Broadcom Inc. Announces Fourth Quarter and Fiscal Year 2018 Financial Results and Quarterly Dividend

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, gain (loss) on acquisition-related assets, 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, software, broadband, wireless, storage and industrial.

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: our acquisition of CA, including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate CA's business and achieve the anticipated benefits of the transaction; 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; our dependency on a limited number of suppliers; any other acquisitions we may make, including integrating acquired companies with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions; our ability to accurately estimate customers' demand and adjust our manufacturing and supply chain accordingly; our significant indebtedness, including the additional indebtedness that we incurred in connection with the CA acquisition 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; quarterly and annual fluctuations in operating results; global economic conditions and concerns; the amount and frequency of our stock repurchases; 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; fluctuations in foreign exchange rates; our 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:
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 


 Fiscal Year Ended 



November 4, 


August 5,


October 29,


November 4, 


October 29,



2018


2018


2017


2018


2017












Net revenue


$              5,444


$              5,063


$              4,844


$               20,848


$           17,636

Cost of products sold:











Cost of products sold


1,746


1,680


1,798


7,021


6,593

Purchase accounting effect on inventory


-


-


2


70


4

Amortization of acquisition-related intangible assets


762


762


658


3,004


2,511

Restructuring charges


1


2


3


20


19












Total cost of products sold


2,509


2,444


2,461


10,115


9,127












Gross margin


2,935


2,619


2,383


10,733


8,509












Research and development


948


959


828


3,768


3,292

Selling, general and administrative


237


234


194


1,056


787

Amortization of acquisition-related intangible assets


67


68


441


541


1,764

Restructuring, impairment and disposal charges


17


19


55


219


161

Litigation settlements


14


-


110


14


122












Total operating expenses


1,283


1,280


1,628


5,598


6,126












Operating income


1,652


1,339


755


5,135


2,383

Interest expense


(148)


(149)


(119)


(628)


(454)

Impairment on investment


(106)


-


-


(106)


-

Loss on debt extinguishment


-


-


(7)


-


(166)

Other income, net


24


39


16


144


62












Income from continuing operations before income taxes


1,422


1,229


645


4,545


1,825

Provision for (benefit from) income taxes


307


32


89


(8,084)


35












Income from continuing operations


1,115


1,197


556


12,629


1,790

Income (loss) from discontinued operations, net of income taxes


-


(1)


5


(19)


(6)












Net income


1,115


1,196


561


12,610


1,784

Net income attributable to noncontrolling interest (1)


-


-


29


351


92












Net income attributable to common stock


$              1,115


$              1,196


$                 532


$               12,259


$             1,692























Basic income per share:











Income per share from continuing operations


$                2.71


$                2.78


$                1.29


$                 29.37


$               4.19

Income (loss) per share from discontinued operations


-


-


0.01


(0.04)


(0.01)

Net income per share


$                2.71


$                2.78


$                1.30


$                 29.33


$               4.18












Diluted income per share (2) :











Income per share from continuing operations


$                2.64


$                2.71


$                1.24


$                 28.48


$               4.03

Income (loss) per share from discontinued operations


-


-


0.01


(0.04)


(0.01)

Net income per share


$                2.64


$                2.71


$                1.25


$                 28.44


$               4.02












Shares used in per share calculations:











Basic


412


430


408


418


405

Diluted


423


441


424


431


421












Stock-based compensation expense included in continuing operations:











Cost of products sold


$                   23


$                   22


$                   17


$                      86


$                  64

Research and development


225


222


171


855


636

Selling, general and administrative


69


71


64


286


220












Total stock-based compensation expense


$                 317


$                 315


$                 252


$                 1,227


$                920


































(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) For the fiscal year ended November 4, 2018 and for each fiscal year 2017 period presented, diluted income per share excluded the potentially dilutive effect of the exchange of LP Units as their effect was antidilutive. There were no LP Units outstanding during the fiscal quarters ended November 4, 2018 and August 5, 2018 due to the Redomiciliation.


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