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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 28,2024ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number:0-23985NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware94-3177549(State or other jurisdiction of(I.R.S.Employerincorporation or organization)Identification No.)2788 San Tomas Expressway,Santa Clara,California95051(Address of principal executive offices)(Zip Code)(408)486-2000(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 ofthis chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of common stock,$0.001 par value,outstanding as of August 23,2024,was 24.53 billion.NVIDIA CorporationForm 10-QFor the Quarter Ended July 28,2024Table of Contents Page Part I:Financial Information Item 1.Financial Statements(Unaudited)a)Condensed Consolidated Statements of Income for the three and six months ended July 28,2024 and July 30,20233b)Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 28,2024 and July 30,20234 c)Condensed Consolidated Balance Sheets as of July 28,2024 and January 28,20245d)Condensed Consolidated Statements of Shareholders Equity for the three and six months ended July 28,2024 and July 30,20236 e)Condensed Consolidated Statements of Cash Flows for the six months ended July 28,2024 and July 30,20238 f)Notes to Condensed Consolidated Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations24Item 3.Quantitative and Qualitative Disclosures About Market Risk33Item 4.Controls and Procedures33 Part II:Other Information Item 1.Legal Proceedings34Item 1A.Risk Factors34Item 2.Unregistered Sales of Equity Securities and Use of Proceeds40Item 5.Other Information40Item 6.Exhibits41Signature 42Where You Can Find More InformationInvestors and others should note that we announce material financial information to our investors using our investor relations website,press releases,SECfilings and public conference calls and webcasts.We also use the following social media channels as a means of disclosing information about the company,ourproducts,our planned financial and other announcements and attendance at upcoming investor and industry conferences,and other matters,and for complyingwith our disclosure obligations under Regulation FD:NVIDIA Corporate Blog(http:/)NVIDIA Technical Blog(http:/ LinkedIn Page(http:/ Facebook Page(https:/ Instagram Page(https:/ X Account(https:/ addition,investors and others can view NVIDIA videos on YouTube(https:/www.YouT information we post through these social media channels may be deemed material.Accordingly,investors should monitor these accounts and the blog,inaddition to following our press releases,SEC filings and public conference calls and webcasts.This list may be updated from time to time.The information wepost through these channels is not a part of this Quarterly Report on Form 10-Q.These channels may be updated from time to time on NVIDIAs investorrelations website.2Part I.Financial InformationItem 1.Financial Statements(Unaudited)NVIDIA Corporation and SubsidiariesCondensed Consolidated Statements of Income(In millions,except per share data)(Unaudited)Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023Revenue$30,040$13,507$56,084$20,699 Cost of revenue7,466 4,045 13,105 6,589 Gross profit22,574 9,462 42,979 14,110 Operating expenses Research and development3,090 2,040 5,810 3,916 Sales,general and administrative842 622 1,618 1,253 Total operating expenses3,932 2,662 7,428 5,169 Operating income18,642 6,800 35,551 8,941 Interest income444 187 803 338 Interest expense(61)(65)(125)(131)Other,net189 59 264 42 Other income(expense),net572 181 942 249 Income before income tax19,214 6,981 36,493 9,190 Income tax expense2,615 793 5,013 958 Net income$16,599$6,188$31,480$8,232 Net income per share:Basic$0.68$0.25$1.28$0.33 Diluted$0.67$0.25$1.27$0.33 Weighted average shares used in per share computation:Basic24,578 24,729 24,599 24,716 Diluted24,848 24,994 24,869 24,948 See accompanying Notes to Condensed Consolidated Financial Statements.3NVIDIA Corporation and SubsidiariesCondensed Consolidated Statements of Comprehensive Income(In millions)(Unaudited)Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023 Net income$16,599$6,188$31,480$8,232 Other comprehensive income(loss),net of taxAvailable-for-sale securities:Net change in unrealized gain(loss)150(11)22 7 Cash flow hedges:Net change in unrealized gain23 22 20 8 Reclassification adjustments for net realized loss included in netincome(8)(12)(13)(23)Net change in unrealized gain(loss)15 10 7(15)Other comprehensive income(loss),net of tax165(1)29(8)Total comprehensive income$16,764$6,187$31,509$8,224 See accompanying Notes to Condensed Consolidated Financial Statements.4NVIDIA Corporation and SubsidiariesCondensed Consolidated Balance Sheets(In millions)(Unaudited)Jul 28,2024Jan 28,2024AssetsCurrent assets:Cash and cash equivalents$8,563$7,280 Marketable securities26,237 18,704 Accounts receivable,net14,132 9,999 Inventories6,675 5,282 Prepaid expenses and other current assets4,026 3,080 Total current assets59,633 44,345 Property and equipment,net4,885 3,914 Operating lease assets1,556 1,346 Goodwill4,622 4,430 Intangible assets,net952 1,112 Deferred income tax assets9,578 6,081 Other assets4,001 4,500 Total assets$85,227$65,728 Liabilities and Shareholders Equity Current liabilities:Accounts payable$3,680$2,699 Accrued and other current liabilities10,289 6,682 Short-term debt 1,250 Total current liabilities13,969 10,631 Long-term debt8,461 8,459 Long-term operating lease liabilities1,304 1,119 Other long-term liabilities3,336 2,541 Total liabilities27,070 22,750 Commitments and contingencies-see Note 12Shareholders equity:Preferred stock Common stock25 25 Additional paid-in capital12,115 13,109 Accumulated other comprehensive income56 27 Retained earnings45,961 29,817 Total shareholders equity58,157 42,978 Total liabilities and shareholders equity$85,227$65,728 See accompanying Notes to Condensed Consolidated Financial Statements.5NVIDIA Corporation and SubsidiariesCondensed Consolidated Statements of Shareholders EquityFor the Three Months Ended July 28,2024 and July 30,2023(Unaudited)Common StockOutstandingAdditionalPaid-in CapitalAccumulated OtherComprehensiveIncome(Loss)RetainedEarningsTotalShareholdersEquitySharesAmount(In millions,except per share data)Balances,Apr 28,202424,598$25$12,628$(109)$36,598$49,142 Net income 16,599 16,599 Other comprehensive income 165 165 Issuance of common stock from stock plans 38 Tax withholding related to vesting of restricted stock units(11)(1,637)(1,637)Shares repurchased(63)(38)(6,990)(7,028)Cash dividends declared and paid($0.01 per common share)(246)(246)Stock-based compensation 1,162 1,162 Balances,Jul 28,202424,562$25$12,115$56$45,961$58,157 Balances,Apr 30,202324,731$25$12,430$(50)$12,115$24,520 Net income 6,188 6,188 Other comprehensive loss (1)(1)Issuance of common stock from stock plans 52 1 1 Tax withholding related to vesting of restricted stock units(16)(672)(672)Shares repurchased(75)(1)(3,283)(3,284)Cash dividends declared and paid($0.004 per common share)(99)(99)Stock-based compensation 848 848 Balances,Jul 30,202324,692$25$12,606$(51)$14,921$27,501 See accompanying Notes to Condensed Consolidated Financial Statements.6NVIDIA Corporation and SubsidiariesCondensed Consolidated Statements of Shareholders EquityFor the Six Months Ended July 28,2024 and July 30,2023(Unaudited)Common StockOutstandingAdditionalPaid-inCapitalAccumulated OtherComprehensiveIncome(Loss)RetainedEarningsTotalShareholdersEquitySharesAmount(In millions,except per share data)Balances,Jan 28,202424,643$25$13,109$27$29,817$42,978 Net income 31,480 31,480 Other comprehensive income 29 29 Issuance of common stock from stock plans 113 285 285 Tax withholding related to vesting of restricted stock units(32)(3,389)(3,389)Shares repurchased(162)(71)(14,992)(15,063)Cash dividends declared and paid($0.014 per common share)(344)(344)Stock-based compensation 2,181 2,181 Balances,Jul 28,202424,562$25$12,115$56$45,961$58,157 Balances,Jan 29,202324,661$25$11,948$(43)$10,171$22,101 Net income 8,232 8,232 Other comprehensive loss (8)(8)Issuance of common stock from stock plans 143 247 247 Tax withholding related to vesting of restricted stock units(37)(1,179)(1,179)Shares repurchased(75)(1)(3,283)(3,284)Cash dividends declared and paid($0.008 per common share)(199)(199)Stock-based compensation 1,591 1,591 Balances,Jul 30,202324,692$25$12,606$(51)$14,921$27,501 See accompanying Notes to Condensed Consolidated Financial Statements.7NVIDIA Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows(In millions)(Unaudited)Six Months Ended Jul 28,2024Jul 30,2023Cash flows from operating activities:Net income$31,480$8,232 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense2,164 1,576 Depreciation and amortization843 749 Gains on investments in non-affiliated entities and publicly-held equity securities,net(264)(45)Deferred income taxes(3,276)(1,881)Other(288)(102)Changes in operating assets and liabilities,net of acquisitions:Accounts receivable(4,133)(3,239)Inventories(1,380)861 Prepaid expenses and other assets(12)(592)Accounts payable801 789 Accrued and other current liabilities3,314 2,675 Other long-term liabilities584 236 Net cash provided by operating activities29,833 9,259 Cash flows from investing activities:Proceeds from maturities of marketable securities8,098 5,111 Proceeds from sales of marketable securities164 Purchases of marketable securities(15,047)(5,343)Purchases related to property and equipment and intangible assets(1,346)(537)Acquisitions,net of cash acquired(317)(83)Purchases of investments in non-affiliated entities(534)(456)Proceeds from sales of investments in non-affiliated entities105 Other 21 Net cash used in investing activities(8,877)(1,287)Cash flows from financing activities:Proceeds related to employee stock plans285 247 Payments related to repurchases of common stock(14,898)(3,067)Repayment of debt(1,250)(1,250)Payments related to tax on restricted stock units(3,389)(1,179)Dividends paid(344)(199)Principal payments on property and equipment and intangible assets(69)(31)Net cash used in financing activities(19,665)(5,479)Change in cash,cash equivalents,and restricted cash1,291 2,493 Cash,cash equivalents,and restricted cash at beginning of period7,280 3,389 Cash,cash equivalents,and restricted cash at end of period$8,571$5,882 Reconciliation of cash,cash equivalents,and restricted cash to the Condensed Consolidated Balance Sheet:Cash and cash equivalents$8,563$5,783 Restricted cash,included in prepaid expenses and other current assets8 99 Total cash,cash equivalents,and restricted cash$8,571$5,882 Supplemental disclosure of cash flow information:Cash paid for income taxes,net$7,449$328 See accompanying Notes to Condensed Consolidated Financial Statements.8NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Unaudited)Note 1-Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in theUnited 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 ExchangeCommission,or SEC,Regulation S-X.The January 28,2024 consolidated balance sheet was derived from our audited consolidated financial statementsincluded in our Annual Report on Form 10-K for the fiscal year ended January 28,2024,as filed with the SEC,but does not include all disclosures required byU.S.GAAP.In the opinion of management,all adjustments,consisting only of normal recurring adjustments considered necessary for a fair presentation ofresults of operations and financial position,have been included.The results for the interim periods presented are not necessarily indicative of the resultsexpected for any future period.The following information should be read in conjunction with the audited consolidated financial statements and notes theretoincluded in our Annual Report on Form 10-K for the fiscal year ended January 28,2024.In May 2024,we announced a ten-for-one stock split,or the Stock Split,of our issued common stock,which was effected through the filing of an amendment tothe Companys Restated Certificate of Incorporation,or the Amendment,with the Secretary of the State of Delaware.In June 2024,the Company filed theAmendment to effect the Stock Split and proportionately increased the number of shares of the Companys authorized common stock from 8.0 billion to80.0 billion.Shareholders of record at the close of market on June 6,2024 received nine additional shares of common stock,distributed after the close of marketon June 7,2024.All share,equity award and per share amounts presented herein have been retrospectively adjusted to reflect the Stock Split.Significant Accounting PoliciesThere 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 28,2024.Fiscal YearWe operate on a 52-or 53-week year,ending on the last Sunday in January.Fiscal years 2025 and 2024 are both 52-week years.The second quarters of fiscalyears 2025 and 2024 were both 13-week quarters.Principles of ConsolidationOur condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries.All intercompany balancesand transactions have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenueand expenses during the reporting period.Actual results could differ materially from our estimates.On an on-going basis,we evaluate our estimates,includingthose related to accounts receivable,cash equivalents and marketable securities,goodwill,income taxes,inventories and product purchase commitments,investigation and settlement costs,litigation,other contingencies,property,plant,and equipment,revenue recognition,and stock-based compensation.Theseestimates are based on historical facts and other assumptions that we believe are reasonable.Recently Issued Accounting PronouncementsRecent Accounting Pronouncements Not Yet AdoptedIn November 2023,the Financial Accounting Standards Board,or FASB,issued a new accounting standard requiring disclosures of significant expenses inoperating segments.We expect to adopt this standard in our annual reporting starting with fiscal year 2025.We are currently evaluating the impact of thisstandard on our Consolidated Financial Statements.In December 2023,the FASB issued a new accounting standard which includes new and updated income tax disclosures,including disaggregation of ratereconciliation and income taxes paid.We expect to adopt this standard in our annual reporting starting with fiscal year 2026.We are currently evaluating theimpact of this standard on our Consolidated Financial Statements.9NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Note 2-LeasesOur lease obligations primarily consist of operating leases for our headquarters complex,domestic and international office facilities,and data center space,withlease periods expiring between fiscal years 2025 and 2035.Future minimum lease payments under our non-cancelable operating leases as of July 28,2024 were as follows:Operating LeaseObligations(In millions)Fiscal Year:2025(excluding first half of fiscal year 2025)$144 2026316 2027299 2028280 2029247 2030 and thereafter486 Total1,772 Less imputed interest218 Present value of net future minimum lease payments1,554 Less short-term operating lease liabilities250 Long-term operating lease liabilities$1,304 In addition,operating leases of$1.0 billion,primarily for our data centers,are expected to commence during fiscal year 2025 with lease terms of 2 to 10.5 years.Operating lease expenses were$84 million and$67 million for the second quarter of fiscal years 2025 and 2024,respectively,and$164 million and$126 millionfor the first half of fiscal years 2025 and 2024,respectively.Short-term and variable lease expenses for the second quarter and first half of fiscal years 2025 and2024 were not significant.Other information related to leases was as follows:Six Months EndedJul 28,2024Jul 30,2023(In millions)Supplemental cash flows information Operating cash flow used for operating leases$146$135 Operating lease assets obtained in exchange for lease obligations$405$299 As of July 28,2024,our operating leases had a weighted average remaining lease term of 6.4 years and a weighted average discount rate of 4.03%.As ofJanuary 28,2024,our operating leases had a weighted average remaining lease term of 6.1 years and a weighted average discount rate of 3.76%.10NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Note 3-Stock-Based CompensationStock-based compensation expense is associated with restricted stock units,or RSUs,performance stock units that are based on our corporate financialperformance targets,or PSUs,performance stock units that are based on market conditions,or market-based PSUs,and employee stock purchase plan,orESPP.Condensed Consolidated Statements of Income include stock-based compensation expense,net of amounts capitalized into inventory and subsequentlyrecognized to cost of revenue,as follows:Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Cost of revenue$40$31$75$58 Research and development832 600 1,559 1,124 Sales,general and administrative282 211 530 394 Total$1,154$842$2,164$1,576 Equity Award ActivityThe following is a summary of our equity award transactions under our equity incentive plans:RSUs,PSUs,and Market-based PSUs Outstanding Number of SharesWeighted Average Grant-Date FairValue Per Share(In millions,except per share data)Balances,Jan 28,2024367$24.59 Granted79$82.68 Vested(93)$19.23 Canceled and forfeited(5)$28.82 Balances,Jul 28,2024348$39.16 As of July 28,2024,aggregate unearned stock-based compensation expense was$12.8 billion,which is expected to be recognized over a weighted averageperiod of 2.5 years for RSUs,PSUs,and market-based PSUs,and 0.8 years for ESPP.Note 4-Net Income Per ShareThe following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:Three Months EndedSix Months EndedJul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions,except per share data)Numerator:Net income$16,599$6,188$31,480$8,232 Denominator:Basic weighted average shares24,578 24,729 24,599 24,716 Dilutive impact of outstanding equity awards270 265 270 232 Diluted weighted average shares24,848 24,994 24,869 24,948 Net income per share:Basic(1)$0.68$0.25$1.28$0.33 Diluted(2)$0.67$0.25$1.27$0.33 Equity awards excluded from diluted net income per share because theireffect would have been anti-dilutive5 104 68 136(1)Calculated as net income divided by basic weighted average shares.(2)Calculated as net income divided by diluted weighted average shares.11NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Diluted net income per share is computed using the weighted average number of common and potentially dilutive shares outstanding during the period,usingthe treasury stock method.The anti-dilutive effect of equity awards outstanding is not included in the computation of diluted net income per share.Note 5-Income TaxesIncome tax expense was$2.6 billion and$5.0 billion for the second quarter and first half of fiscal year 2025,respectively,and$793 million and$958 million forthe second quarter and first half of fiscal year 2024,respectively.The income tax expense as a percentage of income before income tax for the second quarterand first half of fiscal year 2025 was 13.6%and 13.7%,respectively,and 11.4%and 10.4%for the second quarter and first half of fiscal year 2024,respectively.The effective tax rate increased primarily due to a lower percentage of tax benefits from the foreign-derived intangible income deduction relative to the increasein income before income tax.Effective tax rates for the first half of fiscal years 2025 and 2024 were lower than the U.S.federal statutory rate of 21%due to tax benefits from stock-basedcompensation,the foreign-derived intangible income deduction,income earned in jurisdictions that are subject to taxes lower than the U.S.federal statutory taxrate,and the U.S.federal research tax credit.Given our current and anticipated future earnings,we believe that we may release the valuation allowance associated with certain state deferred tax assets inthe near term,which would decrease our income tax expense for the period the release is recorded.The timing and amount of the valuation allowance releasecould vary based on our assessment of all available evidence.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 positionwill 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 otherwiseresolved with the respective tax authorities.As of July 28,2024,we do not believe that our estimates,as otherwise provided for,on such tax positions willsignificantly increase or decrease within the next 12 months.Note 6-Cash Equivalents and Marketable Securities The following is a summary of cash equivalents and marketable securities:Jul 28,2024AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as Cash EquivalentsMarketableSecurities(In millions)Debt securities issued by the U.S.Treasury$14,051$42$(10)$14,083$2,132$11,951 Corporate debt securities11,994 37(7)12,024 682 11,342 Money market funds5,252 5,252 5,252 Debt securities issued by U.S.governmentagencies2,461 7(2)2,466 50 2,416 Certificates of deposit141 141 32 109 Total marketable securities with fair valueadjustments recorded in other comprehensiveincome$33,899$86$(19)$33,966$8,148$25,818 Publicly-held equity securities(1)$419$419 Total$33,899$86$(19)$34,385$8,148$26,237(1)Fair value adjustments on publicly-held equity securities are recorded in net income.In the second quarter of fiscal year 2025,publicly-held equity securities from investments in non-affiliated entitieswere classified in marketable securities on our Condensed Consolidated Balance Sheets.For the second quarter and first half of fiscal year 2025,net unrealized gains on investments in publicly-held equity securities were$132 million and$181 million,respectively.For the second quarter and first half of fiscal year 2024,net unrealized gains on investments in publicly-held equity securities were not significant.12NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Jan 28,2024AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as CashEquivalentsMarketableSecurities(In millions)Corporate debt securities$10,126$31$(5)$10,152$2,231$7,921 Debt securities issued by the U.S.Treasury9,517 17(10)9,524 1,315 8,209 Money market funds3,031 3,031 3,031 Debt securities issued by U.S.government agencies2,326 8(1)2,333 89 2,244 Certificates of deposit510 510 294 216 Foreign government bonds174 174 60 114 Total marketable securities with fair valuechanges recorded in other comprehensiveincome$25,684$56$(16)$25,724$7,020$18,704 The following tables provide the breakdown of unrealized losses,aggregated by investment category and length of time that individual debt securities have beenin a continuous loss position:Jul 28,2024 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealized LossEstimated FairValueGrossUnrealized LossEstimated FairValueGrossUnrealized Loss(In millions)Debt securities issued by U.S.government agencies$4,031$(8)$857$(2)$4,888$(10)Corporate debt securities3,170(5)396(2)3,566(7)Debt securities issued by the U.S.Treasury1,210(1)117(1)1,327(2)Total$8,411$(14)$1,370$(5)$9,781$(19)Jan 28,2024 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealized LossEstimated FairValueGrossUnrealized LossEstimated FairValueGrossUnrealized Loss(In millions)Debt securities issued by the U.S.Treasury$3,343$(5)$1,078$(5)$4,421$(10)Corporate debt securities1,306(3)618(2)1,924(5)Debt securities issued by U.S.government agencies670(1)670(1)Total$5,319$(9)$1,696$(7)$7,015$(16)Gross unrealized losses are related to fixed income securities,driven primarily by changes in interest rates.13NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)The amortized cost and estimated fair value of debt securities included in cash equivalents and marketable securities are shown below by contractual maturity.Jul 28,2024Jan 28,2024Amortized CostEstimated FairValueAmortized CostEstimated FairValue(In millions)Less than one year$15,535$15,532$16,336$16,329 Due in 1-5 years18,364 18,434 9,348 9,395 Total$33,899$33,966$25,684$25,724 Note 7-Fair Value of Financial Assets and Liabilities and Investments in Non-Affiliated EntitiesThe fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or market prices of similar assets from activemarkets.We review fair value classification on a quarterly basis.Pricing CategoryFair Value atJul 28,2024Jan 28,2024(In millions)AssetsCash equivalents and marketable securities:Money market fundsLevel 1$5,252$3,031 Publicly-held equity securitiesLevel 1$419$Debt securities issued by the U.S.TreasuryLevel 2$14,083$9,524 Corporate debt securitiesLevel 2$12,024$10,152 Debt securities issued by U.S.government agenciesLevel 2$2,466$2,333 Certificates of depositLevel 2$141$510 Foreign government bondsLevel 2$174 Other assets(Investments in non-affiliated entities):Publicly-held equity securitiesLevel 1$225 Liabilities(1)0.584%Notes Due 2024Level 2$1,228 3.20%Notes Due 2026Level 2$973$970 1.55%Notes Due 2028Level 2$1,126$1,115 2.85%Notes Due 2030Level 2$1,380$1,367 2.00%Notes Due 2031Level 2$1,068$1,057 3.50%Notes Due 2040Level 2$839$851 3.50%Notes Due 2050Level 2$1,559$1,604 3.70%Notes Due 2060Level 2$386$403(1)These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value,net of unamortized debt discount and issuance costs.Investments in Non-Affiliated EntitiesOur investments in non-affiliated entities include non-marketable equity securities,which are primarily investments in privately held companies.In the secondquarter of fiscal year 2025,publicly-held equity securities from investments in non-affiliated entities were classified in marketable securities on our CondensedConsolidated Balance Sheets.Our non-marketable equity securities are recorded in long-term other assets on our Condensed Consolidated Balance Sheets and valued under themeasurement alternative.Gains and losses on these investments,realized and unrealized,are recognized in Other income and expense,net on our CondensedConsolidated Statements of Income.14NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Adjustments to the carrying value of our non-marketable equity securities during the second quarter and first half of fiscal years 2025 and 2024 were as follows:Three Months EndedSix Months EndedJul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Balance at beginning of period$1,463$496$1,321$288 Adjustments related to non-marketable equity securities:Net additions294 181 421 402 Unrealized gains77 92 Impairments and unrealized losses(15)(1)(15)(14)Balance at end of period$1,819$676$1,819$676 Non-marketable equity securities had cumulative gross unrealized gains of$362 million and cumulative gross losses and impairments of$60 million as of July28,2024.Note 8-Amortizable Intangible Assets and GoodwillThe components of our amortizable intangible assets are as follows:Jul 28,2024Jan 28,2024 GrossCarryingAmountAccumulatedAmortizationNet CarryingAmountGrossCarryingAmountAccumulatedAmortizationNet CarryingAmount(In millions)Acquisition-related intangible assets$2,752$(1,976)$776$2,642$(1,720)$922 Patents and licensed technology442(266)176 449(259)190 Total intangible assets$3,194$(2,242)$952$3,091$(1,979)$1,112 For the second quarter and first half of fiscal year 2025,amortization expense associated with intangible assets was$146 million and$289 million,respectively.For the second quarter and first half of fiscal year 2024,amortization expense was$146 million and$327 million,respectively.The following table outlines the estimated amortization expense related to the net carrying amount of intangible assets as of July 28,2024:Future Amortization Expense(In millions)Fiscal Year:2025(excluding first half of fiscal year 2025)$295 2026304 2027192 202851 20299 2030 and thereafter101 Total$952 In the first half of fiscal year 2025,goodwill increased by$192 million from business combinations assigned to our Compute&Networking reporting unit.15NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Note 9-Balance Sheet Components Three customers accounted for 23%,15%,and 11%of our accounts receivable balance as of July 28,2024.Two customers accounted for 24%and 11%of ouraccounts receivable balance as of January 28,2024.Certain balance sheet components are as follows:Jul 28,2024Jan 28,2024Inventories:(In millions)Raw materials$1,895$1,719 Work in process2,111 1,505 Finished goods2,669 2,058 Total inventories(1)$6,675$5,282(1)During the second quarter of fiscal years 2025 and 2024,we recorded an inventory provision of$345 million and$343 million,respectively and during the first half of fiscal years 2025 and 2024,werecorded an inventory provision of$555 million and$448 million,respectively,in cost of revenue.Jul 28,2024Jan 28,2024Other Assets(Long Term):(In millions)Investments in non-affiliated entities$1,819$1,546 Prepaid supply and capacity agreements(1)1,313 2,458 Prepaid royalties352 364 Prepaid tax331 2 Other186 130 Total other assets$4,001$4,500(1)As of July 28,2024 and January 28,2024,there were$3.3 billion and$2.5 billion of short-term prepaid supply and capacity agreements included in short term Prepaid expenses and other currentassets,respectively.Jul 28,2024Jan 28,2024Accrued and Other Current Liabilities:(In millions)Customer program accruals$3,584$2,081 Excess inventory purchase obligations(1)2,051 1,655 Taxes payable1,173 296 Deferred revenue(2)948 764 Accrued payroll and related expenses941 675 Product warranty and return provisions868 415 Operating leases250 228 Licenses and royalties154 182 Unsettled share repurchases130 187 Other190 199 Total accrued and other current liabilities$10,289$6,682(1)During the second quarter of fiscal years 2025 and 2024,we recorded$563 million and$232 million,respectively and during the first half of fiscal years 2025 and 2024,we recorded$746 million and$261 million,respectively,in cost of revenue.