Broadcom: Fiscal 3Q18 Financial Results

(in $ million)	3Q17	3Q18	9 mo. 17	9 mo. 18
Revenue (GAAP)	4,463	5,063	12,792	15,404
*Growth*		13%		*20%*
Net income (loss)	507	1,196	1,223	11,485

Broadcom Inc. reported financial results for its third quarter of fiscal year 2018, ended August 5, 2018, provided guidance for the fourth quarter of its fiscal year 2018 and announced a quarterly dividend.

“Datacenter demand is driving strong growth in more than 50% of our consolidated revenue,” said Hock Tan, president and CEO. “Through the strength of our franchise business model, we delivered another quarter of sustained revenues and strong free cash flows.”

“During the quarter, we repurchased 24 million shares, returning approximately $5.38 billion to our stockholders,” said Tom Krause, CFO. “Consistent with our stated capital allocation plan, we intend to return to stockholders 50% of the prior fiscal year free cash flow in the form of cash dividends. With the balance of our free cash flow, we have the financial flexibility to fund a combination of share repurchases and future acquisitions to expand earnings capacity.”

3FQ18 GAAP Results

Net revenue was $5,063 million, an increase of 1% from $5,014 million in the previous quarter and an increase of 13% from $4,463 million in the same quarter last year.
Gross margin was $2,619 million, or 51.7% of net revenue. This compares with gross margin of $2,551 million, or 50.9% of net revenue, in the prior quarter, and gross margin of $2,149 million, or 48.2% of net revenue, in the same quarter last year.
Operating expenses were $1,280 million. This compares with $1,350 million in the prior quarter and $1,501 million in the same quarter last year.
Operating income was $1,339 million, or 26.4% of net revenue. This compares with operating income of $1,201 million, or 24.0% of net revenue, in the prior quarter, and operating income of $648 million, or 14.5% of net revenue, in the same quarter last year.
Net income, which includes the impact of discontinued operations, was $1,196 million, or $2.71 per diluted share. This compares with net income of $3,733 million, or $8.33 per diluted share, in the prior quarter, and net income of $507 million, or $1.14 per diluted share, in the same quarter last year.
Cash balance at the end of the third fiscal quarter was $4,136 million, compared to $8,187 million at the end of the prior quarter.
During the third fiscal quarter, the company generated $2,247 million in cash from operations and spent $5,378 million repurchasing an aggregate of 24 million shares and $120 million in capital expenditures.
On June 29, 2018, the company paid a cash dividend of $1.75 per share of common stock, totaling $754 million.

3FQ18 Non-GAAP Results From Continuing Operations

Net revenue from continuing operations was $5,066 million, an increase of 1% from $5,017 million in the previous quarter, and an increase of 13% from $4,467 million in the same quarter last year.
Gross margin from continuing operations was $3,410 million, or 67.3% of net revenue. This compares with gross margin from continuing operations of $3,342 million, or 66.6% of net revenue, in the prior quarter, and $2,827 million, or 63.3% of net revenue, in the same quarter last year.
Operating income from continuing operations was $2,536 million, or 50.1% of net revenue. This compares with operating income from continuing operations of $2,455 million, or 48.9% of net revenue, in the prior quarter, and $2,059 million, or 46.1% of net revenue, in the same quarter last year.
Net income from continuing operations was $2,257 million, or $4.98 per diluted share. This compares with net income of $2,243 million, or $4.88 per diluted share, in the prior quarter, and net income of $1,871 million, or $4.10 per diluted share, in the same quarter last year.
Free cash flow, defined as cash from operations less capital expenditures, was $2,127 million in the quarter.