Broadcom(AVGO) - 2022 Q4 - Annual Report

PART I Business Overview Broadcom is a global technology leader in semiconductor and infrastructure software, combining technology leadership with scale through acquisitions and R&D - Broadcom is a global technology leader designing, developing, and supplying a broad range of semiconductor and infrastructure software solutions[5] - The company's strategy involves combining best-of-breed technology leadership in semiconductor and infrastructure software with unmatched scale, leveraging acquisitions and extensive R&D[6] - Semiconductor solutions include complex digital and mixed-signal CMOS-based devices and analog III-V based products for networking, wireless, storage, and industrial markets[5][7] - Infrastructure software solutions cover DevOps, AIOps, Security, and Data Management Systems for mainframe, distributed, mobile, and cloud platforms, serving most Fortune 500 companies and government agencies[5][14] Overview Broadcom is a global technology leader with over 50 years of innovation in semiconductor and infrastructure software solutions - Broadcom Inc. is a global technology leader with over 50 years of innovation, designing, developing, and supplying semiconductor and infrastructure software solutions[5] - The company maintains worldwide design, product, and software development engineering resources, focusing R&D on niche opportunities and leveraging an extensive IP portfolio[5] Business Strategy Broadcom's strategy combines technology leadership in semiconductor and infrastructure software with scale through acquisitions and R&D - Broadcom's strategy is to combine technology leadership in semiconductor and infrastructure software with scale on a common sales and administrative platform[6] - This strategy is pursued through responsibly financed acquisitions of category-leading businesses and extensive investment in research and development[6] Products and Markets Broadcom provides semiconductor solutions for data center, networking, wireless, storage, and industrial markets, alongside infrastructure software - Broadcom provides semiconductor solutions for data center, service provider, enterprise, and embedded networking, wireless, storage, and industrial applications[7] - Infrastructure software solutions enable customers to plan, develop, automate, manage, and secure applications across mainframe, distributed, mobile, and cloud platforms[14] Research and Development Broadcom commits to continuous R&D investment, focusing on mission-critical, innovative, and higher-value product platforms - Broadcom is committed to continuous investment in product development and enhancement, focusing on rapidly introducing new, proprietary products and releases[18] - R&D efforts are concentrated on mission-critical, innovative, sustainable, and higher-value product platforms, leveraging design capabilities for attractive margins[18] Customers, Sales and Distribution Products are sold through direct sales and global distributors, with significant revenue concentration from top customers like Apple - Products are sold through a direct sales force and a global network of distributors and channel partners[19] Sales to Distributors as % of Net Revenue | Fiscal Year | % of Net Revenue | | :---------- | :--------------- | | 2022 | 56% | | 2021 | 53% | Sales Concentration (FY2022 & FY2021) | Customer Group | % of Net Revenue (FY2022) | % of Net Revenue (FY2021) | | :------------- | :------------------------ | :------------------------ | | Top five end customers | ~35% | ~35% | | Apple Inc. | ~20% | ~20% | Manufacturing Operations Broadcom primarily outsources manufacturing to third-party foundries, using internal facilities for proprietary processes - Broadcom primarily outsources manufacturing operations to third-party foundries (e.g., TSMC) and assembly/test capabilities[22] - Internal fabrication facilities are used for proprietary processes like FBAR filters and III-V semiconductor wafers, mainly in the U.S. and Singapore[22] Manufacturing Materials and Suppliers The company sources materials globally, managing supply chain risks for unique or specialized components through various techniques - The company purchases materials from hundreds of global suppliers, with some parts being unique or specialized, making alternate sourcing difficult[23] - Techniques like redesigning products, making 'lifetime' purchases, or qualifying multiple sources are used to manage supply chain disruption risks[23] Competition Broadcom operates in highly competitive markets, facing large international companies and niche players across semiconductor and software segments - Broadcom operates in highly competitive markets, facing large international companies, smaller niche players, and internal resources of large OEMs[24] - Competition is based on quality, technical performance, price, product features, system-level design, engineering expertise, and customer support[25] - In the semiconductor market, key competitors include Analog Devices, Intel, NVIDIA, Qualcomm, and Texas Instruments[25] - In infrastructure software, competitors include Atlassian, IBM, Microsoft, Oracle, and Salesforce[25] Intellectual Property Broadcom protects its intellectual property through patents, copyrights, trademarks, and trade secrets, with a portfolio of over 17,000 patents - Broadcom relies on patents, copyrights, trademarks, trade secrets, and contractual protections to safeguard its intellectual property[26] Intellectual Property Portfolio (as of Oct 30, 2022) | IP Type | Count | | :------------------ | :---- | | U.S. and