Cisco Systems, Inc.

Welcome to Cisco's Second 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. And you may begin.

Thanks, Michelle. Welcome, everyone, to Cisco's Second 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. Income statements, full gap to non-gap 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 third quarter of fiscal 2020. They are subject to the risk and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ materially 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. With that, I'll now turn it over to Chuck.

Thanks, Marilyn, and good afternoon, everyone. As we told you last quarter and still see now, the feedback from our customers is that they remain strongly committed to both our products and services. However, like many in our industry, we are seeing longer decision-making cycles across our customer segments for a variety of reasons, including macro uncertainty as well as unique geographical issues. The good news is once this uncertainty passes for our customers, we expect to see spending recover as technology continues to be at the heart of all they do. You'll see in our numbers this quarter that we continue to make progress on several key metrics, including our shift to more software and subscriptions, with 72% of our software now being sold as a subscription. While we still have a lot more work to do, I firmly believe we have a tremendous opportunity ahead of us. The long-term secular growth trends of 5G, Wi-Fi 6, 400 gig, and the shift to the cloud remain, and we expect to benefit from them. This is a multi-year transformation, and we are managing our business well while staying focused on helping our customers build simpler, more secure and cost-effective networks. The broad adoption of multi-cloud and modern application environments is changing how the world's largest networks are built, operated and secured, and Cisco is at the center of this transition. We have made significant investments in the development of software, silicon, and optics, the building blocks for the Internet of the future. We believe this strategy will change the economics of how the Internet will be built to support 5G, 400 gig, and the demands of the future, while helping our customers innovate and move faster than ever before. In December, we introduced Cisco Silicon One, a first-ever single unified silicon architecture and the Cisco 8000 carrier-class router family built on Silicon 1 as well as our new iOS XR7 operating system. We also announced new flexible purchasing options that enable customers to consume our technology however they choose. We also collaborated closely with several of the largest web-scale and SP companies throughout the development process. Their participation in our launch demonstrates their strong support of our strategy as well as our commitment to continued innovation. Our goal is to accelerate the deployment of next-generation Internet infrastructure by offering our customers choices of components, white box, or integrated systems in a flexible consumption model. Now let me share a brief update on our businesses, starting with infrastructure platforms. As the global leader in networking, we believe we are well positioned with our intent-based networking portfolio, given the strategic investments we've been making. Over the past several quarters, we've made tremendous progress integrating automation, analytics, and security across our enterprise networking portfolio, while at the same time shifting to a subscription-based model. A great example of our success is the ongoing strong adoption of our Catalyst 9000 platforms. We continue to extend our secure SD-WAN solutions as customers move more applications to the cloud. To do this, we are actively engaging with web-scale companies to help our customers extend their wide-area networks to the cloud and secure their business applications. Recently, we announced integration with Microsoft Azure Virtual WAN and Office 365, along with a deeper partnership with Amazon Web Services to deliver highly secure end-to-end connectivity and better application performance. Now to security. We had another solid quarter with strength across our advanced threat and cloud-based solutions, including Duo and Umbrella, which are important growth drivers of our business. We continue to see significant opportunity as we execute on our strategy to deliver an integrated security platform. As the market moves to a multi-cloud environment and the need for visibility grows, we're benefiting from our strong position as our customer's most trusted partner. Our differentiated end-to-end approach across the network, cloud, and endpoint is winning customers, with 100% of the Fortune 100 now using one or more of Cisco's security solutions. This quarter, we expanded our security portfolio from the cloud to the edge. We brought to market an integrated IoT architecture, providing enhanced visibility, insights, and threat detection across our customers' entire environment. This architecture includes our new software-based security solutions, CyberVision, and our edge intelligence data collection tool to enable our customers to make better business decisions. Finally, applications. There is no question that customers are undergoing a significant workplace transformation, and they are turning to Cisco to help them with this transition. As a global market leader, we believe we are the only company providing a cognitive, highly secure, and analytics-driven collaboration platform, which is the foundation for their workplace transformation. This platform is becoming increasingly critical to how enterprises empower their teams by allowing their employees to work more effectively together. To extend our value proposition, we continue to make strategic investments. For example, we recently brought to market several key WebEx capabilities which combine context, AI, and machine learning to enable our customers and their teams to further enhance their meeting experiences. We achieved another strong quarter of growth with AppDynamics, demonstrating our ability to deliver unique real-time AI-powered insights from a single pane of glass, providing complete visibility. Our customers are looking to connect application performance monitoring with infrastructure automation to simplify IT and increase productivity. Two weeks ago, we announced we were bringing together AppDynamics and our Intersight Workload Optimizer, to deliver comprehensive visibility of applications and infrastructure both on-prem and in the cloud using machine learning and AI to proactively remediate problems and optimize user experiences. To summarize, I am pleased with our business transformation and with the new innovative platforms we're bringing to market. While we continue to experience some pause in customer spending related to the uncertainty in the global macro environment, our long-term growth opportunities remain unchanged. Going forward, we will continue to focus on developing groundbreaking technologies and building a new Internet for the 5G era that will help our customers innovate faster than ever before. I remain incredibly confident that our execution against our strategy will drive profitable growth and generate strong shareholder returns for the long term. I will now turn it over to Kelly.