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Total Expenses were $19.89 billion in 2019
Breakdown of Qualcomm's Total Expenses in 2019:
Total = $19.89 Bil
Cost of Sales = $8.60 Bil
Operating Expenses = $8.01 Bil
Non-operating expenses = $190 Mil
Provision for income taxes = $3.1 Bil
Qualcomm's total expenses have remained roughly stagnant going from $19.81 billion in 2017 to $19.89 billion in 2019. As a percentage of revenues, expenses dropped, going from 89% in 2017 to 81.9% in 2019.Cost of sales is the biggest expense head for the company, with it being 56% of revenue in 2017, before rising to around 64.6% of revenue in 2019. Despite this, a growth in revenue and a simultaneous drop in operating expenses, has helped in bringing in almost an additional $2 in earnings per share between 2017 and 2019.Also, despite an expected drop in revenue in 2020, cost of sales as % of revenue is expected to drop slightly, leading to a projected increase in net income margin from 18.1% in 2019 to 19.2% in 2020.Further, by 2021, net income margin is set to cross 20%, and this projected growth has helped drive a ~80% rise in Qualcomm's share price over the past year.Below, we take a look at the key drivers of Qualcomm's expenses and net margins.
Qualcomm's Total Expenses Have Gone From $19.81 Billion in 2017 to $19.89 Billion in 2019
% Change in total expenses
Qualcomm's total expenses have remained roughly the same, going from $19.81 billion in 2017 to about $19.89 billion in 2019.
For 2020, we expect total expenses to stand at $17.68 billion, which comprises of
1) Cost of Sales: $8.01 billion
2) Operating Expenses: $8.26 billion
2) Non-Operating Expenses: $191 million
3) Income Taxes: $1.22 billion
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
(A) R&D Expense has remained more or less stagnant, going from $5.49 billion in 2017 to $5.4 billion in 2019. However, as a % of revenue, R&D expense dropped from 24.6% to 22.2% over the same period. Going forward, we expect this expense to rise to almost $6 billion by 2021, but a simultaneous growth in revenue means that it would still come in at around 22.3% of revenue.
R&D expenses as a % of revenue
(B) S,G & A Expense decreased from $2.66 billion in 2017 to about $2.19 billion in 2019 due to a drop in selling costs, with a simultaneous drop in chipset sales. As a % of Revenue, R&D expenses dropped from 11.9% to 9% during the same period. Despite an expected rise in chipset sales in 2020, we expect this metric to rise to only 9.6% as 5G chipsets are expected to be priced higher than the current 4G chips.
Selling, General and Administrative expenses
S,G & A as a % of revenue
(C) Other operating expenses went from $1.74 billion in 2017 to about $410 million in 2019. This metric primarily includes restructuring charges and other miscellaneous expenses. We expect this metric to come in at around 4% of total revenue in 2020 and 2021.
Other expenses as a % of revenue
3) Non-Operating Expense (which is only net interest expense for Qualcomm) has increased from -$406 million in 2017 to $186 million in 2019. There was a rise in 2018 and 2019, as Qualcomm's interest expense exceeded interest income. However, total debt has dropped from $21.89 billion in 2017 to $15.93 billion in 2019. Going forward, we expect non operating expenses to grow to around $228 million by 2021.
Net Interest Expense
Net Interest expense as a % of debt
4) Income Tax Expense has increased from $540 million in 2017 to $3.1 billion in 2019, with Effective Tax rate rising from 18.2% to 41.4% during the same period. Effective tax rate is expected to be around 22.5% in the near term
Income Tax Expense
Effective Tax Rate
Our complete set of analyses on Qualcomm
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