01—Abstract
Summary
Summary of the 10-Q filed August 15, 2019. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation's Form 10-Q filing for the period ending July 27, 2019, indicates a significant year-over-year decline in revenue and net income for the second quarter.
Revenue decreased by 17% to $2.58 billiona, and net income fell by 50% to $552 million, impacting diluted EPS to $0.90. This downturn is primarily attributed to a substantial 21% drop in the GPU business segment, driven by lower gaming and data center revenues, partially offset by a modest 2% increase in the Tegra Processor business, largely due to automotive segment growth. Despite the revenue decline, the company is actively managing its capital resources, with cash, cash equivalents, and marketable securities increasing to $8.48 billion.
NVIDIA also highlighted its commitment to returning capital to shareholders, with $195 millionb in dividends paid in the first half of the fiscal year and an intention to return an additional $2.11 billion through a combination of share repurchases and dividends. The company is also progressing with its planned acquisition of Mellanox Technologies for approximately $6.9 billion, which is subject to regulatory approvals.
02—Key points
Key Highlights
- Total revenue for the second quarter of fiscal year 2020 decreased by 17% year-over-year to $2.58 billion.
- Net income for the quarter significantly declined by 50% year-over-year to $552 million, resulting in diluted EPS of $0.90.
- The GPU business segment experienced a 21% revenue decrease year-over-year, primarily due to lower gaming and data center sales.
- The Tegra Processor business segment showed a modest 2% revenue increase year-over-year, driven by growth in the automotive sector.
- Cash, cash equivalents, and marketable securities increased to $8.48 billion, indicating strong liquidity.
- The company intends to return approximately $2.11 billion to shareholders through share repurchases and dividends.
- NVIDIA is proceeding with the acquisition of Mellanox Technologies for approximately $6.9 billion, pending regulatory approvals.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, NVIDIA Corp kept $0.21.
- Revenue$2.58B100.0%
- Cost of revenue−$1.04B40.2%
- Gross profit$1.54B59.8%
- Operating costs−$970.0M37.6%
- Operating income$571.0M22.1%
- Interest, other & tax−$19.0M0.7%
- Net income$552.0M21.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed August 15, 2019Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $2.58B$3.12B | −17.4% |
| Cost of Revenue | $1.04B$1.15B | −9.6% |
| Gross Profit | $1.54B$1.98B | −22.0% |
| R&D Expenses | $704.00M$581.00M | +21.2% |
| SG&A Expenses | $266.00M$237.00M | +12.2% |
| Operating Expenses | $970.00M$818.00M | +18.6% |
| Operating Income | $571.00M$1.16B | −50.6% |
| Interest Expense | $13.00M$14.00M | −7.1% |
| Net Income | $552.00M$1.10B | −49.9% |
| EPS (Basic) | $0.02$0.05 | −49.7% |
| EPS (Diluted) | $0.02$0.04 | −48.9% |
| Shares Outstanding (Basic) | 24.36B24.28B | +0.3% |
| Shares Outstanding (Diluted) | 24.64B25.04B | −1.6% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the year-over-year revenue decline?
The primary driver for the year-over-year revenue decline is the significant decrease in the GPU business segment, which saw a 21% drop. This was mainly due to lower sales in the gaming and data center markets, reflecting market dynamics and potentially a pull-back after a strong period of cryptocurrency-related demand previously.
How is NVIDIA managing its cash and liquidity, and what are its plans for capital return to shareholders?
NVIDIA maintains a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $8.48 billion as of July 28, 2019. The company is committed to returning capital to shareholders, having paid $195 million in dividends in the first half of the fiscal year and planning to return an additional $2.11 billion through share repurchases and dividends, although repurchases are deferred until after the Mellanox acquisition closes.
What is the status and expected impact of the Mellanox acquisition?
NVIDIA entered into an agreement to acquire Mellanox Technologies for approximately $6.9 billion. The acquisition is subject to regulatory approvals, which are currently being sought in Europe and China. If successful, this acquisition is expected to significantly expand NVIDIA's presence in the data center and high-performance computing markets.
How has operating expense grown, and what is the reason for this increase?
Total operating expenses increased by 19% year-over-year to $970 million. This rise is primarily attributed to increased investments in research and development due to employee additions and related costs, as well as higher sales, general, and administrative expenses, which also reflect increased headcount, employee compensation, and costs related to the Mellanox acquisition plans.
06—Continue