INVESTOR PRESENTATION 1Q FY2021 · 5/21/2020 · The presentation of the company's non-GAAP...

INVESTOR PRESENTATION1Q FY2021May 21, 2020

2

Except for the historical information contained herein, certain matters in this presentation including, but not limited to, statements as to: our financial position; our markets; the performance, benefits, abilities and impact of our products and technology; the timing for including Mellanox in our financials and its impact; the impact of COVID-19 and our response; our use of cash; NVIDIA’s financial outlook for the second quarter of fiscal 2021, including the impact of the Mellanox acquisition; our operating expenses for fiscal 2021; the benefits and impact of the Mellanox acquisition; the number of AI interactions; our growth drivers, including, but not limited to gaming, AI, AR/VR, self-driving cars, data center, professional visualization and automotive; accelerated computing; the number of end users and customers for our products and us reaching them; sustained growth in our profitability and businesses; the number of professional designers and creators; our financial policy; future revenue growth; our opportunities in existing and new markets; the TAM for our products; and performance in our financial metrics are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and any other forward-looking statements that go beyond historical facts that are made in this presentation are subject to risks and uncertainties that may cause actual results to differ materially. Important factors that could cause actual results to differ materially include: global economic conditions; our reliance on third parties to manufacture, assemble, package and test our products; the impact of technological development and competition; development of new products and technologies or enhancements to our existing product and technologies; market acceptance of our products or our partners' products; design, manufacturing or software defects; changes in consumer preferences and demands; changes in industry standards and interfaces; unexpected loss of performance of our products or technologies when integrated into systems and other factors.

NVIDIA has based these forward-looking statements largely on its current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, and you should not rely upon the forward-looking statements as predictions of future events. The future events and trends discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Although NVIDIA believes that the expectations reflected in the forward-looking statements are reasonable, the company cannot guarantee that future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. Except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. For a complete discussion of factors that could materially affect our financial results and operations, please refer to the reports we file from time to time with the SEC, including our Annual Report on Form 10-K and quarterly reports on Form 10-Q. Copies of reports we file with the SEC are posted on our website and are available from NVIDIA without charge.

NVIDIA uses certain non-GAAP measures in this presentation including non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income, non-GAAP operating income, non-GAAP diluted earnings per share, non-GAAP operating expenses, non-GAAP other income net, non-GAAP other expense, net, free cash flow, and adjusted EBITDA. NVIDIA believes the presentation of its non-GAAP financial measures enhances investors' overall understanding of the company's historical financial performance. The presentation of the company's non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP, and the company's non-GAAP measures may be different from non-GAAP measures used by other companies. Further information relevant to the interpretation of non-GAAP financial measures, and reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, may be found in the slide titled “Reconciliation of Non-GAAP to GAAP Financial Measures”.

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CONTENT

Q1 FY2021 Earnings Summary

Mellanox Acquisition

GTC 2020 Announcements

NVIDIA Business Overview

NVIDIA Financials

GAAP vs non-GAAP Reconciliation

4

Q1 FY21 EARNINGS SUMMARY

5

HIGHLIGHTS

Strong results, led by Data Center and Gaming

Total revenue up 39% y/y to $3.08B, ahead of outlook of $3.00B

Data Center up 80% y/y to a record $1.14B

A100 in full production, fastest ramp in history; contributed to Q1 revenue

Up to 20x faster vs. V100, biggest generational performance leap ever

Unifies training & inference; adds multi-instance GPU capability to enable elastic data center

Mellanox acquisition closed on April 27, strengthens NVIDIA’s Data Center strategy

Mellanox will be included in NVIDIA financials starting with Q2 FY2021 results

For the March quarter, standalone Mellanox revenue grew 40% y/y to a record $429M

Immediately accretive to non-GAAP gross margins, non-GAAP EPS, and free cash flow

