NVIDIA Reports Financial Results for Third Quarter Fiscal 2014

SANTA CLARA, CA--(Marketwired - Nov 7, 2013) - NVIDIA (NASDAQ: NVDA)

• Revenue of $1.054 billion.
  
  
• GAAP net income of $118.7 million, or $0.20 per diluted share. Non-GAAP net income of $153.8 million, or $0.26 per diluted share.
  
  
• GAAP and non-GAAP gross margins of 55.4 percent and 55.7 percent, respectively.
  
  

NVIDIA (NASDAQ: NVDA) today reported revenue for the third quarter of fiscal 2014, ended Oct. 27, 2013, of $1.054 billion, up 7.9 percent from $977.2 million in the previous quarter.

GAAP earnings per diluted share were $0.20, up 25.0 percent from $0.16 in the previous quarter. Non-GAAP earnings per diluted share were $0.26, up 13.0 percent from $0.23 in the previous quarter.

NVIDIA also announced a 13 percent increase in the quarterly cash dividend to $0.085 per share ($0.34 per share on an annual basis) from $0.075 per share ($0.30 per share on an annual basis). NVIDIA will pay its next quarterly cash dividend of $0.085 per share on Dec. 13, 2013, to all stockholders of record on Nov. 21, 2013.

NVIDIA intends to return $1 billion in fiscal 2015 through stock repurchases and quarterly dividend payments. The company's board of directors has authorized an additional $1 billion under the company's stock repurchase program for a total of $1.286 billion available through the end of January 2016.

"Visual computing is increasingly important to more and more markets," said Jen-Hsun Huang, president and chief executive officer of NVIDIA. "It's creating demand for GPUs and opening up large opportunities. The proof can be seen in the proliferation of Tegra into new verticals like automotive and set-top boxes, in our all-time high Quadro and Tesla revenues, and in the record number of customer trials for our GRID datacenter initiative. At a time when many are struggling with the decline in the mainstream PC market, our visual computing leadership has positioned us well to grow with the accelerating adoption of GPUs in the cloud and the world of connected devices."

GAAP Quarterly Financial Comparison
(in millions except per share data)		Q3 FY14		Q2 FY14		Q3 FY13		Q/Q		Y/Y
Revenue		$1,054.0		$977.2		$1,204.1		up 7.9%		down 12.5%
Gross margin		55.4%		55.8%		52.9%		down 40 bps		up 250 bps
Operating expenses		$443.4		$440.0		$384.4		up 0.8%		up 15.3%
Net income		$118.7		$96.4		$209.1		up 23.1%		down 43.2%
Earnings per share		$0.20		$0.16		$0.33		up 25.0%		down 39.4%

Non-GAAP* Quarterly Financial Comparison
(in millions except per share data)		Q3 FY14		Q2 FY14		Q3 FY13		Q/Q		Y/Y
Revenue		$1,054.0		$977.2		$1,204.1		up 7.9%		down 12.5%
Gross margin		55.7%		56.3%		53.1%		down 60 bps		up 260 bps
Operating expenses		$405.4		$400.8		$344.8		up 1.1%		up 17.6%
Net income		$153.8		$133.3		$245.5		up 15.3%		down 37.3%
Earnings per share		$0.26		$0.23		$0.39		up 13.0%		down 33.3%

*Non-GAAP earnings excluded stock-based compensation, amortization of acquisition-related intangible assets, other acquisition-related costs or credits, a restructuring charge in the third quarter of fiscal 2014, a legal settlement charge in the second quarter of fiscal 2014, and the tax impact associated with such items.

The company's previously announced $750 million accelerated stock repurchase was completed on Oct. 22 with the delivery of an additional 14.6 million shares. In aggregate, we received 51.5 million shares at an average price of $14.56 per share. The common stock delivered to NVIDIA was placed into treasury stock.

Among highlights of the third quarter of fiscal 2014, NVIDIA:

• Strengthened its mobile business, with the first shipments of Tegra® 4 devices -- including China's Mi3 smartphone from Xiaomi and Tegra Note™, a complete tablet platform.
• Improved gaming for NVIDIA® SHIELD™ users, with the introduction of Gamepad Mapper, which expands support for thousands more Android gaming titles.
• Launched its new flagship gaming GPU, GeForce® GTX™ 780 Ti, and the world's most powerful workstation graphics card, Quadro® K6000.
• Introduced revolutionary G-SYNC™ technology, which eliminates onscreen tearing, stuttering and lag by synchronizing the GPU and the display.
• Announced that VMware Horizon View, a leading virtual desktop management product, now supports NVIDIA GRID technology.

