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Broadcom (AVGO)

Filed: 3 Jun 21, 4:19pm
Exhibit 99.1
                                                

Broadcom Inc. Announces Second Quarter Fiscal Year 2021 Financial Results and Quarterly Dividends

Revenue of $6,610 million for the second quarter, up 15 percent from the prior year period
GAAP net income of $1,493 million for the second quarter; Adjusted EBITDA of $3,960 million for the second quarter
GAAP diluted EPS of $3.30 for the second quarter; Non-GAAP diluted EPS of $6.62 for the second quarter
$3,443 million of free cash flow from operations for the second quarter, defined as cash from operations of $3,569 million less capital expenditures of $126 million
Quarterly common stock dividend of $3.60 per share
Third quarter revenue guidance of approximately $6.75 billion, an expected increase of 16 percent from the prior year period
Third quarter Adjusted EBITDA guidance of approximately 60 percent of projected revenue (1)

SAN JOSE, Calif. – June 3, 2021Broadcom Inc. (Nasdaq: AVGO), a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions, today reported financial results for its second quarter of fiscal year 2021, ended May 2, 2021, provided guidance for the third quarter of its fiscal year 2021 and announced its quarterly dividends.

“Due to the strength in demand for semiconductors across our multiple end markets, we delivered 20% year-over-year increase in semiconductor revenue,” said Hock Tan, President and CEO of Broadcom Inc. “Our third quarter outlook projects this year-over-year growth to sustain, as we continue to see strong demand from service providers and hypercloud.”

“Consolidated revenue grew 15% year-over-year and operating profit increased 25%,” said Kirsten Spears, CFO of Broadcom Inc. “We generated $3.4 billion in free cash flow or 52% of revenue in the quarter, and are expecting free cash flow to remain strong in the third quarter.”

Second Quarter Fiscal Year 2021 Financial Highlights
GAAPNon-GAAP
(Dollars in millions, except per share data)Q2 21Q2 20ChangeQ2 21Q2 20Change
Net revenue$6,610 $5,742 +15%$6,610 $5,742 +15%
Net income$1,493 $563 +$930$2,980 $2,323 +$657
Earnings per common share - diluted$3.30 $1.17 +$2.13$6.62 $5.14 +$1.48






________________________________
(1) The Company is not readily able to provide a reconciliation of the projected non-GAAP financial information presented to the relevant projected GAAP measure without unreasonable effort.

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(Dollars in millions)Q2 21Q2 20Change
Cash flow from operations$3,569 $3,213 +$356
Adjusted EBITDA$3,960 $3,209 +$751
Free cash flow$3,443 $3,065 +$378

Net revenue by segment
(Dollars in millions)Q2 21Q2 20Change
Semiconductor solutions$4,820 73%$4,027 70%+20%
Infrastructure software1,790 271,715 30+4%
Total net revenue$6,610 100%$5,742 100%

The Company’s cash and cash equivalents at the end of the second fiscal quarter were $9,518 million, compared to $9,552 million at the end of the prior quarter.

During the second fiscal quarter, the Company generated $3,569 million in cash from operations and spent $126 million on capital expenditures.

On March 31, 2021, the Company paid a cash dividend of $3.60 per share of common stock, totaling $1,477 million and a cash dividend of $20.00 per share of mandatory convertible preferred stock, totaling $75 million.

The differences between the Company’s GAAP and non-GAAP results are described generally under “Non-GAAP Financial Measures” below, and presented in detail in the financial reconciliation tables attached to this release.

Third Quarter Fiscal Year 2021 Business Outlook

Based on current business trends and conditions, the outlook for the third quarter of fiscal year 2021, ending August 1, 2021, is expected to be as follows:

a.Third quarter revenue guidance of approximately $6.75 billion; and
b.Third quarter Adjusted EBITDA guidance of approximately 60 percent of projected revenue

The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The Company is not readily able to provide a reconciliation of projected Adjusted EBITDA to projected net income without unreasonable effort. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.

