NVIDIA Reports Financial Results for Second Quarter Fiscal 2011

Thursday, August 12, 2010

SANTA CLARA, CA -- NVIDIA (NASDAQ: NVDA)

  • Revenue of $811.2 million
  • GAAP net loss of $141.0 million, or $0.25 per share
  • Non-GAAP net income of $20.1 million, or $0.03 per diluted share
  • GAAP gross margin of 16.6 percent

NVIDIA (NASDAQ: NVDA) today reported revenue of $811.2 million for the second quarter of fiscal 2011 ended Aug. 1, 2010, down 19.0 percent from the prior quarter and up 4.5 percent from $776.5 million from the same period a year earlier.

On a GAAP basis, the company recorded a net loss of $141.0 million, or $0.25 per share, compared with net income of $137.6 million, or $0.23 per diluted share, in the previous quarter and a net loss of $105.3 million, or $0.19 per share, in the same period a year earlier. GAAP gross margin was 16.6 percent compared with 45.6 percent in the previous quarter and 20.2 percent in the same period a year earlier.

 

                                         Quarterly Highlights
($ in millions except per    ---------------------------------------------
 share data)                   Q2 FY2011       Q1 FY2011       Q2 FY2010
                             -------------   -------------   -------------
Revenue                          $811.2         $1,001.8         $776.5
                             -------------   -------------   -------------
GAAP:
                             -------------   -------------   -------------
  Gross margin                    16.6%           45.6%           20.2%
                             -------------   -------------   -------------
  Net income (loss)             ($141.0)         $137.6         ($105.3)
                             -------------   -------------   -------------
  Income (loss) per share        ($0.25)          $0.23          ($0.19)
                             -------------   -------------   -------------

 

Results were impacted by a large inventory write-down and a charge related to a weak die/packaging material set.

The inventory write-down was a consequence of weakened demand for consumer graphics processing units (GPUs) as higher memory prices and economic weakness in Europe and China led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics.

The weak die/packaging material set was used in certain versions of previous generation MCP (chipset) and GPU products shipped before July 2008 and used in notebook configurations. The charge, of $193.9 million, includes additional remediation costs, as well as the estimated costs of a pending settlement of a class action lawsuit consolidated in the District Court for the Northern District of California in April 2009 related to this same matter. The settlement is subject to certain approvals, including final approval by the court. Excluding this die/packaging material charge and the associated tax impact, non-GAAP net income was $20.1 million, or $0.03 per diluted share.

"Rapidly changing market conditions made for a challenging quarter," said Jen-Hsun Huang, NVIDIA's CEO and president. "We delivered excellent results in Quadro professional graphics, Tesla GPU computing, and our Tegra system-on-a-chip business. But our GeForce consumer business fell significantly short of expectations amid weak PC demand in Europe and China. Although demand among end-users remains uncertain, we expect to drive revenue and grow market share with new products that are gaining momentum in each of our businesses."

Outlook

The outlook for the third quarter of fiscal 2011 is as follows:

  • Revenue is expected to be up 3 to 5 percent from the second quarter.
  • GAAP gross margin is expected to increase to 46.5 to 47.5 percent.
  • GAAP operating expenses are expected to be approximately $300 million.
  • GAAP tax rate of 17 to 19 percent.

Second Quarter Fiscal 2011 Highlights:

  • NVIDIA launched and shipped the GeForce® GTX 460, bringing the gaming benefits of the Fermi architecture to lower price points.
     
  • NVIDIA launched and shipped a range of Quadro products based on the Fermi architecture for workstation professionals.
     
  • NVIDIA extended its reach in supercomputing as IBM started offering products based on Tesla; these also use Fermi-generation GPUs.

CFO Commentary

Commentary on the quarter by David White, NVIDIA chief financial officer and executive vice president, is available at www.nvidia.com/investor.

Conference Call and Web Cast Information
NVIDIA will conduct a conference call with analysts and investors to discuss its second quarter fiscal 2011 financial results and current financial prospects today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To listen to the call, please dial (212) 231-2900. A live Web cast (listen-only mode) of the conference call will be accessible at the NVIDIA investor relations Web site www.nvidia.com/ir and at www.streetevents.com. The Web cast will be recorded and available for replay until the company's conference call to discuss its financial results for its third quarter fiscal 2011.

Non-GAAP Measures
To supplement NVIDIA's Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets presented in accordance with GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, non-GAAP net income per share and free cash flow. In order for NVIDIA's investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude a charge related to the weak die/packaging material set that was used in certain versions of NVIDIA's previous generation MCP and GPU products, net of insurance reimbursements, a non-recurring charge related to a tender offer purchase, and the associated tax impact of these items, where applicable. Free cash flow is calculated as GAAP net cash provided by operating activities less purchases of property and equipment and intangible assets. NVIDIA believes the presentation of its non-GAAP financial measures enhances the user's overall understanding of the company's historical financial performance. The presentation of the company's non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

About NVIDIA
NVIDIA (NASDAQ: NVDA) awakened the world to the power of computer graphics when it invented the GPU in 1999. Since then, it has consistently set new standards in visual computing with breathtaking, interactive graphics available on devices ranging from tablets and portable media players to notebooks and workstations. NVIDIA's expertise in programmable GPUs has led to breakthroughs in parallel processing which make supercomputing inexpensive and widely accessible. The company holds more than 1,100 U.S. patents, including ones covering designs and insights which are fundamental to modern computing. For more information, see www.nvidia.com.

