NVIDIA Announces Financial Results for Third Quarter Fiscal 2016

NVIDIA's outlook for the fourth quarter of fiscal 2016 is as follows:

  • Revenue is expected to be $1.30 billion, plus or minus two percent.

  • GAAP and non-GAAP gross margins are expected to be 56.7 percent and 57.0 percent, respectively, plus or minus 50 basis points.

  • GAAP operating expenses are expected to be approximately $503 million. Non-GAAP operating expenses are expected to be approximately $445 million.

  • GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2016 are expected to be 20 percent, plus or minus one percent.

  • The above GAAP outlook amounts exclude restructuring charges, which are expected to be in the range of $25 million to $35 million, in the fourth quarter of fiscal 2016.

  • Capital expenditures are expected to be approximately $20 million to $30 million.

Third Quarter Fiscal 2016 Highlights

During the third quarter, NVIDIA achieved progress in each of its platforms.

Gaming:

  • Introduced the GeForce® GTX 950 GPU, designed to play the latest games with processing power that rivals any console.
  • Introduced NVIDIA GameWorks™ VR, a software development kit for creating gaming experiences on virtual reality-ready desktops and notebooks.
  • Launched GeForce NOW™, allowing players to instantly stream titles from the cloud to their SHIELD device.
  • Extended SHIELD™ Android TV into key European markets.

Professional Visualization:

Datacenter:

  • Unveiled the next generation of its virtualized graphics platform, NVIDIA GRID™ 2.0, which delivers even the most graphics-intensive applications to any connected device.
  • Announced that Microsoft Azure will be the first cloud-services provider to offer GRID 2.0 capabilities, as well as accelerated computing.
  • Revealed that the Swiss Federal Office of Meteorology and Climatology is the first major national weather service to use a GPU-accelerated supercomputer to improve daily forecasts.

Auto:

  • Featured in new production vehicles and concept cars with NVIDIA-powered digital cockpits from Mercedes-Benz, Audi, Porsche, Bentley and Honda at the International Auto Show in Frankfurt.
  • Furthered its partnership with Tesla Motors, which introduced the Model X, equipped with an NVIDIA-powered infotainment system and digital instrument cluster.

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 third quarter fiscal 2016 financial results and current financial prospects today at 2 p.m. Pacific Time (5 p.m. Eastern Time). To listen to the conference call, dial (303) 223-2699; no password is required. A live webcast (listen-only mode) of the conference call will be accessible at NVIDIA's investor relations website, 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 fourth quarter and fiscal 2016.

Non-GAAP Measures

To supplement NVIDIA's Condensed Consolidated Statements of Income 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 operating income, non-GAAP other income (expense), net, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, non-GAAP diluted shares, 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, product warranty charge, acquisition-related costs, restructuring and other charges, gains and losses from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable. Weighted average shares used in the non-GAAP diluted net income per share computation includes the anti-dilution impact of the company's Note Hedge. 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 its 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 millions, except per share data)                    
                                (Unaudited)                                 
                                                                            
                                                                                                                                 
                                                        Three  Months  Ended                  Nine  Months  Ended        
                                                  ------------------------    ------------------------  
                                                  October  25,    October  26,    October  25,    October  26,  
                                                          2015                  2014                  2015                  2014        
                                                  -----------    -----------    -----------    -----------  
                                                                                                                                                        
Revenue                                    $          1,305    $          1,225    $          3,609    $          3,431  
Cost  of  revenue                                    571                    549                1,589                1,531  
                                                  -----------    -----------    -----------    -----------  
Gross  profit                                          734                    676                2,020                1,900  
Operating  expenses                                                                                                                    
  Research  and                                                                                                                              
    development                                        329                    340                    987                1,011  
  Sales,  general  and                                                                                                                  
    administrative                                  152                    123                    441                    361  
  Restructuring  and  other                                                                                                        
    charges                                                    8                        -                      97                        -  
                                                  -----------    -----------    -----------    -----------  
    Total  operating                                                                                                                      
      expenses                                            489                    463                1,525                1,372  
                                                  -----------    -----------    -----------    -----------  
Operating  income                                  245                    213                    495                    528  
  Interest  income                                      9                        7                      28                      20  
  Interest  expense                                (12)                  (11)                  (35)                  (35)
  Other  income,  net                                  3                        -                        1                      14  
                                                  -----------    -----------    -----------    -----------  
Income  before  income  tax                                                                                                        
  expense                                                  245                    209                    489                    527  
Income  tax  expense                                                                                                                    
  (benefit)                                                (1)                    36                      83                      90  
                                                  -----------    -----------    -----------    -----------  
Net  income                              $              246    $              173    $              406    $              437  
                                                  ===========    ===========    ===========    ===========  
                                                                                                                                                        
Net  income  per  share:                                                                                                              
  Basic                                      $            0.45    $            0.32    $            0.75    $            0.79  
                                                  ===========    ===========    ===========    ===========  
  Diluted                                  $            0.44    $            0.31    $            0.72    $            0.77  
                                                  ===========    ===========    ===========    ===========  
                                                                                                                                                        
