- Revenue is expected to be $1.35 billion, plus or minus two percent.
- GAAP and non-GAAP gross margins are expected to be 57.7 percent and 58.0 percent, respectively, plus or minus 50 basis points.
- GAAP operating expenses are expected to be approximately $500 million. Non-GAAP operating expenses are expected to be approximately $445 million.
- GAAP and non-GAAP tax rates for the second quarter of fiscal 2017 are both expected to be 20 percent, plus or minus one percent.
- Capital expenditures are expected to be approximately $30 million to $40 million.
First Quarter Fiscal 2017 Highlights
During the first quarter, NVIDIA achieved progress in each of its four major platforms.
Gaming:
- Launched GeForce® GTX 1080 and GTX 1070, based on the new NVIDIA Pascal™ architecture, bringing the biggest performance gains over the previous generation of processors in a decade.
- Expanded the NVIDIA VRWorks™ software development kit with Simultaneous Multi-Projection, which heightens realism with new display capabilities, and VRWorks Audio, which delivers physically modeled positional audio.
- Introduced NVIDIA Ansel™, an in-game photography tool that lets gamers compose shots from any angle and share them as single images or 360-degree panoramas for viewing in VR.
- Expanded the NVIDIA SHIELD™ platform's gaming content available for streaming from GeForce NOW™ with new titles from Sega, Square Enix and Warner Bros. Interactive Entertainment.
Professional Visualization:
- Extended NVIDIA Quadro® leadership in pro visualization markets, with the high-end 24GB Quadro M6000, the mid-range Quadro M2000 and new NVIDIA Iray® physically based rendering solutions.
- Unveiled Iray VR, which creates interactive, photorealistic virtual 3D worlds with unparalleled fidelity, enabling the immersive viewing of buildings and products not yet built.
- Expanded NVIDIA's VR Ready program into the professional market.
Datacenter:
- Hosted the seventh annual GPU Technology Conference with 5,500 attendees, 600 technical sessions and 200 exhibitors, focused on artificial intelligence, VR and self-driving cars.
- Unveiled the NVIDIA Tesla® P100 GPU, the most advanced accelerator ever built, based on the Pascal architecture.
- Revealed the NVIDIA DGX-1™, the world's first deep-learning supercomputing in a box, with the computing throughput of more than 250 servers.
- Joined Massachusetts General Hospital as the founding technology partner of the MGH Clinical Data Science Center to advance healthcare by applying AI to improve the detection, diagnosis, treatment and management of diseases.
- Received VMware's Global Technical Partner of the Year and European Regional Technical Partner of the Year awards for partnership with NVIDIA GRID™ and VMware ESX.
Automotive:
- Made history as NVIDIA-powered WEpods became the first self-driving shuttles to take to public roads.
- Introduced HD Mapping, an end-to-end mapping platform for self-driving cars.
- Announced that NVIDIA DRIVE™ PX 2 will power all vehicles in ROBORACE, a new autonomous car-racing circuit to debut later this year.
CFO Commentary
Commentary on the quarter by Colette Kress, NVIDIA's executive vice president and chief financial officer, is available at
http://investor.nvidia.com/.
Conference Call and Webcast Information
NVIDIA will conduct a conference call with analysts and investors to discuss its first quarter fiscal 2017 financial results and current financial prospects today at 2 p.m. Pacific time (5 p.m. Eastern time). To listen to the conference call, dial (212) 231-2919; no password is required. A live webcast (listen-only mode) of the conference call will be accessible at NVIDIA's investor relations website,
http://investor.nvidia.com, and at
www.streetevents.com. The webcast will be recorded and available for replay until the company's conference call to discuss its financial results for its second quarter of fiscal 2017.
Non-GAAP Measures
To supplement NVIDIA's Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets presented in accordance with GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP other income (expense), net, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, non-GAAP diluted shares, per diluted share impact of certain charges, and free cash flow. In order for NVIDIA's investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude stock-based compensation, legal settlement costs, product warranty charge, acquisition-related costs, advanced healthcare contribution, restructuring and other charges, gains from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable. Weighted average shares used in the non-GAAP diluted net income per share computation includes the anti-dilution impact of the company's Note Hedge. Per diluted share impact of certain charges is calculated as such charges, net of income tax, divided by GAAP diluted shares. Free cash flow is calculated as GAAP net cash provided by operating activities less purchases of property and equipment and intangible assets. NVIDIA believes the presentation of its non-GAAP financial measures enhances the user's overall understanding of the company's historical financial performance. The presentation of the company's non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP, and its non-GAAP measures may be different from non-GAAP measures used by other companies.
