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Welcome to Broadcom Inc.'s Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call. At this time, for opening remarks and introductions, I will like to turn the call over to Beatrice Russotto, Director of Investor Relations for Broadcom Inc. Please go ahead, ma'am.
Thank you, Operator, and good afternoon everyone. Joining me on today's call are Hock Tan, President and CEO; as well as the senior leadership team as announced this afternoon, including Tom Krause, President, Infrastructure Software Group; Charlie Kawwas, Chief Operating Officer; and Kirsten Spears, Chief Financial Officer.
Broadcom also distributed a press release and financial tables after the market closed, describing our financial performance for the fourth quarter and fiscal year 2020. If you did not receive a copy, you may obtain the information from the Investors section of Broadcom's Web site at broadcom.com. This conference call is being webcast live, and a recording will be available via telephone playback for one week. It will also be archived in the Investors section of our Web site at broadcom.com.
During the prepared comments, Hock, Kirsten, and Tom will be providing details of our fourth quarter and fiscal year 2020 results, guidance for our first quarter, as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments.
Please refer to our press release today and our 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 tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results.
And with that, I'll now turn the call over to Hock.
Thank you, Bea. Before I discuss our results, I do want to highlight the senior leadership appointments we just made around the same time this afternoon, which is all about ensuring continued growth and success of Broadcom, but first and foremost as you see here, I'm not going anywhere. I'm as committed and engaged as ever, but while you often see me and Tom, behind us we have a very strong bench that has gotten us to where we are today. So today, we are elevating some of this deep bench into critical positions that will strengthen our organization going forward. Tom, Charlie, and Kirsten are among the people who sustained the platform and make the phenomenal numbers I'm about to announce happen.
And to showcase our deep bench of talent at Broadcom starting in fiscal year '21, we plan to organize a series of analyst days on the various businesses where you can hear from our respective general managers about their businesses. And to kick this off, the first will occur this January where Ram Velaga and Alexis Björlin will review our networking franchise. With this, let me now turn to our very strong fourth quarter results.
We capped off fiscal 2020 with record quarterly revenue and profitability despite the ongoing pandemic and macroeconomic uncertainties. We delivered net revenue of $6.5 billion, above the midpoint of our guidance and up 11% sequentially, and up 12% year-on-year. Semiconductor Solutions revenue was $4.8 billion, increasing 6% year-on-year, and most notably representing a return to year-on-year revenue growth. Infrastructure Software revenue was $1.6 billion, up 36% year-on-year, which of course includes the contribution from Symantec. Let me now turn first to semiconductors.
Networking, which represented approximately 35% of our Semiconductor Solution revenue in the quarter was up 17% year-on-year, driven by the continued strength in cloud datacenter spending as well as continued spending by telcos in upgrading Edge and core networks. Moving on to Q1, we expect this trend of double-digit percentage year-on-year revenue growth to continue even as we expect enterprise campus spending to continue to soften.
Turning to broadband, which represented approximately 14% of Semiconductor Solutions in the quarter; that was up 22% year-on-year. Growth was driven by the work-from-home environment and the need among service providers as well as consumers to upgrade broadband connectivity too, as well as within the home. We experienced strong adoption of Wi-Fi 6 in next-generation access gateways in telcos and consumers. In fact, in this environment Wi-Fi, where we are very well positioned as a leader, has turned into a substantial and growing business for the company.
Beyond Wi-Fi, we also experienced strong investment by service providers in GPON, that's fiber-to-the-home, and digital subscriber line copper, as well as cable modems among the cable operators. All these more than offset a decline in video. We expect low-to-mid teens percentage year-on-year revenue growth in broadband for Q1 as demand continued to remain strong.
Moving on, wireless revenue, which represented approximately 31% of Semiconductor revenue in this quarter, was up 43% sequentially in Q4, with the launch of new generation flagship phone by our large North American OEM customer. Still, this was down 9% year on year given the one quarter delay in the ramp-up production of that program. Accordingly, we expect Q1 fiscal '21 to now be the peak quarter of this seasonal ramp, and revenue will come back extremely favorably with the same quarter a year ago, and we expect that to be up over 50% year-on-year.
