What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-18 compared with 2020-08-19 · 173 added, 177 removed, 584 unchanged (37% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended Six Months Ended

July 26, July 28, July 26, July 28,

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

13 unchanged sentences

Income before income tax 1,348 959 2,939 1,954

Income tax expense (benefit) ( 13 ) 54 52 48

Income tax expense 12 60 64 109

Net income $ 1,336 $ 899 $ 2,875 $ 1,845

9 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

July 26, July 28, July 26, July 28,

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, net of tax

Other comprehensive income (loss), net of tax

Available-for-sale securities:

Net change in unrealized gain 3 1 3 9

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 1 1 1 9

Net change in unrealized gain (loss) ( 1 ) — 1 9

Cash flow hedges:

Net unrealized gain 5 — 10 4

Reclassification adjustments for net realized gain (loss) included in net income ( 3 ) — ( 4 ) ( 2 )

Net change in unrealized gain 13 — 2 2

Other comprehensive income, net of tax 14 1 3 11

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

3 unchanged sentences

(In millions)

July 26, January 26,

October 25, January 26,

Current assets:

16 unchanged sentences

Accrued and other current liabilities 1,574 1,097

Short-term debt 998 —

Total current liabilities 3,669 1,784

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 26, 2020 AND JULY 28, 2019

FOR THE THREE MONTHS ENDED OCTOBER 25, 2020 AND OCTOBER 27, 2019

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, April 26, 2020 615 $ 1 $ 7,354 $ ( 10,036 ) $ ( 10 ) $ 15,790 $ 13,099

Balances, July 26, 2020 617 $ 1 $ 7,828 $ ( 10,232 ) $ 4 $ 16,313 $ 13,914

Net income — — — — — 1,336 1,336

4 unchanged sentences

— — — — — ( 99 ) ( 99 )

Fair value of partially vested equity awards assumed in connection with acquisitions — — 86 — — — 86

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

Balances, April 28, 2019 609 $ 1 $ 6,317 $ ( 9,474 ) $ ( 2 ) $ 12,862 $ 9,704

Net income — — — — — 899 899

Other comprehensive income — — — — 1 — 1

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 )

2 unchanged sentences

Stock-based compensation — — 218 — — — 218

Balances, July 28, 2019 609 $ 1 $ 6,543 $ ( 9,524 ) $ ( 1 ) $ 13,317 $ 10,336

Balances, October 27, 2019 612 $ 1 $ 6,824 $ ( 9,726 ) $ ( 3 ) $ 14,118 $ 11,214

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JULY 26, 2020 AND JULY 28, 2019

FOR THE NINE MONTHS ENDED OCTOBER 25, 2020 AND OCTOBER 27, 2019

Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shareholders' Equity

9 unchanged sentences

Stock-based compensation — — 980 — — — 980

Balances, July 26, 2020 617 $ 1 $ 7,828 $ ( 10,232 ) $ 4 $ 16,313 $ 13,914

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

6 unchanged sentences

Stock-based compensation — — 627 — — — 627

Balances, July 28, 2019 609 $ 1 $ 6,543 $ ( 9,524 ) $ ( 1 ) $ 13,317 $ 10,336

Balances, October 27, 2019 612 $ 1 $ 6,824 $ ( 9,726 ) $ ( 3 ) $ 14,118 $ 11,214

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In millions)

Six Months Ended

July 26, July 28,

Nine Months Ended

October 25, October 27,

Cash flows from operating activities:

17 unchanged sentences

Purchases of marketable securities ( 12,840 ) ( 1,461 )

Acquisition of businesses, net of cash acquired ( 7,171 ) —

Purchases of property and equipment and intangible assets ( 372 ) ( 241 )

Acquisitions, net of cash acquired ( 8,524 ) —

Purchases related to property and equipment and intangible assets ( 845 ) ( 344 )

Investments and other, net ( 4 ) ( 6 )

10 unchanged sentences

Cash and cash equivalents at end of period $ 2,251 $ 9,765

Other non-cash investing activity:

Assets acquired by assuming related liabilities $ 257 $ 80

See accompanying Notes to Condensed Consolidated Financial Statements.

