Advanced Micro Devices Conference Call Highlights

Advanced Micro Devices, Inc. AMD reported its third quarter earnings. Shares of the company are up 4 percent.

Below are some key highlights from its conference call.

• While our Enterprise, Embedded and Semi-Custom segment had a strong quarter.
• We did face some challenges in our Computing and Graphics business due to ongoing weakness in the consumer PC market.
• We know what we need to do to improve performance going forward and are taking the appropriate actions

Segments:

• Our Enterprise, Embedded and Semi-Custom segment delivered sequential and year-over-year revenue and operating profit improvement.
• We had strong embedded processor revenue growth and secured multiple new design wins across our priority markets.
• For instance Arista, a leader in software-driven cloud networking, began ramping production of new switches powered by our Embedded G-Series SoC.
• Our customers also began ramping a number of new retail and educational digital signage wins in the third quarter.
• Our work to lead the industry's transition to 64-bit ARM servers also gained momentum in the quarter.
• Design work for these opportunities has started and we anticipate first silicon revenue in 2016.
• We met our goal to double our commercial client design wins from last year and are pleased with the initial progress we are making to build a richer mix in our PC business.
• New commercial client offerings from Dell, HP and Lenovo have started ramping resulting in approximately a 50% increase in our commercial APU shipments from the second quarter.
• And in the professional graphics market, we believe this remains an area where we see the opportunity for ongoing growth.
• In the third quarter, channel sales increased sequentially and we secured several new design wins with Dell and HP that will reach market early next year.
• Although we increased overall desktop processor unit shipments from the previous quarter, our performance in the component and graphics channel was weak.
• We saw sell-out momentum slow particularly in China and believe there was some downstream inventory build in the quarter causing our distributors to be more cautious managing their inventories.
• Revenue was $1.43 billion, flat sequentially and down 2% year-over-year
• Third quarter revenue included $27 million related to the licensing of technology.
• Gross margin was 35%, flat from the prior quarter and included $27 million or a 2% benefit from revenue.
• Interest expense, taxes and other expenses were $46 million in the quarter.
• Adjusted EBITDA was $133 million, down $4 million from the prior quarter, and for the trailing four quarters, adjusted EBITDA was $574 million.
• Computing and Graphics revenue was $781 million, down 6% sequentially primarily due to lower chipset and GPU sales.
• Computing and Graphics operating loss was $17 million compared to a $6 million loss in the prior quarter.
• Operating income was $108 million, up from $97 million in the prior quarter primarily driven by higher sales of our semi-custom SoCs.
• Our cash, cash equivalents and marketable securities balance totaled $938 million at the end of the quarter, essentially flat from the prior quarter.
• Inventory was $897 million, down $63 million or 7% from the prior quarter.
• We remain focused on maintaining appropriate levels of inventory and plan to manage inventory levels down again in the fourth quarter.
• Debt as of the end of the quarter was $2.2 billion.
• Accounts payable at the end of the third quarter was $498 million, down slightly from $511 million in the second quarter.