AMAT
$84.42
Applied Materials
($1.58)
(1.84%)
Earnings Details
3rd Quarter July 2022
Thursday, August 18, 2022 4:01:00 PM
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Summary

Applied Materials Beats

Applied Materials (AMAT) reported 3rd Quarter July 2022 earnings of $1.94 per share on revenue of $6.5 billion. The consensus earnings estimate was $1.78 per share on revenue of $6.3 billion. The Earnings Whisper number was $1.81 per share. Revenue grew 5.2% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $1.82 to $2.18 per share on revenue of $6.25 billion to $7.05 billion. The current consensus earnings estimate is $1.95 per share on revenue of $6.58 billion for the quarter ending October 31, 2022.

Applied Materials Inc provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic and related industries.

Results
Reported Earnings
$1.94
Earnings Whisper
$1.81
Consensus Estimate
$1.78
Reported Revenue
$6.52 Bil
Revenue Estimate
$6.28 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Applied Materials Announces Third Quarter 2022 Results

  • 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 SystemsQ3 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 ServicesQ3 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 MarketsQ3 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.
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 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.
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)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.