Good day, ladies and gentlemen. Welcome to Broadcom Inc.'s First Quarter Fiscal Year 2019 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Beatrice Russotto, Director of Investor Relations of Broadcom Inc. Please, go ahead ma'am.

Thank you, operator, and good afternoon, everyone. Joining me today are Hock Tan, President and CEO; and Tom Krause, Chief Financial Officer of Broadcom. After the market closed today, Broadcom distributed a press release and financial tables describing our financial performance for the first quarter of fiscal year 2019. If you did not receive a copy, you may obtain the information from the Investors section of Broadcom's website at Broadcom.com. This conference call is being broadcast live and a recording will be available via telephone playback for one week. It will also be archived in the Investors section of our website at Broadcom.com. During the prepared comments section of this call, Hock and Tom will be providing details of our first quarter fiscal year 2019 results, guidance for fiscal year 2019 and commentary regarding the business environment. We will take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the table attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. So with that, I'll turn the call over to Hock.

Thank you, Bea, and thank you everyone for joining us today. So we had a good start to fiscal 2019, growing 9% in our first fiscal quarter compared to the same period a year ago. The strength of our business model delivered another quarter of sustained revenues, strong earnings and an extremely strong free cash flow. Our semiconductor business helped us relatively well. Not surprisingly, our wireless business was down sharply and our storage business underperformed somewhat. However, these challenges were mitigated -- more than mitigated by our networking business, which grew double digits year-over-year. In addition, we were very pleased to see that the broadband business has started to recover and stabilize in the quarter. In fact, putting it all together, the semiconductor segment was actually up year-over-year in the first quarter, if you exclude the expected sharp decline in wireless. Turning to infrastructure. This business which includes SAN switching, mainframe and enterprise software delivered solid top line results, benefiting from a very robust enterprise spending environment. The integration of CA onto the Broadcom platform is very well underway and we are confident that we can meet, if not, exceed in the long term -- exceed the long-term revenue and profitability target that we laid out for CA to you last year. In fact, renewals in our CA business have been strong this past quarter and we believe the dollar commitments from our core customers will continue to grow. Many of our peers have commented that they are seeing a softening demand environment, especially out of China. While we are experiencing the same demand dynamics, we have factored in much of this macroeconomic backdrop when we provided fiscal 2019 guidance last quarter. As a result, after a solid start to the year, we are reaffirming our fiscal 2019 revenue guidance of $24.5 billion. Having said that, we expect our semiconductor business to bottom in the second fiscal quarter, driven almost entirely by the seasonal drop in wireless. But looking to the second half, we are confident that semiconductor business will resume very meaningful growth. This will be driven by strong product cycles in both wireless and networking, coupled with a recovery in broadband. Infrastructure software, on the other hand, is expected to sustain throughout the year. So in summary, our diversification strategy is working and we are effectively managing the decline in wireless as well as in the broader semiconductor industry headwinds. Now, let me turn over to Tom to provide you with more color in Q1.

Thank you, Hock. Consolidated net revenue for the first quarter was $5.8 billion, a 9% increase from a year ago. And EPS came in at $5.55, an 8% increase from a year ago off of a $441 million weighted average fully diluted share count. In addition, free cash flow was $2.03 billion or 35% of revenue. I would highlight, free cash flow grew 39% year-over-year. The Semiconductor Solutions segment revenue was $4.4 billion and represented 76% of our total revenue this quarter. This was down 12% year-on-year on a comparable basis. But as Hock explained, the semiconductor segment was actually up slightly year-over-year in the first quarter, excluding wireless. Let me now turn to our Infrastructure Software segment. Revenue was $1.4 billion and represented 24% of revenue. SAN switching continues to perform extremely well. And as Hock mentioned mainframe enterprise software is off to a good start. Let me now provide additional detail on our financial performance. Operating expenses were $1.08 billion. Operating income from continuing operations was $3.05 billion and represented 52.7% of net revenue. Adjusted EBITDA was $3.24 billion and represented 55.9% of net revenue. This figure excludes $143 million of depreciation. Inventory decreased $50 million from the prior quarter. Similarly, semiconductor receivables were actually down, which is typical for Q1, even though receivables increased $352 million overall due to the CA acquisition. Total current liabilities excluding debt increased $2.5 billion, due to CA. However, excluding CA total current liabilities excluding debt decreased meaningfully more than receivables, primarily due to the payment of our annual performance bonus in Q1. In addition, we spent $99 million on capital expenditures. As a result, we had record Q1 free cash flow from operations at $2.03 billion, or 35% of revenue. This represents 39% growth in free cash flow from operations compared…

Thank you. [Operator Instructions] Our first question comes from Harlan Sur with JPMorgan.

