Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
2022 2021 2022 2021
Revenue $ 5,931 $ 7,103 $ 20,923 $ 19,271
Cost of revenue 2,754 2,472 9,400 6,795
Gross profit 3,177 4,631 11,523 12,476
Operating expenses
Research and development 1,945 1,403 5,387 3,802
Sales, general and administrative 631 557 1,815 1,603
Acquisition termination cost
— — 1,353 —
Total operating expenses 2,576 1,960 8,555 5,405
Income from operations 601 2,671 2,968 7,071
Interest income 88 7 152 20
Interest expense ( 65 ) ( 62 ) ( 198 ) ( 175 )
Other, net ( 11 ) 22 ( 29 ) 160
Other income (expense), net
12 ( 33 ) ( 75 ) 5
Income before income tax 613 2,638 2,893 7,076
Income tax expense (benefit) ( 67 ) 174 ( 61 ) 327
Net income $ 680 $ 2,464 $ 2,954 $ 6,749
Net income per share:
Basic $ 0.27 $ 0.99 $ 1.18 $ 2.71
Diluted $ 0.27 $ 0.97 $ 1.17 $ 2.67
Weighted average shares used in per share computation:
Basic 2,483 2,499 2,495 2,493
Diluted 2,499 2,538 2,517 2,532
See accompanying Notes to Condensed Consolidated Financial Statements.
3
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
2022 2021 2022 2021
Net income $ 680 $ 2,464 $ 2,954 $ 6,749
Other comprehensive income (loss), net of tax
Available-for-sale securities:
Net change in unrealized loss ( 18 ) ( 4 ) ( 53 ) ( 5 )
Reclassification adjustments for net realized gain included in net income — — 1 —
Net change in unrealized loss ( 18 ) ( 4 ) ( 52 ) ( 5 )
Cash flow hedges:
Net unrealized gain (loss) ( 14 ) 22 ( 44 ) ( 5 )
Reclassification adjustments for net realized loss included in net income ( 1 ) ( 17 ) ( 16 ) —
Net change in unrealized gain (loss) ( 15 ) 5 ( 60 ) ( 5 )
Other comprehensive income (loss), net of tax ( 33 ) 1 ( 112 ) ( 10 )
Total comprehensive income $ 647 $ 2,465 $ 2,842 $ 6,739
See accompanying Notes to Condensed Consolidated Financial Statements.
4
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
October 30, January 30,
2022 2022
ASSETS
Current assets:
Cash and cash equivalents $ 2,800 $ 1,990
Marketable securities 10,343 19,218
Accounts receivable, net 4,908 4,650
Inventories 4,454 2,605
Prepaid expenses and other current assets 718 366
Total current assets 23,223 28,829
Property and equipment, net 3,774 2,778
Operating lease assets 927 829
Goodwill 4,372 4,349
Intangible assets, net 1,850 2,339
Deferred income tax assets 2,762 1,222
Other assets 3,580 3,841
Total assets $ 40,488 $ 44,187
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,491 $ 1,783
Accrued and other current liabilities 4,115 2,552
Short-term debt 1,249 —
Total current liabilities 6,855 4,335
Long-term debt 9,701 10,946
Long-term operating lease liabilities 798 741
Other long-term liabilities 1,785 1,553
Total liabilities 19,139 17,575
Commitments and contingencies - see Note 13
Shareholders’ equity:
Preferred stock — —
Common stock 2 3
Additional paid-in capital 11,565 10,385
Accumulated other comprehensive loss ( 123 ) ( 11 )
Retained earnings 9,905 16,235
Total shareholders' equity 21,349 26,612
Total liabilities and shareholders' equity $ 40,488 $ 44,187
See accompanying Notes to Condensed Consolidated Financial Statements.
