NVIDIA Announces Financial Results for Third Quarter Fiscal 2019

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

		Three Months Ended									Nine Months Ended
		October 28,			July 29,			October 29,			October 28,			October 29,
			2018			2018			2017			2018			2017

GAAP gross profit		$	1,921		$	1,975		$	1,569		$	5,964		$	4,021
GAAP gross margin			60.4	%		63.3	%		59.5	%		62.7	%		59.1	%
	Stock-based compensation expense (A)		5			8			6			21			14
	Legal settlement costs		14			-			-			14			-
Non-GAAP gross profit		$	1,940		$	1,983		$	1,575		$	5,999		$	4,035
Non-GAAP gross margin			61.0	%		63.5	%		59.7	%		63.1	%		59.3	%

GAAP operating expenses		$	863		$	818		$	674		$	2,454		$	1,884
	Stock-based compensation expense (A)		(135	)		(124	)		(101	)		(379	)		(251	)
	Acquisition-related costs (B)		(1	)		(2	)		(3	)		(5	)		(11	)
	Legal settlement costs		(1	)		-			-			(3	)		-
	Restructuring and other		4			-			-			4			-
	Contributions		-			-			-			-			(2	)
Non-GAAP operating expenses		$	730		$	692		$	570		$	2,071		$	1,620

GAAP income from operations		$	1,058		$	1,157		$	895		$	3,510		$	2,137
	Total impact of non-GAAP adjustments to income from operations		152			133			110			418			278
Non-GAAP income from operations		$	1,210		$	1,290		$	1,005		$	3,928		$	2,415

GAAP other income (expense)		$	23		$	23		$	1		$	62		$	(20	)
	Gains from non-affiliated investments (C)		(2	)		(2	)		-			(11	)		-
	Interest expense related to amortization of debt discount		-			-			-			1			3
	Debt-related costs (D)		-			-			1			-			19
Non-GAAP other income (expense)		$	21		$	21		$	2		$	52		$	2

GAAP net income		$	1,230		$	1,101		$	838		$	3,575		$	1,928
	Total pre-tax impact of non-GAAP adjustments		150			131			111			409			300
	Income tax impact of non-GAAP adjustments (E)		(91	)		(22	)		(116	)		(199	)		(224	)
	Tax benefit from income tax reform		(138	)		-			-			(138	)		-
Non-GAAP net income		$	1,151		$	1,210		$	833		$	3,647		$	2,004

Diluted net income per share
	GAAP	$	1.97		$	1.76		$	1.33		$	5.71		$	3.05
	Non-GAAP	$	1.84		$	1.94		$	1.33		$	5.83		$	3.20

Weighted average shares used in diluted net income per share computation
	GAAP		625			626			628			626			633
	Anti-dilution impact from note hedge (F)		-			(1	)		(2	)		-			(7	)
	Non-GAAP		625			625			626			626			626

GAAP net cash provided by operating activities		$	487		$	913		$	1,157		$	2,845		$	2,144
	Purchase of property and equipment and intangible assets		(150	)		(128	)		(69	)		(397	)		(178	)
Free cash flow		$	337		$	785		$	1,088		$	2,448		$	1,966



(A) Stock-based compensation consists of the following:		Three Months Ended									Nine Months Ended
		October 28,			July 29,			October 29,			October 28,			October 29,
			2018			2018			2017			2018			2017
	Cost of revenue	$	5		$	8		$	6		$	21		$	14
	Research and development	$	88		$	76		$	61		$	237		$	146
	Sales, general and administrative	$	47		$	48		$	40		$	142		$	105

(B) Consists of amortization of acquisition-related intangible assets and compensation charges.

(C) Consists of unrealized gains from non-affiliated investments.

(D) Consists of loss on early debt conversions.

(E) Income tax impact of non-GAAP adjustments, including the recognition of excess tax benefits or deficiencies related to stock-based compensation under GAAP accounting standard (ASU 2016-09).

(F) Represents the number of shares that would be delivered upon conversion of the currently outstanding 1.00% Convertible Senior Notes Due 2018. Under GAAP, shares delivered in hedge transactions are not considered offsetting shares in the fully diluted share calculation until actually delivered.

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