NVIDIA. November 2015

Transcription

1 NVIDIA November 2015

2 SAFE HARBOR Forward-Looking Statements Except for the historical information contained herein, certain matters in this presentation including, but not limited to, statements as to: our strategies, growth and opportunities; the performance and benefits of our products and technologies; our FY2016 and FY 2017 capital return program; and other predictions and estimates are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements and any other forward-looking statements that go beyond historical facts that are made in this presentation are subject to risks and uncertainties that may cause actual results to differ materially. Important factors that could cause actual results to differ materially include: global economic conditions; our reliance on third parties to manufacture, assemble, package and test our products; the impact of technological development and competition; development of new products and technologies or enhancements to our existing product and technologies; market acceptance of our products or our partners products; design, manufacturing or software defects; changes in consumer preferences and demands; changes in industry standards and interfaces; unexpected loss of performance of our products or technologies when integrated into systems and other factors. For a complete discussion of factors that could materially affect our financial results and operations, please refer to the reports we file from time to time with the SEC, including our Form 10-Q for the quarterly period ended July 26, Copies of reports we file with the SEC are posted on our website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of November 11, 2015, based on information currently available to us. Except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. Financial Measures This presentation contains historical revenue amounts for certain of our market platforms and businesses which provides investors with additional information to supplement the segment reporting information contained in our Form 10-K for the fiscal period ended January 25, In addition to U.S. GAAP financials, this presentation includes non-gaap financial measures. These non-gaap financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. See the Appendix for a reconciliation between each non-gaap measure and the most comparable GAAP measure. Where we present non-gaap financial measures, including non-gaap gross margin, non-gaap operating income and non-gaap operating margin, we generally exclude stock-based compensation, restructuring and other charges, warranty charges associated with a product recall and acquisition-related items, where applicable. We also present non-gaap free cash flow which is calculated as GAAP net cash provided by operating activities less purchases of property and equipment and intangible assets. 2

3 NVIDIA is the world leader in visual computing Our platform strategy is delivering growth Summary We have an experienced and diverse board of directors We have a strong commitment to stockholder rights Our compensation is founded on best practices and is aligned with stockholders We welcome your feedback 3

4 NVIDIA PLATFORMS DELIVERING GROWTH Visual computing is more important than ever revolutionizing industries from VR gaming to cloud services, enterprise virtualization to autonomous vehicles. A singular focus on visual computing leveraging one core investment into platforms with deep domain expertise Gaming, Professional Visualization, Datacenter and Auto. Platform strategy has opened a 10x growth opportunity. Growth platforms are growing over 25% annually and gross margins expanded to over 56%. Operating income growth to 20% management team expects to drive continued expansion. Gross Margin and Operating Income are Non-GAAP measures. 4

5 GAMING PRO ENTERPRISE VISUALIZATION DATACENTER AUTO NVIDIA is the world leader in visual computing. Beginning as a standard PC graphics chip company, NVIDIA has transformed into a specialized platform company that targets four very large markets Gaming, Professional Visualization, Datacenter and Auto where visual computing is essential and deeply valued. We are singularly focused on the field of visual computing with the ability to deliver our value through PC, mobile and cloud architectures. We are vertically integrated and bring together GPUs, system software, algorithms, systems and services to create unique value for the markets we serve. 5

6 Driving growth RECORD REVENUE RECORD GROSS MARGIN EPS 13% $4.7B 55.8% $4.1B 70BPS 51% $ % $0.74 FY14 FY15 FY14 FY15 FY14 FY15 Gross Margin is a Non-GAAP measure. 6

7 Transformation BUSINESS MIX GROWTH MIX (Y-Y) FY13 Q3 FY16 40% Total revenue Growth platforms 6% 5% 10% 30% 29% 27% 42% 52% 85% 20% 17% 13% 10% 5% Gaming, Pro Visualization, Datacenter, Auto IP PC & Tegra OEM 0% -10% -4% FY14 FY15 YTD Q3 FY16 7

8 Growing into large markets 2400 PROFESSIONAL GAMING VISUALIZATION DATACENTER AUTO 36% 900 1% % % FY14 FY15 0 FY14 FY15 0 FY14 FY15 0 FY14 FY15 (Revenue, in millions) 8

9 Operating margin expansion $1,000 Operating Income Operating Margin 25% $800 20% 21% 20% 16% Millions $600 $400 15% 10% $200 5% $- FY14 FY15 YTD Q3FY16 0% Operating Income and Operating Margin are Non-GAAP measures. 9

10 Capital return Since FY 2005: $4.3B ~70% FCF Share Repurchase Dividend Shares Outstanding $1.1B $1.0B $1.0B 700 (S in millions) M $147M 568M 545M $800M 541M $604M thru YTD Q3 FY (shares in millions) 0 FY13 FY14 FY15 FY16F FY17F 500 Free Cash Flow is a Non-GAAP measure. 10

11 NVIDIA s Experienced and Diverse Board JEN-HSUN HUANG Co-Founder, CEO and President, NVIDIA ROB BURGESS Independent Director; considered financial expert Former CEO/Chairman, Macromedia TENCH COXE Independent director Managing Director, Sutter Hill Ventures PERSIS S. DRELL Independent director Dean & Professor, Stanford School of Engineering JAMES C. GAITHER Independent director Managing Director, Sutter Hill Ventures Former President, Board of Trustees, Stanford DAWN HUDSON Independent director; considered financial expert CMO, NFL Former CEO, PepsiCo, North America HARVEY C. JONES Independent director; considered financial expert Former CEO, Synopsys Former Chairman, Tensilica WILLIAM J. MILLER Lead independent director; considered financial expert Former CEO/Chairman, Avid and Quantum MARK L. PERRY Independent director; considered financial expert Former CEO, Aerovance Former CFO, Gilead MIKE McCAFFERY Independent director; considered financial expert Chairman/Managing Director, Makena Capital Former President/CEO, Stanford Management Co. BROOKE SEAWELL Independent director; considered financial expert Venture Partner, New Enterprise Associates Former CFO, Synopsys MARK A. STEVENS Independent director Venture Capitalist Former Managing Partner, Sequoia Capital 11

