Broadcom Inc. Announces Fourth Quarter and Fiscal Year 2019 Financial Results and Quarterly Dividends

SAN JOSE, Calif., Dec. 12, 2019 /PRNewswire/ -- Broadcom Inc. (Nasdaq: AVGO), a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions, today reported financial results for its fourth fiscal quarter and fiscal year ended November 3, 2019, provided guidance for its fiscal year 2020 and announced quarterly dividends. The Company completed its acquisition of the Symantec Enterprise Security business on November 4, 2019. The financial results provided below do not include any contribution from the Symantec Enterprise Security business.

"Fiscal year 2019 concluded as expected. Our semiconductor solutions segment continued to work its way through a cyclical correction. This was more than offset by our infrastructure software segment, which delivered healthy results benefitting from the integration and performance of our CA business," said Hock Tan, President and CEO of Broadcom Inc. "Looking to fiscal 2020, we remain well-positioned across our technology franchises. We continue to believe that our core semiconductor business is bottoming and will return to year over year growth in the second half of our fiscal year. In addition, we expect to benefit from the integration of the Symantec Enterprise Security business into what is otherwise expected to be a stable infrastructure software segment in fiscal 2020."

"We achieved record profitability in fiscal 2019, including free cash flow of over $9 billion, despite a challenging market backdrop for our semiconductor solutions segment. As a result, we are raising our target dividend by 23 percent to $3.25 per share per quarter for fiscal year 2020," said Tom Krause, CFO of Broadcom Inc. "Looking ahead to next year, we expect our adjusted EBITDA to expand by more than $1 billion, while we focus our capital returns on cash dividends, with excess cash going towards debt pay down."

Fourth Quarter Fiscal Year 2019 GAAP Results from Continuing Operations

Net revenue was $5,776 million, 4.7 percent higher than $5,515 million in the previous quarter and 6.1 percent higher than $5,444 million in the same quarter last year.

Gross margin was $3,152 million, or 54.6 percent of net revenue. This compares with gross margin of $3,034 million, or 55.0 percent of net revenue, in the prior quarter, and gross margin of $2,935 million, or 53.9 percent of net revenue, in the same quarter last year.

Operating expenses were $2,098 million. This compares with $2,169 million in the prior quarter and $1,283 million in the same quarter last year.

Operating income was $1,054 million, or 18.2 percent of net revenue. This compares with operating income of $865 million, or 15.7 percent of net revenue, in the prior quarter, and operating income of $1,652 million, or 30.3 percent of net revenue, in the same quarter last year.

Net income was $847 million, or $1.97 per diluted share. This compares with net income of $715 million, or $1.71 per diluted share, in the prior quarter, and net income of $1,115 million, or $2.64 per diluted share, in the same quarter last year.

Cash from operations was $2,479 million in the quarter. This compares with $2,419 million in the prior quarter and $2,635 million in the same quarter last year.



       
              Fourth Quarter Fiscal Year 2019 GAAP Results                                                   
           Change

    ---


       
              (Dollars in millions, except per share data) 
     Q4 19        
     Q3 19        
     Q4 18         
          Q/Q                
       Y/Y

    ---


       Net revenue                                                     $5,776         $5,515          $5,444

                                                                                                                      +5%                    +6%



       Gross margin                                                     54.6%         55.0%          53.9%        -40bps                 +70bps



       Operating expenses                                              $2,098         $2,169          $1,283                   $
       71          
     +  $
      815



       Operating income                                                $1,054           $865          $1,652                       189               $
      598

                                                                                                                
          +$



       Net income                                                        $847           $715          $1,115     
           +    $
       132               $
      268



       Net income attributable to common stock                           $818           $715          $1,115     
           +    $
       103               $
      297



       Earnings per common share - diluted                              $1.97          $1.71           $2.64     
           +   $
       0.26              $
      0.67



       Cash flow from operations                                       $2,479         $2,419          $2,635     
           +     $
       60               $
      156

The Company's cash and cash equivalents at the end of the fourth fiscal quarter were $5,055 million, compared to $5,462 million at the end of the prior quarter.

During the fourth fiscal quarter, the Company generated $2,479 million in cash from operations and spent $587 million on share repurchases and eliminations, consisting of $433 million in repurchases of 1.5 million shares and $154 million of withholding tax payments related to net settled equity awards that vested in the quarter (representing approximately 0.5 million shares withheld), as well as $96 million on capital expenditures.

On October 1, 2019, the Company paid a cash dividend of $2.65 per share of common stock, totaling $1,054 million.

Fourth Quarter Fiscal Year 2019 Non-GAAP Results From Continuing Operations

The differences between the Company's GAAP and non-GAAP results are described generally under "Non-GAAP Financial Measures" below, and presented in detail in the financial reconciliation tables attached to this release.

