amd-20210327

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 27, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-07882

ADVANCED MICRO DEVICES, INC.

(Exact name of registrant as specified in its charter)


Delaware									94-1692300
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

2485 Augustine Drive

Santa Clara, California 95054

(Address of principal executive offices)

(408) 749-4000

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AMD	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of April 23, 2021: 1,215,020,976

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INDEX


		Page No.
Part I Financial Information
Item 1	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4	Controls and Procedures	25
Part II Other Information

Item 1	Legal Proceedings	26
Item 1A	Risk Factors	26
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6	Exhibits	48
Signature		49

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PART I. FINANCIAL INFORMATION


ITEM 1.			CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions, except per share amounts)
Net revenue		$	3,445	$	1,786
Cost of sales		1,858		968
Gross profit		1,587		818

Research and development		610		442
Marketing, general and administrative		319		199

Licensing gain		(4)		—
Operating income		662		177

Interest expense		(9)		(13)
Other income (expense), net		(11)		4
Income before income taxes and equity income		642		168

Income tax provision		89		6
Equity income in investee		2		—
Net income		$	555	$	162

Earnings per share
Basic		$	0.46	$	0.14
Diluted		$	0.45	$	0.14
Shares used in per share calculation
Basic		1,213		1,170
Diluted		1,231		1,224

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Net income		$	555	$	162
Other comprehensive loss, net of tax:
Net change in unrealized losses on cash flow hedges		(11)		(14)
Total comprehensive income		$	544	$	148

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	March 27, 2021		December 26, 2020
	(In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,763	$	1,595
Short-term investments	1,353		695
Accounts receivable, net	2,178		2,066
Inventories	1,653		1,399
Receivables from related parties	7		10
Prepaid expenses and other current assets	243		378

Total current assets	7,197		6,143
Property and equipment, net	681		641
Operating lease right-of-use assets	241		208
Goodwill	289		289
Investment: equity method	65		63
Deferred tax assets	1,162		1,245
Other non-current assets	412		373
Total assets	$	10,047	$	8,962
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	949	$	468
Payables to related parties	40		78
Accrued liabilities	1,779		1,796
Other current liabilities	96		75
Total current liabilities	2,864		2,417
Long-term debt, net	313		330
Long-term operating lease liabilities	238		201
Other long-term liabilities	155		177
Contingencies (See Note 12)
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,221 and 1,217; shares outstanding: 1,215 and 1,211	12		12
Additional paid-in capital	10,658		10,544
Treasury stock, at cost (shares held: 6 and 6)	(141)		(131)
Accumulated deficit	(4,058)		(4,605)
Accumulated other comprehensive income	6		17
Total stockholders’ equity	6,477		5,837
Total liabilities and stockholders’ equity	$	10,047	$	8,962

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended
	March 27, 2021		March 28, 2020
	(In millions)
Cash flows from operating activities:
Net income	$	555	$	162
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	95		68
Stock-based compensation	85		59
Amortization of debt discount and issuance costs	2		4
Amortization of operating lease right-of-use assets	12		10
Loss on debt conversion	6		—
Loss on sale/disposal of property and equipment	8		18
Deferred income taxes	73		—
Impairment of investment	8		—
Other	(3)		3
Changes in operating assets and liabilities:
Accounts receivable, net	(112)		168
Inventories	(254)		(74)
Receivables from related parties	3		3
Prepaid expenses and other assets	33		(31)
Payables to related parties	(38)		(26)
Accounts payable	466		(369)
Accrued liabilities and other	(41)		(60)
Net cash provided by (used in) operating activities	898		(65)
Cash flows from investing activities:
Purchases of property and equipment	(66)		(55)
Purchases of short-term investments	(858)		(55)
Proceeds from maturity of short-term investments	200		37
Other	2		—
Net cash used in investing activities	(722)		(73)
Cash flows from financing activities:
Proceeds from sales of common stock through employee equity plans	2		3
Common stock repurchases for tax withholding on employee equity plans	(10)		(1)

Net cash provided by (used in) financing activities	(8)		2
Net increase (decrease) in cash, cash equivalents, and restricted cash	168		(136)
Cash, cash equivalents, and restricted cash at beginning of period	1,595		1,470
Cash, cash equivalents, and restricted cash at end of period	$	1,763	$	1,334
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	34	$	99
Issuance of common stock to settle convertible debt	$	24	$	—
Transfer of assets for acquisition of property and equipment	$	34	$	13
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities	$	58	$	25
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	1,763	$	1,330
Restricted cash included in Prepaid expenses and other current assets	—		4
Total cash, cash equivalents, and restricted cash	$	1,763	$	1,334

See accompanying notes.

