- Revenue is expected to be $1.30 billion, plus or minus two percent.
- GAAP and non-GAAP gross margins are expected to be 56.7 percent and 57.0 percent, respectively, plus or minus 50 basis points.
- GAAP operating expenses are expected to be approximately $503 million. Non-GAAP operating expenses are expected to be approximately $445 million.
- GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2016 are expected to be 20 percent, plus or minus one percent.
- The above GAAP outlook amounts exclude restructuring charges, which are expected to be in the range of $25 million to $35 million, in the fourth quarter of fiscal 2016.
- Capital expenditures are expected to be approximately $20 million to $30 million.
Third Quarter Fiscal 2016 Highlights
During the third quarter, NVIDIA achieved progress in each of its platforms.
Gaming:
- Introduced the GeForce® GTX 950 GPU, designed to play the latest games with processing power that rivals any console.
- Introduced NVIDIA GameWorks™ VR, a software development kit for creating gaming experiences on virtual reality-ready desktops and notebooks.
- Launched GeForce NOW™, allowing players to instantly stream titles from the cloud to their SHIELD device.
- Extended
SHIELD™ Android TV into key European markets.
Professional Visualization:
- Enabled professional designers to bring virtual reality to applications, with the launch of
NVIDIA DesignWorks™ VR.
Datacenter:
- Unveiled the next generation of its virtualized graphics platform, NVIDIA GRID™ 2.0, which delivers even the most graphics-intensive applications to any connected device.
- Announced that Microsoft Azure will be the first cloud-services provider to offer GRID 2.0 capabilities, as well as accelerated computing.
- Revealed that the
Swiss Federal Office of Meteorology and Climatology is the first major national weather service to use a GPU-accelerated supercomputer to improve daily forecasts.
Auto:
- Featured in new production vehicles and concept cars with NVIDIA-powered digital cockpits from Mercedes-Benz, Audi, Porsche, Bentley and Honda at the International Auto Show in Frankfurt.
- Furthered its partnership with Tesla Motors, which introduced the
Model X, equipped with an NVIDIA-powered infotainment system and digital instrument cluster.
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 third quarter fiscal 2016 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 (303) 223-2699; 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 fourth quarter and fiscal 2016.
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, product warranty charge, acquisition-related costs, restructuring and other charges, gains and losses 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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NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------ ------------------------
October 25, October 26, October 25, October 26,
2015 2014 2015 2014
----------- ----------- ----------- -----------
Revenue $ 1,305 $ 1,225 $ 3,609 $ 3,431
Cost of revenue 571 549 1,589 1,531
----------- ----------- ----------- -----------
Gross profit 734 676 2,020 1,900
Operating expenses
Research and
development 329 340 987 1,011
Sales, general and
administrative 152 123 441 361
Restructuring and other
charges 8 - 97 -
----------- ----------- ----------- -----------
Total operating
expenses 489 463 1,525 1,372
----------- ----------- ----------- -----------
Operating income 245 213 495 528
Interest income 9 7 28 20
Interest expense (12) (11) (35) (35)
Other income, net 3 - 1 14
----------- ----------- ----------- -----------
Income before income tax
expense 245 209 489 527
Income tax expense
(benefit) (1) 36 83 90
----------- ----------- ----------- -----------
Net income $ 246 $ 173 $ 406 $ 437
=========== =========== =========== ===========
Net income per share:
Basic $ 0.45 $ 0.32 $ 0.75 $ 0.79
=========== =========== =========== ===========
Diluted $ 0.44 $ 0.31 $ 0.72 $ 0.77
=========== =========== =========== ===========
Weighted average shares
used in per share
computation:
Basic 542 548 544 555
Diluted 565 558 563 566
NVIDIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
October 25, January 25,
2015 2015
----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and marketable securities $ 4,728 $ 4,623
Accounts receivable, net 536 474
Inventories 425 483
Prepaid expenses and other current assets 145 133
----------- -----------
Total current assets 5,834 5,713