5
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 30, 2022 AND OCTOBER 31, 2021
(Unaudited)
Common Stock
Outstanding
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, July 31, 2022 2,489 $ 2 $ 10,968 $ — $ ( 90 ) $ 12,971 $ 23,851
Net income — — — — — 680 680
Other comprehensive loss — — — — ( 33 ) — ( 33 )
Issuance of common stock from stock plans 9 — 143 — — — 143
Tax withholding related to vesting of restricted stock units ( 2 ) — ( 294 ) — — — ( 294 )
Shares repurchased ( 28 ) — ( 1 ) — — ( 3,646 ) ( 3,647 )
Cash dividends declared and paid ($ 0.04 per common share)
— — — — — ( 100 ) ( 100 )
Stock-based compensation — — 749 — — — 749
Balances, October 30, 2022 2,468 $ 2 $ 11,565 $ — $ ( 123 ) $ 9,905 $ 21,349
Balances, August 1, 2021 2,496 $ 3 $ 9,745 $ ( 11,604 ) $ 8 $ 22,995 $ 21,147
Net income — — — — — 2,464 2,464
Other comprehensive income — — — — 1 — 1
Issuance of common stock from stock plans 8 — 150 — — — 150
Tax withholding related to vesting of restricted stock units ( 2 ) — — ( 434 ) — — ( 434 )
Cash dividends declared and paid ($ 0.04 per common share)
— — — — — ( 100 ) ( 100 )
Fair value of partially vested equity awards assumed in connection with acquisitions — — 18 — — — 18
Stock-based compensation — — 552 — — — 552
Balances, October 31, 2021 2,502 $ 3 $ 10,465 $ ( 12,038 ) $ 9 $ 25,359 $ 23,798
See accompanying Notes to Condensed Consolidated Financial Statements.
6
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 30, 2022 AND OCTOBER 31, 2021
(Unaudited)
Common Stock
Outstanding
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, January 30, 2022 2,506 $ 3 $ 10,385 $ — $ ( 11 ) $ 16,235 $ 26,612
Net income — — — — — 2,954 2,954
Other comprehensive loss — — — — ( 112 ) — ( 112 )
Issuance of common stock from stock plans 24 — 349 — — — 349
Tax withholding related to vesting of restricted stock units ( 6 ) — ( 1,131 ) — — — ( 1,131 )
Shares repurchased ( 56 ) ( 1 ) ( 3 ) — — ( 8,984 ) ( 8,988 )
Cash dividends declared and paid ($ 0.12 per common share)
— — — — — ( 300 ) ( 300 )
Stock-based compensation — — 1,965 — — — 1,965
Balances, October 30, 2022 2,468 $ 2 $ 11,565 $ — $ ( 123 ) $ 9,905 $ 21,349
Balances, January 31, 2021 2,479 $ 3 $ 8,719 $ ( 10,756 ) $ 19 $ 18,908 $ 16,893
Net income — — — — — 6,749 6,749
Other comprehensive loss — — — — ( 10 ) — ( 10 )
Issuance of common stock from stock plans 30 — 277 — — — 277
Tax withholding related to vesting of restricted stock units ( 7 ) — — ( 1,282 ) — — ( 1,282 )
Cash dividends declared and paid ($ 0.12 per common share)
— — — — — ( 298 ) ( 298 )
Fair value of partially vested equity awards assumed in connection with acquisitions — — 18 — — — 18
Stock-based compensation — — 1,451 — — — 1,451
Balances, October 31, 2021 2,502 $ 3 $ 10,465 $ ( 12,038 ) $ 9 $ 25,359 $ 23,798
See accompanying Notes to Condensed Consolidated Financial Statements.
7
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
October 30, October 31,
2022 2021
Cash flows from operating activities:
Net income $ 2,954 $ 6,749
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense 1,971 1,453
Acquisition termination cost
1,353 —
Depreciation and amortization 1,118 865
Losses (gains) on investments in non-affiliates, net 35 ( 152 )
Deferred income taxes ( 1,517 ) ( 182 )
Other ( 27 ) 25
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ( 258 ) ( 1,523 )
Inventories ( 1,848 ) ( 400 )
Prepaid expenses and other assets ( 1,307 ) ( 1,557 )
Accounts payable ( 358 ) 385
Accrued and other current liabilities 1,175 159
Other long-term liabilities 102 253
Net cash provided by operating activities 3,393 6,075
Cash flows from investing activities:
Proceeds from maturities of marketable securities 16,792 7,780
Proceeds from sales of marketable securities 1,806 916
Purchases of marketable securities ( 9,764 ) ( 16,020 )
Purchases related to property and equipment and intangible assets ( 1,324 ) ( 703 )
Acquisitions, net of cash acquired ( 49 ) ( 203 )
Investments and other, net ( 83 ) ( 14 )
Net cash provided by (used in) investing activities 7,378 ( 8,244 )
Cash flows from financing activities:
Proceeds related to employee stock plans 349 277
Payments related to repurchases of common stock ( 8,826 ) —
Payments related to tax on restricted stock units ( 1,131 ) ( 1,282 )
Dividends paid ( 300 ) ( 298 )
Principal payments on property and equipment and intangible asset ( 54 ) ( 62 )
Issuance of debt, net of issuance costs — 4,977
Repayment of debt — ( 1,000 )
Other 1 ( 2 )
Net cash provided by (used in) financing activities ( 9,961 ) 2,610
Change in cash and cash equivalents 810 441
Cash and cash equivalents at beginning of period 1,990 847
Cash and cash equivalents at end of period $ 2,800 $ 1,288
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net $ 1,372 $ 313
See accompanying Notes to Condensed Consolidated Financial Statements.