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Advanced Micro Devices

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Capital stock:
Common stock
Balance, beginning of period		$	12	$	12



Balance, end of period		$	12	$	12
Additional paid-in capital
Balance, beginning of period		$	10,544	$	9,963
Common stock issued under employee equity plans		2		3
Stock-based compensation		85		59
Issuance of common stock to settle convertible debt		24		—
Issuance of common stock warrant		3		1

Balance, end of period		$	10,658	$	10,026
Treasury stock
Balance, beginning of period		$	(131)	$	(53)

Common stock repurchases for tax withholding on employee equity plans		(10)		(1)
Balance, end of period		$	(141)	$	(54)

Accumulated deficit:
Balance, beginning of period		$	(4,605)	$	(7,095)
Cumulative effect of adoption of accounting standard		(8)		—
Net income		555		162
Balance, end of period		$	(4,058)	$	(6,933)

Accumulated other comprehensive income (loss):
Balance, beginning of period		$	17	$	—
Other comprehensive loss		(11)		(14)
Balance, end of period		$	6	$	(14)

Total stockholders' equity		$	6,477	$	3,037

See accompanying notes.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – The Company

Advanced Micro Devices, Inc. is a global semiconductor company. References herein to AMD or the Company mean Advanced Micro Devices, Inc. and its consolidated subsidiaries. AMD’s products include x86 microprocessors (CPUs), accelerated processing units which integrate microprocessors and graphics (APUs), discrete graphics processing units (GPUs), semi-custom System-on-Chip (SOC) products and chipsets for the PC, gaming, datacenter and embedded markets. In addition, AMD provides development services and sells or licenses portions of its intellectual property portfolio.

NOTE 2 – Basis of Presentation and Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of AMD have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the three months ended March 27, 2021 shown in this report are not necessarily indicative of results to be expected for the full year ending December 25, 2021 or any other future period. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and stockholders’ equity. All such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December. The three months ended March 27, 2021 and March 28, 2020 each consisted of 13 weeks.

Significant Accounting Policies. There have been no material changes to the Company’s significant accounting policies in Note 2 - Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies various aspects of accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard in the first quarter of 2021 using the modified retrospective adoption method through a cumulative-effect adjustment to accumulated deficit as of the beginning of the period. The adoption of this new standard resulted in the recognition of an $8 million deferred tax liability associated with book-tax differences in foreign equity method investments.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible instruments and the application of the derivatives scope exception for contracts in an entity’s own equity by eliminating some of the models that require separating embedded conversion features from convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and enhances disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The standard is effective for fiscal years beginning after December 15, 2021, and can be adopted through either a modified retrospective method with a cumulative effect adjustment to opening accumulated deficit or a full retrospective method. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

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Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its consolidated financial statements.

NOTE 3 – Supplemental Financial Statement Information

Short-term Investments


	March 27, 2021		December 26, 2020
	(In millions)
Commercial paper	$	1,003	$	295
Time deposits	350		400
Total short-term investments	$	1,353	$	695

Accounts Receivable, net

As of March 27, 2021 and December 26, 2020, Accounts receivable, net included unbilled accounts receivable of $150 million and $123 million, respectively. Unbilled receivables primarily represent work completed on development services recognized as revenue but not yet invoiced to customers and semi-custom products under non-cancellable purchase orders that have no alternative use to the Company at contract inception, for which revenue has been recognized but not yet invoiced to customers. All unbilled accounts receivable are expected to be billed and collected within 12 months.

