AGM 2020

May 7, 2020

Slides

Good morning, ladies and gentlemen. We're glad you could join us for AMD's 2020 Annual Stockholders Meeting. This meeting is now called to order. I'm John Caldwell, Chairman of AMD's Board of Directors and will chair today's stockholders meeting. Due to travel restrictions and precautions taken to combat the spread of a novel coronavirus COVID-nineteen, we are holding this year's stockholders meeting entirely online. We want to make our meeting as accessible as possible to stockholders and we are pleased to provide all of you the opportunity to vote and ask questions online. It is now 9:0:1 a. M. 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 Members, Board members and Director nominees Doctor. Lisa Su, Director and our President and Chief Executive Officer Ms. Nora Denzel, Director and Chair of the Compensation and Leadership Resources Committee 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 Marin, Director Mr. Avi Talwaker, Director. Also joining us online is our Senior Vice President and Chief Financial Officer, Devinder Kumar and our Senior Vice President, General Counsel and Corporate Secretary, Mr. Harry Wallen. This morning, we will first take care of the formal business of the meeting, then Doctor. Su will give her report. We will also provide time for questions and answers at the conclusion of Doctor. Su's report. In addition, representatives of Ernst and Young LLP, our Independent auditors are available for questions. As Chairman, I designate Mr. Harry Willen as Secretary of the meeting. Mr. Willard 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 third, 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. Only stockholders may ask questions, which must be submitted in the designated field on a web portal as we intend to answer as many questions as possible in the time allotted. Answers to any questions that are submitted in accordance with the meeting rules of conduct and that are not addressed will be posted on the Annual Meeting page of the company's website following the meeting. If you encounter any difficulty submitting questions during the meeting, Please refer to the proxy statement for information on how to reach our support team. I've been authorized by the Board of Directors to appoint Chris Vico, representing Broadridge as Inspector of Elections for this meeting. Ms. Vico will determine the number of shares represented at This meeting, the validity of 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 10, 2020 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 approximately 1,170,000,000 852,297 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 26, 2020 to all stockholders of record on March 10, 2020. I declare that legal notice of the meeting has and duly given. The affidavit is available for inspection online by any stockholder who may wish to see it after this meeting. Immediately prior to the commencement of this meeting, a count of shares present indicated that 982,000,000 976,689 shares of the company's voting stock were present, representing 83.95 percent of the outstanding shares of common stock as of March 10, 2020. 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 floor. A copy of the minutes from the Advanced Micro Devices Annual Meeting of Stockholders held on May 15, 2019 is available online for inspection by stockholders. We will dispense with reading of the 2019 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 2020 proxy statement. The 8 individuals who have been nominated for election are Mr. John Caldwell, Ms. Nora Denzel, Mr. Mark Durkin, Mr. Michael Gregoire, Mr. Joseph Householder, Mr. John Marin, Doctor. Li Si Tzu and Mr. Avi Talwalkar. I now declare the nominations closed. I will pause briefly to review any online questions or comments On the proposal, seeing none, the 2nd 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 to review any online questions or comments on the proposal. Seeing none, the 3rd item is to approve on a non binding advisory basis, The executive compensation of our named executive officers as disclosed in the 2020 proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission. Once again, I will pause briefly to review any online comments on the proposal. The polls are about to close. It is now 9:10 am Pacific Time and I declare that the polls are closed. Ms. Fico, please present the report of the Inspector of Elections. Based on the preliminary results, each of the nominees for Director has received the affirmative vote of a majority of votes cast And the ratification of the appointment of Ernst and Young as the company's independent registered public accounting firm has also received the affirmative vote of a majority of the shares of common stock entitled to vote and represented at the meeting. 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. Biko. 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 result on a current report on Form 8 ks with the Securities and Exchange Commission within 4 business days. On behalf of Mr. Culwell, a formal portion of the meeting is adjourned. 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 28, 2020. Please note that non GAAP financial measures referenced during Doctor. Sue's report are reconciled to their most directly comparable GAAP financial measures in the slide deck posted on our website at .amd.com. At this time, I would like to introduce AMD's President and Chief Executive Officer, Doctor. Lisa Su. Very good. Well, thank you all for joining us today on our virtual shareholder meeting. We appreciate your support. So, let me start by giving just an overview of our business. Our strategy has been very consistent over the last 5 plus years. And it's really around focusing on our strengths. Our strengths are in graphics, In compute and in overall solutions. And you can see that it gives us great exposure to markets across PCs, gaming as well as infrastructure in the cloud. And we believe that these are great markets for us to be in. When you look at our opportunity, we look at it in several different dimensions. 