qcom-20220626

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q

_____________________

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 26, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 0-19528

QUALCOMM Incorporated

(Exact name of registrant as specified in its charter)

Delaware

95-3685934

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

5775 Morehouse Dr., San Diego, California

92121-1714

(Address of Principal Executive Offices)

(Zip Code)

(858) 587-1121

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	QCOM	Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock was 1,123 million at July 25, 2022.

QUALCOMM Incorporated

Form 10-Q

For the Quarter Ended June 26, 2022


		Page
	Risk Factors Summary	4

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Comprehensive Income	8
	Condensed Consolidated Statements of Cash Flows	9
	Condensed Consolidated Statements of Stockholders’ Equity	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53

SIGNATURES		55

Risk Factors Summary:

Our business is subject to numerous risks and uncertainties, including those described in the section labeled “Risk Factors” in “Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. These risks include, but are not limited to, the following:

RISKS RELATED TO THE CORONAVIRUS (COVID-19) PANDEMIC

•The coronavirus (COVID-19) pandemic had an adverse effect on our business and results of operations, and may continue to impact us in the future.

RISKS RELATED TO OUR OPERATING BUSINESSES

•We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium tier devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.

•Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).

•A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.

RISKS RELATED TO NEW INITIATIVES

•Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets. Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations.

•We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.

RISKS RELATED TO SUPPLY AND MANUFACTURING

•We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model. If we fail to execute supply strategies that provide supply assurance, technology leadership and reasonable margins, our business and results of operations may be harmed. We are also subject to order and shipment uncertainties that could negatively impact our results of operations.

•There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues.

RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION

•Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.

RISKS RELATED TO HUMAN CAPITAL MANAGEMENT

•We may not be able to attract and retain qualified employees, and our attempts to fully reopen our offices and operate under a hybrid working environment may not be successful.

RISKS SPECIFIC TO OUR LICENSING BUSINESS

•The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.

•Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business.

•Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.

RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES

•Our business may suffer as a result of adverse rulings in governmental investigations or proceedings.

RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION

•Our revenues depend on our customers’ and licensees’ sales of products and services based on CDMA, OFDMA and other communications technologies, including 5G, and customer demand for our products based on these technologies.

•Our industry is subject to intense competition in an environment of rapid technological change. Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees.

RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES

•Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.

RISKS RELATED TO INTELLECTUAL PROPERTY

•The enforcement and protection of our intellectual property may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property, could result in the loss of our ability to enforce one or more patents, and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property and by ineffective enforcement of laws in such jurisdictions.

•Claims by other companies that we infringe their intellectual property could adversely affect our business.

•Our use of open source software may harm our business.

GENERAL RISK FACTORS

•We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. We are also susceptible to declines in global, regional and local economic conditions generally. Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others.

•Our business may suffer due to the impact of, or our failure to comply with, the various existing, new or amended laws, regulations, policies or standards to which we are subject.

•There are risks associated with our debt.

•Tax liabilities could adversely affect our results of operations.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUALCOMM Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value amounts)

(Unaudited)


	June 26, 2022		September 26, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	2,676	$	7,116
Marketable securities	4,172		5,298
Accounts receivable, net	3,804		3,579
Inventories	5,418		3,228

Held for sale assets	950		—
Other current assets	1,979		854
Total current assets	18,999		20,075

Deferred tax assets	1,778		1,591
Property, plant and equipment, net	5,038		4,559
Goodwill	10,719		7,246
Other intangible assets, net	1,954		1,458
Held for sale assets	916		—
Other assets	7,616		6,311
Total assets	$	47,020	$	41,240

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	3,752	$	2,750
Payroll and other benefits related liabilities	1,578		1,531
Unearned revenues	463		612
Short-term debt	1,945		2,044

Held for sale liabilities	677		—
Other current liabilities	3,414		5,014
Total current liabilities	11,829		11,951
Unearned revenues	180		364
Income taxes payable	1,480		1,713
Long-term debt	13,600		13,701

Held for sale liabilities	128		—
Other liabilities	3,755		3,561
Total liabilities	30,972		31,290

Commitments and contingencies (Note 6)

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; 1,122 and 1,125 shares issued and outstanding, respectively	—		—
Retained earnings	15,830		9,822
Accumulated other comprehensive income	218		128


Total stockholders’ equity	16,048		9,950
Total liabilities and stockholders’ equity	$	47,020	$	41,240

See accompanying notes.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenues:
Equipment and services	$	9,266	$	6,428	$	27,365	$	19,109
Licensing	1,670		1,632		5,440		5,121
Total revenues	10,936		8,060		32,805		24,230

Costs and expenses:
Cost of revenues	4,816		3,404		13,767		10,325
Research and development	2,052		1,864		6,016		5,297
Selling, general and administrative	655		597		1,887		1,721
Other (Note 2)	(1,059)		—		(1,059)		—
Total costs and expenses	6,464		5,865		20,611		17,343

Operating income	4,472		2,195		12,194		6,887
Interest expense	(70)		(138)		(345)		(421)
Investment and other (expense) income, net	(163)		200		(321)		523
Income before income taxes	4,239		2,257		11,528		6,989
Income tax expense	(509)		(230)		(1,465)		(744)




