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
April 30, May 1,
2023 2022
Revenue $ 7,192 $ 8,288
Cost of revenue 2,544 2,857
Gross profit 4,648 5,431
Operating expenses
Research and development 1,875 1,618
Sales, general and administrative 633 592
Acquisition termination cost
— 1,353
Total operating expenses 2,508 3,563
Income from operations 2,140 1,868
Interest income 150 18
Interest expense ( 66 ) ( 68 )
Other, net ( 15 ) ( 13 )
Other income (expense), net
69 ( 63 )
Income before income tax 2,209 1,805
Income tax expense 166 187
Net income $ 2,043 $ 1,618
Net income per share:
Basic $ 0.83 $ 0.65
Diluted $ 0.82 $ 0.64
Weighted average shares used in per share computation:
Basic 2,470 2,506
Diluted 2,490 2,537
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
April 30, May 1,
2023 2022
Net income $ 2,043 $ 1,618
Other comprehensive loss, net of tax
Available-for-sale securities:
Net change in unrealized gain (loss) 17 ( 22 )
Cash flow hedges:
Net unrealized loss ( 13 ) ( 29 )
Reclassification adjustments for net realized loss included in net income ( 11 ) ( 2 )
Net change in unrealized loss ( 24 ) ( 31 )
Other comprehensive loss, net of tax ( 7 ) ( 53 )
Total comprehensive income $ 2,036 $ 1,565
See accompanying Notes to Condensed Consolidated Financial Statements.
4
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
April 30, January 29,
2023 2023
ASSETS
Current assets:
Cash and cash equivalents $ 5,079 $ 3,389
Marketable securities 10,241 9,907
Accounts receivable, net 4,080 3,827
Inventories 4,611 5,159
Prepaid expenses and other current assets 872 791
Total current assets 24,883 23,073
Property and equipment, net 3,740 3,807
Operating lease assets 1,094 1,038
Goodwill 4,430 4,372
Intangible assets, net 1,541 1,676
Deferred income tax assets 4,568 3,396
Other assets 4,204 3,820
Total assets $ 44,460 $ 41,182
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,141 $ 1,193
Accrued and other current liabilities 4,869 4,120
Short-term debt 1,250 1,250
Total current liabilities 7,260 6,563
Long-term debt 9,704 9,703
Long-term operating lease liabilities 939 902
Other long-term liabilities 2,037 1,913
Total liabilities 19,940 19,081
Commitments and contingencies - see Note 13
Shareholders’ equity:
Preferred stock — —
Common stock 2 2
Additional paid-in capital 12,453 11,971
Accumulated other comprehensive loss ( 50 ) ( 43 )
Retained earnings 12,115 10,171
Total shareholders' equity 24,520 22,101
Total liabilities and shareholders' equity $ 44,460 $ 41,182
See accompanying Notes to Condensed Consolidated Financial Statements.
5
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 2023 AND MAY 1, 2022
(Unaudited)
Common Stock
Outstanding Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders' Equity
(In millions, except per share data) Shares Amount
Balances, January 29, 2023 2,466 $ 2 $ 11,971 $ ( 43 ) $ 10,171 $ 22,101
Net income — — — — 2,043 2,043
Other comprehensive loss — — — ( 7 ) — ( 7 )
Issuance of common stock from stock plans 9 — 246 — — 246
Tax withholding related to vesting of restricted stock units ( 2 ) — ( 507 ) — — ( 507 )
Cash dividends declared and paid ($ 0.04 per common share)
— — — — ( 99 ) ( 99 )
Stock-based compensation — — 743 — — 743
Balances, April 30, 2023 2,473 $ 2 $ 12,453 $ ( 50 ) $ 12,115 $ 24,520
Balances, January 30, 2022 2,506 $ 3 $ 10,385 $ ( 11 ) $ 16,235 $ 26,612
Net income — — — — 1,618 1,618
Other comprehensive loss — — — ( 53 ) — ( 53 )
Issuance of common stock from stock plans 9 — 204 — — 204
Tax withholding related to vesting of restricted stock units ( 2 ) — ( 538 ) — — ( 538 )
Shares repurchased ( 9 ) — ( 1 ) — ( 1,995 ) ( 1,996 )
Cash dividends declared and paid ($ 0.04 per common share)
— — — — ( 100 ) ( 100 )
Stock-based compensation — — 573 — — 573
Balances, May 1, 2022 2,504 $ 3 $ 10,623 $ ( 64 ) $ 15,758 $ 26,320
See accompanying Notes to Condensed Consolidated Financial Statements.