8
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission, or SEC, Regulation S-X. The January 30, 2022 consolidated balance sheet was derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 30, 2022, as filed with the SEC, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair statement of results of operations and financial position, have been included. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 30, 2022.
Significant Accounting Policies
There have been no material changes to our significant accounting policies disclosed in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 30, 2022.
Fiscal Year
We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal years 2023 and 2022 are both 52-week years. The third quarters of fiscal years 2023 and 2022 were both 13-week quarters.
Reclassifications
Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.
Prior period intangible asset gross carrying amount and accumulated amortization in Note 9 have been adjusted to write off immaterial fully amortized intangible assets as of January 30, 2022.
Principles of Consolidation
Our condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Note 2 - Business Combination
Termination of the Arm Share Purchase Agreement
In February 2022, NVIDIA and SoftBank Group Corp, or SoftBank, announced the termination of the Share Purchase Agreement whereby NVIDIA would have acquired Arm Limited from SoftBank. The parties agreed to terminate because of significant regulatory challenges preventing the completion of the transaction. We recorded an acquisition termination cost of $ 1.35 billion in the first quarter of fiscal year 2023 reflecting the write-off of the prepayment provided at signing.
9
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 3 - Leases
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 2023 and 2035.
Future minimum lease payments under our non-cancelable operating leases as of October 30, 2022 are as follows:
Operating Lease Obligations
(In millions)
Fiscal Year:
2023 (excluding first nine months of fiscal year 2023)
$ 50
2024 188
2025 167
2026 149
2027 137
2028 and thereafter
393
Total 1,084
Less imputed interest 130
Present value of net future minimum lease payments 954
Less short-term operating lease liabilities 156
Long-term operating lease liabilities $ 798
In addition to our existing operating lease obligations, we have operating leases, primarily for our data centers, that are expected to commence between the fourth quarter of fiscal year 2023 and fiscal year 2025 with lease terms of 2 to 8 years for $ 647 million.
Operating lease expenses were $ 49 million and $ 44 million for the third quarter of fiscal years 2023 and 2022, respectively, and $ 139 million and $ 125 million for the first nine months of fiscal years 2023 and 2022, respectively. Short-term and variable lease expenses for the third quarter and first nine months of fiscal years 2023 and 2022 were not significant.
Other information related to leases was as follows:
Nine Months Ended
October 30, 2022 October 31, 2021
(In millions)
Supplemental cash flows information
Operating cash flows used for operating leases $ 134 $ 114
Operating lease assets obtained in exchange for lease obligations $ 213 $ 230
As of October 30, 2022, our operating leases had a weighted average remaining lease term of 6.9 years and a weighted average discount rate of 2.82 %. As of January 30, 2022, our operating leases had a weighted average remaining lease term of 7.1 years and a weighted average discount rate of 2.51 %.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 4 - Stock-Based Compensation
Our stock-based compensation expense is associated with restricted stock units, or RSUs, performance stock units that are based on our corporate financial performance targets, or PSUs, performance stock units that are based on market conditions, or market-based PSUs, and our employee stock purchase plan, or ESPP.
Our Condensed Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows:
Three Months Ended Nine Months Ended
October 30,
2022 October 31,
2021 October 30,
2022 October 31,
2021
(In millions)
Cost of revenue $ 32 $ 44 $ 108 $ 102
Research and development 530 363 1,365 935
Sales, general and administrative 183 152 498 416
Total $ 745 $ 559 $ 1,971 $ 1,453
Equity Award Activity
The following is a summary of our equity award transactions under our equity incentive plans:
RSUs, PSUs, and Market-based PSUs Outstanding
Number of Shares Weighted Average Grant-Date Fair Value Per Share
(In millions, except per share data)
Balances, January 30, 2022 46 $ 114.19
Granted 23 $ 185.07
Vested restricted stock ( 18 ) $ 94.82
Canceled and forfeited ( 1 ) $ 137.27
Balances, October 30, 2022 50 $ 153.73
As of October 30, 2022, there was $ 7.19 billion of aggregate unearned stock-based compensation expense. This amount is expected to be recognized over a weighted average period of 2.7 years for RSUs, PSUs, and market-based PSUs, and 1.1 years for ESPP.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5 – Net Income Per Share
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 Nine Months Ended
October 30, October 31, October 30, October 31,
2022 2021 2022 2021
(In millions, except per share data)
Numerator:
Net income
$ 680 $ 2,464 $ 2,954 $ 6,749
Denominator:
Basic weighted average shares
2,483 2,499 2,495 2,493
Dilutive impact of outstanding equity awards
16 39 22 39
Diluted weighted average shares
2,499 2,538 2,517 2,532
Net income per share:
Basic (1)
$ 0.27 $ 0.99 $ 1.18 $ 2.71
Diluted (2)
$ 0.27 $ 0.97 $ 1.17 $ 2.67
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive 36 2 29 21
(1) Calculated as net income divided by basic weighted average shares.
