AMD Reports Second Quarter 2018 Financial Results

Reve짯nue increased 53 per짯cent year-over-year; gross mar짯gin expan짯ded to 37 percent 

SANTA CLARA, Calif. 

AMD (NASDAQ:AMD) today announ짯ced reve짯nue for the second quar짯ter of 2018 of $1.76 bil짯li짯on, ope짯ra짯ting inco짯me of $153 mil짯li짯on, net inco짯me of $116 mil짯li짯on and diluted ear짯nings per share of $0.11. On a non-GAAP1 basis, ope짯ra짯ting inco짯me was $186 mil짯li짯on, net inco짯me was $156 mil짯li짯on and diluted ear짯nings per share was $0.14.

We had an out짯stan짯ding second quar짯ter with strong reve짯nue growth, mar짯gin expan짯si짯on and our hig짯hest quar짯ter짯ly net inco짯me in seven years, said Dr. Lisa Su, AMD pre짯si짯dent and CEO. 쏮ost important짯ly, we belie짯ve our long-term tech짯no짯lo짯gy bets posi짯ti짯on us very well for the future. We are con짯fi짯dent that with the con짯tin짯ued exe짯cu짯ti짯on of our pro짯duct road짯maps, we are on an excel짯lent tra짯jec짯to짯ry to dri짯ve mar짯ket share gains and pro짯fi짯ta짯ble growth.

Q2 2018 Results

  • Reve짯nue was $1.76 bil짯li짯on, up 53 per짯cent year-over-year and 7 per짯cent quar짯ter-over-quar짯ter. The year-over-year increase was dri짯ven by hig짯her reve짯nue in both the Com짯pu짯ting and Gra짯phics and Enter짯pri짯se, Embedded and Semi-Cus짯tom busi짯ness seg짯ments. The sequen짯ti짯al increase was dri짯ven by hig짯her reve짯nue in the Enter짯pri짯se, Embedded and Semi-Cus짯tom segment.
  • Gross mar짯gin grew to 37 per짯cent, up 3 per짯cen짯ta짯ge points year-over-year, dri짯ven by the ramp of new pro짯ducts. On a sequen짯ti짯al basis, gross mar짯gin was up 1 per짯cen짯ta짯ge point pri짯ma짯ri짯ly dri짯ven by a richer mix of reve짯nue in the Enter짯pri짯se, Embedded and Semi-Cus짯tom segment.
  • On a GAAP basis, ope짯ra짯ting inco짯me was $153 mil짯li짯on com짯pared to an ope짯ra짯ting loss of $1 mil짯li짯on a year ago and ope짯ra짯ting inco짯me of $120 mil짯li짯on in the pri짯or quarter.
  • Net inco짯me was $116 mil짯li짯on com짯pared to a net loss of $42 mil짯li짯on a year ago and net inco짯me of $81 mil짯li짯on in the pri짯or quar짯ter. Diluted ear짯nings per share was $0.11, com짯pared to a loss per share of $0.04 a year ago and diluted ear짯nings per share of $0.08 in the pri짯or quarter.
  • On a non-GAAPbasis, ope짯ra짯ting inco짯me was $186 mil짯li짯on com짯pared to ope짯ra짯ting inco짯me of $23 mil짯li짯on a year ago and $152 mil짯li짯on in the pri짯or quarter.
  • Non-GAAP1 net inco짯me was $156 mil짯li짯on com짯pared to a net loss of $7 mil짯li짯on a year ago and net inco짯me of $121 mil짯li짯on in the pri짯or quar짯ter. Non-GAAP diluted ear짯nings per share was $0.14, com짯pared to a loss per share of $0.01 a year ago and diluted ear짯nings per share of $0.11 in the pri짯or quarter.
  • Cash, cash equi짯va짯lents and mar짯ke짯ta짯ble secu짯ri짯ties were $983 mil짯li짯on at the end of the quarter.

