NVIDIA Financial Results for Second Quarter Fiscal 2015

NVIDIA Financial Results for Second Quarter Fiscal 2015 
SANTA CLARA, CA -- (Marketwired) -- 08/07/14 --  NVIDIA (NASDAQ:
NVDA) 


 
--  Second quarter revenue of $1.10 billion, up 13 percent from a year
    earlier
--  GAAP diluted EPS of $0.22, up from $0.16 a year earlier; non-GAAP
    diluted EPS of $0.30, up from $0.23 a year earlier
--  Record GAAP gross margin of 56.1 percent; record non-GAAP gross margin
    of 56.4 percent

  
NVIDIA (NASDAQ: NVDA) today reported revenue for the second quarter
ended July 27, 2014, of $1.10 billion, up 13 percent from $977
million a year earlier and in line with the previous quarter. Revenue
for the first half was up 14 percent to a record $2.21 billion from
$1.93 billion a year earlier. 
GAAP earnings per diluted share for the quarter were $0.22, up 38
percent from $0.16 a year earlier and down 8 percent from the
previous quarter. Non-GAAP earnings per diluted share were $0.30, up
30 percent from $0.23 a year earlier and up 3 percent from the
previous quarter.  
"We had a great quarter with strong gains in each of our three growth
areas -- Gaming, Datacenter & Cloud, and Mobile," said Jen-Hsun
Huang, president and chief executive officer of NVIDIA. "Our Tesla
datacenter business is in high gear, benefiting from strong demand
from cloud service providers, and our new SHIELD tablet is generating
considerable excitement. ‎ NVIDIA's accelerating growth stems
directly from investments in extending our visual computing
leadership to the mobile-cloud revolution." 
During the second quarter, NVIDIA paid $47 million in cash dividends
and received 6.8 million shares under the $500 million structured
repurchase agreement it entered into in the first quarter. During the
first quarter, the company had paid $47 million in cash dividends and
had received 20.6 million shares under the agreement. As a result,
during the first half, NVIDIA has returned $594 million of the $1
billion it intends to return to shareholders in fiscal 2015.  
NVIDIA will pay its next quarterly cash dividend of $0.085 per share
on Sept. 12, 2014, to all stockholders of record on Aug. 21, 2014.
NVIDIA expects that a portion of this dividend payment may be
considered a return of capital for U.S. federal income tax purposes. 


 
                                                                            
----------------------------------------------------------------------------
                     GAAP Quarterly Financial Comparison                    
----------------------------------------------------------------------------
($ in millions except                                                       
  earnings per share)  Q2 FY15    Q1 FY15    Q2 FY14      Q/Q         Y/Y   
----------------------------------------------------------------------------
Revenue              $    1,103 $    1,103 $      977        flat     up 13%
----------------------------------------------------------------------------
Gross margin              56.1%      54.8%      55.8%  up 130 bps  up 30 bps
----------------------------------------------------------------------------
Operating expenses   $      456 $      453 $      440       up 1%      up 4%
----------------------------------------------------------------------------
Net income           $      128 $      137 $       96     down 6%     up 33%
----------------------------------------------------------------------------
Diluted earnings per                                                        
 share               $     0.22 $     0.24 $     0.16     down 8%     up 38%
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
                   Non-GAAP Quarterly Financial Comparison                  
----------------------------------------------------------------------------
($ in millions except                                                       
  earnings per share)  Q2 FY15    Q1 FY15    Q2 FY14      Q/Q         Y/Y   
----------------------------------------------------------------------------
Revenue              $    1,103 $    1,103 $      977        flat     up 13%
----------------------------------------------------------------------------
Gross margin              56.4%      55.1%      56.3%  up 130 bps  up 10 bps
----------------------------------------------------------------------------
Operating expenses   $      411 $      411 $      401        flat      up 2%
----------------------------------------------------------------------------
Net income           $      173 $      166 $      133       up 4%     up 30%
----------------------------------------------------------------------------
Diluted earnings per                                                        
 share               $     0.30 $     0.29 $     0.23       up 3%     up 30%
----------------------------------------------------------------------------

 
NVIDIA's outlook for the third quarter of fiscal 2015 is as follows: 


 
--  Revenue is expected to be $1.20 billion, plus or minus two percent.
    
