AMD Q1 2014 Quarterly Earnings Analysis
by Brett Howse on April 17, 2014 8:45 PM EST
AMD hosted their quarterly earnings conference call this afternoon to announce their financial results for the quarter ending March 2014. While they still reported a GAAP loss of $20 Million ($0.03 per share), year over year results showed a strong revenue gain of 28% and a substantial 86% increase in net income (though still a small loss).
| AMD Q1 2014 Financial Results (GAAP) | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Revenue | $1.40B | $1.59B | $1.09B | ||
| Net Income | -$20M | $89M | -$146M | ||
Gross margins were 35% for the quarter which was flat compared to Q4 2013. These margins are in-line with AMD’s stated goals, and while they’d no doubt appreciate greater margins right now, the long term plan is to be profitable with these margins.
Non-GAAP numbers were slightly higher, with a small profit of $12M, or $0.02 per share.
| AMD Q1 2014 Financial Results (Non-GAAP) | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Revenue | $1.40B | $1.59B | $1.09B | ||
| Net Income | $12M | $45M | -$94M | ||
The biggest decrease was in the Computing Solutions (CPUs & APUs) segment, where there was a decrease of 12% year-over-year, however the Graphics and Visual Solutions (GPUs & custom SoCs) segment had a huge year-over-year increase of 118% mostly due to semi-custom SoC production. This isn’t surprising with the very high sales of the Xbox One, and more so the PS4, both which have AMD silicon at the heart of their platform.
| AMD Q1 2014 Computing Solutions Division Financial Results | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Operating Income | -$3M | -$7M | -$39M | ||
GPU operating income also increased year-over-year up $75M with the release of the popular Radeon R7 and R9 products and strong Average Selling Prices of those devices. Sequentially, GPU operating income fell $30M due to a decrease in semi-custom SoC sales. This isn’t surprising, since the PS4 and Xbox One both arrived in Q4 2013 – complete with the major production ramp-up and stockpiling that a console launch entails – and were a large boost to AMD’s sales numbers for that quarter.
| AMD Q1 2014 Graphics and Visual Solutions Financial Results | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Operating Income | $91M | $121M | $16M | ||
Total debt combining long term and short term was up slightly at $2.14B, however Cash, cash equivalents, and marketable securities were hovering around the $1B mark which is where AMD wants to keep its cash reserves. This is in addition to making the final payment to GlobalFoundries of $200M for its previous wafer commitments for 2012, as well as fixing prices for their 2014 wafer purchases.
AMD is expecting a 3% revenue increase (plus or minus 3%) for the 2nd quarter this year.
Overall this is a decent quarter for AMD. Consensus earnings for Q1 was $0.00 per share non-GAAP, which AMD beat at $0.02 per share. AMD shares are up 5.96% in after-hours trading at this time.
Going forward, AMD is expected to bring its ARM 64 bit server architecture out this year, and is hoping to make inroads in the profitable server market.
Rory Read – AMD’s president and CEO – must be pretty happy with the new fiscal outlook. There was a time in 2012 where people weren’t sure if AMD was going to be able to pull through but strong GPU and SoC sales, coupled with cost savings in the CPU division have brought AMD back.
Source: AMD Earnings Release
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Hrel - Thursday, April 17, 2014 - link
If that's not a positive spin I don't know what is.Alexey291 - Friday, April 18, 2014 - link
Making losses and dropping year on year sales is a great quarter for AMD is pretty much all I got out of this one.Mondozai - Friday, April 18, 2014 - link
Then neither of you read a lot of corporate balance sheets.Net income loss has been substantially drawn down, decreasing over 80%.
Even more importantly, revenue increased by 35%. Revenue increases is the healthiest sign, together with low debt, of a good company. Net losses can always be paired down. If you are in a no-revenue growth mode, things are much tougher to evolve, as you basically have no R&D cash to use without cutting elsewhere. (Ask Intel).
Finally, the drop in sales was only in one segment, semi-custom SoCs and that is because of the Christmas rush for Xbone and PS4. If you had any habit reading corporate balance sheets you know that there is almost always a quarter/over/quarter drop in revenue from Q4 to Q1. Q4 is the peak season for most companies. What matters is year over year.
All in all, this is a good report for AMD. They'll be in the black possibly already in Q2(where we are now) on a net income basis (GAAP-adjusted). The major challenge will be to grow SoC and the server business, but there's no question that they are miles away from the imminent death knell many thought they'd be on back 2 years ago or so. They should be in the black within this year, probably even in this quarter. Then they can start paying down debt, keep growing revenue like they have so far.
I'd like to see Intel growing again.
drexnx - Friday, April 18, 2014 - link
Q1 is historically weak in this industry - the relevant comparison isn't to Q4 2013 (holiday sales!) but to Q1 2013, which they're up on significantly.Frenetic Pony - Friday, April 18, 2014 - link
It is great! Compared to expectations. The expectations were that AMD would have filed for chapter 11 by now. So in comparison, it's great. That's what these things are about and how they're judged. It means AMD seems like it could turn around towards a profit, which makes it a potential bet for investors.tafreire - Wednesday, April 23, 2014 - link
I think that AMD should release the overclocking in all their CPUs. Thus, it would make more money because it would sell more CPUs and more chipsets (motherboards).Wreckage - Thursday, April 17, 2014 - link
But they are in all 3 consoles, it should be impossible to lose money.nathanddrews - Friday, April 18, 2014 - link
Yeah, while I'm sure the extra revenue helps, I'm thinking AMD doesn't profit much from that (that's the excuse NVIDIA gave for not competing, anyway). It looks good on paper to have "three design wins" in popular consoles, but the reality is that I'm not sure it's very effective at selling the brand in the PC space, where the extra margin really helps.AMD owning Nintendo and the 360 business didn't help them on the desktop or mobile (definitely not mobile) in the last round, so I doubt it will help this time.
ppi - Friday, April 18, 2014 - link
Well, AMD's GPU division was never really profitable (in absolute terms) and now they are. So even if margins are thin, it apparently helps.Moreover, while AMD just put together stuff they already had ready at hand otherwise (Jaugar cores + GCN graphics card), so their R&D for these customisations was quite limited. On the other hand, nVidia certinaly did not have anything competitive on the CPU front, so their investmetns there would have to be massive.
novastar78 - Sunday, April 20, 2014 - link
Well you are kind of talking apples to oranges here. The actual architecture in the new consoles more closely matches what we have on the PC. Even if mark ups are thin on the hardware itself the side benefit is that all the major games are being developed on AMD hardware and can be ported very easily to any one of the other platforms. I think that is a huge win for them.The previous generation was completely different as the Wii was a purchased product and had no relation to the Radeon line, and the Xenos was more of a custom design that was not an actual copy of a Radeon chip.
They probably made a decent profit as I don't think they did much in terms of GPU design. My guess is that is was more about modifying the the memory interfaces.