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NVIDIA Announces Financial Results for Second Quarter Fiscal 2018

SANTA CLARA, CA -- (Marketwired) -- Aug 10, 2017 -- NVIDIA (NASDAQ: NVDA)

NVIDIA (NASDAQ: NVDA) today reported record revenue for the second quarter ended July 30, 2017, of $2.23 billion, up 56 percent from $1.43 billion a year earlier, and up 15 percent from $1.94 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $0.92, up 124 percent from $0.41 a year ago and up 16 percent from $0.79 in the previous quarter. Non-GAAP earnings per diluted share were $1.01, up 91 percent from $0.53 a year earlier and up 19 percent from $0.85 in the previous quarter.

"Adoption of NVIDIA GPU computing is accelerating, driving growth across our businesses," said Jensen Huang, founder and chief executive officer of NVIDIA. "Datacenter revenue increased more than two and a half times. A growing number of car and robot-taxi companies are choosing our DRIVE PX self-driving computing platform. And in Gaming, increasingly the world's most popular form of entertainment, we power the fastest growing platforms - GeForce and Nintendo Switch.

"Nearly every industry and company is awakening to the power of AI. Our new Volta GPU, the most complex processor ever built, delivers a 100-fold speedup for deep learning beyond our best GPU of four years ago. This quarter, we shipped Volta in volume to leading AI customers. This is the era of AI, and the NVIDIA GPU has become its brain. We have incredible opportunities ahead of us," he said.

Capital Return

During the first half of fiscal 2018, NVIDIA paid $758 million in share repurchases and $166 million in cash dividends. For fiscal 2018, NVIDIA intends to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

NVIDIA will pay its next quarterly cash dividend of $0.14 per share on September 18, 2017, to all shareholders of record on August 24, 2017.

Q2 FY2018 Summary

                                                                            
----------------------------------------------------------------------------
                                    GAAP                                    
----------------------------------------------------------------------------
($ in millions except earnings                                              
 per share)                    Q2 FY18 Q1 FY18 Q2 FY17     Q/Q        Y/Y   
----------------------------------------------------------------------------
Revenue                         $2,230  $1,937  $1,428     Up 15%     Up 56%
----------------------------------------------------------------------------
Gross margin                     58.4%   59.4%   57.9%   Down 100  Up 50 bps
                                                              bps           
----------------------------------------------------------------------------
Operating expenses                $614    $596    $509      Up 3%     Up 21%
----------------------------------------------------------------------------
Operating income                  $688    $554    $317     Up 24%    Up 117%
----------------------------------------------------------------------------
Net income                        $583    $507    $261     Up 15%    Up 123%
----------------------------------------------------------------------------
Diluted earnings per share       $0.92   $0.79   $0.41     Up 16%    Up 124%
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                                  Non-GAAP                                  
----------------------------------------------------------------------------
($ in millions except earnings                                              
 per share)                    Q2 FY18 Q1 FY18 Q2 FY17     Q/Q        Y/Y   
----------------------------------------------------------------------------
Revenue                         $2,230  $1,937  $1,428     Up 15%     Up 56%
----------------------------------------------------------------------------
Gross margin                     58.6%   59.6%   58.1%   Down 100  Up 50 bps
                                                              bps           
----------------------------------------------------------------------------
Operating expenses                $533    $517    $448      Up 3%     Up 19%
----------------------------------------------------------------------------
Operating income                  $773    $637    $382     Up 21%    Up 102%
----------------------------------------------------------------------------
Net income                        $638    $533    $313     Up 20%    Up 104%
----------------------------------------------------------------------------
Diluted earnings per share       $1.01   $0.85   $0.53     Up 19%     Up 91%
----------------------------------------------------------------------------
                                                                            

NVIDIA's outlook for the third quarter of fiscal 2018 is as follows:

Second Quarter Fiscal 2018 Highlights

During the second quarter, NVIDIA achieved progress in these areas:

Datacenter:

Gaming:

Professional Visualization:

Automotive:

Edge Computing:

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 2018 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: 56356419. 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 NVIDIA's conference call to discuss its financial results for its third quarter of fiscal 2018.

