01—Abstract
Summary
Summary of the 10-Q filed July 30, 2015. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices, Inc. (AMD) reported a net loss of $181 milliona for the second quarter ended June 27, 2015, a significant increase from a net loss of $36 million in the same period last year.
Net revenue also declined substantially to $942 millionb, down 35% year-over-year, largely due to weak demand in the Computing and Graphics segment, influenced by OEMs working through existing inventory ahead of the Windows 10 launch. Despite a 13% sequential revenue increase in the Enterprise, Embedded and Semi-Custom segment, it was insufficient to offset the overall decline. The company is navigating challenging market conditions, particularly in the PC sector, and is focused on expense management and strategic transformation.
AMD's liquidity remains a key focus, with cash and cash equivalents at $829 millionc. The company is actively engaged in discussions with GLOBALFOUNDRIES regarding its significant wafer purchase commitments for 2015, seeking to re-profile these obligations, which adds a layer of uncertainty to future financial commitments.
02—Key points
Key Highlights
- Significant year-over-year decline in net revenue: Revenue fell 35% to $942 million in Q2 2015 compared to $1,441 million in Q2 2014.
- Increased Net Loss: The company reported a net loss of $181 million for Q2 2015, a substantial increase from a $36 million net loss in the prior year's second quarter.
- Weakness in Computing and Graphics Segment: This segment saw a substantial revenue decrease of 54% year-over-year, attributed to lower demand from OEMs managing inventory related to the Windows 10 release.
- Resilience in Enterprise, Embedded and Semi-Custom Segment: This segment showed sequential revenue growth of 13% but experienced an 8% year-over-year decline.
- Reduced Gross Margin: Gross margin decreased to 25% from 35% in the prior year's second quarter, impacted by a less favorable product mix and a $33 million technology node transition charge.
- Continued Investment in R&D and SG&A: Research and Development expenses decreased 15% year-over-year, and Marketing, General & Administrative expenses decreased 13%, reflecting cost management efforts.
- Significant Wafer Purchase Commitments with GLOBALFOUNDRIES: AMD has approximately $1.1 billion in estimated purchase obligations for fiscal 2015 with GF and is in discussions to re-profile these commitments.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2015, Advanced Micro Devices Inc lost $0.19.
- Revenue$942.0M100.0%
- Cost of revenue−$710.0M75.4%
- Gross profit$232.0M24.6%
- Operating costs−$369.0M39.2%
- Operating income−$137.0M14.5%
- Interest, other & tax−$44.0M4.7%
- Net income−$181.0M19.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed July 30, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $942.00M$1.44B | −34.6% |
| Cost of Revenue | $710.00M$943.00M | −24.7% |
| Gross Profit | $232.00M$498.00M | −53.4% |
| R&D Expenses | $235.00M$277.00M | −15.2% |
| SG&A Expenses | $134.00M$154.00M | −13.0% |
| Operating Income | -$137.00M$63.00M | −317.5% |
| Interest Expense | $40.00M$46.00M | −13.0% |
| Net Income | -$181.00M-$36.00M | −402.8% |
| EPS (Basic) | $-0.23$-0.05 | −360.0% |
| EPS (Diluted) | $-0.23$-0.05 | −360.0% |
| Shares Outstanding (Basic) | 778.00M764.00M | +1.8% |
| Shares Outstanding (Diluted) | 778.00M764.00M | +1.8% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant revenue decline in the second quarter of 2015?
The substantial revenue decline was primarily driven by weak demand in the Computing and Graphics segment. This was largely due to Original Equipment Manufacturers (OEMs) reducing their inventory levels in anticipation of the Microsoft Windows 10 launch and working through existing Windows 8-based inventory.
How is AMD managing its expenses amidst declining revenues?
AMD has implemented cost management measures, including a reduction in Research and Development expenses by 15% and Marketing, General, and Administrative expenses by 13% year-over-year. The company also incurred restructuring charges related to a 2014 plan and exiting the dense server systems business.
What is the status of AMD's relationship with GLOBALFOUNDRIES (GF) and its financial implications?
AMD has significant wafer purchase commitments with GF. For 2015, the estimated purchase obligation is approximately $1.1 billion. The company is currently in discussions with GF to re-profile these commitments, which could impact future cash flows and financial obligations. The outcome of these negotiations is uncertain and could be material to AMD's business.
What is AMD's current liquidity position?
As of June 27, 2015, AMD had $829 million in cash and cash equivalents and marketable securities. The company believes this balance, along with savings from restructuring and its secured revolving line of credit, will be sufficient to fund operations over the next 12 months. However, they also note the potential need for external financing.
06—Continue