Quarterly Financial Segment Summary

  • Com짯pu짯ting and Gra짯phics seg짯ment reve짯nue was $1.09 bil짯li짯on, up 64 per짯cent year-over-year and down 3 per짯cent quar짯ter-over-quar짯ter. Year-over-year reve짯nue growth was dri짯ven by strong sales of Rade짯on꽓 pro짯ducts and con짯tin짯ued growth of Ryzen꽓products. The quar짯ter-over-quar짯ter decli짯ne was pri짯ma짯ri짯ly rela짯ted to lower reve짯nue from GPU pro짯ducts in the block짯chain market. 
    • Cli짯ent pro짯ces짯sor avera짯ge sel짯ling pri짯ce (ASP) was lower year-over-year and quar짯ter-over-quar짯ter pri짯ma짯ri짯ly due to lower desk짯top pro짯ces짯sor ASP, par짯ti짯al짯ly off짯set by hig짯her mobi짯le pro짯ces짯sor ASP.
    • GPU ASP increased year-over-year dri짯ven by Rade짯on pro짯ducts for the chan짯nel and dat짯a짯cen짯ter. GPU ASP increased quar짯ter-over-quar짯ter dri짯ven by GPU sales for datacenter.
    • Ope짯ra짯ting inco짯me was $117 mil짯li짯on, com짯pared to ope짯ra짯ting inco짯me of $7 mil짯li짯on a year ago and ope짯ra짯ting inco짯me of $138 mil짯li짯on in the pri짯or quar짯ter. The year-over-year ope짯ra짯ting inco짯me impro짯ve짯ment was pri짯ma짯ri짯ly dri짯ven by hig짯her reve짯nue. The quar짯ter-over-quar짯ter ope짯ra짯ting inco짯me decli짯ne was pri짯ma짯ri짯ly due to lower reve짯nue and hig짯her ope짯ra짯ting expenses.
  • Enter짯pri짯se, Embedded and Semi-Cus짯tom seg짯ment reve짯nue was $670 mil짯li짯on, up 37 per짯cent year-over-year and 26 per짯cent quar짯ter-over-quar짯ter pri짯ma짯ri짯ly due to hig짯her semi-cus짯tom and ser짯ver revenue. 
    • Ope짯ra짯ting inco짯me was $69 mil짯li짯on, com짯pared to ope짯ra짯ting inco짯me of $16 mil짯li짯on a year ago and ope짯ra짯ting inco짯me of $14 mil짯li짯on in the pri짯or quar짯ter. The year-over-year and quar짯ter-over-quar짯ter increa짯ses were pri짯ma짯ri짯ly due to hig짯her revenue.
  • All Other ope짯ra짯ting loss was $33 mil짯li짯on com짯pared with ope짯ra짯ting los짯ses of $24 mil짯li짯on a year ago and $32 mil짯li짯on in the pri짯or quarter.

