Delaware | 001-07882 | 94-1692300 | ||
(State of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
EXHIBIT INDEX | ||
Exhibit No. | Description | |
99.1 | Press release dated October 20, 2016 | |
99.2 | CFO Commentary on Results of Second Fiscal Quarter ended September 24, 2016 |
Date: October 20, 2016 | ADVANCED MICRO DEVICES, INC. | |
By: | /s/ Devinder Kumar | |
Name: | Devinder Kumar | |
Title: | Senior Vice President, Chief Financial Officer & Treasurer |
Q3-16 | Q2-16 | Q3-15 | |
Revenue | $1,307M | $1,027M | $1,061M |
Operating loss | $(293)M | $(8)M | $(158)M |
Net income (loss) / earnings (loss) per share | $(406)M/$(0.50) | $69M/$0.08 | $(197)M/$(0.25) |
Q3-16 | Q2-16 | Q3-15 | |
Revenue | $1,307M | $1,027M | $1,061M |
Operating income (loss) | $70M | $3M | $(97)M |
Net income (loss) / earnings (loss) per share | $27M/$0.03 | $(40)M/$(0.05) | $(136)M/$(0.17) |
• | Q3 2016, Q2 2016 and Q3 2015 were 13-week fiscal quarters. |
• | Revenue of $1,307 million, up 27 percent sequentially and up 23 percent year-over-year primarily due to record semi-custom SoC and higher GPU and mobile APU sales, partially offset by client desktop processor and chipset sales. |
• | Gross margin was 5 percent, down from 31 percent from the previous quarter due to a $340 million charge related to the 6th amendment to the Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES (GF). Non-GAAP gross margin of 31 percent was flat quarter-over-quarter. |
• | Operating expenses of $376 million, compared to $353 million for the prior quarter. Non-GAAP operating expenses of $353 million, compared to non-GAAP operating expenses of $342 million in Q2 2016, driven by increased investments in research and development. |
• | Operating loss of $293 million, compared to an operating loss of $8 million in Q2 2016 due to a $340 million WSA charge. Non-GAAP(1) operating income of $70 million, compared to non-GAAP(1) operating income of $3 million in Q2 2016, primarily due to higher revenue. |
• | Net loss of $406 million, net loss per share of $0.50, compared to net income of $69 million, net earnings per share of $0.08 in Q2 2016. The decline was driven by a $340 million WSA charge and a $61 million loss on debt redemption offset by increased revenue. Q2 2016 net income included a $150 million pre-tax gain on the sale of 85 percent of assembly, test, mark and pack (ATMP) facilities to Nantong Fujitsu Microelectronics (NFME). |
• | Non-GAAP(1) net income of $27 million, non-GAAP(1) earnings per share of $0.03. This compares to non-GAAP(1) net loss of $40 million and non-GAAP(1) loss per share of $0.05 in Q2 2016, primarily due to increased revenue in Q3 2016. |
• | Cash and cash equivalents were $1,258 million at the end of the quarter, up $301 million from the end of the prior quarter. The quarter-end cash balance includes approximately $274 million of net proceeds from recent capital markets transactions. |
• | Total debt at the end of the quarter was $1,632 million, down $606 million from the prior quarter as a result of the timing and execution of Q3 2016 debt reduction actions and due to bifurcation of the newly issued 2.125 percent Convertible Notes due 2026 into equity and liability components based on GAAP accounting regulations. We plan to further reduce debt by deploying a significant portion of the remaining cash from our capital markets transactions. |
• | Computing and Graphics segment revenue of $472 million increased 9 percent sequentially and 11 percent from Q3 2015. The sequential and year-over-year increases were driven primarily by increased sales of GPUs, offset by decreased sales of client desktop processors and chipsets. The year-over-year increase was also driven by increased sales of client mobile processors. |
◦ | Operating loss was $66 million, compared with an operating loss of $81 million in Q2 2016 and an operating loss of $181 million in Q3 2015. The sequential improvement was driven primarily by higher GPU revenue, and the year-over-year improvement was primarily due to higher GPU revenue and the absence of an inventory write-down charge. |
◦ | Client average selling price (ASP) decreased sequentially driven by lower mobile and desktop processor ASPs and was flat year-over-year. |
◦ | GPU ASP increased sequentially and year-over-year driven by higher channel and professional graphics ASPs. |
• | Enterprise, Embedded and Semi-Custom segment revenue of $835 million increased 41 percent sequentially and 31 percent year-over-year due to higher sales of semi-custom SoCs. |
