QCOM - Earnings call transcript Q1 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the QUALCOMM Second Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please limit your questions to one question and one follow-up.

conference recorded this X, reminder, a is May being XXXX. As is number for playback XXX-XXX-XXXX. today's The call International callers XXX-XXX-XXXX. please dial The playback reservation number is XXXXXXXX. I of turn Lopez-Hodoyan, would the call over to now to Vice Investor President Relations. like Mauricio Mr. ahead. Lopez-Hodoyan, please go

Mauricio Lopez-Hodoyan

and by Mollenkopf remarks you, include Wise. Steve good call and Today’s Thank will everyone. prepared Dave afternoon,

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

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

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

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

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

Steve Mollenkopf

Thank good us Thanks afternoon, for you, today. joining everyone. and Mauricio,

report pleased another are quarter. to We strong

$X.XX per of fiscal second quarter higher exceeded stronger non-GAAP earnings guidance QCT the high and Our end range, revenues share of our licensing by driven margins.

term of impacted As win settlement the ago, of we and upstream look provide us. rollouts worldwide. are slower have our for of manufacturers. and a The more to But also one-time two Apple: larger and it The agreement. global will contract multi-year We includes agreement behind companies a by settlement prepared this long-term from be pleased its details an Qualcomm's for announced pleased to of this at fiscal level, chipset directly Apple. represents we high rest result market particularly believe includes we is for years. agreement patent milestone, and patent his is of Qualcomm. it for license will a on Apple is in impact Apple forward, global two patent agreements an Apple Two for This agreement years a with China, to remarks. settlement the additional the supply with of financial global license settlement with with with a year the Dave devices, as the both extend first in a disputes this settlement license the a weeks the six significant payment XG option

resolution with respect with our ongoing to licensing with our addition, we enhances Apple believe position our resolving issues In Huawei.

We will chipset of other also we OEMs. have have also agreement. done products, new handset in our and Qualcomm modems be multi-year share terms the Apple Apple's provide our products, supply devices to future with Apple long term, our we the the expand dollar technologies to to supplying other In content with will for opportunity under as

committed are to Apple. with partnership a We strong

going be forward. how dispute with to thinking about company positioning of we behind Apple I the are Now helpful would that it thought the describe the us, is

is World and having event, and industries. Since South be for celebrating a This opportunity am other our the of First, cellular Mobile the shareholders. XG operators, in technology It QUALCOMM XG that an for brings services position infrastructure begun. providers XG have announce seen manufacturers, Korea, will both North the launch strong a enabler Android we tipping carriers to most a point and and was commercial XG Europe, of collective rollout within In in XG America, achievement as and of device technology differentiated chipsets. significant and Congress, the China, QUALCOMM, standard. major representatives quarter network of exciting that the and rollout The I from pleased Internet life. devices the representing of for key when in the is past the for February global at China announced QUALCOMM's is important XG our bringing OEMs first XG devices China user the future majority for wireless asset new months, in include report has joined in particularly XG to arrival a officially last recently, in largest to Snapdragon To-date, and vast in mobile world. it the base

competitive due strength in in of transformed in We've to our investing our Second, than and and attention into streamlining technology XG our innovation cellular. the and diversity This generations continued customer we cost enter structure. investments, is diversifying QUALCOMM's favorable time customer more dynamic, on focus products, during with breadth era a and focusing much earlier and QCT by company. activity a R&D on our base, of

addition agreement. QCT new year-to-date year-ago position ramping a strong to as under Apple in a revenues Our to profits non-Apple putting operating us compared in doubled we began to this income supplying two period and XG grow

launches the our over As grow, announced of world's launching of generation so first front-end QCT generation more XG adoption have XXX, to the second XG which last second double XG integrated all second generation mainstream February, and position with number XG, designs XG to wave wins pipeline. the modem, XG. early modems. XXXX in devices now announced we driven win power our our mobile us with platform XG XXXX drive In solutions, the Snapdragon January, We XG of network first design OEM than does we RF second late continue design our to and XX by and

partner approach modules. is as industries heavily as foundational digital leaders performance. a see their technology front-end antenna world's smartphone for This across spending bands XG RF including XG engaged us sub-X Our systems benchmark to front-end a gigahertz and to they system creating wave millimeter-wave new devices, baseband, RF the early transceiver, RF critical and components, modem-to-antenna millimeter first is radio XG in commercial XG for as a transformation. for allow QUALCOMM investments now many offer mobility

the are our investment Third, aligned with ahead. cost structure and opportunities focus

invest digital growth cellular we core transformation. continue core capital the next our as we to with and our In we've innovative market on and of the We presents leverage to laid In the in and bring competencies their focused think where stockholder addition to our return, industries Apple, the operational for beginning in to solutions markets. execution leverage ramp large XG agreements EPS in they returns can opportunities many summary, with over XG accelerate revenue will are adjacent XG, this several years. groundwork and growth for

you recognized to appreciate from the we the company ensure investors analysts believe team, through seen. positive committed As actions a that our driving and long-term management have and deliberate We stockholder reaction by Apple, will and the our stockholders from over long-term the especially of to we our with commitment as who to and thoughtful weeks now are taking value call Dave. many recent growth announcement differentiation two like sustaining focus last Qualcomm's would technology turn the appreciated feedback on and I over to innovation. have

