AGM 2021

May 19, 2021

Good morning, ladies and gentlemen. We're glad you could join us for AMD's 2021 Annual Stockholders Meeting. This meeting is now called to order. I'm John Caldwell, Chairman of AMD's Board of Directors, And I will chair today's stockholders meeting. Due to travel restrictions and precautions taken to combat the spread of COVID-nineteen, We are holding this year's stockholders meeting entirely online. We want to make our meeting as accessible as possible to all stockholders and we are pleased to provide you the opportunity to vote and ask questions online. It is now 9:0:1 am. The polls are open and you may vote at any time during the meeting until the polls close. Online with us today are the following fellow directors and director nominees: Doctor. Lisa Su, Director our President and Chief Executive Officer Mr. Mark Durkin, Director and Chair of the Innovation and Technology Committee Mr. Michael Gregoire, Director Mr. Joseph Householder, Director and Chair of the Audit and Finance Committee Mr. John Warren, Director and Mr. Abhi Talwalkar, Director. Also joining us online is our Executive Vice President, Chief Financial Officer and Treasurer, Mr. Devinder Kumar and our Senior Vice President, General Counsel and Corporate Secretary, Mr. Harry Wallen. In addition, representatives of Ernst and Young LLP, our independent auditors are available for questions. As Chairman, I designate Mr. Wallen as Secretary of the meeting. Mr. Wallen will now conduct the formal portion of the meeting. Thank you, John. Good morning. As set forth in the notice of the meeting, The official business to be conducted is as follows. 1st, to elect the 8 Director nominees named in our proxy statement. 2nd, to ratify the appointment of Ernst and Young LLP as our independent registered public accounting firm for the current fiscal year. And 3rd, to approve on a non binding advisory basis the executive compensation of our named executive officers. No other matters will be considered. Following the formal business of the meeting, The meeting will be concluded and Doctor. Su will deliver her report as President and Chief Executive Officer of the company. A stockholder question and answer session will follow that report. The question and answer session is open to all AMD stockholders who may submit their questions in the designated field on the web portal. I've been authorized by the Board of Directors to Ms. Chris Vico representing Broadridge as Inspector of Elections for this meeting. Ms. Vika will determine the number of shares represented at this meeting, the validity of the proxies, the existence of a quorum and the number of votes on all matters voted upon at this meeting. The Board of Directors fixed the close of business On March 23, 2021 as a record date for the determination of stockholders Entitled to notice of this meeting and entitled to vote at this meeting. I have a list of stockholders of the company from Computershare, Our transfer agent showing 1,214,000,607,000 613 shares outstanding on the record date and entitled to vote at this meeting. This list has been available at our headquarters in Santa Clara, California for the last 10 days and is available online for inspection by any stockholder. I also have an affidavit certifying that proxy materials for this meeting were first mailed on March 31, 2021 to all stockholders of record on March 23, 2021. I declared that legal notice of the meeting has been duly given. The affidavit is available for inspection by any stockholder who may wish to see it after the meeting. Immediately prior to the commencement of this meeting, A count of shares present indicated that 937,797,000 777 shares of the company's voting stock were present, representing 77.2% of the outstanding shares of common stock as of March 23, 2021. Based on this number, A quorum is present. If you wish to vote at this meeting and have not already done so, or if you wish to change your vote, Please do so now by clicking the Vote Here button and following the pertinent instructions on the Annual Meeting portal. If you have already voted and do not wish to change your vote, your shares will be voted by the proxy holders in the manner specified on the proxy form. A copy of the minutes from the Advanced Micro Devices Annual Meeting of Stockholders held on May 7, 2020 is available online for inspection by stockholders. We will dispense with the reading of the 2020 meeting minutes this morning. The election of directors is the first item on the agenda. The slate of directors recommended by the Board of Directors is described in the 2021 proxy statement. The 8 individuals who have been nominated for election are Mr. John E. Caldwell, Ms. Nora N. Denzel, Mr. Mark Durkin, Mr. Michael P. Guegois, Mr. Joseph A. Householder, Mr. John W. Marin, Doctor. Lisa T. Hsu, Mr. Avi Y. Talwalkar. I now declare the nominations closed. I will pause briefly for Investor Relations to review any online questions or comments on the proposal. There are no online comments or questions, Mr. Wallen. Thank you. The second item is to ratify the appointment of Ernst and Young LLP as our independent registered public accounting firm for the current fiscal year. Again, I will pause briefly for any online questions or comments on the proposal. There are no questions or comments on the proposal, Mr. Wolland. The 3rd item is to approve on a non binding advisory basis the executive compensation of our named executive officers as disclosed in the 2021 proxy statement pursuant to the compensation