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Form 8-K NVIDIA CORP For: Feb 17

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February 17, 2016 4:29 PM EST




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
FORM 8-K


CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 17, 2016

NVIDIA CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Delaware
0-23985
94-3177549
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
 
 
 
 
2701 San Tomas Expressway, Santa Clara, CA
95050
 
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (408) 486-2000
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
















SECTION 2 - Financial Information
  
Item 2.02 Results of Operations and Financial Condition.
 
On February 17, 2016, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter and fiscal year ended January 31, 2016. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.
  
Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter and fiscal year ended January 31, 2016, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.
  
The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


SECTION 9 - Financial Statements and Exhibits
  
Item 9.01 Financial Statements and Exhibits.
  
(d) Exhibits
 
Exhibit
 
Description
99.1
 
Press Release, dated February 17, 2016, entitled "NVIDIA Announces Financial Results for the Fourth Quarter and Fiscal 2016"
99.2
 
CFO Commentary on the Fourth Quarter and Fiscal Year 2016 Results






SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  
 
 
 
NVIDIA Corporation
Date: February 17, 2016
 
By: /s/ Colette M. Kress
 
 
Colette M. Kress
 
 
Executive Vice President and Chief Financial Officer







EXHIBIT INDEX

Exhibit
 
Description
99.1
 
Press Release, dated February 17, 2016, entitled "NVIDIA Announces Financial Results for the Fourth Quarter and Fiscal 2016"
99.2
 
CFO Commentary on the Fourth Quarter and Fiscal Year 2016 Results





FOR IMMEDIATE RELEASE:

NVIDIA Announces Financial Results for the Fourth Quarter and Fiscal 2016
•
Record quarterly revenue of $1.40 billion, up 12 percent from a year earlier
•
Record full-year revenue of $5.01 billion, up 7 percent from fiscal 2015
•
Growth across all market platforms - Gaming, Professional Visualization, Datacenter, Automotive
•
Sharply growing customer engagements in deep learning
SANTA CLARA, Calif.-Feb. 17, 2016-NVIDIA (NASDAQ: NVDA) today reported record revenue for the fourth quarter ended January 31, 2016, of $1.40 billion, up 12 percent from $1.25 billion a year earlier, and up 7 percent from $1.30 billion in the previous quarter.
Revenue for fiscal 2016 was a record $5.01 billion, up 7 percent from $4.68 billion a year earlier.

GAAP earnings per diluted share for the quarter were $0.35, inclusive of a restructuring charge of $0.04 per diluted share. Non-GAAP earnings per diluted share were $0.52, up 21 percent from $0.43 a year earlier and up 13 percent from $0.46 in the previous quarter.

GAAP earnings per diluted share for the full year were $1.08, inclusive of restructuring charges of $0.15 per diluted share. Non-GAAP earnings per diluted share were $1.67, up 18 percent from $1.42 a year earlier.

“We had another record quarter, capping a record year,” said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. “Our strategy is to create specialized accelerated computing platforms for large growth markets that demand the 10x boost in performance we offer.  Each platform leverages our focused investment in building the world’s most advanced GPU technology.
 
“NVIDIA is at the center of four exciting growth opportunities - PC gaming, VR, deep learning, and self-driving cars. We are especially excited about deep learning, a breakthrough in artificial intelligence algorithms that takes advantage of our GPU’s ability to process data simultaneously.

“Deep learning is a new computing model that teaches computers to find patterns and make predictions, extracting powerful insights from massive quantities of data. We are working with thousands of companies that are applying the power of deep learning in fields ranging from life sciences and financial services to the Internet of Things,” he said.

Capital Return

During the fourth quarter, NVIDIA paid $62 million in cash dividends and received 4.3 million shares in connection with an accelerated share repurchase agreement that it had entered into in the quarter. During fiscal 2016, the company returned to shareholders $800 million in quarterly cash dividends and share repurchases.

For fiscal 2017, NVIDIA intends to return approximately $1.0 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

NVIDIA will pay its next quarterly cash dividend of $0.115 per share on March 23, 2016, to all shareholders of record on March 2, 2016.










