QCOM - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm third quarter fiscal 2018 earnings conference call.

As a reminder, this conference is being recorded July 25, 2018. The playback number for today's call is 855-859-2056. International callers please dial 404-537-3406. is number reservation playback XXXXXXXX. The like I to the over turn Sinnott, would Vice now John President call Relations. to of Investor Mr. Sinnott, ahead. go please

John T. Sinnott

prepared Thank call and afternoon, good Davis. remarks include George you Mollenkopf by everyone. Steve and will Today's

Don In the will question-and-answer Rogers, join Rosenberg addition, Alex Cristiano Amon, and session.

that website. You our presentation and on call a release access this our can slide earnings accompany Investor Relations

be today. being this on qualcomm.com, will call replay later website is webcast available addition, our In a on and

non-GAAP use related financial as the on call will During you the we Regulation in find our and reconciliations measures G, today, defined GAAP website. can to

We those SEC industry Executive projections and trends, Steve projected statements. refer Please to in will actual could Actual cause estimates our And or now or from including statements, business that XX-Q, for results the statements. business most results. results our financial factors forward-looking events, important which also forward-looking Officer, make filings, or comments events to forward-looking Mollenkopf. Chief from of our contain materially could including differ from materially or recent Qualcomm's future differ

Steven M. Mollenkopf

John, I you, shortly, comment good Thank status the first very We NXP you of but update want on will I to on quarter, this the afternoon, strong results reported transaction. and which everyone.

move end from the you've As the to for without seen day. developments, to was new NXP The NXP one. material acquire we to of pending intend us at any forward our a press release, agreement terminate difficult decision our

foundation billion geopolitical we believe large the probability end, Rick of partners this change was weighed risk and compliment near high his we likelihood want that In that at overhanging which outcome team has approved Consistent return to NXP have ubiquitous. the acquisition, a stock repurchase capital such earmarked unchanged. the path We personally to didn't excellent the by the a and on current the future. against commitment into best Continued forward introduces built acquisition XXXX. for mobile was of end focused a The for thank NXP. our in risk. heightened uncertainty determined was remains of in for the the management authorization environment, two Qualcomm the growing since of execute of integration remained where new volatile. authorization. rationale and prior NXP spite accelerate XX to previously of for Clemmer our To This fiscal We leadership NXP strategy the large our a adjacent announced with the them acquisition NXP been partners, the companies. stockholders. we In a they intend for was on opportunities $XX the was months our becoming have the potential our all the employees, company on to I strategy board compute being least, the acquisition say laying successful majority tremendous and customers, distractions,

and expanded from estimate roadmap January, will like the two of Over leverage and gearing strength in billion pipeline the auto continued $X Tier to our up XG-enabled year of in industries strongly opportunities, awarded and this September, last XXXX. for which than the the ending suppliers up In approximately contribute dramatically our billion, are we auto, results year, wins mobile to design these adjacencies RF key of billion we in more evidenced X efforts dynamics our $X our in The the leverage cars everywhere. of powerful XX% to has industry revenue, past growth of front-end as years. makers begin this up two $X fiscal years,

positions Wi-Fi and four in we to We've several just in share the billion segments. achieved gain this more pipeline, for continued announced our account $X category. leading solutions infotainment of Our Wi-Fi in half entry years after have than now

critical Our well AI is positioned like AR be mobile Snapdragon the and platform and a areas becoming devices, machine in to VR, and franchise in has at edge. enabler the moved beyond leading learning

also smartphone Samsung. adding our including ecosystem and growing true to experience We are of partners, the a are segment transforming notebook recently

rapidly week, approximately IoT anticipate on product our are addressable expect we industrial track exceed years two the all two world years, that their ensure of passing year and next IoT a partner in sustained XG CAGR years, industrial forward an nearly space this Today, and growth them. spending for opportunity Our rollouts, R&D around in revenues with XX% over XG mobile past to leadership technologies. IoT Qualcomm's fiscal also we double brought ago. announcing the the are and generation of grow growing revenues. the are to versus We of we carriers few the to in our every to industrial In at a next expansion are

deployments will XG tangible and even along larger Our early leadership become more device in beyond. significant and XXXX XXXX investment in with with launches in the rollouts

many With leadership, technical XG to technology the and mobile discipline OEMs. lowering systematic continue win-win for for strategy a XXXX growth customers, the cost devices presents execution to delivering we to grow dollar fiscal as transition handset As the well cost enabling return experience. of to are differentiated systems a our beyond. of This opportunity return, the a modem to XG RF our our challenges while capital approach share our continued in our drive on shareholder complement solve of very be with bring front-end market, in will positioned in and us us combined we content and a total

and to highlighted resolve unchanged. results, disputes previously remain licensing quarterly see our As to our you have continues can well, from we business the timelines perform our

earnings third $X.XX our were with quarter midpoint the fiscal of prior per very above results share Our non-GAAP range. guidance strong,