Quarterly Dividends

The Company’s Board of Directors has approved a quarterly cash dividend on its common stock of $3.60 per share. The common stock dividend is payable on June 30, 2021 to common stockholders of record at the close of business (5:00 p.m. Eastern Time) on June 22, 2021.
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The Company’s Board of Directors has also approved a quarterly cash dividend on its 8.00% Mandatory Convertible Preferred Stock, Series A, of $20.00 per share. This dividend is payable on June 30, 2021 to preferred stockholders of record at the close of business (5:00 p.m. Eastern Time) on June 15, 2021.

Financial Results Conference Call

Broadcom Inc. will host a conference call to review its financial results for the second quarter fiscal year 2021 and to discuss the business outlook, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (866) 310-8712; International +1 (720) 634-2946. The passcode is 2374098. A replay of the call will be accessible for one week after the call. To access the replay dial (855) 859-2056; International +1 (404) 537-3406; and reference the passcode: 2374098. A webcast of the conference call will also be available in the “Investors” section of Broadcom’s website at www.broadcom.com.

Non-GAAP Financial Measures

The non-GAAP measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release. Broadcom believes non-GAAP financial information provides additional insight into the Company’s on-going performance. Therefore, Broadcom provides this information to investors for a more consistent basis of comparison and to help them evaluate the results of the Company’s on-going operations and enable more meaningful period to period comparisons.

In addition to GAAP reporting, Broadcom provides investors with net revenue, net income, operating income, gross margin, operating expenses, cash flow and other data on a non-GAAP basis. This non-GAAP information excludes amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, including integration costs, purchase accounting effect on inventory, litigation settlements, loss on debt extinguishment, gains (losses) on investments, income (loss) from discontinued operations, non-GAAP tax reconciling adjustments, and other adjustments. Management does not believe that these items are reflective of the Company’s underlying performance. Internally, these non-GAAP measures are significant measures used by management for purposes of evaluating the core operating performance of the Company, establishing internal budgets, calculating return on investment for development programs and growth initiatives, comparing performance with internal forecasts and targeted business models, strategic planning, evaluating and valuing potential acquisition candidates and how their operations compare to the Company’s operations, and benchmarking performance externally against the Company’s competitors. The exclusion of these and other similar items from Broadcom’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual.

Free cash flow measures have limitations as they omit certain components of the overall cash flow statement and do not represent the residual cash flow available for discretionary expenditures. Investors should not consider presentation of free cash flow measures as implying that stockholders have any right to such cash. Broadcom’s free cash flow may not be calculated in a manner comparable to similarly named measures used by other companies.

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About Broadcom Inc.

Broadcom Inc., (NASDAQ: AVGO), a Delaware corporation headquartered in San Jose, CA, is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. Broadcom's category-leading product portfolio serves critical markets including data center, networking, enterprise software, broadband, wireless, storage and industrial. Our solutions include data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation. For more information, go to www.broadcom.com.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as “will,” “expect,” “believe,” “anticipate,” “estimate,” “should,” “intend,” “plan,” “potential,” “predict,” “project,” “aim,” and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company’s and management’s control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Particular uncertainties that could materially affect future results include risks associated with: the COVID-19 pandemic, which has disrupted, and will likely continue to disrupt, normal business activity, and which may have an adverse effect on our results of operations; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; government regulations, trade restrictions and trade tensions; global economic conditions and concerns; global political and economic conditions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities, warehouses or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software
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products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result.

Our filings with the SEC, which you may obtain for free at the SEC’s website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this announcement, whether as a result of new information, future events or otherwise, except as required by law.

