NVIDIA 8K Results of Operations and Financial Condition | NVDA 9 Aug 07

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FOR IMMEDIATE RELEASE

NVIDIA REPORTS RECORD RESULTS FOR SECOND QUARTER OF FISCAL 2008

Company Achieves Record Revenue, Record Net Income, and Record Gross Margin

SANTA CLARA, CA—AUGUST 9, 2007—NVIDIA Corporation (Nasdaq: NVDA) today reported financial results for the second quarter of fiscal 2008 ended July 29, 2007.

For the second quarter of fiscal 2008, revenue increased to a record $935.3 million compared to $687.5 million for the second quarter of fiscal 2007, an increase of 36 percent. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the second quarter of fiscal 2008 was a record $172.7 million, or $0.43 per diluted share, an increase of 99 percent compared to the second quarter of fiscal 2007. GAAP gross margin improved by 280 basis points from a year ago to a record 45.3 percent.

Non-GAAP net income for the second quarter of fiscal 2008, which excludes stock-based compensation charges and the associated tax impact, was $198.1 million, or $0.51 per diluted share, an increase of 77 percent compared to the second quarter of fiscal 2007. Non-GAAP gross margin improved to a record 45.6 percent, an increase of 290 basis points from a year ago.

For the six months ended July 29, 2007, revenue increased to a record $1.78 billion compared to $1.37 billion for the six months ended July 30, 2006, an increase of 30 percent. GAAP net income for the six months ended July 29, 2007 was $305.0 million, or $0.76 per diluted share, compared to $178.8 million, or $0.46 per diluted share, for the six months ended July 30, 2006.

Non-GAAP net income for the six months ended July 29, 2007, which excludes stock-based compensation charges and the associated tax impact, was $362.5 million, or $0.93 per diluted share, compared to $223.2 million, or $0.58 per diluted share, for the six months ended July 30, 2006.

“NVIDIA delivered an outstanding quarter, with record revenue, record gross margin, and record net income. These results reflect the growing importance of the GPU as well as great execution across the company,” said Jen-Hsun Huang, president and CEO of NVIDIA. “Our ongoing strategy to extend the reach of the GPU is paying off. There is a fast-growing universe of applications that rely on the processing capability of the GPU, from 3D design and styling tools, video and photo editing software, 3D maps, and video games, to the user interfaces of the Mac and Vista. The GPU can surely enhance the computing experience for everyone, from artists, engineers, and scientists, to gamers and everyday PC users.”

“As the leading and only dedicated GPU company in the world, our opportunity has never been more exciting as the number of applications and digital devices that benefit from the GPU continues to grow,” Mr. Huang added.

Second Quarter Fiscal 2008 Highlights:

·	The GeForce® desktop and notebook product lines each achieved record revenue. The desktop GPU product line grew 37 percent year-over-year, and the notebook GPU product line grew 129 percent from last year.

·	NVIDIA continued to capture leading share in five GPU categories, according to Mercury Research:

o	Total Standalone – 66 percent

o	Total Desktop Standalone – 65 percent

o	DirectX 9 – 64 percent

o	DirectX 10 – 75 percent

o	Total Notebook Standalone – 68 percent

In May, NVIDIA announced its most comprehensive and successful notebook GPU offerings to date. The new GeForce 8M Series GPUs are now available on the new Santa Rosa platform from top PC OEMs such as Acer, Apple, ASUS, HP, Lenovo, Samsung, Sony and Toshiba. The two most notable design wins are the new Lenovo ThinkPad T-Series, NVIDIA’s first ever with Lenovo ThinkPad, and the new Apple MacBook Pro notebooks.

In June, NVIDIA launched the Tesla™ product line, its entry into the high-performance computing industry. HPC Wire, the most recognized and accessed news and information site covering the entire ecosystem of high productivity computing, named the Tesla product line as one of the most significant launches in the HPC industry in the first half of 2007. The Tesla family consists of the C870 GPU Computing Processor, the D870 Deskside Supercomputer, and the S870 1U Computing Server.

The NVIDIA nForce® 650i SLI™ motherboard powers the new Maximum PC Dream Machine 2007. This is the third consecutive year in which an nForce product has been selected as the Dream Machine motherboard of choice. Maximum PC, the number one magazine for home computing enthusiasts, chose the nForce 650i SLI motherboard because of its over-clocking ability with quad-core CPUs and SLI technology support.

·	NVIDIA introduced an entirely new line of G8X-based next-generation professional notebook GPUs – the NVIDIA Quadro® FX 1600M, 570M, and 360M products. Each features the Unified Shader Architecture, Shader Model 4.0, and GPU Computing capabilities.

NVIDIA will conduct a conference call with analysts and investors to discuss its second quarter fiscal 2008 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) 231-2901. A live Web cast (listen-only mode) of the conference call will be held at the NVIDIA investor relations Web site www.nvidia.com/ir and at http://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 2008.

Non-GAAP Measures

To supplement the Company’s Condensed Consolidated Statements of Income presented in accordance with GAAP, we use non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP net income, and non-GAAP diluted net income per share. In order for our investors to be better able to compare our current results with those of previous periods, we have shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude stock-based compensation, a non-recurring credit associated with the net cumulative impact of estimating forfeitures as a result of the adoption of SFAS 123R, and the associated tax impact, where applicable. We believe the presentation of our non-GAAP financial measures enhances the user's overall understanding of our historical financial performance. The presentation of our non-GAAP financial measures is not meant to be considered in isolation or as a substitute for our 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 Corporation is the worldwide leader in programmable graphics processor technologies. The Company creates innovative, industry-changing products for computing, consumer electronics, and mobile devices. NVIDIA is headquartered in Santa Clara, CA and has offices throughout Asia, Europe, and the Americas. For more information, visit www.nvidia.com.

