10-QPeriod: Q1 FY2020

QUALCOMM INC/DE Quarterly Report for Q1 Ended Dec 29, 2019

Filed February 5, 2020For Securities:QCOM

Summary

QUALCOMM Incorporated's (QCOM) Q1 FY2020 report shows a 5% increase in total revenues to $5.1 billion, primarily driven by a significant 455% surge in licensing revenues (QTL segment) to $1.54 billion. This uplift was largely attributed to the inclusion of royalties from Apple following their settlement. Conversely, equipment and services revenues (QCT segment) saw a 3% decline to $3.53 billion, mainly due to lower chipset shipments. Despite the revenue growth, net income decreased by 13% to $925 million, impacted by a substantial increase in R&D expenses, particularly related to 5G and RFFE technologies. The company continues to face significant legal and regulatory challenges, particularly concerning antitrust investigations in various jurisdictions, which pose a material risk to future operations and profitability. However, the company maintained a strong cash position and continued its capital return program through share repurchases and dividends.

Financial Highlights

46 data points
Beta

Revenue

$5.08B

58.4% Gross Margin

Net Income

$925.00M

18.2% Net Margin

EPS (Diluted)

$0.80

Total Assets

$33.11B

Cash & Equivalents

$11.11B

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$5.08B
Cost of Revenue$2.11B
Gross Profit$2.96B
R&D Expenses$1.41B
SG&A Expenses$528.00M
Operating Expenses$4.05B
Operating Income$1.03B
Interest Expense$148.00M
Net Income$925.00M
EPS (Basic)$0.81
EPS (Diluted)$0.80
Shares Outstanding (Basic)1.14B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Total revenues increased by 5% year-over-year to $5.1 billion, driven by strong performance in the licensing segment.
  • 2Licensing revenues (QTL) surged by 455% to $1.54 billion, primarily due to the inclusion of royalties from Apple.
  • 3Equipment and services revenues (QCT) decreased by 3% to $3.53 billion due to lower chipset unit shipments.
  • 4Net income decreased by 13% year-over-year to $925 million, influenced by increased R&D spending.
  • 5Research and development expenses increased by $137 million, largely due to investments in 5G and RFFE technologies.
  • 6The company continued its capital return program, repurchasing $762 million in stock and paying $710 million in dividends during the quarter.
  • 7Significant ongoing legal and regulatory challenges, particularly antitrust investigations, remain a key risk factor for the company.

Frequently Asked Questions

The primary driver of the revenue increase was a significant surge in licensing revenues (QTL segment), which rose by 455% to $1.54 billion. This was largely due to the inclusion of royalties from Apple following the settlement of their dispute.

Net income decreased by 13% to $925 million primarily due to a substantial increase in research and development expenses, which grew by $137 million. These investments were focused on developing next-generation technologies like 5G and RFFE.

QUALCOMM faces significant risks and uncertainties, including ongoing antitrust investigations and legal proceedings in various jurisdictions (e.g., FTC, European Commission) which could result in material adverse effects on its business, revenues, and cash flows. Other risks include intense competition, dependence on a few large customers and licensees, and the cyclical nature of the semiconductor industry.

QUALCOMM continued its capital return program by repurchasing approximately $762 million of its common stock and paying $710 million in cash dividends during the quarter. The company has $6.3 billion remaining under its authorized stock repurchase program.