Net income	$	3,730	$	2,027	$	10,063	$	6,245

Basic earnings per share	$	3.32	$	1.80	$	8.96	$	5.52



Diluted earnings per share	$	3.29	$	1.77	$	8.84	$	5.43



Shares used in per share calculations:
Basic	1,122		1,129		1,124		1,132
Diluted	1,134		1,145		1,139		1,151

See accompanying notes.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Net income	$	3,730	$	2,027	$	10,063	$	6,245
Other comprehensive income (loss), net of income taxes:
Foreign currency translation (losses) gains	(99)		10		(182)		64
Net unrealized (losses) gains on available-for-sale debt securities	(25)		2		(105)		(4)
Net unrealized gains (losses) on derivative instruments	121		(91)		394		(45)
Other losses	—		—		—		(3)
Certain reclassifications included in net income	6		(18)		(17)		(35)
Total other comprehensive income (loss)	3		(97)		90		(23)
Comprehensive income	$	3,733	$	1,930	$	10,153	$	6,222

See accompanying notes.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended
	June 26, 2022		June 27, 2021
Operating Activities:
Net income	$	10,063	$	6,245
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	1,272		1,157

Income tax provision less than income tax payments	(234)		(358)


Share-based compensation expense	1,510		1,238
Net losses (gains) on marketable securities and other investments	374		(487)



Other items, net	—		(49)
Changes in assets and liabilities:
Accounts receivable, net	(216)		1,052
Inventories	(2,201)		(509)
Other assets	(2,360)		39
Trade accounts payable	948		449
Payroll, benefits and other liabilities	(1,274)		805
Unearned revenues	(232)		(123)
Net cash provided by operating activities	7,650		9,459
Investing Activities:
Capital expenditures	(1,628)		(1,458)
Purchases of debt and equity marketable securities	(1,269)		(5,458)
Proceeds from sales and maturities of debt and equity marketable securities	1,960		4,482






Acquisitions and other investments, net of cash acquired	(4,743)		(1,284)

Proceeds from other investments	125		234
Other items, net	41		78
Net cash used by investing activities	(5,514)		(3,406)
Financing Activities:
Proceeds from short-term debt	3,065		2,185
Repayment of short-term debt	(3,066)		(2,185)
Repayment of debt of acquired company	(349)		—
Proceeds from long-term debt	1,477		—
Repayment of long-term debt	(1,540)		—

Proceeds from issuance of common stock	188		174
Repurchases and retirements of common stock	(2,629)		(2,595)
Dividends paid	(2,371)		(2,240)
Payments of tax withholdings related to vesting of share-based awards	(751)		(710)


Other items, net	(28)		(25)
Net cash used by financing activities	(6,004)		(5,396)

Effect of exchange rate changes on cash and cash equivalents	(50)		35
Net (decrease) increase in total cash and cash equivalents	(3,918)		692
Total cash and cash equivalents at beginning of period	7,116		6,707
Total cash and cash equivalents at end of period (including $522 million classified as held for sale)	$	3,198	$	7,399

See accompanying notes.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Total stockholders’ equity, beginning balance	$	13,328	$	7,424	$	9,950	$	6,077

Common stock and paid-in capital:
Balance at beginning of period	$	—	$	—	$	—	$	586
Common stock issued under employee benefit plans	1		—		188		174
Repurchases and retirements of common stock	(352)		(240)		(1,014)		(1,369)
Share-based compensation	540		449		1,577		1,309
Tax withholdings related to vesting of share-based payments	(189)		(209)		(751)		(710)
Stock awards assumed in acquisition	—		—		—		10
Balance at end of period	—		—		—		—

Retained earnings:
Balance at beginning of period	13,113		7,143		9,822		5,284

Net income	3,730		2,027		10,063		6,245
Repurchases and retirements of common stock	(148)		(390)		(1,615)		(1,226)
Dividends	(865)		(787)		(2,440)		(2,310)
Balance at end of period	15,830		7,993		15,830		7,993

Accumulated other comprehensive income:
Balance at beginning of period	215		281		128		207

Other comprehensive income (loss)	3		(97)		90		(23)
Balance at end of period	218		184		218		184

Total stockholders’ equity, ending balance	$	16,048	$	8,177	$	16,048	$	8,177

Dividends per share announced	$	0.75	$	0.68	$	2.11	$	1.98

See accompanying notes.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Significant Accounting Policies Update

Financial Statement Preparation. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with our Annual Report on Form 10-K for our fiscal year ended September 26, 2021. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three and nine months ended June 26, 2022 and June 27, 2021 included 13 weeks and 39 weeks, respectively.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 2. Composition of Certain Financial Statement Items


Inventories (in millions)
	June 26, 2022		September 26, 2021
Raw materials	$	267	$	267
Work-in-process	2,778		1,475
Finished goods	2,373		1,486
	$	5,418	$	3,228

