01—Abstract
Summary
Summary of the 10-Q filed March 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Broadcom Inc. reported strong revenue growth in its fiscal first quarter of 2024, driven significantly by the acquisition of VMware, which closed in November 2023.
Total net revenue reached $11.96 billiona, a 34% increase year-over-year, with the Infrastructure Software segment more than doubling its revenue contribution due to VMware. While the semiconductor solutions segment showed modest growth, the company's overall financial performance was heavily influenced by the integration of VMware. This integration led to a substantial increase in assets, liabilities, and operating expenses, including significant amortization of acquisition-related intangible assets and stock-based compensation.
Despite these increased costs and a reported decrease in operating income compared to the prior year, the company generated strong operating cash flow. Investors should monitor the integration progress of VMware and the impact of increased debt and amortization expenses on future profitability and cash flow.
02—Key points
Key Highlights
- Total net revenue increased by 34% to $11.96 billion in FQ1 2024, largely due to the acquisition of VMware.
- The Infrastructure Software segment revenue surged by 153% to $4.57 billion, primarily driven by VMware's contribution.
- Semiconductor solutions segment revenue grew 4% to $7.39 billion.
- Operating income decreased by 49% to $2.08 billion, impacted by increased operating expenses including amortization of acquisition-related intangible assets and restructuring charges related to the VMware acquisition.
- The company generated $4.82 billion in cash from operations, an increase from the prior year.
- Total assets significantly increased from $72.86 billion to $177.87 billion, largely due to goodwill and intangible assets from the VMware acquisition.
- Long-term debt increased substantially from $37.62 billion to $73.47 billion, primarily related to financing the VMware acquisition.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Broadcom kept $0.11.
- Revenue$11.96B100.0%
- Cost of revenue−$4.59B38.3%
- Gross profit$7.38B61.7%
- Operating costs−$5.29B44.2%
- Operating income$2.08B17.4%
- Interest, other & tax−$758.0M6.3%
- Net income$1.32B11.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed March 14, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $11.96B$8.91B | +34.2% |
| Cost of Revenue | $4.59B$2.91B | +57.5% |
| Gross Profit | $7.38B$6.00B | +22.8% |
| R&D Expenses | $2.31B$1.20B | +93.1% |
| SG&A Expenses | $1.57B$348.00M | +351.7% |
| Operating Expenses | $5.29B$1.90B | +178.4% |
| Operating Income | $2.08B$4.10B | −49.2% |
| Interest Expense | $926.00M$406.00M | +128.1% |
| Net Income | $1.32B$3.77B | −64.9% |
| EPS (Basic) | $0.29$0.90 | −67.9% |
| EPS (Diluted) | $0.28$0.88 | −68.2% |
| Shares Outstanding (Basic) | 4.52B4.18B | +8.1% |
| Shares Outstanding (Diluted) | 4.67B4.29B | +8.8% |
05—Questions
Frequently Asked Questions
How did the acquisition of VMware impact Broadcom's financial results?
The acquisition of VMware, completed in November 2023, significantly boosted Broadcom's total net revenue, particularly in the Infrastructure Software segment, which saw a 153% increase. However, it also led to a substantial rise in liabilities and operating expenses, including higher amortization of acquisition-related intangible assets and restructuring charges, which contributed to a decrease in operating income compared to the prior year. The acquisition also dramatically increased the company's assets and long-term debt.
What is the current debt situation for Broadcom?
Broadcom's long-term debt has significantly increased following the VMware acquisition. As of February 4, 2024, total long-term debt stood at $73.47 billion, up from $37.62 billion in the prior fiscal year-end. This increase is primarily due to the new term loans taken out to finance the cash portion of the VMware Merger and the assumption of VMware's outstanding senior unsecured notes.
How has stock-based compensation changed, and what is its impact?
Stock-based compensation expense saw a substantial increase, rising from $391 million in the prior year's comparable quarter to $1.57 billion in the current quarter. This increase is largely attributable to equity awards assumed in connection with the VMware Merger and higher grant-date fair values for annual awards. A significant portion of this expense relates to equity awards assumed from VMware, including a one-time impact from aligning vesting dates and accelerated vesting for terminated employees.
What are the key risks highlighted in the filing that investors should be aware of?
The filing highlights several significant risks, including the potential failure to realize expected benefits from the VMware Merger, substantial indebtedness which could affect financial health and flexibility, intense competition in the semiconductor and software industries, dependence on a small number of key customers, and risks associated with global economic conditions and geopolitical instability. The company also notes the cyclical nature of the semiconductor industry and potential disruptions in its supply chain.
06—Continue