01—Abstract
Summary
Summary of the 10-Q filed August 19, 2015. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation's (NVDA) Q2 FY2016 10-Q filing for the period ending July 25, 2015, shows modest revenue growth driven by its GPU segment, particularly high-end gaming GPUs, which saw a significant increase.
However, the Tegra Processor business experienced a notable decline, largely due to reduced sales in smartphones and tablets, although automotive applications showed promise. The company incurred significant restructuring charges related to the wind-down of its Icera modem operations, impacting profitability and increasing operating expenses. Despite these challenges, NVIDIA continued its commitment to returning capital to shareholders through share repurchases and dividends, demonstrating confidence in its future prospects and financial stability.
Investors should note the contrasting performance between the GPU and Tegra segments. While the GPU business remains a strong performer, the strategic shift away from mobile chipsets in the Tegra segment, coupled with significant restructuring costs, presents a near-term headwind.
The company's substantial cash and marketable securities position provides a buffer against these challenges, and management believes it is sufficient to meet operating needs. The ongoing patent litigation with Qualcomm and Samsung, while potentially impactful, has not resulted in any liabilities being accrued at this time.
02—Key points
Key Highlights
- Revenue increased by 5% year-over-year for the second quarter of fiscal year 2016, reaching $1.153 billion, driven primarily by a 9% increase in the GPU business.
- The GPU segment showed strong performance, with high-end GeForce gaming GPUs up over 50% year-over-year, while Tesla and Quadro GPUs experienced declines.
- The Tegra Processor business saw a significant 19% decrease in revenue, primarily due to an over 80% decline in sales for OEM smartphones and tablets, though automotive applications grew over 75%.
- NVIDIA incurred $89 million in restructuring and other charges in the second quarter, mainly related to the wind-down of its Icera modem operations, impacting profitability.
- Net income decreased substantially to $26 million ($0.05 per diluted share) from $128 million ($0.22 per diluted share) in the prior year's quarter, largely due to these restructuring charges.
- The company returned $452 million to shareholders in Q2 FY2016 through a $400 million accelerated share repurchase agreement and $52 million in cash dividends.
- NVIDIA reported substantial cash and marketable securities of $4.51 billion, providing ample liquidity despite the decrease from the prior fiscal year-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, NVIDIA Corp kept $0.02.
- Revenue$1.15B100.0%
- Cost of revenue−$519.0M45.0%
- Gross profit$634.0M55.0%
- Operating costs−$558.0M48.4%
- Operating income$76.0M6.6%
- Interest, other & tax−$50.0M4.3%
- Net income$26.0M2.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed August 19, 2015Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $1.15B$1.10B | +4.5% |
| Cost of Revenue | $519.00M$484.00M | +7.2% |
| Gross Profit | $634.00M$619.00M | +2.4% |
| R&D Expenses | $320.00M$337.00M | −5.0% |
| SG&A Expenses | $149.00M$119.00M | +25.2% |
| Operating Expenses | $558.00M$456.00M | +22.4% |
| Operating Income | $76.00M$163.00M | −53.4% |
| Interest Expense | $12.00M$12.00M | 0.0% |
| Net Income | $26.00M$128.00M | −79.7% |
| EPS (Basic) | $0.00$0.01 | −78.3% |
| EPS (Diluted) | $0.00$0.01 | −77.3% |
| Shares Outstanding (Basic) | 21.64B22.32B | −3.0% |
| Shares Outstanding (Diluted) | 22.24B22.84B | −2.6% |
05—Questions
Frequently Asked Questions
What is the primary driver of NVIDIA's recent revenue growth?
NVIDIA's revenue growth is primarily driven by its GPU business, particularly the strong performance of high-end GeForce GPUs for gaming, which saw a significant increase of over 50% year-over-year in the second quarter of fiscal year 2016. This growth segment is largely offsetting declines in other areas.
Why did NVIDIA incur significant restructuring charges?
NVIDIA incurred $89 million in restructuring and other charges in the second quarter of fiscal year 2016 due to the decision to wind down its Icera modem operations. This strategic move aims to focus resources on growth areas like deep learning and autonomous driving.
How is NVIDIA managing its cash and capital return to shareholders?
NVIDIA maintains a strong liquidity position with $4.51 billion in cash and marketable securities as of July 26, 2015. In the second quarter of fiscal year 2016, the company returned $452 million to shareholders through an accelerated share repurchase agreement ($400 million) and cash dividends ($52 million), indicating confidence in its financial health.
What are the key challenges NVIDIA faces based on this filing?
Key challenges include the significant decline in the Tegra Processor business, particularly in the smartphone and tablet markets, the impact of substantial restructuring charges on profitability, and ongoing litigation with competitors like Samsung and Qualcomm. The company also faces risks associated with the development of its new headquarters building.
06—Continue