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 July 25, 2017 | |
99.2 | CFO Commentary on 2017 Second Quarter Results |
Date: July 25, 2017 | ADVANCED MICRO DEVICES, INC. | |
By: | /s/ Devinder Kumar | |
Name: | Devinder Kumar | |
Title: | Senior Vice President, Chief Financial Officer & Treasurer |
Q2-17 | Q1-17 | Q2-16 | ||||
Revenue | $1.22B | $984M | $1.03B | |||
Operating income (loss) | $25M | $(29)M | $(8)M | |||
Net income (loss) | $(16)M | $(73)M | $69M | |||
Earnings (loss) per share | $(0.02) | $(0.08) | $0.08 |
Q2-17 | Q1-17 | Q2-16 | ||||
Revenue | $1.22B | $984M | $1.03B | |||
Operating income (loss) | $49M | $(6)M | $3M | |||
Net income (loss) | $19M | $(38)M | $(40)M | |||
Earnings (loss) per share | $0.02 | $(0.04) | $(0.05) |
• | On a GAAP basis, revenue was $1.22 billion, up 19 percent year-over-year, driven by higher revenue in the Computing and Graphics segment. Revenue was up 24 percent sequentially, driven by increased sales in both business segments. Gross margin was 33 percent, up 2 percentage points year-over-year due to a richer product mix and a higher percentage of revenue from the Computing and Graphics segment, driven by the first full quarter of Ryzen processor sales. On a sequential basis, gross margin declined 1 percentage point due to a higher percentage of revenue from the Enterprise, Embedded and Semi-Custom segment. Operating income was $25 million compared to an operating loss of $8 million a year ago and an operating loss of $29 million in the prior quarter. Net loss was $16 million compared to net income of $69 million a year ago and a net loss of $73 million in the prior quarter. Loss per share was $0.02 compared to diluted earnings per share of $0.08 a year ago (which included a pre-tax gain of $150 million related to our ATMP JV transaction) and a loss per share of $0.08 in the prior quarter. |
• | On a non-GAAP(1) basis, operating income was $49 million compared to operating income of $3 million a year ago and an operating loss of $6 million in the prior quarter. Net income was $19 million compared to a net loss of $40 million a year ago and a net loss of $38 million in the prior quarter. Diluted earnings per share was $0.02 compared to a loss per share of $0.05 a year ago and a loss per share of $0.04 in the prior quarter. |
• | Cash, cash equivalents, and marketable securities were $844 million at the end of the quarter, compared to $943 million in the prior quarter. |
• | Computing and Graphics segment revenue was $659 million, up 51 percent year-over-year, driven by demand for graphics and Ryzen desktop processors. |
• | Operating income was $7 million, compared to an operating loss of $81 million in Q2 2016. The year-over-year improvement was driven primarily by higher revenue and improved product mix. |
• | Client average selling price (ASP) increased significantly year-over-year, as desktop processor ASP increased due to the first full quarter of Ryzen processor shipments. |
• | GPU ASP increased year-over-year. |
• | Enterprise, Embedded and Semi-Custom segment revenue was $563 million, down 5 percent year-over-year primarily due to lower semi-custom SoC sales. In the quarter, AMD reached an important milestone by recognizing initial revenue from EPYC datacenter processor shipments. |
• | Operating income was $42 million, compared to operating income of $84 million in Q2 2016. The year-over-year decrease was primarily due to lower revenue and higher datacenter related R&D investments. |
