Qualcomm Announces Second Quarter Fiscal 2012 Results Revenues $4.9 Billion

GAAP EPS $1.28, Non-GAAP EPS $1.01

-- Record Quarterly Revenues and EPS --

SAN DIEGO, April 18, 2012 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq:   QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the second quarter of fiscal 2012 ended March 25, 2012.

"I am pleased to report another quarter of record revenues and earnings per share, driven by strong demand for 3G- and 4G-enabled devices across both developed and emerging regions," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm.  "We are excited to see the continued growth of 3G and 4G smartphones, as well as new mobile computing devices.  We are increasing our operating expenses to facilitate additional 28 nanometer supply and to continue to position our industry-leading chipset solutions for the opportunities ahead."

Second Quarter Results (GAAP)

  • Revenues: (1) $4.94 billion, up 28 percent year-over-year (y-o-y) and 6 percent sequentially.
  • Operating income: (1) $1.51 billion, up 6 percent y-o-y and down 2 percent sequentially.
  • Net income: (2) $2.23 billion, up 123 percent y-o-y and 59 percent sequentially.
  • Diluted earnings per share: (2) $1.28, up 117 percent y-o-y and 58 percent sequentially. 
  • Effective tax rate: (1) 17 percent for the quarter.
  • Operating cash flow:  $1.89 billion, up 7 percent y-o-y; 38 percent of revenues.
  • Return of capital to stockholders:  $366 million, or $0.215 per share, of cash dividends paid.

(1) The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates throughout this news release are from continuing operations (i.e., before discontinued operations and the adjustment for noncontrolling interests), unless otherwise stated.

(2) Net income and diluted earnings per share throughout this news release are attributable to Qualcomm (i.e., after discontinued operations and adjustment for noncontrolling interests), unless otherwise stated.

Non-GAAP Second Quarter Results

Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain acquisition-related items and certain tax items. 

  • Revenues:  $4.94 billion, up 28 percent y-o-y and 6 percent sequentially.
  • Operating income:  $1.90 billion, up 15 percent y-o-y and 2 percent sequentially.
  • Net income:  $1.76 billion, up 21 percent y-o-y and 5 percent sequentially.
  • Diluted earnings per share:  $1.01, up 17 percent y-o-y and 4 percent sequentially.  Excludes $0.41 earnings per share attributable to the QSI segment, $0.11 loss per share attributable to certain share-based compensation and $0.03 loss per share attributable to certain acquisition-related items. 
  • Effective tax rate:  17 percent for the quarter. 
  • Free cash flow (defined as net cash from operating activities less capital expenditures):  $1.81 billion, down 2 percent y-o-y; 37 percent of revenues.

Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and Non-GAAP results are included at the end of this news release.  

Note:  The following should be considered with regard to the above results and comparisons -  the second quarter of fiscal 2012 GAAP results included $761 million, net of income taxes, for discontinued operations (as a result of a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum), as compared to a $269 million loss, net of income taxes, for discontinued operations in the second quarter of fiscal 2011.  Additionally, the second quarter of fiscal 2012 GAAP and Non-GAAP results included the results of Qualcomm Atheros, Inc., which was acquired in the third quarter of fiscal 2011.  The second quarter of fiscal 2011 GAAP and Non-GAAP results included $401 million in revenues relating to prior quarters as a result of agreements entered into with two licensees to settle disputes.

Second Quarter Key Business Metrics

  • MSMchip shipments:  152 million units, up 29 percent y-o-y and down 3 percent sequentially.
  • December quarter total reported device sales:  approximately $51.7 billion, up 29 percent y-o-y and 25 percent sequentially.
    • December quarter estimated 3G/4G device shipments:  approximately 239 to 243 million units, at an estimated average selling price of approximately $211 to $217 per unit.   

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled $26.6 billion at the end of the second quarter of fiscal 2012, compared to $22.1 billion a year ago and $22.0 billion at the end of the first quarter of fiscal 2012.  During the second quarter of fiscal 2012, we received $1.9 billion in proceeds from the sale of substantially all of our 700 MHz spectrum.  On April 3, 2012, we announced a cash dividend of $0.25 per share payable on June 20, 2012 to stockholders of record as of June 1, 2012.