6

Q1 FY2021 FINANCIAL SUMMARY

Q1 FY21 Y/Y Q/Q

$3,080 +39% -1%

65.1% +670 bps +20 bps

$976 +173% -1%

$917 +133% -3%

$1.47 +130% -4%

$909 +26% -38%

GAAP Non-GAAP

$M Q1 FY21 Y/Y Q/Q

Revenue $3,080 +39% -1%

Gross Margin 65.8% +680 bps +40 bps

Operating Income $1,205 +116% -1%

Net Income $1,120 +106% -4%

Diluted EPS $1.80 +105% -5%

Cash Flow from Operations

$909 +26% -38%

$2,220

$2,579

$3,014$3,105 $3,080

59.0%60.1%

64.1%65.4% 65.8%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

3,100

3,300

Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21

Revenue ($M)

Revenue(M) Non-GAAP GM No difference between GAAP and Non-GAAP Cash Flow from Operations and Revenue

7

COVID-19 RESPONSE

Employees – Committed to keep every job & accelerating annual raises; employees

working from home very effectively

Customers – Able to keep up with customer demand while working through industry-

wide supply chain disruptions and logistics challenges

Community – NVIDIA and its employees have committed to donate more than $10M to

those currently in need

World – Offered Parabricks genomics stack free-of-charge; joined COVID-19 High

Performance Computing Consortium; supported Folding@home project

8

GAMING

Strong demand across all major products

Overcame COVID-19 related closures in iCafes and retail outlets with stronger e-tail demand

'Stay-at-home' driving > 50% increase in hours played on GeForce platform

Launched RTX on Minecraft – the most popular PC game in the world

Released DLSS 2.0 AI algorithm, effectively doubling game performance

Revenue ($M) Highlights

27% y/y

$1,055

$1,313

$1,659

$1,491

$1,339

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800


10% q/q on seasonality

9

DATA CENTER

Record quarter, exceeded the $1 billion mark for the first time

Broad-based demand across hyperscale and vertical industries

New A100 GPUs contributed to quarter with strong adoption across leading hyperscalers

Solid visibility into Q2

Starting with Q2 FY2021, Data Center will incorporate Mellanox revenue.


80% y/y and 18% q/q

$634 $655$726

$968

$1,141

0

200

400

600

800

1000

1200


10

PROFESSIONAL VISUALIZATION

Continued strong demand for laptop workstations

Turing adoption growing, now approximately 50% of sales

Stronger demand verticals included healthcare, media & entertainment, and higher education

Supported COVID-19 related applications with end customers such as Siemens, Oxford Nanopore, and Caption Health

Remote workforce initiatives boosted demand from customers such as Disney


$266

$291

$324 $331$307

0

50

100

150

200

250

300

350


15% y/y

7% q/q on seasonality

11

AUTOMOTIVE

Xpeng introduced the P7, an all-electric sports sedan with L3 automated driving features, powered by NVIDIA DRIVE AGX Xavier; production deliveries begin next month

Announced that the NVIDIA DRIVE AGX Orin is powered by Ampere, our next generation GPU architecture

Announced that the NVIDIA DRIVE platform extends from high performance L5 to very low power ADAS - all on a single scalable, software-defined architecture


$166

$209

$162 $163$155

0

50

100

150

200

250


7% y/y and 5% q/q on lower legacy infotainment revenue

12

SOURCES & USES OF CASH

Returned $98M to shareholders in the form of dividends

Invested $155M in capex

Raised $5B in notes with maturities of 10-40 years, at a blended rate of 3.3%

Ended quarter with $16.4B in gross cash and $7.0B in debt, $9.4B of net cash

After the quarter’s close, funded Mellanox acquisition with approximately $7B in cash.

Cash Flow from Operations ($M) Highlights

Gross cash is defined as cash/cash equivalents and marketable securities.Debt is defined as principal debt.Net cash is defined as gross cash less debt.