• | All Other operating loss was $24 million compared with an operating loss of $11 million in Q2 2016. The year-over-year difference in operating loss was related to stock-based compensation charges and a $7 million restructuring credit in Q2 2016. |
• | AMD launched its new “Zen” architecture-based EPYC™ 7000 series processors, returning innovation and choice to the x86 server market with record setting single and dual-socket performance and product introductions from 10 of the world’s largest server manufacturers. |
• | AMD introduced its upcoming high-end desktop solution targeted at the world’s fastest ultra-premium desktop systems, the Ryzen™ Threadripper™ CPU. |
• | AMD unveiled new details about its upcoming Ryzen™ 3 desktop CPUs. |
• | AMD launched its Ryzen™ PRO desktop processors, designed to bring reliability, security, and performance to enterprise desktops. |
• | AMD announced that Radeon Instinct™ accelerators, including Radeon Instinct MI25, MI8, and MI6, together with AMD’s open ROCm 1.6 software platform, will ship in Q3 2017. |
• | AMD launched the Radeon™ Vega Frontier Edition graphics card which expands the capacity of traditional GPU memory to 256TB by leveraging system memory. |
• | AMD introduced the Radeon™ RX 580 and Radeon™ RX 570 graphics cards, engineered using the 2nd generation Polaris architecture for smooth gaming in leading AAA games at HD resolutions and higher. |
• | Microsoft® unveiled new details and branding for its Xbox One X™ (formerly “Project Scorpio”), which features an AMD semi-custom chip. |
• | AMD announced that it has been selected by the Department of Energy's Exascale Computing Project (ECP) to accelerate critical computing technology research for the development of the nation's first exascale supercomputers. |
• | At Financial Analyst Day, AMD detailed the next phase of its long-term growth strategy focused on delivering products and technologies for a combined $60 billion market for PCs, immersive devices, and datacenters. |
• | AMD announced the appointment of Abhi Y. Talwalkar to its board of directors. |
Reconciliation of GAAP to Non-GAAP Gross Margin | ||||||||||||
(Millions except percentages) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP Gross Margin | $ | 404 | $ | 331 | $ | 319 | ||||||
GAAP Gross Margin % | 33 | % | 34 | % | 31 | % | ||||||
Stock-based compensation | 1 | — | — | |||||||||
Non-GAAP Gross Margin | $ | 405 | $ | 331 | $ | 319 | ||||||
Non-GAAP Gross Margin % | 33 | % | 34 | % | 31 | % |
Reconciliation of GAAP to Non-GAAP Operating Income (Loss) | ||||||||||||
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP operating income (loss) | $ | 25 | $ | (29 | ) | $ | (8 | ) | ||||
Restructuring and other special charges, net | — | — | (7 | ) | ||||||||
Stock-based compensation | 24 | 23 | 18 | |||||||||
Non-GAAP operating income (loss) | $ | 49 | $ | (6 | ) | $ | 3 |
Reconciliation of GAAP to Non-GAAP Net Income (Loss) / Income (Loss) per share | ||||||||||||||||||||||||
(Millions except per share amounts) | Q2-17 | Q1-17 | Q2-16 | |||||||||||||||||||||
GAAP net income (loss) / income (loss) per share | $ | (16 | ) | $ | (0.02 | ) | $ | (73 | ) | $ | (0.08 | ) | $ | 69 | $ | 0.08 | ||||||||
Loss on debt redemption | 3 | — | 4 | — | — | — | ||||||||||||||||||
Non-cash interest expense related to convertible debt | 5 | 0.01 | 6 | 0.01 | — | — | ||||||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (7 | ) | (0.01 | ) | ||||||||||||||||
Stock-based compensation | 24 | 0.02 | 23 | 0.02 | 18 | 0.02 | ||||||||||||||||||
Equity loss in investee | 3 | — | 2 | — | 3 | — | ||||||||||||||||||
Gain on sale of 85% of ATMP JV | — | — | — | — | (150 | ) | (0.19 | ) | ||||||||||||||||
