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Applied Materials Announces Third Quarter 2024 Results
Source: Nasdaq GlobeNewswire / 15 Aug 2024 15:01:01 America/Chicago
- Revenue $6.78 billion, up 5 percent year over year
- GAAP operating margin 28.7 percent and non-GAAP operating margin 28.8 percent, up 0.7 points and 0.5 points year over year, respectively
- GAAP EPS $2.05 and non-GAAP EPS $2.12, up 11 percent and 12 percent year over year, respectively
- Generated $2.39 billion in cash from operations
SANTA CLARA, Calif., Aug. 15, 2024 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its third quarter ended Jul. 28, 2024.
Third Quarter Results
Applied generated record revenue of $6.78 billion. On a GAAP basis, the company reported gross margin of 47.3 percent, operating income of $1.94 billion or 28.7 percent of net revenue, and earnings per share (EPS) of $2.05.
On a non-GAAP basis, the company reported gross margin of 47.4 percent, operating income of $1.95 billion or 28.8 percent of net revenue, and EPS of $2.12.
The company generated $2.39 billion in cash from operations and distributed $1.19 billion to shareholders including $861 million in share repurchases and $331 million in dividends.
“Applied Materials is delivering strong results in 2024 with record revenues in our fiscal third quarter and earnings towards the high end of our guided range,” said Gary Dickerson, President and CEO. “The race for AI leadership is fueling demand for our unique and connected portfolio of products and services, positioning Applied to outperform our markets over the longer term.”
Results Summary
Q3 FY2024 Q3 FY2023 Change (In millions, except per share amounts and percentages) Net revenue $ 6,778 $ 6,425 5 % Gross margin 47.3 % 46.3 % 1.0 point Operating margin 28.7 % 28.0 % 0.7 points Net income $ 1,705 $ 1,560 9 % Diluted earnings per share $ 2.05 $ 1.85 11 % Non-GAAP Results Non-GAAP gross margin 47.4 % 46.4 % 1.0 point Non-GAAP operating margin 28.8 % 28.3 % 0.5 points Non-GAAP net income $ 1,767 $ 1,600 10 % Non-GAAP diluted EPS $ 2.12 $ 1.90 12 % Non-GAAP free cash flow $ 2,088 $ 2,328 (10 )% A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Measures” section.
Business Outlook
In the fourth quarter of fiscal 2024, Applied expects net revenue to be approximately $6.93 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $2.00 to $2.36.
This outlook for non-GAAP diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes the normalized tax benefit of share-based compensation of $0.01 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.
Third Quarter Reportable Segment Information
Effective in the first quarter of fiscal 2024, management began including share-based compensation expense in the evaluation of reportable segments' performance. Prior-year numbers have been recast to conform to the current-year presentation.
Semiconductor Systems Q3 FY2024 Q3 FY2023 (In millions, except percentages) Net revenue $ 4,924 $ 4,676 Foundry, logic and other 72 % 79 % DRAM 24 % 17 % Flash memory 4 % 4 % Operating income $ 1,712 $ 1,568 Operating margin 34.8 % 33.5 % Non-GAAP Results Non-GAAP operating income $ 1,722 $ 1,578 Non-GAAP operating margin 35.0 % 33.7 % Applied Global Services Q3 FY2024 Q3 FY2023 (In millions, except percentages) Net revenue $ 1,580 $ 1,464 Operating income $ 467 $ 399 Operating margin 29.6 % 27.3 % Non-GAAP Results Non-GAAP operating income $ 467 $ 399 Non-GAAP operating margin 29.6 % 27.3 % Display and Adjacent Markets Q3 FY2024 Q3 FY2023 (In millions, except percentages) Net revenue $ 251 $ 235 Operating income $ 16 $ 32 Operating margin 6.4 % 13.6 % Non-GAAP Results Non-GAAP operating income $ 16 $ 32 Non-GAAP operating margin 6.4 % 13.6 % Corporate and Other (In millions) Q3 FY2024 Q3 FY2023 Unallocated net revenue $ 23 $ 50 Unallocated cost of products sold and expenses (276 ) (247 ) Total $ (253 ) $ (197 ) Use of Non-GAAP Financial Measures
Applied provides investors with certain non-GAAP 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; impairments of assets; gain or loss, dividends and impairments 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 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 Statement
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 2024 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; global economic, political and industry conditions, including changes in interest rates and prices for goods and services; the implementation of additional export regulations and license requirements and their interpretation, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; the effects of geopolitical turmoil or conflicts; 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; our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; the concentrated nature of our customer base; 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; cybersecurity incidents affecting our information systems or information contained in them, or affecting our operations, suppliers, customers or vendors; 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 effects of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; 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) 408.986.7977APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended (In millions, except per share amounts) July 28,