Turning to server storage connectivity that represented approximately 14% of Q4 Semiconductor revenue and was down 9% year-on-year, as expected, reflecting softness in enterprise demand. Turning to Q1, we expect revenue to continue to decline, and given a strong Q1 compare in fiscal '20, we expect this to be down double digits, even as much as perhaps 20%.
Last, turning to industrial, which represented approximately 3% of Q4 Semiconductor Solution revenue, we're seeing demand recovery, especially out of China, and consolidated resales, and here we sell through distributors of course, were up 4% year-on-year. And we forecast such resales in Q1 to start to accelerate to mid teens year-on-year growth as the recovery in industrial and auto continues.
So, in summary, our Semiconductor Solutions segment was up 6% year-on-year in Q4, driven primarily by the ramp in wireless as well as continued strength in networking and broadband. Forecasting Q1, we expect this ramp in wireless to peak and broadband and networking demand to remain strong. This will drive revenue in the Semiconductor segment to increase in Q1 by high-teens percentage year-on-year.
Turning to software, let me reiterate our business model here. We focus, as we have said many times, only on the largest enterprise customers and seek to increase their adoption of our software products through a hybrid model, about 90% of which are recurring subscription revenue. We have stepped up investment in R&D, focused on just these core customers, and we are able to do that by spending much less on our go-to-market outside of our large core enterprise customers unlike obviously the other software companies who are chasing every last dollar of revenue, no matter how much it costs. So let me tell you -- with two years of CA under our belt, let me tell you how we have done.
Revenue-wise, after two years integrating CA on to our platform, Q4 '20 revenue was up 5% year-on-year. For Symantec, if you exclude services and hardware, Q4 product revenue of $380 million was up 10% from Q1 fiscal '20, which was obviously our first quarter after the acquisition, but if we just look at revenue from a core account in CA, this was in fact up double digits, closer to 12% year-on-year driven by bookings, which have continued to grow double digits on an annualized basis. This growth in core accounts has obviously more than offset that plain decline in services and attrition of accounts outside our core enterprise customers. That's how we expect to sustain our core software business long-term, albeit at low-to-mid, single-digit percentage revenue growth, but we intend to drive to a financial outcome that is consistent with the Broadcom model. You'll hear more on that from Kirsten when she talks about our financial model.
So, looking ahead to the next quarter on a year-on-year basis, we expect CA and Symantec software revenue to continue to grow in the mid-single digits. However, in Q1, fiscal '21, we expect Brocade to decline high-single digits, consistent with softness in enterprise markets resulting in our infrastructure software segment revenue to be flat to perhaps up low-single digits percentage year-over-year.
In summary, we expand Q1 consolidated net revenue of $6.6 billion, up approximately 13% year-over-year, all derive organically. Today, we are in a unique situation. We started fiscal 2021 we've reacted backlog that has now grown to over $14 billion today. But the timing of this conversion of backlog to revenue won't be driven by a supply chain, which continues to be tight.
Finally, I wanted to take the opportunity here to thank our team for their work in fiscal 2020. This has undoubtedly been a challenging year and through it all, all of our employees have demonstrated unwavering focus and resilience. Because of their hard work, our mission-critical technologies have never been more relevant than they are today.
And with that, let me turn you over to Kirsten.
Thank you, Hock. By way of background, while I've been a part of Broadcom for more than six years, my history and accounting and reporting roles for legacy companies of AVGO and LSI dates back over 20 years, I'm proud of the strong financial organization that Broadcom has built, and I look forward to working together. I know Hock just gave you the details on revenue, which I'll recap before moving down the P&L to discuss our fourth quarter performance, which clearly demonstrates our strong foundations for future growth.