◦ | Operating income was $136 million compared with $84 million in Q2 2016 and $84 million in Q3 2015. The sequential improvement was primarily due to higher revenue and the year-over-year improvement was primarily due to higher revenue and a $24 million IP licensing gain. |
• | All Other category operating loss was $363 million in Q3 2016 compared with $11 million in Q2 2016 and $61 million in Q3 2015. The sequential increase was primarily driven by a $340 million WSA charge. |
• | AMD completed capital markets transactions that raised approximately $1.4 billion in cash, before issuance costs, to lower overall debt, reduce interest expense payments, and further support growing business opportunities. |
• | AMD announced a five-year amendment to the WSA with GF that strengthens the strategic partnership, while providing AMD with flexibility in sourcing foundry services and greater financial predictability. |
• | AMD disclosed new details about its upcoming high-performance x86 “Zen” core architecture and “Zen”-based products, including: |
◦ | A public preview of the competitive performance of the “Zen”-based “Summit Ridge” desktop processor, |
◦ | A first look at “Naples”, its “Zen”-based 32-core, 64-thread server product, and |
◦ | A detailed technical overview of the new grounds-up "Zen" core architecture at the 28th annual Hot Chips conference. |
• | AMD expanded its family of mainstream and workstation class graphics based on its new Polaris architecture based on 14nm FinFET technology |
◦ | Launched the new Radeon RX™ 470 GPU, enabling exceptional HD gaming, true asynchronous compute, and support for high dynamic range (HDR) monitors. |
◦ | Launched the Radeon™ RX 460 GPU for eSports gamers who demand pristine HD gaming, smooth beyond-HD streaming capabilities, and an assortment of future-ready gaming technologies. |
◦ | Unveiled the new Radeon™ Pro WX Series of professional graphics cards, a set of new solutions to address modern content creation and engineering. |
◦ | Introduced the upcoming Radeon™ Pro SSG (Solid State Graphics), a new Radeon™ Pro solution with 1 terabyte of dedicated memory designed for large dataset applications, which will be available initially as a developer kit. |
• | Customer adoption of Radeon™ RX GPUs expanded with notable gaming PC design wins with HP and Alienware. |
◦ | HP announced support for the Radeon™ RX 400-Series graphics cards and introduced the HP OMEN X, a fully customizable enthusiast gaming desktop PC designed for top-end gaming and superior VR experiences that can accommodate up to two Radeon™ R9 Fury X graphics cards. |
◦ | Alienware introduced its latest line of premium gaming laptops, including the new Alienware 15 and new Alienware 17 available with the future-proof2 Radeon™ RX 470 graphics card. |
• | AMD continued to gain momentum in virtual reality (VR) with the introduction of most affordable VR-ready PC to-date, the limited edition CyberPowerPC, featuring the AMD FX 4350 processor and Radeon™ RX 470 graphics. Priced at $499 standalone or $999 when bundled with the Oculus Rift headset. |
• | AMD strengthened its GPUOpen initiative with the addition of AMD TrueAudio Next and Radeon™ ProRender. |
◦ | TrueAudio Next is an API that lets developers leverage the GPU for audio rendering, allowing developers and sound designers to add physics-based environmental audio to games and VR apps across platforms. |
◦ | Radeon™ ProRender is an open source professional GPU-optimized photorealistic renderer that gives developers access to the source code and enables creators to bring ideas to life through high-performance applications and workflows enhanced by photorealistic rendering. |
• | AMD announced the availability of new consumer and commercial desktop systems based on 7th Generation AMD APUs and the new AM4 platform. |
◦ | The AMD AM4 socket is a new unified infrastructure that supports both 7th Generation AMD A-Series APUs and the upcoming “Zen"-based high-performance “Summit Ridge” AMD desktop CPU. AM4 platforms feature DDR4 Memory and next-gen I/O and peripheral support, including PCIe® Gen 3, USB 3.1 Gen 2, NVMe, and SATA Express. |
◦ | AMD 7th Generation APU-based consumer desktop systems are now available from HP, with other global OEM designs to follow. |
◦ | The commercial-focused HP EliteDesk 705 G3 Series desktops feature the new 7th Generation AMD PRO APUs. |
