Advanced Micro Devices’ (AMD) CEO Rory Read on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Advanced Micro Devices, Inc. (NYSE:AMD)

Q2 2014 Earnings Conference Call

July 17, 2014 05:30 PM ET

Executives

Ruth Cotter – CVP of IR

Rory Read – President and CEO

Devinder Kumar – SVP and CFO

Lisa Su – SVP and COO

Analysts

Mark Lipacis – Jefferies & Company

David Wong – Wells Fargo

John Pitzer – Credit Suisse

Ross Seymore – Deutsche Bank

Christopher Rolland – FBR Capital Markets

Joe Moore – Morgan Stanley

Stacy Rasgon – Sanford Bernstein

Matt Ramsay – Canaccord Genuity

Betsy Van Hees – Wedbush Securities

Romit Shah – Nomura

Jim Covello – Goldman Sachs

Mike McConnell – Pacific Crest

Operator

Good day ladies and gentlemen. Thank you for standing by. And welcome to the Advanced Micro Devices’ Q2 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference to our host Ms. Ruth Cotter, Corporate Vice President of Investor Relations.

Ruth Cotter – CVP of IR

Thank you, and welcome to AMD’s second quarter earnings conference call. By now you should have had the opportunity to review a copy of our earnings release and the CFO commentary and slides. If you’ve not reviewed these documents, they can be found on AMD’s Web site at ir.amd.com.

Speakers on today’s conference call are Rory Read, our President and Chief Executive Officer; and Devinder Kumar, our Senior Vice President and Chief Financial Officer. Lisa Su, our Senior Vice President and Chief Operating Officer will be present for the QA portion of the call.

This is a live call and will be replayed via webcast on amd.com.

I’d like to take the opportunity to highlight a few dates for you. Devinder Kumar will attend the Jefferies Semiconductors, Hardware & Communications Infrastructure Summit on August 27th in Chicago. Rory Read will attend the Deutsche Bank Technology Conference on September 9th in Las Vegas. Our third quarter quiet time will begin at the close of business on Friday, September 12th and lastly we intend to announce third quarter earnings on October 16th.

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Please note that non-GAAP financial measures referenced during this call are reconciled to their most directly comparable GAAP financial measure in the press release and CFO commentary posted on our Web site at quarterlyearnings.amd.com.

Before we begin, let me remind everyone that today’s discussions contains forward looking statements based on the environment as we currently see it. Those statements are based on current beliefs, assumptions and expectations, speak only as of the current date, and as such involve risks and uncertainties that could cause actual results to differ materially from our current expectations.

Please refer to the cautionary statements in today’s earnings press release and CFO commentary for more information. You’ll also find detailed discussions around our risk factors in our filings with the SEC and in particular AMD’s quarterly report on Form 10-Quarter for the quarter ended March 29, 2014.

Now, with that, I’ll hand the call over to Rory. Rory?

Rory Read – President and CEO

Thank you, Ruth. The second quarter capped off a solid first half of the year for AMD. We have made significant progress in transforming our Company. This was highlighted by our second quarter results including; revenue of $1.44 billion, an increase of 24% from the year ago period; and non-GAAP EPS of $0.02, an improvement of $0.11 compared to the same period last year.

We are clearly executing our strategy, building a stronger AMD business model and enhancing our ability to deliver consistent performance. We have diligently managed expense and lowered our cost structure, significantly reducing operating expense, while strategically investing in innovations that will fuel our future growth. At the same time we have relentlessly focused on improving and consistently executing, hitting our key products, milestones and ensuring we deliver on our commitments to our customers.

 

We have improved our balance sheet by re-profiling debt at lower rates, which we expect will reduce our interest expense with no significant debt coming due until 2019. We have driven our AMD leadership processing and graphics technology into new markets. And we are currently on track to generate approximately 40% of our revenue from these high growth markets for the full year 2014. And we also remained on track to deliver 50% of our revenue from these high growth markets by year-end 2015.

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As a result, for the first six months of 2014, AMD’s revenue increased 26% and our non-GAAP EPS improved by $0.26 compared to the first half of 2013. We have now delivered four consecutive quarters of non-GAAP profitability and we remained on track to deliver on our commitment of non-GAAP profitability and revenue growth for the full year 2014.

Now let’s turn our attention to our business achievements in the second quarter. Semi-custom SoC shipments increased from the prior quarter as we continued to see strong demand for AMD-powered game consoles. We had record semi-custom unit shipments in the second quarter, and we expect to continue to ramp shipments into the third quarter, our peak quarter as Microsoft and Sony prepare for the holiday cycle.

In our embedded business, revenue increased by double-digit percentage from the previous quarter as new design wins started to ramp in this key growth market. We launched several new products in the quarter and announced win with HP’s thin clients, as well as Boeing’s next generation advanced cockpit display systems to name just a few.

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