NVIDIA Reports Financial Results for Second Quarter Fiscal 2014; declares dividend of $0.075 cents per share on Sept 13

• Revenue of $977.2 million.
• GAAP net income of $96.4 million, or $0.16 per diluted share. Non-GAAP net income of $133.3 million, or $0.23 per diluted share.
• Record GAAP and non-GAAP gross margins of 55.8 percent and 56.3 percent, respectively.

NVIDIA (NASDAQ: NVDA) today reported revenue for the second quarter of fiscal 2014, ended July 28, 2013, of $977.2 million, up 2.4 percent from $954.7 million in the previous quarter.

GAAP earnings per diluted share were $0.16, up 23.1 percent from $0.13 in the previous quarter. Non-GAAP earnings per diluted share were $0.23, up 27.8 percent from $0.18 in the previous quarter.

“The GPU business continued to grow, driving our fourth consecutive quarter of record margins,” said Jen-Hsun Huang, president and chief executive officer of NVIDIA. “We also began shipping GRID virtualized graphics, which puts the power of NVIDIA GPUs into the datacenter. We look forward to a strong second half, with new Tegra 4 devices coming to market, SHIELD moving beyond the U.S. and broader sampling of Project Logan, our next-generation Tegra processor, which brings Kepler, the world’s most advanced GPU, to mobile.”

On May 14, 2013, NVIDIA executed an accelerated share repurchase (ASR) agreement with Goldman, Sachs & Co. such that NVIDIA paid Goldman Sachs$750 million and Goldman Sachs delivered 36.9 million shares on May 16, 2013. These shares were accounted for as treasury share repurchases that reduced the outstanding common shares used to calculate EPS. Upon final settlement of the ASR, Goldman Sachs may be required to deliver additional shares of common stock to NVIDIA or NVIDIA may be required to deliver shares of its common stock, or elect to make a cash payment, to Goldman Sachs, based on the terms and conditions under the ASR. NVIDIA currently expects that, at the time of settlement, Goldman Sachs will be required to deliver additional shares of common stock to NVIDIA.

*Non-GAAP earnings excluded stock-based compensation, amortization of acquisition-related intangible assets, other acquisition-related costs, a legal settlement charge in the second quarter of fiscal 2014, a contribution expense in the second quarter of fiscal 2013, and the tax impact associated with such items.

NVIDIA’s outlook for the third quarter of fiscal 2014 is as follows:

• Revenue is expected to be $1.050 billion, plus or minus two percent.
• GAAP and non-GAAP gross margins are expected to be approximately flat relative to the prior quarter at 56.0 percent and 56.3 percent, respectively.
• GAAP operating expenses are expected to be approximately $460 million. Non-GAAP operating expenses are expected to be approximately $418 million.
• GAAP and non-GAAP tax rates for the remaining half of fiscal 2014 are expected to be 16 percent, plus or minus one percent. 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.

NVIDIA estimates depreciation and amortization for the third quarter to be approximately $62 million to $64 million. Capital expenditures are expected to be in the range of $60 million to $70 million.

Diluted shares for the third quarter are expected to be approximately 589 million.

Among highlights of the second quarter of fiscal 2014, NVIDIA:

• Demonstrated the capabilities of the Kepler™-based GPU in Project Logan, its next-generation mobile processor, and announced an IP licensing initiative that will bring this technology to new markets.
• Shipped NVIDIA® SHIELD™, its open-platform gaming and entertainment portable (July 31, after quarter end).
• Demonstrated NVIDIA® Tegra® 4i phone calls on AT&T’s network, and showed support of LTE Cat 4 data rates.
• Launched a new family of high-end gaming GPUs, the GeForce® GTX™ 760, GeForce GTX 770 and GeForce GTX 780.
• Appeared on stage with the CEO of Citrix to announce that XenDesktop 7 has now fully integrated NVIDIA GRID™ vGPU™ technology to share GPUs across virtual machines.
• Appointed Dawn Hudson, former CEO of PepsiCo’s North American operations, to its board of directors.

Dividend NVIDIA will pay its next quarterly cash dividend of $0.075 cents per share on September 13, 2013, to all stockholders of record on August 22, 2013.

CFO Commentary and Earnings Presentation Commentary on the quarter by Karen Burns, NVIDIA interim chief financial officer, and a presentation, are available at www.nvidia.com/ir.

Conference Call and Webcast Information NVIDIA will conduct a conference call with analysts and investors to discuss its second quarter fiscal 2014 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 (706) 679-2572. A live webcast (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 webcast will be recorded and available for replay until the company’s conference call to discuss its financial results for its third quarter fiscal 2014.

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 income tax expense, non-GAAP net income, non-GAAP net income, or earnings, 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 stock-based compensation, amortization of acquisition-related intangible assets, other acquisition-related costs, a legal settlement, a contribution 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 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.