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NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended
----------------------------
May 1, April 26,
2016 2015
------------- -------------
Revenue $ 1,305 $ 1,151
Cost of revenue 554 498
------------- -------------
Gross profit 751 653
Operating expenses
Research and development 346 339
Sales, general and administrative 159 138
Restructuring and other charges 1 -
------------- -------------
Total operating expenses 506 477
------------- -------------
Income from operations 245 176
Interest income 12 9
Interest expense (12) (12)
Other expense, net (4) (1)
------------- -------------
Income before income tax expense 241 172
Income tax expense 45 38
------------- -------------
Net income $ 196 $ 134
============= =============
Net income per share:
Basic $ 0.36 $ 0.24
============= =============
Diluted $ 0.33 $ 0.24
============= =============
Weighted average shares used in per share
computation:
Basic 537 549
Diluted 597 568
NVIDIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
May 1, January 31,
2016 2016
------------- -------------
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities $ 4,754 $ 5,037
Accounts receivable, net 523 505
Inventories 394 418
Prepaid expenses and other current assets 119 93
------------- -------------
Total current assets 5,790 6,053
Property and equipment, net 479 466
Goodwill 618 618
Intangible assets, net 155 166
Other assets 66 67
------------- -------------
Total assets $ 7,108 $ 7,370
============= =============
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 320 $ 296
Accrued and other current liabilities 636 642
Convertible short-term debt 1,421 1,413
------------- -------------
Total current liabilities 2,377 2,351
Other long-term liabilities 447 453
Capital lease obligations, long-term 9 10
------------- -------------
Total liabilities 2,833 2,814
Convertible debt conversion obligation 79 87
Shareholders' equity 4,196 4,469
------------- -------------
Total liabilities, convertible debt
conversion obligation and shareholders'
equity $ 7,108 $ 7,370
============= =============
NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
(Unaudited)
Three Months Ended
-------------------------------------
May 1, January 31, April 26,
2016 2016 2015
----------- ----------- -----------
GAAP gross profit $ 751 $ 791 $ 653
GAAP gross margin 57.5% 56.5% 56.7%
Stock-based compensation expense
(A) 4 5 2
Legal settlement costs (B) 10 - -
Product warranty charge © - 5 -
----------- ----------- -----------
Non-GAAP gross profit $ 765 $ 801 $ 655
=========== =========== ===========
Non-GAAP gross margin 58.6% 57.2% 56.9%
GAAP operating expenses $ 506 $ 539 $ 477
Stock-based compensation expense
(A) (49) (56) (43)
Legal settlement costs (B) (6) - -
Acquisition-related costs (D) (4) (4) (9)
Advanced healthcare contribution (3) - -
Restructuring and other charges (1) (34) -
----------- ----------- -----------
Non-GAAP operating expenses $ 443 $ 445 $ 425
=========== =========== ===========
GAAP income from operations $ 245 $ 252 $ 176
Total impact of non-GAAP
adjustments to income from
operations 77 104 54
----------- ----------- -----------
Non-GAAP income from operations $ 322 $ 356 $ 230
=========== =========== ===========
GAAP other income (expense), net $ (4) $ 1 $ (4)
Gains from non-affiliated
investments (3) - -
Interest expense related to
amortization of debt discount 7 7 7
----------- ----------- -----------
Non-GAAP other income (expense), net $ - $ 8 $ 3
=========== =========== ===========
GAAP net income $ 196 $ 207 $ 134
Total pre-tax impact of non-GAAP
adjustments 81 111 63
Income tax impact of non-GAAP
adjustments (14) (21) (10)
----------- ----------- -----------
Non-GAAP net income $ 263 $ 297 $ 187
=========== =========== ===========
Diluted net income per share
GAAP $ 0.33 $ 0.35 $ 0.24
=========== =========== ===========
Non-GAAP $ 0.46 $ 0.52 $ 0.33
=========== =========== ===========
Weighted average shares used in
diluted net income per share
computation
GAAP 597 593 568
Anti-dilution impact from note
hedge (E) (29) (26) (6)
----------- ----------- -----------
Non-GAAP 568 567 562
=========== =========== ===========
Per share impact:
Legal settlement costs $ 16 $ - $ -
Advanced healthcare contribution 3 - -
Restructuring and other charges 1 34 -
Income tax impact (7) (9) -
----------- ----------- -----------
Charges, net of income tax impact $ 13 $ 25 $ -
GAAP per diluted share impact $ 0.02 $ 0.04 $ -
=========== =========== ===========
GAAP net cash provided by operating
activities $ 309 $ 510 $ 246
Purchase of property and equipment
and intangible assets (55) (15) (30)
----------- ----------- -----------
Free cash flow $ 254 $ 495 $ 216
=========== =========== ===========
----------------------------------------------------------------------------
(A) Excludes stock-based compensation
as follows: Three Months Ended
--------------------------------------
May 1, January 31, April 26,
2016 2016 2015
----------- ----------- ------------
Cost of revenue $ 4 $ 5 $ 2
Research and development $ 29 $ 33 $ 27
Sales, general and administrative $ 20 $ 22 $ 16
(B) Legal settlement with Advanced Silicon Technologies LLC and other
settlement related costs.
(C) Represents warranty charge associated with a product recall.
(D) Consists of amortization of acquisition-related intangible assets,
transaction costs, compensation charges, and other credits related to
acquisitions.
(E) Represents the number of shares that would be delivered upon conversion
of the currently outstanding 1.00% Convertible Senior Notes Due 2018.
Under U.S. GAAP, shares delivered in hedge transactions are not considered
offsetting shares in the fully diluted share calculation until actually
delivered.
----------------------------------------------------------------------------
NVIDIA CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
Q2 FY2017
Outlook
-------------
GAAP gross margin 57.7%
Impact of stock-based compensation expense 0.3%
-------------
Non-GAAP gross margin 58.0%
=============
Q2 FY2017
Outlook
-------------
(In millions)
GAAP operating expenses $ 500
Stock-based compensation expense, acquisition-related costs,
and other costs (55)
-------------
Non-GAAP operating expenses $ 445
=============