Gross margin was $4,035 million, or 69.9 percent of net revenue. This compares with gross margin of $3,916 million, or 71.0 percent of net revenue, in the prior quarter, and $3,725 million, or 68.4 percent of net revenue, in the same quarter last year.

Operating income was $3,018 million, or 52.3 percent of net revenue. This compares with operating income of $2,910 million, or 52.8 percent of net revenue, in the prior quarter, and $2,862 million, or 52.5 percent of net revenue, in the same quarter last year.

Net income was $2,391 million, or $5.39 per diluted share. This compares with net income of $2,281 million, or $5.16 per diluted share, in the prior quarter, and net income of $2,546 million, or $5.85 per diluted share, in the same quarter last year.

Free cash flow from operations, defined as cash from operations less capital expenditures, was $2,383 million in the quarter. This compares with $2,307 million in the prior quarter and $2,529 million in the same quarter last year.



       
                Fourth Quarter Fiscal Year 2019 Non-GAAP Results                                   
            Change

    ---


       
                (Dollars in millions, except per share data)     Q4 19           Q3 19     Q4 18      Q/Q                  Y/Y

    ---


       Gross margin                                                  69.9%           71.0%      68.4%                        +150bps

                                                                                                         -110bps



       Operating expenses                                                  $
      1,017       $
        1,006              $
       863         
     +   $
       11 
     +    $
      154



       Operating income                                                    $
      3,018       $
        2,910            $
       2,862           +  $
       108     +  $
      156



       Net income                                                          $
      2,391       $
        2,281            $
       2,546         
     +  $
       110        $
      155



       Earnings per common share - diluted                                  $
      5.39        $
        5.16             $
       5.85         
     + $
       0.23       $
      0.46



       Free cash flow                                                      $
      2,383       $
        2,307            $
       2,529         
     +   $
       76        $
      146

Other Quarterly Data



       
                Net revenue by segment                                                                                                                   
         Change

    ---


       
                (Dollars in millions)  
            Q4 19          
          Q3 19       
         Q4 18         
     Q/Q      
        Y/Y

    ---


       Semiconductor solutions                   $
           4,553       79%                  $
         4,353          79%              $
     4,874    90%              +5%        -7%



       Infrastructure software             1,200                21              1,140                  21             513        9               +5%     +134%



       Intellectual property licensing        23                                        22                                    57           1         +5%             -60%



       Total net revenue                         $
           5,776      100%                  $
         5,515         100%              $
     5,444   100%

Fiscal Year 2019 Financial Results from Continuing Operations

Net revenue from continuing operations was $22,597 million, an increase of 8.4 percent from $20,848 million in the prior year. Gross margin was $12,483 million, or 55.2 percent of net revenue, versus $10,733 million, or 51.5 percent of net revenue, in the prior year. Operating income was $3,444 million, or 15.2 percent of net revenue, versus $5,135 million, or 24.6 percent of net revenue, in the prior year. Net income, which includes the impact from discontinued operations, was $2,724 million, or $6.43 per diluted share. This compares with a net income of $12,610 million, or $28.44 per diluted share, in fiscal year 2018. Cash from operations was $9,697 million, compared to $8,880 million in the prior year.



       
                Fiscal Year 2019 GAAP Results

    ---


       
                (Dollars in millions, except per share data)  2019               2018       Change

    ---


       Net revenue                                                     $
       22,597        $
        20,848     +8%



       Gross margin                                              55.2%             51.5%      +370bps



       Operating expenses                                               $
       9,039         $
        5,598       + $
       3,441



       Operating income                                                 $
       3,444         $
        5,135         $
       1,691



       Net income                                                       $
       2,724        $
        12,610         $
       9,886



       Net income attributable to common stock                          $
       2,695        $
        12,259         $
       9,564



       Earnings per common share - diluted                               $
       6.43         $
        28.44         $
       22.01



       Cash flow from operations                                        $
       9,697         $
        8,880 
     +       $
       817

Non-GAAP gross margin was $16,055 million, or 71.0 percent of net revenue, versus $13,931 million, or 66.8 percent of net revenue, in the prior year. Non-GAAP operating income from continuing operations was $11,929 million. This compares with $10,424 million in the prior year. Non-GAAP net income was $9,452 million, or $21.29 per diluted share. This compares with non-GAAP net income of $9,391 million, or $20.82 per diluted share, in fiscal year 2018. Free cash flow from operations, defined as cash from operations less capital expenditures, was $9,265 million compared to $8,245 million in the prior year.