1st and foremost, Our goal is to really have leadership high performance computing solutions. And high performance computing becomes more and more Important as we go forward in a number of different applications, whether you're talking about the consumer side or you're talking about the infrastructure side. Our special capability is in combining disruptive solutions in CPUs and GPUs And we do that over a number of different markets. 1 of the core principles of AMD today is Strong and predictable execution. Our commitment is on having a strong roadmap that our customers And their customers can count on and also strong business execution that all of our stakeholders can count on. And with that, our goal and mission is also to drive a best in class growth franchise. Yes. Just taking a look at the markets that we're in, we're very fortunate that our markets are large and they're also growing. If you look at the data center market combined across high performance CPUs and GPUs, it's a $35,000,000,000 Total market size over the next few years. PCs also over $30,000,000,000 and gaming between discrete gaming solutions as well as game consoles is well over $10,000,000,000 And so overall, you see that our market opportunity is A $79,000,000,000 plus TAM over the next few years. Our focus Has been on leading with great products. And to really have great products, it starts with making the right choices This in terms of innovation. So several of the key tenants of our innovation roadmap include A leading edge intellectual property on both the CPUs and the GPU side. So our CPU core roadmap Has been very successful. With our first introduction of the Zen core lineup in 2017, We have now migrated to our new architecture with Zen 2, which I'll talk about across our products. But basically, it's a multi generational roadmap with leadership performance and scalability. We also recently introduced on our graphics side both A gaming new architecture as well as a compute new architecture known as RDNA and cDNA. And the goal of these architectures are again to start with a very, very competitive IP roadmap That then becomes the basis of our future products over the next number of years. We've also taken some Significant big bets around both process technology as well as our packaging technology. So We were the 1st to introduce 7 nanometer technology into high performance CPUs and GPUs and that's paid off really well With the competitiveness of our roadmap today. And we were also the first to introduce, triplet designs, which allow you to put Silicon of different process nodes on the same package, so that you really optimize The scalability of the silicon elements. And so with these elements of innovation, We currently have the best product portfolio in AMD's history. And I say that With the notion of whether you're talking about desktop processors and what we've been able to do with our Ryzen product portfolio Or you're talking about high performance, high end desktop solutions with our Ryzen Threadripper portfolio, Or you're talking about our new notebook processors with our Ryzen 4000 series or our Radeon graphics Processors or our EPYC data center processors. We have strong performance leadership across these market segments. And it's as a result of many of the decisions that we made over the last 3 to 5 years in terms of investing in the technology and the roadmap for these products. What that has led to is significantly improved financial performance. So here we show our financial performance in terms of revenue growth, gross margin expansion, operating margin improvements as well as net income improvements. And you can see that we've had a nice steady trajectory of improvements across each of these important metrics. From my standpoint, we're still at the beginning of our journey and we have a number of Citing developments going forward. Let me talk about each one of our market segments and some of the progress we've made in our market segments. So first in the client PC space, we're very proud of the progress that we've made in the PC space. I think in this A time where work from home and school from home has become so prevalent. It is another reminder of why PCs are So important in our lives from a productivity standpoint. And we've made tremendous progress over the last couple of years As we closed our Q1 of 2020, we have demonstrated 10 straight quarters of share gains In the client business, our desktop processor portfolio is now regularly 50% Plus share in the premium segment with top global e tailers. We're very proud of our new Ryzen notebook portfolio with our mobile products. Last year, we launched 85 mobile platforms. This year, we are on track to launch Over 130 mobile platforms and our high end desktops with our 3rd generation Threadripper outselling previous generations Also bring a lot of capability to the PC market. Next, talking a little bit about our gaming portfolio. We have launched the first elements of our RDNA family for gaming PCs Last year, second half of last year into the Q1 of this year, we are very Honored and proud to be the exclusive discrete GPU provider for the Mac product lines As well as partnering with some of the strongest gaming