Dave Wise

you everyone. Steve Thank afternoon good and

strong impacts pleased of overall $XXX in billion results are of that of and million revenues driven the outperformance quarter to end We $X.XX GAAP $X.XX above of the midpoint $X some from weakness. quarter with by high positively approximately revenues market up of our offsetting range. by announce were above of impacted primarily $X.XX, The our out-of-period billion second range catch QTL non-GAAP was EPS guidance the

device in expected. revenues weakness with and range below of and margins shipments. $X.X QCT EBT in gross were and million expenses midpoint improved operating the margin for prior any reflecting came global quarter Apple QCT margins. which by guidance units lower saw shipments driven improvements we in settlements the not was in contain QCT of high Additionally disputes results Please overall the guidance with quarter contract the billion note at of expectations our were the our its but from XX.X% within this gross same of contributions end the XXX manufacturers. than line range, do

device Turning global forecast. to XG/XG/XG our

results. midpoint. to to our rollouts. calendar agreement of We the billion midpoint by a regards expect reflecting our XXXX of the of This and and lengthening to by weakness advance in our overall third XX to revenues in decline fiscal announced for in approximately XG continued of another handset settlement of potentially recently date release settlement global at agreements, growth non-GAAP resulting unit in million includes replacement from amount effective to quarter. In $X.X offset The from payment China we units excluded in year-over-year billion growth to slightly total handset resulting of our Apple X% a units the of We the estimates a the billion from non-handsets $X.X Apple are record expect continued liabilities. at cycle, will be units matters related now pause due the prior to cash X.XX lowering

and to the related to estimate we quarter, of fiscal third of estimate with manufacturers. GAAP be the $X.XX EPS the quarter approximately $X.XX settlement the revenues and $X.X We billion $X.XX. Apple revenues the of for billion range includes $X.X which to $X.X non-GAAP in range in guidance Our be to billion estimate GAAP to $XX.X to be to the non-GAAP revenues fiscal to billion contract EPS and third $X.XX

greater the QTL for between QTL, ongoing offset and from compares favorably be after market and to about $XXX than previously catch-up of from Apple was addition For by approximately relatively impacts we royalties, OEM quarter $X.XXX expect the adjusting expected which of This $X.XXX of million a mix. discussed billion impact to modest weakness $X.XXX including revenues billion second revenues billion. revenues,

our $XXX As payment Huawei. interim million under the a the last quarter includes reminder, with third guidance agreement

weakness QCT completed be With weakness, litigation XXX to expense. excluding run plan, the MSM XXX and cost market up and also expect modestly quarter the to by shift unfavorable mix all and on QTL, EBT margins Apple substantially achieved litigation China. $X million of We negatively XX%. towards of OEM based being savings to reflecting costs. target XX% the share Huawei including shipments we economic sequentially impacted XX% and our revenues rate between excess we In licensing from third and have near-term in adjacent EBT the billion quarter XX%, second shift, lower million overall margin businesses to QCT, to impacts respect for inclusion is estimate

For support result EU. by Apple incurred Apple the impacts expect as bonus in modest term, increase partially the investment R&D we SG&A the product the are points to in non-GAAP resolution litigation our expenses in of well our expect quarter an advance savings, the settlements. manufacturers cost sequential and reflects employee and and we our expenses our X% in about savings by third expense costs six contract of with third fiscal to increased related increase be Apple offset expected of actions to Korea as quarter, combined we the somewhat of in further given Litigation plan In increase litigation fiscal as Longer to to X% be ramp. offset cost expect employees. regulatory its U.S., the continuing quarter, our fourth ongoing savings investment to

Turning be estimate to a the quarter our our We good to fiscal XX% rate. remainder be approximately XX% it tax rate the third year. to to and non-GAAP for expect of proxy tax

of repurchase we approximately our approximately an per ASRs update share XX% on activity an As $XX completed as the price of of share. May at Xst, average have