Good afternoon and congratulations on the solid quarterly execution. Hock on the strong double-digits year-over-year momentum in your data center network [came in] [ph] compute acceleration segment you've been shipping your new Tomahawk 3 switching platform now since the second half of last year. I think Google's using it for 200-gig. We hear Amazon is going to transition to 400. We're hearing good things from Baidu, Tencent and all of the cloud guys. Additionally, you're ramping compute acceleration ASIC into some of the big cloud guys as well. Question is, do you anticipate continued double-digits year-over-year of growth for the full year here for the networking business as the pipeline here appears fairly strong?

Very good question, Harlan. And that listening to you, you really got me going. Yes, in networking and it's broader than just data centers. But let's talk data centers. Tomahawk 3 which is the 12.8 terabit top of the rack switch has just barely started production shipments. In fact we do expect -- we are fully expecting the ramp of Tomahawk 3 as part of the broader data center scale-out with 400 gig pipes in the connect so to speak to really start just about right now. In fact, our Q2 -- fiscal Q2 and progressing up to the rest of the end of the year as more and more on the names you were mentioning type of cloud [jumps in] [ph] and expand -- and upgrade into data centers and simply because as you know expanding the capacity of data centers and pipes is the simplest way to decongest to minimize or mitigate congestion control in these huge data centers, in this large cloud tech. So there's a broad refreshing and upgrading of data centers among these cloud guys. One area as mentioned Tomahawk 3 shipping, which is just starting this quarter in significant volumes. What's also not so perhaps obvious, but is very real for us, is the fact that in order to run 400 gigabit per second throughput pipes, you need interconnect, fiber optic interconnect that are built and dedicated in that area. That's very high-tech products which we are very deeply engaged in. And that brings the content by a multiple sector in this data center realm. And then as you expand the top of the rack switch I can't resist saying you have to -- you need to connect data center to data center what is called DCI interconnectivity. And the approach that is being taken, which we are also very engaged in with multiple OEMs who are supporting the cloud guys is obviously coherent, coherent fiber optic connection at 400 gig. And we believe, we are very much in the lead on that area as well. So these are product lives of product cycles we are seeing that are continuing their impetus of double-digit growth in networking. And it extends more than that. In routing, we are going to be launching and ramping our new generation router Jericho 2, probably in Q3 of our fiscal year. And that's going into Edge routing, call routing among the service providers especially the telecom guys. And we're starting to see the preparation in that happening. So yes, we feel very good about networking and the ability to sustain the level of growth we have been seeing.

Thank you, Hock.

Thank you. Our next question comes from Ross Seymore with Deutsche Bank.

Hi guys. Wanted to echo my congratulations. Sticking on the formally called wired category, Hock you mentioned that the -- I think you said the broadband space had stabilized and recovered. Can you talk a little bit about the product cycles that will be driving demand in that segment? And any geographic color, product cycle color would be helpful?

