AGM 2016

May 18, 2016

Slides

Good day, and welcome to the NVIDIA Annual Meeting of Stockholders. I would now like to turn the conference over to Arnab Chandra, Vice President of Investor Relations. Please go ahead. Thank you. Good morning, and welcome to NVIDIA's 2016 Annual Meeting of Stockholders. I'm Arnab Chandra, Vice President, Investor Relations of NVIDIA. We are excited to host a fully virtual annual meeting this year. I would like to take this opportunity to introduce certain members of the management who are present today: Jensen Huang, President, Chief Executive Officer and Director Colette Kress, Executive Vice President and Chief Financial Officer and David Shannon, Executive Vice President, Chief Administrative Officer and Secretary. I also would like to take this opportunity to introduce certain outside members of our Board of Directors that are in attendance virtually today, Rob Burgess, versus Drell, Arvie Jones, Michael Tapiri, Bill Miller, Mark Perry, Brook Sewell and Mark Stevens. Finally, I'd also like to introduce Wayne Hedden from PricewaterhouseCoopers LLP, our independent registered public accounting firm. After the formal portion of the meeting, Jensen will provide an update on our business and then there will be time for questions. I would now like to turn the meeting over to Jensson. Thanks, Arnaud. Good morning and welcome to our 2016 stockholders meeting. The meeting will now officially come to order. I will serve as Chairman and David Shannon will serve as Secretary and conduct a procedural portion of the meeting. Thanks, Jin. And before proceeding, please be aware that we have opened the online portal for any stockholders to ask questions during the course of this meeting. If you have a question, please enter it into the portal and we will do our best to answer it at the end of Jensen's business update in the time permitted. You can also vote your shares online until the polls close. During the course of this meeting, we expect we may make forward looking statements based on current expectations. These forward looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the reports we may file from time to time with the Securities and Exchange Commission, including our Form 10 ks and 10 Q. All our statements are made as of May 18, 2016 based on information available to us as of today. And except as required by law, we assume no obligation to update any such statements. We will first address the matters described in the company's proxy statement dated April 7, 2016. We will then complete the balloting process. An announcement will be made regarding the voting results and then the official portion of the meeting will be adjourned. Jensen will provide a brief business update and then time permitting, we will answer questions received through our online stockholder forum as well as questions submitted online during the meeting. I have a complete list of the stockholders of record of NVIDIA's common stock on March 21, 2016, the record date for this meeting. I also have an affidavit from Broadridge 2016. I am appointing Christopher Woods of American Election Services LLC to act as the Inspector of Elections at this meeting. As the Inspector of Elections, Christopher will decide on the qualifications of voters, accept their votes and tally the final votes when balloting on all matters is completed. Christopher has taken and subscribed to the customary oath of office, and we will file this oath with the records of the meeting. Our bylaws provide that the presence in person or by proxy of a majority of the shares entitled to vote at the meeting will constitute a quorum. Christopher has informed me that proxies have been received for approximately 469000000 dollars of the 544,548,659 shares outstanding on the record date, which represents approximately 86% of the shares outstanding, which constitutes a quorum for today's meeting and the business of the meeting may proceed. Voting is by proxy or online. Each share of common stock is entitled to one vote. If you are eligible to vote and have not submitted your proxy or you want to change your vote, please do so and vote online now. You do not need to vote if you already sent in your signed proxy or voted online or by telephone. Your votes will be counted automatically. This time is 10:08 and the polls are currently open for voting. There are 5 items of business for this meeting. The first item of business is to elect Rob Burgess, Finch Cox, Persis Drell, Jim Gaither, Jensen Wong, Don Hudson, Harvey Jones, Mike McCaffrey, William Miller, Mark Perry, Brook Sewell and Mark Stevens to serve as Directors until our 2017 Annual Meeting. The second item of business is to approve the compensation of our executive officers as disclosed in our 2016 proxy statement. The 3rd item of business is to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm the fiscal year ending January 29, 2017. The 4th item of business is to approve an amendment and restatement of our amended and and amendment and restatement of our amended and restated 2012 employee stock purchase plan. As the company has not received notice from any of its stockholders of any other matter to be considered at today's meeting, no other proposals will be addressed. If you have not voted and intend to vote, please do so online now as the polls will close momentarily. The Inspector of Elections will not accept ballots, proxies or votes or any changes or revocation submitted after the closing of the polls. The time is 10:10 a. M. And the polls are now closed. The preliminary report of the Inspector of Elections covering the proposals presented at this meeting is as follows: proposal to elect the 12 nominees on the ballot as Directors of NVIDIA is carried. The proposal to approve the compensation of NVIDIA's executive officers as disclosed in NVIDIA's 2016 proxy statement is carried. The proposal to ratify the selection of PwC LOP as NVIDIA's independent registered public accounting firm for the fiscal year ending January 29, 2017 is carried. The proposal