12 All committees are 100% independent 4 new directors appointed in the last 4 years Rob Burgess, Persis Drell, Dawn Hudson, Mike McCaffery Our Board is Committed to Sound Governance Directors/CEO are required to hold NVIDIA stock with a value equal to 6x their annual cash retainer/salary Directors own approximately 5% of our common stock Directors have until the later of fiscal 2016 or within 5 years of joining the Board to reach this threshold Strong director engagement All directors attend over 75% of board and committee meetings Director compensation is based on market rates Committed to stockholder engagement Annual board and committee self-evaluations 12

13 We have a Strong Commitment to Stockholder Rights We have a single class of Common Stock outstanding, no priority voting rights All directors elected by stockholders annually Majority voting provision in bylaws (other than contested elections) 13

14 Annual say-on-pay proposal has passed with over 96% in each of last 3 years Our equity plans require stockholder approval for re-pricing; no evergreen provisions Our Compensation Practices are Founded on Best Practices and are Aligned with stockholders Claw back policy Executives are subject to stock ownership guidelines Policy prohibiting the hedging or pledging of company stock No multi-year guaranteed bonuses, income tax gross-ups, or change-in control agreements In response to stockholder feedback, made changes to fiscal 2016 compensation metrics for PSUs and variable cash 14

15 Our peer companies are companies that: Although we Leverage Industry Peer Data, our Culture and Values Drive our Compensation Program We compete with for executive talent Have an established business, market presence and complexity similar to ours Are similar size to us as measured by revenue and market capitalization at roughly.5-2x NVIDIA. One change to our executive peers for fiscal 2016 Avago replaced LSI due to acquisition 15

16 A significant portion of NEO pay is provided through performance based elements; equity is a significant component of total compensation We Have a Strong Pay for Performance Culture We grant PSUs to our CEO and a mix of PSUs and RSUs to our other NEOs Introduced in fiscal 2016 Separate metrics for variable cash (tied to annual revenue) vs. single-year PSUs (tied to annual operating income) Multi-year PSUs tied to total shareholder return performance vs. the S&P 500 over a 3 year period 16

17 CEO Pay FY14 FY15 FY16 13% 13% 12% 34% 20% 9% 27% 12% 34% 79% 49% BASE LVP PSU Options BASE LVP PSU BASE LVP PSU MY-PSU 54% 46% 87% 13% 88% 12% Variable Pay Fixed Pay Variable Pay Fixed Pay Variable Pay Fixed Pay Began granting PSUs based on corporate performance. Introduced PSUs based upon Total Shareholder Return vs. S&P Variable pay includes variable cash compensation tied to corporate performance, PSUs and multi-year PSUs tied to 3 year Total Shareholder Return vs. the S&P 500. Fixed pay includes base salary, stock options and RSUs.

18 NEO Pay FY14 FY15 FY16 15% 4% 16% 38% 30% 39% 28% 69% 9% 9% 23% 21% BASE LVP Options BASE LVP RSU PSU BASE LVP RSU PSU MY-PSU 16% 84% 47% 53% 51% 49% Variable Pay Fixed Pay Variable Pay Fixed Pay Variable Pay Fixed Pay Began granting PSUs based on corporate performance. Introduced PSUs based upon Total Shareholder Return vs. S&P Variable pay includes variable cash compensation tied to corporate performance, PSUs and multi-year PSUs tied to 3 year Total Shareholder Return vs. the S&P 500. Fixed pay includes base salary, stock options and RSUs.

19 We welcome your feedback 19

20 APPENDIX 20

21 RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES NON-GAAP STOCK-BASED COMPENSATION NET WARRANTY CHARGES (A) OTHER (B) GAAP FY14 Gross margin 55.1% (0.3) 0.2 (0.1) 54.9% FY15 Gross margin 55.8% (0.3) 55.5% Footnotes A. Consists of release of the remaining warranty reserve balance as of January 26, 2014 related to the weak die/packaging material set that was used in certain versions of our previous generation chips B. Consists of a legal settlement charge. 21

22 RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES (Contd.) NON- GAAP STOCK-BASED COMPENSATION (A) ACQUISITION- RELATED ITEMS (B) OTHER (C) GAAP FY14 Operating income & Operating margin $664 (137) (32) 1 $496 16% (3) (1) 12% FY15 YTD Q3FY16 Operating income & Operating margin Operating income & Operating margin $954 (158) (37) $759 20% (3) (1) 16% $769 (144) (18) (112) $495 21% (4) (-) (3) 14% Footnotes A. Stock-based compensation charge was allocated to cost of goods sold, research and development expense, and sales, general and administrative expense. B. Acquisition-related items are comprised of amortization of acquisition-related intangible assets and other acquisition-related costs such as transaction costs, compensation charges and restructuring costs C. relating to the acquisitions. Comprised of restructuring and other charges and warranty charges associated with a product recall. 22

23 RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES (Contd.) in millions FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 YTD Q3FY16 GAAP net cash flow provided by operating activities $132 $446 $587 $1,270 $249 $488 $676 $909 $824 $835 $906 $664 Purchases of property and equipment and intangible assets (67) (80) (145) (188) (408) (78) (98) (139) (183) (255) (122) (71) Free cash flow $65 $367 $442 $1,082 ($158) $410 $578 $770 $641 $580 $783 $593 23

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