00010458101/312021Q3FALSE00010458102020-01-272020-10-25xbrli:shares00010458102020-11-13iso4217:USD00010458102020-07-272020-10-2500010458102019-07-292019-10-2700010458102019-01-282019-10-27iso4217:USDxbrli:shares00010458102020-10-2500010458102020-01-260001045810us-gaap:CommonStockMember2020-07-260001045810us-gaap:AdditionalPaidInCapitalMember2020-07-260001045810us-gaap:TreasuryStockMember2020-07-260001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-260001045810us-gaap:RetainedEarningsMember2020-07-2600010458102020-07-260001045810us-gaap:RetainedEarningsMember2020-07-272020-10-250001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-272020-10-250001045810us-gaap:CommonStockMember2020-07-272020-10-250001045810us-gaap:AdditionalPaidInCapitalMember2020-07-272020-10-250001045810us-gaap:TreasuryStockMember2020-07-272020-10-250001045810us-gaap:CommonStockMember2020-10-250001045810us-gaap:AdditionalPaidInCapitalMember2020-10-250001045810us-gaap:TreasuryStockMember2020-10-250001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-250001045810us-gaap:RetainedEarningsMember2020-10-250001045810us-gaap:CommonStockMember2019-07-280001045810us-gaap:AdditionalPaidInCapitalMember2019-07-280001045810us-gaap:TreasuryStockMember2019-07-280001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-280001045810us-gaap:RetainedEarningsMember2019-07-2800010458102019-07-280001045810us-gaap:RetainedEarningsMember2019-07-292019-10-270001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-292019-10-270001045810us-gaap:CommonStockMember2019-07-292019-10-270001045810us-gaap:AdditionalPaidInCapitalMember2019-07-292019-10-270001045810us-gaap:TreasuryStockMember2019-07-292019-10-270001045810us-gaap:CommonStockMember2019-10-270001045810us-gaap:AdditionalPaidInCapitalMember2019-10-270001045810us-gaap:TreasuryStockMember2019-10-270001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-10-270001045810us-gaap:RetainedEarningsMember2019-10-2700010458102019-10-270001045810us-gaap:CommonStockMember2020-01-260001045810us-gaap:AdditionalPaidInCapitalMember2020-01-260001045810us-gaap:TreasuryStockMember2020-01-260001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-260001045810us-gaap:RetainedEarningsMember2020-01-260001045810us-gaap:RetainedEarningsMember2020-01-272020-10-250001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-272020-10-250001045810us-gaap:CommonStockMember2020-01-272020-10-250001045810us-gaap:AdditionalPaidInCapitalMember2020-01-272020-10-250001045810us-gaap:TreasuryStockMember2020-01-272020-10-250001045810us-gaap:CommonStockMember2019-01-270001045810us-gaap:AdditionalPaidInCapitalMember2019-01-270001045810us-gaap:TreasuryStockMember2019-01-270001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-270001045810us-gaap:RetainedEarningsMember2019-01-2700010458102019-01-270001045810us-gaap:RetainedEarningsMember2019-01-282019-10-270001045810us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-282019-10-270001045810us-gaap:CommonStockMember2019-01-282019-10-270001045810us-gaap:AdditionalPaidInCapitalMember2019-01-282019-10-270001045810us-gaap:TreasuryStockMember2019-01-282019-10-270001045810nvda:ArmLimitedMembersrt:ScenarioForecastMember2022-01-012022-03-310001045810nvda:ArmLimitedMember2020-09-132020-09-130001045810nvda:ArmLimitedMembersrt:MaximumMember2020-09-130001045810nvda:ArmLimitedMember2020-09-130001045810nvda:ArmLimitedMemberus-gaap:IntellectualPropertyMember2020-09-130001045810nvda:MellanoxTechnologiesLtdMember2020-04-272020-04-270001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:CommonStockMember2020-04-272020-04-270001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:StockCompensationPlanMember2020-04-272020-04-270001045810nvda:MellanoxTechnologiesLtdMember2020-04-270001045810nvda:MellanoxTechnologiesLtdMembernvda:MellanoxTechnologiesLtdMember2020-04-272020-04-270001045810us-gaap:EmployeeStockOptionMembernvda:MellanoxTechnologiesLtdMembernvda:MellanoxTechnologiesLtdMember2020-04-272020-04-27xbrli:pure0001045810us-gaap:SalesRevenueNetMembernvda:MellanoxTechnologiesLtdMember2020-07-272020-10-250001045810us-gaap:SalesRevenueNetMembernvda:MellanoxTechnologiesLtdMember2020-01-272020-10-250001045810nvda:MellanoxTechnologiesLtdMember2020-01-272020-10-250001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:DevelopedTechnologyRightsMember2020-04-270001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:DevelopedTechnologyRightsMember2020-04-272020-04-270001045810us-gaap:CustomerRelationshipsMembernvda:MellanoxTechnologiesLtdMember2020-04-270001045810us-gaap:CustomerRelationshipsMembernvda:MellanoxTechnologiesLtdMember2020-04-272020-04-270001045810us-gaap:OrderOrProductionBacklogMembernvda:MellanoxTechnologiesLtdMember2020-04-270001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:TradeNamesMember2020-04-270001045810nvda:MellanoxTechnologiesLtdMemberus-gaap:TradeNamesMember2020-04-272020-04-270001045810nvda:MellanoxTechnologiesLtdMember2019-01-282019-10-270001045810us-gaap:CostOfSalesMember2020-07-272020-10-250001045810us-gaap:CostOfSalesMember2019-07-292019-10-270001045810us-gaap:CostOfSalesMember2020-01-272020-10-250001045810us-gaap:CostOfSalesMember2019-01-282019-10-270001045810us-gaap:ResearchAndDevelopmentExpenseMember2020-07-272020-10-250001045810us-gaap:ResearchAndDevelopmentExpenseMember2019-07-292019-10-270001045810us-gaap:ResearchAndDevelopmentExpenseMember2020-01-272020-10-250001045810us-gaap:ResearchAndDevelopmentExpenseMember2019-01-282019-10-270001045810us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-07-272020-10-250001045810us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-07-292019-10-270001045810us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-272020-10-250001045810us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-282019-10-270001045810nvda:RSUsPSUsandMarketbasedPSUsMember2020-01-260001045810nvda:RSUsPSUsandMarketbasedPSUsMember2020-01-272020-10-250001045810nvda:RSUsPSUsandMarketbasedPSUsMember2020-10-250001045810nvda:ShareBasedCompensationArrangementsByShareBasedPaymentAwardEmployeeStockPurchasePlanMember2020-01-272020-10-250001045810nvda:MellanoxTechnologiesLtdMember2020-07-260001045810nvda:MellanoxTechnologiesLtdMember2020-04-272020-07-260001045810us-gaap:USTreasurySecuritiesMember2020-10-250001045810us-gaap:CorporateDebtSecuritiesMember2020-10-250001045810us-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-10-250001045810us-gaap:CertificatesOfDepositMember2020-10-250001045810us-gaap:MoneyMarketFundsMember2020-10-250001045810us-gaap:ForeignGovernmentDebtMember2020-10-250001045810us-gaap:MoneyMarketFundsMember2020-01-260001045810us-gaap:USTreasurySecuritiesMember2020-01-260001045810us-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-01-260001045810us-gaap:CorporateDebtSecuritiesMember2020-01-260001045810us-gaap:ForeignGovernmentDebtMember2020-01-260001045810us-gaap:CertificatesOfDepositMember2020-01-260001045810us-gaap:AssetBackedSecuritiesMember2020-01-260001045810us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2020-10-250001045810us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2020-01-260001045810us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-10-250001045810us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-01-260001045810us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:ForeignGovernmentDebtMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810us-gaap:ForeignGovernmentDebtMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:FairValueInputsLevel3Member2020-10-250001045810us-gaap:FairValueInputsLevel3Member2020-01-260001045810nvda:A2021NotesMember2020-10-250001045810nvda:A2021NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2021NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810nvda:A2026NotesMember2020-10-250001045810nvda:A2026NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2026NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810nvda:A2030NotesMember2020-10-250001045810nvda:A2030NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2030NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810nvda:A2040NotesMember2020-10-250001045810nvda:A2040NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2040NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810nvda:A2050NotesMember2020-10-250001045810nvda:A2050NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2050NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810nvda:A2060NotesMember2020-10-250001045810nvda:A2060NotesMemberus-gaap:FairValueInputsLevel2Member2020-10-250001045810nvda:A2060NotesMemberus-gaap:FairValueInputsLevel2Member2020-01-260001045810us-gaap:DevelopedTechnologyRightsMember2020-10-250001045810us-gaap:DevelopedTechnologyRightsMember2020-01-260001045810nvda:PatentsAndLicensedTechnologyMember2020-10-250001045810nvda:PatentsAndLicensedTechnologyMember2020-01-2600010458102020-10-262020-10-250001045810us-gaap:ForeignExchangeForwardMember2020-01-272020-10-250001045810nvda:A2030NotesMember2020-03-310001045810nvda:A2040NotesMember2020-03-310001045810nvda:A2050NotesMember2020-03-310001045810nvda:A2060NotesMember2020-03-310001045810nvda:March2020NotesMember2020-03-012020-03-310001045810nvda:A2021NotesMember2016-09-300001045810nvda:A2026NotesMember2016-09-300001045810nvda:September2016NotesMember2016-09-012016-09-300001045810nvda:A2021NotesMember2020-01-272020-10-250001045810nvda:A2021NotesMember2020-01-260001045810nvda:A2026NotesMember2020-01-272020-10-250001045810nvda:A2026NotesMember2020-01-260001045810nvda:A2030NotesMember2020-01-272020-10-250001045810nvda:A2030NotesMember2020-01-260001045810nvda:A2040NotesMember2020-01-272020-10-250001045810nvda:A2040NotesMember2020-01-260001045810nvda:A2050NotesMember2020-01-272020-10-250001045810nvda:A2050NotesMember2020-01-260001045810nvda:A2060NotesMember2020-01-272020-10-250001045810nvda:A2060NotesMember2020-01-260001045810us-gaap:RevolvingCreditFacilityMember2020-10-250001045810us-gaap:CommercialPaperMember2020-10-25nvda:segment00010458102019-01-282020-01-260001045810us-gaap:OperatingSegmentsMembernvda:GraphicsMember2020-07-272020-10-250001045810us-gaap:OperatingSegmentsMembernvda:ComputeAndNetworkingMember2020-07-272020-10-250001045810us-gaap:CorporateNonSegmentMember2020-07-272020-10-250001045810us-gaap:OperatingSegmentsMembernvda:GraphicsMember2019-07-292019-10-270001045810us-gaap:OperatingSegmentsMembernvda:ComputeAndNetworkingMember2019-07-292019-10-270001045810us-gaap:CorporateNonSegmentMember2019-07-292019-10-270001045810us-gaap:OperatingSegmentsMembernvda:GraphicsMember2020-01-272020-10-250001045810us-gaap:OperatingSegmentsMembernvda:ComputeAndNetworkingMember2020-01-272020-10-250001045810us-gaap:CorporateNonSegmentMember2020-01-272020-10-250001045810us-gaap:OperatingSegmentsMembernvda:GraphicsMember2019-01-282019-10-270001045810us-gaap:OperatingSegmentsMembernvda:ComputeAndNetworkingMember2019-01-282019-10-270001045810us-gaap:CorporateNonSegmentMember2019-01-282019-10-270001045810country:TW2020-07-272020-10-250001045810country:TW2019-07-292019-10-270001045810country:TW2020-01-272020-10-250001045810country:TW2019-01-282019-10-270001045810nvda:ChinaIncludingHongKongMember2020-07-272020-10-250001045810nvda:ChinaIncludingHongKongMember2019-07-292019-10-270001045810nvda:ChinaIncludingHongKongMember2020-01-272020-10-250001045810nvda:ChinaIncludingHongKongMember2019-01-282019-10-270001045810nvda:OtherAsiaPacificMember2020-07-272020-10-250001045810nvda:OtherAsiaPacificMember2019-07-292019-10-270001045810nvda:OtherAsiaPacificMember2020-01-272020-10-250001045810nvda:OtherAsiaPacificMember2019-01-282019-10-270001045810country:US2020-07-272020-10-250001045810country:US2019-07-292019-10-270001045810country:US2020-01-272020-10-250001045810country:US2019-01-282019-10-270001045810srt:EuropeMember2020-07-272020-10-250001045810srt:EuropeMember2019-07-292019-10-270001045810srt:EuropeMember2020-01-272020-10-250001045810srt:EuropeMember2019-01-282019-10-270001045810nvda:AllOtherCountriesNotSeparatelyDisclosedMember2020-07-272020-10-250001045810nvda:AllOtherCountriesNotSeparatelyDisclosedMember2019-07-292019-10-270001045810nvda:AllOtherCountriesNotSeparatelyDisclosedMember2020-01-272020-10-250001045810nvda:AllOtherCountriesNotSeparatelyDisclosedMember2019-01-282019-10-270001045810nvda:GamingMember2020-07-272020-10-250001045810nvda:GamingMember2019-07-292019-10-270001045810nvda:GamingMember2020-01-272020-10-250001045810nvda:GamingMember2019-01-282019-10-270001045810nvda:ProfessionalVisualizationMember2020-07-272020-10-250001045810nvda:ProfessionalVisualizationMember2019-07-292019-10-270001045810nvda:ProfessionalVisualizationMember2020-01-272020-10-250001045810nvda:ProfessionalVisualizationMember2019-01-282019-10-270001045810nvda:DataCenterMember2020-07-272020-10-250001045810nvda:DataCenterMember2019-07-292019-10-270001045810nvda:DataCenterMember2020-01-272020-10-250001045810nvda:DataCenterMember2019-01-282019-10-270001045810nvda:AutomotiveMember2020-07-272020-10-250001045810nvda:AutomotiveMember2019-07-292019-10-270001045810nvda:AutomotiveMember2020-01-272020-10-250001045810nvda:AutomotiveMember2019-01-282019-10-270001045810nvda:OEMAndOtherMember2020-07-272020-10-250001045810nvda:OEMAndOtherMember2019-07-292019-10-270001045810nvda:OEMAndOtherMember2020-01-272020-10-250001045810nvda:OEMAndOtherMember2019-01-282019-10-270001045810us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembernvda:GraphicsMembernvda:OneCustomerMember2019-07-292019-10-270001045810us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembernvda:GraphicsMembernvda:OneCustomerMember2019-01-282019-10-270001045810us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembernvda:OneCustomerMember2020-01-272020-10-250001045810us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembernvda:OneCustomerMember2019-01-282020-01-260001045810nvda:GraphicsMember2020-10-250001045810nvda:ComputeAndNetworkingMember2020-10-250001045810nvda:ComputeAndNetworkingMembernvda:MellanoxTechnologiesLtdMember2020-01-272020-10-250001045810us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMembernvda:ComputeAndNetworkingMember2020-01-272020-10-25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
|
|
|
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended October 25, 2020
OR
|
|
|
|
|
|
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
Commission file number: 0-23985
NVIDIA CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
|
|
|
|
Delaware |
94-3177549 |
|
(State or Other Jurisdiction of |
(I.R.S. Employer |
|
Incorporation or Organization) |
Identification No.) |
2788 San Tomas Expressway
Santa Clara, California 95051
(408) 486-2000
(Address, including zip code, and telephone number,
including area code, of principal executive
offices)
N/A
(Former name, former address and former fiscal year if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
|
|
|
|
|
|
|
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
Common Stock, $0.001 par value per share |
NVDA |
The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
☒
No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and "emerging growth company" in Rule
12b-2 of the Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
The number of shares of common stock, $0.001 par value, outstanding
as of November 13, 2020,
was 619 million.
