Q3 Fiscal 2016 | Q3 Fiscal 2015 | Year-Over-Year Change | Q2 Fiscal 2016 | Sequential Change | |||||
Revenues | $6.0B | $5.8B | +4% | $5.6B | +9% | ||||
Operating income | $1.6B | $1.2B | +29% | $1.4B | +13% | ||||
Net income 1 | $1.4B | $1.2B | +22% | $1.2B | +24% | ||||
Diluted earnings per share 1 | $0.97 | $0.73 | +33% | $0.78 | +24% | ||||
Operating cash flow | $1.8B | $2.1B | (13%) | $0.7B | N/M |
Q3 Fiscal 2016 | Q3 Fiscal 2015 | Year-Over-Year Change | Q2 Fiscal 2016 | Sequential Change | |||||
Revenues | $6.0B | $5.8B | +3% | $5.5B | +9% | ||||
Operating income | $2.0B | $1.7B | +19% | $1.9B | +8% | ||||
Net income | $1.7B | $1.6B | +7% | $1.6B | +11% | ||||
Diluted earnings per share | $1.16 | $0.99 | +17% | $1.04 | +12% |
• | The third quarter of fiscal 2016 GAAP and Non-GAAP results included: |
◦ | $235 million of revenues, or $0.11 per share, due to the recognition of previously deferred royalty revenues related to the dismissal of the arbitration with LG Electronics, Inc. |
• | The second quarter of fiscal 2016 GAAP and Non-GAAP results included: |
◦ | $266 million of revenues, or $0.13 per share, due to the termination of an infrastructure license agreement resulting from the merger of two licensees. |
• | The third quarter of fiscal 2015 GAAP results included: |
◦ | $142 million of charges, or $0.08 per share, that resulted from an impairment of goodwill and long-lived assets related to one of our display businesses. |
Q3 Fiscal 2016 | Q3 Fiscal 2015 | Year-Over-Year Change (1) | Q2 Fiscal 2016 | Sequential Change (1) | |||||
MSMTM chip shipments | 201M | 225M | (11%) | 189M | +6% | ||||
Total reported device sales (2) | $62.6B | $60.4B | +4% | $70.1B | (11%) | ||||
Est. reported 3G/4G device shipments (approx.) (2) | 321M - 325M | 289M - 293M | +11% | 335M - 339M | (4%) | ||||
Est. reported 3G/4G average selling price (approx.) (2) | $191 - $197 | $205 - $211 | (7%) | $205 - $211 | (7%) |
(1) | The year-over-year and sequential changes for estimated reported 3G/4G device shipments and average selling prices are calculated at the midpoints. The midpoints of the estimated ranges are used for comparison purposes only and do not indicate a higher degree of confidence in the midpoints. |
(2) | The third quarter of fiscal 2015 and 2016 are based on sales by our licensees in the March quarter as reported to us in the June quarter, and the second quarter of fiscal 2016 is based on sales by our licensees in the December quarter as reported to us in the March quarter. |
Q4 FY15 Results | Current Guidance Q4 FY16 Estimates | |||||||
Revenues | $5.5 | B | $5.4B - $6.2B | |||||
Year-over-year change | decrease 1% - increase 14% | |||||||
GAAP diluted earnings per share (EPS) | $0.67 | $0.84 - $0.94 | ||||||
Year-over-year change | increase 25% - 40% | |||||||
Less diluted EPS attributable to QSI | $0.01 | $0.01 | ||||||
Less diluted EPS attributable to share-based compensation | ($0.12 | ) | ($0.13 | ) | ||||
Less diluted EPS attributable to other items (1) | ($0.12 | ) | ($0.09 | ) | ||||
Non-GAAP diluted EPS | $0.91 | $1.05 - $1.15 | ||||||
Year-over-year change | increase 15% - 26% | |||||||
Metrics | ||||||||
MSM chip shipments | 203 | M | 195M - 215M | |||||
Year-over-year change | decrease 4% - increase 6% | |||||||
Total reported device sales* (2) | approx. $58.3B | approx. $57.0B - $65.0B | (3) | |||||
Year-over-year change | decrease 2% - increase 11% | |||||||
*Est. sales in June quarter, reported in September quarter |