other patents | 17,035 | | U.S. and other pending patent applications | 618 | - The company's patent expiration dates range from 2022 to 2041, with no single patent or group of related patents considered material[26] Employees As of October 30, 2022, Broadcom had approximately 20,000 employees worldwide, with 63% in research and development roles - As of October 30, 2022, Broadcom had approximately 20,000 employees worldwide, with 63% in research and development roles[29] - The global voluntary attrition rate in fiscal year 2022 was approximately 6.5%, which is below the technology industry benchmark[29] Governmental Regulation Broadcom's operations are subject to international, federal, state, and local laws governing health, safety, environment, and trade regulations - Broadcom's manufacturing and R&D operations are subject to international, federal, state, and local laws governing health, safety, and the environment, including pollutant discharge limits and chemical content restrictions[30] - The business is also subject to import/export regulations (e.g., U.S. Export Administration Regulations) and rules of industrial standards bodies[30] Seasonality Net revenue is typically higher in the second half of the fiscal year due to wireless communications product seasonality - Historically, net revenue is typically higher in the second half of the fiscal year due to seasonality in wireless communications products, driven by new mobile device launches[31] - Diversification across business portfolios is believed to make overall revenue less susceptible to seasonal variations[31] Other Information Broadcom's website provides access to SEC filings, including 10-K, 10-Q, and 8-K reports, free of charge - Broadcom's website (www.broadcom.com) provides access to SEC filings, including 10-K, 10-Q, and 8-K reports, free of charge[32] Information About Our Executive Officers This section provides a table of Broadcom's executive officers as of December 16, 2022, including their age and position Executive Officers (as of Dec 16, 2022) | Name | Age | Position | | :--------------- | :-- | :----------------------------------------- | | Hock E. Tan | 71 | President, Chief Executive Officer and Director | | Kirsten M. Spears | 58 | Chief Financial Officer and Chief Accounting Officer | | Mark D. Brazeal | 54 | Chief Legal and Corporate Affairs Officer | | Charlie B. Kawwas, Ph.D. | 52 | President, Semiconductor Solutions Group | Risk Factors Broadcom faces risks from global economic conditions, semiconductor cyclicality, customer concentration, supply chain dependence, governmental regulations, and the VMware acquisition - Adverse global economic conditions, including recessions, trade tensions, and inflation, could negatively impact Broadcom's business, financial condition, and liquidity[42][43] - The semiconductor industry is highly cyclical, characterized by price erosion, supply/demand fluctuations, rapid technological change, and short product life cycles[44] - Broadcom is highly dependent on a small number of end customers, with Apple and the top five end customers accounting for approximately 20% and 35% of net revenue, respectively, in fiscal year 2022[44] - The failure to complete the acquisition of VMware, Inc. or to realize its expected benefits could adversely affect Broadcom's business and stock price, potentially incurring a $1.5 billion termination fee under certain circumstances[53] Risk Factors Summary This summary highlights principal risks including adverse global economic conditions, cyclical semiconductor industry, and the VMware acquisition - The summary highlights principal risks including adverse global economic conditions, cyclical semiconductor industry, customer concentration, supply chain dependence, governmental regulations, and the VMware acquisition[36][37] Risks Related to Our Business Business risks include dependence on contract manufacturing, global political conditions, COVID-19 impacts, and challenges in retaining qualified personnel - Dependence on contract manufacturing and a limited number of critical component suppliers (e.g., TSMC for ~90% of wafers) poses risks to product delivery and reputation[44][45][46] - Global political and economic conditions, trade restrictions (e.g., U.S. export restrictions on Huawei), and regulatory investigations (e.g., Korean Fair Trade Commission) can significantly impact international operations and sales[46][47] - The COVID-19 pandemic caused supply chain disruptions, increased lead times, and limited ability to fulfill orders, with ongoing macroeconomic uncertainties[48][50] - The company's success relies on attracting and retaining qualified personnel, especially engineering and technical staff, with potential challenges from immigration laws and changes in equity award philosophy[50][52] Risks Relating to Taxes Changes in tax legislation and loss of tax incentives could significantly increase corporate income taxes and reduce profitability - Changes in tax legislation, such as the U.S. Tax Cuts and Jobs Act (GILTI regime deduction decrease) and the Inflation Reduction Act of 2022 (new book minimum tax and excise tax on stock repurchases), could significantly increase corporate income taxes[70][71] - Loss or modification of tax incentives and holidays (e.g., Singapore, Malaysia) or incorrect interpretations of tax laws could materially increase tax expenses and reduce profitability[71] Risks Relating to Our Indebtedness Substantial indebtedness of $41.2 billion could adversely affect financial health, with debt instruments imposing operational