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.  To Keep Current on NVIDIA:       --  Keep up with the NVIDIA Blog.           --  Like NVIDIA on Facebook.           --  Connect with NVIDIA on LinkedIn.           --  Follow @NVIDIA on Twitter.           --  View NVIDIA videos on YouTube.           --  Use the Pulse news reader to subscribe to the NVIDIA Daily News feed.                                                                                                              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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