    
--  GAAP and non-GAAP gross margins are expected to be 55.2 percent and
    55.5 percent, respectively, plus or minus 50 basis points.
    
    
--  GAAP operating expenses are expected to be approximately $463 million;
    non-GAAP operating expenses are expected to be approximately $416
    million.
    
    
--  GAAP and non-GAAP tax rates for the third quarter and annual fiscal
    2015 are both expected to be 19 percent, plus or minus one percentage
    point. This estimate excludes any discrete tax events that may occur
    during a quarter which, if realized, may increase or decrease NVIDIA's
    actual effective tax rates in such quarter.
    
    
--  Capital expenditures are expected to be approximately $40 million to
    $50 million.

  
Second Quarter Fiscal 2015 Highlights 
During the second quarter, NVIDIA: 


 
--  Extended its leading position in datacenter accelerated computing,
    with the world's 15 most efficient supercomputers all running
    NVIDIA(R) Tesla(R) GPUs, according to the latest Green500 list.
    
    
--  Surpassed 40 million installations in under two years of its GeForce
    Experience(TM) client, which provides game-ready drivers and optimal
    playable settings, and allows gameplay to be streamed and shared.
    
    
--  Invented the first-ever GPU acceleration technology for Adobe
    Illustrator CC, with performance up to 10x faster than previously
    possible. Adobe Illustrator CC is used by more than six million
    artists and designers worldwide.
    
    
--  Featured prominently at the Google I/O conference, where Google's new
    Android L was previewed. NVIDIA Tegra(R) K1 is the first processor
    to support Android L's advanced gaming capabilities; the first to
    bring GPU computing to mobile, evident in Google's Project Tango
    tablet, which features computer vision capabilities; and among the
    first to support Android TV.
    
    
--  Expanded the SHIELD(TM) family of gaming devices with the launch of
    the world's most advanced tab
let built for gamers, the SHIELD tablet,
    along with the SHIELD wireless controller.
    
    
--  Accelerated the growth of its auto business, as BMW shipped new
    models, including the i8 and i3 with infotainment systems powered by
    Tegra. Volkswagen announced that, in addition to the Golf, Tegra will
    be included in the Passat launching later this year in Europe.

  
CFO Commentary
 Commentary on the quarter by Colette Kress, NVIDIA's
executive vice president and chief financial officer, is available at
http://investor.nvidia.com/.  
Conference Call and Webcast Information 
 NVIDIA will conduct a
conference call with analysts and investors to discuss its second
quarter fiscal 2015 financial results and current financial prospects
today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To listen
to the conference call, dial (303) 223-2680; no password is required.
A live webcast (listen-only mode) of the conference call will be
accessible at the NVIDIA investor relations web site
http://investor.nvidia.com/ and at www.streetevents.com. The webcast
will be recorded and available for replay until the company's
conference call to discuss its financial results for its third
quarter fiscal 2015. 
Non-GAAP Measures 
 To supplement NVIDIA's Condensed Consolidated
Statements of Operations and Condensed Consolidated Balance Sheets
presented in accordance with GAAP, the company uses non-GAAP measures
of certain components of financial performance. These non-GAAP
measures include non-GAAP gross profit, non-GAAP gross margin,
non-GAAP operating expenses, non-GAAP other income and expense,
non-GAAP income tax expense, non-GAAP net income, non-GAAP net
income, or earnings, per diluted share, and free cash flow. In order
for NVIDIA's investors to be better able to compare its current
results with those of previous periods, the company has shown a
reconciliation of GAAP to non-GAAP financial measures. These
reconciliations adjust the related GAAP financial measures to exclude
stock-based compensation, legal settlements, acquisition-related
costs, gains and losses from non-affiliated investments, interest
expense related to the amortization of debt discount, and the
associated tax impact of these items, where applicable. Free cash
flow is calculated as GAAP net cash provided by operating activities
less purchases of property and equipment and intangible assets.
NVIDIA believes the presentation of its non-GAAP financial measures
enhances the user's overall understanding of the company's historical
financial performance. The presentation of the company's non-GAAP
financial measures is not meant to be considered in isolation or as a
substitute for the company's financial results prepared in accordance
with GAAP, and our non-GAAP measures may be different from non-GAAP
measures used by other companies. 
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                             NVIDIA CORPORATION                             
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME                
                    (In thousands, except per share data)                   
                                 (Unaudited)                                
                                                                            
