Qualcomm’s profitability in 2017 decreased, while debts were substantially increased, and NXP mergers and acquisitions were made. At the same time, a large amount of cash dividends were sent. As a result, the company’s cash flow was extremely tight and the debt ratio rose sharply. The total debt exceeded annual revenue, and current liabilities exceeded operating cash. With a two-fold flow, the long-term liabilities increase dramatically, resulting in high interest payment costs. They mainly rely on financing and processing some financial assets to obtain large amounts of cash.
The following is a detailed financial report analysis of Qualcomm:
1. Basic analysis
A. Qualcomm’s revenue sources are mainly QCT (mainly Xiaolong Series SoC), and the main source of net profit is QTL business (technical license). QCT's EBT profit is only 17%.
Qualcomm’s revenue in 2017 was approximately US$23 billion, of which QCT business revenue was US$16.5 billion, accounting for 72% of total revenue, and the pre-tax net margin was only 17%; QTL business revenue was 6.4 billion, accounting for 28% of the total business. The pre-tax net rate is as high as 80%.
C. Revenue growth includes RFFE and connectivity products, as well as revenue growth of high-end products (more than average ASP decline). RFFE revenues are US$670 million, accounting for 4% of QCT business; connectivity products revenue is nearly 500 million, the main sources Growth in the industrial sector, not in the traditional mobile phone field.
D.MSM and corresponding RF transceiver chips, Power management chip product revenue decreased, mainly due to the decline in revenue from Apple's share. However, the market share of OEM in China has improved. Apple and Samsung each contributed about 10 Qualcomm. % of revenue, OPPO and ViVO together also contributed to more than 10% of Qualcomm's revenue. The decline in handset shipments will have a double negative impact on the QCT and QTL patent licensing business.
Both the vivo X21 and the OPPO R15 have been officially unveiled in March. As the OV flagship models of the year, these two handsets acted as the burden of a new round of sales. They chose Xiaolong 660. Xiaomi mix2s adopted the Xiaolong 845. These mobile phones will become the market explosion model, referring to the past sales, it is easy to impact 10 million sales.
The OPPO is a new Chinese mobile phone brand factory that was sold in the past two years. After successfully shipping more than 80 million units in the previous year, it officially hit 100 million, reaching 111.8 million, ranking fourth in the world. Following Samsung, Apple After Huawei, the fourth mobile phone factory with annual shipments of more than 100 million units. For mobile phone chip factories, Apple, Samsung, Huawei and other top three mobile phone makers have high self-preparation rate of mobile phone chips, and the space of third-party suppliers is Compression, so OPPO, Xiaomi, Vivo and other three major customers but is the most important customers, their contribution to the high-pass revenue is expected to be higher and higher. Qualcomm's new president Ameng even in the past two days even went to OPPO in Shenzhen The headquarters of the meeting.
2. Cash flow profile
A. Cash and Equivalents, Securities worth approximately US$ 38.6 billion, together with approximately US$ 11 billion in debt financing. With the current purchase price of US$ 44 billion, Qualcomm’s cash flow is very tight.
As can be seen from the above table, the amount of debt issuance financing is relatively high. The operating cash flow that reflects the company's core profitability is only US$4.7 billion, which is a decrease of nearly 37% compared to 2016. Mainly due to the Blackberry litigation fees and KFTC fines. 1.8 billion US dollars, and did not receive Apple's royalties.
B. In terms of daily operating expenses, R&D expenditure in 2017 was 5.5 billion, GA expenditure was 2.7 billion, capital expenditure was nearly 700 million, and annual expenditure was nearly 9 billion. The future expenditures that have not yet been recorded in the report are as follows, including 2018 - Spending is expected to exceed US$17.7 billion in 2022, mainly due to long-term liabilities and purchases of inventory. The purchase of inventory in 2018 amounts to US$3.5 billion, which was $846 million, $286 million, $72 million and $27 million for 2019-2022. US$1.9 billion was used to repay long-term liabilities. The expenditure from 2021 to 2022 was relatively low, averaging only US$1.1 billion per year, which was only 18% in 2018.
Qualcomm has borrowed heavily for the acquisition of NXP. The long-term liabilities increased 94% year-on-year in 2017, increasing from 10 billion in 2016 to 19.3 billion in 2017.
The increase in long-term liabilities has led to higher interest costs. As can be seen from the following data, the interest coverage ratio decreased from 63 in 2015 to 7 in 2017, a sharp drop of 9 times. This resulted in high interest payment costs for enterprises and a decline in profits. The current margin of security is not high.
Current liabilities increased by 50% in 2017 compared to 2016, from 7.3 billion to 10.9 billion. The operating cash flow is only around 4.7 billion (even if the fine of 1.8 billion is added, it is far below the amount of short-term debt).
Qualcomm’s current ratio remained at around 3, but its cash and equity components accounted for 80% of its current assets in 2017. The main source of this increase was investment cash flow.
The ability of operating cash flow to pay current liabilities declined year by year, from 1.7 in 2013 to 0.4, representing that the company’s operating cash was not enough to cover its current liabilities until 2017, mainly through the return on investment to make up for the cash portion.
The investment cash flow and financing cash flow analysis are as follows:
Before 2017, Qualcomm’s investment cash flow was negative, and in 2017 it increased rapidly to 18.8 billion, which was not derived from the main business, but dealt with some financial assets (Proceeds from sales and maturities of available-for-sale securities). , causing a substantial increase in investment cash flow.
Stock rate and stock repurchase
In 2017, net profit fell by 57% compared to 2016. Operating cash flow dropped by 37%. While preparing to acquire NXP, it still sent a large amount of dividends, which amounted to nearly 3.3 billion, and even exceeded net profit for the year. Cash dividends per share also reached new highs.
Qualcomm sent a large amount of cash dividends to increase its dividend yield. Although it increased the value of its stocks, its actual profitability was declining.
At the same time, the amount of stock repurchases was US$1.3 billion, which was the lowest in the past five years. In 2015, a large number of repurchased stocks amounted to US$11.2 billion, and in 2016, US$4 billion.
