Cisco Systems, Inc.

Welcome to Cisco's first quarter fiscal year 2020 financial results conference call. At the request of Cisco, today's conference is being recorded. If you have any objections, you may disconnect. Now I would like to introduce Marilyn Mora, Head of Investor Relations. Ma'am, you may begin.

Thanks, Michelle. Welcome, everyone, to Cisco's first quarter fiscal 2020 quarterly earnings conference call. This is Marilyn Mora, Head of Investor Relations, and I'm joined by Chuck Robbins, our Chairman and CEO, and Kelly Kramer, our CFO. By now, you should have seen our earnings press release. A corresponding webcast with slides, including supplemental information, will be made available on our website in the Investor Relations section following the call. As is customary in Q1, we have made certain reclassifications to prior period amounts to conform to the current period's presentation. Income statements, full GAAP to non-GAAP reconciliation information, balance sheets, cash flow statements, and other financial information can also be found in the financial information section of our investor relations website. Throughout this conference call, we will be referencing both GAAP and non-GAAP financial results, and we'll discuss product results in terms of revenue and geographic and customer results in terms of product orders, unless stated otherwise. All comparisons made throughout this call will be made on a year-over-year basis. The matters we will be discussing today include forward-looking statements, including the guidance we will be providing for the second quarter of fiscal 2020. They are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent report on Form 10-K, which identifies important risk factors that could cause actual results to differ maturely from those contained in the forward-looking statements. With respect to guidance, please also see the slides and press release that accompany this call for further details. Fiscal will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. In Q2 of fiscal 2019, we completed the sale of our SPVSS business and accordingly had no revenue or expense from that business in Q1 fiscal 2020. As such, all of the revenue, non-GAAP, and product orders information we will be discussing is normalized to exclude the SPVSS business from our historical results. We have provided historical financial information for the SPVSS business in the slides that accompany this call and on our website to help to understand these impacts. The guidance we provided during our Q4 earnings call had been normalized in the same way. I will now turn it over to Chuck.

