What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-12-16 compared with 2021-12-17 · 108 added, 214 removed, 253 unchanged (56% of the section changed)

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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” or in other parts of this Annual Report on Form 10-K.

The following section generally discusses our financial condition and results of operations for our fiscal year ended October 31, 2021 (“fiscal year 2021”) compared to our fiscal year ended November 1, 2020 (“fiscal year 2020”).

The following section generally discusses our financial condition and results of operations for our fiscal year ended October 30, 2022 (“fiscal year 2022”) compared to our fiscal year ended October 31, 2021 (“fiscal year 2021”).

A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to our fiscal year ended November 1, 2020 (“fiscal year 2020”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2021, filed with the Securities and Exchange Commission (the “SEC”) on December 17, 2021.

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We have two reportable segments:

semiconductor solutions and infrastructure software, as a result of a change in our organizational structure during fiscal year 2020.

semiconductor solutions and infrastructure software.

Our semiconductor solutions segment includes all of our product lines and intellectual property (“IP”) licensing.

Our infrastructure software segment includes our mainframe, distributed and cyber security solutions, and our FC SAN business.

During fiscal year 2020, we refined our allocation methodology for certain selling, general and administrative expenses to more closely align these costs with the segment benefiting from the shared expenses.

Our strategy is to combine best-of-breed technology leadership in semiconductor and infrastructure software solutions, with unmatched scale, on a common sales and administrative platform to deliver a comprehensive suite of infrastructure technology products to the world’s leading business and government customers.

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COVID-19 Update

In response to the ongoing COVID-19 pandemic and the various resulting government directives, we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities.

We modified our workplace practices globally, which resulted in some of our employees working remotely for an extended period of time and some of whom are still working remotely.

While we have implemented personal safety measures at all of our facilities where

our employees are working on site, we may need to modify our business practices and policies.

We continue to monitor the implications of the COVID-19 pandemic on our business, as well as our customers’ and suppliers’ businesses.

The demand environment for our semiconductor products was consistent with our expectations for the fourth quarter of fiscal year 2021, with continued demand for products and infrastructure as customers invest in technologies to support remote or hybrid tele-work and learning arising from COVID-19, as well as the transition to office re-openings.

While we continue to see robust demand in this area and record profitability driven by the supply imbalance, the macroeconomic environment remains uncertain and it may not be sustainable over the longer term.

We continue to experience various constraints in our supply chain due to the pandemic, including with respect to wafers and substrates.

While supply lead times have stabilized, we continue to have difficulties in obtaining some necessary components and inputs in a timely manner to meet increased demand.

To date, the impact of COVID-19 on the demand environment for our software products has been limited.

We have also taken various actions to de-risk our business in light of the ongoing uncertainty and strengthen our balance sheet, including closely managing working capital and our debt instruments.

Overall, in light of the changing nature and continuing uncertainty around the COVID-19 pandemic, our ability to predict the impact of COVID-19 on our business in future periods remains limited.

The effects of the pandemic on our business are unlikely to be fully realized, or reflected in our financial results, until future periods.

The COVID-19 pandemic and the efforts to control it disrupted, and reduced the efficiency of, normal business activities in much of the world.

The pandemic resulted in authorities around the world implementing numerous unprecedented measures that created supply chain and market disruption, impacting our workforce and operations, and those of our customers, contract manufacturers, suppliers and logistics providers.

While the demand environment for our semiconductor products was consistent with our expectations for fiscal year 2022, with robust and increased profitability driven by the supply imbalance, the macroeconomic environment remains uncertain and it may not be sustainable over the longer term.

We continue to experience various constraints in our supply chain, including with respect to wafers and substrates.

Although supply lead times have stabilized, we continue to have difficulties in obtaining some necessary components and inputs in a timely manner to meet demand.

In response to the pandemic, we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities.

We continue to monitor the implications of the pandemic on our operations and may modify our business practices and policies from time to time.

Our ability to predict the impact of the pandemic on our business remains limited and its effects on our business are unlikely to be fully realized, or reflected in our financial results, until future periods.

Fiscal Year Highlights

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• We paid $7,032 million in cash dividends.

Acquisitions and Divestitures

The discussion and analysis in this section and the accompanying consolidated financial statements include the results of operations of acquired companies commencing on their respective acquisition dates.

Acquisition of Symantec Corporation Enterprise Security Business

On November 4, 2019, we purchased and assumed certain assets and certain liabilities, respectively, of the Symantec Corporation Enterprise Security business (the “Symantec Business”) for $10.7 billion in cash.

We financed this acquisition with the net proceeds from the borrowings under the November 2019 Term Loans, as defined in Note 10.

“Borrowings” included in Part II, Item 8 of this Annual Report on Form 10-K.

Acquisition of CA, Inc.

On November 5, 2018, we acquired CA, Inc.

(“CA”) for $18.8 billion in aggregate cash purchase consideration and assumed $2.25 billion of outstanding unsecured bonds.

We financed the acquisition of CA with $18 billion of term loans, as well as cash on hand of the combined companies.

We also assumed all eligible unvested CA equity awards in the transaction.

On December 31, 2018, we sold Veracode, Inc., a subsidiary of CA and provider of application security testing solutions, to Thoma Bravo, LLC for cash consideration of $950 million, before working capital adjustments.