Inventories


	March 27, 2021		December 26, 2020
	(In millions)
Raw materials	$	89	$	93
Work in process	1,376		1,139
Finished goods	188		167
Total inventories	$	1,653	$	1,399

Property and Equipment, net


	March 27, 2021		December 26, 2020
	(In millions)
Leasehold improvements	$	211	$	208
Equipment	1,265		1,209
Construction in progress	180		136
Property and equipment, gross	1,656		1,553
Accumulated depreciation	(975)		(912)
Total property and equipment, net	$	681	$	641

Other Non-Current Assets


	March 27, 2021		December 26, 2020
	(In millions)
Software technology and licenses, net	$	203	$	229
Other	209		144
Total other non-current assets	$	412	$	373

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Accrued Liabilities


	March 27, 2021		December 26, 2020
	(In millions)
Accrued compensation and benefits	$	334	$	513
Accrued marketing programs and advertising expenses	836		839
Other accrued and current liabilities	609		444
Total accrued liabilities	$	1,779	$	1,796

Revenue

Revenue allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) as of March 27, 2021 was $292 million, which may include amounts received from customers but not yet earned and amounts that will be invoiced and recognized as revenue in future periods associated with any combination of development services, IP licensing and product revenue. The Company expects to recognize $159 million of revenue allocated to remaining performance obligations in the next 12 months. The revenue allocated to remaining performance obligations does not include amounts which have an original expected duration of one year or less.

Revenue recognized over time associated with custom products and development services accounted for approximately 22% and 5% of the Company’s revenue for the three months ended March 27, 2021 and March 28, 2020, respectively.

NOTE 4 – Related Parties — Equity Joint Ventures

ATMP Joint Ventures

The Company holds a 15% equity interest in two joint ventures (collectively, the ATMP JV) with affiliates of Tongfu Microelectronics Co., Ltd, a Chinese joint stock company. The Company has no obligation to fund the ATMP JV. The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV.

The ATMP JV provides assembly, testing, marking and packaging services to the Company. The Company assists the ATMP JV in its management of certain raw material inventory. The purchases from and resales to the ATMP JV of inventory under the Company’s inventory management program are reported within purchases and resales with the ATMP JV and do not impact the Company’s condensed consolidated statement of operations.

The Company’s purchases from the ATMP JV during the three months ended March 27, 2021 and March 28, 2020 amounted to $246 million and $151 million, respectively. As of March 27, 2021 and December 26, 2020, the amounts payable to the ATMP JV were $40 million and $78 million, respectively, and are included in Payables to related parties on the Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three months ended March 27, 2021 and March 28, 2020 amounted to $10 million and $7 million, respectively. As of March 27, 2021 and December 26, 2020, the Company’s receivables from the ATMP JV were $7 million and $10 million, respectively, and were included in Receivables from related parties on the Company’s condensed consolidated balance sheets.

During the three months ended March 27, 2021, the Company recorded a gain of $2 million in Equity income in investee on its condensed consolidated statements of operations. During the three months ended March 28, 2020, the Company did not record any gain or loss in Equity income in investee. As of March 27, 2021 and December 26, 2020, the carrying value of the Company’s investment in the ATMP JV was $65 million and $63 million, respectively.

THATIC Joint Ventures

The Company holds equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. As of both March 27, 2021 and December 26, 2020, the carrying value of the investment was zero.

In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV, payable over several years upon achievement of certain milestones. The Company also receives a royalty based on the sales of the THATIC JV’s products developed on the basis of such Licensed IP. The Company classifies Licensed IP and royalty income associated with the February 2016 agreement as Licensing gain within operating income. During

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the three months ended March 27, 2021, the Company recognized $4 million of licensing gain from royalty income under the agreement. As of both March 27, 2021 and December 26, 2020, the Company had no receivables from the THATIC JV.

In June 2019, the Bureau of Industry and Security of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. The Company is complying with U.S. law pertaining to the Entity List designation.

NOTE 5 – Debt and Revolving Credit Facility

Debt

The Company’s total debt as of March 27, 2021 and December 26, 2020 consisted of the following:


	March 27, 2021		December 26, 2020
	(In millions)
7.50% Senior Notes Due 2022 (7.50% Notes)	$	312	$	312
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	2		26

Total debt (principal amount)	314		338
Unamortized debt discount for 2.125% Notes	—		(7)

Unamortized debt issuance costs for 7.50% Notes	(1)		(1)


Total long-term debt (net)	$	313	$	330

2.125% Convertible Senior Notes Due 2026

In September 2016, the Company issued $805 million in aggregate principal amount of 2.125% Convertible Senior Notes due 2026. The 2.125% Notes are general unsecured senior obligations of the Company.

During the three months ended March 27, 2021, holders of the 2.125% Notes converted $24 million principal amount of notes, in exchange for which the Company issued approximately 3 million shares of the Company’s common stock at the conversion price of $8.00 per share. The Company recorded a loss of $6 million from these conversions in Other income (expense), net on its condensed consolidated statements of operations. As of March 27, 2021, the outstanding aggregate principal amount of the 2.125% Notes was $2 million.