(2) Calculated as net income divided by diluted weighted average shares.
Note 6 – Income Taxes
We recognized an income tax benefit of $ 67 million and $ 61 million for the third quarter and first nine months of fiscal year 2023, respectively, and an income tax expense of $ 174 million and $ 327 million for the third quarter and first nine months of fiscal year 2022, respectively. Income tax as a percentage of income before income tax was a benefit of 10.9 % and 2.1 % for the third quarter and first nine months of fiscal year 2023, respectively, and an expense of 6.6 % and 4.6 % for the third quarter and first nine months of fiscal year 2022, respectively.
The decrease in our effective tax rate for the third quarter and first nine months of fiscal year 2023 as compared to the same periods of fiscal year 2022 was primarily due to the increased tax benefit of the foreign-derived intangible income deduction, stock-based compensation, and the U.S. federal research tax credit, relative to a lower expected profitability. This is partially offset by the impact of an increase in the proportion of earnings subject to U.S. tax in fiscal year 2023 and the one-time discrete benefit from re-valuing certain deferred tax assets in connection with the domestication of one of our foreign subsidiaries, or the Domestication, in fiscal year 2022.
Our effective tax rate for the first nine months of fiscal year 2023 was lower than the U.S. federal statutory rate of 21% due to tax benefits from the foreign-derived intangible income deduction, stock-based compensation and the U.S. federal research tax credit.
Our effective tax rate for the first nine months of fiscal year 2022 was lower than the U.S. federal statutory rate of 21% due to tax benefits from the foreign-derived intangible income deduction, income earned in jurisdictions that are subject to taxes lower than the U.S. federal statutory tax rate, the discrete benefit of the Domestication, and tax benefits related to stock-based compensation and the U.S. federal research tax credit.
For the first nine months of fiscal year 2023, there were 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. Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 30, 2022.
12
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. 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 October 30, 2022, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next 12 months.
Note 7 - Cash Equivalents and Marketable Securities
Our cash equivalents and marketable securities related to debt securities are classified as “available-for-sale” debt securities.
The following is a summary of cash equivalents and marketable securities as of October 30, 2022 and January 30, 2022:
October 30, 2022
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 4,221 $ — $ ( 19 ) $ 4,202 $ 239 $ 3,963
Debt securities issued by the U.S. Treasury 4,176 1 ( 60 ) 4,117 1 4,116
Debt securities issued by U.S. government agencies 2,259 — ( 4 ) 2,255 344 1,911
Certificates of deposit 316 — — 316 58 258
Money market funds 1,843 — — 1,843 1,843 —
Foreign government bonds 99 — — 99 4 95
Total $ 12,914 $ 1 $ ( 83 ) $ 12,832 $ 2,489 $ 10,343
January 30, 2022
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 9,977 $ — $ ( 3 ) $ 9,974 $ 1,102 $ 8,872
Debt securities issued by the U.S. Treasury 7,314 — ( 14 ) 7,300 — 7,300
Debt securities issued by U.S. government agencies 1,612 — — 1,612 256 1,356
Certificates of deposit 1,561 — — 1,561 21 1,540
Money market funds 316 — — 316 316 —
Foreign government bonds 150 — — 150 — 150
Total $ 20,930 $ — $ ( 17 ) $ 20,913 $ 1,695 $ 19,218
The following tables provide the breakdown of unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position:
October 30, 2022
Less than 12 Months 12 Months or Greater Total
Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss
(In millions)
Debt securities issued by the U.S. Treasury $ 1,928 $ ( 35 ) $ 1,051 $ ( 24 ) $ 2,979 $ ( 59 )
Debt securities issued by U.S. government agencies 1,888 ( 4 ) — — 1,888 ( 4 )
Corporate debt securities 1,786 ( 18 ) 208 ( 2 ) 1,994 ( 20 )
Total $ 5,602 $ ( 57 ) $ 1,259 $ ( 26 ) $ 6,861 $ ( 83 )
January 30, 2022
Less than 12 Months 12 Months or Greater Total
Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss
(In millions)
Debt securities issued by the U.S. Treasury $ 5,292 $ ( 14 ) $ — $ — $ 5,292 $ ( 14 )
Corporate debt securities 2,445 ( 3 ) 19 — 2,464 ( 3 )
Total $ 7,737 $ ( 17 ) $ 19 $ — $ 7,756 $ ( 17 )
The gross unrealized losses are related to fixed income securities, driven primarily by changes in interest rates. Net realized 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 October 30, 2022 and January 30, 2022 are shown below by contractual maturity.
