Kelly kramer shareholder value draft final

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1. Driving Shareholder Value Kelly Kramer Executive Vice President, Chief Financial Officer June 9, 2015 2. 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 Ciscos 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 2Investor Day 2015 3. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor Day 2015 Profitable Growth Strategic Investments Capital Return Core Financial Values Cisco and/or its affiliates. All rights reserved. Cisco Public 3Investor Day 2015 4. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 4Investor Day 2015 Source: DellOro, Synergy, Infonetics, ACG; Q1CY15 Market share data Cisco Network Security share DOES include Sourcefire; Web Conferencing is SaaS * Q4CY14 Synergy data 5. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor Day 2015 Cisco Competitive Advantage Source: DellOro, Synergy, Infonetics, ACG; Q1CY15 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 * Q4CY14 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 5Investor Day 2015 6. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 Q415 guidance Cisco and/or its affiliates. All rights reserved. Cisco Public 6Investor Day 2015 7. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 7Investor Day 2015 YoY Growth Rates 8. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 Ciscos SEC filings, including business and economic conditions. $B Cisco and/or its affiliates. All rights reserved. Cisco Public 8Investor Day 2015 9. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 9Investor Day 2015 10. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 10Investor Day 2015 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Ciscos SEC filings, including business and economic conditions. 11. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 11Investor 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 Ciscos SEC filings, including business and economic conditions. 12. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 PublicInvestor Day 2015 12 The FY15E amount is an estimate. Actual results may differ materially due to a variety of factors listed in Ciscos SEC filings, including business and economic conditions. 13. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor Day 2015 FY11 FY12 FY13 FY14 3Q15YTD 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 14. Future Growth and Profitability 15. Cisco and/or its affiliates. All rights reserved. Cisco PublicInvestor 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 Q415 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 Ciscos SEC filings, including business and economic conditions. Switching, Wireless and Routing Driving Solid Growth Cisco and/or its affiliates. All rights re