Certain statements in this press release including, but not limited to, statements as to: the growing importance and uses for the GPU; our strategy; potential growth; our opportunities; and the use of non-GAAP financial measures 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: slower than expected growth of a target market; the impact of technological development and competition; delays in the development of new products or technologies; manufacturing or software defects; our reliance on third-party manufacturers; whether customers continue to adopt our technologies and products; general industry trends; changes in industry standards and interfaces as well as other factors detailed from time to time in the reports NVIDIA files with the Securities and Exchange Commission including its Form 10-Q for the period ended April 29, 2007. Copies of reports filed with the SEC are posted on our Web site 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 © 2007 NVIDIA Corporation. All rights reserved. NVIDIA, GEFORCE, NVIDIA NFORCE, NVIDIA QUADRO, SLI, and TESLA are registered trademarks and/or trademarks of NVIDIA Corporation in the United States and other countries. All other company and/or product names may be trade names, trademarks, and/or registered trademarks of the respective owners with which they are associated. Features, pricing, availability, and specifications are subject to change without notice.

NVIDIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)


	Three Months Ended				Six Months Ended
	July 29,		July 30,		July 29,		July 30,
	2007		2006		2007		2006

Revenue	$	935,253	$	687,519	$	1,779,533	$	1,369,326
Cost of revenue		511,261		395,391		975,403		788,525
Gross profit		423,992		292,128		804,130		580,801
Operating expenses:
Research and development		157,952		127,257		316,273		250,459
Sales, general and administrative		81,280		69,055		161,851		133,017
Total operating expenses		239,232		196,312		478,124		383,476
Operating income		184,760		95,816		326,006		197,325
Interest and other income, net		16,091		8,706		28,634		17,269
Income before income tax expense		200,851		104,522		354,640		214,594
Income tax expense (A)		28,119		17,769		49,649		36,481
Income before change in accounting principle		172,732		86,753		304,991		178,113
Cumulative effect of change in accounting principle, net of income tax (B)		-		-		-		704
Net income	$	172,732	$	86,753	$	304,991	$	178,817

Basic net income per share	$	0.47	$	0.25	$	0.84	$	0.51
Diluted net income per share	$	0.43	$	0.22	$	0.76	$	0.46

Shares used in basic per share computation		364,870		350,244		362,850		349,090
Shares used in diluted per share computation		402,553		385,589		400,638		387,485



(A) The effective income tax rate for the three and six months ended July 29, 2007 was 14%. The effective income tax rate for the three and six months ended July 30, 2006 was 17%.
(B) Reflects the net cumulative impact of estimating forfeitures as a result of adoption of SFAS 123R.


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


	Three Months Ended						Six Months Ended
	July 29,			July 30,			July 29,			July 30,
	2007			2006			2007			2006

GAAP gross profit	$	423,992		$	292,128		$	804,130		$	580,801
Stock-based compensation expense included in cost of revenue		2,702			1,746			5,511			2,973
Non-GAAP gross profit	$	426,694		$	293,874		$	809,641		$	583,774

GAAP net income	$	172,732		$	86,753		$	304,991		$	178,817
Stock-based compensation expense (A)		29,460			28,866			66,865			51,091
Income tax impact of non-GAAP entries		(4,125	)		(3,573	)		(9,362	)		(6,029	)
Cumulative effect of change in accounting principle, net (B)		-			-			-			(704	)
Non-GAAP net income	$	198,067		$	112,046		$	362,494		$	223,175

Diluted net income per share
GAAP	$	0.43		$	0.22		$	0.76		$	0.46
Non-GAAP	$	0.51		$	0.29		$	0.93		$	0.58

Shares used in GAAP diluted net income per share computation		402,553			385,589			400,638			387,485
Cumulative impact of non-GAAP adjustments (C)		(10,388	)		(5,069	)		(10,668	)		(5,426	)
Shares used in non-GAAP diluted net income per share computation		392,165			380,520			389,970			382,059


(A) Results include stock-based compensation expense as follows (in thousands):
		Three Months Ended					Six Months Ended
	July 29,			July 30,			July 29,			July 30,
	2007			2006			2007			2006

Cost of revenue	$	2,702		$	1,746		$	5,511		$	2,973
Research and development	$	16,421		$	16,588		$	38,821		$	31,014
Sales, general and administrative	$	10,337		$	10,532		$	22,533		$	17,104

(B) Reflects the net cumulative impact of estimating forfeitures as a result of adoption of SFAS 123R.
(C) Reflects an adjustment to the diluted outstanding shares calculated under SFAS 123R to conform to diluted outstanding shares calculated under prior accounting standards (APB 25).

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

	July 29,		January 28,
	2007		2007
ASSETS

Current assets:
Cash, cash equivalents and marketable securities	$	1,571,563	$	1,117,850
Accounts receivable, net		508,435		518,680
Inventories		276,305		354,680
Prepaid expenses and other current assets		41,102		40,560
Total current assets		2,397,405		2,031,770

Property and equipment, net		264,832		260,828
Deposits and other assets		25,912		35,729
Goodwill		293,383		301,425
Intangible assets, net		54,735		45,511
Total assets	$	3,036,267	$	2,675,263

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	323,381	$	272,075
Accrued liabilities		357,417		366,732
Total current liabilities		680,798		638,807

Other long-term liabilities		95,191		29,537
Stockholders' equity		2,260,278		2,006,919

Total liabilities and stockholders' equity	$	3,036,267	$	2,675,263

NVIDIA (NVDA) 8-KResults of Operations and Financial Condition