• Applied Materials Announces Second Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 19 May 2022 15:01:03   America/Chicago

    • Quarterly revenue of $6.25 billion, up 12 percent year over year
    • GAAP operating margin of 30.3 percent and non-GAAP operating margin of 30.6 percent, up 2.0 points and down 1.1 points year over year, respectively
    • GAAP EPS of $1.74 and non-GAAP EPS of $1.85, up 22 percent and 13 percent year over year, respectively

    SANTA CLARA, Calif., May 19, 2022 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its second quarter ended May 1, 2022.

    Second Quarter Results

    Applied generated revenue of $6.25 billion. On a GAAP basis, the company achieved gross margin of 46.9 percent, operating income of $1.89 billion or 30.3 percent of net sales, and earnings per share (EPS) of $1.74.

    On a non-GAAP adjusted basis, the company reported gross margin of 47.0 percent, operating income of $1.91 billion or 30.6 percent of net sales, and EPS of $1.85.

    The company generated $415 million in cash from operations and returned $2.01 billion to shareholders including $1.80 billion in share repurchases and $211 million in dividends.

    “Demand for Applied Materials’ products and services has never been stronger, yet we remain constrained by on-going supply chain issues,” said Gary Dickerson, President and CEO. “Our priority is to work quickly and creatively across the supply chain to bring more industry capacity on-line, while accelerating the technology inflections that we believe will enable Applied to outgrow the semiconductor market in the years ahead.”

    Results Summary

     Q2 FY2022 Q2 FY2021 Change
     (In millions, except per share amounts and percentages)
    Net sales$6,245  $5,582  12%
    Gross margin 46.9%  47.5% (0.6) points
    Operating margin 30.3%  28.3% 2.0 points
    Net income$1,536  $1,330  15%
    Diluted earnings per share$1.74  $1.43  22%
    Non-GAAP Adjusted Results     
    Non-GAAP adjusted gross margin 47.0%  47.7% (0.7) points
    Non-GAAP adjusted operating margin 30.6%  31.7% (1.1) points
    Non-GAAP adjusted net income$1,636  $1,509  8%
    Non-GAAP adjusted diluted EPS$1.85  $1.63  13%


    A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.

    Business Outlook

    In the third quarter of fiscal 2022, Applied expects net sales to be approximately $6.25 billion, plus or minus $400 million, which includes the expected impact of ongoing supply chain challenges. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.59 to $1.95.

    This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share, includes the normalized tax benefit of share-based compensation of $0.02 per share and includes a net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

    Second Quarter Reportable Segment Information

    Semiconductor SystemsQ2 FY2022  Q2 FY2021
     (In millions, except percentages)
    Net sales$4,458  $3,972 
    Foundry, logic and other 65%  56%
    DRAM 21%  14%
    Flash memory 14%  30%
    Operating income$1,648  $1,542 
    Operating margin 37.0%  38.8%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$1,656  $1,555 
    Non-GAAP adjusted operating margin 37.1%  39.1%


    Applied Global ServicesQ2 FY2022  Q2 FY2021
     (In millions, except percentages)
    Net sales$1,383  $1,203 
    Operating income$422  $358 
    Operating margin 30.5%  29.8%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$422  $359 
    Non-GAAP adjusted operating margin 30.5%  29.8%


    Display and Adjacent MarketsQ2 FY2022  Q2 FY2021
     (In millions, except percentages)
    Net sales$381  $375 
    Operating income$81  $65 
    Operating margin 21.3%  17.3%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$82  $66 
    Non-GAAP adjusted operating margin 21.5%  17.6%


    Use of Non-GAAP Adjusted Financial Measures

    Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring and severance charges and any associated adjustments; certain incremental expenses related to COVID-19; impairments of assets; gain or loss on strategic investments; certain income tax items and other discrete adjustments. On a non-GAAP basis, the tax effect related to share-based compensation is recognized ratably over the fiscal year. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

    Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied's ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

    Webcast Information

    Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast and related slide presentation will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

    Forward-Looking Statements

    This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the third quarter of fiscal 2022 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products, our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; transportation interruptions and logistics constraints; global economic, political and industry conditions, including rising inflation and interest rates; the effects of regional or global health epidemics, including the severity and duration of the ongoing COVID-19 pandemic and government imposed lockdowns and other measures taken in response; global trade issues and changes in trade and export license policies; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; acquisitions, investments and divestitures; changes in income tax laws; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations; and other risks and uncertainties described in our SEC filings, including our recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

    About Applied Materials

    Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible a better future. Learn more at www.appliedmaterials.com.