• We repurchased $7,000 million of common stock.

Pending Acquisition of VMware, Inc.

On May 26, 2022, we entered into an Agreement and Plan of Merger (the “VMware Merger Agreement”) to acquire all of the outstanding shares of VMware, Inc.

(“VMware”) in a cash-and-stock transaction (the “VMware Merger”) that values VMware at approximately $61 billion, based on the closing price of Broadcom common stock on May 25, 2022.

We will also assume VMware’s closing date outstanding debt, net of expected cash.

Under the terms of the VMware Merger Agreement, each share of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger will be indirectly converted into the right to receive, at the election of the holder of such share of VMware common stock, either $142.50 in cash, without interest, or 0.2520 shares of Broadcom common stock.

The stockholder election will be subject to proration, such that the total number of shares of VMware common stock entitled to receive cash and the total number of shares of VMware common stock entitled to receive Broadcom common stock, will, in each case, be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger.

We will assume all outstanding VMware restricted stock unit (“RSU”) awards and performance stock unit awards held by continuing employees.

The assumed awards will be converted into RSU awards for shares of Broadcom common stock.

All outstanding in-the-money VMware stock options and RSU awards held by non-employee directors will be accelerated and converted into the right to receive cash and shares of Broadcom common stock, in equal parts.

Effective upon the effective time of the VMware Merger, one member of the VMware Board of Directors, to be mutually agreed by us and VMware, will be added to our Board of Directors.

In connection with the execution of the VMware Merger Agreement, we entered into a commitment letter on May 26, 2022, with certain financial institutions that committed to provide, subject to the terms and conditions of the commitment letter, a senior unsecured bridge facility in an aggregate principal amount of $32 billion.

The VMware Merger, which is expected to be completed in our fiscal year ending October 29, 2023 (“fiscal year 2023”), is subject to satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and clearance under the antitrust laws of the European Union and certain other jurisdictions.

On October 3, 2022, we registered approximately 59 million shares of our common stock.

On November 4, 2022, VMware stockholders adopted the VMware Merger Agreement.

We and VMware each have termination rights under the VMware Merger Agreement and, under specified circumstances, upon termination of the agreement, we and VMware would be required to pay the other a termination fee of $1.5 billion.

A majority of our net revenue is derived from sales of a broad range of semiconductor devices that are incorporated into electronic products, as well as from modules, switches and subsystems.

Net revenue is also generated from the sale of software solutions that enable our customers to plan, develop, automate, manage, and secure applications across mainframe, distributed, mobile, and cloud platforms.

Our overall net revenue, as well as the percentage of total net revenue generated by sales in our semiconductor solutions and infrastructure software segments, have varied from quarter to quarter, due largely to fluctuations in end-market demand, including the effects of seasonality, which are discussed in detail in Part I, Item 1.

market demand, including the effects of seasonality, which are discussed in detail in Part I, Item 1.

Business under “Seasonality” of this Annual Report on Form 10-K.

Original equipment manufacturers (“OEMs”), or their contract manufacturers, and distributors, typically account for the substantial majority of our semiconductor sales.

Distributors and original equipment manufacturers (“OEMs”), or their contract manufacturers, typically account for the substantial majority of our semiconductor sales.

To serve customers around the world, we have strategically developed relationships with large global electronic component distributors, complemented by a number of regional distributors with customer relationships based on their respective product ranges.

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Our direct sales force focuses on supporting our large OEM customers and has specialized product and service knowledge that enables us to sell specific offerings at key levels throughout a customer’s organization.

Certain customers require us to contract with them directly and with specified intermediaries, such as contract

manufacturers.

Certain customers require us to contract with them directly and with specified intermediaries, such as contract manufacturers.

Many of our major customer relationships have been in place for many years and are often the result of years of collaborative product development.

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Cost of products sold consists primarily of the costs for semiconductor wafers and other materials, as well as the costs of assembling and testing those products and materials.

Such costs include personnel and overhead related to our manufacturing operations, which include stock-based compensation expense;

related occupancy;

computer services;

equipment costs;

manufacturing quality;

order fulfillment;

warranty adjustments;

inventory adjustments, including write-downs for inventory obsolescence;

and acquisition costs, which include direct transaction costs and acquisition-related costs.

Such costs include personnel and overhead related to our manufacturing operations, which include stock-based compensation expense, related occupancy, computer services, equipment costs, manufacturing quality, order fulfillment, warranty adjustments, inventory adjustments including write-downs for inventory obsolescence, and acquisition costs, which include direct transaction costs and acquisition-related costs.

Although we outsource a significant portion of our manufacturing activities, we do have some proprietary semiconductor fabrication facilities.

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Interest expense includes coupon interest, commitment fees, accretion of original issue discount, amortization of debt premiums and debt issuance costs, and expenses related to debt modifications or extinguishments.

Other income, net.

Other income, net includes interest income, gains or losses on investments, foreign currency remeasurement, and other miscellaneous items.

Provision for (benefit from) income taxes.

Other income (expense), net.

Other income (expense), net includes interest income, gains or losses on investments, foreign currency remeasurement, and other miscellaneous items.

Provision for income taxes.

We have structured our operations to maximize the benefit from tax incentives extended to us in various jurisdictions to encourage investment or employment.

Our tax incentives from the Singapore Economic Development Board provide that any qualifying income earned in Singapore is subject to tax incentives or reduced rates of Singapore income tax.

Subject to our compliance with the conditions specified in these incentives and

legislative developments, these Singapore tax incentives are presently expected to expire in November 2025.

Our tax incentives from the Singapore Economic Development Board provide that any qualifying income earned in Singapore is subject to tax incentives or reduced rates of Singapore income tax, subject to our compliance with the conditions specified in these incentives and legislative developments.

These Singapore tax incentives are presently expected to expire in November 2025.

The corporate income tax rate in Singapore that would otherwise apply to us would be 17%.

We also have a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in fiscal year 2028.

We also have a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in 2028.

Each tax incentive and tax holiday is also subject to our compliance with various operating and other conditions.

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Before taking into consideration the effects of the U.S.

Tax Cuts and Jobs Act and other indirect tax impacts, the effect of these tax incentives and tax holiday was to decrease the provision for income taxes by approximately $1,156 million for fiscal year 2021 and increase the benefit from income taxes by approximately $833 million for fiscal year 2020.

Tax Cuts and Jobs Act and other indirect tax impacts, the effect of these tax incentives and tax holiday was to decrease the provision for income taxes by approximately $1,821 million and $1,156 million for fiscal years 2022 and 2021, respectively.

Our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded, we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and adversely affect our cash flows.

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Our critical accounting policies are those that affect our historical financial statements materially and involve difficult, subjective or complex judgments by management.

Those policies include revenue recognition, business combinations, valuation of goodwill and long-lived assets, inventory valuation, income taxes, retirement and post-retirement benefit plan assumptions, stock-based compensation and employee bonus programs.

Those policies include revenue recognition, valuation of goodwill and long-lived assets, and income taxes.

“Summary of Significant Accounting Policies” included in Part II, Item 8.

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Thus, the reversal of unclaimed rebates may have a positive impact on our net revenue and net income in subsequent periods.

Our contracts may contain more than one of our products and services, each of which is separately accounted for as a distinct performance obligation.

When available, we use directly observable transactions to determine the standalone selling prices for performance obligations.

Our estimates of standalone selling price for each performance obligation require judgment that considers multiple factors, including, but not limited to, historical discounting trends for products and services and pricing practices through different sales channels, gross margin objectives, internal costs, competitor pricing strategies, technology lifecycles and market conditions.

We also estimate the standalone selling price of our material rights.

Our estimate of the value of the customer’s option to purchase or receive additional products or services at a discounted price includes estimating the incremental discount the customer would obtain when exercising the option and the likelihood that the option would be exercised.

Certain contracts contain a right of return that allows the customer to cancel all or a portion of the product or service and receive a credit.

We estimate returns based on historical returns data which is constrained to an amount for which a material revenue reversal is not probable.

We do not recognize revenue for products or services that are expected to be returned.

Business combinations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on histor ical experience and information obtained from management of the acquired companies and are inherently uncertain.

Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash flows from product sales, customer contracts and acquired technologies, revenue growth rate, customer ramp-up period, technology obsolescence rates, expected costs to develop IPR&D into commercially viable products, estimated cash flows from the projects when completed, and discount rates.

The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks.

Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.

Valuation of goodwill and long-lived assets.

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Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk unique to the subject cash flows.

The market approach is based on weighting financial multiples of comparable companies and applies a control premium.

The market approach is based on weighting the financial multiples of comparable companies and applying a control premium.

A reporting unit's carrying value represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash and debt.

We assess the impairment of long-lived assets, including purchased IPR&D, property, plant and equipment, and intangible assets, whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

Factors we consider important which could trigger an impairment review include (i) significant under-performance relative to historical or projected future operating results, (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business, or (iii) significant negative industry or economic trends.

The process of evaluating the potential impairment of long-lived assets under the accounting guidance on property, plant and equipment and other intangible assets is also highly subjective and requires significant judgment.

In order to estimate the fair value of long-lived assets, we typically make various assumptions about the future prospects of our business or the part of our business that the long-lived asset relates to.

Factors we consider important which could trigger an impairment review include:

(i) significant under-performance relative to historical or projected future operating results, (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business, or (iii) significant negative industry or economic trends.

The process of evaluating the potential impairment of long-lived assets under the accounting guidance on property, plant and equipment, and intangible assets is also highly subjective and requires significant judgment.

In order to estimate the fair value of long-lived assets, we typically make various assumptions about the future prospects of our business or the part of our business to which the long-lived assets relate.

We also consider market factors specific to the business and estimate future cash flows to be generated by the business, which requires significant judgment as it is based on assumptions about market demand for our products over a number of future years.

Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the long-lived asset stated on our consolidated balance sheets

to reflect its estimated fair value.

Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the long-lived assets stated on our consolidated balance sheets to reflect their estimated fair value.

Assumptions and estimates about future values and remaining useful lives are complex and often subjective.

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Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, changes in assumptions and estimates could materially impact our reported financial results.

Inventory valuation.

We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our forecast of product demand and production requirements.

Demand for our products can fluctuate significantly from period to period.

A significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand.

In addition, our industry is characterized by rapid technological change, frequent new product development and rapid product obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand.

Additionally, our estimates of future product demand may prove to be inaccurate, which may cause us to understate or overstate both the provision required for excess and obsolete inventory and cost of products sold.

Therefore, although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our results of operations.

Income taxes.

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In evaluating the exposure associated with various tax filing positions, we accrue an income tax liability when such positions do not meet the more-likely-than-not threshold for recognition.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions.

We recognize potential liabilities for anticipated tax audit issues in the U.S.

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If the payment of these amounts ultimately proves to be unnecessary, the reversal of the accrued liabilities would result in tax benefits being recognized in the period when we determine the liabilities no longer exist.

Retirement and post-retirement benefit plan assumptions.

Retirement and post-retirement benefit plan obligations represent liabilities that will ultimately be settled sometime in the future and therefore, are subject to estimation.

Pension accounting is intended to reflect the recognition of future retirement and post-retirement benefit plan costs over the employees' average expected future service to us, based on the terms of the plans and investment and funding decisions.

To estimate the impact of these future payments and our decisions concerning funding of these obligations, we are required to make assumptions using actuarial concepts within the framework of GAAP.

One assumption is the discount rate used to calculate the estimated plan obligations.

Other assumptions include the expected long-term return on plan assets, expected future salary increases, the health care cost trend rate, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates, and portfolio composition.

We evaluate these assumptions at least annually.

plans, we use October 31, the month end closest to our fiscal year end, as the annual discount rate measurement date to determine the present value of future benefit payments .

discount rates are based on the results of matching expected plan benefit payments with cash flows from a hypothetical yield curve constructed with high-quality corporate bond yields.

The discount rate for non-U.S.

plans was based either on published rates for government bonds or use of a hypothetical yield curve constructed with high-quality corporate bond yields, depending on the availability of sufficient quantities of quality corporate bonds.

Lower discount rates increase present values of the pension liabilities and subsequent year pension expense;

higher discount rates decrease present values of the pension liabilities and subsequent year pension expense.

expected rate of return on plan assets is set equal to the discount rate due to the implementation of our fully-matched, liability-driven investment strategy.

Actuarial assumptions are based on our best estimates and judgment.

Material changes may occur in retirement benefit costs in the future if these assumptions differ from actual events or experiences.

We performed a sensitivity analysis on the discount rate, which is the key assumption in calculating the U.S.

pension and post-retirement benefit obligations.

Each change of 25 basis points in the discount rate assumption would have had an estimated $36 million impact on the benefit obligations as of the fiscal year 2021 measurement date.

Each change of 25 basis points in the discount rate assumption or expected rate of return assumption would not have a material impact on annual net retirement benefit costs for the fiscal year ending October 30, 2022 (“fiscal year 2022”).

Stock-based compensation expense.

Stock-based compensation expense consists of expense for restricted stock units (“RSUs”) and stock options granted to employees and non-employees or assumed from acquisitions as well as expense associated with Broadcom employee stock purchase plan (“ESPP”).

We recognize compensation expense for time-based stock options and ESPP rights based on the estimated grant-date fair value method required under the authoritative guidance using the Black-Scholes valuation model.

Certain equity awards include both time-based and market-based conditions and are accounted for as market-based awards.

The fair value of these market-based awards is estimated on the date of grant using a Monte Carlo simulation model.

Employee Bonus Programs.

Our employee bonus programs, which are overseen by our Compensation Committee, or our Board, in the case of our Chief Executive Officer, provide for variable compensation based on the attainment of overall corporate annual targets and functional performance metrics.

At the end of each fiscal quarter, we monitor and accrue for an estimated, variable, proportional compensation expense based on our actual progress toward the achievement of the annual targets and metrics.

The actual achievement of target and metrics at the end of the fiscal year, which is subject to approval by our Compensation Committee, may result in the actual variable compensation amounts being significantly higher or lower than the relevant estimated amounts accrued in earlier quarters, which would result in a corresponding adjustment in the fourth fiscal quarter.

Fiscal Year Presentation

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Fiscal Year Ended

2021 November 1,

2022 October 31,

2021 November 1,

2021 October 30,

2022 October 31,

(In millions) (As a percentage of net revenue)

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Direct sales to WT Microelectronics Co., Ltd., a distributor, accounted for 20% and 18% of our net revenue for fiscal years 2022 and 2021, respectively.

We believe aggregate sales to our top five end customers, through all channels, accounted for more than 35% and 30% of our net revenue for fiscal years 2021 and 2020, respectively.

We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 20% and 15% of our net revenue for fiscal years 2021 and 2020, respectively.

We believe aggregate sales to our top five end customers, through all channels, accounted for approximately 35% of our net revenue for each of fiscal years 2022 and 2021.

We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 20% of our net revenue for each of fiscal years 2022 and 2021.

We expect to continue to experience significant customer concentration in future periods.

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From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly.

This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile handsets.

The ongoing COVID-19 pandemic and related uncertainties and supply imbalance have caused and may continue to cause our net revenue to fluctuate significantly and impact our results of operations, as discussed above.

Additionally, export restrictions on one of our larger customers have had, and may continue to have, an adverse impact on our revenue.