(2)Deferred revenue includes customer advances and unearned revenue related to hardware support,software support,cloud services,and license and development arrangements.The balance as ofJuly 28,2024 and January 28,2024 included$340 million and$233 million of customer advances,respectively.16NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Jul 28,2024Jan 28,2024Other Long-Term Liabilities:(In millions)Income tax payable(1)$1,670$1,361 Deferred revenue(2)773 573 Deferred income tax697 462 Other196 145 Total other long-term liabilities$3,336$2,541(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 includes unearned revenue related to hardware support and software support.Deferred RevenueThe following table shows the changes in short and long term deferred revenue during the first half of fiscal years 2025 and 2024:Six Months Ended Jul 28,2024Jul 30,2023(In millions)Balance at beginning of period$1,337$572 Deferred revenue additions1,478 713 Revenue recognized(1,094)(556)Balance at end of period$1,721$729 We recognized revenue of$323 million and$199 million for the first half of fiscal years 2025 and 2024 respectively,that were included in the prior year enddeferred revenue balances.For revenue contracts with a length greater than one year,$1.3 billion is included in deferred revenue and$123 million has not yet been billed nor recognized asrevenue as of July 28,2024.Approximately 37%of this combined amount will be recognized as revenue over the next twelve months.Note 10-Derivative Financial InstrumentsWe entered into foreign currency forward contracts mitigating the impact of foreign currency exchange rate movements on our operating expenses.Thesecontracts are designated as cash flow hedges.Gains or losses on the contracts are recorded in accumulated other comprehensive income or loss andreclassified to operating expense when the related operating expenses are recognized in earnings or ineffectiveness should occur.We also entered into foreign currency forward contracts mitigating the impact of foreign currency movements on monetary assets and liabilities.The change infair value of these non-designated contracts was recorded in other income or expense and offsets the change in fair value of the hedged foreign currencydenominated monetary assets and liabilities,which was also recorded in other income or expense.The table below presents the notional value of our foreign currency contracts outstanding:Jul 28,2024Jan 28,2024(In millions)Designated as cash flow hedges$1,278$1,168 Non-designated hedges$894$597 The unrealized gains and losses or fair value of our foreign currency contracts were not significant as of July 28,2024 and January 28,2024.As of July 28,2024,all designated foreign currency contracts mature within 18 months and the expected realized gains and losses were not significant.During the first half of fiscal years 2025 and 2024,the impact of derivative financial instruments designated for cash flow hedges was not significant and theinstruments were determined to be highly effective.17NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Note 11-DebtLong-Term DebtExpectedRemaining Term(years)EffectiveInterest RateCarrying Value atJul 28,2024Jan 28,2024(In millions)0.584%Notes Due 2024(1)0.66%$1,250 3.20%Notes Due 20262.13.31%1,000 1,000 1.55%Notes Due 20283.91.64%1,250 1,250 2.85%Notes Due 20305.72.93%1,500 1,500 2.00%Notes Due 20316.92.09%1,250 1,250 3.50%Notes Due 204015.73.54%1,000 1,000 3.50%Notes Due 205025.73.54%2,000 2,000 3.70%Notes Due 206035.73.73P0 500 Unamortized debt discount and issuance costs(39)(41)Net carrying amount8,461 9,709 Less short-term portion(1,250)Total long-term portion$8,461$8,459(1)We repaid the 0.584%Notes Due 2024 in the second quarter of fiscal year 2025.Our notes are unsecured senior obligations.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,as defined in the applicable form of note.The maturity of the notes are calendar year.As of July 28,2024,we complied with the required covenants,which are non-financial in nature,under the outstanding notes.Commercial PaperWe have a$575 million commercial paper program to support general corporate purposes.As of July 28,2024,we had no commercial paper outstanding.Note 12-Commitments and ContingenciesPurchase ObligationsOur purchase obligations reflect our commitment to purchase components used to manufacture our products,including long-term supply and capacityagreements,certain software and technology licenses,other goods and services and long-lived assets.As of July 28,2024,we had outstanding inventory purchases and long-term supply and capacity obligations totaling$27.8 billion,an increase from the prior yeardue to commitments for Hopper and Blackwell capacity and components.We enter into agreements with contract manufacturers that allow them to procureinventory based upon our defined criteria,and in certain instances,these agreements are cancellable,able to be rescheduled,and adjustable for our businessneeds prior to placing firm orders.Though,changes to these agreements may result in additional costs.Other non-inventory purchase obligations were$12.0 billion,including$9.8 billion of multi-year cloud service agreements.We expect our cloud service agreements to be used to support our research anddevelopment efforts and our DGX Cloud offerings.18NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Total future purchase commitments as of July 28,2024 are as follows:Commitments(In millions)Fiscal Year:2025(excluding first half of fiscal year 2025)$21,934 202610,671 20272,778 20282,436 20291,543 2030 and thereafter419 Total$39,781 Accrual for Product Warranty LiabilitiesThe estimated amount of product warranty liabilities was$741 million and$306 million as of July 28,2024 and January 28,2024,respectively.The estimatedproduct returns and product warranty activity consisted of the following:Three Months EndedSix Months EndedJul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Balance at beginning of period$532$77$306$82 Additions237 42 471 55 Utilization(28)(4)(36)(22)Balance at end of period$741$115$741$115 We have provided indemnities for matters such as tax,product,and employee liabilities.We have included intellectual property indemnification provisions in ourtechnology-related agreements with third parties.Maximum potential future payments cannot be estimated because many of these agreements do not have amaximum stated liability.We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.LitigationSecurities Class Action and Derivative LawsuitsThe 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 Courtfor the Northern District of California,and titled In Re NVIDIA Corporation Securities Litigation,filed an amended complaint on May 13,2020.The amendedcomplaint 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 demandbetween May 10,2017 and November 14,2018.Plaintiffs also alleged that the NVIDIA executives who they named as defendants violated Section 20(a)of theExchange Act.Plaintiffs sought class certification,an award of unspecified compensatory damages,an award of reasonable costs and expenses,includingattorneys fees and expert fees,and further relief as the Court may deem just and proper.On March 2,2021,the district court granted NVIDIAs motion todismiss the complaint without leave to amend,entered judgment in favor of NVIDIA and closed the case.On March 30,2021,plaintiffs filed an appeal fromjudgment in the United States Court of Appeals for the Ninth Circuit,case number 21-15604.On August 25,2023,a majority of a three-judge Ninth Circuit panelaffirmed in part and reversed in part the district courts dismissal of the case,with a third judge dissenting on the basis that the district court did not err indismissing the case.On November 15,2023,the Ninth Circuit denied NVIDIAs petition for rehearing en banc of the Ninth Circuit panels majority decision toreverse in part the dismissal of the case,which NVIDIA had filed on October 10,2023.On November 21,2023,NVIDIA filed a motion with the Ninth Circuit for astay of the mandate pending NVIDIAs petition for a writ of certiorari in the Supreme Court of the United States and the Supreme Courts resolution of the matter.On December 5,2023,the Ninth Circuit granted NVIDIAs motion to stay the mandate.NVIDIA filed a petition for a writ of certiorari on March 4,2024.On June17,2024,the Supreme Court of the United States granted NVIDIAs petition for a writ of certiorari.Four amicus briefs were filed in support of NVIDIAs petition.Oral arguments are scheduled for November 13,2024.19NVIDIA Corporation and SubsidiariesNotes 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 filedJanuary 18,2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation,was stayed pending resolution of the plaintiffs appeal in the In ReNVIDIA Corporation Securities Litigation action.On February 22,2022,the court administratively closed the case,but stated that it would reopen the case oncethe appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved.The stay remains in place.The lawsuit asserts claims,purportedly on behalfof us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,waste of corporate assets,and violations of Sections14(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 impactof cryptocurrency mining on GPU demand.The plaintiffs are seeking unspecified damages and other relief,including reforms and improvements to NVIDIAscorporate 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,etal.(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 theIn Re NVIDIA Corporation Securities Litigation action.The lawsuits assert claims,purportedly on behalf of us,against certain officers and directors of theCompany 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 ofcryptocurrency mining on GPU demand.The plaintiffs seek unspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stockand unspecified corporate governance measures.Another putative derivative action was filed on October 30,2023 in the Court of Chancery of the State of Delaware,captioned Horanic v.Huang,et al.(Case No.2023-1096-KSJM).This lawsuit asserts claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty andinsider trading based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining onGPU demand.The plaintiffs seek unspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stock and reform ofunspecified corporate governance measures.This derivative matter is stayed pending the final resolution of In Re NVIDIA Corporation Securities Litigationaction.Accounting for Loss ContingenciesAs of July 28,2024,there are no accrued contingent liabilities associated with the legal proceedings described above based on our belief that liabilities,whilepossible,are not probable.Further,except as 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,webelieve that the ultimate outcome of these actions will not have a material adverse effect on our operating results,liquidity or financial position.Note 13-Shareholders Equity Capital Return Program During the second quarter and first half of fiscal year 2025,we repurchased 62.8 million and 162.1 million shares of our common stock for$7.0 billion and$15.1billion,respectively.During the second quarter and first half of fiscal year 2024,we repurchased 75.5 million shares of our common stock for$3.3 billion.As ofJuly 28,2024,we were authorized,subject to certain specifications,to repurchase up to$7.5 billion of our common stock.On August 26,2024,our Board ofDirectors approved an additional$50.0 billion to our share repurchase authorization,without expiration.As of August 26,2024,a total of$53.9 billion wasavailable for repurchase.Our share repurchase program aims to offset dilution from shares issued to employees while maintaining adequate liquidity to meet ouroperating requirements.We may pursue additional share repurchases as we weigh market factors and other investment opportunities.From July 29,2024 through August 26,2024,we repurchased 31.5 million shares for$3.6 billion pursuant to a Rule 10b5-1 trading plan.On June 7,2024,we increased our quarterly cash dividend to$0.01 per share on a post-Stock Split basis to all shareholders of record on June 11,2024.Ourquarterly cash dividend was paid on June 28,2024.During the second quarter and first half of fiscal year 2025,we paid$246 million and$344 million in cash dividends,respectively.During the second quarter andfirst half of fiscal year 2024,we paid$99 million and$199 million in cash dividends to our shareholders,respectively.Our cash dividend program and thepayment of future cash dividends under that program are subject to our Board of Directors continuing determination that the dividend program and thedeclaration of dividends thereunder are in the best interests of our shareholders.20NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Note 14-Segment InformationOur Chief Executive Officer is our chief operating decision maker,or CODM,and reviews financial information presented on an operating segment basis forpurposes of making decisions and assessing financial performance.The Compute&Networking segment includes our Data Center accelerated computing platforms and artificial intelligence,or AI,solutions and software;networking;automotive platforms and autonomous and electric vehicle solutions;Jetson for robotics and other embedded platforms;and DGX Cloud computingservices.The Graphics segment includes GeForce GPUs for gaming and PCs,the GeForce NOW game streaming service and related infrastructure,and solutions forgaming platforms;Quadro/NVIDIA RTX GPUs for enterprise workstation graphics;virtual GPU software for cloud-based visual and virtual computing;automotiveplatforms for infotainment systems;and Omniverse Enterprise software for building and operating 3D internet applications.Operating results by segment include costs or expenses directly attributable to each segment,and costs or expenses that are leveraged across our unifiedarchitecture 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 operatingdecisions or assessing financial performance.The expenses include stock-based compensation expense,corporate infrastructure and support costs,acquisition-related and other 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 expenses directly attributableto each reportable segment are included in operating results for each segment.However,our CODM does not evaluate depreciation and amortization expenseby operating segment and,therefore,it is not separately presented.The accounting policies for segment reporting are the same as for our consolidated financialstatements.The table below presents details of our reportable segments and the“All Other”category.Compute&NetworkingGraphicsAll OtherConsolidated(In millions)Three Months Ended Jul 28,2024 Revenue$26,446$3,594$30,040 Operating income(loss)$18,848$1,369$(1,575)$18,642 Three Months Ended Jul 30,2023 Revenue$10,402$3,105$13,507 Operating income(loss)$6,728$1,211$(1,139)$6,800 Six Months Ended Jul 28,2024Revenue$49,121$6,963$56,084 Operating income(loss)$35,896$2,609$(2,954)$35,551 Six Months Ended Jul 30,2023Revenue$14,862$5,837$20,699 Operating income(loss)$8,887$2,258$(2,204)$8,941 21NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)Three Months EndedSix Months EndedJul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Reconciling items included in All Other category:Stock-based compensation expense$(1,154)$(842)$(2,164)$(1,576)Unallocated cost of revenue and operating expenses(280)(163)(508)(317)Acquisition-related and other costs(144)(137)(286)(311)Other3 3 4 Total$(1,575)$(1,139)$(2,954)$(2,204)Revenue by geographic areas is based upon the billing location of the customer.The end customer and shipping location may be different from our customersbilling location.For example,most shipments associated with Singapore revenue were to locations other than Singapore and shipments to Singapore wereinsignificant.Revenue by geographic areas was as follows:Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Revenue:United States$13,022$6,043$26,518$8,428 Taiwan5,740 2,839 10,113 4,635 Singapore5,622 1,042 9,659 1,804 China(including Hong Kong)3,667 2,740 6,158 4,330 Other countries1,989 843 3,636 1,502 Total revenue$30,040$13,507$56,084$20,699 We refer to customers who purchase products directly from NVIDIA as direct customers,such as add-in board manufacturers,distributors,original devicemanufacturers,or ODMs,original equipment manufacturers,or OEMs,and system integrators.We have certain customers that may purchase products directlyfrom NVIDIA and may use either internal resources or third-party system integrators to complete their build.We also have indirect customers,who purchaseproducts through our direct customers;indirect customers include cloud service providers,consumer internet companies,enterprises,and public sector entities.Sales to direct customers which represented 10%or more of total revenue,all of which were primarily attributable to the Compute&Networking segment,arepresented in the following table:Three Months EndedSix Months Ended Jul 28,2024Jul 28,2024Customer A14%Customer B11%*Customer C11%*Customer D10%Customer E*10%*Less than 10%of total revenueOne customer represented approximately 17%and 13%of total revenue for the second quarter and first half of fiscal year 2024,respectively,and wasattributable to the Compute&Networking segment.22NVIDIA Corporation and SubsidiariesNotes to Condensed Consolidated Financial Statements(Continued)(Unaudited)The following table summarizes revenue by specialized markets:Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023(In millions)Revenue:Data Center$26,272$10,323$48,835$14,607 Compute22,604 8,612 41,996 11,969 Networking3,668 1,711 6,839 2,638 Gaming2,880 2,486 5,527 4,726 Professional Visualization454 379 881 674 Automotive346 253 675 549 OEM and Other88 66 166 143 Total revenue$30,040$13,507$56,084$20,699 23Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements based on managements beliefs and assumptions and on information currentlyavailable to management.In some cases,you can identify forward-looking statements by terms such as“may,”“will,”“should,”“could,”“goal,”“would,”“expect,”“plan,”“anticipate,”“believe,”“estimate,”“project,”“predict,”“potential”and similar expressions intended to identify forward-looking statements.Thesestatements involve known and unknown risks,uncertainties and other factors,which may cause our actual results,performance,time frames or achievements tobe materially different from any future results,performance,time frames or achievements expressed or implied by the forward-looking statements.We discussmany of these risks,uncertainties and other factors in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year endedJanuary 28,2024 in greater detail under the heading“Risk Factors”of such reports.Given these risks,uncertainties,and other factors,you should not placeundue reliance on these forward-looking statements.Also,these forward-looking statements represent our estimates and assumptions only as of the date of thisfiling.You should read this Quarterly Report on Form 10-Q completely and understand that our actual future results may be materially different from what weexpect.We hereby qualify our forward-looking statements by these cautionary statements.Except as required by law,we assume no obligation to update theseforward-looking statements publicly,or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements,even if new information becomes available in the future.All references to“NVIDIA,”“we,”“us,”“our”or the“Company”mean NVIDIA Corporation and its subsidiaries.2024 NVIDIA Corporation.All rights reserved.The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the risk factors set forth in Item 1A.“Risk Factors”of our Annual Report on Form 10-K for the fiscal year ended January 28,2024 and Part II,Item 1A.“Risk Factors”of this Quarterly Report onForm 10-Q and our Condensed Consolidated Financial Statements and related Notes thereto,as well as other cautionary statements and risks describedelsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC,before deciding to purchase,hold,or sell shares of our common stock.OverviewOur Company and Our BusinessesNVIDIA pioneered accelerated computing to help solve the most challenging computational problems.Since our original focus on PC graphics,we haveexpanded to several other large and important computationally intensive fields.Fueled by the sustained demand for exceptional 3D graphics and the scale of thegaming market,NVIDIA has leveraged its GPU architecture to create platforms for scientific computing,AI,data science,autonomous vehicles,robotics,and 3Dinternet applications.Our two operating segments are Compute&Networking and Graphics,as described in Note 14 of the Notes to CondensedConsolidated Financial Statements in Part I,Item 1 of this Quarterly Report on Form 10-Q.Headquartered in Santa Clara,California,NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.Recent Developments,Future Objectives and ChallengesDemand and SupplyRevenue growth in the second quarter of fiscal year 2025 was driven by data center compute platforms and networking for accelerated computing and AIsolutions.Hopper architecture demand is strong,and shipments are expected to increase in the second half of fiscal 2025.We shipped customer samples of ourBlackwell architecture in the second quarter.We executed a change to the Blackwell GPU mask to improve production yield.Blackwell production ramp isscheduled to begin in the fourth quarter and continue into fiscal year 2026.In the fourth quarter of fiscal year 2025,we expect to ship several billion dollars inBlackwell revenue.Demand estimates for our new products,applications,and services can be incorrect and create volatility in our revenue or supply levels.We may not be able togenerate significant revenue from them.Recent technologies,such as generative AI models,have emerged,and while they have driven increased demand forData Center,the long-term trajectory is unknown.We continue to increase our supply and capacity purchases with existing and new suppliers to support our demand projections.With these additions,we havealso entered and may continue to enter into prepaid manufacturing and capacity agreements to supply both current and future products.The increased purchasevolumes and integration of new suppliers and contract manufacturers into our supply chain may create more complexity in managing multiple suppliers withvariations in production planning,execution and logistics.Our expanding product portfolio and varying component compatibility and quality may lead toincreased inventory levels.We have incurred and may in the future incur inventory24provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.Product Transitions and New Product IntroductionsProduct transitions are complex and we often ship both new and prior architecture products simultaneously as our channel partners prepare to ship and supportnew products.We may be in various stages of transitioning the architectures of our Data Center,Gaming,Professional Visualization and Automotive products.The computing industry is experiencing a broader and faster launch cadence of accelerated computing platforms to meet a growing and diverse set of AIopportunities.We have introduced a new cadence of our Data Center architectures where we seek to complete a new GPU computing architecture each yearand we are providing a greater variety of Data Center offerings.The increased frequency of these transitions and the larger number of products and productconfigurations may magnify the challenges associated with managing our supply and demand which may create volatility in our revenue.The increasedfrequency and complexity of newly introduced products could result in quality or production issues that could increase inventory provisions,warranty,or othercosts or result in product delays.We incur significant engineering development resources for new products,and changes to our product roadmap may impactour ability to develop other products or adequately manage our supply chain cost.Customers may delay purchasing existing products as we increase thefrequency of new products or may not be able to adopt our new products as fast as forecasted,both impacting the timing of our revenue and supply chain cost.While we have managed prior product transitions and have sold multiple product architectures at the same time,these transitions are difficult,may impair ourability to predict demand and impact our supply mix,and may cause us to incur additional costs.For example,we executed a change to the Blackwell GPUmask to improve production yield.Our gross margins in the second quarter of fiscal year 2025 were negatively impacted by inventory provisions for low-yieldingBlackwell material and they may continue to be impacted in the future.Global TradeIn August 2022,the U.S.government,or the USG,announced licensing requirements that,with certain exceptions,impact exports to China(including HongKong and Macau)and Russia of our A100 and H100 integrated circuits,DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.In July 2023,the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and otherregions,including some countries in the Middle East.In October 2023,the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports toChina and Country Groups D1,D4,and D5(including but not limited to Saudi Arabia,the United Arab Emirates,and Vietnam,but excluding Israel)of ourproducts exceeding certain performance thresholds,including A100,A800,H100,H800,L4,L40,L40S and RTX 4090.The licensing requirements also apply tothe export of products exceeding certain performance thresholds to a party headquartered in,or with an ultimate parent headquartered in,Country Group D5,including China.On October 23,2023,the USG informed us the licensing requirements were effective immediately for shipments of our A100,A800,H100,H800,and L40S products.We have not received licenses to ship these restricted products to China.Additionally,partners and customers have experienceddelays in receiving licenses or have not received a license to ship these restricted products.We expanded our Data Center product portfolio to offer new solutions,including those for which the USG does not require a license or advance notice beforeeach shipment.We ramped new products designed specifically for China that do not require an export control license.Our Data Center revenue in China grewsequentially in the second quarter of fiscal year 2025 and is a significant contributor to our Data Center revenue.As a percentage of total Data Center revenue,itremains below levels seen prior to the imposition of export controls in October 2023.To the extent that a customer requires products covered by the licensingrequirements,we may seek a license for the customer but have no assurance that the USG will grant such a license,or that the USG will act on the licenseapplication in a timely manner or at all.Our competitive position has been harmed,and our competitive position and future results may be further harmed in the long term,if there are further changes inthe USGs export controls.Given the increasing strategic importance of AI and rising geopolitical tensions,the USG has changed and may again change theexport control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements,negatively impacting ourbusiness and financial results.In the event of such change,we may be unable to sell our inventory of such products and may be unable to develop replacementproducts not subject to the licensing requirements,effectively excluding us from all or part of the China market,as well as other impacted markets,including theMiddle East.While we work to enhance the resiliency and redundancy of our supply chain,which is currently concentrated in the Asia-Pacific region,new and existing exportcontrols or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business.Refer to“Item 1A.RiskFactors”for a discussion of this potential impact.25Macroeconomic FactorsMacroeconomic factors,includinginflation,interest rate changes,capital market volatility,global supply chain constraints and global economic and geopoliticaldevelopments,may have direct and indirect impacts on our results of operations,particularly demand for our products.While difficult to isolate and quantify,these macroeconomic factors can also impact our supply chain and manufacturing costs,employee wages,costs for capital equipment and value of ourinvestments.Our product and solution pricing generally does not fluctuate with short-term changes in our costs.Within our supply chain,we continuouslymanage product availability and costs with our vendors.Israel and Regional ConflictsWe are monitoring the impact of the geopolitical conflict in and around Israel on our operations,including the health and safety of our approximately 4,000employees in the region who primarily support the research and development,operations,and sales and marketing of our networking products.Our globalsupply chain for our networking products has not experienced any significant impact.A substantial number of our employees in the region have been called-upfor active military duty in Israel.Some employees in Israel have been on active military duty for an extended period and may continue to be absent,which maycause disruption to our product development or operations.We have not experienced significant impact or expense to our business;however,if the conflict isfurther extended,it could impact future product development,operations,and revenue or create other uncertainty for our business.Second Quarter of Fiscal Year 2025 SummaryThree Months EndedQuarter-over-QuarterChangeYear-over-YearChange Jul 28,2024Apr 28,2024Jul 30,2023($in millions,except per share data)Revenue$30,040$26,044$13,507 152%Gross margin75.1x.4p.1%(3.3)pts5.0 ptsOperating expenses$3,932$3,497$2,662 12H%Operating income$18,642$16,909$6,800 104%Net income$16,599$14,881$6,188 128%Net income per diluted share$0.67$0.60$0.25 128%We specialize in markets where our computing platforms can provide tremendous acceleration for applications.These platforms incorporate processors,interconnects,software,algorithms,systems and services to deliver unique value.Our platforms address four large markets where our expertise is critical:DataCenter,Gaming,Professional Visualization,and Automotive.Revenue was$30.0 billion,up 122%from a year ago and up 15%sequentially.Data Center revenue was up 154%from a year ago and up 16%sequentially.The strong sequential and year-on-year growth was driven by demand for ourHopper GPU computing platform for training and inferencing of large language models,recommendation engines,and generative AI applications.Sequentialgrowth was driven by consumer internet and enterprise companies.Cloud service providers represented roughly 45%of our Data Center revenue,and morethan 50%stemmed from consumer internet and enterprise companies.Strong year-on-year growth was driven by all customer types from both compute andnetworking revenue.Customers continue to accelerate their Hopper architecture purchases while gearing up to adopt Blackwell.Data Center compute revenuewas$22.6 billion,up 162%from a year ago and up 17%sequentially.Networking revenue was$3.7 billion,up 114%from a year ago driven by InfiniBand andEthernet for AI revenue,which includes Spectrum-X end-to-end ethernet platform.Networking revenue sequentially was up 16%and includes a doubling ofEthernet for AI revenue.We shipped customer samples of our Blackwell architecture in the second quarter.We executed a change to the Blackwell GPU mask to improve productionyield.Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year 2026.In the fourth quarter of fiscal year 2025,we expectto ship several billion dollars in Blackwell revenue.Hopper demand is strong,and shipments are expected to increase in the second half of fiscal year 2025.Gaming revenue was up 16%from a year ago and up 9%sequentially.These increases reflect higher sales of our GeForce RTX 40 Series GPUs and gameconsole SOCs.We had solid demand in the second quarter for our gaming GPUs as part of the back-to-school season.Professional Visualization revenue was up 20%from a year ago and up 6%sequentially.These increases were driven by the continued ramp of RTX GPUworkstations based on our Ada architecture.26Automotive revenue was up 37%from a year ago and up 5%sequentially.These increases were driven by AI Cockpit solutions and self-driving platforms.Gross margin increased from a year ago on strong Data Center revenue growth primarily driven by our Hopper GPU computing platform.Sequentially,grossmargin decreased primarily driven by inventory provisions for low-yielding Blackwell material and a higher mix of new products within Data Center.Operating expenses were up 48%from a year ago and up 12%sequentially,largely driven by compensation and benefits,reflecting growth in employees andcompensation.Market Platform HighlightsData Center revenue for the second quarter of fiscal year 2025 was$26.3 billion,up 16%from the previous quarter and up 154%from a year ago.We unveiledan array of NVIDIA Blackwell-powered systems featuring NVIDIA Grace CPUs,networking and infrastructure from top manufacturers.We announced broadadoption of the NVIDIA Spectrum-X Ethernet networking platform by cloud service providers,GPU cloud providers and enterprises,as well as partnersincorporating it into their offerings.We released NVIDIA Inference Microservices,or NIM,for broad availability to developers globally and unveiled that more than150 companies are integrating NIM into their platforms to speed generative AI application development.We introduced an NVIDIA AI Foundry service and NIMinference microservices to accelerate generative AI for the worlds enterprises with the Llama 3.1 collection of models.We announced that the combination ofNVIDIA H200 and NVIDIA Blackwell architecture B200 processors swept the latest industry-standard MLPerf results for inference.We also unveiled an array ofBlackwell systems featuring NVIDIA Grace CPUs,networking and infrastructure.Over the trailing four quarters,we estimate that inference drove over 40%ofour Data Center revenue.Gaming revenue for the second quarter of fiscal year 2025 was$2.9 billion,up 9%from the previous quarter and up 16%from a year ago.We announcedNVIDIA ACE generative AI microservices are in early access for RTX AI PCs.We announced new RTX and DLSS titles bringing the total number of RTX gamesand apps to over 600.We surpassed 2,000 games on GeForce NOW and expanded the service into Japan.Professional Visualization revenue for the second quarter of fiscal year 2025 was$454 million,up 6%from the previous quarter and up 20%from a year ago.We introduced generative AI models and NIM microservices for OpenUSD;and announced major Taiwanese electronics makers are creating more autonomousfactories with a new reference workflow that combines NVIDIA Metropolis vision AI,NVIDIA Omniverse simulation and NVIDIA Isaac AI robot development.Automotive revenue for the second quarter of fiscal year 2025 was$346 million,up 5%from the previous quarter and up 37%from a year ago.At the ComputerVision and Pattern Recognition conference,NVIDIA won the Autonomous Grand Challenge in the End-to-End Driving at Scale category,highlighting theimportance of generative AI in building applications for physical AI deployments in autonomous vehicle development.Financial Information by Business Segment and Geographic DataRefer to Note 14 of the Notes to the Condensed Consolidated Financial Statements for disclosure regarding segment information.Critical Accounting Policies and EstimatesRefer to Part II,Item 7,Critical Accounting Policies and Estimates of our Annual Report on Form 10-K for the fiscal year ended January 28,2024.There havebeen no material changes to our Critical Accounting Policies and Estimates.27Results of OperationsThe following table sets forth,for the periods indicated,certain items in our Condensed Consolidated Statements of Income expressed as a percentage ofrevenue.Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023Jul 28,2024Jul 30,2023Revenue100.00.00.00.0%Cost of revenue24.9 29.9 23.4 31.8 Gross profit75.1 70.1 76.6 68.2 Operating expenses Research and development10.3 15.1 10.4 18.9 Sales,general and administrative2.8 4.7 2.9 6.1 Total operating expenses13.1 19.8 13.3 25.0 Operating income62.0 50.3 63.3 43.2 Interest income1.5 1.4 1.4 1.6 Interest expense(0.2)(0.5)(0.2)(0.6)Other,net0.6 0.4 0.5 0.2 Other income(expense),net1.9 1.3 1.7 1.2 Income before income tax63.9 51.6 65.0 44.4 Income tax expense8.7 5.9 8.9 4.6 Net income55.2E.7V.19.8%RevenueRevenue by Reportable SegmentsThree Months EndedSix Months Ended Jul 28,2024Jul 30,2023$Change%ChangeJul 28,2024Jul 30,2023$Change%Change($in millions)Compute&Networking$26,446$10,402$16,044 154%$49,121$14,862$34,259 231%Graphics3,594 3,105 489 16%6,963 5,837 1,126 19%Total$30,040$13,507$16,533 122%$56,084$20,699$35,385 171%Operating Income by Reportable SegmentsThree Months EndedSix Months Ended Jul 28,2024Jul 30,2023$Change%ChangeJul 28,2024Jul 30,2023$Change%Change($in millions)Compute&Networking$18,848$6,728$12,120 180%$35,896$8,887$27,009 304%Graphics1,369 1,211 158 13%$2,609 2,258 351 16%All Other(1,575)(1,139)(436)38%$(2,954)(2,204)(750)34%Total$18,642$6,800$11,842 174%$35,551$8,941$26,610 298%Compute&Networking revenue The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year2024 was due to strength in Data Center computing and networking for accelerated computing and AI solutions.Revenue from GPU computing grew 166%year-on-year and 257%compared to the first half of fiscal year 2024,was driven by demand for our Hopper GPU architecture computing platform for training andinferencing of large language models,recommendation engines,and generative AI applications.Networking was also up 114%year-on-year and 159%compared to the first half of last year driven by both InfiniBand and Ethernet for AI revenue.28Graphics revenue The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 was ledby higher sales of our GeForce RTX 40 Series GPUs.Reportable segment operating income The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half offiscal year 2024 in Compute&Networking and Graphics operating income was driven by higher revenue.All Other operating loss The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024was due to an increase in stock-based compensation expense reflecting employee growth and compensation increases.Concentration of RevenueRevenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers,such as enterprises andgamers in a different location.Revenue from sales to customers outside of the United States accounted for 57%and 53%of total revenue for the second quarterand first half of fiscal year 2025,respectively,and 55%and 59%of total revenue for the second quarter and first half of fiscal year 2024,respectively.We refer to customers who purchase products directly from NVIDIA as direct customers,such as add-in board manufacturers,distributors,ODMs,OEMs,andsystem integrators.We have certain customers that may purchase products directly from NVIDIA and may use either internal resources or third-party systemintegrators to complete their build.We also have indirect customers,who purchase products through our direct customers;indirect customers include cloudservice providers,consumer internet companies,enterprises,and public sector entities.Sales to direct customers which represented 10%or more of total revenue,all of which were primarily attributable to the Compute&Networking segment,arepresented in the following table:Three Months EndedSix Months Ended Jul 28,2024Jul 28,2024Customer A14%Customer B11%*Customer C11%*Customer D10%Customer E*10%*Less than 10%of total revenueFor the second quarter of fiscal year 2025,two indirect customers which primarily purchase our products through system integrators and distributors,includingthrough Customer B and Customer E,are estimated to each represent 10%or more of total revenue attributable to the Compute&Networking segment.For the first half of fiscal year 2025,an indirect customer which primarily purchases our products from system integrators and distributors,including fromCustomer E,is estimated to represent 10%or more of total revenue,attributable to the Compute&Networking segment.Indirect customer revenue is an estimation based upon multiple factors including customer purchase order information,product specifications,internal sales dataand other sources.Actual indirect customer revenue may differ from our estimates.We have experienced periods where we receive a significant amount of our revenue from a limited number of customers,and this trend may continue.Gross Profit and Gross MarginGross profit consists of total net revenue less cost of revenue.Our overall gross margin increased to 75.1%and 76.6%for the second quarter and first half of fiscal year 2025,respectively,from 70.1%and 68.2%for thesecond quarter and first half of fiscal year 2024,respectively.The increases in the second quarter and first half of fiscal year 2025 compared to the secondquarter and first half of fiscal year 2024 were primarily due to strong Data Center revenue growth of 154%and 234%for the second quarter and first half of2025,respectively.Provisions for inventory and excess inventory purchase obligations totaled$908 million and$1.3 billion for the second quarter and first half of fiscal year 2025,respectively,and were primarily due to low-yielding Blackwell material.Sales of previously reserved inventory and settlements of excess inventory purchaseobligations resulted in a provision release of$85 million and$199 million for the second quarter and first half of fiscal year 2025,respectively.The net effect onour29gross margin was an unfavorable impact of 2.7%and 2.0%in the second quarter and first half of fiscal year 2025,respectively.Provisions for inventory and excess inventory purchase obligations totaled$576 million and$709 million for the second quarter and first half of fiscal year 2024,respectively.Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of$84 million and$134 million for the second quarter and first half of fiscal year 2024,respectively.The net effect on our gross margin was an unfavorable impact of 3.6%and2.8%in the second quarter and first half of fiscal year 2024,respectively.We expect our Data Center mix to continue to shift to new products in the second half of fiscal year 2025.For fiscal year 2025,we expect gross margins to be inthe mid-70%range.Operating Expenses Three Months EndedSix Months Ended Jul 28,2024Jul 30,2023$Change%ChangeJul 28,2024Jul 30,2023$Change%Change($in millions)Research and developmentexpenses$3,090$2,040$1,050 51%$5,810$3,916$1,894 48%of net revenue10.3.1.4.9%Sales,general and administrativeexpenses842 622 220 35%1,618 1,253 365 29%of net revenue2.8%4.7%2.9%6.1%Total operating expenses$3,932$2,662$1,270 48%$7,428$5,169$2,259 44%of net revenue13.1.8.3%.0%The increases in research and development expenses for the second quarter and first half of fiscal year 2025 were driven by 35%and 34%increase incompensation and benefits,including stock-based compensation,reflecting employee growth and compensation increases,and 118%and 117%increase incompute and infrastructure investments,respectively.The increases in sales,general and administrative expenses for the second quarter and first half of fiscal year 2025 was primarily driven by compensation andbenefits,including stock-based compensation,reflecting employee growth and compensation increases.For fiscal year 2025,we expect operating expenses to grow in the mid to upper 40%range as we work on developing our next generation of products.Other Income(Expense),NetThree Months EndedSix Months Ended Jul 28,2024Jul 30,2023$ChangeJul 28,2024Jul 30,2023$Change($in millions)Interest income$444$187$257$803$338$465 Interest expense(61)(65)4(125)(131)6 Other,net189 59 130 264 42 222 Other income(expense),net$572$181$391$942$249$693 The increases in interest income for the second quarter and first half of fiscal year 2025 was due to higher cash,cash equivalents,and publicly-held debtsecurity balances.Interest expense is comprised of coupon interest and debt discount amortization related to our notes.Other,net consists of realized or unrealized gains and losses from investments in privately-held equity securities,publicly-held equity securities,and the impactof changes in foreign currency rates.The change in Other,net,compared to the second quarter and first half of fiscal year 2024 was primarily driven by anincrease in fair value of our privately-held and publicly-held equity securities.Refer to Note 6 and 7 of the Notes to Condensed Consolidated FinancialStatements in Part I,Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our investments in privately-held and publicly-held equitysecurities.30Income TaxesWe recognized income tax expense of$2.6 billion and$5.0 billion for the second quarter and first half of fiscal year 2025,respectively,and$793 million and$958 million for the second quarter and first half of fiscal year 2024,respectively.Income tax expense as a percentage of income before income tax was 13.6%and 13.7%for the second quarter and first half of fiscal year 2025,respectively,and 11.4%and 10.4%for the second quarter and first half of fiscal year 2024,respectively.The effective tax rate increased primarily due to a lower percentage of tax benefits from the foreign-derived intangible income deduction relative to the increasein income before income tax.Given our current and anticipated future earnings,we believe that we may release the valuation allowance associated with certain state deferred tax assets inthe near term,which would decrease our income tax expense for the period the release is recorded.The timing and amount of the valuation allowance releasecould vary based on our assessment of all available evidence.Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements in Part I,Item 1 of this Quarterly Report on Form 10-Q for additional information.Liquidity and Capital Resources Jul 28,2024Jan 28,2024(In millions)Cash and cash equivalents$8,563$7,280 Marketable securities26,237 18,704 Cash,cash equivalents and marketable securities$34,800$25,984 Six Months EndedJul 28,2024Jul 30,2023(In millions)Net cash provided by operating activities$29,833$9,259 Net cash used in investing activities$(8,877)$(1,287)Net cash used in financing activities$(19,665)$(5,479)Our investment policy requires the purchase of high-rated fixed income securities,the diversification of investment types and credit exposures,and certainmaturity limits on our portfolio.Cash provided by operating activities increased in the first half of fiscal year 2025 compared to the first half of fiscal year 2024 due to growth in revenue,partiallyoffset by higher tax payments.Our accounts receivable balance at the end of the first half of fiscal year 2025 reflects the strong revenue growth,partially offsetby$2.8 billion from customer payments received prior to the invoice due date.Cash used in investing activities increased in the first half of fiscal year 2025 compared to the first half of fiscal year 2024,primarily driven by net purchases ofmarketable securities,and acquisition of land and buildings.Cash used in financing activities increased in the first half of fiscal year 2025 compared to the first half of fiscal year 2024,mainly due to higher sharerepurchases and higher tax payments related to RSUs.LiquidityOur primary sources of liquidity include cash,cash equivalents,and marketable securities,and the cash generated by our operations.As of July 28,2024,wehad$34.8 billion in cash,cash equivalents,and marketable securities.We believe that we have sufficient liquidity to meet our operating requirements for at leastthe next twelve months,and for the foreseeable future,including our future supply obligations and share repurchases.We continuously evaluate our liquidity andcapital resources,including our access to external capital,to ensure we can finance future capital requirements.Our marketable securities consist of publicly-held equity securities,debt securities issued by the U.S.government and its agencies,highly rated corporationsand financial institutions,and foreign government entities,as well as certificates of deposit issued by highly rated financial institutions.Our corporate debtsecurities are publicly traded.These marketable securities are primarily denominated in U.S.dollars.Refer to Note 6 of the Notes to Condensed ConsolidatedFinancial Statements in Part I,Item 1 of this Quarterly Report on Form 10-Q for additional information.31Except for approximately$1.4 billion of cash,cash equivalents,and marketable securities held outside the U.S.for which we have not accrued any relatedforeign or state taxes if we repatriate these amounts to the U.S.,substantially all of our cash,cash equivalents and marketable securities held outside the U.S.as of July 28,2024 are available for use in the U.S.without incurring additional U.S.federal income taxes.Payment from customers,per our standard payment terms,is generally due shortly after delivery of products,availability of software licenses or commencementof services.Capital Return to ShareholdersDuring the second quarter and first half of fiscal year 2025,we paid$246 million and$344 million,respectively,in quarterly cash dividends.Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors continuing determination that thedividend program and the declaration of dividends thereunder are in the best interests of our shareholders.On June 7,2024,we increased our quarterly cash dividend to$0.01 per share on a post-Stock Split basis to all shareholders of record on June 11,2024.Ourquarterly cash dividend was paid on June 28,2024.During the second quarter and first half of fiscal year 2025,we repurchased 62.8 million and 162.1 million shares of our common stock for$7.0 billion and$15.1 billion,respectively.As of July 28,2024,we were authorized,subject to certain specifications,to repurchase up to$7.5 billion of our common stock.OnAugust 26,2024,our Board of Directors approved an additional$50.0 billion to our share repurchase authorization,without expiration.As of August 26,2024,atotal of$53.9 billion was available for repurchase.Our share repurchase program aims to offset dilution from shares issued to employees while maintainingadequate liquidity to meet our operating requirements.We may pursue additional share repurchases as we weigh market factors and other investmentopportunities.We plan to continue share repurchases this fiscal year.From April 29,2024 through August 26,2024,we repurchased 31.5 million shares for$3.6 billion pursuant to a Rule 10b5-1 trading plan.The U.S.Inflation Reduction Act of 2022 requires a 1%excise tax on certain share repurchases in excess of shares issued for employee compensation madeafter December 31,2022.The excise tax is included in our share repurchase cost and was not material for the second quarter and first half of fiscal year 2025.Outstanding Indebtedness and Commercial Paper ProgramOur aggregate debt maturities as of July 28,2024,by year payable,are as follows:Jul 28,2024(In millions)Due in one year$Due in one to five years2,250 Due in five to ten years2,750 Due in greater than ten years3,500 Unamortized debt discount and issuance costs(39)Net carrying amount8,461 Less short-term portion Total long-term portion$8,461 We have a$575 million commercial paper program to support general corporate purposes.As of July 28,2024,no commercial paper was outstanding.Refer to Note 11 of the Notes to Condensed Consolidated Financial Statements in Part I,Item 1 of this Quarterly Report on Form 10-Q for further discussion.Material Cash Requirements and Other ObligationsUnrecognized tax benefits were$1.7 billion,which includes related interest and penalties of$186 million recorded in non-current income tax payable as ofJuly 28,2024.We are unable to estimate the timing of any potential tax liability,interest payments,or penalties in individual years due to uncertainties in theunderlying income tax positions and the timing of32the effective settlement of such tax positions.Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for further information.Other than the contractual obligations described above,there were no material changes outside the ordinary course of business in our contractual obligationsfrom those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28,2024.Refer to Item 7,“Managements Discussion and Analysis ofFinancial Condition and Results of Operations-Liquidity and Capital Resources”in our Annual Report on Form 10-K for the fiscal year ended January 28,2024for a description of our contractual obligations.For a description of our operating lease obligations,long-term debt,and purchase obligations,refer to Notes 2,11,and 12 of the Notes to Condensed Consolidated Financial Statements in Part I,Item 1 of this Quarterly Report on Form 10-Q,respectively.Climate ChangeTo date,there has been no material impact to our results of operations associated with global sustainability regulations,compliance,costs from sourcingrenewable energy or climate-related business trends.Adoption of New and Recently Issued Accounting PronouncementsThere has been no adoption of any new and recently issued accounting pronouncements.Item 3.Quantitative and Qualitative Disclosures about Market RiskInvestment and Interest Rate RiskFinancial market risks related to investment and interest rate risk are described in Part II,Item 7A,“Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 28,2024.As of July 28,2024,there have been no material changes to the financial marketrisks described as of January 28,2024.Foreign Exchange Rate RiskThe impact of foreign currency transactions related to foreign exchange rate risk is described in Part II,Item 7A,“Quantitative and Qualitative Disclosures AboutMarket Risk”in our Annual Report on Form 10-K for the fiscal year ended January 28,2024.As of July 28,2024,there have been no material changes to theforeign exchange rate risks described as of January 28,2024.Item 4.Controls and ProceduresControls and ProceduresDisclosure Controls and ProceduresBased on their evaluation as of July 28,2024,our management,including our Chief Executive Officer and Chief Financial Officer,has concluded that ourdisclosure controls and procedures(as defined in Exchange Act Rule 13a-15(e)and 15d-15(e)were effective to provide reasonable assurance that theinformation we are required to disclose in reports that we file or submit under the Exchange Act is recorded,processed,summarized and reported within the timeperiods specified in the SEC rules and forms,and that such information is accumulated and communicated to our management,including our Chief ExecutiveOfficer and our Chief Financial Officer,as appropriate,to allow timely decisions regarding required disclosures.Changes in Internal Control Over Financial ReportingThere were no changes that occurred during the second quarter of fiscal year 2025 that have materially affected,or are reasonably likely to materially affect,ourinternal control over financial reporting.In fiscal year 2022,we began an upgrade of our enterprise resource planning,or ERP,system,which will update much ofour existing core financial systems.The ERP system is designed to accurately maintain our financial records used to report operating results.The upgrade willoccur in phases.We will continue to evaluate each quarter whether there are changes that materially affect our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management,including our Chief Executive Officer and Chief Financial Officer,does not expect that our disclosure controls and procedures or our internalcontrols,will prevent all error and all fraud.A control system,no matter how well conceived and operated,can provide only reasonable,not absolute,assurancethat the objectives of the control system are met.Further,the design of a control system must reflect the fact that there are resource constraints,and the benefitsof controls must be considered relative to their costs.Because of the inherent limitations in all control systems,no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud,if any,within NVIDIA have been detected.33Part II.Other InformationItem 1.Legal ProceedingsRefer to Part I,Item 1,Note 12 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in our legalproceedings since January 28,2024.Also refer to Item 3,“Legal Proceedings”in our Annual Report on Form 10-K for the fiscal year ended January 28,2024 fora prior discussion of our legal proceedings.Item 1A.Risk FactorsOther than the risk factors listed below,there have been no material changes from the risk factors previously described under Item 1A of our Annual Report onForm 10-K for the fiscal year ended January28,2024 and Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended April 28,2024.Purchasing or owning NVIDIA common stock involves investment risks including,but not limited to,the risks described in Item 1A of our Annual Report on Form10-K for the fiscal year ended January28,2024,and Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended April 28,2024,and below.Anyone of those risks could harm our business,financial condition and results of operations or reputation,which could cause our stock price to decline.Additionalrisks,trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business,financial condition,results ofoperations or reputation.Long manufacturing lead times and uncertain supply and component availability,combined with a failure to estimate customer demand accurately,has led and could lead to mismatches between supply and demand.We use third parties to manufacture and assemble our products,and we have long manufacturing lead times.We are not provided guaranteed wafer,componentor capacity supply,and our supply deliveries and production may be non-linear within a quarter or year.If our estimates of customer demand are inaccurate,aswe have experienced in the past,there could be a significant mismatch between supply and demand.This mismatch has resulted in both product shortages andexcess inventory,has varied across our market platforms,and has significantly harmed our financial results.We build finished products and maintain inventory in advance of anticipated demand.While we have in the past entered and may in the future enter into long-term supply agreements and capacity commitments,we may not be able to secure sufficient commitments for capacity to address our business needs,or ourlong-term demand expectations may change.Additionally,our ability to sell certain products has been and could be impeded if components necessary for thefinished products are not available from third parties.This risk may increase as a result of our platform strategy.In periods of shortages impacting thesemiconductor industry and/or limited supply or capacity in our supply chain,the lead times on orders for certain supply may be extended.We have previouslyexperienced and may continue to experience extended lead times of more than 12 months.We have paid premiums and provided deposits to secure futuresupply and capacity,which have increased our product costs and may continue to do so.If our existing suppliers are unable to scale their capabilities to meetour supply needs,we may require additional sources of capacity,which may require additional deposits.We may not have the ability to reduce our supplycommitments at the same rate or at all if our revenue declines.Many additional factors have caused and/or could in the future cause us to either underestimate or overestimate our customers future demand for our products,or otherwise cause a mismatch between supply and demand for our products and impact the timing and volume of our revenue,including:changes in product development cycles and time to market;competing technologies and competitor product releases,announcements or other actions;changes in business and economic conditions;sudden or sustained government lockdowns or public health issues;rapidly changing technology or customer requirements;the availability of sufficient data center capacity or energy for customers to procure;new product introductions and transitions resulting in less demand for existing products;new or unexpected end-use cases;increase in demand for competitive products;business decisions made by third parties;the demand for accelerated computing,AI-related cloud services,or large language models;34changes that impact the ecosystem for the architectures underlying our products and technologies;the demand for our products;orgovernment actions or changes in governmental policies,such as export controls or increased restrictions on gaming usage.We continue to increase our supply and capacity purchases with existing and new suppliers to support our demand projections.With these additions,we havealso entered and may continue to enter into prepaid manufacturing and capacity agreements to supply both current and future products.The increased purchasevolumes and integration of new suppliers and contract manufacturers into our supply chain may create more complexity in managing multiple suppliers withvariations in production planning,execution and logistics.Our expanding product portfolio and varying component compatibility and quality may lead toincreased inventory levels.We have incurred and may in the future incur inventory provisions or impairments if our inventory or supply or capacity commitmentsexceed demand for our products or demand declines.Our customer orders and longer-term demand estimates may change or may not be correct,as we h
