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

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

- Revenue of $5,063 million or 13 percent growth from the year ago period

- Non-GAAP diluted EPS of $4.98 or 21 percent growth from the year ago period; GAAP diluted EPS of $2.71 or 138 percent growth from the year ago period

- Free cash flow of $2,127 million or 42 percent of revenue

- Quarterly dividend of $1.75 per share

- Repurchased 24 million shares for $5,378 million; $6,275 million remaining under share repurchase authorization

PR Newswire

SAN JOSE, Calif., Sept. 6, 2018 /PRNewswire/ -- Broadcom Inc. AVGO, a leading semiconductor device supplier to the wired, wireless, enterprise storage, and industrial end markets, today reported financial results for its third quarter of fiscal year 2018, ended August 5, 2018, provided guidance for the fourth quarter of its fiscal year 2018 and announced a quarterly dividend.

"Datacenter demand is driving strong growth in more than 50 percent of our consolidated revenue," said Hock Tan, President and CEO of Broadcom Inc. "Through the strength of our franchise business model, we delivered another quarter of sustained revenues and strong free cash flows."

"During the quarter, we repurchased 24 million shares, returning approximately $5.38 billion to our stockholders," said Tom Krause, CFO of Broadcom. "Consistent with our stated capital allocation plan, we intend to return to stockholders 50 percent of the prior fiscal year free cash flow in the form of cash dividends. With the balance of our free cash flow, we have the financial flexibility to fund a combination of share repurchases and future acquisitions to expand earnings capacity."

Third Quarter Fiscal Year 2018 GAAP Results

Net revenue was $5,063 million, an increase of 1 percent from $5,014 million in the previous quarter and an increase of 13 percent from $4,463 million in the same quarter last year.

Gross margin was $2,619 million, or 51.7 percent of net revenue. This compares with gross margin of $2,551 million, or 50.9 percent of net revenue, in the prior quarter, and gross margin of $2,149 million, or 48.2 percent of net revenue, in the same quarter last year.

Operating expenses were $1,280 million. This compares with $1,350 million in the prior quarter and $1,501 million in the same quarter last year.

Operating income was $1,339 million, or 26.4 percent of net revenue. This compares with operating income of $1,201 million, or 24.0 percent of net revenue, in the prior quarter, and operating income of $648 million, or 14.5 percent of net revenue, in the same quarter last year.

Net income, which includes the impact of discontinued operations, was $1,196 million, or $2.71 per diluted share. This compares with net income of $3,733 million, or $8.33 per diluted share, in the prior quarter, and net income of $507 million, or $1.14 per diluted share, in the same quarter last year.

 

Third Quarter Fiscal Year 2018 GAAP Results















Change

(Dollars in millions, except per share data)



Q3 18



Q2 18



Q3 17



Q/Q



Y/Y

Net revenue



$

5,063



$

5,014



$

4,463



+1%



+13%

Gross margin





51.7%





50.9%





48.2%



+80bps



+350bps

Operating expenses



$

1,280



$

1,350



$

1,501



-$70



-$221

Net income



$

1,196



$

3,733



$

507



-$2,537



+$689

Net income attributable to noncontrolling interest



$



$

15



$

26



-$15



-$26

Net income attributable to common stock



$

1,196



$

3,718



$

481



-$2,522



+$715

Earnings per share - diluted



$

2.71



$

8.33



$

1.14



-$5.62



+$1.57

 

The Company's cash balance at the end of the third fiscal quarter was $4,136 million, compared to $8,187 million at the end of the prior quarter.

During the third fiscal quarter, the Company generated $2,247 million in cash from operations and spent $5,378 million repurchasing an aggregate of 24 million shares and $120 million in capital expenditures.

On June 29, 2018, the Company paid a cash dividend of $1.75 per share of common stock, totaling $754 million.

Third Quarter Fiscal Year 2018 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.

Net revenue from continuing operations was $5,066 million, an increase of 1 percent from $5,017 million in the previous quarter, and an increase of 13 percent from $4,467 million in the same quarter last year.

Gross margin from continuing operations was $3,410 million, or 67.3 percent of net revenue. This compares with gross margin from continuing operations of $3,342 million, or 66.6 percent of net revenue, in the prior quarter, and $2,827 million, or 63.3 percent of net revenue, in the same quarter last year.

Operating income from continuing operations was $2,536 million, or 50.1 percent of net revenue. This compares with operating income from continuing operations of $2,455 million, or 48.9 percent of net revenue, in the prior quarter, and $2,059 million, or 46.1 percent of net revenue, in the same quarter last year.