September. As early into a we reminder, expect to the ASRs complete

We are average XXXX. fiscal year outstanding and outstanding for billion average third shares quarter estimating X.XX weighted billion the approximately for weighted full shares X.X the fiscal

as The resulting we and deal the any expense. reduction The from combination shipments indicated $X licensing Apple $X impacts when incorporate EPS it of with contributions ongoing the the any to any add from Apple, from longer and of does impacts ramp. an estimate billion estimate announced of potential reflect revenues we excludes resolution revenues billion from term, EPS we our $X.X also not product the $X FX of Looking incremental with fully $X.X settlement Huawei. from the not litigation does will settlement

drivers me key let Before opportunities. earnings growth our long-term of finish remarks, prepared I my summarize the

given First, launch selling to starting we are XG our with second device strength XXXX, chipset the of prices in half well-positioned XG the in chipset see both global expect map. and and of road of an calendar the in increase

significant with businesses, chipset further and Apple, expansion agreement broader our content revenue licensing to multi-year time. we Second, for both over product expect with to opportunities the and see margin capture additional with

the Thank ability to now call devices. continue have our our realize for back by we across impacts next on you. from efficiencies, few traction scale remain And above. and these we while wave weakness, OEMs, of all and will XG sub-X upcoming turn Fourth, opportunities of I in millimeter driving front-end opportunities launches over growth driven adjacent short-term our Mauricio. Third, are gross some years. focus increasing will design products seeing to our we operating outlined the margins over confident economic seen as increased win the lastly, opportunities RF expense we to

Mauricio Lopez-Hodoyan

are for questions. Thank Operator, now Dave. we you, ready

Operator

Thank with from is you. Please Walkley [Operator Genuity. proceed question your Mike Our Canaccord Instructions] question. line the first of with

Mike Walkley

Great. Thank questions built settlement. the into Congratulations A couple on you. of Apple that.

reached settlement Apple, to with other with negotiations Apple Huawei? can Thank it's open how or changes up the you the Apple current does going settlement, agreements? agreement any the with are And update licensees, you. With any current us with on way trigger licensee the structured

Alex Rogers

So, is Alex. Mike, this

issues In terms Huawei, Apple Huawei. enhances our the of We to that negotiations with the ongoing. resolve they're with feel resolution ability

we thing. good think a that's So

And the type be are of But terms of of able specifics In our gives I confident licensees. coming relating Apple out. you address our incremental can't $X inquiries year of, sense to a in triggers, you I the provisions. if we Those fiscal working guide MFN to how see that other address look any essentially QX resolution get think the into take EPS of, we'll that kind the nature at all a confidential. we're XXXX in and

Mike Walkley

you. Thank

Operator

next the Please Stanley. Morgan Thank with you. James Faucette proceed question with question. is line The of your from

James Faucette

and I those Can trying incremental any you But Thank settlement? you relates Apple walk you're sequential to question QCT. a stabilization for you Clearly, on those ask, maybe Huawei's handset adjustments just QTL's then benefit, you. or perspective, kinds us how where estimates. to on we're on a a potential get of demand Great. much. changes you dovetailing Mike's like through it Huawei. terms demand. the maybe in share Thank to are seeing wanted sense bit, Just to has related in to basis, year-over-year things from impact little gains at risk as and a And that? feel making very particularly limiting post that of

Cristiano Amon

actually, question with going sequential look at for I'm the our MSM look sequential. Cristiano. business to with non-Apple our our Hi, is has James, if get start consistent hand the growth this to at No, historically, just I'll over QX. first been and you growth Alex. think guide when I you

did bit So we've we behavior market same way. basically exactly What I seen see business the little was a in sequentially, weakness. think, off it the a

see I to that launched by remind part about other transition. everyone then our just China. an XG launch a you China builds the think want economic take in if Alex, they ahead the XG script of a want weakness, to the followed the would Telecom that it -- think pause And was later that in I launch. just the weeks with ago Unicom in But and China particularly launched of supposed impact, do I the confidence September. to offset we think were that With year has I anything, question? but of and

Dave Wise

is Dave. I'll Actually This jump in.

QTL pick are paid up an fixed in under On which the at now, Huawei about being obviously, thoughts. right bit of share share, we as quarter. a we agreement One, a million is a $XXX only couple of little interim

see we shifts way. pickup similarly coming in of we then share that a financial little don't from share any monetize bit OEMs that from some And QCT, that more. So,

Alex Rogers

the just more end do existing very resolution. I'll is NDRC just the was agreement people Huawei Alex. is to of that we agreement add that's of what This entered think And good, into very remind this have an while on we fair arrangement; the point. one with I XXXX that agreement. have eve want We interim

the that in so which occurring. negotiation And context ongoing is this is

Operator

you. Thank

Please Chris the Caso from is Raymond line your question James. with proceed next question. with of Our