Contact:
Ji Yoo
Broadcom Inc.
Investor Relations
408-433-8000
investor.relations@broadcom.com

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BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
Fiscal Quarter EndedTwo Fiscal Quarters Ended
May 2,
2021
January 31,
2021
May 3,
2020
May 2,
2021
May 3,
2020
Net revenue$6,610 $6,655 $5,742 $13,265 $11,600 
Cost of revenue:
Cost of revenue1,699 1,814 1,592 3,513 3,228 
Amortization of acquisition-related intangible assets853 874 954 1,727 1,904 
Restructuring charges15 16 15 
Total cost of revenue2,553 2,703 2,553 5,256 5,147 
Gross margin4,057 3,952 3,189 8,009 6,453 
Research and development1,238 1,211 1,269 2,449 2,558 
Selling, general and administrative325 339 501 664 1,102 
Amortization of acquisition-related intangible assets494 494 599 988 1,202 
Restructuring, impairment and disposal charges25 71 54 96 111 
Total operating expenses2,082 2,115 2,423 4,197 4,973 
Operating income1,975 1,837 766 3,812 1,480 
Interest expense(466)(570)(487)(1,036)(893)
Other income (expense), net(23)117 130 94 126 
Income from continuing operations before income taxes1,486 1,384 409 2,870 713 
Provision for (benefit from) income taxes(7)(159)(1)(235)
Income from continuing operations1,493 1,378 568 2,871 948 
Loss from discontinued operations, net of income taxes— — (5)— — 
Net income1,493 1,378 563 2,871 948 
Dividends on preferred stock(76)(74)(75)(150)(149)
Net income attributable to common stock$1,417 $1,304 $488 $2,721 $799 
Basic income per share attributable to common stock:
Income per share from continuing operations$3.46 $3.20 $1.23 $6.67 $2.00 
Loss per share from discontinued operations— — (0.01)— — 
Net income per share$3.46 $3.20 $1.22 $6.67 $2.00 
Diluted income per share attributable to common stock (1):
    
Income per share from continuing operations$3.30 $3.05 $1.18 $6.34 $1.91 
Loss per share from discontinued operations— — (0.01)— — 
Net income per share$3.30 $3.05 $1.17 $6.34 $1.91 
Weighted-average shares used in per share calculations:
Basic409 407 401 408 400 
Diluted429 428 417 429 419 
Stock-based compensation expense included in continuing operations:
Cost of revenue$38 $32 $41 $70 $84 
Research and development307 328 373 635 764 
Selling, general and administrative80 84 103 164 214 
Total stock-based compensation expense$425 $444 $517 $869 $1,062 
(1) Excludes the potentially dilutive effect of Mandatory Convertible Preferred Stock as the impact was antidilutive.





BROADCOM INC.
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP — UNAUDITED
(IN MILLIONS)
Fiscal Quarter EndedTwo Fiscal Quarters Ended
May 2,
2021
January 31,
2021
May 3,
2020
May 2,
2021
May 3,
2020
Gross margin on GAAP basis$4,057 $3,952 $3,189 $8,009 $6,453 
Purchase accounting effect on inventory— — — — 11 
Amortization of acquisition-related intangible assets853 874 954 1,727 1,904 
Stock-based compensation expense38 32 41 70 84 
Restructuring charges15 16 15 
Acquisition-related costs
Gross margin on non-GAAP basis$4,952 $4,876 $4,196 $9,828 $8,473 
Research and development on GAAP basis$1,238 $1,211 $1,269 $2,449 $2,558 
Stock-based compensation expense307 328 373 635 764 
Acquisition-related costs12 
Research and development on non-GAAP basis$930 $882 $891 $1,812 $1,782 
Selling, general and administrative expense on GAAP basis$325 $339 $501 $664 $1,102 
Stock-based compensation expense80 84 103 164 214 
Acquisition-related costs25 41 95 66 270 
Litigation settlements— — 29 — 42 
Selling, general and administrative expense on non-GAAP basis$220 $214 $274 $434 $576 
Total operating expenses on GAAP basis$2,082 $2,115 $2,423 $4,197 $4,973 
Amortization of acquisition-related intangible assets494 494 599 988 1,202 
Stock-based compensation expense387 412 476 799 978 
Restructuring, impairment and disposal charges25 71 54 96 111 
Litigation settlements— — 29 — 42 
Acquisition-related costs26 42 100 68 282 
Total operating expenses on non-GAAP basis$1,150 $1,096 $1,165 $2,246 $2,358 
Operating income on GAAP basis$1,975 $1,837 $766 $3,812 $1,480 
Purchase accounting effect on inventory— — — — 11 
Amortization of acquisition-related intangible assets1,347 1,368 1,553 2,715 3,106 
Stock-based compensation expense425 444 517 869 1,062 
Restructuring, impairment and disposal charges26 86 61 112 126 
Litigation settlements— — 29 — 42 
Acquisition-related costs29 45 105 74 288 
Operating income on non-GAAP basis$3,802 $3,780 $3,031 $7,582 $6,115 
Interest expense on GAAP basis$(466)$(570)$(487)$(1,036)$(893)
Loss on debt extinguishment50 172 93 222 98 
Interest expense on non-GAAP basis$(416)$(398)$(394)$(814)$(795)
Other income (expense), net on GAAP basis$(23)$117 $130 $94 $126 
Gain from lapse of indemnification— — (116)— (116)
(Gains) losses on investments25 (119)(8)(94)10 
Acquisition-related gain(1)(2)(3)(3)(7)
Other income (expense), net on non-GAAP basis$$(4)$$(3)$13 