Q4 FY2016 Summary
GAAP
($ in millions except earnings per share)
Q4 FY16
Q3 FY16
Q4 FY15
Q/Q
Y/Y
Revenue
$1,401
$1,305
$1,251
up 7%
up 12%

Gross margin
56.5%
56.3%
55.9%
up 20 bps
up 60 bps

Operating expenses
$539
$489
$468
up 10%
up 15%

Operating income
$252
$245
$231
up 3%
up 9%

Net income
$207
$246
$193
down 16%
up 7%

Diluted earnings per share
$0.35
$0.44
$0.35
down 20%
—


Non-GAAP
($ in millions except earnings per share)
Q4 FY16
Q3 FY16
Q4 FY15
Q/Q
Y/Y
Revenue
$1,401
$1,305
$1,251
up 7%
up 12%
Gross margin
57.2%
56.5%
56.2%
up 70 bps
up 100 bps
Operating expenses
$445
$430
$420
up 3%
up 6%
Operating income
$356
$308
$283
up 16%
up 26%
Net income
$297
$255
$241
up 16%
up 23%
Diluted earnings per share
$0.52
$0.46
$0.43
up 13%
up 21%


FY2016 Summary
GAAP
($ in millions except earnings per share)
FY16
FY15
Y/Y
Revenue
$5,010
$4,682
up 7%
Gross margin
56.1%
55.5%
up 60 bps
Operating expenses
$2,064
$1,840
up 12%
Operating income
$747
$759
down 2%
Net income
$614
$631
down 3%
Diluted earnings per share
$1.08
$1.12
down 4%

Non-GAAP
($ in millions except earnings per share)
FY16
FY15
Y/Y
Revenue
$5,010
$4,682
up 7%
Gross margin
56.8%
55.8%
up 100 bps
Operating expenses
$1,721
$1,657
up 4%
Operating income
$1,125
$954
up 18%
Net income
$929
$801
up 16%
Diluted earnings per share
$1.67
$1.42
up 18%





NVIDIA’s outlook for the first quarter of fiscal 2017 is as follows:

•
Revenue is expected to be $1.26 billion, plus or minus two percent.

•
GAAP and non-GAAP gross margins are expected to be 57.2 percent and 57.5 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 first quarter of fiscal 2017 are both expected to be 19 percent, plus or minus one percent.

•
Capital expenditures are expected to be approximately $35 million to $45 million.

Fourth Quarter Fiscal 2016 Highlights
During the fourth quarter, NVIDIA achieved progress in each of its platforms.

Gaming:

•
Announced the GeForce® GTX VR Ready program - in conjunction with PC companies, notebook makers and add-in card providers - to help users discover systems that will provide great virtual reality experiences.

•
Released NVIDIA GameWorks™ VR, a software development kit for developers of VR software and headsets for gaming.

Professional Visualization:

•
Rolled out NVIDIA® Iray® plugins for Autodesk Maya and Autodesk 3ds Max, which enable users of these applications to create designs incorporating real-world lights and materials faster and more easily than before.

•
Released NVIDIA DesignWorks™ VR, a software development kit for developers of VR software and headsets for enterprise.

Datacenter:

•
Introduced an end-to-end hyperscale datacenter deep learning platform - consisting of two accelerators, the NVIDIA Tesla® M40 and NVIDIA Tesla M4 - that lets web-services companies accelerate deep learning workloads.

•
Revealed new breakthroughs from leading web-services groups using NVIDIA GPUs:
◦
Facebook is using the NVIDIA Tesla accelerated computing platform to power Big Sur, its next-generation computing system for machine learning applications.  
◦
Alibaba’s AliCloud cloud computing business is working with NVIDIA to promote China’s first GPU-accelerated, cloud-based, high performance computing platform.
◦
IBM is adding support for NVIDIA GPU accelerators to its Watson cognitive computing platform.
◦
Google is open-sourcing its TensorFlow deep-learning framework, which can be accelerated on GPUs.
◦
Microsoft’s Computational Network Toolkit was integrated with Azure GPU Lab, enabling neural nets for speech recognition that are up to 10x faster than their predecessors.





Auto:

•
Launched NVIDIA DRIVE™ PX 2, a powerful engine for in-vehicle artificial intelligence.

•
Announced that Volvo will use DRIVE PX 2 to power a fleet of 100 Volvo XC90 SUVs that will appear on the road next year in the car manufacturer’s Drive Me autonomous-car pilot program.