6
NVIDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
April 30, May 1,
2023 2022
Cash flows from operating activities:
Net income $ 2,043 $ 1,618
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense 735 578
Depreciation and amortization 384 334
Losses on investments in non-affiliates 14 17
Deferred income taxes ( 1,135 ) ( 542 )
Acquisition termination cost
— 1,353
Other ( 34 ) 23
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ( 252 ) ( 788 )
Inventories 566 ( 560 )
Prepaid expenses and other assets ( 215 ) ( 1,261 )
Accounts payable 11 255
Accrued and other current liabilities 689 634
Other long-term liabilities 105 70
Net cash provided by operating activities 2,911 1,731
Cash flows from investing activities:
Proceeds from maturities of marketable securities 2,512 5,947
Proceeds from sales of marketable securities — 1,029
Purchases of marketable securities ( 2,801 ) ( 3,932 )
Purchases related to property and equipment and intangible assets ( 248 ) ( 361 )
Acquisitions, net of cash acquired ( 83 ) ( 36 )
Investments and other, net ( 221 ) ( 35 )
Net cash provided by (used in) investing activities ( 841 ) 2,612
Cash flows from financing activities:
Proceeds related to employee stock plans 246 204
Payments related to tax on restricted stock units ( 507 ) ( 532 )
Dividends paid ( 99 ) ( 100 )
Principal payments on property and equipment and intangible assets ( 20 ) ( 22 )
Payments related to repurchases of common stock — ( 1,996 )
Net cash used in financing activities ( 380 ) ( 2,446 )
Change in cash and cash equivalents 1,690 1,897
Cash and cash equivalents at beginning of period 3,389 1,990
Cash and cash equivalents at end of period $ 5,079 $ 3,887
See accompanying Notes to Condensed Consolidated Financial Statements.
7
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 29, 2023 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 29, 2023, 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 29, 2023.
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 29, 2023.
Fiscal Year
We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal years 2024 and 2023 are both 52-week years. The first quarters of fiscal years 2024 and 2023 were both 13-week quarters.
Reclassifications
Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.
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.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from our estimates. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, property, plant, and equipment, and other contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.
In February 2023, we completed an assessment of the useful lives of our property, plant, and equipment. Based on advances in technology and usage rate, we increased the estimated useful life of a majority of our server, storage, and network equipment from three to a range of four to five years , and our assembly and test equipment from five to seven years . This change in accounting estimate became effective at the beginning of fiscal year 2024. Based on the carrying amounts of a majority of our server, storage, network, and assembly and test equipment, net, in use as of the end of fiscal year 2023, the effect of this change in estimate for the three months ended April 30, 2023, was a benefit of $ 2 million and $ 31 million for cost of revenue and operating expenses, respectively. This resulted in an increase in operating income of $ 33 million and net income of $ 28 million after tax, or $ 0.01 per both basic and diluted share.
8
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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, or Arm, from SoftBank. The parties agreed to terminate due to significant regulatory challenges preventing the completion of the transaction. We recorded an acquisition termination cost of $ 1.35 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.
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 2024 and 2035.
Future minimum lease payments under our non-cancelable operating leases as of April 30, 2023 are as follows:
Operating Lease Obligations
(In millions)
Fiscal Year:
2024 (excluding first quarter)
$ 178
2025 218
2026 196
2027 180
2028 159
2029 and thereafter
357
Total 1,288
Less imputed interest 162
Present value of net future minimum lease payments 1,126
Less short-term operating lease liabilities 187
Long-term operating lease liabilities $ 939
In addition, we have operating leases, primarily for our data centers, that are expected to commence between the second quarter of fiscal year 2024 and fiscal year 2025 with lease terms of 2 to 8 years for $ 361 million.
