Broadcom Inc.

Welcome to Broadcom, Inc.' 's second 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 GU, Director of Investor Relations of Broadcom, Inc. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Joining me on today's call are Hawk Tan, President and CEO, Kirsten Spears, Chief Financial Officer, Tom Krause, President, Infrastructure Software Group, and Charlie Kawas, Chief Operating Officer. Broadcom also distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter of fiscal year 2021. 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 Kirsten will be providing details of our second quarter fiscal year 2021 results, guidance for our third 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 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.

Thank you, G, and thank you, everyone, for joining us today. In Q2, semiconductor solutions revenue grew a strong 20% year-on-year to $4.8 billion. With infrastructure software revenue growing an expected 4% year-on-year to $1.8 billion, Consolidated net revenue was $6.6 billion, up 15% year-on-year. Now, on the last earnings call we had, we talked about how strong broadband and networking bookings were from hypercloud and service providers, even as wireless was declining seasonally. In Q2, Not only do we see broadband and networking sustaining, we now see a recovery of bookings from enterprise. And on a supply side, hourly times have now stabilized. But the volume of bookings we are experiencing today continues to grow. Now we intend to meet such demand, and in doing so, we maintain our discipline process of carefully reviewing our backlog, identifying real end user demand, and delivering products accordingly. With that as context, let me provide you more color. Starting with broadband, which interestingly enough is going through somewhat of a renaissance. Revenue grew 28% year-on-year and represented 18% of our semiconductor revenue. As discussed during our broadband teaching, the work, learn, and play from home environment is driving global service providers to expand connectivity to the home. In our broadband carrier access business, PON, Fiber, or otherwise known as PON, grew over 40% year on year, mostly with existing generation 2.5G, but with next generation 10G PON representing only 30% today, there is significant room for content growth as 10G PON deploys over the next few years. Not to be outdone by fiber, cable operators in the U.S. are driving deployment of DOCSIS 3.1 cable modems. We saw an 80% year-on-year growth and planning to accelerate the upgrades to next generation DOCSIS 4.0. Our broadband technologies, in fact, are enabling service providers to complement the 5G to deliver best experience for consumers. Now overlaying all these last mile broadband upgrades, we see a demand search for the latest Wi-Fi 6 and 6E technology to enable the last 100 feet of connectivity in homes. Broadcom has emerged as the clear market and technology leader in Wi-Fi for access gateways to the home and to enterprises. with over 50 million ports shipped in Q2 alone, or a year-on-year revenue growth of some 30%. On the other hand, as we might expect, with the push into higher performance fiber, Copper DSL, Digital Subscriber Line, deployments for wireless broadband declined 30% year-on-year, And with a lack of live events during the pandemic, video declined 20%. But with the onset of 5G, service providers are competing for subscribers, leading to technology upgrades globally in fiber, cable, and Wi-Fi connectivity. We're seeing this investment cycle in broadband extending into 2022. And so for Q3, We expect to sustain double-digit year-on-year revenue growth in this segment. Moving on to networking. Networking grew 10% year-on-year and represented 32% of our semiconductor revenue. We experienced tailwinds from HyperCloud and Telcos, partially offset by headwinds from Enterprise. Revenue for switching. was up 30% year-on-year, primarily driven by the strong ramp of Trident and Tomahawk 3 for over 400G platforms and hyper-cloud data centers. In their networks, service providers have been investing in 5G infrastructure worldwide, where the demand for Jericho 2 at the metro core and Qumran at the edge have been robust with revenue up 35% year-on-year. On the other hand, enterprise demand in networking has not yet recovered, still down double digits from a year ago. But as we go into the back half of the year, we expect to see hyperclouds upgrading to our next generation Trident Tomahawk 4 or over 800G switching platforms and sustained strength by service providers in network routing. And accordingly, in Q3, we expect networking revenue to maintain the trend of low double-digit growth year on year. We found the complete recovery of enterprise demand. Speaking of enterprise, Let's talk about server storage connectivity, which represented approximately 12% of semiconductor revenue. This end market is largely driven by enterprise, and in line with our guidance, revenue was down 16% year on year. You may recall, however, in Q1, this was down 22%. And as the economy starts to recover, we have seen an improving demand trajectory. And so in Q3, we expect service storage connectivity revenue to be down high single digits percentage year on year. With the launch of Intel's iFlex, AMD's Milan, as well as future ARM-based servers, this phase is turning quite exciting and innovative for us, both in hardware and software. And we will provide, obviously, more color during our next teaching in July on our server storage business. Moving on to wireless, Q2 revenue was down 16% sequentially, reflecting seasonality, with wireless representing 34% of semiconductor revenue makes. Nonetheless, On a year-over-year basis, wireless revenue was up 48%, reflecting a very favorable compare year-on-year, as well as content increases in FBAR and Wi-Fi. In Q2, we were able to ship more than we had originally planned. And accordingly, in Q3, we expect the growth trend in wireless revenue to sustain but at over 30% year-on-year. Finally, industrial and other represented approximately 4% of Q2 semiconductor solutions revenue. Resales grew 34% year-over-year in Q2 driven by recovery in automotive and China. Inventory in the channel continues to deplete as what we shipped into distributors grew only 23%. Turning to Q3, we expect resales to continue to grow double-digit percentage on a year-on-year basis. Summary, Q2 semiconductor solution segment was up 20% year-on-year, and in Q3, we expect revenue growth year-over-year to be of a similar amount. Turning to software. In Q2, infrastructure software produced another quarter of steady and predictable results, as revenue grew 4% year on year, and represented 27% of total revenue. Now, if we exclude professional services, our enterprise software revenue grew 7%, actually, year over year. And a further indicator of the quality and sustainability of our products, over 90% of our software bookings represented recurring subscription and maintenance, with an average contract lifespan from core customers pretty much close to three years. We continue to believe our infrastructure software business is on track to grow at or better than mid-single digit percentage year over year, which is again what we expect to see in Q3. Summarizing this, demand continues to be robust, and so our Q2 consolidated net revenue grew 15% year over year. We expect momentum to sustain in Q3 and total revenue to be at $6.75 billion or up 16% year-on-year. With that, let me now turn the call over to Kirsten.