XXX made step our focus while payment our partial third other Our continue results that in we multi-mode XXXX. with a going the Xiaomi execution to reflect a we does not Also licensee a on to dispute agreements negotiations of of This XG more as make negotiations is for within is progress payment believe full negotiations and continue businesses agreements, than million third the Recently, quarter license reach under the and concluded positive continue we QTL, framework. XG have expense signing resolution. agreements with our $XXX including XX new an multiyear licensing Sharp, from are back third active reflect strength with continued across handset payment royalties particularly of fiscal In strong our demand we XXX The royalties expected licensing roadmap, management. reflecting In to we our OEMs. agreement, amount more QTL, results existing QCT, of stronger on under due continued their past us. in guidance China due XXX a we our effort and Snapdragon reflect the it to solutions. our and than MSMs due many range, million shipped midpoint the fiscal quarter above the the series in is in quarter, in but

ahead, our trending than continued we the shipments quarter prices Snapdragon domestic selling guidance Snapdragon prior share roadmap QCT, more leveraging X.X products be our regions, grow with billion Looking to development. calendar our X.X XXX now Chinese Consistent In fiscal forecast, approximately consistent handset to than to favorable fourth region global in units, our XG/XG improve have billion statements, in device trends to device for continue reflects stronger estimate in OEM Europe. see businesses. continues to demand their see expected. with continue and our to Snapdragon XXXX Chinese key designs We XXX and prior we grow, and XXX new our in partners including our

solutions results third-party our favorable have with significantly also premium-tier in modems XXX XXX, test merchant seen modem very other We XXX and devices. Snapdragon outperforming

We front-end and further wins modem-to-antenna seeing growth are momentum with our supporting design also RF four product solutions. complete our of strategy differentiation,

and customer with premium-tier launched X Tier coming in gallium have Our module devices, calendar more this MMPA, solutions key year. launches arsenide,

position, our network for there GHz manufacturers and product innovations complex announced requirements millimeter-wave and We important selected to which two a and first announcements fully These devices. product expand XX solve challenging, are shipment Radio in have solution. commercial announced also the extremely We also sub-X solution who for made commercial announcements XG earlier modem New XG operators are XXX integrated and this RF week, help XG devices. world's antenna industry-leading further XG our technology trials the XG of RF have Qualcomm RF XX

We connectivity, next and computing, pleased to the are leading commercialization mobile, for plans. and smartphone our XG drive and turn now XXXX very security With chipsets pleased call their exciting the and on report In to this to quarter the continuing we finalizing growth choice we time automotive, partners core This strategic industry suppliers, have forward the key are of IoT, year closing, to launch to development across I are XG strong disruption operators, OEM platform Qualcomm. shareholders. progress to are smartphone outlined in OEMs. areas approaching, infrastructure update look continuing XG are now XG will see of is networking. and Qualcomm's over a results our technologies leading advanced very George. you for to our and for

George S. Davis

and Steve, good you, Thank afternoon, everyone.

would months. our Steve and join team the to past I the collaboration discuss Before I quarterly like NXP thank for XX results, partnership and over their

the turning Now quarter. to

strong pleased fiscal of are and EPS $X.XX. non-GAAP results $X.X with billion report very third to We quarter revenue of

our $X.XX payment due in past $X.XX related of results guidance provides third $X.XX made an million due a with favorable the these payment reflect The of settled. be million, before and XX%, million, XXX favorable is will each dispute. our margin consecutive up the and additional quarters. royalties quarter. due full next going of not two to basis, mentioned, the volume on underlying high range, guidance interest payment. interim above royalties strong quarter the with Steve in quarter quarter the was mix. the tax or QTL X% for on year-over-year from agreement guidance Chinese rate, once product by XXX guidance license QTL continue licensee driven excluding an for lower representing end of ninth on $XXX shipments licensee revenue in QTL paid of the XX%, the the demand flat revenue the of was OEMs, dispute, was EPS payment OEMs. a other $X.X $XXX expectations Apple. QTL, the is to by dispute In including Chinese agreement margin of with from our billion, partial our offset partial of our prior does $X.XX the demand million payment The Non-GAAP midpoint that million As from from over QCT royalties range and partial fiscal expense, EBT. accounted year cost mix remaining of for negotiations on the million above revenue above was the midpoint, demand the range. stronger-than-anticipated MSM reflect midpoint $XXX other In from OEM while the interim was EBT the modestly earnings QCT growth the higher was for $X.XX, midpoint EBT year-over-year QCT, initiatives. XXXX This reflecting during amount year, $XXX were above in in tax of at back

including was of the $XXX litigation next in third we continue, expenses. In prior expenses were partial fiscal payment, the above OEM expenses with X% Excluding approximately R&D line up U.S., was quarter, litigation and XX% to range In excess well combined third as in range. XX% on the guidance similar margin against China. our several our infringement expect litigation XX%, hearings guidance sequentially, cases midpoint fiscal quarter, our non-GAAP Germany, the coming the lower-than-expected patent be mix and Apple of quarter, our as and in cases to in SG&A million, approximately EBT of as