Operating lease expenses were $ 59 million and $ 44 million for the first quarter of fiscal years 2024 and 2023, respectively. Short-term and variable lease expenses for the first quarter of fiscal years 2024 and 2023 were not significant.
Other information related to leases was as follows:
Three Months Ended
April 30, 2023 May 1, 2022
(In millions)
Supplemental cash flows information
Operating cash flows used for operating leases $ 61 $ 45
Operating lease assets obtained in exchange for lease obligations $ 106 $ 62
9
As of April 30, 2023, our operating leases had a weighted average remaining lease term of 6.6 years and a weighted average discount rate of 3.33 %. As of January 29, 2023, our operating leases had a weighted average remaining lease term of 6.8 years and a weighted average discount rate of 3.21 %.
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
April 30,
2023 May 1,
2022
(In millions)
Cost of revenue $ 27 $ 38
Research and development 524 384
Sales, general and administrative 184 156
Total $ 735 $ 578
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 29, 2023 45 $ 158.45
Granted 2 $ 226.08
Vested restricted stock ( 6 ) $ 115.99
Canceled and forfeited ( 1 ) $ 199.37
Balances, April 30, 2023 40 $ 167.07
As of April 30, 2023, there was $ 6.55 billion of aggregate unearned stock-based compensation expense. This amount is expected to be recognized over a weighted average period of 2.5 years for RSUs, PSUs, and market-based PSUs, and 1.1 years for ESPP.
10
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
April 30, May 1,
2023 2022
(In millions, except per share data)
Numerator:
Net income
$ 2,043 $ 1,618
Denominator:
Basic weighted average shares
2,470 2,506
Dilutive impact of outstanding equity awards 20 31
Diluted weighted average shares
2,490 2,537
Net income per share:
Basic (1)
$ 0.83 $ 0.65
Diluted (2)
$ 0.82 $ 0.64
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive 4 3
(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
Income tax expense was $ 166 million and $ 187 million for the first quarter of fiscal years 2024 and 2023, respectively. The income tax expense as a percentage of income before income tax was 7.5 % and 10.3 % for the first quarter of fiscal years 2024 and 2023, respectively.
The decrease in the effective tax rate was primarily due to the tax impact of the Arm acquisition termination cost recorded in the first quarter of fiscal year 2023, which did not result in a tax benefit, and the increased impact of tax benefits from stock-based compensation, partially offset by decreased tax benefits impact from the foreign-derived intangible income deduction and the U.S. federal research tax credit.
Our effective tax rates for the first quarter of fiscal years 2024 and 2023 were 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.
For the first quarter of fiscal year 2024, 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 29, 2023.
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 April 30, 2023, 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.
11
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:
April 30, 2023
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 6,723 $ 4 $ ( 11 ) $ 6,716 $ 2,535 $ 4,181
Debt securities issued by the U.S. Treasury 3,996 2 ( 31 ) 3,967 421 3,546
Debt securities issued by U.S. government agencies 2,442 1 ( 1 ) 2,442 199 2,243
Money market funds 1,502 — — 1,502 1,502 —
Certificates of deposit 395 — — 395 173 222
Foreign government bonds 49 — — 49 — 49
Total $ 15,107 $ 7 $ ( 43 ) $ 15,071 $ 4,830 $ 10,241
January 29, 2023
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 4,809 $ — $ ( 12 ) $ 4,797 $ 1,087 $ 3,710
Debt securities issued by the U.S. Treasury 4,185 1 ( 44 ) 4,142 — 4,142
Debt securities issued by U.S. government agencies 1,836 — ( 2 ) 1,834 50 1,784
Money market funds 1,777 — — 1,777 1,777 —
Certificates of deposit 365 — — 365 134 231
Foreign government bonds 140 — — 140 100 40
Total $ 13,112 $ 1 $ ( 58 ) $ 13,055 $ 3,148 $ 9,907
12
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:
April 30, 2023
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 $ 1,601 $ ( 11 ) $ 1,106 $ ( 20 ) $ 2,707 $ ( 31 )
Debt securities issued by U.S. government agencies 1,259 ( 1 ) — — 1,259 ( 1 )
Corporate debt securities 945 ( 4 ) 838 ( 7 ) 1,783 ( 11 )
Total $ 3,805 $ ( 16 ) $ 1,944 $ ( 27 ) $ 5,749 $ ( 43 )
January 29, 2023
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 $ 2,444 $ ( 21 ) $ 1,172 $ ( 23 ) $ 3,616 $ ( 44 )
Corporate debt securities 1,188 ( 7 ) 696 ( 5 ) 1,884 ( 12 )
Debt securities issued by U.S. government agencies 1,307 ( 2 ) — — 1,307 ( 2 )
Total $ 4,939 $ ( 30 ) $ 1,868 $ ( 28 ) $ 6,807 $ ( 58 )
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 are shown below by contractual maturity.
