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 | ||
99.2 |
Date: January 30, 2018 | ADVANCED MICRO DEVICES, INC. | |
By: | /s/ Devinder Kumar | |
Name: | Devinder Kumar | |
Title: | Senior Vice President, Chief Financial Officer & Treasurer |
Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | ||||||
Revenue | $1.48B | $1.64B | $1.11B | $5.33B | $4.27B | |||||
Operating income (loss) | $82M | $126M | $(3)M | $204M | $(372)M | |||||
Net income (loss) | $61M | $71M | $(51)M | $43M | $(497)M | |||||
Earnings (loss) per share | $0.06 | $0.07 | $(0.06) | $0.04 | $(0.60) |
Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | ||||||
Revenue | $1.48B | $1.64B | $1.11B | $5.33B | $4.27B | |||||
Operating income | $103M | $155M | $26M | $301M | $44M | |||||
Net income (loss) | $88M | $110M | $(8)M | $179M | $(117)M | |||||
Earnings (loss) per share | $0.08 | $0.10 | $(0.01) | $0.17 | $(0.14) |
• | Revenue of $1.48 billion was up 34 percent year-over-year, primarily driven by strong sales of Radeon™ graphics and Ryzen™ processors. Revenue was down 10 percent sequentially, primarily driven by seasonally lower sales of semi-custom SoCs. |
• | Gross margin was 35 percent, up 3 percentage points year-over-year and flat sequentially. |
• | On a GAAP basis, operating income was $82 million compared to an operating loss of $3 million a year ago and operating income of $126 million in the prior quarter. The year-over-year increase was primarily due to higher revenue from the Computing and Graphics segment, while the sequential decrease was primarily due to seasonally lower Enterprise, Embedded and Semi-Custom segment revenue. Net income was $61 million compared to a net loss of $51 million a year ago and net income of $71 million in the prior quarter. Diluted earnings per share was $0.06 compared to a loss per share of $0.06 a year ago and diluted earnings per share of $0.07 in the prior quarter. |
• | On a non-GAAP basis, operating income was $103 million compared to operating income of $26 million a year ago and $155 million in the prior quarter. The year-over-year improvement was primarily due to higher revenue from the Computing and Graphics segment, while the sequential decrease was primarily due to seasonally lower Enterprise, Embedded and Semi-Custom segment revenue. Net income was $88 million compared to net loss of $8 million a year ago and net income of $110 million in the prior quarter. Diluted earnings per share was $0.08 compared to a loss per share of $0.01 a year ago and diluted earnings per share of $0.10 in the prior quarter. |
• | Cash and cash equivalents were $1.18 billion at the end of the quarter, up $306 million from the end of the prior quarter. |
• | Revenue of $5.33 billion, up 25 percent on an annual basis, was driven by an increase in the Computing and Graphics segment. |
• | On a GAAP basis, gross margin was 34 percent, up 11 percentage points from the prior year primarily due to the absence of a $340 million charge (WSA charge) recorded in 2016 associated with an amendment to our wafer supply agreement with GLOBALFOUNDRIES. Operating income was $204 million compared to an operating loss of $372 million in the prior year. The operating income improvement was primarily due to higher revenue and gross margin expansion in 2017, and the absence of the WSA charge recorded in 2016, partially offset by higher operating expenses. Net income was $43 million compared to a net loss of $497 million in the prior year. Diluted earnings per share was $0.04 compared to a loss per share of $0.60 in 2016. |
• | On a non-GAAP(1) basis, gross margin was 34 percent, up 3 percentage points year-over-year primarily due to improved revenue mix from new products. Operating income was $301 million compared to an operating income of $44 million in the prior year. Operating income improvement was primarily related to higher revenue and gross margin expansion, partially offset by higher operating expenses. Net income was $179 million compared to a net loss of $117 million in the prior year. Diluted earnings per share was $0.17 compared to a loss per share of $0.14 in 2016. |
• | Cash and cash equivalents were $1.18 billion at the end of the year, down from $1.26 billion at the end of 2016. |