Revenues. We disaggregate our revenues by segment (Note 7), by products and services (as presented on our condensed consolidated statement of operations), and for our QCT (Qualcomm CDMA Technologies) segment, by revenue stream, which is based on the industry and application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry and application requires the use of certain assumptions. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s (Qualcomm Technology Licensing) revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees’ sales of mobile handsets. QCT revenue streams were as follows (in millions):


			Three Months Ended				Nine Months Ended
	June 26, 2022	June 27, 2021	June 26, 2022		June 27, 2021


Handsets (1)			$	6,149	$	3,863	$	18,457	$	12,144

RFFE (2)			1,046		957		3,338		2,921
Automotive (3)			350		253		945		705
IoT (internet of things) (4)			1,833		1,399		5,033		3,517
Total QCT revenues			$	9,378	$	6,472	$	27,773	$	19,287

(1) Includes revenues from products sold for use in mobile handsets, excluding RFFE (radio frequency front-end) components.

(2) Includes all revenues from sales of 4G, 5G sub-6 and 5G millimeter wave RFFE products (a substantial portion of which are sold for use in mobile handsets) and excludes radio frequency transceiver components.

(3) Includes revenues from products sold for use in automobiles, including telematics, connectivity and digital cockpit.

(4) Primarily includes products sold for use in the following industries and applications: consumer (including computing, voice and music and XR), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, transportation and logistics and utilities).

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were as follows (in millions):


	Three Months Ended				Nine Months Ended
	June 26, 2022 (1)		June 27, 2021 (2)		June 26, 2022 (1)		June 27, 2021 (2)
Revenues recognized from previously satisfied performance obligations	$	260	$	170	$	578	$	258

(1) Primarily related to certain QCT sales-based royalty revenues related to system software, certain QCT customer incentives and QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due).

(2) Primarily related to QCT customer incentives, the release of a variable constraint against revenues not previously allocated to our segment results and QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due).

Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In the nine months ended June 26, 2022 and June 27, 2021, we recognized revenues of $482 million and $437 million, respectively, that were recorded as unearned revenues at September 26, 2021 and September 27, 2020, respectively.

Remaining performance obligations, substantially all of which are included in unearned revenues, represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our remaining performance obligations are primarily comprised of certain customer contracts for which we received license fees upfront. At June 26, 2022, we had $849 million of remaining performance obligations, of which $210 million, $417 million, $157 million, $55 million and $6 million was expected to be recognized as revenues for the remainder of fiscal 2022 and each of the subsequent four years from fiscal 2023 through 2026, respectively, and $4 million thereafter.

Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL segments. The comparability of customer/licensee concentrations for the interim periods presented are impacted by the timing of customer/licensees device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand. Revenues from each customer/licensee that were 10% or greater of total revenues were as follows:


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Customer/licensee (w)	22	%	13	%	20	%	14	%
Customer/licensee (x)	17		16		20		22
Customer/licensee (y)	*		16		*		14
Customer/licensee (z)	*		10		*		10

* Less than 10%

Other Income, Costs and Expenses. In the third quarter of fiscal 2022, the General Court of the European Union issued a ruling annulling a decision made by the European Commission (EC) in fiscal 2018 (Note 6). As a result of the court’s decision, we recorded a $1.1 billion benefit to other income in the three months ended June 26, 2022.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Investment and Other (Expense) Income, Net (in millions)
	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Interest and dividend income	$	22	$	21	$	59	$	63
Net (losses) gains on marketable securities	(104)		53		(327)		86
Net gains on other investments	25		97		97		307

Net (losses) gains on deferred compensation plan assets	(80)		38		(110)		115
Impairment losses on other investments	(20)		(7)		(41)		(24)
Net losses on derivative instruments	(7)		—		(25)		(7)
Equity in net (losses) earnings of investees	(12)		1		5		12
Net gains (losses) on foreign currency transactions	13		(3)		21		(29)

	$	(163)	$	200	$	(321)	$	523

Note 3. Income Taxes

We estimate our annual effective income tax rate to be 13% for fiscal 2022, which is lower than the U.S. federal statutory rate primarily due to (i) a significant portion of our income qualifying for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate, (ii) the reversal of the 2018 EC fine (Note 6), which is not taxable and is attributable to a foreign jurisdiction, (iii) excess tax benefits associated with share-based awards and (iv) benefits from our federal research and development tax credit. Our effective tax rate of 12% for the third quarter of fiscal 2022 was lower than our estimated annual effective tax rate of 13% primarily due to the benefit from the reversal of the EC fine in the third quarter, partially offset by $47 million of net discrete tax charges, which principally related to foreign currency losses on a noncurrent receivable related to our refund claim of Korean withholding tax, partially offset by excess tax benefits associated with share-based awards that vested in the third fiscal quarter. Our effective tax rate of 10% for the third quarter of fiscal 2021 included $64 million of discrete net tax benefits, which principally related to excess tax benefits associated with share-based awards that vested in the third fiscal quarter.