Sure. Sure. Ross. Yes. In broadband happy to say finally, the thing recovered. And a big part of driving the recovery is cable modem video delivery, DOCSIS as they call it 3.1. We've seen implementations across multiple carriers, service providers of DOCSIS 3.1, so that's very good. What we're also seeing of course is in gateway access, which is a big part of broadband. Among many carriers too is the newer generation of DSL, digital subscriber line as they need to expand capacity and throughput and go through -- what they're calling the next-generation G.fast or 35b and we're seeing a lot of that in Europe, some in North American carriers. But what's also equally interesting is as they go to the last mile into households, what we're also seeing is adoption of wireless connectivity or what we all call Wi-Fi. And what we're seeing now is as we see this wired gateways, whether it's cable modem DOCSIS 3.1 or digital subscriber line, we are seeing -- especially in the back half of the year enterprises and more and more service providers, telecoms, start to attach the next-generation Wi-Fi, Wi-Fi 6 on to those gateways. And in Wi-Fi 6 I'm very, very pleased to note that we are very much in the lead in having developed and productized a whole suite of products that perfectly address towards those enterprise and service providers. And that -- but most of that will be only shipping we believe in the second half of the year, but fiscal and both calendar. And we're looking forward to seeing that happen, but it's a very nice product cycle that will basically push the recovery of our broadband business.

Thank you.

Thank you. Our next question comes from Timothy Arcuri with UBS.

Thank you. Hock I'm wondering how you handicap Huawei. And I believe that they're kind of mid-single-digit customer right now. And we're hearing a lot of evidence that they may be double ordering impossible sanctions. So, I'm wondering how you think of that and how you handicap that for the full-year guidance. Thank you.

I probably know as much as you do seriously in terms of what's available -- publicly available and what's -- and the concerns and the issues overhanging broadly Chinese sponsor, China and specific high-tech companies like Huawei from China. They're a good customer and they buy products which obviously helps their products in a competitive in the global export market and I hope they continue to do so. But certainly, the overhand of that is something that we are closely monitoring and are very concerned about. But as far as specific things you're mentioning, I'm not able to basically comment on it simply because I don't know.

Okay Hock. Thanks so much.

Thank you. Our next question comes from Vivek Arya with Bank of America.

Thanks for taking my question. Actually a quick clarification on a question. I believe Hock you mentioned software could sustain throughout the year. That suggests annualized closer to $6 million rather than the $5 million I think you had before. And if that is the case, shouldn't profit margins than what you had? And then the question -- there has been some more consolidation in semis NVIDIA acquiring Mellanox. We're just curious how you think, if at all, there is an impact on Broadcom. And even if there isn't, how you -- just think about the M&A environment in semis? Thank you.

Okay. You got two questions here, very clever. Let me try to answer -- let me start with the second one. It's easier. I mean as I say we have done quite a bit of acquisitions in very strong assets in the semiconductor space. And it's obviously -- it's something we continue to look at because obviously semiconductor is tall area for us. And -- but you also know we're not necessarily limiting ourselves to that. We'll look towards broader area of technology, software, and appliances as Brocade would be considered. And while we continue to be interested in the semiconductor space and that's still targets and we'll be continue to be very thoughtful and timely in terms of the time and in terms of how we approach those acquisitions. And we have observed our behavior over the last several years. We tend to do it in a very -- on a measured pace simply because it's important. In fact it's critical on any acquisition we make that we can integrate it very, very well. And that's what we're doing with CA right now. And we're right in the thick of it as you notice in the numbers we are going through as we drive down to generate the kind of business model we expect to get out of CA. Turning onto the next question you asked which leads to software. Yes, it's turning out to be a very, very nice deal for us. We actually are seeing for our core customers -- and as you recall, we have differentiated customers of CA between very tall large customers who considers both mainframes and enterprise distributed software as opposed to much smaller long tail of non-core customers. And we'll get those core customers, they are focusing on -- after about at least one quarter now today more than one quarter of going through selling, renewals, and adoption of our software. We feel that the business model has been extremely -- our business model has been extremely successful. I mean the growth as we see of dollars that we get through renewals and expansion of footprint in those core customers is pretty -- is surpassing our expectations. It's gone double-digits. But that's only three months. So, we're still early stage and we'll continue to push that. But as we have also made an announcement on at least one or maybe two deals we have done on our new PLA model above mainframe and enterprise-based software. And these have been very well-received in the marketplace by our core customers. And we are hopeful it's something that makes so much sense that we'll expand. We expect to see more and more of these significant transactions occurring as we move forward toward the rest of the year, all right?

Thank you. Our next question comes from John Pitzer with Credit Suisse.

