01—Abstract
Summary
Summary of the 10-Q filed August 21, 2008. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation (NVDA) reported its second-quarter results for the fiscal year ending January 27, 2009, with the period ending August 20, 2008.
The company experienced a significant revenue decline in the three months ended July 27, 2008, compared to the prior year, dropping from $935.3 million to $892.7 milliona. This revenue decrease, coupled with a substantial increase in cost of revenue, led to a dramatic shift in profitability. Gross profit fell sharply from $424.0 million to $149.9 million, and operating expenses, particularly R&D and SG&A, also increased.
Consequently, NVIDIA reported an operating loss of $155.4 millionb for the quarter, a stark contrast to the $184.8 million operating income in the same period last year. The net loss for the quarter was $120.9 million, or $0.22 per diluted share, compared to a net income of $172.7 million, or $0.29 per diluted share, in the prior year. The six-month period also showed a decline in revenue and profitability compared to the prior year.
Revenue increased to $2.05 billionc from $1.78 billion, but the cost of revenue rose disproportionately, leading to a lower gross profit of $664.8 million compared to $804.1 million. Operating expenses also increased significantly, resulting in operating income of $47.6 million for the six months, down from $326.0 million in the prior year.
The net income for the six months was $55.9 milliond, or $0.09 per diluted share, a considerable decrease from $305.0 million, or $0.51 per diluted share, in the prior year. Investors should note the significant increase in inventory levels and the substantial growth in R&D expenses as key areas of focus.
02—Key points
Key Highlights
- Revenue for the three months ended July 27, 2008, decreased by 4.5% year-over-year to $892.7 million.
- Gross profit for the quarter plummeted by 64.4% to $149.9 million, compared to $424.0 million in the prior year's quarter, due to a significant increase in cost of revenue.
- The company reported an operating loss of $155.4 million for the three months ended July 27, 2008, a significant deterioration from an operating income of $184.8 million in the same period last year.
- Net loss for the quarter was $120.9 million, or -$0.22 per diluted share, a sharp reversal from a net income of $172.7 million, or $0.29 per diluted share, in the prior year.
- For the six months ended July 27, 2008, revenue increased 15.0% year-over-year to $2.05 billion, but net income declined by 81.7% to $55.9 million.
- Operating expenses, particularly R&D and SG&A, increased by 27.7% for the quarter and 29.1% for the six-month period compared to the prior year.
- Inventories increased by 20.6% to $432.3 million as of July 27, 2008, compared to January 27, 2008, indicating potential inventory management challenges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, NVIDIA Corp kept $0.07.
- Revenue$897.7M100.0%
- Cost of revenue−$529.8M59.0%
- Gross profit$367.8M41.0%
- Operating costs−$311.0M34.7%
- Operating income$56.8M6.3%
- Interest, other & tax$5.0M0.6%
- Net income$61.7M6.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed August 21, 2008Financial Statements
| Revenue | $897.65M |
| Cost of Revenue | $529.81M |
| Gross Profit | $367.84M |
| R&D Expenses | $212.36M |
| SG&A Expenses | $90.35M |
| Operating Expenses | $311.05M |
| Operating Income | $56.80M |
| Net Income | $61.75M |
| EPS (Basic) | $0.00 |
| EPS (Diluted) | $0.00 |
| Shares Outstanding (Basic) | 21.75B |
| Shares Outstanding (Diluted) | 22.58B |
05—Questions
Frequently Asked Questions
What is the primary driver behind the significant decline in profitability this quarter?
The primary driver for the sharp decline in profitability, including the operating loss and net loss, is a substantial increase in the cost of revenue. This led to a drastic reduction in gross profit, even though revenue saw only a modest year-over-year decrease for the quarter. Increased operating expenses, particularly in research and development, also contributed to the negative performance.
How has NVIDIA's revenue performance changed over the last two periods reported?
For the three months ended July 27, 2008, revenue declined by 4.5% to $892.7 million compared to the prior year's quarter. However, for the six-month period ended July 27, 2008, revenue actually increased by 15.0% to $2.05 billion compared to the same period last year, indicating a stronger performance in the first quarter of fiscal 2009.
What is the outlook for NVIDIA's financial performance based on this filing?
The filing indicates a challenging quarter with a significant loss, primarily driven by a surge in the cost of revenue. While revenue grew for the six-month period, profitability was severely impacted. The increase in R&D expenses suggests continued investment in future products. Investors should closely monitor the cost of revenue and the company's ability to translate its R&D investments into profitable sales in future periods. The increase in inventory levels also warrants attention.
What accounting changes or significant notes are highlighted in this filing?
NVIDIA adopted SFAS No. 157, 'Fair Value Measurements,' and SFAS No. 159, 'The Fair Value Option for Financial Assets and Financial Liabilities,' effective January 28, 2008, with no significant impact reported. The company also adopted EITF 07-3 for R&D advance payments. Notably, the company experienced a significant increase in its estimated annual effective income tax rate for fiscal year 2009, which was later offset by favorable impacts. The company also disclosed the closure of an IRS review for fiscal years 2004-2006 with no material changes, though it remains subject to future examinations.
06—Continue