Research and Development

($ in millions)

Non-GAAP


QSI


Share-Based
Compensation


Acquisition-
Related Items


GAAP











Second quarter fiscal 2012

$         824


$        4


$           126


$            -


$     954

As a % of revenues

17%








19%

Second quarter fiscal 2011*

$         633


$        2


$             97


$           6


$     738

As a % of revenues

16%








19%

Year-over-year change ($)

30%


 N/M 


30%


 N/M 


29%

*As adjusted for discontinued operations.









N/M - Not Meaningful










Non-GAAP research and development (R&D) expenses increased 30 percent y-o-y primarily due to an increase in investments in the development of integrated circuit products (including connectivity products), next-generation technologies and other initiatives to support the acceleration of advanced wireless products and services.  

Selling, General and Administrative

($ in millions)

Non-GAAP


QSI


Share-Based
Compensation


Acquisition-
Related Items


GAAP











Second quarter fiscal 2012

$         488


$        4


$             97


$           6


$     595

As a % of revenues

10%








12%

Second quarter fiscal 2011*

$         432


$      12


$             85


$           -


$     529

As a % of revenues

11%








14%

Year-over-year change ($)

13%


 N/M 


14%


 N/M 


12%

*As adjusted for discontinued operations.









N/M - Not Meaningful










Non-GAAP selling, general and administrative (SG&A) expenses increased 13 percent y-o-y primarily due to increases in costs relating to legal matters, employee-related expenses, patent-related expenses and selling and marketing expenses, partially offset by a decrease in charitable donations.  In the second quarter of fiscal 2011, we made a contribution to the Qualcomm Charitable Foundation in connection with the establishment of that entity.  

Effective Income Tax Rates

Our fiscal 2012 effective income tax rates are estimated to be approximately 18 percent for GAAP and approximately 18 to 19 percent for Non-GAAP.  The second quarter effective income tax rates for GAAP and Non-GAAP were both 17 percent, which are lower than the estimated annual effective tax rates, primarily due to changes in our estimates related to certain permanent differences and foreign earnings taxed at rates that are less than the United States federal tax rate.

Qualcomm Strategic Initiatives

The QSI segment makes strategic investments, many of which are in early-stage companies, and holds wireless spectrum.  QSI also includes the discontinued operations of our FLO TV business.  GAAP results for the second quarter of fiscal 2012 included $0.41 earnings per share for the QSI segment.  QSI results for the second quarter of fiscal 2012 included a $1.2 billion gain in discontinued operations, or $0.44 earnings per share, associated with the sale of substantially all of our 700 MHz spectrum, and $81 million in other operating expenses related to a payment made to the Indian government in connection with the issuance of the BWA spectrum license.

Business Outlook

The following statements are forward looking, and actual results may differ materially.  The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks. 

Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable.  Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast.  Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.

The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook.  The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.

Qualcomm's Business Outlook Summary

THIRD FISCAL QUARTER





Q3 FY11

Current Guidance



Results

Q3 FY12 Estimates


Revenues

$3.62B

$4.45B - $4.85B


  Year-over-year change


increase 23% - 34%


Non-GAAP Diluted earnings per share (EPS)

$0.73

$0.83 - $0.89


  Year-over-year change


increase 14% - 22%


         Diluted EPS attributable to QSI

$0.01

($0.01)


         Diluted EPS attributable to share-based compensation

($0.09)

($0.12)


         Diluted EPS attributable to acquisition-related items

($0.04)

($0.03)


         Diluted EPS attributable to tax items 

$0.00

n/a


GAAP Diluted EPS

$0.61

$0.67 - $0.73


  Year-over-year change


increase 10% - 20%


Metrics




MSM chip shipments

120M 

144M - 152M 


  Year-over-year change


increase 20% - 27%


Total reported device sales (1)

 approx. $36.4B*

approx. $43.0B - $47.0B*


  Year-over-year change


increase 18% - 29%


*Est. sales in March quarter, reported in June quarter







FISCAL YEAR






FY 2011

Prior Guidance

Current Guidance



Results 

FY 2012 Estimates (2)

