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Broadcom Inc. Announces Second Quarter Fiscal Year 2021 Financial Results and Quarterly Dividends


SAN JOSE, Calif., June 3, 2021 /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 second quarter of fiscal year 2021, ended May 2, 2021, provided guidance for the third quarter of its fiscal year 2021 and announced its quarterly dividends.

“Due to the strength in demand for semiconductors across our multiple end markets, we delivered 20% year-over-year increase in semiconductor revenue,” said Hock Tan, President and CEO of Broadcom Inc. “Our third quarter outlook projects this year-over-year growth to sustain, as we continue to see strong demand from service providers and hypercloud.”

“Consolidated revenue grew 15% year-over-year and operating profit increased 25%,” said Kirsten Spears, CFO of Broadcom Inc. “We generated $3.4 billion in free cash flow or 52% of revenue in the quarter, and are expecting free cash flow to remain strong in the third quarter.”

Second Quarter Fiscal Year 2021 Financial Highlights



GAAP


Non-GAAP

(Dollars in millions, except per share data)


Q2 21


Q2 20


Change


Q2 21


Q2 20


Change

Net revenue


$

6,610


$

5,742


+15%



$

6,610


$

5,742


+15%


Net income


$

1,493


$

563


+$        930



$

2,980


$

2,323


+$       657


Earnings per common share – diluted


$

3.30


$

1.17


+$       2.13



$

6.62


$

5.14


+$      1.48





















(Dollars in millions)












Q2 21


Q2 20


Change

Cash flow from operations












$

3,569


$

3,213


+$      356

Adjusted EBITDA












$

3,960


$

3,209


+$      751

Free cash flow












$

3,443


$

3,065


+$      378

Net revenue by segment



























(Dollars in millions)













Q2 21


Q2 20


Change

Semiconductor solutions













$

4,820


73%


$

4,027


70%


+20%

Infrastructure software














1,790


27



1,715


30


+4%

   Total net revenue













$

6,610


100%


$

5,742


100%



























The Company’s cash and cash equivalents at the end of the second fiscal quarter were $9,518 million, compared to $9,552 million at the end of the prior quarter.

During the second fiscal quarter, the Company generated $3,569 million in cash from operations and spent $126 million on capital expenditures.

On March 31, 2021, the Company paid a cash dividend of $3.60 per share of common stock, totaling $1,477 million and a cash dividend of $20.00 per share of mandatory convertible preferred stock, totaling $75 million.

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.

Third Quarter Fiscal Year 2021 Business Outlook

Based on current business trends and conditions, the outlook for the third quarter of fiscal year 2021, ending August 1, 2021, is expected to be as follows: 

  • Third quarter revenue guidance of approximately $6.75 billion; and
  • Third quarter Adjusted EBITDA guidance of approximately 60 percent of projected revenue

The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The Company is not readily able to provide a reconciliation of projected Adjusted EBITDA to projected net income without unreasonable effort. 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 Dividends

The Company’s Board of Directors has approved a quarterly cash dividend on its common stock of $3.60 per share. The common stock dividend is payable on June 30, 2021 to common stockholders of record at the close of business (5:00 p.m. Eastern Time) on June 22, 2021.

The Company’s Board of Directors has also approved a quarterly cash dividend on its 8.00% Mandatory Convertible Preferred Stock, Series A, of $20.00 per share. This dividend is payable on June 30, 2021 to preferred stockholders of record at the close of business (5:00 p.m. Eastern Time) on June 15, 2021.

Financial Results Conference Call

Broadcom Inc. will host a conference call to review its financial results for the second quarter fiscal year 2021 and to discuss the business outlook, 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 2374098. 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: 2374098. 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

The non-GAAP measures should not be considered 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. Broadcom believes 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.  

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 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, loss on debt extinguishment, gains (losses) on investments, income (loss) from discontinued operations, non-GAAP tax reconciling adjustments, and other 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.

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, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation. For more information, go to www.broadcom.com.

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: the COVID-19 pandemic, which has disrupted, and will likely continue to disrupt, normal business activity, and which may have an adverse effect on our results of operations; 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; government regulations, trade restrictions and trade tensions; global economic conditions and concerns; global political and economic conditions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; 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; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; 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, warehouses 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; 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; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; fluctuations in foreign exchange rates; 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. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. 

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:
Ji Yoo
Broadcom Inc.
Investor Relations
408-433-8000
[email protected]


(1) The Company is not readily able to provide a reconciliation of the projected non-GAAP financial information presented to the relevant projected GAAP measure without unreasonable effort.