Q2 2018 Highlights

  • At Com짯putex 2018, AMD show짯ca짯sed the next-gene짯ra짯ti짯on of lea짯der짯ship CPU and GPU pro짯ducts inclu짯ding the first public demons짯tra짯ti짯ons of: 
    • The 12nm 쏾en+-based 2nd Gene짯ra짯ti짯on Ryzen Thre짯ad짯rip짯perTM CPU, fea짯turing an indus짯try-lea짯ding 32-cores and 64-threads of HEDT com짯pu짯ting power, sche짯du짯led to launch in Q3 2018.
    • The 7nm Rade짯on 쏺ega archi짯tec짯tu짯re-based GPU for ser짯vers and work짯sta짯tions that is plan짯ned to launch later in 2018.
  • One year after its mar짯ket debut, AMD EPYC꽓 dat짯a짯cen짯ter pro짯ces짯sor sales con짯ti짯nue to acce짯le짯ra짯te, with new plat짯form deploy짯ments and com짯mit짯ments from indus짯try leaders: 
    • HPE laun짯ched two new AMD EPYC plat짯forms, inclu짯ding the Pro짯Li짯ant DL325 Gen10 ser짯ver deli짯ve짯ring two-socket per짯for짯mance in a one-socket server.
    • Cis짯co laun짯ched the first ever AMD-based UCS ser짯ver, with EPYC pro짯ces짯sors powe짯ring Cisco셲 hig짯hest den짯si짯ty offe짯ring with 128% more cores, 50% more ser짯vers and 20% more sto짯rage per rack com짯pared to their exis짯ting rack offerings.
    • Ten짯cent Cloud now offers an EPYC pro짯ces짯sor-based SA1 Cloud ins짯tance, deli짯ve짯ring excep짯tio짯nal per짯for짯mance at a lower total cost of owner짯ship com짯pared to other solutions.
    • The Natio짯nal Insti짯tu짯te for Nuclear Phy짯sics in Ita짯ly sel짯ec짯ted the AMD EPYC 7351 pro짯ces짯sor to power its high-per짯for짯mance com짯pu짯ting cluster.
  • AMD announ짯ced unpre짯ce짯den짯ted adop짯ti짯on of its AMD Ryzen PRO pro짯ces짯sors with Rade짯on Vega gra짯phics, with new com짯mer짯cial note짯books and desk짯tops now available from Dell, HP and Lenovo.
  • AMD con짯tin짯ued to expand its offe짯rings for gamers: 
    • AMD announ짯ced that Rade짯on Free짯Sync꽓 tech짯no짯lo짯gy is now sup짯port짯ed across Samsung셲 QLED TV fami짯ly, brin짯ging the ulti짯ma짯te 4K gam짯ing expe짯ri짯ence to lar짯ge-screen TVs.
    • Power짯Co짯lor unvei짯led the Rade짯on RX Vega56 Nano Edi짯ti짯on gra짯phics card, enab짯ling enthu짯si짯ast 4K gam짯ing in small form fac짯tor PCs.
    • At E3, AMD announ짯ced an expan짯ded part짯ner짯ship with Ubi짯s짯oft to levera짯ge DirectX12 tech짯no짯lo짯gy to opti짯mi짯ze their next-gene짯ra짯ti짯on games for Rade짯on GPU users, inclu짯ding the high짯ly anti짯ci짯pa짯ted 쏷om Clancy셲 Divi짯si짯on 2 title.

Current Outlook

AMD셲 out짯look state짯ments are based on cur짯rent expec짯ta짯ti짯ons. The fol짯lo짯wing state짯ments are for짯ward-loo짯king, and actu짯al results could dif짯fer mate짯ri짯al짯ly depen짯ding on mar짯ket con짯di짯ti짯ons and the fac짯tors set forth under 쏞au짯tio짯na짯ry State짯ment below.

For the third quar짯ter of 2018, AMD expects reve짯nue to be appro짯xi짯m짯ate짯ly $1.7 bil짯li짯on, plus or minus $50 mil짯li짯on, an increase of appro짯xi짯m짯ate짯ly 7 per짯cent year-over-year, and non-GAAP gross mar짯gin to increase to appro짯xi짯m짯ate짯ly 38 per짯cent, dri짯ven by the sales growth of Ryzen and EPYC pro짯ducts, par짯ti짯al짯ly off짯set by lower sales of GPU pro짯ducts in the block짯chain market.

AMD Teleconference

AMD will hold a con짯fe짯rence call for the finan짯cial com짯mu짯ni짯ty at 2:30 p.m. PT (5:30 p.m. ET) today to dis짯cuss its second quar짯ter 2018 finan짯cial results and for짯ward loo짯king finan짯cial gui짯dance. AMD will pro짯vi짯de a real-time audio broad짯cast of the tele짯con짯fe짯rence on the Inves짯tor Rela짯ti짯onspage of its web짯site at www.amd.com. The web짯cast will be available for 12 months after the con짯fe짯rence call. A slide pre짯sen짯ta짯ti짯on of quar짯ter짯ly finan짯cial results can be found at ir.amd.com.

The three months ended June 30, 2018 GAAP diluted EPS is cal짯cu짯la짯ted based on 1,147 mil짯li짯on shares, which include 100.6 mil짯li짯on shares rela짯ted to the Company셲 2026 Con짯ver짯ti짯ble Notes and an $11 mil짯li짯on inte짯rest expen짯se add-back to net inco짯me under the 쐇f con짯ver짯ted method.

