EX-99.1 2 d800073dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Broadcom Inc. Announces Third Quarter Fiscal Year 2019 Financial Results and Quarterly Dividend

 

   

Revenue of $5,515 million for the quarter, up 9 percent from the prior year period

 

   

GAAP diluted EPS of $1.71; Non-GAAP diluted EPS of $5.16

 

   

GAAP operating profit margin of 16 percent; Non-GAAP operating profit margin of 53 percent

 

   

$2,307 million of free cash flow, defined as cash from operations of $2,419 million less capital expenditures of $112 million, up 8 percent from the prior year period

 

   

Quarterly dividend of $2.65 per share

 

   

Repurchased and eliminated 3.5 million shares for $977 million

 

   

Maintaining fiscal year 2019 guidance, including revenue outlook of $22.5 billion; $17.5 billion from semiconductor solutions and $5 billion from infrastructure software

SAN JOSE, Calif. – September 12, 2019Broadcom Inc. (Nasdaq: AVGO), a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions, today reported financial results for its third quarter of fiscal year 2019, ended August 4, 2019, and announced a quarterly dividend.

“Our broad portfolio of mission critical semiconductor and infrastructure software solutions, utilized by the world’s largest enterprises, continued to drive sustained revenues and robust cash flow despite a challenging market backdrop,” said Hock Tan, President and CEO of Broadcom Inc. “Looking at the semiconductor solutions segment, we believe demand has bottomed out but will continue to remain at these levels due to the current uncertain environment.”

“During the quarter, we generated over $2.3 billion in free cash flow representing over 8% growth on a year on year basis,” said Tom Krause, CFO of Broadcom Inc. “We returned over $2 billion to stockholders in the quarter including $1.1 billion in cash dividends and approximately $1 billion in share repurchases and eliminations. We remain fully committed to maintaining our investment grade credit rating and, looking forward, we intend to focus on deleveraging our balance sheet.”

Third Quarter Fiscal Year 2019 GAAP Results from Continuing Operations

Net revenue was $5,515 million, substantially consistent with $5,517 million in the previous quarter and 8.9 percent higher than $5,063 million in the same quarter last year.

Gross margin was $3,034 million, or 55.0 percent of net revenue. This compares with gross margin of $3,089 million, or 56.0 percent of net revenue, in the prior quarter, and gross margin of $2,619 million, or 51.7 percent of net revenue, in the same quarter last year.

 

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Operating expenses were $2,169 million. This compares with $2,119 million in the prior quarter and $1,280 million in the same quarter last year.

Operating income was $865 million, or 15.7 percent of net revenue. This compares with operating income of $970 million, or 17.6 percent of net revenue, in the prior quarter, and operating income of $1,339 million, or 26.4 percent of net revenue, in the same quarter last year.

Net income, which includes the impact of discontinued operations, was $715 million, or $1.71 per diluted share. This compares with net income of $691 million, or $1.64 per diluted share, in the prior quarter, and net income of $1,196 million, or $2.71 per diluted share, in the same quarter last year.

Cash from operations was $2,419 million in the quarter, compared to $2,247 million in the same quarter last year.

 

Third Quarter Fiscal Year 2019 GAAP Results

                     Change  

(Dollars in millions, except per share data)

   Q3 19     Q2 19     Q3 18     Q/Q     Y/Y  

Net revenue

   $ 5,515     $ 5,517     $ 5,063       -     +9

Gross margin

     55.0     56.0     51.7     -100bps       +330bps  

Operating expenses

   $  2,169     $  2,119     $  1,280     +$ 50     +$ 889  

Net income

   $ 715     $ 691     $ 1,196     +$ 24      -$ 481  

Earnings per share - diluted

   $ 1.71     $ 1.64     $ 2.71     +$ 0.07      -$ 1.00  

The Company’s cash and cash equivalents at the end of the third fiscal quarter were $5,462 million, compared to $5,328 million at the end of the prior quarter.

During the third fiscal quarter, the Company generated $2,419 million in cash from operations and spent $977 million on share repurchases and eliminations, consisting of $736 million in repurchases of 2.6 million shares and $241 million of withholding tax payments related to net settled equity awards that vested in the quarter (representing approximately 0.9 million shares withheld), as well as $112 million on capital expenditures.