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 fourth quarter and 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 (212) 231-2927; 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 first 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 restructuring and other 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, 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. Per diluted share impact of restructuring and other charges is calculated as restructuring and other 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.

Keep Current on NVIDIA
Subscribe to the NVIDIA blog, follow us on Facebook, Google+, Twitter, LinkedIn and Instagram, and view NVIDIA videos on YouTube and images on Flickr.






About NVIDIA
Since 1993, NVIDIA (NASDAQ: NVDA) has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, professional visualization, datacenter and automotive markets. Its products, services and software power amazing new experiences in virtual reality, artificial intelligence and autonomous cars. More information at http://nvidianews.nvidia.com.


###


For further information, contact:
Arnab Chanda
 
Robert Sherbin
Investor Relations
 
Corporate Communications
NVIDIA Corporation
 
NVIDIA Corporation
(408) 566-6616
 
(408) 566-5150
 

Certain statements in this press release including, but not limited to statements as to: the company’s strategy of creating specialized accelerated computing platforms for large growth markets; the 10x boost in performance the company offers; the company being at the center of four exciting growth opportunities; the impact of deep learning; the company’s intended fiscal 2017 capital return; the company’s next quarterly cash dividend; the company’s financial outlook for the first quarter of fiscal 2017; the company’s tax rates for the first quarter of fiscal 2017; the impact of the GeForce GTX VR Ready program; the benefits of NVIDIA Iray plugins; the impact of the company’s hyperscale datacenter deep learning platform; breakthroughs from web-services groups leveraging NVIDIA GPUs and Volvo’s use of DRIVE PX 2 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 October 25, 2015. Copies of reports filed with the SEC are posted on the company’s website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.


© 2016 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Tesla, Iray, NVIDIA DesignWorks, NVIDIA DRIVE, NVIDIA GameWorks, 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.












NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
 
 Three Months Ended
 
 Twelve Months Ended
 
January 31,
 
January 25,
 
January 31,
 
January 25,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Revenue
$
1,401

 
$
1,251

 
$
5,010

 
$
4,682

Cost of revenue
610

 
552

 
2,199

 
2,083

Gross profit
791

 
699

 
2,811

 
2,599

Operating expenses
 
 
 
 
 
 
 
Research and development
344

 
348

 
1,331

 
1,360

Sales, general and administrative
161

 
120

 
602

 
480

Restructuring and other charges
34

 
—

 
131

 
—

Total operating expenses
539

 
468

 
2,064

 
1,840

Operating income
252

 
231

 
747

 
759

Interest income
11

 
8

 
39

 
28

Interest expense
(12
)
 
(12
)
 
(47
)
 
(46
)
Other income, net
2

 
1

 
4

 
14

Income before income tax expense
253

 
228

 
743

 
755

Income tax expense
46

 
35

 
129

 
124

Net income
$
207

 
$
193

 
$
614

 
$
631

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.38

 
$
0.35

 
$
1.13

 
$
1.14

Diluted
$
0.35

 
$
0.35

 
$
1.08

 
$
1.12

 
 
 
 
 
 
 
 
Weighted average shares used in per share computation:
 
 
 
 
 
 
 
Basic
539

 
544

 
543

 
552

Diluted
593

 
557

 
569

 
563






NVIDIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
January 31,
 
January 25,
 
 
 
2016
 
2015
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash, cash equivalents and marketable securities
 
$
5,037

 
$
4,623

 
Accounts receivable, net
 
505

 
474

 
Inventories
 
418

 
483

 
Prepaid expenses and other current assets
 
93

 
133

 
  Total current assets
 
6,053

 
5,713

 
 
 
 
 
 
Property and equipment, net
 
466

 
557

Goodwill
 
618

 
618

Intangible assets, net
 
166

 
222

Other assets
 
67

 
91

 
  Total assets
 
$
7,370

 
$
7,201

 
 
 
 
 
 
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
 
$
296

 
$
293

 
Accrued and other current liabilities
 
642

 
603

 
Convertible short-term debt
 
1,413

 
—

 
  Total current liabilities
 
2,351

 
896

 
 
 
 
 
 
Convertible long-term debt
 
—

 
1,384

Other long-term liabilities
 
453

 
489

Capital lease obligations, long-term
 
10

 
14

 
  Total liabilities
 
2,814

 
2,783

 
 
 
 
 
 
Convertible debt conversion obligation
 
87

 
—

 
 
 
 
 
 
Shareholders' equity
 
4,469

 
4,418

 
Total liabilities, convertible debt conversion obligation and shareholders' equity
 
$
7,370

 
$
7,201






NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
791

 
$
734

 
$
699

 
$
2,811

 
$
2,599

GAAP gross margin
 
56.5
%
 
56.3
%
 
55.9
%
 
56.1
%
 
55.5
%
Stock-based compensation expense (A)
 
5

 
4

 
4

 
15

 
12

Product warranty charge (B)
 
5

 
—

 
—

 
20

 
—

Non-GAAP gross profit
 
$
801

 
$
738

 
$
703

 
$
2,846

 
$
2,611

Non-GAAP gross margin
 
57.2
%
 
56.5
%
 
56.2
%
 
56.8
%
 
55.8
%
 
 
 
 
 
 
 
 
 
 
 
GAAP operating expenses
 
$
539

 
$
489

 
$
468

 
$
2,064

 
$
1,840

Stock-based compensation expense (A)
 
(56
)
 
(47
)
 
(39
)
 
(190
)
 
(146
)
     Acquisition-related costs (C)
 
(4
)
 
(4
)
 
(9
)
 
(22
)
 
(37
)
Restructuring and other charges
 
(34
)
 
(8
)
 
—

 
(131
)
 
—

Non-GAAP operating expenses
 
$
445

 
$
430

 
$
420

 
$
1,721

 
$
1,657

 
 
 
 
 
 
 
 
 
 
 
GAAP operating income
 
$
252

 
$
245

 
$
231

 
$
747

 
$
759

Total impact of non-GAAP adjustments to operating income
 
104

 
63

 
52

 
378

 
195

Non-GAAP operating income
 
$
356

 
$
308

 
$
283

 
$
1,125

 
$
954

 
 
 
 
 
 
 
 
 
 
 
GAAP other income (expense), net
 
$
1

 
$
—

 
$
(3
)
 
$
(4
)
 
$
(4
)
Gains from non-affiliated investments
 
—

 
(4
)
 
—

 
(5
)
 
(15
)
Interest expense related to amortization of debt discount
 
7

 
7

 
7

 
29

 
28

Non-GAAP other income, net
 
$
8

 
$
3

 
$
4

 
$
20

 
$
9

 
 
 
 
 
 
 
 
 
 
 
GAAP net income
 
$
207

 
$
246

 
$
193

 
$
614

 
$
631

Total pre-tax impact of non-GAAP adjustments
 
111

 
66

 
59

 
402

 
208

Income tax impact of non-GAAP adjustments
 
(21
)
 
(57
)
 
(11
)
 
(87
)
 
(38
)
Non-GAAP net income
 
$
297

 
$
255

 
$
241

 
$
929

 
$
801


  




 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
Diluted net income per share
 
 
 
 
 
 
 
 
 
 
GAAP
 
$
0.35

 
$
0.44

 
$
0.35

 
$
1.08

 
$
1.12

Non-GAAP
 
$
0.52

 
$
0.46

 
$
0.43

 
$
1.67

 
$
1.42

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares used in diluted net income per share computation
 
 
 
 
 
 
 
 
 
 
GAAP
 
593

 
565

 
557

 
569

 
563

Anti-dilution impact from note hedge (D)
 
(26
)
 
(10
)
 
—

 
(13
)
 
—

Non-GAAP
 
567

 
555

 
557

 
556

 
563

 
 
 
 
 
 
 
 
 
 
 
Metrics:
 
 
 
 
 
 
 
 
 
 
Restructuring and other charges
 
$
34

 
$
8

 
$
—

 
$
131

 
$
—

Income tax impact of restructuring and other charges
 
(9
)
 
(50
)
 
—

 
(45
)
 
—

Restructuring and other charges, net of income tax
 
$
25

 
$
(42
)
 
$
—

 
$
86

 
$
—

GAAP diluted shares
 
593

 
565

 
—

 
569

 
—

Per diluted share impact of restructuring and other charges
 
$
0.04

 
$
(0.07
)
 
$
—

 
$
0.15

 
$
—

 
 
 
 
 
 
 
 