NVIDIA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED October 25, 2020
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
Financial Statements (Unaudited) |
|
|
|
|
|
|
a) Condensed Consolidated Statements of Income for the three and
nine months ended October 25, 2020 and October 27, 2019 |
|
|
|
|
|
b) Condensed Consolidated Statements of Comprehensive Income for
the three and nine months ended October 25, 2020 and October 27,
2019 |
|
|
|
|
|
|
c) Condensed Consolidated Balance Sheets as of October 25, 2020 and
January 26, 2020 |
|
|
|
|
|
d) Condensed Consolidated Statements of Shareholders' Equity for
the three and nine months ended October 25, 2020 and October 27,
2019 |
|
|
|
|
|
|
e) Condensed Consolidated Statements of Cash Flows for the nine
months ended October 25, 2020 and October 27, 2019 |
|
|
|
|
|
|
f) Notes to Condensed Consolidated Financial Statements |
|
|
|
|
|
|
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
|
|
|
|
|
|
Quantitative and Qualitative Disclosures About Market
Risk |
|
|
|
|
|
|
Controls and Procedures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal Proceedings |
|
|
|
|
|
|
Risk Factors |
|
|
|
|
|
|
Unregistered Sales of Equity Securities and Use of
Proceeds |
|
|
|
|
|
|
Exhibits |
|
|
|
|
|
|
|
|
WHERE YOU CAN FIND MORE INFORMATION
Investors and others should note that we announce material
financial information to our investors using our investor relations
website, press releases, SEC filings and public conference calls
and webcasts. We also use the following social media channels as a
means of disclosing information about the company, our products,
our planned financial and other announcements and attendance at
upcoming investor and industry conferences, and other matters and
for complying with our disclosure obligations under Regulation
FD:
NVIDIA Twitter Account (https://twitter.com/nvidia)
NVIDIA Company Blog (http://blogs.nvidia.com)
NVIDIA Facebook Page (https://www.facebook.com/nvidia)
NVIDIA LinkedIn Page
(http://www.linkedin.com/company/nvidia)
NVIDIA Instagram Page
(https://www.instagram.com/nvidia)
In addition, investors and others can view NVIDIA videos on
YouTube.
The information we post through these social media channels may be
deemed material. Accordingly, investors should monitor these
accounts and the blog, in addition to following our press releases,
SEC filings and public conference calls and webcasts. This list may
be updated from time to time. The information we post through these
channels is not a part of this quarterly report on Form 10-Q. These
channels may be updated from time to time on NVIDIA's investor
relations website.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25, |
|
October 27, |
|
October 25, |
|
October 27, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
4,726 |
|
|
$ |
3,014 |
|
|
$ |
11,672 |
|
|
$ |
7,813 |
|
|
Cost of revenue |
1,766 |
|
|
1,098 |
|
|
4,432 |
|
|
3,060 |
|
|
Gross profit |
2,960 |
|
|
1,916 |
|
|
7,240 |
|
|
4,753 |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Research and development |
1,047 |
|
|
712 |
|
|
2,778 |
|
|
2,091 |
|
|
Sales, general and administrative |
515 |
|
|
277 |
|
|
1,437 |
|
|
806 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
1,562 |
|
|
989 |
|
|
4,215 |
|
|
2,897 |
|
|
Income from operations |
1,398 |
|
|
927 |
|
|
3,025 |
|
|
1,856 |
|
|
Interest income |
7 |
|
|
45 |
|
|
50 |
|
|
137 |
|
|
Interest expense |
(53) |
|
|
(13) |
|
|
(131) |
|
|
(39) |
|
|
Other, net |
(4) |
|
|
— |
|
|
(5) |
|
|
— |
|
|
Other income (expense), net
|
(50) |
|
|
32 |
|
|
(86) |
|
|
98 |
|
|
Income before income tax |
1,348 |
|
|
959 |
|
|
2,939 |
|
|
1,954 |
|
|
Income tax expense |
12 |
|
|
60 |
|
|
64 |
|
|
109 |
|
|
Net income |
$ |
1,336 |
|
|
$ |
899 |
|
|
$ |
2,875 |
|
|
$ |
1,845 |
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
2.16 |
|
|
$ |
1.47 |
|
|
$ |
4.67 |
|
|
$ |
3.03 |
|
|
Diluted |
$ |
2.12 |
|
|
$ |
1.45 |
|
|
$ |
4.59 |
|
|
$ |
2.99 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in per share computation: |
|
|
|
|
|
|
|
|
Basic |
618 |
|
|
610 |
|
|
616 |
|
|
609 |
|
|
Diluted |
630 |
|
|
618 |
|
|
626 |
|
|
617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25, |
|
October 27, |
|
October 25, |
|
October 27, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
1,336 |
|
|
$ |
899 |
|
|
$ |
2,875 |
|
|
$ |
1,845 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) |
(1) |
|
|
— |
|
|
3 |
|
|
9 |
|
|
Reclassification adjustments for net realized gain (loss) included
in net income |
— |
|
|
— |
|
|
(2) |
|
|
— |
|
|
Net change in unrealized gain (loss) |
(1) |
|
|
— |
|
|
1 |
|
|
9 |
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
Net unrealized gain |
5 |
|
|
— |
|
|
10 |
|
|
4 |
|
|
Reclassification adjustments for net realized gain included in net
income |
4 |
|
|
(2) |
|
|
— |
|
|
(4) |
|
|
Net change in unrealized gain (loss) |
9 |
|
|
(2) |
|
|
10 |
|
|
— |
|
|
Other comprehensive income (loss), net of tax |
8 |
|
|
(2) |
|
|
11 |
|
|
9 |
|
|
Total comprehensive income |
$ |
1,344 |
|
|
$ |
897 |
|
|
$ |
2,886 |
|
|
$ |
1,854 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
January 26, |
|
|
2020 |
|
2020 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
2,251 |
|
|
$ |
10,896 |
|
|
Marketable securities |
7,888 |
|
|
1 |
|
|
Accounts receivable, net |
2,546 |
|
|
1,657 |
|
|
Inventories |
1,495 |
|
|
979 |
|
|
Prepaid expenses and other current assets |
213 |
|
|
157 |
|
|
Total current assets |
14,393 |
|
|
13,690 |
|
|
Property and equipment, net |
2,059 |
|
|
1,674 |
|
|
Operating lease assets |
681 |
|
|
618 |
|
|
Goodwill |
4,193 |
|
|
618 |
|
|
Intangible assets, net |
2,861 |
|
|
49 |
|
|
Deferred income tax assets |
666 |
|
|
548 |
|
|
Other assets |
2,028 |
|
|
118 |
|
|
Total assets |
$ |
26,881 |
|
|
$ |
17,315 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
1,097 |
|
|
$ |
687 |
|
|
Accrued and other current liabilities |
1,574 |
|
|
1,097 |
|
|
Short-term debt |
998 |
|
|
— |
|
|
Total current liabilities |
3,669 |
|
|
1,784 |
|
|
Long-term debt |
5,963 |
|
|
1,991 |
|
|
Long-term operating lease liabilities |
604 |
|
|
561 |
|
|
Other long-term liabilities |
1,311 |
|
|
775 |
|
|
Total liabilities |
11,547 |
|
|
5,111 |
|
|
Commitments and contingencies - see Note 13 |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
Preferred stock |
— |
|
|
— |
|
|
Common stock |
1 |
|
|
1 |
|
|
Additional paid-in capital |
8,301 |
|
|
7,045 |
|
|
Treasury stock, at cost |
(10,530) |
|
|
(9,814) |
|
|
Accumulated other comprehensive income |
12 |
|
|
1 |
|
|
Retained earnings |
17,550 |
|
|
14,971 |
|
|
Total shareholders' equity |
15,334 |
|
|
12,204 |
|
|
Total liabilities and shareholders' equity |
$ |
26,881 |
|
|
$ |
17,315 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 25, 2020 AND
OCTOBER 27, 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
Outstanding
|
|
Additional Paid-in Capital |
|
Treasury Stock |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total Shareholders' Equity |
|
(In millions, except per share data) |
Shares |
|
Amount |
|
|
|
|
|
|
Balances, July 26, 2020 |
617 |
|
|
$ |
1 |
|
|
$ |
7,828 |
|
|
$ |
(10,232) |
|
|
$ |
4 |
|
|
$ |
16,313 |
|
|
$ |
13,914 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,336 |
|
|
1,336 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8 |
|
|
— |
|
|
8 |
|
|
Issuance of common stock from stock plans |
3 |
|
|
— |
|
|
96 |
|
|
— |
|
|
— |
|
|
— |
|
|
96 |
|
|
Tax withholding related to vesting of restricted stock
units |
(1) |
|
|
— |
|
|
— |
|
|
(298) |
|
|
— |
|
|
— |
|
|
(298) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared and paid ($0.16 per common
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(99) |
|
|
(99) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
— |
|
|
— |
|
|
377 |
|
|
— |
|
|
— |
|
|
— |
|
|
377 |
|
|
Balances, October 25, 2020 |
619 |
|
|
$ |
1 |
|
|
$ |
8,301 |
|
|
$ |
(10,530) |
|
|
$ |
12 |
|
|
$ |
17,550 |
|
|
$ |
15,334 |
|
|
Balances, July 28, 2019 |
609 |
|
|
$ |
1 |
|
|
$ |
6,543 |
|
|
$ |
(9,524) |
|
|
$ |
(1) |
|
|
$ |
13,317 |
|
|
$ |
10,336 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
899 |
|
|
899 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2) |
|
|
— |
|
|
(2) |
|
|
Issuance of common stock from stock plans |
4 |
|
|
— |
|
|
63 |
|
|
— |
|
|
— |
|
|
— |
|
|
63 |
|
|
Tax withholding related to vesting of restricted stock
units |
(1) |
|
|
— |
|
|
— |
|
|
(202) |
|
|
— |
|
|
— |
|
|
(202) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared and paid ($0.16 per common
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(98) |
|
|
(98) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
218 |
|
|
— |
|
|
— |
|
|
— |
|
|
218 |
|
|
Balances, October 27, 2019 |
612 |
|
|
$ |
1 |
|
|
$ |
6,824 |
|
|
$ |
(9,726) |
|
|
$ |
(3) |
|
|
$ |
14,118 |
|
|
$ |
11,214 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 25, 2020 AND
OCTOBER 27, 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
Outstanding
|
|
Additional Paid-in Capital |
|
Treasury Stock |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total Shareholders' Equity |
|
(In millions, except per share data) |
Shares |
|
Amount |
|
|
|
|
|
|
Balances, January 26, 2020 |
612 |
|
|
$ |
1 |
|
|
$ |
7,045 |
|
|
$ |
(9,814) |
|
|
$ |
1 |
|
|
$ |
14,971 |
|
|
$ |
12,204 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,875 |
|
|
2,875 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11 |
|
|
— |
|
|
11 |
|
|
Issuance of common stock from stock plans |
9 |
|
|
— |
|
|
190 |
|
|
— |
|
|
— |
|
|
— |
|
|
190 |
|
|
Tax withholding related to vesting of restricted stock
units |
(2) |
|
|
— |
|
|
— |
|
|
(716) |
|
|
— |
|
|
— |
|
|
(716) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared and paid ($0.48 per common
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(296) |
|
|
(296) |
|
|
Fair value of partially vested equity awards assumed in connection
with acquisitions |
— |
|
|
— |
|
|
86 |
|
|
— |
|
|
— |
|
|
— |
|
|
86 |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
980 |
|
|
— |
|
|
— |
|
|
— |
|
|
980 |
|
|
Balances, October 25, 2020 |
619 |
|
|
$ |
1 |
|
|
$ |
8,301 |
|
|
$ |
(10,530) |
|
|
$ |
12 |
|
|
$ |
17,550 |
|
|
$ |
15,334 |
|
|
Balances, January 27, 2019 |
606 |
|
|
$ |
1 |
|
|
$ |
6,051 |
|
|
$ |
(9,263) |
|
|
$ |
(12) |
|
|
$ |
12,565 |
|
|
$ |
9,342 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,845 |
|
|
1,845 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9 |
|
|
— |
|
|
9 |
|
|
Issuance of common stock from stock plans |
9 |
|
|
— |
|
|
146 |
|
|
— |
|
|
— |
|
|
— |
|
|
146 |
|
|
Tax withholding related to vesting of restricted stock
units |
(3) |
|
|
— |
|
|
— |
|
|
(463) |
|
|
— |
|
|
— |
|
|
(463) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared and paid ($0.48 per common
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(292) |
|
|
(292) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
627 |
|
|
— |
|
|
— |
|
|
— |
|
|
627 |
|
|
Balances, October 27, 2019 |
612 |
|
|
$ |
1 |
|
|
$ |
6,824 |
|
|
$ |
(9,726) |
|
|
$ |
(3) |
|
|
$ |
14,118 |
|
|
$ |
11,214 |
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
October 25, |
|
October 27, |
|
|
2020 |
|
2019 |
|
Cash flows from operating activities: |
|
|
|
|
Net income |
$ |
2,875 |
|
|
$ |
1,845 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Stock-based compensation expense |
981 |
|
|
624 |
|
|
Depreciation and amortization |
810 |
|
|
275 |
|
|
Deferred income taxes |
(117) |
|
|
(5) |
|
|
|
|
|
|
Other |
(2) |
|
|
5 |
|
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
|
Accounts receivable |
(667) |
|
|
(32) |
|
|
Inventories |
(190) |
|
|
531 |
|
|
Prepaid expenses and other assets |
(409) |
|
|
55 |
|
|
Accounts payable |
289 |
|
|
91 |
|
|
Accrued and other current liabilities |
111 |
|
|
(103) |
|
|
Other long-term liabilities |
74 |
|
|
10 |
|
|
Net cash provided by operating activities |
3,755 |
|
|
3,296 |
|
|
Cash flows from investing activities: |
|
|
|
|
Proceeds from maturities of marketable securities |
5,165 |
|
|
4,744 |
|
|
Proceeds from sales of marketable securities |
502 |
|
|
3,363 |
|
|
|
|
|
|
Purchases of marketable securities |
(12,840) |
|
|
(1,461) |
|
|
Acquisitions, net of cash acquired |
(8,524) |
|
|
— |
|
|
Purchases related to property and equipment and intangible
assets |
(845) |
|
|
(344) |
|
|
Investments and other, net |
(4) |
|
|
(6) |
|
|
Net cash provided by (used in) investing activities |