2024-08-30
80页
5星级
1 DiDi Announces Results for Second Quarter 2024 Beijing,August 21,2024-DiDi Global Inc.(“we”,“us”,“.
2024-08-29
12页
5星级
May 14,20242024 First Quarter Results PresentationThis presentation may contain forward-looking statements relating to the forecasts,targets,outlook,estimates of financial performance,opportunities,challenges,business developments,business plans and growth strategies of Tencent Holdings Limited(the“Company”or“Tencent”)and its groupcompanies.These forward-looking statements are based on information currently available to Tencent and are stated here on the basis of the outlook atthe time that this presentation was produced.The Company undertakes no obligation to publicly update any forward-looking statement,whether writtenor oral,that may be made from time to time,whether as a result of new information,future developments or otherwise.The forward-looking statementsare based on certain expectations,assumptions and premises,some of which are subjective or beyond our control.The forward-looking statements mayprove to be incorrect and may not be realised in the future.Underlying the forward-looking statements are a large number of risks anduncertainties.Therefore you should not rely on any of these forward-looking statements.Please see our various other public disclosure documents for adetailed discussion of those risks and uncertainties.This presentation also contains some unaudited non-IFRS financial measures which should be considered in addition to,but not as a substitute for,measures of the Companys financial performance prepared in accordance with IFRS.In addition,these non-IFRS financial measures may be defineddifferently from similar terms used by other companies.The Companys management believes that the non-IFRS financial measures provide investorswith useful supplementary information to assess the performance of the Companys core operations by excluding certain non-cash items and certainimpact of acquisitions.For further explanation of our non-IFRS measures and reconciliations between our IFRS and non-IFRS results,please refer to ourearnings announcement.In addition,information relating to other companies and the market in general presented in these materials has been obtained from publicly availableinformation and other sources.The accuracy and appropriateness of that information has not been verified by Tencent and cannot be guaranteed.Allmaterials contained within this presentation are protected by copyright law and may not be reproduced,distributed,transmitted,displayed,published orbroadcast without the prior,express written consent of Tencent.The reporting currency of the company is Renminbi.For the purpose of this presentation,all figures quoted in US dollars are based on the exchange rateof US$1 to RMB7.0950 for 1Q2024.2Cautionary Note1.OverviewIn billion RMB 1Q20241Q2023YoY4Q2023QoQTotal Revenue159.5150.0 65.2 3%Value-added Services78.679.3-0.9i.1 14%Social Networks30.531.0-2(.2 8%Domestic Games34.535.1-2.0 28%International Games13.613.2 3.9-3%Online Advertising26.521.0 26).8-11%FinTech and Business Services52.348.7 7T.4-4%Others2.11.0 110%1.9 6%Gross Profit 83.968.2 23w.6 8%Non-IFRSOperating Profit58.645.0 30I.1 19%Operating Margin36.80.0% 6.8ppt31.7% 5.1pptNet Profit Attributable to Equity Holders50.332.5 54B.7 18%Financial HighlightsDomestic Games refers to our games business in the PRC excluding the Hong Kong Special Administrative Region,the Macao Special Administrative Region and Taiwan4Weixin&WeChat#1 mobile communityMAU at 1,359mQQMobile devices MAU at 553mMobile Payment#1 by MAU&DAUMobile Browser#1 by MAUMobile Security#2 by MAUKey Services Update GamesCommunications&Social NetworksUtilities51.All rankings above refer to China market,unless otherwise stated.Company data as of Mar 31,20242.IDC Quarterly Public Cloud Services Tracker,4Q233.IDC China Cloud Conferencing Market Share report,1H23IaaSLarge scale,high-performance IaaS networkPaaS#2 by revenue2SaaS#1 standalone cloud conferencing solution by revenue3China#1 by users and revenueGlobal#1 by revenuePremium Content#1 by paid subscriptions including video,music,literature FinTechCloudDigital Content2.Business ReviewRevenue722! ! ! %#$!$#!%7%8%8%9%8%8%9%9%9%9%9%8)003222322453%1%1%1%2%1%1%1%1%1%1%1%1%15.3138.3142.4144.2135.5134.0140.1145.0150.0149.2154.6155.2159.51Q212Q213Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24Social NetworksDomestic GamesInternational GamesOnline AdvertisingFBSOthers 25% 20% 13% 8% 0.1%-3%-2% 0.5% 11% 11% 10% 7% 6%Revenue Growth(YoY%)Revenue by Segment(billion RMB) 19% 18% 11%-2%-9%-8%-1% 7% 19% 22% 23% 25% 23dacadcaWcWUHT ! $&$&(1(b.6 62.7 62.7 57.8 57.1 57.9 62.0 61.9 68.2 70.8 76.5 77.6 83.9 1Q212Q213Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24Value-added ServicesOnline AdvertisingFinTech and Business ServicesOthersGross Profit 8Gross Profit Growth(YoY%)Gross Profit by Segment(billion RMB)Value-added ServicesIn billion RMB9Social Networks 31.0 30.5 28.2 30.5 35.1 34.5 27.0 34.5 13.2 13.6 13.9 13.6 79.378.6 69.1 78.6 1Q231Q244Q231Q24Domestic GamesInternational Games-0.9%YoY 14%QoQ-2%-2% 28% 8% 3%-3%Social NetworksRevenue was down 2%YoY.Revenue from music and video subscriptions,Video Accounts live streaming service and mini games increased,whilerevenue from music-and games-related live streaming services declinedsharplyLong-form video subscription revenue increased 12%YoY.Average daily videosubscriptions increased 8%YoY to 116 million1,benefitting from popular self-commissioned drama series and animated seriesMusicsubscriptionrevenueincreased39%YoY,reflectinggrowthinsubscriptions and ARPU.TME strengthened collaboration with Tencent Videoand released original soundtrack of a popular drama series The Legend ofShen LiDomestic GamesRevenue was down 2%YoY,as growth from VALORANT,Fight of the GoldenSpatula and Lost Ark was offset by decrease from HoK due to high base inCNY 2023,and decrease from Peacekeeper Elite reflected weak monetisablecontent in recent quarters.However,1Q24 gross receipts increased 3%YoYInternational GamesRevenue increased 3%YoY,or stable in constant currency,temporarily lagginggross receipts increase of 34%YoY,due to long deferral periods forSupercells gamesGross receipts grew sharply driven by PUBG MOBILE and Supercells games1.The average daily number of subscriptions for 1Q24aa10Communications&Social Networks10Communications&Social NetworksEnable creators to share insights under their own accounts with interested followersPage views resumed healthy YoY growth,as AI-powered recommendation algorithms allow us to providetargeted high-quality content more effectivelyaVideo AccountsTotal user time spent grew over 80%YoY in 1Q24As Weixin users increasingly consume more algorithm-recommended content in addition to social graph content,time spent on Video Accounts is now over 2x of MomentsStrengthened live streaming eCommerce ecosystem by diversifying merchandise categories and enabling morecontent creators to monetise through eCommerce activitiesFacilitate merchants and content providers to engage user base,online and offlineTotal user time spent increased over 20%YoY in 1Q24Daily activations of non-game Mini Programs increased at double-digit rate YoY in 1Q24,especially forproductivity tools,dining services and transportationMini Games gross receipts increased 30%YoY in 1Q24,with notable growth from new releases as well asgames released for over 3 yearsOfficial AccountsMini ProgramsDomestic Games111.Source:data.ai,for 1Q24Multiple games achieved record high gross receiptsFight of the Golden Spatula:popularity of new content resulted in record DAU in 1Q24,while new Chibi Champions and customisable arena boosted ARPU;ranked#3 across allmobile games in China by gross receipts1CrossFire Mobile:new PvE content and enhanced reward system boosted userengagement;paying users and gross receipts reached historical highs in 1Q24Arena Breakout:1)enlarged map with vehicles and 2)armour and weapons inspired byancient Chinese culture,contributed to new highs in average DAU,paying users andgross receipts in 1Q24Arena BreakoutPeacekeeper Elite DnF MobileUpcoming high production value games includingDnF Mobile,Tarisland,Need forSpeed Mobile,One Piece Mobile,Delta Force:Hawk OpsTop two flagship games gross receipts declined YoY,recovering in MarchGross receipts of HoK in 1Q24 declined YoY due to high base during CNY 2023,but werewell above the level in 1Q22Gross receipts of Peacekeeper Elite declined YoY due to weak monetisable contentHowever,gross receipts for both games grew YoY in March due to new monetisationcadence and enhanced content designPUBG MOBILEGross receipts grew over 70%YoYto new high in 1Q24Introduced new fast-moving primewarframe,Gauss PrimeWarframeBrawl StarsAverage DAU and gross receipts grewby double-digit%YoY in 1Q24 due topopularnewmodesandfeaturedeventsEvolving from game product to gameplatform:increasing time spent onnewmodesbeyondoriginalbattleroyalemode,suchasextractionshooter gameplayAverage DAU more than doubledYoY and gross receipts more thanquadrupled YoY in 1Q24;ranked#3mobile game by DAU1Enlarged development team enablednew5v5mode,simplifiedrewardsystem and successful communityevents,increasing user engagementInternational Games1.Source:ranked#3 mobile game by DAU in international markets in March 2024,according to data.ai 12Online AdvertisingIn billion RMB21.0 26.5 29.8 26.5 1Q231Q244Q231Q24 26%YoY-11%QoQ13OverallRevenue grew 26%YoY,benefitting from increased engagement and AI-powered ad targetingAd spend from all major categories except automotive increased YoY,particularly from games,internet services and consumer goodsUpgraded ad tech platform to help advertisers establish ad campaigns moreeffectively,and made generative AI-powered ad creation tools available toall advertisersWeixinVideo Accounts ad revenue grew 100% YoY,underpinned by higher click-through rate and video viewsMini Programs ad revenue grew 40% YoY,as mini games developers aresubstantial advertisers,and mini games provide attractive ad inventoryContent PlatformsLong-form video ad revenue increased double-digit YoY,as popular self-commissioned drama series attracted marketing budgetsFinTech and Business ServicesFinTech ServicesRevenue slowed to single-digit YoY growth rateCommercial payment growth moderated due to slow offline consumptionspendingWithdrawal fee revenue decreased YoY as consumers are increasinglyfunding commercial transactions with cash balances,and placing cashbalances in money market funds,rather than withdrawingWealth management fees grew robustly YoY,with rapid increases in numberof users and average fund investments per user,primarily from low-riskmoney market fundsBusiness ServicesRevenue grew at a teens rate YoY,mainly driven by cloud services revenueand fees collected on Video Accounts eCommerce transactions.Gross profitmore than doubled YoY due to higher-margin revenue streams and improvedefficiencyRevenue from our Tencent Cloud Media Services for short video/live-streaming processing and delivery grew over 50%YoY,with notable tractionfrom international clientsWeCom revenue tripled YoY,as merchants increasingly willing to pay for useof customer communication functionalitiesTencent Meeting revenue doubled YoY driven by increasing adoption andupselling among enterprise clients;rolled out smart framing and AI-poweredspeaker tracking14In billion RMB48.7 52.3 54.4 52.3 1Q231Q244Q231Q24 7%YoY-4%QoQ3.Financial ReviewIncome StatementIn billion RMB1Q20241Q2023YoY4Q2023QoQRevenue159.5150.0 65.2 3%COPS(75.6)(81.8)-8%(77.6)-3%Gross profit83.968.2 23w.6 8%Operating expenses(32.3)(31.6) 2%(38.2)-15%Other gains,net11.01.4-32%2.0-48%Operating profit152.638.0 38A.4 27%Net gains/(losses)from investments and others10.6(0.6)N/A(6.7)N/AInterest income14.23.0 43%3.9 8%Finance costs(2.8)(2.6) 7%(3.5)-20%Share of profit of associates&JVs,net2.20.1 2633%2.4-11%Income tax expense(14.1)(11.5) 24%(9.7) 47%Net profit42.726.4 62.8 53%Net profit attributable to equity holders41.925.8 62.0 55%Diluted EPS in RMB4.3862.639 66%2.807 56%Non-IFRSOperating profit158.645.0 30I.1 19%Net profit attributable to equity holders50.332.5 54B.7 18%Diluted EPS in RMB5.2633.353 57%4.443 18%Weighted average number of sharesin million29,4849,657-1.8%9,546-0.61.Starting 4Q23,we present investment-related gains/(losses),donations and others(previously within“Other gains/(losses),net”)and interest income below operating profit line to better reflect results of day-to-day operations2.Weighted average number of shares for calculation of diluted EPS includes the dilutive effect of share options and awarded shares as determined under the treasury stock method.Non-IFRS AdjustmentsIn billion RMBIFRS1Q2024SBCNet(gains)/losses from investee companies1Amortisationof intangible assetsImpairment provisions2SSV&CPP3Tax effectsNon-IFRS1Q2024YoY changeQoQ changeOperating profit 52.64.7-1.2-0.1-58.6 30% 19%Net profit42.76.2(1.5)2.81.60.1(0.6)51.3 54% 17%Net profit attributable to equity holders 41.96.0(1.4)2.61.50.1(0.4)50.3 54% 18%Operating margin33.06.8% 6.8ppt 5.1pptNet margin26.72.2% 9.9ppt 4.0ppt17Note:1.Including net(gains)/losses on deemed disposals/disposals of investee companies,fair value changes arising from investee companies,and other expenses in relation to equity transactions of investee companies.2.Mainly including impairment provisions for associates,joint ventures,goodwill and other intangible assets arising from acquisitions.3.Mainly including donations and expenses incurred for the Groups Sustainable Social Value&Common Prosperity Programme initiatives.45.1 48.8 46.4 42.7 36.7 40.6 46.3 44.2 41.7 48.9 52.3 56.8 54.8 Online Advertising(%)55.1 52.9 53.0 48.7 50.4 50.6 51.7 49.8 53.9 54.0 55.5 53.7 57.3 Value-added Services(%)Gross Margins32.3 32.0 28.5 27.1 31.6 33.3 33.3 33.6 34.5 38.4 40.9 43.9 45.6 1Q212Q213Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24FinTech and Business Services(%)1846.3 45.4 44.1 40.1 42.1 43.2 44.2 42.6 45.5 47.5 49.5 50.0 52.6 Overall Gross Margin(%)9.4 9.1 10.8 9.1 1Q231Q244Q231Q24S&Min billion RMBOperating Expenses19R&Din billion RMBG&A(excl.R&D)in billion RMB15.2 15.7 16.4 15.7 1Q231Q244Q231Q24Non-IFRSNon-IFRSNon-IFRS7.0 7.5 11.0 7.5 1Q231Q244Q231Q24 7%YoY-31%QoQ1Q24 S&M grew by 10%YoY or declined by 32%QoQ 3%YoY-5%QoQ1Q24 R&D grew by 6%YoY or declined by 2%QoQ1Q24 G&A(excl.R&D)grew by 2%YoY or declined by 12%QoQ-3%YoY-15%QoQ31.4 28.9 27.3 21.7 25.6 25.2 27.3 25.1 30.0 30.9 33.4 31.7 36.8 Non-IFRS Operating Margin(%)25.5 25.4 22.8 17.9 19.4 21.6 23.8 21.1 22.3 25.9 29.6 28.2 32.2 1Q212Q213Q214Q211Q222Q223Q224Q221Q232Q233Q234Q231Q24Non-IFRS Net Margin(%)Non-IFRS Margin Ratios20In billion RMB1Q20241Q2023YoY4Q2023QoQOperating CAPEX6.61.0 557%6.7-1%Non-operating CAPEX7.83.4 127%0.8 832%Total CAPEX14.44.4 226%7.591%Operating Cash Flow72.362.3 16T.0 34%Less:CAPEX Paid(15.2)(4.6) 229%(9.3) 62%Payments for media content(3.7)(4.4)-17%(7.7)-52%Payments for lease liabilities(1.5)(1.5) 2%(2.8)-45%Free Cash Flow51.951.8 0.44.2 52%Total Cash445.2370.5 203.3 10%Less:Total Debt(352.7)(339.0) 4%(348.6) 1%Net Cash92.531.5 194T.7 69PEX,FCF and Cash Position21Repurchased 51 million shares with an aggregated cost of RMB13.5 billion during 1Q24As at 31 Mar 2024,the fair value of our shareholdings1in listed investee companies(excluding subsidiaries)was RMB522 billion(USD74 billion)and the carrying book value of our unlisted investee companies was RMB329 billion(USD46 billion)1.Including those held via special purpose vehicles,on an attributable basis.4.Q&ATencent Holdings Limited2024 First Quarter Results PresentationThank you!https:/
2024-08-09
23页
5星级
UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended March 31,2024 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from toCommission File Number:001-34139 Federal Home Loan Mortgage Corporation (Exact name of registrant as specified in its charter)Federallychartered52-09048748200JonesBranchDrive22102-3110(703)903-2000corporationMcLean,Virginia(Stateorotherjurisdictionof incorporationororganization)(I.R.S.EmployerIdentificationNo.)(Address of principal executive offices)(Zip Code)(Registrantstelephonenumber,including area code)Securities registered pursuant to Section12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredNoneN/AN/AIndicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T(232.405 of this chapter)during the preceding 12months(or for such shorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-acceleratedfiler SmallerreportingcompanyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of April9,2024,there were 650,059,553 shares of the registrants common stock outstanding.Table of ContentsPageMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS1n Introduction1n Housing and Mortgage Market Conditions4n Consolidated Results of Operations6n Consolidated Balance Sheets Analysis9n Our Portfolios10n Our Business Segments12n Risk Management21lCredit Risk21lMarket Risk29n Liquidity and Capital Resources32n Critical Accounting Estimates39n Regulation and Supervision40n Forward-Looking Statements41FINANCIAL STATEMENTS43OTHER INFORMATION88CONTROLS AND PROCEDURES90EXHIBIT INDEX91SIGNATURES92FORM 10-Q INDEX93Table of ContentsFreddie Mac 1Q 2024 Form 10-QiMD&A TABLE INDEX1Summary of Consolidated Statements of Income and Comprehensive Income62Components of Net Interest Income63Analysis of Net Interest Yield74Components of Non-Interest Income75(Provision)Benefit for Credit Losses86Components of Non-Interest Expense87Summarized Condensed Consolidated Balance Sheets98Mortgage Portfolio109Mortgage-Related Investments Portfolio1110Other Investments Portfolio1111Single-Family Segment Financial Results1612Multifamily Segment Financial Results2013Allowance for Credit Losses Activity2114Allowance for Credit Losses Ratios2215Single-Family New Business Activity2316Single-Family Mortgage Portfolio Newly Acquired Credit Enhancements2317Single-Family Mortgage Portfolio Credit Enhancement Coverage Outstanding2418Serious Delinquency Rates for Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Mortgage Portfolio2419Credit Quality Characteristics of Our Single-Family Mortgage Portfolio2520Single-Family Mortgage Portfolio Attribute Combinations2521Single-Family Completed Loan Workout Activity2722Multifamily Mortgage Portfolio CRT Issuance2823Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio2924Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement2925PVS-YC and PVS-L Results Assuming Shifts of the Yield Curve3026Duration Gap and PVS Results3027PVS-L Results Before Derivatives and After Derivatives3028Earnings Sensitivity to Changes in Interest Rates3129Liquidity Sources3230Funding Sources3331Debt of Freddie Mac Activity3332Maturity and Redemption Dates3433Debt of Consolidated Trusts Activity3434Net Worth Activity3535Regulatory Capital Components3636Statutory Capital Components3637Capital Metrics Under ERCF3738Forecasted House Price Growth Rates39TableDescriptionPageTable of ContentsFreddie Mac 1Q 2024 Form 10-QiiManagements Discussion and Analysis of Financial Condition and Results of OperationsThis Quarterly Report on Form 10-Q includes forward-looking statements that are based on current expectations and that are subject to significant risks and uncertainties.These forward-looking statements are made as of the date of this Form 10-Q.We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q.Actual results might differ significantly from those described in or implied by such statements due to various factors and uncertainties,including those described in the MD&A-Forward-Looking Statements section of this Form 10-Q and the Introduction and Risk Factors sections of our Annual Report on Form 10-K for the year ended December 31,2023,or 2023 Annual Report.Throughout this Form 10-Q,we use certain acronyms and terms that are defined in the Glossary of our 2023 Annual Report.You should read the following MD&A in conjunction with our 2023 Annual Report and our condensed consolidated financial statements and accompanying notes for the three months ended March 31,2024 included in Financial Statements.INTRODUCTIONFreddie Mac is a GSE chartered by Congress in 1970,with a mission to provide liquidity,stability,and affordability to the U.S.housing market.We do this primarily by purchasing single-family and multifamily residential mortgage loans originated by lenders.In most instances,we package these loans into guaranteed mortgage-related securities,which are sold in the global capital markets,and transfer interest-rate and liquidity risks to third-party investors.In addition,we transfer a portion of our mortgage credit risk exposure to third-party investors through our credit risk transfer programs,which include securities-and insurance-based offerings.We also invest in mortgage loans,mortgage-related securities,and other types of assets.We do not originate mortgage loans or lend money directly to mortgage borrowers.We support the U.S.housing market and the overall economy by enabling Americas families to access mortgage loan funding with better terms and by providing consistent liquidity to the single-family and multifamily mortgage markets.We have helped many distressed borrowers keep their homes or avoid foreclosure and have helped many distressed renters avoid eviction.Since September 2008,we have been operating in conservatorship,with FHFA as our Conservator.The conservatorship and related matters significantly affect our management,business activities,financial condition,and results of operations.Our future is uncertain,and the conservatorship has no specified termination date.We do not know what changes may occur to our business model during or following conservatorship,including whether we will continue to exist.In connection with our entry into conservatorship,we entered into the Purchase Agreement with Treasury,under which we issued Treasury both senior preferred stock and a warrant to purchase common stock.Our Purchase Agreement with Treasury is critical to keeping us solvent and avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions.We believe the support provided by Treasury pursuant to the Purchase Agreement currently enables us to have adequate liquidity to conduct normal business activities.For additional information on the conservatorship and related matters and the Purchase Agreement,see our 2023 Annual Report.Managements Discussion and AnalysisIntroduction Freddie Mac 1Q 2024 Form 10-Q1Business ResultsConsolidated Financial ResultsNet Revenues and Net Income(In billions)$4.8$5.3$5.7$5.4$5.8$2.0$2.9$2.7$2.9$2.8Net RevenuesNet Income1Q232Q233Q234Q231Q24 Net Worth (In billions)$39.1$42.0$44.7$47.7$50.503/31/2306/30/239/30/2312/31/2303/31/24Key Drivers:n Net income was$2.8 billion,an increase of 39%year-over-year,primarily driven by higher net revenues.nNet revenues were$5.8 billion,an increase of 19%year-over-year,driven by higher net interest income and higher non-interest income.n Net worth was$50.5 billion as of March 31,2024,up from$39.1 billion as of March 31,2023.The quarterly increases in net worth have been,or will be,added to the aggregate liquidation preference of the senior preferred stock.The liquidation preference of the senior preferred stock was$120.4 billion on March 31,2024,and will increase to$123.1 billion on June 30,2024 based on the increase in net worth in 1Q 2024.Market Liquidity Market Liquidity(In thousands)25037238939127915721723319916133413837336011411815585Single-Family home purchase borrowersSingle-Family refinance borrowersMultifamily rental units1Q232Q233Q234Q231Q24We support the U.S.housing market by executing our mission to provide liquidity and help maintain credit availability for new and refinanced single-family mortgages as well as for rental housing.We provided$71 billion in liquidity to the mortgage market in 1Q 2024,which enabled the financing of 279,000 home purchases,refinancings,and rental units.Managements Discussion and AnalysisIntroduction Freddie Mac 1Q 2024 Form 10-Q2Mortgage Portfolio BalancesMortgage Portfolio(UPB in billions)$3,415$3,431$3,456$3,480$3,486$2,989$3,004$3,024$3,039$3,043$426$427$432$441$443Single-Family mortgage portfolioMultifamily mortgage portfolio03/31/2306/30/2309/30/2312/31/233/31/24Key Drivers:n Our mortgage portfolio increased 2%year-over-year to$3.5 trillion at March 31,2024,continuing to grow at a moderate pace as new business activity remained low.lOur Single-Family mortgage portfolio was$3.0 trillion at March 31,2024,up 2%year-over-year.lOur Multifamily mortgage portfolio was$443 billion at March 31,2024,up 4%year-over-year.Credit Enhancement CoverageSingle-Family Mortgage Portfolio with Credit Enhancement(UPB in billions)$1,840$1,864$1,865$1,860$1,86762bbaa%UPBPercentage03/31/2306/30/2309/30/2312/31/233/31/24Multifamily Mortgage Portfolio with Credit Enhancement(UPB in billions)$396$402$410$415$41593%UPBPercentage03/31/2306/30/2309/30/2312/31/233/31/24In addition to transferring interest-rate and liquidity risk to third-party investors through our securitization activities,we engage in various types of credit enhancements,such as primary mortgage insurance and CRT transactions,to reduce our credit risk exposure and transfer a portion of the credit risk on certain loans in our mortgage portfolio to third parties.At March 31,2024,we had credit enhancement coverage of 61%on our Single-Family mortgage portfolio and 94%on our Multifamily mortgage portfolio.See MD&A-Risk Management Credit Risk for additional information on our credit enhancements.Managements Discussion and AnalysisIntroduction Freddie Mac 1Q 2024 Form 10-Q3HOUSING AND MORTGAGE MARKET CONDITIONSThe following charts present certain housing and mortgage market indicators that can significantly affect our business and financial results.Certain market and macroeconomic prior period data have been updated to reflect revised historical data.For additional information on the effect of these indicators on our business and financial results,see MD&A Consolidated Results of Operations and MD&A Our Business Segments.Single-Family U.S.Single-Family Home Sales and House Prices 4,9554,8784,7134,5244,8574,3174,1874,0203,8804,1906386916936446671.0%1.8%2.4%1.1%1.2%Sales of existing homes(units in thousands)Sales of new homes(units in thousands)Single-family house price growth rate1Q232Q233Q234Q231Q24Sources:National Association of Realtors,U.S.Census Bureau,and Freddie Mac House Price Index(seasonally adjusted rate).U.S.Single-Family Mortgage Originations _(UPB in billions)$295$400$385$3006.32%6.71%7.31%6.61%6.79%U.S.single-family originations30-year PMMS rate1Q232Q233Q234Q231Q24Source:Freddie Mac and Inside Mortgage Finance.The 1Q 2024 U.S.single-family mortgage originations data is not yet available.Single-Family Serious Delinquency Rates1.73%1.61%1.52%1.52%0.62%0.56%0.55%0.55%0.52%Total mortgage marketFreddie Mac1Q232Q233Q234Q231Q24Source:Freddie Mac and National Delinquency Survey from the Mortgage Bankers Association.The 1Q 2024 total mortgage market rate is not yet available.Single-Family Mortgage Debt Outstanding(UPB in trillions)$3.0$3.0$3.0$3.0$3.0$13.6$13.7$13.8$13.9$14.0Freddie Mac Single-Family mortgage portfolioU.S.single-family mortgage debt outstanding4Q221Q232Q233Q234Q23Source:Freddie Mac and Federal Reserve Financial Accounts of the United States of America.The 1Q 2024 U.S.single-family mortgage debt outstanding balance is not yet available.Managements Discussion and AnalysisHousing and Mortgage Market ConditionsFreddie Mac 1Q 2024 Form 10-Q4Multifamily Apartment Vacancy Rates and Change in Effective Rents5.2%5.2%5.2%5.5%5.5%(0.9)%0.9%(1.6)%(0.2)%0.7%Apartment vacancy ratesQuarterly change in effective rentsLong-term quarterly effective rent growth rate(2000-1Q24)1Q232Q233Q234Q231Q24Source:Reis.Multifamily Property Price Growth Rate(4.6)%(1.7)%(1.7)%(2.5)%(2.8)%1Q232Q233Q234Q231Q24Source:Real Capital Analytics Commercial Property Price Index(RCA CPPI).Multifamily Delinquency Rates0.13%0.21%0.24%0.28%0.34%0.66%0.65%0.57%0.57%0.96%0.20%0.21%0.29%0.32%Freddie Mac(60 day)Multifamily CMBS market(60 day)FDIC insured institutions(90 day)1Q232Q233Q234Q231Q24Source:Freddie Mac,FDIC Quarterly Banking Profile,Intex Solutions,Inc.,and Wells Fargo Securities(Multifamily CMBS conduit market,excluding REOs).The 1Q 2024 delinquency rate for FDIC insured institutions is not yet available.Multifamily Mortgage Debt Outstanding(UPB in billions)$429$426$427$432$441$2,084$2,116$2,144$2,173$2,199Freddie Mac Multifamily mortgage portfolioU.S.multifamily mortgage debt outstanding4Q221Q232Q233Q234Q23Source:Freddie Mac and Federal Reserve Financial Accounts of the United States of America.The 1Q 2024 U.S.multifamily mortgage debt outstanding balance is not yet available.Managements Discussion and AnalysisHousing and Mortgage Market ConditionsFreddie Mac 1Q 2024 Form 10-Q5CONSOLIDATED RESULTS OF OPERATIONSThe discussion of our consolidated results of operations should be read in conjunction with our condensed consolidated financial statements and accompanying notes.The table below compares our summarized consolidated results of operations.Table 1-Summary of Consolidated Statements of Income and Comprehensive IncomeChange(Dollars in millions)1Q 20241Q 2023$%Net interest income$4,759$4,501$258 6%Non-interest income 998 326 672 206 Net revenues 5,757 4,827 930 19(Provision)benefit for credit losses(181)(395)214 54 Non-interest expense(2,122)(1,932)(190)(10)Income before income tax expense 3,454 2,500 