- Record revenue of $1.43 billion, up 24 percent from a year ago -- growth across all platforms
- GAAP EPS of $0.40. Non-GAAP EPS of $0.53, up 56 percent from a year ago
- Strong launch of Pascal-based GPUs, growing demand for deep learning
NVIDIA (
GAAP earnings per diluted share for the quarter were $0.40, compared with $0.05 a year ago and up 21 percent from $0.33 in the previous quarter. Non-GAAP earnings per diluted share were $0.53, up 56 percent from $0.34 a year earlier and up 15 percent from $0.46 in the previous quarter.
"Strong demand for our new Pascal-generation GPUs and surging interest in deep learning drove record results," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. "Our strategy to focus on creating the future where graphics, computer vision and artificial intelligence converge is fueling growth across our specialized platforms -- Gaming, Pro Visualization, Datacenter and Automotive."
"We are more excited than ever about the impact of deep learning and AI, which will touch every industry and market. We have made significant investments over the past five years to evolve our entire GPU computing stack for deep learning. Now, we are well positioned to partner with researchers and developers all over the world to democratize this powerful technology and invent its future," he said.
Capital Return
During the first half of fiscal 2017, NVIDIA paid $509 million in share repurchases and $124 million in cash dividends.
NVIDIA will pay its next quarterly cash dividend of $0.115 per share on September 16, 2016, to all shareholders of record on August 25, 2016.
Q2 FY2017 Summary
----------------------------------------------------------------------------
GAAP
----------------------------------------------------------------------------
($ in millions except
earnings per share) Q2 FY17 Q1 FY17 Q2 FY16 Q/Q Y/Y
----------------------------------------------------------------------------
Revenue $1,428 $1,305 $1,153 Up 9% Up 24%
----------------------------------------------------------------------------
Gross margin 57.9% 57.5% 55.0% Up 40 bps Up 290 bps
----------------------------------------------------------------------------
Operating expenses $509 $506 $558 Up 1% Down 9%
----------------------------------------------------------------------------
Operating income $317 $245 $76 Up 29% Up 317%
----------------------------------------------------------------------------
Net income $253 $196 $26 Up 29% Up 873%
----------------------------------------------------------------------------
Diluted earnings per $0.40 $0.33 $0.05 Up 21% Up 700%
share
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-GAAP
----------------------------------------------------------------------------
($ in millions except
earnings per share) Q2 FY17 Q1 FY17 Q2 FY16 Q/Q Y/Y
----------------------------------------------------------------------------
Revenue $1,428 $1,305 $1,153 Up 9% Up 24%
----------------------------------------------------------------------------
Gross margin 58.1% 58.6% 56.6% Down 50 bps Up 150 bps
----------------------------------------------------------------------------
Operating expenses $448 $443 $421 Up 1% Up 6%
----------------------------------------------------------------------------
Operating income $382 $322 $231 Up 19% Up 65%
----------------------------------------------------------------------------
Net income $313 $263 $190 Up 19% Up 65%
----------------------------------------------------------------------------
Diluted earnings per $0.53 $0.46 $0.34 Up 15% Up 56%
share
----------------------------------------------------------------------------
NVIDIA's outlook for the third quarter of fiscal 2017 is as follows:
- Revenue is expected to be $1.68 billion, plus or minus two percent.
- GAAP and non-GAAP gross margins are expected to be 57.8 percent and 58.0 percent, respectively, plus or minus 50 basis points.
- GAAP operating expenses are expected to be approximately $530 million. Non-GAAP operating expenses are expected to be approximately $465 million.
- GAAP and non-GAAP tax rates for the third quarter of fiscal 2017 are both expected to be 21 percent, plus or minus one percent.
- Capital expenditures are expected to be approximately $35 million to $45 million.
Second Quarter Fiscal 2017 Highlights
During the second quarter, NVIDIA achieved progress in each of its four major platforms:
Gaming:
- Introduced the first four members of its Pascal™ family of gaming GPUs: NVIDIA® GeForce® GTX 1080 and 1070, which have set records for speed and power efficiency; GTX 1060, which delivers immersive VR at strong value; and TITAN X, the most powerful consumer GPU ever built.
- Released its first game, NVIDIA VR Funhouse, which uses enhanced graphics, interactive audio and simulated physics to bring a new level of immersion to VR.