Net income from continuing operations was $2,257 million, or $4.98 per diluted share. This compares with net income of $2,243 million, or $4.88 per diluted share, in the prior quarter, and net income of $1,871 million, or $4.10 per diluted share, in the same quarter last year.

Free cash flow, defined as cash from operations less capital expenditures, was $2,127 million in the quarter.

 

Third Quarter Fiscal Year 2018 Non-GAAP Results















Change

(Dollars in millions, except per share data)



Q3 18



Q2 18



Q3 17



Q/Q



Y/Y

Net revenue



$

5,066



$

5,017



$

4,467



+1%



+13%

Gross margin





67.3%





66.6%





63.3%



+70bps



+400bps

Operating expenses



$

874



$

887



$

768



-$13



+$106

Net income



$

2,257



$

2,243



$

1,871



+$14



+$386

Earnings per share - diluted



$

4.98



$

4.88



$

4.10



+$0.10



+$0.88

 

Other Quarterly Data

Net revenue by segment:







Growth Rates

(Dollars in millions)



Q3 18



Q2 18



Q3 17



Q/Q



Y/Y

Wired infrastructure



$

2,297





45%





$

2,295





46%





$

2,208





50%





—%



4%

Wireless communications



1,288





25





1,294





26





1,283





29





—%



—%

Enterprise storage



1,253





25





1,162





23





735





16





8%



70%

Industrial & other



225





5





263





5





237





5





-14%



-5%

Total net revenue



$

5,063





100%





$

5,014





100%





$

4,463





100%











 

Non-GAAP net revenue by segment:















Growth Rates

(Dollars in millions)



Q3 18



Q2 18



Q3 17



Q/Q



Y/Y

Wired infrastructure (1)



$

2,300





45%





$

2,298





46%





$

2,211





50%





—%



4%

Wireless communications



1,288





25





1,294





26





1,283





29





—%



—%

Enterprise storage



1,253





25





1,162





23





735





16





8%



70%

Industrial & other (1)



225





5





263





5





238





5





-14%



-5%

Total Non-GAAP net revenue



$

5,066





100%





$

5,017





100%





$

4,467





100%













(1)  Non-GAAP data include the effect of acquisition-related purchase accounting adjustments relating to licensing revenue.

 















Key Statistics (Dollars in millions)



Q3 18



Q2 18



Q3 17

Cash from operations



$

2,247





$

2,313





$

1,656



Depreciation



$

129





$

128





$

112



Amortization of acquisition-related intangible assets



$

830





$

832





$

1,096



Capital expenditures



$

120





$

189





$

255



Days sales outstanding ("DSO")



54





50





49



Inventory days on hand ("DOH")



66





66





78



Non-GAAP DSO



54





50





49



Non-GAAP Inventory DOH



67





67





79



 

Fourth Quarter Fiscal Year 2018 Business Outlook

Based on current business trends and conditions, the outlook for continuing operations for the fourth quarter of fiscal year 2018, ending November 4, 2018, is expected to be as follows: 





GAAP



Reconciling Items



Non-GAAP

Net revenue



$

5,397M +/- $75M



$

3M



$

5,400M +/- $75M

Gross margin



52.3% +/- 1%



$

793M



67.0% +/- 1%

Operating expenses



$

1,259M



$

385M



$

874M

Interest expense and other



$

125M





$

125M

Provision for income taxes



4%



3%



7%

Diluted share count



424M



12M



436M





























 

  • Non-GAAP net revenue includes $3 million of 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 $3 million of licensing revenue, and excludes the effects of $763 million of amortization of acquisition-related intangible assets, $25 million of stock-based compensation expense, $1 million of restructuring charges and $1 million of acquisition-related costs;

                                                                                       
  • Non-GAAP operating expenses exclude $298 million of stock-based compensation expense, $67 million of amortization of acquisition-related intangible assets, $15 million of acquisition-related costs, and $5 million of restructuring charges;

                                                                                       
  • Non-GAAP tax provision is 3% higher than GAAP due to the tax effects of the projected reconciling items noted above;

                                                                                       
  • Non-GAAP diluted share count excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the Company's financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method; and

                                                                                       
  • Diluted share count outlook does not include the impact from any stock repurchases after August 5, 2018.