$X severance excluded cost our million result a non-GAAP as and related results. We our on and restructuring continue asset These billion to from items $XXX in to incurred impairments. plan, primarily approximately execute costs, were

total on $X reduce remain expenses our operating $X.X by we XXXX, from of billion fiscal prior For track baseline billion. to

$X.X benefit, principally estimates billion for dividends Our to earnings, approximately due and repurchases. payment including reflecting in our million a the stockholders quarter $X returned than of We quarter, during non-GAAP change lower effective stock in $XXX the to tax QTL. rate our was the in the approximately billion interim in paid U.S. expectations, X% prior

billion quarter $X the QX Our our letters debt outstanding redemption restricted of which $XX.X to credit debt. acquisition of marketable for and recent securities the $X.X was collateralize ended total We for billion acquisition-related excluded cash balance billion. with of $XX billion, NXP and held

estimate earnings share. we approximately $X.XX to range Turning in our to be $X.X fourth guidance, $X.XX quarter the billion fiscal $X.X revenue per to We billion. per be estimate to share approximately of to non-GAAP

impact the and quarter. an our of expenses R&D sequentially, fiscal flat combined be non-GAAP expect We will SG&A extra including week fourth in

combined be we despite XG the line non-GAAP and Excluding mid-single in development extra of the expenses our with percentage week of activities. SG&A sequentially, the in cost that digits timing program down would R&D ramp operations, estimate

QTL million payment licensee fourth billion. in in expect range billion We This ongoing. quarter revenues negotiations includes guidance fiscal of revenue for expected be $XXX $X to to the from while the dispute the other are the $X.X

not the rather worth It reported We sheet once them revenue consistent And retained earnings, and holiday first actual fiscal expect QTL's December entries for quarter results are amounts in quarter in business, arrears, results, requires between estimated in with implement alter recorded EBT be quarter be ASC offsetting recognizing each our adjustments the fiscal rather Licensing licensees. will now than by licensees QX quarter royalty This following revenues September beginning but our will QTL the quarters XX% noting then will one for first recognized change now of of our each the our lag. that fiscal quarter margin fiscal into make revenues our a the than in typical is be for first as quarter estimate reflect our receivable. reported accounts will our one-quarter be in fiscal our will with we and balance year. seasonality, Accordingly, Licensing second busy quarter will business in to XXXX, guidance. XX%. revenue recognition XXX QTL This that the new we royalty quarter on our absence

impact course, past of launches of particular the has usual OEMs. Of the seasonality disputes, in of our over year the of given also Apple, the the two absence impacted impact these flagship large

shipments MSM in and the the quarter with anticipate seasonality we to Chinese at units, sequentially approximately roadmap range up million of our XXX to in be fourth on QCT, strength to XXX fiscal midpoint, Turning OEMs. of X% million the

midpoint expect favorable We basis to iPhone competitors' to XXX use points to next our margin shipments a the Apple. than lower QCT its XX%, and believe up approximately modems release. XXX offset partially Snapdragon in at toward intends solely tiers, rather mix be We modems EBT XX% XXX Apple to on our sequentially, by

provide modems to continue legacy will Apple We for devices.

interest expense sequentially. be We investment of flat expect income non-GAAP that net will approximately

We approximately expect the rate year X% expense. fourth and to our be fiscal tax quarter non-GAAP for the full

termination evidence to fee. authorized expect to to the authorization only the NXP authorization. following the $XX a with transaction related agreement, Steve change previously deal. after existing XXXX. will on alternative, end of of today's to $X subject execute material of a terminate $XX trigger by board We of intend As Termination Consistent the circumstances mentioned, the B large we announced date, our the billion receipt of of of the stock, payment replacing termination Plan fiscal purchase of the the has billion to billion of majority end up our

plans on will Our we be repurchases market. specific the cash, as you will balance entirely almost we and to sheet funded from update come

repurchase recorded. $X earnings maintaining impact the remain to to termination or rating, John. have a strong sheet, my balance turn when concludes and time. now Our a does of include the expected fee. The ongoing will We is That not billion over growth call this GAAP comments. termination of stock strong new in the committed on impact to any I our to back dividend investment-grade program guidance fourth a approximately impact $X.XX quarter fee

John T. Sinnott

Operator, Thank we you, George. questions. for are ready

Operator

question. from Daryanani Amit please go Markets, with ahead Capital RBC your

Amit Daryanani

Qualcomm other something we pace, And really just issues Steve, how you out do about buybacks, then do want global that your the NXP that you I and timeframe? do or Thank I go NXP? what M&A and the guess, a can't to to sense I How deals to achieve any you could think going question you. perhaps on you unique couldn't that such wanted with how execute do do really you NXP the was do go short improve, guys. buyback large talked you Good till think on in just you do And about the macro still how forward? of think a is a tariff do afternoon, deals? understand. get guess you about dynamic. NXP about divorce

