Qualcomm Announces Record First Quarter Fiscal 2012 Results

Revenues $4.7 Billion

GAAP EPS $0.81, Non-GAAP EPS $0.97

-- Record First Quarter Results, Raising Fiscal 2012 Guidance --

SAN DIEGO, Feb. 2, 2012 /PRNewswire-Asia/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced record results for the first quarter of fiscal 2012 ended December 25, 2011.

"I am pleased to report another record quarter with revenues, earnings and MSM shipments reaching all-time highs, driven by our industry-leading chipset portfolio and the continued strong demand for smartphones around the world," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "We are raising our revenue and earnings guidance as our broad licensing partnerships and extensive chipset roadmap, led by our integrated Snapdragon processors, position us well for strong growth in fiscal 2012. We continue to invest in innovative wireless technologies, products and services, and we are excited about the opportunities ahead as 3G and 4G continue to expand across new device types and geographies."

First Quarter Results (GAAP)

• Revenues: (1) $4.68 billion, up 40 percent year-over-year (y-o-y) and 14 percent sequentially.
• Operating income: (1) $1.55 billion, up 24 percent y-o-y and 25 percent sequentially.
• Net income: (2) $1.40 billion, up 20 percent y-o-y and 33 percent sequentially.
• Diluted earnings per share: (2) $0.81, up 14 percent y-o-y and 31 percent sequentially.  
• Effective tax rate: (1) 19 percent for the quarter.
• Operating cash flow: $1.78 billion, 38 percent of revenues.
• Return of capital to stockholders:  $461 million, including $362 million, or $0.215 per share, of cash dividends paid, and $99 million to repurchase 2.0 million shares of our common stock.

(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 First Quarter Results

Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain acquisition-related items starting with acquisitions completed in the third quarter of fiscal 2011 and certain tax items.

• Revenues: $4.68 billion, up 40 percent y-o-y and 14 percent sequentially.
• Operating income:  $1.87 billion, up 32 percent y-o-y and 15 percent sequentially.
• Net income: $1.67 billion, up 24 percent y-o-y and 22 percent sequentially.
• Diluted earnings per share:  $0.97, up 18 percent y-o-y and 21 percent sequentially.  Excludes $0.01 loss 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 (the sum of Non-GAAP earnings per share and items excluded do not equal GAAP earnings per share due to rounding).
• Effective tax rate:  19 percent for the quarter.
• Free cash flow (defined as net cash from operating activities less capital expenditures):  $1.49 billion, 32 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.

The following should be noted with regards to the above results and year-over-year comparisons: first quarter fiscal 2012 results included the results of Qualcomm Atheros, Inc., which was acquired on May 24, 2011. Additionally, on December 27, 2011, after the close of our first fiscal quarter, we completed the sale of substantially all of our 700 MHz spectrum for $1.9 billion. As a result, we will recognize a gain in discontinued operations of $1.2 billion in the second quarter of fiscal 2012 related to the close of this transaction.

First Quarter Key Business Metrics

• MSM™ shipments: 156 million units, up 32 percent y-o-y and 23 percent sequentially.
• September quarter total reported device sales: approximately $41.4 billion, up 22 percent y-o-y and 6 percent sequentially.
  • September quarter estimated 3G/4G device shipments: approximately 191 to 195 million units, at an estimated average selling price of approximately $212 to $218 per unit.

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled $22.0 billion at the end of the first quarter of fiscal 2012, compared to $20.9 billion at the end of the fourth quarter of fiscal 2011 and $19.1 billion a year ago. As of December 25, 2011, $948 million remained authorized for repurchases under our stock repurchase program, net of put options outstanding. On January 10, 2012, we announced a cash dividend of $0.215 per share payable on March 23, 2012 to stockholders of record as of March 2, 2012.

Research and Development

Non-GAAP R&D expenses increased 33 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

Non-GAAP selling, general and administrative (SG&A) expenses increased 11 percent y-o-y primarily due to increases in employee-related and marketing costs.

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 first quarter effective income tax rates for GAAP and Non-GAAP were both 19 percent.

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 first quarter of fiscal 2012 included a $0.01 loss per share for the QSI segment.

