Broadcom Inc.

Welcome to Broadcom, Inc.' 's first quarter fiscal year 2020 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to Beatrice Rosado, Director of Investor Relations of Broadcom, Inc. Please go ahead, ma'am.

Thank you, Operator, and thanks, everyone, for dialing in today. Joining me on today's call are Hock Tan, President and CEO, and Tom Krause, Chief Financial Officer of Broadcom. After the market closed, Broadcom distributed a press release and financial tables describing our financial performance for the first quarter of fiscal year 2020. If you did not receive a copy, you may obtain the information from the investor section of Broadcom's website at broadcom.com. This conference call is being webcast live and a recording will be available via telephone playback for one week. It will also be archived in the investor section of our website at broadcom.com. During the prepared comments, Hawk and Tom will be providing details of our first quarter fiscal year 2020 results, guidance for our second quarter fiscal year 2020, and commentary regarding the business environment. We will take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I'll now turn the call over to Hawk.

Well, thank you, Bea, and thank you, everyone, for joining today. Well, it certainly was the best of times. It is now the worst of times, and we certainly live in very interesting times. So let me start by reviewing our first quarter results, after which I will provide an update on the current environment and outlook. Consolidated net revenue for first quarter was $5.9 billion, a 1% increase from a year ago. Semiconductor solutions revenue was $4.2 billion, declining 4% year over year. But collectively, Demand for our networking, broadband, and storage products continue to recover, growing 6% year-over-year. However, as expected, wireless products were down sharply year-on-year due to an architectural change in touch sensing, as we explained. Our infrastructure software segment performed largely as expected. Brocade recovered from the bottom of 2019 and continued to stabilize very well. CA had a record quarter under Broadcom, delivering approximately $880 million of revenue, all a 5% growth year over year. Finally, in this first quarter of integrating Symantec onto our platform and taking into account the impact of purchase accounting, we had revenue of approximately $400 million, which we expect will step up as the year progresses. Note, these first quarter results also exclude the managed security services business which we are divesting to Accenture. Now let me turn to our current thinking on the full year. Let me begin by putting into context how we initially came to our prior full year 2020 guidance. It was based on two primary drivers. On the infrastructure software side, we added Symantec, which in the first year we expect to do $1.8 billion. Combined with Brocade, which is on its way back to a normalized run rate, and CA, which is growing, we felt good about $7 billion from the software segment in 2020. Now, in semiconductors, 2018 was a strong year, up high single digits. However, with softening demand industry-wide, 2019 became challenging and was down high single digits, bottoming out in the second half of the year. So when we gave our 2020 guidance last quarter, it reflected a projected recovery from that bottom. We expected the recovery would be more gradual in the first half of 2020, which we have been seeing. and then accelerate in the second half of 2020. Our confidence in that acceleration was driven by the anticipated launch of 5G phones late in the year and expected strong data center spending from enterprise and hyper-cloud customers. So now let's talk about the impact of COVID-19 on that outlook. As I sit here today, I have not yet seen a meaningful impact on bookings and certainly the fundamentals of the business remain very much intact. However, there is no doubt COVID-19 has created a high level of uncertainty which we can't help but thing is going to have an impact on our semiconductor business, in particular, in the second half of the fiscal year. But frankly, visibility is bad, and confidence continues to erode. So as a result, we believe it is only prudent that we withdraw our annual guidance until such time that visibility returns to pre-COVID-19 levels. One more point, though, before I move on. Keep in mind, through all this cyclicality and uncertainty, given the high degree of recurring revenue based on multiyear contracts, any uncertainty around infrastructure software revenue is likely to be very much more muted. Also, in light of the unique environment we are in, We thought it makes sense at this time to provide more color on near-term expectations, which we have better visibility. We expect our second quarter revenue to be 5.7 billion, which reflects a typical sequential drop, slight drop in wireless seasonality. Importantly, on a year-on-year basis, we expect Our semiconductor business, this Q2 overall, to be virtually flat from a year ago. This after year-on-year reduction over the last four quarters. On infrastructure software revenues, we expect that to sustain on a sequential basis as we continue to focus on completing the Symantec integration process. So to put it in perspective, shipments today, in addition to orders on hand, give us the confidence in our ability to achieve this focus. So finally, before I turn the call over to Tom, let me address our wireless business, especially given all the speculation in the press following our last quarterly call. After careful consideration, we have come to the conclusion that continuing to invest in and operate our wireless assets will create the most value for our business and for our shareholders. We're now more closely and strategically aligned with our largest smartphone customer as a result of our recent multi-year supplying agreements. and look forward to the continued success of our wireless franchises. Now, let me turn the call over to Tom.