33 unchanged sentences

Fiscal year 2021 is a 53-week year and fiscal year 2020 is a 52-week year.

The second quarters of fiscal years 2021 and 2020 were both 13-week quarters.

The third quarters of fiscal years 2021 and 2020 were both 13-week quarters.

Reclassifications

15 unchanged sentences

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)

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.

1 unchanged sentence

We acquired Mellanox to optimize data center workloads to scale across the entire computing, networking, and storage stack.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Preliminary Purchase Price Allocation

28 unchanged sentences

Goodwill recognized in the acquisition is not expected to be deductible for foreign tax purposes.

Goodwill 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 second quarter of fiscal year 2021 from the acquisition date.

Revenue attributable to Mellanox was approximately 14 % of consolidated revenue.

There is not a practical way to determine net income attributable to Mellanox due to integration.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Acquisition-related costs of $ 26 million were included in selling, general and administrative expense for the first half of fiscal year 2021.

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

21 unchanged sentences

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:

Three Months Ended Six Months Ended

2020 July 28,

2019 July 26,

2020 July 28,

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

(In millions)

5 unchanged sentences

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 half of fiscal year 2020 and were excluded from the pro forma results for the second quarter and first half of fiscal year 2021.

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.

1 unchanged sentence

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 July 26, 2020, are as follows:

Future minimum lease payments under our non-cancelable operating leases as of October 25, 2020, are as follows:

Operating Lease Obligations

(In millions)

2021 (excluding first half of fiscal year 2021) $ 74

2021 (excluding first nine months of fiscal year 2021)

2026 and thereafter

3 unchanged sentences

Long-term operating lease liabilities $ 604

Operating lease expense was $ 35 million and $ 28 million for the second quarter of fiscal years 2021 and 2020, respectively, and $ 67 million and $ 55 million for the first half of fiscal years 2021 and 2020, respectively.

Short-term and variable lease expenses for the second quarter and first half of fiscal years 2021 and 2020 were not significant.

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:

Six Months Ended

July 26, 2020 July 28, 2019

Nine Months Ended

October 25, 2020 October 27, 2019

(In millions)

2 unchanged sentences

Operating lease assets obtained in exchange for lease obligations (1) $ 147 $ 122

(1) The first half of fiscal year 2021 includes $ 80 million of operating lease assets addition due to a business combination.

As of July 26, 2020, our operating leases had a weighted average remaining lease term of 8.0 years and a weighted average discount rate of 3.08 %.

(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 %.

4 unchanged sentences

Our Condensed Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows:

Three Months Ended Six Months Ended

2020 July 28,

2019 July 26,

2020 July 28,

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

(In millions)

11 unchanged sentences

Vested restricted stock ( 6 ) $ 152.46

Balances, July 26, 2020 17 $ 239.22

As of July 26, 2020, there was $ 3.60 billion of aggregate unearned stock-based compensation expense, net of forfeitures.

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.

3 unchanged sentences

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 Six Months Ended

July 26, July 28, July 26, July 28,

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

13 unchanged sentences

Note 6 – Income Taxes

We recognized an income tax benefit of $ 13 million and an income tax expense of $ 52 million for the second quarter and first half of fiscal year 2021, respectively, and an income tax expense of $ 54 million and $ 48 million for the second quarter and first half of fiscal year 2020, respectively.

The income tax benefit as a percentage of income before income tax was 2.0 % for the second quarter of fiscal year 2021.

The income tax expense as a percentage of income before income tax was 3.3 % for the first half of fiscal year 2021, and 8.8 % and 4.9 % for the second quarter and first half of fiscal year 2020, respectively.

The decrease in our effective tax rate for the second quarter and first half 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 and the U.S.

federal research tax credit.

Our effective tax rates for the first half of fiscal years 2021 and 2020 were lower than the U.S.

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, tax benefits related to stock-based compensation, and the benefit of the U.S.

federal research tax credit.

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.

3 unchanged sentences

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 of July 26, 2020, we intend to indefinitely reinvest approximately $ 675 million of cumulative undistributed earnings held by Mellanox non-U.S.

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.

1 unchanged sentence

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)

For the first half 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 benefits and $ 4 million of related interest through the Mellanox acquisition.

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.

1 unchanged sentence

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 July 26, 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.

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 are classified as “available-for-sale” debt securities.

The following is a summary of cash equivalents and marketable securities as of July 26, 2020 and January 26, 2020:

July 26, 2020

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

Cost Unrealized

4 unchanged sentences

(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

Money market funds 2,053 — — 2,053 2,053 —

Debt securities issued by the United States Treasury 1,956 — — 1,956 — 1,956

Certificates of deposit 797 — — 797 29 768

Money market funds 388 — — 388 388 —

Foreign government bonds 117 — — 117 48 69

16 unchanged sentences

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 July 26, 2020 and January 26, 2020 are shown below by contractual maturity.

July 26, 2020 January 26, 2020

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

9 unchanged sentences

Fair Value at

Pricing Category July 26, 2020 January 26, 2020

Pricing Category October 25, 2020 January 26, 2020

(In millions)

1 unchanged sentence

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

Debt securities issued by the United States Treasury Level 2 $ 1,956 $ 1,358

Certificates of deposit Level 2 $ 797 $ 27

Foreign government bonds Level 2 $ 117 $ 200

Asset-backed securities Level 2 $ — $ 1

Investment in non-affiliated entities (1) Level 3 $ 106 $ 77

13 unchanged sentences

(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 July 26, 2020 has not been significant.

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.

4 unchanged sentences

The components of our amortizable intangible assets are as follows:

July 26, 2020 January 26, 2020

October 25, 2020 January 26, 2020

Amount Accumulated

6 unchanged sentences

Total intangible assets $ 3,992 $ ( 1,131 ) $ 2,861 $ 715 $ ( 666 ) $ 49

(1) As of July 26, 2020, acquisition-related intangible assets include the fair value of a Mellanox IPR&D project of $ 630 million, which initially will not be amortized.

(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 $ 284 million and $ 291 million for the second quarter and first half of fiscal year 2021, respectively, and $ 6 million and $ 13 million for the second quarter and first half of fiscal year 2020, respectively.

Future amortization expense related to the net carrying amount of intangible assets as of July 26, 2020 is estimated to be $ 316 million for the remainder of fiscal year 2021, $ 532 million in fiscal year 2022, $ 529 million in fiscal year 2023, $ 407 million in fiscal year 2024, $ 354 million in fiscal year 2025, and $ 716 million in fiscal year 2026 and thereafter.

Refer to Note 2 of these Notes to Condensed Consolidated Financial Statements for further details on acquisition-related intangible assets.

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:

July 26, January 26,

October 25, January 26,

(In millions)

3 unchanged sentences

Total inventories $ 1,495 $ 979

October 25, January 26,

Other assets:

(In millions)

Advanced consideration for acquisition (1) $ 1,357 $ —

Prepaid royalties (1) 446 1

Investment in non-affiliated entities 106 77

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)

July 26, January 26,

October 25, January 26,

Accrued and Other Current Liabilities:

3 unchanged sentences

Deferred revenue (1) 235 141

Operating leases 124 91

Licenses and royalties 124 66

Coupon interest on debt obligations 74 20

Operating leases 116 91

Taxes payable 70 61

1 unchanged sentence

Professional service fee 28 18

Coupon interest on debt obligations 19 20

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.

July 26, January 26,

October 25, January 26,

Other Long-Term Liabilities:

6 unchanged sentences

Total other long-term liabilities $ 1,311 $ 775

(1) As of July 26, 2020, income tax payable represents the long-term portion of the one-time transition tax payable of $ 284 million, unrecognized tax benefits of $ 245 million, related interest and penalties of $ 41 million, and other foreign long-term tax payable of $ 151 million.

(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.