Property and equipment, net 477 557
Goodwill 618 618
Intangible assets, net 172 222
Other assets 73 91
----------- -----------
Total assets $ 7,174 $ 7,201
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 295 $ 293
Accrued and other current liabilities 560 603
----------- -----------
Total current liabilities 855 896
Long-term debt 1,406 1,384
Other long-term liabilities 437 489
Capital lease obligations, long-term 11 14
Shareholders' equity 4,465 4,418
----------- -----------
Total liabilities and shareholders' equity $ 7,174 $ 7,201
=========== ===========
NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------- --------------------
Oct. 25, July 26, Oct. 26, Oct. 25, Oct. 26,
2015 2015 2014 2015 2014
--------- --------- --------- --------- ---------
GAAP gross profit $ 734 $ 634 $ 676 $ 2,020 $ 1,900
GAAP gross margin 56.3% 55.0% 55.2% 56.0% 55.4%
Stock-based
compensation
expense included
in cost of revenue
(A) 4 3 4 10 8
Product warranty
charge (B) - 15 - 15 -
--------- --------- --------- --------- ---------
Non-GAAP gross profit $ 738 $ 652 $ 680 $ 2,045 $ 1,908
========= ========= ========= ========= =========
Non-GAAP gross
margin 56.5% 56.6% 55.5% 56.7% 55.6%
GAAP operating
expenses $ 489 $ 558 $ 463 $ 1,525 $ 1,372
Stock-based
compensation
expense included
in operating
expense (A) (47) (44) (38) (134) (107)
Acquisition-related
costs (C) (4) (4) (10) (18) (28)
Restructuring and
other charges (8) (89) - (97) -
--------- --------- --------- --------- ---------
Non-GAAP operating
expenses $ 430 $ 421 $ 415 $ 1,276 $ 1,237
========= ========= ========= ========= =========
GAAP operating income $ 245 $ 76 $ 213 $ 495 $ 528
Total impact of
non-GAAP
adjustments to
operating income 63 155 51 274 143
--------- --------- --------- --------- ---------
Non-GAAP operating
income $ 308 $ 231 $ 264 $ 769 $ 671
========= ========= ========= ========= =========
GAAP other income
(expense), net $ - $ (4) $ (4) $ (6) $ (1)
Gains from non-
affiliated
investments (4) - - (4) (14)
Interest expense
related to
amortization of
debt discount 7 7 7 21 21
--------- --------- --------- --------- ---------
Non-GAAP other
income, net $ 3 $ 3 $ 3 $ 11 $ 6
========= ========= ========= ========= =========
GAAP net income $ 246 $ 26 $ 173 $ 406 $ 437
Total pre-tax
impact of non-GAAP
adjustments 66 163 58 291 150
Income tax impact
of non-GAAP
adjustments (57) 1 (11) (65) (27)
--------- --------- --------- --------- ---------
Non-GAAP net income $ 255 $ 190 $ 220 $ 632 $ 560
========= ========= ========= ========= =========
Diluted net income
per share
GAAP $ 0.44 $ 0.05 $ 0.31 $ 0.72 $ 0.77
========= ========= ========= ========= =========
Non-GAAP $ 0.46 $ 0.34 $ 0.39 $ 1.13 $ 0.99
========= ========= ========= ========= =========
Weighted average
shares used in
diluted net income
per share
computation
GAAP 565 556 558 563 566
Anti-dilution
impact from note
hedge (D) (10) (4) - (6) -
--------- --------- --------- --------- ---------
Non-GAAP 555 552 558 557 566
========= ========= ========= ========= =========
Metrics:
GAAP net cash
provided by
operating
activities $ 255 $ 163 $ 216 $ 664 $ 463
Purchase of
property and
equipment and
intangible assets (16) (24) (40) (71) (91)
--------- --------- --------- --------- ---------
Free cash flow $ 239 $ 139 $ 176 $ 593 $ 372
========= ========= ========= ========= =========
----------------------------------------------------------------------------
(A) Excludes stock-
based compensation
as follows: Three Months Ended Nine Months Ended
-----------------------------------------------------
Oct. 25, July 26, Oct. 26, Oct. 25, Oct. 26,
2015 2015 2014 2015 2014
--------- --------- --------- --------- ---------
Cost of revenue $ 4 $ 3 $ 4 $ 10 $ 8
Research and
development $ 28 $ 27 $ 22 $ 82 $ 65
Sales, general and
administrative $ 19 $ 17 $ 16 $ 53 $ 42
(B) Represents warranty charge associated with product recall.
(C) Consists of amortization of acquisition-related intangible assets,
transaction costs, compensation charges, and other credits related to
acquisitions.
(D) 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
Q4 FY2016
Outlook
-------------
GAAP gross margin 56.7%
Impact of stock-based compensation 0.3%
-------------
Non-GAAP gross margin 57.0%
=============
Q4 FY2016
Outlook
-------------
(In millions)
GAAP operating expenses $ 503
Stock-based compensation expense and acquisition-related
costs (58)
-------------
Non-GAAP operating expenses $ 445
=============
