Analyst Conference Summary

conference date: February 11, 2015 @ 2:00 PM Pacific Time
for quarter ending: January 25, 2015 (Q4, fourth quarter fiscal 2015)

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

Overview:

Basic data (GAAP) :

Revenues were $1.25 billion, up 2% sequentially from $1.23 billion, and up 9% from $1.14 billion in the year-earlier quarter.

Net income was $193 million, up 12% sequentially from $173 million and up 31% from $147 million year-earlier.

EPS (earnings per share) were $0.35, 13% sequentially from $0.31, and up 40% from $0.25 year-earlier.

Guidance:

Q1 fiscal 2016 revenue expected to drop sequentially to $1.16 billion (+ or - 2%). Gross margins 56.2% GAAP, 56.5% non-GAAP. Operating expenses $478 million GAAP, $425 million non-GAAP. Tax rate near 20%.

Conference Highlights:

Jen Hsun Huang, CEO, says "momentum is accelerating" in GeForce GPUs, the Shield gaming device, automotive applications, GRID for datacenter graphics, and Tesla for datacenter acceleration. Revenue set a record for both the quarter and year, paced by a "vibrant" gaming market.

GeForce GTX 960, with Maxwell technology, was introduced for the $199 gaming card segment. Dissed gaming consoles as expensive and slow. Launched the Tesla K80 dual-GPU accelerator for high-performance computing. Tegra X1 mobile processor for automotive applications including autonomous driving was shown. 7.5 million cars using Nvidia technology have been sold.

Non-GAAP numbers: Gross margin 56.2%. Net income $241 million, up 10% sequentially from $220 million, and up 29% from $187 million year-earlier. EPS $0.43, up 10% sequentially from $0.39, and up 34% from $0.32 year-earlier. Excludes stock-based compensation expense of about $42 million, acquisition-related costs and other non-cash items.

There was a benefit from the reinstatement of the R&D tax credit.

55.9% GAAP gross margin up sequentially and above Nvidia's outlook.

GPU business grew 8% sequentially and 38% y/y on seasonal strength and Maxwell GPUs. But Tegra processor sales decreased 33% sequentially and 15% y/y on lower smartphone and tablet revenue.

Cash and equivalents balance was $4.62 billion. $443 million cash from operations. $31 million was used for capital expenditures. $412 million free cash flow. 0.2 million shares of stock were repurchased. $46 million was used for dividends. Long-term debt $1.38 billion.

Cash flow in the quarter included the annual payment from Intel.

Returned $1 billion in cash to shareholders in fiscal 2015. Plans to return $0.6 billion in fiscal 2016.

GAAP cost of good sold was $550.9 million, leaving gross profit of $699.6 million. Operating expenses of $468.5 million consisted of $348.3 million for R&D and $120.2 million for Sales, General and Administrative expense. Leaving operating income of $231.1 million. Interest and other expense $3.2 million. Income taxes $34.7 million.

A dividend of $0.085 per share to shareholders of record on February 26 will be paid on March 19.

Q&A:

Tegra drivers in fiscal 2016? We are focusing on automotive and gaming. Automotive nearly doubled y/y. We have exciting things to share in the near future. DRIVE platform includes the chip and a lot of software, including surround vision technology. We also are using Deep Learning for voice processing and understanding of imagery. This will pave the path to the self-driving car.

SHIELD is designed to work with mobile cloud gaming.

Color on GPU growth? Gaming, automotive, enterprise graphics, and high performance/ cloud computing are our 4 segments. Enterprise graphics workstation has been about flat y/y, but Tesla about doubled y/y. PC OEM business declined, as expected, and is a lower-margin business.

GPUs in Q1? We guided seasonally down. Our position in gaming is very strong and the global market is robust. The production value of games is increasing, which requires better GPUs.

Mid and low end car strategy? More and more of the car's value will be delivered through software, which requires good hardware, and all that will gradually penetrate the lower end of the market.

Mobile market? It is a fundamentally new way of designing computers, not just phones. Names things that are not phones that could be impacted. Mobile cloud is a very powerful force. But no one has yet produced a true mobile cloud gaming platform for the billions of users.

Onshore/Offshore cash? We lowered our cash balance y/y by returning cash to shareholders. Our cash flow is mostly international. Our U.S. to non-U.S. cash mix is flat y/y.

% of Tegra that is automotive? Most of our automotive is infotainment. Moving to digital clusters. Most Tegra revenue is now either automotive or Shield.

Tesla is multiple hundreds of millions of dollars on an annual basis.

20 nm vs. 28 nm? We are always moving to the next mode. Tegra X1 is 20 nm. We have the ability to improve at any node, using architecture, software, etc. Maxwell, for instance, greatly improved energy efficiency, which allowed us to put it in the Tegra X1.

"We are not a chip company anymore." A car is a multiple-thousand dollar opportunity, and the value is as much in the software as in the chips.

Maxwell in notebook market? Maxwell enabled a desktop quality experience in a laptop. A laptop can be better than a game console. It is growing at over 100% per year off a small base. We added HP, Alienware, Dell and many other OEMs. It is enabled by energy efficiency. We are not thinking about attach rates anymore. It now depends on the number of gamers in the world.

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