Unrecognized tax benefits were $2.2 billion and $2.1 billion at June 26, 2022 and September 26, 2021, respectively, and primarily related to our refund claim of Korean withholding tax. If successful, the refund will result in a corresponding reduction in U.S. foreign tax credits. We expect that the total amount of unrecognized tax benefits at June 26, 2022 will increase in the next 12 months as licensees in Korea continue to withhold taxes on future payments due under their licensing agreements at a rate higher than we believe is owed; such increase is not expected to have a significant impact on our income tax provision.

Note 4. Capital Stock

Stock Repurchase Program. On October 12, 2021, we announced a $10.0 billion stock repurchase program. The stock repurchase program has no expiration date. At June 26, 2022, $8.6 billion remained authorized for repurchase under our stock repurchase program.

Shares Outstanding. Shares of common stock outstanding at June 26, 2022 were as follows (in millions):


Balance at September 26, 2021			1,125
Issued			15
Repurchased			(18)
Balance at June 26, 2022			1,122

Dividends. On July 15, 2022, we announced a cash dividend of $0.75 per share on our common stock, payable on September 22, 2022 to stockholders of record as of the close of business on September 1, 2022.

Earnings Per Common Share. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of the weighted-average number of dilutive common share equivalents, comprised of

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

shares issuable under our share-based compensation plans and the weighted-average number of common shares outstanding during the reporting period. The following table provides information about the diluted earnings per share calculation (in millions):


	Three Months Ended		Nine Months Ended
	June 26, 2022	June 27, 2021	June 26, 2022	June 27, 2021
Dilutive common share equivalents included in diluted shares	12	16	15	19
Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period	2	—	1	—

Note 5. Debt

Long-term Debt. In May 2022, we issued unsecured fixed-rate notes, consisting of $500 million of fixed-rate 4.25% notes and $1.0 billion of fixed-rate 4.50% notes (May 2022 Notes) that mature on May 20, 2032 and May 20, 2052, respectively. The net proceeds from the May 2022 Notes, together with cash on hand, were used to repay $1.5 billion of fixed-rate notes that matured in May 2022.

The following table provides a summary of our long-term debt:


	June 26, 2022				September 26, 2021
	Maturities	Amount (in millions)		Effective Rate	Maturities	Amount (in millions)		Effective Rate
May 2015 Notes	2025 - 2045	$	3,865	3.46% - 4.73%	2022 - 2045	$	5,405	2.63% - 4.73%
May 2017 Notes	2023 - 2047	5,860		2.03% - 4.46%	2023 - 2047	5,860		0.92% - 4.46%
May 2020 Notes	2030 - 2050	2,000		2.73% - 3.30%	2030 - 2050	2,000		2.31% - 3.30%
August 2020 Notes	2028 - 2032	2,207		2.32% - 3.27%	2028 - 2032	2,207		1.98% - 2.66%
May 2022 Notes	2032 - 2052	1,500		3.14% - 4.26%		—
Total principal		15,432				15,472
Unamortized discount, including debt issuance costs		(249)				(234)
Hedge accounting fair value adjustments		(138)				7
Total long-term debt		$	15,045			$	15,245
Reported as:
Short-term debt		$	1,445			$	1,544
Long-term debt		13,600				13,701
Total		$	15,045			$	15,245

At June 26, 2022, the aggregate fair value of our outstanding floating- and fixed-rate notes, based on Level 2 inputs, was approximately $14.6 billion.

Interest Rate Swaps. At September 26, 2021, we had outstanding forward-starting interest rate swaps with an aggregate notional amount, denominated in U.S. dollars, of $2.6 billion. During the third quarter of fiscal 2022, we terminated $1.0 billion of these swaps associated with our May 2022 Notes, and the related gains of $123 million are being reclassified from accumulated comprehensive income as a reduction to interest expense over the terms of the related debt.

Beginning in the second quarter of fiscal 2022, we entered into interest rate swaps that are designated as fair value hedges and allow us to effectively convert fixed-rate payments into floating-rate payments on a portion of our outstanding long-term debt. We entered into these agreements, in part, to manage interest rate risk associated with our cash equivalents and marketable securities, in addition to changes in the fair value of our outstanding debt. At June 26, 2022, the notional amount of these swaps, which are denominated in U.S. dollars and mature between 2027 and 2032, was $2.1 billion. The fair value of these swaps, which is included in other noncurrent liabilities, was $141 million at June 26, 2022. The net gains and losses on the interest rate swaps, as well as the offsetting gains or losses on the related fixed-rate notes attributable to the hedged risks, are recognized in earnings as interest expense in the current period.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Commercial Paper Program. We have an unsecured commercial paper program, which provides for the issuance of up to $4.5 billion. At June 26, 2022 and September 26, 2021, we had $500 million of outstanding commercial paper recorded as short-term debt.

Note 6. Commitments and Contingencies

Legal and Regulatory Proceedings.

