AGM 2019

May 15, 2019

Good morning, ladies and gentlemen. My name is John Caldwell. I'm AMD's Chairman of the Board of Directors, and I'll be chairing today's stockholders' meeting. I now call this meeting to order and welcome you to AMD's 2019 Annual Stockholders' Meeting. It's our 50th year anniversary. I'd also like to welcome stockholders attending our virtual meeting, which is streaming live online. We want to make our meeting as accessible as possible to stockholders and we're pleased to provide All of you the opportunity to vote and ask questions either in person or via the Internet. It is now my pleasure to introduce to you my fellow Board members and Director nominees who are here with us today. Doctor. Lisa Su, Director, President and Chief Executive Officer Ms. Nora Denzel, Director and Chair of our Compensation and Leadership Resources Committee Mr. Mark Durkin, Director Mr. Joseph Householder, Director and Chair of our Audit and Finance Committee Mr. John Marin, Director and Mr. Abhi Talwalkar, Director. Before continuing, I'd like to recognize Mr. Mike Inglis, who's with us, who having served on our Board since 2014 has chosen not to stand for reelection and will be retiring from our Board effective today. On behalf of the stockholders and behalf of our Board, Mike, we just like to thank you for your contributions, for your insights and counsel to our Board over the last 5 years. I'd also like to recognize Mr. Ahmed Ahia, who's been a board member with us since 2012, who's also chosen not to stand for reelection this year. Achmed has made important contributions to our Board and to our company over his 7 years of service. So let me express to Achmed, on behalf of the shareholders and our Board, our appreciation for Achmed as a valued Board member. Let me now introduce our Senior Vice President, Chief Financial Officer and Treasurer, Mr. Devinder Kumar. I'd also like to introduce our Senior Vice President, General Counsel and Corporate Secretary, Mr. Harry Wallen. This morning, we'll first take care of formal business of the meeting, then Doctor. Sue will give her report. We'll also provide time for you to ask questions of our directors and officers. In addition, we have representatives from Ernst and Young LLP, our independent auditors, also who here also is available to answer questions. I now call this meeting to order. As Chairman, I designate Mr. Harry Willen as Secretary, and Mr. Willen will now conduct the formal portion of the meeting. Thank you, John. Good morning, everyone. As set forth in the notice of the meeting, the official business to be conducted is as follows: 1st, to elect the 7 director nominees named in our proxy statement. 2nd, to ratify the appointment of Ernst and Young, LLP, is our independent registered public accounting firm for the current fiscal year. 3rd, to approve the amendment and restatement of the AMD 2,004 Equity Incentive Plan 4th, to approve on a nonbinding advisory basis the executive compensation of our named executive officers and finally, to transact any other business that may properly become before the meeting or any adjournment or postponement thereof. Following the formal business of the meeting, the meeting will be concluded and Doctor. Sue will deliver her as President and Chief Executive Officer of the company. A stockholder question and answer session will follow that 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 in our business. You will find particularly detailed discussions in our annual report on Form 10 ks for the fiscal period ended December 29, 2018. Please note that non GAAP financial measures Reference during Doctor. Sue's report are reconciled to their most directly comparable GAAP financial measures in the slide deck hosted on our website at ir.amd.com. And finally, please hold your questions until after Doctor. Sue's report is concluded. Now returning to the business of the meeting. I've been authorized by the Board of Directors to appoint Ms. Chris Vico as Inspector of Elections for the meeting. Ms. Vika will determine the number of shares represented at the 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 18, 2019 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 Peter Scherer, our transfer agent, showing approximately 1,000,000,000,000,000,000,005,63,000 723 shares outstanding on the record date and entitled to vote at the meeting. The list has been kept at our headquarters in Santa Clara, California for the last 10 days and is available here at the meeting for inspection by any stockholder. I also have an affidavit certifying that proxy materials for this meeting were first mailed on March 21, 2019, to all stockholders of record on March 18, 2019. The ASPA David is available for inspection at the registration desk by any stockholder who may wish to see it after the meeting. The count immediately before the commencement of this meeting of shares present in person or by proxy indicated that 924,521,299 shares of the company's voting stock were present, representing 85.48 percent of the outstanding shares of common stock as of March 18, 2019. Based on this number, a quorum is present. It is now 9:10 a. M. Pacific Time, and I declare the polls to be open. I expect the polls to close in approximately 10 minutes. Voting today will be online or by ballot or proxy if in person. Is there anyone present who has their proxy or who wishes to change his or her vote or who otherwise desires to vote in person at the meeting? If you need a ballot, please raise your hand, and one will be brought to you. Any online participants who wish to vote at this meeting. You should also do so now by clicking the Vote Here button. The shares of any stockholder who has filed a proxy will be voted by the proxy holders in a manner specified on the proxy form. A copy of the minutes of the Annual Meeting of Stockholders of Advanced Micro Devices held on May 2, 2018, is at the registration desk for inspection by any stockholder who wishes to do so. We will dispense with the reading of those 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 2019 proxy statement. The 7 individuals who have been nominated for election are Mr. John E. Caldwell, Ms. Nora M. Denzel, Mr. Mark Durkin, Mr. Joseph A. Householder, Mr. John W. Marin, Doctor. Lisa T. Hsu, Mr. Abi Y. Talwalkar. The vote required to elect each director is the affirmative vote of a majority of the shares of common stock cast In person or by proxy, at the meeting, the Board of Directors unanimously recommends that you vote for the