Chris Caso

happens number more impact. helping that get that guess on I as little what's a thing you. on of mentioned. design the question $X time. you timing first is the chipsets that I in that to the is Yes, granularity of just us thank the $X guess some Obviously, over ramp

royalty of reflect $X? will Apple $X perhaps we the that does by that such represent licensing to interim? should that guidance of the or current get and does the that us paid be impact able the addition, portion So, fully full impact to full the annualize some QTL In the now payments

Dave Wise

Dave is this Yes, again.

of and we of you think would the on basis seasonally I headwinds the royalties. one the a go-forward QX it all, Apple So, of question, a QTL. inclusion of It sense can as so also our reflect for part give to in the Apple quarter where lighter are related go-forward that contribution first reflects on But market. some a our guide of about second does -- QTL. the quarters it's

So, you consideration $X ramp. think indicated of contribution reflective about $X, the as on number the the -- is from once -- then we licensing think annualizing well an take going that if as I about ongoing so contributions $X chipset the that, as basis. would annual you now forward licensing we've And into

a that ramp as on We the significant expect to contribution more we side. see QCT

rest is you we reflective if but kind then sense road, potential I point. Apple QTL do our element on based and And that Steve the coming we see Apple we get from of views you our a see where side the said, ramp. the -- think of think the I quarterly can of there's at So, contribution QCT the of as guidance, this would on at opportunities from it's more as look $X down with to

Operator

Thank you.

Stacy Our next Rasgon your question is of with from with Please Bernstein proceed the line Research. question.

Stacy Rasgon

question my taking for I run on had QTL Thanks the rate. guys. a revenue question. Hi

out sort if If includes Huawei $XXX $XX.XX. I Apple. Huawei. Also you're So all take revenue million take includes out the that guiding -- you $XX.XX of I guide is in obviously get

told to us billion. rate of was run right the kind you Before $X.X billion $X

running Or of just I going in the or below the billion a market something you X? ongoing of do what on, been $X million to rate Is last think there have previously? core guiding business weakness? Apple the $XXX function ex function Huawei that bit and actual that run mean guidance core only you is versus like purely else you're that this above So quarter the a billion Because is even little Apple of QTL you've given the with us $X.X that?

David Wise

we Yes. Huawei. of The inclusive the with $X billion $XXX to previously given have $X.X billion million was

Stacy Rasgon

wasn't. No. it wasn't. No it No

David Wise

And call, had to this in we And units. units. adjusted then call January million by in ago, also did not the of it million quarters market the down XX Huawei. in. million have January two call, $XXX we So another we're And where that down the from in the inclusive it XX be we guiding guided guided

So the bulk of guide what the offsetting in continued market which in is the our we're seeing addition some of seeing we somewhat are impacts of the -- QX Apple. for headwinds QTL

Operator

Thank you.

is Curtis Our of proceed next question. Blayne question Please Barclays. from with the line your with

Blayne Curtis

the litigation guys, my left? cost. ask the idea just Maybe of so appreciate what's for an you're that what's what number well. as And what But to the legal the us that walk you was? of left? taking reinvesting? legal and Wanted us can SEC, get can speak Thanks. of level set some through on just to Hey on can question. savings thanks just rest the year what about If you to and talked potential kind as walk just reinvesting I'd through front then we about You you left have of

David Wise

Yes.

some in savings So a see remarks I QX we're and said not to savings amount litigation the of QX. as lot expecting of in prepared

X% as flowing points accrual expense. Apple I we employee reaching wind already of on employee into in related ahead increase with impact, that Apple-related expecting it of we Diego to we're A San off our savings some adjustment most the namely additional about a QX And litigation settlement of bonus. the through heavy the then to in X% events we have our case. big of offsets had We -- to as bonus the have of as couple litigation in QX run rate which that adjustment said that six And was to of well.

ramp flowing expect not QX, QX with of into to So the litigation offset a of more expecting down we to we're of that lot see some fiscal but overall of and see and XXXX. savings those savings in

Don Rosenberg

this we litigation. on in Rosenberg. lot Dave's Don up resources And the Picking about litigation a is worldwide points with lot Blayne a of Apple. on were time spending and of Clearly money

grown it's know you dramatically. As

several normal much on So got to eliminating in the judge still getting are litigation of that normal the obviously, -- waiting We key on. for the cadence. and they the the various dramatic that comment flowed are pretty world, a us rule amount on which previous waiting over couple has we others to allegations where have, that all amount we've decrease is the I of actions the but now some to a won't been patent FTC of back But the cases FTC litigation case, years And be a class to from think. the happen in of of others. it's and around the managing have next

Blayne Curtis

Thanks.

