Broadcom Inc. (NASDAQ:AVGO).
- Revenue of $5,789 million for the quarter, up 9 percent from the prior year period
- GAAP diluted EPS of $1.12; Non-GAAP diluted EPS of $5.55
- $2,033 million of free cash flow from operations, defined as cash from operations of $2,132 less capital expenditures of $99 million, up 39 percent from the prior year period
- Quarterly dividend of $2.65 per share
- Repurchased and eliminated 14.2 million shares for $3,513 million
- Maintaining fiscal year 2019 revenue outlook of $24.5 billion
SAN JOSE, Calif., March 14, 2019 /PRNewswire/ -- Broadcom Inc. (Nasdaq: AVGO), a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions, today reported financial results for its first quarter of fiscal year 2019, ended February 3, 2019, and announced a quarterly dividend.
"We had a good start to 2019 as we continued to execute on our proven business model. Strong results in our networking business supported our semiconductor solutions segment, despite the anticipated sharp decline in wireless. Additionally, our infrastructure software segment performed extremely well as we made good progress with the CA business integration into Broadcom," said Hock Tan, President and CEO of Broadcom Inc. "Similar to our peers, we see a slowdown in China impacting demand. However, much of this was factored into our original guidance and we are maintaining our full year fiscal 2019 business outlook."
"We generated over $2 billion in free cash flow in the quarter, which represented 39% growth on a year on year basis," said Tom Krause, CFO of Broadcom Inc. "Consistent with our capital return plan, we returned $4.6 billion to stockholders in the quarter including $1.1 billion of cash dividends and $3.5 billion of share repurchases and eliminations. We remain focused on returning approximately $12 billion to stockholders in fiscal 2019 via a combination of cash dividends and stock buy backs and eliminations, while maintaining our investment grade credit rating."
First Quarter Fiscal Year 2019 GAAP Results from Continuing Operations
Net revenue was $5,789 million, an increase of 6.3 percent from $5,444 million in the previous quarter and an increase of 8.7 percent from $5,327 million in the same quarter last year.
Gross margin was $3,208 million, or 55.4 percent of net revenue. This compares with gross margin of $2,935 million, or 53.9 percent of net revenue, in the prior quarter, and gross margin of $2,628 million, or 49.3 percent of net revenue, in the same quarter last year.
Operating expenses were $2,653 million. This compares with $1,283 million in the prior quarter and $1,685 million in the same quarter last year.
Operating income was $555 million, or 9.6 percent of net revenue. This compares with operating income of $1,652 million, or 30.3 percent of net revenue, in the prior quarter, and operating income of $943 million, or 17.7 percent of net revenue, in the same quarter last year.
Net income, which includes the impact of discontinued operations, was $471 million, or $1.12 per diluted share. This compares with net income of $1,115 million, or $2.64 per diluted share, in the prior quarter, and net income of $6,566 million, or $14.62 per diluted share, in the same quarter last year.
Cash from operations was $2,132 million in the quarter, compared to $1,685 million in the same quarter last year.
First Quarter Fiscal Year 2019 GAAP Results (Dollars in millions, except per share data) Q1 19 Q4 18 Net revenue $ 5,789 $ 5,444 Gross margin 55.4% 53.9% Operating expenses $ 2,653 $ 1,283 Net income $ 471 $ 1,115 Net income attributable to $ - $ - noncontrolling interest Net income attributable to common stock $ 471 $ 1,115 Earnings per share - diluted $ 1.12 $ 2.64 Change Q1 18 Q/Q Net revenue $ 5,327 +6.3% Gross margin 49.3% +150bps Operating expenses $ 1,685 +$1,370 Net income $ 6,566 -$ 644 Net income attributable to $ 336 $ - noncontrolling interest Net income attributable to common stock $ 6,230 -$ 644 Earnings per share - diluted $ 14.62 -$ 1.52 Y/Y Net revenue +8.7% Gross margin +610bps Operating expenses +$ 968 Net income -$ 6,095 Net income attributable to $ 336 noncontrolling interest Net income attributable to common stock -$ 5,759 Earnings per share - diluted -$ 13.50
The Company's cash and cash equivalents at the end of the first fiscal quarter were $5,093 million, compared to $4,292 million at the end of the prior quarter.
