QCOM - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Second Quarter Fiscal 2020 Earnings Conference Call.

At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. [Operator instructions] As a reminder, this conference is being recorded, April 29, 2020. today's (XXX) for number playback call XXX-XXXX. is The XXX-XXXX. callers, please (XXX) dial International is The playback XXXXXXXX. reservation number

I would Mr. to Vice ahead. now like President Mauricio over of Lopez-Hodoyan, to Investor Relations. Lopez-Hodoyan, go turn please the call

Mauricio Lopez-Hodoyan

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

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

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

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

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

Actual those make also forward-looking future industry business will events events, projected We statements. could business, results. or or materially differ in statements, estimates results including our from projections and trends of financial forward-looking or

including refer to actual most our recent SEC XX-K, materially cause differ our from statements. Please contain could results factors forward-looking to that filings, important which the

Qualcomm's, Steve comments now Executive Mollenkopf. Chief And to from Officer,

Steve Mollenkopf

Thank nearly family, you, we extend has in the Qualcomm This people today sudden like are would around the living and collectively in impacted everyone. dramatic XX,XXX change through our we and this citizen On behalf best manage how on the planet. of world, good to wishes the I every Mauricio, afternoon, as unprecedented time.

things. XG commercialize and other and has invent facilitating remote using to wireless been in many played workforce, breakthrough world technology, billions stay-at-home global broadband around our entertainment, critical highlight mission technologies orders telemedicine, learning, that The like amplified. reinforced Qualcomm of and the communications role the distance has people With

we of daily I and have the together culture, resilient Over our challenges to strong solve three seen countless working months examples the face. last

with pandemic all In environment response has of totally safety team as our the we our evident of on priority. execution highest different employees QX, transitioned fronts. working a the our been to in to exceptional the Our

have mid-March began we several operational able of to quickly orders operations. disruption a we were minimal result respond many made to in years, last with over work-from-home As changes the our the the when

able were small a we on number product on-site workforce to Importantly, essential schedule limit with and commitments. very to our remain our

and high we maintained very an have engineering productivity. of levels perspective operations From

advance map while a very road and and to the R&D continue set chain We of XG customers requirements. meeting support complex supply

and We have device chain. collaboration testing also to supply implemented physical transition the mitigate impact COVID-XX global We cloud-based enabled to need without access labs, were also to our remote to access. able for the remote

the handset approximately of in Despite gave the the in was $X.XX challenging estimate overall guidance our non-GAAP we the pandemic. early down February XX%, early market our midpoint was earnings environment, of at we QX where range QX, in share the of stages per

very can front dollar virtually all XG are Our powered QCT be growth XG drivers much RF continue along share see end to design with higher revenue wins our our MSM design solutions. by intact per content as in you our of of and as wins

license license up last In more our we have XX signed licensing agreements, quarter. now from than XX agreements XG business,

long-term Vivo new with Chinese OPPO global XG suppliers patent handset to into two As entered and license devices. expected, mobile we recently multi-mode agreements cover leading

restrictions Turning world handset a with of by trends. rest to provides saw coinciding COVID-XX market. model demand subsided. Fiscal to restrictions growth decrease China basis the sharp month-over-month handset followed a as demand QX This

the on Total speed demand impact will the of the March impact. by rest approximately in of handset the driven to China economic overall from benefiting overall market quarter, while down world of in In the the we As we down was shutdowns I mentioned the are handset be principally seeing June estimate in quarter, the the from rebound depend recovery. approximately XX% XX%, the market China. earlier, the

forecast. change no in see However, we calendar XG smartphone our XXXX year

of half as there to regions second the Overall, and well are planned minor a progressing be deployments. in we to calendar look globally. of to XG with XG positioned is we few XXXX, network adoption the rapid XG continue delays while As drive

is our a track industry-leading strong Qualcomm on map. position road with In and product in closing,

to are in people key We areas add balance executing continue sheet. strong with well we and a

would he the remarks. call to over in I his like provide to turn detail more where Akash, will prepared

Akash Palkhiwala

our and these our Prior you, Thank circumstances. afternoon results everyone. employees' extraordinary and for thank Steve's customers and I commitment want quarter good and Steve thoughts partnership addressing to during second echo to suppliers fiscal their

fiscal in QCT and total and range the share at of second billion billion delivered demonstrated delivered was economic XX%, $X.XX, non-GAAP QTL We revenues midpoint the $X.X earnings and the quarter which EBT per Our both performance revenues guidance. environment. of QTL results despite strong with consistent February. of we midpoint margin $X.X our guidance in of both provided of the challenging of

license entered and now have new We Vivo. OPPO with agreements into global long-term patent

