Cisco Systems Inc Net Income dropped on 98.9% while Revenue increased on 2.8%
08/15/2018 • About Cisco Systems Inc (
$CSCO) • By InTwits
Cisco Systems Inc reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Cisco Systems Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's a lot of higher than industry average of 1.7%.
- In the last 5 years the company invested considerably less than D&A: $5,446m vs. $11,502m. In FY2018 this situation was still the same: CAPEX was 834 while D&A was 2,192
- The company has highly profitable business model: ROIC is 15.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.1x while industry average is 1.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 2.8%. Revenue growth showed acceleration in FY18Q4 - it increased 5.9% YoY. EBITDA Margin showed almost no change in FY2018. During FY2014-FY2018 EBITDA Margin topped in FY2016 at 30.1% and was declining since that time.
Gross Margin decreased slightly on 0.92 pp from 63.0% to 62.0% in FY2018. During FY2014-FY2018 Gross Margin topped in FY2017 at 63.0%. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue followed a declining trend at -0.32 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue stuck to a growing trend at 0.14 pp per annum in the last 5 years.
Net Income margin dropped on 19.8 pp from 20.0% to 0.22% in FY2018. During the last 5 years Net Income margin topped in FY2016 at 21.8% and was declining since that time. The efficient tax rate was 99.2% in FY2018 while the average for the last five years was 37.0%.
Investments (CAPEX, working capital and M&A)
Cisco Systems Inc's CAPEX/Revenue was 1.7% in FY2018. Cisco Systems Inc showed small CAPEX/Revenue decline of 0.81 pp from 2.5% in FY2015 to 1.7% in FY2018. It's average CAPEX/Revenue for the last three years was 2.0%. CAPEX as a % of Revenue stuck to a declining trend at -0.25 pp per annum in the last 5 years.
Accounts receivable as a % of Revenue increased slightly on 0.54 pp from 10.7% to 11.3% in FY2018. Inventories as a % of Revenue showed almost no change at 3.7% in FY2018. Accounts payable as a % of Revenue increased on 2.4 pp from 7.8% to 10.2% in FY2018.
Cisco Systems Inc has spent
$3,006m on M&A in FY2018 which accounts for 6.1% of revenue.
Return on investment
The company operates at good ROIC (15.1%) while ROE is low (0.2%). ROIC increased on 2.2 pp from 12.9% to 15.1% in FY2018. ROE dropped on 14.6 pp from 14.8% to 0.20% in FY2018. During the last 5 years ROE topped in FY2016 at 17.4% and was declining since that time.
Leverage (Debt)
Debt level is 1.1x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA dropped on 0.4x from 1.5x to 1.1x in FY2018. Debt dropped on 24.2% while cash dropped on 23.7%. During FY2014-FY2018 Net Debt/EBITDA topped in FY2017 at 1.5x.
Cisco Systems Inc has good short term financial stability: Interest coverage ratio (ICR) is 13.1x. Cisco Systems Inc has no short term refinancing risk: cash is higher than short term debt (170.6%).
Average interest expence charged on company's debt was 3.7% in FY2018.
Valuation and dividends
Cisco Systems Inc's trades at EV/EBITDA 16.1x and P/E 1,965.9x.
The company paid 5,425.5% of Net Income as dividends in FY2018. Dividends grew on average at 9.7% per annum in the last 5 years).
Management team
The company's CEO is Charles H Robbins "Chuck". Charles H Robbins "Chuck" has 1 year tenure with the company. CEO total compensation was
$21,284,339 in FY2018 which included
$1,231,250 salary. Cisco Systems Inc's CFO is Kelly A Kramer. Kelly A Kramer has 4 years tenure at the company.
0.085% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 74,200 employees. The number of employees increased slightly on 1.8%. Average revenue per employee in FY2018 was
$664,825 and it increased slightly on 0.96%.