(16,546) |
|
|
6,296 |
|
|
Cash flows from financing activities: |
|
|
|
|
Issuance of debt, net of issuance costs |
4,971 |
|
|
— |
|
|
Proceeds related to employee stock plans |
190 |
|
|
146 |
|
|
Payments related to tax on restricted stock units |
(716) |
|
|
(463) |
|
|
Dividends paid |
(296) |
|
|
(292) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
(3) |
|
|
— |
|
|
Net cash provided by (used in) financing activities |
4,146 |
|
|
(609) |
|
|
Change in cash and cash equivalents |
(8,645) |
|
|
8,983 |
|
|
Cash and cash equivalents at beginning of period |
10,896 |
|
|
782 |
|
|
Cash and cash equivalents at end of period |
$ |
2,251 |
|
|
$ |
9,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements were prepared in accordance with accounting principles
generally accepted in the United States of America, or U.S. GAAP,
for interim financial information and with the instructions to Form
10-Q and Article 10 of Securities and Exchange Commission, or SEC,
Regulation S-X. The January 26, 2020 consolidated balance
sheet was derived from our audited consolidated financial
statements included in our Annual Report on Form 10-K for the
fiscal year ended January 26, 2020, as filed with the SEC, but
does not include all disclosures required by U.S. GAAP. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments considered necessary for a fair statement of
results of operations and financial position have been included.
The results for the interim periods presented are not necessarily
indicative of the results expected for any future period. The
following information should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the fiscal year
ended January 26, 2020.
The unaudited condensed consolidated financial statements in this
report include the financial results of Mellanox Technologies Ltd.,
or Mellanox, prospectively from April 27, 2020. For additional
details, refer to Note 2 - Business Combination.
Significant Accounting Policies
Except for the accounting policies for business combination and
investment in non-affiliated entities, there have been no material
changes to our significant accounting policies disclosed in Note 1
- Organization and Summary of Significant Accounting Policies, of
the Notes to the Consolidated Financial Statements included in our
Annual Report on Form 10-K for the fiscal year ended
January 26, 2020.
Business Combination
We allocate the fair value of the purchase price of an acquisition
to the tangible assets acquired, liabilities assumed, and
intangible assets acquired, including in-process research and
development, or IPR&D, based on their estimated fair values.
The excess of the fair value of the purchase price over the fair
values of these net tangible and intangible assets acquired is
recorded as goodwill. Management’s estimates of fair value are
based upon assumptions believed to be reasonable, but our estimates
and assumptions are inherently uncertain and subject to refinement.
The estimates and assumptions used in valuing intangible assets
include, but are not limited to, the amount and timing of projected
future cash flows, discount rate used to determine the present
value of these cash flows and asset lives. These estimates are
inherently uncertain and, therefore, actual results may differ from
the estimates made. As a result, during the measurement period of
up to one year from the acquisition date, we record adjustments to
the assets acquired and liabilities assumed with the corresponding
offset to goodwill. Upon the conclusion of the measurement period
or final determination of the fair value of the purchase price of
an acquisition, whichever comes first, any subsequent adjustments
are recorded to our condensed consolidated statements of
income.
We initially capitalize the fair value of IPR&D as an
intangible asset with an indefinite life. We assess for impairment
thereafter. When IPR&D projects are completed, we reclassify
the IPR&D as an amortizable purchased intangible asset and
amortize over the asset’s estimated useful life.
Acquisition-related expenses are recognized separately from the
business combination and expensed as incurred.
Investment in Non-Affiliated Entities
Non-marketable equity investments in privately-held companies are
recorded at fair value on a non-recurring basis only if an
impairment or observable price adjustment occurs in the period with
changes in fair value recorded through net income. These
investments are valued using observable and unobservable inputs or
data in an inactive market and the valuation requires our judgment
due to the absence of market prices and inherent lack of liquidity.
The estimated fair value is based on quantitative and qualitative
factors including subsequent financing activities by the
investee.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Fiscal Year
We operate on a 52- or 53-week year, ending on the last Sunday in
January. Fiscal year 2021 is a 53-week year and fiscal year 2020 is
a 52-week year. The third quarters of fiscal years 2021 and 2020
were both 13-week quarters.
Reclassifications
Certain prior fiscal year balances have been reclassified to
conform to the current fiscal year presentation.
Principles of Consolidation
Our condensed consolidated financial statements include the
accounts of NVIDIA Corporation and our wholly-owned subsidiaries.
All intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
materially from our estimates. On an on-going basis, we evaluate
our estimates, including those related to revenue recognition, cash
equivalents and marketable securities, accounts receivable,
inventories, income taxes, goodwill, stock-based compensation,
litigation, investigation and settlement costs, restructuring and
other charges, and other contingencies. The inputs into our
judgments and estimates consider the economic implications of
COVID-19 on our critical and significant accounting estimates.
These estimates are based on historical facts and various other
assumptions that we believe are reasonable.
Adoption of New and Recently Issued Accounting
Pronouncements
Recently Adopted Accounting Pronouncement
In June 2016, the Financial Accounting Standards Board issued a new
accounting standard to replace the existing incurred loss
impairment methodology with a methodology that reflects expected
credit losses and requires consideration of a broader range of
reasonable and supportable information to inform credit loss
estimates for accounts receivable and other financial instruments,
including available-for-sale debt securities. We adopted the
standard in the first quarter of fiscal year 2021 and the impact of
the adoption was not material to our consolidated financial
statements.
Note 2 - Business Combination
Pending Acquisition of Arm Limited
On September 13, 2020, we entered into a Share Purchase Agreement,
or the Purchase Agreement, with Arm Limited, or Arm, and SoftBank
Group Capital Limited and SVF Holdco (UK) Limited, or together,
SoftBank, for us to acquire, from SoftBank, all of the allotted and
issued ordinary shares of Arm in a transaction valued at
$40 billion. We paid $2 billion in cash at signing, or
the Signing Consideration, and will pay upon closing of the
acquisition $10 billion in cash and issue to SoftBank
44.3 million shares of our common stock with an aggregate
value of $21.5 billion. The transaction includes a potential
earn out, which is contingent on the achievement of certain
financial performance targets by Arm during the fiscal year ending
March 31, 2022. If the financial targets are achieved, SoftBank can
elect to receive either up to $5 billion in cash or up to
10.3 million shares of our common stock. We will issue up to
$1.5 billion in restricted stock units to Arm employees after
closing. The $2 billion paid upon signing was allocated
between advanced consideration for the acquisition of
$1.36 billion and the prepayment of intellectual property
licenses from Arm of $0.17 billion and royalties of
$0.47 billion. The closing of the acquisition is subject to
customary closing conditions, including receipt of specified
governmental and regulatory consents and approvals and expiration
of any related mandatory waiting period, and Arm's implementation
of the reorganization and distribution of Arm’s IoT Services Group
and certain other assets and liabilities. If the Purchase Agreement
is terminated under certain circumstances, we will be refunded
$1.25 billion of the Signing Consideration. The
$2 billion payment upon signing was allocated on a fair value
basis and any refund of the Signing Consideration will use stated
values in the Purchase Agreement. We believe the closing of the
acquisition will likely occur in the first quarter of calendar year
2022.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Acquisition of Mellanox Technologies, Ltd.
On April 27, 2020, we completed the acquisition of all outstanding
shares of Mellanox for a total purchase consideration of
$7.13 billion. Mellanox is a supplier of high-performance
interconnect products for computing, storage and communications
applications. We acquired Mellanox to optimize data center
workloads to scale across the entire computing, networking, and
storage stack.
Preliminary Purchase Price Allocation
The aggregate purchase consideration has been preliminarily
allocated as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Purchase Price |
|
|
|
Cash paid for outstanding Mellanox ordinary shares (1) |
|
$ |
7,033 |
|
|
Cash for Mellanox equity awards (2) |
|
16 |
|
|
Total cash consideration |
|
7,049 |
|
|
Fair value of Mellanox equity awards assumed by NVIDIA
(3) |
|
85 |
|
|
Total purchase consideration |
|
$ |
7,134 |
|
|
|
|
|
|
Allocation |
|
|
|
Cash and cash equivalents |
|
$ |
115 |
|
|
Marketable securities |
|
699 |
|
|
Accounts receivable, net |
|
216 |
|
|
Inventories |
|
320 |
|
|
Prepaid expenses and other assets |
|
179 |
|
|
Property and equipment, net |
|
144 |
|
|
Goodwill |
|
3,431 |
|
|
Intangible assets |
|
2,970 |
|
|
Accounts payable |
|
(136) |
|
|
Accrued and other current liabilities |
|
(236) |
|
|
Income tax liability |
|
(191) |
|
|
Deferred income tax liability |
|
(258) |
|
|
Other long-term liabilities |
|
(119) |
|
|
|
|
$ |
7,134 |
|
(1) Represents the cash consideration of
$125.00 per share paid to Mellanox shareholders for approximately
56 million shares of outstanding Mellanox ordinary
shares.
(2) Represents the cash consideration for
the settlement of approximately 249 thousand Mellanox stock
options held by employees and non-employee directors of
Mellanox.
(3) Represents the fair value of Mellanox’s
stock-based compensation awards attributable to pre-combination
services.
We allocated the purchase price to tangible and identified
intangible assets acquired and liabilities assumed based on the
preliminary estimates of their estimated fair values, which were
determined using generally accepted valuation techniques based on
estimates and assumptions made by management at the time of the
acquisition and are subject to change during the measurement period
which is not expected to exceed one year. The primary tasks that
are required to be completed include validation of business level
forecasts, jurisdictional forecasts, customer attrition rates,
contingent liabilities assessments and any related tax impacts from
the acquisition. Any adjustments to our preliminary purchase price
allocation identified during the measurement period will be
recognized in the period in which the adjustments are
determined.
The goodwill is primarily attributable to the planned growth in the
combined business of NVIDIA and Mellanox. Goodwill is not amortized
to earnings, but instead is reviewed for impairment at least
annually, absent any interim indicators of impairment. Goodwill
recognized in the acquisition is not expected to be deductible for
foreign tax purposes. Goodwill
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
arising from the Mellanox acquisition has been allocated to the
Compute and Networking segment. Refer to Note 15 – Segment
Information for further details on segments.
The operating results of Mellanox have been included in our
condensed consolidated financial statements for the third quarter
and first nine months of fiscal year 2021 since the acquisition
date of April 27, 2020. Revenue attributable to Mellanox was
approximately 13% and 10% of consolidated revenue for the third
quarter and first nine months of fiscal year 2021, respectively.
