Broadcom Inc. Debt surged on 27.2% and Revenue increased on 5.7%
12/10/2020 • About Broadcom Inc. (
$AVGO) • By InTwits
Broadcom Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Broadcom Inc. is a growth stock: FY2020 revenue growth was 5.7%, 5 year revenue CAGR was 28.5% at FY2020 ROIC 6.4%
- Broadcom Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.7%. At the same time it's a lot of higher than industry average of 5.5%.
- CAPEX is quite volatile: $463m in FY2020, $432m in FY2019, $635m in FY2018, $1,069m in FY2017, $723m in FY2016
- In the last 5 years the company invested considerably less than D&A: $3,322m vs. $11,860m
- The company has potentially unprofitable business model: ROIC is 6.4%
- It operates with high leverage: Net Debt/EBITDA is 3.1x while industry average is 0.3x
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 increased on 5.7%. Revenue growth showed acceleration in FY20Q4 - it increased 12.0% YoY. Revenue decline was accelerating on average at -20.1 pp per annum in the last 5 years. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.2 pp from 40.9% to 46.2% in FY2020.
Gross Margin increased slightly on 1.3 pp from 55.2% to 56.6% in FY2020. Gross Margin followed a growing trend at 3.0 pp per annum in FY2016-FY2020. SG&A as a % of Revenue increased slightly on 0.54 pp from 7.6% to 8.1% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2017 at 4.5% and was growing since that time.
Net Income margin showed almost no change in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 1.9%. The company's CAPEX/Revenue decreased on 4.1 pp from 6.1% in FY2017 to 1.9% in FY2020. Average CAPEX/Revenue for the last three years was 2.3%. CAPEX as a % of Revenue followed a declining trend at -1.1 pp per annum in the last 5 years.
Return on investment
The company operates at good ROE (12.9%) while ROIC is low (6.4%). ROIC showed almost no change in FY2020. ROE increased slightly on 1.6 pp from 11.3% to 12.9% in FY2020. During the last 5 years ROIC topped in FY2018 at 10.8% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.1x and Debt / EBITDA is 3.8x. Net Debt / EBITDA increased on 0.1x from 3.0x to 3.1x in FY2020. Debt surged on 27.2% while cash surged on 50.7%. During FY2016-FY2020 Net Debt/EBITDA bottomed in FY2017 at 0.9x and was growing since that time.
Broadcom Inc. has no short term refinancing risk: cash is higher than short term debt (804.4%).
Valuation and dividends
The company's trades at EV/EBITDA 18.7x and P/E 58.2x.
Management team
The company's CEO is Hock E Tan. Hock E Tan has 2 years tenure with the company. Kirsten M Spears is a the company's CFO. Kirsten M Spears has spent 3 months years at the company.
Financial and operational results
FY ended 11/01/2020
Broadcom Inc. ($AVGO) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 13,240 | 17,636 | 20,848 | 22,597 | 23,888 | 5.7% |
| Gross Profit | 5,940 | 8,509 | 10,733 | 12,483 | 13,516 | 8.3% |
| SG&A | 806 | 787 | 1,056 | 1,709 | 1,935 | 13.2% |
