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NVIDIA Announces Financial Results for First Quarter Fiscal 2017

SANTA CLARA, CA -- (Marketwired) -- May 12, 2016 -- NVIDIA (NASDAQ: NVDA)

NVIDIA (NASDAQ: NVDA) today reported revenue for the first quarter ended May 1, 2016, of $1.30 billion, up 13 percent from $1.15 billion a year earlier, and down 7 percent from $1.40 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $0.33, up 38 percent from $0.24 a year ago and down 6 percent from $0.35 in the previous quarter. Non-GAAP earnings per diluted share were $0.46, up 39 percent from $0.33 a year earlier and down 12 percent from $0.52 in the previous quarter.

"We are enjoying growth in all of our platforms -- gaming, professional visualization, datacenter and auto," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. "Accelerating our growth is deep learning, a new computing model that uses the GPU's massive computing power to learn artificial intelligence algorithms. Its adoption is sweeping one industry after another, driving demand for our GPUs.

"Our new Pascal GPU architecture will give a giant boost to deep learning, gaming and VR. We are excited to bring a new wave of innovations to the markets we serve. Pascal processors are in full production and will be available later this month," he said.

Capital Return
During the first quarter, NVIDIA entered into a $500 million accelerated share repurchase agreement and paid $62 million in quarterly cash dividends.

For fiscal 2017, NVIDIA intends to return approximately $1.0 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

NVIDIA will pay its next quarterly cash dividend of $0.115 per share on June 20, 2016, to all shareholders of record on May 26, 2016.

Q1 FY2017 Summary

----------------------------------------------------------------------------
                                    GAAP                                    
----------------------------------------------------------------------------
($ in millions except earnings                                              
 per share)                     Q1 FY17  Q4 FY16  Q1 FY16    Q/Q      Y/Y   
----------------------------------------------------------------------------
Revenue                          $1,305   $1,401   $1,151  Down 7%    Up 13%
----------------------------------------------------------------------------
Gross margin                      57.5%    56.5%    56.7%   Up 100 Up 80 bps
                                                               bps          
----------------------------------------------------------------------------
Operating expenses                 $506     $539     $477  Down 6%     Up 6%
----------------------------------------------------------------------------
Operating income                   $245     $252     $176  Down 3%    Up 39%
----------------------------------------------------------------------------
Net income                         $196     $207     $134  Down 5%    Up 46%
----------------------------------------------------------------------------
Diluted earnings per share        $0.33    $0.35    $0.24  Down 6%    Up 38%
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                                  Non-GAAP                                  
----------------------------------------------------------------------------
($ in millions except                                                       
 earnings per share)       Q1 FY17   Q4 FY16   Q1 FY16     Q/Q        Y/Y   
----------------------------------------------------------------------------
Revenue                      $1,305    $1,401    $1,151   Down 7%     Up 13%
----------------------------------------------------------------------------
Gross margin                  58.6%     57.2%     56.9%    Up 140 Up 170 bps
                                                              bps           
----------------------------------------------------------------------------
Operating expenses             $443      $445      $425        --      Up 4%
----------------------------------------------------------------------------
Operating income               $322      $356      $231  Down 10%     Up 39%
----------------------------------------------------------------------------
Net income                     $263      $297      $187  Down 11%     Up 41%
----------------------------------------------------------------------------
Diluted earnings per          $0.46     $0.52     $0.33  Down 12%     Up 39%
 share                                                                      
----------------------------------------------------------------------------

NVIDIA's outlook for the second quarter of fiscal 2017 is as follows:

First Quarter Fiscal 2017 Highlights
During the first quarter, NVIDIA achieved progress in each of its four major platforms.

Gaming:

Professional Visualization:

Datacenter:

Automotive:

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 first quarter fiscal 2017 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 (212) 231-2919; 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 second quarter of fiscal 2017.

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, per diluted share impact of certain charges, 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 settlement costs, product warranty charge, acquisition-related costs, advanced healthcare contribution, restructuring and other charges, gains 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. Per diluted share impact of certain charges is calculated as such charges, net of income tax, divided by GAAP diluted shares. 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      
                                               ---------------------------- 
                                                   May 1,       April 26,   
                                                    2016           2015     
                                               -------------  ------------- 
                                                                            
