Analyst Conference Summary

conference date: February 9, 2017 @ 2:00 PM Pacific Time
for quarter ending: January 29, 2017 (Q4, fourth quarter fiscal 2017)

But I own competitor AMD
Forward-looking statements

Overview: Continued strong growth makes Nvidia a semiconductor phenomena. I have to admit, I did not foresee the phenomenal growth Nvidia showed in 2016.

Beware: said "assumes" license agreement with Intel ends in March. Rumors have circulated since December that Intel will start licensing its GPU technology from AMD instead.

Basic data (GAAP) :

Revenues were $2.17 billion, up 8% sequentially from $2.00 billion, and up 55% from $1.40 billion in the year-earlier quarter.

Net income was $655 million, up 21% sequentially from $542 million and up 216% from $207 million year-earlier.

EPS (diluted earnings per share) were $0.99, up 19% sequentially from $0.83, and up 183% the $0.35 year-earlier.

Guidance:

In fiscal 2018 $1.25 billion is planned for use to pay dividends and make share repurchases.

For fiscal Q1 2018 revenue is expected within 2% of $1.90 billion. Gross margin within 50 basis points of 59.5% GAAP and 59.7% non-GAAP. Operating expenses about $603 million GAAP or $520 million non-GAAP. Other expense net $20 million GAAP, $4 million non-GAAP. Tax rate 17%. Capital expense $50 to $60 million.

"Guidance assumes our licensing agreement with Intel ends at March and does not renew."

Conference Highlights:

"Deep learning on NVIDIA GPUs, a breakthrough approach to AI, is helping to tackle challenges such as self-driving cars, early cancer detection and weather prediction. We can now see that ‎GPU-based deep learning will revolutionize major industries, from consumer internet and transportation to health care and manufacturing. The era of AI is upon us,"said Jen-Hsun Huang, CEO of Nvidia.

Growth was driven primarily by datacenter revenue tripling as AI adoption accelerated worldwide.

The dividend of $0.14 will be paid on March 17 to shareholders of record on February 24, 2017.

GPU segment revenue was $1.85 billion, up 9% sequentially from $1.7 billion, and up 57% y/y.

Tegra segment revenue was $257 million, up7 % sequentially from $241 million and up 64% from year-earlier. Tegra Xavier will be used for self-driving cars.

In addition to the segments, NVDA reports revenue by a number of market platforms:

Gaming revenue was $1.35 billion, up 8% sequentially from $1.24 million, and up 66% from year-earlier. E-sports is a major driver of growth.

Professional visualization (Quadro) revenue was $225 million, up 9% sequentially from $207 million, and up 11% y/y. New line of Pascal based GPUs launched recently for mobile workstations.

Datacenter revenue was $296 million, up 23% sequentially from $240 million, and more than tripled from year-earlier. "AI is transforming industries worldwide." Grid graphics virtualization doubled y/y.

Automotive revenue was $128 million, up 1% sequentially from $127 million, and up 38% y/y. In the quarter announced partnerships with Audi, Mercedes-Benz, Bosch, ZF, HERE, and Zenrin. Nvidia demonstrated its own autonomous car.

OEM and IP business revenue was $176 million , down 5% sequentially from $186 million and down 11% from year-earlier.

Non-GAAP numbers: Net income $704 million, up 24% sequentially from $570 million, and up 137% from $297 million year-earlier. EPS $1.13, up 20% sequentially from $0.94, and up 117% from $0.52 year-earlier. 60.2% gross margin. Excludes $ million in stock-based compensation and other non-cash and one-time items.

Cash and equivalents balance was $6.80 billion, up sequentially from $6.67 billion. $ million cash from operations. $ million was used for capital expenditures. $ million free cash flow. Repurchased shares using $ million. $ million was used for dividends. Long-term debt $2.0 billion.

GAAP cost of goods sold was $870 million, leaving gross profit of $1.30 billion. Operating expenses of $570 million consisted of $394 million for R&D and $176 million for Sales, General and Administrative expense. Leaving operating income of $733 million. Interest and other expense $7 million. Income tax expense $71 million.

Q&A:

Datacenter moving parts in 2017 and looking to 2018? Expects datacenter rapid growth to continue. Our AI appliance means you don't have to build your own. AI, cloud, and HPC all contributed.

Where are we in the gaming cycle, where might Pascal peak before the next generation launch? We have a couple of hundred million Geforce gamers, it takes 3 to 4 years to upgrade the entire installed base. We just started with Pascal a couple of quarters ago.

Op ex increase in guidance? We have some large TAMs to pursue, we are going after them, like self-driving cars and more datacenter.

Are hyperscale players mainly using GPUs for their own use, or for customers? Deep learning has proven to be too effective, every hyperscaler in the world is investing heavily in it. It is becoming an essential tool. When they host it, it has a wide variety of applications. MapWorks, for instance, takes video from a car and constructs the 3D world the car is driving through. The list of examples for deep learning and AI is quite long.

VR adoption? The first year of VR sold many hundreds of thousands of units. Our product has delivered excellent results. Current VR is aimed at early adopters. We now have to make the headsets easier to use, lighter, more mobile, and cheaper. It also has professional applications, where price is not as much of an issue.

We provide a full software stack for AI, including deep learning, neural networks, perception, decision making, and some specialties like mapping. All this stack is needed to compete in self-driving cars.

Inference market? It is going to be very large. Every computing device will have inferencing. Mostly that will be done with arm on the device. We are going to focus in markets where precision is mission critical, like self-driving cars and manufacturing robots.

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