There is not a practical way to determine net income attributable
to Mellanox due to integration. Acquisition-related costs
attributable to Mellanox of $27 million were included in
selling, general and administrative expense for the first nine
months of fiscal year 2021.
Intangible Assets
The estimated fair value and weighted average useful life of the
acquired intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Weighted Average Useful Lives |
|
(In millions) |
|
|
|
Developed technology (1) |
$ |
1,640 |
|
|
5 years |
|
Customer relationships (2) |
440 |
|
|
3 years |
|
Order backlog (3) |
190 |
|
|
Based on actual shipments |
|
Trade names (4) |
70 |
|
|
5 years |
|
Total identified finite-lived intangible assets |
2,340 |
|
|
|
|
IPR&D (5) |
630 |
|
|
N/A |
|
Total identified intangible assets |
$ |
2,970 |
|
|
|
(1) The fair value of developed technology
was identified using the Multi-Period Excess Earning
Method.
(2) Customer relationships represent the
fair value of the existing relationships using the With and Without
Method.
(3) Order backlog represents primarily the
fair value of purchase arrangements with customers using the
Multi-Period Excess Earning Method.
(4) Trade names primarily relate to Mellanox
trade names and fair value was determined by applying the
Relief-from-Royalty Method under the income approach.
(5) The fair value of IPR&D was
determined using the Multi-Period Excess Earning
Method.
The fair value of the finite-lived intangible assets will be
amortized over the estimated useful lives based on the pattern in
which the economic benefits are expected to be received to cost of
revenue and operating expenses.
Mellanox had an IPR&D project associated with the next
generation interconnect product that had not yet reached
technological feasibility as of the acquisition date. Accordingly,
we recorded an indefinite-lived intangible asset of
$630 million for the fair value of this project, which will
initially not be amortized. Instead, the project will be tested for
impairment whenever events or changes in circumstances indicate
that the project may be impaired or may have reached technological
feasibility. Once the project reaches technological feasibility, we
will begin to amortize the intangible asset over its estimated
useful life.
Supplemental Unaudited Pro Forma Information
The following unaudited pro forma financial information summarizes
the combined results of operations for NVIDIA and Mellanox as if
the companies were combined as of the beginning of fiscal year
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25,
2020 |
|
October 27,
2019 |
|
October 25,
2020 |
|
October 27,
2019 |
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Revenue |
$ |
4,726 |
|
|
$ |
3,350 |
|
|
$ |
12,101 |
|
|
$ |
8,765 |
|
|
Net income |
$ |
1,388 |
|
|
$ |
786 |
|
|
$ |
3,267 |
|
|
$ |
1,190 |
|
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
The unaudited pro forma information includes adjustments related to
amortization of acquired intangible assets, adjustments to
stock-based compensation expense, fair value of acquired inventory,
and transaction costs. The unaudited pro forma information
presented above is for informational purposes only and is not
necessarily indicative of our consolidated results of operations of
the combined business had the acquisition actually occurred at the
beginning of fiscal year 2020 or of the results of our future
operations of the combined businesses.
The pro forma results reflect the inventory step-up expense of
$161 million in the first nine months of fiscal year 2020 and
were excluded from the pro forma results for the first nine months
of fiscal year 2021. There were no other material nonrecurring
adjustments.
Note 3 - Leases
Our lease obligations primarily consist of operating leases for our
headquarters complex, domestic and international office facilities,
and data center space, with lease periods expiring between fiscal
years 2021 and 2035.
Future minimum lease payments under our non-cancelable operating
leases as of October 25, 2020, are as follows:
|
|
|
|
|
|
|
Operating Lease Obligations |
|
|
(In millions) |
|
Fiscal Year: |
|
|
2021 (excluding first nine months of fiscal year 2021)
|
$ |
38 |
|
|
2022 |
143 |
|
|
2023 |
122 |
|
|
2024 |
102 |
|
|
2025 |
83 |
|
|
2026 and thereafter
|
347 |
|
|
Total |
835 |
|
|
Less imputed interest |
115 |
|
|
Present value of net future minimum lease payments |
720 |
|
|
Less short-term operating lease liabilities |
116 |
|
|
Long-term operating lease liabilities |
$ |
604 |
|
Operating lease expense was $37 million and $28 million for the
third quarter of fiscal years 2021 and 2020, respectively, and $104
million and $83 million for the first nine months of fiscal years
2021 and 2020, respectively. Short-term and variable lease expenses
for the third quarter and first nine months of fiscal years 2021
and 2020 were not significant.
Other information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
October 25, 2020 |
|
October 27, 2019 |
|
|
|
|
|
|
(In millions) |
|
Supplemental cash flows information |
|
|
|
|
Operating cash flows used for operating leases |
$ |
103 |
|
|
$ |
78 |
|
|
Operating lease assets obtained in exchange for lease obligations
(1) |
$ |
147 |
|
|
$ |
122 |
|
(1) The first nine months of fiscal year
2021 includes $80 million of operating lease assets addition
due to a business combination.
As of October 25, 2020, our operating leases had a weighted
average remaining lease term of 7.8 years and a weighted average
discount rate of 3.06%. As of January 26, 2020, our operating
leases had a weighted average remaining lease term of 8.3 years and
a weighted average discount rate of 3.45%.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Note 4 - Stock-Based Compensation
Our stock-based compensation expense is associated with restricted
stock units, or RSUs, performance stock units that are based on our
corporate financial performance targets, or PSUs, performance stock
units that are based on market conditions, or market-based PSUs,
and our employee stock purchase plan, or ESPP.
Our Condensed Consolidated Statements of Income include stock-based
compensation expense, net of amounts allocated to inventory, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25,
2020 |
|
October 27,
2019 |
|
October 25,
2020 |
|
October 27,
2019 |
|
|
|
|
|
|
|
|
|
(In millions) |
|
Cost of revenue |
$ |
28 |
|
|
$ |
15 |
|
|
$ |
62 |
|
|
$ |
27 |
|
|
Research and development |
232 |
|
|
141 |
|
|
594 |
|
|
400 |
|
|
Sales, general and administrative |
123 |
|
|
67 |
|
|
325 |
|
|
197 |
|
|
Total |
$ |
383 |
|
|
$ |
223 |
|
|
$ |
981 |
|
|
$ |
624 |
|
Equity Award Activity
The following is a summary of equity award transactions under our
equity incentive plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs, PSUs, and Market-based PSUs Outstanding |
|
|
|
|
Number of Shares |
|
Weighted Average Grant-Date Fair Value Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Balances, January 26, 2020 |
14 |
|
|
$ |
176.72 |
|
|
|
|
|
|
Granted |
8 |
|
|
$ |
300.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested restricted stock |
(6) |
|
|
$ |
152.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, October 25, 2020 |
16 |
|
|
$ |
253.81 |
|
|
|
|
|
As of October 25, 2020, there was $3.42 billion of aggregate
unearned stock-based compensation expense, net of forfeitures. This
amount is expected to be recognized over a weighted average period
of 2.7 years for RSUs, PSUs, and market-based PSUs, and 0.9 years
for ESPP.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Note 5 – Net Income Per Share
The following is a reconciliation of the denominator of the basic
and diluted net income per share computations for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
October 25, |
|
October 27, |
|
October 25, |
|
October 27, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income
|
$ |
1,336 |
|
|
$ |
899 |
|
|
$ |
2,875 |
|
|
$ |
1,845 |
|
|
Denominator: |
|
|
|
|
|
|
|
|
Basic weighted average shares
|
618 |
|
|
610 |
|
|
616 |
|
|
609 |
|
|
Dilutive impact of outstanding equity awards
|
12 |
|
|
8 |
|
|
10 |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
630 |
|
|
618 |
|
|
626 |
|
|
617 |
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic (1)
|
$ |
2.16 |
|
|
$ |
1.47 |
|
|
$ |
4.67 |
|
|
$ |
3.03 |
|
|
Diluted (2)
|
$ |
2.12 |
|
|
$ |
1.45 |
|
|
$ |
4.59 |
|
|
$ |
2.99 |
|
|
Equity awards excluded from diluted net income per share because
their effect would have been anti-dilutive |
— |
|
|
5 |
|
|
8 |
|
|
11 |
|
(1) Calculated as net income divided by
basic weighted average shares.
(2) Calculated as net income divided by
diluted weighted average shares.
Note 6 – Income Taxes
We recognized an income tax expense of $12 million and
$64 million for the third quarter and first nine months of
fiscal year 2021, respectively, and $60 million and
$109 million for the third quarter and first nine months
of fiscal year 2020, respectively. The income tax expense as a
percentage of income before income tax was 0.9% and 2.2% for the
third quarter and first nine months of fiscal year 2021,
respectively, and 6.3% and 5.6% for the third quarter and first
nine months of fiscal year 2020, respectively.
The decrease in our effective tax rate for the third quarter and
first nine months of fiscal year 2021 as compared to the same
periods of fiscal year 2020 was primarily due to a decrease in the
proportional amount of earnings subject to United States tax and an
increase of tax benefits from stock-based
compensation.
Our effective tax rates for the first nine months of fiscal years
2021 and 2020 were lower than the U.S. federal statutory rate of
21% due to income earned in jurisdictions that are subject to taxes
lower than the U.S. federal statutory tax rate, the benefit of the
U.S. federal research tax credit, and tax benefits related to
stock-based compensation.
During the second quarter of fiscal year 2021, we completed the
acquisition of Mellanox. As a result of the acquisition, we
recorded $256 million of net deferred tax liabilities
primarily on the excess of book basis over the tax basis of the
acquired intangible assets and undistributed earnings in certain
foreign subsidiaries. We also recorded $153 million of
long-term tax liabilities related to tax basis differences in
Mellanox. The net deferred tax liabilities and long-term tax
liabilities are based upon certain assumptions underlying our
purchase price allocation. Upon finalization of the purchase price
allocation, additional adjustments to the amount of our net
deferred taxes and long-term tax liabilities may be required. As a
result of the acquisition, we intend to indefinitely reinvest
approximately $675 million of cumulative undistributed
earnings held by Mellanox non-U.S. subsidiaries. We have not
provided the amount of unrecognized deferred tax liabilities for
temporary differences related to investments in Mellanox non-U.S.
subsidiaries as the determination of such amount is not
practicable.
For the first nine months of fiscal year 2021, there have been no
material changes to our tax years that remain subject to
examination by major tax jurisdictions. We are currently under
examination by the Internal Revenue Service for our fiscal years
2018 and 2019. In the second quarter of fiscal year 2021, we
assumed $59 million of unrecognized tax
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
benefits and $4 million of related interest through the
Mellanox acquisition. Other than these amounts, there have been no
material changes to our unrecognized tax benefits and any related
interest or penalties since the fiscal year ended January 26,
2020.
While we believe that we have adequately provided for all uncertain
tax positions, or tax positions where we believe it is not
more-likely-than-not that the position will be sustained upon
review, amounts asserted by tax authorities could be greater or
less than our accrued position. Accordingly, our provisions on
federal, state and foreign tax related matters to be recorded in
the future may change as revised estimates are made or the
underlying matters are settled or otherwise resolved with the
respective tax authorities. As of October 25, 2020, we do not
believe that our estimates, as otherwise provided for, on such tax
positions will significantly increase or decrease within the next
twelve months.
Note 7 - Cash Equivalents and Marketable
Securities
Our cash equivalents and marketable securities, except for money
market funds and certificates of deposits, are classified as
“available-for-sale” debt securities.
The following is a summary of cash equivalents and marketable
securities as of October 25, 2020 and January 26,
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, 2020 |
|
Amortized
Cost |
|
Unrealized
Gain |
|
Unrealized
Loss |
|
Estimated
Fair Value |
|
Reported as |
|
|
|
|
|
|
Cash Equivalents |
|
Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Debt securities issued by the United States Treasury |
$ |
3,881 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,881 |
|
|
$ |
1,116 |
|
|
$ |
2,765 |
|
|
Corporate debt securities |
3,139 |
|
|
2 |
|
|
— |
|
|
3,141 |
|
|
427 |
|
|
2,714 |
|
|
Debt securities issued by United States government
agencies |
1,571 |
|
|
1 |
|
|
— |
|
|
1,572 |
|
|
— |
|
|
1,572 |
|
|
Certificates of deposit |
797 |
|
|
— |
|
|
— |
|
|
797 |
|
|
29 |
|
|
768 |
|
|
Money market funds |
388 |
|
|
— |
|
|
— |
|
|
388 |
|
|
388 |
|
|
— |
|
|
Foreign government bonds |
117 |
|
|
— |
|
|
— |
|
|
117 |
|
|
48 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
9,893 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
9,896 |
|
|
$ |
2,008 |
|
|
$ |
7,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 26, 2020 |
|
Amortized
Cost |
|
Unrealized
Gain |
|
Unrealized
Loss |
|
Estimated
Fair Value |
|
Reported as |
|
|
|
|
|
|
Cash Equivalents |
|
Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Money market funds |
$ |
7,507 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7,507 |
|
|
$ |
7,507 |
|
|
$ |
— |
|
|
Debt securities issued by the United States Treasury |
1,358 |
|
|
— |
|
|
— |
|
|
1,358 |
|
|
1,358 |
|
|
— |
|
|
Debt securities issued by United States government
agencies |
1,096 |
|
|
— |
|
|
— |
|
|
1,096 |
|
|
1,096 |
|
|
— |
|
|
Corporate debt securities |
592 |
|
|
— |
|
|
— |
|
|
592 |
|
|
592 |
|
|
— |
|
|
Foreign government bonds |
200 |
|
|
— |
|
|
— |
|
|
200 |
|
|
200 |
|
|
— |
|
|
Certificates of deposit |
27 |
|
|
— |
|
|
— |
|
|
27 |
|
|
27 |
|
|
— |
|
|
Asset-backed securities |
1 |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
10,781 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
10,781 |
|
|
$ |
10,780 |
|
|
$ |
1 |
|
Net realized gains and unrealized gains and losses were not
significant for all periods presented.
