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AMD Reports Fourth Quarter and Annual 2019 Financial Results

– Record quarterly revenue of $2.13 billion; record annual revenue of $6.73 billion –

– Gross margin expanded to 45 percent in Q4 2019 and 43 percent for 2019 –

SANTA CLARA, Calif., Jan. 28, 2020 (GLOBE NEWSWIRE) -- AMD (NASDAQ:AMD) today announced revenue for the fourth quarter of 2019 of $2.13 billion, operating income of $348 million, net income of $170 million and diluted earnings per share of $0.15. On a non-GAAP(*) basis, operating income was $405 million, net income was $383 million and diluted earnings per share was $0.32.

For fiscal year 2019, the company reported revenue of $6.73 billion, operating income of $631 million, net income of $341 million and diluted earnings per share of $0.30. On a non-GAAP(*) basis, operating income was $840 million, net income was $756 million and diluted earnings per share was $0.64.

GAAP Quarterly Financial Results

 Q4 2019Q4 2018Y/YQ3 2019Q/Q
Revenue ($B)$2.13 $1.42 Up 50%$1.80 Up 18%
Gross margin 45% 38%Up 7pp 43%Up 2pp
Operating expense ($M)$601 $509 Up $92$591 Up $10
Operating income ($M)$348 $28 Up $320$186 Up $162
Net income ($M)$170 $38 Up $132$120 Up $50
Earnings per share$0.15 $0.04 Up $0.11$0.11 Up $0.04

Non-GAAP(*) Quarterly Financial Results

 Q4 2019Q4 2018Y/YQ3 2019Q/Q
Revenue ($B)$2.13 $1.42 Up 50%$1.80 Up 18%
Gross margin 45% 41%Up 4pp 43%Up 2pp
Operating expense ($M)$545 $ 474 Up $71$539 Up $6
Operating income ($M)$405 $109 Up $296$240 Up $165
Net income ($M)$383 $87 Up $296$219 Up $164
Earnings per share$0.32 $0.08 Up $0.24$0.18 Up $0.14

Annual Financial Results

 GAAPNon-GAAP(*)
  2019  2018 Y/Y 2019  2018 Y/Y
Revenue ($B)$6.73 $ 6.48 Up 4%$6.73 $ 6.48 Up 4%
Gross margin 43% 38%Up 5pp 43% 39%Up 4pp
Operating expense ($B)$2.30 $2.00 Up $0.30$2.09 $1.86 Up $0.23
Operating income ($M)$631 $ 451 Up $180$840 $ 633 Up $207
Net income ($M)$341 $ 337 Up $4$756 $ 514 Up $242
Earnings per share$0.30 $0.32 Down $0.02$0.64 $0.46 Up $0.18

“2019 marked a significant milestone in our multi-year journey as we successfully launched and ramped the strongest product portfolio in our 50-year history,” said Dr. Lisa Su, AMD president and CEO. “We delivered significant margin expansion and increased profitability as we gained market share with our Ryzen and EPYC processors. Our focused execution and the investments we made in our high-performance computing roadmaps position us well for continued growth in 2020 and beyond.”

Q4 2019 Results

Quarterly Financial Segment Summary

2019 Annual Results

Recent PR 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 first quarter of 2020, AMD expects revenue to be approximately $1.8 billion, plus or minus $50 million, an increase of approximately 42 percent year-over-year and a decrease of approximately 15 percent sequentially. The year-over-year increase is expected to be driven by strong growth of Ryzen, EPYC and Radeon product sales. The sequential decrease is driven primarily by negligible semi-custom revenue which continues to soften in advance of the ramp of next generation products, in addition to seasonality. AMD expects non-GAAP gross margin to be approximately 46 percent in the first quarter of 2020.

For the full year 2020, AMD expects revenue growth of approximately 28 to 30 percent over 2019 driven by strength across all businesses. AMD expects non-GAAP gross margin to be approximately 45 percent for 2020.

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 fourth quarter and fiscal year 2019 financial results. 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.


RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES    
 (In millions, except per share data) (Unaudited) Three Months Ended Year Ended
  December 28,
2019
 September 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
GAAP gross margin $949  $777  $537  $2,868  $2,447 
GAAP gross margin % 45% 43% 38% 43% 38%
Impairment of technology licenses     45    45 
Stock-based compensation 1  2  1  6  4 
Non-GAAP gross margin $950  $779  $583  $2,874  $2,496 
Non-GAAP gross margin % 45% 43% 41% 43% 39%
           
GAAP operating expenses $601  $591  $509  $2,297  $1,996 
Stock-based compensation 56  52  35  191  133 
Loss contingency on legal matter       12   
Non-GAAP operating expenses $545  $539  $474  $2,094  $1,863 
           
GAAP operating income $348  $186  $28  $631  $451 
Impairment of technology licenses     45    45 
Stock-based compensation 57  54  36  197  137 
Loss contingency on legal matter       12   
Non-GAAP operating income $405  $240  $109  $840  $633 


  Three Months Ended Year Ended
  December 28,
2019
 September 28,
2019
 December 29,
2018
 December 28,
2019
 December 29,
2018
GAAP net income/ earnings per share $170  $0.15  $120  $0.11  $38  $0.04  $341  $0.30  $337  $0.32 
Loss on debt redemption/conversion 128  0.10  40  0.03  5    176  0.15  12  0.01 
Non-cash interest expense related to convertible debt 4    6    6  0.01  22  0.02  24  0.02 
Stock-based compensation 57  0.05  54  0.04  36  0.03  197  0.16  137  0.11 
Impairment of technology licenses         45  0.04      45  0.04 
Equity (income) loss in investee     (1)           2   
Loss contingency on legal matter             12  0.01     
Provision for income taxes 24  0.02          8       
Withholding tax refund including interest         (43) (0.04)     (43) (0.04)
Non-GAAP net income / earnings per share $383  $0.32  $219  $0.18  $87  $0.08  $756  $0.64  $514  $0.46 
                     
Shares used and net income adjustment in earnings per share calculation                    
Shares used in per share calculation (GAAP) 1,188  1,117  1,079  1,120  1,064 
Interest expense add-back to GAAP net income $4  $  $  $  $ 
Shares used in per share calculation (Non-GAAP)(1) 1,216  1,212  1,180  1,209  1,165 
Interest expense add-back to Non-GAAP net income(1) $2  $4  $5  $16  $18 


(1)The three months ended December 28, 2019, GAAP diluted EPS calculation includes the 31 million shares related to the Company's 2026 Convertible Notes and the associated $4 million interest expense add-back to net income under the "if converted" method.
 
The three months and year ended December 28, 2019, Non-GAAP diluted EPS calculation includes the 59 million and 89 million shares, respectively, related to the Company's 2026 Convertible Notes and the associated $2 million and $16 million interest expense add-back to net income, respectively, under the "if converted" method.
 
The three months ended September 28, 2019, Non-GAAP diluted EPS calculation includes the 95 million shares related to the Company's 2026 Convertible Notes and the associated $4 million interest expense add-back to net income under the "if converted" method.
 
The three months and year ended December 29, 2018, Non-GAAP diluted EPS calculation includes the 100.6 million shares related to the Company's 2026 Convertible Notes and the associated $5 million and $18 million, respectively, interest expense add-back to net income under the "if converted" method.