954 38 Income tax expense(688)(505)(183)(36)Net income 2,766 1,995 771 39 Other comprehensive income(loss),net of taxes and reclassification adjustments(25)54 (79)(146)Comprehensive income$2,741$2,049$692 34%Net RevenuesNet Interest IncomeThe table below presents the components of net interest income.Table 2-Components of Net Interest Income Change(Dollars in millions)1Q 20241Q 2023$%Guarantee net interest income:Contractual net interest income$3,772$3,666$106 3ferred fee income 166 207 (41)(20)Total guarantee net interest income 3,938 3,873 65 2 Investments net interest income 1,514 1,432 82 6 Impact on net interest income from hedge accounting(693)(804)111 14 Net interest income$4,759$4,501$258 6%Key Drivers:nGuarantee net interest incomel 1Q 2024 vs.1Q 2023-Increased primarily due to continued mortgage portfolio growth.nInvestments net interest incomel 1Q 2024 vs.1Q 2023-Increased primarily due to higher returns on securities purchased under agreements to resell as a result of higher short-term interest rates.nImpact on net interest income from hedge accountingl 1Q 2024 vs.1Q 2023-Expense decreased primarily due to lower interest expense on derivatives in hedge relationships,partially offset by an unfavorable change in the earnings mismatch on qualifying fair value hedge relationships.Managements Discussion and AnalysisConsolidated Results of OperationsFreddie Mac 1Q 2024 Form 10-Q6Net Interest Yield AnalysisThe table below presents a yield analysis of interest-earning assets and interest-bearing liabilities.Table 3-Analysis of Net Interest Yield1Q 20241Q 2023(Dollars in millions)AverageBalanceInterestIncome(Expense)AverageRateAverageBalanceInterestIncome(Expense)AverageRateInterest-earning assets:Cash and cash equivalents$12,141$125 4.09%$13,758$121 3.51%Securities purchased under agreements to resell 111,796 1,532 5.48 107,516 1,220 4.54 Investment securities 41,293 470 4.56 38,126 316 3.31 Mortgage loans(1)3,100,111 26,229 3.38 3,042,128 23,304 3.06 Other assets 1,784 29 6.48 1,930 26 5.30 Total interest-earning assets 3,267,125 28,385 3.47 3,203,458 24,987 3.12 Interest-bearing liabilities:Debt of consolidated trusts 3,035,073 (21,122)(2.78)2,975,417 (18,261)(2.45)Debt of Freddie Mac 180,850 (2,504)(5.53)187,599 (2,225)(4.74)Total interest-bearing liabilities 3,215,923 (23,626)(2.94)3,163,016 (20,486)(2.59)Impact of net non-interest-bearing funding 51,202 0.05 40,442 0.03 Total funding of interest-earning assets 3,267,125 (23,626)(2.89)3,203,458 (20,486)(2.56)Net interest income/yield$4,759 0.58%$4,501 0.56%(1)Loan fees included in net interest income were$0.3 billion during both 1Q 2024 and 1Q 2023.Non-Interest IncomeThe table below presents the components of non-interest income.Table 4-Components of Non-Interest IncomeChange(Dollars in millions)1Q 20241Q 2023$%Guarantee income$496$466$30 6%Investment gains,net 405 (225)630 280 Other income 97 85 12 14 Non-interest income$998$326$672 206%Key Drivers:n Investment gains,netl 1Q 2024 vs.1Q 2023-Increased primarily due to gains in Multifamily driven by net gains from interest-rate risk management activities,higher revenues from held-for-sale loan purchase and securitization activities,and favorable fair value changes from spreads.Managements Discussion and AnalysisConsolidated Results of OperationsFreddie Mac 1Q 2024 Form 10-Q7(Provision)Benefit for Credit LossesThe table below presents the components of provision for credit losses.Table 5-(Provision)Benefit for Credit LossesChange(Dollars in millions)1Q 20241Q 2023$%Single-Family($120)($318)$198 62%Multifamily(61)(77)16 21(Provision)benefit for credit losses($181)($395)$214 54%Key Drivers:n1Q 2024 vs.1Q 2023-The provision for credit losses for 1Q 2024 was primarily driven by a modest credit reserve build in Single-Family attributable to new acquisitions and increasing mortgage interest rates.The provision for credit losses for 1Q 2023 was driven by a modest credit reserve build primarily attributable to new acquisitions in Single-Family.Non-Interest Expense The table below presents the components of non-interest expense.Table 6-Components of Non-Interest ExpenseChange(Dollars in millions)1Q 20241Q 2023$%Salaries and employee benefits($421)($374)($47)(13)%Credit enhancement expense(597)(530)(67)(13)Benefit for(decrease in)credit enhancement recoveries 1 49 (48)(98)Legislative assessments expense:Legislated guarantee fees expense(724)(708)(16)(2)Affordable housing funds allocation(30)(27)(3)(11)Total legislative assessments expense(754)(735)(19)(3)Other expense(351)(342)(9)(3)Non-interest expense($2,122)($1,932)($190)(10)%Key Drivers:n Credit enhancement expense l 1Q 2024 vs.1Q 2023-Increased primarily due to expenses related to STACR Trust note repurchases in 1Q 2024.There were no STACR Trust note repurchases in 1Q 2023.n Benefit for(decrease in)credit enhancement recoveriesl 1Q 2024 vs.1Q 2023-Decreased primarily due to a lower increase in expected credit losses on covered loans.Managements Discussion and AnalysisConsolidated Results of OperationsFreddie Mac 1Q 2024 Form 10-Q8CONSOLIDATED BALANCE SHEETS ANALYSISThe table below compares our summarized condensed consolidated balance sheets.Table 7-Summarized Condensed Consolidated Balance SheetsChange(Dollars in millions)March 31,2024December 31,2023$%Assets:Cash and cash equivalents$3,531$6,019 ($2,488)(41)%Securities purchased under agreements to resell 102,257 95,148 7,109 7 Investment securities,at fair value 41,400 43,275 (1,875)(4)Mortgage loans held-for-sale 12,034 12,941 (907)(7)Mortgage loans held-for-investment 3,088,687 3,083,665 5,022 Accrued interest receivable,net 10,047 9,925 122 1 Deferred tax assets,net 4,227 4,076 151 4 Other assets 25,190 25,927 (737)(3)Total assets$3,287,373$3,280,976$6,397%Liabilities and Equity:Liabilities:Accrued interest payable$8,712$8,812 ($100)(1)bt 3,211,742 3,208,346 3,396 Other liabilities 16,456 16,096 360 2 Total liabilities 3,236,910 3,233,254 3,656 Total equity 50,463 47,722 2,741 6 Total liabilities and equity$3,287,373$3,280,976$6,397%Key Drivers:As of March31,2024 compared to December31,2023:n Securities purchased under agreements to resell increased primarily due to investment of retained earnings and a shift from cash and cash equivalents and Treasury securities to securities purchased under agreements to resell.n Mortgage loans held-for-investment increased primarily due to growth in our Single-Family mortgage portfolio.n Debt increased due to an increase in debt of consolidated trusts driven by growth in our Single-Family mortgage portfolio.Managements Discussion and AnalysisConsolidated Balance Sheets Analysis Freddie Mac 1Q 2024 Form 10-Q9OUR PORTFOLIOSMortgage PortfolioThe table below presents the UPB of our mortgage portfolio by segment.Table 8-Mortgage Portfolio March 31,2024December 31,2023(In millions)Single-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalMortgage loans held-for-investment:By consolidated trusts$2,965,370$51,757$3,017,127$2,963,296$47,433$3,010,729By Freddie Mac35,64310,00045,64333,21311,77044,983Total mortgage loans held-for-investment 3,001,013 61,757 3,062,770 2,996,509 59,203 3,055,712 Mortgage loans held-for-sale 3,104 9,446 12,550 3,527 9,905 13,432 Total mortgage loans 3,004,117 71,203 3,075,320 3,000,036 69,108 3,069,144 Mortgage-related guarantees:Mortgage loans held by nonconsolidated trusts 30,324 361,164 391,488 30,182 360,928 391,110 Other mortgage-related guarantees 8,511 10,720 19,231 8,692 10,761 19,453 Total mortgage-related guarantees 38,835 371,884 410,719 38,874 371,689 410,563 Total mortgage portfolio$3,042,952$443,087$3,486,039$3,038,910$440,797$3,479,707 Guaranteed mortgage-related securities:Issued by consolidated trusts$2,975,161$51,811$3,026,972$2,970,707$47,436$3,018,143Issued by nonconsolidated trusts24,762321,905346,66724,600321,262345,862Total guaranteed mortgage-related securities$2,999,923$373,716$3,373,639$2,995,307$368,698$3,364,005 Investments PortfolioOur investments portfolio consists of our mortgage-related investments portfolio and our other investments portfolio.Mortgage-Related Investments PortfolioThe Purchase Agreement limits the size of our mortgage-related investments portfolio to a maximum amount of$225 billion.The calculation of mortgage assets subject to the Purchase Agreement cap includes the UPB of mortgage assets and 10%of the notional value of interest-only securities.We are also subject to additional limitations on the size and composition of our mortgage-related investments portfolio pursuant to FHFA guidance.For additional information on the restrictions on our mortgage-related investments portfolio,see the MD&A-Conservatorship and Related Matters section in our 2023 Annual Report.Managements Discussion and AnalysisOur PortfoliosFreddie Mac 1Q 2024 Form 10-Q10The table below presents the details of our mortgage-related investments portfolio.Table 9-Mortgage-Related Investments PortfolioMarch 31,2024December 31,2023(In millions)Single-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalUnsecuritized mortgage loans:Securitization pipeline loans(1)$9,749$13,057$22,806$8,225$15,197$23,422 Other loans(2)28,998 6,389 35,387 28,515 6,478 34,993 Total unsecuritized mortgage loans 38,747 19,446 58,193 36,74021,67558,415Mortgage-related securities:Investment securities 2,916 4,486 7,402 2,667 4,613 7,280 Debt of consolidated trusts 18,367 684 19,051 18,639 660 19,299 Total mortgage-related securities 21,283 5,170 26,453 21,306 5,273 26,579 Mortgage-related investments portfolio$60,030$24,616$84,646$58,046$26,948$84,994 10%of notional amount of interest-only securities$23,126$22,186Mortgage-related investments portfolio for purposes of Purchase Agreement cap107,772107,180(1)Single-family and multifamily loans that we have purchased for cash and aggregate on our balance sheet for securitization within the normal course of business.(2)Primarily includes delinquent and modified single-family loans that we have purchased from securitization trusts.Other Investments PortfolioThe table below presents the details of our other investments portfolio.Table 10-Other Investments PortfolioMarch 31,2024December 31,2023(In millions)Liquidity and Contingency Operating PortfolioCustodial AccountOtherTotal Other Investments Portfolio(1)Liquidity and Contingency Operating PortfolioCustodial AccountOtherTotal Other Investments Portfolio(1)Cash and cash equivalents$1,947$1,483$101$3,531$5,041$890$88$6,019 Securities purchased under agreements to resell 104,243 10,777 1,037 116,057 94,904 9,396 1,093 105,393 Non-mortgage related securities(2)22,960 5,593 28,553 24,153 6,119 30,272 Other assets 6,479 6,479 5,555 5,555 Other investments portfolio$129,150$12,260$13,210$154,620$124,098$10,286$12,855$147,239(1)Represents carrying value.(2)Primarily consists of U.S.Treasury securities.Managements Discussion and AnalysisOur PortfoliosFreddie Mac 1Q 2024 Form 10-Q11OUR BUSINESS SEGMENTSAs shown in the table below,we have two reportable segments,which are based on the way we manage our business.SegmentDescriptionSingle-Family Reflects results from our purchase,securitization,and guarantee of single-family loans,our investments in single-family loans and mortgage-related securities,the management of Single-Family mortgage credit risk and market risk,and any results of our treasury function that are not allocated to each segment.MultifamilyReflects results from our purchase,securitization,and guarantee of multifamily loans,our investments in multifamily loans and mortgage-related securities,and the management of Multifamily mortgage credit risk and market risk.Segment Net Revenues and Net Income The charts below show our net revenues and net income by segment.Segment Net Revenues(In billions)$4.2$4.4$4.9$4.8$4.5$0.6$1.0$0.8$0.6$1.3Single-FamilyMultifamily1Q232Q233Q234Q231Q24Segment Net Income(In billions)$1.7$2.4$2.3$2.7$1.9$0.3$0.6$0.4$0.3$0.8Single-FamilyMultifamily1Q232Q233Q234Q231Q24Managements Discussion and AnalysisOur Business SegmentsFreddie Mac 1Q 2024 Form 10-Q12Single-Family Business ResultsThe charts,tables,and related discussion below present the business results of our Single-Family segment.New Business ActivityUPB of Single-Family Loan Purchases and Guarantees by Loan Purpose and Average Estimated Guarantee Fee Rate(1)on New Acquisitions(UPB in billions)$59$83$85$73$62$51$73$76$65$53$8$10$9$8$95557555655Home purchaseRefinanceAverage estimated guarantee fee rateon new acquisitions(bps)1Q232Q233Q234Q231Q24(1)Estimated guarantee fee rate calculation excludes the legislated guarantee fees and includes deferred fees recognized over the estimated life of the related loans.Number of Families Helped to Own a Home and Average Loan UPB of New Acquisitions(Loan count in thousands)1902582712361941572172331991613341383733$310,000$322,000$314,000$308,000$320,000Home purchase borrowersRefinance borrowersAverage loan UPB of new acquisitions1Q232Q233Q234Q231Q24n 1Q 2024 vs.1Q 2023lOur loan purchase and guarantee activity increased from$59 billion to$62 billion.lThe average loan size of new acquisitions increased due to a higher conforming loan limit and house price appreciation in recent quarters.lThe average estimated guarantee fee rate on new acquisitions remained at 55 bps.Managements Discussion and AnalysisOur Business Segments|Single-FamilyFreddie Mac 1Q 2024 Form 10-Q13Single-Family Mortgage PortfolioSingle-Family Mortgage Portfolio and Average Estimated Guarantee Fee Rate(1)on Mortgage Portfolio(UPB in billions)$2,989$3,004$3,024$3,039$3,0434848484849Single-Family mortgage portfolioAverage estimated guarantee fee rate onmortgage portfolio(bps)03/31/23 06/30/23 09/30/23 12/31/23 03/31/24(1)Estimated guarantee fee rate is calculated as of acquisition and includes deferred fees recognized over the estimated life of the related loans.Estimated guarantee fee rate calculation excludes the legislated guarantee fees and certain loans,the majority of which are held by VIEs that we do not consolidate.The UPB of these excluded loans was$41 billion as of March31,2024.Single-Family Mortgage Loans(Loan count in millions)13.613.613.713.713.8$219,000$220,000$221,000$221,000$221,000Single-Family mortgage portfolio Average loan UPB03/31/23 06/30/23 09/30/23 12/31/23 03/31/24n Our Single-Family mortgage portfolio was$3.0 trillion at March 31,2024,up 2%year-over-year.The mortgage portfolio continued to grow at a moderate pace as new business activity remained low.n The average estimated guarantee fee rate on our Single-Family mortgage portfolio increased slightly year-over-year.Managements Discussion and AnalysisOur Business Segments|Single-FamilyFreddie Mac 1Q 2024 Form 10-Q14Credit EnhancementsWe obtain credit enhancements on a portion of our Single-Family mortgage portfolio to reduce the risk of future losses to us when borrowers default.The charts below provide the UPB of the mortgage loans acquired during the periods presented that were covered by primary mortgage insurance,the UPB of the mortgage loans covered by CRT transactions issued during the periods presented,and maximum coverage related to these credit enhancements.The primary mortgage insurance and CRT activities presented in these charts are not mutually exclusive as a single loan may be covered by both primary mortgage insurance and CRT transactions.New Acquisitions Covered by Primary Mortgage Insurance(In billions)$27$35$35$29$25$7$9$9$8$7UPBMaximum Coverage1Q232Q233Q234Q231Q24New CRT Issuance(In billions)$15$56$8$36$58$1$2$0$1$2UPBMaximum Coverage1Q232Q233Q234Q231Q24n 1Q 2024 vs.1Q 2023lThe UPB of mortgage loans covered by CRT transactions and related maximum coverage issued increased as we accelerated our targeted 2024 CRT issuance amounts due to market conditions for new issuances during 1Q 2024.See MD&A-Risk Management-Single-Family Mortgage Credit Risk-Transferring Credit Risk to Third-Party Investors for additional information on our credit enhancements.Managements Discussion and AnalysisOur Business Segments|Single-FamilyFreddie Mac 1Q 2024 Form 10-Q15Financial Results The table below presents the results of operations for our Single-Family segment.See Note 11 for additional information about segment financial results.Table 11-Single-Family Segment Financial Results Change(Dollars in millions)1Q 20241Q 2023$%Net interest income$4,488$4,296$192 4%Non-interest income(14)(93)79 85 Net revenues 4,474 4,203 271 6(Provision)benefit for credit losses(120)(318)198 62 Non-interest expense (1,925)(1,783)(142)(8)Income before Income tax expense 2,429 2,102 327 16 Income tax expense(484)(425)(59)(14)Net income 1,945 1,677 268 16 Other comprehensive income(loss),net of taxes and reclassification adjustments(5)(1)(4)(400)Comprehensive income$1,940$1,676$264 16%Key Business Drivers:n1Q 2024 vs.1Q 2023lNet income of$1.9 billion,up 16%year-over-year.Net revenues were$4.5 billion,up 6%year-over-year.Net interest income was$4.5 billion,up 4%year-over-year,primarily driven by continued mortgage portfolio growth and higher investments net interest income as a result of higher short-term interest rates.Provision for credit losses was$0.1 billion for 1Q 2024,primarily driven by a modest credit reserve build attributable to new acquisitions and increasing mortgage interest rates.The provision for credit losses of$0.3 billion for 1Q 2023 was driven by a modest credit reserve build primarily attributable to new acquisitions.Non-interest expense was$1.9 billion,up 8%year-over-year,primarily driven by expenses related to STACR Trust note repurchases in 1Q 2024.There were no STACR Trust note repurchases in 1Q 2023.Managements Discussion and AnalysisOur Business Segments|Single-FamilyFreddie Mac 1Q 2024 Form 10-Q16Multifamily Business ResultsThe charts,tables,and related discussion below present the business results of our Multifamily segment.New Business ActivityNew Business Activity (In billions)$6$13$13$16$91Q232Q233Q234Q231Q24 Total Number of Rental Units Financed(1)(In thousands)60114118155851Q232Q233Q234Q231Q24 (1)Includes rental units financed by supplemental loans.Key Drivers:n 1Q 2024 vs.1Q 2023-The UPB of our new business activity increased by 50%year-over-year,driven by a smaller new business activity pipeline entering 1Q 2023.The new business activities for both periods were adversely impacted by the high interest rate environment.Approximately 60%of this activity,based on UPB,was mission-driven affordable housing,exceeding FHFAs minimum requirement of 50%.n Our index lock agreements and outstanding commitments to purchase or guarantee multifamily assets were$15.9billion and$19.2 billion as of March31,2024 and March31,2023,respectively.Managements Discussion and AnalysisOur Business Segments|MultifamilyFreddie Mac 1Q 2024 Form 10-Q17Multifamily Mortgage Portfolio and Guarantee Exposure Mortgage Portfolio (In billions)$426$427$432$441$4433/31/236/30/239/30/2312/31/233/31/24 Guarantee Exposure (In billions)$362$366$372$379$384$352$355$361$369$374$10$11$11$10$104445464647Guaranteed mortgage-related securitiesOther mortgage-related guaranteesAverage guarantee fee rate charged(bps)3/31/236/30/239/30/2312/31/233/31/24Key Drivers:n 1Q 2024 vs.1Q 2023lOur mortgage portfolio increased by 4%year-over-year,continuing to grow at a moderate pace as new business activity remained low.lOur guarantee exposure increased by 6%year-over-year,as our new mortgage-related security guarantees outpaced paydowns.n In addition to our Multifamily mortgage portfolio,we have investments in LIHTC partnerships with carrying values totaling$3.6billion and$3.5 billion as of March31,2024 and December31,2023,respectively.Managements Discussion and AnalysisOur Business Segments|MultifamilyFreddie Mac 1Q 2024 Form 10-Q18CRT Activities UPB Covered by New CRT Issuance New CRT Issuance Maximum Coverage (In billions)(In billions)$8$16$17$11$71Q232Q233Q234Q231Q24$0.6$0.9$0.9$0.7$0.41Q232Q233Q234Q231Q24Key Drivers:n 1Q 2024 vs.1Q 2023-The UPB of mortgage loans covered by new CRT transactions and the maximum coverage decreased year-over-year primarily due to the issuance of SCR Trust note transactions in 1Q 2023.There were no SCR Trust note transactions in 1Q 2024.See MD&A-Risk Management-Multifamily Mortgage Credit Risk-Transferring Credit Risk to Third-Party Investors for more information on risk transfer transactions and credit enhancements on our Multifamily mortgage portfolio.Managements Discussion and AnalysisOur Business Segments|MultifamilyFreddie Mac 1Q 2024 Form 10-Q19Financial ResultsThe table below presents the results of operations for our Multifamily segment.See Note 11 for additional information about segment financial results.Table 12-Multifamily Segment Financial Results Change(Dollars in millions)1Q 20241Q 2023$%Net interest income$271$205$66 32%Non-interest income 1,012 419 593 142 Net revenues 1,283 624 659 106(Provision)benefit for credit losses(61)(77)16 21 Non-interest expense(197)(149)(48)(32)Income before income tax expense 1,025 398 627 158 Income tax expense(204)(80)(124)(155)Net income 821 318 503 158 Other comprehensive income(loss),net of taxes and reclassification adjustments(20)55 (75)(136)Comprehensive income$801$373$428 115%Key Drivers:n 1Q 2024 vs.1Q 2023lNet income of$0.8billion,up from$0.3billion.Net revenues of$1.3billion,up from$0.6billion.Net interest income was$0.3 billion,up 32%year-over-year,primarily driven by continued mortgage portfolio growth and higher net yields on mortgage loans as a result of higher interest rates.Non-interest income was$1.0 billion,up from$0.4billion,primarily driven by net gains from interest-rate risk management activities,higher revenues from held-for-sale loan purchase and securitization activities,and favorable fair value changes from spreads and prepayment rates.Non-interest expense was$0.2billion,up 32%year-over-year,primarily driven by a larger volume of outstanding cumulative CRT transactions.Managements Discussion and AnalysisOur Business Segments|MultifamilyFreddie Mac 1Q 2024 Form 10-Q20RISK MANAGEMENTTo achieve our mission,we take risks as an integral part of our business activities.We are exposed to the following key types of risk:credit risk,market risk,liquidity risk,operational risk,compliance risk,legal risk,strategic risk,and reputation risk.Credit RiskAllowance for Credit LossesFor financial assets measured at amortized cost,we recognize an allowance for credit losses that is deducted from or added to the amortized cost basis of the financial asset to present the net amount expected to be collected on the financial asset on the balance sheet.For Single-Family credit exposures,we estimate the allowance for credit losses for loans on a pooled basis using a discounted cash flow model that evaluates a variety of factors to estimate the cash flows we expect to collect.The discounted cash flow model forecasts cash flows over the loans remaining contractual life,adjusted for expectations of prepayments,and using our historical experience,adjusted for current and forecasted economic conditions.These projections require significant management judgment,and we face uncertainties and risks related to the models we use for financial accounting and reporting purposes.For further information on our accounting policies and methods for estimating our allowance for credit losses and related management judgments,see MD&A-Critical Accounting Estimates.For Multifamily credit exposures,we estimate the allowance for credit losses using a loss-rate method to estimate the net amount of cash flows we expect to collect.The loss rate method is based on a probability of default and loss given default framework that estimates credit losses by considering a loans underlying characteristics and current and forecasted economic conditions.Loan characteristics considered by our model include vintage,loan term,current DSCR,current LTV ratio,occupancy rate,and interest rate hedges.We generally forecast economic conditions over a reasonable and supportable two-year period prior to reverting to historical averages at the model input level over a five-year period,using a linear reversion method.We also consider as model inputs expected prepayments,contractually specified extensions,expected recoveries from collateral posting requirements,and expected recoveries from credit enhancements that are not freestanding contracts.Management adjustments to our model output may be necessary to take into consideration current economic events and other factors not considered within the model.The tables below present a summary of the changes in our allowance for credit losses and key allowance for credit losses ratios.Table 13-Allowance for Credit Losses Activity1Q 20241Q 2023(Dollars in millions)Single-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalAllowance for credit losses:Beginning balance$6,402$447$6,849$7,746$147$7,893 Provision(benefit)for credit losses 120 61 181 318 77 395 Charge-offs(123)(123)(90)(90)Recoveries collected 26 26 32 32 Net charge-offs(97)(97)(58)(58)Other(1)83 83 91 91 Ending balance$6,508$508$7,016$8,097$224$8,321 Average loans outstanding during the period(2)$3,030,531$58,504$3,089,035$2,985,726$47,748$3,033,474Net charge-offs to average loans outstanding%Components of ending balance of allowance for credit losses:Mortgage loans held-for-investment$6,189$381$6,570$7,675$160$7,835 Other(3)319 127 446 422 64 486 Total ending balance$6,508$508$7,016$8,097$224$8,321(1)Primarily includes capitalization of past due interest related to non-accrual loans that received payment deferral plans and loan modifications.(2)Based on amortized cost basis of mortgage loans held-for-investment for which we have not elected the fair value option.(3)Primarily includes allowance for credit losses related to advances of pre-foreclosure costs and off-balance sheet credit exposures.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q21Table 14-Allowance for Credit Losses RatiosMarch 31,2024December 31,2023(Dollars in millions)Single-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalAllowance for credit losses ratios:Allowance for credit losses(1)to total loans outstanding 0.20%0.64%0.21%0.20%0.57%0.21%Non-accrual loans to total loans outstanding 0.43 0.17 0.42 0.44 0.11 0.44 Allowance for credit losses to non-accrual loans 47.90 369.90 50.45 45.01 509.38 47.20 Balances:Allowance for credit losses on mortgage loans held-for-investment$6,189$381$6,570$6,057$326$6,383 Total loans outstanding(2)3,033,817 59,509 3,093,326 3,031,136 57,107 3,088,243 Non-accrual loans(2)12,921 103 13,024 13,458 64 13,522(1)Represents allowance for credit losses on mortgage loans held-for-investment.(2)Based on amortized cost basis of mortgage loans held-for-investment for which we have not elected the fair value option.As of March 31,2024 compared to December 31,2023:n The ratio of allowance for credit losses to total loans outstanding remained at 0.21%.n The ratio of non-accrual loans to total loans outstanding decreased and the ratio of allowance for credit losses to non-accrual loans increased slightly primarily due to a decrease in the balance of loans in non-accrual status.Single-Family Mortgage Credit RiskMaintaining Prudent Eligibility Standards and Quality Control Practices and Managing Seller/Servicer PerformanceLoan Purchase Credit CharacteristicsWe monitor and evaluate market conditions that could affect the credit quality of our single-family loan purchases.Additionally,when managing our new acquisitions,we consider our risk limits and guidance from FHFA and capital requirements under the ERCF.This may affect the volume and characteristics of our loan acquisitions.The charts below show the credit profile of the single-family loans we purchased.Weighted Average Original LTV Ratio 79yxwx%1Q232Q233Q234Q231Q24Weighted Average Original Credit Score(1)7497517537527531Q232Q233Q234Q231Q24(1)Weighted average original credit score is generally based on three credit bureaus(Equifax,Experian,and TransUnion).Weighted Average Original DTI Ratio365787%1Q232Q233Q234Q231Q24Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q22The table below contains additional information about the single-family loans we purchased.Table 15-Single-Family New Business Activity 1Q 20241Q 2023(Dollars in millions)Amount%of TotalAmount%of Total20-and 30-year,amortizing fixed-rate$59,091 95%$55,469 94-year or less,amortizing fixed-rate 2,278 4 2,214 4 Adjustable-rate 900 1 1,282 2 Total$62,269 100%$58,965 100%Percentage of purchasesDTI ratio 45(#%Original LTV ratio 90% 28 Transaction type:Guarantor swap 66 72 Cash window 34 28 Property type:Detached single-family houses and townhouses 91 91 Condominium or co-op 9 9 Occupancy type:Primary residence 93 92 Second home 2 2 Investment property 5 6 Loan purpose:Purchase 86 86 Cash-out refinance 8 9 Other refinance 6 5 Transferring Credit Risk to Third-Party Investors We engage in various credit enhancement arrangements to reduce our credit risk exposure on our single-family loans.Single-Family Mortgage Portfolio Newly Acquired Credit EnhancementsThe table below provides the UPB of the mortgage loans acquired during the periods presented that were covered by primary mortgage insurance,the UPB of the mortgage loans covered by CRT transactions issued during the periods presented,and maximum coverage related to these newly acquired credit enhancements.Table 16-Single-Family Mortgage Portfolio Newly Acquired Credit Enhancements1Q 20241Q 2023(In millions)UPB(1)(2)Maximum Coverage(3)(4)UPB(1)(2)Maximum Coverage(3)(4)Primary mortgage insurance$25,135$6,616$26,518$6,920 CRT transactions:STACR 41,402 1,284 14,887 611 ACIS 15,523 559 Other 692 107 46 46 Total CRT issuance$57,617$1,950$14,933$657(1)Represents the UPB of the mortgage assets,reference pool,or securitization trust,as applicable.