Financial News

• Net revenue of $644 million, up 15% sequentially and up 6% from Q3 last year; this includes $21 million contribution of net revenue from CyOptics
• GAAP gross margin of 47.2 percent; Non-GAAP gross margin of 50.9 percent
• GAAP diluted EPS of $0.56; Non-GAAP diluted EPS of $0.74

SAN JOSE, Calif. and SINGAPORE, Aug. 27, 2013 (GLOBE NEWSWIRE) -- Avago Technologies Limited (Nasdaq:AVGO), a leading supplier of analog interface components for communications, industrial, and consumer applications, today reported financial results for the third quarter of its fiscal year 2013, ended August 4, 2013, and provided guidance for the fourth quarter of its fiscal year 2013.

Third Quarter Fiscal Year 2013 GAAP Results

Net revenue was $644 million, an increase of 15 percent compared with the previous quarter and an increase of 6 percent from the same quarter last year. The Company completed its acquisition of CyOptics Inc. on June 28, 2013 and CyOptics contributed $21 million to total net revenue for the quarter.

Gross margin was $304 million, or 47.2 percent of net revenue. This compares with gross margin of $272 million, or 48.4 percent of net revenue last quarter, and gross margin of $295 million, or 48.7 percent of net revenue in the same quarter last year.

Operating expenses were $164 million. This compares with $154 million in the prior quarter and $146 million for the same quarter the previous year.

Income from operations was $140 million. This compares with $118 million in the prior quarter and with $149 million in the same quarter last year.

Third quarter net income was $142 million, or $0.56 per diluted share. This compares with net income of $113 million, or $0.45 per diluted share for the prior quarter, and net income of $145 million, or $0.58 per diluted share in the same quarter last year.

The Company's cash balance at the end of the second quarter was $863 million, compared to $1,219 million at the end of the prior quarter.

The Company generated $137 million in cash from operations in the third quarter and spent $65 million on capital expenditures. On June 28, 2013 the Company paid a quarterly cash dividend of 21 cents ($0.21) per ordinary share, totaling approximately $52 million. The Company also paid a total of approximately $400 million in cash on the closing of the CyOptics acquisition, including $27 million in management incentives that will be paid out over a three-year period.

Third Quarter Fiscal Year 2013 Non-GAAP Results

Gross margin was $328 million, or 50.9 percent of net revenue. This compares with gross margin of $288 million, or 51.2 percent of net revenue last quarter, and gross margin of $310 million, or 51.2 percent of net revenue in the same quarter last year.

Income from operations was $191 million. This compares with $158 million in the prior quarter and $186 million in the same quarter the previous year.

Net income was $188 million, or $0.74 per diluted share. This compares with net income of $153 million, or $0.61 per diluted share last quarter, and net income of $182 million, or $0.72 per diluted share in the same quarter last year.

"During the third quarter, strong demand from datacenter spending and a significant uptick in industrial more than offset weaker than expected demand in wireless." said Hock Tan, President and CEO of Avago Technologies Limited. "Momentum in our business continues into the fourth quarter. We expect very strong product ramps in wireless and sustained growth in non-CyOptics wired, together with a full quarter of CyOptics revenue, to drive double-digit sequential revenue growth on a percentage basis."

Other Quarterly Data

[1] Includes net revenues from the CyOptics business.

Fourth Quarter Fiscal Year 2013 Business Outlook

Based on current business trends and conditions, the outlook for the fourth quarter of fiscal year 2013, ending November 3, 2013, is expected to be as follows: 

Reconciling items include $17 million of amortization of intangible assets, $3 million of share-based compensation expense, and $9 million of acquisition-related costs at the Gross Margin line, and $7 million of amortization of intangible assets, $18 million of share-based compensation, $1 million of restructuring charges, and $7 million of acquisition-related costs at the Operating Expenses line. The reconciling item of $6 million at the Taxes line represents the tax effects of the reconciling items noted above.

Capital expenditures for the fourth quarter are expected to be approximately $67 million. For the fourth quarter depreciation is expected to be $27 million and amortization is expected to be $24 million.

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.

Avago Technologies Limited will be presenting and meeting with investors at the Deutsche Bank Technology Conference in Las Vegas on September 11, 2013.

Financial Results Conference Call

Avago Technologies Limited will host a conference call to review its financial results for the third quarter fiscal year 2013, and to provide guidance for the fourth quarter of fiscal year 2013, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (866) 788-0544; International +1 (857) 350-1682. The passcode is 89710834. A replay of the call will be available through September 3, 2013. To access the replay dial (888) 286-8010; International +1 (617) 801-6888 and reference the passcode: 67275356. A webcast of the conference call will also be available in the "Investors" section of Avago's website at www.avagotech.com. 

Non-GAAP Financial Measures

In addition to GAAP reporting, Avago provides investors with net income, income from operations, gross margin, operating expenses and other data, on a non-GAAP basis. This non-GAAP information excludes amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs and the income tax effects of these excluded items. Management does not believe that the excluded items are reflective of the Company's underlying performance. The exclusion of these and other similar items from Avago's non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Avago believes this non-GAAP financial information provides additional insight into the Company's on-going performance and has therefore chosen to provide 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.

About Avago Technologies Limited

Avago Technologies Limited is a leading designer, developer and global supplier of a broad range of analog semiconductor devices with a focus on III-V based products. Our product portfolio is extensive and includes thousands of products in three primary target markets: wireless communications, wired infrastructure and industrial & other.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements which 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; market acceptance of the end products into which our products are designed; our ability to achieve the growth prospects and synergies expected from acquisitions we may make, including CyOptics; delays, challenges and expenses associated with integrating acquired companies with our existing businesses, including CyOptics; our dependence on contract manufacturing and outsourced supply chain and our ability to improve our cost structure through our manufacturing outsourcing program; prolonged disruptions of our or our contract manufacturers' manufacturing facilities or other significant operations; 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 maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and any associated increases in litigation expenses; dependence on and risks associated with distributors of our products; any expenses associated with resolving customer product and warranty and indemnification claims; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Quarterly Report on Form 10-Q filed on June 7, 2013 and other filings with the Securities and Exchange Commission, or "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. We undertake no intent or obligation to publicly update or revise any of these forward looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Contacts:
Avago Technologies Ltd.
Thomas Krause, 408-435-7400
VP Corporate Development
investor.relations@avagotech.com