October 30, 2022 January 30, 2022
Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value
(In millions)
Less than one year $ 8,985 $ 8,952 $ 16,346 $ 16,343
Due in 1 - 5 years 3,929 3,880 4,584 4,570
Total $ 12,914 $ 12,832 $ 20,930 $ 20,913
13
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 8 – Fair Value of Financial Assets and Liabilities
The fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices of similar assets from active markets. We review fair value hierarchy classification on a quarterly basis.
Fair Value at
Pricing Category October 30, 2022 January 30, 2022
(In millions)
Assets
Cash equivalents and marketable securities:
Money market funds Level 1 $ 1,843 $ 316
Corporate debt securities Level 2 $ 4,202 $ 9,974
Debt securities issued by the U.S. Treasury Level 2 $ 4,117 $ 7,300
Debt securities issued by U.S. government agencies Level 2 $ 2,255 $ 1,612
Certificates of deposit Level 2 $ 316 $ 1,561
Foreign government bonds Level 2 $ 99 $ 150
Other assets (Investment in non-affiliated entities):
Publicly-held equity securities (1) Level 1 $ 27 $ 58
Privately-held equity securities Level 3 $ 287 $ 208
Liabilities (2)
0.309 % Notes Due 2023
Level 2 $ 1,217 $ 1,236
0.584 % Notes Due 2024
Level 2 $ 1,168 $ 1,224
3.20 % Notes Due 2026
Level 2 $ 945 $ 1,055
1.55 % Notes Due 2028
Level 2 $ 1,036 $ 1,200
2.85 % Notes Due 2030
Level 2 $ 1,281 $ 1,542
2.00 % Notes Due 2031
Level 2 $ 979 $ 1,200
3.50 % Notes Due 2040
Level 2 $ 764 $ 1,066
3.50 % Notes Due 2050
Level 2 $ 1,427 $ 2,147
3.70 % Notes Due 2060
Level 2 $ 344 $ 551
(1) Unrealized losses of $ 11 million and $ 35 million from investments in publicly-traded equity securities were recorded in other income (expense), net, in the third quarter and first nine months of fiscal year 2023, respectively. Unrealized gains of $ 8 million and $ 126 million from an investment in a publicly-traded equity security were recorded in other income (expense), net, in the third quarter and first nine months of fiscal year 2022, respectively.
(2) These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs.
14
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Amortizable Intangible Assets and Goodwill
The components of our amortizable intangible assets are as follows:
October 30, 2022 January 30, 2022
Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount
(In millions)
Acquisition-related intangible assets (1) $ 3,093 $ ( 1,441 ) $ 1,652 $ 3,061 $ ( 947 ) $ 2,114
Patents and licensed technology 442 ( 244 ) 198 446 ( 221 ) 225
Total intangible assets $ 3,535 $ ( 1,685 ) $ 1,850 $ 3,507 $ ( 1,168 ) $ 2,339
(1) During the first quarter of fiscal year 2023, we commenced amortization of a $ 630 million in-process research and development intangible asset related to our acquisition of Mellanox.
Amortization expense associated with intangible assets was $ 181 million and $ 518 million for the third quarter and first nine months of fiscal year 2023, respectively, and $ 143 million and $ 418 million for the third quarter and first nine months of fiscal year 2022, respectively. Future amortization expense related to the net carrying amount of intangible assets as of October 30, 2022 is estimated to be $ 181 million for the remainder of fiscal year 2023, $ 600 million in fiscal year 2024, $ 538 million in fiscal year 2025, $ 244 million in fiscal year 2026, $ 141 million in fiscal year 2027, and $ 146 million in fiscal year 2028 and thereafter.
In the first nine months of fiscal year 2023, goodwill increased by $ 23 million and intangible assets increased by $ 33 million from acquisitions. We assigned $ 14 million of the increase in goodwill to our Compute & Networking segment and $ 9 million of the increase to our Graphics segment.
