01—Abstract
Summary
Summary of the 10-Q filed October 30, 2019. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices (AMD) reported its third quarter 2019 results, showing a 9% year-over-year increase in net revenue to $1.8 billiona.
This growth was primarily driven by a 36% surge in the Computing and Graphics segment, fueled by strong Ryzen processor sales, which more than offset a 27% decline in the Enterprise, Embedded and Semi-Custom segment. The company's gross margin improved to 43% from 40% in the prior year period, reflecting a more favorable product mix. While operating expenses, particularly in R&D and Marketing, General & Administrative, saw an increase, the overall operating income grew to $186 millionb from $150 million.
Net income for the quarter was $120 millionc, an increase from $102 million in the same period last year. Diluted earnings per share stood at $0.11. The company's balance sheet remains solid with $1.21 billion in cash, cash equivalents, and marketable securities.
AMD also successfully managed its debt, reducing its outstanding debt obligations. The company continues to achieve product milestones, including the launch of its 2nd Gen EPYC processors and new Ryzen Pro and Athlon Pro desktop processors, positioning it for future growth. Investors should note the continued strength in the Computing and Graphics segment driven by Ryzen processors, and the strategic importance of new EPYC server processor launches.
While the decline in the Enterprise, Embedded and Semi-Custom segment due to lower semi-custom revenue is a point of observation, the growth in EPYC server processors provides a counterbalancing positive trend. The improved gross margin is a positive indicator of product mix and pricing power. Management expressed confidence in sufficient liquidity for the next 12 months.
02—Key points
Key Highlights
- Net revenue increased 9% year-over-year to $1.8 billion, driven by a 36% increase in the Computing and Graphics segment.
- Gross margin improved to 43% from 40% year-over-year, attributed to higher sales of Ryzen and EPYC processors.
- Net income rose to $120 million from $102 million in the prior year period.
- Operating income increased to $186 million from $150 million year-over-year.
- The company launched its 2nd Gen EPYC processors based on the 'Zen 2' core architecture.
- Cash, cash equivalents, and marketable securities totaled $1.21 billion as of September 28, 2019.
- The Enterprise, Embedded and Semi-Custom segment revenue decreased by 27%, primarily due to lower semi-custom product revenue, partially offset by higher EPYC server processor revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Advanced Micro Devices Inc kept $0.07.
- Revenue$1.80B100.0%
- Cost of revenue−$1.02B56.9%
- Gross profit$777.0M43.1%
- Operating costs−$591.0M32.8%
- Operating income$186.0M10.3%
- Interest, other & tax−$66.0M3.7%
- Net income$120.0M6.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed October 30, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $1.80B$1.65B | +9.0% |
| Cost of Revenue | $1.02B$992.00M | +3.2% |
| Gross Profit | $777.00M$661.00M | +17.5% |
| R&D Expenses | $406.00M$363.00M | +11.8% |
| SG&A Expenses | $185.00M$148.00M | +25.0% |
| Operating Income | $186.00M$150.00M | +24.0% |
| Interest Expense | $24.00M$30.00M | −20.0% |
| Net Income | $120.00M$102.00M | +17.6% |
| EPS (Basic) | $0.11$0.10 | +10.0% |
| EPS (Diluted) | $0.11$0.09 | +22.2% |
| Shares Outstanding (Basic) | 1.10B987.00M | +11.1% |
| Shares Outstanding (Diluted) | 1.12B1.08B | +3.8% |
05—Questions
Frequently Asked Questions
What drove the revenue growth in the third quarter?
Revenue growth was primarily driven by a significant 36% increase in the Computing and Graphics segment, largely due to higher sales of AMD's Ryzen processors, which saw a 10% increase in unit shipments and a 40% increase in average selling price.
How did the gross margin perform?
Gross margin as a percentage of net revenue improved to 43% for the three months ended September 28, 2019, compared to 40% in the prior year period. This improvement was mainly due to higher sales of Ryzen and EPYC processors, which have higher gross margins than the corporate average.
What is the company's outlook on its financial condition and liquidity?
AMD believes its cash, cash equivalents, and marketable securities balance of $1.21 billion, along with its Secured Revolving Facility, will be sufficient to fund operations, including capital expenditures, over the next 12 months. Management also indicated confidence in accessing capital markets if additional funds are required.
What are the key reasons for the decline in the Enterprise, Embedded and Semi-Custom segment revenue?
The decrease in revenue for this segment was primarily due to lower semi-custom product revenue. However, this was partially offset by higher sales of EPYC server processors.
06—Continue