April 30, 2023 January 29, 2023
Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value
(In millions)
Less than one year $ 12,654 $ 12,625 $ 9,738 $ 9,708
Due in 1 - 5 years 2,453 2,446 3,374 3,347
Total $ 15,107 $ 15,071 $ 13,112 $ 13,055
13
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 April 30, 2023 January 29, 2023
(In millions)
Assets
Cash equivalents and marketable securities:
Money market funds Level 1 $ 1,502 $ 1,777
Corporate debt securities Level 2 $ 6,716 $ 4,797
Debt securities issued by the U.S. Treasury Level 2 $ 3,967 $ 4,142
Debt securities issued by U.S. government agencies Level 2 $ 2,442 $ 1,834
Certificates of deposit Level 2 $ 395 $ 365
Foreign government bonds Level 2 $ 49 $ 140
Other assets (Investment in non-affiliated entities):
Publicly-held equity securities (1) Level 1 $ 9 $ 11
Privately-held equity securities Level 3 $ 496 $ 288
Liabilities (2)
0.309 % Notes Due 2023
Level 2 $ 1,243 $ 1,230
0.584 % Notes Due 2024
Level 2 $ 1,197 $ 1,185
3.20 % Notes Due 2026
Level 2 $ 976 $ 966
1.55 % Notes Due 2028
Level 2 $ 1,112 $ 1,099
2.85 % Notes Due 2030
Level 2 $ 1,375 $ 1,364
2.00 % Notes Due 2031
Level 2 $ 1,062 $ 1,044
3.50 % Notes Due 2040
Level 2 $ 862 $ 870
3.50 % Notes Due 2050
Level 2 $ 1,633 $ 1,637
3.70 % Notes Due 2060
Level 2 $ 403 $ 410
(1) Unrealized losses of $ 14 million and $ 24 million from investments in publicly-traded equity securities were recorded in other income (expense), net, in the first quarter of fiscal years 2024 and 2023, 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
Note 9 - Amortizable Intangible Assets and Goodwill
The components of our amortizable intangible assets are as follows:
April 30, 2023 January 29, 2023
Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net Carrying
Amount
(In millions)
Acquisition-related intangible assets $ 3,112 $ ( 1,780 ) $ 1,332 $ 3,093 $ ( 1,614 ) $ 1,479
Patents and licensed technology 460 ( 251 ) 209 446 ( 249 ) 197
Total intangible assets $ 3,572 $ ( 2,031 ) $ 1,541 $ 3,539 $ ( 1,863 ) $ 1,676
Amortization expense associated with intangible assets was $ 181 million and $ 155 million for the first quarter of fiscal years 2024 and 2023, respectively.
The following table outlines the estimated future amortization expense related to the net carrying amount of intangible assets as of April 30, 2023:
Future Amortization Expense
(In millions)
Fiscal Year:
2024 (excluding first quarter)
$ 433
2025 554
2026 259
2027 149
2028 37
2029 and thereafter 109
Total $ 1,541
In the first quarter of fiscal year 2024, goodwill increased by $ 58 million from an acquisition, and was assigned to our Compute & Networking segment.
