Q4 FY2021 Earnings Call
QCOM · Preprocessing Report
2021-11-03
Quality
100%
65
Turns
14
Speakers
7
Sections
10
Exchanges
185
Claims
REPORTING 33PROJECTING 19POSITIONING 78EXPLANATORY 20FRAMING 1ANALYST 34

Topics 184

qct results drivers×2digital transformation growth opportunity×1chipset revenue and earnings per share×1earnings before taxes growth×1revenue diversification×1edge device mobile technology adoption×1mobile technology leadership×1ai processing leadership positioning×1iot momentum across end markets×1snapdragon xr device adoption×1snapdragon xr platform positioning×1metaverse enablement positioning×1demand drivers from device convergence×1arm based personal computing validation×1connected computing roadmap with nuvia and microsoft×1traction in consumer electronics×1device adoption of qcom technologies×1wifi 6 access point leadership×1edge networking demand drivers×1home broadband upgrade cycle outlook×1

Products 56

Snapdragon×11RF Front End×5Arriver×4Snapdragon 800 Series×4ultraBAW RF Filter Technology×3millimeter wave×3modems×3Snapdragon XR×2premium chipset×2ARM×1NUVIA CPUs×1Peloton Bike Plus×1Peloton Tread×1Astral×1Qualcomm IoT services suites×1Qualcomm IoT solutions×1Qualcomm Flight RB5×1ultraSAW×1ultraBAW×1Snapdragon Digital Chassis×1Snapdragon Ride×1ADAS Solutions×15G×1Snapdragon mobile platforms×1Qualcomm ADAS platform×1qualcomm ADAS platform×1Android premium-tier chip×1Android×1

Companies 48

Qualcomm×6Apple×5Cowen×3Veoneer×2Arriver Technology×2Bank of America×2Piper Sandler×2UBS×2Microsoft×1Peloton×1Amazon×1Verizon×1T-Mobile×1Square×1Clover×1Honeywell×1Pennisonic×1Zebra×1Raymond James×1NTT DOCOMO×1SoftBank×1KTDI×1Rakuten×1Samsung×1Sony×1Huawei×1OPPO×1Vivo×1Xiaomi×1Honor×1Goldman Sachs×1Qualcomm’s major high-end phone makers×1

Speakers

Executives
CACristiano AmonCEOAPAkash PalkhiwalaCFO
Analysts
CCChris CasoanalystMRMatt RamsayanalystSCSamik ChatterjeeanalystSRStacy RasgonanalystTLTal LianianalystRSRoss SeymoreanalystJMJoe MooreanalystRHRod HallanalystHKHarsh KumaranalystTATimothy Arcurianalyst
Other
OPOperatoroperatorMLMauricio Lopez-Hodoyanir

Sections

TypeLabelSpeaker
operator_introOperator IntroductionOperator
legal_disclaimerLegal DisclaimerMauricio Lopez-Hodoyan
prepared_remarksPrepared RemarksCristiano Amon, Akash Palkhiwala
qa_transitionQ&A TransitionMauricio Lopez-Hodoyan
qa_sessionQ&A Session
closing_remarksClosing RemarksCristiano Amon
operator_signoffOperator Sign-offOperator

Q&A Exchanges 10

#AnalystFirmTurns
1
CCChris Caso
Raymond James6
2
MRMatt Ramsay
Cowen5
3
SCSamik Chatterjee
JPMorgan6
4
SRStacy Rasgon
Bernstein Research7
5
TLTal Liani
Bank of America7
6
RSRoss Seymore
Deutsche Bank7
7
JMJoe Moore
Morgan Stanley4
8
RHRod Hall
Goldman Sachs5
9
HKHarsh Kumar
Piper Sandler6
10
TATimothy Arcuri
UBS5

Claim Taxonomy 185

REPORTING33
resultFinancial outcome for a completed period19
metricNon-financial quantitative fact2
operationalDiscrete completed event12
PROJECTING19
guidanceQuantitative expectation with number + time16
commitmentPromise with binary verifiable outcome2
targetLong-term aspirational quantitative goal1
POSITIONING78
strategyPriority, direction, or initiative27
competitiveCompany's position or advantages23
opportunityMarket condition framed as growth driver22
riskHeadwind, constraint, or uncertainty6
EXPLANATORY20
attributionWhy a specific outcome happened14
contextNon-company macro/industry fact6
FRAMING1
thesisFalsifiable belief about how the world works1
ANALYST34
questionInterrogative seeking information31
observationRestates a fact or data point1
concernFlags a risk or challenge1
estimateAnalyst's own projection or calculation1
sentimentOpinion, praise, or critique0

