NVIDIA Announces Financial Results for First Quarter Fiscal 2017

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

  • Revenue is expected to be $1.35 billion, plus or minus two percent.

  • GAAP and non-GAAP gross margins are expected to be 57.7 percent and 58.0 percent, respectively, plus or minus 50 basis points.

  • GAAP operating expenses are expected to be approximately $500 million. Non-GAAP operating expenses are expected to be approximately $445 million.

  • GAAP and non-GAAP tax rates for the second quarter of fiscal 2017 are both expected to be 20 percent, plus or minus one percent.

  • Capital expenditures are expected to be approximately $30 million to $40 million.

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

Gaming:

  • Launched GeForce® GTX 1080 and GTX 1070, based on the new NVIDIA Pascal™ architecture, bringing the biggest performance gains over the previous generation of processors in a decade.
  • Expanded the NVIDIA VRWorks™ software development kit with Simultaneous Multi-Projection, which heightens realism with new display capabilities, and VRWorks Audio, which delivers physically modeled positional audio.
  • Introduced NVIDIA Ansel™, an in-game photography tool that lets gamers compose shots from any angle and share them as single images or 360-degree panoramas for viewing in VR.
  • Expanded the NVIDIA SHIELD™ platform's gaming content available for streaming from GeForce NOW™ with new titles from Sega, Square Enix and Warner Bros. Interactive Entertainment.

Professional Visualization:

  • Extended NVIDIA Quadro® leadership in pro visualization markets, with the high-end 24GB Quadro M6000, the mid-range Quadro M2000 and new NVIDIA Iray® physically based rendering solutions.
  • Unveiled Iray VR, which creates interactive, photorealistic virtual 3D worlds with unparalleled fidelity, enabling the immersive viewing of buildings and products not yet built.
  • Expanded NVIDIA's VR Ready program into the professional market.

Datacenter:

  • Hosted the seventh annual GPU Technology Conference with 5,500 attendees, 600 technical sessions and 200 exhibitors, focused on artificial intelligence, VR and self-driving cars.
  • Unveiled the NVIDIA Tesla® P100 GPU, the most advanced accelerator ever built, based on the Pascal architecture.
  • Revealed the NVIDIA DGX-1™, the world's first deep-learning supercomputing in a box, with the computing throughput of more than 250 servers.
  • Joined Massachusetts General Hospital as the founding technology partner of the MGH Clinical Data Science Center to advance healthcare by applying AI to improve the detection, diagnosis, treatment and management of diseases.
  • Received VMware's Global Technical Partner of the Year and European Regional Technical Partner of the Year awards for partnership with NVIDIA GRID™ and VMware ESX.

Automotive:

  • Made history as NVIDIA-powered WEpods became the first self-driving shuttles to take to public roads.
  • Introduced HD Mapping, an end-to-end mapping platform for self-driving cars.
  • Announced that NVIDIA DRIVE™ PX 2 will power all vehicles in ROBORACE, a new autonomous car-racing circuit to debut later this year.

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
                                                                                                                              =============
                                                                                                                                                        
 




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