News Release

Applied Materials Announces Third Quarter 2022 Results

Aug 18, 2022 at 4:01 PM EDT
  • Record quarterly revenue of $6.52 billion, up 5 percent year over year
  • GAAP EPS of $1.85 and non-GAAP EPS of $1.94, down 1 percent and up 2 percent year over year, respectively
  • Generated $1.47 billion in cash from operations and returned $1.23 billion to shareholders

SANTA CLARA, Calif., Aug. 18, 2022 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its third quarter ended Jul. 31, 2022.

Third Quarter Results

Applied generated revenue of $6.52 billion. On a GAAP basis, the company achieved gross margin of 46.1 percent, operating income of $1.92 billion or 29.5 percent of net sales, and earnings per share (EPS) of $1.85.

On a non-GAAP adjusted basis, the company reported gross margin of 46.2 percent, operating income of $1.95 billion or 30.0 percent of net sales, and EPS of $1.94.

The company generated $1.47 billion in cash from operations and returned $1.23 billion to shareholders including $1.00 billion in share repurchases and $225 million in dividends.

“Applied Materials delivered record quarterly revenue, yet ongoing supply chain challenges constrained our ability to meet demand, and our top priority remains increasing shipments to our customers,” said Gary Dickerson, President and CEO. “We feel confident in our ability to navigate macroeconomic headwinds and remain very positive about the long-term strength of the semiconductor market and our outsized growth opportunities.”

Results Summary

  Q3 FY2022   Q3 FY2021   Change
  (In millions, except per share amounts and percentages)
Net sales $ 6,520     $ 6,196     5%
Gross margin   46.1 %     47.9 %   (1.8) points
Operating margin   29.5 %     32.5 %   (3.0) points
Net income $ 1,606     $ 1,716     (6)%
Diluted earnings per share $ 1.85     $ 1.87     (1)%
Non-GAAP Adjusted Results          
Non-GAAP adjusted gross margin   46.2 %     48.0 %   (1.8) points
Non-GAAP adjusted operating margin   30.0 %     32.7 %   (2.7) points
Non-GAAP adjusted net income $ 1,683     $ 1,740     (3)%
Non-GAAP adjusted diluted EPS $ 1.94     $ 1.90     2%
                   

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 fourth quarter of fiscal 2022, Applied expects net sales to be approximately $6.65 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 $1.82 to $2.18.

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 $0.03 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.

Third Quarter Reportable Segment Information

Semiconductor Systems Q3 FY2022   Q3 FY2021
  (In millions, except percentages)
Net sales $ 4,734     $ 4,454  
Foundry, logic and other   66 %     63 %
DRAM   15 %     20 %
Flash memory   19 %     17 %
Operating income $ 1,701     $ 1,785  
Operating margin   35.9 %     40.1 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 1,708     $ 1,794  
Non-GAAP adjusted operating margin   36.1 %     40.3 %


Applied Global Services Q3 FY2022   Q3 FY2021
  (In millions, except percentages)
Net sales $ 1,420     $ 1,286  
Operating income $ 434     $ 393  
Operating margin   30.6 %     30.6 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 434     $ 393  
Non-GAAP adjusted operating margin   30.6 %     30.6 %
               


Display and Adjacent Markets Q3 FY2022   Q3 FY2021
  (In millions, except percentages)
Net sales $ 333     $ 431  
Operating income $ 69     $ 99  
Operating margin   20.7 %     23.0 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 70     $ 100  
Non-GAAP adjusted operating margin   21.0 %     23.2 %
               

