IRVINE, Calif., Oct 21, 2008 -- Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its third quarter ended September 30, 2008.
Net revenue for the third quarter of 2008 was $1.298 billion, an increase of 8.1% compared with the $1.201 billion reported for the second quarter of 2008 and an increase of 36.7% compared with the $950.0 million reported for the third quarter of 2007. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2008 was $164.9 million, or $.31 per share (diluted), compared with GAAP net income of $134.8 million, or $.25 per share (diluted), for the second quarter of 2008, and GAAP net income of $27.8 million, or $.05 per share (diluted), for the third quarter of 2007.
Net revenue for the nine months ended September 30, 2008 was $3.532 billion, an increase of 28.5% from the $2.749 billion reported for the nine months ended September 30, 2007. Net income computed in accordance with GAAP for the nine months ended September 30, 2008 was $374.0 million, or $.70 per share (diluted), compared with GAAP net income of $123.0 million, or $.21 per share (diluted), for the nine months ended September 30, 2007.
Net revenue for the nine months ended September 30, 2008 included royalties of $109.2 million received pursuant to a patent license agreement entered into in July 2007. The royalty received in the second and third quarters of 2008 was $35.6 million and $38.0 million, respectively.
"The third quarter was a great quarter for Broadcom. We achieved record revenue and cash flow from operations, and demonstrated our commitment to deliver profitable growth," said Scott A. McGregor, Broadcom's President & Chief Executive Officer. "As in prior economic slowdowns, we expect to enhance our competitive positioning and drive the next wave of communications convergence. The widespread acceptance of our combination solutions validates our strategy, and together with our rapid transition to 65nm process technology, should enable us to emerge in a much stronger position when the economy recovers."
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 2008 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial or other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at http://www.broadcom.com/investors. Please note that we have added additional information to this presentation regarding our revenue, gross margin and operating expenses. The webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, Tuesday, November 4, 2008.
Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom® products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry's broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything®.
Broadcom is one of the world's largest fabless semiconductor companies, with 2007 revenue of $3.78 billion, and currently holds more than 2,900 U.S. and 1,300 foreign patents, more than 7,600 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.
Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at http://www.broadcom.com.
Cautions regarding Forward Looking Statements:
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward- looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, gross margin and operating expense targets for the fourth quarter of 2008 and references to our ability to emerge in a stronger position when the economy recovers. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.
These risks and uncertainties include, but are not limited to:
Our Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement, except as required by law.
Broadcom®, the pulse logo, Connecting everything® and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.
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Global Media Relations
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BROADCOM CORPORATION Unaudited Condensed Consolidated Statements of Income (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 2008(a) 2007 2008(a) 2007 Net revenue $1,298,475 $ 949,959 $3,531,616 $2,749,360 Cost of revenue 619,459 465,970 1,655,218 1,343,956 Gross profit 679,016 483,989 1,876,398 1,405,404 Operating expense: Research and development 379,279 352,283 1,115,002 985,223 Selling, general and administrative 141,941 124,907 395,904 373,413 Amortization of purchased intangible assets 183 314 550 843 In-process research and development - 4,970 10,900 15,470 Impairment of other intangible assets 250 - 2,150 1,500 Settlement costs - - 15,810 - Restructuring costs (reversal) - - (1,000) - Income from operations 157,363 1,515 337,082 28,955 Interest income, net 12,451 31,443 44,983 101,355 Other expense, net (3,720) (1,670) (2,987) (2,437) Income before income taxes 166,094 31,288 379,078 127,873 Provision for income taxes 1,188 3,528 5,069 4,866 Net income $ 164,906 $ 27,760 $ 374,009 $ 123,007 Net income per share (basic) $ .32 $ .05 $ .72 $ .23 Net income per share (diluted) $ .31 $ .05 $ .70 $ .21 Weighted average shares (basic) 509,041 539,931 517,418 542,881 Weighted average shares (diluted) 523,759 577,583 531,187 579,479
(a) Includes royalties in the amount of $38.0 million and $109.2 million in the three and nine months ended September 30, 2008, respectively, received pursuant to a patent license agreement entered into in July 2007.