Tax provision related to sale of 85% of ATMP JV | — | — | — | — | 27 | 0.03 | ||||||||||||||||||
Non-GAAP net income (loss) / income (loss) per share* | $ | 19 | $ | 0.02 | $ | (38 | ) | $ | (0.04 | ) | $ | (40 | ) | $ | (0.05 | ) | ||||||||
*Q2 2017 GAAP net loss per share is calculated based on 945 million basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based on 1,036 million diluted weighted-average shares of common stock. |
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 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 free cash flow as supplemental non-GAAP 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 footnotes to the selected data tables. Refer to the data tables at the end of this earnings press release. |
Three Months Ended | Six Months Ended | |||||||||||||||||||
July 1, 2017 | April 1, 2017 | June 25, 2016 | July 1, 2017 | June 25, 2016 | ||||||||||||||||
Net revenue | $ | 1,222 | $ | 984 | $ | 1,027 | $ | 2,206 | $ | 1,859 | ||||||||||
Cost of sales | 818 | 653 | 708 | $ | 1,471 | $ | 1,271 | |||||||||||||
Gross margin | 404 | 331 | 319 | 735 | 588 | |||||||||||||||
Gross margin % | 33 | % | 34 | % | 31 | % | 33 | % | 32 | % | ||||||||||
Research and development | 279 | 266 | 243 | 545 | 485 | |||||||||||||||
Marketing, general and administrative | 125 | 121 | 117 | 246 | 222 | |||||||||||||||
Restructuring and other special charges, net | — | — | (7 | ) | — | (10 | ) | |||||||||||||
Licensing gain | (25 | ) | (27 | ) | (26 | ) | (52 | ) | (33 | ) | ||||||||||
Operating income (loss) | 25 | (29 | ) | (8 | ) | (4 | ) | (76 | ) | |||||||||||
Interest expense | (32 | ) | (32 | ) | (41 | ) | (64 | ) | (81 | ) | ||||||||||
Other income (expense), net | (3 | ) | (5 | ) | 150 | (8 | ) | 150 | ||||||||||||
Income (loss) before equity loss and income taxes | (10 | ) | (66 | ) | 101 | (76 | ) | (7 | ) | |||||||||||
Provision for income taxes | 3 | 5 | 29 | 8 | 30 | |||||||||||||||
Equity loss in investee | (3 | ) | (2 | ) | (3 | ) | (5 | ) | (3 | ) | ||||||||||
Net income (loss) | $ | (16 | ) | $ | (73 | ) | $ | 69 | $ | (89 | ) | $ | (40 | ) | ||||||
Net income (loss) per share | ||||||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.08 | ) | $ | 0.09 | $ | (0.09 | ) | $ | (0.05 | ) | ||||||
Diluted | $ | (0.02 | ) | $ | (0.08 | ) | $ | 0.08 | $ | (0.09 | ) | $ | (0.05 | ) | ||||||
Shares used in per share calculation | ||||||||||||||||||||
Basic | 945 | 939 | 794 | 942 | 794 | |||||||||||||||
Diluted | 945 | 939 | 821 | 942 | 794 | |||||||||||||||
ADVANCED MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Millions) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
July 1, 2017 | April 1, 2017 | June 25, 2016 | July 1, 2017 | June 25, 2016 | ||||||||||||||||
Total comprehensive income (loss) | $ | (12 | ) | $ | (72 | ) | $ | 72 | $ | (84 | ) | $ | (35 | ) |
July 1, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 760 | $ | 1,264 | ||||
Marketable securities | 84 | — | ||||||
Accounts receivable, net | 614 | 311 | ||||||
Inventories, net | 833 | 751 | ||||||
Prepayment and other receivables - related parties | 10 | 32 | ||||||
Prepaid expenses | 68 | 63 | ||||||
Other current assets | 142 | 109 | ||||||
Total current assets | 2,511 | 2,530 | ||||||
Property, plant and equipment, net | 200 | 164 | ||||||
Goodwill | 289 | 289 | ||||||
Investment: equity method | 58 | 59 | ||||||
Other assets | 312 | 279 | ||||||
Total Assets | $ | 3,370 | $ | 3,321 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Short-term debt | 42 | — | ||||||
Accounts payable | 483 | 440 | ||||||
