10-QPeriod: Q1 FY2019

ADVANCED MICRO DEVICES INC Quarterly Report for Q1 Ended Mar 30, 2019

Filed May 1, 2019For Securities:AMD

Summary

Advanced Micro Devices (AMD) reported a decrease in net revenue for the first quarter of 2019, with revenue falling to $1.27 billion from $1.65 billion in the prior year period, a 23% decline. This downturn was primarily attributed to lower sales in the Computing and Graphics segment, affected by reduced demand for Radeon products due to a decline in blockchain-related activity, although partially offset by increased demand for Ryzen processors and datacenter GPUs. The Enterprise, Embedded, and Semi-Custom segment also saw a revenue decrease, mainly due to lower semi-custom revenue, though EPYC server product revenue showed improvement. Despite the revenue decline, AMD reported a gross margin percentage of 41% for the quarter, an improvement from 36% in the prior year, driven by higher-margin Ryzen products. However, operating income decreased to $38 million from $120 million year-over-year, and net income dropped to $16 million from $81 million. The company's financial position remained stable, with cash, cash equivalents, and marketable securities totaling $1.19 billion. Significant financing activities included $449 million from warrant exercise, partially offset by debt repayments. Management anticipates sufficient liquidity to fund operations over the next 12 months.

Financial Highlights

50 data points
Beta

Revenue

$1.27B

41.0% Gross Margin

Net Income

$16.00M

1.3% Net Margin

EPS (Diluted)

$0.01

Total Assets

$4.93B

Cash & Equivalents

$983.00M

Free Cash Flow

-$275.00M

Financial Statements
Beta
Revenue$1.27B
Cost of Revenue$751.00M
Gross Profit$521.00M
R&D Expenses$373.00M
SG&A Expenses$170.00M
Operating Income$38.00M
Interest Expense$27.00M
Net Income$16.00M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)1.04B
Shares Outstanding (Diluted)1.09B

Key Highlights

  • 1Net revenue decreased by 23% to $1.27 billion compared to the prior year period.
  • 2Computing and Graphics segment revenue declined 26%, impacted by reduced demand for Radeon products.
  • 3Enterprise, Embedded, and Semi-Custom segment revenue decreased by 17%, primarily due to lower semi-custom revenue.
  • 4Gross margin percentage improved to 41% from 36% year-over-year, driven by higher-margin Ryzen products.
  • 5Operating income decreased to $38 million from $120 million.
  • 6Net income fell to $16 million from $81 million.
  • 7Cash, cash equivalents, and marketable securities stood at $1.19 billion.

Frequently Asked Questions

The primary driver of the 23% year-over-year revenue decline was a 26% decrease in the Computing and Graphics segment, largely due to lower sales of Radeon products. This was mainly attributed to a decline in blockchain-related demand. Additionally, the Enterprise, Embedded, and Semi-Custom segment saw a 17% revenue decrease, mainly from lower semi-custom revenue.

Profitability decreased significantly. Operating income dropped to $38 million from $120 million in the prior year. Net income also saw a substantial decrease, falling to $16 million from $81 million in the same period. This was driven by the lower revenue and increased operating expenses, despite an improvement in gross margin percentage.

Financing activities were highlighted by a significant cash inflow of $449 million from a warrant exercise by West Coast Hitech L.P. (WCH). This was partially offset by debt repayments, including $164 million for the redemption of 6.75% Senior Notes and repurchases of 7.50% and 7.00% Senior Notes.

Yes, AMD's management believes its cash, cash equivalents, and marketable securities balance of $1.19 billion, along with its Secured Revolving Line of Credit, will be sufficient to fund operations, including capital expenditures, over the next 12 months. The company also believes it can access capital markets if additional funds are required.