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AMD Reports Second Quarter 2018 Financial Results

SANTA CLARA, Calif., July 25, 2018 (GLOBE NEWSWIRE) -- AMD (NASDAQ:AMD) today announced revenue for the second quarter of 2018 of $1.76 billion, operating income of $153 million, net income of $116 million and diluted earnings per share of $0.11. On a non-GAAP(1) basis, operating income was $186 million, net income was $156 million and diluted earnings per share was $0.14.

GAAP Financial Results

 Q2 2018Q2 2017Y/YQ1 2018Q/Q
Revenue$1.76B$1.15B Up 53%$1.65B Up 7%
Gross margin %37%34% Up 3 pp36% Up 1 pp
Operating expense$499M$412M Up $87M$477M Up $22M
Operating expense / revenue %28%36% Down 8 pp29% Down 1 pp
Operating income (loss)$153M$(1M) Up $154M$120M Up $33M
Net income (loss)$116M$(42M) Up $158M$81M Up $35M
Earnings (loss) per share$0.11$(0.04) Up $0.15$0.08 Up $0.03

Non-GAAP(1) Financial Results

 Q2 2018Q2 2017Y/YQ1 2018Q/Q
Revenue$1.76B$1.15BUp 53%$1.65B Up 7%
Gross margin %37%34%Up 3 pp36% Up 1 pp
Operating expense$467M$389MUp $78M$446M Up $21M
Operating expense / revenue %27%34%Down 7 pp27% Flat
Operating income$186M$23MUp $163M$152M Up $34M
Net income (loss)$156M$(7M)Up $163M$121M Up $35M
Earnings (loss) per share$0.14$(0.01)Up $0.15$0.11 Up $0.03

“We had an outstanding second quarter with strong revenue growth, margin expansion and our highest quarterly net income in seven years,” said Dr. Lisa Su, AMD president and CEO. “Most importantly, we believe our long-term technology bets position us very well for the future. We are confident that with the continued execution of our product roadmaps, we are on an excellent trajectory to drive market share gains and profitable growth.”

Q2 2018 Results

Quarterly Financial Segment Summary

Q2 2018 Highlights

Current Outlook
AMD’s outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below.

For the third quarter of 2018, AMD expects revenue to be approximately $1.7 billion, plus or minus $50 million, an increase of approximately 7 percent year-over-year, and non-GAAP gross margin to increase to approximately 38 percent, driven by the sales growth of Ryzen and EPYC products, partially offset by lower sales of GPU products in the blockchain market.

AMD Teleconference
AMD will hold a conference call for the financial community at 2:30 p.m. PT (5:30 p.m. ET) today to discuss its second quarter 2018 financial results and forward looking financial guidance. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com. The webcast will be available for 12 months after the conference call. A slide presentation of quarterly financial results can be found at ir.amd.com.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES    
 (In millions, except per share data) Three Months Ended
  June 30,
2018		 March 31,
2018		 July 1,
2017
GAAP gross margin $652  $597  $386 
GAAP gross margin % 37% 36% 34%
Stock-based compensation 1  1  1 
Non-GAAP gross margin $653  $598  $387 
Non-GAAP gross margin % 37% 36% 34%
       
GAAP operating expenses $499  $477  $412 
Stock-based compensation 32  31  23 
Non-GAAP operating expenses $467  $446  $389 
       
GAAP operating income (loss) $153  $120  $(1)
Stock-based compensation 33  32  24 
Non-GAAP operating income $186  $152  $23 


  Three Months Ended
  June 30,
2018		 March 31,
2018		 July 1,
2017
GAAP net income (loss) / earnings (loss) per share $116  $0.11  $81  $0.08  $(42) $(0.04) 
Loss on debt redemption —  —  1  —  3  —  
Non-cash interest expense related to convertible debt 6  —  6  —  5  0.01  
Stock-based compensation 33  0.03  32  0.03  24  0.02  
Equity loss in investee 1  —  1  —  3  —  
Non-GAAP net income (loss) / earnings (loss) per share $156  $0.14  $121  $0.11  $(7) $(0.01) 
              
The three months ended June 30, 2018 GAAP diluted EPS is calculated based on 1,147 million shares, which include 100.6 million shares related to the Company’s 2026 Convertible Notes and an $11 million interest expense add-back to net income under the "if converted" method.
 
The three months ended June 30 and March 31, 2018 non-GAAP diluted EPS are calculated based on 1,147 million and 1,140 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 for both periods.
 

About AMD
For more than 45 years, AMD has driven innovation in high-performance computing, graphics and visualization technologies - the building blocks for gaming, immersive platforms and the datacenter. Hundreds of millions of consumers, leading Fortune 500 businesses and cutting-edge scientific research facilities around the world rely on AMD technology daily to improve how they live, work and play. AMD employees around the world are focused on building great products that push the boundaries of what is possible. For more information about how AMD is enabling today and inspiring tomorrow, visit the AMD (NASDAQ:AMD) website, blog, Facebook and Twitter pages.