About AMD
For 50 years, AMD has driven innovation in high-performance computing, graphics and visualization technologies – the building blocks for gaming, immersive platforms and the data center. 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 the features, functionality, availability, timing and expected benefits of AMD’s future products and technologies; AMD’s high-performance computing roadmaps positioning AMD well for continued growth in 2020 and beyond; and AMD’s expected first quarter 2020 and fiscal 2020 financial outlook including, revenue along with the expected drivers of such revenue and non-GAAP gross margin, 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 may limit AMD’s ability to compete effectively; AMD relies on third parties to manufacture its products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, AMD’s business could be materially adversely affected; failure to achieve expected manufacturing yields for AMD’s products could negatively impact its financial results;  AMD has a wafer supply agreement with GF with obligations to purchase all of its microprocessor and APU product requirements, and a certain portion of its GPU product requirements at nodes larger than 7 nanometer from GF with limited exceptions. If GF is not able to satisfy AMD’s manufacturing requirements, AMD’s business could be adversely impacted; the success of AMD’s business is dependent upon its ability to introduce products on a timely basis with features and performance levels that provide value to its customers while supporting and coinciding with significant industry transitions; if AMD cannot generate sufficient revenue and operating cash flow or obtain external financing, it may face a cash shortfall and be unable to make all of its planned investments in research and development or other strategic investments; the loss of a significant customer may have a material adverse effect on AMD; AMD’s receipt of revenue from its semi-custom SoC products is dependent upon its technology being designed into third-party products and the success of those products; global economic uncertainty may adversely impact AMD’s business and operating results; AMD’s worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on it; government actions and regulations such as export administration regulations, tariffs, and trade protection measures may limit our ability to export our products to certain customers; AMD’s products may be subject to security vulnerabilities that could have a material adverse effect on AMD; IT outages, data loss, data breaches and cyber-attacks could compromise AMD’s intellectual property or other sensitive information, be costly to remediate and cause significant damage to its business and reputation; AMD’s operating results are subject to quarterly and seasonal sales patterns; AMD may not be able to generate sufficient cash to service its debt obligations or meet its working capital requirements; AMD has a large amount of indebtedness which could adversely affect its financial position and prevent it from implementing its strategy or fulfilling its contractual obligations; the agreements governing AMD’s notes and the Secured Revolving Facility impose restrictions on AMD that may adversely affect AMD’s ability to operate its business; the markets in which AMD’s products are sold are highly competitive; the conversion of the 2.125% Convertible Senior Notes due 2026 (2.125% Notes) may dilute the ownership interest of AMD’s existing stockholders, or may otherwise depress the price of its common stock; uncertainties involving the ordering and shipment of AMD’s products could materially adversely affect it; the demand for AMD’s products depends in part on the market conditions in the industries into which they are sold. Fluctuations in demand for AMD’s products or a market decline in any of these industries could have a material adverse effect on its results of operations; AMD’s ability to design and introduce new products in a timely manner is dependent upon third-party intellectual property; AMD depends on third-party companies for the design, manufacture and supply of motherboards, software and other computer platform components to support its business; if AMD loses Microsoft Corporation’s support for its products or other software vendors do not design and develop software to run on AMD’s products, its ability to sell its products could be materially adversely affected; AMD’s reliance on third-party distributors and add-in-board (AIB) partners subjects it to certain risks; AMD may incur future impairments of goodwill and technology license purchases; AMD’s inability to continue to attract and retain qualified personnel may hinder its business; in the event of a change of control, AMD may not be able to repurchase its outstanding debt as required by the applicable indentures and its Secured Revolving Facility, which would result in a default under the indentures and its Secured Revolving Facility; the semiconductor industry is highly cyclical and has experienced severe downturns that have materially adversely affected, and may continue to materially adversely affect its business in the future; acquisitions, divestitures and/or joint ventures could disrupt its business, harm its financial condition and operating results or dilute, or adversely affect the price of, its common stock; AMD’s business is dependent upon the proper functioning of its internal business processes and information systems and modification or interruption of such systems may disrupt its business, processes and internal controls; if essential equipment, materials or manufacturing processes are not available to manufacture its products, AMD could be materially adversely affected; if AMD’s products are not compatible with some or all industry-standard software and hardware, it could be materially adversely affected; costs related to defective products could have a material adverse effect on AMD; if AMD fails to maintain the efficiency of its supply chain as it responds to changes in customer demand for its products, its business could be materially adversely affected; AMD outsources to third parties certain supply-chain logistics functions, including portions of its product distribution, transportation management and information technology support services; AMD’s stock price is subject to volatility; worldwide political conditions may adversely affect demand for AMD’s products; unfavorable currency exchange rate fluctuations could adversely affect AMD; AMD’s inability to effectively control the sales of its products on the gray market could have a material adverse effect on it; if AMD cannot adequately protect its technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, it may lose a competitive advantage and incur significant expenses; AMD is a party to litigation and may become a party to other claims or litigation that could cause it to incur substantial costs or pay substantial damages or prohibit it from selling its products; AMD’s business is subject to potential tax liabilities; and AMD is subject to environmental laws, conflict minerals-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as a variety of other laws or regulations that could result in additional costs and liabilities. 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 quarter ended September 28, 2019.

