital FY15E assumes mid-point of Q4’15 guidance Based on Non-GAAP EPS and annualized dividend per share This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions. 27
  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 Profitable Growth Strategic Investments Capital Return In Summary 3-6% Revenue Growth… 5-7% Non-GAAP EPS Growth… >50% FCF Returned to Shareholders Profitable Growth Strategic Investments Capital Return Cisco and/or its affiliates. All rights reserved. Cisco Public 28 Investor Day 2015 This long-term financial model does not represent projections or guidance for a particular period, but rather a long-term model management utilizes in managing the business. Actual results for a particular period may differ materially due to a variety of factors listed in Cisco’s SEC filings, including business and economic conditions.
  • These presentation slides and related webcast 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 statements regarding our growth and strategy) and the future financial performance of Cisco 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, including our foundational priorities, and in certain geographical locations; 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; 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; 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 Form 10-K and Form 10-Q. The financial information contained in these presentation slides and related webcast should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco’s results of operations for prior periods are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in these presentation slides and related webcast 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 these presentation slides and related webcast. Forward-looking Statements
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  • Cisco and/or its affiliates. All rights reserved. Cisco Public Investor Day 2015 GAAP Reconciliation Guidance for Q4’FY15 Q4 FY’15 Share-based compensation expense $0.05 – 0.06 Amortization of purchased intangible assets and other acquisition-related/divestiture costs 0.04 – 0.05 Subtotal $0.09 – 0.11 Restructuring and other charges 0.01 – 0.02 Total impact to GAAP EPS $0.10 – 0.13 Share-based compensation expense is expected to be recorded to the various line items of the GAAP income statement in similar proportions as Q3’FY15. Amortization of purchased intangible assets, other acquisition/divestiture-related costs, and restructuring and other charges will be reported as GAAP operating expenses, cost of sales, or other income (loss) as applicable. Guidance assumes no additional acquisitions, asset impairments, restructurings, tax or other events, which may or may not be significant.
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