(1) | Our guidance for diluted EPS attributable to other items for the fourth quarter of fiscal 2016 includes a loss per share of $0.07 for acquisition-related items. |
(2) | Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based and CDMA/OFDMA multimode subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period (collectively, 3G/4G devices). The reported quarterly estimated ranges of average selling prices (ASPs) and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some licensees report sales net of permitted deductions, including transportation, insurance, packing costs and other items, while other licensees report sales and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. In addition, certain licensees may not report (in the quarter in which they are contractually obligated to report) their sales of certain types of subscriber units, which (as a result of audits, legal actions or for other reasons) may be reported in a subsequent quarter. Accordingly, total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until such particular period. |
(3) | Our guidance range for the fourth quarter of fiscal 2016 total reported device sales reflects estimated 3G/4G total reported device sales that we currently expect to be reported to us, which includes an estimate of some prior period activity (i.e., devices shipped in prior periods) that may be reported to us. |
SEGMENTS | QCT | QTL | Non-GAAP Reconciling Items (a) | Non-GAAP Results | QSI | Share-Based Compensation | Other Items (b) (c) (d) | GAAP Results | |||||||||||||||
Q3 - FISCAL 2016 | |||||||||||||||||||||||
Revenues | $3,853 | $2,038 | $141 | $6,032 | $12 | $— | $— | $6,044 | |||||||||||||||
Change from prior year | — | 6 | % | N/M | 3 | % | N/M | 4 | % | ||||||||||||||
Change from prior quarter | 15 | % | (5 | %) | N/M | 9 | % | — | 9 | % | |||||||||||||
Operating income (loss) | $2,032 | ($2) | ($235) | ($203) | $1,592 | ||||||||||||||||||
Change from prior year | 19 | % | 90 | % | 13 | % | (12 | %) | 29 | % | |||||||||||||
Change from prior quarter | 8 | % | N/M | 5 | % | 10 | % | 13 | % | ||||||||||||||
EBT | $365 | $1,749 | $22 | $2,136 | ($5) | ($235) | ($203) | $1,693 | |||||||||||||||
Change from prior year | 26 | % | 6 | % | N/M | 12 | % | 90 | % | 13 | % | (12 | %) | 21 | % | ||||||||
Change from prior quarter | N/M | (6 | %) | N/M | 13 | % | N/M | 5 | % | 10 | % | 15 | % | ||||||||||
EBT as % of revenues | 9 | % | 86 | % | 16 | % | 35 | % | 28 | % | |||||||||||||
Net income (loss) | $1,729 | ($4) | ($197) | ($84) | $1,444 | ||||||||||||||||||
Change from prior year | 7 | % | 85 | % | 8 | % | 55 | % | 22 | % | |||||||||||||
Change from prior quarter | 11 | % | N/M | 10 | % | 58 | % | 24 | % | ||||||||||||||
Diluted EPS | $1.16 | $0.00 | ($0.13) | ($0.06) | $0.97 | ||||||||||||||||||
Change from prior year | 17 | % | N/M | — | 50 | % | 33 | % | |||||||||||||||
Change from prior quarter | 12 | % | N/M | 13 | % | 54 | % | 24 | % | ||||||||||||||
Diluted shares | 1,486 | 1,486 | 1,486 | 1,486 | 1,486 | ||||||||||||||||||
Q2 - FISCAL 2016 | |||||||||||||||||||||||
Revenues | $3,337 | $2,135 | $67 | $5,539 | $12 | $— | $— | $5,551 | |||||||||||||||
Operating income (loss) | 1,885 | 3 | (247) | (226) | 1,415 | ||||||||||||||||||
EBT | $170 | $1,857 | ($130) | 1,897 | 46 | (247) | (226) | 1,470 | |||||||||||||||
Net income (loss) | 1,552 | 30 | (220) | (198) | 1,164 | ||||||||||||||||||
Diluted EPS | $1.04 | $0.02 | ($0.15) | ($0.13) | $0.78 | ||||||||||||||||||
