Qualcomm 3QFY2020 concall’s summary

<<20200729 [Transcript] QCOM 3QFY2020 (202006).docx>>

5G SP forecast unchanged : 175M ~ 225M units

“Our calendar year 2020, 5G forecast of 175 million to 225 million handsets remains unchanged, with our bias now towards the upper end of that range. “

RF market landscape : $750M in June quarter, target at 20% market share (SAM).

“ And as a consequence of our RF front-end strategy, we expect to emerge in fiscal 2021 as one of the largest global RF front-end vendors by revenue. “

“our target is to grow to approximately 20% share of the RF front-end market.”

Huawei settlement agreement : Huawei is going to pay $1.8B over a one-year period with the first payment due in the September quarter (through the end of 2019 and add to it the first six months of 2020 through June).

“$1.8 billion of revenue in our fourth fiscal quarter for amounts due under the settlement agreement relating to the prior license period and the new license agreement

for the first half of calendar 2020. This amount will be excluded from our non-GAAP results”

“ Huawei is going to pay us $1.8 billion for historical periods and it’s a combination of two things; really, it’s the settlement agreement, which goes through the end of 2019 and add to it the first six months of 2020 through June. The combined total of that is $1.8 billion. And so that some– that’s an amount that they’re going to pay over a one-year period with the first payment due in the September quarter.”

Huawei QTL rev have been taken into account in Sep quarter guidance

“our fourth quarter non-GAAP financial guidance includes estimated QTL revenue from Huawei sales in the September quarter”

QCOM expects Sep quarter handset shipment -15% yoy

“our fourth fiscal quarter forecast is based on a planning assumption of approximately 15% year-over-year reduction in handset shipments”

Guidance :

“ We estimate fourth quarter GAAP revenues to be in the range of $7.3 billion to $8.1 billion and GAAP EPS of $2.12 to $2.32, which includes the revenue related to the settlement with Huawei. We expect fourth quarter non-GAAP revenues of $5.5 billion to $6.3 billion and EPS of $1.05 to $1.25. This guidance includes an impact of greater than $0.25 due to the reduction in handset shipments due to COVID-19, including a partial impact from the delay of our 5G flagship phone launch.

In QTL, we estimate fourth quarter revenues of $1.2 billion to $1.4 billion and EBT margins of 67% to 71%. At the midpoint, this guidance implies year-over-year revenue growth of

12% driven by the addition of royalty revenues from Huawei, partially offset by our planning assumption of a 15% reduction in handset shipments.

In QCT, we expect MSM shipments of 145 million to 165 million units, revenues of $4.3 billion to $4.9 billion, and EBT margins of 17% to 19%. These guidance midpoints imply year-over-year growth of 27% in revenue and 66% in EBT, reflecting the strong execution of our strategy in a challenging economic environment.

As we have previously outlined, RF front-end is one of the key drivers of our revenue growth. Our fourth quarter forecast includes revenues of approximately $750 million for

4G, 5G sub-6 and 5G millimeter wave content. We anticipate fourth quarter non-GAAP combined R&D and SG&A expenses to be up approximately 5% sequentially, reflecting normal seasonality in 5G investments.”

QCOM expect their revenue per MSM to grow by 1.5 times

“ we were just over $31 in the second fiscal quarter. And then we reported a little over $28 in the June quarter and we’re guiding a similar number over $29 in the upcoming September quarter “

The reasons QCOM guide 155M units (midpoint) from June actual units 130M

“we are seeing that come back in as we look at the forward demand that we’re seeing from our customers, so that drives growth on a quarter-over-quarter basis

the increase from 130 million to 155 million is really two drivers, increase in units especially at a low-tier and then benefit from the new launch. “

QTL long term sustainable GM is 70%, Huawei revenue was all incremental, there’s no cost

associated with that

“I think at the Analyst Day last year, we provided our view on kind of longer-term sustainable margins for QTL, where we said a midpoint of 70% and with Huawei it would be slightly higher than that”

MMwave

“ traction of millimeter wave technology is moving kind of as we expected. I think the current scorecard I can give it to you, United States continue to ramp, Japan recently launched, we still forecast Korea to launch within the year. Europe and Russia are targeting commercial launches before the end of the year with millimeter wave. And then spectrum auctions had occurred in Hong Kong, Taiwan, Thailand, Singapore and Finland for commercialization in I think worth noting is there is still expectation that China will have also millimeter wave by 2021.”

“ We don’t disclose specific share, but we do have significant technology leadership in millimeter wave and have been showing into some of the expansion of our designs”