1 unchanged sentence

Deferred Revenue

The following table shows the changes in deferred revenue during the first half of fiscal years 2021 and 2020:

July 26, July 28,

The following table shows the changes in deferred revenue during the first nine months of fiscal years 2021 and 2020:

October 25, October 27,

(In millions)

8 unchanged sentences

This includes related deferred revenue currently recorded and amounts that will be invoiced in future periods.

As of July 26, 2020, the amount of our remaining performance obligations that has not been recognized as revenue was $ 670 million, of which we expect to recognize approximately 40 % as revenue over the next twelve months and the remainder thereafter.

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.

3 unchanged sentences

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 July 26, 2020 and January 26, 2020.

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.

2 unchanged sentences

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 July 26, 2020 and January 26, 2020:

The table below presents the notional value of our foreign currency forward contracts outstanding as of October 25, 2020 and January 26, 2020:

2020 January 26,

2 unchanged sentences

Not designated for hedge accounting $ 352 $ 287

As of July 26, 2020, all designated foreign currency forward contracts mature within eighteen months .

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 half 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.

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.

5 unchanged sentences

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 estimated issuance costs.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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 2021 on or after August 16, 2021, or for redemptions of the Notes Due 2026 on or after June 16, 2026.

However, no make-

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

4 unchanged sentences

Remaining Term (years)

Interest Rate July 26, 2020 January 26, 2020

Interest Rate October 25, 2020 January 26, 2020

(In millions)

13 unchanged sentences

Net carrying amount $ 6,961 $ 1,991

As of July 26, 2020, we were in compliance with the required covenants under the Notes.

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 July 26, 2020, we had no t borrowed any amounts and were in compliance with the required covenants under this agreement.

As of October 25, 2020, we had no t 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 July 26, 2020, we had no t issued any commercial paper.

As of October 25, 2020, we had no t issued any commercial paper.

Note 13 - Commitments and Contingencies

Purchase Obligations

As of July 26, 2020, we had outstanding inventory purchase obligations totaling $ 2.04 billion and other purchase obligations totaling $ 310 million.

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 July 26, 2020 and January 26, 2020, respectively, and the activities related to the warranty liabilities were not significant.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

2 unchanged sentences

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)

Securities Class Action and Derivative Lawsuits

On December 21, 2018, a purported securities class action lawsuit was filed in the United States District Court for the Northern District of California, captioned Iron Workers Joint Funds v.

Nvidia Corporation, et al.

18-cv-7669), naming as defendants NVIDIA and certain of NVIDIA’s officers.

On December 28, 2018, a substantially similar purported securities class action was commenced in the Northern District of California, captioned Oto v.

Nvidia Corporation, et al.

18-cv-07783), naming the same defendants, and seeking substantially similar relief.

On February 19, 2019, a number of shareholders filed motions to consolidate the two cases and to be appointed lead plaintiff and for their respective counsel to be appointed lead counsel.

On March 12, 2019, the two cases were consolidated under case number 4:18-cv-07669-HSG and titled In Re NVIDIA Corporation Securities Litigation.

On May 2, 2019, the Court appointed lead plaintiffs and lead counsel.

On June 21, 2019, the lead plaintiffs filed a consolidated class action complaint.

The consolidated complaint asserts that the defendants 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.

The plaintiffs also allege that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act.

The 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 August 2, 2019, NVIDIA moved to dismiss the consolidated class action complaint on the basis that plaintiffs failed to state any claims for violations of the securities laws by NVIDIA or the named defendants.

On March 16, 2020, the Court issued an order dismissing the consolidated class action complaint with leave to amend.

The plaintiffs filed an amended complaint on May 13, 2020.

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 named defendants.

On January 18, 2019, a shareholder, purporting to act on behalf of NVIDIA, filed a derivative lawsuit in the Northern District of California, captioned Han v.

Huang, et al.

19-cv-00341), seeking to assert claims on behalf of NVIDIA against the members of NVIDIA’s board of directors and certain officers.

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 plaintiff is seeking unspecified damages and other relief, including reforms and improvements to NVIDIA’s corporate governance and internal procedures.

On February 12, 2019, a substantially similar derivative lawsuit was filed in the Northern District of California captioned Yang v.

19-cv-00766), naming the same named defendants, and seeking the same relief.