IP Our XG, ability In COVID-XX, these prior customers. and the fiscal quarter, a our the reduction to on shipments handset spread to relationship finalize the XG the of agreements strength our portfolio approximately expectations reiterates of and saw a to XG, XG year-over-year in compared due these multimode of basis. a challenging in with we second environment XX%

factors. was decline This on based two

in estimates substantial decline negative exiting March. second globally regions royalty First, And pronounced followed favorable in China was January previous in a by This updates benefit partially other and and a QTL mix. the weakness in on late demand related to February, to offset many in a recovery impact starting by quarter.

EBT QCT This XXX delivered we of and of XX% RF of midpoint revenues margins. gross front first the launches, content increased the by benefit In reflects solutions $X.X which the million shipments XX%, and of billion, of units and XX% our wave was end at flagship our margin from EBT sequentially. MSM increased revenues QCT, XG chipset and improved of guidance.

our this demand IoT increased in environment. networking and connectivity In addition, we due strength products saw for in work-from-home to

sequential both a basis. expectations, greater on XX% Consistent than our included year-over-year end a with and results front RF in revenues our a increase

the and SG&A combined total $X.X was savings Our range end our of in guidance below including expenses. and billion travel non-GAAP R&D marketing of low expenses

With to turn XG, like XG I'd device Global that, XG, to forecast.

COVID-XX, pace forecast planning based This and is relative handset of the planning assumption continued in our shipments expectations. the two is drivers. uncertainty to assumption a of quarter reduction resolution Given around of prior our approximately on based on XX% fiscal timing the third the

we First, modeled China China. sales is for the March from seeing exit quarter on the regions and the gradually June, the starting other of in a rate in second, improves recovery which quarter; trends are based see

first total forecast of reduction of a the approximately to XXXX forecast. for Our device XXXX the implies calendar half XX%

speed devices of recovery. of However, half will the XXXX economic second on total the in depend the

all forecast. track. on remain XG regions device Launches to Turning across

million minor our While timing some calendar to launch estimates at million of changes remain sell-through we the and to expect XXX certain XXX XXXX units. devices, unchanged

walk This to reduction of earnings me and a third than in $X.XX through let estimate $X.XX. per fiscal Now, greater financial billion We quarter to handset adverse currently non-GAAP guidance. revenues of COVID-XX. to share you guidance our $X.X billion shipments to due $X.XX $X.X includes the attributable impact

billion normalized fiscal the of a time to EBT of and handset impact QTL, due guidance XX% are adjusted providing $X.X shipments lower and to third to scale of economic rate for In reflects margin $XXX revenues run $X million of uncertainty for the of to This XX%. million billion around COVID-XX. estimate we EPS Given the a range the the quarter. wider-than-normal quarter the $XXX recovery, we

to reminder, our does units shipments estimate include and a third of margins for of MSM million XXX In $X.X QCT, from XX%. revenues EBT not to Huawei. to QTL forecast As XXX quarter $X.X revenues XX% billion we fiscal billion, of million

and reflects guidance the latest device to sales the Our from the contemplate demand customers our chains as signals their lower sell-through. reconcile they supply impact on global

We fiscal per expect quarter. the launches flagship seasonal to second revenue the following in XG our sequentially, mix decrease MSM handset normal reflecting shift,

the third $XXX non-GAAP to expenses dividends $X.X in second basis. billion on combined SG&A to in returned $X.X repurchases. anticipate flat stockholders quarter We fiscal fiscal We including quarter, stock and approximately approximately be million a billion and sequential R&D during

per Additionally, we dividend X% $X.XX increase quarterly to announced share. a to our

liquidity and performed as sheet, our evolves. capital focus planning we and have challenging economic will these a debt to situation landscape, glad policy with we rating. liquidity strong position continue the scenario we current the have evaluate are a flow Given times, cash to on In and balance

Looking forward, of which our safety we health is priority communities employees, in operate. the and and the our top

Our remain business the of long-term capture, the and technologies remains opportunities, content front-end confident RF We in adjacent unchanged. expansion adoption, strategy platforms. growth and including our XG you. Thank

to And I'll back turn call Mauricio. now the

Mauricio Lopez-Hodoyan

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

Operator

Our comes you. Mike first Canaccord. Thank [Operator proceed. Please Instructions] Walkley with from question

Mike Walkley

timing tough the was indicated globe COVID-XX before points more based on picture. congratulations they in just and of as in Back you launches. strong results environment. management Question's inflection the on around big expanding a Thank XG more two seen expected February, Great.

