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NVIDIA Reports Financial Results for Third Quarter Fiscal Year 2010

SANTA CLARA, CA -- (Marketwire) -- 11/05/09 -- NVIDIA Corp. (NASDAQ: NVDA)

  • Revenue up 16 percent quarter-on-quarter to $903.2 million

  • GAAP net income of $107.6 million, or $0.19 cents per diluted share

  • GAAP gross margin of 43.4 percent; non-GAAP gross margin of 41.0 percent

  • Cash flow from operating activities of $141.3 million; free cash flow of $124.7 million

NVIDIA Corp. (NASDAQ: NVDA) today reported revenue of $903.2 million for the third quarter of fiscal 2010 ended Oct. 25, 2009, up 16 percent from the previous quarter and up slightly from $897.7 million reported in the same period a year earlier.

On a GAAP basis, the company recorded net income of $107.6 million, or $0.19 per diluted share, compared with net income of $61.7 million, or $0.11 per diluted share a year ago. Third quarter GAAP results included a benefit to operating income of $25.1 million related to insurance reimbursements received during the quarter. On a non-GAAP basis -- excluding the insurance reimbursements and stock-based compensation, as well as their associated tax impact -- net income was $110.3 million, or $0.19 per diluted share, compared with $111.4 million, or $0.20 per diluted share, a year earlier.

                          Quarterly Results Highlights

($ in millions except per share data)   Q3 FY2010   Q2 FY2010   Q3 FY2009
Revenue                                 $    903.2  $    776.5  $    897.7
GAAP:
  Gross margin                                43.4%       20.2%       41.0%
  Net income (loss)                     $    107.6  ($   105.3) $     61.7
  Income (loss) per share               $     0.19  ($    0.19) $     0.11
Non-GAAP: (1)
  Gross margin                                41.0%       36.3%       41.9%
  Net income                            $    110.3  $     37.7  $    111.4
  Income per share                      $     0.19  $     0.07  $     0.20
                                        ----------  ----------  ----------
(1) See Non-GAAP Measures for an explanation of these figures.

"We continued to make progress in the third quarter with healthy market demand across the board," said Jen-Hsun Huang, president and chief executive officer, NVIDIA. "Revenue was up from a year ago, with improvement in each of our PC, professional solutions and consumer businesses. It's great to see us shipping orders with our Tegra mobile-computing solution, and growing enthusiasm for our Tesla platform for parallel computing in the server and cloud-computing markets."

Gross margin, on a GAAP basis, increased to 43.4 percent from 20.2 percent in the previous quarter and 41.0 percent a year earlier. On a non-GAAP basis, gross margin was 41.0 percent, up 4.7 points from the 36.3 percent reported in the previous quarter but slightly off from 41.9 percent a year earlier.

GAAP net loss for the nine months ended Oct. 25, 2009 was $199.1 million, or $0.36 per share, compared to a net income of $117.6 million, or $0.20 per diluted share for the nine months ended Oct. 26, 2008. Non-GAAP net income for the nine months ended Oct. 25, 2009, which excludes a $93.9 million net charge related to the weak die/packaging material set that was used in certain versions of our previous generation chips, a non-recurring charge of $140.2 million in connection with a cash tender offer to purchase employee stock options, stock-based compensation charges, and their associated tax impact, was $101.4 million, or $0.18 per diluted share, compared to a net income of $397.7 million, or $0.68 per diluted share for the nine months ended Oct. 26, 2008.

Outlook

The outlook for the fourth quarter of fiscal 2010 is as follows:

  • Revenue is expected to be up slightly, approximately 2 percent, from the third quarter.

  • GAAP gross margin is expected to be in the range of 40 to 42 percent.

  • GAAP operating expenses are expected to be approximately $305 million.

Third Quarter Fiscal 2010 and Recent Highlights:

  • First major Tegra(TM) devices shipped: Microsoft's Zune HD and the Samsung M1.

  • Held first ever GPU Technology Conference, which was 50% oversubscribed, with 1,500 attendees from 40 countries. More than 200 technical sessions were conducted, and presentations were made by 60 emerging companies that utilize the graphics processing unit (GPU).