    Contact:

    Ricky Gradwohl (editorial/media) 408.235.4676
    Michael Sullivan (financial community) 408.986.7977


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

     Three Months Ended Six Months Ended
    (In millions, except per share amounts)May 1,
    2022    		 May 2,
    2021    		 May 1,
    2022    		 May 2,
    2021
    Net sales$       6,245 $       5,582 $     12,516  $     10,744
    Cost of products sold          3,318           2,929           6,630            5,742
    Gross profit          2,927           2,653           5,886            5,002
    Operating expenses:       
    Research, development and engineering              686               617           1,340            1,223
    Marketing and selling              173               148               340                295
    General and administrative              174               149               340                310
    Severance and related charges                —                   6                  (4)               158
    Deal termination fee                —               154                 —                154
    Total operating expenses          1,033           1,074           2,016            2,140
    Income from operations          1,894           1,579           3,870            2,862
    Interest expense                58                 61               115                122
    Interest and other income, net                28                 27                 34                  45
    Income before income taxes          1,864           1,545           3,789            2,785
    Provision for income taxes              328               215               461                325
    Net income$       1,536 $       1,330 $       3,328  $       2,460
    Earnings per share:       
    Basic$         1.75 $         1.45 $         3.77  $         2.68
    Diluted$         1.74 $         1.43 $         3.74  $         2.66
    Weighted average number of shares:       
    Basic              878               918               883                917
    Diluted              883               927               890                926


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

    (In millions)May 1,
    2022    		 October 31,
    2021
    ASSETS   
    Current assets:   
    Cash and cash equivalents$3,331 $4,995
    Short-term investments 591  464
    Accounts receivable, net 4,883  4,953
    Inventories 5,009  4,309
    Other current assets 1,430  1,386
    Total current assets 15,244  16,107
    Long-term investments 2,102  2,055
    Property, plant and equipment, net 2,071  1,934
    Goodwill 3,479  3,479
    Purchased technology and other intangible assets, net 85  104
    Deferred income taxes and other assets 2,478  2,146
    Total assets$25,459 $25,825
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable and accrued expenses$4,060 $4,268
    Contract liabilities 2,590  2,076
    Total current liabilities 6,650  6,344
    Long-term debt 5,455  5,452
    Income taxes payable 962  1,090
    Other liabilities 813  692
    Total liabilities 13,880  13,578
    Total stockholders’ equity 11,579  12,247
    Total liabilities and stockholders’ equity$25,459 $25,825


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

    (In millions)Three Months Ended Six Months Ended
    May 1,
    2022    		 May 2,
    2021    		May 1,
    2022    		 May 2,
    2021
    Cash flows from operating activities:       
    Net income$1,536  $1,330  $3,328  $2,460 
    Adjustments required to reconcile net income to cash provided by operating activities:       
    Depreciation and amortization 111   97   213   191 
    Severance and related charges —   1   (4)  149 
    Share-based compensation 101   84   219   191 
    Deferred income taxes (257)  (4)  (256)  24 
    Other (24)  (15)  (8)  (15)
    Net change in operating assets and liabilities (1,052)  (306)  (419)  (392)
    Cash provided by operating activities 415   1,187   3,073   2,608 
    Cash flows from investing activities:       
    Capital expenditures (210)  (204)  (354)  (325)
    Cash paid for acquisitions, net of cash acquired —   —   —   (12)
    Proceeds from sales and maturities of investments 321   266   639   624 
    Purchases of investments (524)  (281)  (836)  (722)
    Cash used in investing activities (413)  (219)  (551)  (435)
    Cash flows from financing activities:       
    Proceeds from common stock issuances 96   86   96   86 
    Common stock repurchases (1,800)  (750)  (3,603)  (750)
    Tax withholding payments for vested equity awards (21)  (17)  (256)  (159)
    Payments of dividends to stockholders (211)  (202)  (425)  (403)
    Cash used in financing activities (1,936)  (883)  (4,188)  (1,226)
    Increase (decrease) in cash, cash equivalents and restricted cash equivalents (1,934)  85   (1,666)  947 
    Cash, cash equivalents and restricted cash equivalents—beginning of period 5,369   6,328   5,101   5,466 
    Cash, cash equivalents and restricted cash equivalents — end of period$3,435  $6,413  $3,435  $6,413 
            
