01—Abstract
Summary
Summary of the 10-K filed December 20, 2019. Cited figures are marked; the original filing is the authoritative source.
Broadcom Inc. (AVGO) filed its 2019 10-K on December 20, 2019, reporting on its fiscal year ended November 2, 2019.
The filing highlights significant strategic moves, including the recent acquisition of Symantec's Enterprise Security business for $10.7 billiona in November 2019, which is expected to expand its infrastructure software offerings. This follows the substantial acquisition of CA, Inc. in November 2018 for $18.8 billion.
The company is strategically realigning its reporting segments to two: Semiconductor Solutions and Infrastructure Software, starting in fiscal year 2020. Broadcom continues to focus on leveraging its scale, technology leadership, and disciplined acquisition strategy to drive diversified and sustainable operating and financial results, while also managing significant indebtedness incurred from these acquisitions.
02—Key points
Key Highlights
- Broadcom completed the acquisition of Symantec Corporation’s Enterprise Security business for $10.7 billion on November 4, 2019, significantly expanding its infrastructure software portfolio.
- The company acquired CA, Inc. on November 5, 2018, for $18.8 billion, further strengthening its infrastructure software segment.
- For fiscal year 2019, net revenue was $22.6 billion, with a gross margin of 55%. Semiconductor solutions represented 77% of net revenue, while Infrastructure Software grew significantly to 23% due to acquisitions.
- The company has a concentrated customer base, with Apple Inc. accounting for approximately 20% of net revenue in fiscal year 2019.
- Broadcom is strategically transitioning to two reportable segments: Semiconductor Solutions and Infrastructure Software, starting in fiscal year 2020.
- The company returned significant capital to shareholders through $5.4 billion in stock repurchases and $4.2 billion in cash dividends during fiscal year 2019.
- Significant debt was incurred to finance acquisitions, with total debt and capital lease obligations reaching $32.8 billion as of November 3, 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Broadcom kept $0.12.
- Revenue$22.60B100.0%
- Cost of revenue−$10.11B44.8%
- Gross profit$12.48B55.2%
- Operating costs−$9.04B40.0%
- Operating income$3.44B15.2%
- Interest, other & tax−$720.0M3.2%
- Net income$2.72B12.1%
Where FY2019 revenue went
$22.60B- Cost of revenue: $10.11B, 45% of revenue
- R&D: $4.70B, 21% of revenue
- Net income: $2.72B, 12% of revenue
- SG&A: $1.71B, 7.6% of revenue
- Other operating costs: $2.63B, 12% of revenue
- Interest, other & tax: $720.0M, 3.2% of revenue
Kept 12% as net incomeInterest, other & tax $720.0M · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed December 20, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $22.60B$20.85B | +8.4% |
| Cost of Revenue | $10.11B$10.12B | 0.0% |
| Gross Profit | $12.48B$10.73B | +16.3% |
| R&D Expenses | $4.70B$3.77B | +24.6% |
| SG&A Expenses | $1.71B$1.06B | +61.8% |
| Operating Expenses | $9.04B$5.60B | +61.5% |
| Operating Income | $3.44B$5.13B | −32.9% |
| Interest Expense | $1.44B$628.00M | +129.9% |
| Net Income | $2.72B$12.26B | −77.8% |
| EPS (Basic) | $0.68$2.93 | −76.9% |
| EPS (Diluted) | $0.64$2.84 | −77.4% |
| Shares Outstanding (Basic) | 3.98B4.18B | −4.8% |
| Shares Outstanding (Diluted) | 4.19B4.31B | −2.8% |
05—Questions
Frequently Asked Questions
What were the major strategic actions taken by Broadcom in the fiscal year ended November 2, 2019?
The most significant strategic action was the acquisition of Symantec Corporation’s Enterprise Security business for approximately $10.7 billion, completed in November 2019. This acquisition aims to bolster Broadcom's infrastructure software solutions. This follows the large acquisition of CA, Inc. in November 2018 for $18.8 billion.
How did Broadcom's segment reporting change?
Broadcom updated its organizational structure for fiscal year 2019, reporting three segments: Semiconductor Solutions, Infrastructure Software, and IP Licensing. However, starting with the fiscal year ending November 1, 2020, the company plans to report under two segments: Semiconductor Solutions and Infrastructure Software.
What are the primary risks identified by Broadcom in this filing?
Key risks highlighted include significant customer concentration, with a substantial portion of revenue coming from a few major customers like Apple Inc. Dependence on contract manufacturers and suppliers for critical components, adverse global economic conditions, government regulations and trade restrictions, and substantial indebtedness are also major concerns. The company also faces risks associated with integrating acquired businesses, such as the Symantec Enterprise Security business.
How is Broadcom managing its debt load?
Broadcom has incurred significant indebtedness to finance its acquisitions. As of November 3, 2019, total debt and capital lease obligations were $32.8 billion. The company's ability to service this debt depends on its future performance and cash flow generation. They are also managing debt through offerings like preferred stock to repay existing debt.
06—Continue