Yeah. Good afternoon, guys. Thanks for letting me ask the question. I'll echo my congratulations on the results. Hock, relative to the full-year guide, it does imply like many of your semi-peers, some pretty meaningfully above seasonal growth half on-half on the semi-solutions business. And I think you did a good job on some of the prior questions specific to data center and broadband access of some of the bottoms-up product cycles that are driving that. I'd be curious or it'd be helpful if I could get your views on wireless and how that progresses throughout the year and how you're thinking or how we should be thinking about your content this year versus dependency on units this year within the wireless.

Somehow I knew this was going to come up somehow someway someplace. I truly know if you did that. Yes, I know. It's actually not that because that product cycle in wireless is -- in all our views this is mine very predictable. And we will see that happen in our Q3 fiscal Q3-Q4 of this fiscal 2019. It will. We're already starting production in our wait of that, which has longer product cycle on FBAR and some of our products. And we will see for one of better one because it's so seasonal, and it's very significant a shop bounce-back, which -- it's to mind our confidence that our full year guidance is something that's going to happen, very simple. And that in the second half we'll see that meaningful -- you correctly pointed out somewhat double-digit growth in the semiconductor segment of our business. As I mentioned in answer to earlier questions, data center especially now networking, we have a whole slew of new product cycles will generate a big part of that double-digit growth. So will in our view wireless. I'd say that's happening fast. In this particular year perhaps the difference between this coming year 2019 versus 2018 is simply to do two things. One, is we're probably going to get better share. I've mentioned that before. And secondly, content increase. It always happens year-after-year as I mention. Example in Wi-Fi, you'll see Wi-Fi 6. Wi-Fi 6 is not just in enterprise and access gateways in service providers. We are seeing Wi-Fi 6, the new generation, 802.11ax in handsets and that drives -- I call it strong content increase as the increase amount of bands in the ad bar that we constantly see as basically wireless continue to proliferate in various areas of the world continues to expand the amount of bands content in this next-generation phone. So all that is going to drive a bounce back with perhaps increased content for our products. As far as volume is concerned, yes like you I will probably be as uncertain as you are, how much the volume would be? But regardless it's -- there's a lot of mitigating factors and the biggest part of it is pure content increase.

That’s helpful. Thanks a lot.

Thank you. Our next question comes from Stacy Rasgon with Bernstein Research.

Hi, guys. Thanks for taking my question. So understanding the confidence on the semi ramp, your guidance also implies the infrastructure software business has to decelerate pretty materially as we go through the year. And I mean, it seems like right now in Q1, the CA business must have already been hitting pretty close to the $3.5 billion annualized run rate that you were talking about that was a few years out. So I guess like what drove the strength of CA in Q1? And why does that business decelerate -- have to decelerate so markedly as we go through the rest of the year in order to fit into the guidance that you've provided?

Stacy, it's Tom. I think one element is we don't want to get into the details between CA and SAN switching, but we're taking a conservative approach. It's just the first quarter out of the gate. We've got three quarters to go. As Hock mentioned we are actually pretty pleasantly surprised with the number of ELA and PLA opportunities that we see in the pipeline. And a lot of our success in terms of growing the dollars of each of these accounts is going to be driven by our ability to convert those into wins. But so far so good. So I think we're going to take this one quarter at a time. But for now given that we're only one quarter into the year, we feel very comfortable reaffirming guidance on the top-line. And, of course, we feel comfortable with the operating profit as well as the cash flow expectations going forward.

But you said CA would sustain through the rest of the year. So does that mean that Brocade has to like come down a lot? Or is it just like overall conservatism that's in the number.

No. Stacy, what we said is that the software, the infrastructure software segment would continue to sustain throughout the year. That's our expectation, but we are taking a conservative approach relative to the overall outlook for the business. Q – Stacy Rasgon: But if it sustains wouldn't you be at 5.6 for the year instead of 5? A – Tom Krause: I'll leave that to you Stacy to figure out. Q – Stacy Rasgon: Okay. Thank you, guys. A – Tom Krause: Thank you.