$720

$936

$1,640

$1,465

$909

0

200

400

600

800

1000

1200

1400

1600

1800


26% y/y on strong earnings growth partially offset by changes in working capital

38% q/q on changes in working capital

13

Q2 FY2021 OUTLOOK

Revenue – $3.65 billion, plus or minus two percent

Includes a full quarter of Mellanox revenue

Automotive expected to decline about 40% q/q

Gross Margin – 58.6% GAAP and 66.0% non-GAAP, plus or minus 50 basis points

Operating Expense – $1.52 billion GAAP and $1.04 billion non-GAAP

FY2021 operating expense – approx. $5.7 billion GAAP and $4.1 billion non-GAAP, including

3 quarters of Mellanox

Other Income & Expenses – net loss of $50 million GAAP and $45 million non-GAAP

Tax Rate – GAAP and non-GAAP both approx. 9%

Capital Expenditure – approximately $225 to $250 million

14

MELLANOX ACQUISITION

15

$7B transaction value, funded with cash

Acquisition closed on April 27, 2020 and will start contributing to NVIDIA financials in Q2 FY21

Adds >2,600 employees and trailing 4-qtr revenue of $1.5B, growing at 27%+ y/y

Expected to be immediately accretive to non-GAAP gross margin, non-GAAP EPS and free cash flow

Financial HighlightsStrategic Highlights

Unites two of the world’s leading companies in high performance & data center computing

NVIDIA computing + Mellanox networking will enable higher performance and lower operating costs for customers

Full-stack offerings from processors to software will advance next-gen data centers

Common culture of technology and performance leadership

16

MELLANOXStrong Financial Momentum

$305 $310 $335

$380

$429

68.0% 67.9% 68.1%69.1% 69.1%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

72.0%

74.0%

76.0%

78.0%

80.0%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

Q1CY19 Q2CY19 Q3CY19 Q4CY19 Q1CY20

Revenue Growth and Profitability

Revenue(M) GM

$1,089

$1,331

CY18 CY19

Growth Across Both InfiniBand and Ethernet

Ethernet InfiniBand Others

$1,089

$1,331

CY18 CY19

22% Y/Y Increase

Cables, Others. Switch Systems

Boards ICs

Note: GM = Non-GAAP Gross Margin. Quarters are calendar quarters.

17

GTC 2020 ANNOUNCEMENTS

18

GTC 2020 ANNOUNCEMENTS

Data-Center-Scale Computing

Omniverse RTX Server NVIDIA AIA100 and DGX A100 EGX and ISAAC

19

ANNOUNCING NVIDIA A100GREATEST GENERATIONAL LEAP — 20X VOLTA

54B xtors | 826mm2 | TSMC 7N | 40GB Samsung HBM2 | 3rd gen Tensor Core GPU | 600 GB/s NVLink

20

CHALLENGES: ACCELERATING BIG AND SMALL

AlexNet

ResNet

BERT

GPT-2

Megatron-GPT2

Turing NLG

Megatron-BERT

1E-03

1E-02

1E-01

1E+00

1E+01

1E+02

1E+03

2012 2013 2014 2015 2016 2017 2018 2019 2020

Peta

flop/s

-Days

10s Billions of Ecom

Recommendations

Billions of

Searches

Millions of

InteractionsMillions of Medical

Scans

Thousands Ads / PersonBillions of

photos tagged

100s of Billions Events

For Cyber Threat

100s of Millions Fin Txn

For Fraud

AI Interactions Per DayComputing For Training AI

3000x

3000X Higher Compute Required to TrainLargest Models Since Volta

Every AI Powered Interaction Needs Varying Amount of Compute

21

NVIDIA OVERVIEW

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NVIDIA — A COMPUTING PLATFORM COMPANY

NVIDIA pioneered accelerated computing to help solve the most challenging computational problems. The approach is broadly recognized as the way to advance computing as Moore’s law ends and AI lifts off. NVIDIA’s platform is installed in several hundred million computers, is available in every cloud and from every server maker, powers 136 of the TOP500 supercomputers, and boasts 1.6 million developers.

