10-QPeriod: Q2 FY2021

NVIDIA CORP Quarterly Report for Q2 Ended Jul 26, 2020

Filed August 19, 2020For Securities:NVDA

Summary

NVIDIA Corporation (NVDA) reported strong performance for the fiscal second quarter of 2021, with significant year-over-year revenue growth driven by both its Graphics and Compute & Networking segments. The acquisition of Mellanox, completed at the beginning of the quarter, was a major contributor, particularly boosting the Compute & Networking segment revenue. Despite an increase in operating expenses due to integration costs and hiring, the company demonstrated robust revenue growth and profitability. Investors should note the positive trajectory driven by demand in gaming and data center markets, partially offset by temporary impacts from COVID-19 on certain sectors and acquisition-related expenses impacting gross margins sequentially. The company's balance sheet shows a substantial increase in assets, largely due to the Mellanox acquisition, and a significant rise in long-term debt to finance these activities. NVIDIA continues to return capital to shareholders through dividends and has a substantial authorization for future share repurchases. The company maintains a strong liquidity position, indicating its ability to manage its working capital needs and operational expenditures.

Financial Highlights

54 data points
Beta

Revenue

$3.87B

58.8% Gross Margin

Net Income

$622.00M

16.1% Net Margin

EPS (Diluted)

$0.03

Total Assets

$25.18B

Cash & Equivalents

$3.27B

Free Cash Flow

$1.35B

Financial Statements
Beta
Revenue$3.87B
Cost of Revenue$1.59B
Gross Profit$2.27B
R&D Expenses$997.00M
SG&A Expenses$627.00M
Operating Expenses$1.62B
Operating Income$651.00M
Interest Expense$54.00M
Net Income$622.00M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)24.64B
Shares Outstanding (Diluted)25.04B

Key Highlights

  • 1Revenue for the second quarter of fiscal year 2021 reached $3.87 billion, a 50% increase year-over-year.
  • 2The Compute & Networking segment saw a significant 130% year-over-year revenue increase, largely due to the acquisition of Mellanox.
  • 3Gaming revenue grew by 26% year-over-year, demonstrating continued strength in the gaming market.
  • 4Data Center revenue, including Mellanox, surged by 167% year-over-year.
  • 5Gross margin was 58.8%, impacted by acquisition-related charges, including an inventory step-up of $161 million.
  • 6Operating expenses increased by 67% year-over-year, primarily due to Mellanox acquisition costs and increased headcount.
  • 7Cash, cash equivalents, and marketable securities totaled $10.98 billion, reflecting a strong liquidity position.

Frequently Asked Questions

The primary driver of the 130% year-over-year revenue growth in the Compute & Networking segment was the acquisition of Mellanox, which was completed at the beginning of the quarter. Mellanox contributed approximately 14% of the total company revenue and over 30% of the Data Center revenue.

The Mellanox acquisition had a mixed impact on profitability. While it significantly boosted revenue, it also led to a sequential decrease in gross margin due to acquisition-related charges, including a $161 million non-recurring inventory step-up expense and $84 million in intangible asset amortization. Operating expenses also increased due to integration costs and hiring.

NVIDIA maintains a strong liquidity position with $10.98 billion in cash, cash equivalents, and marketable securities as of July 26, 2020. The company is financing its operations and growth through a combination of operational cash flow, a significant debt issuance of $4.97 billion in March 2020, and continues to return capital to shareholders through dividends. A substantial share repurchase authorization remains available.

NVIDIA highlighted the ongoing impact of the COVID-19 pandemic as a significant risk, affecting its supply chain, customer demand in certain sectors (like Professional Visualization and Automotive), and global financial markets. The company also noted potential exposure to additional tax liabilities and the complexity of managing its global tax obligations.