| EBITDA | 2,633 | 7,120 | 9,216 | 9,252 | 11,025 | 19.2% |
| EBIT | -409 | 2,383 | 5,135 | | | |
| Interest expence | 585 | 454 | 628 | | | |
| Tax | 642 | 35 | -8,084 | | | |
| Net Income | -1,739 | 1,692 | 12,259 | 2,724 | 2,960 | 8.7% |
| Stock Based Compensation | 590 | 921 | 1,227 | | | |
Balance Sheet
|
|---|
| Cash | 3,097 | 11,204 | 4,292 | 5,055 | 7,618 | 50.7% |
| Accounts Receivable | 2,181 | 2,448 | 3,325 | | | |
| Inventory | 1,400 | 1,447 | 1,124 | | | |
| Accounts Payable | 1,261 | 1,105 | 811 | | | |
| Short Term Debt | 454 | 117 | 0 | 2,787 | 947 | -66.0% |
| Long Term Debt | 13,188 | 17,431 | 17,493 | 30,011 | 40,762 | 35.8% |
Cash flow
|
|---|
| Capex | 723 | 1,069 | 635 | 432 | 463 | 7.2% |
| Dividends | 750 | 1,745 | 2,998 | | | |
| Acquisitions | 10,055 | 40 | 4,800 | | | |
Ratios
|
|---|
| Revenue growth | 94.0% | 33.2% | 18.2% | 8.4% | 5.7% | |
| EBITDA growth | 1.5% | 170.4% | 29.4% | 0.4% | 19.2% | |
|
|---|
| Gross Margin | 44.9% | 48.2% | 51.5% | 55.2% | 56.6% | 1.3% |
| EBITDA Margin | 19.9% | 40.4% | 44.2% | 40.9% | 46.2% | 5.2% |
| EBIT Margin | -3.1% | 13.5% | 24.6% | | |
| SG&A, % of revenue | 6.1% | 4.5% | 5.1% | 7.6% | 8.1% | 0.5% |
| SBC, % of revenue | 4.5% | 5.2% | 5.9% | | |
| Net Income Margin | -13.1% | 9.6% | 58.8% | 12.1% | 12.4% | 0.3% |
| CAPEX, % of revenue | 5.5% | 6.1% | 3.0% | 1.9% | 1.9% | 0.0% |
|
|---|
| ROIC | -1.5% | 4.9% | 10.8% | 6.6% | 6.4% | -0.2% |
| ROE | -14.7% | 8.6% | 52.2% | 11.3% | 12.9% | 1.6% |
| Net Debt/EBITDA | 4.0x | 0.9x | 1.4x | 3.0x | 3.1x | 0.1x |
| Interest coverage ratio (ICR) | | 5.2x | 8.2x | | |
| Interest expence / Average debt | 4.3% | 2.9% | 3.6% | | | |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | | | |
| Employees | 15,700 | 14,000 | 15,000 | | | |
| Revenue/Employee, th. $ | 843 | 1,260 | 1,390 | | | |
Broadcom Inc. ($AVGO) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 5,858 | 5,742 | 5,821 | 6,467 | | 1.2% | 4.1% | 5.5% | 12.0% |
| EBITDA | 2,467 | 2,522 | 2,754 | 3,282 | | 22.5% | 4.3% | 19.0% | 31.0% |
| Net Income | 385 | 563 | 688 | 1,324 | | -18.3% | -18.5% | -3.8% | 56.3% |
Balance Sheet
|
|---|
| Cash | 6,444 | 9,207 | 8,857 | 7,618 | | 26.5% | 72.8% | 62.2% | 50.7% |
| Short Term Debt | 2,417 | 926 | 937 | 947 | | -31.7% | -73.8% | -73.5% | -66.0% |
| Long Term Debt | 42,975 | 45,597 | 43,747 | 40,762 | | 26.0% | 34.1% | 28.6% | 35.8% |
Ratios
|
|---|
| Gross Margin | 55.7% | 55.5% | 57.0% | 57.9% | | 0.3% | -0.5% | 2.0% | 3.4% |
| EBITDA Margin | 42.1% | 43.9% | 47.3% | 50.7% | | 7.3% | 0.1% | 5.3% | 7.4% |
| Net Income Margin | 6.6% | 9.8% | 11.8% | 20.5% | | -1.6% | -2.7% | -1.1% | 5.8% |
Peers in Semiconductors
Below you can find Broadcom Inc. benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inphi Corporation ($IPHI) | - | 30.8% | -15.4% | 24.2% | 86.8% |
| Sequans Communications S.A. ($SQNS) | - | 5.9% | -16.6% | -23.3% | 65.0% |
| MaxLinear, Inc ($MXL) | - | 8.4% | -8.4% | -17.6% | 50.9% |