- Released NVIDIA Ansel, an in-game 360 degree capture tool, which enables gamers to take and share screenshots of their favorite in-game moments.
Professional Visualization:
- Unveiled Quadro® P6000 to power the most advanced workstations, enabling designers to manipulate complex designs up to twice as fast as before.
- Introduced in partnership with SMI an innovative rendering technique that uses eye tracking to enable developers to create more immersive VR environments.
- Refreshed NVIDIA DesignWorks™ and NVIDIA VRWorks™ with new SDKs and updates that bring developers enhanced capabilities for interactive ray tracing, 360 degree video stitching and streaming and physically based materials.
Datacenter:
- Opened the path to virtualizing all enterprise applications with Tesla® M10, providing the industry's highest user density.
- Introduced Tesla P100 GPU accelerator for PCI Express-based servers, delivering substantial performance and value compared with CPU-based systems.
- Unveiled its Inception Program which provides access to NVIDIA technology and expertise to support the growth of startups driving breakthroughs in deep learning and data science.
Automotive:
- Initiated collaborative research in advanced self-driving technology with New York University's pioneering deep learning team.
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 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 (877) 223-3864 in the United States or (574) 990-1377 internationally, and provide the following conference ID: 47401500. 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 third 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, 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, contributions, 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. 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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About NVIDIA
NVIDIA (
Certain statements in this press release including, but not limited to statements as to: surging interest in deep learning; the company's strategy fueling growth across the company's specialized platforms; deep learning and AI touching every industry and market; the company's next quarterly cash dividend; the company's financial outlook for the third quarter of fiscal 2017; the company's tax rates for the third quarter of fiscal 2017; and the impact and benefits of Pascal GPUs, NVIDIA VR Funhouse, NVIDIA Ansel, Quadro P6000, NVIDIA DesignWorks, NVIDIA VRWorks, Tesla M10, and Tesla P100 GPU accelerator 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-Q for the fiscal period ended May 1, 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, NVIDIA DesignWorks, NVIDIA VRWorks, and Pascal 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.
NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
July 31, July 26, July 31, July 26,
2016 2015 2016 2015
----------- ----------- ----------- -----------
Revenue $ 1,428 $ 1,153 $ 2,733 $ 2,304
Cost of revenue 602 519 1,156 1,018
----------- ----------- ----------- -----------
Gross profit 826 634 1,577 1,286
Operating expenses
Research and
development 350 320 697 658
Sales, general and
administrative 157 149 316 289
Restructuring and other
charges 2 89 3 89
----------- ----------- ----------- -----------
Total operating
expenses 509 558 1,016 1,036
----------- ----------- ----------- -----------
Income from operations 317 76 561 250
Interest income 12 9 23 18
Interest expense (12) (12) (23) (22)
Other income (expense),
net - (1) (3) (2)
----------- ----------- ----------- -----------
Income before income tax
expense 317 72 558 244
Income tax expense 64 46 109 84
----------- ----------- ----------- -----------
Net income $ 253 $ 26 $ 449 $ 160
=========== =========== =========== ===========
Net income per share:
Basic $ 0.47 $ 0.05 $ 0.84 $ 0.29
=========== =========== =========== ===========
Diluted $ 0.40 $ 0.05 $ 0.73 $ 0.28
=========== =========== =========== ===========
Weighted average shares
used in per share
computation:
Basic 534 541 536 545
Diluted 631 556 617 563
NVIDIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
July 31, January 31,
2016 2016
------------- -------------
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities $ 4,879 $ 5,037
Accounts receivable, net 644 505
Inventories 521 418
Prepaid expenses and other current assets 112 93
------------- -------------
Total current assets 6,156 6,053
Property and equipment, net 485 466
Goodwill 618 618
Intangible assets, net 138 166
Other assets 64 67
