01—Abstract
Summary
Summary of the 10-Q filed May 16, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb, 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 billionc by the end of fiscal year 2020 through dividends and share repurchases.
02—Key points
Key Highlights
- Total revenue for Q1 FY2020 decreased 31% year-over-year to $2.22 billion, impacted by declines in the GPU and Tegra Processor businesses.
- The company announced an agreement to acquire Mellanox Technologies for approximately $6.9 billion, a significant strategic move in the data center and AI space.
- Net income declined 68% year-over-year to $394 million, with diluted EPS falling to $0.64 from $1.98.
- Gross margin decreased to 58.4% from 64.5% year-over-year, mainly due to lower gaming margins and portfolio mix shifts.
- Operating expenses increased by 21% year-over-year, driven by higher R&D and SG&A costs, including expenses related to the Mellanox acquisition.
- NVIDIA plans to return $3.00 billion to shareholders by the end of FY2020 through dividends and share repurchases.
- Cash, cash equivalents, and marketable securities totaled $7.80 billion, providing a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, NVIDIA Corp kept $0.18.
- Revenue$2.22B100.0%
- Cost of revenue−$924.0M41.6%
- Gross profit$1.30B58.4%
- Operating costs−$938.0M42.3%
- Operating income$358.0M16.1%
- Interest, other & tax$36.0M1.6%
- Net income$394.0M17.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 16, 2019Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $2.22B$3.21B | −30.8% |
| Cost of Revenue | $924.00M$1.14B | −18.9% |
| Gross Profit | $1.30B$2.07B | −37.3% |
| R&D Expenses | $674.00M$542.00M | +24.4% |
| SG&A Expenses | $264.00M$231.00M | +14.3% |
| Operating Expenses | $938.00M$773.00M | +21.3% |
| Operating Income | $358.00M$1.29B | −72.4% |
| Interest Expense | $13.00M$15.00M | −13.3% |
| Net Income | $394.00M$1.24B | −68.3% |
| EPS (Basic) | $0.02$0.05 | −68.3% |
| EPS (Diluted) | $0.02$0.05 | −67.7% |
| Shares Outstanding (Basic) | 24.28B24.24B | +0.2% |
| Shares Outstanding (Diluted) | 24.64B25.08B | −1.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of the revenue decline in the first quarter of fiscal year 2020?
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.
What is the strategic significance of the Mellanox acquisition?
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.
How did profitability fare in this quarter compared to the prior year?
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.
What is NVIDIA's approach to returning capital to shareholders?
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.
06—Continue