10-QPeriod: Q1 FY2020

NVIDIA CORP Quarterly Report for Q1 Ended Apr 28, 2019

Filed May 16, 2019For Securities:NVDA

Summary

NVIDIA Corporation reported its first quarter fiscal year 2020 results, ending April 28, 2019, with a significant year-over-year decline in revenue and net income. Total revenue fell 31% to $2.22 billion, driven by a substantial decrease in the GPU business, which was down 27% year-over-year, impacted by lower gaming and data center sales, and the absence of cryptocurrency mining processor revenue. The Tegra Processor business also saw a steep 55% decline. Despite the revenue drop, sequential revenue showed a slight increase of 1%, indicating a potential stabilization. The company also announced a major development with its agreement to acquire Mellanox Technologies for approximately $6.9 billion, a strategic move aimed at bolstering its data center and AI capabilities. Profitability was significantly impacted, with net income dropping 68% to $394 million, resulting in diluted earnings per share of $0.64, down from $1.98 in the prior year. This decline is attributed to lower revenues, reduced gross margins (down to 58.4% from 64.5% year-over-year), and increased operating expenses, which rose 21% year-over-year due to increased R&D and SG&A costs, including those related to the Mellanox acquisition. NVIDIA continues to focus on returning capital to shareholders, planning to return $3.00 billion by the end of fiscal year 2020 through dividends and share repurchases.

Financial Highlights

55 data points
Beta

Revenue

$2.22B

58.4% Gross Margin

Net Income

$394.00M

17.7% Net Margin

EPS (Diluted)

$0.02

Total Assets

$14.02B

Cash & Equivalents

$2.77B

Free Cash Flow

$592.00M

Financial Statements
Beta
Revenue$2.22B
Cost of Revenue$924.00M
Gross Profit$1.30B
R&D Expenses$674.00M
SG&A Expenses$264.00M
Operating Expenses$938.00M
Operating Income$358.00M
Interest Expense$13.00M
Net Income$394.00M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)24.28B
Shares Outstanding (Diluted)24.64B

Key Highlights

  • 1Total revenue for Q1 FY2020 decreased 31% year-over-year to $2.22 billion, impacted by declines in the GPU and Tegra Processor businesses.
  • 2The company announced an agreement to acquire Mellanox Technologies for approximately $6.9 billion, a significant strategic move in the data center and AI space.
  • 3Net income declined 68% year-over-year to $394 million, with diluted EPS falling to $0.64 from $1.98.
  • 4Gross margin decreased to 58.4% from 64.5% year-over-year, mainly due to lower gaming margins and portfolio mix shifts.
  • 5Operating expenses increased by 21% year-over-year, driven by higher R&D and SG&A costs, including expenses related to the Mellanox acquisition.
  • 6NVIDIA plans to return $3.00 billion to shareholders by the end of FY2020 through dividends and share repurchases.
  • 7Cash, cash equivalents, and marketable securities totaled $7.80 billion, providing a strong liquidity position.

Frequently Asked Questions

The primary drivers of the revenue decline were decreased sales in the GPU business, particularly in gaming and data center segments, and the absence of revenue from cryptocurrency mining processors. The Tegra Processor business also experienced a significant drop in revenue.

The acquisition of Mellanox for approximately $6.9 billion is a key strategic move to bolster NVIDIA's position in high-performance computing and artificial intelligence, particularly within the data center market. Mellanox specializes in high-speed interconnect solutions, which are complementary to NVIDIA's GPU technology.

Profitability was significantly impacted, with net income decreasing by 68% and diluted earnings per share falling to $0.64 from $1.98 in the same quarter last year. This was due to lower revenues, reduced gross margins, and increased operating expenses.

NVIDIA intends to return $3.00 billion to shareholders by the end of fiscal year 2020. This will be achieved through a combination of quarterly cash dividends and share repurchases. The company has a substantial authorization for future share repurchases.