Diluted shares | 1,498 | 1,498 | 1,498 | 1,498 | 1,498 | ||||||||||||||||||
Q3 - FISCAL 2015 | |||||||||||||||||||||||
Revenues | $3,853 | $1,931 | $48 | $5,832 | $— | $— | $— | $5,832 | |||||||||||||||
Operating income (loss) | 1,709 | (21) | (271) | (182) | 1,235 | ||||||||||||||||||
EBT | $289 | $1,654 | ($43) | 1,900 | (49) | (271) | (182) | 1,398 | |||||||||||||||
Net income (loss) | 1,611 | (26) | (213) | (188) | 1,184 | ||||||||||||||||||
Diluted EPS | $0.99 | ($0.02) | ($0.13) | ($0.12) | $0.73 | ||||||||||||||||||
Diluted shares | 1,629 | 1,629 | 1,629 | 1,629 | 1,629 |
(a) | Non-GAAP reconciling items related to revenues consisted primarily of nonreportable segment revenues less intersegment eliminations. Non-GAAP reconciling items related to earnings before taxes consisted primarily of certain research and development expenses, selling, general and administrative expenses, other expenses or income, interest expense and certain investment income that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit. |
(b) | At fiscal year end, the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is included in the tax provision (benefit) in the “Other Items” column. See the “Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates” herein for further details. |
(c) | Details of amounts included in the “Other Items” column for the current period are included in the “Supplemental Information and Reconciliations” and the “Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates.” |
(d) | Details of amounts included in the “Other Items” column for prior periods are included in the news releases for those periods. |
Q3 - FISCAL 2016 | ||||||||||||||||||||
($ in millions) | Non-GAAP Results | QSI | Share-Based Compensation | Other Items (a) | GAAP Results | |||||||||||||||
Cost of equipment and services revenues | $2,395 | $9 | $10 | $120 | $2,534 | |||||||||||||||
Research and development expenses | 1,093 | 1 | 152 | 22 | 1,268 | |||||||||||||||
Selling, general and administrative expenses | 512 | 4 | 73 | 31 | 620 | |||||||||||||||
Other expenses | — | — | — | 30 | 30 | |||||||||||||||
Interest expense | (75) | — | — | — | (75) | |||||||||||||||
Investment income (loss), net | 179 | (b) | (3) | (c) | — | — | 176 |
(a) | In the third quarter of fiscal 2016, other items excluded from Non-GAAP EBT included $124 million of acquisition-related charges, $44 million in asset impairment charges, $30 million of restructuring and restructuring-related charges related to our Strategic Realignment Plan and $5 million of other severance costs. |
(b) | Included $152 million in interest and dividend income and $52 million in net realized gains on investments, partially offset by $20 million in other-than-temporary losses on investments and $5 million in other net investment expense. |
(c) | Included $13 million in other-than-temporary losses on investments and $11 million in equity in losses of investees, partially offset by $17 million in net realized gains on investments and $4 million in interest and dividend income. |
Q3 - FISCAL 2016 | |||||||||||||||||||||||||||||||
($ in millions) | Non-GAAP Results | QSI | Share-Based Compensation | Other Items (c) | GAAP Results | ||||||||||||||||||||||||||
Income (loss) before income taxes | $ | 2,136 | $ | (5 | ) | $ | (235 | ) | $ | (203 | ) | $ | 1,693 | ||||||||||||||||||
Income tax (expense) benefit | (407 | ) | — | 38 | 119 | (250 | ) | ||||||||||||||||||||||||