Transcript

Operator Introduction
OP
Operatoroperator
Ladies and gentlemen, thank you for standing by. Welcome to the QUALCOMM Fourth Quarter and Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.
If you would like to ask a question during this time, press star then the number one on your telephone keypad. To withdraw your question press star, then the number two.
If you are using a speakerphone, please pick up your handset before pressing the numbers. Please limit your questions to one question and one follow up. As a reminder, this conference is being recorded November 3rd, 2021.
The playback number for today's call is (877) 660-6853. International callers please dial 201-612-7415. The playback reservation number is 13723721. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mr. Lopez - Hodoyan, please go ahead.
Legal Disclaimer
ML
Mauricio Lopez-HodoyanirQualcomm
Thank you. And good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release in a slide presentation that accompany this call on an Investor Relations website. In addition, this call is being webcast on qualcomm.com and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G. And you can find the related reconciliations to GAAP on our website.
We will also make forward-looking statements and clean projections and estimates of future events, business or industry trends, or business or financial results. Actual events or results. It could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now to comments from QUALCOMM's President and Chief Executive Officer, Cristiano Amon.
Prepared Remarks
CA
Cristiano AmonCEOQualcomm
Thank you, Mauricio, and good afternoon everyone. Thanks for joining us today. As the pace of digital transformation of industries accelerates and as devices become connected and more intelligent, our broad portfolio of technologies and solutions is creating a significant long-term growth opportunity for us. As you can see from our results, the performance in our chipset business led to record fiscal fourth-quarter non-GAAP revenues of $9.3 billion and record non-GAAP earnings per share of $2.55. Notably, this is our fifth consecutive quarter of greater than a 100% year-over-year EBT growth in our chipset business. We also demonstrated revenue diversification with combined, our RF Front end, automotive and IoT fiscal '21 revenues exceeding $10 billion, an increase of 69% year-over-year. Going forward, our chipset business represents the largest growth engine for us, as virtually all devices at the Edge adopt mobile technologies. We have the relevant technologies required that continued to lead the mobile and the connected intelligent Edge. And as the Edge gains scale in connectivity and adopts own device artificial intelligence, we're well-positioned to become a leader in AI processing.
Let me now briefly highlight the strong momentum we continue to see in IoT across consumer, edge networking, and industrial. In consumer, we're pleased that our XR platforms are powering over 50 commercial devices and gaining scale with the leading VR and AR ecosystems. Our early investments have established Snapdragon XR as a device platform of choice for connecting physical and digital spaces. And recent market developments position us as one of the key enablers of the Metaverse opportunity. Additionally, the ongoing conversions of mobile and compute continues to drive demand for Snapdragon power premium tablets, two-in-ones, and laptops. We are pleased with the strong market validation of ARM-based personal computing in the industry transition to a new SoC architecture. We're more confident than ever in the connected computing opportunity, our upcoming solutions powered by our NUVIA CPUs, and our collaboration with Microsoft. We're also seeing increased traction in consumer electronics. Our advanced technologies are powering category-leading devices, such as the Peloton Bike Plus and Tread, as well as the Astral, Amazon's recently announced household robot. In Edge networking, we are a leader in current and next-generation high-performance Wi-Fi 6 and Wi - Fi 6E access point solutions. And we continue to see high demand for our products driven by home and enterprise upgrade cycles. We expect this trend to continue as productivity increasingly requires video collaboration, as well as Cloud processing and storage. 5G, as wireless fiber is now a reality in gaining scale in the United States, Verizon recently announced 5G home Internet service availability in 57 markets, including more than 2 million households covert on millimeter wave. In addition, T-Mobile is leveraging their 5G network to target 7 million to 8 million home broadband customers over the next 5 years. We're seeing demand increase globally, making 5G wireless fiber, one of the fastest-growing last mile broadband technologies. In industrial, we have expanded our Qualcomm IoT services suites to more than 30 verticals. As an example, in retail, our solutions are powering digital signage, payment, and self-checkout devices from companies like Square and Clover, as well as solutions from Honeywell, Pennisonic, Zebra, and others to enable new customer experiences, help empower store associates and improve operational efficiencies. We also continue to lead the way on product innovation, with new launches like the Qualcomm Flight RB5, the world first 5G AI drone platform.
In RF Front End, we expanded our product portfolio with our recently announced ultraBAW RF Filter Technology that supports frequencies from 2.7 gigahertz to 7.2 gigahertz. This is the new industry benchmark for performance in this range. ultraBAW Technology also supports Wi - Fi bands, including 5 gigahertz, the newly adopted 6 gigahertz band for Wi - Fi 6E and future Wi - Fi standards. This creates a new growth factor for RF Front End. As we attach RF Solutions to Wi - Fi. Our RF Front End portfolio, combining ultraSAW, and ultraBAW Technologies, is now best in class from 600 megahertz to 7 gigahertz. And with the addition of millimeter wave, we are the only RF front-end provider with a comprehensive solution for all bands.
