Post 2 of Nvidia Analysis: Income Statement

Updated: Please note that the below analysis does include the recently annouced Q1 2009 results that were released on May 8th, 2008. Here is a link to the 10Q of those financials for your reference.

After providing a company overview on Nvidia in the first post of this series, I would to review the income statement next.

As highlighted in my value scorecard, NVDA received passing scores for the top and bottom line metrics. Achieving 5-year CAGR’s on revenue and income of 22.4% and 80.9%, respectively.

Revenue growth drivers:

• By region: Booming China economy has fueled NVDA growth, from $402MM to $1,256 a 231% increase in 2 years.
• By product line: New product launches within the GPU product line have helped increase market share in GP categories
• 4 new products added to the GeForce 8-series line
• PureVideo HD technology
• Launched new family of GeForce 8M series notebook

Gross Margin improvements of 320 basis points due to favorable product mix of new product lines and decline in memory prices.

Selling, General, & Admin expenses are being leveraged each year and each of the last 5 quarters assisting in the net income margin improvement.

In the last 2 years, the headcount in R&D increased by ~1,600. This represents a re-investment of 16% of sales for future new products. The slight increase in 2007 due to IPR&D acquisition costs.

Lower tax rate trend is due to the country mix of sales, seeing the US drop under 10% of 2008 sales.

Next Post in the series will be analyzing the balance sheet….stay tuned.

Please note all amounts are from the prior 12 months, example 2007 data is for 1/2006-1/2007 time period.

Author Disclosure: I do not own any shares of NVDA

Similar Posts to read:
• NVDA – Post 1 of a Financial Research Project
• The "ARG" term defined
• Nvidia Cash Flow Statement Review
• Post 3 of Nvidia Analysis: Balance Sheet
• True Religion (TRLG) Gross Margin Analysis