NVIDIA reported after the market closed on February 24, 2021, it earned $2.31 per diluted share in the quarter that ended on January 31, 2021, up 51 percent from earnings of $1.53 in the equivalent 14 weeks of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Non-GAAP earnings rose 64 percent to $3.10 per share from $1.89 one year earlier, a much better change than the GAAP percentage. The most significant exclusions contributing to the $0.79 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Stock-based compensation [$0.58 per share], Acquisition-related costs [$0.23 per share], and Gains) from non-affiliated investments [$0.01 per share]. Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's primary, ongoing operations, are intended to be cleaner measures of corporate profits.
This post compares the quarterly Income Statement published by NVIDIA to the estimates I made in a previous “Look Ahead” post. My estimates were based on publicly available guidance provided by NVIDIA's management to financial analysts, news reports, and trends in the company's historical results. Unless otherwise mentioned, all reported values mentioned below are GAAP figures.
First, a little background about the company: NVIDIA develops high-speed integrated circuits and cards for demanding data-processing applications, such as gaming, data centers, visualization, artificial intelligence, and even cryptocurrency mining. NVIDIA announced in September 2020 that it plans to acquire UK-based Arm Limited, a company that has been very successful at licensing designs for integrated circuits, from Softbank for $40 billion in cash and new NVIDIA shares. But, it's uncertain whether regulators will approve this deal and allow it to proceed. NVIDIA was able to acquire Mellanox Technologies, a maker of high-performance computer networking products for data centers, for $7 billion in April 2020.
The following table is a simplified version of NVIDIA's Income Statement for the quarter that ended in January 2021, with company-reported numbers along side my predictions. Figures from the year-earlier quarter are also provided to facilitate comparisons.
Revenue in the January 2021 quarter totaled $5.0 billion, 61 percent more than last year. The Gaming business was responsible for 50 percent of overall revenue, and this unit's revenue grew by 67.3 percent compared to the year-earlier result. The Data Center business contributed 38 percent of revenue, and this unit's revenue increased by 96.6 percent. The Professional Visualization unit supplied 6 percent of revenue, and this business's revenue fell by 7.3 percent.
I was expecting NVIDIA to report revenue of $4.8 billion for the January 2021 quarter. The actual amount surpassed my estimate by $203.0 million (4.2 percent).
The Cost of Revenue (also known as Cost of Goods Sold) was $1.8 billion in the latest quarter, which translates into a Gross Margin of 63.1 percent of revenue. Since it was lower than the 64.9 percent Gross Margin achieved in the year-earlier quarter, it's a sign that NVIDIA sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 62.8 percent in the January 2021 quarter, and NVIDIA exceeded that prediction by 0.3 percent.
NVIDIA spent $1.1 billion on Research and Development in the latest quarter, up from $738 million one year ago. I had estimated that R&D expenses would be $1.1 billion. R&D was 22.9 percent of Revenue.
Sales, General, and Administrative expenses totaled $503 million in the January 2021 quarter, up 75.3 percent from one year ago. SG&A expenses increased from 9.2 percent to 10.1 percent of quarterly revenue, which shows NVIDIA spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 11.3 percent of revenue, and the actual percentage turned out to be lower than the prediction.
NVIDIA's Operating Income was $1.5 billion in the quarter, up 52.2 percent from the year-earlier period. Operating Income exceeded my $1.4 billion estimate by $133 million.
Interest and other non-operating items summed to a net expense of $37 million. My estimate for non-operating items was $55 million.
The effective income tax rate fell by 5.6 percent to 0.9 percent, which had a positive effect on net income. I expected the tax rate to be 8.0 percent.
Net income attributable to NVIDIA was $1.5 billion, $2.31 per share in the quarter ending January 2021. The figures for the year-earlier quarter were $950 million, $1.53/share. My earnings estimate for the latest quarter was $1.2 billion ($1.92/share), so NVIDIA earned $0.39 per share more than I had predicted.
In conclusion, the following list shows where the reported results differed from my expectations:
– Better than expected: Revenue growth + SG&A/Revenue + Income tax rate
– Worse than expected:
– Met or close to expectations: Gross Margin + R&D + SG&A + Interest
This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed. Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company. These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).
#nvidia #nvda #gauges #gcfr #gcfr2 #QtrlyRpt #nac_financialanalysis
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