Thank you. Our next question comes from Toshiya Hari with Goldman Sachs. Q – Toshiya Hari: Thank you for taking the question. Hock, I had a question on 5G as it relates to your wireless business. Based on preliminary discussions with your customers, what sort of content uplift are you expecting in your wireless business as 5G is inserted going forward? And from a timing perspective, do you think -- is it more of a 2020 dynamic when 5G starts to move the needle? Or is it 2020 and beyond? Thank you. A – Hock Tan: It’s a very good interesting question. You're asking areas of very vast uncertainty here. But my sense of it is you start to see a little bit of it in 2020. But it will be only a small part. I think if 5G actually impacts content, in components, in the handsets, high-end smartphones I might add will only really impact in a big way I think beyond 2020. 2020 will see some starts. But the tax rate for want of a better word to use is going to be not that high. But you're right. Beyond 2020 as 5G comes in and you've probably heard and seen that, the amount of content especially for the way it affects us on RS analog FBAR. And here in this case as those FBAR content attaches itself more and more to antenna and various other parts of the phone will be quite significant, but not so in 2020. Q – Toshiya Hari: Thank you.

Thank you. Our next question comes from Craig Hettenbach with Morgan Stanley. Q – Craig Hettenbach: Yes. Thank you. Just a question for Tom. On the back of the strong gross margin upside in the quarter, can you talk about just trends you're seeing in gross margin for the core semiconductor business and then software and just how we think about expectations through the year? A – Tom Krause: Sure Craig. Well you can see that the gross margins are exceptional. They're all over 70% in the quarter. A lot of that is driven by including CA in the business. But you're right. The semiconductor business continues to increase from a gross margin perspective. Mix helps. As wireless comes down, we benefit as I think you know from the rest of the portfolio in semis being at or above the corporate average. But looking out longer-term, we've talked about this a lot. We continue to see the opportunity to improve gross margins and directly translate the course into our operating margins and our free cash flow conversion. So we see that continuing. Q – Craig Hettenbach: Got it. Thanks.

Thank you. Our next question comes from Harsh Kumar with Piper Jaffray. Q – Harsh Kumar: Yeah. Hey guys. First of all congratulations, exceptional execution. I wanted to follow up on the gross margin question. Maybe for Tom. They stepped up quite dramatically. On one of the field trips I think you had mentioned that it really takes an acquisition about a year to hum and really produce results. So question is did you capture the vast majority of CA benefits very quickly in 1Q? Or is the best from CA reserved for the back half and later on? A – Tom Krause: No. I think as you might be able to sort of look through the numbers, we're still not fully optimized around CA. We're only one quarter in. So you've seen some meaningful improvement in profitability for the company that includes CA. But when you look specifically at gross margins, it’s a number of elements within the CA business tie to gross margins primarily services as well as support. So we've taken some actions to improve gross margins and improve the P&L in general. One in particular is we announced a deal with HCL and have outsourced a lot of our service activity to HCL going forward for the CA business. But as we continue to work through our model which is really driving these PLAs as we talked about, we see the opportunity to continue to get better returns on our investment which includes improving our gross margins going forward. So we would expect them to continue to improve not just this year, but really over the long-term. A – Hock Tan: If I could add to that on CA we continue to go through transitions. And you're right. It takes at least a year for us to so-call hum. In the case of software companies, I believe it will take longer because these are contractual commitments probably closer to two years. But it will get there. I think a big part other than fact that we're combining software and hardware now and CA in the software infrastructure, software-sized deal transitioning is improvement. And as Tom said just one quarter -- like to see more reductions. And these are not just cost of goods sold, but down below the line operating expenses as we go through it better. For Q1, it's very critical to is the fact that its product mix. Wireless is down and the other products are humming along, our semiconductor products. And remember year by year nature of a product life cycles in those semiconductor products, we always have an opportunity to expand by delivering more value to our customers, expand our gross margin around 50 to 100 basis points on just its natural cadence. That and mix, I think, is adding a lot of tailwind to our improvement in gross margin.

Thank you. Our next question comes from Edward Snyder with Charter Equity Research.