| Advanced Micro Devices, Inc. ($AMD) | - | 21.6% | 23.3% | 4.0% | 45.0% |
| Kopin Corporation ($KOPN) | - | 23.0% | -12.1% | 20.7% | 35.9% |
| |
|---|
| Median (43 companies) | 1.2% | 10.9% | 4.4% | -3.2% | 1.0% |
|---|
| Broadcom Inc. ($AVGO) | - | 33.2% | 18.2% | 8.4% | 5.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CEVA, Inc. ($CEVA) | 91.6% | 92.1% | 89.8% | 88.4% | 89.3% |
| Universal Display Corporation ($OLED) | 83.9% | 80.8% | 75.5% | 78.5% | 80.1% |
| Rambus, Inc. ($RMBS) | 80.1% | 79.9% | 76.8% | 77.1% | 75.0% |
| Analog Devices, Inc. ($ADI) | 65.1% | 59.9% | 68.3% | 67.0% | 65.9% |
| MoSys, Inc. ($MOSY) | 49.0% | 46.9% | 61.8% | 61.0% | 65.7% |
| |
|---|
| Median (43 companies) | 48.0% | 49.1% | 50.2% | 50.4% | 49.2% |
|---|
| Broadcom Inc. ($AVGO) | 44.9% | 48.2% | 51.5% | 55.2% | 56.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Texas Instruments Incorporated ($TXN) | 43.5% | 46.7% | 48.6% | 47.5% | 47.6% |
| Intel Corp ($INTC) | 35.2% | 41.7% | 45.7% | 45.9% | 46.7% |
| Universal Display Corporation ($OLED) | 44.8% | 51.6% | 35.3% | 48.0% | 45.9% |
| Analog Devices, Inc. ($ADI) | 36.2% | 32.1% | 43.2% | 42.1% | 42.0% |
| Micron Technology, Inc. ($MU) | 25.4% | 47.9% | 65.0% | 54.7% | 40.4% |
| |
|---|
| Median (41 companies) | 9.2% | 10.7% | 9.3% | 12.9% | 17.3% |
|---|
| Broadcom Inc. ($AVGO) | 19.9% | 40.4% | 44.2% | 40.9% | 46.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Micron Technology, Inc. ($MU) | 46.9% | 23.3% | 29.2% | 41.8% | 38.4% |
| Sequans Communications S.A. ($SQNS) | 11.8% | 13.3% | 22.9% | 29.6% | 27.1% |
| Intel Corp ($INTC) | 16.2% | 18.8% | 21.4% | 22.5% | 18.6% |
| First Solar, Inc. ($FSLR) | 7.9% | 17.5% | 33.0% | 21.8% | 15.4% |
| Power Integrations, Inc. ($POWI) | 3.1% | 7.5% | 5.9% | 5.7% | 14.5% |
| |
|---|
| Median (40 companies) | 3.6% | 4.7% | 4.4% | 3.8% | 4.0% |
|---|
| Broadcom Inc. ($AVGO) | 5.5% | 6.1% | 3.0% | 1.9% | 1.9% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Texas Instruments Incorporated ($TXN) | 34.9% | 43.1% | 47.5% | 39.7% | 38.2% |
| Applied Materials Inc ($AMAT) | 19.0% | 31.2% | 36.4% | 27.7% | 32.1% |
| Advanced Micro Devices, Inc. ($AMD) | -21.7% | 7.3% | 21.6% | 21.5% | 31.8% |
| QUALCOMM Incorporated ($QCOM) | 15.8% | 5.7% | 2.2% | 38.0% | 28.1% |
| NVIDIA Corporation ($NVDA) | 13.1% | 27.3% | 35.3% | 36.9% | 22.7% |
| |
|---|
| Median (45 companies) | 1.7% | 3.2% | 2.2% | 2.2% | 5.3% |
|---|
| Broadcom Inc. ($AVGO) | -1.5% | 4.9% | 10.8% | 6.6% | 6.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SunPower Corporation ($SPWR) | - | - | - | - | 8.2x |
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 3.0x | 7.2x | 98.6x | - | 6.6x |
| Rambus, Inc. ($RMBS) | -0.1x | -0.1x | - | - | 5.9x |
| Inphi Corporation ($IPHI) | 4.5x | 33.7x | 32.2x | 4.5x | 3.4x |
| Canadian Solar Inc. ($CSIQ) | 11.3x | 6.8x | 2.7x | 3.4x | 3.3x |
| |
|---|
| Median (31 companies) | -0.0x | 0.4x | 0.3x | 0.5x | 0.1x |
|---|
| Broadcom Inc. ($AVGO) | 4.0x | 0.9x | 1.4x | 3.0x | 3.1x |