Payables to related parties | 374 | 383 | ||||||
Accrued liabilities | 430 | 391 | ||||||
Other current liabilities | 48 | 69 | ||||||
Deferred income on shipments to distributors | 72 | 63 | ||||||
Total current liabilities | 1,449 | 1,346 | ||||||
Long-term debt, net | 1,375 | 1,435 | ||||||
Other long-term liabilities | 129 | 124 | ||||||
Stockholders' equity: | ||||||||
Capital stock: | ||||||||
Common stock, par value | 9 | 9 | ||||||
Additional paid-in capital | 8,405 | 8,334 | ||||||
Treasury stock, at cost | (105 | ) | (119 | ) | ||||
Accumulated deficit | (7,892 | ) | (7,803 | ) | ||||
Accumulated other comprehensive loss | — | (5 | ) | |||||
Total Stockholders' equity | $ | 417 | $ | 416 | ||||
Total Liabilities and Stockholders' Equity | $ | 3,370 | $ | 3,321 |
Three Months Ended | Six Months Ended | |||||||
July 1, 2017 | July 1, 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (16 | ) | $ | (89 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 35 | 69 | ||||||
Stock-based compensation expense | 24 | 47 | ||||||
Non-cash interest expense | 9 | 18 | ||||||
Loss on debt redemption | 3 | 7 | ||||||
Other | (4 | ) | 1 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (120 | ) | (303 | ) | ||||
Inventories | 6 | (82 | ) | |||||
Prepayment and other receivables - related parties | 21 | 22 | ||||||
Prepaid expenses and other assets | (26 | ) | (56 | ) | ||||
Payables to related parties | 45 | (9 | ) | |||||
Accounts payable, accrued liabilities and other | (59 | ) | (6 | ) | ||||
Net cash used in operating activities | $ | (82 | ) | $ | (381 | ) | ||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (12 | ) | (35 | ) | ||||
Purchases of available-for-sale securities | — | (221 | ) | |||||
Proceeds from maturity of available-for-sale securities | 137 | 137 | ||||||
Other | (1 | ) | (3 | ) | ||||
Net cash provided by (used in) investing activities | $ | 124 | (122 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings, net | 42 | 42 | ||||||
Proceeds from issuance of common stock under stock-based compensation equity plans | 2 | 10 | ||||||
Repayments of long-term debt | (42 | ) | (42 | ) | ||||
Other | (6 | ) | (11 | ) | ||||
Net cash used in financing activities | $ | (4 | ) | $ | (1 | ) | ||
Net increase (decrease) in cash and cash equivalents | 38 | (504 | ) | |||||
Cash and cash equivalents at beginning of period | $ | 722 | $ | 1,264 | ||||
Cash and cash equivalents at end of period | $ | 760 | $ | 760 |
Three Months Ended | Six Months Ended | |||||||||||||||||||
July 1, 2017 | April 1, 2017 | June 25, 2016 | July 1, 2017 | June 25, 2016 | ||||||||||||||||
Segment and Category Information | ||||||||||||||||||||
Computing and Graphics (1) | ||||||||||||||||||||
Net revenue | $ | 659 | $ | 593 | $ | 435 | $ | 1,252 | $ | 895 | ||||||||||
Operating income (loss) | $ | 7 | $ | (15 | ) | $ | (81 | ) | $ | (8 | ) | $ | (151 | ) | ||||||
Enterprise, Embedded and Semi-Custom (2) | ||||||||||||||||||||
Net revenue | 563 | 391 | 592 | 954 | 964 | |||||||||||||||
Operating income | 42 | 9 | 84 | 51 | 100 | |||||||||||||||
All Other (3) | ||||||||||||||||||||
Net revenue | — | — | — | — | — | |||||||||||||||
Operating loss | (24 | ) | (23 | ) | (11 | ) | (47 | ) | (25 | ) | ||||||||||
Total | ||||||||||||||||||||
Net revenue | $ | 1,222 | $ | 984 | $ | 1,027 | $ | 2,206 | $ | 1,859 | ||||||||||
Operating income (loss) | $ | 25 | $ | (29 | ) | $ | (8 | ) | $ | (4 | ) | $ | (76 | ) | ||||||
Other Data | ||||||||||||||||||||
Capital expenditures (4) | $ | 12 | $ | 23 | $ | 21 | $ | 35 | $ | 47 | ||||||||||