maybe it you. a see still year? given ongoing for exiting your and do later is calendar point you into discussions pushed XG the Or Thank XXXX? this customers, with year inflection Just second more

Steve Mollenkopf

thank in lot Steve with. talked a launches, dealing general, our think see move they're and guess of Mike, is My to you. that – handset been people overall timing same they've I a say intensity those about, keep seeing general, in its the we're would maintain of schedules. you'll terms The Certainly, year. unit us in changes because But reiterate around XG things you're to little don't for people slots I in call that. going with big bit, see for the the environment just dealing to of of

the about a inflection that you second helps hopefully we feel point. how sense I think get for

Mike Walkley

Thanks, Steve. Great.

for maybe year that as terms gaining to portfolio terms share QX you. shipments Just of XX% the share my macro question Thank you on With gain what strong that your strength your out? cut the guidance certainly seeing of MSM execution of you're on your based then. follow-on the plays Are and appears opportunity base. in in

Steve Mollenkopf

Yeah.

of there's things. think I couple a

good. pretty I picture think share is

– well sequentially is to us. key of, the come the terms of you'll and be we in gross my continues probably have Assuming the look for guess would – in assumption use surprised component, be market be financials. think probably a I One you'll terms if story that to margins as how on good you upside we

in factors like that with dip a the we of exception we're So market, general I the big think at. still looking in those

Operator

you. Thank

the Our question. with Samik line of with proceed question JPMorgan. comes you Chatterjee next from Please

Samik Chatterjee

good my good – morning taking afternoon. Hi, Thanks question. for

So it's the XG see good outlook. reiterating to volume you

in that OEMs as – is you recovering. with are are particularly expecting market pricing China from that the terms handsets of for the seeing themselves weaker wondering, macro in everyone's what Just you

If you implications And them XG chain? supply can on seeing of terms focus have become the handsets that you in more on aggressive pricing? what are

Akash Palkhiwala

devices. at of month of it's very sold And had that the planned COVID of the all on Akash. in metrics launches the environment. this and are Hi, launches clearly channel OEMs those execute were Samik XX% true. key of if being Yeah, XG some to a were The were look March China able devices set in before you its OEMs aggressive. out came that the into We

even much that's So really stronger than expected. we had

And tiers, it. seeing looking to tremendous OEMs across traction across so we're and forward

Cristiano Amon

want which for XG penetration Samik, – China market this another to there's preparing is all reiterating. is worth is that in is XX% models also data shows Cristiano. really launched point, of just That tiers. all the XG. broad across I

Samik Chatterjee

And XQ. understand that that would the shipment it. can roughly – improve if trends exit which start stable have, just just order you follow-up is enter on generally that as MSM into imply seeing Got to flat I quarter-on-quarter, you're remain outlook fairly to you wanted

shipment wanted even to of quarter-on-quarter given kind of kind in volumes? sell-through that you're of fair the just drop-off to terms volumes just guiding in if flat So that's understand, with

Akash Palkhiwala

bit little right. quarters. typically a a That's – a We see between seasonality. there's the bump of slight We

as So see environment, the for this too. we're well. to good very But even is us we strong continue that in pipeline order seeing

Operator

Thank you.

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

Chris Caso

afternoon. Good days about, changed view you. I how XX ago. first is Thank Yes. question versus your the guess, has

about in start have to to you And You rest some and got walk remarks, to as us assumption? like that now there's sounds of half, the forecast that on into go expecting reduction. extent of the are -- that open you you how up? as the bit a different It assumption -- we Could improvement right XX% mentioned the do prepared you world. China through between economies you the second your

Akash Palkhiwala

Yes. Hi, Chris, it's Akash.

weakness on we looked what quarter was third quarter, we fiscal way the at in saw saw quarter from starting a is the through then late the weakness So quarter. exiting all focused And way China, for the exiting February, fiscal but in -- China outside of recovery which the kind us in quarter. we the we saw strong we the the January second earlier really

and quarter how the And rest the was apply world. to June exit to as our so the of the point. model use we the use the starting rates And framework model China that for to recovery

we're a quarter of the already then expecting combination recovery think decline substantial China in through So not being the gone it's that weak as more and of world the given they've as handsets about a seeing that XX% weakness. you rest the June

As look quarter, a as very point beyond the you this full at look our for kind is business if and fiscal XG leading really of it's the when uncertain feel the recovery happens, guidance. the third year indicator but comfortable which to it's -- you number, with how at

so And the the XXX of reiterating we calendar to million XXX for and year. guidance are XXX units