▪ | AMD 7th Generation AMD PRO APUs deliver up to 14 percent more compute and 22 percent more graphic performance, and are 32 percent more energy efficient than the previous generation3, while providing a secure and stable platform to protect customers’ IT investments. |
• | Sony announced a new, thinner and lighter PS4, as well as the PS4 Pro with support for 4K gameplay, both powered by AMD semi-custom SoCs. |
• | AMD announced two new, Polaris-based Embedded Radeon™ discrete GPU products with 4K and 3D support – the E9260 and E9550 – targeting medical imaging, digital signage and casino gaming applications, among others. |
• | AMD reinforced its commitment to open standards by participating in three consortia with the overarching goal of bringing open standards to future servers and datacenters through high-performance interconnect technologies. Other technology leaders taking part in these consortia include Dell EMC, Google, HPE, IBM, Lenovo, Qualcomm, Samsung and Xilinx. |
• | AMD was recognized for its commitment to corporate responsibility by receiving the Catalyst Award by the Green Electronics Council for its 25x20 Energy Efficiency Initiative and being named to the Dow Jones Sustainability Index for the 15th consecutive year. |
(Millions except percentages) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP Gross Margin | $ | 59 | $ | 319 | $ | 239 | ||||||
GAAP Gross Margin % | 5 | % | 31 | % | 23 | % | ||||||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | |||||||||
Non-GAAP Gross Margin | $ | 399 | $ | 319 | $ | 239 | ||||||
Non-GAAP Gross Margin % | 31 | % | 31 | % | 23 | % |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP operating expenses | $ | 376 | $ | 353 | $ | 397 | ||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | ||||||||
Stock-based compensation | 23 | 18 | 13 | |||||||||
Non-GAAP operating expenses | $ | 353 | $ | 342 | $ | 336 |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP operating loss | $ | (293 | ) | $ | (8 | ) | $ | (158 | ) | |||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | |||||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | ||||||||
Stock-based compensation | 23 | 18 | 13 | |||||||||
Non-GAAP operating income (loss) | $ | 70 | $ | 3 | $ | (97 | ) |
(Millions except per share amounts) | Q3-16 | Q2-16 | Q3-15 | |||||||||||||||||||||
GAAP net income (loss) /income (loss) per share | $ | (406 | ) | $ | (0.50 | ) | $ | 69 | $ | 0.08 | $ | (197 | ) | $ | (0.25 | ) | ||||||||
Charge related to the sixth amendment to the WSA with GF | 340 | 0.39 | — | — | — | — | ||||||||||||||||||
Loss on debt redemption | 61 | 0.07 | — | — | — | — | ||||||||||||||||||
Non-cash interest expense related to convertible debt | 1 | — | — | — | — | — | ||||||||||||||||||
Restructuring and other special charges, net | — | — | (7 | ) | (0.01 | ) | 48 | 0.06 | ||||||||||||||||
Stock-based compensation | 23 | 0.03 | 18 | 0.02 | 13 | 0.02 | ||||||||||||||||||
Gain on sale of 85% of ATMP JV | 4 | — | (150 | ) | (0.19 | ) | — | — | ||||||||||||||||
Equity in income (loss) of ATMP JV | 5 | 0.01 | 3 | — | — | — | ||||||||||||||||||
Tax provision (benefit) related to sale of 85% of ATMP JV | (1 | ) | — | 27 | 0.03 | — | — | |||||||||||||||||
Non-GAAP net income (loss)/ income (loss) per share | $ | 27 | $ | 0.03 | $ | (40 | ) | $ | (0.05 | ) | $ | (136 | ) | $ | (0.17 | ) |
1. | In this earnings press release, in addition to GAAP financial results, AMD has provided non-GAAP financial measures including non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP earnings (loss) per share. These non-GAAP financial measures reflect certain adjustments as presented in the tables in this earnings press release. AMD also provided adjusted EBITDA and non-GAAP free cash flow as supplemental measures of its performance. These items are defined in the footnotes to the selected corporate data tables provided at the end of this earnings press release. AMD is providing these financial measures because it believes this non-GAAP presentation makes it easier for investors to compare its operating results for current and historical periods and also because AMD believes it assists investors in comparing AMD’s performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance and for the other reasons described in the CFO Commentary. |
2. | Statement of “future-proof” refers to support of current and upcoming technology standards including 14nm FinFET process technology, DirectX®12 and Vulkan™ API support, new display technology, and experiences such as VR. “Future-proof” statement is not meant to serve as a warranty or indicate that users will never have to upgrade their graphics technology again. Support of current and upcoming technology standards described above has the potential to reduce frequency of graphics upgrades for some users. |