Adjusted EBITDA (5) | $ | 84 | $ | 28 | $ | 36 | $ | 112 | $ | 14 | ||||||||||
Cash, cash equivalents and marketable securities | $ | 844 | $ | 943 | $ | 957 | $ | 844 | $ | 957 | ||||||||||
Free cash flow (6) | $ | (94 | ) | $ | (322 | ) | $ | (106 | ) | $ | (416 | ) | $ | (174 | ) | |||||
Total assets | $ | 3,370 | $ | 3,299 | $ | 3,316 | $ | 3,370 | $ | 3,316 | ||||||||||
Total debt | $ | 1,417 | $ | 1,408 | $ | 2,238 | $ | 1,417 | $ | 2,238 |
(1) | The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete graphics processing units (GPUs) and professional graphics processors. | |||||||||
(2) | The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom System-on-Chip (SoC) products, development services and technology for game consoles. The Company also licenses portions of 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. | |||||||||
(4) | Starting in Q1 2017, the Company classifies production mask sets as property, plant and equipment on its balance sheet. | |||||||||
(5) | Reconciliation of GAAP Operating Income (Loss) to Adjusted EBITDA* |
Three Months Ended | Six Months Ended | |||||||||||||||||||
July 1, 2017 | April 1, 2017 | June 25, 2016 | July 1, 2017 | June 25, 2016 | ||||||||||||||||
GAAP operating income (loss) | $ | 25 | $ | (29 | ) | $ | (8 | ) | $ | (4 | ) | $ | (76 | ) | ||||||
Restructuring and other special charges, net | — | — | (7 | ) | — | (10 | ) | |||||||||||||
Stock-based compensation | 24 | 23 | 18 | 47 | 34 | |||||||||||||||
Depreciation and amortization | 35 | 34 | 33 | 69 | 66 | |||||||||||||||
Adjusted EBITDA | 84 | 28 | 36 | 112 | 14 |
Three Months Ended | Six Months Ended | |||||||||||||||||||
July 1, 2017 | April 1, 2017 | June 25, 2016 | July 1, 2017 | June 25, 2016 | ||||||||||||||||
GAAP net cash used in operating activities | $ | (82 | ) | $ | (299 | ) | $ | (85 | ) | $ | (381 | ) | $ | (127 | ) | |||||
Purchases of property, plant and equipment | (12 | ) | (23 | ) | (21 | ) | (35 | ) | (47 | ) | ||||||||||
Free cash flow | $ | (94 | ) | $ | (322 | ) | $ | (106 | ) | $ | (416 | ) | $ | (174 | ) |
* | 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. The Company calculates and presents Adjusted EBITDA because 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 income and expense and income taxes that can affect cash flows. | |||||||||
** | The Company also presents free cash flow as a supplemental non-GAAP measure of its performance. Free cash flow is determined by adjusting GAAP net cash provided by (used in) operating activities for capital expenditures. The Company calculates and communicates free cash flow in the financial earnings press release because management believes it is of importance to investors to understand the nature of these cash flows. The Company’s calculation of 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 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. |
• | Q2 2017 results were based on a 13 week quarter. |
• | Revenue of $1.22 billion, up 19% year-over-year (y/y) and up 24% quarter-over-quarter (q/q) |
• | GAAP Results: |
◦ | Gross margin was 33%, up 2 percentage points y/y and down 1 percentage point q/q. |
◦ | Operating income was $25 million, compared to operating losses of $8 million a year ago and $29 million in the prior quarter. |
◦ | Net loss was $16 million, compared to net income of $69 million a year ago and a net loss of $73 million in the prior quarter. |
◦ | Loss per share was $0.02, compared to diluted earnings per share of $0.08 a year ago and a loss per share of $0.08 in the prior quarter. |
• | Non-GAAP Results: |