    Reconciliation of cash, cash equivalents, and restricted cash equivalents       
    Cash and cash equivalents$3,331  $6,305  $3,331  $6,305 
    Restricted cash equivalents included in deferred income taxes and other assets 104   108   104   108 
    Total cash, cash equivalents, and restricted cash equivalents$3,435  $6,413  $3,435  $6,413 
            
    Supplemental cash flow information:       
    Cash payments for income taxes$951  $299  $1,031  $409 
    Cash refunds from income taxes$5  $4  $128  $23 
    Cash payments for interest$68  $68  $102  $103 


    APPLIED MATERIALS, INC.
    UNAUDITED SUPPLEMENTAL INFORMATION

    Corporate and Other

    (In millions)Q2 FY2022  Q2 FY2021
    Unallocated net sales$23  $32 
    Unallocated cost of products sold and expenses (179)  (174)
    Share-based compensation (101)  (84)
    Severance and related charges —   (6)
    Deal termination fee —   (154)
    Total$(257) $(386)


    Additional Information

     Q2 FY2022  Q2 FY2021
    Net Sales by Geography (In millions) 
    United States$702  $489 
    % of Total 11%  9%
    Europe$489  $229 
    % of Total 8%  4%
    Japan$407  $442 
    % of Total 6%  8%
    Korea$968  $1,428 
    % of Total 16%  25%
    Taiwan$1,408  $1,041 
    % of Total 23%  19%
    Southeast Asia$138  $109 
    % of Total 2%  2%
    China$2,133  $1,844 
    % of Total 34%  33%
        
    Employees (In thousands)   
    Regular Full Time 30.1   24.8 


     APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

     Three Months Ended Six Months Ended
    (In millions, except percentages)May 1,
    2022    		 May 2,
    2021    		 May 1,
    2022    		 May 2,
    2021
    Non-GAAP Adjusted Gross Profit       
    Reported gross profit - GAAP basis$2,927  $2,653  $5,886  $5,002 
    Certain items associated with acquisitions1 7   7   13   15 
    Certain incremental expenses related to COVID-192 —   —   —   12 
    Other charges —   2   —   2 
    Non-GAAP adjusted gross profit$2,934  $2,662  $5,899  $5,031 
    Non-GAAP adjusted gross margin 47.0%  47.7%  47.1%  46.8%
    Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$1,894  $1,579  $3,870  $2,862 
    Certain items associated with acquisitions1 10   12   19   25 
    Acquisition integration and deal costs 9   11   13   35 
    Certain incremental expenses related to COVID-192 —   —   —   24 
    Severance and related charges3 —   6   (4)  158 
    Deal termination fee —   154   —   154 
    Other charges —   6   —   6 
    Non-GAAP adjusted operating income$1,913  $1,768  $3,898  $3,264 
    Non-GAAP adjusted operating margin 30.6%  31.7%  31.1%  30.4%
    Non-GAAP Adjusted Net Income       
    Reported net income - GAAP basis$1,536  $1,330  $3,328  $2,460 
    Certain items associated with acquisitions1 10   12   19   25 
    Acquisition integration and deal costs 12   12   16   36 
    Certain incremental expenses related to COVID-192 —   —   —   24 
    Severance and related charges3 —   6   (4)  158 
    Deal termination fee —   154   —   154 
    Realized loss (gain) on strategic investments, net (2)  6   —   4 
    Unrealized loss (gain) on strategic investments, net (28)  (26)  (33)  (32)
    Other charges —   6   —   6 
    Income tax effect of share-based compensation4 14   6   (44)  (23)
    Income tax effects related to intra-entity intangible asset transfers 81   17   99   37 
    Resolution of prior years’ income tax filings and other tax items 7   (10)  (55)  (13)
    Income tax effect of non-GAAP adjustments5 6   (4)  6   (45)
    Non-GAAP adjusted net income$1,636  $1,509  $3,332  $2,791 


    1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
      
    2Temporary incremental employee compensation during the COVID-19 pandemic.
      