Consolidated Securities Class Action Lawsuit: On January 23, 2017 and January 26, 2017, securities class action complaints were filed by purported stockholders of us in the United States District Court for the Southern District of California against us and certain of our then current and former officers and directors. The complaints alleged, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with certain allegations that we are or were engaged in anticompetitive conduct. The complaints sought unspecified damages, interest, fees and costs. On May 4, 2017, the court consolidated the two actions. On July 3, 2017, the plaintiffs filed a consolidated amended complaint asserting the same basic theories of liability and requesting the same basic relief. On September 1, 2017, we filed a motion to dismiss the consolidated amended complaint, and on March 18, 2019, the court denied our motion. On January 15, 2020, we filed a motion for judgment on the pleadings, which the court denied on February 3, 2022. On May 23, 2022, the plaintiffs filed a motion for class certification. The court has not yet ruled on the motion, and no trial date has been set. We believe the plaintiffs’ claims are without merit.

Consumer Class Action Lawsuits: Beginning in January 2017, a number of consumer class action complaints were filed against us in the United States District Courts for the Southern and Northern Districts of California, each on behalf of a putative class of purchasers of cellular phones and other cellular devices. In April 2017, the Judicial Panel on Multidistrict Litigation transferred the cases that had been filed in the Southern District of California to the Northern District of California. On July 11, 2017, the plaintiffs filed a consolidated amended complaint alleging that we violated California and federal antitrust and unfair competition laws by, among other things, refusing to license standard-essential patents to our competitors, conditioning the supply of certain of our baseband chipsets on the purchaser first agreeing to license our entire patent portfolio, entering into exclusive deals with companies, including Apple Inc., and charging unreasonably high royalties that do not comply with our commitments to standard setting organizations. The complaint sought unspecified damages and disgorgement and/or restitution, as well as an order that we be enjoined from further unlawful conduct. On August 11, 2017, we filed a motion to dismiss the consolidated amended complaint. On November 10, 2017, the court denied our motion, except to the extent that certain claims seek damages under the Sherman Antitrust Act. On July 5, 2018, the plaintiffs filed a motion for class certification, and on September 27, 2018, the court granted that motion. We appealed the district court’s class certification order to the United States Court of Appeals for the Ninth Circuit (Ninth Circuit), and on September 29, 2021, the Ninth Circuit vacated the class certification order, ruling that the district court had failed to correctly assess the propriety of applying California law to a nationwide class. The Ninth Circuit remanded the case to the district court and instructed the court to consider the effect of United States Federal Trade Commission (FTC) v. QUALCOMM Incorporated (which the Ninth Circuit decided in favor of Qualcomm in August 2020) on this case. On June 10, 2022, the plaintiffs filed an amended complaint, limiting the proposed class to California residents rather than a nationwide class. We believe the plaintiffs’ claims are without merit.

Since November 2017, several other consumer class action complaints have been filed against us in Canada (in the Supreme Court of British Columbia and the Quebec Superior Court), Israel (in the Haifa District Court) and the United Kingdom (in the Competition Appeal Tribunal), each on behalf of a putative class of purchasers of cellular phones and other cellular devices, alleging violations of certain of those countries’ competition and consumer protection laws. The claims in these complaints are similar to those in the U.S. consumer class action complaints. The complaints seek damages. We believe the plaintiffs’ claims are without merit.

ParkerVision, Inc. v. QUALCOMM Incorporated: On May 1, 2014, ParkerVision filed a complaint against us in the United States District Court for the Middle District of Florida alleging that certain of our products infringed seven ParkerVision patents. On August 21, 2014, ParkerVision amended the complaint, alleging that we infringed 11 ParkerVision patents and sought damages and injunctive and other relief. ParkerVision subsequently reduced the number of patents asserted to three. The asserted patents are now expired, and injunctive relief is no longer available. ParkerVision continues to seek damages related to the sale of many of our radio frequency (RF) products sold between 2008 and 2018. On March 23, 2022, the court entered judgment in our favor on all claims and closed the case. On April 20, 2022, ParkerVision filed a

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

notice of appeal to the United States Court of Appeals for the Federal Circuit. We believe that ParkerVision’s claims are without merit.

Korea Fair Trade Commission (KFTC) Investigation (2015): On March 17, 2015, the KFTC notified us that it was conducting an investigation of us relating to the Korean Monopoly Regulation and Fair Trade Act (MRFTA). On December 27, 2016, the KFTC announced that it had reached a decision in the investigation, finding that we violated provisions of the MRFTA. On January 22, 2017, we received the KFTC’s formal written decision, which found that the following conducts violate the MRFTA: (i) refusing to license, or imposing restrictions on licenses for, cellular communications standard-essential patents with competing modem chipset makers; (ii) conditioning the supply of modem chipsets to handset suppliers on their execution and performance of license agreements with us; and (iii) coercing agreement terms including portfolio license terms, royalty terms and free cross-grant terms in executing patent license agreements with handset makers. The KFTC’s decision orders us to: (a) upon request by modem chipset companies, engage in good-faith negotiations for patent license agreements, without offering unjustifiable conditions, and if necessary submit to a determination of terms by an independent third party; (b) not demand that handset companies execute and perform under patent license agreements as a precondition for purchasing modem chipsets; (c) not demand unjustifiable conditions in our license agreements with handset companies and, upon request, renegotiate existing patent license agreements; and (d) notify modem chipset companies and handset companies of the decision and order imposed on us and report to the KFTC new or amended agreements. According to the KFTC’s decision, the foregoing will apply to transactions between us and the following enterprises: (1) handset manufacturers headquartered in Korea and their affiliate companies; (2) enterprises that sell handsets in or to Korea and their affiliate companies; (3) enterprises that supply handsets to companies referred to in (2) above and the affiliate companies of such enterprises; (4) modem chipset manufacturers headquartered in Korea and their affiliate companies; and (5) enterprises that supply modem chipsets to companies referred to in (1), (2) or (3) above and the affiliate companies of such enterprises. The KFTC’s decision also imposed a fine of 1.03 trillion Korean won (approximately $927 million), which we paid on March 30, 2017.

