10-QPeriod: Q1 FY2018

ADVANCED MICRO DEVICES INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported a significant turnaround in its first quarter of 2018 compared to the same period in 2017, demonstrating strong revenue growth and a return to profitability. Net revenue increased by a substantial 40% year-over-year, driven primarily by a 95% surge in the Computing and Graphics segment, fueled by higher average selling prices and increased unit shipments of its Ryzen and Radeon products. This top-line growth, coupled with improved gross margins, translated into a significant swing from a net loss in the prior year to a net income of $81 million in Q1 2018. Despite a decrease in the Enterprise, Embedded and Semi-Custom segment revenue, the overall financial performance showcases AMD's progress in recovering market share and improving its financial health. The company's strategic focus on high-performance products appears to be gaining traction with customers. Investors should monitor the continued growth in the Computing and Graphics segment and the company's ability to maintain this positive momentum amidst a competitive semiconductor landscape.

Financial Highlights

49 data points
Beta

Revenue

$1.65B

36.2% Gross Margin

Net Income

$81.00M

4.9% Net Margin

EPS (Diluted)

$0.08

Total Assets

$3.76B

Cash & Equivalents

$1.05B

Free Cash Flow

-$153.00M

Financial Statements
Beta
Revenue$1.65B
Cost of Revenue$1.05B
Gross Profit$597.00M
R&D Expenses$343.00M
SG&A Expenses$134.00M
Operating Income$120.00M
Interest Expense$31.00M
Net Income$81.00M
EPS (Basic)$0.08
EPS (Diluted)$0.08
Shares Outstanding (Basic)968.00M
Shares Outstanding (Diluted)1.04B

Key Highlights

  • 1Net revenue grew 40% year-over-year to $1.65 billion, driven by strong performance in the Computing and Graphics segment.
  • 2The Computing and Graphics segment revenue increased by 95% year-over-year, attributed to higher average selling prices and unit shipments of Ryzen and Radeon products.
  • 3The company achieved profitability, reporting a net income of $81 million ($0.08 per diluted share) compared to a net loss of $33 million ($0.04 per diluted share) in the prior year's quarter.
  • 4Gross margin improved to 36% from 32% year-over-year, benefiting from a higher mix of revenue from premium products like Ryzen, Radeon, and EPYC.
  • 5Research and Development expenses increased by 27% to $343 million, reflecting continued investment in product engineering and design.
  • 6Cash and cash equivalents stood at $1.045 billion, while net cash used in operating activities was $86 million, indicating a focus on operational efficiency.
  • 7Adoption of new accounting standard ASC 606 (Revenue from Contracts with Customers) impacted prior year reporting and revenue recognition timing.

Frequently Asked Questions

The primary driver of revenue growth was the Computing and Graphics segment, which saw a 95% year-over-year increase. This was fueled by higher average selling prices and a 20% increase in unit shipments, primarily due to the strong performance of AMD's Ryzen processors and Radeon graphics products.

AMD demonstrated a significant improvement in profitability. It reported a net income of $81 million ($0.08 per diluted share) for the first quarter of 2018, a substantial turnaround from a net loss of $33 million ($0.04 per diluted share) in the same period of 2017.

AMD adopted ASC 606 in the first quarter of 2018 using the full retrospective method, which required adjustments to prior periods presented. The adoption accelerated revenue recognition for custom products and sales to distributors (sell-in versus sell-through) and impacted the timing and classification of certain development and IP licensing agreements. While it affected reported revenues and balances, it had no impact on cash flows from operating, financing, or investing activities.

As of March 31, 2018, AMD had $1.045 billion in cash and cash equivalents. Total debt was $1.39 billion (net of unamortized debt costs/discount). The company believes its cash position and available credit line are sufficient to fund operations over the next 12 months.