Chris Caso

Okay. Understood.

to of there. price you ramps to second June half revenue What year second the And MSM what was go year? to mix and as imagine that about go down comes that like trend What penetrates MSM. you go calendar into Second the for you seemed some per that half the second question as quarter. points seasonally consistent expect of I'd it do you you You've be the flagship on year? previously in got of some with the as revenue XG go as you the the is new new into the the said half

Akash Palkhiwala

Yes.

guidance So have changed given previously you. we versus fundamentally nothing the has

like from evidence us RF on on side, there's that core to we attach, which now the As end which to top of. of then the adds feel go seen And XG opportunity ASP ASP. we XG, the front chipset an also you've on the for

seen guidance that well in results gross March has margin a performance. in to as quarter and quarter implied now In June strong addition our very what we've the

gross So on margin of for the really combined with ASP us strength the delivers bottom line. increase kind the

the other OEMs and framework so perspective, of And we year from as framework at rest a that the still hold. look should the

Operator

Thank you.

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

Blayne Curtis

the a my haircut. XX%. would taking here. I for I'm And just XX% when QTL; said curious market Thanks I'm taking you're be guys. explaining down Maybe thought Hi, confused question. you're you

So if that be you would that could just helpful. clarify

And then the second these you two part guess signed agreements. I the of question, new

in curious And noted comment essential are. just patents. patents what taking if filing your portfolio deals a I the your of the I'm seen rates ones you that all the patents? if royalty just just your you the terms on think that's patent versus taking essential you've headwind these in customers body with of just are can

Akash Palkhiwala

to June way $X.X with normal QTL QTL. XX%, midpoint forecasted a is of handset Yeah. $X.X get -- the business, be it we think to market XX% to that for billion the about forecast Blayne. We Hi, From you of a perspective, the we $XXX -- of with in reduction run the billion the if QTL for quarter range of the range applied a rate would million of billion. to the range reduction $X midpoint market for

the guidance. So it's reflecting weakness revenue on straightforward pretty methodology the really market in

Alex Rogers

Alex. is this Blayne, QTL position. And a in Look really is good

signed and agreements and to negotiated and get we license the OPPO did. expected Vivo the We

agreements So $X.X run $X Those absent products. are COVID-XX. billion agreements the those billion are multimode covering to long-term consistent worldwide with rate SEP

And we of is top all the Huawei. got Any fully OEM so signed major but basically up. OEMs,

for we the And don't have a renewals of so number any out. next that years it's -- ways so

in it. way XXXX I don't it subject have opposite and licensing And ongoing. actually agreements well SEP the to see we're kind Huawei the with in I the program executed still with as good negotiation we've a So a position headwinds. position launched see XG one really We back that being around. signed to really where we on of come

Blayne Curtis

Thanks. Great.

Operator

Thank you.

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

Tal Liani

Hi, I two questions. have guys.

two $XX. then MSM implied to quarters up first ago, -- one the guiding pricing, now you're is it And for went $XX. was $XX Now pricing

and that only So What factors is from ago? are it are the quarters what the up driving question puts takes here? are much the two so

the some then just on second And you quarter. question if next give can assumptions is, color your

assuming, that you Thanks. What kind shipments previous of assumptions it's it have environment You unit What you said, said QTL mean? for quarter? unit you're below your the for XX% that does next – do guidance.

Akash Palkhiwala

Hi, Tal.

to quarter, our were December factors. second the there from first MSM quarter, outlined On previously, key quarter three the per going we as drivers had the revenue fiscal trend, fiscal

XG First is, pricing chipset the chipset. us helping the side, transition from the XG on to core

high-tier front phones. that's their a new design and that, come when XG premium and you Second in of RF is to top with the of then quarter, chips several typical launches. seasonal on traction end shift the OEMs when is third that because new out March works along favor And launch go from mix the our our our December

the I'm delivered from we go margin with were we you of When changes, along the shift on and that and do expanding we happy devices. you percentage. June these outlined premium that for those quarter, towards to which look three results. those gross forward -- assumptions extremely quarter that able outlined our When to I March the is mix one factors so high-tier

kind you it. your more have fundamental given but rather chips being it's in historical of a revenue the quarter a revenue and function gross We're per continuing of that bit, strong are per that of high to our extremely on reduces margins top a see a change in which MSM business. in change So MSM, than trends which still sold

Tal Liani

is high forward, is we the to -- going environment XXs new going this get XX to of need low-XXs the from used And kind to high-XXs?