• | Computing and Graphics segment revenue was $958 million, up 60 percent year-over-year and 17 percent sequentially. The year-over-year and sequential increases were primarily driven by strong sales of Radeon graphics and Ryzen desktop processors. |
◦ | Operating income was $85 million, compared to an operating loss of $21 million in Q4 2016 and operating income of $70 million in Q3 2017. The year-over-year and sequential improvements were primarily driven by higher revenue. |
◦ | Client average selling price (ASP) was up year-over-year driven by higher Ryzen desktop processors ASP. Client ASP was flat sequentially. |
◦ | GPU ASP increased year-over-year and sequentially due to higher desktop and professional graphics ASP. |
• | Enterprise, Embedded and Semi-Custom segment revenue was $522 million, up 3 percent year-over-year driven by server revenue. Sequentially, revenue decreased 37 percent driven by seasonally lower semi-custom SoC revenue. |
◦ | Operating income was $19 million compared to $47 million in Q4 2016 and $84 million in Q3 2017. The year-over-year decrease was primarily due to the absence of a $31 million licensing gain in Q4 2016 and an increase in R&D expenses, partially offset by the benefit from a richer product mix. The sequential decrease was primarily due to seasonally lower semi-custom SoC revenue. |
• | All Other operating loss was $22 million compared with operating losses of $29 million in Q4 2016 and $28 million in Q3 2017. The year-over-year and sequential improvement was primarily related to lower stock-based compensation charges in Q4 2017. |
• | AMD expanded its presence in the datacenter with new AMD EPYC™ processor-powered solutions and deployments: |
◦ | Microsoft Azure became the first global cloud provider to deploy AMD EPYC processors in its datacenters for its latest L-Series of Virtual Machines. |
◦ | Baidu deployed AMD EPYC single-socket platforms to power its AI, big data, and cloud computing datacenters. |
◦ | New high-performance platforms powered by AMD EPYC CPUs are now available from ecosystem partners including ASUS, GIGABYTE Technology, and Supermicro. |
◦ | The AMD EPYC processor-powered HPE ProLiant DL385 Gen10 server started shipping in volume in December 2017, which launched with record-setting SPEC CPU® performance and features leadership cost per virtual machine configurations. |
◦ | EPYC CPUs were recognized as the Linley Group Analysts’ Choice Awards “Best Server Processor” and in the “Top 5 Products or Technologies to Watch” category of both the HPCWire Readers’ Choice and Editors’ Choice Awards. |
• | AMD continued its commitment to bring innovation and competition to every segment of the PC market with the launch of its Ryzen Mobile Processors with Radeon Vega graphics, including the AMD Ryzen™ 7 2700U processor - the world’s fastest processor for ultrathin notebooks. |
◦ | Combining the power of the “Zen” CPU and “Vega” GPU architectures, Ryzen mobile processors deliver up to 3x the CPU performance, up to 2.3x the GPU performance, and up to 58 percent less power consumption compared to the previous generation AMD notebook processors. |
◦ | Ryzen mobile-based notebooks are currently available from Acer, HP, and Lenovo, with more systems expected from Dell and other OEMs in Q1 2018. |
◦ | AMD and Qualcomm announced a collaboration to bring smooth and fast PC connectivity based on Qualcomm® Snapdragon™ LTE modem solutions to high-performance AMD Ryzen mobile processors designed for consumer and enterprise notebooks. |
• | At CES 2018, AMD announced details for upcoming computing and graphics products including its first 7nm product, a Radeon “Vega” GPU specifically built for machine learning applications, as well as next-generation Ryzen CPUs and desktop Ryzen APUs. |
• | Momentum around AMD’s next-generation “Vega” graphics portfolio continues to build: |
◦ | Apple launched its most powerful Mac ever, the iMac Pro featuring AMD Radeon Pro Vega graphics. |
◦ | AMD designed a semi-custom GPU that will be integrated into the 8th Gen Intel® Core™ processor with Radeon RX Vega M Graphics. |
◦ | AMD announced the expansion of the “Vega” family with the Radeon Vega Mobile GPU for ultrathin notebooks. |
• | AMD released a major update to its advanced GPU software suite for Radeon graphics, the Radeon Software Adrenalin Edition. |
• | AMD announced the appointment of Mark Durcan to its board of directors. |