                                                                            
                             Three Months Ended         Six Months Ended    
                         ------------------------- -------------------------
                           July 27,     July 28,     July 27,     July 28,  
                             2014         2013         2014         2013    
                         -----------  ------------ ------------ ------------
                                                                            
Revenue                  $ 1,102,824  $    977,238 $  2,205,611 $  1,931,977
Cost of revenue              483,850       431,700      982,435      867,871
                         -----------  ------------ ------------ ------------
Gross profit                 618,974       545,538    1,223,176    1,064,106
Operating expenses                                                          
 Research and                                                               
  development                337,124       331,738      671,387      658,899
 Sales, general and                                                         
  administrative             118,671       108,266      237,251      216,892
                         -----------  ------------ ------------ ------------
  Total operating                                                           
   expenses                  455,795       440,004      908,638      875,791
                         -----------  ------------ ------------ ------------
Operating income             163,179       105,534      314,538      188,315
 Interest income               6,829         3,865       12,539        8,941
 Interest expense             11,526           836       22,997        1,689
 Other income (expense),                                                    
  net                         (3,857)        3,257       13,827        4,315
                         -----------  ------------ ------------ ------------
Income before income tax                                                    
 expense                     154,625       111,820      317,907      199,882
Income tax expense            26,649        15,372       53,415       25,543
                         -----------  ------------ ------------ ------------
Net income               $   127,976  $     96,448 $    264,492 $    174,339
                         ===========  ============ ============ ============
                                                                            
Net income per share:                                                       
 Basic                   $      0.23  $       0.16 $       0.47 $       0.29
                         ===========  ============ ============ ============
 Diluted                 $      0.22  $       0.16 $       0.46 $       0.29
                         ===========  ============ ============ ============
                                                                            
Weighted average shares                                                     
 used in per share                                                          
 computation:                                                               
 Basic                       558,223       585,345      558,657      601,109
 Diluted                     570,572       592,006      570,599      606,051
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
                    CONDENSED CON
SOLIDATED BALANCE SHEETS                   
                               (In thousands)                               
                                 (Unaudited)                                
                                                                            
                                                                            
                                                  July 27,      January 26, 
                                                    2014           2014     
                                               -------------- --------------
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash, cash equivalents and marketable                                     
   securities                                  $    4,386,054 $    4,671,810
  Accounts receivable, net                            469,625        426,357
  Inventories                                         387,434        387,765
  Prepaid expenses and other current assets           134,473        138,779
                                               -------------- --------------
    Total current assets                            5,377,586      5,624,711
                                                                            
Property and equipment, net                           556,911        582,740
Goodwill                                              643,179        643,179
Intangible assets, net                                260,613        296,012
Other assets                                           95,430        104,252
                                               -------------- --------------
    Total assets                               $    6,933,719 $    7,250,894
                                               ============== ==============
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Accounts payable                             $      261,627 $      324,391
  Accrued liabilities and other current                                     
   liabilities                                        607,102        621,105
                                               -------------- --------------
    Total current liabilities                         868,729        945,496
                                                                            
Long-term debt                                      1,370,249      1,356,375
Other long-term liabilities                           374,113        475,125
Capital lease obligations, long-term                   15,842         17,500
Stockholders' equity                                4,304,786      4,456,398
                                               -------------- --------------
    Total liabilities and stockholders' equity $    6,933,719 $    7,250,894
                                               ============== ==============
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                   (In thousands, except per share data)                    
                                (Unaudited)                                 
                                                                            
                           Three Months Ended           Six Months Ended    
                    -------------------------------  ---------------------- 
                     July 27,  April 27,   July 28,   July 27,    July 28,  
                       2014       2014       2013       2014        2013    
                    ---------  ---------  ---------  ----------  ---------- 
                                                                            