Akash Palkhiwala

forward. of increase XG is, kind given, really framework this back the But number to would very a in you to an not see that we past, if we've lead from to the been that expect to we're which yours. where we've with going X.Xx go guiding So framework of similar

Tal Liani

Got it.

Akash Palkhiwala

what looking and of handsets. reduction QTL, of range of is of -- seeing on in $X.X our terms midpoint normal we're question the the at second we're really And guidance the billion forecast then on revenue XX% your is

we're so, we which units we'd that for overall And forecast had that was given, the prior guidance the the X.X annual of to reflected roughly of reflected it, or billion applying to flat was kind that calendar in year. which

you it are and we market of similar reflective taking that think year So of of that's reduction as was to last a should off a that.

Operator

you. Thank

comes your Seymore proceed Our next Deutsche with with Bank. Please from question. question Ross

Ross Seymore

for Hi, that to the guys QTL out want were in a moving side? the kind just XX% that in on weakness did hit letting might that the for you relative you and Qualcomm units. me the $X.XX are a job impact, through take especially June great us what you I some Akash, as COVID I the QTL on as to of the in saying general side. ask reduction If start question. market EPS guys. applying of quarter QCT Thanks far parts side to well? QCT could the puts be said there is takes Or as walk on to guidance,

Akash Palkhiwala

Sure, sure.

a outlined of So, impact Ross, $X.XX combination greater it's and an we and QCT than of QTL.

you've million. taking think got to It's midpoint $XXX a I calculation. delta The of our really billion $XXX the and QTL. So $X.XX of math $X.X that midpoint it guidance million of the part on is comparing

side, of they're that signal's reflects QCT last of, looked points. weakness data have in over couple at seeing a we've we from weeks, receiving the OEMs the four sell-through. On of the One the which the three been kind or how is, bottoms-up the changed kind

impact a factors those We has to we have we looked estimate been and our it's at certain QCT. where on And combination their OEMs share. that in also higher of regions the what sell-through use

Ross Seymore

is any side picture was now anything XX% this. negotiations, And and a with quarter? Vivo relatively OPPO it that billion your the to housekeeping on my then bigger QTL follow-up, Got item side, of I guess, just a the billion going kind on weaker got market the March of to line How you. as sort updates then And finally on the in estimate in done? $X question $X.X Huawei successfully you the then the if And and FTC. one

Akash Palkhiwala

Yes.

things there a in our went the QTL that So couple of are quarter, favor. side on the for March

China was handsets. the First the is we the The impact that at regions and regions. more we XX% much more -- in so it the that on the less in the other of weakness weakness in regions mix saw, came other If on in later look quarter.

so, from translates into how And which OEMs. with perspective mix impact impacted combination devices dollar a then in a terms is got of tier a and which that of

key So that's of factor. kind one

was our second estimates, kind my royalty we The had to normal previous I part updates as factor, said some of in of also is remarks, which licensing prepared program.

see changes some received reporting updated we based You on from OEMs.

bit as little that of the So we well. had quarter in a that helped

Alex Rogers

this So, Alex. is

Let me the two question. the of handle parts last

deal. new binding the lot set the also ongoing both we're negotiation working and a that think invalidate trying FTC, as do the touch negotiate But in appeal. neither So discussed a in first to agreements. have a process. new is, arbitration still we've not on engaged thing previously, respect has to decided back the going a court look point And confidence to still for think important forward, parties that and discussions of I the did is basic to to a terms Huawei the right yet. I are We're we seek to but go decision With party the the district have of existing it's merits to deal

agreements. in not we and it continue is notion this And factor, context. the agreements major are agreements way are during court after, that these And the with going out. a OEMs issue and every never that to came many, was away many honor this an essentially going other not their actually licensees up so -- opinion OEM the these because before signed And to

the going So that the FTC change. again, to however not turns matter aspect is out I decision of think

Operator

Thank you.

Matt from comes with question next Cowen. question. Ramsay proceed with Please Our your

Matt Ramsay

I think make on to earlier data couple them Good you Thank to I Yes. a very just you I sure points Cristiano, want got much. mentioned afternoon. of follow-up right.

