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Investments20.1248
Examining the financial results of Broadcom for 2021 year
Broadcom (NASDAQ: AVGO) - one of the world's largest representatives of the semiconductor industry with more than 22,000 patents.
In early December, the company presented its annual report for 2021, which reflected the double-digit growth of all financial indicators year-on-year:
- revenue increased by 15% - up to 7.407 billion dollars - due to increased demand from customers;
- adjusted EBITDA increased by 19% - from 3.827 to 4.547 billion dollars - against the backdrop of a recovery in industrial activity;
- net profit added 50% - increased to $ 1.989 billion, and earnings per share rose to 4,45 $;
- management announced an increase in its quarterly dividend and the launch of a new share buyback amid a record 2021 Adjusted EBITDA margin in 60%, which generated an annual free cash flow of $13.3 billion.
Let's figure it out, how the company did it and what the future holds for it.
What the company makes money on
Broadcom's business can be divided into two segments:
- Semiconductor manufacturing.
- Infrastructure software.
The company creates solutions based on analog and digital semiconductor technology and consists of 5 subsegments, which are named according to the client principle:
- Networking - network services.
- Wireless - wireless communication.
- Broadband - broadband connection.
- Storage - data storage systems.
- Industrial - solutions for industrial enterprises.
Revenue from referral to 4 quarter grew by 17% - up to 5.634 billion dollars - against the background of strong results of the main sub-segments.
Networking. Revenue from customers, who provide network services, increased by 13% - up to $ 1.9 billion - and amounted to 34% of the overall segment result. The main reason for the growth is increased demand. Based on current data, the company expects, what sub-segment in 1 quarter of 2022 will show an acceleration in growth rates by 30%.
Wireless. Revenue from wireless customers increased by 21% - up to $ 1.8 billion - against the backdrop of the start of sales of new generation smartphones. Given last year's strong base, management expects, that segment revenues in 1 quarter of 2022 will grow by less than 10%.
Broadband. Revenue increased by 29% - up to 0.872 billion dollars. Strong results are attributed to strong growth in vendor and customer deployments of next-generation Broadcom PONs with Wi-Fi access gateways 6 and 6C. Forecast for the next quarter - continued double-digit growth.
Storage. Revenue from connecting server storage systems increased by 21% and amounted to 0.815 billion dollars. Performance beats Broadcom forecasts as businesses resume spending to upgrade their computing and storage infrastructure. IN 1 in the quarter of 2022, management calculates, that customer spending will continue to recover and drive server storage connectivity revenues up to about 30%.
Industrial. Revenue from industrial enterprises added 36% and rose to $ 0.232 billion thanks to strong demand from electric vehicle manufacturers, robotics and automated production systems. IN 1 the company expects similar growth in the quarter of 2022.
Infrastructure software. The company creates software solutions for planning, development, automation, manage and protect client applications or systems. IN 4 quarter, the segment increased by only 8% - up to $ 1.773 billion. Forecast of 1 the management has no quarter of 2022.
Key financial results, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Revenue | 6,467 | 7,407 | 15% |
| Adjusted EBITDA | 3,827 | 4,547 | 19% |
| EBITDA margin | 59% | 61% | 2 P. P. |
| Net profit | 1,324 | 1,989 | 50% |
| FCF | 3,246 | 3,453 | 6% |
| net debt | 33,444 | 27,567 | −18% |
Broadcom revenue by segment in 4 quarter of 2021, billion dollars
| Semiconductor manufacturing | 5,634 |
| Networking | 1,900 |
| Wireless | 1,800 |
| Broadband | 0,872 |
| Storage | 0,815 |
| Industrial | 0,232 |
| Infrastructure software | 1,773 |
| Broadcom total revenue | 7,407 |
5,634
Forecasts
Management presented forecasts of financial results for 1 quarter of 2022:
- Broadcom's total revenue will grow by 14% - up to 7.6 billion dollars.
- Semiconductor Revenue Including Wireless Subsegment (Wireless) will increase by 17%, and without him - on 28%.
- Adjusted EBITDA of $ 4.674 billion, and EBITDA margin 61,5%.
- According to management estimates, the number of traded shares of the company in the first quarter will be 448 million shares.
- Broadcom will continue to pursue its principle and highlight 50% free cash flow for dividends. It is for this reason that the payment for 1 quarter was increased by 14% - to 4,1 $, Going forward, management intends to pay the same quarterly dividend.
Comparison with competitors
2021 became the year of Broadcom: the company showed record financial results against the backdrop of increased demand for products, settled her antitrust dispute with the FTC and had a good investor day. All these factors allowed the company to show stronger market dynamics in comparison with its main competitors..
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Broadcom | 17,36 | 40,41 | 2,63 |
| Qualcomm | 18,87 | 22,77 | 0,76 |
| TSMC | 16,54 | 30,32 | −0,27 |
| Texas Instruments | 19,91 | 24,73 | 0,23 |
| Intel | 7,43 | 9,75 | 1,01 |
Dividends
The company's management announced, what will pay the next quarterly dividend 31 December in the amount 4,1 $ per share. The dividend will grow by 14%, and the dividend yield will be 0,6%.
In addition to the dividend increase, the board of directors also announced a new $10 billion share buyback program., which will be valid until 31 December 2022. Given the current capitalization of Broadcom in the amount of $ 260 billion, shareholders will receive an additional yield in 2022 from the repurchase in the amount of 3,8%.
What's the bottom line?
Broadcom posts strong financial results for Q4 2021, due to which the management announced large dividend payments to shareholders in 2022 in the amount of 6,2%, out of which 2,4% investors will receive dividends, and the remaining 3,8% will be distributed through buyback.
Immediately after the publication of the report from 32 market analysts, who follow Broadcom, 18 raised their target prices, resulting in the average cost target increased from 578.93 to 664,72 $. The current market recommendations are distributed as follows:
- "Buy" - 27.
- "Hold" - 4.
- "Sell" - 1.
