QUALCOMM Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm first quarter fiscal 2022 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 February 2, 2022. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 137-260-28. I would now like to turn the call over to Mauricio Lopez-Hedoyan, 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 Cristiano Mon and Akash Palkawala. In addition, Alex Rogers will join the question and answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call has been 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, 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 the comments from Qualcomm's President and Chief Executive Officer, Cristiano Mon.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. Based on our performance over the past several quarters and the strong fiscal second quarter guidance, it is clear that our strategy is working. Demand for products and solutions continues to accelerate as our one technology roadmap is driving the growth of premium Android smartphones, as well as enabling the connected intelligent edge, which is driving digital transformation for the cloud connected economy. As you can see from our results today, strong performance in our chipset and licensing business led to record fiscal first quarter revenues of $10.7 billion and record non-GAAP earnings per share of $3.23. Our chipset business had its second consecutive quarter of record performance with revenues of $8.8 billion, EBT of $3.1 billion, and EBT margin of 35%. Notably, QCT revenues exceeded those of any fabulous semiconductor company. These results demonstrate the continued success of our diversification strategy. In IoT, we continue to see strong momentum, with revenue growth of 41% year-over-year in the first quarter across consumer, edge networking, and industrial. In consumer IoT, our early investments, collaboration with Microsoft, and the recent acquisition of Nuvia uniquely positions us to drive the PC industry transition to ARM-based computing for next-generation connected laptops. We recently introduced two new platforms, the 8CX Gen 3 and 7C Plus Gen 3. And at CES, we highlighted broad support from ecosystem partners, including Acer, Asus, HP, Lenovo, and Microsoft. as well as 200 enterprise customers currently testing or deploying Windows on Snapdragon laptops and 2-in-1 devices. We're also seeing strong growth in premium and high-tier Android tablets, further highlighting the convergence of mobile and PC. Notably, we have already doubled the total number of premium-tier Android tablet design wings launched or in the pipeline versus all of fiscal 21. Additionally, as the metaverse opportunity materializes, we continue to build on our industry leadership position in VR and AR devices with key ecosystem players, including Meta and Microsoft. At CES, we announced a collaboration with Microsoft to expand and accelerate the adoption of augmented reality in both the consumer and enterprise sectors. This partnership includes custom AR chips to enable a new wave of power-efficient, lightweight AR glasses that deliver rich and immersive experiences, as well as plans to integrate our Snapdragon Spaces XR developer platform into Microsoft Mesh. We're also very pleased that Time Magazine named our Snapdragon XR2 platform as one of the best inventions of 2021. and we're seeing strong support for our VR and AR platforms from virtually all ecosystem providers, OEMs, and content creators. In edge networking, we continue to lead in current and next-generation high-performance Wi-Fi 6 and Wi-Fi 6E solutions, which now make up more than 80% of our Wi-Fi access point revenues. Recently, we launched the world's first quad-band network Wi-Fi 6e mesh system with Netgear, which was rated the best in class mesh platform by PC Magazine. Additionally, our Wi-Fi 6 immersive home platforms continue to gain momentum across regions with significant growth now expanding into China, one of the fastest growing markets for Wi-Fi 6 for both retail and carrier deployments. 5G as wireless fiber continues to gain scale and expand globally. In addition to our extended range millimeter wave platforms, we recently expanded our portfolio to include the 5G fixed wireless access solutions with extended range sub six, and we're seeing strong traction. In industrial, we're still in the early phases of digital transformation across many industries and demand for our solutions continues to accelerate. As an example, combined smart utility meter tracking robotics and retail revenues more than double over the last year. In robotics specifically, we expect total fiscal 22 product launches using our platforms to increase by over 50% year-over-year, spanning applications from warehouse automation to public safety, delivery services, and in-home assistance. The diversity of vertical segments and applications reflects our ability to provide a common platform that integrates advanced computer vision, on-device AI, high-performance and low-power computing, and industry-leading connectivity technologies. In RF front-end, we successfully launched our latest 5G modules, which now include our UltraBAR technology. Our mode-into-antenna strategy is working, enhancing power and performance with every generation of Snapdragon. Notably, virtually all our Snapdragon 8 Gen 1 design wins now include Qualcomm UltraBAR filter technology. Building on our success in handsets, we're seeing traction with our mode-into-antenna solution across automotive and IoT. As examples, we're well positioned to address up to $30 of 5G RF content per vehicle, and we're also intersecting our RF front-end roadmap with Wi-Fi 7. In automotive, Qualcomm is becoming the technology partner of choice for the industry, and we're enabling the transition of the automobile to a digital cloud-connected platform. Our innovative Snapdragon digital chassis is an open and scalable cloud-enabled platform for telematics, connectivity, digital cockpit, and ADAS and uniquely position us as the leading system solution provider for silicon, software, systems, and services across multiple domains. As a reminder, General Motors, BMW, and now Renault Group are cornerstone customers for our platform, including ADAS. At CES, we announced an addition to our ADAS and autonomy platform, the Snapdragon Ride Vision System. a new modular computer vision solution that combines our Snapdragon Ride SOCs with the next generation vision perception software from Arriva. It supports the various compute functions needed for enhanced perception around the vehicle in the scales across applications from entry-tier in-cap front camera to comprehensive front and surround view camera for enhanced autonomy. We expect the Snapdragon Ride vision system to be available in production in 2024. In handsets, we recently announced our most advanced 5G mobile platform for flagship smartphones, the Snapdragon 8 Gen 1, at our annual Snapdragon Tech Summit. The announcement was viewed by more than 50 million people worldwide. The new Snapdragon 8 Gen 1 leads the way to a new era of premium mobile technology with category-defining enhancements across modem RF, camera, AI, gaming, security, and more. Snapdragon 8 Gen 1 is the world's first 5G modem RF solution to reach 10 gigabit download speeds. It's the first to include commercial 18-bit mobile image sensor in the world's first platform compliant with the Android-ready Secure Element Alliance. We also announced new mobile platforms in every Snapdragon series to address global customer demand across every smartphone tier. In our licensing business, first quarter results reflect a favorable mix in the strength of smartphone shipments. With over 150 5G license agreements, QTL is well positioned for the future, and we continue to expect 5G to have a longer lifecycle than prior generations due to its broad application across multiple industries. Lastly, demand remains strong across all of our technologies and continues to exceed supply. Despite ongoing challenges across the global supply chain, our multi-sourcing and capacity expansion initiatives will provide incremental improvements to our supply throughout the year.