restrictions - As of October 30, 2022, aggregate indebtedness was $41,218 million, which could adversely affect financial health and ability to execute business strategy, especially with additional debt for the VMware Merger[74] - Debt instruments impose restrictions on business operations, including limitations on secured debt and mergers, potentially affecting flexibility and access to capital[76] - Servicing substantial debt requires significant cash flow, and insufficient future cash generation could necessitate reducing investments, selling assets, or refinancing on unfavorable terms[77] Risks Relating to Owning Our Common Stock Common stock price volatility, fluctuating stock repurchases, concentrated institutional ownership, and dividend uncertainty pose risks to investors - The stock price has been volatile and may fluctuate significantly due to various factors, including analyst reports, acquisition announcements, and general economic conditions, potentially leading to substantial losses for investors and litigation[78] - The amount and frequency of stock repurchases may fluctuate based on cash priorities, market conditions, and regulatory requirements, as the company is not obligated to repurchase a specific amount[79] - A substantial amount of stock is held by a small number of large institutional investors (approximately 27% by top 10 as of Sep 30, 2022), whose sales could depress the market price[80] - There is no assurance that cash dividends will continue to be declared, as payment is subject to Board approval and subsidiary dividend restrictions[81] Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments were reported[82] Properties Broadcom's headquarters are in San Jose, California, with its primary warehouse in Malaysia, operating global owned and leased facilities - Broadcom's headquarters are in San Jose, California, and its primary warehouse is in Malaysia[82] - The company conducts operations in owned and leased facilities for administration, manufacturing, R&D, sales, and marketing[82] Total Facilities (as of Oct 30, 2022) | Location | Owned Facilities (sq ft) | Leased Facilities (sq ft) | Total Facilities (sq ft) | | :------------ | :----------------------- | :------------------------ | :----------------------- | | United States | 2,586,368 | 796,508 | 3,382,876 | | Other Countries | 928,888 | 1,310,661 | 2,239,549 | | Total | 3,515,256 | 2,107,169 | 5,622,425 | Legal Proceedings Legal proceedings information is incorporated by reference from Note 14, 'Commitments and Contingencies,' in Part II, Item 8 - Legal proceedings information is incorporated by reference from Note 14, 'Commitments and Contingencies,' in Part II, Item 8[83] Mine Safety Disclosures There are no mine safety disclosures to report - No mine safety disclosures were reported[84] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Broadcom's common stock is listed on Nasdaq, with 1,060 holders of record, and the company conducted significant stock repurchases in fiscal year 2022 - Broadcom common stock is listed on The Nasdaq Global Select Market under the symbol 'AVGO'[85] - As of November 25, 2022, there were 1,060 holders of record of common stock, with a substantially greater number of beneficial holders[85] - In fiscal year 2022, Broadcom repurchased and retired approximately 12 million shares of common stock for $7 billion under a $10 billion stock repurchase program[87] - Another $10 billion stock repurchase program was authorized in May 2022, extending through December 31, 2023[87] Market Information Broadcom common stock is traded on The Nasdaq Global Select Market under the ticker symbol AVGO - Broadcom common stock is traded on The Nasdaq Global Select Market under the ticker symbol AVGO[85] Holders As of November 25, 2022, there were 1,060 holders of record for Broadcom's common stock - As of November 25, 2022, there were 1,060 holders of record for Broadcom's common stock[85] Unregistered Sales of Equity Securities In August 2022, 9,923 restricted shares were issued for an acquisition, exempt from Securities Act registration - On August 1, 2022, 9,923 restricted shares of common stock were issued to an individual for an acquisition, exempt from registration under Section 4(a)(2) of the Securities Act of 1933[86] Issuer Purchases of Equity Securities In fiscal year 2022, Broadcom repurchased approximately 12 million shares for $7 billion under a stock repurchase program - In fiscal year 2022, Broadcom repurchased and retired approximately 12 million shares for $7 billion under a stock repurchase program[87] - An additional $10 billion stock repurchase program was authorized in May 2022, valid through December 31, 2023[87] - Approximately $274 million was paid in employee withholding taxes upon vesting of net settled equity awards, resulting in the withholding of about 1 million shares at an average price of $502.62 per share[87] Stock Performance Graph The stock performance graph compares Broadcom's cumulative total return against the S&P 500 and NASDAQ 100 indices - The stock performance graph compares Broadcom's cumulative total return against the S&P 500 Index and the NASDAQ 100 Index for the five fiscal years ended October 30, 2022[89] Five Year Cumulative Total Return (October 27, 2017 = $100) | Index | Oct 29, 2017 | Nov 4, 2018 | Nov 3, 2019 | Nov 1, 2020 | Oct 31, 2021 | Oct 30, 2022 | | :------------------ | :----------- | :---------- | :---------- | :---------- | :----------- | :----------- | | Broadcom Inc. | $100.00 | $89.74 | $125.30 | $154.78 | $242.74 | $222.41 | | S&P 500 Index | $100.00 | $107.58 | $123.66 | $134.35 | $192.01 | $165.18 | | NASDAQ 100 Index | $100.00 | $113.29 | $134.24 | $183.52 | $265.05 | $194.63 | RESERVED This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Broadcom achieved strong FY2022 financial performance with significant revenue and operating income growth, continuing capital returns and pursuing the VMware acquisition Key Financial Highlights (FY2022 vs FY2021) | Metric | FY2022 ($ millions) | FY2021 ($ millions) | Change ($ millions) | % Change | | :---------------------- | :------------------ | :------------------ | :------------------ | :------- | | Total Net Revenue | 33,203 | 27,450 | 5,753 | 21% | | Gross Margin | 22,095 | 16,844 | 5,251 | 31% | | Operating Income | 14,225 | 8,519 | 5,706 | 67% | | Net Income | 11,495 | 6,736 | 4,759 | 71% | | Cash from Operations | 16,736 | 13,764 | 2,972 | 22% | | Common Stock Repurchases | 7,000 | 0 | 7,000 | N/A | | Cash Dividends Paid | 7,032 | 6,212 | 820 | 13% | - The pending acquisition of VMware, Inc. for approximately $61 billion (cash-and-stock) is expected to close in fiscal year 2023, with $32 billion in new debt financing[98][123] - Semiconductor solutions net revenue increased by 27% due to strong demand for networking, server storage, broadband, and wireless products[111][112] - Infrastructure software net revenue increased by 4% primarily due to higher demand for mainframe solutions and FC SAN products[111][112] Overview Broadcom is a global technology leader in semiconductor and infrastructure software, leveraging acquisitions and R&D for comprehensive infrastructure products - Broadcom is a global technology leader in semiconductor and infrastructure software solutions, with two reportable segments: semiconductor solutions and infrastructure software[94] - The company's strategy involves combining technology leadership with scale through acquisitions and R&D to deliver a comprehensive suite of infrastructure technology products[94] COVID-19 Update The COVID-19 pandemic caused supply chain disruptions and workforce impacts, though semiconductor demand remained robust in FY2022 - The COVID-19 pandemic caused supply chain and market disruptions, impacting workforce and operations, and leading to difficulties in timely component procurement[95][96] - Demand for semiconductor products remained robust in fiscal year 2022, driven by supply imbalance, but macroeconomic uncertainty persists[96] Fiscal Year Highlights This section highlights key financial metrics for fiscal year 2022, including cash from operations, dividends, and stock repurchases Fiscal Year 2022 Highlights | Metric | Amount ($ millions) | | :--------------------- | :------------------ | | Cash from operations | 16,736 | | Cash dividends paid | 7,032 | | Common stock repurchased | 7,000 | Pending Acquisition of VMware, Inc. Broadcom agreed to acquire VMware for approximately $61 billion in a cash-and-stock transaction, expected to close in fiscal year 2023 - Broadcom entered an agreement on May 26, 2022, to acquire VMware, Inc. for approximately $61 billion in a cash-and-stock transaction, assuming VMware's outstanding debt[98] - The acquisition is subject to customary closing conditions, including antitrust clearances, and is expected to be completed in fiscal year 2023[98] - A $32 billion senior unsecured bridge facility has been committed to fund the cash portion of the VMware Merger[98] Net Revenue Total net revenue increased by 21% in FY2022, driven by semiconductor solutions and infrastructure software, with significant Apple concentration Net Revenue by Segment (FY2022 vs FY2021) | Segment | FY2022 ($ millions) | FY2021 ($ millions) | $ Change | % Change | | :---------------------- | :------------------ | :------------------ | :------- | :------- | | Semiconductor solutions | 25,818 | 20,383 | 5,435 | 27% | | Infrastructure software | 7,385 | 7,067 | 318 | 4% | | Total net revenue | 33,203 | 27,450 | 5,753 | 21% | - Sales to distributors accounted for 56% and 53% of net revenue for fiscal years 2022 and 2021, respectively[109] - Aggregate sales to Apple Inc. accounted for approximately 20% of net revenue for both fiscal years 2022 and 2021[109] Costs and Expenses Costs and expenses include product costs, R&D, amortization of intangibles, and restructuring charges, with tax incentives impacting income taxes - Cost of products sold includes wafer and material costs, assembly, testing, personnel, and overhead, with fixed costs potentially leading to lower gross margins if manufacturing facilities are underutilized[101] - Research and development expenses primarily cover personnel costs for engineers, project materials, third-party fees, and prototype development[101] - Amortization of acquisition-related intangible assets and restructuring, impairment, and disposal charges are also significant components of total costs and expenses[101] - Tax incentives from Singapore (expiring 2025) and Malaysia (expiring 2028) significantly decreased the provision for income taxes by $1,821 million in FY2022 and $1,156 million in FY2021[103] Critical Accounting Estimates Critical accounting policies involve significant management judgment for revenue recognition, goodwill valuation, and income taxes - Critical accounting policies include revenue recognition, valuation of goodwill and long-lived assets, and income taxes, all requiring significant management judgment and assumptions[104] - Revenue recognition involves estimates for distributor credits and rebates, with potential for significant differences between actual and estimated amounts[104] - Goodwill