The amortized cost and estimated fair value of cash equivalents and
marketable securities as of October 25, 2020 and January 26,
2020 are shown below by contractual maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, 2020 |
|
January 26, 2020 |
|
Amortized Cost |
|
Estimated Fair Value |
|
Amortized Cost |
|
Estimated Fair Value |
|
|
|
|
|
|
|
|
|
(In millions) |
|
Less than one year |
$ |
9,329 |
|
|
$ |
9,330 |
|
|
$ |
10,781 |
|
|
$ |
10,781 |
|
|
Due in 1 - 5 years |
564 |
|
|
566 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total |
$ |
9,893 |
|
|
$ |
9,896 |
|
|
$ |
10,781 |
|
|
$ |
10,781 |
|
Note 8 – Fair Value of Financial Assets and
Liabilities
The fair values of our financial assets and liabilities are
determined using quoted market prices of identical assets or quoted
market prices of similar assets from active markets. We review fair
value hierarchy classification on a quarterly basis.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
Pricing Category |
|
October 25, 2020 |
|
January 26, 2020 |
|
|
|
|
|
|
|
|
|
(In millions) |
|
Assets |
|
|
|
|
|
|
Cash equivalents and marketable securities: |
|
|
|
|
|
|
Money market funds |
Level 1 |
|
$ |
388 |
|
|
$ |
7,507 |
|
|
Debt securities issued by the United States Treasury |
Level 2 |
|
$ |
3,881 |
|
|
$ |
1,358 |
|
|
Corporate debt securities |
Level 2 |
|
$ |
3,141 |
|
|
$ |
592 |
|
|
Debt securities issued by United States government
agencies |
Level 2 |
|
$ |
1,572 |
|
|
$ |
1,096 |
|
|
Certificates of deposit |
Level 2 |
|
$ |
797 |
|
|
$ |
27 |
|
|
Foreign government bonds |
Level 2 |
|
$ |
117 |
|
|
$ |
200 |
|
|
Asset-backed securities |
Level 2 |
|
$ |
— |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
Other asset: |
|
|
|
|
|
|
Investment in non-affiliated entities (1) |
Level 3 |
|
$ |
106 |
|
|
$ |
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities: |
|
|
|
|
|
|
2.20% Notes Due 2021 (2)
|
Level 2 |
|
$ |
1,016 |
|
|
$ |
1,006 |
|
|
3.20% Notes Due 2026 (2)
|
Level 2 |
|
$ |
1,127 |
|
|
$ |
1,065 |
|
|
2.85% Notes Due 2030 (2)
|
Level 2 |
|
$ |
1,676 |
|
|
$ |
— |
|
|
3.50% Notes Due 2040 (2)
|
Level 2 |
|
$ |
1,163 |
|
|
$ |
— |
|
|
3.50% Notes Due 2050 (2)
|
Level 2 |
|
$ |
2,311 |
|
|
$ |
— |
|
|
3.70% Notes Due 2060 (2)
|
Level 2 |
|
$ |
594 |
|
|
$ |
— |
|
(1) Investment in non-affiliated entities
is privately held and recorded at fair value on a non-recurring
basis only if an impairment or observable price adjustment occurs
in the period with changes in fair value recorded through net
income. The amount recorded as of October 25, 2020 has not
been significant.
(2) These liabilities are carried on our
Consolidated Balance Sheets at their original issuance value, net
of unamortized debt discount and issuance costs, and are not marked
to fair value each period. Refer to Note 12 of these Notes to
Condensed Consolidated Financial Statements for additional
information.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Note 9 - Amortizable Intangible Assets
The components of our amortizable intangible assets are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, 2020 |
|
January 26, 2020 |
|
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Net Carrying
Amount |
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Net Carrying
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Acquisition-related intangible assets (1) |
$ |
3,287 |
|
|
$ |
(642) |
|
|
$ |
2,645 |
|
|
$ |
195 |
|
|
$ |
(192) |
|
|
$ |
3 |
|
|
Patents and licensed technology |
705 |
|
|
(489) |
|
|
216 |
|
|
520 |
|
|
(474) |
|
|
46 |
|
|
Total intangible assets |
$ |
3,992 |
|
|
$ |
(1,131) |
|
|
$ |
2,861 |
|
|
$ |
715 |
|
|
$ |
(666) |
|
|
$ |
49 |
|
(1) As of October 25, 2020,
acquisition-related intangible assets include the fair value of a
Mellanox IPR&D project of $630 million, which has not been
amortized. Once the project reaches technological feasibility, we
will begin to amortize the intangible asset over its estimated
useful life. Refer to Note 2 of these Notes to Condensed
Consolidated Financial Statements for further details.
Amortization expense associated with intangible assets was $174
million and $465 million for the third quarter and first nine
months of fiscal year 2021, respectively, and $6 million and $19
million for the third quarter and first nine months of fiscal year
2020, respectively. Future amortization expense related to the net
carrying amount of intangible assets as of October 25, 2020 is
estimated to be $146 million for the remainder of fiscal year 2021,
$542 million in fiscal year 2022, $539 million in fiscal year 2023,
$418 million in fiscal year 2024, $364 million in fiscal year 2025,
and $852 million in fiscal year 2026 and thereafter. Refer to Note
2 of these Notes to Condensed Consolidated Financial Statements for
further details on intangible assets.
Note 10 - Balance Sheet Components
Certain balance sheet components are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
January 26, |
|
|
2020 |
|
2020 |
|
|
|
|
|
Inventories: |
(In millions) |
|
Raw materials |
$ |
455 |
|
|
$ |
249 |
|
|
Work in-process |
380 |
|
|
265 |
|
|
Finished goods |
660 |
|
|
465 |
|
|
Total inventories |
$ |
1,495 |
|
|
$ |
979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
January 26, |
|
|
2020 |
|
2020 |
|
|
|
|
|
Other assets: |
(In millions) |
|
Advanced consideration for acquisition (1) |
$ |
1,357 |
|
|
$ |
— |
|
|
Prepaid royalties (1) |
446 |
|
|
1 |
|
|
Investment in non-affiliated entities |
106 |
|
|
77 |
|
|
Other |
119 |
|
|
40 |
|
|
Total other assets |
$ |
2,028 |
|
|
$ |
118 |
|
(1) Advanced consideration for acquisition
and long-term prepaid royalties are related to the pending
acquisition of Arm. Refer to Note 2 of these Notes to Condensed
Consolidated Financial Statements for further details.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
January 26, |
|
|
2020 |
|
2020 |
|
|
|
|
|
Accrued and Other Current Liabilities: |
(In millions) |
|
Customer program accruals |
$ |
609 |
|
|
$ |
462 |
|
|
Accrued payroll and related expenses |
277 |
|
|
185 |
|
|
Deferred revenue (1) |
235 |
|
|
141 |
|
|
Licenses and royalties |
124 |
|
|
66 |
|
|
Operating leases |
116 |
|
|
91 |
|
|
Taxes payable |
70 |
|
|
61 |
|
|
|
|
|
|
Product warranty and return provisions |
33 |
|
|
24 |
|
|
Professional service fee |
28 |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coupon interest on debt obligations |
19 |
|
|
20 |
|
|
Other |
63 |
|
|
29 |
|
|
Total accrued and other current liabilities |
$ |
1,574 |
|
|
$ |
1,097 |
|
(1) Deferred revenue primarily includes
customer advances and deferrals related to license and development
arrangements and post contract customer support, or
PCS.
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
January 26, |
|
|
2020 |
|
2020 |
|
|
|
|
|
Other Long-Term Liabilities: |
(In millions) |
|
Income tax payable (1) |
$ |
747 |
|
|
$ |
528 |
|
|
Deferred income tax (2) |
258 |
|
|
29 |
|
|
Deferred revenue (3) |
147 |
|
|
60 |
|
|
Licenses payable |
71 |
|
|
110 |
|
|
Employee benefits |
40 |
|
|
22 |
|
|
|
|
|
|
Other |
48 |
|
|
26 |
|
|
Total other long-term liabilities |
$ |
1,311 |
|
|
$ |
775 |
|
(1) As of October 25, 2020, income tax
payable represents the long-term portion of the one-time transition
tax payable of $284 million, unrecognized tax benefits of $264
million, related interest and penalties of $46 million, and other
foreign long-term tax payable of $153 million.
(2) Deferred income tax primarily relates to
acquired intangible assets.
(3) Deferred revenue primarily includes
deferrals related to PCS.
Deferred Revenue
The following table shows the changes in deferred revenue during
the first nine months of fiscal years 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, |
|
October 27, |
|
|
2020 |
|
2019 |
|
|
|
|
|
(In millions) |
|
Balance at beginning of period |
$ |
201 |
|
|
$ |
138 |
|
|
Deferred revenue added during the period |
361 |
|
|
237 |
|
|
Addition due to business combinations |
75 |
|
|
— |
|
|
Revenue recognized during the period |
(255) |
|
|
(199) |
|
|
Balance at end of period |
$ |
382 |
|
|
$ |
176 |
|
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Revenue related to remaining performance obligations represents the
remaining contracted license, development arrangements and PCS that
has not been recognized. This includes related deferred revenue
currently recorded and amounts that will be invoiced in future
periods. As of October 25, 2020, the amount of our remaining
performance obligations that has not been recognized as revenue was
$679 million, of which we expect to recognize approximately 41% as
revenue over the next twelve months and the remainder thereafter.
This amount excludes the value of remaining performance obligations
for contracts with an original expected length of one year or
less.
Note 11 - Derivative Financial Instruments
We enter into foreign currency forward contracts to mitigate the
impact of foreign currency exchange rate movements on our operating
expenses. These contracts are designated as cash flow hedges for
hedge accounting treatment. Gains or losses on the contracts are
recorded in accumulated other comprehensive income or loss and
reclassified to operating expense when the related operating
expenses are recognized in earnings or ineffectiveness should
occur. The fair value of the contracts was not significant as of
October 25, 2020 and January 26, 2020.
We also enter into foreign currency forward contracts to mitigate
the impact of foreign currency movements on monetary assets and
liabilities that are denominated in currencies other than the U.S.
dollar, including intercompany hedging instruments, or intercompany
derivatives, with wholly-owned subsidiaries in order to hedge
certain forecasted expenses denominated in currencies other than
the U.S. dollar. These forward contracts were not designated for
hedge accounting treatment. Therefore, the change in fair value of
these contracts is recorded in other income or expense and offsets
the change in fair value of the hedged foreign currency denominated
monetary assets and liabilities, which is also recorded in other
income or expense.
The table below presents the notional value of our foreign currency
forward contracts outstanding as of October 25, 2020 and
January 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25,
2020 |
|
January 26,
2020 |
|
|
|
|
|
(In millions) |
|
Designated as cash flow hedges |
$ |
744 |
|
|
$ |
428 |
|
|
Not designated for hedge accounting |
$ |
352 |
|
|
$ |
287 |
|
As of October 25, 2020, all designated foreign
currency forward contracts mature within eighteen months. The
expected realized gains and losses deferred into accumulated other
comprehensive income or loss related to foreign currency forward
contracts within the next twelve months was not
significant.
During the first nine months of fiscal years 2021 and 2020, the
impact of derivative financial instruments designated for hedge
accounting treatment on other comprehensive income or loss was not
significant and all such instruments were determined to be highly
effective. Therefore, there were no gains or losses associated with
ineffectiveness.
Note 12 - Debt
Long-Term Debt
In March 2020, we issued $1.50 billion of the 2.85% Notes Due
2030, $1.00 billion of the 3.50% Notes Due 2040,
$2.00 billion of the 3.50% Notes Due 2050, and
$500 million of the 3.70% Notes Due 2060, or collectively, the
March 2020 Notes. Interest on the March 2020 Notes is payable on
April 1 and October 1 of each year, beginning on October 1, 2020.
Upon 30 days' notice to holders of the Notes, we may redeem the
Notes for cash prior to maturity, at redemption prices that include
accrued and unpaid interest, if any, and a make-whole premium.
However, no make-whole premium will be paid for redemptions of the
Notes Due 2030 on or after January 1, 2030, the Notes Due 2040 on
or after October 1, 2039, the Notes Due 2050 on or after October 1,
2049, or the Notes Due 2060 on or after October 1, 2059. The net
proceeds from the March 2020 Notes were $4.97 billion, after
deducting debt discount and issuance costs.
In September 2016, we issued $1.00 billion of the 2.20% Notes
Due 2021 and $1.00 billion of the 3.20% Notes Due 2026, or
collectively, the September 2016 Notes. Interest on the September
2016 Notes is payable on March 16 and September 16 of each year.
Upon 30 days' notice to holders of the Notes, we may redeem the
Notes for cash prior to maturity, at redemption prices that include
accrued and unpaid interest, if any, and a make-whole premium.
However, no make-
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
whole premium will be paid for redemptions of the Notes Due 2021 on
or after August 16, 2021, or for redemptions of the Notes Due 2026
on or after June 16, 2026. The net proceeds from the September 2016
Notes were $1.98 billion, after deducting debt discount and
issuance costs.
