BROADCOM INC.

FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED

(IN MILLIONS, EXCEPT DAYS)

 Fiscal Quarter Ended 

 Fiscal Year Ended 

November 4, 

August 5,

October 29,

November 4, 

October 29,

2018

2018

2017

2018

2017

Net revenue on GAAP basis

$              5,444

$              5,063

$              4,844

$           20,848

$           17,636

Acquisition-related purchase accounting revenue adjustment ⁽¹⁾

4

3

4

14

29

Net revenue on non-GAAP basis

$              5,448

$              5,066

$              4,848

$           20,862

$           17,665

Gross margin on GAAP basis

$              2,935

$              2,619

$              2,383

$           10,733

$             8,509

Acquisition-related purchase accounting revenue adjustment ⁽¹⁾

4

3

4

14

29

Purchase accounting effect on inventory

-

-

2

70

4

Amortization of acquisition-related intangible assets

762

762

658

3,004

2,511

Stock-based compensation expense

23

22

17

86

64

Restructuring charges

1

2

3

20

19

Acquisition-related costs

-

2

1

4

1

Gross margin on non-GAAP basis

$              3,725

$              3,410

$              3,068

$           13,931

$           11,137

Research and development on GAAP basis

$                 948

$                 959

$                 828

$             3,768

$             3,292

Stock-based compensation expense

225

222

171

855

636

Acquisition-related costs

1

-

-

4

6

Research and development on non-GAAP basis

$                 722

$                 737

$                 657

$             2,909

$             2,650

Selling, general and administrative expense on GAAP basis

$                 237

$                 234

$                 194

$             1,056

$                787

Stock-based compensation expense

69

71

64

286

220

Acquisition-related costs

27

26

12

172

91

Selling, general and administrative expense on non-GAAP basis

$                 141

$                 137

$                 118

$                598

$                476

Total operating expenses on GAAP basis

$              1,283

$              1,280

$              1,628

$             5,598

$             6,126

Amortization of acquisition-related intangible assets

67

68

441

541

1,764

Stock-based compensation expense

294

293

235

1,141

856

Restructuring, impairment and disposal charges

17

19

55

219

161

Litigation settlements

14

-

110

14

122

Acquisition-related costs

28

26

12

176

97

Total operating expenses on non-GAAP basis

$                 863

$                 874

$                 775

$             3,507

$             3,126

Operating income on GAAP basis

$              1,652

$              1,339

$                 755

$             5,135

$             2,383

Acquisition-related purchase accounting revenue adjustment ⁽¹⁾

4

3

4

14

29

Purchase accounting effect on inventory

-

-

2

70

4

Amortization of acquisition-related intangible assets

829

830

1,099

3,545

4,275

Stock-based compensation expense

317

315

252

1,227

920

Restructuring, impairment and disposal charges

18

21

58

239

180

Litigation settlements

14

-

110

14

122

Acquisition-related costs

28

28

13

180

98

Operating income on non-GAAP basis

$              2,862

$              2,536

$              2,293

$           10,424

$             8,011

Interest expense on GAAP basis

$                (148)

$                (149)

$                (119)

$               (628)

$             (454)

Debt-related costs

-

-

-

32

1

Interest expense on non-GAAP basis

$                (148)

$                (149)

$                (119)

$               (596)

$              (453)

Other income, net on GAAP basis

$                   24

$                   39

$                   16

$                144

$                  62

(Gains) losses on acquisition-related assets

-

1

-

(3)

(23)

Other income, net on non-GAAP basis

$                   24

$                   40

$                   16

$                141

$                  39

Income from continuing operations before income taxes on GAAP basis

$              1,422

$              1,229

$                 645

$             4,545

$             1,825

Acquisition-related purchase accounting revenue adjustment ⁽¹⁾

4

3

4

14

29

Purchase accounting effect on inventory

-

-

2

70

4

Amortization of acquisition-related intangible assets

829

830

1,099

3,545

4,275

Stock-based compensation expense

317

315

252

1,227

920

Restructuring, impairment and disposal charges

18

21

58

239

180

Litigation settlements

14

-

110

14

122

Acquisition-related costs

28

28

13

180

98

Impairment on investment

106

-

-

106

-

Debt-related costs

-

-

-

32

1

Loss on debt extinguishment

-

-

7

-

166

(Gains) losses on acquisition-related assets

-

1

-

(3)

(23)

Income before income taxes on non-GAAP basis

$              2,738

$              2,427

$              2,190

$             9,969

$             7,597

Provision for (benefit from) income taxes on GAAP basis

$                 307

$                   32

$                   89

$            (8,084)

$                  35

Non-GAAP tax reconciling adjustments

(115)

138

10

8,662

307

Provision for income taxes on non-GAAP basis

$                 192

$                 170

$                   99

$                578

$                342

Net income on GAAP basis

$              1,115

$              1,196

$                 561

$           12,610

$             1,784

Acquisition-related purchase accounting revenue adjustment ⁽¹⁾

4

3

4

14

29

Purchase accounting effect on inventory

-

-

2

70

4

Amortization of acquisition-related intangible assets

829

830

1,099

3,545

4,275

Stock-based compensation expense

317

315

252

1,227

920

Restructuring, impairment and disposal charges

18

21

58

239

180

Litigation settlements

14

-

110

14

122

Acquisition-related costs

28

28

13

180

98

Impairment on investment

106

-

-

106

-

Debt-related costs

-

-

-

32

1

Loss on debt extinguishment

-

-

7

-

166

(Gains) losses on acquisition-related assets

-

1

-

(3)

(23)

Non-GAAP tax reconciling adjustments

115

(138)

(10)

(8,662)

(307)

Discontinued operations, net of income taxes

-

1

(5)

19

6

Net income on non-GAAP basis

$              2,546

$              2,257

$              2,091

$             9,391

$             7,255

Shares used in per share calculation - diluted on GAAP basis

423

441

424

431

421

Non-GAAP adjustment ⁽²⁾

12

12

32

20

32

Shares used in per share calculation - diluted on non-GAAP basis

435

453

456

451

453

Inventory days on hand on GAAP basis

59

66

73

Non-GAAP adjustment ⁽³⁾

-

1

1

Inventory days on hand on non-GAAP basis

59

67

74

Net income on non-GAAP basis

$              2,546

$              2,257

$              2,091

Interest expense on non-GAAP basis

148

149

119

Provision for income taxes on non-GAAP basis

192

170

99

Depreciation

132

129

117

Adjusted EBITDA

$              3,018

$              2,705

$              2,426

Net cash provided by operating activities

$              2,635

$              2,247

$              1,959

$             8,880

$             6,551

Purchases of property, plant and equipment

(106)

(120)

(233)

(635)

(1,069)

Free cash flow

$              2,529

$              2,127

$              1,726

$             8,245

$             5,482

(1) Amounts represent licensing revenue not included in GAAP net revenue as a result of the effect of purchase accounting for acquisitions.

(2) Non-GAAP adjustment for number of shares used in the diluted per share calculations excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. Non-GAAP adjustment also includes the impact of LP Units that are anti-dilutive on a GAAP basis for the fiscal year ended November 4, 2018 and for each fiscal year 2017 period presented.  

(3) Non-GAAP adjustment for inventory days on hand represents the impact of purchase accounting on inventory, stock-based compensation expense, and acquisition-related costs.