Am not going to try and interpret, GAAP vs NON GAAP I find too difficult.
Sometimes it is impossible, but AMD’s GAAP and non-GAAP seem to be understandable. Note that what I am saying is based on AMD’s documented results. I don’t expect nasty off-book shenanigans, but always be wary.
Operating income was $526 million, or 8% of revenue, compared to $831 million or 22% a year ago primarily due to amortization of intangible assets associated with the Xilinx acquisition. Record non-GAAP operating income was $2.0 billion, or 30% of revenue, up from $924 million or 24% a year ago primarily driven by higher revenue and gross profit.
That should be most of the differences. How much needs to be amortized? We will get to that.
Net income was $447 million compared to $710 million a year ago primarily due to lower operating income. Record non-GAAP net income was $1.7 billion, up from $778 million a year ago primarily driven by higher operating income.
A paragraph that only an accountant could love, or sign off on.
Diluted earnings per share was $0.27 compared to $0.58 a year ago primarily due to lower net income and a higher share count as a result of the Xilinx acquisition. Non-GAAP diluted earnings per share was $1.05 compared to $0.63 a year ago primarily driven by higher net income.
Not quite as skanky as the previous paragraph, but requires more attention. The Xilinx acquisition diluted AMD’s share basis by a lot. If Xilinx continues to provide enough sales and earnings, no big deal. But it will still mean that every Ryzen or EPYC processor is going to have to carry more weight to result in earnings increases. If Xilinx continues to provide its current level of sales and earnings great. For improvements though, you need the expected synergy, which may take a year–or several–to materialize.
Cash, cash equivalents and short-term investments were $6.0 billion at the end of the quarter and debt was $2.8 billion. AMD repurchased $920 million of common stock during the quarter. Cash, cash equivalents and short-term investments were $6.0 billion at the end of the quarter and debt was $2.8 billion. AMD repurchased $920 million of common stock during the quarter…
Goodwill and acquisition-related intangible assets associated with the acquisitions of Xilinx and Pensando were $50.4 billion.
That last is good news and bad news. $50.4 billion is a lot of money. Goodwill is effectively fairy dust, doesn’t drain cash or other assets, but is very hard to spend. Acquisition-related intangible assets are, in theory, saleable goods, but most of them are things like licenses that the company has bought but are tough to resell.
Unless Xilinx was investing in oil exploration leases, Most of that $50 billion is what was paid for the two companies, minus real estate, inventory, etc. If the companies are worth at least what was paid for them, no big deal–other than possible management issues.
So a company doing very well, as long as it won’t go bankrupt. Again with the fairy dust. If the company’s cash position is good, and AMD now looks incredibly good, the goodwill just sits on the P&L doing nothing. To the extent it can be amortized it allows taxes to be reduced. (I shouldn’t have to say this, but there are at least 53 different laws in the US, with more overseas on the treatment of goodwill. If you don’t want to go to jail along with your accountant, get a second opinion, read the details, etc.)