10-QPeriod: Q1 FY2022

Broadcom Inc. Quarterly Report for Q1 Ended Jan 30, 2022

Filed March 10, 2022For Securities:AVGO

Summary

Broadcom Inc. (AVGO) reported strong financial performance for the fiscal quarter ended January 30, 2022, demonstrating significant growth across its key segments. Total net revenue reached $7.71 billion, a 16% increase year-over-year, driven by robust demand in its Semiconductor Solutions segment, which grew 20%, and a solid 5% increase in Infrastructure Software. The company's profitability also saw a substantial improvement, with operating income rising 69% to $3.11 billion. This was largely attributed to a significant increase in gross margin to 66% from 59% in the prior year period, benefiting from lower amortization of acquisition-related intangible assets and improved profitability in its semiconductor business. Broadcom also generated strong operating cash flow of $3.49 billion, underscoring its operational efficiency and financial health. Investors should note Broadcom's commitment to returning capital to shareholders through significant share repurchases totaling $2.72 billion during the quarter, alongside continued dividend payments. The company maintains a strong liquidity position, with $10.22 billion in cash and cash equivalents and ample capacity under its revolving credit facility, positioning it well to navigate market uncertainties and fund future growth initiatives.

Financial Highlights

55 data points
Beta

Revenue

$7.71B

65.5% Gross Margin

Net Income

$2.47B

32.1% Net Margin

EPS (Diluted)

$0.56

Total Assets

$73.22B

Cash & Equivalents

$10.22B

Free Cash Flow

$3.38B

Financial Statements
Beta
Revenue$7.71B
Cost of Revenue$2.66B
Gross Profit$5.05B
R&D Expenses$1.21B
SG&A Expenses$321.00M
Operating Expenses$1.94B
Operating Income$3.11B
Interest Expense$407.00M
Net Income$2.47B
EPS (Basic)$0.58
EPS (Diluted)$0.56
Shares Outstanding (Basic)4.12B
Shares Outstanding (Diluted)4.29B

Key Highlights

  • 1Total net revenue increased by 16% year-over-year to $7.71 billion.
  • 2Operating income surged by 69% to $3.11 billion, reflecting improved profitability.
  • 3Semiconductor Solutions segment revenue grew by 20% year-over-year, driven by strong demand.
  • 4Gross margin improved significantly to 66% from 59% in the prior year period.
  • 5Generated $3.49 billion in cash from operating activities, indicating strong operational cash generation.
  • 6Repurchased $2.72 billion of common stock during the quarter under a new $10 billion authorization.
  • 7Maintained a strong liquidity position with $10.22 billion in cash and cash equivalents.

Frequently Asked Questions

The substantial increase in revenue and operating income was primarily driven by strong demand across Broadcom's Semiconductor Solutions segment, particularly for networking, server storage, and broadband products. This was complemented by higher demand for its Infrastructure Software, specifically mainframe solutions. Improved profitability, reflected in the higher gross margin, also contributed significantly.

Broadcom demonstrated a strong commitment to returning capital by repurchasing approximately $2.72 billion of its common stock during the quarter under a new $10 billion authorization. The company also continued to pay cash dividends to both common and preferred stockholders.

Broadcom acknowledged ongoing supply chain constraints, particularly for wafers and substrates, which have led to stabilized but still extended lead times and difficulty in obtaining certain components. While the company sees robust demand and record profitability driven by supply imbalances, it notes the macroeconomic environment remains uncertain and the current situation may not be sustainable long-term. Management is focused on managing working capital and de-risking the business.

Customer concentration remains a significant factor. Broadcom noted that a few customers account for a substantial portion of its revenue. For instance, WT Microelectronics accounted for 23% of net revenue, and Apple Inc. represented approximately 25% of net revenue in the quarter. The company believes its top five end customers, through all channels, accounted for over 35% of net revenue. The potential loss of or decrease in demand from these key customers could materially impact the business.