This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile devices.

The COVID-19 pandemic and macroeconomic uncertainties may cause our net revenue to fluctuate significantly and impact our results of operations.

Although we recognize revenue for the majority of our products when title and control transfer in Penang, Malaysia, we disclose net revenue by country based primarily on the geographic shipment or delivery location specified by our distributors, OEMs, contract manufacturers, channel partners, or software customers.

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Net Revenue by Segment October 30,

2021 November 1,

2022 October 31,

2021 $ Change % Change

(In millions, except for percentages)

(In millions, except percentages)

Semiconductor solutions $ 25,818 $ 20,383 $ 5,435 27 %

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Fiscal Year Ended

Net Revenue by Segment October 31, 2021 November 1, 2020

Net Revenue by Segment October 30, 2022 October 31, 2021

(As a percentage of net revenue)

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Total net revenue 100 % 100 %

Net revenue from our semiconductor solutions segment increased primarily due to higher demand for our wireless products, as well as the delayed production ramp of a new mobile handset by a major customer in the prior fiscal year, which resulted in lower shipments in fiscal year 2020.

Net revenue from our semiconductor solutions segment also increased due to higher demand for our networking and wireless connectivity products.

Net revenue from our infrastructure software segment increased primarily due to higher demand for our FC SAN products, mainframe and cyber security solutions.

Net revenue from our semiconductor solutions segment increased due to strong product demand, primarily for networking, server storage and broadband products, as well as higher demand for our wireless content in mobile devices.

Net revenue from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions and FC SAN products.

Gross margin was $22,095 million, or 67% of net revenue, for fiscal year 2022, compared to $16,844 million, or 61% of net revenue, for fiscal year 2021.

The increase was primarily due to lower amortization of acquisition-related intangible assets and favorable margin within our semiconductor solutions segment due to increased demand.

The increase was primarily due to lower amortization of acquisition-related intangible assets, mainly from our 2016 acquisition of Broadcom Corporation and, to a lesser extent, favorable margin within our semiconductor solutions segment.

Research and Development Expense

Research and development expense decreased $114 million, or 2%, in fiscal year 2021, compared to the prior fiscal year.

The decrease was primarily due to lower stock-based compensation expense reflecting the full vesting of certain equity awards and the effects of forfeitures, partially offset by higher variable employee compensation expense.

Research and development expense increased $65 million, or 1%, in fiscal year 2022, compared to the prior fiscal year.

The increase was primarily due to higher variable employee compensation expense and engineering project costs, partially offset by lower stock-based compensation expense reflecting the full vesting of certain equity awards and the effects of forfeitures.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $588 million, or 30%, in fiscal year 2021, compared to the prior fiscal year.

The decrease was primarily due to higher acquisition-related costs incurred in the prior fiscal year as a result of our acquisition of the Symantec Business.

The decrease was also due to lower compensation expense reflecting the full benefit of the completed Symantec Business integration as well as our strategic workforce alignment.

In addition, fiscal year 2020 included non-recurring litigation settlements.

Selling, general and administrative expense increased $35 million, or 3%, in fiscal year 2022, compared to the prior fiscal year.

The increase was primarily due to higher variable employee compensation expense, offset in part by lower stock-based compensation expense.

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets recognized in operating expenses decreased $464 million, or 23%, in fiscal year 2022, compared to the prior fiscal year.

The decrease was primarily due to lower amortization of certain intangible assets from our acquisition of CA.

The decrease was primarily due to lower amortization of certain intangible assets from our acquisition of CA, Inc.

Restructuring, Impairment and Disposal Charges

Restructuring, impairment and disposal charges recognized in operating expenses decreased $91 million, or 61%, in fiscal year 2022, compared to the prior fiscal year .

The decrease was primarily due to higher employee termination costs in the prior fiscal year from cost reduction activities related to our acquisition of the Symantec Business.

The decrease was primarily due to lower employee termination costs following the completion of key restructuring activities from acquisitions.

Stock-Based Compensation Expense

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Total $ 2,704

During the first quarter of fiscal year 2019, our Compensation Committee approved a broad-based program of multi-year equity grants of time- and market-based RSUs (the “Multi-Year Equity Awards”) in lieu of our annual employee equity awards historically granted on March 15 of each year.

During the first quarter of fiscal year ended November 3, 2019 (“fiscal year 2019”), our Compensation Committee approved a broad-based program of multi-year equity grants of time- and market-based RSUs (the “Multi-Year Equity Awards”) in lieu of our annual employee equity awards historically granted on March 15 of each year.

Each Multi-Year Equity Award vests on the same basis as four annual grants made March 15 of each year, beginning in fiscal year 2019, with successive four-year vesting periods.

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Fiscal Year Ended

Operating Income by Segment October 31, 2021 November 1, 2020 $ Change % Change

(In millions, except for percentages)

Operating Income by Segment October 30, 2022 October 31, 2021 $ Change % Change

(In millions, except percentages)

Semiconductor solutions $ 15,075 $ 10,976 $ 4,099 37 %

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Total operating income $ 14,225 $ 8,519 $ 5,706 67 %

Operating income from our semiconductor solutions segment increased primarily due to higher demand for our wireless products, as well as the delayed production ramp of a new mobile handset by a major customer in the prior fiscal year, which resulted in lower shipments in fiscal year 2020.