to approve an amendment and restatement of NVIDIA's amended and restated 2,007 Equity Incentive Plan is carried. And the proposal to approve amendment and restatement of NVIDIA's amended and restated 2012 employee stock purchase plan is carried. A full tally of the votes will be published in a Form 8 ks, which we expect to file with the SEC within 4 business days. That concludes the formal portion of today's Annual Meeting, and I declare the business portion of the 2016 Annual Meeting of Stockholders adjourned. Thank you very much. With that, let me hand this meeting back over to Jensen for a brief business update, following which we will answer stockholders' questions. Please note that given our time constraints, we may not be able to answer all questions. Thanks, David. NVIDIA stronger than ever. Our dedication to the craft of GPU computing has catapulted us to the forefront of our field. We are the leaders in large markets we have chosen gaming, professional visualization, data center, automotive. Our transformation from a PC graphics company into a new kind of computer company at the center of VR, AI and self driving cars is accelerating our growth. We make computers for the most demanding users in the world, gamers, designers and scientists. For medical researchers trying to crack the code of cancer, for pioneers of deep learning and modern AI, they are the Madame Curies, the Da Vinci's and Einsteins of our time. The millions of gamers who want to play the latest blockbuster titles at the highest level of settings on the most beautiful displays. Ordinary computers just don't cut it. Our customers turn to us because they need something more, a supercharged form of computing we call GPU computing. We pioneered the field. It is our singular focus. The GPU has evolved from a 3 d graphics chip into a computer brain that gives humans the power to simulate virtual worlds and computers the intelligence to understand the real world. Simulating reality, understanding reality, two sides of the same point, both near infinite levels both requiring near infinite levels of computing. Have been in the business of simulating reality for over 2 decades. Today, gaming is the largest entertainment market in the world. And PC gaming is about much more than games today. It's a sport with $1,000,000 purses, a spectator sport enjoyed about 100 of 1000000 of people. It's a place to socialize, a medium for artistic expression, and with VR, a brand new portal to fully immersive worlds. And so we don't just build chips for gaming PCs. We build a top to bottom platform to delight gamers. It's called GeForce. More than 100,000,000 gamers around the world enjoy today. Last month at Dreamhack in Austin we launched the latest advances to the GeForce platform, including the GTX 10 80 and 1070. The first gaming GPU is based on our breakthrough Pascal architecture. Twice the performance of Titan X and 3 times the energy efficiency, GTX 1080 represents a quantum leap for PC gaming. It combines a groundbreaking new multi projection architecture. The first production 16 nanometer FinFET GPU, the first G5X memory and our level of craftsmanship across all of our engineering groups that can only be characterized as a market. We also expanded our GameWorks software for developers with 2 new modules. Ansel, the world's 1st in game camera system gives gamers sophisticated tools and a colorful palette for the new art form of in game photography. Virtual reality audio, the world's first real time physically modeled acoustic simulator will take us another step closer to the full presence in VR. If simulating reality is the right brain of GPU computing, understanding reality is the left. About 5 years ago, pioneer researchers discovered NVIDIA GPUs for another application, deep learning. Today, deep learning is sweeping through every industry. Superhuman achievements like DeepMind's AlphaGo beating world champion Lee Sedol and the Berkeley Brett robot teaching itself motor skills have captured our imagination. We saw the potential of deep learning to revolutionize computing. It was clear that deep learning was not merely a new application, but a whole new computing model. It used to be that software engineers entirely wrote an algorithm. Now engineers write a learning algorithm, training it with data to create a deep massive amounts of data and massively parallel processing capabilities of the GPU, software can now write software by itself. This is a turning point for our industry. Today NVIDIA GPUs accelerate every deep learning framework, the basic tool used to build deep neural nets. We power IBM Watson, Facebook's Big Sur Server for AI as well as AI platforms that hypersale channels such as Microsoft, Amazon, Alibaba and Baidu. Every company has data and every company wants intelligence, but not every company can build a supercomputer. To help bring deep learning to every enterprise, we built something special. At GTC, we announced DGX-one, the world's 1st deep learning supercomputer, loaded with 8 Tesla P100s interconnected with NVLink, it provides the deep learning performance equivalent of 250 traditional servers. And it comes loaded with software for AI developers. Universities, hyperscale companies and large enterprises are showing strong interest in DGX-one. One of the most exciting applications of deep learning is self driving cars. Working closely with partners to develop self driving cars using our end to end platform, which starts with Tesla in the data center and extends into the car with DRiV PX2. We're now collaborating with more than 80 companies using the open architecture of DRiVE PX to develop their own software and driving experiences. At GTC, we demonstrated the world's 1st self driving car train using end to end deep learning. With just 3,000 miles of driving, our deep neural net learned to navigate in extremely challenging conditions in the rain, merging into highway traffic, even on dirt roads without lanes. Learned all of this by watching video of human driven cars, incredible. Simulating