Qualcomm Announces Second Quarter Fiscal 2015 Results

 

(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 CDMA/OFDMA multimode subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period (collectively, 3G/4G devices). The reported quarterly estimated ranges of average selling prices (ASPs) and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some licensees report sales net of permitted deductions, including transportation, insurance, packing costs and other items, while other licensees report sales and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. In addition, certain licensees may not report (in the quarter in which they are contractually obligated to report) their sales of certain types of subscriber units, which (as a result of audits, legal actions or for other reasons) may be reported in a subsequent quarter. Accordingly, total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until such particular period.



(2)

Our prior guidance for fiscal 2015 included an estimate of the benefit related to stock repurchases that we planned to complete over the remainder of fiscal 2015 under our previous stock repurchase program. Our current guidance for fiscal 2015 includes an estimate of the benefit related to stock repurchases that we plan to complete over the remainder of fiscal 2015 under our new $15 billion stock repurchase program, including our intention to repurchase $10 billion of common stock within 12 months, in addition to our current commitment to return a minimum of 75% of free cash flow to stockholders through stock repurchases and dividends.



(3)

Our guidance range for the third quarter of fiscal 2015 and fiscal 2015 total reported device sales reflects estimated 3G/4G total reported device sales that we currently expect to be reported to us, which includes an estimate of some prior period activity (i.e., devices shipped in prior periods) that may be reported to us.



(4)

We estimate global 3G/4G device shipments were approximately 1.37 billion for calendar year 2014. However, we do not believe that all of the global 3G/4G device shipments for calendar year 2014 were reported to us within the time periods required by our license agreements. Accordingly, we currently estimate approximately 1.174 billion to 1.190 billion calendar year 2014 3G/4G device shipments were actually reported to us through the first calendar quarter of 2015.



Sums may not equal totals due to rounding.


Results of Business Segments

The following table reconciles our Non-GAAP results to our GAAP results ($ in millions, except per share data):



























SEGMENTS

QCT

QTL

Non-GAAP
Reconciling
Items (a)

Non-GAAP

QSI

Share-Based
Compensation

Other
Items
(b) (c)


GAAP

Q2 - FISCAL 2015






Revenues

$4,434

$2,414

$46

$6,894



$—



$—


$—


$6,894


Change from prior year

5%

17%

(13%)

8%







8%


Change from prior quarter

(15%)

33%

12%

(3%)







(3%)


Cost of equipment and services revenues




$2,554



$—


$11

$63


$2,628


Research and development




1,186


1


158

30


1,375


Selling, general and administrative




447


3


80

15


545


Other expenses






1,010


1,010


Operating income (loss)




$2,707


($4)


($249)

($1,118)


$1,336


Change from prior year




16%


33%


1%

N/M


(33%)


Change from prior quarter




7%


43%


9%

N/M


(35%)


Investment income, net




$231

(d)

($28)

(e)


$—


$—


$203


EBT

$750

$2,162

$26

$2,938


($32)


($249)

($1,118)


$1,539


Change from prior year

1%

18%

(67%)

11%


18%


1%

N/M


(32%)


Change from prior quarter

(35%)

37%

(24%)

6%


N/M


9%

N/M


(33%)


EBT as % of revenues

17%

90%

57%

43%







22%


Net income (loss)




$2,339


($27)


($206)

($1,053)


$1,053


Change from prior year




4%


(59%)


(4%)

N/M


(46%)


Change from prior quarter




3%


N/M


10%

N/M


(47%)


Diluted EPS




$1.40


($0.02)


($0.12)

($0.63)


$0.63


Change from prior year




7%


N/M


(9%)

N/M


(45%)


Change from prior quarter




4%


N/M


14%

N/M


(46%)


Diluted shares used




1,667


1,667


1,667

1,667


1,667


Q1 - FISCAL 2015






Revenues

$5,242

$1,816

$41

$7,099



$—



$—


$—


$7,099


Operating income (loss)




2,531


(7)


(273)

(187)


2,064


EBT

$1,146

$1,579

$34

2,759


(1)