  • Introduced the next generation CUDA(TM) GPU architecture, codenamed "Fermi." The Fermi architecture is the foundation for the world's first computational GPUs, delivering breakthroughs in both graphics and parallel computing.

  • Oak Ridge National Laboratory announced plans to use Fermi to build a new supercomputer, which is designed to be the world's fastest.

  • Launched the industry's first development environment for massively parallel computing. The tool, code-named "Nexus," is integrated into Microsoft Visual Studio, so that developers will be able to use Visual Studio and C++ to write applications that leverage Fermi GPUs.

  • Launched NVIDIA® RealityServer®, a powerful combination of GPUs and software that streams interactive, photorealistic 3D applications to any web connected PC, laptop, netbook or smart phone.

  • Adobe's new Flash Player 10.1 will be accelerated by GeForce®, NVIDIA ION(TM) and Tegra(TM) products, helping to bring uncompromised browsing of rich Web content to netbooks, smartphones and smartbooks.

Conference Call and Web Cast Information
NVIDIA will conduct a conference call with analysts and investors to discuss its third quarter fiscal 2010 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 held 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 fourth quarter fiscal 2010.

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 cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income, non-GAAP net income per share, free cash flow and days sales in inventory. 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 chips, net of insurance reimbursements, a non-recurring charge related to a tender offer purchase, a non-recurring charge against cost of revenue related to a royalty dispute, a non-recurring restructuring charge against operating expenses, recurring stock-based compensation charges, 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. Days sales in inventory is computed using GAAP ending inventory multiply by the number of days in the period divided by the non-GAAP cost of revenue. 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 graphics processing unit (GPU) in 1999. Since then, it has consistently set new standards in visual computing with breathtaking, interactive graphics. Expertise in programmable GPUs has led to breakthroughs in parallel processing which make supercomputing inexpensive and widely accessible. Fortune magazine has ranked NVIDIA #1 in innovation in the semiconductor industry for two years in a row. For more information, see www.nvidia.com.

Certain statements in this press release including, but not limited to, statements as to: the benefits and impact of, and demand and enthusiasm for, NVIDIA's products and technologies; and NVIDIA's revenue outlook for the fourth quarter of fiscal 2010; 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; 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 July 26, 2009. Copies of reports filed with the SEC are posted on NVIDIA'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 © 2009 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Tegra, NVIDIA ION and CUDA 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 OPERATIONS
                  (In thousands, except per share data)
                                (Unaudited)

                           Three Months Ended         Nine Months Ended
                        ------------------------- ------------------------
                        October 25,  October 26,  October 25,  October 26,
                            2009         2008         2009         2008
                        ------------ -----------  -----------  ------------

Revenue                 $    903,206 $   897,655  $ 2,343,957  $  2,943,719

Cost of revenue              511,423     529,812    1,605,755     1,911,116
                        ------------ -----------  -----------  ------------

Gross profit                 391,783     367,843      738,202     1,032,603

Operating expenses
 Research and
  development                197,948     212,360      692,600       644,100
 Sales, general and
  administrative              85,990      90,349      278,829       275,782
 Restructuring charges             -       8,338            -         8,338
                        ------------ -----------  -----------  ------------
     Total operating
      expenses               283,938     311,047      971,429       928,220
                        ------------ -----------  -----------  ------------

Operating income (loss)      107,845      56,796     (233,227)      104,383

Interest and other
 income, net                   2,362       4,207       11,512        23,038
                        ------------ -----------  -----------  ------------

Income (loss) before
 income tax expense          110,207      61,003     (221,715)      127,421

Income tax expense
 (benefit)                     2,630        (745)     (22,652)        9,797
                        ------------ -----------  -----------  ------------

Net income (loss)       $    107,577 $    61,748  $  (199,063) $    117,624
                        ============ ===========  ===========  ============


Basic net income (loss)
 per share              $       0.20 $      0.11  $     (0.36) $       0.21
                        ============ ===========  ===========  ============

Diluted net income
 (loss) per share       $       0.19 $      0.11  $     (0.36) $       0.20
                        ============ ===========  ===========  ============

