Broadcom Inc. reports 625% Net Income growth in 2018 and 18.2% Revenue growth
12/06/2018 • About Broadcom Inc. (
$AVGO) • By InTwits
Broadcom Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Broadcom Inc. is a fast growth stock: FY2018 revenue growth was 18.2%, 5 year revenue CAGR was 52.6% at FY2018 ROIC 10.8%
- Broadcom Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.6%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $635m in FY2018, $1,069m in FY2017, $723m in FY2016, $593m in FY2015, $409m in FY2014
- In the last 5 years the company invested considerably less than D&A: $3,429m vs. $13,447m. In FY2018 this situation was still the same: CAPEX was 635 while D&A was 4,081
- The company has business model with average profitability: ROIC is 10.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Broadcom Inc.'s Revenue jumped on 18.2%. Revenue growth showed slowdown in FY18Q4 - it was 12.4% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.3 pp from 14.9% to 12.5% in FY2018.
Gross Margin increased on 3.2 pp from 48.2% to 51.5% in FY2018. SG&A as a % of Revenue increased slightly on 0.60 pp from 4.5% to 5.1% in FY2018. SG&A as a % of Revenue stuck to a declining trend at -1.2 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.66 pp from 5.2% to 5.9% in FY2018. During the last 5 years SBC as a % of Revenue bottomed in FY2015 at 1.6% and was growing since that time.
Net Income margin surged on 49.2 pp from 9.6% to 58.8% in FY2018.
Investments (CAPEX, working capital and M&A)
Broadcom Inc.'s CAPEX/Revenue was 3.0% in FY2018. Broadcom Inc. showed decline in CAPEX/Revenue of 5.6 pp from 8.7% in FY2015 to 3.0% in FY2018. Average CAPEX/Revenue for the last three years was 4.9%. CAPEX as a % of Revenue followed a declining trend at -1.6 pp per annum in FY2014-FY2018.
Accounts receivable as a % of Revenue increased on 2.1 pp from 13.9% to 15.9% in FY2018. Inventories as a % of Revenue decreased on 2.8 pp from 8.2% to 5.4% in FY2018. Accounts payable as a % of Revenue decreased on 4.1 pp from 12.1% to 8.0% in FY2018.
Broadcom Inc. has spent
$4,800m on M&A in FY2018 which accounts for 23.0% of revenue.
Return on investment
The company operates at good ROE (52.2%) while ROIC is low (10.8%). ROIC increased on 5.9 pp from 4.9% to 10.8% in FY2018. ROE jumped on 43.6 pp from 8.6% to 52.2% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.4x and Debt / EBITDA is 1.9x. Net Debt / EBITDA surged on 0.5x from 0.9x to 1.4x in FY2018. Debt showed almost no change in FY2018 while cash dropped on 61.7%.
Broadcom Inc. has good short term financial stability: Interest coverage ratio (ICR) is 8.2x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 3.6% in FY2018.
Valuation and dividends
Broadcom Inc.'s trades at EV/EBITDA 13.0x and P/E 8.7x.
The company paid 24.5% of Net Income as dividends in FY2018. Dividends grew on average at 60.2% per annum in the last 5 years).
Management team
Hock E Tan is a the company's CEO. Hock E Tan is a founder and has spent 13 years with the company. CEO total compensation was
$5,042,937 in FY2018 which included
$1,121,154 salary. Broadcom Inc.'s CFO Thomas H Krause Jr "Tom" has spent 2 years with the company.
Insider ownership is 0.30%. Insider ownership didn't change in 2018.
The company has 15,000 employees. The number of employees increased on 7.1%. Average revenue per employee in FY2018 was
$1,389,867 and it jumped on 10.3%.