election of each of these directors. I now declare the nominations closed. Are there any questions or comments on this proposal? The second item is to ratify the appointment of Ernst and Young LLP as our independent registered public accounting firm for the current year. The vote required to prove this proposal Is the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. The Board of Directors unanimously recommends ratification. Are there any questions or comments on this proposal? The third item is to approve the amendment and restatement of the AMD 2,004 Equity Incentive Plan. The vote required to approve this proposal This is the affirmative vote of a majority of the outstanding shares of our common stock as of the record date. The Board of Directors unanimously recommends that you vote for this amendment. Are there any comments or questions on this proposal? The 4th item is to approve on a non binding advisory basis the Executive compensation of our named executive officers as disclosed in the 2019 proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission. The vote required to approve this proposal is the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. The Board of Directors unanimously recommends that you vote for the proposal. Are there any questions or comments on this proposal? Has everybody had their chance to vote as the polls are about to close? It is now 9:13 a. M. Pacific Time, and I declare the polls to be closed. Ms. Vico, could you 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 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 in person or by proxy at the At the meeting, the proposal regarding the amendment and restatement of the AMD 2,004 Equity incentive plan received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at the meeting. The proposal concerning the advisory vote on the compensation of named executive officers Received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. Thank you, Ms. Vico. Based on the preliminary report of the Inspector Each of the nominees for director have been elected. The appointment of Ernst and Young LLP has been ratified. The proposal regarding the amendment and restatement of the 2004 Equity Incentive Plan has been approved And a proposal concerning the advisory vote on the compensation of named executive officers has also been approved. The final report of the Inspector of Elections will be on file for inspection by all stockholders of 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 days. On behalf of Mr. Caldwell, the formal portion of the meeting is now adjourned. At this time, I'd like to introduce AMD's President and Chief Executive Officer, Doctor. Lisa Su. Good morning. Thank you for those shareholders who are here in person and those who are joining us on I'd like to give you a brief overview of our progress in 2018 and then Certainly, our opportunities in 2019. So as John said, 2019 is actually our 50th anniversary as a company and we celebrated that 50th anniversary just a few weeks ago on May 1. AMD has had a strong of technology. If you look across our many firsts, including being the first to introduce a gigahertz processor, Sir, the first to introduce the Teraflop GPU. More recently, in our case, We are inside every major game console as well as the first to introduce the 32 core data center CPU as well as many other first. So we're proud of our technology heritage, and we are all about pushing the technology envelope. If you look at 2018, 2018 was a very strong year for us. I'm going to go through each of our business lines. So starting first with client computing, which is a focus on the PC market. The PC market has overall stabilized, And our focus has been putting great products introducing great products into the PC market and as such gaining market share. If If you look across our Ryzen mobile notebook portfolio, our 2nd generation Ryzen desktop CPUs as well as our Ryzen Pro Processors That are going into the commercial market. Each of those has made very strong progress both with our partners as well as with consumer and commercial customers. So this continues to be a strong focus for us. In 2018, we gained 4 points of client market share in the PC market, which is a large market. And in the Q1 of 2019, we also gained A share in the client computing market. Moving on to graphics. Graphics also is a very strong market We like it for gaming. We like it for data center GPUs as well as workstation products. If you look across 2018, we introduced several new products, including our Radeon RX590, which is a mainstream gaming product. We had a very strong investment in software. And software now is a very strong piece of our gaming ecosystem. And we also introduced the first 7 nanometer GPU, which was a Radeon Instinct Mi 60, which was introduced into The data center GPU market. Data center GPU will be a strong focus for us. We believe that it is a growth market for us. We saw growth as We went throughout the year, especially into the Q4 of 2018. And we will see we expect to see in 2019 as well in this important market for both high performance computing as well as for machine learning and AI. And then moving on to the data center CPU business. We believe this is the single largest opportunity for us As a company, it's a very strong market. If you take a look at all of the applications that are now either in cloud or in a hybrid cloud on Prem Environment, we believe that our technology is very well suited for this market. And we've seen strong growth across the enterprise customers As well as our cloud customers. So Microsoft Azure, Amazon, Baidu and Tencent all We'll have public facing cloud instances using AMD. We've also won a number of large high performance Computing opportunities, including marquee wins with some of the government labs. And then we have a strong focus on the enterprise And growth in the enterprise business. One of the key things for us was to show progress in terms of market share growth, And we did achieve our mid single digit unit share target in Q4 of 2018, which was an important metric for us to demonstrate the progress in data center CPUs. So on the financial side, We are a growth company, and we're continuing to focus on growth. We finished 2018 at $6,500,000,000 And So over the last couple of years, we've added over $2,000,000,000 of revenue. This is in the core markets that I talked about, PCs, gaming as well as data center. We also continue to work on margin expansion. Margin expansion is an important metric when we talk about technology capability and Technology Companies. So we grew over 4 points of margin in from 2017 into 18. And then we also saw leverage in our business model. So although we have continued to invest in the business and we will continue to invest, we actually saw our operating expenses, We saw our operating expenses expense ratio to revenue actually go down over the last couple of years because we are growing we are Increasing OpEx slower than our revenue is increasing. And from a Corporate standpoint, we're very involved in our community and this continues to be a important thing for us. And if you look across some of the industry awards We've gotten, again, this is one of those things that the company feels very strongly about. So now let me turn to 2019 and our opportunities in 2019. 