(*)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 expenses, non-GAAP operating income, non-GAAP net income and non-GAAP earnings 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, Ryzen, Threadripper 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) (Unaudited)
 Three Months Ended Year Ended
 December 28,
2019
September 28,
2019
December 29,
2018
 December 28,
2019
December 29,
2018
Net revenue$2,127 $1,801 $1,419  $6,731 $6,475 
Cost of sales 1,178  1,024  882   3,863  4,028 
Gross margin 949  777  537   2,868  2,447 
Gross margin % 45% 43% 38%  43% 38%
Research and development 395  406  371   1,547  1,434 
Marketing, general and administrative 206  185  138   750  562 
Licensing gain -  -  -   (60) - 
Operating income 348  186  28   631  451 
Interest expense (18) (24) (29)  (94) (121)
Other income (expense), net (125) (36) 4   (165) - 
Income before income taxes and equity income (loss) 205  126  3   372  330 
Provision for (benefit from) for income taxes 35  7  (35)  31  (9)
Equity income (loss) in investee -  1  -   -  (2)
Net Income$170 $120 $38  $341 $337 
Earnings per share      
Basic$0.15 $0.11 $0.04  $0.31 $0.34 
Diluted$0.15 $0.11 $0.04  $0.30 $0.32 
Shares used in per share calculation      
Basic 1,140  1,097  1,002   1,091  982 
Diluted 1,188  1,117  1,079   1,120  1,064 


 ADVANCED MICRO DEVICES, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Millions) (Unaudited)
     
  December 28,
2019(1)(2)
 December 29,
2018(2)
 Assets   
 Current assets:   
 Cash and cash equivalents$1,466  $1,078 
 Marketable securities 37   78 
 Accounts receivable, net 1,859   1,235 
 Inventories, net 982   845 
 Prepayment and receivables - related parties 20   34 
 Prepaid expenses and other current assets 233   270 
 Total current assets 4,597   3,540 
 Property and equipment, net 500   348 
 Operating lease right-of use assets 205   - 
 Goodwill 289   289 
 Investment: equity method 58   58 
 Other assets 379   321 
 Total Assets$6,028  $4,556 
     
 Liabilities and Stockholders' Equity    
 Current liabilities:   
 Short-term debt, net$-  $136 
 Accounts payable 988   834 
 Payables to related parties 213   207 
 Accrued liabilities 1,084   783 
 Other current liabilities 74   24 
 Total current liabilities 2,359   1,984 
 Long-term debt, net 486   1,114 
 Long-term operating lease liabilities 199   - 
 Other long-term liabilities 157   192 
     
 Stockholders' equity:   
 Capital stock:   
 Common stock, par value 12   10 
 Additional paid-in capital 9,963   8,750 
 Treasury stock, at cost (53)  (50)
 Accumulated deficit (7,095)  (7,436)
 Accumulated other comprehensive loss -   (8)
 Total Stockholders' equity$2,827  $1,266 
 Total Liabilities and Stockholders' Equity $6,028  $4,556 
     
(1)During the first quarter of 2019, the Company adopted the new lease accounting standard, ASC 842, Leases, which resulted in an increase to assets and liabilities for leases primarily related to office buildings. The adoption of this standard had no impact to the Company's results of operations or cash flows.
  