Note 10 - Balance Sheet Components
Certain balance sheet components are as follows:
October 30, January 30,
2022 2022
Inventories: (In millions)
Raw materials $ 1,936 $ 791
Work in-process 788 692
Finished goods 1,730 1,122
Total inventories $ 4,454 $ 2,605
October 30, January 30,
2022 2022
Other assets: (In millions)
Prepaid supply agreements $ 2,771 $ 1,747
Prepaid royalties 393 409
Investment in non-affiliated entities 314 266
Advanced consideration for acquisition (1) — 1,353
Other 102 66
Total other assets $ 3,580 $ 3,841
(1) Refer to Note 2 - Business Combination for further details on the Arm acquisition.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
October 30, January 30,
2022 2022
Accrued and Other Current Liabilities: (In millions)
Customer program accruals $ 1,394 $ 1,000
Excess inventory purchase obligations 1,181 196
Deferred revenue (1) 338 300
Accrued payroll and related expenses 307 409
Unsettled share repurchases 162 —
Product warranty 104 46
Taxes payable 108 132
Other 521 469
Total accrued and other current liabilities $ 4,115 $ 2,552
(1) Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements, support for hardware and software, and cloud services.
October 30, January 30,
2022 2022
Other Long-Term Liabilities: (In millions)
Income tax payable (1) $ 1,057 $ 980
Deferred income tax 246 245
Deferred revenue (2) 213 202
Other 269 126
Total other long-term liabilities $ 1,785 $ 1,553
(1) As of October 30, 2022, income tax payable represents the long-term portion of the one-time transition tax payable of $ 188 million, unrecognized tax benefits of $ 789 million, and related interest and penalties of $ 80 million. As of January 30, 2022, income tax payable represents the long-term portion of the one-time transition tax payable of $ 251 million, unrecognized tax benefits of $ 670 million, and related interest and penalties of $ 59 million.
(2) Deferred revenue primarily includes deferrals related to support for hardware and software.
Deferred Revenue
The following table shows the changes in deferred revenue during the first nine months of fiscal years 2023 and 2022:
October 30, October 31,
2022 2021
(In millions)
Balance at beginning of period $ 502 $ 451
Deferred revenue additions during the period 577 621
Revenue recognized during the period ( 528 ) ( 583 )
Balance at end of period $ 551 $ 489
Revenue related to remaining performance obligations represents the contracted license and development arrangements and support for hardware and software. This includes deferred revenue currently recorded and amounts that will be invoiced in future periods. As of October 30, 2022, $ 681 million of revenue related to performance obligations had not been recognized, of which we expect to recognize approximately 47 % over the next twelve months and the remainder thereafter. This excludes revenue related to performance obligations for contracts with a length of one year or less.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Derivative Financial Instruments
We enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operating expenses. These contracts are designated as cash flow hedges for hedge accounting treatment. 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 October 30, 2022 and January 30, 2022.
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. dollar. These forward contracts were not designated for hedge accounting treatment. 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 October 30, 2022 and January 30, 2022:
October 30,
2022 January 30,
2022
(In millions)
Designated as cash flow hedges $ 1,139 $ 1,023
Not designated for hedge accounting $ 330 $ 408
As of October 30, 2022, all designated foreign currency forward contracts mature within 18 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 nine months of fiscal years 2023 and 2022, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 12 - Debt
Long-Term Debt
The carrying values of our outstanding notes and their associated interest rates were as follows:
Carrying Value at
Expected
Remaining Term (years)
Effective
Interest Rate October 30, 2022 January 30, 2022
(In millions)
0.309 % Notes Due 2023
0.6 0.41 % $ 1,250 $ 1,250
0.584 % Notes Due 2024
1.6 0.66 % 1,250 1,250
3.20 % Notes Due 2026
3.9 3.31 % 1,000 1,000
1.55 % Notes Due 2028
5.6 1.64 % 1,250 1,250
2.85 % Notes Due 2030
7.4 2.93 % 1,500 1,500
2.00 % Notes Due 2031
8.6 2.09 % 1,250 1,250
3.50 % Notes Due 2040
17.4 3.54 % 1,000 1,000
3.50 % Notes Due 2050
27.4 3.54 % 2,000 2,000
3.70 % Notes Due 2060
37.4 3.73 % 500 500
Unamortized debt discount and issuance costs ( 50 ) ( 54 )
Net carrying amount 10,950 10,946
Less short-term portion ( 1,249 ) —
Total long-term portion $ 9,701 $ 10,946
All our notes are unsecured senior obligations. All existing and future liabilities of our subsidiaries will be effectively senior to the notes. Our notes pay interest semi-annually. We may redeem each of our notes prior to maturity, subject to a make-whole premium as defined in the applicable form of note.