The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above:Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Cost of revenue $ 6,652 $ 7,214 $ 18,354 $ 19,889 Research and development 93,334 94,619 262,043 263,882 Selling, general and administrative 33,328 37,023 93,661 106,256 BROADCOM CORPORATION Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Operating activities Net income $ 164,906 $ 27,760 $ 374,009 $ 123,007 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,370 14,897 54,929 42,555 Stock-based compensation expense: Stock options and other awards 53,684 84,128 168,891 249,326 Restricted stock units issued by the company 79,630 54,728 205,167 140,701 Acquisition-related items: Amortization of purchased intangible assets 4,118 4,249 12,354 10,394 In-process research and development - 4,970 10,900 15,470 Impairment of intangible assets 250 - 2,150 1,500 Impairment of strategic investments and marketable securities 4,287 2,121 6,047 4,769 Changes in operating assets and liabilities: Accounts receivable (21,183) (11,509) (131,998) (8,330) Inventory (66,259) (20,399) (91,292) (8,929) Prepaid expenses and other assets (20,387) (24,964) (1,629) (41,610) Accounts payable 23,503 44,547 147,332 55,149 Accrued settlement liabilities - - (2,000) (2,000) Other accrued and long-term liabilities 44,330 30,507 17,757 30,800 Net cash provided by operating activities 286,249 211,035 772,617 612,802 Investing activities Net purchases of property and equipment (16,084) (15,939) (65,151) (123,318) Net cash paid for acquisitions and other purchased intangible assets (57) (141,372) (29,795) (219,324) Purchases of strategic investments - - (355) (3,194) Purchases of marketable securities (772,012) (112,732) (1,109,673) (568,462) Proceeds from sales and maturities of marketable securities 291,424 156,960 512,022 821,092 Net cash used in investing activities (496,729) (113,083) (692,952) (93,206) Financing activities Repurchases of Class A common stock (23,912) (170,534) (859,775) (811,822) Minimum tax withholding paid on behalf of employees for restricted stock units (19,433) (16,453) (45,186) (53,032) Proceeds from issuance of common stock, net 23,968 81,912 114,582 224,362 Net cash used in financing activities (19,377) (105,075) (790,379) (640,492) Decrease in cash and cash equivalents (229,857) (7,123) (710,714) (120,896) Cash and cash equivalents at beginning of period 1,705,715 2,044,337 2,186,572 2,158,110 Cash and cash equivalents at end of period $1,475,858 $2,037,214 $1,475,858 $2,037,214 UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION September 30, June 30, December 31, 2008 2008 2007 (In thousands) Cash and cash equivalents $ 1,475,858 $ 1,705,715 $ 2,186,572 Short-term marketable securities 770,872 228,418 141,728 Long-term marketable securities 40,905 105,513 75,352 Total cash, cash equivalents and marketable securities $ 2,287,635 $ 2,039,646 $ 2,403,652 Increase from prior quarter end $ 247,989 Decrease from prior year end $ (116,017) BROADCOM CORPORATION Unaudited Condensed Consolidated Balance Sheets (In thousands) September 30, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $ 1,475,858 $ 2,186,572 Short-term marketable securities 770,872 141,728 Accounts receivable, net 501,015 369,004 Inventory 322,605 231,313 Prepaid expenses and other current assets 105,481 125,663 Total current assets 3,175,831 3,054,280 Property and equipment, net 252,999 241,803 Long-term marketable securities 40,905 75,352 Goodwill 1,386,394 1,376,721 Purchased intangible assets, net 34,253 46,607 Other assets 58,293 43,430 Total assets $ 4,948,675 $ 4,838,193 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 459,593 $ 313,621 Wages and related benefits 166,137 147,853 Deferred revenue 10,246 15,864 Accrued liabilities 238,010 253,226 Total current liabilities 873,986 730,564 Commitments and contingencies Long-term deferred revenue 4,764 8,108 Other long-term liabilities 65,879 63,373 Shareholders' equity 4,004,046 4,036,148 Total liabilities and shareholders' equity $ 4,948,675 $ 4,838,193 BROADCOM CORPORATION Unaudited Supplementary Financial Data (In thousands) The following table presents details of supplementary financial data included in each functional line item in the unaudited condensed consolidated statements of income: Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Cost of revenue: Stock-based compensation $ 6,652 $ 7,214 $ 18,354 $ 19,889 Amortization of purchased intangible assets 3,935 3,935 11,804 9,551 Research and development: Stock-based compensation 93,334 94,619 262,043 263,882 Selling, general and administrative: Stock-based compensation 33,328 37,023 93,661 106,256 Recovery of legal fees related to Qualcomm litigation - - (8,569) - Other operating expense: Amortization of purchased intangible assets 183 314 550 843 In-process research and development (1) - 4,970 10,900 15,470 Impairment of intangible assets 250 - 2,150 1,500 Restructuring costs (reversal) - - (1,000) - Settlement costs (2) - - 15,810 - Other: Employer payroll tax expense on certain stock option exercises 1,532 1,484 3,631 4,304 Charges related to equity award review - - - 3,409 Impairment of strategic investments 2,506 2,121 4,266 4,769 Non-operating gains (193) (146) (193) (275) (1) Recorded in connection with the company's acquisition of Sunext Design, Inc. in the nine months ended September 30, 2008 and in connection with the company's acquisition of LVL7 Systems, Octalica, Inc. and Global Locate, Inc. in the nine months ended September 30, 2007. (2) Recorded accrued settlement costs included $12.0 million related to Broadcom's settlement with the Securities and Exchange Commission as well as $3.8 million related to a patent infringement claim settlement in the nine months ended September 30, 2008. BROADCOM CORPORATION Guidance for the Three Months Ending December 31, 2008 Three Months Ending December 31, 2008* Net revenue $1,170 to $1,235 million Gross margin Down 50 to 75 basis points sequentially Total operating expense (including stock-based compensation) Up $12 to $17 million sequentially Total stock-based compensation** Approximately $130 million * Excludes the impact of the proposed AMD transaction. ** Included in cost of revenue, research and development, and selling general and administrative expenses.
Broadcom has based the preceding guidance for the three months ending December 31, 2008 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 21, 2008. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today.
The guidance set forth in the table above should be read together with the information under the caption, "Cautions regarding Forward Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2007, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other Securities and Exchange Commission filings. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein.
SOURCE Broadcom Corporation; BRCM Corporate