On July 2, 2019, the Company paid a cash dividend of $2.65 per share of common stock, totaling $1,057 million.

Third Quarter Fiscal Year 2019 Non-GAAP Results From Continuing Operations

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.

Gross margin from continuing operations was $3,916 million, or 71.0 percent of net revenue. This compares with gross margin from continuing operations of $3,971 million, or 72.0 percent of net revenue, in the prior quarter, and $3,410 million, or 67.3 percent of net revenue, in the same quarter last year.

 

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Operating income from continuing operations was $2,910 million, or 52.8 percent of net revenue. This compares with operating income from continuing operations of $2,949 million, or 53.5 percent of net revenue, in the prior quarter, and $2,536 million, or 50.1 percent of net revenue, in the same quarter last year.

Net income from continuing operations was $2,281 million, or $5.16 per diluted share. This compares with net income of $2,334 million, or $5.21 per diluted share, in the prior quarter, and net income of $2,257 million, or $4.98 per diluted share, in the same quarter last year.

Free cash flow from operations, defined as cash from operations less capital expenditures, was $2,307 million in the quarter, compared to $2,127 million in the same quarter last year.

 

Third Quarter Fiscal Year 2019 Non-GAAP Results

   Q3 19     Q2 19     Q3 18     Change  

(Dollars in millions, except per share data)

  Q/Q      Y/Y  

Gross margin

     71.0     72.0     67.3     -100bps        +370bps  

Operating expenses

   $  1,006     $  1,022     $ 874      -$ 16      +$ 132  

Net income

   $ 2,281     $ 2,334     $  2,257      -$ 53      +$ 24  

Earnings per share - diluted

   $ 5.16     $ 5.21     $ 4.98      -$ 0.05      +$ 0.18  

Other Quarterly Data

 

Net revenue by segment

                                          Change  

(Dollars in millions)

   Q3 19     Q2 19     Q3 18     Q/Q     Y/Y  

Semiconductor solutions

   $  4,353        79   $  4,088        74   $  4,568        90     6     -5

Infrastructure software

     1,140        21       1,413        26       492        10       -19     132

Intellectual property licensing

     22        —         16        —         3        —         38     633
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

Total net revenue

   $ 5,515        100   $ 5,517        100   $ 5,063        100    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

Fiscal Year 2019 Business Outlook

Based on current business trends and conditions, the outlook for continuing operations for fiscal year 2019, ending November 3, 2019, including contributions from CA, is expected to be as follows:

 

     GAAP     Reconciling Items     Non-GAAP  

Net revenue

   $ 22,500M       —       $ 22,500M  

Operating margin

     14.75   $ 8,470M       52.50

Net interest expense and other

   $ 1,300M       —       $ 1,300M  

Provision for (benefit from) income taxes

     -17.75     28.75     11.00

 

   

Non-GAAP operating margin excludes $5,210 million of amortization of acquisition-related intangible assets, $2.2 billion of stock-based compensation expense, $800 million of restructuring charges, and $260 million of acquisition-related costs; and

 

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Non-GAAP tax provision is 28.75% higher than GAAP due to the tax effects of the projected reconciling items noted above.

Capital expenditures for the fiscal year are expected to be approximately $500 million. For the fiscal year, depreciation is expected to be $600 million and total intangible amortization is expected to be approximately $5,235 million.

The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. Among other things, this guidance is based on an initial estimate of purchase accounting adjustments and allocations for CA, Inc., all of which may be revised during the remainder of the measurement period (which will not exceed 12 months from the CA acquisition). The guidance excludes the impact of any future mergers, acquisitions, divestiture and stock repurchase activity that may occur during fiscal year 2019. 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 Dividend

The Company’s Board of Directors has approved a quarterly cash dividend of $2.65 per share.

The dividend is payable on October 1, 2019 to stockholders of record at the close of business (5:00 p.m. Eastern Time) on September 23, 2019.

Financial Results Conference Call

Broadcom Inc. will host a conference call to review its financial results for the third quarter of fiscal year 2019, ended August 4, 2019, and discuss guidance for fiscal year 2019, 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 8385364. 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: 8385364. A webcast of the conference call will also be available in the “Investors” section of Broadcom’s website at www.broadcom.com.