3. | Testing by AMD Performance labs. PC manufacturers may vary configurations yielding different results. 3DMark 11 Performance is used to simulate graphics performance, and Cinebench R11.5 1T Performance is used to simulate single threaded CPU performance; the 7th Generation AMD PRO A12-9800 at 65W scored 3521.25 and 1.21 while the AMD PRO A10-8850B at 95W scored 2880 and 1.06 respectively. CPU Performance improvement: 1.21/1.06=1.14X or 14% more, Graphic Performance improvement: 3521.25/2880=1.22X or 22% more, Power Consumption improvement: (95W-65W)/95W=0.32X or 32% less. BRPD-4 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 24, 2016 | June 25, 2016 | September 26, 2015 | September 24, 2016 | September 26, 2015 | ||||||||||||||||
Net revenue | $ | 1,307 | $ | 1,027 | $ | 1,061 | 3,166 | $ | 3,033 | |||||||||||
Cost of sales | 1,248 | 708 | 822 | 2,519 | 2,236 | |||||||||||||||
Gross margin | 59 | 319 | 239 | 647 | 797 | |||||||||||||||
Gross margin % | 5 | % | 31 | % | 23 | % | 20 | % | 26 | % | ||||||||||
Research and development | 259 | 243 | 241 | 744 | 718 | |||||||||||||||
Marketing, general and administrative | 117 | 117 | 108 | 339 | 373 | |||||||||||||||
Amortization of acquired intangible assets | — | — | — | — | 3 | |||||||||||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | (10 | ) | 135 | |||||||||||||
Licensing gain | (24 | ) | (26 | ) | — | (57 | ) | — | ||||||||||||
Operating loss | (293 | ) | (8 | ) | (158 | ) | (369 | ) | (432 | ) | ||||||||||
Interest expense | (41 | ) | (41 | ) | (39 | ) | (122 | ) | (119 | ) | ||||||||||
Other income (expense), net | (63 | ) | 150 | — | 87 | (3 | ) | |||||||||||||
Income (loss) before equity loss and income taxes | (397 | ) | 101 | (197 | ) | (404 | ) | (554 | ) | |||||||||||
Provision for income taxes | 4 | 29 | — | 34 | 4 | |||||||||||||||
Equity in income (loss) of ATMP JV | (5 | ) | (3 | ) | — | (8 | ) | — | ||||||||||||
Net income (loss) | (406 | ) | 69 | (197 | ) | (446 | ) | (558 | ) | |||||||||||
Net income (loss) per share | ||||||||||||||||||||
Basic | $ | (0.50 | ) | $ | 0.09 | $ | (0.25 | ) | $ | (0.56 | ) | $ | (0.72 | ) | ||||||
Diluted | $ | (0.50 | ) | $ | 0.08 | $ | (0.25 | ) | (0.56 | ) | $ | (0.72 | ) | |||||||
Shares used in per share calculation | ||||||||||||||||||||
Basic | 815 | 794 | 785 | 801 | 780 | |||||||||||||||
Diluted | 815 | 821 | 785 | 801 | 780 | |||||||||||||||
ADVANCED MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Millions) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 24, 2016 | June 25, 2016 | September 26, 2015 | September 24, 2016 | September 26, 2015 | ||||||||||||||||
Total comprehensive income (loss) | $ | (406 | ) | $ | 72 | $ | (207 | ) | $ | (441 | ) | $ | (568 | ) |
September 24, 2016 | December 26, 2015 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,258 | $ | 785 | ||||
Accounts receivable, net | 640 | 533 | ||||||
Inventories, net | 772 | 678 | ||||||
Prepayment and other - GLOBALFOUNDRIES | 13 | 33 | ||||||
Prepaid expenses | 63 | 43 | ||||||
Other current assets | 78 | 248 | ||||||
Total current assets | 2,824 | 2,320 | ||||||
Property, plant and equipment, net | 161 | 188 | ||||||
Goodwill | 289 | 278 | ||||||
Investment in ATMP JV | 60 | — | ||||||
Other assets | 282 | 298 | ||||||
Total Assets | $ | 3,616 | $ | 3,084 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | — | $ | 230 | ||||
Accounts payable | 582 | 279 | ||||||
Payable to GLOBALFOUNDRIES | 284 | 245 | ||||||
Payable to ATMP JV | 144 | — | ||||||
Accrued liabilities | 384 | 472 | ||||||
Other current liabilities | 25 | 124 | ||||||
Deferred income on shipments to distributors | 54 | 53 | ||||||
Total current liabilities | 1,473 | 1,403 | ||||||
Long-term debt, net | 1,632 | 2,007 | ||||||
Other long-term liabilities | 126 | 86 | ||||||
Stockholders' equity (deficit): | ||||||||
Capital stock: | ||||||||
Common stock, par value | 9 | 8 | ||||||
Additional paid-in capital | 8,258 | 7,017 | ||||||
Treasury stock, at cost | (127 | ) | (123 | ) | ||||
Accumulated deficit | (7,752 | ) | (7,306 | ) | ||||
Accumulated other comprehensive loss | (3 | ) | (8 | ) | ||||
Total Stockholders' equity (deficit) | 385 | (412 | ) | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 3,616 | $ | 3,084 |