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.

(1) As adjusted to reflect the reclassification of revenues related to FLO TV to discontinued operations.

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

(3) 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 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.

(4) 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):

(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 investment income or losses, interest expense, research and development expenses, sales and marketing expenses and other operating expenses 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) Starting with acquisitions completed in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During the first quarter of 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 first quarter of fiscal 2012 earnings conference call will be broadcast live on February 1, 2012, beginning at 1:45 p.m. Pacific Time (PT) on the Investor Relations section of the Company's web site at: http://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 http://www.qualcomm.com/ immediately prior to commencement of the call. A taped audio replay will be available via telephone on February 1, 2012, beginning at approximately 5:30 p.m. PT through March 1, 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 41343500. An audio replay of the conference call will be available on the Investor Relations section of the Company's web site at http://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, visithttp://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 results 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 comparable basis; (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Non-GAAP measurements of the following financial data are used by the Company's management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income (loss), net investment income (loss), income (loss) before income taxes, effective tax rate, net income (loss), diluted earnings (loss) per share, operating cash flow and free cash flow. Management is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments.

Non-GAAP information used by management excludes the QSI segment, certain share-based compensation, certain tax items and certain acquisition-related items. The QSI segment is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments and realized gains or losses are viewed by management as unrelated to the Company's operational performance. Share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company's common stock, is excluded because management views such share-based compensation as unrelated to the Company's operational performance. Further, share-based compensation is affected by factors that are subject to change, including the Company's stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts in future years. Certain tax items that were recorded in reported earnings in each fiscal year presented, but that were unrelated to the fiscal year in which they were recorded, are excluded in order to provide a clearer understanding of the Company's ongoing Non-GAAP tax rate and after tax earnings. However, the Company excludes any benefit resulting from the retroactive extensions of the federal R&D tax credit from Non-GAAP results because the Company does not include the potential extension of the credit in its business outlook due to uncertainty as to whether and when the federal R&D tax credit will be retroactively extended. In addition to its historical practice of excluding acquired in-process research and development expenses from Non-GAAP results, the Company began excluding amortization of certain intangible assets, recognition of the step-up of inventories to fair value and the related tax effects of these items starting with acquisitions completed in the third quarter of fiscal 2011, as well as any tax effects of restructuring the ownership of such acquired assets. These certain acquisition-related items are excluded and no longer allocated to the Company's segments because management has concluded that such expenses should not be considered when assessing segment performance as they are unrelated to the operating activities of the Company's ongoing core businesses. In addition, these charges are significantly impacted by the size and timing of acquisitions, potentially obscuring period to period comparisons of the Company's operating businesses.

The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term stockholder value. The Company believes that this presentation is useful in evaluating its operating performance and financial strength. In addition, management uses this measure to evaluate the Company's performance, to value the Company and to compare its operating performance with other companies in the industry.

Note Regarding Forward-Looking Statements

In addition to the historical information contained herein, this news release contains forward-looking statements that are inherently subject to risks and uncertainties, including but not limited to statements regarding the Company's business outlook; growth expectations; and estimates and guidance related to financial performance, effective income tax rates, MSM shipments, device shipments, device sales and device average selling prices. Forward-looking statements are generally identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "guidance" and similar expressions. Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to, risks associated with the commercial deployment of, and demand for, our technologies in communications products and services; the uncertainty of global economic conditions and their potential impacts on demand for our products, services or applications and on the value of our marketable securities; competition; our dependence on a small number of customers and licensees; attacks on our licensing business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; our dependence on third-party suppliers; the commercial success of our QMT division's IMOD display technology; foreign currency fluctuations; strategic investments and transactions we have or may pursue, including our investment in the BWA Spectrum in India, which is currently subject to legal proceedings; and failures and defects or errors in our products and services or in the products of our customers. These and other risks are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 2011 and Quarterly Report on Form 10-Q for the fiscal quarter ended December 25, 2011 filed with the SEC. Our reports filed with the SEC are available on our website at http://www.qualcomm.com/. We undertake no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

Qualcomm, MSM and Snapdragon are registered trademarks of Qualcomm Incorporated, registered in the United States and other countries. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.