(273)

(187)


2,298


Net income (loss)




2,263



(229)

(62)


1,972


Diluted EPS




$1.34


$0.00


($0.14)

($0.04)


$1.17


Diluted shares used




1,686


1,686


1,686

1,686


1,686


Q2 - FISCAL 2014






Revenues

$4,243

$2,071

$53

$6,367



$—



$—


$—


$6,367


Operating income (loss)




2,337


(6)


(251)

(90)


1,990


EBT

$740

$1,834

$78

2,652


(39)


(251)

(90)


2,272


Net income (loss)




2,255


(17)


(198)

(81)


1,959


Diluted EPS




$1.31


($0.01)


($0.11)

($0.05)


$1.14


Diluted shares used




1,719


1,719


1,719

1,719


1,719


Q3 - FISCAL 2014






Revenues

$4,957

$1,803

$46

$6,806



$—



$—


$—


$6,806


Operating income (loss)




2,425


(5)


(274)

(71)


2,075


EBT

$1,116

$1,550

$177

2,843


(1)


(274)

(71)


2,497


Net income (loss)




2,470



(232)


2,238


Diluted EPS




$1.44


$0.00


($0.14)

$0.00


$1.31


Diluted shares used




1,714


1,714


1,714

1,714


1,714




(a)

Non-GAAP reconciling items related to revenues consisted primarily of nonreportable segment revenues less intersegment eliminations. Non-GAAP reconciling items related to earnings before taxes consisted primarily of certain research and development expenses, selling, general and administrative expenses, other expenses or income and certain investment income that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit.



(b)

Beginning in the first quarter of fiscal 2015, we changed our methodology for reporting Non-GAAP results to exclude third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and long-lived asset impairment charges and litigation settlements and/or damages. In the second quarter of fiscal 2015, other items excluded from Non-GAAP EBT included $975 million related to the resolution reached with the NDRC, $79 million of acquisition-related items, impairment charges of $35 million and $27 million related to goodwill and in-process research and development, respectively, and $2 million of severance costs related to a restructuring.



(c)

In the second quarter of fiscal 2015, the tax benefit in the "Other Items" column included a $61 million tax benefit as a result of an agreement reached with the Internal Revenue Service related to Atheros' pre-acquisition tax returns, a $10 million tax benefit for the tax effect of other items in EBT and a $3 million tax benefit for the tax effect of acquisition-related items, partially offset by a $9 million tax expense to reconcile the tax provisions for each column to the total GAAP tax provision for the quarter. At fiscal year end, the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is included in the tax provision (benefit) in the "Other Items" column. In interim quarters of prior fiscal years, this difference was allocated to the tax provisions (benefits) among the columns. See the "Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates" herein.



(d)

Included $138 million in interest and dividend income, $106 million in net realized gains on investments and $1 million in other net investment income, partially offset by $14 million in other-than-temporary losses on investments.



(e)

Included $27 million in other-than-temporary losses on investments and $1 million in other net investment expense.



























SEGMENTS

QCT

QTL

Non-GAAP
Reconciling
Items (a)

Non-GAAP

QSI

Share-Based
Compensation

Other
Items
(f) (g)


GAAP


6 MONTHS - FISCAL 2015






Revenues

$9,676

$4,230

$87

$13,993



$—


$—

$—


$13,993


Change from prior year

9%

7%

(45%)

8%







8%


Cost of equipment and services revenues




$5,524



$—


$23

$129


$5,676


Research and development




2,356


2


333

35


2,726


Selling, general and administrative




875


9


166

62


1,112


Other expenses






1,079


1,079


Operating income (loss)




$5,238


($11)


($522)

($1,305)


$3,400


Change from prior year




25%


(10%)


2%

N/M


(2%)


Investment income, net




$459

(h)

($22)

(i)

$—

$—


$437


EBT

$1,896

$3,741

$60

$5,697


($33)


($522)

($1,305)


$3,837


Change from prior year

15%

7%

N/M

20%


6%


2%

N/M


(5%)


EBT as % of revenues

20%

88%

69%

41%







27%


Net income (loss)




$4,603



($27)


($436)

($1,115)


$3,025


Change from prior year




4%


N/M


(3%)

N/M


(21%)


Diluted EPS




$2.75


($0.02)


($0.26)

($0.67)


$1.80


Change from prior year




7%


N/M


(4%)

N/M


(19%)


Diluted shares used




1,677


1,677


1,677

1,677


1,677


6 MONTHS - FISCAL 2014






Revenues

$8,859

$3,971

$159

$12,989



$—


$—

$—


$12,989


Operating income (loss)




4,185


(10)


(532)

(160)


3,483


EBT

$1,646

$3,504

($394)

4,756


(35)


(532)

(160)


4,029


Discontinued operations, net of tax




430




430


Net income (loss)




4,418


(13)


(423)

(147)


3,835


Diluted EPS




$2.57


($0.01)


($0.25)

($0.09)


$2.23


Diluted shares used




1,721


1,721


1,721

1,721


1,721


12 MONTHS - FISCAL 2014






Revenues

$18,665

$7,569

$253

$26,487



$—


$—

$—


$26,487


Operating income (loss)




8,933


(18)


(1,059)

(306)


7,550


EBT

$3,807

$6,590

($247)

10,150


(7)


(1,059)

(306)


8,778


Discontinued operations, net of tax




430




430


Net income (loss)




9,032


15


(856)

(224)


7,967


Diluted EPS




$5.27


$0.01


($0.50)

($0.13)


$4.65


Diluted shares used




1,714


1,714


1,714

1,714


1,714




(f)

In the six months ended March 29, 2015, other items excluded from Non-GAAP EBT included $975 million related to the resolution reached with the NDRC, $162 million of acquisition-related items, $104 million related to goodwill impairment charges, $37 million of severance costs related to a restructuring and a $27 million impairment charge related to in-process research and development.



(g)

In the six months ended March 29, 2015, the tax benefit in the "Other Items" column included a $101 million tax benefit related to fiscal 2014 as a result of the retroactive reinstatement of the federal R&D tax credit, a $61 million tax benefit as a result of an agreement reached with the Internal Revenue Service related to Atheros' pre-acquisition tax returns, a $31 million tax benefit for the tax effect of other items in EBT and a $3 million tax benefit related to fiscal 2014 as a result of the retroactive reinstatement of other tax laws, partially offset by a $6 million tax expense to reconcile the tax provisions for each column to the total GAAP tax provision for the six months ended March 29, 2015. See the "Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates" herein.



(h)

Included $270 million in interest and dividend income, $262 million in net realized gains on investments and $3 million in other net investment income, partially offset by $76 million in other-than-temporary losses on investments.



(i)

Included $30 million in other-than-temporary losses on investments and $10 million in equity in losses of investees, partially offset by $15 million in net realized gains on investments and $3 million in other net investment income.



N/M - Not Meaningful


Sums may not equal totals due to rounding.



Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates

(Unaudited)



























Three Months Ended March 29, 2015

($ in millions)


Non-GAAP Results



QSI



Share-Based Compensation



Other
Items



GAAP Results


Income (loss) from continuing operations before income taxes


$

2,938



$

(32)



$

(249)



$

(1,118)



$

1,539


Income tax (expense) benefit


(599)



4



43



65



(487)


Income (loss) from continuing operations


$

2,339



$

(28)



$

(206)



$

(1,053)



$

1,052


















Tax rate


20%



13%



17%



6%



32%





























Six Months Ended March 29, 2015

($ in millions)


Non-GAAP Results



QSI



Share-Based Compensation



Other
Items



GAAP Results


Income (loss) from continuing operations before income taxes


$

5,697



$

(33)



$

(522)



$

(1,305)



$

3,837


Income tax (expense) benefit


(1,094)



4



86



190



(814)


Income (loss) from continuing operations


$

4,603



$

(29)



$

(436)



$

(1,115)



$

3,023


















Tax rate


19%



12%



16%



15%



21%



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