nvidia · nvidia is the world leader in visual computing. beginning as a standard pc graphics chip...

24
November 2015 NVIDIA

Upload: others

Post on 31-Jul-2020

1 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: NVIDIA · 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

November 2015

NVIDIA

Page 2: NVIDIA · 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

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 1995. 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, 2015. 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, 2015. 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.

Page 3: NVIDIA · 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

3

Summary

NVIDIA is the world leader in visual computing

Our platform strategy is delivering growth

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

Page 4: NVIDIA · 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

4

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.

NVIDIA PLATFORMS DELIVERING GROWTH

Gross Margin and Operating Income are Non-GAAP measures.

Page 5: NVIDIA · 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

5

ENTERPRISE AUTO GAMING DATACENTER PRO VISUALIZATION

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.

Page 6: NVIDIA · 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

6

FY14 FY15FY14 FY15

Driving growth

Gross Margin is a Non-GAAP measure.

FY14 FY15

RECORD REVENUE RECORD GROSS MARGIN EPS

$4.1B

$4.7B

55.1%

55.8%

70BPS

$0.74

$1.12

51%

13%

Page 7: NVIDIA · 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

7

-4%

13%

5%

17%

29% 27%

-10%

0%

10%

20%

30%

40%

GROWTH MIX (Y-Y)

Transformation

FY13 Q3 FY16

Gaming, Pro Visualization, Datacenter, Auto

85% 52% 42%

10%

BUSINESS MIX

6% 5%

Total revenue Growth platforms

FY14 FY15 YTD Q3 FY16

IP PC & Tegra OEM

Page 8: NVIDIA · 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

8

Growing into large markets

0

600

1200

1800

2400

FY14 FY15

36%

0

50

100

150

200

FY14 FY15

85%

0

225

450

675

900

FY14 FY15

1%

0

75

150

225

300

375

FY14 FY15

60%

(Revenue, in millions)

PROFESSIONAL VISUALIZATION GAMING DATACENTER AUTO

Page 9: NVIDIA · 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

9

0%

5%

10%

15%

20%

25%

$-

$200

$400

$600

$800

$1,000

FY14 FY15 YTD Q3FY16

Operating margin expansion

Operating Income Operating Margin

Operating Income and Operating Margin are Non-GAAP measures.

16%

Mill

ions

20% 21%

Page 10: NVIDIA · 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

10

Since FY 2005: $4.3B ~70% FCF

617M

568M

545M 541M

500

600

700

0

200

400

600

800

1000

1200

FY13 FY14 FY15 FY16F FY17F

Capital return

$1.0B $1.1B

$147M

Free Cash Flow is a Non-GAAP measure.

$604M thru YTD Q3 FY16

$800M

(S in

mill

ions

)

(sha

res

in m

illio

ns)

Share Repurchase Dividend Shares Outstanding

$1.0B

Page 11: NVIDIA · 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

11

NVIDIA’s Experienced and Diverse Board

ROB BURGESS Independent Director; considered financial expert Former CEO/Chairman, Macromedia

TENCH COXE Independent director Managing Director, Sutter Hill Ventures

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

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

JEN-HSUN HUANG Co-Founder, CEO and President, NVIDIA

PERSIS S. DRELL Independent director Dean & Professor, Stanford School of Engineering

MIKE McCAFFERY Independent director; considered financial expert Chairman/Managing Director, Makena Capital Former President/CEO, Stanford Management Co.

Page 12: NVIDIA · 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

12

Our Board is Committed to Sound Governance

All committees are 100% independent

4 new directors appointed in the last 4 years Rob Burgess, Persis Drell, Dawn Hudson, Mike McCaffery

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

Page 13: NVIDIA · 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

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)

Page 14: NVIDIA · 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

14

Our Compensation Practices are Founded on Best

Practices and are Aligned with stockholders

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

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

Page 15: NVIDIA · 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

15

Although we Leverage Industry Peer Data, our

Culture and Values Drive our Compensation Program

Our peer companies are companies that:

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

Page 16: NVIDIA · 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

16

A significant portion of NEO pay is provided through performance based elements; equity is a significant component of total compensation

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

We Have a Strong Pay for Performance Culture

Page 17: NVIDIA · 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

17

CEO Pay

Variable Pay

54% Fixed Pay

46% Variable Pay

87% Fixed Pay

13% Variable Pay

88% Fixed Pay

12%

13%

20%

34%

34%

FY14

BASE LVP PSU Options

13%

9%

79%

FY15

BASE LVP PSU

12%

12%

49%

27%

FY16

BASE LVP PSU MY-PSU

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.

Began granting PSUs based on corporate performance.

Introduced PSUs based upon Total Shareholder Return vs. S&P 500

Page 18: NVIDIA · 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

18

NEO Pay

Variable Pay

16% Fixed Pay

84% Variable Pay

47% Fixed Pay

53% Variable Pay

51% Fixed Pay

49%

15%

16%

69%

FY14

BASE LVP Options

30%

9%

23%

38%

FY15

BASE LVP RSU PSU

28%

9%

21%

39%

4%

FY16

BASE LVP RSU PSU MY-PSU

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.

Began granting PSUs based on corporate performance.

Introduced PSUs based upon Total Shareholder Return vs. S&P 500

Page 19: NVIDIA · 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

19

We welcome your feedback

Page 20: NVIDIA · 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

20

APPENDIX

Page 21: NVIDIA · 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

21

RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES

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.

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%

Page 22: NVIDIA · 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

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 Operating income

& Operating margin

$954 (158) (37) — $759

20% (3) (1) — 16%

YTD Q3FY16

Operating income &

Operating margin

$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

relating to the acquisitions. C. Comprised of restructuring and other charges and warranty charges associated with a product recall.

Page 23: NVIDIA · 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

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

Page 24: NVIDIA · 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