NVIDIA's outlook for the fourth quarter of fiscal 2014 is as follows:

• Revenue is expected to be $1.05 billion, plus or minus two percent.
  
  
• GAAP and non-GAAP margins are expected to be approximately 54.2 percent and 54.5 percent, respectively.
  
  
• GAAP operating expenses are expected to be approximately $450 million; non-GAAP operating expenses are expected to be approximately $410 million.
  
  
• GAAP and non-GAAP tax rates are expected to be 16 percent, plus or minus one percent. This estimate excludes any discrete tax events that may occur during the quarter, which, if realized, may increase or decrease our actual effective tax rates in the quarter.
  
  

Diluted shares for the fourth quarter are expected to be approximately 578.5 million.

CFO Commentary and Earnings Presentation
Commentary on the quarter by Colette Kress, NVIDIA chief financial officer, and a presentation, are available at www.nvidia.com/ir.

Conference Call and Webcast Information
NVIDIA will conduct a conference call with analysts and investors to discuss its third quarter fiscal 2014 financial results and current financial prospects today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To listen to the call, please dial (212) 231-2922. A live webcast (listen-only mode) of the conference call will be accessible at the NVIDIA investor relations web site www.nvidia.com/ir and at www.streetevents.com. The webcast will be recorded and available for replay until the company's conference call to discuss its financial results for its fourth quarter fiscal 2014.

Non-GAAP Measures
To supplement NVIDIA's Condensed Consolidated Statements of Operations 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 tax expense, non-GAAP net income, non-GAAP net income, or earnings, per share, 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, amortization of acquisition-related intangible assets, other acquisition-related costs or credits, a restructuring charge, a legal settlement, a contribution expense, and the associated tax impact of these items, where applicable. 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 our 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 thousands, except per share data)
(Unaudited)
				Three Months Ended						Nine Months Ended
				October 27, 2013			October 28, 2012			October 27, 2013			October 28, 2012
Revenue				$	1,053,967		$	1,204,110		$	2,985,944		$	3,173,257
Cost of revenue					469,552			567,452			1,337,423			1,532,516
Gross profit					584,415			636,658			1,648,521			1,640,741
Operating expenses
	Research and development				340,294			284,180			999,193			849,275
	Sales, general and administrative				103,133			100,261			320,025			326,800
		Total operating expenses			443,427			384,441			1,319,218			1,176,075
Operating income					140,988			252,217			329,303			464,666
Interest and other income, net					496			1,411			12,063			11,265
Income before income tax expense					141,484			253,628			341,366			475,931
Income tax expense					22,750			44,548			48,293			87,368
Net income				$	118,734		$	209,080		$	293,073		$	388,563
Basic net income per share				$	0.20		$	0.34		$	0.49		$	0.63
Diluted net income per share				$	0.20		$	0.33		$	0.49		$	0.62
Shares used in basic per share computation					580,870			622,352			594,363			619,043
Shares used in diluted per share computation					588,752			628,845			600,108			625,973

NVIDIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
				October 27, 2013			January 27, 2013
ASSETS
Current assets:
	Cash, cash equivalents and marketable securities			$	3,032,954		$	3,727,883
	Accounts receivable, net				447,631			454,252
	Inventories				380,319			412,467
	Prepaid expenses and other current assets				188,937			180,656
		Total current assets			4,049,841			4,775,258
Property and equipment, net					595,418			576,144
Goodwill					643,179			641,030
Intangible assets, net					320,589			312,332
Other assets					102,346			107,481
		Total assets		$	5,711,373		$	6,412,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	333,283		$	356,428
	Accrued liabilities and other current liabilities				652,644			619,795
		Total current liabilities			985,927			976,223
Other long-term liabilities					387,784			589,321
Capital lease obligations, long term					17,015			18,998
Stockholders' equity					4,320,647			4,827,703
		Total liabilities and stockholders' equity		$	5,711,373		$	6,412,245

NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
				Three Months Ended												Nine Months Ended
				October 27, 2013				July 28, 2013				October 28, 2012				October 27, 2013				October 28, 2012
GAAP gross profit				$	584,415			$	545,538			$	636,658			$	1,648,521			$	1,640,741
	GAAP gross margin				55.4	%			55.8	%			52.9	%			55.2	%			51.7	%
		Stock-based compensation expense included in cost of revenue (A)			3,090				2,168				2,489				7,911				7,664
		Legal settlement			-				2,290				-				2,290				-
Non-GAAP gross profit				$	587,505			$	549,996			$	639,147			$	1,658,722			$	1,648,405
	Non-GAAP gross margin				55.7	%			56.3	%			53.1	%			55.6	%			51.9	%
GAAP operating expenses				$	443,427			$	440,004			$	384,441			$	1,319,218			$	1,176,075
		Stock-based compensation expense included in operating expense (A)			(31,209	)			(30,227	)			(30,580	)			(92,180	)			(93,229	)
		Amortization of acquisition-related intangible assets			(4,906	)			(3,980	)			(4,402	)			(12,801	)			(12,809	)
		Other acquisition-related costs or credits (B)			329				(4,984	)			(4,666	)			(9,601	)			(14,631	)
		Contribution expense (C)			-				-				-				-				(20,127	)
		Restructuring charge			(2,235	)			-				-				(2,235	)			-
Non-GAAP operating expenses				$	405,406			$	400,813			$	344,793			$	1,202,401			$	1,035,279
GAAP net income				$	118,734			$	96,448			$	209,080			$	293,073			$	388,563
		Total pre-tax impact of non-GAAP adjustments			41,111				43,649				42,137				127,018				148,460
		Income tax impact of non-GAAP adjustments			(6,055	)			(6,767	)			(5,755	)			(19,170	)			(23,583	)
Non-GAAP net income				$	153,790			$	133,330			$	245,462			$	400,921			$	513,440
Diluted net income per share
		GAAP		$	0.20			$	0.16			$	0.33			$	0.49			$	0.62
		Non-GAAP		$	0.26			$	0.23			$	0.39			$	0.67			$	0.82
Shares used in diluted net income per share computation					588,752				592,006				628,845				600,108				625,973
Metrics:
		GAAP net cash flow provided by operating activities		$	162,315			$	96,469			$	181,485			$	434,434			$	373,163
		Purchase of property and equipment and intangible assets			(38,159	)			(84,986	)			(44,684	)			(188,812	)			(135,551	)
		Free cash flow		$	124,156			$	11,483			$	136,801			$	245,622			$	237,612
(A) Excludes stock-based compensation as follows:				Three Months Ended												Nine Months Ended
				October 27, 2013				July 28, 2013				October 28, 2012				October 27, 2013				October 28, 2012
		Cost of revenue		$	3,090			$	2,168			$	2,489			$	7,911			$	7,664
		Research and development		$	20,902			$	18,555			$	20,056			$	61,392			$	60,148
		Sales, general and administrative		$	10,307			$	11,672			$	10,524			$	30,788			$	33,081
(B) Consists of transaction costs, compensation charges, and other credits related to acquisitions.
(C) Net present value of a $25 million charitable contribution pledged on June 12, 2012 to Stanford Hospital and Clinic, payable over ten years.

NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
			Q4 FY2014 Outlook
GAAP gross margin				54.2	%
	Impact of stock-based compensation (A)			0.3	%
Non-GAAP gross margin				54.5	%
			Q4 FY2014 Outlook
			(In millions)
GAAP operating expenses			$	450.0
	Stock-based compensation expense included in operating expense			(30.8	)
	Amortization of acquisition-related intangible assets			(4.9	)
	Other acquisition-related costs (B)			(4.3	)
Non-GAAP operating expenses			$	410.0
(A) Represents $2.7 million of stock-based compensation expense included in cost of revenue.
(B) Consists of transaction costs and compensation charges related to acquisitions.

About NVIDIA
Since 1993, NVIDIA (NASDAQ: NVDA) has pioneered the art and science of visual computing. The company's technologies are transforming a world of displays into a world of interactive discovery -- for everyone from gamers to scientists, and consumers to enterprise customers. More information at http://nvidianews.nvidia.com and http://blogs.nvidia.com.

Certain statements in this press release including, but not limited to statements as to: the company's planned return of capital to shareholders and the form of return visual computing's importance; visual computing creating demand for GPUs and opening up large opportunities; proliferation of Tegra into new verticals; visual computing positioning us well; our growth opportunities; the company's financial outlook for the fourth quarter of fiscal 2014; and the company's tax rate for the fourth quarter of fiscal year 2014 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 July 28, 2013. 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.

© 2013 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, GeForce GTX, Quadro, Tegra, Tegra Note, NVIDIA GRID, G-SYNC, Kepler 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.