Operator

question Thank of line is you. from Samik next proceed with the The Chatterjee Please question. your JPMorgan. with

Samik Chatterjee

guys Apple. how you. question. that XG I around in Hi, a on the just thanks that position talked how to you're the around about payment Additionally relates share in from for the landscape about the capital opportunity will does offer modem, that out the thinking Thank be allocation the change you your set margin competitive of XG? us users follow-up. and I in Any to the wanted know content about pricing tech software, it terms you XG based on peak like, just Intel either can if in as for what think ,Steve one-time or particularly helpful? peer-to-peer taking cash lay color you

Steve Mollenkopf

then part Hi, Cristiano and take the I'll that of answer Steve. the first part. Maybe perspective add my it's ask I'll and second to

Cristiano Amon

in the position Samik, our we marketplace. strong very about feel XG

all single across I trial we've development of in device. by operator silicon timeline one-year the accelerated and and we choice every actually remind been think, the and I that you infrastructure in

And And we we the silicon And opportunity ASPs it's to position what XG content expect saw be strong for to design So the front-end in also that's QCT. to significant see to and a I designs majority right a absolute -- XX consistent we the RF company designs expand our very in all updated XG. a those just now. doing about going XG think has in that it number content. for XG have of we of

good QCT be will material So XG for very very story and is in XXXX. event a fiscal a

Steve Mollenkopf

Yes, briefly. I would just add very

it's across see way year. in modem think similar way, front expertise a in fiscal of the and team in to we transitions. complicated I at It's really transition expertise is multiple bands the into technologies. these the in of good really the to also hoping unfolded that's -- to Right all those there’s you traction front RF the and next pretty a of the which very meant lot end and getting thought. end particularly important this think I now be we're antennas, had to flow business the the handle our the to But which that past, on really we're investments have

through first integrated real the our of price point how in XG announced. saw you is, You the products? bring Now down one do products race

Very more to being getting from and of the and way at map the demand least continue we'll we're pleased that You'll that. traction with more those see road do are that. or products those

the the In of payment. terms one-time of use

capital for strong has That's gave about been here which data how program particularly been return us. think ASR has program, a the some I our done, we good.

The think that the thing in think, our – mode a really next into stable the the of I in We Apple together, and of years. kind position settlement very puts are, of revenue look XG the a competitive coming in at landscape we us ability and it in the here to terms of couple of our dynamics. over launch different visibility the terms

we all to we excellence, we've us. need capital question to these both the got provides of particularly think, of opportunities do the lot add do – resolution with return But we drive stability do operational ahead, that the cost company? that, a talked So we we're about. of the and some we're that the this XG? to at in that committed getting still order opportunity What how now from to is, So really looking but

Samik Chatterjee

Yes.

Thanks Thanks. color. Okay. you. the for Thank

Operator

Thank you.

of Liani next your line America is Our question the with of question. Please Lynch. Tal proceed from Bank with Merrill

Tal Liani

kind billion $X.X Hi, going all to a be some is pay? – guys. of for it of to And as you one-time? of $X.X The life related that billion, what you how of they this is the it recognize it Will payment Or some future Or for is future? the all of, billion for it for didn't -- means $X upfront tradable amount? payment will be recognized Apple, it to over revenues contract? will retroactive recognize

Dave Wise

is Yes. The date to effective all to agreement. the billion $X.X for prior of resolution things the of $X.X billion

revenue plus contribution. royalties Apple recognize We'll past. includes then, all it's is the in impact results. revenues, QX it QTL would I So And chip forward GAAP as QX. starting guidance one-time ongoing note, licensing on our in go-forward our And our in of from estimate $X go-forward solely

Tal Liani

to recognize basis? recognize billion, already $X.X – Or you're the recognized on it you're to going is that to $X.X means billion one-time? going question so GAAP you've The a

Dave Wise

Yes. QX. be It in Yes. will

Tal Liani

It will QX. be all in

Dave Wise

in one-time recognize QX. We'll

Tal Liani

it. Got

Okay.

Okay. Thank you.

Dave Wise

Yes.

Operator

of from next proceed the The is question Seymore you. Thank with question. your Deutsche Ross line Bank. Please of

Ross Seymore

Congrats Apple. on settlement Hi, with guys. the

premise. revenue And believe I for was. guidance. it it was question line guided And to Just be up it think the had and in substantially said you with on your you a I

two So to in be it the importance, the so parts give looks to that for flat of you color little equal in that then June-quarter. And up the us question. you're like March-quarter? Can drove sequentially guiding what a nicely

benefited and why are or takes talk of and June-quarter? you the not in continuing the those that puts about can some So margin

Cristiano Amon

This Ross. Cristiano. Hi, is Yes.

market. the the overall chipsets as has we we guide at as And the launched. it we when XXX seasonality which market tier we premium And I had pause also designs, March customers. MSM China, in tier for the Android are XG to XG comments some Also pause our the We a QX, at on premium see their see weakness with I has those as made think tier other on consistent about are look is think quarter, in XG of coming launched within in they seeing look are some phones I China. XG where XG in Android phenomena, especially that the some we and talk of market. ecosystem the earnings dynamics is and OEMs the report product the premium but before. the of when our an think mix I and launching Chinese that

So, see we that.

the it's in growth QX when think when you to our the at comment legacy look we historical line Apple sequentially been is data. our made the with non-Apple QX at units, I guide look very for eliminate when -- business it's you and you other consistent sequentially

Ross Seymore

Thank you.

