10-QPeriod: Q2 FY2002

NVIDIA CORP Quarterly Report for Q2 Ended Jul 29, 2001

Filed September 10, 2001For Securities:NVDA

Summary

NVIDIA Corporation reported strong revenue growth for the quarter and six months ended July 29, 2001, compared to the prior year period. Net revenues increased by 53% for the quarter and 57% for the first half, driven by increased sales of graphics processors and strong demand for new, higher-priced products. The company's gross profit also saw significant increases, reflecting higher unit shipments and the contribution of higher-margin GeForce products. Despite robust revenue and profit growth, NVIDIA incurred increased operating expenses, notably in Research and Development, which rose 68% for the quarter and 71% for the six-month period. This increase is attributed to new employees from the 3dfx acquisition, expansion of the team for next-generation products, and costs associated with a new headquarters. The company also recognized amortization of goodwill and acquisition-related charges stemming from the 3dfx acquisition. NVIDIA ended the period with a healthy cash position of $681.1 million, demonstrating strong operational cash flow generation.

Key Highlights

  • 1Revenue grew significantly, up 53% year-over-year for the quarter and 57% for the six-month period, indicating strong market demand for NVIDIA's graphics processors.
  • 2Gross profit increased by 63% year-over-year for the quarter and 64% for the six-month period, benefiting from higher unit shipments and the introduction of higher-margin GeForce products.
  • 3Research and Development expenses saw a substantial increase of 68% year-over-year for the quarter, reflecting investments in future product development and integration of the acquired 3dfx assets.
  • 4The company made a significant acquisition of assets from 3dfx Interactive, Inc. for approximately $78.7 million, which contributed to increased goodwill and intangible assets on the balance sheet and acquisition-related charges in the income statement.
  • 5NVIDIA reported a strong cash and cash equivalents balance of $681.1 million as of July 29, 2001, with positive cash flow from operating activities of $93.8 million for the first six months.
  • 6International sales continue to be a dominant revenue driver, accounting for 89% of total revenue in the second quarter and 91% for the first half, with the Asia Pacific region showing particularly strong growth.
  • 7The company announced a two-for-one stock split approved by the Board of Directors in August 2001, indicating confidence in future performance and aiming to increase stock liquidity.

Frequently Asked Questions

Revenue growth was primarily driven by increased sales volume of NVIDIA's graphics processors and strong demand for its newer products, which command higher average selling prices. The company also benefited from increased sales outside the United States, particularly in the Asia Pacific region.

The acquisition of assets from 3dfx Interactive, Inc. has resulted in increased goodwill and purchased intangible assets on the balance sheet. For the current period, it contributed to higher operating expenses, specifically amortization of goodwill and intangible assets, and acquisition-related charges. The integration of 3dfx's operations also contributed to increased R&D expenses due to additional personnel.

While NVIDIA achieved substantial revenue growth in the reported periods, management anticipates that this high rate of growth may not be sustainable in future periods. The company also expects average selling prices (ASPs) for its products to decline over their product life cycles, especially as the market matures and competition intensifies.

NVIDIA maintains a strong liquidity position with $681.1 million in cash and cash equivalents at the end of the quarter. Operating activities generated a healthy $93.8 million in cash during the first half of fiscal 2002. The company believes its current cash reserves and anticipated operational cash flows are sufficient to meet its needs for at least the next 12 months.