10-QPeriod: Q2 FY2014

ADVANCED MICRO DEVICES INC Quarterly Report for Q2 Ended Jun 28, 2014

Filed July 31, 2014For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported a net revenue of $1,441 million for the second quarter of 2014, a 24% increase year-over-year, indicating revenue growth. While gross margin saw a decrease to 35% from 40% in the prior year quarter, the company swung to an operating income of $63 million from an operating loss of $29 million in Q2 2013, signaling improved operational efficiency. The company continued to manage its debt, issuing new senior notes and repurchasing existing ones. AMD's strategic transformation efforts are evident in its segment performance, with the Graphics and Visual Solutions segment showing substantial revenue growth, largely driven by semi-custom System-on-Chip (SoC) products. Financially, AMD reported a net loss of $36 million for the quarter. Despite the net loss, the company's cash position remained substantial, although it decreased from the prior quarter due to debt management activities. Management highlighted progress in its transformation plan, aiming for significant revenue from high-growth adjacent markets. Investors should monitor the company's ability to sustain revenue growth, improve gross margins, and successfully execute its strategic shift in the competitive semiconductor market.

Financial Highlights

55 data points
Beta

Revenue

$1.44B

34.6% Gross Margin

Net Income

-$36.00M

-2.5% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$4.25B

Cash & Equivalents

$503.00M

Free Cash Flow

-$51.00M

Financial Statements
Beta
Revenue$1.44B
Cost of Revenue$943.00M
Gross Profit$498.00M
R&D Expenses$277.00M
SG&A Expenses$154.00M
Operating Income$63.00M
Interest Expense$46.00M
Net Income-$36.00M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)764.00M
Shares Outstanding (Diluted)764.00M

Key Highlights

  • 1Net revenue increased by 24% year-over-year to $1,441 million in Q2 2014.
  • 2The company reported an operating income of $63 million, a significant improvement from a $29 million operating loss in Q2 2013.
  • 3Graphics and Visual Solutions segment revenue surged by 141% year-over-year, driven by semi-custom SoC products.
  • 4Net loss for the quarter was $36 million, or $(0.05) per diluted share.
  • 5The company issued $500 million of 7.00% Senior Notes due 2024 and repurchased $452 million of its 8.125% Senior Notes due 2017.
  • 6Cash, cash equivalents, and marketable securities stood at $948 million as of June 28, 2014.
  • 7Gross margin decreased to 35% from 40% in the prior year period, primarily due to product mix.

Frequently Asked Questions

The substantial revenue increase in the Graphics and Visual Solutions segment (141% year-over-year) was primarily driven by increased net revenue from sales of semi-custom System-on-Chip (SoC) products, which began shipping in the second quarter of 2013. This was partially offset by a decrease in revenue from GPU products.

AMD actively managed its debt during the quarter by issuing $500 million in 7.00% Senior Notes due 2024 and using the proceeds to repurchase and redeem the remaining $452 million of its 8.125% Senior Notes due 2017. They also repurchased a portion of their 6.00% Convertible Senior Notes due 2015.

AMD is focused on its transformation plan to generate approximately 50% of net revenue from high-growth adjacent markets by the end of 2015. Key indicators to watch include the continued growth of the Graphics and Visual Solutions segment, the performance of new product introductions in emerging markets (like ARM-based processors), the ability to improve gross margins despite changes in product mix, and the overall trend of revenue growth across its segments.

Although revenue and operating income improved year-over-year, the company reported a net loss of $36 million. This was influenced by significant interest expenses ($46 million) and other expenses, notably a $49 million loss from debt repurchases during the quarter, which impacted the bottom line despite improved operational performance.