Both the September 2016 Notes and the March 2020 Notes, or
collectively, the Notes, are our unsecured senior obligations and
rank equally in right of payment with all existing and future
unsecured and unsubordinated indebtedness. The Notes are
structurally subordinated to the liabilities of our subsidiaries
and are effectively subordinated to any secured indebtedness to the
extent of the value of the assets securing such indebtedness. All
existing and future liabilities of our subsidiaries will be
effectively senior to the Notes.
The carrying value of the Notes and the associated interest rates
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
Remaining Term (years)
|
|
Effective
Interest Rate |
|
October 25, 2020 |
|
January 26, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
2.20% Notes Due 2021
|
|
0.9 |
|
2.38% |
|
$ |
1,000 |
|
|
$ |
1,000 |
|
|
3.20% Notes Due 2026
|
|
5.9 |
|
3.31% |
|
1,000 |
|
|
1,000 |
|
|
2.85% Notes Due 2030
|
|
9.4 |
|
2.93% |
|
1,500 |
|
|
— |
|
|
3.50% Notes Due 2040
|
|
19.4 |
|
3.54% |
|
1,000 |
|
|
— |
|
|
3.50% Notes Due 2050
|
|
29.5 |
|
3.54% |
|
2,000 |
|
|
— |
|
|
3.70% Notes Due 2060
|
|
39.5 |
|
3.73% |
|
500 |
|
|
— |
|
|
Unamortized debt discount and issuance costs |
|
|
|
|
|
(39) |
|
|
(9) |
|
|
Net carrying amount |
|
|
|
|
|
$ |
6,961 |
|
|
$ |
1,991 |
|
As of October 25, 2020, we were in compliance with the
required covenants under the Notes.
Revolving Credit Facility
We have a Credit Agreement under which we may borrow up
to $575 million for general corporate purposes and can obtain
revolving loan commitments up to $425 million. As of
October 25, 2020, we had not borrowed any amounts and were in
compliance with the required covenants under this
agreement.
Commercial Paper
We have a $575 million commercial paper program to support general
corporate purposes. As of October 25, 2020, we had not issued
any commercial paper.
Note 13 - Commitments and Contingencies
Purchase Obligations
As of October 25, 2020, we had outstanding inventory purchase
obligations totaling $2.57 billion and other purchase obligations
totaling $398 million.
Accrual for Product Warranty Liabilities
The estimated amount of product returns and warranty liabilities
was $19 million and $15 million as of October 25, 2020 and
January 26, 2020, respectively, and the activities related to
the warranty liabilities were not significant.
In connection with certain agreements that we have entered in the
past, we have provided indemnities to cover the indemnified party
for matters such as tax, product, and employee liabilities. We have
included intellectual property indemnification provisions in our
technology related agreements with third parties. Maximum potential
future payments cannot be estimated because many of these
agreements do not have a maximum stated liability. We have not
recorded any liability in our Condensed Consolidated Financial
Statements for such indemnifications.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Litigation
Securities Class Action and Derivative Lawsuits
The plaintiffs in the putative securities class action lawsuit,
captioned 4:18-cv-07669-HSG, initially filed on December 21, 2018,
and titled In Re NVIDIA Corporation Securities Litigation, filed an
amended complaint on May 13, 2020. The amended complaint asserts
that NVIDIA and certain NVIDIA executives violated Section 10(b) of
the Securities Exchange Act of 1934, as amended, or the Exchange
Act, and SEC Rule 10b-5, by making materially false or misleading
statements related to channel inventory and the impact of
cryptocurrency mining on GPU demand between May 10, 2017 and
November 14, 2018. Plaintiffs also allege that the NVIDIA
executives who they named as defendants violated Section 20(a) of
the Exchange Act. Plaintiffs seek class certification, an award of
unspecified compensatory damages, an award of reasonable costs and
expenses, including attorneys’ fees and expert fees, and further
relief as the Court may deem just and proper. On June 29, 2020,
NVIDIA moved to dismiss the amended complaint on the basis that
plaintiffs failed to state any claims for violations of the
securities laws by NVIDIA or the individual defendants. As of
September 14, 2020, the motion was fully briefed but the Court has
not yet issued a decision.
The putative derivative lawsuit pending in the United States
District Court for the Northern District of California, captioned
4:19-cv-00341-HSG, initially filed January 18, 2019 and titled In
re NVIDIA Corporation Consolidated Derivative Litigation, remains
stayed pending resolution of NVIDIA’s motion to dismiss the
complaint in the In Re NVIDIA Corporation Securities Litigation
action. The lawsuit asserts claims for breach of fiduciary duty,
unjust enrichment, waste of corporate assets, and violations of
Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the
dissemination of allegedly false and misleading statements related
to channel inventory and the impact of cryptocurrency mining on GPU
demand. The plaintiffs are seeking unspecified damages and other
relief, including reforms and improvements to NVIDIA’s corporate
governance and internal procedures.
The putative derivative actions initially filed September 24, 2019
and pending in the United States District Court for the District of
Delaware, Lipchitz v. Huang, et al. (Case No. 1:19-cv-01795-UNA)
and Nelson v. Huang, et. al. (Case No. 1:19-cv-01798- UNA), remain
stayed pending resolution of NVIDIA’s motion to dismiss the
complaint in the In Re NVIDIA Corporation Securities Litigation
action. The lawsuits assert claims for breach of fiduciary duty,
unjust enrichment, insider trading, misappropriation of
information, corporate waste and violations of Sections 14(a),
10(b), and 20(a) of the Exchange Act based on the dissemination of
allegedly false, and misleading statements related to channel
inventory and the impact of cryptocurrency mining on GPU demand.
The plaintiffs seek unspecified damages and other relief, including
disgorgement of profits from the sale of NVIDIA stock and
unspecified corporate governance measures.
It is possible that additional suits will be filed, or allegations
received from shareholders, with respect to these same or other
matters, naming NVIDIA and/or its officers and directors as
defendants.
Accounting for Loss Contingencies
As of October 25, 2020, we have not recorded any accrual for
contingent liabilities associated with the legal proceedings
described above based on our belief that liabilities, while
possible, are not probable. Further, except as specifically
described above, any possible loss or range of loss in these
matters cannot be reasonably estimated at this time. We are engaged
in legal actions not described above arising in the ordinary course
of business and, while there can be no assurance of favorable
outcomes, we believe that the ultimate outcome of these actions
will not have a material adverse effect on our operating results,
liquidity or financial position.
Note 14 - Shareholders’ Equity
Capital Return Program
Beginning August 2004, our Board of Directors authorized us to
repurchase our stock.
Through October 25, 2020, we have repurchased an aggregate of
260 million shares under our share repurchase program for a total
cost of $7.08 billion. All shares delivered from these repurchases
have been placed into treasury stock. As of October 25, 2020,
we were authorized, subject to certain specifications, to
repurchase additional shares of our common stock up to $7.24
billion through December 2022.
During the third quarter and first nine months of fiscal year 2021,
we paid $99 million and $296 million in cash dividends to our
shareholders, respectively.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Note 15 - Segment Information
Our Chief Executive Officer, who is considered to be our chief
operating decision maker, or CODM, reviews financial information
presented on an operating segment basis for purposes of making
decisions and assessing financial performance. In the prior fiscal
year, we had reported two operating segments: GPU and Tegra
Processor. During the first quarter of fiscal year 2021, we changed
our operating segments to be consistent with the revised manner in
which our CODM reviews our financial performance and allocates
resources. The two new operating segments are "Graphics" and
"Compute & Networking". Comparative periods presented reflect
this change. Our operating segments are equivalent to our
reportable segments.
Our Graphics segment includes GeForce GPUs for gaming and PCs, the
GeForce NOW game streaming service and related infrastructure, and
solutions for gaming platforms; Quadro GPUs for enterprise design;
GRID software for cloud-based visual and virtual computing; and
automotive platforms for infotainment systems. Our Compute &
Networking segment includes Data Center platforms and systems for
artificial intelligence, or AI, high performance computing, or HPC,
and accelerated computing; Mellanox networking and interconnect
solutions; DRIVE for autonomous vehicles; and Jetson for robotics
and other embedded platforms.
Operating results by segment include costs or expenses that are
directly attributable to each segment, and costs or expenses that
are leveraged across our unified architecture and therefore
allocated between our two segments.
The “All Other” category includes the expenses that our CODM does
not assign to either Graphics or Compute & Networking for
purposes of making operating decisions or assessing financial
performance. The expenses include stock-based compensation expense,
corporate infrastructure and support costs, acquisition-related
costs, legal settlement costs, and other non-recurring charges and
benefits that our CODM deems to be enterprise in
nature.
Our CODM does not review any information regarding total assets on
a reportable segment basis. Depreciation and amortization expense
directly attributable to each reportable segment is included in
operating results for each segment. However, the CODM does not
evaluate depreciation and amortization expense by operating segment
and, therefore, it is not separately presented. There is no
intersegment revenue. The accounting policies for segment reporting
are the same as for our consolidated financial statements. The
table below presents details of our reportable segments and the
“All Other” category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics |
|
Compute & Networking |
|
All Other |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Three Months Ended October 25, 2020 |
|
|
|
|
|
|
|
|
Revenue |
$ |
2,787 |
|
|
$ |
1,939 |
|
|
$ |
— |
|
|
$ |
4,726 |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
1,345 |
|
|
$ |
738 |
|
|
$ |
(685) |
|
|
$ |
1,398 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 27, 2019 |
|
|
|
|
|
|
|
|
Revenue |
$ |
2,226 |
|
|
$ |
788 |
|
|
$ |
— |
|
|
$ |
3,014 |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
1,068 |
|
|
$ |
158 |
|
|
$ |
(299) |
|
|
$ |
927 |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 25, 2020 |
|
|
|
|
|
|
|
|
Revenue |
$ |
6,778 |
|
|
$ |
4,894 |
|
|
$ |
— |
|
|
$ |
11,672 |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
3,092 |
|
|
$ |
1,880 |
|
|
$ |
(1,947) |
|
|
$ |
3,025 |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 27, 2019 |
|
|
|
|
|
|
|
|
Revenue |
$ |
5,555 |
|
|
$ |
2,258 |
|
|
$ |
— |
|
|
$ |
7,813 |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
2,307 |
|
|
$ |
418 |
|
|
$ |
(869) |
|
|
$ |
1,856 |
|
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
October 25,
2020 |
|
October 27,
2019 |
|
October 25,
2020 |
|
October 27,
2019 |
|
|
|
|
|
|
|
|
|
(In millions) |
|
Reconciling items included in "All Other" category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
$ |
(383) |
|
|
$ |
(223) |
|
|
$ |
(981) |
|
|
$ |
(624) |
|
|
Acquisition-related and other costs |
(192) |
|
|
(7) |
|
|
(669) |
|
|
(22) |
|
|
Unallocated cost of revenue and operating expenses |
(89) |
|
|
(69) |
|
|
(259) |
|
|
(210) |
|
|
Legal settlement costs |
(21) |
|
|
— |
|
|
(38) |
|
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
(685) |
|
|
$ |
(299) |
|
|
$ |
(1,947) |
|
|
$ |
(869) |
|
Revenue by geographic region is allocated to individual countries
based on the location to which the products are initially billed
even if our customers’ revenue is attributable to end customers
that are located in a different location. The following table
summarizes information pertaining to our revenue from customers
based on the invoicing address by geographic regions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
October 25, |
|
October 27, |
|
October 25, |
|
October 27, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Revenue: |
|
|
|
|
|
|
|
|
Taiwan |
$ |
1,296 |
|
|
$ |
838 |
|
|
$ |
3,062 |
|
|
$ |
2,171 |
|
|
China (including Hong Kong) |
1,113 |
|
|
758 |
|
|
2,727 |
|
|
1,894 |
|
|
Other Asia Pacific |
955 |
|
|
805 |
|
|
2,260 |
|
|
1,983 |
|
|
United States |
890 |
|
|
236 |
|
|
2,331 |
|
|
589 |
|
|
Europe |
247 |
|
|
216 |
|
|
741 |
|
|
753 |
|
|
Other countries |
225 |
|
|
161 |
|
|
551 |
|
|
423 |
|
|
Total revenue |
$ |
4,726 |
|
|
$ |
3,014 |
|
|
$ |
11,672 |
|
|
$ |
7,813 |
|
The following table summarizes information pertaining to our
revenue by each of the specialized markets we serve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
October 25, |
|
October 27, |
|
October 25, |
|
October 27, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Revenue: |
|
|
|
|
|
|
|
|
Gaming |
$ |
2,271 |
|
|
$ |
1,659 |
|
|
$ |
5,264 |
|
|
$ |
4,027 |
|
|
Professional Visualization |
236 |
|
|
324 |
|
|
746 |
|
|
881 |
|
|
Data Center |
1,900 |
|
|
726 |
|
|
4,793 |
|
|
2,015 |
|
|
Automotive |
125 |
|
|
162 |
|
|
391 |
|
|
537 |
|
|
OEM and Other |
194 |
|
|
143 |
|
|
478 |
|
|
353 |
|
|
Total revenue |
$ |
4,726 |
|
|
$ |
3,014 |
|
|
$ |
11,672 |
|
|
$ |
7,813 |
|
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
No customer represented 10% or more of total revenue for the third
quarter and first nine months of fiscal year 2021. One customer
represented 10% and 11% of our total revenue for the third
quarter and first nine months of fiscal year 2020, respectively,
and was attributable primarily to the Graphics
segment.