Headquarters: Santa Clara, CAHeadcount: 13,775

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FY16 FY17 FY18 FY19 FY20

Gaming

Data Center

ProViz

Auto

OEM/IP

NVIDIA AT A GLANCEAccelerated Computing Pioneer

Brief History

Recognitions From Chip Vendor to Computing Platform

Revenue by Market Platform

1993: Founded by Jensen Huang, Chris Malachowsky, and Curtis Priem

1999: IPO on NASDAQ at $12 (prior to 4 stock splits, now 12:1)

2001: Xbox win; fastest semiconductor company to reach $1B in sales

2006: Unveils CUDA architecture, expanding to scientific computing

2009: Inaugural GPU Technology Conference (GTC)

2016: Introduces first products for AI and autonomous driving

Harvard Business Review’s The CEO 100

Fortune’s Best Places to Work

MIT Tech Review’s 50 Smartest Companies

Fortune’s World’s Most Admired Companies

Forbes JUST 100 Best Corporate Citizens

Dow Jones Sustainability Index

1999GM 30%+

2014GM 50%+

2019GM 60%+

$5.0B

$6.9B

$9.7B$10.9B

$11.7B

Fiscal Year End Jan

CUDA-X

CUDA

Health-

care

AIPRO VIZTrans-

portation

Smart

City/IOTHPC

Robotics

GAMING

ARCHITECTURE SYSTEMS DATA CENTER

24

GROWTH DRIVERS

AI Self-driving CarsGaming AR/VR

25

OUR CORE BUSINESSES

Data Center27% of FY20 Rev

Automotive6% of FY20 Rev

Gaming51% of FY20 Rev

Professional Visualization11% of FY20 Rev

FY20 Revenue $5.52B, 3-year CAGR of 11%

Strong market position and technology leadership

Compounded long-term unit and ASP growth

200M+ gamers on our platform

Strong Gaming ecosystem

Multiple secular growth drivers: expanding population of gamers, eSports, VR, rising production value of games, gaming and prosumer laptops

FY20 Revenue of $2.98B, 3-year CAGR of 53%

Leader in deep learning/AI –used by all major cloud computing providers and thousands of enterprises

Leader in HPC - in 5 of the top 10 and 136 of the top 500 fastest supercomputers

Multiple secular growth drivers: fast growing adoption of AI in every major industry; rising compute needs unmet by conventional approaches such as x86 CPUs

FY20 Revenue of $1.21B, 3-year CAGR of 13%

90%+ market share in graphics for workstations

Diversified end markets, e.g. media & entertainment, architecture, engineering &construction, public sector

Strong software ecosystem

Multiple secular growth drivers: expanding creative & design workflows, mobile workstations, rising adoption of AR/VR across industries

FY20 Revenue of $700M, 3-year CAGR of 13%

Current revenue driven largely by infotainment

Future growth expected to be driven largely by Autonomous Vehicle (AV) solution offering full hardware & software stack

Large secular growth opportunity: autonomous vehicles estimated to drive a $25B TAM for the AV computing stack by 2025

ASP = Average Selling Price. Gamers are defined as consumers who purchase our GPUs to play video games. 200M+ gamers on our platform as of March 2020. FY20 ending 1/26/2020.

26

56

7

15

6

16

GamingData CenterProVizAutoOEM / IP

51

27

11

65

GamingData CenterProVizAutoOEM / IP FY16 FY17 FY18 FY19 FY20

Gaming Data Center ProViz Auto OEM/IP

STRONG, PROFITABLE GROWTH

Broad-based Growth Sustained Profitability(showing non-GAAP margins)

Business Mix (%)

$5.0B

$6.9B

$9.7B

$10.9B$11.7B

57%59% 60%

62% 63%

22%

32%

37% 38%

34%

20%

30%

40%

50%

60%

70%

80%

0

2,000

4,000

6,000

8,000

10,000

12,000


Revenue Gross Margin Operating MarginFY16 FY20

Refer to Appendix for reconciliation of Non-GAAP measures

27

WHY ACCELERATED COMPUTING?

The world’s demand for computing power continues to grow exponentially, yet CPUs are no longer keeping up as Moore’s Law has ended.

NVIDIA pioneered GPU-accelerated computing to solve this challenge.

Optimizing across the entire stack — from silicon to software — allows NVIDIA to advance computing in the post-Moore’s Law era for large and important markets:

Gaming, Pro Viz, High Performance Computing (HPC), AI, Cloud, Transportation, Healthcare, Robotics, and the Internet of Things (IOT).