Revenue                                        $       1,305  $       1,151 
Cost of revenue                                          554            498 
                                               -------------  ------------- 
Gross profit                                             751            653 
Operating expenses                                                          
  Research and development                               346            339 
  Sales, general and administrative                      159            138 
  Restructuring and other charges                          1              - 
                                               -------------  ------------- 
    Total operating expenses                             506            477 
                                               -------------  ------------- 
Income from operations                                   245            176 
  Interest income                                         12              9 
  Interest expense                                       (12)           (12)
  Other expense, net                                      (4)            (1)
                                               -------------  ------------- 
Income before income tax expense                         241            172 
Income tax expense                                        45             38 
                                               -------------  ------------- 
Net income                                     $         196  $         134 
                                               =============  ============= 
                                                                            
Net income per share:                                                       
  Basic                                        $        0.36  $        0.24 
                                               =============  ============= 
  Diluted                                      $        0.33  $        0.24 
                                               =============  ============= 
                                                                            
Weighted average shares used in per share                                   
 computation:                                                               
  Basic                                                  537            549 
  Diluted                                                597            568 
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                (In millions)                               
                                 (Unaudited)                                
                                                                            
                                                    May 1,      January 31, 
                                                     2016           2016    
                                                -------------  -------------
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash, cash equivalents and marketable                                     
   securities                                   $       4,754  $       5,037
  Accounts receivable, net                                523            505
  Inventories                                             394            418
  Prepaid expenses and other current assets               119             93
                                                -------------  -------------
    Total current assets                                5,790          6,053
                                                                            
Property and equipment, net                               479            466
Goodwill                                                  618            618
Intangible assets, net                                    155            166
Other assets                                               66             67
                                                -------------  -------------
    Total assets                                $       7,108  $       7,370
                                                =============  =============
                                                                            
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS' EQUITY
                                                                            
Current liabilities:                                                        
  Accounts payable                              $         320  $         296
  Accrued and other current liabilities                   636            642
  Convertible short-term debt                           1,421          1,413
                                                -------------  -------------
    Total current liabilities                           2,377          2,351
                                                                            
Other long-term liabilities                               447            453
Capital lease obligations, long-term                        9             10
                                                -------------  -------------
    Total liabilities                                   2,833          2,814
                                                                            
Convertible debt conversion obligation                     79             87
                                                                            
Shareholders' equity                                    4,196          4,469
                                                -------------  -------------
    Total liabilities, convertible debt                                     
     conversion obligation and shareholders'                                
     equity                                     $       7,108  $       7,370
                                                =============  =============
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                    (In millions, except per share data)                    
                                (Unaudited)                                 
                                                                            
                                                Three Months Ended          
                                      ------------------------------------- 
                                         May 1,    January 31,   April 26,  
                                          2016         2016         2015    
                                      -----------  -----------  ----------- 
                                                                            
GAAP gross profit                     $       751  $       791  $       653 
 GAAP gross margin                           57.5%        56.5%        56.7%
  Stock-based compensation expense                                          
   (A)                                          4            5            2 
  Legal settlement costs (B)                   10            -            - 
  Product warranty charge ©                   -            5            - 
                                      -----------  -----------  ----------- 
Non-GAAP gross profit                 $       765  $       801  $       655 
                                      ===========  ===========  =========== 
 Non-GAAP gross margin                       58.6%        57.2%        56.9%
                                                                            
GAAP operating expenses               $       506  $       539  $       477 
  Stock-based compensation expense                                          
   (A)                                        (49)         (56)         (43)
  Legal settlement costs (B)                   (6)           -            - 
  Acquisition-related costs (D)                (4)          (4)          (9)
  Advanced healthcare contribution             (3)           -            - 
  Restructuring and other charges              (1)         (34)           - 
                                      -----------  -----------  ----------- 
Non-GAAP operating expenses           $       443  $       445  $       425 
                                      ===========  ===========  =========== 
                                                                            
GAAP income from operations           $       245  $       252  $       176 
  Total impact of non-GAAP                                                  
   adjustments to income from                                               
   operations                                  77          104           54 
                                      -----------  -----------  ----------- 
Non-GAAP income from operations       $       322  $       356  $       230 
                                      ===========  ===========  =========== 
                                                                            
GAAP other income (expense), net      $        (4) $         1  $        (4)
  Gains from non-affiliated                                                 
   investments                                 (3)           -            - 
  Interest expense related to                                               
   amortization of debt discount                7            7            7 
                                      -----------  -----------  ----------- 
Non-GAAP other income (expense), net  $         -  $         8  $         3 
                                      ===========  ===========  =========== 
                                                                            
GAAP net income                       $       196  $       207  $       134 
  Total pre-tax impact of non-GAAP                                          
   adjustments                                 81          111           63 
  Income tax impact of non-GAAP                                             
   adjustments                                (14)         (21)         (10)
                                      -----------  -----------  ----------- 
Non-GAAP net income                   $       263  $       297  $       187 
                                      ===========  ===========  =========== 
                                                                            