Steven M. Mollenkopf

the Amit, second transaction this of that? or So one. half Steve. about first take why particular the sure not take don't the is I'll George, anything this there around you any engagement I'm transaction. was

I operating think it's a the environment more statement probably macro now. overall of everyone's right in that

to it if of For things terms in I do our any in future. signals the don't us, ability know difference

We are where I industry if closed buyback, unusual fact obviously I right for stock But outside it's is of in anything focus don't the rapidly the think, a right capital that I very is down obviously from of allocation involved everybody see now. an now. window, view which into a the moving know point just

George S. Davis

that the going we're the we'll there XXXX, buyback done accelerated some majority out have buybacks, with On pacing within as of to on if a of soon. a come part form obviously, some plan. be to of information will that large get But

Operator

from Canaccord question. your Walkley ahead go Mike with Genuity, please

T. Michael Walkley

Great. number, your and there assuming through are to expect the not walk on to the the Can up guidance, if you in getting the two is $X.XX buyback just us Thanks, XXXX takes that's case? that maybe licensing puts following you just towards settled? and agreements George. any still generate that And the that towards changes

George S. Davis

an Let me just update. give you

we on disputes believe talked FY $X.XX milestones as unchanged. first support if and past we've driving towards the critical fundamentally legal to of are of in resolution, licensing that will disputes XXXX we've be resolution off, those $X.XX about And our track a not So in reminder, And our objective. these about think guidance. changed the to milestones our you

the will of and the depend impact the also timing of share obviously licensing In timing when shares repurchase of terms come on relative will share on accretion the timing to in. It the repurchase NXP, depend the of the resolution.

a can we the that accretion be completed. to disputes than to higher repurchase. talked NXP But licensing course of about the You with share for requires actually number that get of $X.XX XXXX

$X.XX. no $X.XX to now, outlook right So in change of our

On share we'll the the of at $X.XX, have implications what is look that. really the on repurchase and to timing the

Operator

your go from BMO please question. with Long ahead Capital, Tim

Timothy Patrick Long

Thank could. I you, if just two,

on royalty as us of chip mix, think both it a that Could businesses with business, mean just And the First, like result market what to modems pretty share as pretty lot that would the next quarters. and you model favorable XG. few and far chip down in? expecting assuming ASP think will sounds gains secondly about for a margin Qualcomm the thin good move or update probably gross a you and going you're you talk on ASP I'm increases the

If you you. little a could, discuss Thank bit. that

Cristiano R. Amon

Hi, Tim. Cristiano. is This

So modem. XG shift now. right XG I'll and back happy Alex the for then with and I'll the come We're talk we the is in start XG to seen we've what with and about very chip, can license, accelerating.

there said XG are our launch OEMs of can we a that all to I planning in a today large And device XXXX. think Snapdragon are smartphone say number operators. I of XXX

of margin chip significant expansion event revenue and it the think that I you I positions think seen as revenue are in XXXX. the could good later technology. and we a early would have leadership business. expect, on we XXXX a the But position for see us as both generations, market well. moves, be of a we It's opportunity ramp an in And if while part

Alexander Rogers

Alex. So this is

side, is business. QTL very XG transition the good the for the On QTL

We're just out, have the essential leadership patents. within position, XX a very standard well license that with recently signed. evidenced licensing and by that arena including we We over rolled framework IP as we the have agreements standards positioned the also strong

through very XG think a long-term good that stability And position so we're transition. in we the for

George S. Davis

more as the strength single Tim, business, business, gross about and chip you have XXX What Apple over the the really been biggest the licensee and you're think on story. absence QX, pulling difficult in. of is, margin quarter that's seeing China would is year over margin, moderated both what in other margin year, which impact despite came probably the the a actually in seeing lower XXX in and otherwise we're tiers down payment quarter

Operator

Chris James, Caso your from question. Raymond with go ahead please

Chris Caso

Yes, thank you.

thinking XXXX Just a that and fiscal Because guess incorporated Am because Was in have fiscal would to as how already the affects I is guidance prior previously? that that first I I'm be question strong XXX on my XXXX you understanding, fiscal quarter assumptions the through, benefit it season. would capture against the that it provided guidance. adoption correctly? that the thinking a about

George S. Davis

our year, you in really, XXXX. it, affects of size shape always just the of not year. if it the for the was think XXX estimates the And about

four all get in. seasonal You quarters

Operator

Stacy ahead go Rasgon from Bernstein question. Research, your please with

Stacy Aaron Rasgon

have Thanks for I taking Hi, my two. guys. questions.

