Broadcom Inc.

Ladies and gentlemen, today's conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience. Thank you. Welcome to Broadcom, Inc., first quarter, fiscal year, 2022 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.

Thank you, Cherie, 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 first quarter fiscal year 2022. 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 first quarter fiscal year 2022 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 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 Huck.

All right. Thank you, G. Thank you, everyone, for joining us today. So, in our fiscal Q1-22, Consolidated net revenue was a record 7.7 billion, up 16% year-on-year. Semiconductor solutions revenue grew 20% year-on-year to 5.9 billion, and infrastructure software revenue grew 5% year-on-year to $1.8 billion. Now, enterprise demand grew very robustly from the trough we saw in Q1 last year, as the recovery in enterprise IT spending continued to accelerate. Meanwhile, hyperclouds are upgrading their data centers, and service providers, telcos, continue to deploy next generation fiber to the home. As expected against the peak of a year ago, Wireless grew single digits, and our core software business remains very stable and steady. On the supply front, lead times remain extended and unchanged, as inventory of our products in the channel and at our customers remains lean. Our semiconductor backlog at the close of Q1 continued to grow double digits from that of the prior quarter. Let me now provide more color by end markets. Starting with networking. Networking revenue of 1.9 billion was up 33% year on year and represented 32% of our semiconductor revenue. This strong growth was driven by deployment at scale of Tomahawk 4 and compute offload across several hyperscale customers. as they upgrade and scale out their data centers. In enterprises, campus switching upgrades continue to accelerate. Let me talk about routing in this space. Investments in 5G backhaul by telco operators worldwide continue to drive strong growth in our Qumran family of products. More than this, the opportunity in our routing silicon has expanded into hyperscale in a very significant way, moving Ethernet into the backend networks of large-scale AI ML clusters. In particular, I'm referring to the Arista 7800 AI platform, which scales Ethernet to connect many tens of thousands of CPUs and GPUs in hyperscale. This platform is built on our Jericho router. Our devices provide the most cost-effective fabric for AI ML Scalar with an end-to-end congestion managed lossless network and highest efficiency load balancing across the links. Now in contrast to proprietary protocols such as InfiniBand, used typically in high performance computing, we see low latency Ethernet as the way forward for large scale AI ML networks as a widely adopted open architecture. Our unique ability to network these complex AI workloads in hyperscale is extending our customized training and inference SOC footprint at several cloud guys. In Q2, we expect networking to continue to be strong across the board and revenue growth to be in excess of 30% year over year. Next, our server storage connectivity revenue was $801 million. and growth accelerated to 32% year on year, representing 14% of semiconductor revenue. This was driven in large part by the continuing recovery of enterprise IT spending, much of which was deployed towards upgrading compute servers. And most of these compute servers use either our MegaRate or SAN. for server storage connectivity. We are also benefiting from increased content as enterprises upgrade to next generation storage connectivity solutions to support deployment of leading edge service. Beyond enterprise, with proliferation of video content in social media, we see our cloud customers increasingly adopting near-line hard disk drives as the primary storage of choice. And to manage this large arrays of hard disk drives, they deploy storage servers and expanders, which utilize very much our next generation storage connectivity silicon and software, creating another driver for revenue growth. Interestingly, we're also a critical supplier of pre-amplifiers and rechannels in nearline hard disk drives. With our revenue growing at over 20% CAGR over the last five years, our nearline revenue represented over two-thirds of our hard drive business this quarter. With the adoption of next generation technology here, we're selling more boards than just silicon. resulting in much higher dollar content. This dynamic, coupled with continuing strong demand from both enterprise and hyperscale, is expected to accelerate Q2 server storage connectivity revenue to over 55% year on year. Now moving on to broadband, revenue of $911 million grew 23% year on year, and represented 16% of semiconductor revenue. This was driven largely by increased deployment of next generation PON and DOCSIS, or cable modem, with high attach rates of Wi-Fi 6 and 6E in home gateways. Examples of this abound. Last quarter, Chartered announced trials of DOCSIS 4.0 running at speeds of 8.5 gigabit downstream and 6 gigabit upstream, both in CPE and remote node. Comcast started deployment of their Wi-Fi 6E DOCSIS 3.1 gateways, and AT&T announced a multi-gig PON service on their gateways. All of this are using Broadcom SOCs. We remain the market leader in delivering Wi-Fi 6 and 6E chips to leading phones, as well as routers, enterprise access points, and carrier gateways. Through the first quarter of 2022, we have cumulatively shipped over 1 billion Wi-Fi 6 and 6E radios in just around three years since our launch. Our OEM customers and carrier partners are now ramping Wi-Fi 6E, the current generation of Wi-Fi making use of the six gigahertz band, which has increasingly been made available for unlicensed access across the globe. And as we look ahead, we are the industry leader heavily investing in Wi-Fi 7 as the strategic complement to 10G PON and cable modem. We see both broadband. We see this as the next step in broadband development and deployment globally. In the US alone, the Pending Infrastructure Act sets aside $65 billion over the next five years to connect more homes to high-speed broadband. Across the world, the same is happening as next-generation wired broadband is seen as the better alternative to 5G for home connectivity. As far as Q2 is concerned, we expect our broadband business to continue to grow 20% year on year. Moving on to wireless, Q1 revenue of $2 billion represented 34% of semiconductor revenue. Demand from our North American customer for our products continued to be strong during the quarter driving wireless revenue up 10% sequentially and up 4% year-on-year from the peak quarter in fiscal 21. As expected in Q2, wireless revenue will be seasonally down about mid-teens, quarter-on-quarter, but will still be up mid-single digits from a year ago. Finally, industrial revenue of $243 million represented approximately 4% of Q1 semiconductor revenue. Q1 resales of $239 million grew 37% year-over-year, driven by robust demand from electric vehicles, renewable energy, factory automation, and healthcare. Reflecting such strong resales, our inventory in the channel remain around one month, and we expect resales to continue to be strong in Q2. Accordingly, in summary, Q1 semiconductor solution revenue was up 20% year-on-year, Q2 we expect semiconductor revenue to accelerate to 25% year-on-year. Turning to software, in Q1, infrastructure software revenue of $1.8 billion grew 5% year-on-year and represented 24% of total revenue. Core software revenue grew 6% year-on-year. In dollar terms, consolidated renewal rates averaged 121 percent over expiring contracts, while in our strategic accounts, we averaged 136 percent. Within the strategic accounts, $656 million represented renewals on expiring contracts, of which 164 million represented cross-selling, including PLAs, of our portfolio products to these same customers. Over 90% of the renewal value represented recurring subscription and maintenance. Okay, ARR, annual recurring revenue, at the end of Q1 was $5.3 billion, which was up 5% from a year ago. In Q2, we expect our infrastructure software revenue to sustain around mid-single digit percentage growth year upon year. In summary, in Q1, semiconductor revenue grew a strong 20%. In fact, excluding wireless, it actually grew over 30%. Combined with our stable software business, consolidated revenue grew 16% year-on-year to $7.7 billion. Now turning to Q2 guidance, we expect semiconductor revenue growth will accelerate to 25% year-upon-year. And excluding wireless, it will be 35% year-on-year. Layering on our stable software business, We expect Q2 consolidated revenue growth of 20% year on year to $7.9 billion. And before I turn this call over to Kirsten, I just want to add Broadcom recently published its second annual ESG report available on the company's corporate citizenship site which discusses the company's ESG initiatives. As a global technology leader, we recognize the company's responsibility to have a positive impact on our communities through our product and technology innovation and operational excellence. We remain very committed to this mission. With that, let me turn the call over to Kirsten.