On February 21, 2017, we filed an action in the Seoul High Court to cancel the KFTC’s decision. The Seoul High Court held hearings concluding on August 14, 2019, and on December 4, 2019, announced its judgment affirming certain portions of the KFTC’s decision and finding other portions of the KFTC’s decision unlawful. The Seoul High Court cancelled the KFTC’s remedial orders described in (c) above, and solely insofar as they correspond thereto, the Seoul High Court cancelled the KFTC’s remedial orders described in (d) above. The Seoul High Court dismissed the remainder of our action to cancel the KFTC’s decision. On December 19, 2019, we filed a notice of appeal to the Korea Supreme Court challenging those portions of the Seoul High Court decision that are not in our favor. The KFTC filed a notice of appeal to the Korea Supreme Court challenging the portions of the Seoul High Court decision that are not in its favor. Both we and the KFTC have filed briefs on the merits. The Korea Supreme Court has not yet ruled on our appeal or that of the KFTC. We believe that our business practices do not violate the MRFTA.

Korea Fair Trade Commission (KFTC) Investigation (2020): On June 8, 2020, the KFTC informed us that it was conducting an investigation of us relating to the MRFTA. The KFTC has not provided a formal notice on the scope of its investigation, but we believe it concerns our business practices in connection with our sale of radio frequency front-end (RFFE) components. We continue to cooperate with the KFTC as it conducts its investigation. If a violation is found, a broad range of remedies is potentially available to the KFTC, including imposing a fine (of up to 3% of our sales in the relevant markets during the alleged period of violation) and/or injunctive relief prohibiting or restricting certain business practices. It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the KFTC. We believe that our business practices do not violate the MRFTA.

Icera Complaint to the European Commission (EC): On June 7, 2010, the EC notified and provided us with a redacted copy of a complaint filed with the EC by Icera, Inc. (subsequently acquired by Nvidia Corporation) alleging that we were engaged in anticompetitive activity. On July 16, 2015, the EC announced that it had initiated formal proceedings in this matter. On July 18, 2019, the EC issued a decision finding that between 2009 and 2011, we engaged in predatory pricing by selling certain baseband chipsets to two customers at prices below cost with the intention of hindering competition and imposed a fine of approximately 242 million euros. On October 1, 2019, we filed an appeal of the EC’s decision with the General Court of the European Union. The court has not yet ruled on our appeal. We believe that our business practices do not violate the European Union (EU) competition rules.

In the third quarter of fiscal 2019, we recorded a charge of $275 million to other expenses related to this EC fine. We provided a financial guarantee in the first quarter of fiscal 2020 to satisfy the obligation in lieu of cash payment while we appeal the EC’s decision. The fine is accruing interest at a rate of 1.50% per annum while it is outstanding. In the fourth

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

quarter of fiscal 2019, we designated the liability as a hedge of our net investment in a certain foreign subsidiary, with gains and losses recorded in accumulated other comprehensive income as a component of the foreign currency translation adjustment. At June 26, 2022, the liability, including related foreign currency gains and accrued interest (which, to the extent they were not related to the net investment hedge, were recorded in investment and other (expense) income, net), was $266 million and included in other current liabilities.

European Commission (EC) Investigation: On October 15, 2014, the EC notified us that it was conducting an investigation of us relating to Articles 101 and/or 102 of the Treaty on the Functioning of the European Union (TFEU). On January 24, 2018, the EC issued a decision finding that pursuant to an agreement with Apple Inc. we paid significant amounts to Apple on the condition that it exclusively use our baseband chipsets in its smartphones and tablets, reducing Apple’s incentives to source baseband chipsets from our competitors and harming competition and innovation for certain baseband chipsets, and imposed a fine of 997 million euros. On April 6, 2018, we filed an appeal of the EC’s decision with the General Court of the European Union. From May 4, 2021 to May 6, 2021, a hearing on our appeal was held before the court. On June 15, 2022, the court issued a ruling annulling the EC’s decision in its entirety. Any appeal of the General Court’s decision must be brought before the European Court of Justice by late August 2022.