Net income (loss) (a) | $ | 1,729 | $ | (5 | ) | $ | (197 | ) | $ | (84 | ) | $ | 1,443 | ||||||||||||||||||
Tax rate | 19 | % | 0 | % | (b) | 0 | % | (b) | (4 | %) | (b) | 15 | % | ||||||||||||||||||
12 MONTHS - FISCAL 2016 | |||||||||||||||||||||||||||||||
Non-GAAP Results | QSI | Share-Based Compensation | Other Items (d) | GAAP Results | |||||||||||||||||||||||||||
Estimated annual tax rate | 18 | % | 1 | % | (b) | 0 | % | (b) | (2 | %) | (b) | 17 | % |
(a) | Before adjustments for noncontrolling interests. |
(b) | The incremental effect of our Non-GAAP adjustments to the GAAP tax rate is calculated by allocating the difference between (i) the tax expense (benefit) calculated based on the GAAP tax rate and (ii) the actual or estimated tax expense (benefit) for each column. |
(c) | In the third quarter of fiscal 2016, the tax benefit in the “Other Items” column included a $101 million tax benefit for a worthless stock deduction, a $20 million tax benefit for the combined tax effect of other items in EBT and a $16 million tax benefit for the tax effect of acquisition-related items in EBT, partially offset by a $18 million tax expense to reconcile the tax provision for each column to the total GAAP tax provision for the quarter. |
(d) | In fiscal 2016, the estimated annual effective tax rate for the “Other Items” column includes tax benefits of $101 million for a worthless stock deduction and $79 million related to fiscal 2015 as a result of the retroactive reinstatement of the federal R&D tax credit, along with a tax benefit for the combined tax effect of acquisition-related items and other items in EBT. |
• | QSI is excluded because the Company expects to exit its strategic investments in the foreseeable future, and the effects of fluctuations in the value of such investments and realized gains or losses are viewed by management as unrelated to the Company’s operational performance. |
• | Share-based compensation expense primarily relates to restricted stock units. Management believes that excluding non-cash share-based compensation from the Non-GAAP financial information allows management and investors to make additional comparisons of the operating activities of the Company’s ongoing core businesses over time and with respect to other companies. |
• | Certain other items are excluded because management views such expenses as unrelated to the operating activities of the Company’s ongoing core businesses, as follows: |
• | Acquisition-related items include amortization of certain intangible assets, recognition of the step-up of inventories to fair value and the related tax effects of these items starting with acquisitions completed in the third quarter of fiscal 2011, as well as any tax effects from restructuring the ownership of such acquired assets. Additionally, the Company excludes expenses related to the termination of contracts that limit the use of the acquired intellectual property and third-party acquisition and integration services costs. |
• | The Company excludes certain other items that management views as unrelated to the Company’s ongoing business, such as major restructuring and restructuring-related costs, goodwill and indefinite- and long-lived asset impairments and litigation settlements and/or damages. |
• | Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Company’s ongoing Non-GAAP tax rate and after tax earnings. |
June 26, 2016 | September 27, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,885 | $ | 7,560 | |||
Marketable securities | 11,225 | 9,761 | |||||