• | AMD expanded its leadership team with the appointment of graphics industry leaders Mike Rayfield as senior vice president and general manager of AMD Radeon Technologies Group (RTG) and David Wang as senior vice president of engineering for RTG. Rayfield will be responsible for all aspects of strategy and business management for AMD’s consumer graphics, professional graphics, and semi-custom products. Wang will be responsible for all aspects of graphics engineering, including the technical strategy, architecture, hardware, and software for AMD graphics products and technologies. |
Reconciliation of GAAP to Non-GAAP Gross Margin | ||||||||||||||||||||
(Millions except percentages) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP Gross Margin | $ | 515 | $ | 573 | $ | 351 | $ | 1,823 | $ | 998 | ||||||||||
GAAP Gross Margin % | 35 | % | 35 | % | 32 | % | 34 | % | 23 | % | ||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Stock-based compensation | — | 1 | 1 | 2 | 2 | |||||||||||||||
Non-GAAP Gross Margin | $ | 515 | $ | 574 | $ | 352 | $ | 1,825 | $ | 1,340 | ||||||||||
Non-GAAP Gross Margin % | 35 | % | 35 | % | 32 | % | 34 | % | 31 | % |
Reconciliation of GAAP Operating Income (loss) to Non-GAAP Operating Income | ||||||||||||||||||||
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP operating income (loss) | $ | 82 | $ | 126 | $ | (3 | ) | $ | 204 | $ | (372 | ) | ||||||||
Stock-based compensation | 21 | 29 | 29 | 97 | 86 | |||||||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Non-GAAP operating income | $ | 103 | $ | 155 | $ | 26 | $ | 301 | $ | 44 |
Reconciliation of GAAP to Non-GAAP Net Income (Loss) / Earnings (Loss) per Share | ||||||||||||||||||||||||||||||||||||||||
(Millions except per share amounts) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||||||||||||||||||||||
GAAP net income (loss) / earnings (loss) per share | $ | 61 | $ | 0.06 | $ | 71 | $ | 0.07 | $ | (51 | ) | $ | (0.06 | ) | $ | 43 | $ | 0.04 | $ | (497 | ) | $ | (0.60 | ) | ||||||||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | — | — | — | — | 340 | 0.41 | ||||||||||||||||||||||||||||||
Stock-based compensation | 21 | 0.02 | 29 | 0.02 | 29 | 0.03 | 97 | 0.09 | 86 | 0.10 | ||||||||||||||||||||||||||||||
Restructuring and other special charges, net | — | — | — | — | — | — | — | — | (10 | ) | (0.01 | ) | ||||||||||||||||||||||||||||
Loss on debt redemption | 3 | — | 2 | — | 7 | 0.01 | 12 | 0.01 | 68 | 0.08 | ||||||||||||||||||||||||||||||
Non-cash interest expense related to convertible debt | 5 | — | 6 | 0.01 | 5 | 0.01 | 22 | 0.02 | 6 | 0.01 | ||||||||||||||||||||||||||||||
Gain on sale of 85% of ATMP JV | (3 | ) | — | — | — | — | — | (3 | ) | — | (146 | ) | (0.17 | ) | ||||||||||||||||||||||||||
Tax provision related to sale of 85% of ATMP JV | 1 | — | — | — | — | — | 1 | — | 26 | 0.03 | ||||||||||||||||||||||||||||||
Equity loss in investee | — | — | 2 | — | 2 | — | 7 | 0.01 | 10 | 0.01 | ||||||||||||||||||||||||||||||
Non-GAAP net income (loss) / earnings (loss) per share | $ | 88 | $ | 0.08 | $ | 110 | $ | 0.10 | $ | (8 | ) | $ | (0.01 | ) | $ | 179 | $ | 0.17 | $ | (117 | ) | $ | (0.14 | ) | ||||||||||||||||
Q4 and Q3 2017 GAAP diluted earnings per share (EPS) are calculated based on 1,037 million and 1,042 million shares, respectively. Q4 and Q3 2017 non-GAAP diluted EPS are calculated based on 1,137 million and 1,143 million shares, respectively, which include 100.6 million shares related to the Company’s 2026 Convertible Notes and a $5 million cash interest expense add-back to net income under the "if converted" method. 2017 GAAP and non-GAAP diluted EPS are both calculated based on 1,039 million shares. |
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 | Year Ended | |||||||||||||||||||
December 30, 2017 | September 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | ||||||||||||||||
Net revenue | $ | 1,480 | $ | 1,643 | $ | 1,106 | $ | 5,329 | $ | 4,272 | ||||||||||
Cost of sales | 965 | 1,070 | 755 | $ | 3,506 | 3,274 | ||||||||||||||
Gross margin | 515 | 573 | 351 | 1,823 | 998 | |||||||||||||||
Gross margin % | 35 | % | 35 | % | 32 | % | 34 | % | 23 | % | ||||||||||
Research and development | 300 | 315 | 264 | 1,160 | 1,008 | |||||||||||||||
Marketing, general and administrative | 133 | 132 | 121 | 511 | 460 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Licensing gain | — | — | (31 | ) | (52 | ) | (88 | ) | ||||||||||||