       
                Fiscal Year 2019 Non-GAAP Results

    ---


       
                (Dollars in millions, except per share data)  2019              2018       Change

    ---


       Gross margin                                              71.0%            66.8%      +420bps



       Operating expenses                                               $
      4,126         $
        3,507 +   $
        619



       Operating income                                                $
      11,929        $
        10,424 + $
        1,505



       Net income                                                       $
      9,452         $
        9,391 +    $
        61



       Earnings per common share - diluted                              $
      21.29         $
        20.82 +  $
        0.47



       Free cash flow                                                   $
      9,265         $
        8,245 + $
        1,020

Fiscal Year 2020 Business Outlook

Based on current business trends and conditions, the outlook for continuing operations for fiscal year 2020, ending November 1, 2020, including contributions from the Symantec Enterprise Security business, is expected to be as follows:

    --  Revenue is expected to be $25 billion plus or minus $500 million.
    --  Adjusted EBITDA is expected to be $13.75 billion plus or minus $250
        million.

The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The Company is not readily able to provide a reconciliation of projected Adjusted EBITDA to projected net income without unreasonable effort. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.

Quarterly Dividends

The Company's Board of Directors has approved a quarterly cash dividend on its common stock of $3.25 per share. The common stock dividend is payable on December 31, 2019 to common stockholders of record at the close of business (5:00 p.m. Eastern Time) on December 23, 2019.

The Company's Board of Directors also approved a quarterly cash dividend on its 8.00% Mandatory Convertible Preferred Stock, Series A, of $20.00 per share. This dividend is payable on December 31, 2019 to preferred stockholders of record at the close of business (5:00 p.m. Eastern Time) on December 15, 2019.

Financial Results Conference Call

Broadcom Inc. will host a conference call to review its financial results for the fourth fiscal quarter and fiscal year ended November 3, 2019, and discuss guidance for fiscal year 2020, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (866) 310-8712; International +1 (720) 634-2946. The passcode is 8988706. A replay of the call will be accessible for one week after the call. To access the replay dial (855) 859-2056; International +1 (404) 537-3406; and reference the passcode: 8988706. A webcast of the conference call will also be available in the "Investors" section of Broadcom's website at www.broadcom.com.

Basis of Presentation

The Company's financial results include contributions from CA, Inc.'s continuing operations starting in the first quarter of fiscal year 2019. The financial results from businesses that have been classified as discontinued operations in the Company's financial statements are not included in the results presented above, unless otherwise stated.

Due to the Company's 52/53 week reporting cycle, fiscal year 2018 included an extra week in the first quarter, compared to fiscal year 2019.

Non-GAAP Financial Measures

In addition to GAAP reporting, Broadcom provides investors with net revenue, net income, operating income, gross margin, operating expenses, cash flow and other data on a non-GAAP basis. This non-GAAP information includes the effect, where applicable, of purchase accounting on revenue, and excludes amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, including integration costs, purchase accounting effect on inventory, litigation settlements, impairment on investment, debt-related costs, gains on investments, income (loss) from discontinued operations and non-GAAP tax reconciling adjustments. Management does not believe that these items are reflective of the Company's underlying performance. Internally, these non-GAAP measures are significant measures used by management for purposes of evaluating the core operating performance of the Company, establishing internal budgets, calculating return on investment for development programs and growth initiatives, comparing performance with internal forecasts and targeted business models, strategic planning, evaluating and valuing potential acquisition candidates and how their operations compare to the Company's operations, and benchmarking performance externally against the Company's competitors. The exclusion of these and other similar items from Broadcom's non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Free cash flow measures have limitations as they omit certain components of the overall cash flow statement and do not represent the residual cash flow available for discretionary expenditures. Investors should not consider presentation of free cash flow measures as implying that stockholders have any right to such cash. Broadcom's free cash flow may not be calculated in a manner comparable to similarly named measures used by other companies.

Broadcom believes this non-GAAP financial information provides additional insight into the Company's on-going performance. Therefore, Broadcom provides this information to investors for a more consistent basis of comparison and to help them evaluate the results of the Company's on-going operations and enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release.

About Broadcom Inc.