Accounts receivable, net | 1,939 | 1,964 | |||||
Inventories | 1,338 | 1,492 | |||||
Deferred tax assets | — | 635 | |||||
Other current assets | 592 | 687 | |||||
Total current assets | 20,979 | 22,099 | |||||
Marketable securities | 13,922 | 13,626 | |||||
Deferred tax assets | 2,075 | 1,453 | |||||
Property, plant and equipment, net | 2,341 | 2,534 | |||||
Goodwill | 5,657 | 5,479 | |||||
Other intangible assets, net | 3,669 | 3,742 | |||||
Other assets | 2,143 | 1,863 | |||||
Total assets | $ | 50,786 | $ | 50,796 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 1,572 | $ | 1,300 | |||
Payroll and other benefits related liabilities | 874 | 861 | |||||
Unearned revenues | 535 | 583 | |||||
Short-term debt | 1,749 | 1,000 | |||||
Other current liabilities | 2,113 | 2,356 | |||||
Total current liabilities | 6,843 | 6,100 | |||||
Unearned revenues | 2,426 | 2,496 | |||||
Long-term debt | 10,024 | 9,969 | |||||
Other liabilities | 855 | 817 | |||||
Total liabilities | 20,148 | 19,382 | |||||
Stockholders’ equity: | |||||||
Qualcomm stockholders’ equity: | |||||||
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding | — | — | |||||
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,473 and 1,524 shares issued and outstanding, respectively | 169 | — | |||||
Retained earnings | 30,134 | 31,226 | |||||
Accumulated other comprehensive income | 344 | 195 | |||||
Total Qualcomm stockholders’ equity | 30,647 | 31,421 | |||||
Noncontrolling interests | (9 | ) | (7 | ) | |||
Total stockholders’ equity | 30,638 | 31,414 | |||||
Total liabilities and stockholders’ equity | $ | 50,786 | $ | 50,796 |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Revenues: | |||||||||||||||
Equipment and services | $ | 3,875 | $ | 3,840 | $ | 11,311 | $ | 13,459 | |||||||
Licensing | 2,169 | 1,992 | 6,059 | 6,366 | |||||||||||
Total revenues | 6,044 | 5,832 | 17,370 | 19,825 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of equipment and services revenues | 2,534 | 2,451 | 7,210 | 8,126 | |||||||||||
Research and development | 1,268 | 1,407 | 3,922 | 4,133 | |||||||||||
Selling, general and administrative | 620 | 621 | 1,817 | 1,749 | |||||||||||
Other | 30 | 118 | (270 | ) | 1,181 | ||||||||||
Total costs and expenses | 4,452 | 4,597 | 12,679 | 15,189 | |||||||||||
Operating income | 1,592 | 1,235 | 4,691 | 4,636 | |||||||||||
Interest expense | (75 | ) | (32 | ) | (221 | ) | (34 | ) | |||||||
Investment income, net | 176 | 195 | 403 | 634 | |||||||||||
Income before income taxes | 1,693 | 1,398 | 4,873 | 5,236 | |||||||||||
Income tax expense | (250 | ) | (215 | ) | (770 | ) | (1,029 | ) | |||||||
Net income | 1,443 | 1,183 | 4,103 | 4,207 | |||||||||||
Net loss attributable to noncontrolling interests | 1 | 1 | 3 | 2 | |||||||||||
Net income attributable to Qualcomm | $ | 1,444 | $ | 1,184 | $ | 4,106 | $ | 4,209 | |||||||
Basic earnings per share attributable to Qualcomm | $ | 0.98 | $ | 0.74 | $ | 2.76 | $ | 2.57 | |||||||
Diluted earnings per share attributable to Qualcomm | $ | 0.97 | $ | 0.73 | $ | 2.74 | $ | 2.53 | |||||||
Shares used in per share calculations: | |||||||||||||||
Basic | 1,471 | 1,608 | 1,487 | 1,638 | |||||||||||
Diluted | 1,486 | 1,629 | 1,500 | 1,661 | |||||||||||
Dividends per share announced | $ | 0.53 | $ | 0.48 | $ | 1.49 | $ | 1.32 |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Operating Activities: | |||||||||||||||
Net income | $ | 1,443 | $ | 1,183 | $ | 4,103 | $ | 4,207 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization expense | 356 | 297 | 1,092 | 888 | |||||||||||
