The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. Among other things, this guidance is based on an initial estimate of purchase accounting adjustments and allocations, all of which are subject to revision. The guidance also excludes the impact of any additional mergers, acquisitions and divestiture activity that may occur during the quarter. 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.
Broadcom will be meeting investors at the Deutsche Bank 2016 Technology Conference in Las Vegas, on September 14, 2016.
Interim Dividend
The Company’s Board of Directors has approved a quarterly, interim cash dividend of $0.51 per ordinary share. A corresponding distribution will also be paid by the Partnership, of which the Company is the General Partner, to holders of REUs, in the amount of $0.51 per REU.
The dividend and the distribution are both payable on September 30, 2016 to shareholders or unitholders of record, as applicable, at the close of business (5:00 p.m.) Eastern Time on September 19, 2016.
Financial Results Conference Call
Broadcom Limited will host a conference call to review its financial results for the third quarter of its fiscal year 2016, ended July 31, 2016, and to provide guidance for the fourth quarter of fiscal year 2016, 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 62126584. 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: 62126584. A webcast of the conference call will also be available in the “Investors” section of Broadcom’s website at www.broadcom.com.
Non-GAAP Financial Measures
In addition to GAAP reporting, Broadcom provides investors with net revenue, net income, operating income, gross margin, operating expenses and other data on a non-GAAP basis. This non-GAAP information includes the effect, where applicable, of purchase accounting on revenues, and excludes amortization of intangible assets, share-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, including integration costs, purchase accounting effect on inventory, write-off of debt issuance costs, gain (loss) on extinguishment of debt, income (loss) from discontinued operations and income tax effects of non-GAAP reconciling adjustments. Management does not believe that these items are reflective of the Company’s underlying performance. However, 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 presentation of these and other similar items in Broadcom’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Broadcom believes this non-GAAP financial information provides additional insight into the Company’s on-going performance and has therefore chosen to provide 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 Limited
Broadcom Limited (NASDAQ:AVGO) is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions. Broadcom Limited’s extensive product portfolio serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & other. Applications for our products in these end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.
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 statements about (i) the expected benefits of the Acquisition, (ii) our plans, objectives and intentions with respect to future operations and products, (iii) our competitive position and opportunities, (iv) the impact of the transaction on the market for our products, (v) other statements identified by words such as “will”, “expect”, “intends”, “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 any risks associated with our recent acquisition of BRCM, and other acquisitions we may make, including delays, challenges and expenses associated with integrating BRCM and other acquired companies with our existing businesses and our ability to achieve the benefits, growth prospects and synergies expected from BRCM and other acquisitions we may make; loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our ability to accurately estimate customers’ demand and adjust our manufacturing and supply chain accordingly; the significant indebtedness incurred by us in February 2016 in connection with the Acquisition, including the need to generate sufficient cash flows to service and repay such debt; our ability to improve our manufacturing efficiency and quality; increased dependence on a small number of markets; our ability to timely increase our internal manufacturing capacity to meet customer demand; quarterly and annual fluctuations in operating results; cyclicality in the semiconductor industry or in our target markets; global economic conditions and concerns; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of those design wins; rates of growth in our target markets; our dependence on contract manufacturing and outsourced supply chain and our ability to improve our cost structure through our manufacturing outsourcing program; prolonged disruptions of our or our contract manufacturers’ manufacturing facilities or other significant operations; 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 maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product and warranty and indemnification claims; dependence on and risks associated with distributors of our products; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; 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 Securities and Exchange Commission (“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. We undertake no intent or obligation to publicly update or revise any of these forward looking statements, whether as a result of new information, future events or otherwise, except as required by law.