Shares used in basic
 per share computation       551,283     543,807      546,737       551,623

Shares used in diluted
 per share computation       574,381     564,536      546,737       590,490


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

                                                    October 25, January 25,
                                                       2009        2009
                                                    ----------- -----------
ASSETS
Current assets:
 Cash, cash equivalents and marketable securities   $ 1,634,079 $ 1,255,390
 Accounts receivable, net                               397,820     318,435
 Inventories                                            277,643     537,834
 Prepaid expenses and other current assets               48,174      56,299
                                                    ----------- -----------
   Total current assets                               2,357,716   2,167,958

Property and equipment, net                             565,296     625,798
Goodwill                                                369,844     369,844
Intangible assets, net                                  127,817     147,101
Deposits and other assets                                42,901      40,026
                                                    ----------- -----------

   Total assets                                     $ 3,463,574 $ 3,350,727
                                                    =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                   $   321,530 $   218,864
 Accrued liabilities and other current liabilities      567,276     559,727
                                                    ----------- -----------

   Total current liabilities                            888,806     778,591

Other long-term liabilities                             126,373     151,850
Capital lease obligations, long term                     24,760      25,634

Stockholders' equity                                  2,423,635   2,394,652
                                                    ----------- -----------

   Total liabilities and stockholders' equity       $ 3,463,574 $ 3,350,727
                                                    =========== ===========



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

                      Three Months Ended             Nine Months Ended
              ----------------------------------  ------------------------
             October 25,   July 26,   October 26,  October 25,  October 26,
                2009         2009        2008         2009         2008
              ---------  -----------  ----------  -----------  -----------
GAAP gross
 profit       $ 391,783  $   156,723  $  367,843  $   738,202  $ 1,032,603
  GAAP gross
   margin          43.4%        20.2%       41.0%        31.5%        35.1%
    Stock-based
     compensation
     expense
     included in
     cost of
     revenue (A)  2,650        4,828       3,558        9,708       10,027
    Net
     warranty
     charge
     against
     cost of
     revenue
     arising
     from a
     weak
     die/packaging
     material
     set (B)    (24,115)     119,993           -       95,878      195,954
    Non-recurring
     charge
     related
     to a
     royalty
     dispute          -            -       4,500            -        4,500
    Stock
     option
     purchase
     charge
     related
     to cost of
     revenue
     ©              -            -           -       11,412            -
              ---------  -----------  ----------  -----------  -----------
Non-GAAP
 gross profit $ 370,318  $   281,544  $  375,901  $   855,200  $ 1,243,084
              =========  ===========  ==========  ===========  ===========
  Non-GAAP
   gross
   margin          41.0%        36.3%       41.9%        36.5%        42.2%

GAAP net
 income
 (loss)       $ 107,577  $  (105,302) $   61,748  $  (199,063) $   117,624
    Stock-
     based
     compensation
     expense (A) 22,982       25,376      38,384       82,471      120,873
    Net
     warranty
     charge
     against
     cost of
     revenue
     arising
     from a
     weak
     die/packaging
     material
     set (B)    (25,105)     119,054           -       93,949      195,954
    Restructuring
     charges          -            -       8,338            -        8,338
    Non-recurring
     charge
     related
     to a
     royalty
     dispute          -            -       4,500            -        4,500
    Stock
     option
     purchase
     charge ©       -            -           -      140,241            -
    Income tax
     impact of
     non-GAAP
     adjustments  4,876       (1,398)     (1,540)     (16,212)     (49,624)
              ---------  -----------  ----------  -----------  -----------
Non-GAAP net
 income       $ 110,330  $    37,730  $  111,430  $   101,386  $   397,665
              =========  ===========  ==========  ===========  ===========

Diluted net
 income
 (loss) per
 share
    GAAP      $    0.19  $     (0.19) $     0.11  $     (0.36) $      0.20
              =========  ===========  ==========  ===========  ===========
    Non-GAAP  $    0.19  $      0.07  $     0.20  $      0.18  $      0.68
              =========  ===========  ==========  ===========  ===========