Consolidated net revenue for the fourth quarter was $6.5 billion, a 12% increase from a year ago. Semiconductor solutions revenue was $4.8 billion and represented 75% of our total revenue this quarter. This was up 6% year-on-year. Revenue for the Infrastructure Software segment was $1.6 billion and represented 25% of revenue. This was up 36% year-on-year, given the inclusion of Symantec.
Continuing down the P&L, gross margins were 74% of revenue in the quarter up approximately 370 basis points year-on-year. The expansion and gross margin year-on-year was driven by favorable product mix and semiconductors and a higher percentage of software revenue. Operating expenses were $1.1 billion, up 10% year-on-year due primarily to the addition of Symantec. Operating income from continuing operations was $3.6 billion, and represented, 56% of revenue.
Operating margins were up approximately 400 basis points year-on-year. Adjusted EBITDA was $3.8 billion, and represented 59% of revenue. This figure excludes $139 million of depreciation. Gross margins for our Semiconductor Solutions segment were approximately 68% in Q4 of 320 basis points year-over-year, driven by an approved product mix. This mix included more networking products and less wireless. As you know, wireless carries around 10 points less margin on product profitability than the rest of our semiconductor portfolio.
Operating expenses were $777 million in Q4 or 16% of Semiconductor Solutions revenue, compared to $727 million in the prior-year period as we continue to invest in our business. R&D cost as a percentage of revenue for Q4 was approximately 14% and SG&A as a percentage of revenue was 2%. Operating margins for our Semiconductor Solutions segment was 52% in Q4 up 290 basis points year-on-year, all told in Semiconductor Solutions, revenue was up 6% and operating profit grew 12%.
Gross margins for our Infrastructure Software segment were 90% in Q4 up 130 basis points year-over-year. Cost of revenue primarily includes cost of product support, hosting for our SaaS products, professional services, and hardware. Operating expenses were $338 million in Q4 or 21% of Infrastructure Software revenue, compared to $290 million or 24% of revenue in the prior-year period as we generate scale through the acquisition of Symantec.
R&D cost as a percentage of revenue for Q4 was approximately 12% and SG&A as a percentage of Infrastructure Software revenue was 9%. Operating margin was 69% in Q4 up 480 basis points year-over-year. Our operating margins reflect our model, which is about focusing on the largest enterprise customers and increasing our share of their wallet in terms of our software portfolio. Given this model, we're able to focus our R&D investments on a strategic group of customers, and by doing so reduce costs primarily on go-to-market. This is how we get to operating margins of about 69%, which we believe we can sustain.
Looking at cash flow, we had quarterly free cash flow of $3.2 billion representing 50% of revenue. This is up 36% year-on-year as we managed our working capital more tightly during this pandemic.
Moving on to capital allocation for Q4, we paid our common stockholders $1.3 billion of cash dividends. We also paid $185 million in withholding taxes due on vesting of employee equity, resulting in the elimination of approximately 500,000 AVGO shares. We ended the quarter with 407 million outstanding common shares and 451 million diluted shares. Note that we expect the diluted share count to be 450 million in Q1. On the financing and balance sheet front, we reduced total debt by $3 billion in the quarter.
All told, we ended the quarter with $7.6 billion of cash and currently have $12.6 billion of liquidity including our $5 billion revolver. We ended the quarter with $41.1 billion of total debt of which approximately $800 million is short-term.
I'll now turn the call over to Tom.
Thank you, Kirsten. Let me now recap our financial performance for fiscal year 2020. Our revenue hit a new record of $23.9 billion growing 6% year-on-year. Semiconductor Solutions revenue was $17.3 billion down 1% year-over-year. Infrastructure Software revenue was $6.6 billion which included $1.5 billion from Brocade which was down 17% year-on-year, $3.5 billion from CA which was up 4% year-on-year and addition of Symantec which is $1.6 billion.