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 income from operations, non-GAAP other income (expense), 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 expense, legal settlement costs, acquisition-related costs, contributions, restructuring and other charges, gains from non-affiliated investments, interest expense related to amortization of debt discount, loss on early debt conversions, 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.

Keep Current on NVIDIA

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About NVIDIA
NVIDIA's (NASDAQ: NVDA) invention of the GPU in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionized parallel computing. More recently, GPU deep learning ignited modern AI -- the next era of computing -- with the GPU acting as the brain of computers, robots and self-driving cars that can perceive and understand the world. More information at http://nvidianews.nvidia.com/.

Certain statements in this press release including, but not limited to statements as to: adoption of NVIDIA GPU computing accelerating and driving growth; a growing number of car and robot-taxi companies choosing DRIVE PX; gaming being the world's most popular form of entertainment; GeForce and Nintendo Switch as the fastest growing platforms; the impact of AI and the company's Volta GPU; the company's intended capital return for fiscal 2018; the company's next quarterly cash dividend; the company's financial outlook for the third quarter of fiscal 2018; the company's tax rates for the third quarter of fiscal 2018; the impact and benefits of the NVIDIA GPU Cloud Platform, partnerships with VW and Baidu, Max-Q, Project Holodeck, OptiX 5.0 SDK, VRWorks 360 Video SDK, DRIVE PX, the NVIDIA Isaac robot simulator and the NVIDIA Metropolis platform; and the use of DRIVE PX by Baidu's self-driving platform 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 April 30, 2017. 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.

© 2017 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, DGX, DRIVE, GeForce, OptiX, Quadro, Tesla and VRWorks are trademarks and/or registered trademarks of NVIDIA Corporation in the U.S. and/or other countries. MAXQ® is the registered trademark of Maxim Integrated Products, Inc. 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 30,   July 31,   July 30,   July 31, 
                                    2017       2016       2017       2016   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenue                          $   2,230  $   1,428  $   4,167  $   2,733 
Cost of revenue                        928        602      1,715      1,156 
                                 ---------  ---------  ---------  --------- 
Gross profit                         1,302        826      2,452      1,577 
Operating expenses                                                          
  Research and development             416        350        827        697 
  Sales, general and                                                        
   administrative                      198        157        383        316 
  Restructuring and other                                                   
   charges                               -          2          -          3 
                                 ---------  ---------  ---------  --------- 
    Total operating expenses           614        509      1,210      1,016 
                                 ---------  ---------  ---------  --------- 
Income from operations                 688        317      1,242        561 
  Interest income                       15         12         31         23 
  Interest expense                     (15)       (12)       (31)       (23)
  Other, net                            (4)         -        (21)        (3)
                                 ---------  ---------  ---------  --------- 
    Total other income (expense)        (4)         -        (21)        (3)
                                 ---------  ---------  ---------  --------- 
Income before income tax expense       684        317      1,221        558 
Income tax expense                     101         56        130         89 
                                 ---------  ---------  ---------  --------- 
Net income                       $     583  $     261  $   1,091  $     469 
                                 =========  =========  =========  ========= 
                                                                            
Net income per share:                                                       
  Basic                          $    0.98  $    0.49  $    1.83  $    0.88 
                                 =========  =========  =========  ========= 
  Diluted                        $    0.92  $    0.41  $    1.71  $    0.76 
                                 =========  =========  =========  ========= 
                                                                            
Weighted average shares used in                                             
 per share computation:                                                     
  Basic                                597        534        595        536 
  Diluted                              633        634        637        620 
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                               (In millions)                                
                                (Unaudited)                                 
                                                                            