(1) Amounts reflected adoption of FASB ASU 2015-17, Balance Sheet Classification of Deferred Taxes beginning in the first quarter of 2016. | ||||
(2) Amounts reflected adoption of FASB ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs beginning in the first quarter of 2016. |
Three Months Ended | Nine Months Ended | |||||||
September 24, 2016 | September 24, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (406 | ) | $ | (446 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Net gain on sale of equity interests in ATMP JV | 4 | (146 | ) | |||||
Equity in loss of ATMP JV | 2 | 1 | ||||||
Depreciation and amortization | 33 | 99 | ||||||
Provision for deferred income taxes | — | 11 | ||||||
Stock-based compensation expense | 23 | 57 | ||||||
Non-cash interest expense | 4 | 11 | ||||||
Loss on debt redemption | 61 | 61 | ||||||
Fair value of warrant issued related to sixth amendment to the WSA | 240 | 240 | ||||||
Other | 1 | (5 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 31 | (107 | ) | |||||
Inventories | (28 | ) | (94 | ) | ||||
Prepayment and other - GLOBALFOUNDRIES | (1 | ) | 20 | |||||
Prepaid expenses and other assets | (17 | ) | (134 | ) | ||||
Payable to ATMP JV | (6 | ) | 144 | |||||
Payable to GLOBALFOUNDRIES | 190 | 39 | ||||||
Accounts payable, accrued liabilities and other | (102 | ) | 151 | |||||
Net cash provided by (used in) operating activities | $ | 29 | $ | (98 | ) | |||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (9 | ) | (56 | ) | ||||
Net proceeds from sale of equity interests in ATMP JV | (5 | ) | 346 | |||||
Other | 4 | 3 | ||||||
Net cash provided by (used in) investing activities | $ | (10 | ) | $ | 293 | |||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock, net of issuance costs | 668 | 668 | ||||||
Proceeds from issuance of convertible senior notes, net of issuance costs | 681 | 681 | ||||||
Proceeds from issuance of common stock under stock-based compensation equity plans | 10 | 12 | ||||||
Repayments of borrowings, net | (226 | ) | (230 | ) | ||||
Repayments of long-term debt | (848 | ) | (848 | ) | ||||
Other | (3 | ) | (5 | ) | ||||
Net cash provided by financing activities | $ | 282 | $ | 278 | ||||
Net increase in cash and cash equivalents | 301 | 473 | ||||||
Cash and cash equivalents at beginning of period | $ | 957 | $ | 785 | ||||
Cash and cash equivalents at end of period | $ | 1,258 | $ | 1,258 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 24, 2016 | June 25, 2016 | September 26, 2015 | September 24, 2016 | September 26, 2015 | ||||||||||||||||
Segment and Category Information | ||||||||||||||||||||
Computing and Graphics (1) | ||||||||||||||||||||
Net revenue | $ | 472 | $ | 435 | $ | 424 | $ | 1,367 | $ | 1,335 | ||||||||||
Operating loss | $ | (66 | ) | $ | (81 | ) | $ | (181 | ) | $ | (217 | ) | $ | (403 | ) | |||||
Enterprise, Embedded and Semi-Custom (2) | ||||||||||||||||||||
Net revenue | 835 | 592 | 637 | 1,799 | 1,698 | |||||||||||||||
Operating income | 136 | 84 | 84 | 236 | 156 | |||||||||||||||
All Other (3) | ||||||||||||||||||||
Net revenue | — | — | — | — | — | |||||||||||||||
Operating loss | (363 | ) | (11 | ) | (61 | ) | (388 | ) | (185 | ) | ||||||||||
Total | ||||||||||||||||||||
Net revenue | $ | 1,307 | $ | 1,027 | $ | 1,061 | $ | 3,166 | $ | 3,033 | ||||||||||
Operating loss | $ | (293 | ) | $ | (8 | ) | $ | (158 | ) | $ | (369 | ) | $ | (432 | ) | |||||
Other Data | ||||||||||||||||||||
Depreciation and amortization, excluding amortization of acquired intangible assets | $ | 33 | $ | 33 | $ | 42 | $ | 99 | $ | 130 | ||||||||||
Capital additions | $ | 9 | $ | 21 | $ | 25 | $ | 56 | $ | 64 | ||||||||||
Adjusted EBITDA (4) | $ | 103 | $ | 36 | $ | (55 | ) | $ | 117 | $ | (84 | ) | ||||||||
Cash and cash equivalents | $ | 1,258 | $ | 957 | $ | 755 | $ | 1,258 | $ | 755 | ||||||||||
Non-GAAP free cash flow (5) | $ | 20 | $ | (106 | ) | $ | (81 | ) | $ | (154 | ) | $ | (349 | ) | ||||||
Total assets | $ | 3,616 | $ | 3,316 | $ | 3,229 | $ | 3,616 | $ | 3,229 | ||||||||||
Total debt | $ | 1,632 | $ | 2,238 | $ | 2,260 | $ | 1,632 | $ | 2,260 | ||||||||||
Headcount | 8,306 | 8,099 | 9,475 | 8,306 | 9,475 |
(1 | ) | Computing and Graphics segment primarily includes desktop and notebook processors, chipsets, discrete graphics processing units (GPUs) and professional graphics. | |||||||||
(2 | ) | Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom System-on-Chip (SoC) products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. | |||||||||