Basis of Presentation

Broadcom Inc. is the successor to Broadcom Limited for financial reporting purposes effective as of the close of trading on April 4, 2018. Information provided for fiscal periods beginning with the fiscal quarter ended May 6, 2018, relates to Broadcom Inc. and for prior fiscal periods relates to Broadcom Limited. Unless the context otherwise requires, references in this press release to “Broadcom,” “the Company,” “we,” “our,” “us” and similar terms are to Broadcom Inc. and, prior to that time, are to our predecessor, Broadcom Limited.

 

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The Company’s financial results include contributions from CA, Inc.’s continuing operations starting in the first quarter of fiscal year 2019. The financial results from businesses that have been classified as discontinued operations in the Company’s financial statements are not included in the results presented above, unless otherwise stated.

Due to the Company’s 52/53 week reporting cycle, fiscal year 2018 included an extra week in the first quarter, compared to fiscal year 2019.

Non-GAAP Financial Measures

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 includes the effect, where applicable, of purchase accounting on revenue, and 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, impairment on investment, debt-related costs, gain (loss) on extinguishment of debt, gains (losses) on investments, income (loss) from discontinued operations and non-GAAP tax reconciling 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.

Broadcom believes this 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. These non-GAAP measures are provided in addition to, and not 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.

 

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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 and mainframe software focused on automation, monitoring and security, smartphone components, telecoms and factory automation.

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: 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; global economic conditions and concerns; 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, including our pending Symantec Corporation transaction; government regulations and trade restrictions; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors of our products; dependence on senior management and our ability to attract and retain qualified personnel; international political and economic conditions; involvement in legal or administrative proceedings; our dependency on a limited number of suppliers; quarterly and annual fluctuations in operating results; cyclicality in the semiconductor industry or in our

 

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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 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 products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; 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; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; the amount and frequency of our stock repurchases; 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.

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:

Broadcom Inc.

Beatrice F. Russotto

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 Ended     Three Fiscal Quarters Ended  
     August 4,     May 5,     August 5,     August 4,     August 5,  
     2019     2019     2018     2019     2018  

Net revenue

   $  5,515     $  5,517     $  5,063     $  16,821     $  15,404  

Cost of revenue:

          

Cost of revenue

     1,651       1,592       1,680       4,935       5,275  

Purchase accounting effect on inventory

     —         —         —         —         70  

Amortization of acquisition-related intangible assets

     828       826       762       2,487       2,242  

Restructuring charges

     2       10       2       68       19  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     2,481       2,428       2,444       7,490       7,606  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     3,034       3,089       2,619       9,331       7,798  

Research and development

     1,235       1,151       959       3,519       2,820  

Selling, general and administrative

     410       419       234       1,300       819  

Amortization of acquisition-related intangible assets

     475       473       68       1,424       474  

Restructuring, impairment and disposal charges

     49       76       19       698       202  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,169       2,119       1,280       6,941       4,315  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     865       970       1,339       2,390       3,483  

Interest expense

     (362     (376     (149     (1,083     (480

Other income, net

     41       63       39       172       120  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     544       657       1,229       1,479       3,123  

Provision for (benefit from) income taxes

     (171     (36     32       (410     (8,391
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     715       693       1,197       1,889       11,514  

Loss from discontinued operations, net of income taxes

     —         (2     (1     (12     (19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     715       691       1,196       1,877       11,495  

Net income attributable to noncontrolling interest (1)

     —         —         —         —         351  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stock

   $ 715     $ 691     $ 1,196     $ 1,877     $ 11,144  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic income per share:

          

Income per share from continuing operations

   $ 1.80     $ 1.75     $ 2.78     $ 4.73     $ 26.58  

Loss per share from discontinued operations

     —         (0.01     —         (0.03     (0.05
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share

   $ 1.80     $ 1.74     $ 2.78     $ 4.70     $ 26.53  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted income per share (2):

          

Income per share from continuing operations

   $ 1.71     $ 1.64     $ 2.71     $ 4.50     $ 25.78  

Loss per share from discontinued operations

     —         —         —         (0.03     (0.04
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share

   $ 1.71     $ 1.64     $ 2.71     $ 4.47     $ 25.74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculations:

          

Basic

     398       397       430       399       420  

Diluted

     418       422       441       420       433  

Stock-based compensation expense included in continuing operations:

          

Cost of revenue

   $ 47     $ 41     $ 22     $ 122     $ 63  

Research and development

     456       371       222       1,138       630  

Selling, general and administrative

     129       132       71       381       217  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

   $ 632     $ 544     $ 315     $ 1,641     $ 910  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

In connection with the redomiciliation to the United States on April 4, 2018, or the Redomiciliation, all outstanding exchangeable limited partnership units, or LP Units, in Broadcom Cayman L.P. were exchanged for common stock of Broadcom on a one-for-one basis and the noncontrolling interest, or NCI, was eliminated. Net income attributable to NCI prior to the Redomiciliation represents approximately 5% of net income attributable to LP Units.

(2)

There were no LP Units outstanding during the fiscal quarters ended August 4, 2019, May 5, 2019, August 5, 2018 or three fiscal quarters ended August 4, 2019 due to the Redomiciliation. The diluted income per share calculations excluded the LP Units for the three fiscal quarters ended August 5, 2018 as the impact was antidilutive.


BROADCOM INC.

FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED

(IN MILLIONS)

 

     Fiscal Quarter Ended     Three Fiscal Quarters Ended  
     August 4,
2019
    May 5,
2019
    August 5,
2018
    August 4,
2019
    August 5,
2018
 

Net revenue on GAAP basis

   $  5,515     $  5,517     $  5,063     $  16,821     $  15,404  

Acquisition-related purchase accounting revenue adjustment (1)

     —         —         3       —         10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenue on non-GAAP basis

   $ 5,515     $ 5,517     $ 5,066     $ 16,821     $ 15,414  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin on GAAP basis

   $ 3,034     $ 3,089     $ 2,619     $ 9,331     $ 7,798  

Acquisition-related purchase accounting revenue adjustment (1)

     —         —         3       —         10  

Purchase accounting effect on inventory

     —         —         —         —         70  

Amortization of acquisition-related intangible assets

     828       826       762       2,487       2,242  

Stock-based compensation expense

     47       41       22       122       63  

Restructuring charges

     2       10       2       68       19  

Acquisition-related costs

     5       5       2       12       4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin on non-GAAP basis

   $ 3,916     $ 3,971     $ 3,410     $ 12,020     $ 10,206  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development on GAAP basis

   $ 1,235     $ 1,151     $ 959     $ 3,519     $ 2,820  

Stock-based compensation expense

     456       371       222       1,138       630  

Acquisition-related costs

     1       1       —         4       3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development on non-GAAP basis

   $ 778     $ 779     $ 737     $ 2,377     $ 2,187  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense on GAAP basis

   $ 410     $ 419     $ 234     $ 1,300     $ 819  

Stock-based compensation expense

     129       132       71       381       217  

Acquisition-related costs

     53       44       26       187       145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense on non-GAAP basis

   $ 228     $ 243     $ 137     $ 732     $ 457  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses on GAAP basis

   $ 2,169     $ 2,119     $ 1,280     $ 6,941     $ 4,315  

Amortization of acquisition-related intangible assets

     475       473       68       1,424       474  

Stock-based compensation expense

     585       503       293       1,519       847  

Restructuring, impairment and disposal charges

     49       76       19       698       202  

Acquisition-related costs

     54       45       26       191       148  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses on non-GAAP basis

   $ 1,006     $ 1,022     $ 874     $ 3,109     $ 2,644  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income on GAAP basis

   $ 865     $ 970     $ 1,339     $ 2,390     $ 3,483  

Acquisition-related purchase accounting revenue adjustment (1)

     —         —         3       —         10  

Purchase accounting effect on inventory

     —         —         —         —         70  

Amortization of acquisition-related intangible assets

     1,303       1,299       830       3,911       2,716  

Stock-based compensation expense

     632       544       315       1,641       910  

Restructuring, impairment and disposal charges

     51       86       21       766       221  

Acquisition-related costs

     59       50       28       203       152  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income on non-GAAP basis