Gross margin for the year was a record high of 73.5% up from 71% a year-ago. The addition of Symantec as well as a beneficial mix in semiconductor product sales drove the gross margin expansion. Additionally, operating expenses were $4.6 billion, which included the addition of Symantec. Operating income from continuing operations was $12.9 billion, up 8% year-over-year and represented 54% of net revenue.
Adjusted EBITDA was $13.6 billion up 8% year-over-year and represented 57% of net revenue. This figure excludes $570 million in depreciation. We accrued $644 million of restructuring integration expenses and made $583 million of cash restructuring integration payments in fiscal 2020. We spent $463 million on capital expenditures and free cash flow represented 49% of revenue, or $11.6 billion. Free cash flow grew 25% year-over-year.
Now on the capital allocation; for the year, we returned $6 billion to our common stockholders, consisting of $5.2 billion in the form of cash dividends and $800 million for the elimination of 2.6 million AVGO shares. We also paid $299 million in dividends to our preferred stockholders. I would also note, through the refinancing and liability management activities we've undertaken this year, our weighted average debt maturity is now approximately six years, with a weighted average interest rate of approximately 3.5%.
Looking ahead to fiscal 2021, we remain committed to returning approximately 50% of our prior year normalized free cash flow to stockholders in form of cash dividends. With that, on the dividend, based on approximately $12 billion of free cash flow in fiscal year 2020, we are increasing our target quarterly common stock cash dividend starting this quarter, to $3.60 per share. This constitutes an increase of 11%, and assumes a basic outstanding share count of 413 million shares at the end of fiscal 2021. We plan to maintain this dividend payout throughout this year subject to quarterly Board approval. Consistent with our capital allocation policy we'll reassess the dividend this time next year based on our fiscal '21 free cash flow result.
With that, I'll turn the call back over to Be.
Thank you, Tom. At this time, we'll open the call for questions. We have Hock, Tom, Kirsten, and Charlie available to answer any questions. So, operator, please go ahead and kick us off.
Thank you so much. [Operator Instructions] Our first question will come from Craig Hettenbach with Morgan Stanley. Please go ahead.
Yes, thank you. A question for Hock, I think on the call a year ago, you talked about an increase in R&D investment, and there was areas in cloud, photonics, I think wireless infrastructure. So just wanted to get an update on how that's progressing, and the visibility into revenue from that R&D investment?
Okay. That's a very good question. And the investment, we -- the cadence of the investment we're doing continues in areas that we see as very strategic in various businesses, and you've seen some of that coming out as we continue to do so. For instance, last week, we announced the introduction and ramp -- an introduction and availability of the -- our 800 gig platform for switching, routing, interconnect and the basic size re-timers [ph], and all that that goes hand in hand with it. So, all of our launching 800 gig platform, and that comes in the form of our new product, Tomahawk 4, and it's pretty interesting that we're launching it now because our previous generation, which is at 400 gigs platform, Tomahawk 3, which we introduced over a year ago or close to a year-and-a-half ago, is just starting to ramp into a larger market.
And we are already launching an 800 gig. So the speed -- the regularity and the speed at which we are pushing this product is definitely something we intend to keep where we're coming out with a newer generation that is probably 2x throughput capacity at a regularity of 18 months to two years on a consistent basis, because that's what our hyper cloud customers want. And it makes sense because we need to scale up datacenters as CPUs start to hit the limitation of Moore's law, and that's one example. As part of that, as we indicated a year ago, we’re stepping our investment in areas of silicon photonics, basically to enable interconnects at very high throughput, at very high bandwidth. And that's been going very, very well. It's a multi-year investment, and as we indicated and from the last time we talked about, we are now only on the second year, but we expect to have something that will be out to the marketplace within a generation or two of our platforms in switching and routing, and that's on that aspect of it.