The three months ended June 30 and March 31, 2018 non-GAAP diluted EPS are cal짯cu짯la짯ted based on 1,147 mil짯li짯on and 1,140 mil짯li짯on shares, respec짯tively, which include 100.6 mil짯li짯on shares rela짯ted to the Company셲 2026 Con짯ver짯ti짯ble Notes and a $5 mil짯li짯on cash inte짯rest expen짯se add-back to net inco짯me under the 쐇f con짯ver짯ted method for both periods.

About AMD

For more than 45 years, AMD has dri짯ven inno짯va짯ti짯on in high-per짯for짯mance com짯pu짯ting, gra짯phics and visua짯liza짯ti짯on tech짯no짯lo짯gies the buil짯ding blocks for gam짯ing, immersi짯ve plat짯forms and the dat짯a짯cen짯ter. Hundreds of mil짯li짯ons of con짯su짯mers, lea짯ding For짯tu짯ne 500 busi짯nesses and cut짯ting-edge sci짯en짯ti짯fic rese짯arch faci짯li짯ties around the world rely on AMD tech짯no짯lo짯gy dai짯ly to impro짯ve how they live, work and play. AMD employees around the world are focu짯sed on buil짯ding gre짯at pro짯ducts that push the boun짯da짯ries of what is pos짯si짯ble. For more infor짯ma짯ti짯on about how AMD is enab짯ling today and inspi짯ring tomor짯row, visit the AMD (NASDAQ: AMDweb짯siteblogFace짯book and Twit짯ter pages.