2024July 30,
2023July 28,
2024July 30,
2023Net revenue $ 6,778 $ 6,425 $ 20,131 $ 19,794 Cost of products sold 3,573 3,449 10,569 10,579 Gross profit 3,205 2,976 9,562 9,215 Operating expenses: Research, development and engineering 836 767 2,375 2,313 Marketing and selling 205 193 621 584 General and administrative 222 214 745 635 Total operating expenses 1,263 1,174 3,741 3,532 Income from operations 1,942 1,802 5,821 5,683 Interest expense 63 60 181 180 Interest and other income (expense), net 81 64 617 41 Income before income taxes 1,960 1,806 6,257 5,544 Provision for income taxes 255 246 811 692 Net income $ 1,705 $ 1,560 $ 5,446 $ 4,852 Earnings per share: Basic $ 2.06 $ 1.86 $ 6.57 $ 5.76 Diluted $ 2.05 $ 1.85 $ 6.52 $ 5.73 Weighted average number of shares: Basic 826 838 829 842 Diluted 833 843 835 846 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In millions) July 28,
2024October 29,
2023ASSETS Current assets: Cash and cash equivalents $ 8,288 $ 6,132 Short-term investments 815 737 Accounts receivable, net 4,970 5,165 Inventories 5,568 5,725 Other current assets 1,030 1,388 Total current assets 20,671 19,147 Long-term investments 2,981 2,281 Property, plant and equipment, net 3,100 2,723 Goodwill 3,732 3,732 Purchased technology and other intangible assets, net 262 294 Deferred income taxes and other assets 2,901 2,552 Total assets $ 33,647 $ 30,729 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Short-term debt $ 99 $ 100 Accounts payable and accrued expenses 4,387 4,297 Contract liabilities 2,742 2,975 Total current liabilities 7,228 7,372 Long-term debt 6,158 5,461 Income taxes payable 671 833 Other liabilities 750 714 Total liabilities 14,807 14,380 Total stockholders’ equity 18,840 16,349 Total liabilities and stockholders’ equity $ 33,647 $ 30,729 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In millions) Three Months Ended Nine Months Ended July 28,
2024July 30,
2023July 28,
2024July 30,
2023Cash flows from operating activities: Net income $ 1,705 $ 1,560 $ 5,446 $ 4,852 Adjustments required to reconcile net income to cash provided by operating activities: Depreciation and amortization 95 136 282 385 Share-based compensation 132 114 436 375 Deferred income taxes (179 ) (38 ) (385 ) (174 ) Other 48 15 (199 ) 189 Net change in operating assets and liabilities 584 796 522 1,518 Cash provided by operating activities 2,385 2,583 6,102 7,145 Cash flows from investing activities: Capital expenditures (297 ) (255 ) (783 ) (797 ) Cash paid for acquisitions, net of cash acquired — (7 ) — (25 ) Proceeds from sales and maturities of investments 382 302 1,495 971 Purchases of investments (745 ) (465 ) (1,968 ) (1,195 ) Cash used in investing activities (660 ) (425 ) (1,256 ) (1,046 ) Cash flows from financing activities: Debt borrowings, net of issuance costs 694 — 694 — Proceeds from issuance of commercial paper 100 297 300 892 Repayments of commercial paper (100 ) (300 ) (300 ) (700 ) Proceeds from common stock issuances — — 119 111 Common stock repurchases (861 ) (439 ) (2,381 ) (1,489 ) Tax withholding payments for vested equity awards (25 ) (11 ) (258 ) (165 ) Payments of dividends to stockholders (331 ) (268 ) (863 ) (707 ) Repayments of principal on finance leases 1 1 (12 ) (8 ) Cash used in financing activities (522 ) (720 ) (2,701 ) (2,066 ) Increase (decrease) in cash, cash equivalents and restricted cash equivalents 1,203 1,438 2,145 4,033 Cash, cash equivalents and restricted cash equivalents—beginning of period 7,175 4,695 6,233 2,100 Cash, cash equivalents and restricted cash equivalents — end of period $ 8,378 $ 6,133 $ 8,378 $ 6,133 Reconciliation of cash, cash equivalents, and restricted cash equivalents Cash and cash equivalents $ 8,288 $ 6,025 $ 8,288 $ 6,025 Restricted cash equivalents included in deferred income taxes and other assets 90 108 90 108 Total cash, cash equivalents, and restricted cash equivalents $ 8,378 $ 6,133 $ 8,378 $ 6,133 Supplemental cash flow information: Cash payments for income taxes $ 213 $ 197 $ 819 $ 418 Cash refunds from income taxes $ 2 $ — $ 7 $ 51 Cash payments for interest $ 35 $ 35 $ 137 $ 137 Additional Information Q3 FY2024 Q3 FY2023 Net Revenue by Geography (In millions) United States $ 1,053 $ 1,039 % of Total 16 % 16 % Europe $ 339 $ 661 % of Total 5 % 10 % Japan $ 555 $ 478 % of Total 8 % 8 % Korea $ 1,102 $ 988 % of Total 16 % 15 % Taiwan $ 1,148 $ 1,345 % of Total 17 % 21 % Southeast Asia $ 428 $ 180 % of Total 6 % 3 % China $ 2,153 $ 1,734 % of Total 32 % 27 % Employees (In thousands) Regular Full Time 35.2 34.5 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS Three Months Ended Nine Months Ended (In millions, except percentages) July 28,