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 fourth 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   Nine Months Ended
(In millions, except per share amounts) July 31,
2022
  August 1,
2021
  July 31,
2022
  August 1,
2021
Net sales $ 6,520     $ 6,196     $ 19,036     $ 16,940  
Cost of products sold   3,514       3,229       10,144       8,971  
Gross profit   3,006       2,967       8,892       7,969  
Operating expenses:              
Research, development and engineering   705       640       2,045       1,863  
Marketing and selling   180       159       520       454  
General and administrative   197       155       537       465  
Severance and related charges               (4 )     158  
Deal termination fee                     154  
Total operating expenses   1,082       954       3,098       3,094  
Income from operations   1,924       2,013       5,794       4,875  
Interest expense   56       57       171       179  
Interest and other income (loss), net   (7 )     24       27       69  
Income before income taxes   1,861       1,980       5,650       4,765  
Provision for income taxes   255       264       716       589  
Net income $ 1,606     $ 1,716     $ 4,934     $ 4,176  
Earnings per share:              
Basic $ 1.86     $ 1.89     $ 5.63     $ 4.57  
Diluted $ 1.85     $ 1.87     $ 5.59     $ 4.52  
Weighted average number of shares:              
Basic   864       908       877       914  
Diluted   869       918       883       923  
                               

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions) July 31,
2022
  October 31,
2021
ASSETS      
Current assets:      
Cash and cash equivalents $ 2,956     $ 4,995  
Short-term investments   592       464  
Accounts receivable, net   4,956       4,953  
Inventories   5,506       4,309  
Other current assets   1,424       1,386  
Total current assets   15,434       16,107  
Long-term investments   2,047       2,055  
Property, plant and equipment, net   2,194       1,934  
Goodwill   3,713       3,479  
Purchased technology and other intangible assets, net   337       104  
Deferred income taxes and other assets   2,436       2,146  
Total assets $ 26,161     $ 25,825  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable and accrued expenses $ 4,005     $ 4,268  
Contract liabilities   2,828       2,076  
Total current liabilities   6,833       6,344  
Long-term debt   5,456       5,452  
Income taxes payable   955       1,090  
Other liabilities   847       692  
Total liabilities   14,091       13,578  
Total stockholders’ equity   12,070       12,247  
Total liabilities and stockholders’ equity $ 26,161     $ 25,825  
               

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

(In millions)

Three Months Ended   Nine Months Ended
July 31,
2022
  August 1,
2021
July 31,
2022
  August 1,
2021
Cash flows from operating activities:              
Net income $ 1,606     $ 1,716     $ 4,934     $ 4,176  
Adjustments required to reconcile net income to cash provided by operating activities:              
Depreciation and amortization   108       98       321       289  
Severance and related charges               (4 )     149  
Share-based compensation   95       81       314       272  
Deferred income taxes   47       20       (209 )     44  
Other   22       (15 )     14       (30 )
Net change in operating assets and liabilities   (409 )     (214 )     (828 )     (606 )
Cash provided by operating activities   1,469       1,686       4,542       4,294  
Cash flows from investing activities:              
Capital expenditures   (210 )     (137 )     (564 )     (462 )
Cash paid for acquisitions, net of cash acquired   (441 )           (441 )     (12 )
Proceeds from sales and maturities of investments   374       400       1,013       1,024  
Purchases of investments   (339 )     (457 )     (1,175 )     (1,179 )
Cash used in investing activities   (616 )     (194 )     (1,167 )     (629 )
Cash flows from financing activities:              
Proceeds from common stock issuances               96       86  
Common stock repurchases   (1,000 )     (1,500 )     (4,603 )     (2,250 )
Tax withholding payments for vested equity awards   (3 )     (12 )     (259 )     (171 )
Payments of dividends to stockholders   (225 )     (219 )     (650 )     (622 )
Cash used in financing activities   (1,228 )     (1,731 )     (5,416 )     (2,957 )
Increase (decrease) in cash, cash equivalents and restricted cash equivalents   (375 )     (239 )     (2,041 )     708  
Cash, cash equivalents and restricted cash equivalents—beginning of period   3,435       6,413       5,101       5,466  
Cash, cash equivalents and restricted cash equivalents — end of period $ 3,060     $ 6,174     $ 3,060     $ 6,174  
               