Operating income (loss) | 82 | 126 | (3 | ) | 204 | (372 | ) | |||||||||||||
Interest expense | (31 | ) | (31 | ) | (34 | ) | (126 | ) | (156 | ) | ||||||||||
Other income (expense), net | 2 | (3 | ) | (7 | ) | (9 | ) | 80 | ||||||||||||
Income (loss) before equity loss and income taxes | 53 | 92 | (44 | ) | 69 | (448 | ) | |||||||||||||
Provision (benefit) for income taxes | (8 | ) | 19 | 5 | 19 | 39 | ||||||||||||||
Equity loss in investee | — | (2 | ) | (2 | ) | (7 | ) | (10 | ) | |||||||||||
Net Income (loss) | $ | 61 | $ | 71 | $ | (51 | ) | $ | 43 | $ | (497 | ) | ||||||||
Earnings (loss) per share | ||||||||||||||||||||
Basic | $ | 0.06 | $ | 0.07 | $ | (0.06 | ) | $ | 0.04 | $ | (0.60 | ) | ||||||||
Diluted | $ | 0.06 | $ | 0.07 | $ | (0.06 | ) | $ | 0.04 | $ | (0.60 | ) | ||||||||
Shares used in per share calculation | ||||||||||||||||||||
Basic | 965 | 957 | 931 | 952 | 835 | |||||||||||||||
Diluted | 1,037 | 1,042 | 931 | 1,039 | 835 | |||||||||||||||
ADVANCED MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Millions) | ||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
December 30, 2017 | September 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | ||||||||||||||||
Total comprehensive income (loss) | $ | 65 | $ | 73 | $ | (53 | ) | $ | 54 | $ | (494 | ) |
December 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,185 | $ | 1,264 | ||||
Accounts receivable, net | 400 | 311 | ||||||
Inventories, net | 739 | 751 | ||||||
Prepayment and other receivables - related parties | 33 | 32 | ||||||
Prepaid expenses | 77 | 63 | ||||||
Other current assets | 188 | 109 | ||||||
Total current assets | 2,622 | 2,530 | ||||||
Property, plant and equipment, net | 261 | 164 | ||||||
Goodwill | 289 | 289 | ||||||
Investment: equity method | 58 | 59 | ||||||
Other assets | 310 | 279 | ||||||
Total Assets | $ | 3,540 | $ | 3,321 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Short-term debt | 70 | — | ||||||
Accounts payable | 384 | 440 | ||||||
Payables to related parties | 412 | 383 | ||||||
Accrued liabilities | 541 | 391 | ||||||
Other current liabilities | 57 | 69 | ||||||
Deferred income on shipments to distributors | 22 | 63 | ||||||
Total current liabilities | 1,486 | 1,346 | ||||||
Long-term debt, net | 1,325 | 1,435 | ||||||
Other long-term liabilities | 118 | 124 | ||||||
Stockholders' equity: | ||||||||
Capital stock: | ||||||||
Common stock, par value | 9 | 9 | ||||||
Additional paid-in capital | 8,464 | 8,334 | ||||||
Treasury stock, at cost | (108 | ) | (119 | ) | ||||
Accumulated deficit | (7,760 | ) | (7,803 | ) | ||||
Accumulated other comprehensive income (loss) | 6 | (5 | ) | |||||
Total Stockholders' equity | $ | 611 | $ | 416 | ||||
Total Liabilities and Stockholders' Equity | $ | 3,540 | $ | 3,321 |
Three Months Ended | Year Ended | |||||||
December 30, 2017 | December 30, 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net Income | $ | 61 | $ | 43 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 39 | 144 | ||||||
Stock-based compensation expense | 21 | 97 | ||||||
Amortization of debt discount and issuance costs | 9 | 36 | ||||||
Loss on debt redemption | 3 | 12 | ||||||
Net gain on sale of equity interests in ATMP JV | (3 | ) | (3 | ) | ||||
Other | (1 | ) | 3 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 371 | (89 | ) | |||||
Inventories | 55 | 12 | ||||||
Prepayment and other receivables - related parties | (7 | ) | (1 | ) | ||||
Prepaid expenses and other assets | (58 | ) | (140 | ) | ||||
Payables to related parties | (32 | ) | 29 | |||||
Accounts payable, accrued liabilities and other | (75 | ) | (75 | ) | ||||
Net cash provided by operating activities | $ | 383 | $ | 68 | ||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (44 | ) | (113 | ) | ||||
Purchases of available-for-sale securities | (1 | ) | (222 | ) | ||||
Proceeds from maturity of available-for-sale securities | 1 | 222 | ||||||
Net proceeds from sale of equity interests in ATMP JV | 1 | 1 | ||||||
Other | — | (2 | ) | |||||
Net cash used in investing activities | $ | (43 | ) | $ | (114 | ) | ||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings, net | — | 70 | ||||||
Proceeds from issuance of common stock under stock-based compensation equity plans | 5 | 20 | ||||||
Repayments of long-term debt | (40 | ) | (110 | ) | ||||