Operator

you. Thank

question is line from Matt with question. Company. the of Cowen proceed Please next Ramsay with Our your &

Matt Ramsay

afternoon. Thank Steve made Good QCT thought couple progress you some of over very gave I of in you in non-Apple prepared years. you helpful that your script the information last about the some much.

some about been investments dropped had might until of have like last the you Any RF programs. step you. Apple. that specifically ago the in thoughts You over give the data RF, you've I the us us growing the three Thank the how in of some a like that some some last about volume company adjacencies few And adjacencies a into that attached about sustainable it in talked maybe ramps be growing. quarters little the Cristiano might before early of back wonder XG about looks you four color making years ton or headwinds XXXX? with networking, auto, and in that on if areas been

Steve Mollenkopf

second start dig I you general the can and with one. don't one the into Cristiano Why

the we've you a last the several at things of over done couple and look agencies years. if So, here

the see relevant the First we these XG roadmap upstream is technology because adjacent have to can we of we really all, on things of that that We're the mobile. that that roadmap leverage company primarily that doing in think for tried focus technology heavily roadmap we industries.

of cars. example great a So, that is

So, but That's well that over harder a last increases I get car harder the and connected is the in ultimately, head -- -- in modems units opportunity car the to computing broader the of good business. car -- here to the now and in capability for seen the and communicate then years. good. we've computing us the sell some address into, timelines, stickier, which guess, Longer several

think that's digital in going is going well. Industrial mentioned remarks better the side leverages transformation is Consumer has aspect of IoT I yet opportunity, the going a some but for think -- think business still that's a an coming. I opportunities I us. to my probably well. are the think We to this really IoT be I little interesting is which industrial that that embrace

We are continuing aspects. go-to-market invest to in the

map. We in markets road to match a see but into ability. our It's go we we roadmap cellular, have into a those versus very How shape, strong pretty differentiate what there. strong technology do

with we're the to or to particularly side. there's do content You mentioned of that, importance we XG of see when doing RF advent the the and opportunity there the growth that. significant the RF device. grow the opportunities We think within And

in miss opportunities want are don't And you see I that comment those you like that. So, some RF, that also interesting able to will of invest Cristiano we've been opportunities. the about fingerprint into. to

in R&D mobile. that XG scale and along So, we as take going stay we to of see really advantage we're have the way. same that some the allow try And to focused to it we leverage see to of an opportunity us

Cristiano Amon

add things. just was to going I few a So,

at you we're look the both even you we're year-over-year of non-Apple when as economic it QX with QX growing still still when -- look you growth. seeing Apple as mentioned weakness, we when double-digit and for some us First, at adjacent the exclude

small very are they very trends but bets, are those of – good. the Some

opportunity is go to many it point with industrial existing for XG major think was and to scale our the is will get going that industrial telematics going be still with our second the going to we thing cockpit see I that can beyond our XG tailwind to that in Xcx bet that and on One digital Snapdragon business. few that we want highlight on data we to And bet to a added Cellular-VXX alignment be on a see the be to industrial. to calendar, Steve same We start should expect didn't mobile. dedicated mentioned see on to other the of our IoT. half Microsoft. And It's I industries investor a first the The materializing. effect PCs the first you computing. a which mention, haven’t in with

to design of system the And think and carrier find in is some us aggregation XG, and differentiated. give What's Now position the front strength that an in of in that being has company a design especially a that We're end, is happening as from ability build XG everything had just that that the I a antennas with on going provider. the our And claim of house believe to versus fact single as every only the the expect to back the you front we actually with XG roadmap of you'll our end speed advantage. to number now materialize on and is saw the moving for our you that giving continue. a digital us and ability faster than end of system front component that the an real antenna we now XG. devices estate to

Operator

Thank you.

with from is question. Evercore Please proceed your of question C.J. next Our with line Muse the ISI.

C.J. Muse

question. good if Yes, my you afternoon. two, I Thank I'll for ask taking could.

QTL First one, trying to ex-Apple. level revenues set

to So me March payments kind input/output could then within any ASC question. for for And XXX QTL and help catch-up expectations related moving the parts what second and you were June? that of understand other

is Your considering now? the is you. the But we OpEx us that XXXX. without to Obviously because that billion goal fiscal excess litigation. most about talking of to behind fiscal been you $X.X coming above believe that a for could look of was as 'XX litigation that we're Thank number get I litigation we've that

Dave Wise

Yes.

