Broadcom Inc. (NASDAQ: AVGO), reported financial results for its second quarter of fiscal year 2018, ended May 6, 2018, provided guidance for the third quarter of its fiscal year 2018, and announced a quarterly dividend.
“Our business continues to be very robust and sustainable. This is validated through our strong execution in the second quarter which drove gross margin to a record 66.6 percent and free cash flow to 42.3 percent of net revenue,” said Hock Tan, President and CEO of Broadcom Inc. “Reflecting our commitment to our return of capital program and our belief that stock repurchases can generate attractive returns on our earnings capability, we bought back 6.4 million shares in the six weeks ended June 1, 2018 returning $1.5 billion to stockholders.”
Effective as of the close of trading on April 4, 2018, the Company completed the redomiciliation of the parent company of the Broadcomcorporate group from a Singapore company to a Delaware corporation. In connection with the redomiciliation, all issued ordinary shares of Broadcom Limited were exchanged on a one-for-one basis for common stock of Broadcom Inc. and all outstanding exchangeable limited partnership units (“LP Units”), which represented the non-controlling interest in Broadcom Cayman L.P. (the “Partnership”), were also exchanged on a one-for-one basis for common stock of Broadcom Inc. eliminating this non-controlling interest. Broadcom Inc. is the successor to Broadcom Limited for financial reporting purposes. Information provided for fiscal periods following the redomiciliation, beginning with the fiscal quarter ended May 6, 2018, relates to Broadcom Inc. and information provided for prior fiscal periods relates to Broadcom Limited. Unless the context otherwise requires, references in this press release to “Broadcom,” “the Company,” “we,” “our,” “us” and similar terms are to Broadcom Inc. from and after the effective time of the redomiciliation and, prior to that time, are to our predecessor, Broadcom Limited.
The Company’s financial results include contributions from Brocade Communication Systems’ continuing operations starting in the first fiscal quarter of 2018. 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 below, unless otherwise stated.
Due to the Company’s 52/53 week reporting cycle, fiscal year 2018 includes an extra week in the first quarter, compared to fiscal year 2017.
Second Quarter Fiscal Year 2018 GAAP Results
Net revenue was $5,014 million, a decrease of 6 percent from $5,327 million in the previous quarter and an increase of 20 percent from $4,190 million in the same quarter last year.
Gross margin was $2,551 million, or 50.9 percent of net revenue. This compares with gross margin of $2,628 million, or 49.3 percent of net revenue, in the prior quarter, and gross margin of $1,976 million, or 47.2 percent of net revenue, in the same quarter last year.
Operating expenses were $1,350 million. This compares with $1,685 million in the prior quarter and $1,502 million for the same quarter last year.
Operating income was $1,201 million, or 24.0 percent of net revenue. This compares with operating income of $943 million, or 17.7 percent of net revenue, in the prior quarter, and operating income of $474 million, or 11.3 percent of net revenue, in the same quarter last year.
Net income, which includes the impact of discontinued operations, was $3,733 million, or $8.33 per diluted share. This compares with net income of $6,566 million, or $14.62 per diluted share, for the prior quarter, and net income of $464 million, or $1.05 per diluted share, in the same quarter last year. Net income attributable to ordinary shares was $3,718 million. Net income attributable to the LP Units’ noncontrolling interest was $15 million.