and long-lived assets are subject to annual impairment reviews, using qualitative and quantitative assessments (income and market approaches) that rely on future financial performance forecasts and discount rates[105] - Income tax liabilities involve uncertainties in applying complex tax laws across multiple jurisdictions, with accruals based on the 'more-likely-than-not' threshold for recognition[105] Fiscal Year Presentation Broadcom operates on a 52- or 53-week fiscal year, with fiscal years 2022, 2021, and 2020 each consisting of 52 weeks - Broadcom operates on a 52- or 53-week fiscal year, with fiscal years 2022, 2021, and 2020 each consisting of 52 weeks[106] Results of Operations Operating income significantly increased in FY2022 due to higher gross margin and lower amortization, despite increased provision for income taxes Statements of Operations Data (FY2022 vs FY2021) | Metric | FY2022 ($ millions) | FY2021 ($ millions) | % of Net Revenue (FY2022) | % of Net Revenue (FY2021) | | :-------------------------------------------- | :------------------ | :------------------ | :------------------------ | :------------------------ | | Net revenue: | | | | | | Products | 26,277 | 20,886 | 79% | 76% | | Subscriptions and services | 6,926 | 6,564 | 21% | 24% | | Total net revenue | 33,203 | 27,450 | 100% | 100% | | Cost of revenue: | | | | | | Cost of products sold | 7,629 | 6,555 | 23% | 24% | | Cost of subscriptions and services | 627 | 607 | 2% | 2% | | Amortization of acquisition-related intangible assets | 2,847 | 3,427 | 8% | 13% | | Restructuring charges | 5 | 17 | —% | —% | | Total cost of revenue | 11,108 | 10,606 | 33% | 39% | | Gross margin | 22,095 | 16,844 | 67% | 61% | | Research and development | 4,919 | 4,854 | 15% | 18% | | Selling, general and administrative | 1,382 | 1,347 | 4% | 5% | | Amortization of acquisition-related intangible assets | 1,512 | 1,976 | 5% | 7% | | Restructuring, impairment and disposal charges | 57 | 148 | —% | —% |\ | Total operating expenses | 7,870 | 8,325 | 24% | 30% | | Operating income | 14,225 | 8,519 | 43% | 31% | - Gross margin increased to 67% in FY2022 from 61% in FY2021, primarily due to lower amortization of acquisition-related intangible assets and favorable margins in the semiconductor solutions segment[113] - Research and development expense increased by 1% ($65 million) in FY2022, driven by higher variable employee compensation and engineering project costs, partially offset by lower stock-based compensation[114] - Total stock-based compensation expense decreased to $1,533 million in FY2022 from $1,704 million in FY2021, reflecting the full vesting of certain equity awards and forfeitures[118] Operating Income by Segment (FY2022 vs FY2021) | Segment | FY2022 ($ millions) | FY2021 ($ millions) | $ Change | % Change | | :---------------------- | :------------------ | :------------------ | :------- | :------- | | Semiconductor solutions | 15,075 | 10,976 | 4,099 | 37% | | Infrastructure software | 5,219 | 4,936 | 283 | 6% | | Unallocated expenses | (6,069) | (7,393) | 1,324 | (18)% | | Total operating income | 14,225 | 8,519 | 5,706 | 67% | - Interest expense decreased to $1,737 million in FY2022 from $1,885 million in FY2021, primarily due to lower losses on extinguishment of debt, but is expected to increase with the VMware Merger[121] - Provision for income taxes significantly increased to $939 million in FY2022 from $29 million in FY2021, mainly due to higher income from continuing operations before income taxes[121] Liquidity and Capital Resources Primary liquidity sources include cash, operations, and credit facilities, with requirements for acquisitions, working capital, and debt payments - Primary liquidity sources as of October 30, 2022, included $12,416 million in cash and cash equivalents, cash from operations, and available capacity under a $7.5 billion unsecured revolving credit facility[122] - Liquidity requirements include business acquisitions (like VMware Merger), working capital, R&D, capital expenditures, dividends, debt payments, share repurchases, and income taxes[123] - The company expects capital expenditures to be higher in fiscal year 2023 and intends to fund the cash portion of the VMware Merger with $32 billion in new debt financing[123] Working Capital Working capital increased in FY2022 due to higher accounts receivable, inventory, and cash, partially offset by increased liabilities - Working capital increased to $11,452 million at October 30, 2022, from $10,305 million at October 31, 2021[124] - This increase was driven by higher accounts receivable ($2,958 million from $2,071 million) and inventory ($1,925 million from $1,297 million), and an increase in cash and cash equivalents[124] - Offsetting factors included increases in contract liabilities, taxes payable, interest payable, and the current portion of long-term debt[124][125] Capital Returns Broadcom returned capital through cash dividends and significant common stock repurchases in fiscal year 2022 Cash Dividends Declared and Paid (FY2022 vs FY2021) | Metric | FY2022 ($) | FY2021 ($) | | :----------------------------------- | :--------- | :--------- | | Dividends per share to common stockholders | 16.40 | 14.40 | | Dividends to common stockholders ($ millions) | 6,733 | 5,913 | | Dividends per share to preferred stockholders | 80.00 | 80.00 | | Dividends to preferred stockholders ($ millions) | 299 | 299 | - Broadcom repurchased $7 billion of common stock in fiscal year 2022 under a $10 billion program, with another $10 billion program authorized through December 31, 