In terms of further investments, we have pushed back our investment, as I indicated in my report, on Wi-Fi, on connectivity of basically 802.11ax now, and we launched that platform two years ago and very successful. And we are already working on another -- we have invested a lot on the next-generation Wi-Fi 7 successor to this Wi-Fi 6. In between, we're putting out six gigahertz Wi-Fi, that's Wi-Fi 6E, which is the spectral bandwidth recently was approved by the FCC not that long ago, and we already have our first product certified by the FCC recently. We are the first out there. So we intend to be in the lead, for instance, in this wireless connectivity, which by the way today, as I indicated, represents a very substantial and growing part of our business. And it is a testimonial -- level of investment and success we have gotten in this area. And so these are some of the things that we have, and most of these investments are multiyear, but you do start to see some of the benefits, some of the products, some of the launches, some of the revenues starting to come in with this level of investments we are making in here.
Thank you. Our next question will come from Vivek Arya with Bank of America Securities. Please go ahead.
Thanks for taking my question and good luck to Tom, and Kirsten, and Charlie in your new roles. Hock, the question is for you on supply constraints, that several of your peers in semiconductors had mentioned whether it's in substrates or wafers or foundry capacity. I'm curious, where does Broadcom stand on this? Is supply a factor in your reported results or your Q1 outlook or something that you think can constrain the growth in fiscal '21? Just what steps are you taking to make sure it doesn't constrain growth, and also, on the other side, make sure customers are not double ordering because of all these supply issues? Thank you.
Well, interesting question. We reported on -- by the way, we reported on the supply constraint at least three months ago when we did our earnings call. In fact, probably even earlier than that, we have said -- probably even two quarters ago, we have seen that supply constraint. And we were one of the first to report on it. And that supply constraint continues from when we first touched on it six months ago, and in some area it just seems to revolve in different specific areas whether we talk about wafers then. Since then people will, as you correctly pointed out, and we hear in the news, substrate is a consideration. And believe me, beyond that wire bonding is even a possible constraint depending on whether, like more and more automotive legacy products come in.
So we operate in an environment, and I mentioned in my remarks, that is fairly unique. Here, we are in the middle of a pandemic, here we are where there are winners and losers even in the product lines, even in the industry we're in, where there are some businesses where demand is just booming, and we touched on that in networking, in broadband, and some areas particularly in enterprise where they're not strong, but what we also see is a capacity from supply chain that is tight, that's what we are doing. And we have seen that for months, and we have taken a lot of actions to address it, and we continue to do that.
We're also one of the largest consumer of those third-party manufacturers in semiconductors out there, be they wafers, be they substrates, be they backend assembly or test capacity, we are all in there and we've been seeing it for six months. So best answer is we're managing that. We have -- having said that, we have the backlog in place, and we have also -- very early on in our fiscal '20 stretch out our supply chain, not only based on what we've seen, but based on what we anticipate happening, and that has also enabled us to be able to in a more orderly manner and what I consider in a more appropriate manner put products in the hands of end users who need it at appropriate times, we've done that very well.
And having said all that, even as we do it our backlog continues to grow. To give you a sense, I mentioned we have over 14 billion of backlog today. When we started the quarter our backlog, and we're shipping in between since then, beginning of the quarter, our backlog was 12. So it's accelerating. But having said that, please don't get carried away in the other aspect. As you know, wireless business that we have is seasonal, so we are seeing obviously our wireless is a significant part of our total backlog, but given the seasonality of it we obviously have seen deceleration in the order -- in the bookings that are coming in from our wireless business.
But we are seeing on the other side acceleration and continued strength in orders coming in from the other parts of our business. Networking has always remained strong; broadband continues to be very strong. And now we start to seeing on the smaller part of our business, industrial coming in very, very strong. So one side is offsetting the other, and we continue to see this strong backlog, which in a way makes our planning in our supply chain easier, but in some ways poses other challenges of making sure we are delivering products to the right consumer, our customers at the right time.
Thank you. Our next question will come from Harlan Sur with J.P. Morgan. Please go ahead.