Weighted  average  shares                                                                                                          
  used  in  per  share                                                                                                                    
  computation:                                                                                                                              
  Basic                                                      542                    548                    544                    555  
  Diluted                                                  565                    558                    563                    566  
                                                                                                                                                        
                                                                                                                                                        
                                                          NVIDIA  CORPORATION                                                          
                                        CONDENSED  CONSOLIDATED  BALANCE  SHEETS                                      
                                                                (In  millions)                                                              
                                                                  (Unaudited)                                                                
                                                                                                                                                        
                                                                                                                                                        
                                                                                                          October  25,  January  25,
                                                                                                                  2015                2015      
                                                                                                          -----------  -----------
ASSETS                                                                                                                                            
                                                                                                                                                        
Current  assets:                                                                                                                          
    Cash,  cash  equivalents  and  marketable  securities      $          4,728  $          4,623
    Accounts  receivable,  net                                                                      536                  474
    Inventories                                                                                                425                  483
    Prepaid  expenses  and  other  current  assets                                    145                  133
                                                                                                          -----------  -----------
        Total  current  assets                                                                      5,834              5,713
                                                                                                                                                        
Property  and  equipment,  net                                                                    477                  557
Goodwill                                                                                                          618                  618
Intangible  assets,  net                                                                              172                  222
Other  assets                                                                                                    73                    91
                                                                                                          -----------  -----------
        Total  assets                                                                          $          7,174  $          7,201
                                                                                                          ===========  ===========
                                                                                                                                                        
LIABILITIES  AND  SHAREHOLDERS'  EQUITY                                                                                
                                                                                                                                                        
Current  liabilities:                                                                                                                
    Accounts  payable                                                                      $              295  $              293
    Accrued  and  other  current  liabilities                                            560                  603
                                                                                                          -----------  -----------
        Total  current  liabilities                                                                855                  896
                                                                                                                                                        
Long-term  debt                                                                                          1,406              1,384
Other  long-term  liabilities                                                                    437                  489
Capital  lease  obligations,  long-term                                                    11                    14
Shareholders'  equity                                                                              4,465              4,418
                                                                                                          -----------  -----------
        Total  liabilities  and  shareholders'  equity              $          7,174  $          7,201
                                                                                                          ===========  ===========
                                                                                                                                                        
                                                                                                                                                        
                                                          NVIDIA  CORPORATION                                                          
                      RECONCILIATION  OF  GAAP  TO  NON-GAAP  FINANCIAL  MEASURES                        
                                        (In  millions,  except  per  share  data)                                        
                                                                (Unaudited)                                                                  
                                                                                                                                                        
                                                          Three  Months  Ended                    Nine  Months  Ended    
                                            -------------------------------    --------------------  
                                              Oct.  25,      July  26,      Oct.  26,      Oct.  25,      Oct.  26,  
                                                  2015              2015              2014              2015              2014      
                                            ---------    ---------    ---------    ---------    ---------  
                                                                                                                                                        
GAAP  gross  profit          $          734    $          634    $          676    $      2,020    $      1,900  
  GAAP  gross  margin                  56.3%            55.0%            55.2%            56.0%            55.4%
    Stock-based                                                                                                                              
      compensation                                                                                                                          
      expense  included                                                                                                                  
      in  cost  of  revenue                                                                                                              
      (A)                                                4                    3                    4                  10                    8  
    Product  warranty                                                                                                                    
      charge  (B)                                  -                  15                    -                  15                    -  
                                            ---------    ---------    ---------    ---------    ---------  
Non-GAAP  gross  profit  $          738    $          652    $          680    $      2,045    $      1,908  
                                            =========    =========    =========    =========    =========  
  Non-GAAP  gross                                                                                                                          
    margin                                      56.5%            56.6%            55.5%            56.7%            55.6%
                                                                                                                                                        