Operating income from our semiconductor solutions segment also increased due to higher demand for our networking and wireless connectivity products, as well as higher gross margin.

Operating income from our infrastructure software segment increased primarily due to higher demand for our FC SAN products and mainframe solutions.

Operating income from our semiconductor solutions segment increased primarily due to higher net revenue from networking, server storage, broadband, and wireless products, as well as higher gross margin.

Operating income from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions and FC SAN products.

Unallocated expenses include amortization of acquisition-related intangible assets;

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and other costs that are not used in evaluating the results of, or in allocating resources to, our segments.

Unallocated expenses decreased 17% in fiscal year 2021, compared to the prior fiscal year, primarily due to lower amortization of acquisition-related intangible assets, acquisition-related costs and stock-based compensation expense.

Unallocated expenses decreased 18% in fiscal year 2022, compared to the prior fiscal year, primarily due to lower amortization of acquisition-related intangible assets.

Non-Operating Income and Expenses

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Interest expense was $1,737 million and $1,885 million for fiscal years 2022 and 2021, respectively.

The increase was primarily due to higher losses on extinguishment of debt as a result of our fiscal year 2021 debt transactions.

Other income, net.

Other income, net, which includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items, was $131 million and $206 million for fiscal years 2021 and 2020, respectively.

The decrease was primarily due to a $116 million non-recurring gain from the lapse of a tax indemnification arrangement included in the prior fiscal year, offset in part by an increase in gains on investments in fiscal year 2021.

Provision for (benefit from) income taxes.

The provision for income taxes of $29 million in fiscal year 2021 was primarily due to income from continuing operations, offset in part by excess tax benefits from stock-based awards, a benefit from foreign derived intangible income, and the recognition of gross unrecognized tax benefits as a result of lapses of statutes of limitations and audit settlements.

The benefit from income taxes of $518 million in fiscal year 2020 was primarily due to the jurisdictional mix of income and expense, the recognition of gross uncertain tax benefits as a result of lapses of statutes of limitations, the remeasurement of certain foreign deferred tax assets and liabilities, and excess tax benefit from stock-based awards.

The decrease was primarily due to lower losses on extinguishment of debt.

We expect to incur additional interest expense in future periods as a result of indebtedness associated with the pending VMware Merger.

Other income (expense), net.

Other income (expense), net, includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items.

Other expense, net, was $54 million for fiscal year 2022, compared to other income, net, of $131 million for fiscal year 2021.

The change was primarily due to changes in investment gains or losses.

Provision for income taxes.

The provision for income taxes was $939 million and $29 million for fiscal years 2022 and 2021, respectively.

The increase was primarily due to higher income from continuing operations before income taxes.

Liquidity and Capital Resources

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Our primary sources of liquidity as of October 30, 2022 consisted of:

(i) $12,163 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit facility (the “Revolving Facility”).

(i) $12,416 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit

facility (the “Revolving Facility”).

In addition, we may also generate cash from the sale of assets and debt or equity financing from time to time.

Our short-term and long-term liquidity requirements primarily arise from:

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our outstanding indebtedness, (vi) share repurchases, and (vii) payment of income taxes.

(i) business acquisitions and investments we may make from time to time, including the pending VMware Merger, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our $41,218 million of outstanding indebtedness, (vi) share repurchases, and (vii) payment of income taxes.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

We expect a slight increase in capital expenditures in fiscal year 2022 as compared to fiscal year 2021.

We expect capital expenditures to be higher in fiscal year 2023 as compared to fiscal year 2022.

Our debt and liquidity needs will increase as a result of the pending VMware Merger, and we intend to fund the cash portion of the consideration with $32 billion in new, fully committed debt financing.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility, as well as the committed debt funding related to the pending VMware Merger, will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

For additional information regarding our cash requirement from contractual obligations, indebtedness and lease obligations, see Note 14.

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Working Capital

Working capital increased to $10,305 million at October 31, 2021 from $5,524 million at November 1, 2020.

Working capital increased to $11,452 million at October 30, 2022 from $10,305 million at October 31, 2021.

The increase was attributable to the following:

• Cash and cash equivalents increased to $12,163 million at October 31, 2021 from $7,618 million at November 1, 2020, primarily due to $13,764 million in net cash provided by operating activities and $9,904 million in proceeds from long-term borrowings, partially offset by $11,495 million of payments on debt obligations, $6,212 million of dividend payments and $1,299 million in payments of employee withholding taxes related to net share settled equity awards.

See the “Cash Flows” section below for further details.

• Current portion of long-term debt decreased to $290 million at October 31, 2021 from $827 million at November 1, 2020, primarily as a result of our fiscal year 2021 debt transactions.

• Inventory increased to $1,297 million at October 31, 2021 from $1,003 million at November 1, 2020, primarily due to the timing of customer product ramps.

• Accounts receivable increased to $2,958 million at October 30, 2022 from $2,071 million at October 31, 2021, primarily due to revenue linearity and less receivables sold through factoring arrangements.

• Inventory increased to $1,925 million at October 30, 2022 from $1,297 million at October 31, 2021, primarily to support customer demand and due to higher material costs.