◦ | Gross margin was 33%, up 2 percentage points y/y and down 1 percentage point q/q. |
◦ | Operating income was $49 million, compared to $3 million a year ago and an operating loss of $6 million in the prior quarter. |
◦ | Net income was $19 million, compared to net losses of $40 million a year ago and $38 million in the prior quarter. |
◦ | Diluted earnings per share were $0.02, compared to losses per basic share of $0.05 a year ago and $0.04 in the prior quarter. |
AMD Q2-17 CFO Commentary | Page 1 | July 25, 2017 |
• | R&D expenses were $279 million (or 23% of revenue), up $36M y/y and up $13M q/q. |
• | SG&A expenses were $125 million (or 10% of revenue), up $8M y/y and up $4M q/q. |
• | Non-GAAP R&D was $266 million (or 22% of revenue), up $33M y/y and up $14M q/q. |
• | Non-GAAP SG&A was $115 million (or 9% of revenue), up $6M y/y and up $3M q/q. |
Q2-17 | Q1-17 | Q2-16 | ||||
GAAP | $404M | $387M | $353M | |||
Non-GAAP | $381M | $364M | $342M |
AMD Q2-17 CFO Commentary | Page 2 | July 25, 2017 |
AMD Q2-17 CFO Commentary | Page 3 | July 25, 2017 |
• | Revenue was $659 million, up 51% y/y and up 11% q/q. The y/y increase was primarily driven by our demand for graphics and Ryzen desktop processors. |
◦ | Client average selling price (ASP) increased significantly y/y. On a q/q basis, client ASP was down slightly due to lower mobile processor ASP. Both y/y and q/q, desktop processor ASP increased due to the first full quarter of shipments of Ryzen processors. |
◦ | GPU ASP increased y/y and q/q driven by a richer product mix. |
• | Operating income was $7 million, compared to an operating loss of $81 million a year ago and a loss of $15 million in the prior quarter. The y/y and q/q improvements were driven by higher revenue and improved product mix. |
• | Revenue was $563 million, down 5% y/y and up 44% q/q. The y/y decrease was primarily driven primarily by lower semi-custom SoC revenue. Additionally, we had initial revenue from EPYC datacenter processor shipments in the quarter. |
• | Operating income was $42 million, compared to operating income of $84 million a year ago and operating income of $9 million in the prior quarter. The year-over-year decrease was primarily due to lower revenue and higher datacenter related R&D investments. The q/q increase was primarily due to higher sales of semi-custom SoCs. |
AMD Q2-17 CFO Commentary | Page 4 | July 25, 2017 |
(Millions) | Q2-17 | Q4-16 | |||||||
6.75% Senior Notes due 2019 | $ | 191 | $ | 196 | |||||
7.50% Senior Notes due 2022 | 347 | 350 | |||||||
7.00% Senior Notes due 2024 | 350 | 416 | |||||||
2.125% Convertible Senior Notes due 2026 | 805 | 805 | |||||||
Borrowings from secured revolving line of credit, net | 42 | — | |||||||
Other | 1 | 1 | |||||||
Total Debt (principal amount) | $ | 1,736 | $ | 1,768 | |||||
Unamortized debt discount associated with 2.125% Convertible Senior Notes due 2026 | $ | (297 | ) | $ | (308 | ) | |||
Unamortized debt issuance costs | $ | (22 | ) | $ | (25 | ) | |||
Total Debt (net) | $ | 1,417 | $ | 1,435 |
• | Revenue to increase 23% q/q, plus or minus 3%. The midpoint of guidance would result in a y/y increase of 15%, |
• | Non-GAAP gross margin to be approximately 34%, |
• | Non-GAAP operating expenses to be approximately $400 million, |
AMD Q2-17 CFO Commentary | Page 5 | July 25, 2017 |
• | Non-GAAP interest expense, taxes and other to be approximately $28 million, |
• | Non-GAAP diluted share count to be approximately 1.14 billion, and |
• | Inventory to be down versus Q2 2017. |
• | Revenue to increase by a mid to high teens percentage year-over-year, |