Broadcom Inc., (NASDAQ: AVGO), a Delaware corporation headquartered in San Jose, CA, is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. Broadcom's category-leading product portfolio serves critical markets including data center, networking, enterprise software, broadband, wireless, storage and industrial. Our solutions include data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation. For more information, go to www.broadcom.com.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning Broadcom. These statements include, but are not limited to, statements that address our expected future business and financial performance and other statements identified by words such as "will", "expect", "believe", "anticipate", "estimate", "should", "intend", "plan", "potential", "predict" "project", "aim", and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of the management of Broadcom, as well as assumptions made by, and information currently available to, such management, current market trends and market conditions and involve risks and uncertainties, many of which are outside the Company's and management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Particular uncertainties that could materially affect future results include risks associated with: our acquisition of Symantec Corporation's Enterprise Security business ("Symantec Business"), including (1) potential difficulties in employee retention, (2) unexpected costs, charges or expenses, and (3) our ability to successfully integrate the Symantec Business and achieve the anticipated benefits of the transaction; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our dependence on contract manufacturing and outsourced supply chain; our dependency on a limited number of suppliers; global economic conditions and concerns; international political and economic conditions; any acquisitions we may make, such as delays, challenges and expenses associated with receiving governmental and regulatory approvals and satisfying other closing conditions, and with integrating acquired businesses with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected by such acquisitions, including our recent acquisition of the Symantec Business; government regulations and trade restrictions; our significant indebtedness and the need to generate sufficient cash flows to service and repay such debt; dependence on and risks associated with distributors and resellers of our products; dependence on senior management and our ability to attract and retain qualified personnel; involvement in legal or administrative proceedings; quarterly and annual fluctuations in operating results; our ability to accurately estimate customers' demand and adjust our manufacturing and supply chain accordingly; cyclicality in the semiconductor industry or in our target markets; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of any design wins; prolonged disruptions of our or our contract manufacturers' manufacturing facilities or other significant operations; our ability to improve our manufacturing efficiency and quality; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margin; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; compatibility of our software products with operating environments, platforms or third-party products; our ability to enter into satisfactory software license agreements; sales to our government clients; availability of third party software used in our products; use of open source code sources in our products; any expenses or reputational damage associated with resolving customer product warranty and indemnification claims; market acceptance of the end products into which our products are designed; our ability to sell to new types of customers and to keep pace with technological advances; our compliance with privacy and data security laws; our ability to protect against a breach of security systems; changes in accounting standards; fluctuations in foreign exchange rates; our provision for income taxes and overall cash tax costs, legislation that may impact our overall cash tax costs and our ability to maintain tax concessions in certain jurisdictions; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature.

Our filings with the SEC, which you may obtain for free at the SEC's website at http://www.sec.gov, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Actual results may vary from the estimates provided. We undertake no intent or obligation to publicly update or revise any of the estimates and other forward-looking statements made in this announcement, whether as a result of new information, future events or otherwise, except as required by law.

Contact:
Broadcom Inc.
Beatrice F. Russotto
Investor Relations
408-433-8000
investor.relations@broadcom.com




                            (1) The Company is not readily able
                             to provide a reconciliation of the
                             projected non-GAAP financial
                             information presented to the
                             relevant projected GAAP measure
                             without unreasonable effort.


                                                                                             
              
                BROADCOM INC.


                                                                               
            
         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED


                                                                                        
       
                (IN MILLIONS, EXCEPT PER SHARE DATA)






                                                                               
            
          Fiscal Quarter Ended                                                          Fiscal Year Ended



                                                                          November 3,                                      August 4,                           November 4,                    November 3,             November 4,


                                                                                 2019                                            2019                                   2018                            2019                     2018






     Net revenue                                                                     $
       5,776                                                          $
              5,515                                  $
     5,444                            $
      22,597             $
     20,848



     Cost of revenue:



     Cost of revenue                                                           1,788                                           1,651                                  1,746                           6,723                    7,021



     Purchase accounting effect on inventory                                                                                                                                                                                  70



     Amortization of acquisition-related intangible assets                       827                                             828                                    762                           3,314                    3,004



     Restructuring charges                                                         9                                               2                                      1                              77                       20






     Total cost of revenue                                                     2,624                                           2,481                                  2,509                          10,114                   10,115






     Gross margin                                                              3,152                                           3,034                                  2,935                          12,483                   10,733





     Research and development                                                  1,177                                           1,235                                    948                           4,696                    3,768



     Selling, general and administrative                                         409                                             410                                    237                           1,709                    1,056



     Amortization of acquisition-related intangible assets                       474                                             475                                     67                           1,898                      541



     Restructuring, impairment and disposal charges                               38                                              49                                     17                             736                      219



     Litigation settlements                                                                                                                                            14                                                      14






     Total operating expenses                                                  2,098                                           2,169                                  1,283                           9,039                    5,598






     Operating income                                                          1,054                                             865                                  1,652                           3,444                    5,135



     Interest expense                                                          (361)                                          (362)                                 (148)                        (1,444)                   (628)



     Impairment on investment                                                                                                                                       (106)                                                  (106)



     Other income, net                                                            54                                              41                                     24                             226                      144






     Income from continuing operations before income taxes                       747                                             544                                  1,422                           2,226                    4,545