Note 10 - Balance Sheet Components
Certain balance sheet components are as follows:
April 30, January 29,
2023 2023
Inventories: (In millions)
Raw materials $ 1,809 $ 2,430
Work in-process 930 466
Finished goods 1,872 2,263
Total inventories $ 4,611 $ 5,159
15
April 30, January 29,
2023 2023
Other Assets: (In millions)
Prepaid supply and capacity agreements $ 3,002 $ 2,989
Investment in non-affiliated entities 505 299
Prepaid royalties 381 387
Prepaid cloud services 171 23
Other 145 122
Total other assets $ 4,204 $ 3,820
April 30, January 29,
2023 2023
Accrued and Other Current Liabilities: (In millions)
Taxes payable $ 1,544 $ 467
Customer program accruals 1,245 1,196
Excess inventory purchase obligations 786 954
Deferred revenue (1) 367 354
Accrued payroll and related expenses 320 530
Operating leases 187 176
Licenses and royalties 143 149
Product warranty and return provisions 112 108
Other 165 186
Total accrued and other current liabilities $ 4,869 $ 4,120
(1) Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements, support for hardware and software, and cloud services.
April 30, January 29,
2023 2023
Other Long-Term Liabilities: (In millions)
Income tax payable (1) $ 1,300 $ 1,204
Deferred income tax 290 247
Deferred revenue (2) 230 218
Licenses payable 155 181
Other 62 63
Total other long-term liabilities $ 2,037 $ 1,913
(1) Income tax payable is comprised of the long-term portion of the one-time transition tax payable, unrecognized tax benefits, and related interest and penalties.
(2) Deferred revenue primarily includes deferrals related to support for hardware and software.
16
Deferred Revenue
The following table shows the changes in deferred revenue during the first quarter of fiscal years 2024 and 2023:
April 30, May 1,
2023 2022
(In millions)
Balance at beginning of period $ 572 $ 502
Deferred revenue additions during the period 287 212
Revenue recognized during the period ( 262 ) ( 177 )
Balance at end of period $ 597 $ 537
Revenue allocated to remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $ 639 million as of April 30, 2023. We expect to recognize approximately 46 % of this revenue 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.
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.
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:
April 30,
2023 January 29,
2023
(In millions)
Designated as cash flow hedges $ 1,142 $ 1,128
Non-designated hedges $ 350 $ 366
The unrealized gains and losses or fair value of our foreign currency forward contracts was not significant as of April 30, 2023 and January 29, 2023.
As of April 30, 2023, 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 quarter of fiscal years 2024 and 2023, 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.
17
Note 12 - Debt
Long-Term Debt
The carrying value of our outstanding notes, the calendar year of maturity, and the associated interest rates were as follows:
Carrying Value at
Expected
Remaining Term (years) Effective
Interest Rate April 30, 2023 January 29, 2023
(In millions)
0.309 % Notes Due 2023
0.1 0.41 % $ 1,250 $ 1,250
0.584 % Notes Due 2024
1.1 0.66 % 1,250 1,250
3.20 % Notes Due 2026
3.4 3.31 % 1,000 1,000
1.55 % Notes Due 2028
5.1 1.64 % 1,250 1,250
2.85 % Notes Due 2030
6.9 2.93 % 1,500 1,500
2.00 % Notes Due 2031
8.1 2.09 % 1,250 1,250
3.50 % Notes Due 2040
16.9 3.54 % 1,000 1,000
3.50 % Notes Due 2050
26.9 3.54 % 2,000 2,000
3.70 % Notes Due 2060
36.9 3.73 % 500 500
Unamortized debt discount and issuance costs ( 46 ) ( 47 )
Net carrying amount 10,954 10,953
Less short-term portion ( 1,250 ) ( 1,250 )
Total long-term portion $ 9,704 $ 9,703
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 April 30, 2023, we were in compliance with the required covenants, which are non-financial in nature, under the outstanding notes.
Commercial Paper
We have a $ 575 million commercial paper program to support general corporate purposes. As of April 30, 2023, we had no t issued any commercial paper.
Note 13 - Commitments and Contingencies
Purchase Obligations
Our purchase obligations reflect our commitments to purchase components used to manufacture our products, including long-term supply and capacity agreements, certain software and technology licenses, other goods and services and long-lived assets.
