This summary is based on the second quarter fiscal 2009 earnings call conducted by NVIDIA Corp. (NVDA) on August 12, 2008.
Management:
President, Chairman and CEO: Jen-Hsun Huang
CFO: Marvin D. Burkett
Investor Relations: Michael Hara
Key Investor Issues:
- Q2 GAAP loss per share was 22 cents and non-GAAP EPS was 13 cents per share.
- Half year gross profit eased to $664.8 million from $804.1 million in the year ago period.
- Half year net income slumped from $305 million in 2007 to $55.9 million in 2008.
Half Year Highlights:
- The revenue increased to $2.05 billion versus $1.78 billion for the same period last year.
- The GAAP net income for the six months ended July 27, 2008 was $55.9 million or 9 cents per share compared with $305 million or 51 cents per share for the six months ended July 27, 2007.
- The non-GAAP net income, which excludes stock-based compensation charges, non-recurring warranty charge against cost of revenue and the associated tax impact, was $286.2 million or 49 cents per share.
- This is in comparison with $362.5 million or 62 cents per share for the same period in 2007.
Second-Quarter Financial Highlights:
The company recorded a $196 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and associated costs.
- The charge arose from a weak die/packaging material set in certain versions of the previous generation MCP and GPU products used in notebook systems.
- The non-GAAP net income for the quarter, which excludes stock-based compensation charges, the non-recurring warranty charge against cost of revenue and the associated tax impact, was $74.5 million or 13 cents per share.
The company underestimated the price performance of its competitor’s most recent GPU.
- This resulted in the company mis-positioning the fall line-up.
- The first response was to reset the company price to reflect competitive realities.
- The step put the company in a strong competitive position but took hard hits with respect to the overall GPU ASPs and ultimately to the gross margins.
- The desktop stand-alone GPU shipments declined more than 23% from the first quarter.
- The decline was mostly in the low-end GPU segments.
- The decrease was mainly due to a weak economic environment, driving a mix shift to lower priced PCs as well as a continued mix shift to notebook PCs.
- The desktop GPU revenue dipped 40% during the quarter and 25% year-to-year.
- The desktop GPU units declined by 20% and desktop ASPs fell by 25% quarter-over-quarter.
- The notebook GPU revenue rose quarter-over-quarter by 8% and 43% year-over-year.
- The Quadro business grew 38% over last year.
- The mobile workstation marketplace is reportedly growing at 30% a year. Over the last 18 months, the company has increased market share from 40% to more than 90%.
The operating expenses totaled $305.3 million compared with $239.2 million in the year ago quarter.
- The quarter-over-quarter R&D expenses rose from $158 million to $213 million.
- The SG&A expenses rose $11.1 million to $92.4 million during the quarter.
- As a result, the company reported an operating loss of $155.4 million versus operating income of $184.8 million in the last year quarter.
- The Q2 depreciation was $46 million, an increase of $5 million from Q1.
- The CapEx were $63 million, a sequential decrease of $139 million.
- The Q1 capital additions included $150 million for the purchase of property in Santa Clara.
- The Q2 additions of $63 million included $25 million of test equipment.
Despite the challenges, the company posted positive cash flow from operations in the amount of $90 million.
- The interest income and other was $9 million, a decrease of $1 million from the first quarter.
- The decrease was primarily due to lower than average cash balances and lower interest rates during the quarter.