Other | 1 | (13 | ) | |||||
Net cash used in financing activities | $ | (34 | ) | $ | (33 | ) | ||
Net increase (decrease) in cash and cash equivalents | 306 | (79 | ) | |||||
Cash and cash equivalents at beginning of period | $ | 879 | $ | 1,264 | ||||
Cash and cash equivalents at end of period | $ | 1,185 | $ | 1,185 |
Three Months Ended | Year Ended | |||||||||||||||||||
December 30, 2017 | September 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | ||||||||||||||||
Segment and Category Information | ||||||||||||||||||||
Computing and Graphics (1) | ||||||||||||||||||||
Net revenue | $ | 958 | $ | 819 | $ | 600 | $ | 3,029 | $ | 1,967 | ||||||||||
Operating income (loss) | $ | 85 | $ | 70 | $ | (21 | ) | $ | 147 | $ | (238 | ) | ||||||||
Enterprise, Embedded and Semi-Custom (2) | ||||||||||||||||||||
Net revenue | $ | 522 | $ | 824 | $ | 506 | $ | 2,300 | $ | 2,305 | ||||||||||
Operating income | $ | 19 | $ | 84 | $ | 47 | $ | 154 | $ | 283 | ||||||||||
All Other (3) | ||||||||||||||||||||
Net revenue | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Operating loss | $ | (22 | ) | $ | (28 | ) | $ | (29 | ) | $ | (97 | ) | $ | (417 | ) | |||||
Total | ||||||||||||||||||||
Net revenue | $ | 1,480 | $ | 1,643 | $ | 1,106 | $ | 5,329 | $ | 4,272 | ||||||||||
Operating income (loss) | $ | 82 | $ | 126 | $ | (3 | ) | $ | 204 | $ | (372 | ) | ||||||||
Other Data | ||||||||||||||||||||
Capital expenditures (4) | $ | 44 | $ | 34 | $ | 21 | $ | 113 | $ | 77 | ||||||||||
Adjusted EBITDA (5) | $ | 142 | $ | 191 | $ | 60 | $ | 445 | $ | 177 | ||||||||||
Cash and cash equivalents | $ | 1,185 | $ | 879 | $ | 1,264 | $ | 1,185 | $ | 1,264 | ||||||||||
Free cash flow (6) | $ | 339 | $ | 32 | $ | 167 | $ | (45 | ) | $ | 13 | |||||||||
Total assets | $ | 3,540 | $ | 3,586 | $ | 3,321 | $ | 3,540 | $ | 3,321 | ||||||||||
Total debt | $ | 1,395 | $ | 1,426 | $ | 1,435 | $ | 1,395 | $ | 1,435 |
(1) | The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete graphics processing units (GPUs) and professional graphics processors. The Company also licenses portions of its intellectual property portfolio. | |||||||||
(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 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 is stock-based compensation expense. In addition, the Company also included a charge related to the sixth amendment to the WSA with GF and restructuring and other special charges, net for the year ended December 31, 2016. | |||||||||
(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 | Year Ended | |||||||||||||||||||
December 30, 2017 | September 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | ||||||||||||||||
GAAP operating income (loss) | $ | 82 | $ | 126 | $ | (3 | ) | $ | 204 | $ | (372 | ) | ||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Stock-based compensation | 21 | 29 | 29 | 97 | 86 | |||||||||||||||
Depreciation and amortization | 39 | 36 | 34 | 144 | 133 | |||||||||||||||
Adjusted EBITDA | $ | 142 | $ | 191 | $ | 60 | $ | 445 | $ | 177 |
Three Months Ended | Year Ended | |||||||||||||||||||
December 30, 2017 | September 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | ||||||||||||||||
GAAP net cash provided by operating activities | $ | 383 | $ | 66 | $ | 188 | $ | 68 | $ | 90 | ||||||||||
Purchases of property, plant and equipment | (44 | ) | (34 | ) | (21 | ) | (113 | ) | (77 | ) | ||||||||||
Free cash flow | $ | 339 | $ | 32 | $ | 167 | $ | (45 | ) | $ | 13 |
* | 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 and stock-based compensation expense. In addition, the Company excluded a charge related to the sixth amendment to the WSA with GF and restructuring and other special charges, net for the year ended December 31, 2016. 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. |
• | Q4 2017 results were based on a 13 week quarter. |
• | Revenue of $1.48 billion, up 34% year-over-year (y/y) and down 10% quarter-over-quarter (q/q). |
• | GAAP Results: |
◦ | Gross margin was 35%, up 3 percentage points y/y and flat q/q. |
◦ | Operating income was $82 million, compared to an operating loss of $3 million a year ago and operating income of $126 million in the prior quarter. |
◦ | Net income was $61 million, compared to a net loss of $51 million a year ago and net income of $71 million in the prior quarter. |