Cautionary Statement

This docu짯ment con짯ta짯ins for짯ward-loo짯king state짯ments con짯cer짯ning Advan짯ced Micro Devices, Inc. (AMD) such as AMD셲 expec짯ted posi짯tio짯ning in the future; AMD셲 abili짯ty to exe짯cu짯te its pro짯duct road짯maps and the resul짯ting impact on mar짯ket share and pro짯fi짯ta짯ble growth; AMD셲 finan짯cial out짯look for the third quar짯ter of 2018, inclu짯ding reve짯nue, non-GAAP gross mar짯gin and expec짯ted dri짯vers; the fea짯tures, func짯tion짯a짯li짯ty, avai짯la짯bi짯li짯ty, timing and expec짯ted bene짯fits of AMD셲 pro짯ducts and tech짯no짯lo짯gies inclu짯ding the expec짯ted launch of 2nd Gene짯ra짯ti짯on Ryzen Thre짯ad짯rip짯perTM CPU and 7nm Rade짯on 쏺ega archi짯tec짯tu짯re-based GPU pro짯ducts; and the con짯tin짯ued acce짯le짯ra짯ti짯on of AMD EPYC dat짯a짯cen짯ter pro짯ces짯sor sales, which are made pur짯su짯ant to the Safe Har짯bor pro짯vi짯si짯ons of the Pri짯va짯te Secu짯ri짯ties Liti짯ga짯ti짯on Reform Act of 1995. For짯ward-loo짯king state짯ments are com짯mon짯ly iden짯ti짯fied by words such as 쐗ould, 쐌ay, 쐃xpects, 쐀elie짯ves, 쐏lans, 쐇ntends, 쐏ro짯jects and other terms with simi짯lar mea짯ning. Inves짯tors are cau짯tio짯ned that the for짯ward-loo짯king state짯ments in this docu짯ment are based on cur짯rent beliefs, assump짯ti짯ons and expec짯ta짯ti짯ons, speak only as of the date of this docu짯ment and invol짯ve risks and uncer짯tain짯ties that could cau짯se actu짯al results to dif짯fer mate짯ri짯al짯ly from cur짯rent expec짯ta짯ti짯ons. Such state짯ments are sub짯ject to cer짯tain known and unknown risks and uncer짯tain짯ties, many of which are dif짯fi짯cult to pre짯dict and gene짯ral짯ly bey짯ond AMD셲 con짯trol, that could cau짯se actu짯al results and other future events to dif짯fer mate짯ri짯al짯ly from tho짯se expres짯sed in, or impli짯ed or pro짯jec짯ted by, the for짯ward-loo짯king infor짯ma짯ti짯on and state짯ments.  Mate짯ri짯al fac짯tors that could cau짯se actu짯al results to dif짯fer mate짯ri짯al짯ly from cur짯rent expec짯ta짯ti짯ons include, wit짯hout limi짯ta짯ti짯on, the fol짯lo짯wing: Intel Corporation셲 domi짯nan짯ce of the micro짯pro짯ces짯sor mar짯ket and its aggres짯si짯ve busi짯ness prac짯ti짯ces; the abili짯ty of GLOBALFOUNDRIES Inc. to satis짯fy AMD셲 manu짯fac짯tu짯ring requi짯re짯ments; the abili짯ty of third par짯ty manu짯fac짯tu짯r짯ers to manu짯fac짯tu짯re AMD pro짯ducts on a time짯ly basis in suf짯fi짯ci짯ent quan짯ti짯ties and using com짯pe짯ti짯ti짯ve tech짯no짯lo짯gies; the abili짯ty of third par짯ty manu짯fac짯tu짯r짯ers to achie짯ve expec짯ted manu짯fac짯tu짯ring yields; AMD셲 abili짯ty to intro짯du짯ce pro짯ducts on a time짯ly basis with fea짯tures and per짯for짯mance levels that pro짯vi짯de value to its cus짯to짯mers; AMD셲 abili짯ty to gene짯ra짯te suf짯fi짯ci짯ent reve짯nue and ope짯ra짯ting cash flow or obtain exter짯nal finan짯cing; the loss of a signi짯fi짯cant cus짯to짯mer; AMD셲 abili짯ty to gene짯ra짯te reve짯nue from its semi-cus짯tom SoC pro짯ducts; actu짯al or per짯cei짯ved secu짯ri짯ty vul짯nerabi짯li짯ties of AMD셲 pro짯ducts; poten짯ti짯al data brea짯ches and cyber-attacks; glo짯bal eco짯no짯mic uncer짯tain짯ty; AMD셲 abili짯ty to gene짯ra짯te suf짯fi짯ci짯ent cash to ser짯vice its debt obli짯ga짯ti짯ons or meet its working capi짯tal requi짯re짯ments; AMD셲 lar짯ge amount of indeb짯ted짯ness; rest짯ric짯tions impo짯sed by agree짯ments gover짯ning AMD셲 debt and its secu짯red revol짯ving line of cre짯dit; the com짯pe짯ti짯ti짯ve natu짯re of the mar짯kets in which AMD셲 pro짯ducts are sold;  the dilu짯ti짯ve effect on share짯hol짯ders if West Coast Hitech L.P. exer짯ci짯s짯es its war짯rants to purcha짯se AMD셲 com짯mon stock, and the con짯ver짯si짯on of AMD셲 2.125% Con짯ver짯ti짯ble Seni짯or Notes due 2026; uncer짯tain짯ties invol짯ving the orde짯ring and ship짯ment of AMD셲 pro짯ducts; fluc짯tua짯tions in demand or a mar짯ket decli짯ne for AMD셲 pro짯ducts; AMD셲 reli짯ance on third-par짯ty intellec짯tu짯al pro짯per짯ty to design and intro짯du짯ce new pro짯ducts in a time짯ly man짯ner; AMD셲 reli짯ance on third-par짯ty com짯pa짯nies for the design, manu짯fac짯tu짯re and sup짯p짯ly of mother짯boards, soft짯ware and other com짯pu짯ter plat짯form com짯pon짯ents; AMD셲 reli짯ance on Micro짯soft Corporation셲 sup짯port and other soft짯ware ven짯dors; AMD셲 reli짯ance on third-par짯ty dis짯tri짯bu짯tors and AIB part짯ners; AMD셲 abili짯ty to con짯ti짯nue to attract and retain qua짯li짯fied per짯son짯nel; AMD셲 abili짯ty to repurcha짯se its debt in the event of a chan짯ge of con짯trol; the high짯ly cycli짯cal natu짯re of the semi짯con짯duc짯tor indus짯try; future acqui짯si짯ti짯ons, dives짯ti짯tures and/or joint ven짯tures that may dis짯rupt AMD셲 busi짯ness; modi짯fi짯ca짯ti짯on or inter짯rup짯ti짯on of inter짯nal busi짯ness pro짯ces짯ses and infor짯ma짯ti짯on sys짯tems; quar짯ter짯ly and sea짯so짯nal sales pat짯terns that may affect AMD셲 busi짯ness; avai짯la짯bi짯li짯ty of essen짯ti짯al equip짯ment, mate짯ri짯als or manu짯fac짯tu짯ring pro짯ces짯ses to manu짯fac짯tu짯re AMD셲 pro짯ducts; com짯pa짯ti짯bi짯li짯ty of AMD셲 pro짯ducts with indus짯try-stan짯dard soft짯ware and hard짯ware; cos짯ts rela짯ted to defec짯ti짯ve pro짯ducts; the effi짯ci짯en짯cy of AMD셲 sup짯p짯ly chain; AMD셲 abili짯ty to rely on third par짯ties cer짯tain sup짯p짯ly-chain logi짯stics func짯tions, pro짯duct dis짯tri짯bu짯ti짯on, trans짯por짯ta짯ti짯on manage짯ment and infor짯ma짯ti짯on tech짯no짯lo짯gy sup짯port ser짯vices; future impairm짯ents of good짯will; stock pri짯ce vola짯ti짯li짯ty; poli짯ti짯cal, legal and eco짯no짯mic risks and natu짯ral dis짯as짯ters; world짯wi짯de poli짯ti짯cal con짯di짯ti짯ons; unfa짯vorable cur짯ren짯cy exch짯an짯ge rate fluc짯tua짯tions; AMD셲 abili짯ty to effec짯tively con짯trol the sales of its pro짯ducts on the gray mar짯ket; AMD셲 abili짯ty to pro짯tect its tech짯no짯lo짯gy or intellec짯tu짯al pro짯per짯ty; cur짯rent and future liti짯ga짯ti짯on; poten짯ti짯al tax lia짯bi짯li짯ties; and envi짯ron짯men짯tal laws and con짯flict mine짯rals-rela짯ted pro짯vi짯si짯ons. Inves짯tors are urged to review in detail the risks and uncer짯tain짯ties in AMD셲 Secu짯ri짯ties and Exch짯an짯ge Com짯mis짯si짯on filings, inclu짯ding but not limi짯t짯ed to AMD셲 Quar짯ter짯ly Report on Form 10멡 for the year ending March 31, 2018.

