NVIDIA Financial Results for Second Quarter Fiscal 2015

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® Tesla® GPUs, according to the latest Green500 list.

  • Surpassed 40 million installations in under two years of its GeForce Experience™ 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® 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™ family of gaming devices with the launch of the world's most advanced tablet 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  CONSOLIDATED  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  Months  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  
                                                                                                                ===================  
                                                                                                                                                        
                                                                                                                                                        
 




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