One customer represented 13% and 21% of our accounts receivable
balance as of October 25, 2020 and January 26, 2020,
respectively.
Note 16 - Goodwill
During the first quarter of fiscal year 2021, we changed our
operating segments to Graphics and Compute & Networking, as
discussed in Note 15 of these Notes to Condensed Consolidated
Financial Statements. As a result, our reporting units also
changed, and we reassigned the goodwill balance to the new
reporting units based on their relative fair values. We determined
there was no goodwill impairment immediately prior to the
reorganization. As of October 25, 2020, the total carrying
amount of goodwill was $4.19 billion and the amount of
goodwill allocated to our Graphics and Compute & Networking
reporting units was $347 million and $3.85 billion,
respectively. In the first nine months of fiscal year 2021,
goodwill increased by $3.57 billion. The increase in goodwill
in the first nine months of fiscal year 2021 was due to goodwill of
$3.43 billion arising from the Mellanox acquisition, and
goodwill of $133 million from other acquisition activity, both
of which were allocated to the Compute & Networking reporting
unit.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are subject to the “safe
harbor” created by those sections. Forward-looking statements are
based on our management’s beliefs and assumptions and on
information currently available to our management. In some cases,
you can identify forward-looking statements by terms such as “may,”
“will,” “should,” “could,” “goal,” “would,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “project,” “predict,”
“potential” and similar expressions intended to identify
forward-looking statements. Other statements in this Form 10-Q
regarding the potential future impact of the COVID-19 pandemic on
the Company’s business and results of operations are
forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors, which may cause our
actual results, performance, time frames or achievements to be
materially different from any future results, performance, time
frames or achievements expressed or implied by the forward-looking
statements. We discuss many of these risks, uncertainties and other
factors in this Quarterly Report on Form 10-Q in greater
detail under the heading “Risk Factors.” Given these risks,
uncertainties and other factors, you should not place undue
reliance on these forward-looking statements. Also, these
forward-looking statements represent our estimates and assumptions
only as of the date of this filing. You should read this Quarterly
Report on Form 10-Q completely and with the understanding that
our actual future results may be materially different from what we
expect. We hereby qualify our forward-looking statements by these
cautionary statements. Except as required by law, we assume no
obligation to update these forward-looking statements publicly, or
to update the reasons actual results could differ materially from
those anticipated in these forward-looking statements, even if new
information becomes available in the
future.
All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean
NVIDIA Corporation and its subsidiaries.
NVIDIA, the NVIDIA logo, GeForce, DRIVE AGX Orin, GeForce NOW,
GeForce RTX SUPER, NVIDIA A100, NVIDIA Broadcast, NVIDIA CloudXR,
NVIDIA CUDA, NVIDIA DLSS, NVIDIA DGX A100, NVIDIA DGX SuperPOD,
NVIDIA DRIVE, NVIDIA EGX, NVIDIA GRID, NVIDIA Jarvis, NVIDIA
Jetson, NVIDIA Maxine, NVIDIA Merlin, NVIDIA Omniverse, NVIDIA
Omniverse Machinima, NVIDIA Reflex, NVIDIA RTX, Mellanox, Quadro,
Quadro RTX, Quadro View and Tegra are trademarks and/or registered
trademarks of NVIDIA Corporation in the United States and/or other
countries. Other company and product names may be trademarks of the
respective companies with which they are associated. Features,
pricing, availability, and specifications are subject to change
without notice.
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with “Item
6. Selected Financial Data” of our Annual Report on Form 10-K for
the fiscal year ended January 26, 2020 and “Item 1A. Risk
Factors” of this Quarterly Report on Form 10-Q and our Condensed
Consolidated Financial Statements and related Notes thereto, as
well as other cautionary statements and risks described elsewhere
in this Quarterly Report on Form 10-Q, before deciding to purchase
or sell shares of our common stock.
Overview
Our Company and Our Businesses
NVIDIA pioneered accelerated computing to help solve the most
challenging computational problems. Starting with a focus on PC
graphics, we extended our focus in recent years to the
revolutionary field of AI. Fueled by the sustained demand for
exceptional 3D graphics and the scale of the gaming market, NVIDIA
leveraged its GPU architecture to create platforms for virtual
reality, HPC, and AI.
Through fiscal year 2020, our reportable segments were GPU and
Tegra Processor. Starting with the first quarter of fiscal year
2021, our reportable segments have changed to "Graphics" and
"Compute & Networking".
Our Graphics segment includes GeForce GPUs for gaming and PCs, the
GeForce NOW game streaming service and related infrastructure, and
solutions for gaming platforms; Quadro GPUs for enterprise design;
GRID software for cloud-based visual and virtual computing; and
automotive platforms for infotainment systems.
Our Compute & Networking segment includes Data Center platforms
and systems for AI, HPC, and accelerated computing; Mellanox
networking and interconnect solutions; DRIVE for autonomous
vehicles; and Jetson for robotics and other embedded
platforms.
All prior period comparisons presented reflect our new reportable
segments. Our market platforms – Gaming, Professional
Visualization, Data Center, Automotive, OEM and Other – remain
unchanged.
Headquartered in Santa Clara, California, NVIDIA was incorporated
in California in April 1993 and reincorporated in Delaware in April
1998.
Recent Developments, Future Objectives and Challenges
Pending Acquisition of Arm Limited
On September 13, 2020, we entered into a Purchase Agreement with
Arm and SoftBank for us to acquire, from SoftBank, all of the
allotted and issued ordinary shares of Arm in a transaction valued
at $40 billion. We paid $2 billion in Signing
Consideration and will pay upon closing of the acquisition
$10 billion in cash and issue to SoftBank 44.3 million
shares of our common stock with an aggregate value of
$21.5 billion. The transaction includes a potential earn out,
which is contingent on the achievement of certain financial
performance targets by Arm during the fiscal year ending March 31,
2022. If the financial performance targets are achieved, Softbank
can elect to receive either up to $5 billion in cash or up to
10.3 million shares of our common stock. We will issue up to
$1.5 billion in restricted stock units to Arm employees after
closing. The $2 billion paid upon signing was allocated
between advanced consideration for the acquisition of
$1.36 billion and the prepayment of intellectual property
licenses from Arm of $0.17 billion and royalties of
$0.47 billion. The closing of the acquisition is subject to
customary closing conditions, including receipt of specified
governmental and regulatory consents and approvals and expiration
of any related mandatory waiting period, and Arm's implementation
of the reorganization and distribution of Arm’s IoT Services Group
and certain other assets and liabilities. If the Purchase Agreement
is terminated under certain circumstances, we will be refunded
$1.25 billion of the Signing Consideration. The
$2 billion payment upon signing was allocated on a fair value
basis and any refund of the Signing Consideration will use stated
values in the Purchase Agreement. We believe the closing of the
acquisition will likely occur in the first quarter of calendar year
2022.
COVID-19
The worldwide COVID-19 pandemic is prompting governments and
businesses to take unprecedented measures including restrictions on
travel, temporary business closures, quarantines and
shelter-in-place orders. It has significantly impacted global
economic activity and caused volatility and disruption in global
financial markets. Since March 2020, most of our employees have
been working remotely and we have temporarily prohibited most
business travel.
Our Gaming and Data Center market platforms have benefited from
stronger demand as people continue to work, learn, and play from
home. In Professional Visualization, stronger demand for mobile
workstations due to work from home trends was partially offset by
lower demand for desktop workstations. In Automotive, customers'
production volumes have largely returned to pre-COVID levels. In
our supply chain, stronger demand globally has limited the
availability of capacity and components.
As the COVID-19 pandemic continues, the timing and overall demand
from customers and the availability of supply chain, logistical
services and component supply may have a material net negative
impact on our business and financial results. Refer to Part II,
Item 1A of this Quarterly Report on Form 10-Q for additional
information under the heading “Risk Factors”.
The Company believes its existing balances of cash, cash
equivalents and marketable securities, along with commercial paper
and other short-term liquidity arrangements, will be sufficient to
satisfy its working capital needs, capital asset purchases,
dividends, debt repayments and other liquidity requirements
associated with its existing operations.
Third Quarter of Fiscal Year 2021 Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
October 25, 2020 |
|
July 26, 2020 |
|
October 27, 2019 |
|
Quarter-over-Quarter Change |
|
Year-over-Year Change |
|
|
|
|
|
|
|
|
|
|
|
($ in millions, except per share data) |
|
|
|
|
|
Revenue |
$ |
4,726 |
|
|
$ |
3,866 |
|
|
$ |
3,014 |
|
|
22 |
% |
|
57 |
% |
|
Gross margin |
62.6 |
% |
|
58.8 |
% |
|
63.6 |
% |
|
380 bps |
|
(100) bps |
|
Operating expenses |
$ |
1,562 |
|
|
$ |
1,624 |
|
|
$ |
989 |
|
|
(4) |
% |
|
58 |
% |
|
Income from operations |
$ |
1,398 |
|
|
$ |
651 |
|
|
$ |
927 |
|
|
115 |
% |
|
51 |
% |
|
Net income |
$ |
1,336 |
|
|
$ |
622 |
|
|
$ |
899 |
|
|
115 |
% |
|
49 |
% |
|
Net income per diluted share |
$ |
2.12 |
|
|
$ |
0.99 |
|
|
$ |
1.45 |
|
|
114 |
% |
|
46 |
% |
Revenue for the third quarter of fiscal year 2021 was $4.73
billion, up 57% from a year earlier and up 22%
sequentially.
Graphics segment revenue was $2.79 billion, up 25% from a year
earlier and up 34% sequentially.
Compute & Networking segment revenue was $1.94 billion, up 146%
from a year ago and up 9% sequentially.
From a market-platform perspective, Gaming revenue was $2.27
billion, up 37% both from a year ago and sequentially. The
increases reflect higher sales across desktop and notebook gaming
GPUs, and game console SOCs. Desktop gaming sales benefited from
the launch of our GeForce RTX 30 Series based on the NVIDIA Ampere
architecture.
Professional Visualization revenue was $236 million, down 27% from
a year earlier and up 16% sequentially. The year-on-year decline
was influenced by COVID-19, with reduced demand for desktop
workstations. The sequential increase reflects a sharp rebound in
mobile workstations due to work from home trends.
Data Center revenue was $1.90 billion, up 162% from a year ago and
up 8% sequentially. Our recent acquisition of Mellanox contributed
13% of total company revenue and approximately a third of Data
Center revenue. In addition to Mellanox, the year-on-year and
sequential increases were driven by the ramp of NVIDIA Ampere
architecture products.
Automotive revenue was $125 million, down 23% from a year earlier
and up 13% sequentially. The year-on-year decrease reflects a
decline in revenue from legacy infotainment modules and autonomous
driving development agreements. The sequential increase reflects
higher sales of AI cockpit solutions.
OEM and Other revenue was $194 million, up 36% from a year ago and
up 33% sequentially, primarily due to higher volume of entry-level
laptop GPUs.
Gross margin was 62.6% in the third quarter, down 100 basis points
from a year earlier and up 380 basis points sequentially. The
year-on-year decline reflects charges related to the Mellanox
acquisition and lower margins in Gaming, partially offset by a
shift in product mix with higher Data Center and lower Automotive
sales. The sequential increase was primarily driven by the absence
of a non-recurring inventory step-up expense related to the
Mellanox acquisition in the prior quarter.
Operating expenses were $1.56 billion, up 58% from a year earlier
and down 4% sequentially. The year-on-year increase was primarily
driven by compensation-related costs, the Mellanox acquisition,
infrastructure costs, and employee growth. The sequential decrease
was due to a reduction in acquisition-related costs.
Income from operations was $1.40 billion, up 51% from a year
earlier and up 115% sequentially. Net income was $1.34 billion. Net
income per diluted share was $2.12, up 46% from a year earlier and
up 114% sequentially.
Cash, cash equivalents and marketable securities at the end of the
third quarter were $10.14 billion, up from $9.77 billion a year
earlier and down from $10.98 billion in the prior quarter. The
year-on-year increase primarily reflects the issuance of the $5
billion of notes in March 2020 and cash flow generation, partially
offset by acquisitions. The sequential decrease primarily reflects
the $2 billion payment under the Purchase Agreement to acquire
Arm.
We paid $99 million in quarterly cash dividends in the third
quarter.
Market Platform Highlights
During the third quarter of fiscal year 2021, in our Gaming
platform, we unveiled GeForce RTX 30 Series GPUs; announced that
Fortnite will support NVIDA RTX real-time ray tracing and DLSS AI
super-resolution; introduced NVIDIA Reflex; and unveiled NVIDIA
Broadcast.
In our Professional Visualization platform, we brought to open beta
NVIDIA Omniverse; announced NVIDIA Omniverse Machinima; and
collaborated with Adobe to bring GPU-accelerated neural filters to
Adobe Photoshop AI-powered tools.
In our Data Center platform, we shared news that Amazon Web
Services and Oracle Cloud Infrastructure announced general
availability of cloud computing instances based on the NVIDIA A100
GPU; announced the NVIDIA DGX SuperPOD Solution for Enterprise;
announced that five supercomputers backed by EuroHPC will use
NVIDIA’s data center accelerators or networking; introduced the new
family of NVIDIA BlueField-2 DPUs (data processing units);
announced a broad partnership with VMware to create an end-to-end
enterprise platform for AI and a new architecture for data center,
cloud and edge; unveiled NVIDIA Maxine; introduced the NVIDIA RTX
A6000 and NVIDIA A40 GPUs; extended our lead on MLPerf performance
benchmarks for inference; announced a partnership with GSK to
integrate computing
platforms for imaging, genomics and AI into the drug and vaccine
discovery process; and introduced NVIDIA A100 80GB GPU, NVIDIA DGX
Station A100, and NVIDIA Mellanox InfiniBand.