• | Semi-custom revenue to be down year-over-year based on the maturity of the current game console cycle, |
• | Non-GAAP gross margin to be approximately 34%, |
• | To achieve non-GAAP net income, |
• | Non-GAAP operating expense to revenue ratio (E/R) to be approximately 31%, |
• | THATIC JV-related licensing gain to be approximately $52 million, |
• | Non-GAAP interest expense, taxes and other to be approximately $30 million per quarter, |
• | Capital expenditures to be approximately $140 million, and |
• | Inventory to be down from the end of 2016. |
• | The 2.125% Convertible Senior Notes due 2026 (Convertible Notes 2026) which have cash and non-cash interest expense components. There are 101 million shares underlying the Convertible Notes 2026. |
• | The warrant to purchase 75 million shares (Warrant) granted in 2016 to a Mubadala entity, in consideration for rights under the sixth amendment to our wafer supply agreement (WSA) with GLOBALFOUNDRIES, and |
• | On-going employee equity grants. |
AMD Q2-17 CFO Commentary | Page 6 | July 25, 2017 |
Shares (millions)(3) | Q2-17 Actual | Q3-17 Estimate |
Basic Shares | 945 | 957 |
Dilutive impacts from: | ||
Employee Equity Grants(1) | 53 | 44 |
75 million share Warrant(1) | 38 | 38 |
Diluted Shares (without Convertible Notes 2026) | 1,036 | 1,039 |
Convertible Notes 2026(2) | - | 101 |
Diluted Shares (with Convertible Notes 2026) | 1,036 | 1,140 |
(1) The dilutive impact from the Warrant and employee equity grants are based on the Treasury Stock method and is dependent upon the average stock price during the period. | ||
(2) The dilutive impact from the Convertible Notes 2026 is based on the If-Converted method, where the interest costs associated with the Convertible Notes 2026 are added back to the Net Income and the 101 million shares underlying the Convertible Notes 2026 are assumed to be converted and are added to the share count. The impact from the Convertible Notes 2026, if dilutive, is included in diluted EPS calculation. For the GAAP computation, the add-back to Net Income includes cash and non-cash interest expense, while only the non-cash interest expense is included for the non-GAAP computation. | ||
(3) Share counts are weighted average shares. |
Investor Contacts: | ||
Laura Graves | Alina Ostrovsky | |
408-749-5467 | 408-749-6688 | |
laura.graves@amd.com | alina.ostrovsky@amd.com |
AMD Q2-17 CFO Commentary | Page 7 | July 25, 2017 |
AMD Q2-17 CFO Commentary | Page 8 | July 25, 2017 |
Reconciliation of GAAP to Non-GAAP Gross Margin | ||||||||||||
(Millions except percentages) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP Gross Margin | $ | 404 | $ | 331 | $ | 319 | ||||||
GAAP Gross Margin % | 33 | % | 34 | % | 31 | % | ||||||
Stock-based compensation | 1 | — | — | |||||||||
Non-GAAP Gross Margin | $ | 405 | $ | 331 | $ | 319 | ||||||
Non-GAAP Gross Margin % | 33 | % | 34 | % | 31 | % |
Reconciliation of GAAP to Non-GAAP Operating Expenses | ||||||||||||
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP operating expenses | $ | 404 | $ | 387 | $ | 353 | ||||||
Restructuring and other special charges, net | — | — | (7 | ) | ||||||||
Stock-based compensation | 23 | 23 | 18 | |||||||||
Non-GAAP operating expenses | $ | 381 | $ | 364 | $ | 342 |
Reconciliation of GAAP to Non-GAAP Research and Development (R&D) and Marketing, General and Administrative Expenses (SG&A) | |||||||||||||||||||||||||||||||||||
(Millions) | Q2-17 | Q1-17 | Q2-16 | ||||||||||||||||||||||||||||||||
R&D | SG&A | Total | R&D | SG&A | Total | R&D | SG&A | Total | |||||||||||||||||||||||||||