GAAP gross profit   $ 618,974  $ 604,202  $ 545,538  $1,223,176  $1,064,106 
 GAAP gross margin       56.1%      54.8%      55.8%       55.5%       55.1%
   Stock-based                                                              
    compensation                                                            
    expense                                                                 
    included in                                                             
    cost of revenue                                                         
    (A)                 2,656      2,919      2,168       5,575       4,821 
   Legal settlement         -          -      2,290           -       2,290 
                    ---------  ---------  ---------  ----------  ---------- 
Non-GAAP gross                                                              
 profit             $ 621,630  $ 607,121  $ 549,996  $1,228,751  $1,071,217 
                    =========  =========  =========  ==========  ========== 
 Non-GAAP gross                                                             
  margin                 56.4%      55.1%      56.3%       55.7%       55.4%
                                                                            
GAAP operating                                                              
 expenses           $ 455,795  $ 452,843  $ 440,004  $  908,638  $  875,791 
 Stock-based                                                                
  compensation                                                              
  expense included                                                          
  in operating                                                              
  expense (A)         (35,759)   (32,602)   (30,227)    (68,361)    (60,971)
 Acquisition-                                                               
  related costs (B)    (9,173)    (9,441)    (8,964)    (18,614)    (17,825)
                    ---------  ---------  ---------  ----------  ---------- 
Non-GAAP operating                                                          
 expenses           $ 410,863  $ 410,800  $ 400,813  $  821,663  $  796,995 
                    =========  =========  =========  ==========  ========== 
                                                                            
GAAP other income                                                           
 (expense), net     $  (8,554) $  11,923  $   6,286  $    3,369  $   11,567 
 Gains and losses                                                           
  from non-                                                                 
  affiliated                                                                
  investments           2,500    (16,982)         -     (14,482)          - 
 Interest expense                                                           
  related to                                                                
  amortization of                                                           
  debt discount         6,973      6,901          -      13,874           - 
                    ---------  ---------  ---------  ----------  ---------- 
Non-GAAP other                                                              
 income (expense),                                                          
 net                $     919  $   1,842  $   6,286  $    2,761  $   11,567 
                    =========  =========  =========  ==========  ========== 
                                                                            
GAAP net income     $ 127,976  $ 136,516  $  96,448  $  264,492  $  174,339 
 Total pre-tax                                                              
  impact of non-                   
                                         
  GAAP adjustments     57,061     34,881     43,649      91,942      85,907 
 Income tax impact                                                          
  of non-GAAP                                                               
  adjustments         (11,606)    (5,342)    (6,767)    (16,948)    (13,115)
                    ---------  ---------  ---------  ----------  ---------- 
Non-GAAP net income $ 173,431  $ 166,055  $ 133,330  $  339,486  $  247,131 
                    =========  =========  =========  ==========  ========== 
                                                                            
Diluted net income                                                          
 per share                                                                  
 GAAP               $    0.22  $    0.24  $    0.16  $     0.46  $     0.29 
                    =========  =========  =========  ==========  ========== 
 Non-GAAP           $    0.30  $    0.29  $    0.23  $     0.59  $     0.41 
                    =========  =========  =========  ==========  ========== 
                                                                            
Shares used in                                                              
 diluted net income                                                         
 per share                                                                  
 computation          570,572    570,422    592,006     570,599     606,051 
                                                                            
Metrics:                                                                    
                                                                            
 GAAP net cash flow                                                         
  provided by                                                               
  operating                                                                 
  activities        $  96,282  $ 151,022  $  96,469  $  247,304  $  272,119 
 Purchase of                                                                
  property and                                                              
  equipment and                                                             
  intangible assets   (22,527)   (29,068)   (84,986)    (51,595)   (150,653)
                    ---------  ---------  ---------  ----------  ---------- 
 Free cash flow     $  73,755  $ 121,954  $  11,483  $  195,709  $  121,466 
                    =========  =========  =========  ==========  ========== 
                                                                            