Capital expenditures for the fourth fiscal quarter are expected to be approximately $110 million. For the fourth fiscal quarter, depreciation is expected to be $135 million and amortization is expected to be approximately $835 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, all of which are subject to revision. The guidance excludes any results from the pending acquisition of CA Technologies. The guidance also excludes the impact of any additional mergers, acquisitions, divestiture and stock repurchase activity that may occur during the fourth 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 to investors at the Deutsche Bank Technology Conference in Las Vegas on September 12, 2018.

Acquisition of CA Technologies

As announced on July 11, 2018, Broadcom and CA Technologies have entered into a definitive agreement under which Broadcom will acquire CA Technologies CA, one of the world's leading providers of information technology (IT) management software and solutions, in an all cash transaction that represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion.

As previously announced, the transaction has received approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. The transaction remains subject to customary closing conditions, including the approval of CA shareholders and antitrust approvals in the EU and Japan. The closing of the transaction is expected to occur in the fourth calendar quarter of 2018.

Quarterly Dividend

The Company's Board of Directors has approved a quarterly cash dividend of $1.75 per share.

The dividend is payable on September 28, 2018 to stockholders of record at the close of business (5:00 p.m.) Eastern Time on September 19, 2018.

Financial Results Conference Call

Broadcom Inc. will host a conference call to review its financial results for the third quarter of fiscal year 2018, ended August 5, 2018, and to provide guidance for the fourth quarter of fiscal year 2018, 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 4968519. 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: 4968519. 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. from and after the effective time of the redomiciliation and, prior to that time, are to our predecessor, Broadcom Limited.

The Company's financial results include contributions from Brocade Communication Systems' continuing operations starting in the first fiscal quarter of 2018. 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 below, unless otherwise stated.

Due to the Company's 52/53 week reporting cycle, fiscal year 2018 includes an extra week in the first quarter, compared to fiscal year 2017.

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 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, 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. 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 Inc.

Broadcom Inc. AVGO, a Delaware corporation headquartered in San Jose, CA, is a leading designer, developer and global supplier of a broad range of digital and analog semiconductor connectivity solutions. Broadcom Inc.'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, set-top box, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and electronic 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 regarding the expected completion and timing of our proposed acquisition of CA and 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 proposed acquisition of CA, including (1) the acquisition may not be completed in a timely manner or at all, (2) the effect of the announcement or pendency of the proposed acquisition on our business relationships, operating results and business generally, (3) potential difficulties in employee retention, (4) risks related to diverting management's attention from ongoing business operations, and (5) the outcome of any legal proceedings related to the merger agreement or the proposed acquisition; 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, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with 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 significant indebtedness that we expect to incur in connection with the proposed acquisition of CA and the need to generate sufficient cash flows to service and repay such debt; dependence on a small number of markets and the rate of growth in these markets; 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; 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 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:

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 5,



May 6,



July 30,



August 5,



July 30,





2018



2018



2017



2018



2017























Net revenue



$               5,063



$               5,014



$               4,463



$               15,404



$           12,792

Cost of products sold:





















Cost of products sold



1,680



1,696



1,658



5,275



4,795

Purchase accounting effect on inventory



-



-



1



70



2

Amortization of acquisition-related intangible assets



762



765



655



2,242



1,853

Restructuring charges



2



2



-



19



16























    Total cost of products sold



2,444



2,463



2,314



7,606



6,666























Gross margin



2,619



2,551



2,149



7,798



6,126























Research and development



959



936



827



2,820



2,464

Selling, general and administrative



234



294



200



819



605

Amortization of acquisition-related intangible assets



68



67



441



474



1,323

Restructuring, impairment and disposal charges



19



53



33



202



106























  Total operating expenses



1,280



1,350



1,501



4,315



4,498























Operating income



1,339



1,201



648



3,483



1,628

Interest expense



(149)



(148)



(112)



(480)



(335)

Loss on debt extinguishment



-



-



-



-



(159)

Other income, net



39



46



12



120



46























Income from continuing operations before income taxes



1,229



1,099



548



3,123



1,180

Provision for (benefit from) income taxes



32



(2,637)



39



(8,391)



(54)























Income from continuing operations



1,197



3,736



509



11,514



1,234

Loss from discontinued operations, net of income taxes



(1)



(3)



(2)



(19)



(11)























Net income



1,196



3,733



507



11,495



1,223

Net income attributable to noncontrolling interest (1)



-



15



26



351



63























Net income attributable to common stock



$               1,196



$               3,718



$                  481



$               11,144



$             1,160













































Basic income per share:





