disclosure rules of Securities and Exchange Commission. Once again, I will briefly pause for any online questions or comments on the proposal. There are no online questions or comments on the proposal, Mr. Waller. Thank you. The polls are about to close. It is now 9:0:7 am Pacific Time and I declare that the polls are closed. Ms. Vico, please present the report of the Inspector of Elections. Yes. Based on the preliminary results, Each of the nominees for Director has received the affirmative vote of a majority of votes cast and of the appointment of Ernst and Young as the company's independent registered public accounting firm has received the affirmative vote of a majority of the shares of common stock entitled to vote and represented at the meeting and the proposal concerning the advisory vote to approve the compensation of named executive officers received the affirmative vote of a majority of the shares of common stock Entitled to vote and represented at this meeting. Thank you, Ms. Vico. Based on the preliminary report of the inspector, Each of the nominees for director has been elected. The appointment of Ernst and Young LLP has been ratified And the proposal concerning the advisory vote to approve the compensation of named executive officers has been approved. The final report of the Inspector of Elections will be on file for inspection by stockholders And the company will report the final results on a current report on Form 8 ks with the Securities and Exchange Commission within 4 business On behalf of Mr. Caldwell, a formal portion of the meeting is adjourned. We will now proceed with Doctor. Su's report. I would like to point out that management may be making forward looking statements about the company's current plans and expectations. Actual results may differ materially from current plans and expectations, So I encourage you to review our SEC filings where we discuss the risks inherent to our business. You will find detailed discussions In our quarterly report on Form 10Q for the quarter ended March 27, 2021. It should be noted that any non GAAP financial measures referenced during Doctor. Sue's report are reconciled to their most directly comparable GAAP financial measures in the slide deck for this meeting, which can be found on the Investor Relations portion of AMD's website. At this time, I would like to introduce AMD's President and Chief Executive Officer, Doctor. Lisa Su. Thank you, Harry, and thank you everyone for joining us at today's meeting. I want to give you an update on our business at this point. So Let me start first with a reminder of our strategy. Our strategy has been very consistent over The last 5 years and it's really a focus on the compute, graphics As well as solutions as being the major aspects of our technology and of our intellectual property. When you look at our focus from an overall market standpoint, we are best at high performance Computing Solutions. And when we talk about high performance computing, we mean across Applications like supercomputing, the cloud and hyperscale type applications, AI and analytics, Visualization as well as gaming and smarter client devices. All of these items Require more and more compute and that's been especially clear, as we've experienced the last 15 months through the global pandemic. When you look at our overall markets, we participate in large and growing markets. Our TAM today is about $80,000,000,000 and that's across the data center, across PCs as well as gaming. And we see significant opportunities for continued growth in the market and more importantly for growth In AMD's participation in the market based on the strengths of our overall roadmaps as well as our strong customer relationships. And as we go through the Xilinx acquisition, post Xilinx acquisition, this TAM actually grows from about $80,000,000,000 to about $110,000,000,000 Now, let me go through a brief update On our progress in 2020 across each of these markets. So starting first with the data center. 2020 was a very strong year for us in the data center with record annual server processor revenue. When you look across the various pieces of the data center market, starting first with the cloud, we've made very strong progress In the cloud. And that's across both public instances as well as powering significant amounts of the internal workloads With industry leaders like Amazon Web Services, Google Cloud, Microsoft Azure, Tencent and a number of others. We've also built a strong foundation for enterprise growth. And when you look At our footprint both in terms of platforms with the largest OEMs like Dell, HPE and Lenovo As well as with, Fortune 1,000 enterprise customers, we see accelerating adoption across key verticals based on the strength of our product And then when you look at supercomputing, this is also an area where we have seen significant growing momentum. And it's clear that our performance advantages are on both the CPU side as well as our growing Instinct portfolio with data center GPUs are enabling us to continue significant wins In the HPC markets. And we are really proud of the work that we're doing together with the U. S. National Labs, particularly with Oak Ridge National Labs, on the next exascale computer, actually the first exascale computer for the U. S. With Frontier. So now, let me talk a little bit about the PC market. Certainly, the PC market has seen a significant growth in 2020 from 2019 as the work from home, School from home dynamics have played out and that has driven a strong growth in the overall