During the first fiscal quarter the Company generated $2,132 million in cash from operations and spent $3,513 million on share repurchases and eliminations consisting of $3,436 million in repurchases of 13.9 million shares and $77 million on withholding tax payments related to net settled equity awards that vested in the quarter (representing approximately 0.3 million shares withheld), as well as $99 million on capital expenditures.
On December 28, 2018, the Company paid a cash dividend of $2.65 per share of common stock, totaling $1,067 million.
First Quarter Fiscal Year 2019 Non-GAAP Results From Continuing Operations
The differences between the Company's GAAP and non-GAAP results are described generally under "Non-GAAP Financial Measures" below, and presented in detail in the financial reconciliation tables attached to this release.
Gross margin from continuing operations was $4,133 million, or 71.4 percent of net revenue. This compares with gross margin from continuing operations of $3,725 million, or 68.4 percent of net revenue, in the prior quarter, and $3,454 million, or 64.8 percent of net revenue, in the same quarter last year.
Operating income from continuing operations was $3,052 million, or 52.7 percent of net revenue. This compares with operating income from continuing operations of $2,862 million, or 52.5 percent of net revenue, in the prior quarter, and $2,571 million, or 48.2 percent of net revenue, in the same quarter last year.
Net income from continuing operations was $2,446 million, or $5.55 per diluted share. This compares with net income of $2,546 million, or $5.85 per diluted share, in the prior quarter, and net income of $2,345 million, or $5.12 per diluted share, in the same quarter last year.
Free cash flow from operations, defined as cash from operations less capital expenditures, was $2,033 million in the quarter, compared to $1,465 million in the same quarter last year.
First Quarter Fiscal Year 2019 Non-GAAP Results (Dollars in Q1 19 Q1 19 Q1 19 millions) Semiconductor solutions $ 4,374 $ 4,374 $ 4,374 76% Infrastructure software 1,403 1,403 1,403 24 Intellectual property licensing 12 12 12 - Total net revenue $ 5,789 $ 5,789 $ 5,789 100% (Dollars in Q4 18 Q1 18 millions) Semiconductor solutions $ 4,874 90% $ 4,955 93% Infrastructure software 513 9 328 6 Intellectual property licensing 57 1 44 1 Total net revenue $ 5,444 100 % $ 5,327 100 % (Dollars in Change millions) Q/Q Y/Y Semiconductor solutions 10% 12% Infrastructure software 173% 328% Intellectual property licensing - - Total net revenue 79 % 73 %
Fiscal Year 2019 Business Outlook
Based on current business trends and conditions, the outlook for continuing operations for fiscal year 2019, ending November 3, 2019, including contributions from CA, is expected to be as follows:
GAAP Reconciling Items Net revenue $24,500M - Operating margin 17.6% $8,180M Net interest expense and other $1,250M - Provision for income taxes 3% 8% Non-GAAP Net revenue $24,500M Operating margin 51.0% Net interest expense and other $1,250M Provision for income taxes 11%
Non-GAAP operating margin excludes an expected $5,210 million of amortization of acquisition-related intangible assets, $2.0 billion of stock-based compensation expense, $750 million of restructuring charges, and $220 million of acquisition-related costs; and
Non-GAAP tax provision is 8% higher than GAAP due to the tax effects of the projected reconciling items noted above.
Capital expenditures for the fiscal year are expected to be approximately $550 million. For the fiscal year, depreciation is expected to be $600 million and total intangible amortization is expected to be approximately $5,235 million.
The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. Among other things, this guidance is based on an initial estimate of purchase accounting adjustments and allocations, all of which are subject to revision. The guidance excludes the impact of any mergers, acquisitions, divestiture and stock repurchase activity that may occur during fiscal year 2019. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.
The Company's Board of Directors has approved a quarterly cash dividend of $2.65 per share.
The dividend is payable on March 29, 2019 to stockholders of record at the close of business (5:00 p.m.) Eastern Time on March 21, 2019.