Good afternoon. Great job on the quarterly execution, and congratulations to all on the executive appointments. Hock, we're still at the very start of the 400 gig networking upgrade cycle with your hyperscale customers. It seems like teloc service providers are also starting to adopt the whitebox switching and routing model, which is good for your Tomahawk and Jericho chipsets, and then you guys are also benefiting from the optical connectivity that goes along with your switching solutions. Beyond this quarter, do you see sustainability of the networking upgrade and spending cycle through next year? And then given the wafer and substrate constraints, are your lead times in networking expanding beyond six months now?
Very good question, Harlan, and thank you for your kind words. To answer the first part, yes, we are -- our new product generation in 400G platform, as I mentioned earlier, is starting to ramp up in a big way this coming -- this fiscal '21. Started in '20 with a couple large hyperscale customers, and it's ramping up with many more fiscal '21, and I'm sure it goes on to '22. And we do not see a slowdown in the demand. And you're correct, service provider and operators are also adopting this merchant silicon in their routing platforms, on their networks, as I mentioned, particularly in call as well as Edge. And we're seeing extreme -- very, very good demand and success, as evidenced by the backlog and orders we're getting from service providers, and not just hyper cloud, particularly service providers on our merchant silicon Jericho family.
So, that's good. And so I see that continuing? Probably, as far as can see, '21, we have -- our lead times go -- is not beyond six months to answer your question. So -- and just to add a further thought, we have a policy in this company that we adhere to very, very strictly further both because of financial and governance, any orders placed on us do not -- we do not allow to be cancelled. All our customers know that, all our partner know that. So we are actually seeing real demand out there at least six months, and that brings us pretty close to that second or that brings us in fact to the second-half of fiscal '21 at that point, and I guess as many of you will know just in time for the beginning of a seasonal rim of the next generation wireless products. So, our '21 visibility appears to be remarkably better than we usually have at this point in the beginning of a fiscal year.
Thank you. Our next question will come from Stacy Rasgon with Bernstein Research. Please go ahead.
Hi guys. Thanks for taking my questions. I had a question on the wireless trajectory. Last quarter, just given the change in seasonality you had given us a little bit of color -- actually on this quarter you said it would probably still grow sequentially. How should we think about the seasonality into -- I guess is it the May quarter off February? Just especially given there seem to have been a push out. It looks like wireless in Q4 was actually came in a little lower than you had expected, and it sounds like some of that's pushing into Q1. So can you, I guess given those dynamics and given that the seasonal peak in Q1, can you give us some idea similar to what you did last quarter on what to expect for the wireless trajectory into fiscal Q2?
Well, that's a tough question, and to begin with, we generally don't talk much about Q2. Though, I did give you guidance on indication based on backlog we sitting today, why it's unlikely to flow, but I mean, it's -- you're right. I mean, we have this $14 billion of backlog, which continues to grow and substantially most of it, a lot of it will be feel good think you want in Q2 to begin with and a bigger picture, but in the way you asked in the respect of wireless, you're correct also in pointing out when we do year-on-year comparisons now, it's interesting because the Q4 fiscal '20, the quarter we just finished and reporting on becomes the first quarterly ramp of our wireless business, and it compares to Q4 fiscal '19, which in typical cycles in the past is sheet the peak quarter of revenue seasonally for a while as business. So you're comparing an initial ramp against a peak quarter, and that's down, as I indicated at 9% year-on-year. The quick ramp now for this current generation of phones in our wireless business will be out Q1 the quarter we're in now. And that compares to the Q1 of fiscal '20 now, which is pulse peak bread of the last generation. And which is why I also indicate that we're likely to see a -- not a fit around the 50% year-on-year, step up in our wireless revenue. Now you go on to Q2 and I think people probably things get back to a more normalcy and that's always expect wireless to demonstrate seasonality as probably the bottom quarter of an annual cycle.
Thank you. Our next question will come from John Pitzer with Credit Suisse. Please go ahead.