As of October 30, 2022, we have complied with the required covenants under the notes.
Commercial Paper
We have a $ 575 million commercial paper program to support general corporate purposes. As of October 30, 2022, we had no t issued any commercial paper.
Note 13 - Commitments and Contingencies
Purchase Obligations
Our purchase obligations primarily include our commitments to purchase components used to manufacture our products, including long-term supply agreements, certain software and technology licenses, other goods and services and long-lived assets.
We have entered into several long-term supply agreements, under which we have made advance payments and have $ 917 million remaining unpaid. As of October 30, 2022, we had outstanding inventory purchase and long-term supply obligations totaling $ 7.02 billion, inclusive of the $ 917 million. Other non-inventory purchase obligations of $ 2.75 billion include $ 1.59 billion of multi-year cloud service agreements.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Total gross future unconditional purchase commitments as of October 30, 2022 are as follows:
Commitments
(In millions)
Fiscal Year:
2023 (excluding first nine months of fiscal year 2023)
$ 4,234
2024 3,362
2025 798
2026 504
2027 464
2028 and thereafter
410
Total $ 9,772
Accrual for Product Warranty Liabilities
The estimated amount of product warranty liabilities was $ 104 million and $ 46 million as of October 30, 2022 and January 30, 2022, respectively. The estimated product returns and estimated product warranty activity consisted of the following:
Three Months Ended
Nine Months Ended
October 30,
October 31,
October 30,
October 31,
2022 2021
2022 2021
(In millions)
Balance at beginning of period
$ 168 $ 31 $ 46 $ 22
Additions
3 5 141 20
Utilization
( 67 ) ( 4 ) ( 83 ) ( 10 )
Balance at end of period
$ 104 $ 32 $ 104 $ 32
In the third quarter of fiscal year 2023, we recognized a warranty-related benefit of approximately $ 70 million in cost of revenue due to favorable product recovery.
In connection with certain agreements that we have entered in the past, we have provided indemnities for matters such as tax, product, and employee liabilities. We have included intellectual property indemnification provisions in our technology-related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.
Securities Class Action and Derivative Lawsuits
The plaintiffs in the putative securities class action lawsuit, captioned 4:18-cv-07669-HSG, initially filed on December 21, 2018 in the United States District Court for the Northern District of California, and titled In Re NVIDIA Corporation Securities Litigation , filed an amended complaint on May 13, 2020. The amended complaint asserted 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 alleged that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act. Plaintiffs sought 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 March 2, 2021, the district court granted NVIDIA’s motion to dismiss the complaint without leave to amend, entered judgment in favor of NVIDIA and closed the case. On March 30, 2021, plaintiffs filed an appeal from judgment in the United States Court of Appeals for the Ninth Circuit, case number 21-15604. Oral argument on the appeal was held on May 10, 2022.
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 , was stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action. On February 22, 2022, the court administratively closed the case, but stated that it would reopen the case once the appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved. The lawsuit asserts claims, purportedly on behalf of us, against certain officers and directors of the Company 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 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. (Case No. 1:19-cv-01795-UNA) and Nelson v. Huang, et. al. (Case No. 1:19-cv-01798- UNA), remain stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action. The lawsuits assert claims, purportedly on behalf of us, against certain officers and directors of the Company 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.
Accounting for Loss Contingencies
As of October 30, 2022, 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. We are engaged in legal actions not described above arising in the ordinary course of business and, while there can be no assurance of favorable outcomes, we believe that the ultimate outcome of these actions will not have a material adverse effect on our operating results, liquidity or financial position.
Note 14 - Shareholders’ Equity
Capital Return Program
During the third quarter and first nine months of fiscal year 2023, we repurchased 28 million shares for $ 3.65 billion and 56 million shares for $ 8.99 billion, respectively. Since the inception of our share repurchase program through October 30, 2022, we have repurchased an aggregate of 1.10 billion shares for $ 16.07 billion. As of October 30, 2022, we were authorized, subject to certain specifications, to repurchase an additional $ 8.28 billion of shares through December 2023. From October 31, 2022 through November 17, 2022, we repurchased 7 million shares for $ 1.05 billion pursuant to a Rule 10b5-1 trading plan.