                                                      July 30,  January 29, 
                                                        2017        2017    
                                                    ----------- ----------- 
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash, cash equivalents and marketable securities  $     5,877 $     6,798 
  Accounts receivable, net                                1,213         826 
  Inventories                                               855         794 
  Prepaid expenses and other current assets                 125         118 
                                                    ----------- ----------- 
    Total current assets                                  8,070       8,536 
                                                                            
Property and equipment, net                                 578         521 
Goodwill                                                    618         618 
Intangible assets, net                                       76         104 
Other assets                                                 60          62 
                                                    ----------- ----------- 
    Total assets                                    $     9,402 $     9,841 
                                                    =========== =========== 
                                                                            
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION                         
 AND SHAREHOLDERS' EQUITY                                                   
                                                                            
Current liabilities:                                                        
  Accounts payable                                  $       431 $       485 
  Accrued and other current liabilities                     517         507 
  Convertible short-term debt                                84         796 
                                                    ----------- ----------- 
    Total current liabilities                             1,032       1,788 
                                                                            
Long-term debt                                            1,984       1,983 
Other long-term liabilities                                 408         271 
Capital lease obligations, long-term                          3           6 
                                                    ----------- ----------- 
    Total liabilities                                     3,427       4,048 
                                                                            
Convertible debt conversion obligation                        2          31 
                                                                            
Shareholders' equity                                      5,973       5,762 
                                                    ----------- ----------- 
    Total liabilities, convertible debt conversion                          
     obligation and shareholders' equity            $     9,402 $     9,841 
                                                    =========== =========== 
                                                                            

                                                                            
                             NVIDIA CORPORATION                             
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                    (In millions, except per share data)                    
                                (Unaudited)                                 
                                                                            
                             Three Months Ended          Six Months Ended   
                      -------------------------------  -------------------- 
                       July 30,  April 30,   July 31,   July 30,   July 31, 
                         2017       2017       2016       2017       2016   
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
GAAP gross profit     $   1,302  $   1,150  $     826  $   2,452  $   1,577 
  GAAP gross margin        58.4%      59.4%      57.9%      58.8%      57.7%
  Stock-based                                                               
   compensation                                                             
   expense (A)                4          4          4          8          8 
  Legal settlement                                                          
   costs                      -          -          -          -         10 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP gross profit $   1,306  $   1,154  $     830  $   2,460  $   1,595 
                      =========  =========  =========  =========  ========= 
  Non-GAAP gross                                                            
   margin                  58.6%      59.6%      58.1%      59.0%      58.4%
                                                                            
GAAP operating                                                              
 expenses             $     614  $     596  $     509  $   1,210  $   1,016 
  Stock-based                                                               
   compensation                                                             
   expense (A)              (77)       (73)       (54)      (150)      (104)
  Legal settlement                                                          
   costs                      -          -          -          -         (6)
  Acquisition-related                                                       
   costs (B)                 (4)        (4)        (4)        (8)        (8)
  Contributions               -         (2)        (1)        (2)        (4)
  Restructuring and                                                         
   other charges              -          -         (2)         -         (3)
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP operating                                                          
 expenses             $     533  $     517  $     448  $   1,050  $     891 
                      =========  =========  =========  =========  ========= 
                                                                            
GAAP income from                                                            
 operations           $     688  $     554  $     317  $   1,242  $     561 
  Total impact of                                                           
   non-GAAP                                                                 
   adjustments to                                                           
   income from                                                              
   operations                85         83         65        168        143 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP income from                                                        
 operations           $     773  $     637  $     382  $   1,410  $     704 
                      =========  =========  =========  =========  ========= 
                                                                            
GAAP other income                                                           
 (expense)            $      (4) $     (18) $       -  $     (21) $      (3)
  Gains from non-                                                           
   affiliated                                                               
   investments                -          -          -          -         (3)
  Interest expense                                                          
   related to                                                               
   amortization of                                                          
   debt discount              1          2          7          3         14 
  Loss on early debt                                                        
   conversions                3         14          -         17          - 
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP other income                                                       
 (expense)            $       -  $      (2) $       7  $      (1) $       8 
                      =========  =========  =========  =========  ========= 
                                                                            