Yes, good afternoon, Hock. Glad to see that you're sticking around. I guess I want to ask some of the questions around the management change and specifically Tom's new position. I'm just kind of curious, what that might mean for the software infrastructure business longer term, and whether or not there is any sort of plan to potentially actually spin that business out. And I asked the question because clearly when you look at the core IP you have in your Silicon business around IO around acceleration and how important those IP blocks are, when you look at the sum of the part valuation of overall Broadcom, it just looks dirt cheap. You've doubled the operating margins in the software businesses since you acquired those companies and you've got great franchises in Silicon, and you're trading at a big discount. Is there a belief that perhaps the best way to get value longer term for these businesses might be a spin, and is that part of the rationale behind Tom's new position?
Oh, no, no. I love the thing you speculate so vividly here, but -- no, there is no plan. I think it's just that the software business especially go-to-market is a very interesting play for this company because Broadcom as a whole, and you look at us, we're around $20 billion, $25 billion roughly give or take a few billion in revenues, each one year. We're technology company of various out there technology suppliers, to an ecosystem and by that I mean, an ecosystem that addresses end-users albeit hypercloud, albeit service providers, albeit basic large where we tend to focus large enterprises out there, like the banks, insurance company, travel agency, whatever the end-user, we look at this as our eventual end-use customers, that's our ecosystem and as deepen our ecosystem, we have partners with the OEMs.
Some distributors, but largely our key partners are on the OEM. And these are partners. These are in a way, important partners that we often sell our products with and through we look at it that way. So when you look at it that way, and new software, infrastructure software, it's no different than the silicon solutions, hardware and software tied to it, we sell out there. It's just that we tend to sell silicon software through partners, partners who wrap it in a system and go to end-users versus Infrastructure Software where we tend to go direct, though not all the time. Sometimes we go with MS, GSM service providers, like IBM GTS or VXC that tells the truth, but ultimately both end users who uses our software. And we look at ecosystem that way. It makes total logical sense that we have a unified platform that does everything across. So at the end of the day, we're still fulfilling to the same end-users, whether they're semiconductor hardware solutions with a software developers kit SDK or other operating system or straight infrastructure software, some with appliances so I could add. And so to us, long-term is very logical state to get.
Thank you. Our next question will come from Ross Seymore with Deutsche Bank. Please go ahead.
Hi, thanks for letting me ask the question and congrats to all the senior appointments. I guess this one could be for Hock, Tom or Kirsten, I want to talk about the capital allocation side versus a year-ago, you de-lever the balance sheet, pushed out the maturities locked in some good rates. So that doesn't seem to be an issue there. You're comfortable enough to raise your dividend significantly. So I wanted to hear what your thoughts are especially given the pandemics and what's going on with the backlog being as large as it is, as far as how are you thinking about the other half of your capital, any sort of update given the environment? Or is it as simple as you're just going to focus on either giving it back with shareholder returns via buybacks or do a deal?
Hey Ross, it's Tom, I'll take that one. I think it's very much back to business as usual. I think obviously 2020 we got into crisis mode earlier in the year. I think we focused a lot on pushing out maturities, we padded the balance sheet from a liquidity standpoint, which we continue to do. And, the markets were very favorable. And we'll do all that. I think obviously, business also came back and performed quite well and as Hock has talked about, we've got a decent amount of visibility in the first-half, and we'll see what happens in the second-half. But it seems like this year is set up for a reasonable amount of success. And so I think with that in mind, we're comfortable with our investment grade credit ratings, we have de-levered we paid down $3 billion of debt in Q4. We're upping the dividend, as you mentioned, sticking to the policy of giving back about 50% of free cash flow. So that's going to leave us with some excess cash. And we always look at it as what are the right relative returns, and what's best for shareholders. And that usually means buying back stock or doing M&A. And I think we'll certainly look at doing both. We're biased toward acquisitions historically, I think we'll continue to be so as long as we can find the right targets and generate the right returns consistent with our business model. So I'd really say business is usual.
Thank you. Our next question will come from Timothy Arcuri with UBS. Please go ahead.