GAAP  operating                                                                                                                            
  expenses                          $          489    $          558    $          463    $      1,525    $      1,372  
    Stock-based                                                                                                                              
      compensation                                                                                                                          
      expense  included                                                                                                                  
      in  operating                                                                                                                          
      expense  (A)                            (47)              (44)              (38)            (134)            (107)
    Acquisition-related                                                                                                              
      costs  (C)                                  (4)                (4)              (10)              (18)              (28)
    Restructuring  and                                                                                                                  
      other  charges                          (8)              (89)                  -                (97)                  -  
                                            ---------    ---------    ---------    ---------    ---------  
Non-GAAP  operating                                                                                                                    
  expenses                          $          430    $          421    $          415    $      1,276    $      1,237  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
GAAP  operating  income  $          245    $            76    $          213    $          495    $          528  
    Total  impact  of                                                                                                                      
      non-GAAP                                                                                                                                  
      adjustments  to                                                                                                                      
      operating  income                    63                155                  51                274                143  
                                            ---------    ---------    ---------    ---------    ---------  
Non-GAAP  operating                                                                                                                    
  income                              $          308    $          231    $          264    $          769    $          671  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
GAAP  other  income                                                                                                                      
  (expense),  net              $              -    $            (4)  $            (4)  $            (6)  $            (1)
    Gains  from  non-                                                                                                                      
      affiliated                                                                                                                              
      investments                              (4)                  -                    -                  (4)              (14)
    Interest  expense                                                                                                                    
      related  to                                                                                                                              
      amortization  of                                                                                                                    
      debt  discount                            7                    7                    7                  21                  21  
                                            ---------    ---------    ---------    ---------    ---------  
Non-GAAP  other                                                                                                                            
  income,  net                    $              3    $              3    $              3    $            11    $              6  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
GAAP  net  income              $          246    $            26    $          173    $          406    $          437  
    Total  pre-tax                                                                                                                          
      impact  of  non-GAAP                                                                                                              
      adjustments                              66                163                  58                291                150  
    Income  tax  impact                                                                                                                  
      of  non-GAAP                                                                                                                            
      adjustments                            (57)                  1                (11)              (65)              (27)
                                            ---------    ---------    ---------    ---------    ---------  
Non-GAAP  net  income      $          255    $          190    $          220    $          632    $          560  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
Diluted  net  income                                                                                                                    
  per  share                                                                                                                                    
    GAAP                                $        0.44    $        0.05    $        0.31    $        0.72    $        0.77  
                                            =========    =========    =========    =========    =========  
    Non-GAAP                        $        0.46    $        0.34    $        0.39    $        1.13    $        0.99  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
Weighted  average                                                                                                                        
  shares  used  in                                                                                                                          
  diluted  net  income                                                                                                                  
  per  share                                                                                                                                    
  computation                                                                                                                                
    GAAP                                            565                556                558                563                566  
    Anti-dilution                                                                                                                          
      impact  from  note                                                                                                                  
      hedge  (D)                                (10)                (4)                  -                  (6)                  -  
                                            ---------    ---------    ---------    ---------    ---------  
    Non-GAAP                                    555                552                558                557                566  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
Metrics:                                                                                                                                        
                                                                                                                                                        
    GAAP  net  cash                                                                                                                          
      provided  by                                                                                                                            
      operating                                                                                                                                
      activities                  $          255    $          163    $          216    $          664    $          463  
    Purchase  of                                                                                                                              
      property  and                                                                                                                          
      equipment  and                                                                                                                        
      intangible  assets                (16)              (24)              (40)              (71)              (91)
                                            ---------    ---------    ---------    ---------    ---------  
    Free  cash  flow            $          239    $          139    $          176    $          593    $          372  
                                            =========    =========    =========    =========    =========  
                                                                                                                                                        
                                                                                                                                                        
----------------------------------------------------------------------------
(A)  Excludes  stock-                                                                                                                  
  based  compensation                                                                                                                  
  as  follows:                                    Three  Months  Ended                    Nine  Months  Ended  
                                              -----------------------------------------------------
                                                Oct.  25,      July  26,      Oct.  26,      Oct.  25,      Oct.  26,
                                                    2015              2015              2014              2015              2014    
                                              ---------    ---------    ---------    ---------    ---------
Cost  of  revenue                $              4    $              3    $              4    $            10    $              8
Research  and                                                                                                                                
  development                      $            28    $            27    $            22    $            82    $            65
Sales,  general  and                                                                                                                    
  administrative                $            19    $            17    $            16    $            53    $            42
                                                                                                                                                        
(B)  Represents  warranty  charge  associated  with  product  recall.                            
                                                                                                                                                        
(C)  Consists  of  amortization  of  acquisition-related  intangible  assets,            
  transaction  costs,  compensation  charges,  and  other  credits  related  to            
  acquisitions.                                                                                                                            
                                                                                                                                                        
(D)  Represents  the  number  of  shares  that  would  be  delivered  upon  conversion  
  of  the  currently  outstanding  1.00%  Convertible  Senior  Notes  Due  2018.  Under
  GAAP,  shares  delivered  in  hedge  transactions  are  not  considered  offsetting  
  shares  in  the  fully  diluted  share  calculation  until  actually  delivered.        
----------------------------------------------------------------------------
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                          NVIDIA  CORPORATION                                                          
                                  RECONCILIATION  OF  GAAP  TO  NON-GAAP  OUTLOOK                                  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                Q4  FY2016      
                                                                                                                                  Outlook        
                                                                                                                            -------------  
                                                                                                                                                        
GAAP  gross  margin                                                                                                            56.7%
    Impact  of  stock-based  compensation                                                                        0.3%
                                                                                                                            -------------  
Non-GAAP  gross  margin                                                                                                    57.0%
                                                                                                                            =============  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                    Q4  FY2016  
                                                                                                                                        Outlook  
                                                                                                                            -------------  
                                                                                                                              (In  millions)
                                                                                                                                                        
GAAP  operating  expenses                                                                              $                  503  
    Stock-based  compensation  expense  and  acquisition-related                                    
      costs                                                                                                                                (58)
                                                                                                                            -------------  
Non-GAAP  operating  expenses                                                                      $                  445  
                                                                                                                            =============  
                                                                                                                                                        
                                                                                                                                                        
 




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