Analyst Conference Summary

conference date: August 6, 2015 @ 2:00 PM Pacific Time
for quarter ending: July 26, 2015 (Q2, second quarter fiscal 2016)

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

Overview: Showed y/y growth, led by automotive applications. Big difference between GAAP and non-GAAP earnings reported.

Basic data (GAAP) :

Revenues were $1.15 billion, flat sequentially from $1.15 billion, and up 5% from $1.10 billion in the year-earlier quarter.

Net income was $26 million, down 81% sequentially from $134 million and down 80% from $128 million year-earlier.

EPS (earnings per share) were $0.05, down 79% sequentially from $0.24, and down 77% from $0.22 year-earlier.

Guidance:

For fiscal Q3 ending October 26, revenue is expected within 2% of $1.18 billion. Gross margin 56.2% GAAP, 56.5% non-GAAP. Operating expenses $484 GAAP, $435 non-GAAP. Restructuring charges $15 million to $25 million. Capital expenditures $25 million to $35 million.

Conference Highlights:

Demand was high for GeForce GPUs, with flagship GTX 980 Ti introduced. NVIDIA SHIELD launched [didn't it get recalled due to battery fires? Yes, I found].

GPU segment revenue was $959 million, up sequentially from $940 million, and up 9% y/y.

Tegra segment revenue was $128 million, up sequentially from $105 million, and down 19% y/y.

Gaming revenue was $661 million, up sequentially from $587 million, and up 59 % y/y [this includes parts of both the GPU and the Tegra segment, I think]. Propelled by e-sports.

Enterprise revenue was $187 million, down sequentially from $190 million, and down 4% y/y. Quadro business was in a weak refresh cycle. Over 40 Grid customers added this quarter.

HPC and cloud revenue was $62 million, down sequentially from $79 million, and down 15% y/y. Deep learning sales have been lumpy. GPU computing in the cloud is gathering momentum.

Automotive revenue was $71 million, down sequentially from $77 million, and up 76% y/y. More than 50 companies are using the NVIDIA DRIVE PX platform to develop autonomous driving.

Non-GAAP numbers: Net income $190 million, up 2% sequentially from $187 million, and up 10% from $173 million year-earlier. EPS $0.34, up 3% sequentially from $0.33, and up 13% from $0.30 year-earlier. Excludes stock-based compensation expense of about $47 million, acquisition-related costs of $4 million, restructuring charges of $89 million, and other non-cash items.

Cash and equivalents balance was $4.51 billion. $163 million cash from operations. $24 million was used for capital expenditures. $139 million free cash flow. $400 million was used to repurchase stock. $52 million was used for dividends. Long-term debt $1.4 billion.

GAAP cost of good sold was $519 million, leaving gross profit of $634 million. Operating expenses of $558 million consisted of $320 million for R&D and $149 million for Sales, General and Administrative expense, and $89 million for restructuring. Leaving operating income of $76 million. Interest and other expense $4 million. Income taxes $46 million.

Q&A:

Blockbuster game pipeline, so why not more seasonal growth? Four major drivers in gaming: blockbusters; e-sports; 4K + Skylake + Windows 10; VR (virtual reality). Gaming will continue to grow, including the high end. Our guidance is what we think makes sense at this time.

Auto segment? We have 8 million cars on the road and 30 million coming with our Tegra platform in them, plus the development of autonomous vehicles. Our advantage is image capturing and sensor fusion. We expect the car business will continue to grow, with a high y/y rate.

VR demand timeline? Hard to say. Several 100 thousand development kits were sold. You need high-end GPUs to drive 90 frame per second stereo. It is hard to say how big the VR market will become. We are working with Oculus and Valve to get seamless rendering. It should also give our workstation business a lift.

We changed our business model from a company that mainly sold to PC and mobile OEMs to a focus on specialized platforms for specialized applications where we add a lot of value.

Cash use? We look at cash balance net of debt. We are excited at how much capital we are returning to investors this year, $800 million. We continue to look for opportunities for our cash, including M&A.

GTX 980 Ti vs. HBM, roadmap? We are really proud of our software. But our Maxwell architecture delivers performance partly because of a brand new, special memory technology inside the chip that uses compression to multiply the physical bandwidth by 1.5. We can scale this across the entire Maxwell family. We increase performance 2x every year and a half by innovating across multiple layers including architecture, silicon, and algorithms. We increased performance by a factor of 4 to 5 in one node, 28 nm, which we stayed on for a long time.

We saw some slow down in enterprise buying. We believe this may be partly related to the delay in Intel's introduction of Skylake, which has important increases in capabilities for workstations.

Auto competitive dynamics? There are several centers of innovation. Infotainment has become a commodity. A digital cluster, however, is still complicated. The software quality must be very high. Nvidia is getting a lot of traction in autonomous driving, and the steps towards it so far. [In other words, did not answer the question about competition]

PC OEM business in Q3? There are reasons for optimism, including Windows 10. PC OEM sales are about 15% of sales. Y/Y PC + mobile OEM sales were down about $200 million, but we managed to increase sales through our specialized platform strategy.

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