QUALCOMM Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm fourth quarter and fiscal 2019 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're 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 6, 2019. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 136-95634. I would now like to turn the call over to Mauricio Lopez-Hedoyen, Vice President of Investor Relations. Mr. Lopez-Odoin, please go ahead.

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Steve Molenkopf and Akash Balkhawala. In addition, Christiana Molen, Alex Rogers, and Don Rosenberg will join the question and answer session. You can access our earnings release and a slide presentation that accompanied this call on our Investor Relations website. In addition, this call has been webcast on Qualcomm.com, and the 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, including projections and estimates of future events, business or industry trends, or business or financial results. Actual events or results 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 Chief Executive Officer, Steve Malenkov.

Thank you, Mauricio, and good afternoon, everyone. We are pleased to report strong results in the fourth quarter with non-GAAP earnings of 78 cents per share, above the high end of our guidance range on solid performance in our licensing business. We are also pleased to see our licensing revenue return to a seasonal pattern with fiscal Q1 as a high, based on our recent licensing agreement with Apple. Over the last several years, we have invested to establish Qualcomm as a leader in 5G. As a reminder, 5G brings a significant increase in complexity over 4G, such as new and dense network architectures, high-performance basebands, advanced RF front-end designs, increased processing requirements, in addition to driving the leading-edge process node. We are actively focused on helping to define and standardize releases 16 and 17 features to support the expansion of 5G into new, large, adjacent markets such as enterprise, industrial IoT, and automotive. The complexity and expansion of cellular technologies beyond the smartphone into nearly every industry play directly to Qualcomm's strength and are why we believe 5G will represent the single biggest opportunity in Qualcomm's history. Looking ahead to fiscal year 2020, the company remains focused on these three key priorities. Number one, continue executing on 5G with our partners around the world. The number of OEMs and operators launching 5G products and services continues to increase throughout the year. There are now over 40 OEMs and over 30 operators launching or announcing 5G products or commercial service, up from approximately 20 OEMs and operators, respectively. at the start of the year. Looking forward, we expect 5G to launch in all regions within the next two to three years. On the product side, in September, we announced plans to accelerate 5G global commercialization at scale by expanding our portfolio of 5G mobile platforms into the Snapdragon 7 series and 6 series, launching as early as calendar Q1 2020. Our integrated 5G SOCs will support both sub-6 gigahertz and millimeter wave at the volume tiers across all geographies. As we continue to expand our 5G product portfolio, our design wins are also increasing. We now have over 230 5G design wins launched or in development, up from 150 in the prior quarter, virtually all of which are using our RF front-end solutions for 5G sub-6 and or millimeter wave. Notably, Multiple OEMs are now shipping or have announced their second or third 5G device models using both our Snapdragon 5G core chipset and our modem to antenna RF front end solution. In Korea, the migration to 5G continues at a strong pace. According to the Korean Ministry of Science and ICT, Korean operators have already signed up 3.5 million 5G subscribers through September, a pace that remains faster than its migration to 4G. Additionally, 5G millimeter wave services are in planning stages by Korean carriers for calendar 2020. In the United States, Verizon has committed to deploy 5G ultra-wideband millimeter wave in 30 markets by year end, and T-Mobile separately announced plans to cover 200 million people with 5G on 600 megahertz before the end of this year. And in Europe, there are multiple 5G launches across Switzerland, Italy, the United Kingdom, and Germany. In China, all three mobile operators commercially launched 5G services last week, bringing 5G to the largest smartphone subscriber base in the world. We now estimate that by the end of this year, the three operators will deploy a total of approximately 130,000 5G base stations. We further estimate that by the end of 2020, 5G base station deployments will increase to approximately 1 million which to put in context is 10 times the scale of the entire network of a large U.S. operator. Lastly, TSMC recently attributed the significant increase in demand for their leading technology nodes to a stronger outlook for 5G deployment next year. This is yet another significant indicator of the 5G ramp into 2020. Second priority, to expand our technology platform into adjacent industry segments. In automotive, we are very encouraged with the engagement and design wind traction we are experiencing from automakers and Tier 1 customers with our telematics and third-generation Snapdragon automotive cockpit solutions. Our design wind pipeline has now increased to almost $6.5 billion, up from $5 billion at the start of the fiscal year, giving us great visibility into strong growth in auto over the next several years. Over time, as the technology roadmap in auto converges with the cellular roadmap, we expect to see an increased opportunity to lead in new product categories, notably ADAS. In compute, we continue to build traction in the Windows on Snapdragon Always On, Always Connected PC category. In August, Samsung announced the Galaxy Book S based on the Snapdragon 8CX. This is Samsung's second Windows on Snapdragon device and the first announced Snapdragon 8CX Always Connected PC. In October, Microsoft launched the Surface Pro X, our first design with Microsoft in this premium tier, powered by a Snapdragon 8CX variant that is designed for the always-on compute environment, the Microsoft SQ1, developed in partnership with Microsoft. This is the thinnest Surface ever and has three times the performance per watt as the Surface Pro 6. Priority three, drive revenue growth, operating leverage, and earnings per share. Consistent with our comments last quarter, we continue to expect a positive inflection point as 5G ramps beginning in our fiscal second quarter. With the conclusion of our cost plan and significant share repurchases over the last year, we are poised to deliver margin expansion and outsized growth in earnings and earnings per share as revenue growth accelerates. We are pleased with the progress we have made over the course of 2019 and believe the business is very well positioned for sustained long-term growth as we benefit from the decisions and investments made over the last several years, including 5G, the return of Apple licensing and product revenues, growth in RF front end, and growth in adjacent businesses. Before I turn the call over to Akash, I'd like to congratulate him on becoming Qualcomm's Chief Financial Officer. As QCT Finance Lead for the past four years, Akash brings a deep knowledge base of our company, both operationally and strategically. I'm looking forward to working closely with Akash as we enter this next chapter of our history. I would now like to turn the call over to Akash.