FY 2012 Estimates (2)


Revenues

$14.96B 

$18.7B - $19.7B

$18.7B - $19.7B


  Year-over-year change


increase 25% - 32%

increase 25% - 32%


Non-GAAP Diluted EPS

$3.20

$3.55 - $3.75

$3.61 - $3.76


  Year-over-year change


increase 11% - 17%

increase 13% - 18%


        Diluted EPS attributable to QSI

($0.23)

$0.41

$0.39


        Diluted EPS attributable to share-based compensation

($0.37)

($0.47)

($0.46)


        Diluted EPS attributable to acquisition-related items

($0.12)

($0.13)

($0.13)


        Diluted EPS attributable to tax items

$0.04

n/a

n/a


GAAP Diluted EPS

$2.52

$3.36 - $3.56

$3.41 - $3.56


  Year-over-year change


increase 33% - 41%

increase 35% - 41%


Metrics





Est. fiscal year* 3G/4G device average selling price range (1)

approx. $203 - $209

approx. $204 - $216

approx. $207 - $217


*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters









CALENDAR YEAR Device Estimates (1)






Prior Guidance
Calendar 2011
Estimates

Current Guidance
Calendar 2011
Estimates

Prior Guidance Calendar 2012
Estimates

Current Guidance
Calendar 2012
Estimates


Est. 3G/4G device shipments






March quarter

approx. 170M - 174M

approx. 170M - 174M

not provided

not provided


June quarter

approx. 187M - 191M

approx. 187M - 191M

not provided

not provided


September quarter

approx. 191M - 195M

approx. 191M - 195M

not provided

not provided


December quarter

not provided

approx. 239M - 243M

not provided

not provided


Est. calendar year range (approx.)

770M - 795M

787M - 803M

875M - 945M

885M - 945M


Est. calendar year midpoint (approx.) (3)

783M

795M

910M

915M


(1)  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 multimode CDMA/OFDMA 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 selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices 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.  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.

(2)  FY 2012 guidance for QSI and GAAP includes $0.44 EPS related to a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum, which was recognized in discontinued operations in Q2 FY12 and was excluded from Non-GAAP results.  

(3)  The midpoints of the estimated calendar year ranges are identified for comparison purposes only and do not indicate a higher degree of confidence in the midpoints.

Sums may not equal totals due to rounding.

Results of Business Segments

The following table has been adjusted to reflect discontinued operations (Note 4) (in millions, except per share data):

SEGMENTS

QCT

QTL

QWI 

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI* (2)


Share-Based
Compensation* (2)

Acquisition- Related Items (2) (3)

Tax Items

GAAP* 

Q2 - FISCAL 2012










Revenues 

$3,059

$1,723

$159

$2

$4,943

$  -

$  -

$  -

$  -

$4,943

 Change from prior year

56%

(1%)

1%

N/M

28%





28%

 Change from prior quarter 

(1%)

20%

5%

N/M

6%





6%

Operating income (loss)





$1,900

($89)

($240)

($57)

$  -

$1,514

 Change from prior year





15%

N/M

(21%)

N/M


6%

 Change from prior quarter 





2%

N/M

3%

5%


(2%)

EBT

$599

$1,540

($10)

$1

$2,130

($99)

($240)

($57)

$  -

$1,734

  Change from prior year

44%

(2%)

N/M

N/M

14%

N/M

(21%)

N/M


7%

  Change from prior quarter 

(19%)

22%

N/M

N/M

3%

N/M

3%

5%


1%

EBT as a % of revenues

20%

89%

N/M

N/M

43%





35%

Discontinued operations, net of tax (4)


$  -

$761

$  -

$  -

$  -

$761

Net income (loss) 