On February 19, 2019, a third substantially similar derivative lawsuit was filed in the Northern District of California captioned The Booth Family Trust v.

3:19-cv-00876), naming the same named defendants, and seeking substantially the same relief.

On March 12, 2019, the three derivative actions were consolidated under case number 4:19-cv-00341-HSG, and titled In re NVIDIA Corporation Consolidated Derivative Litigation.

The Court approved the parties’ stipulation to stay the In Re NVIDIA Corporation Consolidated Derivative Litigation pending resolution of any motion to dismiss that NVIDIA may file in the In Re NVIDIA Corporation Securities Litigation.

On September 24, 2019, two shareholders, purporting to act on behalf of NVIDIA, filed two identical lawsuits in the District of Delaware.

One is captioned Lipchitz v.

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.

1:19-cv-01795-UNA) and the other is captioned Nelson v.

1:19-cv-01798- UNA).

1:19-cv-01795-UNA) and Nelson v.

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.

On December 11, 2019, the Court approved the parties’ stipulation to stay the Lipchitz and Huang actions pending resolution of any motion to dismiss that NVIDIA may file in the In Re NVIDIA Corporation Securities Litigation.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 July 26, 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.

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.

3 unchanged sentences

Beginning August 2004, our Board of Directors authorized us to repurchase our stock.

Through July 26, 2020, we have repurchased an aggregate of 260 million shares under our share repurchase program for a total cost of $ 7.08 billion.

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 July 26, 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 second quarter and first half of fiscal year 2021, we paid $ 99 million and $ 197 million in cash dividends to our shareholders, respectively.

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)

Note 15 - Segment Information

21 unchanged sentences

There is no intersegment revenue.

The accounting policies for segment reporting are the

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

same as for our consolidated financial statements.

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.

1 unchanged sentence

(In millions)

Three Months Ended July 26, 2020

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 July 28, 2019

Three Months Ended October 27, 2019

Revenue $ 2,226 $ 788 $ — $ 3,014

Operating income (loss) $ 1,068 $ 158 $ ( 299 ) $ 927

Six Months Ended July 26, 2020

Nine Months Ended October 25, 2020

Revenue $ 6,778 $ 4,894 $ — $ 11,672

Operating income (loss) $ 3,092 $ 1,880 $ ( 1,947 ) $ 3,025

Six Months Ended July 28, 2019

Nine Months Ended October 27, 2019

Revenue $ 5,555 $ 2,258 $ — $ 7,813

Operating income (loss) $ 2,307 $ 418 $ ( 869 ) $ 1,856

Three Months Ended Six Months Ended

2020 July 28,

2019 July 26,

2020 July 28,

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

(In millions)

Reconciling items included in "All Other" category:

Acquisition-related and other costs $ ( 474 ) $ ( 5 ) $ ( 479 ) $ ( 15 )

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 )

1 unchanged sentence

Total $ ( 685 ) $ ( 299 ) $ ( 1,947 ) $ ( 869 )

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Six Months Ended

July 26, July 28, July 26, July 28,

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

1 unchanged sentence

Taiwan $ 1,296 $ 838 $ 3,062 $ 2,171

United States 944 188 1,441 353

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

2 unchanged sentences

The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:

Three Months Ended Six Months Ended

July 26, July 28, July 26, July 28,

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

6 unchanged sentences

Total revenue $ 4,726 $ 3,014 $ 11,672 $ 7,813

No customer represented 10% or more of total revenue for the second quarter and first half of fiscal year 2021.

One customer represented 11 % of our total revenue for the second quarter and first half of fiscal year 2020, and was attributable primarily to the Graphics segment.

One customer represented 14 % and 21 % of our accounts receivable balance as of July 26, 2020 and January 26, 2020, respectively.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2 unchanged sentences

We determined there was no goodwill impairment immediately prior to the reorganization.

As of July 26, 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 second quarter and first half of fiscal

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

year 2021, goodwill increased by $ 3.56 billion and $ 3.57 billion, respectively.

The increase in goodwill in the second quarter 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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements