- Net revenue down 4 percent sequentially to
$709 million , up 23 percent from Q1 last year - GAAP gross margin of 48 percent; Non-GAAP gross margin of 52 percent
- GAAP diluted EPS of
$0.53 ; Non-GAAP diluted EPS of$0.84
First Quarter Fiscal Year 2014 GAAP Results
Net revenue was
Gross margin was
Operating expenses were
Income from operations was
First quarter net income was
The Company's cash balance at the end of the first quarter was
The Company generated
On
First Quarter Fiscal Year 2014 Non-GAAP Results
Gross margin was
Income from operations was
Net income was
| First Quarter Fiscal Year 2014 Non-GAAP Results | Change | ||||
| (Dollars in millions, except EPS) | Q1 14 | Q4 13 | Q1 13 | Q/Q | Y/Y |
| Net Revenue | $709 | $738 | $576 | -4% | +23% |
| Gross Margin | 52% | 51% | 51% | +1ppt | +1ppt |
| Operating Expenses | $142 | $145 | $130 | -$3 | +$12 |
| Net Income | $217 | $227 | $163 | -4% | +33% |
| Earnings Per Share - Diluted | $0.84 | $0.89 | $0.65 | -$0.05 | +$0.19 |
"In the first fiscal quarter of the year, we experienced significant growth in our wireless and wired infrastructure end markets and a clear recovery in our industrial as we compare revenue to the same quarter a year ago," said Hock Tan, President and CEO of
Other Quarterly Data
| Percentage of Net Revenue | Growth Rates | ||||
| Net Revenues by Target Market | Q1 14 | Q4 13 | Q1 13 | Q/Q | Y/Y |
| Wireless Communications | 49 | 47 | 53 | 1% | 13% |
| Wired Infrastructure | 32 | 33 | 25 | -7% | 59% |
| Industrial & Other | 19 | 20 | 22 | -11% | 6% |
| Key Statistics | Q1 14 | Q4 13 | Q1 13 | ||
| (Dollars in millions) | |||||
| Cash From Operations | $229 | $212 | $185 | ||
| Depreciation | $32 | $32 | $22 | ||
| Amortization | $25 | $26 | $19 | ||
| Capital Expenditures | $52 | $57 | $67 | ||
| Days Sales Outstanding | 42 | 52 | 46 | ||
| Inventory Days On Hand | 76 | 71 | 72 | ||
Second Quarter Fiscal Year 2014 Business Outlook
Based on current business trends and conditions, the outlook for the second quarter of fiscal year 2014, ending
| GAAP | Reconciling Items | Non-GAAP | |
| Sequential Change in Net Revenue | Down 3% to 6% | Down 3% to 6% | |
| Gross Margin | 48.5% plus/minus 1% | $25M | 52.5% plus/minus 1% |
| Operating Expenses | $201M | $54M | $147M |
| Taxes | $9M | $2M | $7M |
| Diluted Share Count | 258M | 3M | 261M |
Reconciling items include:
$18 million of amortization of intangible assets,$3 million of share-based compensation expense,$2 million of restructuring charges, and$2 million of acquisition-related costs primarily attributable to the CyOptics acquisition at the Gross Margin line;$8 million of amortization of intangible assets,$27 million of share-based compensation,$6 million of restructuring charges, and$13 million of acquisition-related costs attributable to the CyOptics acquisition and the pending LSI acquisition at the Operating Expenses line; and$2 million , which represents the tax effects of the reconciling items noted above at the Taxes line.
Capital expenditures for the second quarter are expected to be approximately
The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The guidance excludes any impact from share repurchases or mergers and acquisitions activity that may occur during the quarter. 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.
Financial Results Conference Call
Non-GAAP Financial Measures
In addition to GAAP reporting,
About
Cautionary Note Regarding Forward-Looking Statements
This announcement contains forward-looking statements that address our expected future business and financial performance. These forward-looking statements are based on current expectations, estimates, forecasts and projections of future Company or industry performance, based on management's judgment, beliefs, current trends and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. For Avago, particular uncertainties that could materially affect future results include global economic conditions and concerns; cyclicality in the semiconductor industry or in our target markets; quarterly and annual fluctuations in operating results; loss of our significant customers; increased dependence on the volatile, wireless handset market; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of those design wins; market acceptance of the end products into which our products are designed; rates of growth in our target markets; failure to complete our acquisition of
| AVAGO TECHNOLOGIES LIMITED | |||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED | |||
| (IN MILLIONS, EXCEPT PER SHARE DATA) | |||
| Fiscal Quarter Ended | |||
| February 2, | November 3, | February 3, | |
| 2014 | 2013 | 2013 | |
| Net revenue | $ 709 | $ 738 | $ 576 |
| Cost of products sold: | |||
| Cost of products sold | 347 | 373 | 286 |
| Amortization of intangible assets | 18 | 19 | 14 |
| Restructuring charges | 5 | -- | -- |
| Total cost of products sold | 370 | 392 | 300 |
| Gross margin | 339 | 346 | 276 |
| Research and development | 107 | 109 | 93 |
| Selling, general and administrative | 74 | 60 | 53 |
| Amortization of intangible assets | 7 | 7 | 5 |
| Restructuring charges | 12 | -- | 1 |
| Total operating expenses | 200 | 176 | 152 |
| Income from operations | 139 | 170 | 124 |
| Loss on extinguishment of debt | -- | (1) | -- |
| Other income, net | -- | 11 | 2 |
| Income before income taxes | 139 | 180 | 126 |
| Provision for income taxes | 5 | 8 | 1 |
| Net income | $ 134 | $ 172 | $ 125 |
| Net income per share: | |||
| Basic | $ 0.54 | $ 0.69 | $ 0.51 |
| Diluted | $ 0.53 | $ 0.68 | $ 0.50 |
| Shares used in per share calculations: | |||
| Basic | 249 | 248 | 246 |
| Diluted | 255 | 253 | 251 |
| Share-based compensation expense included in: | |||
| Cost of products sold | $ 3 | $ 3 | $ 2 |
| Research and development | 8 | 8 | 7 |
| Selling, general and administrative | 13 | 11 | 9 |
| Total share-based compensation expense | $ 24 | $ 22 | $ 18 |
| AVAGO TECHNOLOGIES LIMITED | |||
| NON-GAAP FINANCIAL SUMMARY - UNAUDITED(1) | |||
| (IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA) | |||
| Fiscal Quarter Ended | |||
| February 2, | November 3, | February 3, | |
| 2014 | 2013 | 2013 | |
| Net revenue | $ 709 | $ 738 | $ 576 |
| Gross margin | $ 366 | $ 374 | $ 292 |
| % of net revenue | 52% | 51% | 51% |
| Research and development | $ 98 | $ 100 | $ 86 |
| Selling, general and administrative | $ 44 | $ 45 | $ 44 |
| Total operating expenses | $ 142 | $ 145 | $ 130 |
| % of net revenue | 20% | 20% | 23% |
| Income from operations | $ 224 | $ 229 | $ 162 |
| Income before income taxes | $ 224 | $ 240 | $ 164 |
| Provision for income taxes | $ 7 | $ 13 | $ 1 |
| Net income | $ 217 | $ 227 | $ 163 |
| Net income per share - diluted | $ 0.84 | $ 0.89 | $ 0.65 |
| Shares used in per share calculation - diluted | 258 | 255 | 252 |
| (1) A reconciliation of the non-GAAP measures presented above to the most directly comparable GAAP financial data appears on the next page. These non-GAAP measures are provided in addition to and not as a substitute for measures of financial performance prepared in accordance with GAAP. The financial summary excludes amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, loss on extinguishment of debt, and income tax effects of non-GAAP reconciling adjustments. |
| AVAGO TECHNOLOGIES LIMITED | |||
| FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED | |||
| (IN MILLIONS) | |||
| Fiscal Quarter Ended | |||
| February 2, | November 3, | February 3, | |
| 2014 | 2013 | 2013 | |
| Net income on GAAP basis | $ 134 | $ 172 | $ 125 |
| Amortization of intangible assets | 25 | 26 | 19 |
| Share-based compensation expense | 24 | 22 | 18 |
| Restructuring charges | 17 | -- | 1 |
| Acquisition-related costs | 19 | 11 | -- |
| Loss on extinguishment of debt | -- | 1 | -- |
| Income tax effects of non-GAAP reconciling adjustments | (2) | (5) | -- |
| Net income on non-GAAP basis | $ 217 | $ 227 | $ 163 |
| Gross margin on GAAP basis | $ 339 | $ 346 | $ 276 |
| Amortization of intangible assets | 18 | 19 | 14 |
| Share-based compensation expense | 3 | 3 | 2 |
| Restructuring charges | 5 | -- | -- |
| Acquisition-related costs | 1 | 6 | -- |
| Gross margin on non-GAAP basis | $ 366 | $ 374 | $ 292 |
| Research and development on GAAP basis | $ 107 | $ 109 | $ 93 |
| Share-based compensation expense | 8 | 8 | 7 |
| Acquisition-related costs | 1 | 1 | -- |
| Research and development on non-GAAP basis | $ 98 | $ 100 | $ 86 |
| Selling, general and administrative expense on GAAP basis | $ 74 | $ 60 | $ 53 |
| Share-based compensation expense | 13 | 11 | 9 |
| Acquisition-related costs | 17 | 4 | -- |
| Selling, general and administrative expense on non-GAAP basis | $ 44 | $ 45 | $ 44 |
| Total operating expense on GAAP basis | $ 200 | $ 176 | $ 152 |
| Amortization of intangible assets | 7 | 7 | 5 |
| Share-based compensation expense | 21 | 19 | 16 |
| Restructuring charges | 12 | -- | 1 |
| Acquisition-related costs | 18 | 5 | -- |
| Total operating expense on non-GAAP basis | $ 142 | $ 145 | $ 130 |
| Income from operations on GAAP basis | $ 139 | $ 170 | $ 124 |
| Amortization of intangible assets | 25 | 26 | 19 |
| Share-based compensation expense | 24 | 22 | 18 |
| Restructuring charges | 17 | -- | 1 |
| Acquisition-related costs | 19 | 11 | -- |
| Income from operations on non-GAAP basis | $ 224 | $ 229 | $ 162 |
| Income before income taxes on GAAP basis | $ 139 | $ 180 | $ 126 |
| Amortization of intangible assets | 25 | 26 | 19 |
| Share-based compensation expense | 24 | 22 | 18 |
| Restructuring charges | 17 | -- | 1 |
| Acquisition-related costs | 19 | 11 | -- |
| Loss on extinguishment of debt | -- | 1 | -- |
| Income before income taxes on non-GAAP basis | $ 224 | $ 240 | $ 164 |
| Provision for income taxes on GAAP basis | $ 5 | $ 8 | $ 1 |
| Income tax effects of non-GAAP reconciling adjustments | 2 | 5 | -- |
| Provision for income taxes on non-GAAP basis | $ 7 | $ 13 | $ 1 |
| Shares used in per share calculation - diluted on GAAP basis | 255 | 253 | 251 |
| Non-GAAP adjustment | 3 | 2 | 1 |
| Shares used in per share calculation - diluted on non-GAAP basis(1) | 258 | 255 | 252 |
| (1) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of share-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. |
| AVAGO TECHNOLOGIES LIMITED | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED | ||
| (IN MILLIONS) | ||
| February 2, | November 3, | |
| 2014 | 2013 (1) | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 1,112 | $ 985 |
| Trade accounts receivable, net | 323 | 418 |
| Inventory | 286 | 285 |
| Other current assets | 138 | 130 |
| Total current assets | 1,859 | 1,818 |
| Property, plant and equipment, net | 684 | 661 |
| Goodwill | 392 | 391 |
| Intangible assets, net | 467 | 492 |
| Other long-term assets | 70 | 53 |
| Total assets | $ 3,472 | $ 3,415 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 257 | $ 278 |
| Employee compensation and benefits | 59 | 98 |
| Capital lease obligations - current | 1 | 1 |
| Other current liabilities | 47 | 46 |
| Total current liabilities | 364 | 423 |
| Long-term liabilities: | ||
| Capital lease obligations - non-current | 1 | 1 |
| Other long-term liabilities | 115 | 105 |
| Total liabilities | 480 | 529 |
| Shareholders' equity: | ||
| Ordinary shares, no par value | 1,622 | 1,587 |
| Retained earnings | 1,377 | 1,305 |
| Accumulated other comprehensive loss | (7) | (6) |
| Total shareholders' equity | 2,992 | 2,886 |
| Total liabilities and shareholders' equity | $ 3,472 | $ 3,415 |
| (1) Amounts as of November 3, 2013 have been derived from audited financial statements as of that date. |
| AVAGO TECHNOLOGIES LIMITED | |||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED | |||
| (IN MILLIONS) | |||
| Fiscal Quarter Ended | |||
| February 2, | November 3, | February 3, | |
| 2014 | 2013 | 2013 | |
| Cash flows from operating activities: | |||
| Net income | $ 134 | $ 172 | $ 125 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation and amortization | 57 | 58 | 41 |
| Share-based compensation | 24 | 22 | 17 |
| Tax benefits of share-based compensation | 4 | 19 | -- |
| Excess tax benefits from share-based compensation | (3) | (14) | -- |
| Gain from sale of investments | -- | (10) | -- |
| Unrealized (gain)/loss on trading securities | -- | 1 | (2) |
| Impairment of investment and loan receivable from investee | -- | (3) | -- |
| Amortization of debt issuance costs | -- | 1 | -- |
| Gain from post-retirement medical plan curtailment and settlement | (3) | -- | -- |
| Loss on extinguishment of debt | -- | 1 | -- |
| Changes in assets and liabilities, net of acquisitions: | |||
| Trade accounts receivable | 95 | (53) | 75 |
| Inventory | (1) | (1) | (14) |
| Accounts payable | (24) | 9 | (34) |
| Employee compensation and benefits | (39) | 18 | (13) |
| Deferred tax assets and liabilities | (3) | (15) | 1 |
| Other current assets and current liabilities | (13) | 9 | (12) |
| Other long-term assets and long-term liabilities | 1 | (2) | 1 |
| Net cash provided by operating activities | 229 | 212 | 185 |
| Cash flows from investing activities: | |||
| Purchase of property, plant and equipment | (52) | (57) | (67) |
| Acquisitions, net of cash acquired | -- | (5) | -- |
| Purchases of investments | -- | (5) | (9) |
| Proceeds from sale of investments | -- | 13 | -- |
| Net cash used in investing activities | (52) | (54) | (76) |
| Cash flows from financing activities: | |||
| Proceeds from government grants | 2 | 2 | 3 |
| Debt financing costs | -- | (2) | -- |
| Payment on capital lease obligation | -- | (1) | -- |
| Issuance of ordinary shares, net of issuance cost | 19 | 41 | 10 |
| Repurchase of ordinary shares | (12) | (33) | (13) |
| Excess tax benefits from share-based compensation | 3 | 14 | -- |
| Dividend payments to shareholders | (62) | (57) | (42) |
| Net cash used in financing activities | (50) | (36) | (42) |
| Net increase in cash and cash equivalents | 127 | 122 | 67 |
| Cash and cash equivalents at the beginning of period | 985 | 863 | 1,084 |
| Cash and cash equivalents at end of period | $ 1,112 | $ 985 | $ 1,151 |
CONTACT:
Avago Technologies Ltd.
Bin Jiang
Investor Relations
+1 408 435 7400
investor.relations@avagotech.com