As Cellular expands beyond handsets, we're focused on extending our modem to antenna platform to automotive and IoT. In our automotive, we're creating a leading horizontal and open platform with our Snapdragon Digital Chassis, which includes our Telematics, digital cockpit, card to cloud service, ADAS, and autonomy solutions. Taking the same approach we used to make the smart phone, the world's largest computing and developer platform, we're currently working with automakers and Tier 1s to create a joint roadmap to build multi-tier, multi-generation, scalable, and upgradable platforms for long-term sustainable business. The strength of our digital chassis strategy is reflected in both our results, as well as a strong design pipeline and it's creating a platform for innovation, for Auto. We are also very excited about Arriver. Upon closing, Snapdragon Ride, ADAS Solutions will be complemented with Arriver 's computer vision, drive policy in driver-assistant assets, enhancing our ability to deliver on an open and competitive ADAS platform for automakers in tier-1s at scale. In handsets, we're successfully executing on our strategy. Our premium tier Snapdragon solutions continue to gain traction with OEMs. In fiscal Q4, devices announced or shipped with our Snapdragon premium-tier products increased by 21% year-over-year. Notably, all leading 5G Android smartphones OEMs, by volume, continued to power their flagship devices of Snapdragon. Snapdragon continues to be the preferred choice for premium and high-tier Android smartphones in all regions. As a result, we're benefiting from the changing OEM landscape and Android SAM expansion. Lastly, our licensing business achieved fiscal '21 revenues in excess of $6.3 billion. QTL remains the most successful licensing business in the industry, reflecting the strength of our innovation in seller technology, the value of our extensive patent portfolio in our execution in securing long-term agreements with key OEMs, as well as over 150 5G agreements to date. As we have noted throughout the year, we continue to see incredibly strong demand across all our technologies as the current environment, is accelerating the scale of connectivity and processing at the edge. We still expect material improvements to our supply by the end of the calendar year, and our second sourcing initiatives remain on track. Before I turn the call over to Akash, I would like to highlight that, we recently announced a goal to achieve net 0 global emissions for scopes 1, 2, and 3 by 2040. We also look forward to enabling a more sustainable future with 5G through its impact on greenhouse gas emissions reduction, energy and water use optimization, green jobs creation, and more. I would now like to turn the call over to Akash.
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AP
Akash PalkhiwalaCFOQualcomm
Thank you Cristiano and good afternoon, everyone.
We are pleased to announce record fourth fiscal quarter results with non-GAAP revenues of $9.3 billion and non-GAAP EPS of $2.55. Reflecting year-over-year growth of 43% and 76% respectively. For QCT, this was another record quarter with revenues of $7.7 billion and EBT margin of 32%, both above the high-end of our guidance. QCT EBT of $2.5 billion grew by 143% versus the year-ago quarter on revenue growth of 56% and 12 points of EBT margin expansion. We also delivered record revenues in each of QCT revenue streams, handsets, RF Front End, IoT, and automotive.
Handset revenues of $4.7 billion increased 56% year-over-year on strong demand across all major OEMs. RF front-end revenues of $1.2 billion grew 45% year-over-year, and included the benefit of full enough demand in advance of certain holiday launches. IoT revenues were up 66% year-over-year to $1.5 billion as digital transformation continues to drive higher demand across our diversified customer base. Automotive revenues of $270 million grew 44% year-over-year on the ramp of digital cockpit launches and continued strength in telematics. QTL revenues of $1.6 billion and EBT margins of 72% were in line with guidance.
These results reflect slightly lower-than-expected units offset by favorable mix. Lastly, we delivered GAAP EPS of $2.45, $0.47 above the high-end of our guidance, driven by record non-GAAP earnings and approximately 500 million of gains in our QSI investment portfolio. Now, I would like to highlight some key achievements in fiscal '21. We are exceeding all targets we set at our 2019 Analyst Day, which is a year earlier than forecasted. We delivered year-over-year revenue growth of 26% in QTL and 64% in QCT. And more than doubled non-GAAP EPS to $8.54. In QCT, we had greater than 50% year-over-year growth in each of our revenue streams. And EBT margins expanded from 17% in fiscal '20 to 29% in fiscal '21.
Within handsets, our Android revenues for our Snapdragon chipsets were approximately 40% higher than our primary competitor. With our focus on diversification, RF Front End, automotive, and IoT, accounted for 38% of total QCT revenues. Lastly, we returned 74% of our free cash flow to stockholders, including $3 billion in dividends and $3.4 billion in stock repurchases.
Turning to our guidance for handset units and the first fiscal quarter. For calendar 2021, we are narrowing the range for 5G handsets to 500 to 550 million units. We're now forecasting mid to high single-digit growth in global 3G, 4G, 5G handsets, relative to Calendar 2020.