Indefinite and long-lived asset impairment charges | 47 | 166 | 94 | 304 | |||||||||||
Income tax provision (less than) in excess of income tax payments | (47 | ) | 86 | (236 | ) | 159 | |||||||||
Gain on sale of wireless spectrum | — | — | (380 | ) | — | ||||||||||
Non-cash portion of share-based compensation expense | 235 | 271 | 730 | 793 | |||||||||||
Incremental tax benefits from share-based compensation | (1 | ) | (20 | ) | (3 | ) | (98 | ) | |||||||
Net realized gains on marketable securities and other investments | (69 | ) | (122 | ) | (142 | ) | (399 | ) | |||||||
Impairment losses on marketable securities and other investments | 33 | 55 | 138 | 161 | |||||||||||
Other items, net | (47 | ) | 2 | — | (29 | ) | |||||||||
Changes in assets and liabilities: | |||||||||||||||
Accounts receivable, net | (215 | ) | 100 | 39 | 438 | ||||||||||
Inventories | 90 | 281 | 169 | (122 | ) | ||||||||||
Other assets | 32 | 241 | 153 | (897 | ) | ||||||||||
Trade accounts payable | 126 | (261 | ) | 263 | (769 | ) | |||||||||
Payroll, benefits and other liabilities | 176 | (1 | ) | (434 | ) | (406 | ) | ||||||||
Unearned revenues | (319 | ) | (162 | ) | (270 | ) | (408 | ) | |||||||
Net cash provided by operating activities | 1,840 | 2,116 | 5,316 | 3,822 | |||||||||||
Investing Activities: | |||||||||||||||
Capital expenditures | (136 | ) | (366 | ) | (389 | ) | (815 | ) | |||||||
Purchases of available-for-sale securities | (5,185 | ) | (4,360 | ) | (12,960 | ) | (13,118 | ) | |||||||
Proceeds from sales and maturities of available-for-sale securities | 4,497 | 3,266 | 10,303 | 11,897 | |||||||||||
Purchases of trading securities | — | (339 | ) | (177 | ) | (1,034 | ) | ||||||||
Proceeds from sales and maturities of trading securities | 23 | 298 | 779 | 1,008 | |||||||||||
Proceeds from sales of other marketable securities | — | — | 450 | — | |||||||||||
Proceeds from sales of property, plant and equipment | 15 | 128 | 15 | 161 | |||||||||||
Acquisitions and other investments, net of cash acquired | (40 | ) | (134 | ) | (663 | ) | (325 | ) | |||||||
Proceeds from sale of wireless spectrum | — | — | 232 | — | |||||||||||
Other items, net | 32 | (23 | ) | 181 | 6 | ||||||||||
Net cash used by investing activities | (794 | ) | (1,530 | ) | (2,229 | ) | (2,220 | ) | |||||||
Financing Activities: | |||||||||||||||
Proceeds from short-term debt | 2,305 | 1,718 | 6,633 | 2,813 | |||||||||||
Proceeds from long-term debt | — | 9,937 | — | 9,937 | |||||||||||
Repayment of short-term debt | (2,505 | ) | (1,813 | ) | (5,885 | ) | (1,814 | ) | |||||||
Proceeds from issuance of common stock | 151 | 154 | 422 | 571 | |||||||||||
Repurchases and retirements of common stock | (100 | ) | (5,405 | ) | (3,698 | ) | (9,016 | ) | |||||||
Dividends paid | (781 | ) | (757 | ) | (2,208 | ) | (2,142 | ) | |||||||
Incremental tax benefits from share-based compensation | 1 | 20 | 3 | 98 | |||||||||||
Other items, net | (14 | ) | 50 | (32 | ) | 41 | |||||||||
Net cash (used) provided by financing activities | (943 | ) | 3,904 | (4,765 | ) | 488 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 7 | 5 | 3 | (10 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 110 | 4,495 | (1,675 | ) | 2,080 | ||||||||||
Cash and cash equivalents at beginning of period | 5,775 | 5,492 | 7,560 | 7,907 | |||||||||||
Cash and cash equivalents at end of period | $ | 5,885 | $ | 9,987 | $ | 5,885 | $ | 9,987 |