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Q3 2012 Earnings Call
October 23, 2012 4:45 pm ET
Chris Zegarelli - Director of Investor Relations
Scott A. McGregor - Chief Executive Officer, President and Director
Eric K. Brandt - Chief Financial Officer and Executive Vice President
Romit J. Shah - Nomura Securities Co. Ltd., Research Division
Harlan Sur - JP Morgan Chase & Co, Research Division
Glen Yeung - Citigroup Inc, Research Division
James Schneider - Goldman Sachs Group Inc., Research Division
John W. Pitzer - Crédit Suisse AG, Research Division
Craig A. Ellis - Caris & Company, Inc., Research Division
Christopher J. Muse - Barclays Capital, Research Division
Ross Seymore - Deutsche Bank AG, Research Division
Craig Berger - FBR Capital Markets & Co., Research Division
Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division
Daniel A. Berenbaum - MKM Partners LLC, Research Division
Srini Pajjuri - Credit Agricole Securities (USA) Inc., Research Division
Vivek Arya - BofA Merrill Lynch, Research Division
Anil K. Doradla - William Blair & Company L.L.C., Research Division
Alex Gauna - JMP Securities LLC, Research Division
Doug Freedman - RBC Capital Markets, LLC, Research Division
Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division
Steven Chin - UBS Investment Bank, Research Division
Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division
Shawn R. Webster - Macquarie Research
Ruben Roy - Mizuho Securities USA Inc., Research Division
Previous Statements by BRCM
» Broadcom Management Discusses Q2 2012 Results - Earnings Call Transcript
» Broadcom's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Broadcom's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Scott McGregor, our President and Chief Executive Officer; and Eric Brandt, our Executive Vice President and Chief Financial Officer.
This call will include forward-looking statements that involve risks and uncertainties that could cause Broadcom's results to differ materially from management's current expectations. We encourage you to review the cautionary statements and risk factors contained in the earnings release and our 10-Q, which were furnished and filed, respectively, with the SEC today and are available on our website.
We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances. Additionally, throughout this call, we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present a reconciliation between the 2 for the periods reported in the release.
Please also see the Investors section of our website at www.broadcom.com/investors for a slide deck that includes additional information disclosed in accordance with SEC Regulation G.
Now it is my pleasure to introduce Broadcom's President and Chief Executive Officer, Scott McGregor.
Scott A. McGregor
Good afternoon, and thanks for joining us today. We're pleased to report quarterly revenue -- record revenue, record cash flow from operations and model profitability in the September quarter. Revenue came in at $2.13 billion, which was up 8% sequentially and at the high end of the guided range. Q3 was the first quarter in the company's history exceeding $2 billion. Non-GAAP earnings per share of $0.79 were up 10% over Q2, and cash flow from operations was a record $621 million.
All 3 of our businesses grew in Q3. Mobile and Wireless grew almost 14% sequentially and crossed $1 billion of quarterly revenue for the first time. We continue to see strong demand for connectivity solutions, while our 3G baseband business continues to grow with the ramp of our latest 40-nanometer platform.
Despite a challenging economic environment, we're benefiting from multiple attractive secular themes, including increasing WiFi attach rates, exponential growth in network traffic and strong adoption of high-definition cable and satellite solutions in emerging markets.
This quarter, we introduced the industry's highest density, [indiscernible] Bragg switch and the industry's first 28-nanometer multicore communications processors. Broadcom's technology innovation has created a product portfolio that's stronger than ever and drives growth from new product cycles going forward.
I'll discuss these trends and announcements later in the call. But first, I'd like to turn it over to Eric for details on the third quarter financial results and fourth quarter guidance. Eric?
Eric K. Brandt
Thanks, Scott. As Chris mentioned, please refer to the data breakout in the Investor section of our website for additional financial information that will supplement my financial commentary.
Moving to the financial overview. To summarize for Q3, total record revenue of $2.13 billion, including product revenue of $2.08 billion. Q3 total net revenue was up 8% sequentially and 8.7% year-over-year. Q3 non-GAAP product gross margin was 52.1%. Q3 GAAP product gross margin was 48.8%. Non-GAAP and GAAP R&D plus SG&A expenses were up $28 million and $21 million, respectively, from Q2 levels. Q3 non-GAAP EPS was $0.79 or $0.02 above First Call Consensus of $0.77 per share. Q3 GAAP EPS was $0.38 per share, including $0.21 of acquisition-related and non-recurring adjustments outlined in our earnings release. Cash flow from operations for Q3 was a record $621 million. Our cash and marketable securities balance at the end of the quarter was $3.2 billion.
Moving to revenue and gross margin. In July, we said that we expected Q3 total net revenue to be $2 billion to $2.15 billion. We delivered revenue at the upper end of the range at $2.13 billion. The Broadband Communications segment was up a bit less than expected, increasing 2.6% from Q2 principally driven by growth in sales of set-top box platforms. Revenue from our Infrastructure & Networking segment was a bit stronger than anticipated, increasing 5.2% sequentially, driven principally by stronger-than-expected sales of switching products. Our Mobile and Wireless segment was up 13.7% from Q2 to a record $1.02 billion, which was slightly higher than anticipated driven primarily by strength in wireless connectivity.