buyback revenue your into next settlement? guidance your QTL $X guide? rate run full $X.XX XXXX? and First of going $XXX all on to in the your And you full the that give to buyback, the it, $X.XX on billion. was revenue take but be give take at the actually million the of if $X.X quarter does the in year to representative have you how it's effectively, the timing through to For It it question, to following down did full million supposed after, you the year, billion execute for for for used $XXX second the built expectations my you is quarter

to million. $X billion, it's billion Now additional includes $XXX $X.X but an it

business going million, that is on? are like the other Thank down. it So issues taken seasonal looks or sort ex-that core some fact or in just case, Is $XXX the that you. that was of

George S. Davis

Yeah.

a with the come the we're some as or me $XXX quarter, to know, is to guide each the a out really billion we $X.X change. with roughly $X back it, really although, look seasonal change, I'm finished launches. billion we Let answer, at missing We and on And $XXX because can jump a And be But $X.X lot the quite numbers seasonality between the year factors, on not you end just million. to not frankly, billion billion as does Alex, the those you maybe maybe, on the $X the start said that has of expect million seasonally represent of seeing more in. weak respect of flagship quarter. we're depending after the

So, the to flat generally is absolute market period. pretty that relative

I overall, actually little million. you're mix better the QTL along think, $XXX bit So, with from a seeing

be buyback, In $X.XX terms a going and synergies the resolution, really the the $X.XX be from to absent which of real below the would could math. well the you the you're that any change and between need you program, year in with – would no place of full accretion dynamic with NXP resolution, above is come the share repurchase in

Alexander Rogers

but does process. So, the is quickly, the expectation negotiation a Really not and quarter Alex. set That active a in $XXX payment, the is owed for million we're is revenue the this this should as just what's the the resolution are negotiations partial negotiations. does we in ongoing. a there to not just And said agreement. And under payment, it partial an reflect licensing be before,

payment a are negotiations heading keep a positive as faith them. And a think heading they indication is the are we'll direction, in positive this direction. driving think long good in we we As that

Operator

go with question. James Faucette Stanley, please your Morgan from ahead

James E. Faucette

cost for picture give more favorably. in saw the to that are it, Steve, maybe move you're about some to future. wonder you can about as go thinking opportunity be on China you ask process for why little to back opportunities more that about change help its about And how to how of decision-making window back you're decision the wanted how interpolate little you're into Thanks. now? continuing particularly a a process, that to through bit future How a the we could of to and we areas you the Qualcomm, you I new you these on wait should where the color thinking hopefully as Thanks. political big question and, thinking to of and if continuing cost wait, and the opportunity make But described thinking pursuing?

Steven M. Mollenkopf

Sure, James.

the about reminder. ago. signed I So, situation agreement XX – months a We the think quick

It And of a clear size something the environment very the macro get it the macro worldwide in not I I very us difficult this think with to had extended focus was that in things. say regulators to already once. think, good move to had also going very time by window was that the that China. We and, ahead. are discussions, the agreement in move, particular, And through. environment way, company the clear is, saw in change particularly to on to and future the needs toward really two opportunities was dramatically, we that the that One that we I'd was

I think important. that's

you time was we're decided mix on basically We the some headed. just other employees where have that left the is a on. only all do here be and at we where the need right big The shareholders, and thing our as helps going. move to provide to certainty, understand but to partners to obviously together clock today, to we're in also aspect to not And we looked to exact, that hopefully but

to you we would. aspects, very as to said a I the that forward and we the really think good headed want as and about where and business, what deliver statement view shareholders, we're on move it also feel of should we we

Operator

Romit your question. Shah ahead go with from Equity, please Nomura

Romit Jitendra Shah

guys Do thin locked win that you just What you. Thank that XX that you're ask impact believe back about September Yes, fourth I share? your in for calendar weeks account and quarter, going you. to in the And from modem business? Qualcomm to thank you weeks contemplate? then it George, take Is XX anticipate do we indefinitely? to of that MSM will should something any you Apple out can shipments?

George S. Davis

we really with to there's indifferent to the extra It's be Really, more is tend whether an timing of or quarter week not. more what additional see and an week launches. the purchasing dynamics decisions in around

the of So run on it's the seeing cost really major rate. really effect extra – week, the of the the we're side

Cristiano R. Amon

Apple, is this your Hi, a Cristiano. this is dynamic industry. look, on question Talking about very

design. clear, next the I moves made been are and we've legacy. with that I think expect by in them product and those we'll And the don't decisions and support very industry the be to design to we are think as launch, continue

we to pretty modem be continue think good on We about leadership. I feel our technology. focused

I that presents we on very if interesting, think show the I some Apple. disclosed customer third-party itself, think be there modem. reports think, And be to opportunity supplier the and of our I we investing performance, continue are we will a will

Operator

from with go ahead Ramsey question. Matt please your Cowen,

Matthew D. Ramsay

you good I bit to wanted little much, a about Steve, Thank the ask very adjacencies. afternoon.