For the three months ended June 30, 2018, diluted EPS includes the impact of the 2026 Con짯ver짯ti짯ble Notes as their inclu짯si짯on is dilu짯ti짯ve under the 쐇f-con짯ver짯ted method. Accor짯din짯gly, $11 mil짯li짯on of inte짯rest expen짯se is added back to net inco짯me and diluted shares includes 100.6 mil짯li짯on shares.

(1)The Com짯pu짯ting and Gra짯phics seg짯ment pri짯ma짯ri짯ly includes desk짯top and note짯book pro짯ces짯sors and chip짯sets, dis짯crete and inte짯gra짯ted gra짯phics pro짯ces짯sing units (GPUs) and pro짯fes짯sio짯nal GPUs. The Com짯pa짯ny also licen짯ses por짯ti짯ons of its intellec짯tu짯al pro짯per짯ty portfolio.

(2)The Enter짯pri짯se, Embedded and Semi-Cus짯tom seg짯ment pri짯ma짯ri짯ly includes ser짯ver and embedded pro짯ces짯sors, semi-cus짯tom Sys짯tem-on-Chip (SoC) pro짯ducts, deve짯lo짯p짯ment ser짯vices and tech짯no짯lo짯gy for game con짯so짯les. The Com짯pa짯ny also licen짯ses por짯ti짯ons of its intellec짯tu짯al pro짯per짯ty portfolio.