     Provision for (benefit from) income taxes                                 (100)                                          (171)                                   307                           (510)                 (8,084)






     Income from continuing operations                                           847                                             715                                  1,115                           2,736                   12,629



     Loss from discontinued operations, net of income taxes                                                                                                                                         (12)                    (19)






     Net income                                                                  847                                             715                                  1,115                           2,724                   12,610



     Dividends on preferred stock (1)                                             29                                                                                                                   29



     Net income attributable to noncontrolling interest (2)                                                                                                                                                                  351






     
                Net income attributable to common stock                              $
       818                                                            $
              715                                  $
     1,115                             $
      2,695             $
     12,259








     Basic income per share attributable to common stock:



     Income per share from continuing operations                               $2.06                                                   $
              1.80                                   $
              2.71                            $
       6.80            $
        29.37



     Loss per share from discontinued operations                                                                                                                                                  (0.03)                  (0.04)




     Net income per share                                                      $2.06                                                   $
              1.80                                   $
              2.71                            $
       6.77            $
        29.33






     Diluted income per share attributable to common stock(3):



     Income per share from continuing operations                               $1.97                                                   $
              1.71                                   $
              2.64                            $
       6.46            $
        28.48



     Loss per share from discontinued operations                                                                                                                                                  (0.03)                  (0.04)




     Net income per share                                                      $1.97                                                   $
              1.71                                   $
              2.64                            $
       6.43            $
        28.44






     Weighted-average shares used in per share calculations:



     Basic                                                                       397                                             398                                    412                             398                      418



     Diluted                                                                     416                                             418                                    423                             419                      431





     Stock-based compensation expense included in continuing operations:



     Cost of revenue                                                             $41                                                     $
              47                                     $
              23                             $
       163               $
        86



     Research and development                                                    394                                             456                                    225                           1,532                      855



     Selling, general and administrative                                         109                                             129                                     69                             490                      286






     Total stock-based compensation expense                                     $544                                                    $
              632                                    $
              317                           $
       2,185            $
        1,227




               (1) Net income attributable to common stock excludes
                dividends on Mandatory Convertible Preferred Stock
                issued during the fiscal quarter ended November 3,
                2019.




               (2) In connection with the redomiciliation to the
                United States on April 4, 2018, or the
                Redomiciliation, all outstanding exchangeable
                limited partnership units, or LP Units, in Broadcom
                Cayman L.P. were exchanged for common stock of
                Broadcom on a one-for-one basis and the
                noncontrolling interest, or NCI, was eliminated. Net
                income attributable to NCI prior to the
                Redomiciliation represented approximately 5% of net
                income attributable to LP Units.




               (3) For the fiscal quarter and fiscal year ended
                November 3, 2019, diluted income per share excluded
                the potentially dilutive effect of Mandatory
                Convertible Preferred Stock as the impact was
                antidilutive. For the fiscal year ended November 4,
                2018, diluted income per share excluded the
                potentially dilutive effect of LP Units as the
                impact was antidilutive. There were no LP Units
                outstanding during any of fiscal year 2019 periods
                or the fiscal quarter ended November 4, 2018 due to
                the Redomiciliation.


                                                                                              
              
                BROADCOM INC.


                                                                                         
     
         FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED


                                                                                              
              
                (IN MILLIONS)






                                                                                                
              
                 Fiscal Quarter Ended                                         Fiscal Year Ended



                                                                                             November 3,                                               August 4,        November 4,         November 3,                   November 4,


                                                                                                    2019                                                     2019                2018                 2019                           2018








     Net revenue on GAAP basis                                                                            $
              5,776                                       $
              5,515                        $
          5,444                     $
             22,597     $
            20,848



     Acquisition-related purchase accounting revenue adjustment (1)                                                                                                              4                                                 14






     Net revenue on non-GAAP basis                                                                        $
              5,776                                       $
              5,515                        $
          5,448                     $
             22,597     $
            20,862








     Gross margin on GAAP basis                                                                           $
              3,152                                       $
              3,034                        $
          2,935                     $
             12,483     $
            10,733



     Acquisition-related purchase accounting revenue adjustment (1)                                                                                                              4                                                 14



     Purchase accounting effect on inventory                                                                                                                                                                                      70



     Amortization of acquisition-related intangible assets                                          827                                                      828                 762                3,314                          3,004



     Stock-based compensation expense                                                                41                                                       47                  23                  163                             86



     Restructuring charges                                                                            9                                                        2                   1                   77                             20



     Acquisition-related costs                                                                        6                                                        5                                      18                              4






     Gross margin on non-GAAP basis                                                                       $
              4,035                                       $
              3,916                        $
          3,725                     $
             16,055     $
            13,931








     Research and development on GAAP basis                                                               $
              1,177                                       $
              1,235                          $
          948                      $
             4,696      $
            3,768



     Stock-based compensation expense                                                               394                                                      456                 225                1,532                            855



     Acquisition-related costs                                                                        1                                                        1                   1                    5                              4






     Research and development on non-GAAP basis                                                             $
              782                                         $
              778                          $
          722                      $
             3,159      $
            2,909








     Selling, general and administrative expense on GAAP basis                                              $
              409                                         $
              410                          $
          237                      $
             1,709      $
            1,056



     Stock-based compensation expense                                                               109                                                      129                  69                  490                            286



     Acquisition-related costs                                                                       65                                                       53                  27                  252                            172






     Selling, general and administrative expense on non-GAAP basis                                          $
              235                                         $
              228                          $
          141                        $
             967        $
            598








     Total operating expenses on GAAP basis                                                               $
              2,098                                       $
              2,169                        $
          1,283                      $
             9,039      $
            5,598



     Amortization of acquisition-related intangible assets                                          474                                                      475                  67                1,898                            541



     Stock-based compensation expense                                                               503                                                      585                 294                2,022                          1,141



     Restructuring, impairment and disposal charges                                                  38                                                       49                  17                  736                            219



     Litigation settlements                                                                                                                                                     14                                                 14



     Acquisition-related costs                                                                       66                                                       54                  28                  257                            176






     Total operating expenses on non-GAAP basis                                                           $
              1,017                                       $
              1,006                          $
          863                      $
             4,126      $
            3,507








     Operating income on GAAP basis                                                                       $
              1,054                                         $
              865                        $
          1,652                      $
             3,444      $
            5,135



     Acquisition-related purchase accounting revenue adjustment (1)                                                                                                              4                                                 14



     Purchase accounting effect on inventory                                                                                                                                                                                      70



     Amortization of acquisition-related intangible assets                                        1,301                                                    1,303                 829                5,212                          3,545



     Stock-based compensation expense                                                               544                                                      632                 317                2,185                          1,227



     Restructuring, impairment and disposal charges                                                  47                                                       51                  18                  813                            239



     Litigation settlements                                                                                                                                                     14                                                 14



     Acquisition-related costs                                                                       72                                                       59                  28                  275                            180






     Operating income on non-GAAP basis                                                                   $
              3,018                                       $
              2,910                        $
          2,862                     $
             11,929     $
            10,424








     Interest expense on GAAP basis                                                                       $
              (361)                                      $
              (362)                       $
          (148)                   $
             (1,444)     $
            (628)



     Debt-related costs                                                                              26                                                        2                                      54                             32






     Interest expense on non-GAAP basis                                                                   $
              (335)                                      $
              (360)                       $
          (148)                   $
             (1,390)     $
            (596)








     Other income, net on GAAP basis                                                                         $
              54                                          $
              41                           $
          24                        $
             226        $
            144



     Gains on investments                                                                          (50)                                                    (28)                                  (145)                           (3)






     Other income, net on non-GAAP basis                                                                      $
              4                                          $
              13                           $
          24                         $
             81        $
            141








     Income from continuing operations before income taxes on GAAP basis                                    $
              747                                         $
              544                        $
          1,422                      $
             2,226      $
            4,545



     Acquisition-related purchase accounting revenue adjustment (1)                                                                                                              4                                                 14



     Purchase accounting effect on inventory                                                                                                                                                                                      70



     Amortization of acquisition-related intangible assets                                        1,301                                                    1,303                 829                5,212                          3,545



     Stock-based compensation expense                                                               544                                                      632                 317                2,185                          1,227



     Restructuring, impairment and disposal charges                                                  47                                                       51                  18                  813                            239



     Litigation settlements                                                                                                                                                     14                                                 14



     Acquisition-related costs                                                                       72                                                       59                  28                  275                            180



     Impairment on investment                                                                                                                                                  106                                                106



     Debt-related costs                                                                              26                                                        2                                      54                             32



     Gains on investments                                                                          (50)                                                    (28)                                  (145)                           (3)






     Income before income taxes on non-GAAP basis                                                         $
              2,687                                       $
              2,563                        $
          2,738                     $
             10,620      $
            9,969








     Provision for (benefit from) income taxes on GAAP basis                                              $
              (100)                                      $
              (171)                         $
          307                      $
             (510)   $
            (8,084)



     Non-GAAP tax reconciling adjustments                                                           396                                                      453               (115)               1,678                          8,662






     Provision for income taxes on non-GAAP basis                                                           $
              296                                         $
              282                          $
          192                      $
             1,168        $
            578