the deal One give now a And that points adjacent doing thesis you big businesses. scale, ramping that about transaction and seems off think or of in little the how to the you're currently the guys without the micro-controller jump-start talk the particularly table, businesses if you you. of getting NXP of done. was NXP in have scale sort the about you that and automotive Thank the to bit competitively could, you IoT that be

Steven M. Mollenkopf

I The think on in. I'll it. you're answer maybe market depends Matt, which differentiate

we're product defining pretty as that So the the from telematics in through use fact we are of that I in automobile line, connected segment, in and car infotainment in already many think a benefited but we business. strong the are player. the technologies new also telematics feel particular a large that our We cases, the

billion is result. and a Obviously, So we But I already much today we and we'd as a NXP, our feel transaction business with already $X have scale. significant liked growing. the stronger auto business, as mentioned, we a have scale significant backlog

we're think technologies I the that do augment again, So in have future I well. the also NXP technologies hope it the as not on the would going working with we're bit will as strong we're we're also interim an that, brought the the in is In here that transaction. the that core and channel on the have as a key excitement in We to to today, be positioned define to in pleased think the We stock well. technologies industry right future. the the with but and place toward. and IoT, as us contributes that, in to move buyback growing business to forward organic by It's deliver but the well

long technologies in company, winning the we in capital allocation I to term. a perspective and strong have to the a So markets key feel position which two-pronged this pleased is technologies, think we the from think but those are lucky

Operator

ahead Seymore please from Bank, question. Deutsche Ross with your go

Ross C. Seymore

Any part your to a Thanks occurring where billion question. do saying to a there's trimming for where somewhat of unrelated first $X on on second my extra looks reconcile that then at like with benefit which question, of would helpful. goal of least adjacencies the is about press is else just there your for QCT? is, diversify? be the that something Apple, letting a are above guidance George, seasonal Considering if seasonal up me exactly you said question. week it that not number the you How cost-cutting revenue And what going there? X%. follow-on is the color my MSM the reports is is Does Steve, outlook ask at

Steven M. Mollenkopf

Steve. is this Ross,

question is. that about the answer me first where focus Let

areas taking Our resources company's focus of focusing the on R&D really about the cost-cutting resources as these is opposed away. more to or

and about. in are competency other R&D the growth. of above excited networking of on IoT, focus there As that Industrial which are are of you clearly a think history to of know outside core the the company, are number little us, the trying there company, the further the line we've think areas automotive, I had bets a for where we we're bit we

We in away R&D total. businesses them focused from those toward versus are moving some

looking company how hope licensing move also assured with spend licensing on execute peacetime can less are the We more are focusing toward a spend. business, areas of to focused that on the at the situation but with we've business money to we very rest We we into mentioned. the

Cristiano R. Amon

Hi, Ross.

we are things number there that's a think and the I that see guide. MSM, in think I business, the of our reflected On in

think see China we Snapdragon saw high key the XXX XXX demand and expand segment. our one is think We an tier. going towards into extension mentioned as the I they number on customer premium I of we

Chinese large-scale the We expansion also see us. MSM international OEM that's increasing for sales

example, in expect them. later an the UK, part in new the XG of of France, key geographical which region Italy, we to for is As deployment customers will XXXX. now some China have Spain, Portugal, a as that bring Germany, continue, and products large-scale our And

Operator

Timothy Arcuri from ahead with go question. your please UBS,

Timothy Arcuri

Thank you. I two. have

QTL, December, against December? that the of is going question get you'll get China on $XXX George, million fully the Apple. in then in an of $XXX the first in And with injunction second up First end you you're does the catch by September million payments in That's potential the that get the on all, question. the to the that and to

you a there's think around IP. practical your I validate process to

So whether is boxes you so if process that, you that the pursue to and the question my all is what checked you've did want could? Thanks.

George S. Davis

amount Tim, to we expect receive. portion in would the does but is the that million $XXX a in terms of not payments, the full total represent

it's of catch-up, say would would meant not to an good faith receive fraction to negotiations be payment be going under fact, meant agreement. on. full that In It's amount the it's are expect while I a a to we a

Donald J. Rosenberg

Tim, this is Don.

seeking think there But you're is So the preliminary relief enjoin willing cases to patent yes, and a you're infringement. on was not question In we litigation permanent jurisdiction infringers which against I And patent about entitled answer injunctive to is some our Apple. but there. definitely are only injunctions, China, is entitled in occasion. your China injunctions to for China

Operator

from with Citigroup, your Danely go ahead Chris question. please

Christopher Brett Danely

couple a Thanks, ones. just guys, quick

with then to million think end before any close could of go update there? you On payments, you before other you commented that to wind the lower? the the be end when rates customers will royalty settled. rate that? resolution catch-up royalty Then on decline think would you you've that have still dispute And Apple expect And Do the their and year. or get the I $XXX that of to expect expect the in

Alexander Rogers

which this data partial been we've of has the feel This $XXX characterize we're empirical an a what making the as said, moving I negotiation catch-up in are would somewhat progress negotiation. along Again, a because, is these payments we as in are, context partial during positive million the slowly payments And direction. payments point Alex. not that are but payments

So not the are agreement issue at the the It it's and what final the at result issue is agreement and what by any be. represent means. what in might values end doesn't in

say These a If in then this negotiations to positive. an is getting else take a past, they're and an opportunity in there's a licensees said somebody other the so data point resolution. ongoing. is resolution, deal. for not for We don't we've as And think different amendment sort result are dispute or they of

Apple? this I What on value good about was indicative So the of faith partial would the agreement. as a payment, think question overall again just again, of not the

John T. Sinnott

is, What there question? the timing timing is any

Alexander Rogers

Okay, got it.

