Broadcom Inc.

Welcome to Broadcom, Inc.' 's fourth quarter and fiscal year 2023 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to G.U., Head of Investor Relations of Broadcom, Inc. The floor is yours.

Thank you, Operator, and good afternoon, everyone. Joining me on today's call are Hawk Tan, President and CEO, Kirsten Spears, Chief Financial Officer, and Charlie Kawas, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the fourth quarter and fiscal year 2023. 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 then audio replay of the call can be accessed for one year through the investor section of Broadcom's website. During the prepared comments, Hawk and Kirsten will be providing details of our fourth quarter and fiscal year 2023 results, guidance for our fiscal year 2024, 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 Hock.

Thank you, Gee, and thank you, everyone, for joining us today. In our fiscal Q4 23, consolidated net revenue was $9.3 billion, up 4% year on year, and very much as we had guided at the last conference call. Semiconductor solutions revenue increased 3% year-on-year to $7.3 billion, and infrastructure software revenue grew 7% year-on-year to $2 billion. Overall, while infrastructure software remains very stable, semiconductor is continuing the cyclical slowdown at enterprises and telcos that we have been seeing over the past six months. However, hyperscalers remain strong. Generative AI revenue driven by internet solutions and custom AI accelerators represented close to $1.5 billion in Q4, or 20% of semiconductor revenue, while the rest of the semiconductor revenue continued to be rather stable at around six billion dollars moving on to results for the year for fiscal 2023 consolidated revenue hit a record 35.8 billion growing eight percent year on year and since 2020 even though we have not made an acquisition we have shown a robust trajectory of growth driven by semiconductor growing at and 18% CAGR over the past three years. In fiscal 2023, operating profit grew by 9% year-on-year, and our free cash flow grew 8% year-on-year to $17.6 billion, or 49% of revenue. We returned $13.5 billion in cash to our shareholders through dividends and stock buybacks. As you well know, we just closed the acquisition of VMware on November 22nd, just about four weeks into Broadcom's fiscal 2024. We are now refocusing VMware on its core business of creating private and hybrid cloud environments among large enterprises globally and divesting non-core assets. Reflecting the consolidation of a restructured VMware into our 2024 outlook, we forecast our fiscal year 24 consolidated revenue to be $50 billion. We expect the integration to take about a year and will require close to $1 billion in transition spending, which will largely be done as we exit fiscal 24. Regardless, we expect our fiscal year 2024 adjusted EBITDA to be approximately 60% of revenue. Kirsten will give you more details in her section. Now, let me give you more color on our two reporting segments, and I'll start with software. In Q4, as you know, there's no VMware revenue. and the infrastructure software business of CA, Symantec, and Brocade grew 7% year-on-year to $2 billion. Consolidated renewal rates averaged 119% over expiring contracts, and in our strategic accounts, we actually averaged 130%. Over 90% of the renewal value represented recurring subscription and maintenance. For the year, renewal rates averaged 116% over expiring contracts, and in strategic accounts, we averaged 124%. Revenue in fiscal 2023 was $7.6 billion, up 3% year-on-year, and our expectation for fiscal 24 is for this revenue to be $8 billion, which is 4% year on year. For the 2024 outlook, we are excited to now include VMware. As we all know, VMware has the leading technology to virtualize entire data centers, not just compute, and by doing so, create private clouds on-prem. Our strategy going forward is simply to enable global enterprises to run their applications across the other data centers as well as on public clouds by consuming VMware's higher value software stack. And to track and keep these workloads across the environment, we are investing in a rich catalog of microservices tools. This will be our focus. And the non-core businesses of end-user computing and carbon blank will be divested. So for 2024, based on 11 months of contribution from VMware, we expect VMware to contribute $12 billion in revenue. And on a consolidated basis, we expect our infrastructure software revenue in 2024 to be $20 billion. Turning now to semiconductor segment, let me give you more color by end markets. Q4 net working revenue of $3.1 billion grew 23% year on year, representing 42% of our semiconductor revenue. This was primarily driven by strong demand from hyperscalers for our custom AI accelerators and as well for our networking switches, routers, and NICs network interface cards dedicated to scaling out AI data centers. As you know, even as Ethernet is the standard protocol in front end networks. Hyperscalers are also deploying Ethernet predominantly in their AI networks. In fiscal 23, networking revenue grew 21% year-on-year to $10.8 billion. If we exclude the AI accelerators, Networking connectivity represented about $8 billion, and this is purely silicon, not systems, not cables, nor subsystems. In fiscal 2024, we expect networking revenue to grow 30% year-on-year, driven by accelerating deployments of networking connectivity and expansion of AI accelerators in hyperscalers. Moving to wireless. Consistent with the seasonal launch by our North American customer, Q4 wireless revenue of $2 billion increased 23% sequentially and declined 3% year on year, representing 27% of semiconductor revenue. In fiscal 23, wireless revenue was relatively flat at $7.3 billion, in fact, just down 2% year-on-year. The engagement with our North American customers continues to be deep, strategic, and multi-year. And accordingly, in fiscal 24, we expect wireless revenue to again remain stable year-on-year. Our Q4 server storage connectivity revenue was $1 billion, or 14% of semiconductor revenue, and down 17% year-on-year. In fiscal 23, server storage connectivity was $4.5 billion, up 11% year-on-year. And going to fiscal 24, we expect server storage revenue to decline mid to high teens percentage year-on-year driven by the cyclical weakness that began late 23. And moving on to broadband, Q4 revenue declined 9% year-on-year to $950 million in line with expectations and represented 13% of semiconductor revenue. And in fiscal 23, broadband revenue was $4.5 billion and up 8% year-on-year. Moving on to fiscal 24, we expect broadband revenue to be down low to mid-teens percentage year-on-year and reflecting again the further slowdown as the cyclical weakness as service providers that began in late 23 continues into fiscal 24. And finally, Q4 industrial sales of $236 million was stable year-on-year. In fiscal 23, industrial resales were $962 million. In fiscal 24, we expect industrial resales to be down low single digits year-on-year. So in summary, fiscal 23 semiconductor solutions revenue was up 9% year-on-year to $28.2 billion. Revenue from generative AI in fiscal 23 reached 15% of semiconductor revenue in line with our expectation. And moving on to fiscal 24, we forecast semiconductor solutions revenue to be up mid to high single-digit percent year on year. We expect revenue from generative AI to represent more than 25% of the semiconductor revenue consistent with prior guidance, which more than offset the lack of growth from non-AI semiconductor revenue. With the consolidation of VMware bringing our infrastructure software segment revenue to $20 billion, and the semiconductor segment holding at mid-high single-digit growth year-on-year, we are therefore guiding our fiscal 24 revenue to be $50 billion, which represents 40% year-on-year growth from fiscal 23. With that, let me turn the call over to Kirsten.