In our Automotive platform, we announced with Mercedes-Benz that
NVIDIA is powering the next-generation MBUX AI cockpit system;
announced with Hyundai Motor Group that the Korean automaker’s
entire lineup of Hyundai, Kia and Genesis models will come standard
with NVIDIA DRIVE in-vehicle infotainment systems, starting in
2022; and announced that China’s Li Auto will develop its
next-generation of electric vehicles using NVIDIA DRIVE AGX Orin, a
software-defined platform for autonomous vehicles.
Financial Information by Business Segment and Geographic
Data
Refer to Note 15 of the Notes to Condensed Consolidated Financial
Statements for disclosure regarding segment
information.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States, or U.S. GAAP.
The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenue, cost of revenue, expenses and related
disclosure of contingencies. We base our estimates on historical
experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities. Our management has discussed the development and
selection of these critical accounting policies and estimates with
the Audit Committee of our Board of Directors. The Audit Committee
has reviewed our disclosures relating to our critical accounting
policies and estimates in this Quarterly Report on Form 10-Q. Due
to the Mellanox acquisition, we added the following critical
accounting policy:
Business Combinations
The application of acquisition accounting to a business acquisition
requires that we identify the individual assets acquired and
liabilities assumed and estimate the fair value of each. The fair
value of assets acquired and liabilities assumed in a business
acquisition are recognized at the acquisition date, with the
purchase price exceeding the fair values being recognized as
goodwill. Determining fair value of identifiable assets,
particularly intangibles, liabilities acquired and contingent
obligations assumed requires management to make estimates. In
certain circumstances, the allocations of the purchase price are
based upon preliminary estimates and assumptions and subject to
revision when we receive final information, including appraisals
and other analysis. Accordingly, the measurement period for such
purchase price allocations will end when the information, or the
facts and circumstances, becomes available, but will not exceed
twelve months. We will recognize measurement-period adjustments
during the period of resolution, including the effect on earnings
of any amounts that would have been recorded in previous periods if
the accounting had been completed at the acquisition
date.
Goodwill and intangible assets often represent a significant
portion of the assets acquired in a business combination. We
recognize the fair value of an acquired intangible apart from
goodwill whenever the intangible arises from contractual or other
legal rights, or when it can be separated or divided from the
acquired entity and sold, transferred, licensed, rented or
exchanged, either individually or in combination with a related
contract, asset or liability. Intangible assets consist primarily
of technology, customer relationships, order backlog and trade name
acquired in a business combination and IPR&D. We generally
assess the estimated fair values of acquired intangibles using a
combination of valuation techniques. To estimate fair value, we are
required to make certain estimates and assumptions, including
future economic and market conditions, revenue growth, technology
migration curve, and risk-adjusted discount rates. Our estimates
require significant judgment and are based on historical data,
various internal estimates, and external sources. Our assessment of
IPR&D also includes consideration of the risk of the projects
not achieving technological feasibility.
There have been no other material changes in our critical
accounting policies and estimates since our Annual Report on Form
10-K for the fiscal year ended January 26, 2020. Refer to Note
1 “Basis of Presentation” to the condensed consolidated financial
statements for additional details. In addition, please refer to
Management’s Discussion and Analysis of Financial Condition and
Results of Operations contained in Part II, Item 7 of our Annual
Report on Form 10-K for our fiscal year ended January 26, 2020
for a more complete discussion of our critical accounting policies
and estimates.
Results of Operations
The following table sets forth, for the periods indicated, certain
items in our Condensed Consolidated Statements of Income expressed
as a percentage of revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25,
2020 |
|
October 27,
2019 |
|
October 25,
2020 |
|
October 27,
2019 |
|
Revenue |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
Cost of revenue |
37.4 |
|
|
36.4 |
|
|
38.0 |
|
|
39.2 |
|
|
Gross profit |
62.6 |
|
|
63.6 |
|
|
62.0 |
|
|
60.8 |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Research and development |
22.2 |
|
|
23.6 |
|
|
23.8 |
|
|
26.8 |
|
|
Sales, general and
administrative |
10.9 |
|
|
9.2 |
|
|
12.3 |
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
33.1 |
|
|
32.8 |
|
|
36.1 |
|
|
37.1 |
|
|
Income from operations |
29.5 |
|
|
30.8 |
|
|
25.9 |
|
|
23.7 |
|
|
Interest income |
0.1 |
|
|
1.5 |
|
|
0.4 |
|
|
1.8 |
|
|
Interest expense |
(1.1) |
|
|
(0.4) |
|
|
(1.1) |
|
|
(0.5) |
|
|
Other, net |
(0.1) |
|
|
— |
|
|
— |
|
|
— |
|
|
Other income (expense), net
|
(1.1) |
|
|
1.1 |
|
|
(0.7) |
|
|
1.3 |
|
|
Income before income tax |
28.4 |
|
|
31.9 |
|
|
25.2 |
|
|
25.0 |
|
|
Income tax expense |
0.3 |
|
|
2.0 |
|
|
0.5 |
|
|
1.4 |
|
|
Net income |
28.1 |
% |
|
29.9 |
% |
|
24.7 |
% |
|
23.6 |
% |
Revenue
Revenue by Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25,
2020 |
|
October 27,
2019 |
|
$
Change |
|
%
Change |
|
October 25,
2020 |
|
October 27,
2019 |
|
$
Change |
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
Graphics |
$ |
2,787 |
|
|
$ |
2,226 |
|
|
$ |
561 |
|
|
25 |
% |
|
$ |
6,778 |
|
|
$ |
5,555 |
|
|
$ |
1,223 |
|
|
22 |
% |
|
Compute & Networking |
1,939 |
|
|
788 |
|
|
1,151 |
|
|
146 |
% |
|
4,894 |
|
|
2,258 |
|
|
2,636 |
|
|
117 |
% |
|
Total |
$ |
4,726 |
|
|
$ |
3,014 |
|
|
$ |
1,712 |
|
|
57 |
% |
|
$ |
11,672 |
|
|
$ |
7,813 |
|
|
$ |
3,859 |
|
|
49 |
% |
Graphics -
Graphics segment revenue for the third quarter of fiscal year 2021
compared to the third quarter of fiscal year 2020 increased by 25%
and revenue for the first nine months of fiscal year 2021 compared
to the first nine months of fiscal year 2020 increased by 22%.
These increases reflect growth in GeForce GPUs and game console
SOCs, partially offset by lower sales of Quadro
workstations.
Compute & Networking -
Compute & Networking segment revenue for the third quarter of
fiscal year 2021 compared to the third quarter of fiscal year 2020
increased by 146% and revenue for the first nine months of fiscal
year 2021 compared to the first nine months of fiscal year 2020
increased by 117%. These increases reflect the addition of Mellanox
acquired on April 27, 2020 and the continued ramp of NVIDIA Ampere
GPU architecture systems and new products, partially offset by
lower autonomous driving development agreement
revenue.
Concentration of Revenue
Revenue from sales to customers outside of the United States
accounted for 81% and 80% of total revenue for the third quarter
and first nine months of fiscal year 2021, respectively, and 92% of
total revenue for the third quarter and first nine months of fiscal
year 2020. Revenue by geographic region is allocated to individual
countries based on the location to which the products are initially
billed even if the revenue is attributable to end customers in a
different location.
No customer represented 10% or more of total revenue for the third
quarter and first nine months of fiscal year 2021. One customer
represented 10% and 11% of our total revenue for the third
quarter and first nine months of fiscal year 2020, respectively,
and was attributable primarily to the Graphics
segment.
Gross Margin
Our overall gross margin decreased to 62.6% for the third quarter
of fiscal year 2021 from 63.6% for the third quarter of fiscal year
2020, reflecting charges related to the Mellanox acquisition and
lower margins in Gaming, partially offset by a shift in product mix
with higher Data Center and lower Automotive sales. Our overall
gross margin increased to 62.0% for the first nine months of fiscal
year 2021 from 60.8% for the first nine months of fiscal year 2020,
primarily driven by Mellanox products, lower Automotive sales and
lower product costs within Compute & Networking, partially
offset by Mellanox acquisition-related costs including a
non-recurring inventory step-up charge of $161 million and ongoing
intangible asset amortization of $171 million.
Inventory provisions totaled $15 million and $42 million for the
third quarter of fiscal years 2021 and 2020, respectively. Sales of
inventory that was previously written-off or -down totaled $29
million and $78 million for the third quarter of fiscal years 2021
and 2020, respectively. As a result, the overall net effect on our
gross margin was a favorable impact of 0.3% and 1.2% in the third
quarter of fiscal years 2021 and 2020, respectively.
Inventory provisions totaled $96 million and $114 million for the
first nine months of fiscal years 2021 and 2020, respectively.
Sales of inventory that was previously written-off or -down totaled
$116 million and $109 million for the first nine months of fiscal
years 2021 and 2020, respectively. As a result, the overall net
effect on our gross margin was a favorable impact of 0.2% in the
first nine months of fiscal year 2021 and an unfavorable impact of
0.1% for the first nine months of fiscal year 2020.
A discussion of our gross margin results for each of our reportable
segments is as follows:
Graphics -
The gross margin of our Graphics segment decreased during the third
quarter of fiscal year 2021 compared to the third quarter of fiscal
year 2020, primarily driven by a shift in product mix and higher
product costs. The gross margin of our Graphics segment increased
during the first nine months of fiscal year 2021 compared to the
first nine months of fiscal year 2020, primarily driven by lower
legacy infotainment sales and product mix within
Quadro.
Compute & Networking - The
gross margin of our Compute & Networking segment increased
during the third quarter and first nine months of fiscal year 2021
compared to the third quarter and first nine months of fiscal year
2020, primarily driven by Mellanox products and lower product
costs.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
October 25,
2020 |
|
October 27,
2019 |
|
$
Change |
|
%
Change |
|
October 25,
2020 |
|
October 27,
2019 |
|
$
Change |
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
Research and development expenses |
$ |
1,047 |
|
|
$ |
712 |
|
|
$ |
335 |
|
|
47 |
% |
|
$ |
2,778 |
|
|
$ |
2,091 |
|
|
$ |
687 |
|
|
33 |
% |
|
% of net revenue |
22 |
% |
|
24 |
% |
|
|
|
|
|
24 |
% |
|
27 |
% |
|
|
|
|
|
Sales, general and administrative expenses |
515 |
|
|
277 |
|
|
238 |
|
|
86 |
% |
|
1,437 |
|
|
806 |
|
|
631 |
|
|
78 |
% |
|
% of net revenue |
11 |
% |
|
9 |
% |
|
|
|
|
|
12 |
% |
|
10 |
% |
|
|
|
|
|
Total operating expenses |
$ |
1,562 |
|
|
$ |
989 |
|
|
$ |
573 |
|
|
58 |
% |
|
$ |
4,215 |
|
|
$ |
2,897 |
|
|
$ |
1,318 |
|
|
45 |
% |
Research and Development
Research and development expenses increased by 47% and 33% during
the third quarter and first nine months of fiscal year 2021,
compared to the third quarter and first nine months of fiscal year
2020, respectively, primarily driven by expenses related to the
Mellanox acquisition. In addition to Mellanox, increases reflect
employee compensation and related costs, including stock-based
compensation, and infrastructure costs.
Sales, General and Administrative
Sales, general and administrative expenses increased by 86% and 78%
during the third quarter and first nine months of fiscal year 2021,
compared to the third quarter of fiscal year 2020, respectively,
primarily driven by Mellanox acquisition-related expenses. In
addition to Mellanox, increases reflect employee compensation and
related costs, including stock-based compensation.
Other Income (Expense), Net
Interest income consists of interest earned on cash, cash
equivalents and marketable securities. Interest income was $7
million and $45 million during the third quarter of fiscal years
2021 and 2020, respectively, and $50 million and $137 million
during the first nine months of fiscal years 2021 and 2020,
respectively. The decrease in interest income was primarily due to
lower interest earned on our investments.
Interest expense is primarily comprised of coupon interest and debt
discount amortization related to our September 2016 Notes and March
2020 Notes. Interest expense was $53 million and $13 million during
the third quarter of fiscal years 2021 and 2020, respectively, and
$131 million and $39 million during the first nine months of fiscal
years 2021 and 2020, respectively.
Income Taxes
We recognized an income tax expense of $12 million and
$64 million for the third quarter and first nine months of
fiscal year 2021, respectively, and $60 million and
$109 million for the third quarter and first nine months
of fiscal year 2020, respectively. The income tax expense as a
percentage of income before income tax was 0.9% and 2.2% for the
third quarter and first nine months of fiscal year 2021,
respectively, and 6.3% and 5.6% for the third quarter and first
nine months of fiscal year 2020, respectively.
The decrease in our effective tax rate for the third quarter and
first nine months of fiscal year 2021 as compared to the same
periods of fiscal year 2020 was primarily due to a decrease in the
proportional amount of earnings subject to United States tax and an
increase of tax benefits from stock-based
compensation.
Refer to Note 6 of the Notes to Condensed Consolidated Financial
Statements for further information.
Liquidity and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25, 2020 |
|
January 26, 2020 |
|
|
|
|
|
|
(In millions) |
|
Cash and cash equivalents |
$ |
2,251 |
|
|
$ |
10,896 |
|
|
|