Fiscal Quarter EndedTwo Fiscal Quarters Ended
May 2,
2021
January 31,
2021
May 3,
2020
May 2,
2021
May 3,
2020
Provision for (benefit from) income taxes on GAAP basis$(7)$$(159)$(1)$(235)
Non-GAAP tax reconciling adjustments414 399 476 813 875 
Provision for income taxes on non-GAAP basis$407 $405 $317 $812 $640 
Net income on GAAP basis$1,493 $1,378 $563 $2,871 $948 
Purchase accounting effect on inventory— — — — 11 
Amortization of acquisition-related intangible assets1,347 1,368 1,553 2,715 3,106 
Stock-based compensation expense425 444 517 869 1,062 
Restructuring, impairment and disposal charges26 86 61 112 126 
Litigation settlements— — 29 — 42 
Acquisition-related costs28 43 102 71 281 
Loss on debt extinguishment50 172 93 222 98 
Gain from lapse of indemnification— — (116)— (116)
(Gains) losses on investments25 (119)(8)(94)10 
Non-GAAP tax reconciling adjustments(414)(399)(476)(813)(875)
Loss from discontinued operations, net of income taxes— — — — 
Net income on non-GAAP basis$2,980 $2,973 $2,323 $5,953 $4,693 
Weighted-average shares used in per share calculations - diluted on GAAP basis429 428 417 429 419 
Non-GAAP adjustment (1)
21 22 35 21 33 
Weighted-average shares used in per share calculations - diluted on non-GAAP basis450 450 452 450 452 
Net income on non-GAAP basis$2,980 $2,973 $2,323 $5,953 $4,693 
Interest expense on non-GAAP basis416 398 394 814 795 
Provision for income taxes on non-GAAP basis407 405 317 812 640 
Depreciation133 138 147 271 293 
Amortization of purchased intangibles and right-of-use assets24 27 28 51 53 
Adjusted EBITDA$3,960 $3,941 $3,209 $7,901 $6,474 
Net cash provided by operating activities$3,569 $3,113 $3,213 $6,682 $5,535 
Purchases of property, plant and equipment(126)(114)(148)(240)(256)
Free cash flow$3,443 $2,999 $3,065 $6,442 $5,279 

Fiscal Quarter Ending
August 1,
Expected average diluted share count:2021
Weighted-average shares used in per share calculation - diluted on GAAP basis429 
Non-GAAP adjustment (1)
20 
Weighted-average shares used in per share calculation - diluted on non-GAAP basis449 

(1) Non-GAAP adjustment for the number of shares used in the diluted per share calculations excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. The non-GAAP adjustment also includes the impact of Mandatory Convertible Preferred Stock that is antidilutive on a GAAP basis. For the fiscal quarter ending August 1, 2021, the non-GAAP adjustment includes the impact of Mandatory Convertible Preferred Stock that is expected to be antidilutive on a GAAP basis.