Financial and operational results
FY ended 11/04/2018
Broadcom Inc. ($AVGO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 4,269 | 6,824 | 13,240 | 17,636 | 20,848 | 18.2% |
| Gross Profit | 1,877 | 3,553 | 5,940 | 8,509 | 10,733 | 26.1% |
| SG&A | 407 | 486 | 806 | 787 | 1,056 | 34.2% |
| EBITDA | 1,063 | 2,594 | 2,633 | 7,120 | 9,216 | 29.4% |
| EBIT | 438 | 1,632 | -409 | 2,383 | 5,135 | 115.5% |
| Interest expence | 110 | 191 | 585 | 454 | 628 | 38.3% |
| Tax | 33 | 76 | 642 | 35 | -8,084 | -23,197.1% |
| Net Income | 263 | 1,364 | -1,739 | 1,692 | 12,259 | 624.5% |
| Stock Based Compensation | 124 | 107 | 590 | 921 | 1,227 | 33.2% |
Balance Sheet
|
|---|
| Cash | 1,604 | 1,822 | 3,097 | 11,204 | 4,292 | -61.7% |
| Accounts Receivable | 782 | 1,019 | 2,181 | 2,448 | 3,325 | 35.8% |
| Inventory | 519 | 524 | 1,400 | 1,447 | 1,124 | -22.3% |
| Accounts Payable | 515 | 617 | 1,261 | 1,105 | 811 | -26.6% |
| Short Term Debt | 46 | 46 | 454 | 117 | 0 | -100.0% |
| Long Term Debt | 5,463 | 3,826 | 13,188 | 17,431 | 17,493 | 0.4% |
Cash flow
|
|---|
| Capex | 409 | 593 | 723 | 1,069 | 635 | -40.6% |
| Dividends | 284 | 408 | 750 | 1,745 | 2,998 | 71.8% |
| Acquisitions | 5,961 | 394 | 10,055 | 40 | 4,800 | 11,900.0% |
Ratios
|
|---|
| Revenue growth | 69.4% | 59.9% | 94.0% | 33.2% | 18.2% | |
| EBITDA growth | 43.8% | 144.0% | 1.5% | 170.4% | 29.4% | |
|
|---|
| Gross Margin | 44.0% | 52.1% | 44.9% | 48.2% | 51.5% | 3.2% |
| EBITDA Margin | 24.9% | 38.0% | 19.9% | 40.4% | 44.2% | 3.8% |
| EBIT Margin | 10.3% | 23.9% | -3.1% | 13.5% | 24.6% | 11.1% |
| SG&A, % of revenue | 9.5% | 7.1% | 6.1% | 4.5% | 5.1% | 0.6% |
| SBC, % of revenue | 2.9% | 1.6% | 4.5% | 5.2% | 5.9% | 0.7% |
| Net Income Margin | 6.2% | 20.0% | -13.1% | 9.6% | 58.8% | 49.2% |
| CAPEX, % of revenue | 9.6% | 8.7% | 5.5% | 6.1% | 3.0% | -3.0% |
|
|---|
| ROIC | 7.4% | 18.8% | -1.5% | 4.9% | 10.8% | 5.9% |
| ROE | 8.6% | 34.3% | -14.7% | 8.6% | 52.2% | 43.6% |
| Net Debt/EBITDA | 3.7x | 0.8x | 4.0x | 0.9x | 1.4x | 0.5x |
| Interest coverage ratio (ICR) | 4.0x | 8.5x | | 5.2x | 8.2x | 2.9x |
| Interest expence / Average debt | 2.0% | 4.1% | 6.7% | 2.9% | 3.6% | 0.7% |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | 0.3% | 0.3% | 0.0% |
| Employees | 8,400 | 8,200 | 15,700 | 14,000 | 15,000 | 7.1% |
| Revenue/Employee, th. $ | 508 | 832 | 843 | 1,260 | 1,390 | 10.3% |
Broadcom Inc. ($AVGO) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 5,327 | 5,014 | 5,063 | 5,444 | | 28.7% | 19.7% | 13.4% | 12.4% |
| EBITDA | 2,127 | 2,165 | 2,304 | 2,620 | | 31.3% | 29.9% | 23.9% | 32.7% |
| Net Income | 6,230 | 3,718 | 1,196 | 1,115 | | 2,506.7% | 745.0% | 148.6% | 109.6% |
Balance Sheet
|
|---|
| Cash | 7,076 | 8,187 | 4,136 | 4,292 | | 100.1% | 92.5% | -21.2% | -61.7% |
| Short Term Debt | 117 | 117 | 117 | 0 | | | | | -100.0% |
| Long Term Debt | 17,475 | 17,481 | 17,487 | 17,493 | | 28.9% | 28.8% | 28.8% | 0.4% |
Ratios
|
|---|
| Gross Margin | 49.3% | 50.9% | 51.7% | 53.9% | | 1.0% | 3.7% | 3.6% | 4.7% |
| EBITDA Margin | 39.9% | 43.2% | 45.5% | 48.1% | | 0.8% | 3.4% | 3.9% | 7.4% |
| Net Income Margin | 117.0% | 74.2% | 23.6% | 20.5% | | 111.2% | 63.7% | 12.8% | 9.5% |
Peers in Semiconductors
Below we provide Broadcom Inc. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 4.4% | 10.9% | 4.7% |
|---|
| Broadcom Inc. ($AVGO) | | 59.9% | 94.0% | 33.2% | 18.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 46.4% | 47.0% | 48.0% | 49.1% | 50.4% |
|---|
| Broadcom Inc. ($AVGO) | 44.0% | 52.1% | 44.9% | 48.2% | 51.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Broadcom Inc. ($AVGO) | 24.9% | 38.0% | 19.9% | 40.4% | 44.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.6% |
|---|
| Broadcom Inc. ($AVGO) | 9.6% | 8.7% | 5.5% | 6.1% | 3.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.7% | 3.2% | 3.0% |
|---|
| Broadcom Inc. ($AVGO) | 7.4% | 18.8% | -1.5% | 4.9% | 10.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.6x | -0.3x | -0.0x | 0.4x | 0.3x |
|---|
| Broadcom Inc. ($AVGO) | 3.7x | 0.8x | 4.0x | 0.9x | 1.4x |