PC market, But our revenue has grown significantly faster than the market. Our client revenue grew by more than 50% in 2020. And when you look at that, it's based on the strength of the product portfolio. So, our desktop products with the Ryzen Desktop Processors are best in class in terms of performance across the price points. In notebooks, we delivered 4 straight record mobile processor revenue and that's based on strong demand for our Ryzen 4000 Processors As well as the launch of our new Ryzen 5000 Processors that occurred at CES. And we're on track to increase the number of notebook powered by our new Ryzen 5000 Processors by 50% compared to the previous generation positioning us well for further growth in 20 When you look at the progress across the markets, we see that our technology leadership is actually driving A move up the stack with higher premium ASPs and a growing number of commercial platforms. And we think these are the most strategic portions of the market and will continue to be our focus going forward. And now let me talk a little bit about our progress in the gaming market. The gaming market is undergoing secular growth. There's a tremendous demand for more gaming capabilities, whether you're talking about PCs or consoles or in the cloud. 2020 was a very strong year for our gaming business as we launched our new Sure. In the high end of the Radeon 6000 series of GPUs. We've seen very strong demand for our new GPUs. And the Radeon 6,000 series were our fastest selling high end GPUs ever. We've also seen significant demand and we're very proud to be The technology in the newest game consoles from both Sony and Microsoft. And so, again, Very strong product portfolio, very strong end user demand in that space. And then we're continuing to expand our System into the mobile form factor and you'll hear more about that from us as later this quarter. So, when you summarize all that and put it all together, we've executed extremely well across Our product portfolio. This is really the best product portfolio in AMD's history, with performance leadership across Data Center, PCs and gaming. And in addition to that, we've also strengthened the AMD brand and our reputation with customers. And for all of these reasons, we have very strong confidence in our growth trajectory over the next few years. So now turning to some of the financials. We had a very We've made significant progress over the last few years, but we had a especially strong set of financial results in 2020. We saw outstanding growth in the business. So our annual revenue reached $9,800,000,000 and that was 45 Percent growth year over year. We expanded margins both on the gross margin standpoint as well as the operating margin standpoint and we've been able to generate A significant growth in profitability with this scale in the business. Turning to 2021, we had a strong start to 2021 with growth in the 3% year over year and we tripled the net income and earnings per share on a year over year basis. We had strong revenue growth across every business and especially with The data center business, which has been a strategic focus for us for the last several years, we doubled our data center revenue on a year over year basis. Based on the strong demand and also our strong partnership with our supply chain partners, we also updated in our last earnings call Our full year guidance from originally at 37% year over year growth, we now see approximately 50% year over year growth over 2020. And so we're adding significant scale close to $5,000,000,000 From 2021 compared to 2020. We also are expecting gross margins to expand to Approximately 47% and we're really very pleased to see the strong demand for our overall product portfolio as well as our deep partnerships in the ecosystem that lead us to believe that 2021 will really be an outstanding year for our business. Now let me turn to our capital allocation strategy. We've made a lot of progress in the business over the last several years. And I'm very pleased to announce today that our Board has approved a $4,000,000,000 share repurchase program. Given our strong product portfolio and growing customer adoption, we are very confident in our long term revenue and profit growth And strong cash generation potential. While we've always said that our number one priority for capital allocation is investing in the business And that's investing in R and D and sales and marketing and scaling the overall size of the business. Our Board feels strongly that this is the right Time to start to return capital to our shareholders as our cash balances grow. The objective of this program is to offset share dilution from share issuances as well as reduced share count over time through open market repurchases and this will be funded through Cash generated from operations. We're very pleased to announce this program today and as always we very much appreciate the support of our shareholders. So I'd also like to give you an update on our Xilinx acquisition. Last October, we announced our strategic acquisition of Xilinx to create the industry's high performance computing leader And really to position us to be the partner of choice for the largest and most important technology companies. We are very excited about the technology and IP that Xilinx has. Xilinx is really the ideal match For AMD. They're the industry's number one provider for FPGAs and adaptive SoCs. And we also see a very strong Synergy with our CPUs and GPUs as we bring on additional adaptive computing capabilities