2019 is an extremely exciting year for us. It's one where We are very focused on some of our new products coming out, and we believe that there are opportunities for us to grow And the key to our strategy has been to make the right technology bets and then execute well on those technology bets. So if you just take a look at some of the key pieces of technology investments that we've made, They're really in 3 areas. The first is in the foundation and the foundation is around our high performance architectures and cores. And so Zen 2 is our new CPU architecture. Navi is our new GPU architecture. There's a lot of excitement in the industry as to what those will bring to the market, and we will be talking more about some of those details shortly. The second is really a view of where systems are going in the future. We believe in this Triplet architecture gives us actually a lot of capability and it gives us the opportunity to mix and match the best technology elements in the right technology platform. So this is an example of one of the ways that we believe we'll continue to advance our technology. And then the third Is a bet on 7 nanometer technology. We're very excited about 7 nanometer. 7 nanometer is a very strong technology. With TSMC and they continue to be a very strong partner for us. And we have a number of products that are coming out in 7 nanometer in 2019. So now for our 2019 product portfolio. We actually started with our Radeon Instinct Mi 60 sort of at the far, I guess, left on this side. And that was available actually in the Q4 of 2018. That was the first 7 nanometer product that we launched. We followed that up in February with the launch of Radeon 7, which Was our first 7 nanometer gaming GPU. And those have done well in the marketplace. Very exciting is our Next set of products, our 3rd generation Ryzen CPUs, those will launch shortly in the Q3 of 2019. Our Navi based gaming GPUs also will launch shortly in the Q3 of 2019. And then our 2nd generation EPYC CPUs PUs for the data center code name Rome will also launch shortly in the Q3 of 2019. So it's a busy time for us. There's a lot of product work that we're doing, but we are very confident in our execution and how we are positioning these products in the We also had a very important announcement, actually recently that I wanted to mention Here, one of the things that I think makes AMD very, very unique is our ability to combine our CPU assets in Our GPU assets to build great systems. And I would say that I was several weeks ago right at Oak Ridge National Lab. And with that, we were able to launch not launch, we were able to announce Frontier, which will The next supercomputing system that the Department of Energy is funding for the United States. And I'm very proud to say that we are partnered with Cray, with both our AMD EPYC CPUs and our AMD Radeon Instinct GPUs to be the technology provider for that system. This system will launch in 2021. And we believe at that point Time, it'll be the most powerful supercomputer in the world. And it's one of those things that as a technology person, To be part of something that is so important to our country is something that we are all very proud of at AMD. So with that, let me just summarize and say we're very excited about our opportunities. We believe the markets that we've chosen are the right markets. We believe our products are well positioned, and the entire AMD is focused on execution for there. And so, we thank our shareholders for their support and we look forward to 2019. Thank you. Are there any questions in the room Okay. Lisa, I have two questions online so far. Yes, please. The first question is besides the forward focus on servers and gaming, can you address the efforts that AMD is making to also become a leader in artificial intelligence and machine Yes, absolutely. So look, we believe that artificial intelligence and Machine learning is a large growing market, and we have technology that actually fits very well into that market, both on the CPU and on the GPU side. One of the most important things is the investment in software for artificial intelligence and machine learning. And so we've continued to invest In software, we call our software ecosystem the Radeon Open Compute Platform and that allows To really leverage the open source community to build upon our CPU GPU Ecosystems. So we'll continue to invest in those areas. And when you look overall at our data center GPU strategy, you saw our And we believe that will Frontier is both a high performance computing system as well as an AI system. And we look forward to having engineers from all across the United States really designing building To our architecture. Thank you, Lisa. The next question is that AMD's business outlook appears to be more positive And competitors who are calling for a pause in data center spending. Is this a good time for AMD to be bringing these new products to market? So for our strategy, our strategy is really about choosing large markets and then gaining share in those markets. And we believe that we are on the right strategy. As it relates to the data center market in the current environment, There are certainly some pockets of conversation around the pause in data center spending in the first half of the year. Our plan was always more second half weighted and continues to be more second half weighted. And it's very, very connected to the launch of Rome and the adoption of Rome. So we feel good about our market position and we need to continue to execute this year. Are there any other questions in the room? That concludes the question and answer session. Very good. Fantastic. Well, again, thank you very much to our shareholders for joining us today in the room