◦ | Diluted earnings per share was $0.06, compared to a loss per share of $0.06 a year ago and diluted earnings per share of $0.07 in the prior quarter. |
• | Non-GAAP Results: |
◦ | Gross margin was 35%, up 3 percentage points y/y and flat q/q. |
◦ | Operating income was $103 million, compared to $26 million a year ago and $155 million in the prior quarter. |
◦ | Net income was $88 million, compared to a net loss of $8 million a year ago and net income of $110 million in the prior quarter. |
◦ | Diluted earnings per share was $0.08, compared to a loss per share of $0.01 a year ago and diluted earnings per share of $0.10 in the prior quarter. |
AMD Q4-17 CFO Commentary | Page 1 | January 30, 2018 |
• | R&D expenses were $300 million (or 20% of revenue), up $36 million y/y and down $15 million q/q. |
• | SG&A expenses were $133 million (or 9% of revenue), up $12 million y/y and up $1 million q/q. |
• | Non-GAAP R&D was $288 million (or 19% of revenue), up $39 million y/y and down $9 million q/q. |
• | Non-GAAP SG&A was $124 million (or 8% of revenue), up $16 million y/y and up $2 million q/q. |
AMD Q4-17 CFO Commentary | Page 2 | January 30, 2018 |
• | Revenue was $958 million, up 60% y/y and 17% q/q. The y/y and q/q increase was primarily driven by strong sales of RadeonTM graphics and RyzenTM desktop processors. |
◦ | Client average selling price (ASP) increased y/y due to an increase in desktop processor ASP, driven by sales of Ryzen processors. Client ASP was flat q/q. |
◦ | GPU ASP increased y/y and q/q driven by desktop and professional graphics processors ASP. |
• | Operating income was $85 million, compared to an operating loss of $21 million a year ago and operating income of $70 million in the prior quarter. The y/y and q/q increase was primarily driven by higher revenue. |
AMD Q4-17 CFO Commentary | Page 3 | January 30, 2018 |
• | Revenue was $522 million, up 3% y/y and down 37% q/q. The y/y increase was driven by server revenue. The q/q decrease was driven by seasonally lower semi-custom SoC revenue. |
• | Operating income was $19 million, compared to $47 million a year ago and $84 million in the prior quarter. The y/y decrease was primarily due to the absence of a $31 million licensing gain in Q4 2016, and by an increase in R&D expenses, partially offset by the benefit of a richer product mix. The q/q decrease was primarily due to seasonally lower semi-custom SoC revenue. |
• | R&D was $1.16 billion (22% of revenue), up $152 million from 2016. |
• | SG&A was $511 million (10% of revenue), up $51 million from 2016. |
• | Non-GAAP R&D was $1,103 million (21% of revenue), up $144 million from 2016. |
• | Non-GAAP SG&A was $473 million (9% of revenue), up $48 million from 2016. |
AMD Q4-17 CFO Commentary | Page 4 | January 30, 2018 |
AMD Q4-17 CFO Commentary | Page 5 | January 30, 2018 |
(Millions) | Q4-17 | Q3-17 | Q4-16 | |||||||||
6.75% Senior Notes due 2019 | $ | 166 | $ | 191 | $ | 196 | ||||||
7.50% Senior Notes due 2022 | 347 | 347 | 350 | |||||||||
7.00% Senior Notes due 2024 | 311 | 324 | 416 | |||||||||
2.125% Convertible Senior Notes due 2026 | 805 | 805 | 805 | |||||||||
Borrowings from secured revolving line of credit, net | 70 | 70 | — | |||||||||
Total Debt (principal amount) | $ | 1,699 | $ | 1,737 | $ | 1,767 | ||||||
Unamortized debt discount associated with 2.125% Convertible Senior Notes due 2026 | (286 | ) | (291 | ) | (308 | ) | ||||||
Unamortized debt issuance costs | (19 | ) | (21 | ) | (25 | ) | ||||||
Other | 1 | 1 | 1 | |||||||||
Total Debt (net) | $ | 1,395 | $ | 1,426 | $ | 1,435 |
• | channel shipments on a sell-in basis (CPUs and GPUs), |
• | inventory of custom products with a non-cancellable purchase order (semi-custom products), and |
• | transactions that involve combined development and licensing arrangements. |
AMD Q4-17 CFO Commentary | Page 6 | January 30, 2018 |
• | AMD expects revenue to be approximately $1.55 billion plus or minus $50 million, an increase of 32% y/y primarily driven by the strength of the ramp of new Ryzen, GPU and EPYC products. |
• | For comparative purposes, under the new accounting method, Q1 2017 restated revenue was $1.18 billion and Q4 2017 restated revenue was $1.34 billion. |
Revenue ($M) | Q1-18(1) | Q4-17 | Q1-17 | Q/Q | Y/Y |
Prior accounting standard ASC 605 | -- | 1,480 | 984 | -- | -- |