$1,759

$707

($184)

($52)

$  -

$2,230

  Change from prior year




21%

N/M

(26%)

N/M

N/M

123%

  Change from prior quarter 



5%

N/M

5%

5%

N/A

59%

Diluted EPS





$1.01

$0.41

($0.11)

($0.03)

$  -

$1.28

  Change from prior year




17%

N/M

(22%)

N/A

N/M

117%

  Change from prior quarter 



4%

N/M

0%

0%

N/A

58%

Diluted shares used




1,743

1,743

1,743

1,743

1,743

1,743

Q1 - FISCAL 2012










Revenues 

$3,085

$1,440

$152

$4

$4,681

$  -

$  -

$  -

$  -

$4,681

Operating income (loss)





1,871

(13)

(247)

(60)

-

1,551

EBT

$739

$1,267

$1

$55

2,062

(34)

(247)

(60)

-

1,721

Discontinued operations, net of tax (4)


-

(5)

-

-

-

(5)

Net income (loss)




1,672

(22)

(194)

(55)

-

1,401

Diluted EPS




$0.97

($0.01)

($0.11)

($0.03)

$  -

$0.81

Diluted shares used




1,721

1,721

1,721

1,721

1,721

1,721

Q2 - FISCAL 2011










Revenues 

$1,962

$1,746

$157

$5

$3,870

$  -

$  -

$  -

$  -

$3,870

Operating income (loss)





1,652

(17)

(199)

(6)

-

1,430

EBT

$417

$1,575

($135)

$13

1,870

(46)

(199)

(6)

-

1,619

Discontinued operations, net of tax (4)


-

(267)

(2)

-

-

(269)

Net income (loss)




1,450

(296)

(146)

(6)

(3)

999

Diluted EPS





$0.86

($0.18)

($0.09)

$0.00

$0.00

$0.59

Diluted shares used




1,689

1,689

1,689

1,689

1,689

1,689

Q3 - FISCAL 2011










Revenues 

$2,194

$1,257

$164

$8

$3,623

$  -

$  -

$  -

$  -

$3,623

Operating income (loss)





1,393

(10)

(193)

(77)

-

1,113

EBT

$430

$1,092

($13)

$65

1,574

(30)

(193)

(77)

-

1,274

Discontinued operations, net of tax (4)


-

44

-

-

-

44

Net income (loss)




1,240

19

(147)

(73)

(4)

1,035

Diluted EPS





$0.73

$0.01

($0.09)

($0.04)

$0.00

$0.61

Diluted shares used




1,709

1,709

1,709

1,709

1,709

1,709

 

SEGMENTS

QCT

QTL

QWI 

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI* (2)


Share-Based
Compensation* (2)

Acquisition- Related Items (2) (3)

Tax Items

GAAP* 

6 MONTHS - FISCAL 2012









Revenues 

$6,143

$3,162

$311

$9

$9,625

$  -

$  -

$  -

$  -

$9,625

 Change from prior year

51%

13%

(5%)

N/M

33%





33%

Operating income (loss)





3,772

(102)

(487)

(117)

-

$3,066

  Change from prior year





23%

N/M

(33%)

N/A


15%

EBT

$1,338

$2,808

($9)

$55

$4,192

($133)

($487)

($117)

-

$3,455

  Change from prior year

27%

14%

N/M

N/M

19%

N/M

(33%)

N/M


12%

EBT as a % of revenues

22%

89%

N/M

N/M

44%





36%

Discontinued operations, net of tax (4)


$  -

$756

$  -

$  -

$  -

$756

Net income (loss) 




$3,431

$686

($378)

($108)

$  -

$3,631

  Change from prior year




23%

N/M

(44%)

N/M

N/M

67%

Diluted EPS





$1.98

$0.40

($0.22)

($0.06)

$  -

$2.10

  Change from prior year




19%

N/M

(38%)

N/M

N/M

62%

Diluted shares used




1,732

1,732

1,732

1,732

1,732

1,732

6 MONTHS - FISCAL 2011









Revenues 

$4,078

$2,803

$329

$7

$7,217

$  -

$  -

$  -

$  -

$7,217

Operating income (loss)