for new and evolving workloads. We're making very good progress on the regulatory front and we passed several important milestones to date and we remain on track to close This acquisition in by the end of 2021. So with that, let me just close by reminding you of our ambitions and our focus. Our focus at AMD is really to build the best in high performance computing. We have the best product portfolio in our history. We are expanding our customer and partner ecosystem with more and more adoption of our leadership products. We are seeing significant Acceleration in our business, as evidenced by, the strong growth over the last few years. And as we accomplish these goals, Our focus is on delivering best in class financial performance and shareholder returns. So with that, Laura, Why don't we open it up for questions and see if there are questions from our shareholders that have been submitted in the web portal. We also have the members of our Board as Well as several of the officers of the company and Ernst and Young are independent auditors who will also be happy to respond to questions. Laura? Thank you, Lisa. We do have a few questions online today. You did review the our accomplishments in the PC market, But I do have some questions about your thoughts on the future of the PC market going forward given that it has been so strong since the beginning of the pandemic. Yes. Thank you for that question. So, there's certainly the PC market has seen strong growth in 2020 And we're projecting for another strong growth year in 2021. We feel very good about the progress that we in the PC market across the last few years. And although we have seen some increased demand from some of the work from home trends, We actually believe we're seeing strong adoption of the AMD Ryzen product portfolio based Our strong performance on both the notebook and the desktop sides. So from our standpoint, I think the PC market is a good market. It's important market. It's an essential market. But we also see that AMD's participation in the market, will continue to be focused On the premium segments and those places where we know that this demand will continue To grow post COVID and that includes things like higher end and premium consumer, commercial SKUs as well as Yes, the gaming market. So we're very focused on ensuring that we have consistent growth in this area. Thank you, Lisa. Our second question is related to the gaming market and that it is difficult Still to buy our new Radeon graphics cards are online or on our website? And will we be able to make and sell more graphics cards this year to meet the high demand? Well, look, we have had very strong market reception to our high end Radeon 1,000 GPUs, we're very, very happy with that. We see that demand continues to be strong. We will continue to ramp Production as we go through this year. And we continue to prioritize our graphics cards for gamers. And so we're very focused on trying To ensure that the stock does go to gamers and that includes selling GPUs through our amd.com website. Question number 3 today is, we continue to read about shortness of supply affecting the semiconductor computing market. Does AMD have supply agreements in place that will allow it to meet its objectives for the year of 50% revenue growth? So yes, there are some overall tightness in the supply chain for semiconductors. We had a very strong start of the year and we have strong visibility working with our customers, as well as our supply chain in terms of what's available. So, yes, we do have commitments to meet the 50% annual revenue growth in 2021. We're continuing to work with our supply chain partners and customers every day to make sure that we're satisfying their needs and we have excellent partnerships with our wafer suppliers, TSMC and GlobalFoundries as well as our manufacturing partners across the ecosystem. So we continue to work closely with them. And overall, I would say channel inventories are still low in the Hi, Jade. And so we're continuing to work with our partners to ramp overall capacity, as there's quite a bit more we would like to do. Thank you. And our final question today is about the program that you just announced. And why did AMD decide to start a share repurchase program now? And did you consider paying a dividend in favor of share repurchase program? Yes. We're very pleased with the progress that we've made in the business over the last few years and it's really been a multiyear growth Jarrodji, I know many of you have been with us on this journey. Based on our very strong financial results and the cash generation that we Going forward, this is enabling us to first, as I said, our first priority is to invest significantly in the business. We see significant growth opportunities across our business portfolio. But it is the right time to start the return To cap return of capital to our shareholders. And we think this share repurchase program is the right thing to do. This is sort of the next step in our capital allocation strategy and will enable us to limit dilution From share issuances as well as reduced share count over time. And so we'll we continue to evaluate what the best capital allocation strategy is over time. We're very excited to be able to start the return of capital to our shareholders. Thank you, Lisa. And there are no further questions. Ladies and gentlemen, I would like to thank our Chairman, our Board members and executives that are on the line today. And as always, we would like to thank our shareholders for their support