10-QPeriod: Q1 FY2021

Broadcom Inc. Quarterly Report for Q1 Ended Jan 31, 2021

Filed March 12, 2021For Securities:AVGO

Summary

Broadcom Inc. reported strong financial results for the fiscal quarter ended January 31, 2021. Total net revenue increased by 14% year-over-year to $6.66 billion, driven by a 17% increase in Semiconductor Solutions and a 5% increase in Infrastructure Software. Operating income saw a significant surge of 157% to $1.84 billion, reflecting improved gross margins and cost efficiencies, particularly lower operating expenses due to reduced amortization and acquisition-related costs. The company generated robust cash flow from operations of $3.11 billion, a substantial increase from the prior year, while maintaining a strong liquidity position with $9.55 billion in cash and cash equivalents. Despite higher interest expenses due to debt refinancing, Broadcom demonstrated effective management of its financial resources. The company also continued its commitment to shareholder returns by declaring significant cash dividends for both preferred and common stockholders.

Financial Highlights

57 data points
Beta

Revenue

$6.66B

59.4% Gross Margin

Net Income

$1.38B

20.7% Net Margin

EPS (Diluted)

$0.30

Total Assets

$76.97B

Cash & Equivalents

$9.55B

Free Cash Flow

$3.00B

Financial Statements
Beta
Revenue$6.66B
Cost of Revenue$2.70B
Gross Profit$3.95B
R&D Expenses$1.21B
SG&A Expenses$339.00M
Operating Expenses$2.12B
Operating Income$1.84B
Interest Expense$570.00M
Net Income$1.38B
EPS (Basic)$0.32
EPS (Diluted)$0.30
Shares Outstanding (Basic)4.07B
Shares Outstanding (Diluted)4.28B

Key Highlights

  • 1Total net revenue grew 14% to $6.66 billion, with Semiconductor Solutions up 17% and Infrastructure Software up 5%.
  • 2Operating income surged 157% to $1.84 billion, driven by higher gross margin (59% vs 56%) and decreased operating expenses.
  • 3Strong cash flow generation with $3.11 billion from operating activities, a significant increase from $2.32 billion in the prior year.
  • 4Cash and cash equivalents increased to $9.55 billion, reflecting strong operational performance and proceeds from long-term borrowings.
  • 5Gross margin improved to 59% from 56% in the prior year, aided by lower amortization of acquisition-related intangible assets.
  • 6Significant reduction in Selling, General and Administrative (SG&A) expenses by 44% due to lower acquisition-related costs and integration benefits.
  • 7Company continues to return capital to shareholders with substantial cash dividends paid to both preferred and common stockholders.

Frequently Asked Questions

Broadcom reported a 14% increase in total net revenue, reaching $6.66 billion for the fiscal quarter ended January 31, 2021. The Semiconductor Solutions segment grew by 17% to $4.91 billion, and the Infrastructure Software segment increased by 5% to $1.75 billion.

Profitability significantly improved. Operating income more than doubled, increasing by 157% to $1.84 billion. This was driven by a higher gross margin of 59% (up from 56%) and a substantial reduction in operating expenses, particularly SG&A and amortization of acquisition-related intangible assets.

Broadcom maintained a strong liquidity position, with cash and cash equivalents increasing to $9.55 billion. The company generated a robust $3.11 billion in cash from operating activities, a significant increase from the prior year, supported by strong net income and effective working capital management. Proceeds from long-term borrowings also contributed to the cash balance.

Yes, Broadcom continues to have significant customer concentration. One customer accounted for 19% of net revenue in the quarter, and aggregate sales to its top five end customers represented over 35% of net revenue. The company notes that Apple Inc. alone accounted for approximately 25% of net revenue. The loss or significant reduction in demand from any of these major customers could materially impact the business.