For the first fiscal quarter, we are forecasting revenues of $10 to $10.8 billion and non-GAAP EPS of $2.90 to $3.10. In QCT, we expect revenues of $8.4 billion to $8.9 billion, an EBT margins of 32% to 34%. At the midpoint, this implies year-over-year revenue growth of 32% and EBT dollar growth of 49%. The sequential revenue growth is driven by handsets due to higher demand primarily for our Snapdragon chipsets in Android devices. Following the record performance in the fourth quarter, we expect non-handset revenues to remain in line sequentially. Consistent with our previous guidance, we expect QTL revenues of $1.6 billion to $1.8 billion, and EBT margins of 74% to 78%. This forecast assumed sequential unit growth in line with historical trends.
Lastly, we anticipate non-GAAP combined R&D and SG&A expenses to decrease 2% to 3% sequentially. As a reminder, operating expenses are typically higher in the second fiscal quarter, as it includes calendar year resets for certain employee-related costs. Looking forward, fiscal '22 will be another exciting year for Qualcomm, with year-over-year EPS growth expected to exceed 20% driven by strength across all QCT revenue streams. In handsets, we are positioned to benefit from the 10 billion SAM expansion due to the changing OEM landscape. A portion of this benefit, is reflected in our first-quarter guidance. And we also expect it to contribute to the rest of fiscal '22. Before I finish my prepared remarks, I would like to thank our employees for their leadership and contributions in making 2021 successful. Finally, we look forward to seeing you at our Investor Day on November 16, where we will provide additional detail about our growth strategy. Thank you, and I'll now turn the call back to Mauricio.
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Q&A Transition
ML
Mauricio Lopez-HodoyanirQualcomm
Thank you, Akash. Operator, we're now ready for questions.
Q&A Session
Q&A 1/10
OP
Operatoroperator
Thank you.
To queue a question, press star than the number one. To withdraw your question, press star two. If you're using a speakerphone, please pick up your handset before pressing the numbers. Our first question comes from Chris Caso with Raymond James, please proceed with your question.
CC
Chris CasoanalystRaymond James
Yes. Thank you. Good evening. For my first question, perhaps you could help us out with what was different from your expectations heading into this quarter. I know that you were struggling with supply constraints like everyone else in the industry. Was it that the supply came on better than you expected? Was it the demand, was it a combination of both?
question#76
AP
Akash PalkhiwalaCFOQualcomm
Hi, Chris, this is Akash.
It was really a combination of both. We were — we had lots of strength in QCT really across all of our revenue streams with handsets, IoT and RF Front End, those are the three areas that did really well. Relative to our expectations. And we were able to work through the supply constraints to address the demand that came up. So it was really a combination of both.
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CC
Chris CasoanalystRaymond James
Great.
And maybe you could expand on your comments, you spoke about — and I think I have this right, EPS growth expected to exceed 20% as you go into next year. Can you give us some details? I'm sure that's something that, you're planning on hitting as you go into the Analyst Day.
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CA
Cristiano AmonCEOQualcomm
Yeah, absolutely. I mean, just to clarify, what we guided is non-GAAP EPS growth of greater than 20%.
And the key driver for that is really across all QCT revenue streams. So you're seeing the strength exiting the year, and that's the strength that's playing out both in our first-quarter guidance and also the full-year. The one thing I would highlight is within handsets, we're really in a strong position to benefit from the 10 billion SAM expansion we've previously discussed from the changing OEM landscape. And a portion of this benefit is reflected in our first quarter guidance, and that's also contemplated in the greater than 20% EPS growth we are suggesting.
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AP
Akash PalkhiwalaCFOQualcomm
Given that, we expect handsets to grow faster than non-handsets in fiscal '22. But really across-the-board, we'll have very strong growth rates and really set up to do well in the year and beyond.
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Q&A 2/10
OP
Operatoroperator
Thank you. Our next question is coming from the line of Matt Ramsay with Cowen, please proceed with your question.
MR
Matt RamsayanalystCowen
Yes.Thank you very much. Good afternoon, guys. And congrats on the results.
Cristiano, I wanted to dig a little bit with you into the guidance for the December quarter in QCT. I think you guys mentioned in the script that that was primarily going to be driven by your Android business and increase supply. So I just wanted to make sure that I got that right. Obviously, that's a seasonally strong quarter for Cupertino, but I just wanted to dig a little bit more into the dynamics that are driving the fourth-quarter and Android. Thank you.
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CA
Cristiano AmonCEOQualcomm
No, thanks Matt for the question.
Look, I think what you're starting to see exactly the correlation is going a different direction. You're correct, is a seasonally stronger quarter for our modem only shipments, but the sequential revenue growth is primarily driven by Android handsets. And demand for Snapdragon mobile platforms, both across premium and high tier. And consistent why we said, we see an incredible opportunity to grow way faster than the market. And Android is the primarily growth driver in our handset business right now.
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MR
Matt RamsayanalystCowen
Very clear. Thank you. Akash is my follow-up, 33% QCT op margins in the December quarter.Obviously, there was a settlement with Apple and some things changed there, but that number I think was 13%, 2 years ago. So I guess it's pretty remarkable progress. I wonder if you might talk a little bit more and maybe this is something for a couple of weeks from now at the Analyst Day, but, the puts and takes and drivers of the QCT op margin going forward and where are we? Is this this a seasonal peak or is this a new trend? Thank you.