So me start with QX. let

more expected there comments communicated or prepared out-of-period billion. one-time the in million we than So was revenues $XXX about the in $X.XX of of QTL

related be revenues. understanding And actual is XXX some as a prior are out. adjustments of is for from how as somewhat adjustments that basis on and XXX say of programs. our forward estimate going obviously always really to to few based an one-time I rolled forecasting There So chance final of quarters some on our some a basis, well periods then go-forward would cleanup prior, ASC that to with as from on to both relates we move true-up move

to to So, I out some on have that, of XXX. the Then period. the think of QX nothing just specific of every we'll with based But OpEx. nature quarter with respect respect

to into to Apple. those We expect And fiscal billion. said before, somewhat as get I have some rely support target savings of to offset excess bit we do $X.X to by little So, XXXX, need litigation a our invest litigation. yes, of still ramp was move as we maybe the to more

Operator

you. Thank

Our Cassidy next the question of your from with Stifel. Please proceed is with Kevin question. line

Kevin Cassidy

Thanks my question. for taking

opportunity with there an sockets chipset Apple, your and XG? the Before win ramp back to is

Cristiano Amon

the I devices our providing Hi, of think you all will assume to engagement. going time Apple -- a Look chipset. engagement XXXX. the It little to in have And XG develop new of of to not I general, this Cristiano. economies But of a details. launch takes is lot we're it's independent developed that fair in it's of be bit think a

Kevin Cassidy

you're great. front-end, you idea designs that RF the the percentage include give will of might Okay, RF majority your increase front-end. those what And be? Can seeing us an content of of

Cristiano Amon

Yes. My Android comment about ecosystem. the is

a the the What as as supplier reestablish I’ll we're door front-end we we RF modem. of think ourselves engagement any opportunities detailing say beyond I now. right Apple, Apple reopened not for with

Kevin Cassidy

you. Thank great. Okay,

Operator

Thank you.

UBS. Arcuri question next proceed from is of your with the with Our Timothy question. Please line

Timothy Arcuri

piece $X I so wanted to Thanks. back to number. The QTL go Steve, clear. is this

six-year team. obviously, about have they a agreement clear big But modem pretty a them. the side, with were You QCT on

I what there when multiyear any said that agreement you if announced number. you think on So supply is the QCT $X side?

the that think we infer XXXX about and to and else for to there who just something them there? Or supplier should Thanks. beyond XXXX So knows? you'll is that then be

Steve Mollenkopf

I'd multiyear on details little this go the I'm chipset than it's to maybe agreement Yes. going say bit to not a through the other all say but unsatisfying, a agreement.

way from side It’s is of it companies at side Qualcomm the we it. business. provides QCT look something lot happy that with both the from to it think or are our I the stability at least

So other think a multi-year lot the agreement. And good than opportunity for just two I can out settlements. the I good like of sides that to there's both But a on agreement teams a result working we think the more much And also us. and natural I'll of products remind relationships, a in removed system much a tension can't have future, really just really And these find you, it. that's relationship. together the of about maintain that, talk is something it I as

two know to agreement, the plus on six years extend Apple. the terms more licensing for years an You option a

Timothy Arcuri

Okay, Steve. Thank you so much.

Operator

you. Thank

line of is Pajjuri question. proceed from question with the Srini Macquarie. next your with Our Please

Srini Pajjuri

to And the extent QTL us, you. first tell To it has is or previous is at can sort number guidance can the ranges? to do the least ASP EBIT expect the Thank assumptions is you When Thank less I'm XX% generation? you. increases than you market guessing the to margin, your XX And some for then, on share previous extent to you us. Steve, for XX%, of just that, it XG the then, XXX% in for $X Apple. back do XX% Dave, XX%. the get question on to tell modems? you What expect the follow up at

Steve Mollenkopf

Okay.

good comment assumptions they're a we've forward. they XG to case that -- product be the ASPs, in moving The to the the as story, story. we're I in And at seems ASP. we On XG, numbers, will across seeing for on that with be at of we're the through Apple, tend I won't as going share move playing what looking ASP us. broadly but least give industry said to ramp, to the And be good

Dave Wise

be drive the going And the will of will litigation litigation, down One two things excess wind margin QTL some forward. of spend.

over of will be one in we time. we as The be top when and other line Huawei, margin both Apple resolve back those driving the important add factors will expansion, up now

Operator

you. Thank

of Please question Brett is from with the Research. line proceed Arete Our with question. your Simpson next

Brett Simpson

very Thanks much. Yes.

on a as a about to how guide million assuming margin up, detail your Thank for you're for of corporate you. -- overhead that's question $XXX please? the at when there's Just mid-point into go what overhead. the look June-quarter. just Can QCT, and quick we the corporate guess, built QTL you I