                                                                            
----------------------------------------------------------------------------
(A) Excludes stock-                                                         
 based compensation                                                         
 as follows:               Three Months Ended            Six Mont
hs Ended   
                    -------------------------------  ---------------------- 
                                  April                                     
                     July 27,      27,     July 28,    July 27,    July 28, 
                       2014       2014       2013        2014        2013   
                    ---------  ---------  ---------  ----------  ---------- 
 Cost of revenue    $   2,656  $   2,919  $   2,168  $    5,575  $    4,821 
 Research and                                                               
  development       $  21,462  $  20,494  $  18,555  $   41,956  $   40,490 
 Sales, general and                                                         
  administrative    $  14,297  $  12,108  $  11,672  $   26,405  $   20,481 
                                                                            
(B) Consists of amortization of acquisition-related intangible assets,      
 transaction costs, compensation charges, and other credits related to      
 acquisitions.                                                              
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
                 RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK                 
                                                                            
                                                         Q3 FY2015 Outlook  
                                                        ------------------- 
                                                                            
GAAP gross margin                                                      55.2%
  Impact of stock-based compensation                                    0.3%
                                                        ------------------- 
Non-GAAP gross margin                                                  55.5%
                                                        =================== 
                                                                            
                                                          Q3 FY2015 Outlook 
                                                        ------------------- 
                                                            (In millions)   
                                                                            
GAAP operating expenses                                 $               463 
  Stock-based compensation expense and acquisition-                         
   related costs                                                        (47)
                                                        ------------------- 
Non-GAAP operating expenses                             $               416 
                                                        =================== 

 
About NVIDIA
 Since 1993, NVIDIA (NASDAQ: NVDA) has pioneered the art
and science of visual computing. The company's technologies are
transforming a world of displays into a world of interactive
discovery -- for everyone from gamers to scientists, and consumers to
enterprise customers. More information at
http://nvidianews.nvidia.com and http://blogs.nvidia.com. 
Certain statements in this press release including, but not limited
to statements as to: strong demand from cloud service providers; the
company's growth stemming directly from investments in extending its
visual computing leadership to the mobile-cloud revolution; the $1
billion the company intends to return to shareholders in fiscal 2015;
a portion of the company's dividend payment being considered a return
of capital; the company's financial outlook for the third quarter of
fiscal 2015; and the company's tax rate for the third quarter and
fiscal 2015 are forward-looking statements that are subject to risks
and uncertainties that could cause results to be materially different
than expectations. Important factors that could cause actual results
to differ materially include: global economic conditions; our
reliance on third parties to manufacture, assemble, package and test
our products; the impact of technological development and
competition; development of new products and technologies or
enhancements to our existing product and technologies; market
acceptance of our products or our partners' products; design,
manufacturing or software defects; changes in consumer preferences or
demands; changes in industry standards and interfaces; unexpected
loss of performance of our products or technologies when integrated
into systems; as well as other factors detailed from time to time in
the reports NVIDIA files wi
th the Securities and Exchange Commission,
or SEC, including its Form 10-Q for the fiscal period ended April 27,
2014. Copies of reports filed with the SEC are posted on the
company's website and are available from NVIDIA without charge. These
forward-looking statements are not guarantees of future performance
and speak only as of the date hereof, and, except as required by law,
NVIDIA disclaims any obligation to update these forward-looking
statements to reflect future events or circumstances. 
Copyright 2014 NVIDIA Corporation. All rights reserved. NVIDIA, the
NVIDIA logo, GeForce Experience, Tegra, Tesla, NVIDIA GRID, and
SHIELD are trademarks and/or registered trademarks of NVIDIA
Corporation in the U.S. and/or other countries. Other company and
product names may be trademarks of the respective companies with
which they are associated. Features, pricing, availability, and
specifications are subject to change without notice. 
For further information, contact: 
Chris Evenden 
Investor Relations 
NVIDIA Corporation 
(408) 627-0608 
cevenden@nvidia.com  
Robert Sherbin
Corporate Communications
NVIDIA Corporation
(408) 566-5150
rsherbin@nvidia.com 
 
 
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