GAAP R&D & SG&A | $ | 279 | $ | 125 | $ | 404 | $ | 266 | $ | 121 | $ | 387 | $ | 243 | $ | 117 | $ | 360 | |||||||||||||||||
Stock-based compensation | 13 | 10 | 23 | 14 | 9 | 23 | 10 | 8 | 18 | ||||||||||||||||||||||||||
Non-GAAP R&D & SG&A | $ | 266 | $ | 115 | $ | 381 | $ | 252 | $ | 112 | $ | 364 | $ | 233 | $ | 109 | $ | 342 |
Reconciliation of GAAP to Non-GAAP Operating Income (Loss) | ||||||||||||
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP operating income (loss) | $ | 25 | $ | (29 | ) | $ | (8 | ) | ||||
Restructuring and other special charges, net | — | — | (7 | ) | ||||||||
Stock-based compensation | 24 | 23 | 18 | |||||||||
Non-GAAP operating income (loss) | $ | 49 | $ | (6 | ) | $ | 3 |
AMD Q2-17 CFO Commentary | Page 9 | July 25, 2017 |
Reconciliation of GAAP to Non-GAAP Net Income (Loss) / Income (Loss) per share | ||||||||||||||||||||||||
(Millions except per share amounts) | Q2-17 | Q1-17 | Q2-16 | |||||||||||||||||||||
GAAP net income (loss) / income (loss) per share | $ | (16 | ) | $ | (0.02 | ) | $ | (73 | ) | $ | (0.08 | ) | $ | 69 | $ | 0.08 | ||||||||
Loss on debt redemption | 3 | — | 4 | — | — | — | ||||||||||||||||||
Non-cash interest expense related to convertible debt | 5 | 0.01 | 6 | 0.01 | — | — | ||||||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (7 | ) | (0.01 | ) | ||||||||||||||||
Stock-based compensation | 24 | 0.02 | 23 | 0.02 | 18 | 0.02 | ||||||||||||||||||
Equity loss in investee | 3 | — | 2 | — | 3 | — | ||||||||||||||||||
Gain on sale of 85% of ATMP JV | — | — | — | — | (150 | ) | (0.19 | ) | ||||||||||||||||
Tax provision related to sale of 85% of ATMP JV | — | — | — | — | 27 | 0.03 | ||||||||||||||||||
Non-GAAP net income (loss) / income (loss) per share* | $ | 19 | $ | 0.02 | $ | (38 | ) | $ | (0.04 | ) | $ | (40 | ) | $ | (0.05 | ) | ||||||||
*Q2 2017 GAAP net loss per share is calculated based on 945 million basic and diluted weighted-average shares of common stock. Non-GAAP net income per share is calculated based on 1,036 million diluted weighted-average shares of common stock. |
Reconciliation of GAAP to Non-GAAP Interest Expense, Taxes and Other | ||||||||||||
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
Interest expense | $ | (32 | ) | $ | (32 | ) | $ | (41 | ) | |||
Other income (expense), net | (3 | ) | (5 | ) | 150 | |||||||
Provision for income taxes | (3 | ) | (5 | ) | (29 | ) | ||||||
Total GAAP Interest Expense, Taxes and Other | $ | (38 | ) | $ | (42 | ) | $ | 80 | ||||
Loss on debt redemption | 3 | 4 | — | |||||||||
Non-cash interest expense related to convertible debt | 5 | 6 | — | |||||||||
Gain on sale of 85% of ATMP JV | — | — | (150 | ) | ||||||||
Tax provision related to sale of 85% of ATMP JV | — | — | 27 | |||||||||
Total Non-GAAP Interest Expense, Taxes and Other | $ | (30 | ) | $ | (32 | ) | $ | (43 | ) |
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP operating income (loss) | $ | 25 | $ | (29 | ) | $ | (8 | ) | ||||
Restructuring and other special charges, net | — | — | (7 | ) | ||||||||
Stock-based compensation | 24 | 23 | 18 | |||||||||
Depreciation and amortization | 35 | 34 | 33 | |||||||||
Adjusted EBITDA | $ | 84 | $ | 28 | $ | 36 |
(Millions) | Q2-17 | Q1-17 | Q2-16 | |||||||||
GAAP net cash used in operating activities | $ | (82 | ) | $ | (299 | ) | $ | (85 | ) | |||
Purchases of property, plant and equipment | (12 | ) | (23 | ) | (21 | ) | ||||||
Free cash flow | $ | (94 | ) | $ | (322 | ) | $ | (106 | ) |
AMD Q2-17 CFO Commentary | Page 10 | July 25, 2017 |
AMD Q2-17 CFO Commentary | Page 11 | July 25, 2017 |
AMD Q2-17 CFO Commentary | Page 12 | July 25, 2017 |