   $ 2,910     $ 2,949     $ 2,536     $ 8,911     $ 7,562  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense on GAAP basis

   $ (362   $ (376   $ (149   $  (1,083   $ (480

Debt-related costs

     2       26       —         28       32  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense on non-GAAP basis

   $ (360   $ (350   $ (149   $  (1,055   $ (448
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income, net on GAAP basis

   $ 41     $ 63     $ 39     $ 172     $ 120  

(Gains) losses on investments

     (28     (40     1       (95     (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income, net on non-GAAP basis

   $ 13     $ 23     $ 40     $ 77     $ 117  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes on GAAP basis

   $ 544     $ 657     $ 1,229     $ 1,479     $ 3,123  

Acquisition-related purchase accounting revenue adjustment (1)

     —         —         3       —         10  

Purchase accounting effect on inventory

     —         —         —         —         70  

Amortization of acquisition-related intangible assets

     1,303       1,299       830       3,911       2,716  

Stock-based compensation expense

     632       544       315       1,641       910  

Restructuring, impairment and disposal charges

     51       86       21       766       221  

Acquisition-related costs

     59       50       28       203       152  

Debt-related costs

     2       26       —         28       32  

(Gains) losses on investments

     (28     (40     1       (95     (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes on non-GAAP basis

   $ 2,563     $ 2,622     $ 2,427     $ 7,933     $ 7,231  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for (benefit from) income taxes on GAAP basis

   $ (171   $ (36   $ 32     $ (410   $  (8,391

Non-GAAP tax reconciling adjustments

     453       324       138       1,282       8,777  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for income taxes on non-GAAP basis

   $ 282     $ 288     $ 170     $ 872     $ 386  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on GAAP basis

   $ 715     $ 691     $ 1,196     $ 1,877     $ 11,495  

Acquisition-related purchase accounting revenue adjustment (1)

     —         —         3       —         10  

Purchase accounting effect on inventory

     —         —         —         —         70  

Amortization of acquisition-related intangible assets

     1,303       1,299       830       3,911       2,716  

Stock-based compensation expense

     632       544       315       1,641       910  

Restructuring, impairment and disposal charges

     51       86       21       766       221  

Acquisition-related costs

     59       50       28       203       152  

Debt-related costs

     2       26       —         28       32  

(Gains) losses on investments

     (28     (40     1       (95     (3

Non-GAAP tax reconciling adjustments

     (453     (324     (138     (1,282     (8,777

Discontinued operations, net of income taxes

     —         2       1       12       19  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on non-GAAP basis

   $ 2,281     $ 2,334     $ 2,257     $ 7,061     $ 6,845  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation - diluted on GAAP basis

     418       422       441       420       433  

Non-GAAP adjustment (2)

     24       26       12       24       24  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation - diluted on non-GAAP basis

     442       448       453       444       457  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on non-GAAP basis

   $ 2,281     $ 2,334     $ 2,257     $ 7,061     $ 6,845  

Interest expense on non-GAAP basis

     360       350       149       1,055       448  

Provision for income taxes on non-GAAP basis

     282       288       170       872       386  

Depreciation

     141       142       129       426       383  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 3,064     $ 3,114     $ 2,705     $ 9,414     $ 8,062  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   $ 2,419     $ 2,667     $ 2,247     $ 7,218     $ 6,245  

Purchases of property, plant and equipment

     (112     (125     (120     (336     (529
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 2,307     $ 2,542     $ 2,127     $ 6,882     $ 5,716  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Fiscal
Quarter
Ending
                         

Expected average diluted share count:

   November 3,
2019
                         

Shares used in per share calculation - diluted on GAAP basis

     417          

Non-GAAP adjustment (2)

     23          
  

 

 

         

Shares used in per share calculation - diluted on non-GAAP basis

     440          
  

 

 

         

 

(1)

Amounts represent licensing revenue not included in GAAP net revenue as a result of the effect of purchase accounting for acquisitions.

(2)

Non-GAAP adjustment for 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.


BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(IN MILLIONS)

 

     August 4,
2019
    November 4,
2018
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 5,462     $ 4,292  

Trade accounts receivable, net

     3,539       3,325  

Inventory

     1,091       1,124  

Other current assets

     806       366  
  

 

 

   

 

 

 

Total current assets

     10,898       9,107  

Long-term assets:

    

Property, plant and equipment, net

     2,611       2,635  

Goodwill

     36,686       26,913  

Intangible assets, net

     18,879       10,762  

Other long-term assets

     693       707  
  

 

 

   

 

 

 

Total assets

   $  69,767     $  50,124  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 996     $ 811  

Employee compensation and benefits

     575       715  

Current portion of long-term debt

     3,537       —    

Other current liabilities

     3,174       812  
  

 

 

   

 

 

 

Total current liabilities

     8,282       2,338  

Long-term liabilities:

    

Long-term debt

     34,028       17,493  

Other long-term liabilities

     5,954       3,636  
  

 

 

   

 

 

 

Total liabilities

     48,264       23,467  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock and additional paid-in capital

     21,619       23,285  

Retained earnings

     —         3,487  

Accumulated other comprehensive loss

     (116     (115
  

 

 

   

 

 

 

Total stockholders’ equity

     21,503       26,657  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $    69,767     $ 50,124  
  

 

 

   

 

 

 


BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(IN MILLIONS)

 

     Fiscal Quarter Ended     Three Fiscal Quarters Ended  
     August 4,
2019
    May 5,
2019
    August 5,
2018
    August 4,
2019
    August 5,
2018
 

Cash flows from operating activities:

          

Net income

   $ 715     $ 691     $ 1,196     $ 1,877     $  11,495  

Adjustments to reconcile net income to net cash provided by operating activities:

          

Amortization of intangible assets

     1,309       1,305       836       3,930       2,730  

Depreciation

     141       142       129       426       383  

Stock-based compensation

     632       544       315       1,641       910  

Deferred taxes and other non-cash taxes

     (235     (94     22       (708     (8,512

Non-cash restructuring, impairment and disposal charges

     15       6       3       113       13  

Non-cash interest expense

     23       14       6       50       18  

Other

     (21     (39     5       (81     22  

Changes in assets and liabilities, net of acquisitions and disposals:

          

Trade accounts receivable, net

     (60     193       (262     201       (340

Inventory

     (57     40       19       33       325  

Accounts payable

     244       30       (41     105       (353

Employee compensation and benefits

     104       (6     205       (360     (87

Contributions to defined benefit pension plans

     —         —         (1     —         (130

Other current assets and current liabilities

     (354     (37     (148     115       206  

Other long-term assets and long-term liabilities

     (37     (122     (37     (124     (435
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     2,419       2,667       2,247       7,218       6,245  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Acquisitions of businesses, net of cash acquired

     (6     —         (7     (16,033     (4,793

Proceeds from sales of businesses

     —         —         —         957       782  

Purchases of property, plant and equipment

     (112     (125     (120     (336     (529

Proceeds from disposals of property, plant and equipment

     82       —         —         82       238  

Purchases of investments

     —         (5     —         (5     (249

Proceeds from sales of investments

     2       3       —         5       54  

Other

     (1     21       (47     (4     (59
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (35     (106     (174     (15,334     (4,556
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Proceeds from long-term borrowings

     —         10,897       —         28,793       —    

Repayment of debt

     —         (12,000     —         (12,000     (856

Payment of debt issuance costs

     —         —         —         (46     —    

Other borrowings

     (230     1,044       —         1,345       —    

Dividend and distribution payments

     (1,057     (1,057     (754     (3,181     (2,275

Repurchases of common stock - repurchase program

     (736     (830     (5,378     (5,002     (5,725

Shares repurchased for tax withholdings on vesting of equity awards

     (241     (500     (33     (818     (35

Issuance of common stock

     11       121       39       194       153  

Other

     3       (1     2       1       (19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (2,250     (2,326     (6,124     9,286       (8,757
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

     134       235       (4,051     1,170       (7,068

Cash and cash equivalents at the beginning of period

     5,328       5,093       8,187       4,292       11,204  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 5,462     $ 5,328     $ 4,136     $ 5,462     $ 4,136  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

          

Cash paid for interest

   $ 368     $ 189     $ 312     $ 980     $ 545  

Cash paid for income taxes

   $ 98     $ 425     $ 127     $ 618     $ 323