01—Abstract
Summary
Summary of the 10-K filed December 18, 2020. Cited figures are marked; the original filing is the authoritative source.
Broadcom Inc. (AVGO) reported its 2020 fiscal year results with a notable increase in net revenue driven by the acquisition of Symantec's Enterprise Security business.
The company operates in two main segments: semiconductor solutions and infrastructure software. While the semiconductor segment experienced a slight decline in revenue, primarily due to a major customer's mobile handset production delays, the infrastructure software segment saw significant growth, largely fueled by the integration of the acquired Symantec business. Financially, Broadcom demonstrated strong cash flow from operations.
The company's strategy focuses on combining best-of-breed technology leadership in both semiconductors and infrastructure software through strategic acquisitions and R&D investment. A significant aspect of the company's business model is customer concentration, with a few key customers accounting for a substantial portion of revenue, which presents both an opportunity and a risk. The company also continues to manage its substantial debt levels, a consequence of its aggressive acquisition strategy.
02—Key points
Key Highlights
- Broadcom Inc. reported total net revenue of $23.888 billion for fiscal year 2020, an increase of 6% from fiscal year 2019.
- The Infrastructure Software segment saw a significant revenue increase of 28%, primarily driven by the acquisition of Symantec's Enterprise Security business.
- Semiconductor solutions revenue saw a slight decrease of 1% year-over-year, impacted by delays in a major customer's mobile handset ramp-up.
- Gross margin improved to 57% of net revenue, up from 55% in the prior year, benefiting from the higher-margin Symantec business and a favorable semiconductor product mix.
- The company generated strong operating cash flow of $12.061 billion.
- Broadcom paid $5.235 billion in cash dividends to common stockholders in fiscal year 2020.
- Customer concentration remains a key factor, with aggregate sales to the top five end customers accounting for over 30% of net revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Broadcom kept $0.12.
- Revenue$23.89B100.0%
- Cost of revenue−$10.37B43.4%
- Gross profit$13.52B56.6%
- Operating costs−$9.50B39.8%
- Operating income$4.01B16.8%
- Interest, other & tax−$1.05B4.4%
- Net income$2.96B12.4%
Where FY2020 revenue went
$23.89B- Cost of revenue: $10.37B, 43% of revenue
- R&D: $4.97B, 21% of revenue
- Net income: $2.96B, 12% of revenue
- SG&A: $1.94B, 8.1% of revenue
- Other operating costs: $2.60B, 11% of revenue
- Interest, other & tax: $1.05B, 4.4% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed December 18, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $23.89B$22.60B | +5.7% |
| Cost of Revenue | $10.37B$10.11B | +2.6% |
| Gross Profit | $13.52B$12.48B | +8.3% |
| R&D Expenses | $4.97B$4.70B | +5.8% |
| SG&A Expenses | $1.94B$1.71B | +13.2% |
| Operating Expenses | $9.50B$9.04B | +5.1% |
| Operating Income | $4.01B$3.44B | +16.6% |
| Interest Expense | $1.78B$1.44B | +23.1% |
| Net Income | $2.96B$2.72B | +8.7% |
| EPS (Basic) | $0.66$0.68 | −2.2% |
| EPS (Diluted) | $0.63$0.64 | −1.6% |
| Shares Outstanding (Basic) | 4.02B3.98B | +1.0% |
| Shares Outstanding (Diluted) | 4.21B4.19B | +0.5% |
05—Questions
Frequently Asked Questions
What were Broadcom's primary business segments in fiscal year 2020?
Broadcom's business is organized into two reportable segments: Semiconductor Solutions and Infrastructure Software.
How did the acquisition of Symantec's Enterprise Security business impact Broadcom's financial performance?
The acquisition of Symantec's Enterprise Security business, completed in November 2019 for $10.7 billion, significantly boosted Broadcom's Infrastructure Software segment, leading to an overall increase in net revenue and contributing to improved gross margins.
What are the main risks highlighted in Broadcom's 10-K filing for fiscal year 2020?
Key risks include significant customer concentration, dependence on contract manufacturers and suppliers, the cyclical nature of the semiconductor industry, potential impacts from the COVID-19 pandemic, and ongoing legal proceedings, such as the patent infringement case with Caltech.
How is Broadcom managing its debt?
Broadcom has a substantial amount of debt, largely due to its acquisition strategy. The company is actively managing its debt through repayments and by focusing on generating strong cash flows from operations to service its debt obligations.
06—Continue