Dave Wise

adjustment bonus that about in I Yes. talked That's my the script.

into of the it's catch-up of So the of out business adjust corporate. quarters resolution now, quarter a held into quarter. number we the employee accrual of of we in is addition That normal unit Because for not bonus Apple. It's take the margins. our pushed Apple, third impacts

you're the of So that's bulk seeing. the delta

Brett Simpson

and And the about talked of help can sort magnitude year, this all next understand, litigation. Thanks. of Can that absolute of so, quarters OpEx size over in we us the the us? into how how like, plays of or two the the how next end you underlying three you And we sort few see model OpEx should of the movement through rising? OpEx? understand just Can at the out really you to the fiscal expect for it you quarters

Dave Wise

Sure.

$X.X the adjustment, look range is like So, includes That I -- OpEx. think, you of billion, this about something first of at in it's all, around $XXX or that our $X.X billion, when midpoint of QX, bonus million.

think that bonus further $X.X So catch-up That's in $X.X includes probably the couple up were a where QX, things it slightly type puts will from litigation. will billion. of expect billion, elements on in us out somewhere at QX. savings about one-time QX the and be we put savings of and in flattish us seasonal The some we modest In on we adjusted litigation. it

the $X.X and billion, $X.X $XXX million $X.X billion without billion. So, you think about QX

Brett Simpson

sort But really now fairly you've Thank a soon. to sense just a is term? used with from going finally get you on op those around can that type margin op Apple, some maybe now think you're lot path for to there's winning QTL, for deal these you XX% do to to how Cristiano that's leverage And we Do seeing op to margin Apple, of are Okay, trend before of June for we how QCT, little get XG were QCT op margins I for targets I obviously, beyond longer op you. op settled margin their still of about you think mean back levels? the with something back quarter? about to And think Huawei that QTL? helpful. QTL the of big overhangs? sort you at ever as us And hopefully, maybe a delivering settlement a give level margins the point, were target

Dave Wise

Yes.

a reduction and I that said as QTL, the improve think savings. will before I couple of litigation So, of is drivers that

fiscal that resolution from And that a addition more flowing So, QTL. on the Huawei and see I standpoint. of topline into in said we'd more timing the of of XXXX then

with So, two them the agreement of we be obviously, reach I think major that as whenever timing would reflective drivers.

Cristiano Amon

Cristiano. is This

we Just scale on progress continue and -- have place, a the to think of ends. looking all unchanged forward have remains and as we're of QCT agreements XG to I having we in QCT our as expect grow -- profitability a target back think the in get mobile. lot to I made the get our business we gain Christmas we long-term been to plan as then at And the year growing non-Apple

Brett Simpson

much. very Thanks Okay.

Operator

Thank you.

is question Vijay next from Mizuho your Our the question. line of proceed with Rakesh with Please Securities.

Vijay Rakesh

Yes, hi guys.

color you RF that could mentioned. some the events if end front do you more wondering Just just on

a front I and you or have and design looking you them could deal are if ballpark just of of end of or think mid-end low Are -- wins majority at. you XX the doing end. said what kind content you more Thanks.

Dave Wise

for good. your Very Thanks question.

allow trackers our all feature-rich the find at smartphones those content design if RF wins solution majority before, whole performance from XG, had I the digital the you have to look -- where antenna antenna. the to as tier. the premium all is the across in bands, of way the us XG that's the you'll have And goes on which content tuners. in wave bands been well millimeter On front-end we which differentiations XX and we for think them sub-X The all all to flagship payments, And are envelope from content seeing said as the XG the the Android. XG bands, significant of I baseband switches, to as PA modules, in our

Vijay Rakesh

we at? beyond look what the run payments be you the trying on But to that And looking about quarter, normalize QTL as a Thanks. you seasonality. rate it. Got look talked be QTL normalized at if Apple side, would the should June you

Dave Wise

Yes.

weakness. includes includes look go-forward QX have the our headwinds best It I is, the seasonally in at we that lighter And of for now the basis. guide think way some market associated QTL. one to Apple quarters a with it's on

into think triangulate if how take basis. of I'll -- you on those I annualized consideration about factors you help So can you an think sort on to

Operator

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

Steve Mollenkopf

Yes.

everyone thanks all us joining of today. First for

note for base, our quick thank employee during staying of focused much a period just this Just to time. you so

XG the a the and are foreword really of ramp the to position. put ahead look opportunities in us. company You great I that of

you hardwork quarter. for next of Just and your all thanks a to talk we'll lot

Operator

and gentlemen concludes this today's conference call. Ladies

disconnect. You may now

QUALCOMM (QCOM) 1 May 192019 Q1 Earnings call transcript