     Net income on GAAP basis                                                                               $
              847                                         $
              715                        $
          1,115                      $
             2,724     $
            12,610



     Acquisition-related purchase accounting revenue adjustment (1)                                                                                                              4                                                 14



     Purchase accounting effect on inventory                                                                                                                                                                                      70



     Amortization of acquisition-related intangible assets                                        1,301                                                    1,303                 829                5,212                          3,545



     Stock-based compensation expense                                                               544                                                      632                 317                2,185                          1,227



     Restructuring, impairment and disposal charges                                                  47                                                       51                  18                  813                            239



     Litigation settlements                                                                                                                                                     14                                                 14



     Acquisition-related costs                                                                       72                                                       59                  28                  275                            180



     Impairment on investment                                                                                                                                                  106                                                106



     Debt-related costs                                                                              26                                                        2                                      54                             32



     Gains on investments                                                                          (50)                                                    (28)                                  (145)                           (3)



     Non-GAAP tax reconciling adjustments                                                         (396)                                                   (453)                115              (1,678)                       (8,662)



     Discontinued operations, net of income taxes                                                                                                                                                   12                             19






     Net income on non-GAAP basis                                                                         $
              2,391                                       $
              2,281                        $
          2,546                      $
             9,452      $
            9,391










     Weighted-average shares used in per share calculations - diluted on GAAP basis                 416                                                      418                 423                  419                            431



     Non-GAAP adjustment (2)                                                                         28                                                       24                  12                   25                             20






     Weighted-average shares used in per share calculations - diluted on non-GAAP basis             444                                                      442                 435                  444                            451








     Net income on non-GAAP basis                                                                         $
              2,391                                       $
              2,281                        $
          2,546                      $
             9,452      $
            9,391



     Interest expense on non-GAAP basis                                                             335                                                      360                 148                1,390                            596



     Provision for income taxes on non-GAAP basis                                                   296                                                      282                 192                1,168                            578



     Depreciation                                                                                   143                                                      141                 132                  569                            515






     Adjusted EBITDA                                                                                      $
              3,165                                       $
              3,064                        $
          3,018                     $
             12,579     $
            11,080








     Net cash provided by operating activities                                                            $
              2,479                                       $
              2,419                        $
          2,635                      $
             9,697      $
            8,880



     Purchases of property, plant and equipment                                                    (96)                                                   (112)              (106)               (432)                         (635)






     Free cash flow                                                                                       $
              2,383                                       $
              2,307                        $
          2,529                      $
             9,265      $
            8,245

               (1) Amounts represent licensing revenue not included
                in GAAP net revenue as a result of the effect of
                purchase accounting for acquisitions.




               (2) Non-GAAP adjustment for the number of shares
                used in the diluted per share calculations excludes
                the impact of stock-based compensation expense
                expected to be incurred in future periods and not
                yet recognized in the financial statements, which
                would otherwise be assumed to be used to repurchase
                shares under the GAAP treasury stock method. For the
                fiscal quarter and fiscal year ended November 3,
                2019, non-GAAP adjustment included the impact of
                Mandatory Convertible Preferred Stock that was
                antidilutive on a GAAP basis. For the fiscal year


                                              
          
                BROADCOM INC.


                                          
     
       CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED


                                              
          
                (IN MILLIONS)






                                                  November 3,                                     November 4,


                                                         2019                                             2018






     
                ASSETS





     Current assets:


      Cash and cash equivalents                                  $
              5,055                              $
        4,292


      Trade accounts receivable, net                    3,259                                            3,325



     Inventory                                           874                                            1,124


      Other current assets                                729                                              366





      Total current assets                              9,917                                            9,107





     Long-term assets:


      Property, plant and equipment,
       net                                              2,565                                            2,635



     Goodwill                                         36,714                                           26,913


      Intangible assets, net                           17,554                                           10,762


      Other long-term assets                              743                                              707






     Total assets                                              $
              67,493                             $
        50,124









                   LIABILITIES AND EQUITY




      Current liabilities:



     Accounts payable                                             $
              855                                $
        811


      Employee compensation and
       benefits                                           641                                              715


      Current portion of long-term
       debt                                             2,787


      Other current liabilities                         2,616                                              812





      Total current liabilities                         6,899                                            2,338




      Long-term liabilities:



     Long-term debt                                   30,011                                           17,493


      Other long-term liabilities                       5,613                                            3,636






     Total liabilities                                42,523                                           23,467







      Preferred stock dividend
       obligation                                          29




      Stockholders' equity:



     Preferred stock



     Common stock


      Additional paid-in capital                       25,081                                           23,285



     Retained earnings                                                                                 3,487


      Accumulated other
       comprehensive loss                               (140)                                           (115)





      Total stockholders' equity                       24,941                                           26,657





        Total liabilities and equity                            $
              67,493                             $
        50,124


                                                                                                      
              
                BROADCOM INC.