Advancing Computing in the Post-Moore’s Law Era

1980 1990 2000 2010 2020

103

105

107

GPU PERFORMANCE

CPU PERFORMANCE

28

WORLD LEADER IN ACCELERATED COMPUTINGOur Four Market Platforms & Key Brands

AutoDRIVE for Autonomous Vehicles

Data CenterTesla for HPC/AI

GamingGeForce GPUs for PC Gamers

Professional VisualizationQuadro for Workstations

29

$2,818

$4,060

$5,513

$6,246

$5,518


18% CAGR

GAMINGGeForce - The World’s Largest Gaming Platform

HighlightsRevenue ($M) 200M+ Gamers on GeForce

#1 in PC gaming with more than 3X the revenue of the other major GPU vendor

Expanding the market with gaming laptops and cloud gaming

Powering the Nintendo Switch console

30

2005 2010 2015 2020

0

500K

1M

1.5M

2.0M

$339

$830

$1,932

$2,932 $2,983


72% CAGR

DATA CENTERHigh Performance Computing (HPC) and AI

Registered NVIDIA Developers 90%+ Share of Accelerators in Supercomputing

Revenue ($mm) Every Major Cloud Provider

NVIDIA Share of New Top 500 Systems

#1 and #2 Supercomputers Worldwide; #1 in Europe; #1 in Japan

50%

40%

30%

20%

10%

0%

SC16 SC17 SC18 SC19

6%

24%

34%

41%

31

PROFESSIONAL VISUALIZATIONWorkstation Graphics

40+ Applications Unlocking New Markets

40M Designers and Creatives

Foundry

Remington

Virtual Workstations

Accelerated Rendering

Data Science

Simulationand Sci Viz

AR/VR

Revenue ($mm)

$750$835

$934

$1,130$1,212


13% CAGR

32

42

7

26 24

15

33

76

0

10

20

30

40

50

60

70

80

Cars Trucks Tier 1sRobotaxis SensorsMapping Software

$320

$487

$558

$641

$700


22% CAGR

AUTOInfotainment and Autonomous Vehicles

NVIDIA DRIVE Partners Strong Partnership / EcosystemRevenue ($mm)

TOYOTA MERCEDES-BENZ

VOLVO KOMATSU

DIDI ZF

XPENG SINGULATO

33

LARGE AND DIVERSE CUSTOMER BASEReaching Hundreds of Millions of End Users Through Hundreds of Customers

Data Center AutoGaming Pro Visualization

40M Designers/Creatives

20M Enterprise Users

Cloud

HPC

Vertical Industry

ORNLSummit

LLNLSierra

PizDaint

ABCI

Reaching 200M+ PC gamers

Every Major PC OEM/ODM

Every Major Graphics Card Manufacturer

Largest Customer 11% of Total Revenue Over Past 3 Fiscal Years

34

FINANCIALS

35

ANNUAL REVENUE BY MARKET PLATFORM

Gaming

Pro Visualization Auto

Data Center

$2,818

$4,060

$5,513$6,246

$5,518

FY2016 FY2017 FY2018 FY2019 FY2020FY16 FY17 FY18 FY19 FY20

$339

$830

$1,932

$2,932 $2,983


$750$835

$934

$1,130$1,212


$320

$487$558

$641$700

FY2016 FY2017 FY2018 FY2019 FY2020FY2016 FY2017 FY2018 FY2019 FY2020FY16 FY17 FY18 FY19 FY20

$m

m

$m

m

$m

m

$m

m

36

ANNUAL CASH & CASH FLOW METRICS

ADJUSTED EBITDA (NON-GAAP)