Thanks a lot. Hock, I'd like to if we could maybe touch back on wireless. This rebound you're going to see in the second half of the year, and I understand you've got a year-over-year issue here, because we were kind of weak last year. But this is flattening out units. This sounds like it's going to be a much stronger rebound than normal just on content alone. Correct me if I'm wrong, but you've got three big areas that you're playing with, just in handsets alone. Of course, your standard ball business which covers I think above 2.4-gig. You're doing more products in the antenna congestion area now, because I know you're doing antenna flexors. And that problem's getting much more acute over the next year, especially as 5G comes on. But the Wi-Fi 802.11ax like you mentioned not only in enterprise, but we're seeing that in handsets and isn't it the cast that you've got a big lead over your closest competitor, maybe Qualcomm here. So, should we expect one, to see a bigger rebound just on content; two, for maybe just to have more legs than we'd otherwise expected beginning next year? I know units are an issue, but given Wi-Fi itself is being deployed this -- and you play stronger to that, it should last longer, shouldn't it?

Ed, we love all your comments, but I want to be played down very straight down the center simply. We'd see a rebound. My view is a normal rebound and it's a normal rebound. And while content increases, it's not really over the top that -- by that much either. But don't forget comparing it against last year, it's relatively an easier compare. So, we do see -- we definitely see a rebound and this will be a good rebound, but it's not -- and it will not be an extraordinary rebound. Just want to emphasize that. Just your normal rebound. It's not hard to compare year-on-year against last year versus second half fiscal 2019. The fact that, that will be a main improvement.

Okay. Thanks.

Thank you. Our next question comes from Aaron Rakers with Wells Fargo.

Yeah. Thanks for taking the question, and also congratulations on the quarter. A lot of questions on wired and wireless has been asked, but I wanted to ask about the storage business. The storage business, I think you mentioned, was up. I don't know if you've framed how much in this quarter. But I'm curious and kind of similar questions as prior, what kind of things are we to be focused on in that piece of the business over the next couple of quarters? And how do you assume that can go through the course of this year? Thank you.

Okay. Well, very good interesting question. In storage, we have a mixed bag here. A bag -- a lot of it not all of it, but a lot of it relates to hard disk drive. And as you know hard disk drive is nothing to yell over these days and we see that no different from the others. Our mitigating factor here is that most of our hard disk drives, in fact all our hard disk drive component sales goes to near-line or basically in data centers. We don't do -- we do relatively less in PC desktops or mobile. So, we do see the impact of it being weak, but not as extreme as obviously the industry is saying. So, that helps mitigate it, but that's not a growth area. Where we see a hopefully embedded new product cycle coming in is the fact that type two storage is -- especially on Flash SSDs is PCI Express. Second half of the year, we see pushing -- a strong push in the marketplace on PCI Express Gen 4. We're in the lead of it and we see a lot of interesting opportunities related to that, be it in storage or even be it in resulting the amounts are in offload computing, from viewpoint of machine learning, GPU-to-GPU connectivity. But it's also related to storage and that push something you said where is Gen 4 is what's quite interesting in storage over the next -- over the next -- well, actually over the rest of this year, especially the second half. All right?

Thank you.

Thank you. Our next question comes from William Stein with SunTrust.

Great. Thanks for taking my question. Hock, if you cut through the end markets and look instead at the business on a geographic basis, I'm well aware that when you shift to one region, there may not be consumption in that region that China's a big export in economy certainly. But can you talk to the pace of demand that you're seeing in China as best you can tell it, in particular relative to inventories there? Thank you.

Good question. No surprise. Across the regions, as far as I can sense, China is the weakest. We all see that. We all know that. And I'm talking domestic demand products and view our product shipped to the -- ship to those regions used in that region indigenously. And it's the weakest region. It also had collateral impact we see to some extent on certain sectors in Japan and certain sectors in Europe, less so in the U.S. But broadly -- so China has an impact beyond just the region in South China. It also impacts to a couple of other regions. But North America continues to be quite decent and that's what helps us mitigate this overall macroeconomic saturation.

Thank you. Ladies and gentlemen, thank you for participating in today's question-and-answer session, as well as today's call. This does conclude the program. You may all disconnect and have a wonderful day.