(2)The primary mortgage insurance and CRT transactions presented in this table are not mutually exclusive as a single loan may be covered by both primary mortgage insurance and CRT transactions.(3)For primary mortgage insurance,represents the coverage as of the related loan acquisition.For STACR transactions,represents the balance held by third parties at issuance.For ACIS transactions,represents the aggregate limit of insurance purchased from third parties at issuance.(4)The credit risk positions to which the maximum coverage applies may vary on a transaction-by-transaction basis.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q23Single-Family Mortgage Portfolio Credit Enhancement Coverage OutstandingThe table below provides information on the UPB and maximum coverage associated with credit-enhanced loans in our Single-Family mortgage portfolio.Table 17-Single-Family Mortgage Portfolio Credit Enhancement Coverage OutstandingMarch 31,2024(Dollars in millions)UPB(1)%of PortfolioMaximum Coverage(2)(3)Primary mortgage insurance(4)$636,735 21%$166,486 STACR 1,187,102 39 31,085 ACIS 804,323 26 17,535 Other 39,871 1 10,911 Less:UPB with multiple credit enhancements and other reconciling items(5)(801,385)(26)Single-Family mortgage portfolio-credit-enhanced 1,866,646 61 226,017 Single-Family mortgage portfolio-non-credit-enhanced 1,176,306 39 N/ATotal$3,042,952 100%$226,017 December 31,2023(Dollars in millions)UPB(1)%of PortfolioMaximum Coverage(2)(3)Primary mortgage insurance(4)$637,037 21%$165,738 STACR 1,175,837 39 31,222 ACIS 821,048 27 17,647 Other 39,901 1 11,027 Less:UPB with multiple credit enhancements and other reconciling items(5)(813,966)(27)Single-Family mortgage portfolio-credit-enhanced 1,859,857 61 225,634 Single-Family mortgage portfolio-non-credit-enhanced 1,179,053 39 N/ATotal$3,038,910 100%$225,634(1)Represents the current UPB of the mortgage assets,reference pool,or securitization trust,as applicable.(2)For STACR transactions,represents the outstanding balance held by third parties.For ACIS transactions,represents the remaining aggregate limit of insurance purchased from third parties.(3)The credit risk positions to which the maximum coverage applies may vary on a transaction-by-transaction basis.(4)Amounts exclude certain loans for which we do not control servicing,as the coverage information for these loans is not readily available to us.(5)Other reconciling items primarily include timing differences in reporting cycles between the UPB of certain CRT transactions and the UPB of the underlying loans.Credit Enhancement Coverage CharacteristicsThe table below provides the serious delinquency rates for the credit-enhanced and non-credit-enhanced loans in our Single-Family mortgage portfolio.The credit-enhanced categories are not mutually exclusive as a single loan may be covered by both primary mortgage insurance and other credit enhancements.Table 18-Serious Delinquency Rates for Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Mortgage PortfolioMarch 31,2024December 31,2023(%of portfolio based on UPB)(1)%of Portfolio(2)SDQ Rate%of Portfolio(2)SDQ RateCredit-enhanced:Primary mortgage insurance 21%0.92!%0.95%CRT and other 55 0.57 55 0.60 Non-credit-enhanced 39 0.40 39 0.42 TotalN/A 0.52 N/A 0.55(1)Excludes loans underlying certain securitization products for which loan-level data is not available.(2)Percentages do not total to 100%as a single loan may be included in multiple line items.Credit Enhancement Recoveries Our expected recovery receivable from freestanding credit enhancements was$0.1 billion as of both March 31,2024 and December 31,2023.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q24Monitoring Loan Performance and Characteristics We review loan performance,including delinquency statistics and related loan characteristics,in conjunction with housing market and economic conditions,to assess credit risk when estimating our allowance for credit losses.Loan Characteristics The table below contains details of the characteristics of the loans in our Single-Family mortgage portfolio.Table 19-Credit Quality Characteristics of Our Single-Family Mortgage Portfolio March 31,2024(Dollars in millions)UPBOriginal CreditScore(1)Current CreditScore(1)(2)OriginalLTVRatioCurrent LTVRatioSingle-Family mortgage portfolio year of origination:2024$42,481 754754 78x 23 278,342 751744 79 75 2022 426,234 746744 76 68 2021 968,107 752755 71 53 2020 707,779 761767 71 46 2019 and prior 620,009 738751 75 34 Total$3,042,952 750754 73 52 December 31,2023(Dollars in millions)UPBOriginal CreditScore(1)Current CreditScore(1)(2)OriginalLTVRatioCurrent LTVRatioSingle-Family mortgage portfolio year of origination:2023$265,072 751745 79u 22 433,252 745746 76 68 2021 984,004 752756 71 54 2020 719,822 761768 71 46 2019 119,557 746753 76 46 2018 and prior 517,203 736751 75 32 Total$3,038,910 750 755 73 52(1)Original credit score is generally based on three credit bureaus(Equifax,Experian,and TransUnion).Current credit score is based on Experian only.(2)Credit scores for certain recently acquired loans may not have been updated by the credit bureau since the loan acquisition and therefore the original credit scores also represent the current credit scores.The following table presents the combination of credit score and CLTV ratio attributes of loans in our Single-Family mortgage portfolio.Table 20-Single-Family Mortgage Portfolio Attribute Combinations(1)March 31,2024CLTV 60CLTV 60 to 80CLTV80 to 90CLTV90 to 100CLTV100All LoansOriginal credit score%of PortfolioSDQ Rate%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate740 and above 44%0.15%0.23%4%0.31%2%0.29%NM 65%0.17p0 to 739 12 0.49 6 0.79 2 0.89 1 0.73 NM 21 0.58 680 to 699 4 0.85 2 1.48 NM NM NM 6 1.00 660 to 679 3 1.21 1 2.13 NM NM NM 4 1.40 620 to 659 2 1.89 1 3.28 NM NM NM 3 2.10 Less than 620 1 4.30 NM NM NM NM 1 4.63 Total 66%0.46 25%0.67 6%0.71 3%0.59%NM 100%0.52 Referenced footnotes are included after the prior period table.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q25December 31,2023CLTV 60CLTV 60 to 80CLTV80 to 90CLTV90 to 100CLTV100All LoansOriginal credit score%of PortfolioSDQ Rate%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate(2)%of PortfolioSDQ Rate740 and above 45%0.16%0.24%4%0.32%1%0.27%NM 65%0.18p0 to 739 13 0.53 5 0.82 2 0.93 1 0.59 NM 21 0.61 680 to 699 4 0.90 2 1.50 NM NM NM 6 1.05 660 to 679 3 1.28 1 2.18 NM NM NM 4 1.45 620 to 659 2 2.00 1 3.37 NM NM NM 3 2.21 Less than 620 1 4.41 NM NM NM NM 1 4.74 Total 68%0.49 24%0.70 6%0.72 2%0.52%NM 100%0.55(1)Excludes loans underlying certain securitization products for which original credit score is not available.(2)NM-not meaningful due to the percentage of the portfolio rounding to zero.Geographic ConcentrationsWe purchase mortgage loans from across the U.S.However,local economic and other conditions can affect the borrowers ability to repay and the value of the underlying collateral,leading to concentrations of credit risk in certain geographic areas.In addition,certain states and municipalities have passed or may pass laws that limit our ability to foreclose or evict and make it more difficult and costly to manage our risk.See Note 12 for more information about the geographic distribution of our Single-Family mortgage portfolio.Delinquency Rates We report Single-Family delinquency rates based on the number of loans in our Single-Family mortgage portfolio that are past due as reported to us by our servicers as a percentage of the total number of loans in our Single-Family mortgage portfolio.The chart below presents the delinquency rates of mortgage loans in our Single-Family mortgage portfolio.Single-Family Delinquency Rates0.76%0.88%0.99%1.10%0.96%0.20%0.21%0.24%0.27%0.24%0.62%0.56%0.55%0.55%0.52%One month past dueTwo months past dueSeriously delinquent1Q232Q233Q234Q231Q24The percentages of loans that were one month past due and two months past due increased as of March 31,2024 compared to March 31,2023.The percentage of loans one month past due can be volatile due to seasonality and other factors that may not be indicative of default.As a result,the percentage of loans two months past due tends to be a better early performance indicator than the percentage of loans one month past due.Our Single-Family serious delinquency rate has declined to 0.52%as of March 31,2024,compared to 0.62%as of March 31,2023.See Note 3 for additional information on the payment status of our single-family mortgage loans.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q26Engaging in Loss Mitigation ActivitiesWe offer a variety of borrower assistance programs,including refinance programs for certain eligible loans and loan workout activities for struggling borrowers.For purposes of the disclosure below related to loss mitigation activities,we generally exclude loans for which we do not control servicing.See Note 3 for additional information on our loss mitigation activities.For information on our refinance programs,see the MD&A-Our Business Segments-Single-Family and MD&A-Risk Management-Credit Risk-Single-Family Mortgage Credit Risk sections in our 2023 Annual Report.Loan Workout ActivitiesWe continue to help struggling families retain their homes or otherwise avoid foreclosure through loan workouts.The table below provides details about the single-family loan workout activities that were completed during the periods presented.Table 21-Single-Family Completed Loan Workout Activity1Q 20241Q 2023(UPB in millions,loan count in thousands)UPBLoan CountUPBLoan CountPayment deferral plans$2,670 10$2,735 11Loan modifications 1,382 6 1,259 6Forbearance plans and other(1)1,180 5 1,490 7Total$5,232 21$5,484 24(1)The forbearance data is limited to loans in forbearance that were past due based on the loans original contractual terms and excludes loans included in certain legacy transactions,as the forbearance data for such loans is either not reported to us by the servicers or is otherwise not readily available to us.Other includes repayment plans and foreclosure alternatives.Our loan workout activity decreased in 1Q 2024 compared to 1Q 2023 as the seriously delinquent loan population continued to decline.Completed loan workout activity includes forbearance plans where borrowers fully reinstated the loan to current status during or at the end of the forbearance period,payment deferral plans,loan modifications,successfully completed repayment plans,short sales,and deeds in lieu of foreclosure.Completed loan workout activity excludes active loss mitigation activity that was ongoing and had not been completed as of the end of the period,such as forbearance plans that had been initiated but not completed and trial period modifications.There were approximately 14,000 loans in active forbearance plans and approximately 14,000 loans in other active loss mitigation activity as of March 31,2024.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q27Multifamily Mortgage Credit RiskCompleting Our Own Underwriting,Credit and Legal Review for New Business Activity Our underwriting standards focus on the LTV ratio and DSCR,which estimates the value of the collateral and a borrowers ability to repay the loan using the secured propertys cash flows,after expenses.The charts below provide the weighted average original LTV ratio and original DSCR for our new business activity.Weighted Average Original LTV Ratio 57XYa%1Q232Q233Q234Q231Q24 Weighted Average Original DSCR1.271.271.261.271.291Q232Q233Q234Q231Q24Transferring Credit Risk to Third-Party InvestorsTo reduce our credit risk exposure,we engage in a variety of CRT activities through which we have transferred a substantial amount of the expected and stressed credit risk on the Multifamily mortgage portfolio,thereby reducing our overall credit risk exposure and required capital.Multifamily Mortgage Portfolio CRT IssuanceThe table below provides the UPB of the mortgage loans covered by CRT transactions issued during the periods presented as well as the maximum coverage provided by those transactions.Table 22-Multifamily Mortgage Portfolio CRT Issuance1Q 20241Q 2023(In millions)UPB(1)Maximum Coverage(2)(3)UPB(1)Maximum Coverage(2)(3)Subordination$6,598$399$6,149$425 SCR 1,166 105 Lender risk-sharing 239 48 Total CRT issuance$6,598$399$7,554$578(1)Represents the UPB of the assets included in the associated reference pool or securitization trust,as applicable.(2)For subordination,represents the UPB of the securities that are held by third parties at issuance and are subordinate to the securities we guarantee.For SCR transactions,represents the UPB of securities held by third parties at issuance.For lender risk-sharing,represents the amount of loss recovery that is available subject to the terms of counterparty agreements at issuance.(3)The credit risk positions to which the maximum coverage applies may vary on a transaction-by-transaction basis.Multifamily Mortgage Portfolio Credit Enhancement Coverage OutstandingWhile we obtain various forms of credit protection in connection with the acquisition,guarantee,and/or securitization of a loan or group of loans,our principal credit enhancement type is subordination,which is created through our senior subordinate securitization transactions.Our maximum coverage provided by subordination in nonconsolidated VIEs was$39.2billion and$39.5 billion,as of March31,2024 and December31,2023,respectively.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q28The table below presents the UPB and delinquency rates for both credit-enhanced and non-credit-enhanced loans underlying our Multifamily mortgage portfolio.Table 23-Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage PortfolioMarch 31,2024December 31,2023(Dollars in millions)UPBDelinquency RateUPBDelinquency RateCredit-enhanced:Subordination$359,244 0.34%$358,944 0.26%SCR/MCIP 46,904 0.23 47,011 0.23 Other 8,779 0.86 8,844 0.89 Total credit-enhanced 414,927 0.34 414,799 0.27 Non-credit-enhanced 28,160 0.33 25,998 0.51 Total$443,087 0.34$440,797 0.28 The Multifamily delinquency rate increased to 0.34%at March31,2024,primarily driven by an increase in delinquent floating rate loans including small balance loans that are in their floating rate period.As of March31,2024,94%of the delinquent loans in the Multifamily mortgage portfolio have credit enhancement coverage.The table below contains details on the loans underlying our Multifamily mortgage portfolio that are not credit-enhanced.Table 24-Credit Quality of Our Multifamily Mortgage Portfolio Without Credit EnhancementMarch 31,2024December 31,2023(Dollars in millions)UPBDelinquency RateUPBDelinquency RateMortgage loans held-for-sale$8,602%$8,823%Mortgage loans held-for-investment:Held by Freddie Mac 7,980 0.99 9,941 1.21 Held by consolidated trusts 9,182 0.14 4,851 0.27 Other mortgage-related guarantees 2,396 2,383 Total$28,160 0.33$25,998 0.51 Market RiskOverviewOur business segments have embedded exposure to market risk,which is the economic risk associated with adverse changes in interest rates,volatility,and spreads.Market risk can adversely affect future cash flows,or economic value,as well as earnings and net worth.The primary sources of interest-rate risk are our investments in mortgage-related assets,the debt we issue to fund these assets,and our Single-Family guarantees.Interest-Rate RiskOur primary interest-rate risk measures are duration gap and Portfolio Value Sensitivity(PVS).Duration gap measures the difference in price sensitivity to interest rate changes between our financial assets and liabilities and is expressed in months relative to the value of assets.PVS is an estimate of the change in the present value of the cash flows of our financial assets and liabilities from an instantaneous shock to interest rates,assuming spreads are held constant and no rebalancing actions are undertaken.PVS is measured in two ways,one measuring the estimated sensitivity of our portfolio value to a 50 bps parallel movement in interest rates(PVS-L)and the other to a non-parallel movement resulting from a 25 bps change in the slope of theyield curve(PVS-YC).While we believe that duration gap and PVS are useful risk management tools,they should be understood as estimates rather than as precise measurements.The following tablesprovide our duration gap,estimated point-in-time and minimum and maximum PVS-L and PVS-YC results,and an average of the daily values and standard deviation.The tablebelow also provides PVS-L estimates assuming an immediate 100bps shift in the yield curve.The interest-rate sensitivity of a mortgage portfolio varies across a wide range of interest rates.Managements Discussion and AnalysisRisk ManagementFreddie Mac 1Q 2024 Form 10-Q29Table 25-PVS-YC and PVS-L Results Assuming Shifts of the Yield CurveMarch 31,2024December 31,2023PVS-YCPVS-LPVS-YCPVS-L(In millions)25 bps50 bps100 bps25 bps50 bps100 bpsAssuming shifts of the yield curve,(gains)losses on:(1)Assets:Investments$316$3,047$6,015 ($301)$3,150$6,229 Guarantees(2)(15)(314)(599)34 (369)(678)Total assets 301 2,733 5,416 (267)2,781 5,551 Liabilities 56 (1,496)(3,044)(52)(1,519)(3,073)Derivatives(357)(1,267)(2,494)322 (1,274)(2,547)Total$($30)($122)$3 ($12)($69)PVS$3$(1)The categorization of the PVS impact between assets,liabilities,and derivatives on this table is based upon the economic characteristics of those assets and liabilities,not their accounting classification.For example,purchase and sale commitments of mortgage-related securities and debt of consolidated trusts held by the mortgage-related investments portfolio are both categorized as assets on this table.(2)Represents the interest-rate risk from our guarantees,which include buy-ups,float,and upfront fees(including buy-downs).Table 26-Duration Gap and PVS Results1Q 20241Q 2023(Duration gap in months,dollars in millions)DurationGapPVS-YC25 bpsPVS-L50 bpsDurationGapPVS-YC25 bpsPVS-L50 bpsAverage 0.1$2$3$3 Minimum(0.1)(0.2)Maximum 0.2 5 5 0.2 9 24 Standard deviation 0.1 1 1 0.1 2 6 Derivatives enable us to reduce our economic interest-rate risk exposure as we continue to align our derivative portfolio with the changing duration of our economically hedged assets and liabilities.The table below shows that the PVS-L risk levels,assuming a 50 bps shift in the yield curve for the periods presented,would have been higher if we had not used derivatives.Table 27-PVS-L Results Before Derivatives and After DerivativesPVS-L(50 bps)(In millions)BeforeDerivativesAfterDerivativesEffect ofDerivativesMarch31,2024$1,236$($1,236)December31,2023 1,261 (1,261)Earnings Sensitivity to Market RiskThe GAAP accounting treatment for our financial assets and liabilities(i.e.,some are measured at amortized cost,while others are measured at fair value)creates variability in our GAAP earnings when interest rates and spreads change.We manage this variability of GAAP earnings,which may not reflect the economics of our business,using fair value hedge accounting.See MD&A-Consolidated Results of Operations and MD&A-Our Business Segments for additional information on the effect of changes in interest rates and market spreads on our financial results.Managements Discussion and AnalysisRisk Management Freddie Mac 1Q 2024 Form 10-Q30Interest Rate-Related Earnings SensitivityWhile we manage our interest-rate risk exposure on an economic basis to a low level as measured by our models,our GAAP financial results are subject to significant earnings variability from period to period based on changes in market conditions.In an effort to reduce our GAAP earnings variability and better align our GAAP results with the economics of our business,we elect to use hedge accounting for certain single-family mortgage loans and certain debt instruments.See Note 8 for additional information on hedge accounting.Earnings Sensitivity to Changes in Interest RatesWe evaluate a range of interest rate scenarios to determine the sensitivity of our earnings due to changes in interest rates and to determine our fair value hedge accounting strategies.The interest rate scenarios evaluated include parallel shifts in the yield curve in which interest rates increase or decrease by 100 bps,non-parallel shifts in the yield curve in which long-term interest rates increase or decrease by 100 bps,and non-parallel shifts in the yield curve in which short-term and medium-term interest rates increase or decrease by 100 bps.This evaluation identifies the net effect on comprehensive income from changes in fair value attributable to changes in interest rates for financial instruments measured at fair value,including the effects of fair value hedge accounting,for each of the identified scenarios.This evaluation does not include the net effect on comprehensive income from interest-rate sensitive items that are not measured at fair value(e.g.,amortization of mortgage loan premiums and discounts,changes in fair value of held-for-sale mortgage loans for which we have not elected the fair value option,etc.)or from changes in our future contractual net interest income due to repricing of our interest-bearing assets and liabilities.The before-tax results of this evaluation are shown in the table below.Table 28-Earnings Sensitivity to Changes in Interest Rates(In millions)March 31,2024March 31,2023Interest Rate Scenarios(1)Parallel yield curve shifts: 100 bps$10$25 -100 bps(10)(25)Non-parallel yield curve shifts-long-term interest rates: 100 bps 282 118 -100 bps(282)(118)Non-parallel yield curve shifts-short-term and medium-term interest rates: 100 bps(272)(92)-100 bps 272 92(1)The earnings sensitivity presented is calculated using the change in interest rates and net effective duration exposure.The actual effect of changes in interest rates on our comprehensive income in any given period may vary based on a number of factors,including,but not limited to,the composition of our assets and liabilities,the actual changes in interest rates that are realized at different terms along the yield curve,and the effectiveness of our hedge accounting strategies.Even if implemented properly,our hedge accounting programs may not be effective in reducing earnings volatility,and our hedges may fail in any given future period,which could expose us to significant earnings variability in that period.Managements Discussion and AnalysisRisk Management Freddie Mac 1Q 2024 Form 10-Q31LIQUIDITY AND CAPITAL RESOURCESOur business activities require that we maintain adequate liquidity to meet our financial obligations as they come due and to meet the needs of customers in a timely and cost-efficient manner.We also must maintain adequate capital resources to avoid being placed into receivership by FHFA.LiquidityPrimary Sources of Liquidity The following table lists the sources of our liquidity,the balances as of the dates shown,and a brief description of their importance to Freddie Mac.Table 29-Liquidity Sources(In millions)March31,2024(1)December31,2023(1)DescriptionOther Investments Portfolio-Liquidity and Contingency Operating Portfolio$129,150$124,098 The liquidity and contingency operating portfolio,included within our other investments portfolio,is primarily used for short-term liquidity management.Mortgage-Related Investments Portfolio 24,440 24,469 The liquid portion of our mortgage-related investments portfolio can be pledged or sold for liquidity purposes.The amount of cash we may be able to successfully raise may be substantially less than the balance.(1)Represents carrying value for the liquidity and contingency operating portfolio,included within our other investments portfolio,and UPB for the liquid portion of the mortgage-related investments portfolio.Other Investments PortfolioOur other investments portfolio is important to our cash flow,collateral management,asset and liability management,and ability to provide liquidity and stability to the mortgage market.Our liquidity and contingency operating portfolio primarily includes securities purchased under agreements to resell and non-mortgage-related securities.Our non-mortgage-related securities consist of U.S.Treasury securities and other investments that we could sell to provide us with an additional source of liquidity to fund our business operations.We also maintain non-interest-bearing deposits at the Federal Reserve Bank of New York and interest-bearing deposits at commercial banks.Our interest-bearing deposits at commercial banks,including custodial accounts,totaled$2.7 billion and$5.1 billion as of March31,2024 and December31,2023,respectively.See MD&A-Our Portfolios-Investments Portfolio-Other Investments Portfolio for additional information about our other investments portfolio.Mortgage-Related Investments Portfolio We invest principally in mortgage-related investments,certain categories of which are largely unencumbered and liquid.Our primary source of liquidity among these mortgage assets is our holdings of agency securities.See MD&A-Our Portfolios-Investments Portfolio-Mortgage-Related Investments Portfolio for additional information about our mortgage loans and mortgage-related securities.Managements Discussion and AnalysisLiquidity and Capital Resources Freddie Mac 1Q 2024 Form 10-Q32Primary Sources of Funding The following table lists the sources of our funding,the balances as of the dates shown,and a brief description of their importance to Freddie Mac.Table 30-Funding Sources(In millions)March31,2024(1)December31,2023(1)DescriptionDebt of Freddie Mac$161,704$166,419 Debt of Freddie Mac is used to fund our business activities.Debt of Consolidated Trusts 3,050,038 3,041,927 Debt of consolidated trusts is used primarily to fund our Single-Family guarantee activities.This type of debt is principally repaid by the cash flows of the associated mortgage loans.As a result,our repayment obligation is limited to amounts paid pursuant to our guarantee of principal and interest and to purchase modified or seriously delinquent loans from the trusts.(1)Represents the carrying value of debt balances after consideration of offsetting arrangements.Debt of Freddie MacWe issue debt of Freddie Mac to fund our operations.Competition for funding can vary with economic,financial market,and regulatory environments.The amount,type,and term of debt issued is based on a variety of factors and is designed to meet our ongoing cash needs and to comply with our Liquidity Management Framework.The table below summarizes the par value and the average rate of debt of Freddie Mac securities we issued or paid off,including regularly scheduled principal payments,payments resulting from calls,and payments for repurchases.We call,exchange,or repurchase outstanding debt of Freddie Mac securities from time to time for a variety of reasons,including managing our funding composition and supporting the liquidity of our debt securities.Table 31-Debt of Freddie Mac Activity1Q 20241Q 2023(Dollars in millions)Par ValueAverage Rate(1)Par ValueAverage Rate(1)Short-term:Beginning balance$6,031 5.39%$7,716 3.49%Issuances 15,943 5.29 50,739 4.18 Repayments Maturities(13,043)5.26 (49,739)4.04 Total short-term debt 8,931 5.37 8,716 4.36 Long-term:Beginning balance 168,009 3.31 170,363 2.22 Issuances 16,438 5.38 14,192 5.33 Repayments(20,812)5.62 (2,491)5.93 Maturities(3,164)2.62 (680)1.50 Total long-term debt 160,471 3.24 181,384 2.51 Total debt of Freddie Mac,net$169,402 3.35%$190,100 2.60%(1)Average rate is weighted based on par value.As of March31,2024,our aggregate indebtedness pursuant to the Purchase Agreement was$169.4billion,which was below the current$270.0 billion debt cap limit.Our aggregate indebtedness calculation primarily includes the par value of short-and long-term debt.Maturity and Redemption DatesThe following table presents the par value of debt of Freddie Mac by contractual maturity date and earliest redemption date.The earliest redemption date refers to the earliest call date for callable debt and the contractual maturity date for all other debt of Freddie Mac.Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q33Table 32-Maturity and Redemption DatesAs of March 31,2024As of December 31,2023(In millions)Contractual Maturity DateEarliest Redemption DateContractual Maturity DateEarliest Redemption DateDebt of Freddie Mac(1):1 year or less$47,192$143,141$47,276$144,232 1 year through 2 years 54,690 12,049 61,187 15,249 2 years through 3 years 13,032 243 15,645 447 3 years through 4 years 13,154 290 12,530 305 4 years through 5 years 14,957 345 10,947 345 Thereafter 24,328 11,285 24,278 11,285 STACR and SCR debt(2)2,049 2,049 2,177 2,177 Total debt of Freddie Mac$169,402$169,402$174,040$174,040(1)As of March31,2024 and December31,2023,excludes$13.8billion and$10.2billion,respectively,of payables related to securities sold under agreements to repurchase that we offset against receivables related to securities purchased under agreements to resell on our condensed consolidated balance sheets.