Certain statements in this press release including, but not limited to, statements as to: the company's financial outlook for the third quarter of fiscal 2011; the company's growth; the company's reach in supercomputing; the benefit of the company's products and technologies; and the pending settlement of the class action lawsuit; 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: our reliance on third parties to manufacture, assemble, package and test our products; global economic conditions; development of faster or more efficient technology; the impact of technological development and competition; 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 May 2, 2010. 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.

Copyright © 2010. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Tesla, Quadro, NVIDIA, Tegra, and Fermi are trademarks or registered trademarks of NVIDIA Corporation in the United States and other countries around the world. 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 OPERATIONS
                  (In thousands, except per share data)
                                (Unaudited)



                           Three Months Ended         Six Months Ended
                        ------------------------  ------------------------
                         August 1,     July 26,    August 1,     July 26,
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------


Revenue                 $   811,208  $   776,520  $ 1,813,021  $ 1,440,751

Cost of revenue             676,916      619,797    1,222,352    1,094,332
                        -----------  -----------  -----------  -----------

Gross profit                134,292      156,723      590,669      346,419
Operating expenses
  Research and
   development              210,635      192,855      428,740      494,652
  Sales, general and
   administrative            98,864       73,975      189,743      192,839
                        -----------  -----------  -----------  -----------
    Total operating
     expenses               309,499      266,830      618,483      687,491
                        -----------  -----------  -----------  -----------

Operating loss             (175,207)    (110,107)     (27,814)    (341,072)

Interest and other
 income, net                  6,160        3,006        9,492        9,150
                        -----------  -----------  -----------  -----------

Loss before income tax
 expense                   (169,047)    (107,101)     (18,322)    (331,922)

Income tax benefit          (28,086)      (1,799)     (14,955)     (25,282)
                        -----------  -----------  -----------  -----------

Net loss                $  (140,961) $  (105,302) $    (3,367) $  (306,640)
                        ===========  ===========  ===========  ===========

Basic net loss per
 share                  $     (0.25) $     (0.19) $     (0.01) $     (0.56)
                        ===========  ===========  ===========  ===========

Diluted net loss per
 share                  $     (0.25) $     (0.19) $     (0.01) $     (0.56)
                        ===========  ===========  ===========  ===========

Shares used in basic
 per share computation      572,764      546,639      569,971      544,463

Shares used in diluted
 per share computation      572,764      546,639      569,971      544,463






                            NVIDIA CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                                (Unaudited)



                                                    August 1,   January 31,
                                                       2010        2010
                                                    ----------- -----------
ASSETS

Current assets:
  Cash, cash equivalents and marketable securities  $ 1,772,500 $ 1,728,227
  Accounts receivable, net                              395,934     374,963
  Inventories                                           434,227     330,674
  Prepaid expenses and other current assets              53,301      46,966
                                                    ----------- -----------
    Total current assets                              2,655,962   2,480,830

Property and equipment, net                             542,216     571,858
Goodwill                                                369,844     369,844
Intangible assets, net                                  118,879     120,458
Deposits and other assets                                44,367      42,928
                                                    ----------- -----------

    Total assets                                    $ 3,731,268 $ 3,585,918
                                                    =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                  $   280,041 $   344,527
  Accrued liabilities and other current liabilities     539,098     439,851
                                                    ----------- -----------
    Total current liabilities                           819,139     784,378

Other long-term liabilities                             127,881     111,950
Capital lease obligations, long term                     23,734      24,450

Stockholders' equity                                  2,760,514   2,665,140
                                                    ----------- -----------

    Total liabilities and stockholders' equity      $ 3,731,268 $ 3,585,918
                                                    =========== ===========





                            NVIDIA CORPORATION
          RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
                  (In thousands, except per share data)
                                (Unaudited)


                                            Three Months Ended
                                    ----------------------------------
                                    August 1,       May 2,   July 26,
                                      2010           2010      2009
                                    ---------      --------  ---------

GAAP gross profit                   $ 134,292      $456,377  $ 156,723
  GAAP gross margin                      16.6%         45.6%      20.2%
    Net charge against cost of
     revenue arising from a weak
     die/packaging material set       181,193  (A)        -    119,993  (A)
    Stock option purchase charge
     related to cost of revenue                           -          -
                                    ---------      --------  ---------
Non-GAAP gross profit               $ 315,485      $456,377  $ 276,716
                                    =========      ========  =========
  Non-GAAP gross margin                  38.9%         45.6%      35.6%

GAAP operating expenses             $ 309,499      $308,984  $ 266,830
    Net charge against operating
     expenses arising from a weak
     die/packaging material set       (12,705) (A)        -        939  (A)
    Stock option purchase charge
     related to operating expenses          -             -          -
                                    ---------      --------  ---------
Non-GAAP operating expenses         $ 296,794      $308,984  $ 267,769
                                    =========      ========  =========