Income per share from continuing operations



$                 2.78



$                 8.84



$                 1.19



$                 26.58



$               2.91

Loss per share from discontinued operations



-



(0.01)



(0.01)



(0.05)



(0.03)

Net income per share



$                 2.78



$                 8.83



$                 1.18



$                 26.53



$               2.88























Diluted income per share(2):





















Income per share from continuing operations



$                 2.71



$                 8.34



$                 1.14



$                 25.78



$               2.79

Loss per share from discontinued operations



-



(0.01)



-



(0.04)



(0.02)

Net income per share



$                 2.71



$                 8.33



$                 1.14



$                 25.74



$               2.77























Shares used in per share calculations:





















Basic



430



421



407



420



403

Diluted



441



448



445



433



442























Stock-based compensation expense included in continuing operations:





















Cost of products sold



$                    22



$                    21



$                    18



$                      63



$                  47

Research and development



222



205



174



630



465

Selling, general and administrative



71



70



59



217



156























     Total stock-based compensation expense



$                  315



$                  296



$                  251



$                    910



$                668



































































(1) During the fiscal quarter ended May 6, 2018, 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 dissolved. Net income attributable to NCI prior to the Redomiciliation represents approximately 5% of net income attributable to LP Units.











(2) Diluted income per share includes the impact of NCI, which assumes 100% conversion of LP Units to shares of Broadcom under the "if converted" method, resulting in approximately 14 million, 22 million and 23 million LP Units included in diluted shares for the fiscal quarter ended May 6, 2018, the fiscal quarter and three fiscal quarters ended July 30, 2017, respectively. For the fiscal quarter ended August 5, 2018, there were no LP Units due to the Redomiciliation. For the three fiscal quarters ended August 5, 2018, diluted shares excluded LP units as the impact was antidilutive.





 

 

BROADCOM INC.

FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED

(IN MILLIONS, EXCEPT DAYS)

















































 Fiscal Quarter Ended 



 Three Fiscal Quarters Ended 





August 5,



May 6,



July 30,



August 5,



July 30,





2018



2018



2017



2018



2017













































Net revenue on GAAP basis



$               5,063



$               5,014



$               4,463



$           15,404



$           12,792

Acquisition-related purchase accounting revenue adjustment (1)



3



3



4



10



25























Net revenue on non-GAAP basis



$               5,066



$               5,017



$               4,467



$           15,414



$           12,817













































Gross margin on GAAP basis



$               2,619



$               2,551



$               2,149



$             7,798



$             6,126

Acquisition-related purchase accounting revenue adjustment (1)



3



3



4



10



25

Purchase accounting effect on inventory



-



-



1



70



2

Amortization of acquisition-related intangible assets



762



765



655



2,242



1,853

Stock-based compensation expense



22



21



18



63



47

Restructuring charges



2



2



-



19



16

Acquisition-related costs



2



-



-



4



-























Gross margin on non-GAAP basis



$               3,410



$               3,342



$               2,827



$           10,206



$             8,069













































Research and development on GAAP basis



$                  959



$                  936



$                  827



$             2,820



$             2,464

Stock-based compensation expense



222



205



174



630



465

Acquisition-related costs



-



-



1



3



6























Research and development on non-GAAP basis



$                  737



$                  731



$                  652



$             2,187



$             1,993













































Selling, general and administrative expense on GAAP basis



$                  234



$                  294



$                  200



$                819



$                605

Stock-based compensation expense



71



70



59



217



156

Acquisition-related costs



26



68



25



145



91























Selling, general and administrative expense on non-GAAP basis



$                  137



$                  156



$                  116



$                457



$                358













































Total operating expenses on GAAP basis



$               1,280



$               1,350



$               1,501



$             4,315



$             4,498

Amortization of acquisition-related intangible assets



68



67



441



474



1,323

Stock-based compensation expense



293



275



233



847



621

Restructuring, impairment and disposal charges



19



53



33



202



106

Acquisition-related costs



26



68



26



148



97























Total operating expenses on non-GAAP basis



$                  874



$                  887



$                  768



$             2,644



$             2,351













































Operating income on GAAP basis



$               1,339



$               1,201



$                  648



$             3,483



$             1,628

Acquisition-related purchase accounting revenue adjustment (1)