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AP
Akash PalkhiwalaCFOQualcomm
Matt, thanks for the question.
Yeah, we're very pleased by the operating margin performance as well. So maybe I'll point to a couple of drivers, but really, we're planning to address this in a lot more detail in a couple of weeks. I'll ask you to hold until then.
If you see our gross margin performance in the September quarter that we just reported, very strong gross margins. And we are forecasting in similar range going into the December quarter. And then year-over-year, if you look at the full-year, so abstract back from the seasonality, we went from 17% in fiscal '20 to 29% in fiscal '21. And so, we feel, obviously, very comfortable with that number, and in a couple of weeks, we'll talk about how the combination of revenue growth and gross margin percentage and R&D leverage will take us going forward.
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Q&A 3/10
OP
Operatoroperator
Thank you. Our next question comes from the line of Samik Chatterjee with JPMorgan. Please proceed with your question.
SC
Samik ChatterjeeanalystJPMorgan
Thank you. Hi, thanks for taking my question. I guess, Cristiano, Akash both of you are sounding great on — and great adoption of your premium chipsets going into the December quarter. I just wanted to see if I can get some more color about how you're thinking about adoption of millimeter wave with the Android customers. I know there has been some investor conversation or disappointment around the primary customer not deploying a more widely rolling out millimeter wave this year. So just wanted to get what you're seeing in the pipeline, we're talking millimeter wave, and how our Android customers are sounding about that. And I have a follow-up.
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CA
Cristiano AmonCEOQualcomm
Hi Samik, thanks for asking the question.
Our position on millimeter wave remains unchanged, and will remain unchanged. There are 2, I think, answers your question, the first one is continue to track exactly as we'd expected. We have millimeter wave in United States, is now commercially available in Japan across all carriers, DOCOMO, SoftBank, KTDI, even a new carrier, Rakuten. And we continue to be optimistic about the opportunity of millimeter-wave becoming commercial overtime in China, the first milestone is the millimeter-wave for the Winter Olympics early 2022.
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AP
Akash PalkhiwalaCFOQualcomm
Japan is moving for a millimeter wave. And nothing has changed the carriers plans to continue to build the technology. And there are a number of commercial millimeter-wave smartphones in Japan that's include the Galaxy Note, the Gal — GS21, and Galaxy Fold, and Sony.
And from our perspective, just knowing what we know of wireless and how the growth of data is going in the spectrum efficiency, millimeter wave is inevitable, it's just a matter of time. And it's just different markets will deploy at different speeds, but that's how we get more Spectrum and our position of millimeter wave remains unchanged.
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SC
Samik ChatterjeeanalystJPMorgan
Thank you.
For my follow-up, if I can ask you right where you've got some investors asking about how to think about the opportunity with Arriver and how should we think about OEM customers that are looking for a full stack solution versus OEMs that look for more of just the hardware piece of that stack and leveraging Qualcomm from that aspect. And then if you can provide any updates. I think you've updated us on the purchase price along with SSA partners, but what — any more details around the closing as well as the price for Qualcomm standalone for the Arriver assets?
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CA
Cristiano AmonCEOQualcomm
We're very excited about the Veoneer acquisition and Arriver Technology. As we said before, with the natural owners of that asset, we were — believe we're on track to get the ability to get all the approvals and close on this transaction.
And more important, as we had a business preparation in place with Veoneer, prior to the acquisition, that remains unchanged and allow us to continue to progress towards our ADAS platform. We're getting incredibly positive feedback from the market, from the ability to provide truly open horizontal platform for ADAS and I highly encourage you to be at our New York Analyst Day, we have a lot more details to provide about what we're doing in ADAS on autonomy.
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Q&A 4/10
OP
Operatoroperator
Thank you. Our next question is coming from the line of Stacy Rasgon with Bernstein Research. Please proceed with your question.
SR
Stacy RasgonanalystBernstein Research
Hi, guys. Thanks for taking my questions. For my first one, I was curious just given the current state of the handset market, what kind of handset growth you have embedded in your more than 20% EPS forecast for 2022? Are you are looking for recovery, or is it all around content? How are we thinking about our unit growth in the market to drive that?
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AP
Akash PalkhiwalaCFOQualcomm
Yes, Stacy, for the guidance that we gave, there are no heroic assumptions on market growth. We are assuming similar scale to this year. And within that, we feel comfortable that we have the opportunities in front of us to grow.
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SR
Stacy RasgonanalystBernstein Research
So it feel like mid to high single-digit?
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AP
Akash PalkhiwalaCFOQualcomm
That's right.
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SR
Stacy RasgonanalystBernstein Research