And promotional bit this right And and about in of You of XG carrier China? I as of be XG device you Thanks. about subsidies markets the of of the environment, through something said the in kind world XG may XX% launches. sort the have that those at like China point XG? cascading and carriers units the how a you of promotion talk turns little and if aggressive rest world rest the aggressive on how maybe XX% think could

Cristiano Amon

you, for question. your Matt Thank

So let one. first me address the

the XX% December. saw sell-in in reached for the we data XX% XG point is month is March. penetration demand of So is That from what up in

see So month which to continued in the XG. XG devices which China different launched all getting market phone data is points. actually price XG, models of that the transition the you can other towards XX% of March the was shows And the point in to all the

saw the lot if $XXX saw further a some total So at our And remains you position which strong. remember very quarter, think XXX, to devices. of units Snapdragon points think And last of validate driving with XG with the going volume. XG that I is China China we platform, is our be for price we year the I and for that

Now to we question. your other questions about the -- XG rollout. an What interesting it's

completed where auctions been we've like seen Europe while example What places delays not some some is have all the have in in yet places. think for I in we acceleration other seen countries.

XXXX. build-out, to traffic. end in sub-X of within advantage probably in millimeter had example, before some launched the that millimeter the United quarter For taking carriers scheduling announced of and Korea States, actually and both the of XG ahead Telecom wave less are note Japan And the Korea wave important

probably environment you. have in may puts And underscored connectivity telecom. story the the takes. But Thank and general, importance I of if XG this you in think current remain So some anything intact.

Operator

Thank you.

your comes from Please with Bernstein Rasgon, question proceed question. Research. Stacy next Our

Stacy Rasgon

Thanks QTL for taking guys. question. in wanted the revisit quarter. Hi, my I to

X%. down was don't know know Can well it? were I I only It been were was much that $XX mean, year-over-year. XX% catch-up of So mentioned you driver coming units as would QTL But Was was you for the the your the catch-up any -- revenues us the you were of quarter had year-over-year. catch-up? that Like or know or very the and OPPO market China sequential. without benefits what payment-wise million have down some I mean must catch it take, year-over-year XX% down give adjustment or XX% like as how sizable. mix from it I have an adjustment and Vivo? to mean I ups. units of what give relative idea QX in if been I

Akash Palkhiwala

Yeah, Akash. hi, Stacy, it's

to kind the address as of in get think So way updates familiar units from from you're their in finish maybe licensees and get just and the we the quickly -- We the model reports ASPs. they QTL of as past, catch-up we very with The the kind up the of works sometimes I them comments. this. accounting future,

that So a results catch-up. in usually

The that settlements well. catch-ups then are audit would would second be we licenses, us that if a up is finalizing as there give that And if really end also. factor

had cause are couple several And we've as So smaller. is there know, in consistently. of it. you factors that a these our history Usually, number the

quarter time. had But it. of impact a rate run Clearly, we a these this is – about talk And we factors. specifically don't we in each there So larger

Stacy Rasgon

[Indiscernible].

Akash Palkhiwala

the clearly a number that's but highlighted not it why it We is it. are disclosing specific we impact significant this and outlined point, at and

were that at clearly -- this units had fact was factor significant is it handset an the well. of was impact there I China the were they other and that a end The as I decline. portion Also lower think mentioned

non-handsets, saw If you total we in look at X% we to the of impact somewhere -- on range estimate units. X%

average XX%. smaller weighted the than the the was market impact So across

Stacy Rasgon

below does guess XX% expectations. quarter your reverse I XX% the QTL below then, only normal revenues And market you're like it. that guiding next but your guiding expectations, you're Got because

unit the Is there boost? QX. to driving what's like So on what's XG relative going revenues in -- Is shortfall because it is that that's that Is mix? it? that the it the actually helping

Akash Palkhiwala

Yeah, that's right Stacy.

impact to that it's factor quarter. that's devices that's why full down that the is benefiting the So handset of is and there in a devices fiscal third XX% non-handset the not versus

Stacy Rasgon

one-timers not It's one or --any anything?

Akash Palkhiwala

mean, we see might benefits some updated I We as something of we happens that but not kind as licensees forecast. we really and quarter, the expecting get are that. from finish not we reporting

Operator

you. Thank

your Please question Capital RBC next comes Mitch Steves with proceed Our Markets. question. with from

Mitch Steves

two combine into Thanks for Hi, going of because taking one guys. related. kind they're my I'm to question.