(2)During the second quarter of 2019, GLOBALFOUNDRIES Inc. (GF) ceased being a related party of the Company. All prior period GF related party balances have been reclassified to conform to the current period presentation.


ADVANCED MICRO DEVICES, INC.
SELECTED CASH FLOW INFORMATION
(Millions) (Unaudited)
 Three Months Ended Year Ended
 December 28,
2019
 December 28,
2019
Net cash provided by (used in)   
Operating activities$442  $493 
Investing activities$(26) $(149)
Financing activities$(107) $43 


ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
(Millions) (Unaudited)
  Three Months Ended   Year Ended 
Segment and Category Information December 28,
2019
  September 28,
2019
  December 29,
2018
   December 28,
2019
  December 29,
2018
 
                 
Computing and Graphics (1)                
Net revenue $1,662   $1,276   $986    $4,709   $4,125  
Operating income $360   $179   $115    $577   $470  
Enterprise, Embedded and Semi-Custom (2)                
Net revenue $465   $525   $433    $2,022   $2,350  
Operating income $45   $61   $(6)   $263   $163  
All Other (3)                
Net revenue  -    -    -     -    -  
Operating loss $(57)  $(54)  $(81)   $(209)  $(182) 
Total                
Net revenue $ 2,127   $ 1,801   $ 1,419    $ 6,731   $ 6,475  
Operating income $ 348   $ 186   $ 28    $ 631   $ 451  
                 
                 
Other Data                
Capital expenditures $42   $55   $41    $217   $163  
Adjusted EBITDA (4) $469   $300   $152    $1,062   $803  
Cash, cash equivalents and marketable securities $1,503   $1,209   $1,156    $1,503   $1,156  
Free cash flow (5) $400   $179   $79    $276   $(129) 
Total assets $6,028   $5,253   $4,556    $6,028   $4,556  
Total debt $486   $872   $1,250    $486   $1,250  
                 


(1)The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, and development services. 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 Net Income to Adjusted EBITDA* 
  Three Months Ended Year Ended
  December 28,
2019
September 28,
2019
December 29,
2018
 December 28,
2019
December 29,
2018
 GAAP net income$170 $120 $38  $341 $337 
 Interest expense 18  24  29   94  121 
 Other (income) expense, net 125  36  (4)  165  - 
 Provision (benefit) for income taxes 35  7  (35)  31  (9)
 Equity (income) loss in investee -  (1) -   -  2 
 Impairment of technology licenses -  -  45   -  45 
 Stock-based compensation 57  54  36   197  137 
 Depreciation and amortization 64  60  43   222  170 
 Loss contingency on legal matter -  -  -   12  - 
 Adjusted EBITDA$469 $300 $152  $1,062 $803 
        
(5)Free Cash Flow Reconciliation**      
  Three Months Ended Year Ended
  December 28,
2019
September 28,
2019
December 29,
2018
 December 28,
2019
December 29,
2018
 GAAP net cash provided by operating activities$442 $234 $120  $493 $34 
 Purchases of property and equipment (42) (55) (41)  (217) (163)
 Free cash flow$400 $179 $79  $276 $(129)
        
        
*The Company presents “Adjusted EBITDA” as a supplemental measure of its performance. Adjusted EBITDA for the Company is determined by adjusting GAAP net income for interest expense, other income (expense), net, provision (benefit) for income taxes, equity income (loss) on investee, stock-based compensation, and depreciation and amortization expense. In addition, the Company included a loss contingency on legal matter in the year ended December 28, 2019 and an impairment of technology licenses in the three months and the year ended December 29, 2018. 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 income 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 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. All periods presented conform to the current period presentation.
        
 The Company has provided reconciliations within the earnings press release of these Non-GAAP financial measures to the most directly comparable GAAP financial measures.

Media Contact:
Drew Prairie
AMD Communications
512-602-4425
drew.prairie@amd.com

Investor Contact
Laura Graves
AMD Investor Relations
408-749-5467
laura.graves@amd.com

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