• Cash and cash equivalents increased to $12,416 million at October 30, 2022 from $12,163 million at October 31, 2021, primarily due to $16,736 million in net cash provided by operating activities and $1,935 million in proceeds from long-term borrowings, partially offset by $7,032 million of dividend payments, $7,000 million of common stock repurchases, $2,361 million of debt payments, and $1,455 million of employee withholding tax payments related to net settled equity awards.

• Other current assets increased to $1,205 million at October 30, 2022 from $1,055 million at October 31, 2021, primarily due to an increase in prepaid taxes, offset in part by a decrease in short-term investments.

These increases in working capital were offset in part by the following:

• Accounts payable increased to $1,086 million at October 31, 2021 from $836 million at November 1, 2020, primarily due to the timing of vendor payments.

• Accounts receivable decreased to $2,071 million at October 31, 2021 from $2,297 million at November 1, 2020, primarily due to revenue linearity and additional receivables sold through factoring arrangements.

• Employee compensation and benefits increased to $1,066 million at October 31, 2021 from $877 million at November 1, 2020, primarily due to higher variable compensation based on current fiscal year performance.

• Other current liabilities increased to $4,412 million at October 30, 2022 from $3,839 million at October 31, 2021, primarily due to increases in contract liabilities, taxes payable and interest payable.

• Current portion of long-term debt increased to $440 million at October 30, 2022 from $290 million at October 31, 2021, primarily due to certain debt instruments becoming due within the next twelve months, offset in part by repayments.

• Employee compensation and benefits increased to $1,202 million at October 30, 2022 from $1,066 million at October 31, 2021, primarily due to higher variable compensation based on current fiscal year performance.

Capital Returns

Fiscal Year Ended

Cash Dividends Declared and Paid October 31, 2021 November 1, 2020

Cash Dividends Declared and Paid October 30, 2022 October 31, 2021

(In millions, except per share data)

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Dividends to preferred stockholders $ 299 $ 299

During fiscal years 2021 and 2020, we paid approximately $1,299 million and $765 million, respectively, in employee withholding taxes due upon the vesting of net settled equity awards.

We withheld approximately 3 million shares of common stock from employees in connection with such net share settlements during each of fiscal years 2021 and 2020.

In December 2021, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock from time to time on or prior to December 31, 2022.

Repurchases under our stock repurchase program may be effected through a variety of methods, including open market or privately negotiated purchases.

During fiscal year 2022, we repurchased and retired approximately 12 million shares of our common stock for $7 billion under this stock repurchase program.

In May 2022, our Board of Directors authorized another stock repurchase program to repurchase up to an additional $10 billion of our common stock from time to time through December 31, 2023.

Repurchases under our stock repurchase programs may be effected through a variety of methods, including open market or privately negotiated purchases.

The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

We are not obligated to repurchase any specific amount of shares of common stock, and the stock repurchase program may be suspended or terminated at any time.

We are not obligated to repurchase any specific amount of shares of common stock, and the stock repurchase programs may be suspended or terminated at any time.

During fiscal years 2022 and 2021, we paid approximately $1,455 million and $1,299 million, respectively, in employee withholding taxes due upon the vesting of net settled equity awards.

We withheld approximately 3 million shares of common stock from employees in connection with such net share settlements during each of fiscal years 2022 and 2021.

Fiscal Year Ended

October 31, 2021 November 1, 2020

October 30, 2022 October 31, 2021

(In millions)

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Net cash used in investing activities (667) (245)

Net cash provided by (used in) financing activities (8,974) 1,611

Net cash used in financing activities (15,816) (8,974)

Net change in cash and cash equivalents $ 253 $ 4,545

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Cash provided by operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities.

The $1,703 million increase in cash provided by operations during fiscal year 2021 compared to fiscal year 2020 was due to $3,776 million higher net income, offset by a $1,220 million decrease resulting from changes in operating assets and liabilities, as well as a $853 million decrease in amortization of intangible assets, stock-based compensation, and other adjustments.

The $2,972 million increase in cash provided by operations during fiscal year 2022 compared to fiscal year 2021 was due to $4,759 million higher net income and certain non-cash adjustments including deferred taxes and other non-cash taxes, offset by a decrease in amortization of intangible assets and stock-based compensation, as well as a $1,527 million decrease resulting from changes in operating assets and liabilities.

Investing Activities

Cash flows from investing activities primarily consisted of cash used for acquisitions, capital expenditures and investments, and proceeds from sales of businesses and assets.

The $10,864 million decrease in cash used in investing activities for fiscal year 2021 compared to fiscal year 2020 was primarily related to a $10,864 million decrease in cash paid for acquisitions, partially offset by $173 million less in proceeds received from sales of businesses.

Cash flows from investing activities primarily consisted of cash used for acquisitions, capital expenditures, and sales and purchases of investments.

The $422 million increase in cash used in investing activities for fiscal year 2022 compared to fiscal year 2021 was primarily due to a $238 million increase in cash paid for acquisitions and $169 million lower net proceeds from sales of investments.

Financing Activities

Cash flows from financing activities primarily consisted of net proceeds and payments related to our long-term borrowings, dividend and distribution payments, stock repurchases and the issuances of stock.

