Broadcom Limited Announces First Quarter Fiscal Year 2016 Financial Results


Second Quarter Fiscal Year 2016 Business Outlook

Based on current business trends and conditions, the outlook for continuing operations for the second quarter of fiscal year 2016, ending May 1, 2016, including projected contributions from the combined Avago and BRCM businesses, is expected to be as follows: 
  

  GAAP Reconciling Items Non-GAAP
Net Revenue $3,533M +/- $75M $17M $3,550 +/- $75M
Gross Margin 30.75% +/- 1% $1,001M 59.00% +/- 1%
Operating Expenses $2,147M $1,315M $832M
Interest and Other $302M $141M $161M
Taxes provision (benefit) ($120)M ($170)M $50M
Diluted Share Count 428M 15M 443M
  • Non-GAAP Net Revenue includes $17 million of intellectual property licensing revenue not included in GAAP revenue, as a result of the effects of purchase accounting for acquisitions;

  • Non-GAAP Gross Margin includes the effects of $17 million of intellectual property licensing revenue, and excludes the effects of $600 million of inventory step-up charges to record BRCM inventory at fair value, as part of the purchase accounting for the Acquisition, $329 million of amortization of intangible assets, $41 million of restructuring charges, $13 million of share-based compensation expense and $1 million of acquisition-related costs;

  • Non-GAAP Operating Expenses exclude $853 million of amortization of intangible assets, $237 million of restructuring charges, $182 million of share-based compensation, and $43 million of acquisition-related costs;

  • Non-GAAP Interest and Other excludes $141 million of debt modification fees and a loss on extinguishment of long-term debt; and

  • Non-GAAP tax provision excludes $170 million tax benefit representing the tax effects of the reconciling items noted above.

Capital expenditures for the second fiscal quarter are expected to be approximately $210 million. For the second fiscal quarter, depreciation is expected to be $104 million and amortization is expected to be approximately $1.2 billion. The cash balance at the end of the second fiscal quarter is expected to be in the range of $1.7 billion to $2 billion, which includes an expected repayment of $300 million of our outstanding debt in the quarter.

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, all of which are subject to revision. The above guidance excludes the estimated results of certain acquired BRCM businesses classified as assets held for sale as of February 1, 2016, which will be reported as discontinued operations. The guidance also excludes the impact of any additional mergers, acquisitions and divestiture 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.

Broadcom will be presenting at the Susquehanna Financial Group's Fifth Annual Semi, Storage & Tech Conference in New York City on March 10, 2016.

Financial Results Conference Call

Broadcom Limited will host a conference call to review its financial results for the first quarter of its fiscal year 2016, ended January 31, 2016, and to provide guidance for the second quarter of fiscal year 2016, 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 46478676. 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: 46478676. A webcast of the conference call will also be available in the “Investors” section of Broadcom’s website at www.broadcom.com

Non-GAAP Financial Measures

In addition to GAAP reporting, Broadcom provides investors with net revenue, net income, operating income, gross margin, operating expenses and other data on a non-GAAP basis. This non-GAAP information includes the effect, where applicable, of purchase accounting on revenues, and excludes amortization of intangible assets, share-based compensation expense, restructuring and disposal charges, acquisition-related costs, including integration costs, purchase accounting effect on inventory, write-off of debt issuance costs, gain (loss) on extinguishment of debt, income (loss) from and gain (loss) on discontinued operations and income tax effects of non-GAAP reconciling adjustments. Management does not believe that these items are reflective of the Company’s underlying performance. The presentation of these and other similar items in Broadcom’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Broadcom 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 Broadcom Limited

Broadcom Limited (NASDAQ:AVGO) is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions.  Broadcom Limited’s extensive product portfolio serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & other. Applications for our products in these end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.

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 statements about (i) the expected benefits of the Acquisition, (ii) the combined organization’s plans, objectives and intentions with respect to future operations and products, (iii) the combined organization’s competitive position and opportunities, (iv) the impact of the transaction on the market for the combined organization’s products, (v) other statements identified by words such as “will”, “expect”, “intends”, “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 any risks associated with our recent acquisition of BRCM, and other acquisitions we may make, including delays, challenges and expenses associated with integrating BRCM and other acquired companies with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected from BRCM and other acquisitions we may make; loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our ability to accurately estimate customers’ demand and adjust supply chain and third party manufacturing capacity accordingly; the significant indebtedness incurred by us in February 2016 in connection with the BRCM acquisition, including the need to generate sufficient cash flows to service and repay such debt; our ability to timely increase our internal manufacturing capacity to meet customer demand; our ability to improve our manufacturing efficiency and quality; increased dependence on a small number of markets; quarterly and annual fluctuations in operating results; cyclicality in the semiconductor industry or in our target markets; global economic conditions and concerns; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of those design wins; rates of growth in our target markets; 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 the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product and warranty and indemnification claims; dependence on and risks associated with distributors of our products; 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; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature.

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