Thanks, Marilyn. We delivered a solid quarter against a challenging macro environment. While we're pleased with this performance, we're most focused on the environment as we move forward. We'll discuss this more in a moment. What's happening inside Cisco, regardless of the macro, is an unrelenting focus on driving innovation, transforming our business, and exceeding our customers' expectations. In Q1, as you've seen, we had revenue growth of 2% and double-digit non-GAAP earnings per share growth. We also delivered strong non-GAAP gross margins and non-GAAP operating margins along with solid operating cash flow. We continue to invest in innovation and expand our market opportunities while maintaining our commitment to maximizing shareholder return. Over the last year, many of you have heard me talk about the resilience of the global macro environment. However, on our last earnings call, we indicated that we had begun to see some weakness, and that weakness continued throughout Q1 and was more broad-based. While the main challenges continue to be service provider and emerging markets, this quarter we also saw relative weakness in enterprise and commercial. Despite these headwinds, and because of key decisions we made four years ago to change our business model, we remain well positioned to capitalize on the tremendous opportunities across cloud, automation, 5G, security, and collaboration. Our transition to software continues to progress, and we are on track with where we said we would be at the end of fiscal year 2020. This transition to software not only aligns to how our customers want to consume our technology, but we also believe it will lessen the impact of macroeconomic shifts in the future. Despite the current uncertainty, our innovation pipeline remains strong. At our annual partner summit last week, we announced several exciting additions to our portfolio, including network automation and analytics, cloud-based networking, collaboration, as well as new security capabilities. Over the next couple of months, you will see us deliver even more innovation to help our customers achieve their business objectives. Now I'd like to share some recent highlights across the business. Our enterprise networking portfolio continues to grow as customers increasingly adopt our intent-based networking portfolio, spanning our Catalyst 9000 family of switches, Meraki cloud-based platforms, and next-generation data center solutions. Our customers today are running applications across multiple cloud environments, and this shift requires a fundamental change in how they build their networks and their security architectures. To help them achieve this, we are automating connectivity across any cloud. A good example of this is our recently announced partnership with Microsoft to help our customers improve network connectivity with the highest level of security from branch offices to cloud-based applications by integrating Cisco's SD-WAN solution with Azure's Virtual WAN. To further extend our enterprise networking leadership, we continue to expand our cloud-managed network and security offerings. Last week, we also announced an expansion of our Meraki portfolio, including continued integration between Meraki's dashboard and Cisco's switching portfolio. as well as innovative new LTE-based WAN connectivity solutions. We believe our planned acquisition of Acacia will also play a critical role in building upon the strength of our switching, routing, and optical networking portfolio. By utilizing our innovations across silicon, software, and optics, we are enabling our customers to transform their networks. Now let's turn to security, which is always at the heart of everything we do. It's deeply integrated into the fabric of our entire portfolio to help secure our customers' data and address their modern application and multi-cloud environments. Cybersecurity continues to be a top concern for our customers as they evolve their enterprise architectures to address the challenges of an ever-changing threat environment. We have the most comprehensive integrated cybersecurity platform in the market designed to enable our customers to securely connect any application running on any cloud and delivered to any device. We have been building an expansive Zero Trust framework for securing access across the workforce, the workplace, and the workload. As the leader in Zero Trust, our customers are increasingly turning to us to help them extend simple and trusted access to their users in hybrid and multi-cloud environments. This is leading to strong uptake of Duo, our identity access management solution, which provides continuous authentication, ensuring the right people are able to access the right applications. To further reduce complexity in our customers' environments, we recently announced new enhanced capabilities in our firewall, breach defense, endpoint protection, and Talos incident response solutions. These innovations are designed to provide greater threat protection and enhance the benefits of our platform. We also continue to leverage AI and ML capabilities through our industry-leading threat intelligence platform, Talos, along with StealthWatch and Umbrella to bring our customers' simplicity, visibility and insight that no other company can deliver. Moving to applications. We are rapidly becoming the center of our customer strategy for empowering teams and increasing productivity as 95% of the Fortune 500 use our collaboration portfolio. This is leading to the solid performance in our business as a growing number of customers adopt our unique solutions. During the quarter, we expanded our offerings to empower our customers for the modern workplace, protecting data from ever-increasing cyber threats and delivering highly secure productivity and collaboration solutions. A good example of this is our next-generation WebEx, our cloud-based team collaboration platform, enabling better teamwork while helping users stay secure with integrated end-to-end encryption. We also launched Single Platform Advantage, delivering all collaboration workloads, including calling, messaging, meeting, and contact center, from a single platform. In addition, we announced our new Cisco Webex Edge for devices, as well as hardware as a service options for phones, desks, and room-based video systems. We are raising the bar for the industry by continuing to drive innovation in our expanding family of cognitive collaboration offers with AI and ML integrated capabilities. During the quarter, we acquired CloudCherry, a market-leading customer experience management solution to augment our contact center portfolio with cloud analytics and AI to increase productivity and enhance user experiences. We also achieved a strong quarter in our AppDynamics business with yet another quarter of double-digit growth. Our investments in AppDynamics have made Cisco the leader in application monitoring and analytics. We are helping our customers transform their digital businesses through our comprehensive portfolio of solutions that turns data into actionable real-time insights by linking application performance to business outcomes. To summarize... While we remain in a challenging macroeconomic environment, I'm proud of our progress, both in our own continued transformation and in how we are empowering customers to drive their own transformation and shift to the cloud. We have a clear vision and strategy and are executing well against it to capture the many opportunities ahead. I feel great about our portfolio, and I believe fully in our customers' commitment to our technology solutions. We will also continue to invest in organic and inorganic innovation to position Cisco for the long term. We also remain committed to managing our business to ensure we drive the greatest long-term value for our customers, employees, partners, and shareholders. Now let me turn it over to Kelly.