(3)All Other cate짯go짯ry pri짯ma짯ri짯ly includes cer짯tain expen짯ses and cre짯dits that are not allo짯ca짯ted to any of the ope짯ra짯ting seg짯ments. Also included in this cate짯go짯ry is stock-based com짯pen짯sa짯ti짯on expense.

(4)Reconciliation of GAAP Ope짯ra짯ting Inco짯me (Loss) to Adjus짯ted EBITDA*

(5) Free cash flow reconciliation**

*The Com짯pa짯ny pres짯ents 쏛djus짯ted EBITDA as a sup짯ple짯men짯tal mea짯su짯re of its per짯for짯mance. Adjus짯ted EBITDA for the Com짯pa짯ny is deter짯mi짯ned by adjus짯ting ope짯ra짯ting inco짯me (loss) for stock-based com짯pen짯sa짯ti짯on and depre짯cia짯ti짯on and amor짯tiza짯ti짯on expen짯se. The Com짯pa짯ny cal짯cu짯la짯tes and pres짯ents Adjus짯ted EBITDA becau짯se manage짯ment belie짯ves it is of importance to inves짯tors and len짯ders in rela짯ti짯on to its over짯all capi짯tal struc짯tu짯re and its abili짯ty to bor짯row addi짯tio짯nal funds. In addi짯ti짯on, the Com짯pa짯ny pres짯ents Adjus짯ted EBITDA becau짯se it belie짯ves this mea짯su짯re assists inves짯tors in com짯pa짯ring its per짯for짯mance across report짯ing peri짯ods on a con짯sis짯tent basis by exclu짯ding items that the Com짯pa짯ny does not belie짯ve are indi짯ca짯ti짯ve of its core ope짯ra짯ting per짯for짯mance. The Company셲 cal짯cu짯la짯ti짯on of Adjus짯ted EBITDA may or may not be con짯sis짯tent with the cal짯cu짯la짯ti짯on of this mea짯su짯re by other com짯pa짯nies in the same indus짯try. Inves짯tors should not view Adjus짯ted EBITDA as an alter짯na짯ti짯ve to the GAAP ope짯ra짯ting mea짯su짯re of ope짯ra짯ting inco짯me (loss) or GAAP liqui짯di짯ty mea짯su짯res of cash flows from ope짯ra짯ting, inves짯t짯ing and finan짯cing acti짯vi짯ties. In addi짯ti짯on, Adjus짯ted EBITDA does not take into account chan짯ges in cer짯tain assets and lia짯bi짯li짯ties as well as inte짯rest inco짯me and expen짯se and inco짯me taxes that can affect cash flows.

**The Com짯pa짯ny also pres짯ents free cash flow as a sup짯ple짯men짯tal Non-GAAP mea짯su짯re of its per짯for짯mance. Free cash flow is deter짯mi짯ned by adjus짯ting GAAP net cash pro짯vi짯ded by (used in) ope짯ra짯ting acti짯vi짯ties for capi짯tal expen짯dit짯ures. The Com짯pa짯ny cal짯cu짯la짯tes and com짯mu짯ni짯ca짯tes free cash flow in the finan짯cial ear짯nings press release becau짯se manage짯ment belie짯ves it is of importance to inves짯tors to under짯stand the natu짯re of the짯se cash flows. The Company셲 cal짯cu짯la짯ti짯on of free cash flow may or may not be con짯sis짯tent with the cal짯cu짯la짯ti짯on of this mea짯su짯re by other com짯pa짯nies in the same indus짯try. Inves짯tors should not view free cash flow as an alter짯na짯ti짯ve to GAAP liqui짯di짯ty mea짯su짯res of cash flows from ope짯ra짯ting activities.

The Com짯pa짯ny has pro짯vi짯ded recon짯ci짯lia짯ti짯ons within the ear짯nings press release of the짯se non-GAAP finan짯cial mea짯su짯res to the most direct짯ly com짯pa짯ra짯ble GAAP finan짯cial measures.