The $10,585 million decrease in cash related to financing activities for fiscal year 2021 compared to fiscal year 2020 was primarily due to a $9,294 million decrease in net proceeds from borrowings as a result of debt repayments, and a $678 million increase in dividend payments.

Summarized Obligor Group Financial Information

Pursuant to indentures dated January 19, 2017 and October 17, 2017 (collectively, the “2017 Indentures”), Broadcom Cayman Finance Limited (subsequently merged into Broadcom Technologies Inc.

(“BTI”) during fiscal year 2019 with BTI remaining as the surviving entity) and Broadcom Corporation (“BRCM”) (BRCM and BTI collectively, the “2017 Senior Notes Co-Issuers”) issued $13,550 million and $4,000 million aggregate principal amount of notes, respectively (collectively, the “2017 Senior Notes”).

Substantially all of the 2017 Senior Notes have been registered with the SEC.

We may redeem all or a portion of our 2017 Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the 2017 Indentures.

In the event of a change of control triggering event, holders of our 2017 Senior Notes will have the right to require us to purchase for cash, all or a portion of their 2017 Senior Notes at a redemption price of 101% of the aggregate principal amount plus accrued and unpaid interest.

The 2017 Indentures also contain covenants that restrict, among other things, the ability of Broadcom and its subsidiaries to incur certain secured debt and to consummate certain sale and leaseback transactions and restrict the ability of Broadcom, BRCM and BTI (collectively,

the “Obligor Group”) to merge, consolidate or sell all or substantially all of their assets.

Broadcom and BTI fully and unconditionally guarantee, jointly and severally, on an unsecured, unsubordinated basis, the 2017 Senior Notes.

Because the guarantees are not secured, they are effectively subordinated to any existing and future secured indebtedness of the guarantors to the extent of the value of the collateral securing that indebtedness.

The guarantee by Broadcom and BTI will be automatically and unconditionally released upon the sale, exchange, disposition or other transfer of all or substantially all of the assets of such guarantor if any of these events occurs, subject to the terms of the 2017 Indentures.

The guarantee by Broadcom (1) will also be automatically and unconditionally released at such time as:

(A) the 2017 Senior Notes Co-Issuers, in their sole discretion, determine that such guarantee is no longer required by Rule 3-10(a), as applicable, of Regulation S-X to except the 2017 Senior Notes Co-Issuers’ financial statements from being required to be filed pursuant to Rule 3-10(a) of Regulation S-X or otherwise facilitate a reduction in its financial reporting obligations or (B) either of the 2017 Senior Notes Co-Issuers becomes subject to Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) and (2) may, at the election of the 2017 Senior Notes Co-Issuers, be unconditionally released at such time as Broadcom is eligible to suspend its reporting obligation under the Exchange Act.

In March 2021, we completed the settlement of our private offers to exchange $5.5 billion of certain of our outstanding notes maturing between 2024 and 2027 (the “Exchange Offer”) for $2,250 million of 3.419% new senior unsecured notes due April 2033 and $3,250 million of 3.469% new senior unsecured notes due April 2034.

In connection with the Exchange Offer, BRCM and BTI were automatically and unconditionally released from their guarantees in accordance with the respective indentures governing the January 2021 Senior Notes, the June 2020 Senior Notes, the May 2020 Senior Notes, the April 2020 Senior Notes, and the April 2019 Senior Notes, as defined in Note 10.

“Borrowings” included in Part II, Item 8 of this Annual Report on Form 10-K.

The following tables set forth the summarized financial information of the Obligor Group on a combined basis.

This summarized financial information excludes any subsidiaries that are not issuers or guarantors (the “Non-Obligor Group”).

Intercompany balances and transactions between members of the Obligor Group have been eliminated.

Summarized Balance Sheet Information October 31,

(In millions)

Current assets:

Amount due from Non-Obligor Group $ 792

Other current assets 7,418

Total current assets $ 8,210

Long-term assets:

Amount due from Non-Obligor Group, long-term $ 4,620

Goodwill 1,380

Other long-term assets 1,376

Total long-term assets $ 7,376

Current liabilities:

Amount due to Non-Obligor Group $ 7,412

Current portion of long-term debt 264

Other current liabilities 666

Total current liabilities $ 8,342

Long-term liabilities:

Amount due to Non-Obligor Group, long-term $ 7

Long-term debt 38,998

Other long-term liabilities 2,787

Total long-term liabilities $ 41,792

Fiscal Year Ended

Summarized Statement of Operations Information October 31,

(In millions)

Intercompany revenue with Non-Obligor Group $ 1,760

Intercompany gross margin $ 1,596

_________________________________

(a) In addition to intercompany gross margin, there were $962 million of intercompany transactions included in net loss.

Cash flows from financing activities primarily consisted of dividend payments, stock repurchases, proceeds and payments related to our long-term borrowings, and employee withholding tax payments related to net settled equity awards.

The $6,842 million increase in cash used in financing activities for fiscal year 2022 compared to fiscal year 2021 was primarily

due to $7,000 million in common stock repurchases, a $820 million increase in dividend payments, and a $156 million increase in employee withholding tax payments related to net settled equity awards, offset in part by a $1,165 million change in net borrowing activities.

Accounting Changes and Recent Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis