Form 8-K NVIDIA CORP For: Nov 06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13�or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): November 6, 2014
NVIDIA CORPORATION |
(Exact name of registrant as specified in its charter) |
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Delaware | 0-23985 | 94-3177549 |
(State or other jurisdiction | (Commission | (IRS Employer |
of incorporation) | File Number) | Identification No.) |
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� | 2701 San Tomas Expressway, Santa Clara, CA | 95050 |
� | (Address of principal executive offices) | (Zip Code) |
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Registrants telephone number, including area code: (408) 486-2000
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Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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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:
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[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
SECTION 2 - Financial Information
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Item 2.02 Results of Operations and Financial Condition.
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On�November 6, 2014, NVIDIA Corporation issued a press release announcing its results for the three and nine months ended October 26, 2014. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.
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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 NVIDIA, regarding results of the quarter ended October 26, 2014, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.
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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 NVIDIA, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SECTION 9 - Financial Statements and Exhibits
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Item 9.01 Financial Statements and Exhibits.
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(d) Exhibits
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Exhibit | � | Description |
99.1 | � | Press Release, dated November 6, 2014, entitled NVIDIA Announces Financial Results�for Third Quarter Fiscal 2015" |
99.2 | � | CFO Commentary on Third Quarter Fiscal Year 2015 Results |
SIGNATURE
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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.
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� | NVIDIA Corporation | |
Date: November 6, 2014 | By: /s/ Colette M. Kress | |
� | Colette M. Kress | |
� | Executive Vice President�and�Chief Financial Officer | |
EXHIBIT INDEX
Exhibit | � | Description |
99.1 | � | Press Release, dated November 6, 2014, entitled NVIDIA Announces Financial Results�for Third Quarter Fiscal 2015" |
99.2 | � | CFO Commentary on Third Quarter Fiscal Year 2015 Results |
FOR IMMEDIATE RELEASE:
NVIDIA Announces Financial Results for Third Quarter Fiscal 2015
" | Record revenue of $1.23 billion in quarter, up 16 percent from a year earlier |
" | GAAP diluted EPS of $0.31 in quarter, up from $0.20 a year earlier; non-GAAP diluted EPS of $0.39, up from $0.26 a year earlier |
" | Record revenue of $3.43 billion in first three quarters, up 15 percent from a year earlier |
SANTA CLARA, Calif.-Nov. 6, 2014-NVIDIA (NASDAQ: NVDA) today reported revenue for the third quarter ended October 26, 2014, of $1.23�billion, up 16 percent from $1.05 billion a year earlier and up 11 percent from $1.10 billion the previous quarter. Revenue for the first three quarters of fiscal 2015 was a record $3.43 billion, up 15 percent from $2.99 billion a year earlier.
GAAP earnings per diluted share for the quarter were $0.31, up 55 percent from $0.20 a year earlier and up 41 percent from the previous quarter. Non-GAAP earnings per diluted share were $0.39, up 50 percent from $0.26 a year earlier and up 30 percent from the previous quarter.
NVIDIAs focus on creating visual computing platforms for datacenter, mobile and PC drove record revenue this quarter, said Jen-Hsun Huang, president and chief executive officer of NVIDIA.
Growth drivers have kicked in for us on several fronts. High-performance computing, virtualization and web service providers have created demand for our GPU-accelerated datacenter platforms. Automakers are using Tegra to help reinvent the driving experience. And our new Maxwell architecture is a giant leap forward that has triggered a major upgrade�cycle by PC gamers. �
During the third quarter, NVIDIA paid $46 million in cash dividends and received 16.8 million shares under a $310 million structured repurchase agreement it entered into in the quarter. During the first three quarters of fiscal 2015, the company paid $140 million in cash dividends and repurchased 44.2 million shares. As a result, the company has returned to shareholders $950 million in the first three quarters of fiscal 2015.
Since restarting its capital return program in the fourth quarter of fiscal 2013, NVIDIA has returned approximately $2.17 billion to shareholders. This represents 136 percent of the companys cumulative free cash flow for fiscal years 2013 to 2015 to date, and reflects the acceleration of the capital return program of cash generated in previous years.
The company intends to return approximately $600 million to shareholders in fiscal 2016 through ongoing quarterly cash dividends and share repurchases.
NVIDIA will pay its next quarterly cash dividend of $0.085 per share on Dec. 15, 2014, to all shareholders of record on Nov. 21, 2014. NVIDIA expects that a portion of this dividend payment may be considered a return of capital for U.S. federal income tax purposes.
GAAP Quarterly Financial Comparison | |||||
($ in millions except earnings per share) | Q3 FY15 | Q2 FY15 | Q3 FY14 | Q/Q | Y/Y |
Revenue | $1,225 | $1,103 | $1,054 | up 11% | up 16% |
Gross margin | 55.2% | 56.1% | 55.4% | down 90 bps | down 20 bps |
Operating expenses | $463 | $456 | $443 | up 2% | up 5% |
Net income | $173 | $128 | $119 | up 35% | up 45% |
Diluted earnings per share | $0.31 | $0.22 | $0.20 | up 41% | up 55% |
Non-GAAP Quarterly Financial Comparison | |||||
($ in millions except earnings per share) | Q3 FY15 | Q2 FY15 | Q3 FY14 | Q/Q | Y/Y |
Revenue | $1,225 | $1,103 | $1,054 | up 11% | up 16% |
Gross margin | 55.5% | 56.4% | 55.7% | down 90 bps | down 20 bps |
Operating expenses | $415 | $411 | $405 | up 1% | up 2% |
Net income | $220 | $173 | $154 | up 27% | up 43% |
Diluted earnings per share | $0.39 | $0.30 | $0.26 | up 30% | up 50% |
NVIDIAs outlook for the fourth quarter of fiscal 2015 is as follows:
" | Revenue is expected to be $1.20 billion, plus or minus two percent. |
" | GAAP and non-GAAP gross margins are expected to be 55.2 percent and 55.5 percent, respectively, plus or minus 50 basis points. |
" | GAAP operating expenses are expected to be approximately $470�million; non-GAAP operating expenses are expected to be approximately $422 million, inclusive of litigation costs. |
" | GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2015 are both expected to be 18 percent, plus or minus one percentage point. This estimate excludes any discrete tax events that may occur during a quarter which, if realized, may increase or decrease NVIDIAs actual effective tax rates in such quarter. |
" | Capital expenditures are expected to be approximately $40 million to $50 million. |
Third Quarter Fiscal 2015 Highlights
During the third quarter, NVIDIA:
" | Launched flagship NVIDIA� GeForce� GTX" GPUs for gaming based on Maxwell", its 10th generation GPU architecture, which sets new standards of efficiency and performance. |
" | Extended Maxwell-based processors into the companys upgraded NVIDIA Quadro� lineup. |
" | Continued Tesla�s push into the big data analytics market. IBM announced future support for GPU acceleration in its IBM DB2 with BLU database software; NVIDIA released a deep learning library to enable faster growth in machine learning; and nearly all teams in the recent ImageNet international computer-vision competition used GPUs. |
" | Announced its early customer access program for NVIDIA GRID" with VMware, which is drawing strong interest from companies worldwide. Among those signing up were airline-manufacturer Airbus, international construction group CH2M Hill and U.S. healthcare-provider MetroHealth. |
" | Added new wins for the Tegra� K1 mobile processor, including the Google Nexus 9 tablet and NVIDIAs SHIELD" tablet with 32GB of memory and LTE connectivity. Acer and HP also announced Chromebooks with Tegra K1. |
" | Surpassed 6 million cars on the road with infotainment systems powered by NVIDIA. Honda also announced that three of its models - the Civic, Civic Tourer and CR-V - will include Tegra-based systems in the European market. |
" | Filed lawsuits against Samsung and Qualcomm in the International Trade Commission (ITC) and U.S. District Court in Delaware for using NVIDIA GPU patents without a license. The ITC has subsequently determined that it will investigate the case and hold an evidentiary hearing in June of 2015. |
CFO Commentary
Commentary on the quarter by Colette Kress, NVIDIAs 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 2015 financial results and current financial prospects today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To listen to the conference call, dial (303) 223-2684; no password is required. A live webcast (listen-only mode) of the conference call will be accessible at the NVIDIA investor relations web site 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 fiscal 2015.
Non-GAAP Measures
To supplement NVIDIAs 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 other income and expense, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, and free cash flow. In order for NVIDIAs 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 settlements, acquisition-related costs, gains and losses from non-affiliated investments, interest expense related to the amortization of debt discount, other 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 companys historical financial performance. The presentation of the companys non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the companys financial results prepared in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.
To Keep Current on NVIDIA:
" | Keep up with the NVIDIA Blog. |
" | Like NVIDIA on Facebook. |
" | Connect with NVIDIA on LinkedIn. |
" | Follow @NVIDIA on Twitter. |
" | View NVIDIA videos on YouTube. |
" | Use the Pulse news reader to subscribe to the NVIDIA Daily News feed. |
About NVIDIA
Since 1993, NVIDIA (NASDAQ: NVDA) has pioneered the art and science of visual computing. The companys 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: demand for the companys GPU-accelerated datacenter platforms; automakers using Tegra to help reinvent the driving experience; Maxwell architecture as a giant leap forward; the companys intent to return $600 million to shareholders in fiscal 2016; a portion of the companys dividend payment being considered a return of capital; the companys financial outlook for the fourth quarter of fiscal 2015; and the companys tax rate for the fourth quarter of fiscal 2015 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 27, 2014. Copies of reports filed with the SEC are posted on the companys 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.
� 2014 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, GTX, Quadro, Tegra, Tesla, Maxwell, NVIDIA 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.
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For further information, contact:
Raj Santhanam | Robert Sherbin | |
Investor Relations | Corporate Communications | |
NVIDIA Corporation | NVIDIA Corporation | |
(408) 566-6616 | (408) 566-5150 | |
NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
� | �Three Months Ended | �Nine Months Ended | |||||||||||||
� | October 26, | October 27, | October 26, | October 27, | |||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenue | $ | 1,225,382 | $ | 1,053,967 | $ | 3,430,993 | $ | 2,985,944 | |||||||
Cost of revenue | 548,684 | 469,552 | 1,531,119 | 1,337,423 | |||||||||||
Gross profit | 676,698 | 584,415 | 1,899,874 | 1,648,521 | |||||||||||
Operating expenses | |||||||||||||||
Research and development | 340,085 | 340,294 | 1,011,472 | 999,193 | |||||||||||
Sales, general and administrative | 123,298 | 103,133 | 360,549 | 320,025 | |||||||||||
Total operating expenses | 463,383 | 443,427 | 1,372,021 | 1,319,218 | |||||||||||
Operating income | 213,315 | 140,988 | 527,853 | 329,303 | |||||||||||
Interest income | 7,422 | 4,022 | 19,961 | 12,963 | |||||||||||
Interest expense | 11,542 | 819 | 34,539 | 2,508 | |||||||||||
Other income (expense), net | (125 | ) | (2,707 | ) | 13,702 | 1,608 | |||||||||
Income before income tax expense | 209,070 | 141,484 | 526,977 | 341,366 | |||||||||||
Income tax expense | 36,103 | 22,750 | 89,518 | 48,293 | |||||||||||
Net income | $ | 172,967 | $ | 118,734 | $ | 437,459 | $ | 293,073 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.32 | $ | 0.20 | $ | 0.79 | $ | 0.49 | |||||||
Diluted | $ | 0.31 | $ | 0.20 | $ | 0.77 | $ | 0.49 | |||||||
Weighted average shares used in per share computation: | |||||||||||||||
Basic | 547,789 | 580,870 | 555,035 | 594,363 | |||||||||||
Diluted | 558,201 | 588,752 | 565,653 | 600,108 | |||||||||||
NVIDIA CORPORATION | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
October 26, | January 26, | ||||||||
2014 | 2014 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash, cash equivalents and marketable securities | $ | 4,240,797 | $ | 4,671,810 | |||||
Accounts receivable, net | 563,400 | 426,357 | |||||||
Inventories | 408,081 | 387,765 | |||||||
Prepaid expenses and other current assets | 128,831 | 138,779 | |||||||
��Total current assets | 5,341,109 | 5,624,711 | |||||||
Property and equipment, net | 566,601 | 582,740 | |||||||
Goodwill | 643,179 | 643,179 | |||||||
Intangible assets, net | 241,301 | 296,012 | |||||||
Other assets | 93,679 | 104,252 | |||||||
��Total assets | $ | 6,885,869 | $ | 7,250,894 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 328,097 | $ | 324,391 | |||||
Accrued liabilities and other current liabilities | 605,810 | 621,105 | |||||||
��Total current liabilities | 933,907 | 945,496 | |||||||
Long-term debt | 1,377,259 | 1,356,375 | |||||||
Other long-term liabilities | 355,133 | 475,125 | |||||||
Capital lease obligations, long-term | 14,977 | 17,500 | |||||||
Stockholders' equity | 4,204,593 | 4,456,398 | |||||||
��Total liabilities and stockholders' equity | $ | 6,885,869 | $ | 7,250,894 | |||||
NVIDIA CORPORATION | ||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
� | �Three Months Ended | Nine Months Ended | ||||||||||||||||||
� | October 26, | July 27, | October 27, | October 26, | October 27, | |||||||||||||||
� | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
GAAP gross profit | $ | 676,698 | $ | 618,974 | $ | 584,415 | $ | 1,899,874 | $ | 1,648,521 | ||||||||||
GAAP gross margin | 55.2 | % | 56.1 | % | 55.4 | % | 55.4 | % | 55.2 | % | ||||||||||
Stock-based compensation expense included in cost of revenue (A) | 3,021 | 2,656 | 3,090 | 8,596 | 7,911 | |||||||||||||||
Legal settlement | 2,290 | |||||||||||||||||||
Non-GAAP gross profit | $ | 679,719 | $ | 621,630 | $ | 587,505 | $ | 1,908,470 | $ | 1,658,722 | ||||||||||
Non-GAAP gross margin | 55.5 | % | 56.4 | % | 55.7 | % | 55.6 | % | 55.6 | % | ||||||||||
GAAP operating expenses | $ | 463,383 | $ | 455,795 | $ | 443,427 | $ | 1,372,021 | $ | 1,319,218 | ||||||||||
Stock-based compensation expense included in operating expense (A) | (38,414 | ) | (35,759 | ) | (31,209 | ) | (106,775 | ) | (92,180 | ) | ||||||||||
�����Acquisition-related costs (B) | (9,572 | ) | (9,173 | ) | (4,577 | ) | (28,186 | ) | (22,402 | ) | ||||||||||
�����Other expense (C) | (2,235 | ) | (2,235 | ) | ||||||||||||||||
Non-GAAP operating expenses | $ | 415,397 | $ | 410,863 | $ | 405,406 | $ | 1,237,060 | $ | 1,202,401 | ||||||||||
GAAP other income (expense), net | $ | (4,245 | ) | $ | (8,554 | ) | $ | 496 | $ | (876 | ) | $ | 12,063 | |||||||
Gains and losses from non-affiliated investments | 2,500 | (14,482 | ) | |||||||||||||||||
Interest expense related to amortization of debt discount | 7,010 | 6,973 | 20,884 | |||||||||||||||||
Non-GAAP other income (expense), net | $ | 2,765 | $ | 919 | $ | 496 | $ | 5,526 | $ | 12,063 | ||||||||||
GAAP net income | $ | 172,967 | $ | 127,976 | $ | 118,734 | $ | 437,459 | $ | 293,073 | ||||||||||
Total pre-tax impact of non-GAAP adjustments | 58,017 | 57,061 | 41,111 | 149,959 | 127,018 | |||||||||||||||
Income tax impact of non-GAAP adjustments | (10,549 | ) | (11,606 | ) | (6,055 | ) | (27,497 | ) | (19,170 | ) | ||||||||||
Non-GAAP net income | $ | 220,435 | $ | 173,431 | $ | 153,790 | $ | 559,921 | $ | 400,921 | ||||||||||
Diluted net income per share | ||||||||||||||||||||
GAAP | $ | 0.31 | $ | 0.22 | $ | 0.20 | $ | 0.77 | $ | 0.49 | ||||||||||
Non-GAAP | $ | 0.39 | $ | 0.30 | $ | 0.26 | $ | 0.99 | $ | 0.67 | ||||||||||
Shares used in diluted net income per share computation | 558,201 | 570,572 | 588,752 | 565,653 | 600,108 | |||||||||||||||
Metrics: | ||||||||||||||||||||
GAAP net cash flow provided by operating activities | $ | 215,623 | $ | 96,282 | $ | 162,315 | $ | 462,927 | $ | 434,434 | ||||||||||
Purchase of property and equipment and intangible assets | (39,741 | ) | (22,527 | ) | (38,159 | ) | (91,336 | ) | (188,812 | ) | ||||||||||
Free cash flow | $ | 175,882 | $ | 73,755 | $ | 124,156 | $ | 371,591 | $ | 245,622 | ||||||||||
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(A) Excludes stock-based compensation as follows: | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
� | October 26, | July 27, | October 27, | October 26, | October 27, | |||||||||||||||
� | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
Cost of revenue | $ | 3,021 | $ | 2,656 | $ | 3,090 | $ | 8,596 | $ | 7,911 | ||||||||||
Research and development | $ | 22,680 | $ | 21,462 | $ | 20,902 | $ | 64,636 | $ | 61,392 | ||||||||||
Sales, general and administrative | $ | 15,734 | $ | 14,297 | $ | 10,307 | $ | 42,139 | $ | 30,788 | ||||||||||
(B) Consists of amortization of acquisition-related intangible assets, transaction costs, compensation charges, and other credits related to acquisitions. | ||||||||||||||||||||
(C) Consists of restructuring charges. | ||||||||||||||||||||
�NVIDIA CORPORATION | |||||
�RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK | |||||
�Q4 FY2015 Outlook | |||||
��GAAP gross margin | 55.2 | % | |||
Impact of stock-based compensation | 0.3 | % | |||
��Non-GAAP gross margin | 55.5 | % | |||
�Q4 FY2015 Outlook | |||||
(In millions) | |||||
GAAP operating expenses | $ | 470 | |||
Stock-based compensation expense and acquisition-related costs | (48 | ) | |||
Non-GAAP operating expenses | $ | 422 | |||
CFO Commentary on Third Quarter Fiscal Year 2015 Results
Q3 FY 2015 Summary
GAAP Quarterly Financial Comparison | |||||
($ in millions except earnings per share) | Q3 FY15 | Q2 FY15 | Q3 FY14 | Q/Q | Y/Y |
Revenue | $1,225 | $1,103 | $1,054 | up 11% | up 16% |
Gross margin | 55.2% | 56.1% | 55.4% | down 90 bps | down 20 bps |
Operating expenses | $463 | $456 | $443 | up 2% | up 5% |
Net income | $173 | $128 | $119 | up 35% | up 45% |
Diluted earnings per share | $0.31 | $0.22 | $0.20 | up 41% | up 55% |
Non-GAAP Quarterly Financial Comparison | |||||
($ in millions except earnings per share) | Q3 FY15 | Q2 FY15 | Q3 FY14 | Q/Q | Y/Y |
Revenue | $1,225 | $1,103 | $1,054 | up 11% | up 16% |
Gross margin | 55.5% | 56.4% | 55.7% | down 90 bps | down 20 bps |
Operating expenses | $415 | $411 | $405 | up 1% | up 2% |
Net income | $220 | $173 | $154 | up 27% | up 43% |
Diluted earnings per share | $0.39 | $0.30 | $0.26 | up 30% | up 50% |
Revenue
GAAP Quarterly Revenue Comparison | |||||
($ in millions) | Q3 FY15 | Q2 FY15 | Q3 FY14 | Q/Q | Y/Y |
GPU | $991 | $878 | $877 | up 13% | up 13% |
Tegra Processor | 168 | 159 | 111 | up 6% | up 51% |
Other | 66 | 66 | 66 | ------- | ------- |
Total | $1,225 | $1,103 | $1,054 | up 11% | up 16% |
Revenue increased 16 percent year over year to a record $1.23 billion. Growth was driven by the strength of GeForce� GPUs for gaming, related to our launch during the quarter of Maxwell" -based GPUs. Growth was also fueled by strength in datacenter GPUs and automobile infotainment systems. Overall, we experienced growth in revenue across all our businesses and platforms - PC, datacenter, and mobile.
Revenue in the GPU business grew 13 percent from the third quarter of the prior year. Revenue from GeForce GPUs for gaming desktops and notebooks grew 36 percent, fueled by continued strength in PC gaming, including the recently released Maxwell-based GTX" GPUs. Within this gaming segment, gaming notebooks more than doubled from year-ago levels. Tesla� GPU for high performance computing increased strongly, representing another record quarter for revenue, driven by large project wins with cloud service providers and government customers. Quadro� GPU revenue remained strong, with the new product platform, launched in August, delivering industry leading graphics and rendering performance.
Tegra� Processor sales grew 51 percent from a year ago, led by automobile infotainment systems, mobile devices, embedded systems, and the onset of SHIELD" tablet sales. Automobile infotainment system revenue nearly doubled year over year.
Revenue was up 11 percent sequentially. The GPU business grew 13 percent due to Maxwell and the seasonal increase in consumer PCs. Our datacenter platform revenue increased sequentially, as well, driven by continued strength in GPU acceleration opportunities. Tegra Processor sales increased, led by embedded systems, auto infotainment systems, and the onset of SHIELD tablet sales.����
License revenue from our patent license agreement with Intel was $66 million.
Gross Margin
GAAP gross margin was 55.2 percent, in line with our outlook for the quarter and down 90 basis points from last quarter. Non-GAAP gross margin was 55.5 percent, also in line with our outlook and down 90 basis points sequentially. The gross margin reflected continued strength in our GPU margins for PC platforms inclusive of the product transition to Maxwell-based GPUs for desktops, notebooks, and workstations. Our margins from the above mentioned PC platforms and datacenter and cloud GPUs, were partially offset by the impact of Tegra processor margins, which are lower than the companys overall average.
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Expenses and Other
GAAP operating expenses for the third quarter were $463 million, in line with our outlook for the quarter and up 2 percent from the prior quarters $456 million. Non-GAAP operating expenses were $415 million, lower than our outlook and inclusive of legal fees associated with our litigation against Samsung and Qualcomm.
The operating expense discipline reflects continued management of our investments in both R&D and capital expenditures to enhance our return on invested capital. Operating expenses grew year over year due to employee additions, employee compensation increases and related costs, partially offset by lower engineering development related costs.
Operating Income, OI&E, and Taxes
GAAP operating income was $213 million, up 51 percent from the prior years third quarter, reflecting strong revenue growth from higher margin GPUs and contained operating expenses. GAAP operating income was also up from the second quarter of fiscal 2015 due to sequential growth in revenue and contained operating expenses.
Other income and expense, or OI&E, includes interest earned on our cash and investments, interest expense associated with our convertible debt, and other operating gains and losses. OI&E was a net $4 million of expense, inclusive of $11.5 million of interest expense primarily associated with our convertible debt and $7.4 million of interest income from our investment portfolio.
GAAP income tax expense was $36 million, or an effective tax rate of 17.3 percent. Non-GAAP effective tax rate was 17.5 percent. Our effective tax rates for the quarter were higher than the prior years 16 percent due to the absence of the U.S. federal R&D tax credit.
Net Income and EPS
GAAP net income was $173 million, up 45 percent from a year earlier, driven by increased operating profit from strong revenue and margins. GAAP earnings per diluted share of $0.31 increased 55 percent from $0.20 per diluted share in the year-ago quarter, reflecting net income growth and share repurchases. GAAP net income was up 35% and EPS was up $0.09 from the previous quarter, driven by higher operating profits, fueled by the sequential growth in revenue.
Balance Sheet
Cash, cash equivalents and marketable securities at the end of the quarter were $4.24 billion, compared with $4.39 billion at the end of the second quarter, primarily related to a $310 million structured repurchase agreement executed within the quarter and the payment of our quarterly cash dividend, partially offset by growth in cash flow from operations.
During the third quarter, we paid $46 million in cash dividends and repurchased 16.8 million shares under the aforementioned structured repurchase agreement.� During the first three quarters of fiscal 2015, we paid $140 million in cash dividends and repurchased 44.2 million shares.� As a result, we have returned to shareholders $950 million during the first three quarters of fiscal 2015.
Since the restart of our capital return program in the fourth quarter of fiscal 2013, we have returned approximately $2.17 billion to shareholders.� This return represents 136 percent of our cumulative free cash flow for fiscal years 2013, 2014, and 2015 to date and reflects the acceleration of our capital return program from cash generated in prior years.�
As we transition into fiscal 2016, as part of our ongoing commitment to deliver shareholder value through capital return, we are pleased to announce our intention to return approximately $600 million to shareholders through ongoing quarterly cash dividends and share repurchases in fiscal 2016.�
Accounts receivable at the end of the quarter were $563 million, up from $470 million in the prior quarter. The sequential increase was primarily due to the mid-quarter launch of our Maxwell-based GPUs and late-quarter project shipments in our datacenter business compared with the second quarter. DSO at quarter-end was 42 days, up from 39 days in the prior quarter and in the third quarter of fiscal 2014.
Inventory at the end of the quarter was $408 million, up from $387 million in the prior quarter, and $380 million a year earlier. The sequential increase included the ramping of Maxwell-based GPUs, coupled with decreases in products based on previous-generation architectures. DSI at quarter-end was 68 days, down from 73 days in the prior quarter and from 74 days in the prior year.
Cash flow from operating activities was $216 million, up from $96 million in the prior quarter and from $162 million a year earlier. The sequential increase was primarily due to increased accounts payable and net income, partially offset by increased accounts receivable. Compared with the year-ago quarter, the operating cash flow reflected higher net income from growth in revenue and contained operating expenses, partially offset by higher accounts receivable.
Free cash flow was $176 million in the third quarter, compared with $124 million a year earlier and $74 million in the previous quarter.
Depreciation and amortization expense for the third quarter amounted to $55 million. Capital expenditures were $40 million, in line with our expectations.
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Segment Definitions
The GPU business leverages our GPU technology to target multiple end markets. It comprises four primary product lines: GeForce for desktop and notebook PCs; Quadro for professional workstations; Tesla for high-performance computing; and NVIDIA GRID" for cloud-enabled graphics solutions. It also includes other related products, licenses and revenue supporting the GPU business, such as memory products.
The Tegra Processor business comprises product lines primarily based on our Tegra SOC and modem processor technologies including Tegra for smartphones and tablets; automotive computers, including infotainment and navigation systems; and gaming devices, including the SHIELD tablet and portable, and Tegra NOTE". It also includes other related products, licenses and revenue supporting the Tegra Processor business - such as Icera� baseband processors and RF transceivers, embedded products, and license and other revenue associated with game consoles.
The Other category includes licensing revenue from our patent cross-license agreement with Intel.
Fourth Quarter Outlook
Our outlook for the fourth quarter of fiscal 2015 is as follows:
" | Revenue is expected to be $1.20 billion, plus or minus two percent. |
" | GAAP and non-GAAP gross margins are expected to be 55.2 percent and 55.5 percent, respectively, plus or minus 50 basis points. |
" | GAAP operating expenses are expected to be approximately $470�million; non-GAAP operating expenses are expected to be approximately $422 million, inclusive of litigation costs. |
" | GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2015 are both expected to be 18 percent, plus or minus one percentage point. This estimate excludes any discrete tax events that may occur during a quarter which, if realized, may increase or decrease our actual effective tax rates in such quarter. |
" | Capital expenditures are expected to be approximately $40 million to $50 million. |
______________
For further information, contact:
Raj Santhanam | Robert Sherbin | |
Investor Relations | Corporate Communications | |
NVIDIA Corporation | NVIDIA Corporation | |
(408) 566-6616 | (408) 566-5150 | |
Non-GAAP Measures
To supplement NVIDIAs 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 other income and expense, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, and free cash flow. In order for NVIDIAs 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 settlements, acquisition-related costs, gains and losses from non-affiliated investments, interest expense related to amortization of debt discount, other 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 companys historical financial performance. The presentation of the companys non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the companys 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: the strength of GeForce GPUs for gaming; strength in datacenter GPUs and automobile infotainment systems; continued strength in PC gaming; the new Quadro product platform delivering industry leading graphics and rendering performance; continued strength in GPU acceleration opportunities; continued strength in our GPU margins for PC platforms; continued management of our investments in R&D and capital expenditures; our intention to return approximately $600 million in fiscal 2016; the companys financial outlook for the fourth quarter of fiscal 2015; and the companys tax rate for the fourth quarter of fiscal 2015 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 27, 2014. Copies of reports filed with the SEC are posted on the companys 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.
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� 2014 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, GTX, Quadro, Tegra, Tegra NOTE, Tesla, Icera, Maxwell, NVIDIA 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 thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
� | �Three Months Ended | Nine Months Ended | ||||||||||||||||||
� | October 26, | July 27, | October 27, | October 26, | October 27, | |||||||||||||||
� | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
GAAP gross profit | $ | 676,698 | $ | 618,974 | $ | 584,415 | $ | 1,899,874 | $ | 1,648,521 | ||||||||||
GAAP gross margin | 55.2 | % | 56.1 | % | 55.4 | % | 55.4 | % | 55.2 | % | ||||||||||
Stock-based compensation expense included in cost of revenue (A) | 3,021 | 2,656 | 3,090 | 8,596 | 7,911 | |||||||||||||||
Legal settlement | 2,290 | |||||||||||||||||||
Non-GAAP gross profit | $ | 679,719 | $ | 621,630 | $ | 587,505 | $ | 1,908,470 | $ | 1,658,722 | ||||||||||
Non-GAAP gross margin | 55.5 | % | 56.4 | % | 55.7 | % | 55.6 | % | 55.6 | % | ||||||||||
GAAP operating expenses | $ | 463,383 | $ | 455,795 | $ | 443,427 | $ | 1,372,021 | $ | 1,319,218 | ||||||||||
Stock-based compensation expense included in operating expense (A) | (38,414 | ) | (35,759 | ) | (31,209 | ) | (106,775 | ) | (92,180 | ) | ||||||||||
�����Acquisition-related costs (B) | (9,572 | ) | (9,173 | ) | (4,577 | ) | (28,186 | ) | (22,402 | ) | ||||||||||
�����Other expense (C) | (2,235 | ) | (2,235 | ) | ||||||||||||||||
Non-GAAP operating expenses | $ | 415,397 | $ | 410,863 | $ | 405,406 | $ | 1,237,060 | $ | 1,202,401 | ||||||||||
GAAP other income (expense), net | $ | (4,245 | ) | $ | (8,554 | ) | $ | 496 | $ | (876 | ) | $ | 12,063 | |||||||
Gains and losses from non-affiliated investments | 2,500 | (14,482 | ) | |||||||||||||||||
Interest expense related to amortization of debt discount | 7,010 | 6,973 | 20,884 | |||||||||||||||||
Non-GAAP other income (expense), net | $ | 2,765 | $ | 919 | $ | 496 | $ | 5,526 | $ | 12,063 | ||||||||||
GAAP net income | $ | 172,967 | $ | 127,976 | $ | 118,734 | $ | 437,459 | $ | 293,073 | ||||||||||
Total pre-tax impact of non-GAAP adjustments | 58,017 | 57,061 | 41,111 | 149,959 | 127,018 | |||||||||||||||
Income tax impact of non-GAAP adjustments | (10,549 | ) | (11,606 | ) | (6,055 | ) | (27,497 | ) | (19,170 | ) | ||||||||||
Non-GAAP net income | $ | 220,435 | $ | 173,431 | $ | 153,790 | $ | 559,921 | $ | 400,921 | ||||||||||
Diluted net income per share | ||||||||||||||||||||
GAAP | $ | 0.31 | $ | 0.22 | $ | 0.20 | $ | 0.77 | $ | 0.49 | ||||||||||
Non-GAAP | $ | 0.39 | $ | 0.30 | $ | 0.26 | $ | 0.99 | $ | 0.67 | ||||||||||
Shares used in diluted net income per share computation | 558,201 | 570,572 | 588,752 | 565,653 | 600,108 | |||||||||||||||
Metrics: | ||||||||||||||||||||
GAAP net cash flow provided by operating activities | $ | 215,623 | $ | 96,282 | $ | 162,315 | $ | 462,927 | $ | 434,434 | ||||||||||
Purchase of property and equipment and intangible assets | (39,741 | ) | (22,527 | ) | (38,159 | ) | (91,336 | ) | (188,812 | ) | ||||||||||
Free cash flow | $ | 175,882 | $ | 73,755 | $ | 124,156 | $ | 371,591 | $ | 245,622 | ||||||||||
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(A) Excludes stock-based compensation as follows: | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
� | October 26, | July 27, | October 27, | October 26, | October 27, | |||||||||||||||
� | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||
Cost of revenue | $ | 3,021 | $ | 2,656 | $ | 3,090 | $ | 8,596 | $ | 7,911 | ||||||||||
Research and development | $ | 22,680 | $ | 21,462 | $ | 20,902 | $ | 64,636 | $ | 61,392 | ||||||||||
Sales, general and administrative | $ | 15,734 | $ | 14,297 | $ | 10,307 | $ | 42,139 | $ | 30,788 | ||||||||||
(B) Consists of amortization of acquisition-related intangible assets, transaction costs, compensation charges, and other credits related to acquisitions. | ||||||||||||||||||||
(C) Consists of restructuring charges. | ||||||||||||||||||||
�NVIDIA CORPORATION | |||||
�RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK | |||||
�Q4 FY2015 Outlook | |||||
��GAAP gross margin | 55.2 | % | |||
Impact of stock-based compensation | 0.3 | % | |||
��Non-GAAP gross margin | 55.5 | % | |||
�Q4 FY2015 Outlook | |||||
(In millions) | |||||
GAAP operating expenses | $ | 470 | |||
Stock-based compensation expense and acquisition-related costs | (48 | ) | |||
Non-GAAP operating expenses | $ | 422 | |||