reality, understanding reality, two sides of the same coin, 2 exciting markets, 1 computing model. The execution of our strategy is clear in our financial results. In FY 2016, revenue was up 7% to reach a record $5,010,000,000 and gross margins expanded by 60 basis points to a record 56 point 1%. Our strong financial performance continued in the Q1 of FY 'seventeen. Q1 revenues increased 13% year over year to 1,300,000,000 dollars And as we grew across our 4 specialized markets, gaming revenue increased 17% year over year to 687,000,000 dollars Data center revenue accelerated to a record $143,000,000 63% up 63% year over year, reflecting continued adoption of deep learning. We also achieved record GAAP gross margins of 57.5%, driven by our platform approach and our unrivaled products. A few years back, we aligned to a single unified architecture across our GPU integral products. Whether it's cloud or workstation or PCs or cars or embedded systems or autonomous machines, the underlying architecture is exactly the same. This gives us increasing leverage of our single investment and greatly streamlines our execution. The result, operating margins and profitability continues to expand. Our tenets of shareholder value include growing profitability and continuing our long term capital return program. Since the restart of our capital return program in the Q4 of fiscal 2013, we have returned over $3,500,000,000 to shareholders to date. For fiscal 2017, we intend to return approximately $1,000,000,000 to shareholders through share repurchases and quarterly cash dividends. We are a driving force in some of the most exciting developments in our industry. PC gaming is thriving. It's not just gaming anymore and virtual reality will take it to a new level of immersion. VR will also revolutionize news, design, architecture, retail and communications. Deep learning is sweeping across every industry, making data center our fastest growing business. And we're bringing new computing model to self driving cars. Cars with autonomous features will make driving safer and more enjoyable. Fully autonomous cars will reinvent the transformation system transportation system altogether. Simulating reality, understanding reality. The NVIDIA GPU is the ideal processor for these massively parallel problems with nearly infinite computing needs. And as we have a unique ability to build computers from a blank sheet of paper all the way through fully integrated systems, we optimize the entire stack from the architecture to the design, to the system to the middleware, to the system software, all the way to the work that we do with developers all around the world, so that we can deliver the best performance and experience imaginable. NVIDIA has become a one of a kind company, a new kind of computer company for the 21st century. Thank you. Now we'll move to the Q and A portion of the meeting. If you have any questions, please enter it in the online portal now. As VR is the next disruptive technology that will change the way we live our lives, live live I can't read that far as we know it. VR is something pretty extraordinary. The industry, the computer graphics industry has been working on VR for coming up on 2 decades. And the thing that's really amazing about VR is it gives you a sense of presence. It doesn't just look beautiful. It doesn't just look real. It actually makes you feel like you're there. The sense of a virtual presence, this concept called telepresence, the concept of a holodeck, virtual reality really is the opening to all of those experiences. And so we're quite excited about it. The challenge of virtual reality is not insignificant. When you're immersed in a world and you're immersed in this virtually creative graphics experience, computer experience, If something is a little bit off kilter, you lose your sense of presence. You're completely shaken from that sense of disbelief. And so everything has to behave according to physics. We know what the world looks like and we know how the world behaves. When you pour a glass of water on a table, it rolls off the table and you know what it looks like and the water behaves according to water. When things bump into each other, when you touch things, when you're listening to the sound that is reverberating through an environment, there's a great sense there's a great sense, great ability for humans to pick out what is not realistic and when something is off. And so virtual reality has a lot of challenges. But if we're successful, the type of applications are really quite extraordinary. When we're currently designing our new campus And it's become impossible for me to really get a sense of the rightness of a design, how best to organize our cubicles and our workspaces, where do we put the windows and is it going to be too hot or is it going to properly illuminate the building. These type of decisions can cost 1,000,000 of dollars later, but we can now if not done right, but we can now virtually simulate it in virtual reality and really get a sense of how it's going to look, how it's going to function and how it's going to feel. And so that the capability is really quite extraordinary. Some of the things that I'm pretty excited about is virtual presence. The idea that you can actually be engaged in a teleconference with somebody except that person is literally sitting in front of you. And everything about that person looks almost exactly as it would in reality except of course we're both in virtual reality. And so that sense of virtual presence, telepresence, the potentials are really, really quite boundless. And so whether it's design or visiting places that you couldn't have imagined going, communications with telepresence, virtual presence, entertainment, you name it. It's virtual reality is going to be very big. Seeing no further questions, we will now move to the closing of the meeting. Thank you for attending our 2016 Annual Meeting and for your continued support of NVIDIA. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.