Broadcom Inc.

Welcome to Broadcom, Inc.' 's third 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 Ji Yu, Director of Investor Relations of Broadcom, Inc.

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, Broadcom 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 third 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 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 remarks, Hawk and Kirsten will be providing details of our third quarter fiscal year 2021 results, guidance for our fourth 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 Hauk.

Thank you, G. And thank you everyone for joining us today. In Q3, semiconductor solutions revenue grew 19% year-on-year to $5 billion. With infrastructure software revenue growing 10% year-on-year to $1.8 billion, consolidated net revenue was $6.8 billion or up 16% year-on-year. In Q3, demand continued to be strong from hypercloud and service provider customers. Wireless continued to have a strong year-on-year compare, and while enterprise has been on a trajectory of recovery, we believe Q3 is still early in that cycle, and that enterprise was down year-on-year. On the supply side, we continue to keep our lead times stable. With that as context, let me provide more color by end markets. Starting with networking. Networking revenue of $1.8 billion grew stronger than we had forecasted, up 19% year-on-year versus low double-digit growth. and represented 36% of our semiconductor revenue. The better than expected growth was driven by routing from service providers in the expansion of 5G networks for backhaul, metro, and call, as well as major share gains in ethernet network interface controllers within data centers. While we experienced strong orders from OEMs, consistent with a recovering environment for enterprise spending, we believe actual deployment of networking in enterprise are still lagging from a year ago. Our shipments and revenue appropriately reflects this. In Q4, however, we expect a different set of demand dynamics. We see cloud customers upgrading to our next generation 800 gigabit base Tomahawk 4 and Trident switches. We're the first and only provider of 25.6 terabit switches, and we are shipping two versions. One with 512 lanes at 50 G30s, and the other 256 lanes at 100 G30s. I would like to highlight that we are the only company today shipping 100 G30s. In data center switching, as in service provider routing, we continue to lead in next generation product transitions as our engineers continue to out-execute what's out there. And in Q4, against a very strong year-on-year compare, We expect networking revenue growth to be low double digits year on year. Next, our service storage connectivity business was $673 million in Q3, down 9% year on year, in line with our guidance and represented approximately 13% of semiconductor revenue, as you know. Our products here supply mission-critical applications largely to enterprise, which, as I said earlier, was in a state of recovery. That being said, we have seen a very strong booking trajectory from traditional enterprise customers within this segment. We expect such enterprise recovery in service storage, and the same is happening in networking. to be one of the key engines of growth in Q4 and into 2022. In this particular segment, customer transition to our next generation SaaS and NVMe connectivity at the server is amplifying this growth. The aggressive migration in cloud to 18 terabyte hard disk drives will also provide a strong tailwind to demand, for external storage connectivity products in this segment. In sharp contrast to the 9% decline in Q3, we forecast in Q4 server storage connectivity revenue to be up low double digits percentage year on year. Moving on to broadband. Revenue of $910 million in Q3 grew 23% year on year, and represented 18% of semiconductor revenue. This was primarily driven by the 2X growth in deployments of Wi-Fi 6 access gateways, as well as double digit growth in next generation fiber and DOCSIS 3.1 cable modem deployments. For Q4, We continue to expect double-digit year-on-year revenue growth in broadband as has been seen for the last few quarters. So looking ahead, we see service providers like AT&T, British Telecom, and even Deutsche Telekom deploying in increasing volumes next-generation last-mile fiber connectivity to homes in the U.S. and globally. are multi-year and multi-billion dollar investments by these operators. And attached to every one of these fiber nodes, you need Wi-Fi connectivity for the last 100 feet within the holes. And we lead the global transition to Wi-Fi 6 today. We expect our strong design wind momentum for Wi-Fi 6E at US and European operators will sustain our market position into the next generation. Now moving to wireless. Q3 revenue of $1.4 billion was up 35% year on year, in line with expectations and represented 29% of semiconductor revenue mix. In Q4, We expect wireless revenue to ramp approximately 33% sequentially in support of the launch of next-generation smartphones and to be up 25% year-on-year. Finally, industrial revenue of $205 million in Q3 represented approximately 4% of Q3 semiconductor solutions revenue. Resales here grew what we consider an unsustainable 55% year-over-year, driven by aggressive buying from OEMs in automotive, robotics, and renewable energy. As a result, inventory in our channels declined significantly to below two months, and turning to Q4, we do expect resales to come down to a more rational 20% year upon year growth. And so in summary, Q3 semiconductor solutions revenue was up 19% year on year, and in Q4 we expect the momentum to continue and revenue growth to be up double digit percentage year on year. Turning to software. In Q3, infrastructure software revenue of $1.8 billion grew 10% year-on-year and represented 26% of total revenue. Within this, Brocade grew 27% year-on-year, driven by the launch of new generation Gen 7 fiber channel sand products. Excluding Brocade, Broadcom's software revenue grew 6% year-on-year. In dollar terms, bookings averaged 116% over expiring contracts, while in our core accounts, we averaged 129%. Over 9% of these bookings represented recurring subscription and maintenance revenues. Reflecting these renewables, we expect our infrastructure software revenue to be on track to grow around mid-single-digit percentage year-over-year, which is again what we expect to see in Q4. So in summary, combining a strongly growing semiconductor segment with our more stable software segment, total Q3 net revenue grew 6%. year-on-year, and we expect this double-digit growth to sustain in Q4 and total revenue to be $7.35 billion or up 14% year-on-year. And with that, let me turn the call to Kirsten.