companies in the world, including Google for their Stadia cloud gaming platform, Warm. As well as our number one position in game consoles with both Sony and Microsoft having selected us for their next generation consoles. So through from 2013 through 2020, we've sold over 150,000,000 Consoles on the previous the current generation product, we are in the process of ramping the next generation consoles, which are Very, very competitive and very exciting and we expect that those will be very popular coming this holiday season. And then on the data center, we've talked about the importance of data center strategically. We see this as one of the most important growth vectors across high performance computing for the coming years. We've made significant progress with our EPYC processor portfolio. For example, in the cloud, we have major deployments At many of the large cloud providers, we have 150 plus instances In cloud environments today, we've also scaled out our large enterprise deployments as well with over 100 and 40 platforms today. And we're very honored and proud to be selected in a number of large supercomputing wins. In particular, the 2 largest supercomputers for the United States, the Frontier Supercomputer at Oak Ridge National Labs And the El Capitan supercomputer at Lawrence Livermore National Labs that will be going into service over the next few years Have both selected AMD's EPYC CPUs as well as our Instinct GPUs. So we've made very significant progress In the data center market, we continue to make progress. We see, again, significant momentum in both Cloud and enterprise deployments as we go through this year and it will continue to be a large growth focus for us. Now moving to some of our corporate responsibility areas. This is an area that's very important to us As a management team and to our Board, these are some of the honors that we've received from various external organizations. It continues to be an area that we place a lot of focus and our employees Enjoy being part of a strong corporate culture. Now let me talk a little bit about our response to COVID-nineteen. It's certainly been an unprecedented time for the world, for everyone, No matter which geography you live in or what occupation you're in, From an AMD standpoint, we have transitioned the majority of our employees to a work From home environment, as the virus started hitting the various regions, I'm very proud of how our employees have reacted. Our priority has been protect our employees, ensure strong business continuity and do as much as we can for our Customers and our communities. Some of the things that we have done for our global communities, we continue to be very involved in our The local regions where we operate and supporting local charities with donations both financial as well as securing Personal protective equipment for local hospitals. We have an employee gift matching program that also seeks to allow our employees with a matching gift from AMD to contribute to relief efforts. And we are involved with both the national and the local efforts around economic recovery through various councils. So we continue to do everything that we can to support both our customers as well as our communities as we go through this situation. I'm also very proud of the fact that AMD's technology is relevant In the response to the virus, I talked earlier about the fact that in our current work from home environment, we're actually seeing Robust PC demand, as people look to refresh their systems, particularly notebook systems. We've seen robust cloud demand as well as several of our larger cloud customers have asked to accelerate demand As they increased their infrastructure to support work from home. We are also joining efforts to forward medical research in this area. We joined the White House COVID-nineteen HPC Consortium as it started With the notion of trying to provide technology to researchers so that they could more effectively Look for both therapeutics as well as vaccine efforts. That included a donation to the Lawrence Livermore National Labs Corona System as they look to accelerate some of the work in Molecular modeling and more recently, we've also announced an AMD COVID-nineteen HPC fund. And this fund is targeted at key research institutions, particularly universities that have a need for more supercomputing horsepower. We're offering AMD technology as well as System hardware such that these universities can jumpstart their efforts, not just On COVID-nineteen, but using this as an opportunity to increase the infrastructure for future medical research as well. So with that, let me summarize and again say, we thank you for your support of AMD. Our goal has been to provide leading edge technology as well as ensure that we have a very strong business. In terms of our goals around driving shareholder returns, we recently did a Financial Analyst Day in the beginning of March Where we talked about some of our long term priorities over the next 5 years. So if you haven't had a chance, please look at some of that material. But in terms of shareholder returns, it's really about being a best in class growth franchise In the semiconductor business, we believe we have the technology and the capability to do that. And our focus is on the execution to make sure that that happens with consistent execution. We are investing in key growth areas and we will continue to invest In key growth areas, while we expand margins and grow profitability as well as generate Significant free cash flow over the next number of years. So again, thank you for your support. We will now turn it over to take questions. I do have