(3 | ) | All Other category primarily includes certain expenses and credits that are not allocated to any of the operating segments. Also included in this category are stock-based compensation expense and restructuring and other special charges, net. In addition, the Company also included a charge related to the sixth amendment to the WSA with GF for the three and nine months ended September 24, 2016 and amortization of acquired intangible assets for the nine months ended September 26, 2015. | |||||||||
(4 | ) | Reconciliation of GAAP Operating Loss to Adjusted EBITDA* |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 24, 2016 | June 25, 2016 | September 26, 2015 | September 24, 2016 | September 26, 2015 | ||||||||||||||||
GAAP operating loss | $ | (293 | ) | $ | (8 | ) | $ | (158 | ) | $ | (369 | ) | $ | (432 | ) | |||||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | 340 | — | |||||||||||||||
Technology node transition charge | — | — | — | — | 33 | |||||||||||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | (10 | ) | 135 | |||||||||||||
Stock-based compensation | 23 | 18 | 13 | 57 | 47 | |||||||||||||||
Amortization of acquired intangible assets | — | — | — | — | 3 | |||||||||||||||
Depreciation and amortization | 33 | 33 | 42 | 99 | 130 | |||||||||||||||
Adjusted EBITDA | $ | 103 | $ | 36 | $ | (55 | ) | $ | 117 | $ | (84 | ) |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 24, 2016 | June 25, 2016 | September 26, 2015 | September 24, 2016 | September 26, 2015 | ||||||||||||||||
GAAP net cash provided by (used in) operating activities | $ | 29 | $ | (85 | ) | $ | (56 | ) | $ | (98 | ) | $ | (285 | ) | ||||||
Purchases of property, plant and equipment | (9 | ) | (21 | ) | (25 | ) | (56 | ) | (64 | ) | ||||||||||
Non-GAAP free cash flow | $ | 20 | $ | (106 | ) | $ | (81 | ) | $ | (154 | ) | $ | (349 | ) |
* | The Company presents “Adjusted EBITDA” as a supplemental measure of its performance. Adjusted EBITDA for the Company is determined by adjusting operating income (loss) for depreciation and amortization, stock-based compensation expense and restructuring and other special charges, net. In addition, the Company excluded a charge related to the sixth amendment to the WSA with GF for the three and nine months ended September 24, 2016, a technology node transition charge and amortization of acquired intangible assets for the nine months ended September 26, 2015. The Company calculates and communicates Adjusted EBITDA because the Company’s management believes it is of importance to investors and lenders in relation to its overall capital structure and its ability to borrow additional funds. In addition, the Company presents Adjusted EBITDA because it believes this measure assists investors in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company’s calculation of Adjusted EBITDA may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view Adjusted EBITDA as an alternative to the GAAP operating measure of operating income (loss) or GAAP liquidity measures of cash flows from operating, investing and financing activities. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. | ||||||
** | The Company also presents non-GAAP free cash flow as a supplemental measure of its performance. Non-GAAP free cash flow is determined by adjusting GAAP net cash provided by (used in) operating activities for capital expenditures. The Company calculates and communicates non-GAAP free cash flow in the financial earnings press release because the Company’s management believes it is of importance to investors to understand the nature of these cash flows. The Company’s calculation of non-GAAP free cash flow may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view non-GAAP free cash flow as an alternative to GAAP liquidity measures of cash flows from operating activities. The Company has provided reconciliations within the earnings press release of these non-GAAP financial measures to the most directly comparable GAAP financial measures. |
• | Revenue of $1,307 million, up 27% sequentially and 23% year-over-year. |
• | Gross margin of 5%, down 26 percentage points sequentially driven by a $340 million charge related to the 6th amendment to the Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES (GF). Non-GAAP gross margin of 31%, flat sequentially. |
• | Operating loss of $293 million driven by a $340 million WSA charge, compared to an operating loss of $8 million in Q2 2016 and non-GAAP operating income of $70 million, compared to non-GAAP operating income of $3 million in Q2 2016. |