Financial and operational results
FY ended 07/28/2018
Cisco Systems Inc ($CSCO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 47,142 | 49,161 | 49,247 | 48,005 | 49,330 | 2.8% |
| Gross Profit | 27,769 | 29,681 | 30,960 | 30,224 | 30,606 | 1.3% |
| SG&A | 11,437 | 11,861 | 11,433 | 11,177 | 11,386 | 1.9% |
| EBITDA | 11,777 | 13,212 | 14,810 | 14,259 | 14,501 | 1.7% |
| EBIT | 9,345 | 10,770 | 12,660 | 11,973 | 12,309 | 2.8% |
| Interest expence | | 566 | 676 | 861 | 943 | 9.5% |
| Tax | 1,862 | 2,220 | 2,181 | 2,678 | 12,929 | 382.8% |
| Net Income | 7,853 | 8,981 | 10,739 | 9,609 | 110 | -98.9% |
| Stock Based Compensation | 1,230 | 1,312 | 1,329 | 1,373 | 1,576 | 14.8% |
Balance Sheet
|
|---|
| Cash | 6,726 | 6,877 | 7,631 | 11,708 | 8,934 | -23.7% |
| Accounts Receivable | 5,157 | 5,344 | 5,847 | 5,146 | 5,554 | 7.9% |
| Inventory | 1,591 | 1,627 | 1,217 | 1,616 | 1,846 | 14.2% |
| Accounts Payable | 1,032 | 1,104 | 1,056 | 1,385 | 1,904 | 37.5% |
| Short Term Debt | 508 | 3,897 | 4,160 | 7,992 | 5,238 | -34.5% |
| Long Term Debt | 20,337 | 21,457 | 24,483 | 25,725 | 20,331 | -21.0% |
Cash flow
|
|---|
| Capex | 1,275 | 1,227 | 1,146 | 964 | 834 | -13.5% |
| Dividends | 3,758 | 4,086 | 4,750 | 5,511 | 5,968 | 8.3% |
| Acquisitions | 2,989 | 326 | 3,161 | 3,324 | 3,006 | -9.6% |
Ratios
|
|---|
| Revenue growth | -3.0% | 4.3% | 0.2% | -2.5% | 2.8% | |
| EBITDA growth | -13.1% | 12.2% | 12.1% | -3.7% | 1.7% | |
|
|---|
| Gross Margin | 58.9% | 60.4% | 62.9% | 63.0% | 62.0% | -0.9% |
| EBITDA Margin | 25.0% | 26.9% | 30.1% | 29.7% | 29.4% | -0.3% |
| EBIT Margin | 19.8% | 21.9% | 25.7% | 24.9% | 25.0% | 0.0% |
| SG&A, % of revenue | 24.3% | 24.1% | 23.2% | 23.3% | 23.1% | -0.2% |
| SBC, % of revenue | 2.6% | 2.7% | 2.7% | 2.9% | 3.2% | 0.3% |
| Net Income Margin | 16.7% | 18.3% | 21.8% | 20.0% | 0.2% | -19.8% |
| CAPEX, % of revenue | 2.7% | 2.5% | 2.3% | 2.0% | 1.7% | -0.3% |
|
|---|
| ROIC | 12.4% | 13.4% | 14.6% | 12.9% | 15.1% | 2.2% |
| ROE | 13.6% | 15.4% | 17.4% | 14.8% | 0.2% | -14.6% |
| Net Debt/EBITDA | 1.2x | 1.4x | 1.4x | 1.5x | 1.1x | -0.4x |
| Interest expence / Average debt | | 2.5% | 2.5% | 2.8% | 3.7% | 0.9% |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | 74,042 | 71,833 | 73,700 | 72,900 | 74,200 | 1.8% |
| Revenue/Employee, th. $ | 637 | 684 | 668 | 659 | 665 | 1.0% |
Cisco Systems Inc ($CSCO) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 12,136 | 11,887 | 12,463 | 12,844 | | -1.7% | 2.7% | 4.4% | 5.9% |
| EBITDA | 3,322 | 3,619 | 3,698 | 3,862 | | -4.4% | 5.1% | -0.8% | -27.4% |
| Net Income | 2,394 | -8,778 | 2,691 | 3,803 | | 3.1% | -473.9% | 7.0% | 56.9% |
Balance Sheet
|
|---|
| Cash | 11,043 | 17,624 | 6,719 | 8,934 | | 28.7% | 61.7% | -17.2% | -23.7% |
| Short Term Debt | 10,239 | 13,741 | 7,736 | 5,238 | | 146.4% | 208.7% | 82.1% | -34.5% |
| Long Term Debt | 25,684 | 25,625 | 20,336 | 20,331 | | -16.2% | -15.9% | -27.9% | -21.0% |
Ratios
|
|---|
| Gross Margin | 61.2% | 63.1% | 62.3% | 61.7% | | -2.6% | 0.2% | -0.7% | -0.5% |
| EBITDA Margin | 27.4% | 30.4% | 29.7% | 30.1% | | -0.8% | 0.7% | -1.6% | -13.8% |
| Net Income Margin | 19.7% | -73.8% | 21.6% | 29.6% | | 0.9% | -94.1% | 0.5% | 9.6% |
Peers in Telecommunications
Below we provide Cisco Systems Inc benchmarking against other companies in Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
