UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________________ FORM 10-Q _____________________ (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-19528 QUALCOMM Incorporated (Exact name of registrant as specified in its charter) Delaware 95-3685934 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5775 Morehouse Dr., San Diego, California 92121-1714 (Address of Principal Executive Offices) (Zip Code) (858) 587-1121 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.0001 par value QCOM Nasdaq Stock Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Smaller reporting Emerging growth Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ company ☐ company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 1 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The number of shares outstanding of the registrant’s common stock was 1,124,927,980 at April 27, 2020. 2 QUALCOMM Incorporated Form 10-Q For the Quarter Ended March 29, 2020 Page PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Comprehensive Income 5 Condensed Consolidated Statements of Cash Flows 6 Condensed Consolidated Statements of Stockholders’ Equity 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 53 Item 4. Controls and Procedures 53 PART II. OTHER INFORMATION Item 1. Legal Proceedings 53 Item 1A. Risk Factors 53 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54 Item 3. Defaults Upon Senior Securities 54 Item 4. Mine Safety Disclosures 54 Item 5. Other Information 54 Item 6. Exhibits 55 SIGNATURES 57 2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) QUALCOMM Incorporated CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except par value amounts) (Unaudited) March 29, September 29, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 8,403 $ 11,839 Marketable securities 1,543 421 Accounts receivable, net 3,081 2,471 Inventories 1,700 1,400 Other current assets 586 634 Total current assets 15,313 16,765 Deferred tax assets 1,249 1,196 Property, plant and equipment, net 3,358 3,081 Goodwill 6,294 6,282 Other intangible assets, net 1,889 2,172 Other assets 3,835 3,461 Total assets $ 31,938 $ 32,957 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Trade accounts payable $ 2,061 $ 1,368 Payroll and other benefits related liabilities 699 1,048 Unearned revenues 529 565 Short-term debt 2,499 2,496 Other current liabilities 3,986 3,458 Total current liabilities 9,774 8,935 Unearned revenues 968 1,160 Income taxes payable 1,879 2,088 Long-term debt 13,449 13,437 Other liabilities 2,823 2,428 Total liabilities 28,893 28,048 Commitments and contingencies (Note 5) Stockholders’ equity: Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding — — Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,127 and 1,145 shares issued and outstanding, respectively — 343 Retained earnings 2,990 4,466 Accumulated other comprehensive income 55 100 Total stockholders’ equity 3,045 4,909 Total liabilities and stockholders’ equity $ 31,938 $ 32,957 See accompanying notes. 3 QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended March 29, March 31, March 29, March 31, 2020 2019 2020 2019 Revenues: Equipment and services $ 4,050 $ 3,753 $ 7,583 $ 7,506 Licensing 1,166 1,229 2,709 2,318 Total revenues 5,216 4,982 10,292 9,824 Costs and expenses: Cost of revenues 2,297 2,179 4,410 4,367 Research and development 1,468 1,308 2,873 2,577 Selling, general and administrative 483 573 1,011 1,100 Other (23) (18) (23) 130 Total costs and expenses 4,225 4,042 8,271 8,174 Operating income 991 940 2,021 1,650 Interest expense (146) (162) (294) (317) Investment and other (expense) income, net (247) 28 (182) 33 Income before income taxes 598 806 1,545 1,366 Income tax (expense) benefit (130) (143) (152) 365 Net income $ 468 $ 663 $ 1,393 $ 1,731 Basic earnings per share $ 0.41 $ 0.55 $ 1.22 $ 1.43 Diluted earnings per share $ 0.41 $ 0.55 $ 1.21 $ 1.42 Shares used in per share calculations: Basic 1,139 1,213 1,142 1,213 Diluted 1,151 1,217 1,155 1,220 See accompanying notes. 4 QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended Six Months Ended March 29, March 31, March 29, March 31, 2020 2019 2020 2019 Net income $ 468 $ 663 $ 1,393 $ 1,731 Other comprehensive loss, net of income taxes: Foreign currency translation losses (44) (17) (13) (41) Net unrealized losses on available-for-sale securities (5) (1) (5) (6) Net unrealized (losses) gains on derivative instruments (31) — (28) 16 Other (losses) gains (1) (8) 7 (8) Certain reclassifications included in net income (1) (3) (6) (2) Total other comprehensive loss (82) (29) (45) (41) Comprehensive income $ 386 $ 634 $ 1,348 $ 1,690 See accompanying notes. 5 QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Six Months Ended March 29, March 31, 2020 2019 Operating Activities: Net income $ 1,393 $ 1,731 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 691 698 Income tax provision less than income tax payments (350) (958) Non-cash portion of share-based compensation expense 603 452 Net gains on marketable securities and other investments (49) (9) Indefinite and long-lived asset impairment charges — 203 Impairment losses on other investments 337 69 Other items, net (75) (190) Changes in assets and liabilities: Accounts receivable, net (607) 200 Inventories (297) (49) Other assets (71) 25 Trade accounts payable 755 (173) Payroll, benefits and other liabilities 24 (727) Unearned revenues (153) (122) Net cash provided by operating activities 2,201 1,150 Investing Activities: Capital expenditures (641) (322) Purchases of debt and equity marketable securities (1,312) — Proceeds from sales and maturities of debt and equity marketable securities 256 96 Acquisitions and other investments, net of cash acquired (128) (118) Other items, net 56 83 Net cash used by investing activities (1,769) (261) Financing Activities: Proceeds from short-term debt 1,116 3,297 Repayment of short-term debt (1,116) (3,303) Proceeds from issuance of common stock 174 177 Repurchases and retirements of common stock (2,340) (1,019) Dividends paid (1,415) (1,502) Payments of tax withholdings related to vesting of share-based awards (232) (143) Other items, net (55) (38) Net cash used by financing activities (3,868) (2,531) Effect of exchange rate changes on cash and cash equivalents — — Net decrease in total cash and cash equivalents (3,436) (1,642) Total cash and cash equivalents at beginning of period 11,839 11,777 Total cash and cash equivalents at end of period $ 8,403 $ 10,135 See accompanying notes. 6 QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended March 29, March 31, March 29, March 31, 2020 2019 2020 2019 Total stockholders’ equity, beginning balance $ 4,513 $ 3,617 $ 4,909 $ 807 Common stock and paid-in capital: Balance at beginning of period $ — $ — $ 343 $ — Common stock issued under employee benefit plans and the related tax benefits 151 150 171 177 Repurchases and retirements of common stock (451) — (932) (136) Share-based compensation 331 237 650 486 Tax withholdings related to vesting of share-based