                                                                                        
     
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED


                                                                                                      
              
                (IN MILLIONS)




                                                                                              
              
                 Fiscal Quarter Ended                                           Fiscal Year Ended



                                                                                           November 3,                                               August 4,          November 4,        November 3,                 November 4,


                                                                                                  2019                                                     2019                  2018                2019                         2018




     
                Cash flows from operating activities:



     Net income                                                                                           $
              847                                           $
              715                      $
         1,115                 $
       2,724 $
        12,610



     Adjustments to reconcile net income to net cash provided by operating activities:



     Amortization of intangible assets                                                          1,309                                                    1,309                   836               5,239                        3,566



     Depreciation                                                                                 143                                                      141                   132                 569                          515



     Stock-based compensation                                                                     544                                                      632                   317               2,185                        1,227



     Deferred taxes and other non-cash taxes                                                    (226)                                                   (235)                  242               (934)                     (8,270)



     Impairment on investment                                                                                                                                                  106                                             106



     Non-cash restructuring, impairment and disposal charges                                       20                                                       15                     8                 133                           21



     Non-cash interest expense                                                                     40                                                       23                     6                  90                           24



     Other                                                                                       (44)                                                    (21)                   15               (125)                          37



     Changes in assets and liabilities, net of acquisitions and disposals:



       Trade accounts receivable, net                                                             285                                                     (60)                (312)                486                        (652)



       Inventory                                                                                  217                                                     (57)                   92                 250                          417



       Accounts payable                                                                         (147)                                                     244                    28                (42)                       (325)



       Employee compensation and benefits                                                          66                                                      104                    93               (294)                           6



       Contributions to defined benefit pension plans                                                                                                                                                                       (130)



       Other current assets and current liabilities                                             (398)                                                   (354)                  163               (283)                         369



       Other long-term assets and long-term liabilities                                         (177)                                                    (37)                (206)              (301)                       (641)






     
                Net cash provided by operating activities                                     2,479                                                    2,419                 2,635               9,697                        8,880








     
                Cash flows from investing activities:



     Acquisitions of businesses, net of cash acquired                                                                                                     (6)                  (7)           (16,033)                     (4,800)



     Business sale proceeds (repayments)                                                                                                                                       (9)                957                          773



     Purchases of property, plant and equipment                                                  (96)                                                   (112)                (106)              (432)                       (635)



     Proceeds from disposals of property, plant and equipment                                       6                                                       82                     1                  88                          239



     Purchases of investments                                                                                                                                                                     (5)                       (249)



     Proceeds from sales of investments                                                                                                                     2                                        5                           54



     Other                                                                                          2                                                      (1)                    3                 (2)                        (56)






     
                Net cash used in investing activities                                          (88)                                                    (35)                (118)           (15,422)                     (4,674)








     
                Cash flows from financing activities:



     Proceeds from long-term borrowings                                                                                                                                                        28,793



     Repayment of debt                                                                        (4,800)                                                                        (117)           (16,800)                       (973)



     Other borrowings, net                                                                      (104)                                                   (230)                                   1,241



     Dividend and distribution payments                                                       (1,054)                                                 (1,057)                (723)            (4,235)                     (2,998)



     Repurchases of common stock - repurchase program                                           (433)                                                   (736)              (1,533)            (5,435)                     (7,258)



     Shares repurchased for tax withholdings on vesting of equity awards                        (154)                                                   (241)                 (21)              (972)                        (56)



     Issuance of preferred stock, net                                                           3,679                                                                                            3,679



     Issuance of common stock                                                                      59                                                       11                    59                 253                          212



     Other                                                                                          9                                                        3                  (26)               (36)                        (45)






     
                Net cash provided by (used in) financing activities                         (2,798)                                                 (2,250)              (2,361)              6,488                     (11,118)








     Net change in cash and cash equivalents                                                    (407)                                                     134                   156                 763                      (6,912)



     Cash and cash equivalents at the beginning of period                                       5,462                                                    5,328                 4,136               4,292                       11,204




     Cash and cash equivalents at end of period                                                         $
              5,055                                         $
              5,462                      $
         4,292                 $
       5,055  $
        4,292






     
                Supplemental disclosure of cash flow information:



     Cash paid for interest                                                                               $
              307                                           $
              368                          $
         2                 $
       1,287    $
        547



     Cash paid for income taxes                                                                           $
              123                                            $
              98                        $
         189                   $
       741    $
        512

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SOURCE Broadcom Inc.