| BROADCOM LIMITED | |||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED | |||||||||||||||||||||
| (IN MILLIONS, EXCEPT PER SHARE DATA) | |||||||||||||||||||||
| Fiscal Quarter Ended | Three Fiscal Quarters Ended | ||||||||||||||||||||
| July 31, | May 1, | August 2, | July 31, | August 2, | |||||||||||||||||
| 2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Net revenue | $ | 3,792 | $ | 3,541 | $ | 1,735 | $ | 9,104 | $ | 4,984 | |||||||||||
| Cost of products sold: | |||||||||||||||||||||
| Cost of products sold | 1,520 | 1,437 | 694 | 3,656 | 2,038 | ||||||||||||||||
| Purchase accounting effect on inventory | 271 | 828 | 26 | 1,099 | 30 | ||||||||||||||||
| Amortization of intangible assets | 211 | 198 | 129 | 539 | 355 | ||||||||||||||||
| Restructuring charges | 8 | 32 | 2 | 41 | 5 | ||||||||||||||||
| Total cost of products sold | 2,010 | 2,495 | 851 | 5,335 | 2,428 | ||||||||||||||||
| Gross margin | 1,782 | 1,046 | 884 | 3,769 | 2,556 | ||||||||||||||||
| Research and development | 814 | 787 | 276 | 1,868 | 762 | ||||||||||||||||
| Selling, general and administrative | 230 | 238 | 143 | 582 | 368 | ||||||||||||||||
| Amortization of intangible assets | 728 | 735 | 68 | 1,517 | 186 | ||||||||||||||||
| Restructuring, impairment and disposal charges | 274 | 287 | 98 | 592 | 122 | ||||||||||||||||
| Total operating expenses | 2,046 | 2,047 | 585 | 4,559 | 1,438 | ||||||||||||||||
| Operating income (loss) | (264 | ) | (1,001 | ) | 299 | (790 | ) | 1,118 | |||||||||||||
| Interest expense | (139 | ) | (256 | ) | (43 | ) | (479 | ) | (150 | ) | |||||||||||
| Gain (loss) on debt extinguishment | (21 | ) | (53 | ) | 3 | (74 | ) | (10 | ) | ||||||||||||
| Other income (expense), net | 4 | (6 | ) | 8 | 1 | 24 | |||||||||||||||
| Income (loss) from continuing operations before income taxes | (420 | ) | (1,316 | ) | 267 | (1,342 | ) | 982 | |||||||||||||
| Provision for (benefit from) income taxes | (117 | ) | (99 | ) | 23 | (199 | ) | 61 | |||||||||||||
| Income (loss) from continuing operations | (303 | ) | (1,217 | ) | 244 | (1,143 | ) | 921 | |||||||||||||
| Income (loss) from discontinued operations, net of income taxes | (12 | ) | (38 | ) | (4 | ) | (50 | ) | 14 | ||||||||||||
| Net income (loss) | (315 | ) | (1,255 | ) | 240 | (1,193 | ) | 935 | |||||||||||||
| Net loss attributable to noncontrolling interest | (17 | ) | (69 | ) | - | (86 | ) | - | |||||||||||||
| Net income (loss) attributable to ordinary shares | $ | (298 | ) | $ | (1,186 | ) | $ | 240 | $ | (1,107 | ) | $ | 935 | ||||||||
| Basic income (loss) per share (1) : | |||||||||||||||||||||
| Income (loss) per share from continuing operations | $ | (0.72 | ) | $ | (2.93 | ) | $ | 0.92 | $ | (2.99 | ) | $ | 3.54 | ||||||||
| Income (loss) per share from discontinued operations, net of income taxes | (0.03 | ) | (0.09 | ) | (0.01 | ) | (0.13 | ) | 0.06 | ||||||||||||
| Net income (loss) per share | $ | (0.75 | ) | $ | (3.02 | ) | $ | 0.91 | $ | (3.12 | ) | $ | 3.60 | ||||||||
| Diluted income (loss) per share (2) : | |||||||||||||||||||||
| Income (loss) per share from continuing operations | $ | (0.72 | ) | $ | (2.93 | ) | $ | 0.85 | $ | (3.09 | ) | $ | 3.25 | ||||||||
| Income (loss) per share from discontinued operations, net of income taxes | (0.03 | ) | (0.09 | ) | (0.01 | ) | (0.13 | ) | 0.05 | ||||||||||||
| Net income (loss) per share | $ | (0.75 | ) | $ | (3.02 | ) | $ | 0.84 | $ | (3.22 | ) | $ | 3.30 | ||||||||
| Shares used in per share calculations: | |||||||||||||||||||||
| Basic | 396 | 392 | 265 | 355 | 260 | ||||||||||||||||
| Diluted | 419 | 415 | 287 | 370 | 283 | ||||||||||||||||
| Share-based compensation expense included in continuing operations: | |||||||||||||||||||||
| Cost of products sold | $ | 15 | $ | 13 | $ | 7 | $ | 34 | $ | 19 | |||||||||||
| Research and development | 144 | 122 | 31 | 294 | 77 | ||||||||||||||||
| Selling, general and administrative | 54 | 51 | 25 | 128 | 73 | ||||||||||||||||
| Total share-based compensation expense | $ | 213 | $ | 186 | $ | 63 | $ | 456 | $ | 169 | |||||||||||
| (1) For the fiscal quarters ended July 31, 2016 and May 1, 2016 and the three fiscal quarters ended July 31, 2016, basic loss per share numerators are reduced by the amount of net loss attributable to noncontrolling interest, which is approximately 5.4% of net loss for the fiscal quarter ended July 31, 2016 and 5.5% for the fiscal quarter ended May 1, 2016. The noncontrolling interest is related to the restricted exchangeable partnership units of Broadcom Cayman L.P. (“Partnership REUs”), of which Broadcom Limited is the General Partner. | |||||||||||||||||||||
| (2) For the fiscal quarters ended July 31, 2016 and May 1, 2016 and the three fiscal quarters ended July 31, 2016, diluted loss per share numerators and denominators include the impact of the noncontrolling interest, which assumes conversion of Partnership REUs to Broadcom ordinary shares. The diluted loss per share calculations include 23 million, 23 million and 15 million Partnership REUs for the fiscal quarters July 31, 2016 and May 1, 2016 and three fiscal quarters ended July 31, 2016, respectively, representing an assumed conversion of 100% of the Partnership REUs under the “if converted” method. | |||||||||||||||||||||