2023[126] Cash Flows Operating cash flow increased in FY2022, while investing and financing activities used more cash, primarily due to acquisitions and stock repurchases Cash Flow Summary (FY2022 vs FY2021) | Cash Flow Type | FY2022 ($ millions) | FY2021 ($ millions) | | :------------------------------ | :------------------ | :------------------ | | Net cash provided by operating activities | 16,736 | 13,764 | | Net cash used in investing activities | (667) | (245) | | Net cash used in financing activities | (15,816) | (8,974) | | Net change in cash and cash equivalents | 253 | 4,545 | - Operating cash flow increased by $2,972 million in FY2022, driven by higher net income and non-cash adjustments, partially offset by changes in operating assets and liabilities[128] - Investing activities used $422 million more cash in FY2022, primarily due to increased cash paid for acquisitions and lower net proceeds from investment sales[129] - Financing activities used $6,842 million more cash in FY2022, mainly due to $7 billion in common stock repurchases and increased dividend payments, partially offset by changes in net borrowing activities[130][131] Accounting Changes and Recent Accounting Standards For details on accounting changes and recent accounting standards, refer to Note 2, 'Summary of Significant Accounting Policies,' in Part II, Item 8 - For details on accounting changes and recent accounting standards, refer to Note 2, 'Summary of Significant Accounting Policies,' in Part II, Item 8[132] Quantitative and Qualitative Disclosures About Market Risk Broadcom manages market risks related to foreign currency exchange rates and interest rates, using derivatives for hedging but not for speculation - Broadcom uses foreign exchange forward contracts to hedge currency exchange rate exposures from global operating and financing activities, but not for trading or speculative purposes[133] - As of October 30, 2022, there were no outstanding foreign exchange forward contracts, and gains/losses from foreign currency transactions were not significant[133] - Changes in interest rates affect the fair value of the company's $41.2 billion outstanding debt (fixed-rate senior notes), with a hypothetical 50 basis point change impacting fair value by approximately $1.6 billion[134] - Treasury rate lock contracts are used to hedge variability of cash flows due to changes in benchmark interest rates for anticipated future debt issuances[134] Foreign Currency Exchange Risk Broadcom uses foreign exchange forward contracts to hedge currency exposures, with no significant outstanding contracts as of October 30, 2022 - Broadcom uses foreign exchange forward contracts to hedge foreign currency exchange rate exposures[133] - As of October 30, 2022, no foreign exchange forward contracts were outstanding, and related gains/losses were not significant[133] Interest Rate Risk Interest rate risk primarily affects fixed-rate debt, with a hypothetical 50 basis point change impacting fair value by approximately $1.6 billion - As of October 30, 2022, Broadcom had $41.2 billion in principal amount of fixed-rate debt outstanding, with an estimated fair value of $33.0 billion[134] - A hypothetical 50 basis points increase or decrease in market interest rates would change the fair value of debt by approximately $1.6 billion[134] - Treasury rate lock contracts are used to hedge cash flow variability from future debt issuances[134] Financial Statements and Supplementary Data This section presents Broadcom's audited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes - The consolidated financial statements for the period ended October 30, 2022, were audited by PricewaterhouseCoopers LLP, who issued an unqualified opinion[138][139] - A critical audit matter identified was 'Uncertain Tax Positions (UTPs)' due to significant management judgment in evaluating technical merits and the complexity of auditor procedures[147][148][149] Consolidated Balance Sheet Summary (as of Oct 30, 2022 vs Oct 31, 2021) | Asset/Liability Category | Oct 30, 2022 ($ millions) | Oct 31, 2021 ($ millions) | | :----------------------- | :------------------------ | :------------------------ | | Total Current Assets | 18,504 | 16,586 | | Total Assets | 73,249 | 75,570 | | Total Current Liabilities | 7,052 | 6,281 | | Total Liabilities | 50,540 | 50,581 | | Total Stockholders' Equity | 22,709 | 24,962 | Consolidated Statements of Operations Summary (FY2022 vs FY2021) | Metric | FY2022 ($ millions) | FY2021 ($ millions) | | :-------------------------------------------- | :------------------ | :------------------ | | Total net revenue | 33,203 | 27,450 | | Gross margin | 22,095 | 16,844 | | Operating income | 14,225 | 8,519 | | Income from continuing operations before income taxes | 12,434 | 6,765 | | Net income | 11,495 | 6,736 | | Net income attributable to common stock | 11,223 | 6,437 | | Diluted EPS | 26.53 | 15.00 | Consolidated Statements of Cash Flows Summary (FY2022 vs FY2021) | Cash Flow Type | FY2022 ($ millions) | FY2021 ($ millions) | | :---------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | 16,736 | 13,764 | | Net cash used in investing activities | (667) | (245) | | Net cash used in financing activities | (15,816) | (8,974) | | Net change in cash and cash equivalents | 253 | 4,545 | Report of Independent Registered Public Accounting Firm PwC audited Broadcom's financial statements and internal controls, issuing an unqualified opinion and identifying uncertain tax positions as a critical audit matter - PricewaterhouseCoopers LLP audited Broadcom's consolidated financial