In the first quarter of fiscal 2018, we recorded a charge of $1.2 billion to other expenses related to this EC fine. We provided financial guarantees in the third quarter of fiscal 2018 to satisfy the obligation in lieu of cash payment while we appealed the EC’s decision. The fine accrued interest at a rate of 1.50% per annum while it was outstanding. In the first quarter of fiscal 2019, we designated the liability as a hedge of our net investment in certain foreign subsidiaries, with gains and losses recorded in accumulated other comprehensive income as a component of the foreign currency translation adjustment. As a result of the court’s ruling, in the third quarter of fiscal 2022, we recorded a $1.1 billion benefit in other income and a $62 million reduction in interest expense resulting from the reversal of the accrued fine and the associated interest previously recorded. We also discontinued the net investment hedge related to this fine. The associated foreign currency gains will remain in accumulated other comprehensive income until the foreign subsidiaries are sold or substantially liquidated, at which point it will be reclassified into earnings.

Contingent Losses and Other Considerations: We will continue to vigorously defend ourselves in the foregoing matters. However, litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss, particularly in antitrust and trade regulation investigations. Other than with respect to the EC fine related to the Icera Complaint to the European Commission, we have not recorded any accrual at June 26, 2022 for contingent losses associated with these matters based on our belief that losses, while reasonably possible, are not probable. Further, any possible amount or range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. We are engaged in numerous other legal actions not described above arising in the ordinary course of our business (for example, proceedings relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

Note 7. Segment Information

We are organized on the basis of products and services and have three reportable segments. Our operating segments reflect the way our businesses and management/reporting structure are organized internally and the way our Chief Operating Decision Maker (CODM), who is our CEO, reviews financial information, makes operating decisions and assesses business performance. We also consider, among other items, the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined, as well as the similarity of activities within our operating segments, such as the nature of products, the level of shared products, technology and other resources, production processes and customer base. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies, including RFFE, for use in mobile devices, automotive systems for telematics, connectivity and digital cockpit and IoT including wireless networks, broadband gateway equipment, consumer electronic devices and industrial devices. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies), our cloud AI inference processing initiative and other technology and service initiatives.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our CODM allocates resources to and evaluates the performance of our segments based on revenues and earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense, certain net investment income, certain share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets and certain research and development expenses, certain selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories and property, plant and equipment to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters. Our CODM does not evaluate our operating segments using discrete asset information.

The table below presents revenues and EBT for reportable segments (in millions):


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenues
QCT	$	9,378	$	6,472	$	27,773	$	19,287
QTL	1,519		1,489		4,917		4,762
QSI	8		11		22		30
Reconciling items	31		88		93		151
Total	$	10,936	$	8,060	$	32,805	$	24,230
EBT
QCT	$	2,996	$	1,795	$	9,450	$	5,299
QTL	1,080		1,053		3,640		3,514
QSI	(101)		156		(248)		412
Reconciling items	264		(747)		(1,314)		(2,236)
Total	$	4,239	$	2,257	$	11,528	$	6,989

Reconciling items for revenues and EBT in the previous table were as follows (in millions):


	Three Months Ended				Nine Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenues
Nonreportable segments	$	31	$	34	$	93	$	97
Unallocated revenues (Note 2)	—		54		—		54
	$	31	$	88	$	93	$	151
EBT
Unallocated revenues (Note 2)	$	—	$	54	$	—	$	54
Unallocated cost of revenues	(76)		(73)		(182)		(220)
Unallocated research and development expenses	(408)		(505)		(1,294)		(1,325)
Unallocated selling, general and administrative expenses	(171)		(125)		(462)		(418)
Unallocated other income (Note 2)	1,059		—		1,059		—
Unallocated interest expense (Note 6)	(69)		(138)		(345)		(420)
Unallocated investment and other (expense) income, net	(58)		55		(68)		140
Nonreportable segments	(13)		(15)		(22)		(47)
	$	264	$	(747)	$	(1,314)	$	(2,236)

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8. Acquisitions

Nuvia. On March 16, 2021, we completed the acquisition of NuVia, Inc. (Nuvia) for $1.1 billion (net of $174 million cash acquired), substantially all of which was paid in cash. In connection with the acquisition, we assumed or replaced unvested Nuvia stock awards with Qualcomm stock awards with an estimated fair value of $258 million, which have post-acquisition requisite service periods of up to four years. Nuvia has certain in-process technologies and is comprised of a CPU (central processing unit) and technology design team with expertise in high performance processors, SoC (system-on-chip) and power management for compute-intensive devices and applications. Upon completion of development, Nuvia’s technologies are expected to be integrated into certain QCT products. We recorded $885 million of goodwill, which is not deductible for tax purposes and was allocated to our QCT segment for annual impairment testing purposes. Goodwill is primarily attributable to assembled workforce and certain revenue and cost synergies expected to arise after the acquisition. We also recorded a $247 million in-process research and development intangible asset related to a single project, which is expected to be completed in fiscal 2023 and, upon completion, will be amortized over its useful life, which is expected to be seven years. Our results of operations for fiscal 2021 included the operating results of Nuvia since the acquisition date, the amounts of which were not material.

Veoneer. On October 4, 2021, we and SSW Partners, a New York-based investment partnership, entered into a definitive agreement to acquire Veoneer, Inc. (Veoneer). The transaction closed on April 1, 2022 (the Closing Date). Total cash consideration paid in the transaction was approximately $4.7 billion, consisting of (i) approximately $4.6 billion paid in respect of Veoneer’s outstanding capital stock and equity awards and amounts paid to settle Veoneer’s convertible senior notes (which were converted at the election of the note holders and settled in cash in the third quarter of fiscal 2022) and (ii) a $110 million termination fee paid to Magna International Inc. (Magna) in the first quarter of fiscal 2022. We funded substantially all of the cash consideration payable in the transaction in exchange for (i) the Arriver business (which SSW transferred to us shortly after the Closing Date) and (ii) the right to receive a majority of the proceeds upon the sale of the Non-Arriver businesses by SSW Partners. We intend to incorporate Arriver’s computer vision, drive policy and driver assistance technologies into our Snapdragon automotive platform to deliver an integrated software SoC ADAS (advanced driver assistance systems) platform for automakers and Tier-1 automotive suppliers. SSW Partners retained Veoneer’s Tier-1 automotive supplier businesses, primarily consisting of the Active Safety and Restraint Control Systems businesses (the Non-Arriver businesses), which it intends to sell in one or more transactions.

We have agreed to provide certain funding of approximately $300 million to the Non-Arriver businesses while SSW Partners seeks a buyer(s), of which approximately $150 million of funding remained available to the Non-Arriver businesses at June 26, 2022. Such amounts, along with cash retained in the Non-Arriver business, are expected to be used to fund working and other near-term capital needs, as well as certain costs incurred in connection with the close of the acquisition.

Although we do not own or operate the Non-Arriver businesses, we have determined that we are the primary beneficiary, within the meaning of the Financial Accounting Standards Board (FASB) accounting guidance related to consolidation (ASC 810), of these businesses under the variable interest model. Factors considered in reaching this conclusion included, among others: (i) our involvement in the design of and our funding of substantially all of the total cash consideration payable in the transaction and (ii) our obligations to absorb losses and rights to receive returns from the Non-Arriver businesses. We expect that SSW Partners will complete the sale of the Non-Arriver businesses within fiscal 2023, subject to any required regulatory approvals and other closing conditions being met. Accordingly, the assets and liabilities of the Non-Arriver businesses are consolidated and presented as held for sale (in other current and noncurrent assets and liabilities on our balance sheet), and the operating results will be presented as discontinued operations.

Our accounting purchase price was approximately $4.3 billion, substantially all of which relates to our share of cash consideration at close for the outstanding common shares of Veoneer and the Magna termination fee and excludes Veoneer’s convertible senior notes that are reflected as an assumed liability.

We have not finalized the purchase price allocation. Accordingly, the preliminary purchase price allocation shown below could change as the fair values of the tangible and intangible assets acquired and liabilities assumed, and the related income tax effects, are finalized during the remainder of the measurement period (which will not exceed 12 months from the Closing

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Date). The preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values was as follows (in millions):


Cash	$	31
Current held for sale assets, net of costs to sell (1)	667
Completed technology-based intangible assets	349
In-process research and development (IPR&D)	298
Goodwill	3,016
Noncurrent held for sale assets (1)	916
Other assets	333
Total assets	5,610
Current held for sale liabilities (1)	(677)
Convertible senior notes	(352)
Noncurrent held for sale liabilities (1)	(128)
Other liabilities	(202)
Total liabilities	(1,359)
Net assets acquired	$	4,251

(1) Held for sale assets and liabilities relate to the Non-Arriver businesses and were measured at fair value less costs to sell (including SSW Partners’ estimated return with respect to the sale proceeds of the Non-Arriver businesses), which was estimated using a market approach based on significant inputs that were not observable. The Non-Arriver businesses’ assets are not available to be used to settle our obligations, and the Non-Arriver businesses’ creditors do not have recourse to us. SSW Partners owns and operates the Non-Arriver businesses, and its funding of the purchase price for Veoneer was recorded as a component of held for sale liabilities. The underlying classes of assets and liabilities held for sale have not been presented because such amounts are not material.

Goodwill related to this transaction was allocated to our QCT segment, and $471 million of which is expected to be deductible for tax purposes. Goodwill is primarily attributable to assembled workforce and certain synergies expected to arise after the acquisition. Completed technology-based intangible assets will be amortized on a straight-line basis over the weighted-average useful life of nine years. IPR&D relates to a single project that is expected to be completed in fiscal 2025. Upon completion, we expect the IPR&D to be amortized over its useful life of seven years. We valued the completed technology and IPR&D using an income approach based on significant unobservable inputs.

The operating results of the Arriver and Non-Arriver businesses are reported on a one quarter lag. Therefore, no such amounts were included in our results of operations for the three and nine months ended June 26, 2022. Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated results of operations.

Other. During the first nine months of fiscal 2022, we acquired six other businesses for a total accounting purchase price of $660 million. We recognized $143 million of intangible assets (which primarily relate to completed technology) that will be amortized on a straight-line basis over a weighted-average useful life of six years. Substantially all of the goodwill recognized in these transactions of $527 million was allocated to our QCT segment.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS