Analyst Conference Summary

conference date: November 9, 2017 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2017 (Q3, third quarter fiscal 2018)

Forward-looking statements

Overview: Strong revenue and profit ramp continues. Increased the dividend.

Basic data (GAAP) :

Revenues were $2.64 billion, up 18% sequentially from $2.23 billion, and up 32% from $2.00 billion in the year-earlier quarter.

Net income was $838 million, up 44% sequentially from $583 million and up 55% from $542 million year-earlier.

EPS (diluted earnings per share) were $1.33, up 45% sequentially from $0.92, and up 60% the $0.83 year-earlier.

Guidance:

For Q4 fiscal 2018 revenue is expected within 2% of $2.65 billion. Gross margins near 59.7% GAAP or 60.0% non-GAAP. Operating expenses $722 million GAAP, $600 million non-GAAP. Tax rates 16.5% to 18.5%. Capital expenditures $75 to $85 million.

Conference Highlights:

All four segments generated record revenue.

The dividend was increased 7% to $0.15 per share per quarter. Payable on December 15, 2017 to shareholders of record on November 24, 2017.

GPU segment revenue was $2.22 billion, up 31% y/y.

Tegra segment revenue was $419 million, up 74% from year-earlier.

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

Gaming revenue was $1.56 billion, up 32% sequentially, and up 25% from year-earlier. The new game titles this season should drive further sales, as will e-sports. Also benefited from cryptocurrency mining, though it is hard to quantify. Nintendo Switch console also contributed to growth.

Professional visualization (Quadro) revenue was $239 million, up 2% sequentially, and up 15% y/y.

Datacenter revenue was $501 million, up 21% sequentially, and more than doubled from year-earlier. V100 is being broadly adopted for AI. Tensor accelerated inferencing platform recently launched.

Automotive revenue was $144 million, up slightly sequentially, and up 13% y/y.

Non-GAAP numbers: Net income $833 million, up 31% sequentially from $638 million, and up 46% from $570 million year-earlier. EPS $1.33, up 32% sequentially from $1.01, and up 41% from $0.94 year-earlier. Excludes $107 million in stock-based compensation and other non-cash and one-time items.

Cash and equivalents balance was $6.32 billion. $1.16 billion cash from operations. $69 million was used for capital expenditures. $1.09 billion free cash flow. Repurchased shares using $100 million. $47 million was used for dividends. Long-term debt $2.0 billion.

GAAP cost of goods sold was $1.07 billion, leaving gross profit of $1.57 billion. Operating expenses of $674 million consisted of $462 million for R&D and $212 million for Sales, General and Administrative expense. Leaving operating income of $895 million. Interest and other income $1 million. Income tax expense $58 million.

Q&A:

Datacenter outlook, particularly inferencing? Volta ramped starting in Q2 with the main ramp in Q3. Every major cloud provider has adopted it, as has every major server maker. Major markets are HPC (high performance computing); deep learning training; inference to support datacenter queries; public cloud. The software stacks are complicated, but we containerized them for programmers.

Gaming seasonality in Q4, any unusual drivers? We are comfortable with our guidance. We sell GPU chips one at a time to consumers. In e-sports people want to win, so will pay for better gear to reduce latency. The quality of content "looks just amazing."

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