ASC 606 Adjustment | -- | (140)(2) | 194(3) | -- | -- |
New accounting standard ASC 606 | 1,550 | 1,340 | 1,178 | 16% | 32% |
• | Non-GAAP gross margin to be approximately 36%, |
• | Non-GAAP operating expenses to be approximately $435 million, or approximately 28% of revenue, |
• | Non-GAAP interest expense, taxes and other to be approximately $30 million, |
• | Inventory to be up sequentially in support of higher revenue. |
• | Double digit percent growth in annual revenue, |
• | Greater than 36% non-GAAP gross margin, |
• | Non-GAAP operating expenses to be approximately 28% of revenue, and |
• | Tax rate of approximately 10% of pre-tax income for 2018. |
• | The impact of the new revenue recognition accounting standard to be immaterial for 2018 annual revenue. |
AMD Q4-17 CFO Commentary | Page 7 | January 30, 2018 |
• | The 2.125% Convertible Senior Notes due 2026 (2026 Convertible Notes) which have cash and non-cash interest expense components. There are 100.6 million shares underlying the 2026 Convertible Notes. |
• | 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 WSA with GLOBALFOUNDRIES, and |
• | On-going employee equity grants. |
Shares (millions)(3) | Q4-17 Actual | Q1-18 Estimate | ||
Basic Shares | 965 | 968 | ||
Dilutive impacts from: | ||||
Employee Equity Grants(1) | 35 | 35 | ||
75 million share Warrant(1) | 37 | 41 | ||
Diluted Shares (without 2026 Convertible Notes) | 1,037 | 1,044 | ||
2026 Convertible Notes (2) | 100.6 | 100.6 | ||
Diluted Shares (with 2026 Convertible Notes) | 1,137 | 1,144 |
(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. Q4 2017 average quarterly price was $11.69. | ||
(2) The dilutive impact from the 2026 Convertible Notes is based on the If-Converted method, where the interest costs associated with the 2026 Convertible Notes are added back to the Net Income and the 100.6 million shares underlying the 2026 Convertible Notes are assumed to be converted and are added to the share count. The impact from the 2026 Convertible Notes, 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 cash interest expense is added back to non-GAAP net income. | ||
(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 Q4-17 CFO Commentary | Page 8 | January 30, 2018 |
AMD Q4-17 CFO Commentary | Page 9 | January 30, 2018 |
Reconciliation of GAAP to Non-GAAP Gross Margin | ||||||||||||||||||||
(Millions except percentages) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP Gross Margin | $ | 515 | $ | 573 | $ | 351 | $ | 1,823 | $ | 998 | ||||||||||
GAAP Gross Margin % | 35 | % | 35 | % | 32 | % | 34 | % | 23 | % | ||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Stock-based compensation | — | 1 | 1 | 2 | 2 | |||||||||||||||
Non-GAAP Gross Margin | $ | 515 | $ | 574 | $ | 352 | $ | 1,825 | $ | 1,340 | ||||||||||
Non-GAAP Gross Margin % | 35 | % | 35 | % | 32 | % | 34 | % | 31 | % |
Reconciliation of GAAP to Non-GAAP Operating Expenses | ||||||||||||||||||||
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP operating expenses | $ | 433 | $ | 447 | $ | 385 | $ | 1,671 | $ | 1,458 | ||||||||||
Stock-based compensation | 21 | 28 | 28 | 95 | 84 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Non-GAAP operating expenses | $ | 412 | $ | 419 | $ | 357 | $ | 1,576 | $ | 1,384 |
Reconciliation of GAAP to Non-GAAP Research and Development and Marketing, General and Administrative Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
R&D | SG&A | Total | R&D | SG&A | Total | R&D | SG&A | Total | R&D | SG&A | Total | R&D | SG&A | Total | |||||||||||||||||||||||||||||||||||||||||||||
GAAP R&D & SG&A | $ | 300 | $ | 133 | $ | 433 | $ | 315 | $ | 132 | $ | 447 | $ | 264 | $ | 121 | $ | 385 | $ | 1,160 | $ | 511 | $ | 1,671 | $ | 1,008 | $ | 460 | $ | 1,468 | |||||||||||||||||||||||||||||
Stock-based compensation | 12 | 9 | 21 | 18 | 10 | 28 | 15 | 13 | 28 | 57 | 38 | 95 | 49 | 35 | 84 | ||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP R&D & SG&A | $ | 288 | $ | 124 | $ | 412 | $ | 297 | $ | 122 | $ | 419 | $ | 249 | $ | 108 | $ | 357 | $ | 1,103 | $ | 473 | $ | 1,576 | $ | 959 | $ | 425 | $ | 1,384 |
Reconciliation of GAAP Operating Income (loss) to Non-GAAP Operating Income | ||||||||||||||||||||
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP operating income (loss) | $ | 82 | $ | 126 | $ | (3 | ) | $ | 204 | $ | (372 | ) | ||||||||