statements and internal control over financial reporting, issuing an unqualified opinion for both as of October 30, 2022[138][139] - A critical audit matter identified was 'Uncertain Tax Positions (UTPs)' due to significant management and auditor judgment in evaluating technical merits and calculating liabilities[147][148][149] Consolidated Balance Sheets This section presents Broadcom's consolidated balance sheets as of October 30, 2022, and October 31, 2021, detailing assets, liabilities, and equity Consolidated Balance Sheets (as of Oct 30, 2022 vs Oct 31, 2021) | ASSETS | Oct 30, 2022 ($ millions) | Oct 31, 2021 ($ millions) | | :------------------------------------ | :------------------------ | :------------------------ | | Cash and cash equivalents | 12,416 | 12,163 | | Trade accounts receivable, net | 2,958 | 2,071 | | Inventory | 1,925 | 1,297 | | Other current assets | 1,205 | 1,055 | | Total current assets | 18,504 | 16,586 | | Property, plant and equipment, net | 2,223 | 2,348 | | Goodwill | 43,614 | 43,450 | | Intangible assets, net | 7,111 | 11,374 | | Other long-term assets | 1,797 | 1,812 | | Total assets | 73,249 | 75,570 | | LIABILITIES AND EQUITY | | | | Accounts payable | 998 | 1,086 | | Employee compensation and benefits | 1,202 | 1,066 | | Current portion of long-term debt | 440 | 290 | | Other current liabilities | 4,412 | 3,839 | | Total current liabilities | 7,052 | 6,281 | | Long-term debt | 39,075 | 39,440 | | Other long-term liabilities | 4,413 | 4,860 | | Total liabilities | 50,540 | 50,581 | | Preferred stock dividend obligation | — | 27 | | Additional paid-in capital | 21,159 | 24,330 | | Retained earnings | 1,604 | 748 | | Accumulated other comprehensive loss | (54) | (116) | | Total stockholders' equity | 22,709 | 24,962 | | Total liabilities and equity | 73,249 | 75,570 | Consolidated Statements of Operations This section presents Broadcom's consolidated statements of operations for fiscal years 2022, 2021, and 2020, detailing revenue, expenses, and net income Consolidated Statements of Operations (FY2022 vs FY2021 vs FY2020) | Metric | FY2022 ($ millions) | FY2021 ($ millions) | FY2020 ($ millions) | | :-------------------------------------------- | :------------------ | :------------------ | :------------------ | | Net revenue: | | | | | Products | 26,277 | 20,886 | 17,435 | | Subscriptions and services | 6,926 | 6,564 | 6,453 | | Total net revenue | 33,203 | 27,450 | 23,888 | | Cost of revenue: | | | | | Cost of products sold | 7,629 | 6,555 | 5,892 | | Cost of subscriptions and services | 627 | 607 | 626 | | Amortization of acquisition-related intangible assets | 2,847 | 3,427 | 3,819 | | Restructuring charges | 5 | 17 | 35 | | Total cost of revenue | 11,108 | 10,606 | 10,372 | | Gross margin | 22,095 | 16,844 | 13,516 | | Research and development | 4,919 | 4,854 | 4,968 | | Selling, general and administrative | 1,382 | 1,347 | 1,935 | | Amortization of acquisition-related intangible assets | 1,512 | 1,976 | 2,401 | | Restructuring, impairment and disposal charges | 57 | 148 | 198 |\ | Total operating expenses | 7,870 | 8,325 | 9,502 | | Operating income | 14,225 | 8,519 | 4,014 | | Interest expense | (1,737) | (1,885) | (1,777) | | Other income (expense), net | (54) | 131 | 206 | | Income from continuing operations before income taxes | 12,434 | 6,765 | 2,443 | | Provision for (benefit from) income taxes | 939 | 29 | (518) | | Income from continuing operations | 11,495 | 6,736 | 2,961 | | Loss from discontinued operations, net of income taxes | — | — | (1) | | Net income | 11,495 | 6,736 | 2,960 | | Dividends on preferred stock | (272) | (299) | (297) | | Net income attributable to common stock | 11,223 | 6,437 | 2,663 | | Net income per share attributable to common stock: | | | | | Basic | 27.44 | 15.70 | 6.62 | | Diluted | 26.53 | 15.00 | 6.33 | | Weighted-average shares used in per share calculations: | | | | | Basic | 409 | 410 | 402 | | Diluted | 423 | 429 | 421 | Consolidated Statements of Comprehensive Income This section presents Broadcom's consolidated statements of comprehensive income for fiscal years 2022, 2021, and 2020 Consolidated Statements of Comprehensive Income (FY2022 vs FY2021 vs FY2020) | Metric | FY2022 ($ millions) | FY2021 ($ millions) | FY2020 ($ millions) | | :------------------------------------------------------------------ | :------------------ | :------------------ | :------------------ | | Net income | 11,495 | 6,736 | 2,960 | | Other comprehensive income (loss), net of tax: | | | | | Change in unrealized gain on derivative instruments | 37 | — | — | | Change in actuarial loss and prior service costs associated with defined benefit plans | 25 | (8) | 24 | | Other comprehensive income (loss), net of tax | 62 | (8) | 24 | | Comprehensive income | 11,557 | 6,728 | 2,984 | Consolidated Statements of Cash Flows This section presents Broadcom's consolidated statements of cash flows for fiscal years 2022, 2021, and 2020, detailing operating, investing, and financing activities Consolidated Statements of Cash Flows (FY2022 vs FY2021 vs FY2020) | Cash Flow Type | FY2022 ($ millions) | FY2021 ($ millions) | FY2020 ($ millions) | | :---------------------------------------- | :------------------ | :------------------ | :------------------ | | Net cash provided by operating activities | 16,736 | 13,764 | 12,061 | | Net cash used in investing activities | (667) | (245) | (11,109) |\ | Net cash used in financing activities | (15,816) | (8,974) | 1,611 | | Net change in cash and cash equivalents | 253 | 4,545 | 2,563 | | Cash and cash equivalents at