10-QPeriod: Q3 FY2015

ADVANCED MICRO DEVICES INC Quarterly Report for Q3 Ended Sep 26, 2015

Filed November 3, 2015For Securities:AMD

Summary

Advanced Micro Devices (AMD) reported a significant net loss of $197 million ($0.25 per share) for the third quarter of 2015, a stark contrast to the modest net income of $17 million ($0.02 per share) in the same period last year. This downturn was primarily driven by a substantial decrease in net revenue, which fell 26% year-over-year to $1.06 billion. The company faced challenges in both its Computing and Graphics segment, which saw revenue drop significantly, and its Enterprise, Embedded and Semi-Custom segment, which experienced a slight decline. Compounding these revenue pressures were significant restructuring charges related to a workforce reduction and organizational changes. An inventory write-down of $65 million, largely due to lower demand for older-generation APUs, also impacted gross margins, which fell to 23% from 35% in the prior year. Despite these headwinds, AMD is actively pursuing strategic initiatives, including a joint venture for its assembly, test, mark, and pack (ATMP) operations, which is expected to close in the first half of 2016 and bring in approximately $320 million in net proceeds.

Financial Highlights

54 data points
Beta

Revenue

$1.06B

22.5% Gross Margin

Net Income

-$197.00M

-18.6% Net Margin

EPS (Diluted)

$-0.25

Total Assets

$3.23B

Cash & Equivalents

$755.00M

Free Cash Flow

-$81.00M

Financial Statements
Beta
Revenue$1.06B
Cost of Revenue$822.00M
Gross Profit$239.00M
R&D Expenses$241.00M
SG&A Expenses$108.00M
Operating Income-$158.00M
Interest Expense$39.00M
Net Income-$197.00M
EPS (Basic)$-0.25
EPS (Diluted)$-0.25
Shares Outstanding (Basic)785.00M
Shares Outstanding (Diluted)785.00M

Key Highlights

  • 1Net loss of $197 million in Q3 2015, compared to a net income of $17 million in Q3 2014.
  • 2Net revenue decreased by 26% year-over-year to $1.06 billion in Q3 2015.
  • 3Gross margin percentage declined to 23% in Q3 2015 from 35% in Q3 2014, impacted by a $65 million inventory write-down.
  • 4Significant restructuring charges were recorded, including a 5% global headcount reduction and outsourcing of IT services, totaling $48 million in Q3 2015.
  • 5The company announced a proposed joint venture to sell 85% of its ATMP operations for approximately $320 million net proceeds, expected to close in H1 2016.
  • 6Operating loss in the Computing and Graphics segment widened to $181 million from $17 million in the prior year period.
  • 7Cash and cash equivalents decreased to $755 million from $805 million at the beginning of the year.

Frequently Asked Questions

The primary reason for the significant net loss of $197 million in Q3 2015 was a substantial year-over-year decrease in net revenue, down 26% to $1.06 billion. This was coupled with a sharp decline in gross margin percentage to 23% from 35%, largely due to a $65 million inventory write-down and a higher proportion of revenue from the lower-margin Enterprise, Embedded and Semi-Custom segment.

AMD is implementing several strategic initiatives. This includes a 2015 Restructuring Plan involving a 5% global headcount reduction and organizational changes to simplify the business and align resources. Furthermore, the company has entered into an agreement to form a joint venture for its assembly, test, mark, and pack (ATMP) operations, which is expected to generate significant cash proceeds upon closing in the first half of 2016.

The Computing and Graphics segment experienced a significant revenue decline and a widened operating loss. The Enterprise, Embedded and Semi-Custom segment saw a slight decrease in revenue year-over-year but improved quarter-over-quarter, driven by semi-custom SoC products. The company is actively working on new product roadmaps, including the 'Zen' processor core, to re-enter high-performance and server markets.

As of September 26, 2015, cash and cash equivalents stood at $755 million, a decrease from the beginning of the year. The company believes its current cash balance, along with expected savings from restructuring and its secured revolving line of credit, will be sufficient to fund operations for the next 12 months. However, significant debt obligations remain.