Analyst Conference Summary


conference date: May 7, 2015 @ 2:00 PM Pacific Time
for quarter ending: April 26, 2015 (Q1, first quarter fiscal 2016)

But I own competitors AMD and Marvell as this is written.
Forward-looking statements

Overview: Continued slow revenue growth due to PC market stall, but gross margin set a record. Raised the dividend.

Basic data (GAAP) :

Revenues were $1.15 billion, down 8% sequentially from $1.25 billion, and up 4% from $1.10 billion in the year-earlier quarter.

Net income was $134 million, down 31% sequentially from $193 million and down 2% from $137 million year-earlier.

EPS (earnings per share) were $0.24, down 31% sequentially from $0.35, and flat from $0.24 year-earlier.


Revenue expected with 2% of $1.01 billion. Gross margin 56.0% non-GAAP, plus or minus 50 basis points. GAAP operating expenses about $474 million.

Conference Highlights:

Jen Hsun Huang, CEO, said "Our singular focus on visual computing is aligned with some of the most exciting growth opportunities in computing today." [WPM: which does not explain why revenue growth was just 4% y/y]

We were reminded that Nvidia's case against Samsung and Qualcomm will be heard in June by the ITC.

On May 5 Nvidia had announced it Icera modem operations will be wound down or sold, which will result in a $100 million to $125 million restructuring charge.

Non-GAAP operating expenses in fiscal 2016 are expected to be about flat y/y, excluding litigation costs of about $70 million to $90 million [The price of justice, or injustice, in America, depending on your point of view].

GPU segment revenue was $940 million, up 5% y/y.

Tegra segment revenue was $105 million, up 4% y/y.

Gaming revenue was $587 million, up 25% y/y [this includes parts of both the GPU and the Tegra segment, I think]

Enterprise revenue was $190 million, down 4% y/y, mainly due to Euro FX.

HPC and cloud revenue was $79 million, up 57% y/y. Leading cloud service providers like Baidu, Microsoft and Facebook are using GPUs for deep learning neural networks.

Automotive revenue was $77 million, up 121% y/y.

OEM and IP platform had revenue of $218 million, down 38% y/y, resulting from some end-of-life Tegra OEM designs and weakness in PC sales.

A number of new products were introduced in the quarter, notably the TITAN X GPU, the Shield, and the Quadro Visual Computing Appliance. In automotive the Drive PX car computer platform is available to developers, enabling self-driving capabilities.

The dividend is being rasied 15%. $0.975 per share will be paid on June 12, 2015 to stockholders of record on May 21, 2015. Share repurchases will also be increased in fiscal 2016, so the total planned return to shareholders is $800 million.

Non-GAAP numbers: Gross margin 56.9%. Net income $187 million, down 22% sequentially from $241 million, and up 13% from $166 million year-earlier. EPS $0.33, down 23% sequentially from $0.43, and up 14% from $0.29 year-earlier. Excludes stock-based compensation expense of about $45 million, acquisition-related costs and other non-cash items.

56.7% GAAP gross margin up from 54.8% in the year-earlier quarter due to a better product mix.

Cash and equivalents balance was $4.79 billion. $ million cash from operations. $not state million was used for capital expenditures. $not stated million free cash flow. $53 million was used to repurchase stock. $46 million was used for dividends. Long-term debt 1.39 billion.

GAAP cost of good sold was $498 million, leaving gross profit of $653 million. Operating expenses of $477 million consisted of $339 million for R&D and $138 million for Sales, General and Administrative expense. Leaving operating income of $176 million. Interest and other expense $4 million. Income taxes $38 million.


Will weakness in the OEM segment continue into June? Yes, we still seeing a decline in PC OEM and Tegra OEM. It is still an important business for us.

Gross margin guidance? It is partly mix, partly the lower revenue expectation for Q2.

Icera windown should not result in a material change to our revenue expectations.

AMD OEM new product launches, is there a margin level where you would not want this business? We will always work with OEMs, but if they are just looking for low-cost, they probably would not look to us.

GPU pricing, inventory? We have good channel visibility, inventories are healthy, despite the FX concerns.

Automotive outlook? We don't give specific guidance on all the different pieces of our market. Automotive looks healthy, we have a strong list of design wins. Long term this is a growth opportunity for us.

Enterprise outlook? It depends somewhat on currency.

Part of sales in Euro? We bill in U.S. dollars, but we still see an FX effect due to the prices to end users.

Grid revenue opportunity? Has grown proportional to switch from trial to production. It helps that VMWare has integrated Grid. First they test all of their applications before going into production. Some networks need to shored up so 3D graphics can be streamed.

Is gaming growing, or are you just getting short-term market share from AMD? Gaming is growing. Each generation of people has a higher percentage of gamers. Plus VR is coming, and requires high-end GPUs.

FPGA vs. GPU coprocessors? CUDA GPGPU technology is growing over 50% per year across a broad variety of applications. Nearly all OEMs offer GPU accelerated servers. None offer an FPGA accelerated server. CUDA is completely software programmable with a well-established set of tools. FPGA's is like a reconfigurable ASIC, so they have to know how to design chips. Software programmers can't create solutions with FPGAs. Aside from CUDA there is no architecture for parallel processing. [WPM: why are OpenGL and OpenCL not rivals for CUDA? I think having a large lead is not the same as not having alternatives. FPGA's can now be programmed in C, C++, and OpenCL, and Nvidia uses OpenCL. See also Acceleration Wars]

ARM vs. 86x? ARM has its place, but 86x is deeply entrenched and needed for heavy-dury computation both in PCs and in datacenters.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2015 William P. Meyers