members of the Board as well as several of the officers of the company and Ernst and Young, our independent auditors here. We'll all be happy to respond to your questions. Questions on similar topics will be asked as one question in the interest of time. And any appropriate questions that we do not get to will be addressed on the on our website. So with that, Laura, you want to open it up for questions, please? Sure, Lisa. Thank you very much. And you've just mentioned and we're talking about AMD's response to COVID-nineteen. Our first question is, What is the business situation in China? And how have sales and manufacturing evolved in relation to the coronavirus there? Yes. So thank you for that question. We have certainly been very active in managing the situation in China since The COVID-nineteen outbreak started in the Q1. From a manufacturing standpoint, there have Several opportunities for us to make sure that we manage that well and we've managed that well Across our manufacturing facilities. We have manufacturing facilities in China, in Taiwan, in Malaysia, And we've been able to balance across that. So we would say that our manufacturing is running at expectations At this point. It's an important part of our supply chain and we continue to watch it carefully. In terms of the business situation, What we saw in China in the Q1 is that, we did see some softness in sales, due to the COVID-nineteen situation, on our PC consumer related sales. And what we saw is that online vendors were particularly strong, But the offline channel was weaker than expected as many retail locations in China were closed for much of the quarter. We have seen as we've gone through the month of April, some recovery in those retail channels. And We continue to watch that situation carefully. Thank you. Our second question is related to graphics. And the question is, when is the company planning to launch a new high end gaming GPU? And will future radio and graphic cards support real time ray tracing? Yes. So I know that there's a lot of excitement about a high end gaming GPU from us. We are on track to launch our new RDNA2 architecture with a high end gaming GPU later this year in 2020. And RDNA too will support Hardware based ray tracing technology as one of the advanced features as well as a number of other features. So we're pretty excited about our RDNA2 roadmap. We think it will be a strong upgrade across our GPU product line and It is also the technologies that is the basis for the Sony and Microsoft game consoles that will launch later this year. That's great. Moving on to supply, Lisa. The question is AMD is using TSMC to manufacture many of its new products. Are you able to get enough of the wafer supply that you need? Yes. So TSMC has been a very good partner for us In both from a technology standpoint, having access to leading edge technology, as well as a number of product ramps that we have been doing with 7 nanometer technology. So we're ramping our Ryzen products, our EPYC products, our Radeon products And our game console products, all in 7 nanometer technology. I would say that wafer supply from TSMC continues to be tight, But we are focused on ensuring that we have good product availability for our customers through our strong partnerships. Thank you. There's a financial question. Now that AMD's cash balance has significantly improved, Will the company consider paying a dividend? Yes. So, we are certainly pleased With the improvement in our balance sheet, I think the efforts over the last few years have enabled us to reduce debt by more than $1,000,000,000 And also improve our cash balances. And so with our current balance sheet, we're actually at a net cash positive position. As we look forward in terms of our priorities, I mentioned earlier that our aspiration is to be a best in class growth company. And what that means is we need to continue to prioritize investments in the business as our first priority. So we will prioritize investing in R and D and our go to market activities to drive revenue growth. And as we look out over Time as our free cash flow increases, we will consider all options available to us for returns to shareholders as that comes over the next few years. Thank you. And we have one final question today and this is back to the business. Given the strength of Ryzen, How is AMD working with manufacturers and partners to drive momentum in the consumer laptop space and particularly to enhance AMD's Offering in the premium space. Yes. So we are very excited about our Ryzen 4000 notebook offerings. We launched At CES in January and we've had a number of systems start coming into the market over the last several months. I would say the reviews have been very, very strong and we are pleased with the momentum so far. We're working very closely with our OEMs and our retail partners. So with our OEMs, it's making sure that the systems have The right features and the right peripherals in addition to the Ryzen 4,000 processors. So you'll see more premium products Coming from AMD together with our OEM partners. And then we're also doing a significant amount Of marketing and co marketing with our retail partners. And that includes ensuring That our products are positioned well on shelf as well as having additional marketing programs in retail. So we see notebooks as a strong growth vector for us as we go through 2020. And we're excited about the Platforms that will become available, as we go through this year. Thank you, Lisa. That is our last question. We would like to thank everyone for their time and participation today. As always, we appreciate your support of our company.