Broadcom Inc.

Hello, and welcome to Broadcom's Inc. Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. At this time, for opening remarks and introductions, I will turn the call over to G.U., Director of Investor Relations of Broadcom Inc. You may begin.

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 press release and financial tables after the market closed, describing our financial performance for the fourth quarter and fiscal year 2021. If you did not receive a copy, you can find the information from the investor 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 fourth quarter and fiscal year 2021 results, guidance for our first 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. So in the environment we have today, enterprise demand rebounded sharply over 30% year on year. HyperCloud and service provider demand continue to be strong. and strong wireless growth in Q4 was driven by the seasonal launch of next-generation smartphones by our North American OEM. Meanwhile, our core software business continues to be steady with a focus on strategic customers. On the supply side, our lead times remain extended and stable. Inventory in our channels and at our customers remains very lean. Accordingly, in Q4, semiconductor solutions revenue grew 17% year on year to $5.6 billion, with infrastructure software revenue growing 8% year on year to $1.8 billion. Consolidated net revenue was a record $7.4 billion, up 15% year on year. Let me now provide more color by end markets. Let's start with networking. Networking revenue of $1.9 billion was up 13% year on year in line with our forecast for low double-digit growth and represented 34% of our semiconductor revenue. Double-digit year on year growth was primarily by strong demand from campus switching, both from our merchant, Silicon, as well as ASIC solutions through OEMs like Cisco and HP. We also experienced similar double-digit growth with the deployment of Jericho routers within large-scale AI networks in the cloud, as well as Qumran in 5G infrastructure, and DCI. Our unique capability here to deliver ultra-low latency Ethernet networks enables large-scale deployment of AI compute for the cloud. Meanwhile, in the core of these large data centers, we have begun to ramp Trident 4 and Tomahawk 4, the world's first first 25.6 terabit per second switch to several hyperscale cloud customers as they address their ever-growing need for bandwidth demand in scaling out their massive data centers. Now, within hyperscale cloud, we continue to lead in delivering ASIC silicon for multiple compute offload accelerators, which has manifested into being 20% of our networking revenue. We expect continued growth in the next fiscal year here to over $2 billion. The key to our success here lies with our robust design methodology which integrates our broad and substantial silicon IP and rapidly delivers world-class customized silicon SOCs to enable AI, virtualization, orchestration, video transcoding, and security. We have now extended our footprint here beyond TPUs and multiple cloud customers. In Q1, networking is firing on all cylinders, and we expect networking revenue growth to accelerate to close to 30% year on year. Next, our server storage connectivity revenue was $815 million, up 21% year on year, in sharp contrast to the first half of 2021, and represented 15% of semiconductor revenue. The better than expected results were driven by robust demand for storage controllers and host bus adapters from renewed spend by enterprises upgrading their compute and storage infrastructure. Additionally, hypercloud storage, we saw accelerated migration to 80 terabytes and the start of 20 terabyte hard disk drives, which drove our near-line storage revenue. To put things in perspective, today our near-line storage business is close to a billion dollars on an annualized basis. We continue to gain share in server storage connectivity as we expand our leadership in next-generation SAS 4, PCI Express Gen 5, and NVMe. Spending for enterprise continues to recover, and we expect this will accelerate growth in our service storage connectivity revenue in Q1 to approximately 30% year-on-year growth. Moving on to broadband, revenue of $872 million grew 29% year-on-year and represented 16% of semiconductor revenue. This was driven by the continued strong growth in deployment by service providers globally of next generation PON with Wi-Fi 6 and 6E access gateways. We continue to lead the industry with a portfolio of end-to-end integrated solutions across multiple access protocols, PON, cable modem, and DSL. All SOC controllers, each with integrated Wi-Fi managed through our software stacks to reliably deliver more bandwidth, faster data speeds from the call service provider networks to the homes. And a critical element in our broadband platform, I might add, is leading edge Wi-Fi. Wi-Fi 6 and 6E today and Wi-Fi 7 tomorrow. Having leading-edge wireless is important for service provider customers to reach digital homes from their networks. By the same token, in-campus switching in enterprises is also critical that our OEMs can connect enterprise data centers through campus switches to the access points with leading-edge Wi-Fi. In both markets, our platforms, which encompass wired and wireless, silicon and software, uniquely differentiate Broadcom and sustain our market leadership. So in Q1, we expect this double-digit percent year-on-year growth rate in broadband to continue as we have seen for the last few months. Moving on to wireless, consistent with the launch of our customers' next generation phone during the quarter, Q4 revenue of $1.8 billion represented 32% of semiconductor revenue and was up 21% against a softer Q4 quarter a year ago. Nevertheless, We expect continuing strong demand into Q1 which will drive wireless revenue to be up sequentially single digit and be flat to up low single digit percentage year on year from the peak of a year ago. Finally, industrial revenue of $197 million represented approximately 3% of our Q4 semiconductor solutions revenue. Having said this, resales of industrial of $232 million grew 36% year-over-year in Q4, driven by strong demand from OEMs for electric vehicles, robotics, factory automation, and healthcare. As a result, our inventory in the channel declined further. to below a month. And turning to Q1, we expect resales to continue to be strong at the levels we saw in Q4. In summary, Q4 semiconductor solutions revenue was up 17% year on year, and in Q1, we expect the momentum to continue and revenue growth to be up double digits again year on year. This implies that Q1 semiconductor revenue will be up low single digits sequentially. Turning to software Q4, infrastructure software revenue of $1.8 billion grew 8% year-on-year, represented 24% of total revenue. Within this, Brocade showed strong growth of 19% year-on-year revenue. consistent with strong enterprise recovery during the quarter, and deployment of our next generation, Generation 7 fiber channel sand products. Now, excluding Brocade, our core software revenue grew 6% year-on-year. In dollar terms, consolidated renewal rates averaged 116% over expiring contracts, while within our strategic accounts, we actually average 127% consistent with prior quarters. Over 90% of the return value represented recurring subscription and maintenance. Stepping back and following the Software Investor Day last month, let me provide an update on the entire fiscal 21 for core software. Total backlog at the end of the year, total $14.9 billion, up 15% from a year ago, with average duration of contracts extending from 2.6 to 2.9 years. This backlog translates into an ARR, or annual recurring revenue, of 5.2 billion, which was up 5% from a year ago. 74% of this ARR comes from our approximately 600 strategic accounts, which in fiscal 21 we renewed at 129%. or $2.4 billion of annualized booking value. $1.9 billion of this represented renewals on expiring contracts, and roughly $500 million represented cross-selling, including PLAs of our portfolio products to these strategic customers. For the year, We booked over 300 contracts generating greater than a million dollars of revenue annually, with over 30 contracts generating over $10 million annually. With such stability in Q1, we expect our infrastructure software revenue to continue to sustain around mid-single-digit percentage growth year over year. So let me summarize. With the continuous strength in our semiconductor segment and steady growth in our software segment, total Q4 net revenue grew 15% year on year. Turning to Q1, semiconductor revenue excluding wireless is expected to be up 28% year on year. Wireless is expected to grow flat to low single digit percentage compared to the peak of a year ago. So semiconductor revenue in total is expected to grow 70% year on year again, and consolidated revenue is expected to grow 14% year on year. Sequentially, this will drive revenue to grow from $7.4 billion in Q4 to $7.6 billion in Q1. We are very well positioned in every one of our franchise markets in fiscal 22 and beyond. We continue to significantly outinvest anyone else across our platforms in switching and routing, offload compute, silicon photonics, and wireless connectivity to accelerate our next-generation roadmaps as we continue to gain market share. With that, let me turn the call over to Kirsten.