Reconciliation of cash, cash equivalents, and restricted cash equivalents              
Cash and cash equivalents $ 2,956     $ 6,066     $ 2,956     $ 6,066  
Restricted cash equivalents included in deferred income taxes and other assets   104       108       104       108  
Total cash, cash equivalents, and restricted cash equivalents $ 3,060     $ 6,174     $ 3,060     $ 6,174  
               
Supplemental cash flow information:              
Cash payments for income taxes $ 592     $ 232     $ 1,623     $ 641  
Cash refunds from income taxes $ 5     $ 3     $ 133     $ 26  
Cash payments for interest $ 35     $ 34     $ 137     $ 137  
                               

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions) Q3 FY2022   Q3 FY2021
Unallocated net sales $ 33     $ 25  
Unallocated cost of products sold and expenses   (218 )     (208 )
Share-based compensation   (95 )     (81 )
Total $ (280 )   $ (264 )
               

Additional Information

  Q3 FY2022   Q3 FY2021
Net Sales by Geography (In millions)  
United States $ 725     $ 533  
% of Total   11 %     9 %
Europe $ 529     $ 238  
% of Total   8 %     4 %
Japan $ 438     $ 449  
% of Total   7 %     7 %
Korea $ 1,224     $ 1,291  
% of Total   19 %     21 %
Taiwan $ 1,537     $ 1,261  
% of Total   24 %     20 %
Southeast Asia $ 270     $ 173  
% of Total   4 %     3 %
China $ 1,797     $ 2,251  
% of Total   27 %     36 %
       
Employees (In thousands)      
Regular Full Time   31.9       26.0  
               

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

  Three Months Ended   Nine Months Ended
(In millions, except percentages) July 31,
2022
  August 1,
2021
  July 31,
2022
  August 1,
2021
Non-GAAP Adjusted Gross Profit              
Reported gross profit - GAAP basis $ 3,006     $ 2,967     $ 8,892     $ 7,969  
Certain items associated with acquisitions1   7       6       20       21  
Certain incremental expenses related to COVID-192                     12  
Other charges                     2  
Non-GAAP adjusted gross profit $ 3,013     $ 2,973     $ 8,912     $ 8,004  
Non-GAAP adjusted gross margin   46.2 %     48.0 %     46.8 %     47.2 %
Non-GAAP Adjusted Operating Income              
Reported operating income - GAAP basis $ 1,924     $ 2,013     $ 5,794     $ 4,875  
Certain items associated with acquisitions1   10       11       29       36  
Acquisition integration and deal costs   19       5       32       40  
Certain incremental expenses related to COVID-192                     24  
Severance and related charges3               (4 )     158  
Deal termination fee                     154  
Other charges                     6  
Non-GAAP adjusted operating income $ 1,953     $ 2,029     $ 5,851     $ 5,293  
Non-GAAP adjusted operating margin   30.0 %     32.7 %     30.7 %     31.2 %
Non-GAAP Adjusted Net Income              
Reported net income - GAAP basis $ 1,606     $ 1,716     $ 4,934     $ 4,176  
Certain items associated with acquisitions1   10       11       29       36  
Acquisition integration and deal costs   12       5       28       41  
Certain incremental expenses related to COVID-192                     24  
Severance and related charges3               (4 )     158  
Deal termination fee                     154  
Realized loss (gain) on strategic investments, net   (1 )     (6 )     (1 )     (2 )
Unrealized loss (gain) on strategic investments, net   18       (13 )     (15 )     (45 )
Other charges                     6  
Income tax effect of share-based compensation4   22       11       (22 )     (12 )
Income tax effects related to intra-entity intangible asset transfers   21       23       120       60  
Resolution of prior years’ income tax filings and other tax items   1       (9 )     (54 )     (22 )
Income tax effect of non-GAAP adjustments5   (6 )     2             (43 )
Non-GAAP adjusted net income $ 1,683     $ 1,740     $ 5,015     $ 4,531  


