Broadcom Inc.

Welcome to Broadcom Inc.' 's first quarter fiscal year 2021 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to G.U., Director of Investor Relations of Broadcom Inc. Please go ahead, ma'am.

Thank you, Operator, and good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO of Kirsten Spears, Chief Financial Officer, Tom Krause, President, Infrastructure Software Group, and Charlie Kawas, Chief Operating Officer. Broadcom also distributed press release and financial tables after the market closed, describing our financial performance for the first quarter of fiscal year 21. If you did not receive a copy, you may obtain the information from the Advisor section of Broadcom's website at broadcom.com. This conference call is being webcast live and the 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 Kirsten will be providing details of our first quarter fiscal year 21 results, guidance for our second quarter, as well as commentary regarding the business environment. We'll 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 US 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.

Thank you, Gee, and thank you, everyone, for joining us today. Well, we delivered net revenue of $6.7 billion, up 14% year-on-year. Semiconductor solutions revenue was $4.9 billion, increasing 17% year-on-year. Infrastructure software revenue was $1.7 billion, up 5% year-on-year. Let me turn first to semiconductor solutions, but before I get into the numbers, perhaps it would be very constructive for me to give you my perspective on the situation today, and in fact, what has actually evolved over the past nine months. You may recall in our earnings call Q2 fiscal 20, around middle of last year, that we highlighted supply chain challenges. Since then, we have started extending lead times across our product portfolio. We stretch these lead times further over the past nine months as we saw demand within end markets continue to increase. So fast forward to today, we see customers accelerating their bookings for early deliveries and attempting to build buffers and creating the demand supply imbalance You all here out there, in anticipation of this phenomenon, we put in place in mid-2020 a very rigorous discipline process of carefully reviewing our backlog, identifying real end-user demand, and aligning our supply chain to more closely match end-user consumption. Of course, not all end markets are behaving the same way, but we believe we have done a very good job of balancing demand and supply in our end markets, and what I'm reporting today does reasonably reflect what's been consumed by our end users. With that, let me get into the numbers. In semiconductors, we grew 17% year-on-year organically. Starting with wireless, we hit the seasonal peak in Q1 where wireless was up 52% year-on-year and reached 40% of semiconductor revenue makes. This sharp increase was in large part due to a higher content FR content was up and we shipped in high volume Wi-Fi 6 and Wi-Fi 6E, the next generation of Wi-Fi 6. As expected, Q2 wireless revenue will now show a typical seasonal decline sequentially, even as anticipated revenues will be up 30 to 40% year-on-year. And as we look into the second half of the year, we are planning for typical revenue rent in this space and structuring our in-house at BASFAP capacity appropriately. This should result in sustaining the year-on-year growth trend we now see in Q2 through the second half of the year. Moving on, networking represented approximately 29% of our semiconductor solution revenue in the quarter and grew 15% year-on-year. Demand is strong, driven largely by data center spend in the cloud and global telcos who continue to upgrade their infrastructure and network. Sustainability of this strength is evidenced by bookings as they jump 80% year-on-year and 62% sequentially. Demand for switch and routing platforms, both of the current and as well as next generation, is robust. But as anticipated, our AITPU business was seasonally down this quarter. Moving on to Q2, we expect networking to be up sequentially and continue the trend of being up year on year, driven by continuous strength we see in cloud and telcos offset partially by continued weakness in enterprise. Turning to broadband, which represented approximately 15% of semiconductor solutions. Revenue was up 8% year-on-year, driven by the work-from-home environment. Multiple telcos in Europe and the U.S. continued to roll out pond and cable docks. Embedded in these wireline gateways are our next generation Wi-Fi 6 access points. Softness in enterprise was more than offset by this strong demand from retail home routers, even as telcos continue to span. Looking at Q2, we are enabling the launch of new Wi-Fi 6 enabled platforms with higher value content for North American and European telcos. As a result, we do see demand accelerating, consumption increasing, and we expect to generate double-digit year-on-year revenue growth in broadband. Server storage connectivity represented approximately 12% of Q1 semiconductor revenue. This segment is largely driven by enterprise demand, as we know, and not surprisingly, server storage revenue was down 22% year-on-year, reflecting continuous softness in end-user demand, as well as OEMs, original equipment manufacturers, depleting their inventory in this space. While bookings have improved, These are largely for demand in the second half. And accordingly, we expect revenue in Q2 to continue to be down year over year by double digit percentage. However, we do expect some recovering based on our bookings received in the second half. And finally, industrial represented approximately 4% of Q1 semiconductor solution revenue. Resales grew 13% year over year in Q1, driven by a recovery of multiple economic sectors in China. Turning to Q2, we expect resales to grow at roughly the same level as we see recovering now occurring as well in Japan and Europe. Inventory in the channel for us continues to deplete, and we may have to increase shipments and revenues to replenish channel inventory this quarter. So in summary, semiconductor solution revenue, segment revenue was up 17% year-on-year in Q1. We expect this year-over-year percentage revenue to continue around a similar amount in spite of a seasonal decline in wireless. The way it looks now, this relatively strong trend appears to be sustaining through most of 2021. However, in our view, this very high and unusual secular growth rate merely highlight an accelerated adoption of our connectivity platforms during this pandemic. Turning to our other segment, software, Q1 2021 was our first quarter that on a year-on-year basis provides an organic comparison following the Symantec acquisition. In Q1, infrastructure software revenue growth was 5% year on year. In dollar terms, bookings averaged 122% over expiring contracts, while core accounts averaged 137%. Now, over 90% of these bookings represented recurring subscription and maintenance. Our strategy of focusing on core accounts continues to perform well as we cross-sell our portfolio of software tools. In other words, our software portfolio continues to perform as we had planned and continues to be on track with our long-term financial model for organic software revenue growth of around mid-single-digit percentage year-over-year. And that's something we expect to continue to see in Q2. So in summary, our Q1 consolidated net revenue grew 14% year-on-year. We expect a similar growth trajectory in Q2, which could bring revenue to $6.5 billion or a 13% year-on-year growth. So with that, I'll now turn the call over to Kirsten.