beginning of period | 12,163 | 7,618 | 5,055 | | Cash and cash equivalents at end of period | 12,416 | 12,163 | 7,618 | | Supplemental disclosure: | | | | | Cash paid for interest | 1,386 | 1,565 | 1,408 | | Cash paid for income taxes | 908 | 775 | 501 | Consolidated Statements of Stockholders' Equity This statement details changes in stockholders' equity, including net income, dividends, and stock repurchases, for the periods presented - The statement details changes in stockholders' equity, including net income, other comprehensive income/loss, dividends, common stock issuance, stock-based compensation, and stock repurchases[166] - As of October 30, 2022, total stockholders' equity was $22,709 million, down from $24,962 million at October 31, 2021[155][166] Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering significant accounting policies and other disclosures Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure were reported[292] Controls and Procedures Management concluded that Broadcom's disclosure controls and internal control over financial reporting were effective as of October 30, 2022 - As of October 30, 2022, Broadcom's disclosure controls and procedures were deemed effective at the reasonable assurance level by management, including the CEO and CFO[293] - Management concluded that internal control over financial reporting was effective as of October 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO[295] - No material changes in internal control over financial reporting occurred during the fourth quarter ended October 30, 2022[296] Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of October 30, 2022[293] - They concluded that disclosure controls and procedures were effective at the reasonable assurance level[293] Management's Report on Internal Control Over Financial Reporting Management assessed and concluded that internal control over financial reporting was effective as of October 30, 2022, based on COSO criteria - Management is responsible for establishing and maintaining adequate internal control over financial reporting[295] - Management assessed and concluded that internal control over financial reporting was effective as of October 30, 2022, based on COSO criteria[295] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the fourth quarter of fiscal year 2022 - No material changes in internal control over financial reporting occurred during the fourth quarter ended October 30, 2022[296] - Workplace modifications due to the COVID-19 pandemic, including remote work, have not meaningfully affected internal controls[296] Other Information There is no other information to report under this item - No other information was reported[296] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections There are no disclosures regarding foreign jurisdictions that prevent inspections to report - No disclosures regarding foreign jurisdictions that prevent inspections were reported[296] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[298] Executive Compensation Details on executive compensation are incorporated by reference from Broadcom's 2023 Annual Meeting of Stockholders Proxy Statement - Executive compensation information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[299] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from Broadcom's 2023 Annual Meeting of Stockholders Proxy Statement - Security ownership information for beneficial owners and management is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[300] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from Broadcom's 2023 Proxy Statement - Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[301] Principal Accountant Fees and Services Details regarding principal accountant fees and services are incorporated by reference from Broadcom's 2023 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[302] PART IV Exhibits and Financial Statement Schedules This section lists financial statements and a comprehensive table of exhibits filed with the Annual Report on Form 10-K - The section includes a list of consolidated financial statements found in Item 8 of the Annual Report on Form 10-K[304] - A comprehensive table of exhibits is provided, detailing various agreements, certificates, and plans, with many incorporated by reference from prior SEC filings[305] Financial Statements The consolidated financial statements are included in Item 8 of this Annual Report on Form 10-K - The consolidated financial statements, including balance sheets, statements of operations, comprehensive income, cash flows, and stockholders' equity, are included in Item 8[304] Exhibits Exhibits include various agreements, certificates, and plans, many incorporated by reference from previous SEC filings - Exhibits include merger agreements (e.g., VMware, Symantec), certificates of incorporation, bylaws, common stock descriptions, and various indenture and credit agreements[305][306][307][308][309][310][311][312][313][314][315][316][317][318][319][320][321][322][323][324][325][326][327][328] - Also included are equity incentive award plans, severance agreements, and certifications from executive officers[323][324][325] Form 10-K Summary This item indicates that there is no Form 10-K summary provided - No Form 10-K summary is provided in this section[329] Signatures The Annual Report on Form 10-K is duly signed by Broadcom's President and CEO and other officers and directors - The report is signed by Hock E. Tan, President and Chief Executive Officer, and other key officers and directors, as required by the Securities Exchange Act of 1934[331][333]