Diluted net income per share                                                
  GAAP                                $      0.33  $      0.35  $      0.24 
                                      ===========  ===========  =========== 
  Non-GAAP                            $      0.46  $      0.52  $      0.33 
                                      ===========  ===========  =========== 
                                                                            
Weighted average shares used in                                             
 diluted net income per share                                               
 computation                                                                
  GAAP                                        597          593          568 
  Anti-dilution impact from note                                            
   hedge (E)                                  (29)         (26)          (6)
                                      -----------  -----------  ----------- 
  Non-GAAP                                    568          567          562 
                                      ===========  ===========  =========== 
                                                                            
Per share impact:                                                           
  Legal settlement costs              $        16  $         -  $         - 
  Advanced healthcare contribution              3            -            - 
  Restructuring and other charges               1           34            - 
  Income tax impact                            (7)          (9)           - 
                                      -----------  -----------  ----------- 
  Charges, net of income tax impact   $        13  $        25  $         - 
GAAP per diluted share impact         $      0.02  $      0.04  $         - 
                                      ===========  ===========  =========== 
                                                                            
GAAP net cash provided by operating                                         
 activities                           $       309  $       510  $       246 
  Purchase of property and equipment                                        
   and intangible assets                      (55)         (15)         (30)
                                      -----------  -----------  ----------- 
Free cash flow                        $       254  $       495  $       216 
                                      ===========  ===========  =========== 
                                                                            
----------------------------------------------------------------------------
(A) Excludes stock-based compensation                                       
 as follows:                                    Three Months Ended          
                                      --------------------------------------
                                         May 1,    January 31,   April 26,  
                                          2016         2016         2015    
                                      -----------  -----------  ------------
    Cost of revenue                   $         4  $         5  $         2 
    Research and development          $        29  $        33  $        27 
    Sales, general and administrative $        20  $        22  $        16 
                                                                            
(B) Legal settlement with Advanced Silicon Technologies LLC and other       
 settlement related costs.                                                  
                                                                            
(C) Represents warranty charge associated with a product recall.            
                                                                            
(D) Consists of amortization of acquisition-related intangible assets,      
 transaction costs, compensation charges, and other credits related to      
 acquisitions.                                                              
                                                                            
(E) Represents the number of shares that would be delivered upon conversion 
 of the currently outstanding 1.00% Convertible Senior Notes Due 2018.      
 Under U.S. 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                 
                                                                            
                                                                            
                                                                 Q2 FY2017  
                                                                  Outlook   
                                                               -------------
                                                                            
GAAP gross margin                                                      57.7%
  Impact of stock-based compensation expense                            0.3%
                                                               -------------
Non-GAAP gross margin                                                  58.0%
                                                               =============
                                                                            
                                                                            
                                                                 Q2 FY2017  
                                                                  Outlook   
                                                               -------------
                                                               (In millions)
                                                                            
GAAP operating expenses                                                $ 500
  Stock-based compensation expense, acquisition-related costs,              
   and other costs                                                      (55)
                                                               -------------
Non-GAAP operating expenses                                            $ 445
                                                               =============
                                                                            

About NVIDIA
NVIDIA (NASDAQ: NVDA) is a computer technology company that has pioneered GPU-accelerated computing. It targets the world's most demanding users -- gamers, designers and scientists -- with products, services and software that power amazing experiences in virtual reality, artificial intelligence, professional visualization and autonomous cars. More information at http://nvidianews.nvidia.com/.

Certain statements in this press release including, but not limited to statements as to: growth in all of the company's platforms; the adoption of deep learning and its impact; the launch of the company's Pascal GPU architecture; the company's intended fiscal 2017 capital return; the company's next quarterly cash dividend; the company's financial outlook for the second quarter of fiscal 2017; the company's tax rates for the second quarter of fiscal 2017; and NVIDIA DRIVE PX2 powering all vehicles in ROBORACE 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 with the Securities and Exchange Commission, or SEC, including its Form 10-K for the fiscal period ended January 31, 2016. 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.

© 2016 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Quadro, Tesla, Ansel, GeForce NOW, Iray, NVIDIA DGX-1, NVIDIA VRWorks, NVIDIA DRIVE, NVIDIA GRID, Pascal, 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:

Arnab Chanda 
Investor Relations 
NVIDIA Corporation 
(408) 566-6616 

achanda@nvidia.com 

Robert Sherbin
Corporate Communications
NVIDIA Corporation
(408) 566-5150

rsherbin@nvidia.com