China's that. a related it's couple So online. of questions coming to hear back just had good to I that

number a stockpile how additional of that trying really ahead we inventories one potential not know to So is, of U.S.-China a do little worse? China getting bit is relationship

going what And rough then sort about metric look recovery XXXX? the not the majority terms next Thank you of is think in quantitative? terms to think any can to is like or is of granularity to mean, of, like year you. give investors you to there eyeball think sort be. going impact it's I secondly what even just any I in are of looking any, guys if out of the

Akash Palkhiwala

see in would mean, lot at a sales with actually getting looking out Typically sell-in Chinese of obviously matching decline the in sense we out I New Year of the and through there's in inventory them is and it slight and we've And China. device shaping our chipsets inventory consistent versus the profile of the you expectations March how Well, following quarter. time inventory a in spend process. decline seen been a play the a

Steve Mollenkopf

for the a we if respect you terms in situation. look And say Mitch think I think year prepared better fiscal With we is fiscal is within of position lays that would ahead. company this view opportunity to economic in we're general the at the need to Steve. I be we that XXXX, XXXX, the much mean,

how for XXXX be telemedicine and definitely we served to XG think connectivity. to some the -- point. just this really desire this it. the the tele some to thinking I mean need of then here and work-from-home from through near-term in is XG the the will other be getting there'll we're the launch -- we've I thing about infrastructure and at increase be -- market that we're prepared desire And educate-from-home, That's

Mitch Steves

just in recovery So more of of of it or You-shape like side? being of no any terms like sort the comment a shape smartphone for

Steve Mollenkopf

Yeah.

point. appears. been trying internally what talked at advantage trying the to terms to haven't we've We of we give this our really take a we're terms in sure prepared than as in about are recovery make shape to any And that other shape, talked about that we've of company, market of

next trying at then and market we're positioning really And least can to quarter. company, looks of the best how communicate how the over so we in the that's the terms

Operator

Thank you.

C.J. Muse question next your with Our question. proceed comes with Evercore. Please from

C.J. Muse

preference hoping Yeah, recover. of customers' good from signals first I they're the are question. I customers points China the question, in view? price hearing taking afternoon, the taking underpins of in mix I to terms world your could perhaps speak they you're as rest perhaps and what was what thank guess, seeing, there. And you you guess you're overall What bringing for recovery then your to what that

Cristiano Amon

a continuing as had now shift This their the we've markets other it's but be Thanks think the your phones outlined and only it sell-in, frequent, Look, to to why can with are think not we And since what is C.J. only market we're sell-out But to believe customers kind engagement of a across for Cristiano. tracking right we good our we see launch. very recover. That's model have see I the of time. not I seeing, in in be lot question. of very market in China started globe. expect China, we what Akash

C.J. Muse

the times of based back terms launch the year. Does on the then rate XG rate on that do RF Or seeing in based what and the what on flagship there And helpful. know attach side seeing you're upside what attach coming on move XG front-end you're to include in the half in you That's X.X both content Okay. of there front-end? and the side? from is

Cristiano Amon

Okay.

couple of a updates. So

quarter In our have XG designs. it with been absolute devices those repeat end them went of of starting attach. with modem-to-antenna that to think quarter for And this I continue solution have in happy of now we up, have continue in the total to got the reflected very we far expect is for We're inflection results that now It repeat, We business this and to And so XG started continue. virtually RF all the majority to be XXX number meaningful. front-end have tracking that announcing. an we a to QCT. front the

about even like-for-like even metric from market for the that down XXX the that tier see holds tier as or To flagship scale that X.X. to of the -- your XXX remain And question tiers metric we'll lower us. XXX X.X in the true or tiers

Operator

Thank you.

comes question Our Arcuri question. with Timothy your with UBS. Please from next proceed

Timothy Arcuri

had I X. Hi, I guess

have the of at kind of sort I on really they're an signed. Huawei, same the we on time Apple turning And Huawei. because First guess heat now obviously the outlier U.S. all Vivo and have OPPO, is up

they sign why would of has the China more So one now, in this. of if sort points you're of obvious leverage all that

do question arbitrate to you go is of sort there with how And the So on this you just decide with when do them? let them? long

Alex Rogers

a one as environmental is that are -- some maybe view you of are in can view another can this Look Alex. Others number direction. direction. So, there in factors

negotiated Phase a the a For example resolution environment here. for is good one good moving outcome toward --

this still in we're negotiation. Look

that have at so, something or arbitration we And a still some to whether to this we as conclusion. out. question to drive of want The months is looking are we not still trigger

this And this so, keep going get with thing if and to we resolved. can we're see moving

than answer So for other I don't an that. have you

Timothy Arcuri

a guess I it Okay. OPPO on catch-up is footnote is know question -- in there and the just June specifically? there on in I help from was licensees. around Can question second Because footnotes quantify and near my like sounds The Vivo. you payments in prior this the are June. the Akash question but these some term. us what catch-ups are says two then June

that the will two Thanks. in So I of assume all June? for licensees true-up those be

Akash Palkhiwala

Yes.

