01—Abstract
Summary
Summary of the 10-Q filed November 19, 2013. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation reported revenue of $1.054 billiona for the third quarter of fiscal year 2014, a decrease of 12.5% compared to the same period last year.
For the first nine months of fiscal year 2014, revenue was $2.986 billionb, down 5.9% year-over-year. This decline was largely driven by a significant 54.4% decrease in the Tegra Processor business revenue, which was anticipated due to lower shipments of Tegra 4-based devices compared to the prior year's Tegra 3 devices. The GPU business, however, showed resilience, with revenue down only 1.9% year-over-year in the third quarter and up 4.2% for the nine-month period, driven by strong demand for Quadro and Tesla products, though desktop and notebook GPU revenue saw slight declines.
Net income for the quarter was $118.7 millionc, or $0.20 per diluted share, a decrease from $209.1 million, or $0.33 per diluted share, in the prior year's third quarter. The company also highlighted its commitment to returning capital to shareholders, having repurchased $850 million in stock and paid $133 million in dividends in the first nine months of fiscal year 2014.
Subsequent to the quarter, NVIDIA announced a further increase in its quarterly dividend and an expansion of its share repurchase program. Despite the revenue headwinds, the company continues to invest heavily in R&D, with expenses up 19.7%d year-over-year for the quarter, reflecting its focus on developing next-generation Tegra and GPU products.
02—Key points
Key Highlights
- Revenue for Q3 FY2014 decreased by 12.5% year-over-year to $1.054 billion, primarily due to a significant decline in the Tegra Processor business.
- The GPU business remained relatively stable, with Q3 FY2014 revenue down 1.9% year-over-year, driven by strength in Quadro and Tesla products.
- Net income for Q3 FY2014 was $118.7 million, down from $209.1 million in Q3 FY2013, with diluted EPS at $0.20 compared to $0.33.
- Research and Development expenses increased by 19.7% year-over-year to $340.3 million in Q3 FY2014, indicating continued investment in future technologies.
- The company returned $983 million to shareholders in the first nine months of FY2014 through $850 million in stock repurchases and $133 million in dividends.
- As of October 27, 2013, NVIDIA held $3.03 billion in cash, cash equivalents, and marketable securities, a decrease from $3.73 billion at the start of the fiscal year due to share repurchases.
- The company has ongoing legal proceedings related to the 3dfx acquisition and product defect litigation, though the product defect litigation has been resolved and affirmed on appeal.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2014, NVIDIA Corp kept $0.11.
- Revenue$1.05B100.0%
- Cost of revenue−$469.6M44.6%
- Gross profit$584.4M55.4%
- Operating costs−$443.4M42.1%
- Operating income$141.0M13.4%
- Interest, other & tax−$22.3M2.1%
- Net income$118.7M11.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2014filed November 19, 2013Financial Statements
Q3 FY2014 against Q3 FY2013
| Line item | Q3 FY2014Q3 FY2013 | Change |
|---|---|---|
| Revenue | $1.05B$1.20B | −12.5% |
| Cost of Revenue | $469.55M$567.45M | −17.3% |
| Gross Profit | $584.41M$636.66M | −8.2% |
| R&D Expenses | $340.29M$284.18M | +19.7% |
| SG&A Expenses | $103.13M$100.26M | +2.9% |
| Operating Expenses | $443.43M$384.44M | +15.3% |
| Operating Income | $140.99M$252.22M | −44.1% |
| Interest Expense | $819K— | — |
| Net Income | $118.73M$209.08M | −43.2% |
| EPS (Basic) | $0.01$0.01 | −41.2% |
| EPS (Diluted) | $0.01$0.01 | −39.4% |
| Shares Outstanding (Basic) | 23.23B24.89B | −6.7% |
| Shares Outstanding (Diluted) | 23.55B25.15B | −6.4% |
05—Questions
Frequently Asked Questions
What were the primary drivers for the year-over-year revenue decline in Q3 FY2014?
The primary driver for the revenue decline was the significant decrease in the Tegra Processor business, which fell by 54.4% year-over-year. This was largely anticipated and attributed to lower shipments of Tegra 4-based devices compared to the prior year's Tegra 3 devices. While the GPU business showed more stability, it also experienced a slight year-over-year revenue decrease of 1.9%.
How is NVIDIA managing its capital and returning value to shareholders?
NVIDIA is actively returning capital to shareholders. In the first nine months of fiscal year 2014, the company repurchased $850 million of its common stock and paid $133 million in dividends. Subsequent to the quarter, it announced an increase in its quarterly dividend and an expansion of its share repurchase program. The company also maintained a strong liquidity position with $3.03 billion in cash, cash equivalents, and marketable securities as of October 27, 2013.
What is the outlook for NVIDIA's R&D investments?
NVIDIA continues to make substantial investments in Research and Development. R&D expenses increased by 19.7% year-over-year to $340.3 million in Q3 FY2014. This investment is focused on developing next-generation Tegra and GPU products, reflecting the company's strategy to stay at the forefront of visual computing technologies.
Are there any significant legal contingencies that investors should be aware of?
NVIDIA has ongoing legal proceedings, notably related to the 3dfx acquisition. While the product defect litigation concerning a weak die/packaging material set has been resolved and affirmed on appeal, the 3dfx litigation remains pending on appeal. The company has accrued $30.6 million related to this matter. Management believes that other ongoing legal actions will not have a material adverse effect on the company's financial position, though outcomes are not guaranteed.
06—Continue