01—Abstract
Summary
Summary of the 10-Q filed August 21, 2013. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation's (NVDA) fiscal Q2 2014 report (ending July 27, 2013) shows a year-over-year revenue decline, primarily driven by a significant drop in the Tegra Processor business.
While the GPU segment demonstrated growth, it was not enough to offset the overall revenue decrease. Net income also saw a decline compared to the prior year. The company continued its aggressive share repurchase program and initiated dividend payments, returning substantial capital to shareholders.
Despite the revenue headwinds, NVIDIA increased its investment in research and development, indicating a focus on future product innovation, particularly in its core GPU business and emerging areas like visual computing appliances. The company's financial position remains strong with ample cash and marketable securities, though a portion was used to fund share repurchases. Investors should monitor the performance of the Tegra business and the company's ability to maintain growth in its GPU segment amidst ongoing competition.
02—Key points
Key Highlights
- Revenue decreased by 6.4% year-over-year to $977.2 million for the second quarter, and by 1.9% for the first half of the fiscal year.
- The GPU business revenue grew by 7.5% year-over-year in Q2 and 7.8% for the first half, driven by strong sales of high-end Kepler-based GeForce desktop products.
- The Tegra Processor business revenue declined significantly, down 70.7% in Q2 and 50.1% for the first half, due to lower sales of older generation processors.
- Net income for the quarter decreased to $96.4 million from $119.0 million in the prior year's comparable quarter.
- Research and development expenses increased by 18.0% year-over-year for the quarter, reflecting continued investment in future technologies.
- NVIDIA returned over $1 billion to shareholders in the first half of FY2014 through share repurchases ($100 million in Q1, $750 million ASR in Q2) and dividends ($89.6 million).
- The company had a strong liquidity position with $2.94 billion in cash, cash equivalents, and marketable securities as of July 28, 2013, though this was a decrease from the prior fiscal year-end due to share repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2014, NVIDIA Corp kept $0.10.
- Revenue$977.2M100.0%
- Cost of revenue−$431.7M44.2%
- Gross profit$545.5M55.8%
- Operating costs−$440.0M45.0%
- Operating income$105.5M10.8%
- Interest, other & tax−$9.1M0.9%
- Net income$96.4M9.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2014filed August 21, 2013Financial Statements
Q2 FY2014 against Q2 FY2013
| Line item | Q2 FY2014Q2 FY2013 | Change |
|---|---|---|
| Revenue | $977.24M$1.04B | −6.4% |
| Cost of Revenue | $431.70M$503.55M | −14.3% |
| Gross Profit | $545.54M$540.72M | +0.9% |
| R&D Expenses | $331.74M$281.19M | +18.0% |
| SG&A Expenses | $108.27M$119.90M | −9.7% |
| Operating Expenses | $440.00M$401.10M | +9.7% |
| Operating Income | $105.53M$139.62M | −24.4% |
| Interest Expense | $836K— | — |
| Net Income | $96.45M$119.05M | −19.0% |
| EPS (Basic) | $0.00$0.00 | −15.8% |
| EPS (Diluted) | $0.00$0.00 | −15.8% |
| Shares Outstanding (Basic) | 23.41B24.76B | −5.4% |
| Shares Outstanding (Diluted) | 23.68B24.93B | −5.0% |
05—Questions
Frequently Asked Questions
What is driving the year-over-year revenue decline reported in this quarter?
The primary driver of the year-over-year revenue decline is the significant decrease in the Tegra Processor business. While the GPU business showed growth, it was not enough to offset the substantial drop in Tegra revenue.
How is NVIDIA managing its capital and returning value to shareholders?
NVIDIA has a robust share repurchase program, having repurchased $100 million in Q1 and executing a $750 million accelerated share repurchase (ASR) in Q2. The company also initiated a quarterly cash dividend, paying out $89.6 million in the first half of the fiscal year, demonstrating a commitment to returning capital to shareholders.
What is the outlook for the Tegra Processor business, given its sharp decline?
The decline in the Tegra Processor business was anticipated by the company as customers transitioned away from older Tegra 2 and Tegra 3 processors. The company is focused on future Tegra generations and other initiatives, but this segment experienced a significant reduction in revenue for the reported period.
How is NVIDIA investing in future growth?
NVIDIA is increasing its investment in research and development, with R&D expenses up 18% year-over-year for the quarter. This investment is aimed at developing next-generation Tegra and GPU products and supporting strategic growth initiatives.
06—Continue