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(IN MILLIONS, EXCEPT PER SHARE DATA)



































Fiscal Quarter Ended


Two Fiscal Quarters Ended



May 2,


January 31,


May 3,


May 2,


May 3,



2021


2021


2020


2021


2020

















Net revenue


$

6,610


$

6,655


$

5,742


$

13,265


$

11,600

Cost of revenue:
















Cost of revenue



1,699



1,814



1,592



3,513



3,228

Amortization of acquisition-related intangible assets



853



874



954



1,727



1,904

Restructuring charges



1



15



7



16



15

Total cost of revenue



2,553



2,703



2,553



5,256



5,147

Gross margin



4,057



3,952



3,189



8,009



6,453

Research and development



1,238



1,211



1,269



2,449



2,558

Selling, general and administrative



325



339



501



664



1,102

Amortization of acquisition-related intangible assets



494



494



599



988



1,202

Restructuring, impairment and disposal charges



25



71



54



96



111

Total operating expenses



2,082



2,115



2,423



4,197



4,973

Operating income



1,975



1,837



766



3,812



1,480

Interest expense



(466)



(570)



(487)



(1,036)



(893)

Other income (expense), net



(23)



117



130



94



126

Income from continuing operations before income taxes



1,486



1,384



409



2,870



713

Provision for (benefit from) income taxes



(7)



6



(159)



(1)



(235)

Income from continuing operations



1,493



1,378



568



2,871



948

Loss from discontinued operations, net of income taxes







(5)





Net income



1,493



1,378



563



2,871



948

Dividends on preferred stock



(76)



(74)



(75)



(150)



(149)

Net income attributable to common stock


$

1,417


$

1,304


$

488


$

2,721


$

799

















Basic income per share attributable to common stock:
















Income per share from continuing operations


$

3.46


$

3.20


$

1.23


$

6.67


$

2.00

Loss per share from discontinued operations







(0.01)





Net income per share


$

3.46


$

3.20


$

1.22


$

6.67


$

2.00

















Diluted income per share attributable to common stock (1):
















Income per share from continuing operations


$

3.30


$

3.05


$

1.18


$

6.34


$

1.91

Loss per share from discontinued operations







(0.01)





Net income per share


$

3.30


$

3.05


$

1.17


$

6.34


$

1.91

















Weighted-average shares used in per share calculations:
















Basic



409



407



401



408



400

Diluted



429



428



417



429



419

















Stock-based compensation expense included in continuing operations:
















Cost of revenue


$

38


$

32


$

41


$

70


$

84

Research and development



307



328



373



635



764

Selling, general and administrative



80



84



103



164



214

Total stock-based compensation expense


$

425


$

444


$

517


$

869


$

1,062

































(1) Excludes the potentially dilutive effect of Mandatory Convertible Preferred Stock as the impact was antidilutive.

BROADCOM INC.

FINANCIAL RECONCILIATION: GAAP TO NON-GAAP – UNAUDITED

(IN MILLIONS)



































Fiscal Quarter Ended


Two Fiscal Quarters Ended



May 2,


January 31,


May 3,


May 2,


May 3,



2021


2021


2020


2021


2020

















Gross margin on GAAP basis


$

4,057


$            3,952


$              3,189


$               8,009


$             6,453

Purchase accounting effect on inventory











11

Amortization of acquisition-related intangible assets



853



874



954



1,727



1,904

Stock-based compensation expense



38



32



41



70



84

Restructuring charges



1



15



7



16



15

Acquisition-related costs



3



3



5



6



6

Gross margin on non-GAAP basis


$

4,952


$

4,876


$

4,196


$

9,828


$

8,473

















Research and development on GAAP basis


$

1,238


$

1,211


$

1,269


$

2,449


$

2,558

Stock-based compensation expense



307



328



373



635



764

Acquisition-related costs



1



1



5



2



12

Research and development on non-GAAP basis


$

930


$

882


$

891


$

1,812


$

1,782

















Selling, general and administrative expense on GAAP basis


$

325


$

339


$

501


$

664


$

1,102

Stock-based compensation expense



80



84



103



164



214

Acquisition-related costs



25



41



95



66



270

Litigation settlements







29





42

Selling, general and administrative expense on non-GAAP basis


$

220


$

214


$

274


$

434


$

576

















Total operating expenses on GAAP basis


$

2,082


$

2,115


$

2,423


$

4,197


$

4,973

Amortization of acquisition-related intangible assets



494



494



599



988



1,202

Stock-based compensation expense



387



412



476



799



978

Restructuring, impairment and disposal charges



25



71



54



96



111

Litigation settlements







29





42

Acquisition-related costs



26



42



100



68



282

Total operating expenses on non-GAAP basis


$

1,150


$

1,096


$

1,165


$

2,246


$

2,358

















Operating income on GAAP basis


$

1,975


$

1,837


$

766


$

3,812


$

1,480

Purchase accounting effect on inventory











11

Amortization of acquisition-related intangible assets



1,347



1,368



1,553



2,715



3,106

Stock-based compensation expense



425



444



517



869



1,062

Restructuring, impairment and disposal charges



26



86



61



112



126

Litigation settlements







29





42

Acquisition-related costs



29



45



105



74



288

Operating income on non-GAAP basis


$

3,802


$

3,780


$

3,031


$

7,582


$

6,115

















Interest expense on GAAP basis


$

(466)


$

(570)


$

(487)


$

(1,036)


$

(893)

Loss on debt extinguishment



50



172



93



222



98

Interest expense on non-GAAP basis


$

(416)


$

(398)


$

(394)


$

(814)


$

(795)

















Other income (expense), net on GAAP basis


$

(23)


$

117


$

130


$

94


$

126

Gain from lapse of indemnification







(116)





(116)

(Gains) losses on investments



25



(119)



(8)



(94)



10

Acquisition-related gain



(1)



(2)



(3)



(3)



(7)

Other income (expense), net on non-GAAP basis


$

1


$

(4)


$

3


$

(3)


$

13

















Provision for (benefit from) income taxes on GAAP basis


$

(7)


$

6


$

(159)


$

(1)


$

(235)

Non-GAAP tax reconciling adjustments



414



399



476



813



875

Provision for income taxes on non-GAAP basis


$

407


$

405


$

317


$

812


$

640

















Net income on GAAP basis


$

1,493


$

1,378


$

563


$

2,871


$

948

Purchase accounting effect on inventory











11

Amortization of acquisition-related intangible assets



1,347



1,368



1,553



2,715



3,106

Stock-based compensation expense



425



444



517



869



1,062

Restructuring, impairment and disposal charges



26



86



61



112



126

Litigation settlements







29





42

Acquisition-related costs



28



43



102



71



281

Loss on debt extinguishment



50



172



93



222



98

Gain from lapse of indemnification







(116)





(116)

(Gains) losses on investments



25



(119)



(8)



(94)



10

Non-GAAP tax reconciling adjustments



(414)



(399)



(476)



(813)



(875)

Loss from discontinued operations, net of income taxes







5





Net income on non-GAAP basis


$

2,980


$

2,973


$

2,323


$

5,953


$

4,693

































Weighted-average shares used in per share calculations – diluted on GAAP basis



429



428



417



429



419

Non-GAAP adjustment (1)



21



22



35



21



33

Weighted-average shares used in per share calculations – diluted on non-GAAP basis



450



450



452



450



452

































Net income on non-GAAP basis


$

2,980


$

2,973


$

2,323


$

5,953


$

4,693

Interest expense on non-GAAP basis



416



398



394



814



795

Provision for income taxes on non-GAAP basis



407



405



317



812



640

Depreciation



133



138



147



271



293

Amortization of purchased intangibles and right-of-use assets



24



27



28



51



53

Adjusted EBITDA


$

3,960


$

3,941


$

3,209


$

7,901


$

6,474

















Net cash provided by operating activities


$

3,569


$

3,113


$

3,213


$

6,682


$

5,535

Purchases of property, plant and equipment



(126)



(114)



(148)



(240)



(256)

Free cash flow


$

3,443


$

2,999


$

3,065


$

6,442


$

5,279



















 Fiscal Quarter
Ending 















August 1,













Expected average diluted share count:


2021





























Weighted-average shares used in per share calculation – diluted on GAAP basis


429













Non-GAAP adjustment (1)


20













Weighted-average shares used in per share calculation – diluted on non-GAAP basis


449






























(1) Non-GAAP adjustment for the 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. The non-GAAP adjustment also includes the impact of Mandatory Convertible Preferred Stock that is antidilutive on a GAAP basis. For the fiscal quarter ending August 1, 2021, the non-GAAP adjustment includes the impact of Mandatory Convertible Preferred Stock that is expected to be antidilutive on a GAAP basis.

BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS – UNAUDITED

(IN MILLIONS)



















May 2,


November 1,




2021


2020










ASSETS
















Current assets:








Cash and cash equivalents


$

9,518


$

7,618


Trade accounts receivable, net



2,425



2,297


Inventory



1,004



1,003


Other current assets



1,298



977


Total current assets



14,245



11,895










Long-term assets:








Property, plant and equipment, net



2,416



2,509


Goodwill



43,457



43,447


Intangible assets, net



14,068



16,782


Other long-term assets



1,338



1,300


Total assets


$

75,524


$

75,933


















LIABILITIES AND EQUITY
















Current liabilities:








Accounts payable


$

830


$

836


Employee compensation and benefits



639



877


Current portion of long-term debt



278



827


Other current liabilities



4,689



3,831


Total current liabilities



6,436



6,371










Long-term liabilities:








Long-term debt



40,160



40,235


Other long-term liabilities



4,962



5,426


Total liabilities



51,558



52,032










Preferred stock dividend obligation



27



27










Stockholders’ equity:








Preferred stock






Common stock






Additional paid-in capital



24,045



23,982


Retained earnings






Accumulated other comprehensive loss



(106)



(108)


Total stockholders’ equity



23,939



23,874


  Total liabilities and equity


$

75,524


$

75,933


BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(IN MILLIONS)



















Fiscal Quarter Ended


Two Fiscal Quarters Ended



May 2,


January 31,


May 3,


May 2,


May 3,



2021


2021


2020


2021


2020

Cash flows from operating activities:
















Net income


$

1,493


$

1,378


$

563


$

2,871


$

948

Adjustments to reconcile net income to net cash provided by operating activities:
















Amortization of intangible and right-of-use assets



1,371



1,395



1,583



2,766



3,165

Depreciation



133



138



147



271



293

Stock-based compensation



425



444



517



869



1,062

Deferred taxes and other non-cash taxes



(177)



(149)



(175)



(326)



(247)

Loss on debt extinguishment



26



172



93



198



98

Unrealized (gain) loss on investments



25



(119)





(94)



Non-cash restructuring, impairment and disposal charges



12



15



6



27



17

Non-cash interest expense



21



22



31



43



61

Other



(3)



(5)



(8)



(8)



11

Changes in assets and liabilities, net of acquisitions and disposals:
















  Trade accounts receivable, net



106



(247)



440



(141)



48

  Inventory



(52)



51



(10)



(1)



30

  Accounts payable



(58)



44



233



(14)



350

  Employee compensation and benefits



135



(375)



61



(240)



(156)

  Other current assets and current liabilities



182



408



118



590



464

  Other long-term assets and long-term liabilities



(70)



(59)



(386)



(129)



(609)

Net cash provided by operating activities



3,569



3,113



3,213



6,682



5,535

















Cash flows from investing activities:
















Acquisitions of businesses, net of cash acquired





(8)





(8)



(10,870)

Proceeds from sale of business







168





168

Purchases of property, plant and equipment



(126)



(114)



(148)



(240)



(256)

Proceeds from disposals of property, plant and equipment



3







3



Other



(3)





4



(3)



(5)

Net cash provided by (used in) investing activities



(126)



(122)



24



(248)



(10,963)

















Cash flows from financing activities:
















Proceeds from long-term borrowings





9,904



4,468



9,904



19,849

Payments on debt obligations



(1,533)



(9,200)



(4,452)



(10,733)



(8,989)

Other borrowings, net







1,025





1,743

Payments of dividends



(1,552)



(1,543)



(1,381)



(3,095)



(2,753)

Shares repurchased for tax withholdings on vesting of equity awards



(461)



(225)



(219)



(686)



(388)

Issuance of common stock



71



35



91



106



128

Other



(2)



(28)



(6)



(30)



(10)

Net cash provided by (used in) financing activities



(3,477)



(1,057)



(474)



(4,534)



9,580

















Net change in cash and cash equivalents



(34)



1,934



2,763



1,900



4,152

Cash and cash equivalents at beginning of period



9,552



7,618



6,444



7,618



5,055

Cash and cash equivalents at end of period


$

9,518


$

9,552


$

9,207


$

9,518


$

9,207

















Supplemental disclosure of cash flow information:
















Cash paid for interest


$

369


$

372


$

375


$

741


$

756

Cash paid for income taxes


$

293


$

147


$

124


$

440


$

255

SOURCE Broadcom Inc.



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