(2)STACR debt notes and SCR debt notes are subject to prepayment risk as their payments are based upon the performance of a reference pool of mortgage assets that may be prepaid by the related mortgage borrowers at any time generally without penalty and are,therefore,included as a separate category in the table.Debt of Consolidated TrustsThe largest component of debt on our condensed consolidated balance sheets is debt of consolidated trusts,which relates to securitization transactions that we consolidate for accounting purposes.We primarily issue this type of debt by securitizing mortgage loans to fund our guarantee activities.The table below shows the issuance and extinguishment activity for the debt of consolidated trusts.Table 33-Debt of Consolidated Trusts Activity(In millions)1Q 20241Q 2023Beginning balance$2,999,893$2,929,567 Issuances 84,873 87,021 Repayments and extinguishments(75,689)(77,867)Ending balance 3,009,077 2,938,721 Unamortized premiums and discounts 40,961 48,329 Debt of consolidated trusts$3,050,038$2,987,050 Off-Balance Sheet ArrangementsWe enter into certain business arrangements that are not recorded on our condensed consolidated balance sheets or that may be recorded in amounts that differ from the full contractual or notional amount of the transaction that affect our short-and long-term liquidity needs.Our off-balance sheet arrangements primarily consist of guarantees and commitments.Certain of these arrangements present credit risk exposure.See Note 2 and Note 4 for additional information on these transactions.See MD&A-Risk Management-Credit Risk for additional information on our credit risk exposure on off-balance sheet arrangements.Cash Flows Cash and cash equivalents(including restricted cash and cash equivalents)decreased by$2.3 billion from$5.9 billion as of March31,2023 to$3.5 billion as of March31,2024,primarily due to repayment of outstanding debt and investment of retained earnings.Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q34Capital ResourcesThe table below presents activity related to our net worth.Table 34-Net Worth Activity(In millions)1Q 20241Q 2023Beginning balance$47,722$37,018 Comprehensive income 2,741 2,049 Capital draw from Treasury Senior preferred stock dividends declared Total equity/net worth$50,463$39,067 Remaining Treasury funding commitment$140,162$140,162 Aggregate draws under Purchase Agreement 71,648 71,648 Aggregate cash dividends paid to Treasury 119,680 119,680 Liquidation preference of the senior preferred stock 120,370 109,666 ERCFThe charts below present the ERCF capital adequacy requirements under the risk-based capital requirement(CET1 capital ratio relative to RWA)and leverage capital requirement(Tier 1 capital ratio relative to ATA).Our required CET1 capital ratio increased to 10.1%as of March 31,2024,from 9.5%as of December 31,2023,primarily due to an increase in the stability capital buffer.Risk-Based Capital Requirement:CET1 Capital Ratio10.1%9.9%9.7%9.5.1%4.5%4.5%4.5%4.5%4.5%3.0%2.9%2.8%2.7%2.8%2.6%2.5%2.4%2.3%2.8%Minimum requirementStress capital bufferStability capital buffer03/31/2306/30/2309/30/2312/31/2303/31/24Leverage Capital Requirement:Tier 1 Capital Ratio2.8%2.8%2.8%2.8%2.9%2.5%2.5%2.5%2.5%2.5%0.3%0.3%0.3%0.3%0.4%Minimum requirementPLBA03/31/2306/30/2309/30/2312/31/2303/31/24Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q35Capital MetricsThe table below presents the components of our regulatory capital.Table 35-Regulatory Capital Components(In billions)March 31,2024December 31,2023Total equity$50$48 Less:Senior preferred stock 73 73 Preferred stock 14 14 Common equity(37)(39)Less:deferred tax assets arising from temporary differences that exceed 10%of CET1 capital and other regulatory adjustments 4 4 Common equity Tier 1 capital(41)(43)Add:Preferred stock 14 14 Tier 1 capital(27)(29)Tier 2 capital adjustments Adjusted total capital($27)($29)The table below presents the components of our statutory capital.Table 36-Statutory Capital Components(In billions)March 31,2024December 31,2023Total equity$50$48 Less:Senior preferred stock 73 73 AOCI,net of taxes Core capital(23)(25)General allowance for foreclosure losses(1)7 7 Total capital($16)($18)(1)Represents our allowance for credit losses.Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q36The table below presents our capital metrics under the ERCF.Table 37-Capital Metrics Under ERCF(In billions)March 31,2024December 31,2023Adjusted total assets$3,786$3,775 Risk-weighted assets(standardized approach):Credit risk 893 884 Market risk 54 54 Operational risk 71 71 Total risk-weighted assets$1,018$1,009(In billions)March 31,2024December 31,2023Stress capital buffer$28$28 Stability capital buffer 29 23 Countercyclical capital buffer amount PCCBA$57$51 PLBA$14$11 March 31,2024(Dollars in billions)Minimum Capital RequirementApplicable Buffer(1)Capital Requirement(Including Buffer(1)Available Capital(Deficit)Capital ShortfallRisk-based capital amounts:Total capital$81 N/A$81 ($16)($97)CET1 capital 46$57 103 (41)(144)Tier 1 capital 61 57 118 (27)(145)Adjusted total capital 81 57 138 (27)(165)Risk-based capital ratios(2):Total capital 8.0%N/A 8.0%(1.5)%(9.5)T1 capital 4.5 5.6.1 (4.0)(14.1)Tier 1 capital 6.0 5.6 11.6 (2.6)(14.2)Adjusted total capital 8.0 5.6 13.6 (2.6)(16.2)Leverage capital amounts:Core capital$95 N/A$95 ($23)($118)Tier 1 capital 95$14 109 (27)(136)Leverage capital ratios(3):Core capital 2.5%N/A 2.5%(0.6)%(3.1)%Tier 1 capital 2.5 0.4%2.9 (0.7)(3.6)Referenced footnotes are included after the prior period table.Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q37December 31,2023(Dollars in billions)Minimum Capital RequirementApplicable Buffer(1)Capital Requirement(Including Buffer(1)Available Capital(Deficit)Capital ShortfallRisk-based capital amounts:Total capital$81 N/A$81 ($18)($99)CET1 capital 45$51 96 (43)(139)Tier 1 capital 60 51 111 (29)(140)Adjusted total capital 81 51 132 (29)(161)Risk-based capital ratios(2):Total capital 8.0%N/A 8.0%(1.8)%(9.8)T1 capital 4.5 5.0%9.5 (4.3)(13.8)Tier 1 capital 6.0 5.0 11.0 (2.9)(13.9)Adjusted total capital 8.0 5.0 13.0 (2.9)(15.9)Leverage capital amounts:Core capital$95 N/A$95 ($25)($120)Tier 1 capital 95$11 106 (29)(135)Leverage capital ratios(3):Core capital 2.5%N/A 2.5%(0.7)%(3.2)%Tier 1 capital 2.5 0.3%2.8 (0.8)(3.6)(1)PCCBA for risk-based capital and PLBA for leverage capital.(2)As a percentage of RWA.(3)As a percentage of ATA.At March31,2024,our maximum payout ratio under the ERCF was 0.0%.See Note 15 for additional information on our capital amounts and ratios under the ERCF.Managements Discussion and AnalysisLiquidity and Capital ResourcesFreddie Mac 1Q 2024 Form 10-Q38CRITICAL ACCOUNTING ESTIMATESOur critical accounting estimates and policies relate to the Single-Family allowance for credit losses.For additional information about our critical accounting estimates and other significant accounting policies,see Note 1 and Critical Accounting Estimates in our 2023 Annual Report.Single-Family Allowance for Credit LossesThe Single-Family allowance for credit losses represents our estimate of expected credit losses over the contractual term of the mortgage loans.The Single-Family allowance for credit losses pertains to all single-family loans classified as held-for-investment on our condensed consolidated balance sheets.Determining the appropriateness of the Single-Family allowance for credit losses is a complex process that is subject to numerous estimates and assumptions requiring significant management judgment about matters that involve a high degree of subjectivity.This process involves the use of models that require us to make judgments about matters that are difficult to predict.Changes in forecasted house price growth rates can have a significant effect on our allowance for credit losses estimates.The table below shows our nationwide forecasted house price growth rates that were used in determining our allowance for credit losses.See Note 5 for additional information regarding our current period provision for credit losses.Table 38-Forecasted House Price Growth Rates12-Month Forward13-to 24-Month ForwardMarch 31,2024 0.2%0.6cember 31,2023 2.8 2.0 Managements Discussion and AnalysisCritical Accounting EstimatesFreddie Mac 1Q 2024 Form 10-Q39REGULATION AND SUPERVISIONIn addition to oversight by FHFA as our Conservator,we are subject to regulation and oversight by FHFA under our Charter and the GSE Act and to certain regulation by other government agencies.FHFA has the power to require us from time to time to change our processes,take action and/or stop taking action that could impact our business.Furthermore,regulatory activities by other government agencies can affect us indirectly,even if we are not directly subject to such agencies regulation or oversight.For example,regulations that modify requirements applicable to the purchase or servicing of mortgages can affect us.Federal Housing Finance AgencyFICO 10T and VantageScore 4.0In October 2022,FHFA announced the validation and approval of the FICO 10T and VantageScore 4.0 credit score models for use by Freddie Mac and Fannie Mae,as well as the transition to a bi-merge credit reporting requirement.Under a bi-merge approach,lenders may obtain credit reports from two,rather than three,of the national consumer reporting agencies for each borrower.In March 2023,FHFA and the Enterprises initiated a public engagement process to solicit input on this initiative and gather information on how to ensure a smooth transition to the new credit score requirements.On February 29,2024,FHFA announced further updates to the implementation of new credit score requirements for single-family loans acquired by the Enterprises.FHFA aligned the implementation date of the bi-merge credit reporting requirement with the transition from the Classic FICO credit score model,which is expected to occur in the fourth quarter of 2025.FHFA further announced in February that Freddie Mac and Fannie Mae will accelerate the publication of VantageScore 4.0 historical data to early in the third quarter of 2024.As part of the transition,Freddie Mac and Fannie Mae will make available historical VantageScore 4.0 data on loans acquired by the Enterprises during the 10-year period from April 1,2013 to March 31,2023.FHFA and the Enterprises will continue to work towards providing similar data to support the transition to the FICO 10T model,contingent upon achieving the necessary conditions for acquisition and publication of this data.Fair Lending Oversight RuleOn April 29,2024,FHFA issued its final rule on fair lending,fair housing,and equitable housing finance plans.We are currently assessing the impact of the final rule.Managements Discussion and AnalysisRegulation and SupervisionFreddie Mac 1Q 2024 Form 10-Q40FORWARD-LOOKING STATEMENTSWe regularly communicate information concerning our business activities to investors,the news media,securities analysts,and others as part of our normal operations.Some of these communications,including this Form 10-Q,contain forward-looking statements.Examples of forward-looking statements include,but are not limited to,statements pertaining to the conservatorship,our current expectations and objectives for the Single-Family and Multifamily segments of our business,our efforts to assist the housing market,our liquidity and capital management,economic and market conditions and trends including,but not limited to,changes in house prices and house price forecasts,our market share,the effect of legislative and regulatory developments and new accounting guidance,the credit quality of loans we own or guarantee,the costs and benefits of our CRT transactions,the impact of banking crises or failures,the effects of catastrophic events or significant climate change effects and actions taken in response thereto on our business,and our results of operations and financial condition.Forward-looking statements involve known and unknown risks and uncertainties,some of which are beyond our control.Forward-looking statements are often accompanied by,and identified with,terms such as could,may,will,believe,expect,anticipate,forecast,and similar phrases.These statements are not historical facts,but rather represent our expectations based on current information,plans,judgments,assumptions,estimates,and projections.Actual results may differ significantly from those described in or implied by such forward-looking statements due to various factors and uncertainties,including those described in the Risk Factors section in our 2023 Annual Report,and including,without limitation,the following:nThe actions the federal government(including FHFA,Treasury,and Congress)and state governments may take,require us to take,or restrict us from taking,including actions to promote equitable access to affordable and sustainable housing,such as programs to implement the expectations in FHFAs Conservatorship Scorecards,recent requirements and guidance related to equitable housing and fair lending,and other objectives for us;nChanges in the fiscal and monetary policies of the Federal Reserve,including changes in target interest rates and in the amount of agency MBS and agency CMBS held by the Federal Reserve;nThe effect of the restrictions on our business due to the conservatorship and the Purchase Agreement;nThe impact of any changes in our credit ratings or those of the U.S.government;n Changes in our Charter,applicable legislative or regulatory requirements(including any legislation affecting the future status of our company),or the Purchase Agreement;nChanges to our capital requirements and potential effects of such changes on our business strategies;nChanges in tax laws;nChanges in privacy and cybersecurity laws and regulations;nChanges in accounting policies,practices,standards,or guidance;nChanges in economic and market conditions,including volatility in the financial services industry,changes in employment rates,inflation,interest rates,spreads,and house prices;nChanges in the U.S.mortgage market,including changes in the supply and type of loan products;nThe success of our efforts to mitigate our losses;nThe success of our strategy to transfer mortgage credit risk;nOur ability to maintain adequate liquidity to fund our operations;nOur ability to maintain the security and resiliency of our operational systems and infrastructure,including against cybersecurity incidents or other security incidents,whether due to insider error or malfeasance or system errors or vulnerabilities in our or our third parties systems;nOur ability to effectively execute our business strategies,implement significant changes,and improve efficiency;nThe adequacy of our risk management framework,including the adequacy of our regulatory capital framework prescribed by FHFA and internal models for measuring risk;nOur ability to manage mortgage credit risk,including the effect of changes in underwriting and servicing practices;nOur ability to limit or manage our economic exposure and GAAP earnings exposure to interest-rate volatility and spread volatility,including the availability of derivative financial instruments needed for interest-rate risk management purposes and our ability to apply hedge accounting;nOur operational ability to issue new securities,make timely and correct payments on securities,and provide initial and ongoing disclosures;nOur reliance on CSS and the CSP for the operation of the majority of our Single-Family securitization activities,limits on our influence over CSS Board decisions,and any additional changes FHFA may require in our relationship with,or support of,CSS;n Performance of and changes in the methodologies,models,assumptions,and estimates we use to prepare our financial statements,make business decisions,and manage risks;nChanges in investor demand for our debt or mortgage-related securities;Managements Discussion and AnalysisForward-Looking StatementsFreddie Mac 1Q 2024 Form 10-Q41nOur ability to maintain market acceptance of our mortgage-related securities,including our ability to maintain alignment of the prepayment speeds and pricing performance of our and Fannie Maes respective UMBS;nChanges in the practices of loan originators,servicers,investors,and other participants in the secondary mortgage market;nCompetition from other market participants,which could affect the pricing we offer for our products,the credit characteristics of the loans we purchase,and our ability to meet our affordable housing goals and other mandated activities;nThe adverse consequences on our business and operations that may occur from the transition to SOFR as the replacement for LIBOR;nThe availability of critical third parties,or their vendors and other business partners,to deliver products or services,or to manage risks,including cybersecurity risk,effectively;nThe occurrence of a catastrophic event or significant climate change effects in areas in which our offices,significant portions of our total mortgage portfolio,or the offices of critical third parties are located,and for which we may be uninsured or significantly underinsured;and n Other factors and assumptions described in this Form10-Q and our 2023 Annual Report,including in the MD&A section.Forward-looking statements are made only as of the date of this Form 10-Q,and we undertake no obligation to update any forward-looking statements we make to reflect events or circumstances occurring after the date of this Form10-Q.Managements Discussion and AnalysisForward-Looking StatementsFreddie Mac 1Q 2024 Form 10-Q42Financial StatementsFinancial StatementsFreddie Mac 1Q 2024 Form 10-Q43FREDDIE MAC Condensed Consolidated Statements of Income and Comprehensive Income(Unaudited)(In millions,except share-related amounts)1Q 20241Q 2023Net interest incomeInterest income$28,385$24,987 Interest expense(23,626)(20,486)Net interest income 4,759 4,501 Non-interest incomeGuarantee income 496 466 Investment gains,net 405 (225)Other income 97 85 Non-interest income 998 326 Net revenues 5,757 4,827(Provision)benefit for credit losses(181)(395)Non-interest expenseSalaries and employee benefits(421)(374)Credit enhancement expense(597)(530)Benefit for(decrease in)credit enhancement recoveries 1 49 Legislative assessments expense(754)(735)Other expense(351)(342)Non-interest expense(2,122)(1,932)Income before income tax expense 3,454 2,500 Income tax expense(688)(505)Net income 2,766 1,995 Other comprehensive income(loss),net of taxes and reclassification adjustments(25)54 Comprehensive income$2,741$2,049 Net income$2,766$1,995 Amounts attributable to senior preferred stock(2,741)(2,049)Net income attributable to common stockholders$25 ($54)Net income per common share$0.01 ($0.02)Weighted average common shares(in millions)3,234 3,234 The accompanying notes are an integral part of these condensed consolidated financial statements.Financial StatementsCondensed Consolidated Statements of Income and Comprehensive IncomeFreddie Mac 1Q 2024 Form 10-Q44FREDDIE MACCondensed Consolidated Balance Sheets(Unaudited)March 31,December 31,(In millions,except share-related amounts)20242023AssetsCash and cash equivalents(includes$1,584 and$978 of restricted cash and cash equivalents)$3,531$6,019 Securities purchased under agreements to resell 102,257 95,148 Investment securities,at fair value 41,400 43,275 Mortgage loans held-for-sale(includes$7,926 and$7,356 at fair value)12,034 12,941 Mortgage loans held-for-investment(net of allowance for credit losses of$6,570 and$6,383 and includes$1,931 and$1,806 at fair value)3,088,687 3,083,665 Accrued interest receivable,net 10,047 9,925 Deferred tax assets,net 4,227 4,076 Other assets(includes$5,849 and$6,095 at fair value)25,190 25,927 Total assets$3,287,373$3,280,976 Liabilities and equityLiabilitiesAccrued interest payable$8,712$8,812 Debt(includes$2,696 and$2,476 at fair value)3,211,742 3,208,346 Other liabilities(includes$1,053 and$873 at fair value)16,456 16,096 Total liabilities 3,236,910 3,233,254 Commitments and contingenciesEquitySenior preferred stock(liquidation preference of$120,370 and$117,309)72,648 72,648 Preferred stock,at redemption value 14,109 14,109 Common stock,$0.00 par value,4,000,000,000 shares authorized,725,863,886 shares issued and 650,059,553 shares outstanding Retained earnings(32,362)(35,128)AOCI,net of taxes,related to:Available-for-sale securities 51 72 Other(98)(94)AOCI,net of taxes(47)(22)Treasury stock,at cost,75,804,333 shares(3,885)(3,885)Total equity 50,463 47,722 Total liabilities and equity$3,287,373$3,280,976 The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our condensed consolidated balance sheets.March 31,December 31,(In millions)20242023Assets:Cash and cash equivalents(includes$1,483 and$890 of restricted cash and cash equivalents)$1,484$891 Securities purchased under agreements to resell10,777 9,396 Investment securities,at fair value 65 Mortgage loans held-for-investment,net3,044,215 3,039,461 Accrued interest receivable,net9,051 8,885 Other assets5,525 4,858 Total assets of consolidated VIEs$3,071,052$3,063,556Liabilities:Accrued interest payable$7,702$7,527 Debt 3,050,038 3,041,927 Total liabilities of consolidated VIEs$3,057,740$3,049,454 The accompanying notes are an integral part of these condensed consolidated financial statements.Financial StatementsCondensed Consolidated Balance SheetsFreddie Mac 1Q 2024 Form 10-Q45FREDDIE MACCondensed Consolidated Statements of Equity(Unaudited)Shares OutstandingSeniorPreferredStockPreferredStock,atRedemptionValueCommonStock,atParValueRetainedEarningsAOCI,Net ofTaxTreasuryStock,atCostTotalEquity(In millions)SeniorPreferredStockPreferredStockCommonStockBalance at December31,2023 1 464 650$72,648$14,109$($35,128)($22)($3,885)$47,722 Comprehensive income:Net income 2,766 2,766 Other comprehensive income(loss):Changes in net unrealized gains(losses)on available-for-sale securities(net of taxes of$7million)(25)(25)Reclassification adjustment for(gains)losses on available-for-sale securities included in net income(net of taxes of$1million)4 4 Other(net of taxes of$1million)(4)(4)Comprehensive income 2,766 (25)2,741 Ending balance at March 31,2024 1 464 650$72,648$14,109$($32,362)($47)($3,885)$50,463 Balance at December31,2022 1 464 650$72,648$14,109$($45,666)($188)($3,885)$37,018 Comprehensive income:Net income 1,995 1,995 Other comprehensive income(loss):Changes in net unrealized gains(losses)on available-for-sale securities(net of taxes of$14 million)52 52 Reclassification adjustment for(gains)losses on available-for-sale securities included in net income(net of taxes of$0 million)Other(net of taxes of$1 million)2 2 Comprehensive income 1,995 54 2,049 Ending balance at March 31,2023 1 464 650$72,648$14,109$($43,671)($134)($3,885)$39,067 The accompanying notes are an integral part of these condensed consolidated financial statements.Financial StatementsCondensed Consolidated Statements of EquityFreddie Mac 1Q 2024 Form 10-Q46FREDDIE MACCondensed Consolidated Statements of Cash Flows(Unaudited)(In millions)1Q 20241Q 2023Net cash provided by(used in)operating activities$2,894$3,435 Cash flows from investing activitiesInvestment securities:Purchases(15,067)(39,052)Proceeds from sales 16,257 34,919 Proceeds from maturities and repayments 1,595 5,464 Mortgage loans acquired held-for-investment:Purchases(23,751)(19,991)Proceeds from sales 714 1,661 Proceeds from repayments 57,248 55,034 Advances under secured lending arrangements(19,544)(22,317)Net(increase)decrease in securities purchased under agreements to resell(10,736)(13,353)Cash flows related to derivatives 1,890 61 Other,net 320 (112)Net cash provided by(used in)investing activities 8,926 2,314 Cash flows from financing activitiesDebt of consolidated trusts:Proceeds from issuance 43,851 44,187 Repayments and redemptions(57,074)(55,197)Debt of Freddie Mac:Proceeds from issuance 32,281 64,864 Repayments(36,920)(52,748)Net increase(decrease)in securities sold under agreements to repurchase 3,555 (7,339)Other,net(1)(3)Net cash provided by(used in)financing activities(14,308)(6,236)Net increase(decrease)in cash and cash equivalents(includes restricted cash and cash equivalents)(2,488)(487)Cash and cash equivalents(includes restricted cash and cash equivalents)at the beginning of year 6,019 6,360 Cash and cash equivalents(includes restricted cash and cash equivalents)at end of period$3,531$5,873 Supplemental cash flow informationCash paid for:Debt interest$24,220$20,806 Income taxes Non-cash investing and financing activities(Notes 3 and 6)The accompanying notes are an integral part of these condensed consolidated financial statements.Financial StatementsCondensed Consolidated Statements of Cash FlowsFreddie Mac 1Q 2024 Form 10-Q47Notes to Condensed Consolidated Financial StatementsNOTE 1Summary of Significant Accounting PoliciesFreddie Mac is a GSE chartered by Congress in 1970,
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Proprietary business information of ADM.Proprietary business information of ADM.First Quarter 2024Earnings Conference CallApril 30,2024Proprietary business information of ADM.|2This presentation contains“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties.All statements,other than statements of historical fact included in this release,are forward-looking statements.You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.These statements may include words such as“anticipate,”“estimate,”“expect,”“project,”“plan,”“intend,”“believe,”“may,”“outlook,”“will,”“should,”“can have,”“likely,”and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.All forward-looking statements are subject to significant risks,uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from the forward-looking statements.These forward-looking statements are not guarantees of future performance and involve risks,assumptions and uncertainties,including,without limitation,those that are described in the Companys most recent Annual Report on Form 10-K and in other documents that the Company files or furnishes with the Securities and Exchange Commission.Should one or more of these risks or uncertainties materialize,or should underlying assumptions prove incorrect,actual outcomes may vary materially from those indicated or anticipated by such forward-looking statements.Accordingly,you are cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date they are made.Except to the extent required by law,ADM does not undertake,and expressly disclaims,any duty or obligation to update publicly any forward-looking statement after the date of this announcement,whether as a result of new information,future events,changes in assumptions or otherwise.Cautionary Note Regarding Forward-Looking StatementsProprietary business information of ADM.|3The Company uses certain“Non-GAAP”financial measures as defined by the Securities and Exchange Commission.These are measures of performance not defined by accounting principles generally accepted in the United States,and should be considered in addition to,not in lieu of,GAAP reported measures.Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this presentation.1.Adjusted net earnings and Adjusted earnings per share(EPS):Adjusted net earnings reflects ADMs reported net earnings after removal of the effect on net earnings of specified items as more fully described in the reconciliation tables.Adjusted EPS reflects ADMs fully diluted EPS after removal of the effect on EPS as reported of specified items as more fully described in the reconciliation tables.Management believes that Adjusted net earnings and Adjusted EPS are useful measures of ADMs performance because they provide investors additional information about ADMs operations allowing better evaluation of underlying business performance and better period-to-period comparability.These non-GAAP financial measures are not intended to replace or be alternatives to net earnings and EPS as reported,the most directly comparable GAAP financial measures,or any other measures of operating results under GAAP.Earnings amounts described above have been divided by the companys diluted shares outstanding for each respective period in order to arrive at an adjusted EPS amount for each specified item.2.Segment operating profit and adjusted segment operating profit:Segment operating profit is ADMs consolidated income from operations before income tax excluding corporate items.Adjusted segment operating profit,a non-GAAP measure,is segment operating profit excluding specified items.Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADMs performance because they provide investors information about ADMs business unit performance excluding corporate overhead costs as well as specified items.Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S.GAAP and should not be considered alternatives to income before income taxes,the most directly comparable GAAP financial measure,or any other measure of consolidated operating results under U.S.GAAP.3.Adjusted Return on Invested Capital(ROIC):Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital.Adjusted ROIC earnings is ADMs net earnings adjusted for the after-tax effects of interest expense on borrowings,changes in the LIFO reserve and other specified items.Adjusted invested capital is the sum of ADMs equity(excluding noncontrolling interests)and interest-bearing liabilities adjusted for the after-tax effect of the LIFO reserve,and other specified items.Management believes Adjusted ROIC is a useful financial measure because it provides investors information about ADMs returns excluding the impacts of LIFO inventory reserves and other specified items and increases period-to-period comparability of underlying business performance.Management uses Adjusted ROIC to measure ADMs performance by comparing Adjusted ROIC to its weighted average cost of capital(WACC).Adjusted ROIC,Adjusted ROIC earnings and Adjusted invested capital are non-GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.4.Average ROIC:Average ROIC is ADMs trailing 4-quarter net earnings adjusted for the after-tax effects of interest expense on borrowings,and changes in the LIFO reserve divided by the sum of ADMs equity(excluding non-controlling interests)and interest-bearing liabilities adjusted for the after-tax effect of the LIFO reserve.Management uses average ROIC for investors as additional information about ADMs returns.Average ROIC is a non-GAAP financial measure and is not intended to replace or be an alternative to GAAP financial measures.5.Adjusted Economic Value Added:Adjusted economic value added is ADMs trailing 4-quarter economic value added adjusted for specified items.The Company calculates economic value added by comparing ADMs trailing 4-quarter adjusted returns to its Annual WACC multiplied by adjusted invested capital.Adjusted economic value added is a non-GAAP financial measure and is not intended to replace or be an alternative to GAAP financial measures.6.Adjusted EBITDA:Adjusted EBITDA is defined as earnings before interest,taxes,depreciation,and amortization,adjusted for specified items.The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense on borrowings and depreciation and amortization to earnings before income taxes.Management believes that adjusted EBITDA is a useful measure of the Companys performance because it provides investors additional information about the Companys operations allowing better evaluation of underlying business performance and better period-to-period comparability.Adjusted EBITDA is a non-GAAP financial measure and is not intended to replace or be an alternative to net earnings,the most directly comparable GAAP financial measure.7.Forecasted GAAP Earnings Reconciliation:ADM is not presenting forecasted GAAP earnings per diluted share or a quantitative reconciliation to forecasted adjusted earnings per diluted share in reliance on the unreasonable efforts exemption provided under Item 10(e)(1)(i)(B)of Regulation S-K.ADM is unable to predict with reasonable certainty and without unreasonable effort the impact of any impairment and timing of restructuring-related and other charges,along with acquisition-related expenses and the outcome of certain regulatory,legal and tax matters.The financial impact of these items is uncertain and is dependent on various factors,including timing,and could be material to our Consolidated Statements of Earnings.Non-GAAP Financial Measures Proprietary business information of ADM.|41.Non-GAAP measures-see notes on page 32.See earnings per share,the most directly comparable GAAP measure,on page 213.See segment operating profit as reported on page 174.Cash from operations before working capital is total operating activities of$0.7 billion plus the changes in working capital of$0.2 billionPRIVILEGED AND CONFIDENTIAL|DRAFTFinancial HighlightsAdjusted Earnings Per Share1,2$1.46Adjusted Segment Operating Profit1,3$1.3BTRAILING 4-QUARTER Adjusted ROIC111.2%Reported Earnings Per Share$1.42Cash Flow from Operations Before Working Capital4$0.9BReturn of Cash to Shareholders$1.6BQ1 2024(Unless otherwise stated)Proprietary business information of ADM.|5Making Progress on Our Value Creation Priorities for the YearStrategic InitiativesStrategic Initiatives Delivered 10%volume growth in BioSolutions Exceeded 2023 regenerative ag acre target and increasing 2025 goal from 4M to 5M acres New CapacitiesNew Capacities Increased volume and utilization rate at Green Bison JVDrive for ExcellenceDrive for Excellence Nearly 1,200 initiatives in the pipeline focused on$500M in cost reduction over 2 years Operational ChangesOperational Changes Debottlenecked EMEA demand fulfillment challenges post-1ADM go-liveSimplificationSimplification Continuing SKU reduction effortsPortfolio OptimizationPortfolio Optimization M&A integration playbook driving results ahead of model in new acquisitionsDemand CreationDemand Creation Fine-tuned go-to-market teams to better align to customer demand and drive stronger pipeline wins and conversion rates Enhanced Return of Cash to Enhanced Return of Cash to ShareholdersShareholders Completed$1B in share repurchases through the Accelerated Share Repurchase program announced in March Plan to complete over$2B in share repurchases in 2024Q1 2024 AccomplishmentsProprietary business information of ADM.|6Adjusted Earnings Per Share1(dollars per share)Adjusted Segment Operating Profit1,2(in millions of dollars)AS&O margin normalizationCarb Sol lower on pressured domestic ethanol margins1.Non-GAAP measures-see notes on page 3Lower pricing and execution margins,primarily in AS&OImprovement in AS&O volumesLower manufacturing costs in AS&O and Carb SolShare repurchases drove improvement in other2.See segment operating profit as reported on page 17Nutrition down due headwinds in Specialty IngredientsOther business up on higher captive insuranceTotal Consolidated Operating Profit and Earnings Per ShareQ1 2024 versus Prior Year QuarterEarnings declined due to lower margins partially offset by improvements in processed volumes and costsProprietary business information of ADM.|7Risk managementGlobal Trade marginsSA origination volumes and margins$75M timing impactsNA biodiesel margins$205M timing impactsGlobal soy crush marginsManufacturing costsProcessed volumesAg Services&Oilseeds Operating ProfitQ1 2024 versus Prior Year QuarterStabilization of trade flows have led to lower risk management results and Global Trade margins compared to an outsized 1Q 2023Lower South American origination volumes and margins in Ag ServicesImproved cost position and processed volumes in CrushingLower global soy crush margins partially offset by improved processed oilseeds volumesSignificant negative year-over-year timing impacts in Crushing and RPOHigher equity earnings results in WilmarSegment Operating Profit(in millions of dollars)Higher processed volumes and improved manufacturing costs partially supported earnings as margins declined1.2023 Ag Services&Oilseeds segment operating profits has been revised to reflect immaterial error corrections with no change to total Adjusted Segment Operating Profit.See Note 13,Segment Information of the Companys consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarter ended March 31,2024.1Proprietary business information of ADM.|8In S&S,lower domestic ethanol margins and moderating margins in EMEA were partially offset by lower manufacturing and input costsIn VCP,strong export demand for sustainably certified ethanol supported strong volumes and improved marginsManufacturing costsDomestic ethanol marginsEMEA marginsExport ethanol volumes and marginsCarbohydrate Solutions Operating ProfitQ1 2024 versus Prior Year QuarterSegment Operating Profit(in millions of dollars)Lower manufacturing costs partially offset lower domestic ethanol margins and lower EMEA margins1.2023 Carbohydrate Solutions segment operating profits has been revised to reflect immaterial error corrections with no change to total Adjusted Segment Operating Profit.See Note 13,Segment Information of the Companys consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarter ended March 31,2024.1Proprietary business information of ADM.|9Nutrition RevenueQ1 2024 versus Prior Year QuarterOverall,Nutrition revenue declined 1%In Human Nutrition,recent M&A and strong Flavors performance more than offset lower volumes in plant-based proteins and lower texturants pricingIn Animal Nutrition,lower price and mix was partially offset by currency benefitsSegment Revenue(in millions of dollars)M&A contributionsPlant-based protein volumes Texturants pricing Flavors price/mix and volumesNutrition revenue declined due to headwinds in Specialty Ingredients and lower pricing in Animal NutritionPrice/mixFXProprietary business information of ADM.|10Segment Operating Profit(in millions of dollars)Nutrition Operating ProfitQ1 2024 versus Prior Year QuarterFlavors operating profit was down slightly relative to last year as demand fulfillment challenges in EMEA offset volume and price improvement in NAIn Specialty Ingredients,unplanned downtime at Decatur East resulted in higher fixed cost absorption Lower texturants pricing due to market normalization was a headwind to Specialty Ingredients operating profit in the quarterIn Animal Nutrition,cost optimization actions and lower commodity prices supported improved margins,partially offsetting lower volumesHeadwinds from Specialty Ingredients business led to significant decline in operating profitUnplanned downtime at Decatur EastTexturants pricingMarginsVolumes1.2023 Nutrition segment operating profits has been revised to reflect immaterial error corrections with no change to total Adjusted Segment Operating Profit.See Note 13,Segment Information of the Companys consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarter ended March 31,2024.1Proprietary business information of ADM.|11Other Business Results and CorporateQ1 2024 versus Prior Year Quarter Increased spend related to 1ADM to support digital transformation and legal feesOther includes impacts of$18M related to valuation losses associated with ADM Ventures investmentsCaptive Insurance results supported by higher program premiums and lower claimsOther Business Segment Operating Profit(in millions of dollars)Corporate and Other Costs(in millions of dollars)Proprietary business information of ADM.|12Cash Flow from Operations and Cash Deployment Cash from Operations Before Working Capital1(in billions of dollars)Q1 2023$1.3BQ1 2024$0.9B1.Cash from operations before working capital is total operating activities of$0.7 billion plus the changes in working capital of$0.2 billionQ1 2024 versus Prior Year Cash Deployment(in billions of dollars)Q1 2023Q1 2024Share Repurchase$1.3B$0.3BDividendCapex$0.3BShare Repurchase$0.4B$0.2BDividendCapex$0.3B$0.9B$1.9BContinued strong cash flow creates opportunity to return excess cash to shareholdersProprietary business information of ADM.|13MetricFY 2023FY 2024 Guidance1Q1 2024Adjusted EPS1,3$6.98$5.25$6.25$1.46Corporate Costs*$1.6 billion$1.8 billion$426 millionCorporate Net Interest Expense$431 million$525 million$110 millionCapital Expenditures$1.5 billion$1.3 billion$328 millionDepreciation&Amortization$1.1 billion$1.2 billion$280 millionEffective Tax Rate19.3!.8%Diluted Weighted Avg.Shares Outstanding542 million shares495 million shares513 million sharesAdjusted Net Debt2/Adjusted EBITDA10.9x1.5x 2.0 x1.5x*includes corporate net interest expense1.Non-GAAP measures-see notes on page 32.see calculation on page 253.See earnings per share,the most directly comparable GAAP measure,on page 21Consolidated OutlookProprietary business information of ADM.|14Operating ProfitQ2 2024FY 2024Full Year Planning AssumptionsAS&OExpect to be significantly lower versus prior yearExpect to be lower versus prior yearAnticipate easing global supply environment with another year of strong South American cropsExpect global soybean crush margin in the range of$35/metric ton to$60/metric tonExpect operational excellence leading to mid to high single digit processed volume improvementExpect significantly lower biodiesel margins Carbohydrate SolutionsExpect to be slightly higher versus prior yearExpect to be slightly lower versus prior yearStrong volumes and lower energy costs to support margin expansion in starches and sweetenersExpect lower wheat milling marginsRobust export opportunities in ethanol,but lower domestic marginsNutritionExpect to be lower versus prior yearExpect to be higher versus prior yearExpect mid-single digit revenue growth,led by strong pipeline conversionTexturants market normalization expected to be a headwindSegment OutlookQ2 2024 and FY 2024Proprietary business information of ADM.|1516AppendixProprietary business information of ADM.|17Quarter Ended Mar.31Quarter Ended Mar.31(Amounts in millions)2024202420232023ChangeChangeTotal Segment Operating Profit$1,311$1,719$(408)Specified items:(Gain)loss on sale of assets(1)1 Impairment and restructuring charges6 7(1)Adjusted Segment Operating Profit(1)(2)$1,317$1,725$(408)Ag Services and Oilseeds$864$1,211$(347)Ag Services232 348(116)Crushing313 427(114)Refined Products and Other170 327(157)Wilmar149 109 40 Carbohydrate Solutions$248$279$(31)Starches and Sweeteners261 313(52)Vantage Corn Processors(13)(34)21 Nutrition$84$138$(54)Human Nutrition76 138(62)Animal Nutrition8 8 Other Business$121$97$24 Total Segment Operating Profit$1,311$1,719$(408)Corporate$(426)$(322)$(104)Interest expense net(110)(103)(7)Unallocated corporate costs(304)(248)(56)Other 24(24)Specified Items:Gain on debt conversion option 5(5)Restructuring charges(12)(12)Earnings Before Income Taxes$885$1,397$(512)Segment Operating Profit and Corporate Results1.Non-GAAP measure-see notes on page 32.Adjusted segment operating profit equals total segment operating profit excluding specified items.Proprietary business information of ADM.|18MarchMarch 3131(Amounts in millions)2022024 42022023 3Cash(1)$830$899 Net property,plant,and equipment10,596 10,071 Operating working capital(2)10,181 13,457-Total inventories11,634 14,771 Total debt9,980 10,506-CP outstanding884845 Shareholders equity23,232 24,896 MemosMemosAvailable credit capacity March 31-CP$4.1 bil$4.2 bil-Other$4.7 bil$4.7 bil Readily marketable inventory$6.7 bil$9.2 bil Balance Sheet Highlights1.Cash=cash and cash equivalents and short-term marketable securities 2.Current assets(excluding cash and cash equivalents and short-term marketable securities less current liabilities(excluding short-term debt and current maturities of long-term debt).Proprietary business information of ADM.|19Three Months Ended Mar.31Three Months Ended Mar.31(Amounts in millions)2024202420232023Cash from operations before working capital changes$882$1,310 Changes in working capital(182)(2,920)Purchases of property,plant,and equipment(328)(327)Net assets of businesses acquired(915)Sub-total(543)(1,937)Other investing activities 13(1)Debt increase/(decrease)1,619 1,304 Dividends(257)(248)Stock buyback(1,327)(351)Other(50)(113)Increase(decrease)in cash,cash equivalents,restricted cash,and restricted cash equivalents$(545)$(1,346)Cash Flow HighlightsProprietary business information of ADM.|20GAAP Statement of Earnings SummaryQuarter Ended Mar.31Quarter Ended Mar.31(Amounts in millions except per share data)2024202420232023ChangeChangeRevenues$21,847$24,072$(2,225)Gross profit1,6592,080(421)Selling,general and administrative expenses95188170 Asset impairment,exit,and restructuring charges18711 Equity in(earnings)losses of unconsolidated affiliates(212)(174)(38)Interest and investment income(123)(134)11 Interest expense16614719 Other(income)expense net(26)(44)18 Earnings before income taxes8851,397(512)Income tax expense(benefit)166225(59)Net earnings including noncontrolling interests7191,172(453)Less:Net earnings(losses)attributable to noncontrolling interests(10)2(12)Net earnings attributable to ADM$729$1,170$(441)Earnings per share(fully diluted)$1.42$2.12$(0.70)Proprietary business information of ADM.|21Reconciliation of Adjusted Earnings Per Share(EPS)1.Non-GAAP measure-see notes on page 3Quarter Ended Mar.3120242023In millionsPer shareIn millionsPer shareNet earnings and EPS(fully diluted)as reported$729$1.42$1,170$2.12 AdjustmentsAdjustments(Gain)loss on sales of assets(1)Impairment and restructuring charges180.0350.01Gain on debt conversion option(5)(0.01)Tax adjustment30.01(18)(0.03)Adjusted net earnings and adjusted EPS(non-GAAP)(1)$750$1.46$1,151$2.09 Proprietary business information of ADM.|22Q1 CY24Q1 CY24Trailing 4Q Average Adjusted ROIC(1)(2)11.2%Annual WACC8.00%Trailing 4Q Average Adjusted EVA$1.1B Long-Term WACC7.0%Trailing 4Q Average ROIC(1)(3)10.2%ROIC versus WACCLT ROIC Objective:10%1.Non-GAAP measure-see notes on page 32.Adjusted for LIFO and specified items see notes on page 33.Adjusted for LIFO see notes on page 3Proprietary business information of ADM.|23Adjusted ROIC EarningsAdjusted ROIC Earnings(1)(1)(Amounts in millions)Four Quarters Four Quarters Ended Ended Quarter EndedQuarter EndedJun.30,2023Jun.30,2023Sep.30,2023Sep.30,2023Dec.31,2023Dec.31,2023Mar.31,2024Mar.31,2024Mar.31,2024Mar.31,2024Net earnings attributable to ADM$927$821$565$729$3,042 AdjustmentsInterest expense124 97 109 115 445 Other adjustments130 76 167 21 394 Total adjustments254 173 276 136 839 Tax on adjustments(52)(40)(38)(27)(157)Net adjustments202 133 238 109 682 Total Adjusted ROIC Earnings$1,129$954$803$838$3,724 Adjusted Invested CapitalAdjusted Invested Capital(1)(1)(Amounts in millions)Trailing Trailing Four QuarterFour QuarterAverage Average Quarter EndedQuarter EndedJun.30,2023Jun.30,2023Sep.30,2023Sep.30,2023Dec.31,2023Dec.31,2023Mar.31,2024Mar.31,2024Equity(2)$24,939$25,228$24,132$23,219$24,380 Interest-bearing liabilities(3)8,675 8,346 8,370 9,995 8,847 Other adjustments(net of tax)108 59 155 21 86 Total Adjusted Invested Capital$33,722$33,633$32,657$33,235$33,313 Reconciliation of Return on Invested Capital1.Non-GAAP measure see notes on page 32.Excludes noncontrolling interests 3.Includes short-term debt,current maturities of long-term debt,finance lease obligations,and long-term debtProprietary business information of ADM.|24Adjusted EBITDAAdjusted EBITDA(1)(1)(Amounts in millions)Four Quarters Four Quarters Ended Ended Quarter EndedQuarter EndedJun.30,2023Jun.30,2023Sep.30,2023Sep.30,2023Dec.31,2023Dec.31,2023Mar.31,2024Mar.31,2024Mar.31,2024Mar.31,2024Net earnings$927$821$565$729$3,042 Net earnings attributable to noncontrolling interests1 3(23)(10)(29)Income tax expense204 207 192 166 769 Interest expense124 97 109 115 445 Depreciation and amortization262 261 277 280 1,080 EBITDA1,5181,3891,1201,2805,307(Gain)loss on sales of assets and businesses(11)2(7)(16)Impairment and restructuring charges and settlement contingencies117 71 172 18 378Railroad maintenance expense2 26 39 67 Expenses related to acquisitions3 3 1 7 Adjusted EBITDA$1,629$1,491$1,325$1,298$5,743 Adjusted EBITDAAdjusted EBITDA(1)(1)by Segmentby Segment(Amounts in millions)Four QuartersFour QuartersEndedEndedQuarter EndedQuarter EndedJun.30,2023Jun.30,2023Sep.30,2023Sep.30,2023Dec.31,2023Dec.31,2023Mar.31,2024Mar.31,2024Mar.31,2024Mar.31,2024Ag Services and Oilseeds$1,143$937$1,053$959$4,092 Carbohydrate Solutions397 546 387 325 1,655 Nutrition237 197 58 158 650 Other Business84 44 143 119 390 Corporate(232)(233)(316)(263)(1,044)Adjusted EBITDA$1,629$1,491$1,325$1,298$5,743 Reconciliation of Adjusted Earnings Before Interest,Taxes,and Depreciation and Amortization(EBITDA)(1)Four Quarters Ended March 31,20241.Non-GAAP measure see notes on page 3Proprietary business information of ADM.|25Adjusted Net DebtAdjusted Net DebtMarch 31March 31(Amounts in millions)2024202420232023Short-term debt$1,734$1,809 Current maturities of long-term debt1 952 Long-term debt8,245 7,745 Total Debt9,980 10,506 Cash and cash equivalents(830)(899)Net Debt$9,150$9,607 Adjustments:Readily marketable inventories(RMI)$(6,707)$(9,157)x RMI factor40%RMI adjustment(2,683)(3,663)Accounts receivable transferred against the securitization programs facility2,271 2,630 Total adjustments$(412)$(1,033)Adjusted Net Debt$8,738$8,574 Trailing Four Quarters Adjusted EBITDA(1,2)$5,743$6,951 Adjusted Net Debt/Adjusted EBITDA1.5x1.2xReconciliation of Adjusted Net Debt to Total Debt and to Adjusted EBITDA1.Non-GAAP measure-see notes on page 32.See net earnings,the most directly comparable GAAP measure,reconciliation on page 24
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17 May 2024Q1 2024FINANCIAL INFORMATION2ENGIE MAY 2024CATHERINE MACGREGORCEO Q1 2024FINANCIAL INFORMATION3ENGIE MAY 2024Q1 2024 HIGHLIGHTSQ1 2024FINANCIAL INFORMATIONSteady delivery of our strategy with expansion in renewables,BESS and green gasesDecisive step in nuclearwith the vote of the Belgian lawA strong start to the year in a fast-moving market environment4ENGIE MAY 2024A STRONG START TO THE YEAR,2024 GUIDANCE CONFIRMEDQ1 2024FINANCIAL INFORMATION2024 guidance confirmedNRIgs expected between 4.2 and4.8bnEBIT ex.Nuclear3.7bnvs.3.8bn in Q1 2023CFF015.1bnUp 1.4bnEconomic net debt43.9bnDown 2.6bn vs end-20231Cash Flow From Operations=Free Cash Flow before Maintenance Capex and nuclear provisions funding5ENGIE MAY 2024Q1 2024FINANCIAL INFORMATIONSTEADY DELIVERY OF OUR STRATEGY RenewablesGreen gasesBESS11 TWh(up 2.1 TWh y-o-y)capacity connected to ENGIEs network in FranceENGIE passed the 1 TWhmilestone in annual biomethane production capacity in EuropeLaunch of mosaHYc,a 90 km cross-border hydrogen pipeline project between France and GermanyENGIE starts commercial operation of BESS Coya(139 MW/638 MWh),the largest Battery Energy Storage System in Latin AmericaIt will enable to store the equivalent of 5 hours of electricity and inject it into the grid during peak periodsAverage of 4 GWuntil 2025 on track 42.1 GWinstalled capacity7 GWunder construction 68projects308 MWof PPAs signed,with maturity longer than 5 yearsClosing of the acquisition of 5 solar farms in Brazil with total capacity of 545 MWac6ENGIE MAY 2024DECISIVE STEP IN NUCLEAR TOWARD CLOSINGQ1 2024FINANCIAL INFORMATIONLaw has been voted by the parliament on April 18th,2024Only EU approval now remains to be achievedOn track,with a closing expected by the end of 20247ENGIE MAY 2024Q1 2024FINANCIAL INFORMATIONPIERRE-FRANOIS RIOLACCICFO 8ENGIE MAY 2024Limited decrease of EBIT EBIT(excluding Nuclear)slightly below Q1 2023 due to Networks and GEMS Positive contribution from Renewables and Flex Gen as well as favorable timing effect Strong cash flow generation,CFFO up 1.4bn Improving Net Debt and credit ratios2024 guidance confirmedSTRONG FINANCIAL PERFORMANCE IN NORMALIZING ENERGY MARKETSQ1 RESULTSbn,unaudited figures1Actual Gross Organic2EBITDA(excluding Nuclear)4.8-1%-2IT(excluding Nuclear)3.7-3%-4FO35.1 1.4Net Financial Debt27.6-1.9Economic Net Debt43.9-2.6Economic Net Debt/EBITDA2.9x-0.2x1.Unaudited figures through the presentation 2.Organic variation=gross variation without scope and foreign exchange effect3.Cash flow from Operations=Free Cash Flow before Maintenance Capex and nuclear provisions fundingQ1 2024FINANCIAL INFORMATION9ENGIE MAY 2024EBIT EVOLUTION BY GBUOrganic evolution impacted by accelerated energy market normalization 18 28-130 11 112-14-146o/w-148 GEMSQ1 2023Q1 2024EnergySolutionsNetworksRenewablesOthersEBIT(excl.Nuclear)(m)Flex GenFX 14Scope 43,7053,827-140m organicRetail712779219637731 284(o/w 1,458GEMS)RENEWABLESNETWORKSENERGYSOLUTIONSFLEX GENOTHERSRETAILup 73m to461m3,705Q1 2024FINANCIAL INFORMATION10ENGIE MAY 2024GEMS IN Q1 2024Strong performance including market reserve recoveries and timing effectsKey market drivers1(/MWh)Q1 2023Q12024Prices&Spreads(month ahead)Power Germany13065Gas TTF5327France Clean Spark Spreads10-18Geographical spreadsPower DE-FR19-5Gas TTF-TRF(Netherlands-France)-2-1VolatilityBid-Ask spread0.140.03Gas intraday volatility(spread low-high)4.81.6Q1 2024 underpinned by non-recurring positives Normalization of market conditions leading to reversal of market reserves,although smaller than in Q1 2023 Timing effect( 0.5bn)impacting Q1 that will reverse in H2 2024Excluding those items:Q1 2024 EBIT amounts to c.0.5bn,supported by legacy high margin contracts in supply businesses Significantly below Q1 2023,as expected,resulting from market normalization and lower volatilityUnderlying EBIT for 2024 close to 2.0bn confirmedQ1 2024FINANCIAL INFORMATION0.90.5Q1 2024Q1 20230.51.2ActivityCustomers Risk Management&SupplyAsset Management&Optimization(bn)1.Average monthly value11ENGIE MAY 2024CASH FLOW FROM OPERATIONSCFFO continues to benefit from strong operating cash flow and reversal of working capital3.85.1 0.2 0.7 0.1 2.7 0.6-1.8-0.5-0.3-0.1-0.2Q1 2024CFFOQ1 2023CFFOTaxes&interestpaidOperatingcash flowMargincallsOtherchangesin WCRSupplyTariffshieldsGas inventoryNet receivablesUnbilledNuclearGEMSmarketreserves&adjustments*Change in WCR: 1.4(excluding GEMS market reserves&adjustments*: 0.7)(bn)Q1 2024FINANCIAL INFORMATION*:GEMS derivatives reserves&other MtM12ENGIE MAY 2024STRONG CREDIT RATIOS,RATING MAINTAINEDDecrease in Net Debt thanks to strong cash flow generation2.0 x1.8x3.1x2.9xNet Financial Debt/EBITDAEconomic Net Debt/EBITDADec 23Mar 244.0 xRating:Strong investment grade maintained29.527.6-5.1 2.6 0.6 0.1-0.1DividendsOthersCFFOCapex1Net Financial Debt(bn)Average cost of gross debt46.543.9-1.9 0.1-0.6-0.2ARO3provisionsNet FinancialDebtDec2023Mar20241 Growth maintenance Capex,net of DBSO and US tax equity proceeds,including net debt acquired 2 Including Synatom funding and waste/dismantling expenses3 Asset Retirement Obligations for dismantling,decommissioning,nuclear waste managementLeverage ratiosEconomic Net Debt(bn)Dec20234.73%4.31%Mar2024Nuclear funding&costs2Q1 2024FINANCIAL INFORMATIONOthersNuclear funding&costs213ENGIE MAY 2024FY 2024 GUIDANCE CONFIRMEDDividend 65-75%payout ratio based on NRIgsFloor of 0.65 Rating“Strong investment grade”Economic Net Debt/EBITDA 4.0 x 4.0 x over the long termKey assumptionsFX:/USD:1.09/BRL:5.36Market commodity forward prices as at 31 March 2024Nuclear Belgium 92-94%availabilityAverage weather conditionsRecurring net financial costs(2.4-2.7)bn*Recurring effective tax rate25-27.2-13.2bn7.5-8.5bn4.2-4.8bnQ1 2024FINANCIAL INFORMATION*:Average on 2024-202614ENGIE MAY 2024SUMMARYQ1 2024FINANCIAL INFORMATIONSteady delivery of our strategy with expansion in renewables,BESS and green gasesDecisive step in nuclearwith the vote of the Belgian lawA strong start to the year in a fast-moving market environmentADDITIONAL MATERIAL16ENGIE MAY 2024Q1 2024 EBIT CHANGE BY ACTIVITYY/Y change(m)RENEWABLES 74Mainly scope-in AMEA(Kathu consolidation,Trivoli acquisition) 28 Commissioning of new capacity Higher hydro volumes in Europe Lower prices in EuropeNETWORKS-142TAG:15%disposal-130 Increase in tariffs in Romania Less premium sales to Germany Warm climate,mainly FranceENERGYSOLUTIONS 12- 11 Organic growth&Performance Negative impact of strikes in CPCU in Q1 2023 Climate impact in FranceFLEX GEN&RETAIL 95-16Disposal of Pampa Sul,acquisition of BRP- 112-14 Prices:Chile,hedge spreads in Europe Positive one-offs in Q1 2024 Negative one-offs in Q1 2023 Inframarginal tax in France Lower volumes(shutdown of a biomass unit in Belgium&decrease in ancillary services)NUCLEAR 73- 73 Nuclear&Inframarginal taxesVolume:Tihange2 plant retirement&lower availability in BelgiumLower captured pricesOTHERS-145-146 GEMS:positive timing effect on seasonal salesGEMS:market normalization with lower prices and volatilityENGIE-50 18-67GrossOrganicKey drivers for organic changeFX/ScopeQ1 2024FINANCIAL INFORMATION ADDITIONAL MATERIAL17ENGIE MAY 2024EBIT BREAKDOWNQ1 2024(m)FranceRest of EuropeLatin AmericaNorthern AmericaAMEAOthersTOTALRENEWABLES3001102462738(9)712NETWORKS445135204(1)(3)779ENERGY SOLUTIONS16168(1)(14)18(14)219FLEX GEN2291991088102(9)637RETAIL(71)160(5)(10)73OTHERS211,2811,284o/w GEMS21,4561,458EBIT ex.NUCLEAR 1 065672557211531,2363,705NUCLEAR137324461Q1 2023(m)FranceRest of EuropeLatin AmericaNorthern AmericaAMEAOthersTOTALRENEWABLES230147242233(6)638NETWORKS602104219(1)(3)921ENERGY SOLUTIONS14274(1)(9)15(14)207FLEX GEN 88338591251(7)542RETAIL(70)13435(9)89OTHERS1(2)41,4261,429o/w GEMS11,6051,606EBIT ex.NUCLEAR993796519291031,3873,827NUCLEAR259129389Q1 2024FINANCIAL INFORMATION ADDITIONAL MATERIAL18ENGIE MAY 2024OUTRIGHT POWER PRODUCTION IN EUROPE Nuclear and HydroAs at 31 March 2024Belgium and FranceCaptured prices are shown:before specific Belgian nuclear and French CNR hydro tax contributions before inframarginal rent cap excluding the mark-to-market impact of the proxy hedging used for part of Belgian nuclear volumes,which is volatile andhistorically unwinds to close to zero at deliveryHedged positions and captured prices(%and/MWh)59707477Q1 2024FINANCIAL INFORMATION ADDITIONAL MATERIAL19ENGIE MAY 2024DISCLAIMERImportant NoticeThe figures presented here are those customarily used and communicated to the markets by ENGIE.This message includes forward-looking information and statements.Such statements include financial projections and estimates,the assumptions on which they are based,as well as statements about projects,objectives and expectations regarding future operations,profits,or services,or future performance.Although ENGIE management believes that these forward-looking statements are reasonable,investors and ENGIE shareholders should beaware that such forward-looking information and statements are subject to many risks and uncertainties that are generally difficult to predictand beyond the control of ENGIE and may cause results and developments to differ significantly from those expressed,implied or predictedin the forward-looking statements or information.Such risks include those explained or identified in the public documents filed by ENGIEwith the French Financial Markets Authority(AMF),including those listed in the“Risk Factors”section of the ENGIE(ex GDF SUEZ)Universal Registration Document filed with the AMF on March 07,2024(under number D.23-0085).Investors and ENGIE shareholdersshould note that if some or all of these risks are realized,they may have a significant unfavourable impact on ENGIE.20ENGIE MAY 2024FOR MORE INFORMATION ABOUT ENGIEFOR MORE INFORMATION ABOUT Q1 2024 RESULTS:https:/ 1 44 22 66 https:/
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