going going to the accounts pay they're that So outstanding that's this really receivables forward. is

with a And that those them there's license on finish so an them payments. remaining and payments to schedule outstanding a of for kind are very alignment as agreement part our near-term of

Operator

Thank you.

your comes Susquehanna. Christopher from proceed with Please with question Rolland question. Our next

Christopher Rolland

it into perhaps tying that for well? talk big XXXX business size business guys, How and you seen now is perhaps your as question. in TDK a adjacencies the Hi acquisition of since about adjacency we've in earlier changes Can then XXXX expectation any and that the in business? growth and

Akash Palkhiwala

hi Chris. Yes,

those we grow Day fiscal to So -- sized matching with going XXXX. And year for we the the X% growth. had market kind approximately fast then on of how when scale businesses at target the of Analyst market total or our the our of gave beating and an is forecast assumption

the those still businesses track for kind on that's along lines. and forecasting those framework And we're so of

we've environment including benefit and businesses in of from things the the we strength have our In they of seen seen several those work-from-home one networking of environment this lot areas. a IoT is and

Christopher Rolland

Excellent even is and module then various just tying into parts conditions? the for would up RF within situation it a antenna more possible any you technically which specifically. Are the your break Or there is example, transceiver? or deal this just all about sell sub-X? sell you thinking that? could an even you for guys How For you them the and wave nothing Or millimeter individually? for or are

Cristiano Amon

clear we the opportunities Cristiano. sell question. we're about baseband we antenna. that, advantages But of competitors' starting to seen Look some Chris, of having number Hey well. as it's have silicon been interfaces. very modem of technical there Thanks have the is said to open And different a our in that the for

solution. I So the flexibility an you'll actually probably feel you have you still to best we but antenna see from performance when integrated think will that Qualcomm, strongly get modem

Operator

you. Thank

proceed with with Please from your Our Arete Simpson Brett comes next question Research. question.

Brett Simpson

then with XXX that to between MSMs, between ramp Akash. Yes, much. into and the help XG? up? in quarter now the million million which Can you've particularly how just A starts just XG thanks guided you March that MSMs and the for looking XG in June, us look would split the XXX to And very XG question again maybe XXXG

Akash Palkhiwala

Yes. Brett. Hi,

look tier has our Huawei. premium way XG clearly is, not units. important for a metric if at the of we outside happened and has every tier, our of used key the launches kind the launch So high you pretty – tier that much should in premium MSM chip premium penetration. mean of disclosed The it we've of think about an you in far so us it's breakdown terms I

and premium a launches one volume us it's and of so to mix XG way for different regions be number of that XG. in back versus for a really could kind And into tier

solutions. it we We sense the guys look so us can XG. at how disclosures design traction – will as of for just our XG we demand have a keep customers. but across pipeline strong premium get at very gives we seeing win go not – well in and across that we're sense we'll it you And a Overall high forward as all additional mid-tiers tier gives

Brett Simpson

Thanks. days. And Akash. just wanted in the in Cristiano. Okay. given to your follow-up XX Thanks, my last millimeter the for all wave, market the maybe get perspective changes On I

your for we millimeter millimeter and this much. smartphones wave operators. in Is grand for U.S. track? that wave. overall And the think about of in past mandatory you launch very the many we Korean see – on millimeter a mandatory year? for is a volumes Japanese And how a should then a think talked I about U.S. feature still there's the scheme would flagship XG wave Thanks in

Cristiano Amon

the Brett, of as have thanks for question. wave the a And current probably earlier the the mentioned environment Yes remains it millimeter accelerated market. build-out reality. in had cases we some new

United So in continues for a requirement flagships be the States it to market.

in announced wave millimeter provide the will millimeter markets the Telecom as IGA start other as we're expect service calendar we announced continue within that saw [ph] to they year. wave capability We down launch seeing you'll across chipsets. And to – Japan coming see our that going to bringing Korea high-tier well. to that this as the expect We expected. Korea XXXX,

Operator

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

Steve Mollenkopf

Yes. Thank you.

and I on they been than we're Qualcomm. with the environment. for important a more today. never all of work. the have execution of First work to to obviously want just strong everyone probably employees their had And I very that say unusual want working We even wanted respect to a with think thank to technologies I thank very you quarter are hard everyone that I to the also remind all

you to thank look advantage of we and together. very your much hard everything forward we're So work that for taking putting

So thank next you you quarter. everybody. See

Operator

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

disconnect. now may You

QUALCOMM (QCOM) 29 Apr 202020 Q2 Earnings call transcript