This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Broadcom Corporation (BRCM) on January 24, 2008.
Management:
President, Chief Executive Officer, Director: Scott A. McGregor
Chief Financial Officer: Eric K. Brandt
Vice President of Corporate Communications: Peter Andrew
Key Investors Issues
- EPS were 16 cents per share compared to 8 cents per share last year.
- Net income was $90.3 million compared to profit of $45.1 million for the year ago quarter.
- Revenue was $1.027 billion compared to $923.5 million for the same quarter last year.
Fourth Quarter Highlights
Revenue of $1.027 billion was up $77 million, $32 million of which relates to the Verizon royalty payment, or 8% from the third quarter of 2007, and was at the upper end of the range provided at analyst day.
This represents the fastest quarterly sequential revenue growth since the first quarter of 2006.
Non-GAAP gross margin, excluding the effect of the Verizon royalty, was 52%, was down 10 basis points from last quarter, consistent with guidance.
Including the Verizon royalty payment, non-GAAP gross margin was 53.5%.
Total non-GAAP operating expense increased by $12.4 million over the third quarter of 2007.
This was below the expected range of $15 million to $20 million provided on last earnings call.
- Non-GAAP earnings per share were 34 cents per share, which was above the 27 cents per share in the third quarter of 2007, driven by higher revenue and margin and lower-than-anticipated spending. Cash flow from operations was a strong $217 million.
- Cash and marketable securities on hand remained flat at $2.4 billion, driven primarily by $328 million of share repurchases settled, which offsets a strong operating cash flow.
- Inventory increased by $18 million to $231 million, which equates to 8.3 turns on a non-GAAP basis. This turns level of 8.3 times remains above long-term goal of 7 to 8 turns.
In the mobile and wireless business, as anticipated, the company benefited from growth across all lines of business, driven by new products and customer ramps and seasonal strength in Bluetooth, wireless LAN, and baseband, as well as in the GPS segment.
In addition, the company ahs included in this business the $32 million in Verizon royalties.
- Similar to last quarter and contrary to what expected, enterprise networking business did grow, driven by growth in the business and the continued delay of timing and fall-off in the gigabit ethernet controller segment, which caused revenues from the controllers to be relatively flat quarter over quarter.
- Revenue distribution was as follows: broadband communications accounted for 35% of total revenues, mobile and wireless, which includes the Verizon royalty for 37%, enterprise networking for 28%.
- With respect to gross margin, gross margin excluding Verizon declined to 52%, driven by product mix and the ramp of a number of new products and customers. Product gross margins tend to be lower for new products that have not yet moved down the cost curve.
Non-GAAP operating expenses were up $12.4 million from the third quarter levels, or about $2.5 million below the range provided.
This improvement was driven by an increased focus on cost and the timing of legal expenses, which can be highly variable.
R&D as a percentage of sales on a non-GAAP basis declined to 26.4%.
The company continues to operate above long-term targeted R&D range of 20% to 22% as a percentage of sales while it continues to invest to deliver on recent design wins and a number of emerging businesses, yet the company remains committed to returning to targeted operating model. This increased R&D percentage will continue until those design wins convert into revenue, especially in the cellular market.