• | Net loss of $406 million, loss per share of $0.50, driven by a $340 million WSA charge and a $61 million loss on debt redemption compared to net income of $69 million, earnings per share of $0.08 in Q2 2016. Q2 2016 net income was driven by a $150 million pre-tax gain on the sale of 85% of our equity interest in ATMP facilities to Nantong Fujitsu Microelectronics Co., Ltd. (NFME). |
• | Non-GAAP net income of $27 million, earnings per share of $0.03, compared to non-GAAP net loss of $40 million, loss per share of $0.05 in Q2 2016. |
• | Q3 2016 special charges: |
◦ | Recorded a $340 million WSA charge. |
◦ | Recorded a $61 million loss related to debt redemption. |
• | Raised $690 million through an equity offering of common shares and issued $700 million of 2.125% Convertible Senior Notes due 2026 (Convertible Notes due 2026). The proceeds from these transactions, net of issuance costs, were used to retire approximately $796 million in principal of outstanding term debt and pay off $226 million of our outstanding ABL balance. Beginning in Q4 2016, annual cash interest expense will be lowered by approximately $55 million. |
AMD Q3-16 CFO Commentary | Page 1 | October 20, 2016 |
• | R&D expenses were $259 million, non-GAAP R&D was $244 million or 19% of revenue. |
• | SG&A expenses were $117 million, non-GAAP SG&A was $109 million or 8% of revenue. |
Q3-16 | Q2-16 | Q3-15 | |||
GAAP | $376M | $353M | $397M | ||
Non-GAAP | $353M | $342M | $336M |
AMD Q3-16 CFO Commentary | Page 2 | October 20, 2016 |
AMD Q3-16 CFO Commentary | Page 3 | October 20, 2016 |
• | Client mobile processor sales increased sequentially and year-over-year. |
• | Client average selling price (ASP) decreased sequentially driven by lower mobile and desktop processor ASP and was flat year-over-year. |
• | GPU ASP increased sequentially and year-over-year driven by higher channel and professional graphics ASPs. |
• | The 6th amendment is for a 5-year period. |
• | The $100 million one-time cash charge will be paid to GF in $25 million quarterly installments from Q4 2016 to Q3 2017. |
AMD Q3-16 CFO Commentary | Page 4 | October 20, 2016 |
• | The warrant is only exercisable to the extent Mubadala’s overall ownership of AMD stock does not exceed 19.99% after exercise. |
AMD Q3-16 CFO Commentary | Page 5 | October 20, 2016 |
(Millions) | Early Q4-16 | Q3-16 | Q2-16 | |||||||||
9.28.16 | 9.24.16 | 6.25.16 | ||||||||||
6.75% Senior Notes due 2019 | $ | 196 | $ | 196 | $ | 600 | ||||||
6.75% Senior Notes due 2019—Interest Rate Swap | 2 | 2 | 10 | |||||||||
7.75% Senior Notes due 2020 | — | 208 | 450 | |||||||||
7.50% Senior Notes due 2022 | 350 | 350 | 475 | |||||||||
7.00% Senior Notes due 2024 | 475 | 475 | 500 | |||||||||
2.125% Convertible Senior Notes due 2026 | 805 | 700 | — | |||||||||
Borrowings from secured revolving line of credit, net | — | — | 226 | |||||||||
Total Debt (principal amount) | 1,828 | 1,931 | 2,261 | |||||||||
Unamortized debt discount associated with 2.125% Convertible Senior Notes due 2026* | (314 | ) | (273 | ) | — | |||||||
Unamortized debt issuance costs | (26 | ) | (26 | ) | (23 | ) | ||||||
Total Debt (net) | $ | 1,488 | $ | 1,632 | $ | 2,238 |
1. | Amounts represent principal balances outstanding. See footnotes for reconciliation to the net book value of debt presented on financials as the result of adoption of ASU 2015-03. |
2. | $805M convertible senior notes due 2026 represented by liability component of $491M and equity component of $314M according to ASC 470-20. |
AMD Q3-16 CFO Commentary | Page 6 | October 20, 2016 |
Q3-16 | Q2-16 | Q1-16 | Q4-15 | Q3-15 | ||||
$1,258M | $957M | $716M | $785M | $755M |
AMD Q3-16 CFO Commentary | Page 7 | October 20, 2016 |
• | Revenue to decrease 18% sequentially, +/- 3%, primarily driven by seasonally lower semi-custom sales. The midpoint of revenue guidance would be up 12% year-over-year. |
• | Non-GAAP gross margin to be approximately 32%, |
• | Non-GAAP operating expenses to be approximately $350 million, |
• | IP monetization licensing gain of approximately $25 million, |
• | Maintain non-GAAP operating profitability, |
• | Non-GAAP interest expense, taxes and other to be approximately $32 million, |
• | Cash and cash equivalents balances to be up, in-line with our guidance of ending the year free cash flow positive excluding cash from capital markets transactions and net proceeds from the ATMP JV, |
• | Inventory to decline to approximately $660 million, |
• | Basic share count to be approximately 930 million shares which includes 115 million shares related to the Q3 2016 equity issuance. |
• | We now expect full year 2016 revenue to be up approximately 6% from 2015 based on the midpoint of Q4 2016 revenue guidance. |
AMD Q3-16 CFO Commentary | Page 8 | October 20, 2016 |
AMD Q3-16 CFO Commentary | Page 9 | October 20, 2016 |
(Millions except percentages) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP Gross Margin | $ | 59 | $ | 319 | $ | 239 | ||||||
GAAP Gross Margin % | 5 | % | 31 | % | 23 | % | ||||||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | |||||||||
Non-GAAP Gross Margin | $ | 399 | $ | 319 | $ | 239 | ||||||
Non-GAAP Gross Margin % | 31 | % | 31 | % | 23 | % |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP operating expenses | $ | 376 | $ | 353 | $ | 397 | ||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | ||||||||
Stock-based compensation | 23 | 18 | 13 | |||||||||
Non-GAAP operating expenses | $ | 353 | $ | 342 | $ | 336 |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||||||||||||||||||||||||||
R&D | SG&A | Total | R&D | SG&A | Total | R&D | SG&A | Total | ||||||||||||||||||||||||||||
GAAP R&D & SG&A | $ | 259 | $ | 117 | $ | 376 | $ | 243 | $ | 117 | $ | 360 | $ | 241 | $ | 108 | $ | 349 | ||||||||||||||||||
Stock-based compensation | 15 | 8 | 23 | 10 | 8 | 18 | 7 | 6 | 13 | |||||||||||||||||||||||||||
Non-GAAP R&D & SG&A | $ | 244 | $ | 109 | $ | 353 | $ | 233 | $ | 109 | $ | 342 | $ | 234 | $ | 102 | $ | 336 |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP operating loss | $ | (293 | ) | $ | (8 | ) | $ | (158 | ) | |||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | |||||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | ||||||||
Stock-based compensation | 23 | 18 | 13 | |||||||||
Non-GAAP operating income (loss) | $ | 70 | $ | 3 | $ | (97 | ) |
AMD Q3-16 CFO Commentary | Page 10 | October 20, 2016 |
(Millions except per share amounts) | Q3-16 | Q2-16 | Q3-15 | |||||||||||||||||||||
GAAP net income (loss) /income (loss) per share | $ | (406 | ) | $ | (0.50 | ) | $ | 69 | $ | 0.08 | $ | (197 | ) | $ | (0.25 | ) | ||||||||
Charge related to the sixth amendment to the WSA with GF | 340 | 0.39 | — | — | — | — | ||||||||||||||||||
Loss on debt redemption | 61 | 0.07 | — | — | — | — | ||||||||||||||||||
Non-cash interest expense related to convertible debt | 1 | — | — | — | — | — | ||||||||||||||||||
Restructuring and other special charges, net | — | — | (7 | ) | (0.01 | ) | 48 | 0.06 | ||||||||||||||||
Stock-based compensation | 23 | 0.03 | 18 | 0.02 | 13 | 0.02 | ||||||||||||||||||
Gain on sale of 85% of ATMP JV | 4 | — | (150 | ) | (0.19 | ) | — | — | ||||||||||||||||
Equity in income (loss) of ATMP JV | 5 | 0.01 | 3 | — | — | — | ||||||||||||||||||
Tax provision (benefit) related to sale of 85% of ATMP JV | (1 | ) | — | 27 | 0.03 | — | — | |||||||||||||||||
Non-GAAP net income (loss)/ income (loss) per share | $ | 27 | $ | 0.03 | $ | (40 | ) | $ | (0.05 | ) | $ | (136 | ) | $ | (0.17 | ) |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP operating loss | $ | (293 | ) | $ | (8 | ) | $ | (158 | ) | |||
Charge related to the sixth amendment to the WSA with GF | 340 | — | — | |||||||||
Technology node transition charge | — | — | — | |||||||||
Restructuring and other special charges, net | — | (7 | ) | 48 | ||||||||
Stock-based compensation | 23 | 18 | 13 | |||||||||
Amortization of acquired intangible assets | — | — | — | |||||||||
Depreciation and amortization | 33 | 33 | 42 | |||||||||
Adjusted EBITDA | $ | 103 | $ | 36 | $ | (55 | ) |
(Millions) | Q3-16 | Q2-16 | Q3-15 | |||||||||
GAAP net cash provided by (used in) operating activities | 29 | (85 | ) | (56 | ) | |||||||
Purchases of property, plant and equipment | (9 | ) | (21 | ) | (25 | ) | ||||||
Non-GAAP free cash flow | $ | 20 | $ | (106 | ) | $ | (81 | ) |
(Millions) | Q3-16 |
Interest expense | $ (41) |
Other income (expense), net | (63) |
Provision for income taxes | (4) |
Total GAAP Interest Expense, Taxes and Other | $ (108) |
Loss on debt redemption | 61 |
Non-cash interest expense related to convertible debt | 1 |
Gain on sale of 85% of ATMP JV | 4 |
Tax provision (benefit) related to sale of 85% of ATMP JV | (1) |
Total Non-GAAP Interest Expense, Taxes and Other | $ (43) |
AMD Q3-16 CFO Commentary | Page 11 | October 20, 2016 |
AMD Q3-16 CFO Commentary | Page 12 | October 20, 2016 |
AMD Q3-16 CFO Commentary | Page 13 | October 20, 2016 |