QUALCOMM Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm first quarter fiscal 2020 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 February 5th, 2020. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 136-97473. I would now like to turn the call over to Mauricio Lopez-Hedoyen, Vice President of Investor Relations. Mr. Lopez-Hedoyen, please go ahead.

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Steve Molenkopf and Akash Balkhawala. In addition, Christiane Amon, 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 Molenkopf.

Thank you, Mauricio, and good afternoon, everyone. We are pleased to report strong results in the first fiscal quarter with non-GAAP earnings of 99 cents per share, above the high end of our guidance range, led by strength in our chip business. We are also pleased to to see strong year-over-year revenue growth in our licensing business. As you can see from our strong results, our business reached a key inflection point exiting fiscal Q1, demonstrating the positive financial impact of our 5G strategy to grow our addressable dollar content per device with higher performing core chipsets and new RF front-end content. Virtually all of our 5G Snapdragon design wins are using our RF front-end solutions for 5G sub-6 and or millimeter wave, including DesignWinds based on our second generation solutions. As we continue to execute on our RF front-end strategy, we are pleased to see our RF DesignWinds pipeline contribute to the strength of our quarterly results and our outlook. We are in a strong position with leading technology and intellectual property and the best products in the company's history. Our 5G roadmap extends beyond Release 17, placing us on the cusp of a multi-decade mobile transformation, as 5G increasingly becomes the foundation for the digital transformation of industries beyond smartphones. Turning to QTL, we have now signed over 80 5G license agreements, up from 75 license agreements last November. Most recently, We signed extensions with two key Chinese OEMs through the end of March as we work to complete long-term 5G license agreements. Let me now spend some time updating you on 5G traction globally. As we start the year, there are over 345 operators in nearly 120 countries investing in 5G, including 45 operators in over 20 countries that have launched commercial 5G services spanning both sub-6 and millimeter wave spectrum. Looking forward, we continue to expect millimeter wave to be deployed in all regions. Additionally, more than 45 OEMs have launched or announced commercial 5G devices, many of which are using our Snapdragon 5G platforms. On the product side, we recently introduced our flagship Snapdragon 865 mobile platform that we expect will power many premium-tier Android smartphones this year. We also introduced the Snapdragon 765 and 765 gaming mobile platforms with an integrated 5G modem. With over 275 5G devices announced or in development, spanning multiple price tiers, our product offerings will help make 5G more accessible to consumers. We also expanded our 4G lineup with new mobile platforms that enable our partners to offer sophisticated solutions that meet global 4G demand, particularly in emerging economies across multiple tiers and price segments. Turning to Korea, last December, all three Korean operators combined reported approximately 4.7 million 5G subscribers and are forecasting continued growth throughout calendar year 2020. we see Korea as a leading indicator for the pace of 5G adoption. Of note, the expected 5G subscriber growth is not just isolated to the sub-6 frequency bands. Carriers are planning millimeter wave service in 2020. Turning to China, 5G device sell-in increased through December. The China Academy of Telecommunication Research reported sell-in of 13 million 5G handsets in calendar Q4 2019. Importantly, 5G handset sell-in penetration reached 19% in December 2019. We are already seeing devices priced as low as 2,000 RMB or approximately 285 US dollars. At this point, 5G can address approximately 40% of domestic China smartphone sales. In the US, the 5G network build-out is progressing well at the top four carriers across sub-six and millimeter wave spectrum. Verizon is leading the deployment of enhanced mobile broadband with millimeter wave service in 31 cities and is expanding their device roadmap to approximately 20 new 5G products this year. T-Mobile's 5G network now covers more than 200 million people and more than 1 million square miles across the United States. AT&T expects to have nationwide 5G coverage by calendar Q2, and Sprint expanded their 5G network coverage to nine metropolitan areas. I would also like to highlight two recent developments on spectrum in the United States that will help drive even greater momentum for 5G. First, the FCC gave final approval for commercial use of the CBRS band, taking advantage of spectrum sharing techniques that we and others in the industry began working on years ago. The CBRS band is well suited for enterprise, smart city, and industrial IoT deployments. And second, the FCC's latest millimeter wave auction which includes the largest amount of millimeter wave spectrum ever up for bid in an auction, is ongoing and will bring up to 3.4 gigahertz of additional millimeter wave spectrum to the U.S. market. Turning to automotive, as a measure of our continued automotive success, our design wind pipeline is now over $7 billion, up from $5.5 billion a year ago, which does not include any impact from our recently launched autonomous driving platform, Snapdragon Ride. We continue to benefit from our systems-level expertise, expanding our automotive solutions to include an autonomous driving platform, Snapdragon Ride. With a long history of automotive innovation, we have now become a trusted advisor to many of the world's leading automakers. Over 125 million vehicles use our broad range of automotive solutions, including telematics, in-car connectivity, and infotainment platforms. Our Snapdragon Ride ADAS platform represents a significant expansion of our addressable market. We look forward to seeing our Snapdragon Ride ADAS and autonomous solutions on the road in 2023. We are very pleased with the FCC's unanimous vote in December to move forward with allocating spectrum in the 5.9 GHz band for cellular vehicle to everything technology. Since that vote, we are seeing traction for cellular V2X in the 5.9 GHz band across regions. Looking forward, we continue to remain optimistic about our growth opportunities in IoT, always connected PCs, and cloud AI. Lastly, As the coronavirus situation continues to unfold, our thoughts are with the many Qualcomm employees in China, our customers and suppliers, their families, as well as those who are impacted by this unprecedented situation. As Akash will share with you, we have considered the impact of the coronavirus in our forward guidance based on the limited information we have at this time. I would now like to turn the call over to Akash.