Thank you. For my follow-up, I know you've had supply issues, I know they're resolving by the end of the calendar year. Are you still under-shipping what you could ship, if you had supply and is that supply eases up, does that have any impact on how we might think about typical seasonality in the March quarter?
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AP
Akash PalkhiwalaCFOQualcomm
Stacy, it's Akash. So we do have constraints really across-the-board and you have to figure out how the demand would have played out if there was supply across the industry. But we feel pretty comfortable that the overall supply picture is playing out exactly as we had planned. We saw this coming early and we've been talking about it for the last couple of quarters. And we have put in place plans both for dual sourcing for certain parts. We've now announced three parts that are dual sourced, that are available. And then also capacity expansions with our suppliers that were previously being planned.
Anyways, come in towards the end of the year. So that's definitely something that we are very excited about. On your question on the second quarter, we're obviously not guiding the quarter at this point, but it's a reasonable assumption to think that, as we launch our new Android premium-tier chip in the first quarter of the calendar year, that will offset some of the decline you would see in the handset market naturally within QCT. And then of course we also expect non-handset to grow from first quarter to second quarter.
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Q&A 5/10
OP
Operatoroperator
Thank you. Our next question comes from the line of Tal Liani with Bank of America. Please proceed with your question.
TL
Tal LianianalystBank of America
Hi, guys, I have 2 questions, so I'll just ask them together, what are the trends in China, meaning the headset market is weakening, and we heard it throughout the quarter? And on the other hand, there is Huawei share loss and your share gains. I'm wondering if you can share with us the trends within China and your outlook for the market.
And the second question is not related, but it's the second question I'm getting from investors, which is, you always say that the — when Apple starts using their motives, the surface area Apple is big and there are other opportunities. Can you elaborate what are the other opportunities? What are the — and maybe give us scenarios. What are the scenarios that you can still manage the transition of Apple using their own motive? Thanks.
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AP
Akash PalkhiwalaCFOQualcomm
Tal, It's Akash. I'll take the first one, and Cristiano will address the second one.
So what we saw in the September quarter and the market was weakness in units in China and emerging markets, but developed markets volume remained very resilient. So that's really the jumping off point for the December quarter. We are forecasting normal seasonality on top of what we saw in September. I'll say that a portion of the weakness was driven by supply imbalances at certain OEMs. And so, that did impact the demand to a certain extent, but that's one of the key factors we saw happening.
Within the market though, 5G continues to be very strong, so we are seeing two trends in China. First, is the transition to 5G, there's a variance month-to-month, but very, very strong in the high 70% has already transitioned to 5G. And so we are raising the guidance — the midpoint of the guidance for 5G to now, 525 million units. And then within that, we're also seeing higher tier of devices, so OPPO, Vivo, Xiaomi, Honor, all of our customers are moving up tier and, as they move up tier, that creates an incremental opportunity for us. So pretty positive market trends for us.
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OP
Operatoroperator
Thank you
CA
Cristiano AmonCEOQualcomm
So the Second question -
OP
Operatoroperator
I apologize,
CA
Cristiano AmonCEOQualcomm
The second — Okay. So I'm just going to answer the second question. So the second question, we're very focused right now on our contract with Apple, which is focused on providing modem for their products.
We're very happy with their relationship, but anything beyond our contract with them is an upside to our model. And as I continue to say, what I said before, we have a lot of technologies, they have a large number of devices. And if there are opportunities, we'll be very happy to engage with them and supply, we just don't want to speculate at this point. And we've been very clear that our assumptions in our model is just focused on our contract. Everything else is upside.
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Q&A 6/10
OP
Operatoroperator
Our next question is coming from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.
RS
Ross SeymoreanalystDeutsche Bank
Hi, guys. Thanks for letting me ask a question. Congrats on the strong results and guide. Akash or Cristiano, just wanted to talk a little bit about the pairing of the handset in the RF side of things. I know you said that there was a little bit of a pull-in into your fiscal fourth quarter on the RF side of things. But with the Android market share gains that you're talking about heading into the December quarter, why is the RF side not coming along for that ride? And is that pairing something that it's just a transition period, and as we look further out, those are going to be more linked together?
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Akash PalkhiwalaCFOQualcomm
Ross, it's Akash. It's the exactly the right question that, we expect that two to move together in concert.
As I mentioned in my prepared remarks, and that's why we highlighted that, we did see some pull-in from December quarter to September quarter within RF Front End. And it was really where supply was available, our customers chose to take it sooner than receiving the chipset. And if you normalize for it, the two would have moved together. So we definitely see the growth in the Android opportunity as a tremendous growth factor for us within RF Front End as well.
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Ross SeymoreanalystDeutsche Bank
Thanks for that color. I guess —
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Cristiano AmonCEOQualcomm
No. Just to be crystal clear, all of this growth opportunity that we've seen in Android, especially the premium high, is coming with RF. I want to make that statement clear.
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Ross SeymoreanalystDeutsche Bank
Okay. Thank you for that, Cristiano. I guess, it's my follow-up. If I talk about QCT X handsets and X RF Front End. It sounds like, Akash, you said those would be relatively flat in December, but then you thought it would actually grow again in March. What's going on in those markets? And then I guess the higher-level question is given the supply constraints, there's a big debate going on in broad-based semis between the investors worried about increased selectivity from customers, changing behaviors, are you seeing some digestion period here? Why is it slowing and then why is it re-accelerating?
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Akash PalkhiwalaCFOQualcomm
Yeah.
So as you saw, we're tremendously strong results both in auto and IoT and record results in both in the fourth fiscal quarter. You're right. Going into the first quarter, we are forecasting in line sequentially. And one of the key factors there is still we are supply constrained, and we're making certain decisions given the strong handset market in that quarter, to allocate supply a little differently based on profitability. But really when you think about the raw demand from the customer continues to be very strong. And so we are confident that when you look at second fiscal quarter or look at fiscal 2021 going to fiscal 2022, both those businesses will grow in a very strong fashion.
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Q&A 7/10
OP
Operatoroperator
Our next question is coming from the line of Joe Moore with Morgan Stanley. Please proceed with your question.
JM
Joe MooreanalystMorgan Stanley
Great. Thank you. I wonder if you could just talk about the overall supply chain and smartphone. And are you seeing bottlenecks at some of your customers where they're unable to procure parts that aren't from Qualcomm that might lead to inventory buildup of Qualcomm parts? It seems like, overall, the handset sell-through numbers are a little weaker because of those constraints, but it doesn't seem like to supply chain has changed at all. Can you just describe that dynamic?
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Akash PalkhiwalaCFOQualcomm
Sure Joe.
So we're definitely seeing some mismatch of parts in the short-term at some of our customers. But you should think of those as, really timing issues. The other thing to keep in mind is that, Cristiano outlined earlier in the call that, we're focusing really on the premium and high-tier units, and so when our customers have supply mismatch, they actually end up supplying the premium in high-tier devices. So our chips and our devices are still being used and it's not something that's a big factor for us in the short-term.
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JM
Joe MooreanalystMorgan Stanley
Great. Thank you very much.
Q&A 8/10
OP
Operatoroperator
Thank you. Our next question comes from Rod Hall with Goldman Sachs. Please proceed with your question.
RH
Rod HallanalystGoldman Sachs
Yes. Thanks for the question. I wanted to come back to this idea of supply versus demand in the Q1 quarter. I'd heard earlier — someone mentioned that they were assuming that that supply would be meeting demand. That it seems to — I just wanted to check that with you. Is that a good assumption or do you think that we'd see supply continuing to rise to meet demand on into the fiscal Q2? And then I have a follow-up.
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Cristiano AmonCEOQualcomm
Hi, Rod. This is Cristiano.
Look, if you remember, we had said, if I believe, two earnings calls ago that we had put — we act early, we put a lot of things in place, multi-sourcing, capacity expansions, and we said that we expect to see material improvement in our supply towards the end of the calendar year. That's reflected in the Q1 guide, our ability to have supply. We continue to have pockets of areas that we would ship more, if we had more, but we see a lot of improvements, we see at least three announced products of multi-sourcing had been shipped. And we've been executing on that increased supply.
And different companies are going to have different outlooks. We, look at the first half of 2022, we still have some shortage. But as we get to the second part the year, in general, supply and demand are going to be aligned.
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RH
Rod HallanalystGoldman Sachs
Just, I guess, my question was just aimed at the idea that, this seems like it could continue to be a little bit of a tailwind for you, as you move into the beginning of next year and it's not just magically resolved here at the end of this year. My follow-up is regarding the Android opportunity, I wonder if you guys could comment on content there versus the other big high enhanced that maker you supply. We calculate a substantial increase in content, but I'm just curious, do you agree with that, with — if you sell a high-end Android phone in January, is that phone going to have materially more content for you than another type of phone might?
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Cristiano AmonCEOQualcomm
Absolutely. Look, we are very pleased with the strength of our Snapdragon 800 Series. The Snapdragon 800 Series became synonymous with premium Android Flagship smartphones.
There's a lot more silicon content besides the RF Front End that's attached to the modem. There's GPU, there's CPU, there's all the multimedia, and it's a lot more richer platform than just selling a modem. And it's a multiple times in terms of revenue and earnings contribution. And when we look of the sum available to us — when we look at the consolidation of a Snapdragon 800 being the chipset for every Flagship, that's no surprise that we actually grow faster in the Android segments.
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Q&A 9/10
OP
Operatoroperator
Thank you. Our next question is coming from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.
HK
Harsh KumaranalystPiper Sandler
Hey, guys. First of all, congratulations on tremendous execution and diversification. Had a question. Cristiano, you talked a lot about Android and how positive you are on that. I know you were supposed to get additional supply in the December quarter. You seem to be benefiting from units. Are you benefiting from units primarily or are you also going back and taking share that you were expecting to take from your competitors?
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Cristiano AmonCEOQualcomm
Look, there's plenty of opportunity with the changing landscape for growth between us and our competitors. I think what's important to highlight, is that Qualcomm has been concentrated into premium and high. There's very high demand for premium and high Snapdragon mobile platforms, both the 700, 800, and it is a share gain of Snapdragon in Android premium. And we're very happy with the opportunity to capture actually the higher value share of the market.
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Akash PalkhiwalaCFOQualcomm
And then maybe hard to answer that. I'll just draw your attention to product announcements that we had a couple of weeks ago where we announced a whole new set of 5G products across tiers.
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Harsh KumaranalystPiper Sandler
Great guys and for my follow-up, I wanted to follow up on a question that was asked about the March quarter.
You talked about some benefits coming from your premium chipset you'll be launching in the March timeframe, which is seasonally weak. Now, Apple for one, talked about leaving, I think it was $6 billion plus worth of revenues behind on the table. Do you think you might get a benefit from all the handset OEMs that are leaving revenue behind on the table along with your premium? Or you think it's just again, your own chipsets that are getting benefit from launch of new chipsets.
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Akash PalkhiwalaCFOQualcomm
Well, what I said about the March quarter was really you have a seasonal decline in the handset market, but given the launch of our new chipset, and really, all the other chipset launches we've done over the last month, we feel like we will be in a very strong position to expand our units within the Android market. And then, the second thing I said is non-handset growth. We expect non-handsets, all three to grow within the quarter as well.
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Q&A 10/10
OP
Operatoroperator
Thank you. Our final question is coming from the line of Timothy Arcuri with UBS. Please proceed with your question.
TA
Timothy ArcurianalystUBS
Thanks a lot. I had two questions. The first Akash was on the RF business. I think you said at the Analyst Day that, you were targeting more than 20% share of an $18 billion TAM next year, but you're now annualizing to almost $5 billion. So either the market's a lot bigger or your share's a lot higher. Can you just comment on that? And then secondly, I had a question on the contract with the big customer.
Can you just level set us? Cristiano, you just alluded to it. So can you level set us? I think it goes through 2024, but can you just help us on the timing of that? Thank you.
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Akash PalkhiwalaCFOQualcomm
Tim, on your first question on the math, $3.6 billion is right, and were reported results at $4.1 billion, I think.
So we have definitely exceeded the target we had set. And as Cristiano said earlier in the conversation, we're really confident that, we have several more vectors of growth left in the RF business, not just within handsets, but also as 5G expands into Telematics in IoT. And then also within Wi-Fi. There's some ways to go and we'll definitely plan to address that at Analyst Day in a couple of weeks.
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CA
Cristiano AmonCEOQualcomm
Hi, Tim. It's Cristiano. The only thing we can disclose is what we've disclosed before. It is a long-term agreement and it's a multi-year agreement. We unfortunately cannot say anything more than that.
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Operatoroperator
Thank you. That concludes today's question-and-answer session. Mr. Amon, do you have anything further to add before adjourning the call?
Closing Remarks
CA
Cristiano AmonCEOQualcomm
Thanks, everyone for joining us on the call today. We are at the intersection of key trends, their accelerating Edge connectivity, efficient processing, and own device artificial intelligence. This is driving demand for industry-leading roadmap of relevant technologies creating a significant opportunity for growth and continued diversification. In addition to driving the mobile industry to 5G, we will power the connected intelligent Edge. I look forward to outlining our strategy and vision for the future at Investor Day on November 16, and sharing our next generation Snapdragon platforms at our Annual Tech Summit in December. I also want to take a moment to thank our employees for an incredible fiscal year. They are truly the best of QUALCOMM and there is no better time to be part of this great Company.
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Operator Sign-off
OP
Operatoroperator
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.