3



3



4



10



25

Purchase accounting effect on inventory



-



-



1



70



2

Amortization of acquisition-related intangible assets



830



832



1,096



2,716



3,176

Stock-based compensation expense



315



296



251



910



668

Restructuring, impairment and disposal charges



21



55



33



221



122

Acquisition-related costs



28



68



26



152



97























Operating income on non-GAAP basis



$               2,536



$               2,455



$               2,059



$             7,562



$             5,718













































Interest expense on GAAP basis



$                (149)



$                (148)



$                (112)



$               (480)



$               (335)

Debt-related costs



-



-



-



32



1























Interest expense on non-GAAP basis



$                (149)



$                (148)



$                (112)



$               (448)



$               (334)













































Other income, net on GAAP basis



$                    39



$                    46



$                    12



$                120



$                  46

(Gains) losses on acquisition-related assets



1



(4)



-



(3)



(23)























Other income, net on non-GAAP basis



$                    40



$                    42



$                    12



$                117



$                  23













































Income from continuing operations before income taxes on GAAP basis



$               1,229



$               1,099



$                  548



$             3,123



$             1,180

Acquisition-related purchase accounting revenue adjustment (1)



3



3



4



10



25

Purchase accounting effect on inventory



-



-



1



70



2

Amortization of acquisition-related intangible assets



830



832



1,096



2,716



3,176

Stock-based compensation expense



315



296



251



910



668

Restructuring, impairment and disposal charges



21



55



33



221



122

Acquisition-related costs



28



68



26



152



97

Debt-related costs



-



-



-



32



1

Loss on debt extinguishment



-



-



-



-



159

(Gains) losses on acquisition-related assets



1



(4)



-



(3)



(23)























Income before income taxes on non-GAAP basis



$               2,427



$               2,349



$               1,959



$             7,231



$             5,407













































Provision for (benefit from) income taxes on GAAP basis



$                    32



$             (2,637)



$                    39



$            (8,391)



$                 (54)

Non-GAAP tax reconciling adjustments



138



2,743



49



8,777



297























Provision for income taxes on non-GAAP basis



$                  170



$                  106



$                    88



$                386



$                243













































Net income on GAAP basis



$               1,196



$               3,733



$                  507



$           11,495



$             1,223

Acquisition-related purchase accounting revenue adjustment (1)



3



3



4



10



25

Purchase accounting effect on inventory



-



-



1



70



2

Amortization of acquisition-related intangible assets



830



832



1,096



2,716



3,176

Stock-based compensation expense



315



296



251



910



668

Restructuring, impairment and disposal charges



21



55



33



221



122

Acquisition-related costs



28



68



26



152



97

Debt-related costs



-



-



-



32



1

Loss on debt extinguishment



-



-



-



-



159

(Gains) losses on acquisition-related assets



1



(4)



-



(3)



(23)

Non-GAAP tax reconciling adjustments



(138)



(2,743)



(49)



(8,777)



(297)

Discontinued operations, net of income taxes



1



3



2



19



11























Net income on non-GAAP basis



$               2,257



$               2,243



$               1,871



$             6,845



$             5,164



































































Shares used in per share calculation - diluted on GAAP basis



441



448



445



433



442

Non-GAAP adjustment (2)



12



12



11



24



10























Shares used in per share calculation - diluted on non-GAAP basis



453



460



456



457



452













































Inventory days on hand on GAAP basis



66



66



78









Non-GAAP adjustment(3)



1



1



1































Inventory days on hand on non-GAAP basis



67



67



79





















































Net income on non-GAAP basis



$               2,257

















Interest expense on non-GAAP basis



149

















Provision for income taxes on non-GAAP basis



170

















Depreciation



129







































Adjusted EBITDA



$               2,705





























































Net cash provided by operating activities



$               2,247



$               2,313



$               1,656









Purchases of property, plant and equipment



(120)



(189)



(255)































Free cash flow



$               2,127



$               2,124



$               1,401











































































(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.  Non-GAAP adjustment also includes the impact of LP Units that are anti-dilutive on a GAAP basis for the three fiscal quarters ended August 5, 2018.







(3) Non-GAAP adjustment for inventory days on hand represents the impact of purchase accounting on inventory, stock-based compensation expense, and acquisition-related costs.







 

 

BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(IN MILLIONS)





























August 5,



October 29,







2018



2017















ASSETS























Current assets:











Cash and cash equivalents



$               4,136



$             11,204



Trade accounts receivable, net



3,010



2,448



Inventory



1,216



1,447



Other current assets



333



724















     Total current assets



8,695



15,823















Long-term assets:











Property, plant and equipment, net



2,695



2,599



Goodwill



26,920



24,706



Intangible assets, net



11,598



10,832



Other long-term assets



464



458















     Total assets



$             50,372



$             54,418







































LIABILITIES AND STOCKHOLDERS' EQUITY























Current liabilities:











Accounts payable



$                  785



$               1,105



Employee compensation and benefits



622



626



Current portion of long-term debt



117



117



Other current liabilities



663



681















     Total current liabilities



2,187



2,529















Long-term liabilities:











Long-term debt



17,487



17,431



Other long-term liabilities



3,246



11,272















     Total liabilities



22,920



31,232



























Stockholders' equity:











Common stock and additional paid-in capital



23,291



20,505



Retained earnings (accumulated deficit)



4,267



(129)



Accumulated other comprehensive loss



(106)



(91)















  Total Broadcom Inc. stockholders' equity



27,452



20,285



  Noncontrolling interest



-



2,901



  Total stockholders' equity



27,452



23,186















    Total liabilities and stockholders' equity



$             50,372



$             54,418



























 

 

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(IN MILLIONS)



























 Fiscal Quarter Ended 



Three Fiscal Quarters Ended





August 5,



May 6,



July 30,



August 5,



July 30,





2018



2018



2017



2018



2017

Cash flows from operating activities:





















Net income



$               1,196



$               3,733



$                  507



$            11,495



$              1,223

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



















Amortization of intangible assets



836



836



1,099



2,730



3,184

Depreciation



129



128



112



383



334

Stock-based compensation



315



296



251



910



669

Deferred taxes and other non-cash taxes



22



(2,702)



12



(8,512)



(99)

Non-cash portion of debt extinguishment loss



-



-



-



-



159

Non-cash restructuring, impairment and disposal charges



3



5



14



13



54

Amortization of debt issuance costs and accretion of debt discount



6



6



5



18



19

Other



5



14



13



22



(2)

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





















  Trade accounts receivable, net



(262)



(277)



(344)



(340)



(236)

  Inventory



19



56



(119)



325



(23)

  Accounts payable



(41)



91



217



(353)



(34)

  Employee compensation and benefits



205



84



82



(87)



29

  Contributions to defined benefit pension plans



(1)



-



(5)



(130)



(16)

  Other current assets and current liabilities



(148)



70



(179)



206



(570)

  Other long-term assets and long-term liabilities



(37)



(27)



(9)



(435)



(99)























Net cash provided by operating activities



2,247



2,313



1,656



6,245



4,592













































Cash flows from investing activities:





















Acquisitions of businesses, net of cash acquired



(7)



-



(3)



(4,793)



(40)

Proceeds from sales of businesses



-



-



-



782



10

Purchases of property, plant and equipment



(120)



(189)



(255)



(529)



(836)

Proceeds from disposals of property, plant and equipment



-



1



1



238



1

Purchases of investments



-



(5)



-



(249)



(200)

Proceeds from sale of investment



-



54



-



54



-

Other



(47)



(16)



(1)



(59)



(5)























Net cash used in investing activities



(174)



(155)



(258)



(4,556)



(1,070)













































Cash flows from financing activities:





















Proceeds from issuance of long-term debt



-



-



-



-



13,446

Repayment of debt



-



-



-



(856)



(13,668)

Payment of debt issuance costs



-



-



-



-



(23)

Dividend and distribution payments



(754)



(766)



(438)



(2,275)



(1,306)

Repurchases of common stock



(5,378)



(347)



-



(5,725)



-

Issuance of common stock, net of shares withheld for employee taxes



6



78



41



118



191

Payment of capital lease obligations



-



(15)



(6)



(21)



(10)

Other



2



3



-



2



-























Net cash used in financing activities



(6,124)



(1,047)



(403)



(8,757)



(1,370)













































Net change in cash and cash equivalents



(4,051)



1,111



995



(7,068)



2,152

Cash and cash equivalents at the beginning of period



8,187



7,076



4,254



11,204



3,097

Cash and cash equivalents at end of period



$               4,136



$               8,187



$               5,249



$              4,136



$              5,249























Supplemental disclosure of cash flow information:





















Cash paid for interest



$                  312



$                      1



$                  206



$                 545



$                 309

Cash paid for income taxes



$                  127



$                    87



$                    35



$                 323



$                 253

 

 

Cision View original content:http://www.prnewswire.com/news-releases/broadcom-inc-announces-third-quarter-fiscal-year-2018-financial-results-and-quarterly-dividend-300708427.html

SOURCE Broadcom Inc.

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