3,067

(18)

(367)

(6)

-

2,676

EBT

$1,057

$2,467

($135)

$140

3,529

(68)

(367)

(6)

-

3,088

Discontinued operations, net of tax (4)


-

(347)

(4)

-

-

(351)

Net income (loss)




2,794

(383)

(262)

(6)

25

2,168

Diluted EPS





$1.67

($0.23)

($0.16)

$0.00

$0.01

$1.30

Diluted shares used




1,669

1,669

1,669

1,669

1,669

1,669

12 MONTHS - FISCAL 2011









Revenues 

$8,859

$5,422

$656

$20

$14,957

$  -

$  -

$  -

$  -

$14,957

Operating income (loss)





6,084

(37)

(813)

(208)

-

5,026

EBT

$2,056

$4,753

($152)

$183

6,840

(132)

(813)

(208)

-

5,687

Discontinued operations, net of tax (4)


-

(308)

(5)

-

-

(313)

Net income (loss)




5,407

(385)

(624)

(200)

62

4,260

Diluted EPS





$3.20

($0.23)

($0.37)

($0.12)

$0.04

$2.52

Diluted shares used




1,691

1,691

1,691

1,691

1,691

1,691

(1)  Non-GAAP reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations.  Non-GAAP reconciling items related to earnings before taxes consist primarily of certain costs of equipment and services revenues, research and development expenses, sales and marketing expenses, other operating expenses and certain investment income or losses and interest expense that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit.

(2)  At fiscal year end, the sum of the quarterly tax provisions (benefits) 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 starting in fiscal 2012, this difference is allocated to tax provisions (benefits) among the columns.  In interim quarters of prior years, it was included in QSI because variability in QSI results was considered the primary driver of the difference.

(3)  In addition to our historical practice of excluding acquired in-process research and development expenses, starting with acquisitions completed in the third quarter of fiscal 2011, Non-GAAP results also exclude other items related to acquisitions.  During fiscal 2012, acquisition-related items consisted of amortization of certain intangible assets.

(4)  During fiscal 2011, we shut down the FLO TV business and network.  The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly.

* As adjusted for discontinued operations.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Conference Call

Qualcomm's second quarter of fiscal 2012 earnings conference call will be broadcast live on April 18, 2012, beginning at 1:45 p.m. Pacific Time (PT) on the Investor Relations section of the Company's web site at: www.qualcomm.com.  This conference call will include a discussion of "Non-GAAP financial measures" as that term is defined in Regulation G.  The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as the other material financial and statistical information to be discussed in the conference call, will be posted on the Investor Relations section of the Company's web site at www.qualcomm.com immediately prior to commencement of the call.  An audio replay will be available via telephone on April 18, 2012, beginning at approximately 5:30 p.m. PT through May 18, 2012 at 9:00 p.m. PT.  To listen to the replay, U.S. callers may dial (855) 859-2056, and international callers may dial (404) 537-3406.  U.S. and international callers should use reservation number 64261105.  An audio replay of the conference call will also be available on the Investor Relations section of the Company's web site at www.qualcomm.com following the live call.

Editor's Note:  To view the web slides that supplement the conference call, please go to: http://investor.qualcomm.com/results.cfm

Qualcomm Incorporated (Nasdaq:  QCOM) is a world leader in 3G and next-generation mobile technologies.  For more than 25 years, Qualcomm ideas and inventions have driven the evolution of digital communications, linking people everywhere more closely to information, entertainment and each other.  For more information, visit www.qualcomm.com.

Note Regarding Use of Non-GAAP Financial Measures

The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  In addition, "Non-GAAP" is not a term defined by GAAP, and as a result, the Company's measure of Non-GAAP results might be different than similarly titled measures used by other companies.  Reconciliations between GAAP and Non-GAAP results are presented herein.

The Company presents Non-GAAP financial information that is used by management (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparab