Analyst Conference Summary

conference date: February 17, 2016 @ 2:00 PM Pacific Time
for quarter ending: January 31, 2016 (Q4, fourth quarter fiscal 2016)

But I own competitor AMD
Forward-looking statements

Overview: Nvidia has returned to a solid rate of growth. This resulted in a record quarter and year for revenue.

Basic data (GAAP) :

Revenues were $1.40 billion, up 7% sequentially from $1.31 billion, and up 12% from $1.25 billion in the year-earlier quarter.

Net income was $207 million, down 16% sequentially from $246 million and up 7% from $193 million year-earlier.

EPS (earnings per share) were $0.35, down 20% sequentially from $0.44, and flat from $0.35 year-earlier.

Guidance:

Nvidia plans to return about $1.0 billion ot shareholders in fscal 2017 through dividends and share repurchases.

For fiscal Q1 2017 revenue is expected near $1.26 billion. Gross margin near 57.2% GAAP or 57.5% non-GAAP. Tax rate 19%, plus or minus 1%. Capital expense $45 to $45 million.

Conference Highlights:

The dividend of $0.115 will be paid on March 23, 2016 to shareholders of record on March 2, 2016.

"We had another record quarter, capping a record year," said Jen-Hsun Huang, co-founder and chief executive officer, Nvidia. "Our strategy is to create specialized accelerated computing platforms for large growth markets that demand the 10x boost in performance we offer. Each platform leverages our focused investment in building the world's most advanced GPU technology."

For the full year fiscal 2016, revenue was $5.0 billion, up 7% from $4.7 billion in FY 2015.

GPU segment revenue was $1.18 billion, down 7% sequentially from $1.11 billion, and up 10% y/y.

Tegra segment revenue was $157 million, up 22% sequentially from $129 million.

Gaming revenue was $810 million, up sequentially from $761 million, and up 25% y/y. New games and e-sports are driving graphic card sales. GTX notebook GPUs are getting good traction. VR gaming is the next big thing.

Professional graphics revenue was $203 million, up 7% sequentially from $190 million, but up 7% y/y.

Datacenter revenue was $97 million, up 18% sequentially from $82 million, and up 10% y/y. Deep learning is a driver. Acceleration is also being implemented with Nvidia by companies like Facebook and Alibaba.

Automotive revenue was $93 million, up 18% sequentially from $79 million, and up 68% y/y. The NVIDIA DRIVE PX 2 platform to was introduced in the quarter.

$198 million OEM and IP business. Intel license revenue of $66 million was flat y/y.

Non-GAAP numbers: Net income $297 million, up 16% sequentially from $255 million, and up 23% from $241 million year-earlier. EPS $0.52, up 13% sequentially from $0.46, and up 21% from $0.43 year-earlier. 57.2% gross margin.

Cash and equivalents balance was $5.04 billion. $510 million cash from operations. $15 million was used for capital expenditures. $495 million free cash flow. Repurchased 4.3 million shares, did not say $ million used. $62 million was used for dividends. Short-term debt $1.4 billion.

GAAP cost of good sold was $610 million, leaving gross profit of $791 million. Operating expenses of $539 million consisted of $344 million for R&D and $161 million for Sales, General and Administrative expense, and $34 million for restructuring. Leaving operating income of $252 million. Interest and other income $1 million. Income tax expense $46 million.

Q&A:

Gaming segment 30% growth rate, is it sustainable? GeForce is not a chip business, it is a gaming platform. You have to see it within the gaming industry. Prospects for growth are significant. Maxwell platform is the most successful ever introduced. Graphics richness keeps increasing. GameWorks has been a success for game builders. Southeast Asia is growing incredibly. Games like GTA V are incredible for telling stories. We will continue to grow with the industry.

Automobile competition, like Qualcomm? That is not the segment we will address. We will serve parts of the infotainment market. Display costs are coming down. AI can change the way the systems are used. The autonomous driving computer is best addressed with deep learning. It will become a commodity, moving from assisted driving to fully autonomous driving.

Tegra service business? There are semi-custom businesses that people need our help on. We can help partners develop proprietary systems with deep learning and supercomputing. But there is not much to announce yet.

Margins, when might they flatten? There are a lot of moving parts in gross margin. Consumer business tends to have lower gross margins. We are moving from being a chip business to being a software, chip, and platform business. Margins reflect that.

High performance compute, Pascal vs. Intel's Knights Landing? Ours is using an accelerated computing model. It takes advantage of the CPU and the GPU. It dramatically accelerates computing in some verticals, thus reducing their costs. Maybe by a factor of 5, and it also reduces power bills. The killer app we are starting to see is Deep Learning. This lets companies comb through massive amounts of data. The medical applications are exciting. We have a real advantage over competion because of our relatively minor incremental cost. We have a high velocity rhythm that brings out new GPUs and software, which can be used for computational acceleration in additon to games.

We disagree with the IPC decisions about Samsung's use of our technology. We have appealed for a review.

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