GAAP net income       $     583  $     507  $     261  $   1,091  $     469 
  Total pre-tax                                                             
   impact of non-GAAP                                                       
   adjustments               89         99         72        188        153 
  Income tax impact                                                         
   of non-GAAP                                                              
   adjustments              (34)       (73)       (20)      (108)       (46)
                      ---------  ---------  ---------  ---------  --------- 
Non-GAAP net income   $     638  $     533  $     313  $   1,171  $     576 
                      =========  =========  =========  =========  ========= 
                                                                            
Diluted net income                                                          
 per share                                                                  
  GAAP                $    0.92  $    0.79  $    0.41  $    1.71  $    0.76 
                      =========  =========  =========  =========  ========= 
  Non-GAAP            $    1.01  $    0.85  $    0.53  $    1.87  $    0.99 
                      =========  =========  =========  =========  ========= 
                                                                            
Weighted average                                                            
 shares used in                                                             
 diluted net income                                                         
 per share                                                                  
 computation                                                                
  GAAP                      633        641        634        637        620 
  Anti-dilution                                                             
   impact from note                                                         
   hedge ©                 (4)       (14)       (43)       (10)       (37)
                      ---------  ---------  ---------  ---------  --------- 
  Non-GAAP                  629        627        591        627        583 
                      =========  =========  =========  =========  ========= 
                                                                            
GAAP net cash                                                               
 provided by                                                                
 operating activities $     705  $     282  $     201  $     987  $     519 
  Purchase of                                                               
   property and                                                             
   equipment and                                                            
   intangible assets        (55)       (53)       (33)      (108)       (88)
                      ---------  ---------  ---------  ---------  --------- 
Free cash flow        $     650  $     229  $     168  $     879  $     431 
                      =========  =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
(A) Excludes stock-                                                         
 based compensation                                                         
 as follows:                 Three Months Ended          Six Months Ended   
                      -------------------------------  -------------------- 
                       July 30,  April 30,   July 31,   July 30,   July 31, 
                         2017       2017       2016       2017       2016   
                      ---------  ---------  ---------  ---------  --------- 
  Cost of revenue     $       4  $       4  $       4  $       8  $       8 
  Research and                                                              
   development        $      44  $      41  $      30  $      85  $      59 
  Sales, general and                                                        
   administrative     $      33  $      31  $      24  $      65  $      44 
                                                                            
                                                                            
(B) Consists of amortization of acquisition-related intangible assets and   
 compensation charges.                                                      
                                                                            
© 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                 
                                                                            
                                                                            
                                                               Q3 FY2018    
                                                                 Outlook    
                                                             ---------------
                                                                            
GAAP gross margin                                                      58.6%
  Impact of stock-based compensation expense                            0.2%
                                                             ---------------
Non-GAAP gross margin                                                  58.8%
                                                             ===============
                                                                            
                                                                            
                                                                Q3 FY2018   
                                                                 Outlook    
                                                             ---------------
                                                              (In millions) 
                                                                            
GAAP operating expenses                                      $          672 
  Stock-based compensation expense, acquisition-related                     
   costs, and other costs                                              (102)
                                                             ---------------
Non-GAAP operating expenses                                  $          570 
                                                             ===============
                                                                            
GAAP other income (expense)                                  $           (2)
  Loss on early debt conversions and interest expense                       
   related to amortization of debt discount                               2 
                                                             ---------------
Non-GAAP other income (expense)                              $            - 
                                                             ===============
                                                                            

For further information, contact:

Shawn Simmons
Investor Relations
NVIDIA Corporation
(408) 486-5784

ssimmons@nvidia.com

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

rsherbin@nvidia.com