01—Abstract
Summary
Summary of the 10-Q filed October 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices, Inc. (AMD) filed its 10-Q for the period ending September 23, 2016, reporting a net revenue of $1.31 billiona for the third quarter, a significant increase of 23% year-over-year.
Despite the revenue growth, the company reported a net loss of $406 millionb for the quarter. This loss was largely attributed to a significant charge of $340 million related to the Sixth Amendment of the Wafer Supply Agreement with GLOBALFOUNDRIES Inc. (GF) and the issuance of warrants. The company also successfully raised substantial capital through the issuance of common stock ($668 million) and convertible senior notes ($700 million), which were largely used to reduce its debt.
The Enterprise, Embedded and Semi-Custom segment showed strong performance, while the Computing and Graphics segment saw modest revenue growth. Financially, AMD ended the quarter with a stronger cash position of $1.26 billionc, up from $785 million at the end of the prior year. Debt was reduced, with significant repurchases of senior notes.
The company's strategic initiatives, including the formation of joint ventures and amendments to supply agreements, are aimed at enhancing flexibility and market expansion, particularly in China. Investors should note the significant one-time charge impacting profitability this quarter, while recognizing the positive steps taken to strengthen the balance sheet and secure future operational flexibility.
02—Key points
Key Highlights
- Third-quarter revenue increased 23% year-over-year to $1.31 billion, driven by the Enterprise, Embedded and Semi-Custom segment (+31%) and Computing and Graphics segment (+11%).
- Net loss for the quarter was $406 million, significantly impacted by a $340 million charge related to the Sixth Amendment to the Wafer Supply Agreement and warrant issuance.
- The company successfully raised approximately $1.35 billion in new capital through the issuance of common stock ($668 million) and convertible senior notes ($700 million).
- Cash and cash equivalents increased to $1.26 billion as of September 24, 2016, up from $785 million at the end of 2015, indicating improved liquidity.
- Long-term debt decreased significantly to $1.63 billion from $2.01 billion due to substantial debt repurchases during the quarter.
- Entered into a Sixth Amendment to the Wafer Supply Agreement with GLOBALFOUNDRIES, granting more sourcing flexibility in exchange for future payments and a warrant issued to a Mubadala affiliate.
- Completed the sale of a majority equity interest in ATMP facilities, forming joint ventures and generating approximately $346 million in net cash proceeds.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2016, Advanced Micro Devices Inc lost $0.31.
- Revenue$1.31B100.0%
- Cost of revenue−$1.25B95.5%
- Gross profit$59.0M4.5%
- Operating costs−$352.0M26.9%
- Operating income−$293.0M22.4%
- Interest, other & tax−$113.0M8.6%
- Net income−$406.0M31.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed October 26, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $1.31B$1.06B | +23.2% |
| Cost of Revenue | $1.25B$822.00M | +51.8% |
| Gross Profit | $59.00M$239.00M | −75.3% |
| R&D Expenses | $259.00M$241.00M | +7.5% |
| SG&A Expenses | $117.00M$108.00M | +8.3% |
| Operating Income | -$293.00M-$158.00M | −85.4% |
| Interest Expense | $41.00M$39.00M | +5.1% |
| Net Income | -$406.00M-$197.00M | −106.1% |
| EPS (Basic) | $-0.50$-0.25 | −100.0% |
| EPS (Diluted) | $-0.50$-0.25 | −100.0% |
| Shares Outstanding (Basic) | 815.00M785.00M | +3.8% |
| Shares Outstanding (Diluted) | 815.00M785.00M | +3.8% |
05—Questions
Frequently Asked Questions
What is the primary reason for AMD's net loss in the third quarter of 2016?
The substantial net loss of $406 million in the third quarter of 2016 was primarily due to a one-time charge of $340 million. This charge was related to the Sixth Amendment of the Wafer Supply Agreement with GLOBALFOUNDRIES Inc. (GF) and the issuance of warrants to West Coast Hitech L.P. (WCH) in connection with that amendment.
How did AMD strengthen its financial position in this quarter?
AMD significantly strengthened its financial position by raising approximately $1.35 billion through the issuance of common stock ($668 million) and 2.125% Convertible Senior Notes due 2026 ($700 million). These proceeds were used to reduce outstanding debt, including repurchasing $796 million of senior notes and repaying $226 million on its secured revolving line of credit. This also resulted in a substantial increase in cash and cash equivalents to $1.26 billion.
What is the significance of the Sixth Amendment to the Wafer Supply Agreement with GLOBALFOUNDRIES?
The Sixth Amendment provides AMD with greater flexibility in sourcing foundry services, including a limited waiver to contract with other wafer foundries for certain products and technology nodes. In return, AMD agreed to future payments to GF and issued warrants. This strategic move aims to enhance AMD's supply chain flexibility, crucial for its product roadmap.
What impact did the ATMP joint venture transaction have on AMD's financials?
The sale of a majority equity interest in its ATMP facilities to form joint ventures generated approximately $346 million in net cash proceeds for AMD. This transaction was a key driver of cash inflow from investing activities and also resulted in a pre-tax gain on sale of equity interests, contributing positively to the 'Other income (expense), net' line item.
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