FREE CASH FLOW CASH BALANCE

OPERATING CASH FLOW


$m

m

$m

m

$m

m

$m

m

$1,305

$2,392

$3,803$4,110

FY2016 FY2017 FY2018 FY2019 FY2020

$1,175$1,672

$3,502 $3,743

FY2016 FY2017 FY2018 FY2019 FY2020

$5,037

$6,798 $7,108 $7,422

$10,897

FY2016 FY2017 FY2018 FY2019 FY2020



$1,089$1,496

$2,909$3,143


$4,272

$4,761$4,662

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FY20

Revenue $10.92B

Adjusted EBITDA $4.11B

Free Cash Flow $4.27B

Cash & Cash Equivalents and Marketable Securities

$10.90B

Principal Value of Debt $2.00B

Net Cash $8.90B

Principal Value of Debt / Adjusted EBITDA 0.5x

CONSERVATIVE FINANCIAL POLICY

Financial Policy Highlights Historical Debt / Adjusted EBITDA

Source: SEC filings and public disclosures

1 Adjusted EBITDA and Free Cash Flow are Non-GAAP measures. Refer to Appendix for reconciliation of Non-GAAP measures2 Net Cash is defined as Cash & Cash Equivalents and Marketable Securities less principal value of debt

Commitment to maintain our historically modest leverage, consistent with investment grade credit ratings

Disciplined capital return policy

Solid balance sheet with substantial liquidity, and positive net cash position

Disciplined approach to M&A0

0.2

0.4

0.6

0.8

1

1.2

1.4


Key Credit Metrics

38

NVIDIA’S COMMITMENT TO ESG

Creating a Leading Workplace Tackling Climate Change

NVIDIA GPUs are 20 to 25 times more energy efficient than traditional CPU servers for AI workloads.

39

RECONCILIATION OF GAAP VS NON-GAAP FINANCIAL MEASURES

40

RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES

($ IN MILLIONS)

NON-GAAP

OPERATING INCOME

(A)

GAAP DEPRECIATION

& AMORTIZATION

AMORTIZATION OF

ACQUISITION-

RELATED

INTANGIBLES

ADJUSTED EBITDA

FY 2016 $1,125 197 (17) $1,305

FY 2017 $2,221 187 (16) $2,392

FY 2018 $3,617 199 (13) $3,803

FY 2019 $4,407 262 (7) $4,662

FY 2020 $3,735 381 (6) $4,110

A. Refer to Appendix herein for reconciliation of Non-GAAP operating income to GAAP operating income

41

RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES (CONTD.)

($ IN

MILLIONS)

NON-GAAP

OPERATING

INCOME

STOCK-BASED

COMPENSATION

(A)

PRODUCT

WARRANTY

(B)

ACQUISITION-

RELATED AND

OTHER COSTS

(C)

OTHER

(D)

GAAP

OPERATING

INCOME

FY 2016 $1,125 (205) (20) (22) (131) $747

FY 2017 $2,221 (248) — (16) (23) $1,934

FY 2018 $3,617 (391) — (13) (3) $3,210

FY 2019 $4,407 (557) — (2) (44) $3,804

FY 2020 $3,735 (844) — (30) (15) $2,846

A. Stock-based compensation charge was allocated to cost of goods sold, research and development expense, and sales, general and administrative expense.

B. Consists of warranty charge associated with a product recall.

C. Consists of amortization of acquisition-related intangible assets, transaction costs, compensation charges, other credits related to acquisitions, and other costs.

D. Comprises of legal settlement costs, contributions, and restructuring and other charges.

42


($ IN MILLIONS) NON-GAAP

STOCK-BASED

COMPENSATION

(A)

ACQUISITION-

RELATED ITEMS

AND OTHER

COSTS (B)

OTHER

(C)

TAX IMPACT OF

ADJUSTMENTSGAAP

Q1 FY2021

Revenue $3,080 — — — — $3,080

Gross profit $2,026 (21) (1) — — $2,004

Gross margin 65.8% (0.7) — — — 65.1%

Operating expense $821 203 4 — — $1,028

Operating income $1,205 (224) (5) — — $976

Net income $1,120 (224) (5) (3) 29 $917

Diluted EPS $1.80 (0.36) (0.01) (0.01) 0.05 $1.47


B. Consists of amortization of acquisition-related intangible assets, transaction costs, and other costs.

C. Other comprises of losses from non-affiliated investments and interest expense related to amortization of debt discount