BROADCOM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(IN MILLIONS)
May 2,
2021
November 1,
2020
ASSETS
Current assets:
Cash and cash equivalents$9,518 $7,618 
Trade accounts receivable, net2,425 2,297 
Inventory1,004 1,003 
Other current assets1,298 977 
Total current assets14,245 11,895 
Long-term assets:
Property, plant and equipment, net2,416 2,509 
Goodwill43,457 43,447 
Intangible assets, net14,068 16,782 
Other long-term assets1,338 1,300 
Total assets$75,524 $75,933 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$830 $836 
Employee compensation and benefits639 877 
Current portion of long-term debt278 827 
Other current liabilities4,689 3,831 
Total current liabilities6,436 6,371 
Long-term liabilities:
Long-term debt40,160 40,235 
Other long-term liabilities4,962 5,426 
Total liabilities51,558 52,032 
Preferred stock dividend obligation27 27 
Stockholders' equity:
Preferred stock— — 
Common stock— — 
Additional paid-in capital24,045 23,982 
Retained earnings— — 
Accumulated other comprehensive loss(106)(108)
Total stockholders' equity23,939 23,874 
  Total liabilities and equity$75,524 $75,933 





BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(IN MILLIONS)
Fiscal Quarter EndedTwo Fiscal Quarters Ended
May 2,
2021
January 31,
2021
May 3,
2020
May 2,
2021
May 3,
2020
Cash flows from operating activities:
Net income$1,493 $1,378 $563 $2,871 $948 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible and right-of-use assets1,371 1,395 1,583 2,766 3,165 
Depreciation133 138 147 271 293 
Stock-based compensation425 444 517 869 1,062 
Deferred taxes and other non-cash taxes(177)(149)(175)(326)(247)
Loss on debt extinguishment26 172 93 198 98 
Unrealized (gain) loss on investments25 (119)— (94)— 
Non-cash restructuring, impairment and disposal charges12 15 27 17 
Non-cash interest expense21 22 31 43 61 
Other(3)(5)(8)(8)11 
Changes in assets and liabilities, net of acquisitions and disposals:
  Trade accounts receivable, net106 (247)440 (141)48 
  Inventory(52)51 (10)(1)30 
  Accounts payable(58)44 233 (14)350 
  Employee compensation and benefits135 (375)61 (240)(156)
  Other current assets and current liabilities182 408 118 590 464 
  Other long-term assets and long-term liabilities(70)(59)(386)(129)(609)
Net cash provided by operating activities3,569 3,113 3,213 6,682 5,535 
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired— (8)— (8)(10,870)
Proceeds from sale of business— — 168 — 168 
Purchases of property, plant and equipment(126)(114)(148)(240)(256)
Proceeds from disposals of property, plant and equipment— — — 
Other(3)— (3)(5)
Net cash provided by (used in) investing activities(126)(122)24 (248)(10,963)
Cash flows from financing activities: 
Proceeds from long-term borrowings— 9,904 4,468 9,904 19,849 
Payments on debt obligations(1,533)(9,200)(4,452)(10,733)(8,989)
Other borrowings, net— — 1,025 — 1,743 
Payments of dividends(1,552)(1,543)(1,381)(3,095)(2,753)
Shares repurchased for tax withholdings on vesting of equity awards(461)(225)(219)(686)(388)
Issuance of common stock71 35 91 106 128 
Other(2)(28)(6)(30)(10)
Net cash provided by (used in) financing activities(3,477)(1,057)(474)(4,534)9,580 
Net change in cash and cash equivalents(34)1,934 2,763 1,900 4,152 
Cash and cash equivalents at beginning of period9,552 7,618 6,444 7,618 5,055 
Cash and cash equivalents at end of period$9,518 $9,552 $9,207 $9,518 $9,207 
Supplemental disclosure of cash flow information:
Cash paid for interest$369 $372 $375 $741 $756 
Cash paid for income taxes$293 $147 $124 $440 $255