2024July 30,
2023July 28,
2024July 30,
2023Non-GAAP Gross Profit GAAP reported gross profit $ 3,205 $ 2,976 $ 9,562 $ 9,215 Certain items associated with acquisitions1 6 7 20 21 Non-GAAP gross profit $ 3,211 $ 2,983 $ 9,582 $ 9,236 Non-GAAP gross margin 47.4 % 46.4 % 47.6 % 46.7 % Non-GAAP Operating Income GAAP reported operating income $ 1,942 $ 1,802 $ 5,821 $ 5,683 Certain items associated with acquisitions1 10 10 31 32 Acquisition integration and deal costs 1 6 9 20 Non-GAAP operating income $ 1,953 $ 1,818 $ 5,861 $ 5,735 Non-GAAP operating margin 28.8 % 28.3 % 29.1 % 29.0 % Non-GAAP Net Income GAAP reported net income $ 1,705 $ 1,560 $ 5,446 $ 4,852 Certain items associated with acquisitions1 10 10 31 32 Acquisition integration and deal costs 1 6 9 20 Realized loss (gain), dividends and impairments on strategic investments, net 16 (4 ) 12 109 Unrealized loss (gain) on strategic investments, net 25 6 (275 ) 13 Income tax effect of share-based compensation2 8 5 (7 ) (6 ) Income tax effects related to intra-entity intangible asset transfers 17 9 57 25 Resolution of prior years’ income tax filings and other tax items (11 ) 10 22 (22 ) Income tax effect of non-GAAP adjustments3 (4 ) (2 ) (2 ) (7 ) Non-GAAP net income $ 1,767 $ 1,600 $ 5,293 $ 5,016 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2 GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis. 3 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 RESULTS Three Months Ended Nine Months Ended (In millions, except per share amounts) July 28,
2024July 30,
2023July 28,
2024July 30,
2023Non-GAAP Earnings Per Diluted Share GAAP reported earnings per diluted share $ 2.05 $ 1.85 $ 6.52 $ 5.73 Certain items associated with acquisitions 0.01 0.01 0.04 0.04 Acquisition integration and deal costs — 0.01 0.01 0.02 Realized loss (gain), dividends and impairments on strategic investments, net 0.01 — 0.01 0.13 Unrealized loss (gain) on strategic investments, net 0.03 — (0.33 ) 0.01 Income tax effect of share-based compensation 0.01 0.01 (0.01 ) (0.01 ) Income tax effects related to intra-entity intangible asset transfers 0.02 0.01 0.07 0.03 Resolution of prior years’ income tax filings and other tax items (0.01 ) 0.01 0.03 (0.02 ) Non-GAAP earnings per diluted share $ 2.12 $ 1.90 $ 6.34 $ 5.93 Weighted average number of diluted shares 833 843 835 846 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS Three Months Ended Nine Months Ended (In millions, except percentages) July 28,
2024July 30,
2023July 28,
2024July 30,
2023Semiconductor Systems Non-GAAP Operating Income GAAP reported operating income $ 1,712 $ 1,568 $ 5,157 $ 5,138 Certain items associated with acquisitions1 10 10 30 29 Non-GAAP operating income $ 1,722 $ 1,578 $ 5,187 $ 5,167 Non-GAAP operating margin 35.0 % 33.7 % 35.2 % 34.9 % Applied Global Services Non-GAAP Operating Income GAAP reported operating income $ 467 $ 399 $ 1,320 $ 1,128 Non-GAAP operating income $ 467 $ 399 $ 1,320 $ 1,128 Non-GAAP operating margin 29.6 % 27.3 % 28.8 % 26.5 % Display and Adjacent Markets Non-GAAP Operating Income GAAP reported operating income $ 16 $ 32 $ 46 $ 51 Non-GAAP operating income $ 16 $ 32 $ 46 $ 51 Non-GAAP operating margin 6.4 % 13.6 % 6.8 % 8.9 % 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. Note: The reconciliation of GAAP and non-GAAP 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.
APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE Three Months
Ended(In millions, except percentages) July 28, 2024 GAAP provision for income taxes (a) $ 255 Income tax effect of share-based compensation (8 ) Income tax effects related to intra-entity intangible asset transfers (17 ) Resolutions of prior years’ income tax filings and other tax items 11 Income tax effect of non-GAAP adjustments 4 Non-GAAP provision for income taxes (b) $ 245 GAAP income before income taxes (c) $ 1,960 Certain items associated with acquisitions 10 Acquisition integration and deal costs 1 Realized loss (gain), dividends and impairments on strategic investments, net 16 Unrealized loss (gain) on strategic investments, net 25 Non-GAAP income before income taxes (d) $ 2,012 GAAP effective income tax rate (a/c) 13.0 % Non-GAAP effective income tax rate (b/d) 12.2 % UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW Three Months Ended Nine Months Ended (In millions) July 28,
2024July 30,
2023July 28,
2024July 30,
2023Cash provided by operating activities $ 2,385 $ 2,583 $ 6,102 $ 7,145 Capital expenditures (297 ) (255 ) (783 ) (797 ) Non-GAAP free cash flow $ 2,088 $ 2,328 $ 5,319 $ 6,348 
