Analyst Conference Summary

conference date: November 8, 2012 @ 5:00 AM Pacific Time
for quarter ending: October 28, 2012 (Q3, third quarter fiscal 2013)

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

Overview: Record revenue in quarter.

Basic data (GAAP) :

Revenues were $1.204 billion, up 15% sequentially from $1.044 billion, and up 13% from $1.066 billion in the year-earlier quarter.

Net income was $209.1 million, up 76% sequentially from $119.0 million and up 17% from $178.3 million year-earlier.

EPS (earnings per share) were $0.33, up 74% sequentially from $0.19 and up 14% from $0.29 year-earlier.

Guidance:

Q4 fiscal 2013 ending in January 2013: revenue between $1.025 and $1.175 billion. GAAP gross margin 52.9%. GAAP operating expenses around $400 million. Tax rate 20%. Depreciation and amortization $58 to $60 million. Capital expenditures $60 to $70 million. Diluted share count 629 million.

Conference Highlights:

Record revenue and margins from Kepler GPUs and Tegra. Announced the first dividend, 7.5 cents per share, payable on December 14, 2012 to holders of record on November 23, 2012.

Non-GAAP numbers: gross profit $639.1 million. Net income $245.5 million. EPS $0.39. Stock-based compensation excluded was $30.6 million. 53.1% gross margin, up 0.6% from year-earlier.

Microsoft Surface RT tablet launched using Tegra 3 processor, as did Google Nexus 7. Non-GPU segment now 30% of revenues. Android captured 41% of the tablet market, with Tegra 3 as its leading processor. Tegra 3 smartphones are shipping. Automobile infotainment systems are also using Tegra.

GPU segment up 10.7% sequentially and 14.7% y/y. Professional business up 12.4% sequentially, but down 4.2% y/y. Consumer segment up 35.7% sequentially and 27.6% y/y.

Kepler rollout continued with lower-priced cards for gaming and continued adoption for supercomputers. Supplies improved. Believes most gamers need to upgrade their cards to take advantage of the newest PC games. Quadro business was down y/y consistent with the soft business workstation market. Introduced a cloud-based workstation GPU, VGX K2.

Making chips for special purpose PC markets is now part of the strategy.

Cash balance ended at $3.43 billion. $48.1 million increase in inventory. Renewed share buyback program.

Cost of goods sold was $567.5 million, leaving gross profit of $636.7 million. Operating expenses of $384.4 million included $284.2 million for research and development and $100.3 million for sales, general and administrative. Leaving operating income of $252.2 million. Interest income $1.4 million. Income taxes $44.5 million.

Q&A:

Fundamentals in PC business, seasonality? We are gaining share, our GPU position is better than ever. PC end market is uncertain, so we are taking a cautious approach to our outlook.

Upside surprise opportunity in guidance? Quadro has been underperforming, partly due to economy but also to delay of Intel Romley platform. Notebooks and desktops, our expectation is for softness.

The holiday season for PC sales is soft around the globe. A great tablet is better than a cheap PC, so they are eating into traditional PC sales. The Microsoft Surface is making the tablet and notebook markets merge. We don't play in the low end PC market, where integrated chips are used.

R&D increase in guidance? We are getting the next generation mobile processor ready for market and the 4G LTE modem. We have to integrate the modem into our application processor, while we are currently selling discrete modems.

Tegra tablets vs. smartphones? Believes tablet sales will be down in January quarters because we already shipped for the holiday build. Most Tegra growth has come from tablets, with smartphones being stable. We have been limited by our inability to integrate modems into Tegra; this creates a big opportunity for us.

Gaming trends in Asia? GeForce business has been growing steadily as PC gaming has. In China there are no game consoles really in China. They like massive online free to play online games. They still need a GeForce card for that. The gaming marketplace is quite vibrant.

28 nm supply? The yield and supply situation have improved substantially. We believe there is balance of supply and demand at the moment.

Tegra revenue? $165 million for Q3.

We have Kepler supercomputers to build out all over the world. GPU accelerated computing is the most efficient way forward. CUDA has helped the GPU grow into more and more businesses.

Competition from Samsung in ARM landscape? They are a formidable company. To customers they are downright scary. We have to continue to stay ahead of them technologically and we have the ability to do so. We are a neutral, friendly partner for OEMs Samsung competes against. It is not like selling a DRAM, it requires collaboration, keeping confidentiality about trade secrets. Tegra is currently a small business that can grow at 50% per year. With integrated modems introduced in 2013, we have a bit opportunity.

64-bit ARM? We have nothing to say yet, except Denver is going great.

Once an instruction set processor like ARM reaches a critical mass the developers concentrate on it and it disrupts the market above, which in this case is the cheap PC market. Windows RT is disruptive.

For superphones (smartphones) we did about as well this year as last year. We are going to continue to expand in that segment once we introduce our integrated modem LTE product.

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