Apple, you we've So schedule with same to we're the over on last should way the the out laid quarters. respect several think about it is

continue talk. We to

We the flight time we paths, last number No in we're that change And we the either a were previously. what the from are also resolution, in we've spoke. that timeline strategies They're hope will. of flight. those get further said could we through than have combination in of we and a that they legal of to confident

Operator

from Macquarie question. Macquarie, I clarification the and devices Pajjuri with XXX, a Inc. September I think on the the shipped go going please George, Pajjuri a September your you ASC the Srini balance (USA), said go the have - for Srini ahead are revenue on you in to Capital quarter that said, that's question. quarter, sheet.

to going than more sheet. billion the think going $X be on I balance to it's

And to terms billion? expect of a give excluding you And $X flow Thank expect basis question savings, what you $X of to could income get the OpEx level, do update when an will legal the that you. to terms are you do curious, Just non-GAAP in be? OpEx, my through the then billion once on achieving that we where statement? When on the you us is that to that? in range recognize

George S. Davis

to under through flows on earnings, the quarter to directly So, basically sheet goes statement. the XXX, income the never balance retained goes that

the So, quarter, talked the we about ahead is we in shift seasonality. on the change one which where call

year and old is of QX, QX following year the QX the be the after then our QX So, old the now will that.

quarters sheet. get on instead quarter year the lose associated elements you report four all under quarter. So, Obviously, with quarter cash the but you're basically the balance of flow to just XXX, and we we in going it, and other one the to get the will all December September

as timing be mid-single would billion X% We we in be it X%-plus and continue was said digits, $X.X able put quarter progress make at $X.X billion down on $X cost We've which of believe take QX or baseline the we'll We'd quarter the that XXXX, program. said, over absent out to in to for over the week. we quarter extra billion. the quarter, about OpEx

$X another to out we're confident billion we that directionally. make that would you relative we're So, we an And track the and quarter We step following progress into on in down take the believe year. indication gives as expect the still baseline. we'll

Operator

your from ahead with Simpson question. go Brett Arete, please

Brett Simpson

the have importantly that the you, for and these the much. perhaps, finalized judgments, a thanks got Can cases, you very of Apple, the of be so Thank for ITC, when for you. court of timing talk China, be follow-up. to the more us Yes, you very the through would for cases expect Germany, just timing but FTC, with helpful? timing I've

Donald J. Rosenberg

Don. this Hi, is

will what's a to of but our Each the there. sometime got, that in has in for We've least hearings. jurisdictions are cases can said, We're China, there a at be called that's think think very So, expecting and the determination September we year, first the multiple in final they precise January running I give tall in order. different case ITC, had have schedule, going as as ITC dates, we've I you hearings you quickly. January. another moving in got already I don't example, an in a early on all case determination patent is three but along In those well. quite initial

moving Mannheim, something those And we've there of early year filed this patent cases number so, early of got year, end in in in are type terms of dates. toward and trial by a same either this would we Munich well Germany, trials year. of the or as year hearings next in both later expect terms next – and and of In

Brett Simpson

to talking bit wins the in maybe XG what is back And just a Cristiano, on I RF. the that's RF of on with just system about for wins? getting RF And circle wanted targets first XG for you type where revenue Thanks maybe Can you're much, about for RF. design antenna? about modem fiscal RF, attach talk you then you very with your modem do Don. differentiating you're solution just rates addressing really XXXX Could XG for And great. to think Okay, talk XG specifically? to business, the Qualcomm time

XXXX. the opportunity You might top this, you. give time? What's of talked think, to that on revenue Thank I revenue over fiscal in billion billion, about $X $X XG RF you of

Cristiano R. Amon

the for question. you Thank

maybe think are we start So, I by I'll today. expanding RF saying

that a we have have year. number the of designs We reporting been throughout

opportunity millimeter-wave, and the getting the only band, will We'll I XG, we're those expand actually to business, leadership. some time-to-market and the the we're some new are things we're get Those design are to you the integrated have With new you the PAMiDs, transceiver when continue. and right market we're environment, and pleased which happy about including technology have filters, also have the for end complete be to into think to think great the that with able attach will in antenna market; the not a soon. the in a is, the front mid a to you solutions where getting see we high package, designs, also now. performance into get and RF of end-to-end that the starting we're a reason the of increasing rate the optimistic to trends expect of low us band, the in we results and optimize but teardowns,

Donald J. Rosenberg

hearing correct to said is just the This January. case I is something. wanted in ITC to believe again. I second going Don I

hearing In fact, September. it's going in to

Operator

from please ahead go question. Edward your Equity, with Charter Snyder

Edward. Snyder

just LTE on PXX Snapdragon then They've good out hit, with you could you end the they have the especially XG Snapdragon that dynamic Snapdragon on gotten if news to abandoned back much. us series especially to very MediaTek's could, Snapdragon series. like their is The the quite series. to and which your in have dozens platform. I of to the market? XXX very results, I you, have fight checks your that. said seemed to if Pro you the know for uptick put Can XXX has Thank in help ground ground sure make China positioned target. high I few mid-tier I'd flag series year. really would wins regard series, XXX of And lot a between a modem been PXX. the in be obviously you QCT for And while the XXX I'm seen or and with overall. guys have bit has are wins business up? it what have some XG? XG to next to I XG that They've think by a Or on that commercial there catch in risks Pro where lagged between impact LTE beyond they're got LTE to delayed also, to basic they going LTE does their between trying will XG, maybe mix deploying Advanced to your in and the cover going have Advanced know to suggest they've especially? Do targeted a Thanks now they're deployments China's about lot. increase That then and a

Cristiano R. Amon

Thank you, Ed.

the saw got the devices what just is basically So with past market XXX OEMs start market mid-tier Snapdragon have questions answer the The your have two of series. lot with key two in the you Snapdragon – saw dynamic was China, opportunity, said that we performance. the in how is consistent XXX for probably performance is The some We in one XXX years lot that, a XXX. the – an terms as OEMs more premium the bringing of it we feature a markets, been me series, series Latin with LTE. advertising China of our the some a to as up. set. I'll Snapdragon drove with of technology. of And moving was X.XG let XXX modem of features And are labeled see the example, especially for Snapdragon even In more outside interested a America. that that on Snapdragon in other markets some also That the advanced

market. XXX Snapdragon good But key series, of pickup as customers So the a sign. the some this is also the we saw entered

markets. our particular, continues to out single Not direction is Xiaomi expansion market other into and in bodes view us, as for the just looking that move our global year. only but they of the right for four at example, they're into and That's set with So were well LTE to countries, our in customers in domestic. a anyone the the and China as now Europe at the point design an the look thing, China, smartphone number one within good feature customers of not XX in

with And more half, the standalone, side as indication The the working Going large. interesting. second is to scale about opportunity China of we're that set basically, largest an XG gave where China transition towards in Mobile, excited us jump which the well. XG, feature saw the OEM creates of in that's meaningful XG things could user-friendly side and trial we for the so that on very be the with in China, is radio that and the in XG, as an that operator become everyone infrastructure as towards

Operator

question-and-answer Mollenkopf, have adjourning today's you before anything call? the add concludes That to do further Mr. session.

Steven M. Mollenkopf

Yes, thank you.

that depth the an in, well obviously I the the outlook also delivery has the occurred, the not only through and position but of we've as that product in company that's quarter in Cristiano strong been XXX, products accomplished just XG. a the to put and lot also observation but Just mentioned, leadership recognize year, lot breadth the last as well, want the the that we've a as

through just everyone. our tenacity us the to dedication for this for. and the the period delivering And a employees competitive and Thank I Qualcomm to partners forward want it's for our been to supporting and testament look future. in think the and spirit thank the I has you, customers that them and known

Operator

today's gentlemen, call. concludes Ladies and this conference

may You disconnect. now

John T. Sinnott	Qualcomm, Inc.
Steven M. Mollenkopf	Qualcomm, Inc.
George S. Davis	Qualcomm, Inc.
Cristiano R. Amon	Qualcomm, Inc.
Alexander Rogers	Qualcomm, Inc.
Donald J. Rosenberg	Qualcomm, Inc.
Amit Daryanani	RBC Capital Markets LLC
T. Michael Walkley	Canaccord Genuity, Inc.
Timothy Patrick Long	BMO Capital Markets (United States)
Chris Caso	Raymond James & Associates, Inc.
Stacy Aaron Rasgon	Bernstein Research
James E. Faucette	Morgan Stanley & Co. LLC
Romit Jitendra Shah	Nomura Instinet
Matthew D. Ramsay	Cowen & Co. LLC
Ross C. Seymore	Deutsche Bank Securities, Inc.
Timothy Arcuri	UBS Securities LLC
Christopher Brett Danely	Citigroup Global Markets, Inc.
Srini Pajjuri	Macquarie Capital (NYSE:USA), Inc.
Brett Simpson	Arete Research Services LLP
Edward. Snyder	Charter Equity Research, Inc.

QUALCOMM (QCOM) 25 Jul 182018 Q3 Earnings call transcript