Stock-based compensation | 21 | 29 | 29 | 97 | 86 | |||||||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Non-GAAP operating income | $ | 103 | $ | 155 | $ | 26 | $ | 301 | $ | 44 |
AMD Q4-17 CFO Commentary | Page 10 | January 30, 2018 |
Reconciliation of GAAP to Non-GAAP Net Income (Loss) / Earnings (Loss) per Share | ||||||||||||||||||||||||||||||||||||||||
(Millions except per share amounts) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||||||||||||||||||||||
GAAP net income (loss) / earnings (loss) per share | $ | 61 | $ | 0.06 | $ | 71 | $ | 0.07 | $ | (51 | ) | $ | (0.06 | ) | $ | 43 | $ | 0.04 | $ | (497 | ) | $ | (0.60 | ) | ||||||||||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | — | — | — | — | 340 | 0.41 | ||||||||||||||||||||||||||||||
Stock-based compensation | 21 | 0.02 | 29 | 0.02 | 29 | 0.03 | 97 | 0.09 | 86 | 0.10 | ||||||||||||||||||||||||||||||
Restructuring and other special charges, net | — | — | — | — | — | — | — | — | (10 | ) | (0.01 | ) | ||||||||||||||||||||||||||||
Loss on debt redemption | 3 | — | 2 | — | 7 | 0.01 | 12 | 0.01 | 68 | 0.08 | ||||||||||||||||||||||||||||||
Non-cash interest expense related to convertible debt | 5 | — | 6 | 0.01 | 5 | 0.01 | 22 | 0.02 | 6 | 0.01 | ||||||||||||||||||||||||||||||
Gain on sale of 85% of ATMP JV | (3 | ) | — | — | — | — | — | (3 | ) | — | (146 | ) | (0.17 | ) | ||||||||||||||||||||||||||
Tax provision related to sale of 85% of ATMP JV | 1 | — | — | — | — | — | 1 | — | 26 | 0.03 | ||||||||||||||||||||||||||||||
Equity loss in investee | — | — | 2 | — | 2 | — | 7 | 0.01 | 10 | 0.01 | ||||||||||||||||||||||||||||||
Non-GAAP net income (loss) / earnings (loss) per share | $ | 88 | $ | 0.08 | $ | 110 | $ | 0.10 | $ | (8 | ) | $ | (0.01 | ) | $ | 179 | $ | 0.17 | $ | (117 | ) | $ | (0.14 | ) | ||||||||||||||||
Q4 and Q3 2017 GAAP diluted earnings per share (EPS) are calculated based on 1,037 million and 1,042 million shares, respectively. Q4 and Q3 2017 non-GAAP diluted EPS are calculated based on 1,137 million and 1,143 million shares, respectively, which include 100.6 million shares related to the Company’s 2026 Convertible Notes and a $5 million cash interest expense add-back to net income under the "if converted" method. 2017 GAAP and non-GAAP diluted EPS are both calculated based on 1,039 million shares. |
Reconciliation of GAAP to Non-GAAP Interest Expense, Taxes and Other | ||||||||||||||||||||
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
Interest expense | $ | (31 | ) | $ | (31 | ) | $ | (34 | ) | $ | (126 | ) | $ | (156 | ) | |||||
Other income (expense), net | 2 | (3 | ) | (7 | ) | (9 | ) | 80 | ||||||||||||
Provision (benefit) for income taxes | 8 | (19 | ) | (5 | ) | (19 | ) | (39 | ) | |||||||||||
Total GAAP Interest Expense, Taxes and Other | $ | (21 | ) | $ | (53 | ) | $ | (46 | ) | $ | (154 | ) | $ | (115 | ) | |||||
Loss on debt redemption | 3 | 2 | 7 | 12 | 68 | |||||||||||||||
Non-cash interest expense related to convertible debt | 5 | 6 | 5 | 22 | 6 | |||||||||||||||
Gain on sale of 85% of ATMP JV | (3 | ) | — | — | (3 | ) | (146 | ) | ||||||||||||
Tax provision related to sale of 85% of ATMP JV | 1 | — | — | 1 | 26 | |||||||||||||||
Total Non-GAAP Interest Expense, Taxes and Other | $ | (15 | ) | $ | (45 | ) | $ | (34 | ) | $ | (122 | ) | $ | (161 | ) |
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP operating income (loss) | $ | 82 | $ | 126 | $ | (3 | ) | $ | 204 | $ | (372 | ) | ||||||||
Charge related to the sixth amendment to the WSA with GF | — | — | — | — | 340 | |||||||||||||||
Restructuring and other special charges, net | — | — | — | — | (10 | ) | ||||||||||||||
Stock-based compensation | 21 | 29 | 29 | 97 | 86 | |||||||||||||||
Depreciation and amortization | 39 | 36 | 34 | 144 | 133 | |||||||||||||||
Adjusted EBITDA | $ | 142 | $ | 191 | $ | 60 | $ | 445 | $ | 177 |
AMD Q4-17 CFO Commentary | Page 11 | January 30, 2018 |
(Millions) | Q4-17 | Q3-17 | Q4-16 | 2017 | 2016 | |||||||||||||||
GAAP net cash provided by operating activities | $ | 383 | $ | 66 | $ | 188 | $ | 68 | $ | 90 | ||||||||||
Purchases of property, plant and equipment | (44 | ) | (34 | ) | (21 | ) | (113 | ) | (77 | ) | ||||||||||
Free cash flow | $ | 339 | $ | 32 | $ | 167 | $ | (45 | ) | $ | 13 |
AMD Q4-17 CFO Commentary | Page 12 | January 30, 2018 |
AMD Q4-17 CFO Commentary | Page 13 | January 30, 2018 |