43


NON-GAAP GROSS

MARGIN

STOCK-BASED

COMPENSATION

(A)

PRODUCT

WARRANTY (B)

OTHER

(C)

GAAP GROSS

MARGIN

FY 2016 56.8% (0.3) (0.4) — 56.1%

FY 2017 59.2% (0.2) — (0.2) 58.8%

FY 2018 60.2% (0.3) — — 59.9%

FY 2019 61.7% (0.2) — (0.3) 61.2%

FY 2020 62.5% (0.4) — (0.1) 62.0%

A. Stock-based compensation charge was allocated to cost of goods sold.


C. Consists of legal settlement costs.

44


NON-GAAP GROSS

MARGIN

STOCK-BASED

COMPENSATION (A)

OTHER

(B)

GAAP GROSS

MARGIN

Q1 FY2020 59.0% (0.2) (0.4) 58.4%

Q2 FY2020 60.1% (0.3) — 59.8%

Q3 FY2020 64.1% (0.5) — 63.6%

Q4 FY2020 65.4% (0.4) (0.1) 64.9%

Q1 FY2021 65.8% (0.7) — 65.1%


B. Consists of legal settlement costs.

45


NON-GAAP

OPERATING

MARGIN

STOCK-BASED

COMPENSATION

(A)

PRODUCT

WARRANTY

(B)

ACQUISITION-

RELATED AND

OTHER COSTS

(C)

OTHER

(D)

GAAP

OPERATING

MARGIN

FY 2016 22.5% (4.2) (0.4) (0.4) (2.6) 14.9%

FY 2017 32.1% (3.6) — (0.2) (0.3) 28.0%

FY 2018 37.2% (4.0) — (0.2) — 33.0%

FY 2019 37.6% (4.7) — — (0.4) 32.5%

FY 2020 34.2% (7.7) — (0.3) (0.1) 26.1%



C. Consists of amortization of acquisition-related intangible assets, transaction costs, compensation charges, other credits related to acquisitions, and other costs.

D. Comprises of legal settlement costs, contributions, and restructuring and other charges.

46


($ IN MILLIONS)NET CASH PROVIDED BY

OPERATING ACTIVITIES

PURCHASES OF PROPERTY

AND EQUIPMENT AND

INTANGIBLE ASSETS

FREE CASH FLOW

FY 2016 $1,175 (86) $1,089

FY 2017 $1,672 (176) $1,496

FY 2018 $3,502 (593) $2,909

FY 2019 $3,743 (600) $3,143

FY 2020 $4,761 (489) $4,272

47

RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK($ in millions)

Q2 FY2021

Outlook

GAAP gross margin 58.6%

Impact of stock-based compensation expense, acquisition-related costs, and other costs 7.4%

Non-GAAP gross margin 66.0%

GAAP operating expenses $1,515

Stock-based compensation expense, acquisition-related costs, and other costs (475)

Non-GAAP operating expenses $1,040

GAAP other expense, net $50

Interest expense from amortization of debt discount and other costs (5)

Non-GAAP other expense, net $45

48

RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK (CONTD.)

($ in millions)FY2021

Outlook

GAAP operating expenses $5,700

Stock-based compensation expense, acquisition-related costs, and other costs (1,600)

Non-GAAP operating expenses $4,100

49

MELLANOX RECONCILIATION OF NON-GAAP TO GAAPFINANCIAL MEASURES

NON-GAAP GROSS

MARGIN

STOCK-BASED

COMPENSATION (A)

AMORTIZATION OF

ACQUIRED

INTANGIBLES

GAAP GROSS MARGIN

Q1 CY2019 68.0% (0.2) (3.2) 64.6%

Q2 CY2019 67.9% (0.3) (3.1) 64.5%

Q3 CY2019 68.1% (0.3) (2.9) 64.9%

Q4 CY2019 69.1% (0.3) (2.6) 66.2%

Q1 CY2020 69.1% (0.2) (2.1) 66.8%


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INVESTOR PRESENTATION 1Q FY2021 · 5/21/2020 · The presentation of the company's non-GAAP...

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