These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2 Temporary incremental employee compensation during the COVID-19 pandemic.
3 The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
4 GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
5 Adjustment 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   Nine Months Ended
(In millions, except per share amounts) July 31,
2022
  August 1,
2021
  July 31,
2022
  August 1,
2021
Non-GAAP Adjusted Earnings Per Diluted Share              
Reported earnings per diluted share - GAAP basis $ 1.85     $ 1.87     $ 5.59     $ 4.52  
Certain items associated with acquisitions   0.01       0.01       0.03       0.03  
Acquisition integration and deal costs   0.01       0.01       0.03       0.04  
Certain incremental expenses related to COVID-19                     0.02  
Severance and related charges                     0.13  
Deal termination fee                     0.17  
Realized loss (gain) on strategic investments, net         (0.01 )           0.01  
Unrealized loss (gain) on strategic investments, net   0.02       (0.01 )     (0.02 )     (0.05 )
Other charges                     0.01  
Income tax effect of share-based compensation   0.03       0.01       (0.03 )     (0.01 )
Income tax effects related to intra-entity intangible asset transfers   0.02       0.03       0.14       0.06  
Resolution of prior years’ income tax filings and other tax items         (0.01 )     (0.06 )     (0.02 )
Non-GAAP adjusted earnings per diluted share $ 1.94     $ 1.90     $ 5.68     $ 4.91  
Weighted average number of diluted shares   869       918       883       923  
                               

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

  Three Months Ended   Nine Months Ended
(In millions, except percentages) July 31,
2022
  August 1,
2021
  July 31,
2022
  August 1,
2021
Semiconductor Systems Non-GAAP Adjusted Operating Income              
Reported operating income - GAAP basis $ 1,701     $ 1,785     $ 5,120     $ 4,588  
Certain items associated with acquisitions1   7       9       22       29  
Acquisition integration costs                     (2 )
Certain incremental expenses related to COVID-192                     12  
Other charges                     3  
Non-GAAP adjusted operating income $ 1,708     $ 1,794     $ 5,142     $ 4,630  
Non-GAAP adjusted operating margin   36.1 %     40.3 %     37.4 %     38.7 %
AGS Non-GAAP Adjusted Operating Income              
Reported operating income - GAAP basis $ 434     $ 393     $ 1,259     $ 1,083  
Certain incremental expenses related to COVID-192                     8  
Other charges                     1  
Non-GAAP adjusted operating income $ 434     $ 393     $ 1,259     $ 1,092  
Non-GAAP adjusted operating margin   30.6 %     30.6 %     30.5 %     30.0 %
Display and Adjacent Markets Non-GAAP Adjusted Operating Income              
Reported operating income - GAAP basis $ 69     $ 99     $ 226     $ 229  
Certain items associated with acquisitions1   1       1       3       3  
Certain incremental expenses related to COVID-192                     1  
Severance and related charges3                     8  
Non-GAAP adjusted operating income $ 70     $ 100     $ 229     $ 241  
Non-GAAP adjusted operating margin   21.0 %     23.2 %     21.2 %     19.8 %


These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2 Temporary incremental employee compensation during the COVID-19 pandemic.
3 The 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) July 31, 2022
   
Provision for income taxes - GAAP basis (a) $ 255  
Income tax effect of share-based compensation   (22 )
Income tax effects related to intra-entity intangible asset transfers   (21 )
Resolutions of prior years’ income tax filings and other tax items   (1 )
Income tax effect of non-GAAP adjustments   6  
Non-GAAP adjusted provision for income taxes (b) $ 217  
   
Income before income taxes - GAAP basis (c) $ 1,861  
Certain items associated with acquisitions   10  
Acquisition integration and deal costs   12  
Realized loss (gain) on strategic investments, net   (1 )
Unrealized loss (gain) on strategic investments, net   18  
Non-GAAP adjusted income before income taxes (d) $ 1,900  
   
Effective income tax rate - GAAP basis (a/c)   13.7 %
   
Non-GAAP adjusted effective income tax rate (b/d)   11.4 %
       

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Source: Applied Materials, Inc.