During the third quarter and first nine months of fiscal year 2023, we paid $ 100 million and $ 300 million in cash dividends to our shareholders, respectively. During the third quarter and first nine months of fiscal year 2022, we paid $ 100 million and $ 298 million in cash dividends to our shareholders, respectively.
Note 15 - Segment Information
Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making decisions and assessing financial performance.
Our Compute & Networking segment includes Data Center platforms and systems for artificial intelligence, or AI, high-performance computing, and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors, or CMP; Jetson for robotics and other embedded platforms; and NVIDIA AI Enterprise and other software.
Our Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation
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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
graphics; vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building 3D designs and virtual worlds.
Operating results by segment include costs or expenses that are directly attributable to each segment, and costs or expenses that are leveraged across our unified architecture and therefore allocated between our two segments.
The “All Other” category includes the expenses that our CODM does not assign to either Compute & Networking or Graphics for purposes of making operating decisions or assessing financial performance. The expenses include stock-based compensation expense, acquisition-related and other costs, corporate infrastructure and support costs, restructuring costs, acquisition termination cost, IP-related and legal settlement costs, contributions, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.
Our CODM does not review any information regarding total assets on a reportable segment basis. Depreciation and amortization expense directly attributable to each reportable segment is included in operating results for each segment. However, the CODM does not evaluate depreciation and amortization expense by operating segment and, therefore, it is not separately presented. There is no intersegment revenue. 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.
Compute & Networking Graphics All Other Consolidated
(In millions)
Three Months Ended October 30, 2022
Revenue $ 3,816 $ 2,115 $ — $ 5,931
Operating income (loss) $ 1,086 $ 606 $ ( 1,091 ) $ 601
Three Months Ended October 31, 2021
Revenue $ 3,011 $ 4,092 $ — $ 7,103
Operating income (loss) $ 1,332 $ 2,160 $ ( 821 ) $ 2,671
Nine Months Ended October 30, 2022
Revenue $ 11,395 $ 9,528 $ — $ 20,923
Operating income (loss) $ 3,509 $ 3,739 $ ( 4,280 ) $ 2,968
Nine Months Ended October 31, 2021
Revenue $ 7,821 $ 11,450 $ — $ 19,271
Operating income (loss) $ 3,227 $ 6,073 $ ( 2,229 ) $ 7,071
21
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Three Months Ended Nine Months Ended
October 30,
2022 October 31,
2021 October 30,
2022 October 31,
2021
(In millions)
Reconciling items included in "All Other" category:
Stock-based compensation expense $ ( 745 ) $ ( 559 ) $ ( 1,971 ) $ ( 1,453 )
Acquisition-related and other costs ( 174 ) ( 156 ) ( 499 ) ( 482 )
Unallocated cost of revenue and operating expenses ( 156 ) ( 106 ) ( 432 ) ( 286 )
Restructuring costs ( 16 ) — ( 16 ) —
Acquisition termination cost — — ( 1,353 ) —
IP-related and legal settlement costs — — ( 7 ) ( 8 )
Contributions — — ( 2 ) —
Total $ ( 1,091 ) $ ( 821 ) $ ( 4,280 ) $ ( 2,229 )
Revenue by geographic region is allocated to individual countries based on the billing location of the customer. End customer location may be different than our customer’s billing location. The following table summarizes information pertaining to our revenue from customers based on the invoicing address by geographic regions:
Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
2022 2021 2022 2021
(In millions)
Revenue:
United States $ 2,148 $ 1,126 $ 6,069 $ 2,890
Taiwan 1,153 2,187 5,134 5,932
China (including Hong Kong) 1,148 2,017 4,831 5,128
Other countries 1,482 1,773 4,889 5,321
Total revenue $ 5,931 $ 7,103 $ 20,923 $ 19,271
The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:
Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
2022 2021 2022 2021
(In millions)
Revenue:
Data Center $ 3,833 $ 2,936 $ 11,389 $ 7,350
Gaming 1,574 3,221 7,236 9,042
Professional Visualization 200 577 1,318 1,468
Automotive 251 135 609 441
OEM and Other 73 234 371 970
Total revenue $ 5,931 $ 7,103 $ 20,923 $ 19,271
One customer represented 10 % of our total revenue for the third quarter of fiscal year 2023 and was attributable primarily to the Compute & Networking segment. No customer represented 10% or more of total revenue for the first nine months of fiscal year 2023 and for the third quarter and first nine months of fiscal year 2022.
22
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
One customer represented 10% or more of accounts receivable for a total of 12 % of our accounts receivable balance as of October 30, 2022. Two customers each represented 10% or more of accounts receivable for a total of 22 % as of January 30, 2022.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.