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FINANCIAL NEWS RELEASE

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., Sept. 12, 2019 /PRNewswire/ -- Broadcom 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.

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.

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

             

Change

(Dollars in millions, except per share data)

 

Q3 19

 

Q2 19

 

Q3 18

 

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
  • 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.

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.

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 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

 

 

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,

 

May 5,

 

August 5,

 

August 4,

 

August 5,

   

2019

 

2019

 

2018

 

2019

 

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 

               
   

November 3,

               

Expected average diluted share count:

 

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,

 

November 4,

 
   

2019

 

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,

 

May 5,

 

August 5,

 

August 4,

 

August 5,

   

2019

 

2019

 

2018

 

2019

 

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

 

 

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