Cautionary Statement

This document contains forward-looking statements concerning Advanced Micro Devices, Inc. (AMD) such as AMD’s expected positioning in the future; AMD’s ability to execute its product roadmaps and the resulting impact on market share and profitable growth; AMD’s financial outlook for the third quarter of 2018, including revenue, non-GAAP gross margin and expected drivers; the features, functionality, availability, timing and expected benefits of AMD’s products and technologies including the expected launch of 2nd Generation Ryzen ThreadripperTM CPU and 7nm Radeon “Vega” architecture-based GPU products; and the continued acceleration of AMD EPYC datacenter processor sales, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "would," "may," "expects," "believes," "plans," "intends," "projects" and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this document are based on current beliefs, assumptions and expectations, speak only as of the date of this document and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Such statements are subject to certain known and unknown risks and uncertainties, many of which are difficult to predict and generally beyond AMD's control, that could cause actual results and other future events to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.  Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: Intel Corporation’s dominance of the microprocessor market and its aggressive business practices; the ability of GLOBALFOUNDRIES Inc. to satisfy AMD’s manufacturing requirements; the ability of third party manufacturers to manufacture AMD products on a timely basis in sufficient quantities and using competitive technologies; the ability of third party manufacturers to achieve expected manufacturing yields; AMD’s ability to introduce products on a timely basis with features and performance levels that provide value to its customers; AMD’s ability to generate sufficient revenue and operating cash flow or obtain external financing; the loss of a significant customer; AMD’s ability to generate revenue from its semi-custom SoC products; actual or perceived security vulnerabilities of AMD’s products; potential data breaches and cyber-attacks; global economic uncertainty; AMD’s ability to generate sufficient cash to service its debt obligations or meet its working capital requirements; AMD’s large amount of indebtedness; restrictions imposed by agreements governing AMD’s debt and its secured revolving line of credit; the competitive nature of the markets in which AMD’s products are sold;  the dilutive effect on shareholders if West Coast Hitech L.P. exercises its warrants to purchase AMD’s common stock, and the conversion of AMD’s 2.125% Convertible Senior Notes due 2026; uncertainties involving the ordering and shipment of AMD’s products; fluctuations in demand or a market decline for AMD’s products; AMD’s reliance on third-party intellectual property to design and introduce new products in a timely manner; AMD’s reliance on third-party companies for the design, manufacture and supply of motherboards, software and other computer platform components; AMD’s reliance on Microsoft Corporation’s support and other software vendors; AMD’s reliance on third-party distributors and AIB partners; AMD’s ability to continue to attract and retain qualified personnel; AMD’s ability to repurchase its debt in the event of a change of control; the highly cyclical nature of the semiconductor industry; future acquisitions, divestitures and/or joint ventures that may disrupt AMD’s business; modification or interruption of internal business processes and information systems; quarterly and seasonal sales patterns that may affect AMD’s business; availability of essential equipment, materials or manufacturing processes to manufacture AMD’s products; compatibility of AMD’s products with industry-standard software and hardware; costs related to defective products; the efficiency of AMD’s supply chain; AMD’s ability to rely on third parties’ certain supply-chain logistics functions, product distribution, transportation management and information technology support services; future impairments of goodwill; stock price volatility; political, legal and economic risks and natural disasters; worldwide political conditions; unfavorable currency exchange rate fluctuations; AMD’s ability to effectively control the sales of its products on the gray market; AMD’s ability to protect its technology or intellectual property; current and future litigation; potential tax liabilities; and environmental laws and conflict minerals-related provisions. Investors are urged to review in detail the risks and uncertainties in AMD's Securities and Exchange Commission filings, including but not limited to AMD's Quarterly Report on Form 10-Q for the year ending March 31, 2018.

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 expense, 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.

AMD, the AMD Arrow logo, EPYC, Radeon, Radeon Instinct, Ryzen, and combinations thereof, are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and used to identify companies and products and may be trademarks of their respective owner.

    
ADVANCED MICRO DEVICES, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)
 Three Months Ended Six Months Ended
 June 30,
2018		March 31,
2018		July 1,
2017		 June 30,
2018		July 1,
2017
Net revenue$1,756 $1,647 $1,151  $3,403 $2,329 
Cost of sales 1,104  1,050  765   2,154  1,565 
Gross margin 652  597  386   1,249  764 
Gross margin % 37% 36% 34%  37% 33%
Research and development 357  343  285   700  556 
Marketing, general and administrative 142  134  127   276  250 
Licensing gain -  -  (25)  -  (52)
Operating income (loss) 153  120  (1)  273  10 
Interest expense (31) (31) (32)  (62) (64)
Other income (expense), net 1  1  (3)  2  (8)
Income (loss) before equity loss and income taxes 123  90  (36)  213  (62)
Provision for income taxes 6  8  3   14  8 
Equity loss in investee (1) (1) (3)  (2) (5)
Net Income (loss)$116 $81 $(42) $197 $(75)
Earnings (loss) per share      
Basic$0.12 $0.08 $(0.04) $0.20 $(0.08)
Diluted$0.11 $0.08 $(0.04) $0.19 $(0.08)
Shares used in per share calculation      
Basic 972  968  945   970  942 
Diluted 1,147  1,039  945   1,043  942 
                 
For the three months ended June 30, 2018, diluted EPS includes the impact of the 2026 Convertible Notes as their inclusion is dilutive under the “if-converted” method. Accordingly, $11 million of interest expense is added back to net income and diluted shares includes 100.6 million shares.
       