7.50% Senior Notes Due 2022

On August 15, 2012, the Company issued $500 million of its 7.50% Senior Notes due 2022. As of March 27, 2021, the outstanding aggregate principal amount of the 7.50% Notes was $312 million.

Revolving Credit Facility

The Company is party to a $500 million unsecured revolving credit facility (the Revolving Credit Facility), including a $50 million swingline sub-facility and a $75 million sublimit for letters of credit pursuant to a credit agreement with a syndicate of banks (expiring in June 2024). Borrowings under the Revolving Credit Facility bear interest at either the LIBOR rate or the base rate at the Company’s option (in each case, as customarily defined) plus an applicable margin. As of March 27, 2021, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants. As of March 27, 2021, the Company had $13 million of letters of credit outstanding under the Revolving Credit Facility.

NOTE 6 – Financial Instruments

Fair Value Measurements

Financial Instruments Recorded at Fair Value on a Recurring Basis

As of March 27, 2021 and December 26, 2020, the Company had $1.0 billion and $295 million of commercial paper, respectively, included in Short-term investments on the Company’s condensed consolidated balance sheets. The commercial paper is classified within Level 2 as its fair value estimates were based on quoted prices for comparable instruments.

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As of March 27, 2021 and December 26, 2020, the Company also had approximately $59 million and $46 million, respectively, of investments in mutual funds held in a Rabbi trust established for the Company’s deferred compensation plan, which were included in Other non-current assets on the Company’s condensed consolidated balance sheets. These money market funds and mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized cost approximates the fair value for both periods presented. The Company is restricted from accessing these investments.

Financial Instruments Recorded at Fair Value on a Non-recurring Basis

During the three months ended March 27, 2021, the Company recorded in Other income (expense), net an impairment charge of $8 million associated with an equity investment.

Financial Instruments Not Recorded at Fair Value

The Company carries its financial instruments at fair value except for its long-term debt. The carrying amounts and estimated fair values of the Company’s long-term debt are as follows:


	March 27, 2021				December 26, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)

Long-term debt, net	$	313	$	361	$	330	$	642

The estimated fair values of the Company’s long-term debt are based on Level 2 inputs as the fair value is based on quoted prices for the Company’s debt and comparable instruments in inactive markets. The estimated fair value of the 2.125% Notes takes into account the current value of the Company’s stock price compared to the initial conversion price of approximately $8.00 per share of common stock.

The fair value of the Company’s time deposits, accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing terms.

Hedging Transactions and Derivative Financial Instruments

Cash Flow Hedges Designated as Accounting Hedges and Foreign Currency Forward Contracts Not Designated as Accounting Hedges

The Company enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in currencies other than the U.S. Dollar. These contracts generally mature within 18 months and are designated as accounting hedges. As of March 27, 2021 and December 26, 2020, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was $811 million and $501 million, respectively. The fair value of these contracts was not material as of March 27, 2021 and December 26, 2020.

The Company also enters into foreign currency forward contracts to reduce the short-term effects of foreign currency fluctuations on certain receivables or payables denominated in currencies other than the U.S. Dollar. These forward contracts generally mature within 3 months and are not designated as accounting hedges. As of March 27, 2021 and December 26, 2020, the notional values of these outstanding contracts were $443 million and $254 million, respectively. The fair value of these contracts was not material as of March 27, 2021 and December 26, 2020.

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NOTE 7 – Accumulated Other Comprehensive Income (Loss)

The table below summarizes the changes in accumulated other comprehensive Income (loss):


	Three Months Ended
		March 27, 2021		March 28, 2020
Gains (losses) on cash flow hedges:		(In millions)
Beginning balance		$	17	$	—
Net unrealized losses arising during the period		—		(17)
Net losses (gains) reclassified into income during the period		(10)		3
Tax effect		(1)		—
Total other comprehensive income (loss)		(11)		(14)
Ending balance		$	6	$	(14)

NOTE 8 – Earnings Per Share

The following table sets forth the components of basic and diluted earnings per share:


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions, except per share amounts)
Numerator
Net income for basic earnings per share		$	555	$	162
Effect of potentially dilutive shares:
Interest expense related to the 2.125% Notes		—		4
Net income for diluted earnings per share

SEC Form 10-Q filed by Advanced Micro Devices, Inc.