    3The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
      
    4GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
      
    5Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.


    APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

     Three Months Ended Six Months Ended
    (In millions, except per share amounts)May 1,
    2022    		 May 2,
    2021    		 May 1,
    2022    		 May 2,
    2021
    Non-GAAP Adjusted Earnings Per Diluted Share       
    Reported earnings per diluted share - GAAP basis$1.74  $1.43  $3.74  $2.66 
    Certain items associated with acquisitions 0.01   0.01   0.02   0.02 
    Acquisition integration and deal costs 0.01   0.01   0.02   0.03 
    Certain incremental expenses related to COVID-19 —   —   —   0.02 
    Severance and related charges —   0.01   —   0.13 
    Deal termination fee —   0.17   —   0.17 
    Realized loss (gain) on strategic investments, net —   0.01   —   — 
    Unrealized loss (gain) on strategic investments, net (0.03)  (0.03)  (0.04)  (0.02)
    Income tax effect of share-based compensation 0.02   0.01   (0.05)  (0.02)
    Income tax effects related to intra-entity intangible asset transfers 0.09   0.02   0.11   0.04 
    Resolution of prior years’ income tax filings and other tax items 0.01   (0.01)  (0.06)  (0.01)
    Non-GAAP adjusted earnings per diluted share$1.85  $1.63  $3.74  $3.02 
    Weighted average number of diluted shares 883   927   890   926 



    APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

     Three Months Ended Six Months Ended
    (In millions, except percentages)May 1,
    2022    		 May 2,
    2021    		 May 1,
    2022    		 May 2,
    2021
    Semiconductor Systems Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$1,648  $1,542  $3,419  $2,803 
    Certain items associated with acquisitions1 8   10   15   20 
    Acquisition integration costs —   —   —   (2)
    Certain incremental expenses related to COVID-192 —   —   —   12 
    Other charges —   3   —   3 
    Non-GAAP adjusted operating income$1,656  $1,555  $3,434  $2,836 
    Non-GAAP adjusted operating margin 37.1%  39.1%  38.0%  37.7%
    AGS Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$422  $358  $825  $690 
    Certain incremental expenses related to COVID-192 —   —   —   8 
    Other charges —   1   —   1 
    Non-GAAP adjusted operating income$422  $359  $825  $699 
    Non-GAAP adjusted operating margin 30.5%  29.8%  30.5%  29.6%
    Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$81  $65  $157  $130 
    Certain items associated with acquisitions1 1   1   2   2 
    Certain incremental expenses related to COVID-192 —   —   —   1 
    Severance and related charges3 —   —   —   8 
    Non-GAAP adjusted operating income$82  $66  $159  $141 
    Non-GAAP adjusted operating margin 21.5%  17.6%  21.3%  17.9%


    1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
    2Temporary incremental employee compensation during the COVID-19 pandemic.
    3The severance and related charges related to workforce reduction actions globally across the Display and Adjacent Markets business.


    Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.


    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE

     Three Months Ended
    (In millions, except percentages)May 1, 2022
      
    Provision for income taxes - GAAP basis (a)$328 
    Income tax effect of share-based compensation (14)
    Income tax effects related to intra-entity intangible asset transfers (81)
    Resolutions of prior years’ income tax filings and other tax items (7)
    Income tax effect of non-GAAP adjustments (6)
    Non-GAAP adjusted provision for income taxes (b)$220 
      
    Income before income taxes - GAAP basis (c)$1,864 
    Certain items associated with acquisitions 10 
    Acquisition integration and deal costs 12 
    Realized loss (gain) on strategic investments, net (2)
    Unrealized loss (gain) on strategic investments, net (28)
    Non-GAAP adjusted income before income taxes (d)$1,856 
      
    Effective income tax rate - GAAP basis (a/c) 17.6%
      
    Non-GAAP adjusted effective income tax rate (b/d) 11.9%

     


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