Hi, I guess I wanted to follow-on John's question. So, in addition to the Management changes, you're pretty much giving us a full segment P&L, which you've never done before. So I guess the question is why now? Is there some investor feedback on maybe that the segmentation will drive a better multiple? I mean, for sure the stock is very inexpensive, and it seems like some of the parts would be a better way to value it, but is there some feedback that's giving you driving you to sort of break out segment P&L? Thanks.
Tim, you answered your own question perfectly. Yes, we're doing it because we feel that we should give more disclosures, more specifics of our various businesses, as you noticed, in addition to giving full P&L, almost full P&L to the extent there is because there's also some amount of allocation, but we tried to be very representative of our two large -- of our two segments, Semiconductors and Infrastructure Software. You'll notice that within it, especially in Semiconductors, we give you a lot more color and break down on what drives, which are the particular end-market applications in semiconductors, and the behavior and the dynamics in each of those verticals. And something we understand we have been perhaps more lacking in the past which we try to remedy now by giving you guys much more details.
And it's also in this particular environment, it is very, very important, I think we give it because I cannot say that all cylinders are firing like crazy because as you all know, we all know, they're not in this environment we have some cylinder, and as we indicated very loudly, that some areas where it's performing very, very well and is performing very well, very well, I should quickly hasten to add, not because we're super good in it, which we are, but we're also super good in the other areas that are not performing as well also. It's just the economy is the macro economy, the demand and unusual situation we're all in and so we found it is appropriate to give you guys more specifics, what's driving the overall revenue, and what has changed and because as I also indicated in my last earnings call, when we began this year, we had a certain set of expectations, which had dramatically changed now that we finished the year.
I have expected Semiconductors as an industry to recover from downturns of 2019, obviously and that 2020 will be a slow steady recovery, accelerating into the back-end. What we didn't expect is in actual numbers, it did recover. But not everything recovered. And in a sense is a response to the requirement, the situation of a pandemic and work from home environment. And so we see those businesses that are doing it doing superbly. And to really explain it, we felt we had to give you more disclosures and which we are and we start giving this disclosure if you go all the way and show you where even how the segment, the two broad segment P&L look like.
And one of the other things we want to also demonstrate to you guys loud and clear is that we have a business model in mind, investment thesis when we go and buy this specific software companies, some of which may not be in favor when we bought them, but what we're looking at as we looked at Semiconductors is that these are very sustainable franchises, which with the right approach, with the right model and the right focus, which we liked being what we described to you is the approach we're taking that we can make them into real sustainable franchises, and generate the kind of cash and profit returns that we're demonstrating to you today, and that those are sustainable.
Thank you. And our final question today will come from Toshiya Hari with Goldman Sachs. Please go ahead.
Hi guys, thank you so much for squeezing me in. I had a follow-up question for Tom. Now that you'll be leading the software business going forward, where are the one or two top priorities for you in running that business? And a clarification question, I think, Hock, in your prepared remarks you talked about the long-term growth rate in your software business being in the low-to-mid single digits, is that organic number or does that include M&A? And then, on M&A, Tom, if you can speak to the pipeline and software and your thoughts on valuation today, that would be helpful. Thank you so much.
Toshiya, it's so many questions. I can barely remember the first one, but -- look, I'm excited, I think we've got a great team bringing together the go-to-market and the business units under one umbrella, I think will allow us to scale, continue to grow, which we've been doing. We've had some early success, but we've got a lot to learn, and so, I think this position us well, and I'm looking forward to it. Beyond that, we'll take all the other follow-up questions on the callback call, but thanks very much.
Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to Ms. Beatrice Russotto for any closing remarks.
Thank you, Operator. So, in closing, we did want to note that we'll be kicking off the presentations by our general managers at the J.P. Morgan Tech's Forum on Tuesday, January 12. Hock will be joined by Ram Velaga and Alexis Björlin from our Networking Division to present at that event. So, thank you. That will conclude our earnings call today. And Operator, you may end the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.