Note Regarding Use of Non-GAAP Financial Measures
The Non-GAAP financial measures 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, our Non-GAAP financial measures might be different than similarly titled measures used by other companies. Reconciliations between GAAP and Non-GAAP financial measures are presented herein.
We use Non-GAAP financial information: (i) to evaluate, assess and benchmark our operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of our ongoing core operating businesses, including our QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing) segments; and (iii) to compare the performance and efficiency of these segments against competitors. Non-GAAP measurements used by us include revenues, cost of revenues, research and development (R&D) expenses, selling, general and administrative (SG&A) expenses, other income or expenses, operating income, interest expense, net investment and other income, income or earnings before income taxes, effective tax rate, net income and diluted earnings per share. We are able to assess what we believe is a more meaningful and comparable set of financial performance measures by using Non-GAAP information. In addition, the HR and Compensation Committee of the Board of Directors uses certain Non- GAAP financial measures in establishing portions of the performance-based incentive compensation programs for our executive officers. We present Non-GAAP financial information to provide greater transparency to investors with respect to our use of such information in financial and operational decision-making. This Non-GAAP financial information is also used by institutional investors and analysts in evaluating our business and assessing trends and future expectations.
Non-GAAP information excludes our QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items, tax items and other items.
-
QSI is excluded because we expect to exit our strategic investments in the foreseeable future, and the effects of fluctuations in the value of such investments and realized gains or losses are viewed as unrelated to our operational performance.
-
Share-based compensation expense primarily relates to restricted stock units. We believe that excluding non-cash share-based compensation from the Non-GAAP financial information allows us and investors to make additional comparisons of the operating activities of our ongoing core businesses over time and with respect to other companies.
-
Certain other items are excluded because we view such items as unrelated to the operating activities of our ongoing core businesses, as follows:
-
Acquisition-related items include amortization of acquisition-related intangible assets, substantially all of which relate to the amortization of technology-based intangible assets that is recorded in cost of revenues and will recur in future periods until the related intangible assets have been fully amortized. We view acquisition-related intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. Acquisition-related intangible assets contribute to revenue generation that has not been excluded from our Non-GAAP financial information. Acquisition-related items also include recognition of the step-up of inventories and property, plant and equipment to fair value and the related tax effects of acquisition-related items, as well as any effects from restructuring the ownership of such acquired assets. Additionally, we exclude third-party acquisition and integration services costs and costs related to temporary debt facilities and letters of credit executed prior to the close of an acquisition.
-
We exclude certain other items that we view as unrelated to our ongoing businesses, such as major restructuring and restructuring-related costs, goodwill and indefinite- and long-lived asset impairments and awards, settlements and/or damages arising from legal or regulatory matters. Beginning in the second quarter of fiscal 2020, we exclude gains and losses driven by the revaluation of our deferred compensation plan liabilities recognized in operating expenses and the offsetting gains and losses on the related plan assets recognized in investment and other income. Amounts prior to the second quarter of fiscal 2020, which were not material, continue to be included in Non-GAAP results.
-
Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of our ongoing Non-GAAP tax rate and after-tax earnings.
-
Reconciliations of GAAP Results to Non-GAAP Results
(in millions, except per share data and percentages) |
GAAP to Non-GAAP Reconciliation |
Non-GAAP Supplemental Information |
||||||
GAAP Results |
Less QSI |
Less Share- Based Compensation |
Less Other Items1 |
Non-GAAP Results |
QCT |
QTL |
Non-GAAP Reconciling Items2 |
|
Q1 Fiscal 2021 |
|
|
|
|
|
|
|
|
Revenues |
$8,235 |
$9 |
$— |
$— |
$8,226 |
$6,533 |
$1,660 |
$33 |
Operating income (loss) |
2,526 |
6 |
(393) |
(118) |
3,031 |
|
|
|
EBT |
2,604 |
158 |
(393) |
(73) |
2,912 |
1,919 |
1,270 |
(277) |
EBT as % of revenues |
32% |
|
|
|
35% |
|
|
|
Net income (loss) |
2,455 |
150 |
(231) |
26 |
2,510 |
|
|
|
Diluted EPS |
$2.12 |
$0.13 |
($0.20) |
$0.02 |
$2.17 |
|
|
|
Diluted shares |
1,156 |
1,156 |
1,156 |
1,156 |
1,156 |
|
|
|
Q1 Fiscal 2020 |
|
|
|
|
|
|
|
|
Revenues |
$5,077 |
$20 |
$— |
$— |
$5,057 |
$3,618 |
$1,404 |
$35 |
Operating income (loss) |
1,030 |
13 |
(294) |
(84) |
1,395 |
|
|
|
EBT |
947 |
(3) |
(294) |
(90) |
1,334 |
479 |
1,017 |
(162) |
EBT as % of revenues |
19% |
|
|
|
26% |
|
|
|
Net income (loss) |
925 |
(2) |
(222) |
(2) |
1,151 |
|
|
|
Diluted EPS |
$0.80 |
$— |
($0.19) |
$— |
$0.99 |
|
|
|
Diluted shares |
1,159 |
1,159 |
1,159 |
1,159 |
1,159 |
|
|
|
-
Further details of amounts included in the “Other Items” column for the current period are included in the “Supplemental Information and Reconciliations” section herein. Details of amounts included in the “Other Items” column for the prior period are included in the news release for that period.