GAAP net income (loss)              $(140,961)     $137,594  $(105,302)
    Net charge arising from a weak
     die/packaging material set       193,898  (A)        -    119,054  (A)
    Stock option purchase charge            -             -          -
    Income tax impact of non-GAAP
     adjustments                      (32,828) (C)        -     (3,080) (C)
                                    ---------      --------  ---------
Non-GAAP net income (loss)          $  20,109      $137,594  $  10,672
                                    =========      ========  =========

Diluted net income (loss) per share
    GAAP                            $   (0.25)     $   0.23  $   (0.19)
                                    =========      ========  =========
    Non-GAAP                        $    0.03      $   0.23  $    0.02
                                    =========      ========  =========

Shares used in GAAP diluted net
 income (loss) per share
 computation                          572,764       590,997    546,639
    Cumulative impact of non-GAAP
     adjustments                        9,609  (D)        -     15,183  (D)
                                    ---------      --------  ---------
Shares used in non-GAAP diluted net
 income (loss) per share
 computation                          582,373       590,997    561,822
                                    =========      ========  =========

Metrics:
GAAP net cash flow provided by /
 (used in) operating activities     $  34,344      $ (5,397) $ 135,117
    Purchase of property and
     equipment and intangible
     assets                           (37,644)      (17,080)   (17,656)
                                    ---------      --------  ---------
Free cash flow                      $  (3,300)     $(22,477) $ 117,461
                                    =========      ========  =========



                                       Six Months Ended
                                    ----------------------
                                    August 1,     July 26,
                                      2010          2009
                                    --------      --------

GAAP gross profit                    590,669       346,419
  GAAP gross margin                     32.6%         24.0%
    Net charge against cost of
     revenue arising from a weak
     die/packaging material set      181,193  (A)  119,993  (A)
    Stock option purchase charge
     related to cost of revenue            -        11,412  (B)
                                    --------      --------
Non-GAAP gross profit               $771,862      $477,824
                                    ========      ========
  Non-GAAP gross margin                 42.6%         33.2%

GAAP operating expenses              618,483       687,491
    Net charge against operating
     expenses arising from a weak
     die/packaging material set      (12,705) (A)      939  (A)
    Stock option purchase charge
     related to operating expenses         -      (128,829) (B)
                                    --------      --------
Non-GAAP operating expenses         $605,778      $559,601
                                    ========      ========

GAAP net income (loss)                (3,367)     (306,640)
    Net charge arising from a weak
     die/packaging material set      193,898  (A)  119,054  (A)
    Stock option purchase charge           -       140,241  (B)
    Income tax impact of non-GAAP
     adjustments                     (32,828) (C)  (11,580) (C)
                                    --------      --------
Non-GAAP net income (loss)          $157,703      $(58,925)
                                    ========      ========

Diluted net income (loss) per share
    GAAP                            $  (0.01)     $  (0.56)
                                    ========      ========
    Non-GAAP                        $   0.27      $  (0.11)
                                    ========      ========

Shares used in GAAP diluted net
 income (loss) per share
 computation                         569,971       544,463
    Cumulative impact of non-GAAP
     adjustments                      17,165  (D)        -
                                    --------      --------
Shares used in non-GAAP diluted net
 income (loss) per share
 computation                         587,136       544,463
                                    ========      ========

Metrics:
GAAP net cash flow provided by /
 (used in) operating activities     $ 28,947      $277,245
    Purchase of property and
     equipment and intangible
     assets                          (54,724)      (38,433)
                                    --------      --------
Free cash flow                      $(25,777)     $238,812
                                    ========      ========


(A) Excludes a charge related to the weak die/packaging material set,
    net of insurance reimbursement.

(B) During the three months ended April 26, 2009, the Company completed a
    tender offer to purchase outstanding stock options which resulted in a
    charge of $140.2 million, $11.4 million of which was associated with
    cost of revenue and $128.8 million with operating expenses.

(C) The income tax impact of non-GAAP adjustments has only been reported
    during fiscal quarters that include other GAAP to non-GAAP reconciling
    items, as well as in the full fiscal year results during which the GAAP
    to non-GAAP reconciling items occur. As such, any effective tax rate
    differences between GAAP and non-GAAP results that result from such
    adjustments have not been reported separately in the non-GAAP results
    for a fiscal quarter that does not contain other GAAP to non-GAAP
    reconciling items.

(D) Reflects an adjustment to diluted shares to reflect a non-GAAP net
    income versus a GAAP net loss.

 

About NVIDIA
NVIDIA (NASDAQ: NVDA) is the AI computing company. Its invention of the GPU in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionized parallel computing. More recently, GPU deep learning ignited modern AI — the next era of computing — with the GPU acting as the brain of computers, robots and self-driving cars that can perceive and understand the world. More information at http://nvidianews.nvidia.com/. 
© 2016 NVIDIA Corporation. All rights reserved. NVIDIA and the NVIDIA logo are trademarks and/or registered trademarks of NVIDIA Corporation in the U.S. and 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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