 
 
 
GAAP net cash provided by operating activities
 
$
510

 
$
255

 
$
443

 
$
1,175

 
$
906

Purchase of property and equipment and intangible assets
 
(15
)
 
(16
)
 
(31
)
 
(86
)
 
(123
)
Free cash flow
 
$
495

 
$
239

 
$
412

 
$
1,089

 
$
783


(A) Excludes stock-based compensation as follows:
 
 
 
 
 
 
 
 
 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
Cost of revenue
 
$
5

 
$
4

 
$
4

 
$
15

 
$
12

Research and development
 
$
33

 
$
28

 
$
23

 
$
115

 
$
88

Sales, general and administrative
 
$
22

 
$
19

 
$
15

 
$
74

 
$
57

 
 
 
 
 
 
 
 
 
 
 
(B) Represents warranty charge associated with a 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 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
 
 
 
 
 Q1 FY2017 Outlook
  GAAP gross margin
 
57.2
%
 
Impact of stock-based compensation
 
0.3
%
  Non-GAAP gross margin
 
57.5
%
 
 
 
 
 
 
 
 Q1 FY2017 Outlook
 
 
 
(In millions)
GAAP operating expenses
 
$
500

 
Stock-based compensation expense and acquisition-related costs
 
(55
)
Non-GAAP operating expenses
 
$
445








CFO Commentary on the Fourth Quarter and Fiscal Year 2016 Results

Q4 FY 2016 Summary

GAAP
($ in millions except earnings per share)
Q4 FY16
Q3 FY16
Q4 FY15
Q/Q
Y/Y
Revenue
$1,401
$1,305
$1,251
up 7%
up 12%

Gross margin
56.5%
56.3%
55.9%
up 20 bps
up 60 bps

Operating expenses
$539
$489
$468
up 10%
up 15%

Operating income
$252
$245
$231
up 3%
up 9%

Net income
$207
$246
$193
down 16%
up 7%

Diluted earnings per share
$0.35
$0.44
$0.35
down 20%
—


Non-GAAP
($ in millions except earnings per share)
Q4 FY16
Q3 FY16
Q4 FY15
Q/Q
Y/Y
Revenue
$1,401
$1,305
$1,251
up 7%
up 12%
Gross margin
57.2%
56.5%
56.2%
up 70 bps
up 100 bps
Operating expenses
$445
$430
$420
up 3%
up 6%
Operating income
$356
$308
$283
up 16%
up 26%
Net income
$297
$255
$241
up 16%
up 23%
Diluted earnings per share
$0.52
$0.46
$0.43
up 13%
up 21%

Revenue
($ in millions)
Q4 FY16
Q3 FY16
Q4 FY15
Q/Q
Y/Y
GPU
$1,178
$1,110
$1,073
up 6%

up 10%

Tegra Processor
157

129

112

up 22%

up 40%

Other
66

66

66

—

—

Total
$1,401
$1,305
$1,251
up 7%

up 12%


FY 2016 Summary

GAAP
($ in millions except earnings per share)
FY16
FY15
Y/Y
Revenue
$5,010
$4,682
up 7%
Gross margin
56.1%
55.5%
up 60 bps
Operating expenses
$2,064
$1,840
up 12%
Operating income
$747
$759
down 2%
Net income
$614
$631
down 3%
Diluted earnings per share
$1.08
$1.12
down 4%





Non-GAAP
($ in millions except earnings per share)
FY16
FY15
Y/Y
Revenue
$5,010
$4,682
up 7%
Gross margin
56.8%
55.8%
up 100 bps
Operating expenses
$1,721
$1,657
up 4%
Operating income
$1,125
$954
up 18%
Net income
$929
$801
up 16%
Diluted earnings per share
$1.67
$1.42
up 18%

Revenue
($ in millions)
FY16
FY15
Y/Y
GPU
$4,187
$3,839
up 9%

Tegra Processor
559
579
down 3%

Other
264
264
—

Total
$5,010
$4,682
up 7%


Fourth quarter revenue increased 7 percent sequentially and 12 percent year over year to $1.40 billion. Growth was driven by GPUs for gaming, professional visualization, and datacenter as well as Tegra automotive systems.

Full year fiscal 2016 revenue grew 7 percent to a record $5.01 billion, reflecting growth in our market platforms -- Gaming, Datacenter, and Automotive.

GPU revenue for the fourth quarter was $1.18 billion, up 6 percent sequentially and up 10 percent from a year earlier. GeForce® Gaming GPU revenue grew 21 percent from a year ago, as sales from all regions continue to provide solid growth. Professional visualization revenue from Quadro® was $203 million, up 7 percent both sequentially and year over year. Datacenter revenue, including Tesla® and GRID™, was $97 million, up 18 percent sequentially and up 10 percent from a year earlier.

Tegra® Processor revenue for the fourth quarter of $157 million was up 22 percent sequentially and up 40 percent year on year, reflecting growth in Tegra development services and automotive. Automotive revenue of $93 million from infotainment modules and product-development contracts increased 18 percent sequentially and 68 percent from a year earlier.

License revenue from our patent license agreement with Intel remained flat at $66 million for the fourth quarter.

Gross Margin

GAAP gross margin for the fourth quarter was 56.5 percent; non-GAAP gross margin was a record 57.2 percent. For fiscal 2016, GAAP gross margin was a record 56.1 percent; non-GAAP gross margin was a record 56.8 percent. Growth in GAAP and non-GAAP gross margins from a year ago were led by the strength in GPU gaming platform revenue.





Expenses

GAAP operating expenses for the fourth quarter were $539 million, including $34 million in restructuring and other charges and $60 million in stock-based compensation and other charges. Non-GAAP operating expenses were $445 million, in line with our outlook.

For fiscal 2016, GAAP operating expenses were $2.06 billion, including $131 million in restructuring and other charges and $212 million in stock-based compensation and other charges. Non-GAAP operating expenses were $1.72 billion, including legal fees associated with our litigation against Samsung and Qualcomm.
 
Restructuring and Other

During the quarter, we continued the wind-down of our Icera® modem operations.

Our GAAP operating expenses included $34 million of restructuring and other charges - consisting of $24 million in severance and benefits, $8 million from lease obligations and the write-down of physical assets, and $2 million of other exit costs. In all, our GAAP net income for fiscal 2016 included $86 million in restructuring charges, net of tax.

In the first quarter of fiscal year 2017, we expect to incur restructuring charges of $1 million to $2 million as we continue to wind down the Icera modem operations.

The Icera wind-down benefited non-GAAP operating expenses in the fourth quarter of the year. In fiscal 2016, we carefully invested in our growth initiatives of gaming, deep learning and autonomous cars, while non-GAAP operating expenses were approximately flat with fiscal 2015, excluding litigation costs.
 
Operating Income, OI&E, and Taxes

GAAP operating income for fiscal 2016 was $747 million and for the fourth quarter was $252 million, up from $231 million a year earlier, reflecting strong revenue growth from GeForce GTX GPUs, partially offset by restructuring costs. Non-GAAP operating income for fiscal 2016 was $1.13 billion and for the fourth quarter was $356 million, up 26 percent from $283 million a year earlier.

Other income and expense, or OI&E, includes interest earned on our cash and investments, interest expense associated with our convertible debt, and other gains and losses. OI&E for the quarter included $12 million of interest expense primarily associated with our convertible debt, $11 million of interest income from our investment portfolio and $2 million of other income. OI&E for fiscal 2016 was a net $4 million of expense.

For the fourth quarter, our GAAP effective tax rate was 18.3 percent. Our non-GAAP effective tax rate was 18.4 percent, higher than 15.9 percent a year earlier. For fiscal 2016, our GAAP effective tax rate was 17.3 percent. Our non-GAAP effective tax rate was 18.8 percent.

Net Income and EPS

For the fourth quarter, GAAP net income was $207 million, and GAAP earnings per diluted share were $0.35. This includes a restructuring charge of $0.04 per diluted share in connection with the wind-down of Icera. Non-GAAP net income was $297 million, and non-GAAP earnings per diluted share were $0.52 for the fourth quarter, up 23 and 21 percent, respectively, from a year earlier, fueled by strong revenue growth and improved gross and operating margins.

For fiscal 2016, GAAP net income was $614 million and GAAP earnings per diluted share were $1.08, inclusive of restructuring and other charges of $0.15 per diluted share. Non-GAAP net income was $929 million and non-GAAP earnings per diluted share were $1.67, up 18% from a year ago.





Capital Return

During the fourth quarter, we paid $62 million in cash dividends and received 4.3 million shares from an accelerated share repurchase agreement that we had entered into in the quarter.

Since the restart of our capital return program in the fourth quarter of fiscal 2013, we have returned just over $3 billion to shareholders.  This return represents 98 percent of our cumulative free cash flow for fiscal years 2013 through 2016.  For fiscal 2016, we have returned $800 million to shareholders.

For fiscal 2017, we intend to return approximately $1.0 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

Balance Sheet and Cash Flow

Cash, cash equivalents and marketable securities at the end of the fourth quarter were $5.04 billion, compared with $4.73 billion at the end of the prior quarter, reflecting growth in operating cash flow, partially offset by the quarterly cash dividend and share repurchases.

Accounts receivable at the end of the quarter was $505 million, down from $536 million in the prior quarter. The sequential decrease was primarily due to the linearity of shipments within the quarter. DSO at quarter-end was 35 days, down from 37 days in the prior quarter, and up from 34 days in the fourth quarter of fiscal 2015.

Inventory at the end of the quarter was $418 million, down from $425 million in the prior quarter and from $483 million a year earlier. DSI at quarter-end was 67 days, down from 68 days in the prior quarter and 80 days a year earlier.

Cash flow from operating activities was $510 million in the fourth quarter, up from $255 million in the prior quarter and $443 million a year earlier. The sequential increase was primarily due to the annual Intel license payment and strong collections of accounts receivable.

Free cash flow was $495 million in the fourth quarter, compared with $239 million in the previous quarter and $412 million a year earlier.

Depreciation and amortization expense for the fourth quarter amounted to $46 million. Capital expenditures were $15 million.
    
First Quarter of Fiscal 2017 Outlook

Our outlook for the first quarter of fiscal 2017 is as follows:

•
Revenue is expected to be $1.26 billion, plus or minus two percent.

•
GAAP and non-GAAP gross margins are expected to be 57.2 percent and 57.5 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 first quarter of fiscal 2017 are both expected to be 19 percent, plus or minus one percent.

•
Capital expenditures are expected to be approximately $35 million to $45 million.





______________
For further information, contact:
Arnab Chanda
 
Robert Sherbin
Investor Relations
 
Corporate Communications
NVIDIA Corporation
 
NVIDIA Corporation
(408) 566-6616
 
(408) 566-5150
 

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 restructuring and other 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, 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 our Note Hedge. Per diluted share impact of restructuring and other charges is calculated as restructuring and other 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 our non-GAAP measures may be different from non-GAAP measures used by other companies.

Certain statements in this CFO Commentary including, but not limited to, statements as to: expected Icera restructuring charges; our intended fiscal 2017 capital return; our financial outlook for the first quarter of fiscal 2017; and our tax rates for the first quarter of fiscal 2017 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 October 25, 2015. Copies of reports filed with the SEC are posted on the company’s website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

# # #

© 2016 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Quadro, Tegra, Tesla, Icera, GRID, 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.









NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
791

 
$
734

 
$
699

 
$
2,811

 
$
2,599

GAAP gross margin
 
56.5
%
 
56.3
%
 
55.9
%
 
56.1
%
 
55.5
%
Stock-based compensation expense (A)
 
5

 
4

 
4

 
15

 
12

Product warranty charge (B)
 
5

 
—

 
—

 
20

 
—

Non-GAAP gross profit
 
$
801

 
$
738

 
$
703

 
$
2,846

 
$
2,611

Non-GAAP gross margin
 
57.2
%
 
56.5
%
 
56.2
%
 
56.8
%
 
55.8
%
 
 
 
 
 
 
 
 
 
 
 
GAAP operating expenses
 
$
539

 
$
489

 
$
468

 
$
2,064

 
$
1,840

Stock-based compensation expense (A)
 
(56
)
 
(47
)
 
(39
)
 
(190
)
 
(146
)
     Acquisition-related costs (C)
 
(4
)
 
(4
)
 
(9
)
 
(22
)
 
(37
)
Restructuring and other charges
 
(34
)
 
(8
)
 
—

 
(131
)
 
—

Non-GAAP operating expenses
 
$
445

 
$
430

 
$
420

 
$
1,721

 
$
1,657

 
 