------------- -------------
Total assets $ 7,461 $ 7,370
============= =============
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 423 $ 296
Accrued and other current liabilities 556 642
Convertible short-term debt 1,428 1,413
------------- -------------
Total current liabilities 2,407 2,351
Other long-term liabilities 494 453
Capital lease obligations, long-term 8 10
------------- -------------
Total liabilities 2,909 2,814
Convertible debt conversion obligation 72 87
Shareholders' equity 4,480 4,469
------------- -------------
Total liabilities, convertible debt
conversion obligation and shareholders'
equity $ 7,461 $ 7,370
============= =============
NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------------ --------------------
July 31, May 1, July 26, July 31, July 26,
2016 2016 2015 2016 2015
--------- -------- --------- --------- ---------
GAAP gross profit $ 826 $ 751 $ 634 $ 1,577 $ 1,286
GAAP gross margin 57.9% 57.5% 55.0% 57.7% 55.8%
Stock-based
compensation
expense (A) 4 4 3 8 6
Legal settlement
costs (B) - 10 - 10 -
Product warranty
charge (C) - - 15 - 15
--------- -------- --------- --------- ---------
Non-GAAP gross profit $ 830 $ 765 $ 652 $ 1,595 $ 1,307
========= ======== ========= ========= =========
Non-GAAP gross
margin 58.1% 58.6% 56.6% 58.4% 56.7%
GAAP operating
expenses $ 509 $ 506 $ 558 $ 1,016 $ 1,036
Stock-based
compensation
expense (A) (54) (49) (44) (104) (87)
Legal settlement
costs (B) - (6) - (6) -
Acquisition-related
costs (D) (4) (4) (4) (8) (13)
Contributions (1) (3) - (4) -
Restructuring and
other charges (2) (1) (89) (3) (89)
--------- -------- --------- --------- ---------
Non-GAAP operating
expenses $ 448 $ 443 $ 421 $ 891 $ 847
========= ======== ========= ========= =========
GAAP income from
operations $ 317 $ 245 $ 76 $ 561 $ 250
Total impact of non-
GAAP adjustments to
income from
operations 65 77 155 143 211
--------- -------- --------- --------- ---------
Non-GAAP income from
operations $ 382 $ 322 $ 231 $ 704 $ 461
========= ======== ========= ========= =========
GAAP other income
(expense), net $ - $ (4) $ (4) $ (3) $ (6)
Gains from non-
affiliated
investments - (3) - (3) -
Interest expense
related to
amortization of
debt discount 7 7 7 14 14
--------- -------- --------- --------- ---------
Non-GAAP other income
(expense), net $ 7 $ - $ 3 $ 8 $ 8
========= ======== ========= ========= =========
GAAP net income $ 253 $ 196 $ 26 $ 449 $ 160
Total pre-tax impact
of non-GAAP
adjustments 72 81 162 154 225
Income tax impact of
non-GAAP
adjustments (12) (14) 2 (27) (8)
--------- -------- --------- --------- ---------
Non-GAAP net income $ 313 $ 263 $ 190 $ 576 $ 377
========= ======== ========= ========= =========
Diluted net income per
share
GAAP $ 0.40 $ 0.33 $ 0.05 $ 0.73 $ 0.28
========= ======== ========= ========= =========
Non-GAAP $ 0.53 $ 0.46 $ 0.34 $ 0.99 $ 0.68
========= ======== ========= ========= =========
Weighted average
shares used in
diluted net income
per share computation
GAAP 631 597 556 617 563
Anti-dilution impact
from note hedge (E) (43) (29) (4) (37) (5)
--------- -------- --------- --------- ---------
Non-GAAP 588 568 552 580 558
========= ======== ========= ========= =========
GAAP net cash provided
by operating
activities $ 184 $ 309 $ 163 $ 493 $ 409
Purchase of property
and equipment and
intangible assets (33) (55) (24) (88) (54)
--------- -------- --------- --------- ---------
Free cash flow $ 151 $ 254 $ 139 $ 405 $ 355
========= ======== ========= ========= =========
----------------------------------------------------------------------------
(A) Excludes stock-based compensation as follows:
Three Months Ended Six Months Ended
------------------------------ --------------------
July 31, May 1, July 26, July 31, July 26,
2016 2016 2015 2016 2015
--------- -------- --------- --------- ---------
Cost of revenue $ 4 $ 4 $ 3 $ 8 $ 6
Research and
development $ 30 $ 29 $ 27 $ 59 $ 54
Sales, general
and
administrative $ 24 $ 20 $ 17 $ 44 $ 33
(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
Q3 FY2017
Outlook
-------------------
GAAP gross margin 57.8%
Impact of stock-based compensation expense 0.2%
-------------------
Non-GAAP gross margin 58.0%
===================
Q3 FY2017
Outlook
-------------------
(In millions)
GAAP operating expenses $ 530
Stock-based compensation expense, acquisition-related
costs, and other costs (65)
-------------------
Non-GAAP operating expenses $ 465
===================
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