As of April 30, 2023, we had outstanding inventory purchase and long-term supply and capacity obligations totaling $ 7.27 billion. During the normal course of business, to manage manufacturing lead times and help ensure adequate supply, we enter into agreements with contract manufacturers that allow them to procure inventory based upon criteria as defined by us, and in certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed, but these changes may result in the payment of costs incurred through the date of cancellation.
18
Other non-inventory purchase obligations of $ 3.26 billion include $ 2.43 billion of multi-year cloud service agreements.
Total future purchase commitments as of April 30, 2023 are as follows:
Commitments
(In millions)
Fiscal Year:
2024 (excluding first quarter)
$ 6,667
2025 1,816
2026 753
2027 704
2028 332
2029 and thereafter
255
Total $ 10,527
Accrual for Product Warranty Liabilities
The estimated amount of product warranty liabilities was $ 77 million and $ 82 million as of April 30, 2023 and January 29, 2023, respectively. The estimated product returns and estimated product warranty activity consisted of the following:
Three Months Ended
April 30, 2023 May 1, 2022
(In millions)
Balance at beginning of period
$ 82 $ 46
Additions
13 16
Utilization
( 18 ) ( 7 )
Balance at end of period
$ 77 $ 55
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.
Litigation
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
19
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.
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 April 30, 2023, 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
Since the inception of our share repurchase program through April 30, 2023, we have repurchased an aggregate of 1.10 billion shares for a total cost of $ 17.12 billion. As of April 30, 2023, we were authorized, subject to certain specifications, to repurchase an additional $ 7.23 billion of shares through December 2023. We did not repurchase any shares during the first quarter of fiscal year 2024.
During the first quarter of fiscal years 2024 and 2023, we paid $ 99 million and $ 100 million in cash dividends to our shareholders, respectively. Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors' continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.
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.
The Compute & Networking segment includes our Data Center accelerated computing platform; networking; automotive artificial intelligence, or AI, Cockpit, autonomous driving development agreements, and
20
autonomous vehicle solutions; electric vehicle computing platforms; Jetson for robotics and other embedded platforms; NVIDIA AI Enterprise and other software; and cryptocurrency mining processors, or CMP.
The 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 graphics; virtual GPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse Enterprise software for building and operating metaverse and 3D internet applications.
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, acquisition termination cost, intellectual property related, or IP-related and legal settlement costs, 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 April 30, 2023
Revenue $ 4,460 $ 2,732 $ — $ 7,192
Operating income (loss) $ 2,160 $ 1,046 $ ( 1,066 ) $ 2,140
Three Months Ended May 1, 2022
Revenue $ 3,672 $ 4,616 $ — $ 8,288
Operating income (loss) $ 1,606 $ 2,476 $ ( 2,214 ) $ 1,868
Three Months Ended
April 30,
2023 May 1,
2022
(In millions)
Reconciling items included in "All Other" category:
Stock-based compensation expense $ ( 735 ) $ ( 578 )
Acquisition-related and other costs ( 173 ) ( 149 )
Unallocated cost of revenue and operating expenses ( 154 ) ( 127 )
IP-related and legal settlement costs ( 8 ) ( 7 )
Acquisition termination cost — ( 1,353 )
Other 4 —
Total $ ( 1,066 ) $ ( 2,214 )
21
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
April 30, May 1,
2023 2022
(In millions)
Revenue:
United States $ 2,385 $ 1,932
Taiwan 1,796 2,777
China (including Hong Kong) 1,590 2,081
Singapore 762 454
Other countries 659 1,044
Total revenue $ 7,192 $ 8,288
No customer represented 10% or more of total revenue for the first quarter of fiscal years 2024 and 2023.
Two customers accounted for 12 % and 10 % of our accounts receivable balance as of April 30, 2023. Two customers accounted for 14 % and 11 % of our accounts receivable balance as of January 29, 2023.
The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:
Three Months Ended
April 30, May 1,
2023 2022
(In millions)
Revenue:
Data Center $ 4,284 $ 3,750
Gaming 2,240 3,620
Professional Visualization 295 622
Automotive 296 138
OEM and Other 77 158
Total revenue $ 7,192 $ 8,288
22
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.