 

    
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Millions)
    
 June 30,
2018		 December 30,
2017
Assets   
Current assets:   
Cash and cash equivalents$948  $1,185 
Marketable securities 35   - 
Accounts receivable, net 1,118   454 
Inventories, net 750   694 
Prepayment and other receivables - related parties 25   33 
Prepaid expenses 68   77 
Other current assets 155   191 
    
Total current assets 3,099   2,634 
Property and equipment, net 295   261 
Goodwill 289   289 
Investment: equity method 57   58 
Other assets 363   310 
    
Total Assets$4,103  $3,552 
    
Liabilities and Stockholders' Equity    
Current liabilities:   
Short-term debt$223  $70 
Accounts payable 520   384 
Payables to related parties 475   412 
Accrued liabilities 577   555 
Other current liabilities 73   92 
    
Total current liabilities 1,868   1,513 
Long-term debt, net 1,170   1,325 
Other long-term liabilities 186   118 
    
Stockholders' equity:   
Capital stock:   
Common stock, par value 10   9 
Additional paid-in capital 8,564   8,464 
Treasury stock, at cost (109)  (108)
Accumulated deficit (7,576)  (7,775)
Accumulated other comprehensive income (loss) (10)  6 
    
Total Stockholders' equity$879  $596 
Total Liabilities and Stockholders' Equity $4,103  $3,552 
    

 

ADVANCED MICRO DEVICES, INC.
SELECTED CASH FLOW INFORMATION
(Millions)
 Three Months Ended Six Months Ended
 June 30,
2018		 June 30,
2018
Net cash provided by (used in)   
Operating activities$(45) $(131)
Investing activities$(78) $(124)
Financing activities$28  $20 
    

 

                 
ADVANCED MICRO DEVICES, INC.  
SELECTED CORPORATE DATA  
(Millions)  
  Three Months Ended   Six Months Ended 
Segment and Category Information June 30,
2018		  March 31,
2018		  July 1,
2017		   June 30,
2018		  July 1,
2017		 
                 
Computing and Graphics (1)                
Net revenue $  1,086   $  1,115   $  661    $  2,201   $  1,234  
Operating income (loss) $  117   $  138   $  7    $  255   $  (14) 
                 
Enterprise, Embedded and Semi-Custom (2)                
Net revenue $  670   $  532   $  490    $  1,202   $  1,095  
Operating income $  69   $  14   $  16    $  83   $  71  
                 
All Other (3)                
Net revenue    -      -       -       -      -  
Operating loss $  (33)  $  (32)  $  (24)   $  (65)  $  (47) 
                 
Total                
Net revenue $   1,756    $   1,647    $   1,151     $   3,403    $   2,329   
Operating income (loss) $   153    $   120    $   (1)   $   273    $   10   
                 
                 
Other Data                
                 
Capital expenditures  $  43   $  46   $  12    $  89   $  35  
Adjusted EBITDA (4) $  228   $  196   $  58    $  424   $  126  
Cash, cash equivalents and marketable securities $  983   $  1,045   $  844    $  983   $  844  
Free cash flow (5) $  (88)  $  (132)  $  (94)   $  (220)  $  (416) 
Total assets $  4,103   $  3,763   $  3,395    $  4,103   $  3,395  
Total debt $  1,393   $  1,388   $  1,417    $  1,393   $  1,417  
                 

 

        
(1)The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units (GPUs) and professional GPUs. 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.
   
(4)Reconciliation of GAAP Operating Income (Loss) to Adjusted EBITDA*
  Three Months Ended Six Months Ended
  June 30,
2018		March 31,
2018		July 1,
2017		 June 30,
2018		July 1,
2017
 GAAP operating income (loss)$153 $120 $(1) $273 $10 
 Stock-based compensation 33  32  24   65  47 
 Depreciation and amortization 42  44  35   86  69 
 Adjusted EBITDA$228 $196 $58  $424 $126 
        
(5)Free cash flow reconciliation**      
  Three Months Ended Six Months Ended
  June 30,
2018		March 31,
2018		July 1,
2017		 June 30,
2018		July 1,
2017
 GAAP net cash used in operating activities$(45)$(86)$(82) $(131)$(381)
 Purchases of property and equipment (43) (46) (12)  (89) (35)
 Free cash flow$(88)$(132)$(94) $(220)$(416)
        
        
*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 stock-based compensation and depreciation and amortization expense. 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.
 
 
 
 

Contact:
Drew Prairie
AMD Communications
512-602-4425
Email Contact 

Laura Graves
AMD Investor Relations
408-749-5467
Email Contact 

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