 
 
 
 
 
 
 
 
 
GAAP operating income
 
$
252

 
$
245

 
$
231

 
$
747

 
$
759

Total impact of non-GAAP adjustments to operating income
 
104

 
63

 
52

 
378

 
195

Non-GAAP operating income
 
$
356

 
$
308

 
$
283

 
$
1,125

 
$
954

 
 
 
 
 
 
 
 
 
 
 
GAAP other income (expense), net
 
$
1

 
$
—

 
$
(3
)
 
$
(4
)
 
$
(4
)
Gains from non-affiliated investments
 
—

 
(4
)
 
—

 
(5
)
 
(15
)
Interest expense related to amortization of debt discount
 
7

 
7

 
7

 
29

 
28

Non-GAAP other income, net
 
$
8

 
$
3

 
$
4

 
$
20

 
$
9

 
 
 
 
 
 
 
 
 
 
 
GAAP net income
 
$
207

 
$
246

 
$
193

 
$
614

 
$
631

Total pre-tax impact of non-GAAP adjustments
 
111

 
66

 
59

 
402

 
208

Income tax impact of non-GAAP adjustments
 
(21
)
 
(57
)
 
(11
)
 
(87
)
 
(38
)
Non-GAAP net income
 
$
297

 
$
255

 
$
241

 
$
929

 
$
801


  




 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
Diluted net income per share
 
 
 
 
 
 
 
 
 
 
GAAP
 
$
0.35

 
$
0.44

 
$
0.35

 
$
1.08

 
$
1.12

Non-GAAP
 
$
0.52

 
$
0.46

 
$
0.43

 
$
1.67

 
$
1.42

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares used in diluted net income per share computation
 
 
 
 
 
 
 
 
 
 
GAAP
 
593

 
565

 
557

 
569

 
563

Anti-dilution impact from note hedge (D)
 
(26
)
 
(10
)
 
—

 
(13
)
 
—

Non-GAAP
 
567

 
555

 
557

 
556

 
563

 
 
 
 
 
 
 
 
 
 
 
Metrics:
 
 
 
 
 
 
 
 
 
 
Restructuring and other charges
 
$
34

 
$
8

 
$
—

 
$
131

 
$
—

Income tax impact of restructuring and other charges
 
(9
)
 
(50
)
 
—

 
(45
)
 
—

Restructuring and other charges, net of income tax
 
$
25

 
$
(42
)
 
$
—

 
$
86

 
$
—

GAAP diluted shares
 
593

 
565

 
—

 
569

 
—

Per diluted share impact of restructuring and other charges
 
$
0.04

 
$
(0.07
)
 
$
—

 
$
0.15

 
$
—

 
 
 
 
 
 
 
 
 
 
 
GAAP net cash provided by operating activities
 
$
510

 
$
255

 
$
443

 
$
1,175

 
$
906

Purchase of property and equipment and intangible assets
 
(15
)
 
(16
)
 
(31
)
 
(86
)
 
(123
)
Free cash flow
 
$
495

 
$
239

 
$
412

 
$
1,089

 
$
783


(A) Excludes stock-based compensation as follows:
 
 
 
 
 
 
 
 
 
 
 Three Months Ended
 
 Twelve Months Ended
 
 
January 31,
 
October 25,
 
January 25,
 
January 31,
 
January 25,
 
 
2016
 
2015
 
2015
 
2016
 
2015
Cost of revenue
 
$
5

 
$
4

 
$
4

 
$
15

 
$
12

Research and development
 
$
33

 
$
28

 
$
23

 
$
115

 
$
88

Sales, general and administrative
 
$
22

 
$
19

 
$
15

 
$
74

 
$
57

 
 
 
 
 
 
 
 
 
 
 
(B) Represents warranty charge associated with a 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 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
 
 
 
 
 Q1 FY2017 Outlook
  GAAP gross margin
 
57.2
%
 
Impact of stock-based compensation
 
0.3
%
  Non-GAAP gross margin
 
57.5
%
 
 
 
 
 
 
 
 Q1 FY2017 Outlook
 
 
 
(In millions)
GAAP operating expenses
 
$
500

 
Stock-based compensation expense and acquisition-related costs
 
(55
)
Non-GAAP operating expenses
 
$
445








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