Shares used
 in GAAP
 diluted net
 income
 (loss) per
 share
 computation    574,381      546,639     564,536      546,737      590,490
    Impact of
     non-GAAP
     adjustments
     on dilutive
     share
     computation (1,190)      15,996      (3,374)      16,291       (9,058)
              ---------  -----------  ----------  -----------  -----------
Shares used
 in non-GAAP
 diluted net
 income per
 share
 computation    573,191      562,635     561,162      563,028      581,432
              =========  ===========  ==========  ===========  ===========

Metrics:
GAAP net cash
 flow
 provided by
 operating
 activities   $ 141,317  $   135,117  $   43,003  $   418,562  $   269,205
    Purchase
     of property
     and equipment
     and intangible
     assets     (16,593)     (17,656)   (109,008)     (55,026)    (364,695)
              ---------  -----------  ----------  -----------  -----------
Free cash
 flow         $ 124,724  $   117,461  $  (66,005) $   363,536  $   (95,490)
              =========  ===========  ==========  ===========  ===========

GAAP cost of
 revenue [1]  $ 511,423  $   619,797  $  529,812  $ 1,605,755  $ 1,911,116
GAAP
 inventory
 [2]          $ 277,643  $   279,216  $  523,988  $   277,643  $   523,988
Days in
 period [3]          91           91          91          273          273
              ---------  -----------  ----------  -----------  -----------
GAAP days
 sales in
 inventory
 [2]*[3]÷[1]         49           41          90           47           75
              =========  ===========  ==========  ===========  ===========

GAAP revenue  $ 903,206  $   776,520  $  897,655  $ 2,343,957  $ 2,943,719
    Less:
     Non-GAAP
     gross
     profit    (370,318)    (281,544)   (375,901)    (855,200)  (1,243,084)
              ---------  -----------  ----------  -----------  -----------
Non-GAAP cost
 of revenue
 [4]          $ 532,888  $   494,976  $  521,754  $ 1,488,757  $ 1,700,635
              =========  ===========  ==========  ===========  ===========

GAAP ending
 inventory
 [5]          $ 277,643  $   279,216  $  523,988  $   277,643  $   523,988
Days in
 period [6]          91           91          91          273          273

Non-GAAP days
 sales in
 inventory
 [5]*[6]÷[4]         47           51          91           51           84
              =========  ===========  ==========  ===========  ===========


(A) Results include stock-based compensation expense as follows (in
    thousands):

                      Three Months Ended              Nine Months Ended
              ----------------------------------- -------------------------
              October 25,  July 26,   October 26, October 25,  October 26,
                2009         2009        2008         2009         2008
              ---------- ------------ ----------- ------------ ------------
 Cost of
  revenue     $    2,650 $      4,828 $     3,558 $      9,708 $     10,027
 Research and
  development $   12,853 $     13,268 $    22,740 $     47,391 $     71,500
 Sales, general
  and adminis-
  trative     $    7,479 $      7,280 $    12,086 $     25,372 $     39,346

(B) Excludes a charge related to the weak die/packaging material set that
    was used in certain versions of our previous generation chips, net of
    insurance reimbursement.
(C) During the three months ended April 26, 2009, the Company completed a
    tender offer to purchase an aggregate of 28.5 million outstanding stock
    options for a total cash payment of $78.1 million.  As a result of the
    tender offer the Company incurred a charge of $140.2 million,
    consisting of the remaining unamortized stock-based compensation
    expenses associated with the unvested portion of the options tendered
    in the offer, stock-based compensation expense resulting from amounts
    paid in excess of the fair value of the underlying options, plus
    associated payroll taxes and professional fees. The $140.2 million
    stock option purchase charge for the three months ended April 26, 2009
    relates to personnel associated with cost of revenue (for
    manufacturing personnel), research and development, and sales, general
    and administrative of $11.4 million, $90.5 million, and $38.3 million,
    respectively.

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For further information, contact:

Michael Hara
Investor Relations
NVIDIA Corporation
(408) 486-2511
[email protected]

Robert Sherbin
Corporate Communications
NVIDIA Corporation
(408) 566-5150
[email protected]

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