• Applied Materials Announces First Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 16 Feb 2023 15:01:46   America/Chicago

    • Revenue $6.74 billion, up 7 percent year over year
    • GAAP operating margin 29.2 percent and non-GAAP operating margin 29.5 percent, down 2.3 points and 2.2 points year over year, respectively
    • GAAP EPS $2.02 and non-GAAP EPS $2.03, up 1 percent and 7 percent year over year, respectively
    • Generated $2.27 billion in cash from operations

    SANTA CLARA, Calif., Feb. 16, 2023 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its first quarter ended Jan. 29, 2023.

    First Quarter Results

    Applied generated revenue of $6.74 billion. On a GAAP basis, the company achieved gross margin of 46.7 percent, operating income of $1.97 billion or 29.2 percent of net sales, and record earnings per share (EPS) of $2.02.

    On a non-GAAP adjusted basis, the company reported gross margin of 46.8 percent, operating income of $1.99 billion or 29.5 percent of net sales, and EPS of $2.03.

    The company generated $2.27 billion in cash from operations and returned $470 million to shareholders including $250 million in share repurchases and $220 million in dividends.

    “While the economy and semiconductor industry are facing challenges in 2023, Applied Materials delivered strong first quarter results, and we believe Applied is well positioned to outperform our markets this year,” said Gary Dickerson, President and CEO. “Our resilience is underpinned by our strong positions with leading customers at key technology inflections, large backlog of differentiated products and growing service business.”

    Results Summary

     Q1 FY2023 Q1 FY2022 Change
     (In millions, except per share amounts and percentages)
    Net sales$6,739  $6,271  7%
    Gross margin 46.7%  47.2% (0.5) points
    Operating margin 29.2%  31.5% (2.3) points
    Net income$1,717  $1,792  (4)%
    Diluted earnings per share$2.02  $2.00  1%
    Non-GAAP Adjusted Results     
    Non-GAAP adjusted gross margin 46.8%  47.3% (0.5) points
    Non-GAAP adjusted operating margin 29.5%  31.7% (2.2) points
    Non-GAAP adjusted net income$1,724  $1,696  2%
    Non-GAAP adjusted diluted EPS$2.03  $1.89  7%

    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 second quarter of fiscal 2023, Applied expects net sales to be approximately $6.40 billion, plus or minus $400 million, which includes ongoing supply chain challenges and a negative estimated impact of $250 million dollars related to a cybersecurity event recently announced by one of our suppliers. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.66 to $2.02.

    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 $0.01 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.

    First Quarter Reportable Segment Information

    Semiconductor SystemsQ1 FY2023 Q1 FY2022
     (In millions, except percentages)
    Net sales$5,162  $4,567 
    Foundry, logic and other 77%  60%
    DRAM 13%  25%
    Flash memory 10%  15%
    Operating income$1,917  $1,771 
    Operating margin 37.1%  38.8%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$1,926  $1,778 
    Non-GAAP adjusted operating margin 37.3%  38.9%


    Applied Global ServicesQ1 FY2023 Q1 FY2022
     (In millions, except percentages)
    Net sales$1,369  $1,320 
    Operating income$383  $403 
    Operating margin 28.0%  30.5%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$383  $403 
    Non-GAAP adjusted operating margin 28.0%  30.5%


    Display and Adjacent MarketsQ1 FY2023 Q1 FY2022
     (In millions, except percentages)
    Net sales$167  $366 
    Operating income$8  $76 
    Operating margin 4.8%  20.8%
    Non-GAAP Adjusted Results  
    Non-GAAP adjusted operating income$8  $77 
    Non-GAAP adjusted operating margin 4.8%  21.0%


    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; 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 estimate of the impact on our second quarter of fiscal 2023 of a recent cybersecurity incident at one of our major suppliers, our business outlook for the second quarter of fiscal 2023 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; our ability to assess and mitigate the impact on our business of the recent cybersecurity incident at one of our major suppliers, and this supplier’s ability to recover its manufacturing and operations to meet our requirements; financial, legal and reputational risks, and the risk of loss of intellectual property, resulting from this or other cybersecurity incidents affecting us or our suppliers; global economic, political and industry conditions, including rising inflation and interest rates; the interpretation and implementation of new export regulations and license requirements, 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; transportation interruptions and logistics constraints; 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; 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-K 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
    (In millions, except per share amounts)January 29,
    2023    		 January 30,
    2022
    Net sales$6,739 $6,271 
    Cost of products sold 3,594  3,312 
    Gross profit 3,145  2,959 
    Operating expenses:   
    Research, development and engineering 771  654 
    Marketing and selling 197  167 
    General and administrative 207  166 
    Severance and related charges —  (4)
    Total operating expenses 1,175  983 
    Income from operations 1,970  1,976 
    Interest expense 59  57 
    Interest and other income, net 50  6 
    Income before income taxes 1,961  1,925 
    Provision for income taxes 244  133 
    Net income$1,717 $1,792 
    Earnings per share:   
    Basic$2.03 $2.02 
    Diluted$2.02 $2.00 
    Weighted average number of shares:   
    Basic 845  889 
    Diluted 849  897 


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

    (In millions)January 29,
    2023    		 October 30,
    2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$3,547 $1,995
    Short-term investments 500  586
    Accounts receivable, net 5,385  6,068
    Inventories 6,054  5,932
    Other current assets 1,229  1,344
    Total current assets 16,715  15,925
    Long-term investments 2,088  1,980
    Property, plant and equipment, net 2,494  2,307
    Goodwill 3,718  3,700
    Purchased technology and other intangible assets, net 332  339
    Deferred income taxes and other assets 2,612  2,475
    Total assets$27,959 $26,726
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Short-term debt$199 $—
    Accounts payable and accrued expenses 3,969  4,237
    Contract liabilities 3,082  3,142
    Total current liabilities 7,250  7,379
    Long-term debt 5,458  5,457
    Income taxes payable 975  964
    Other liabilities 856  732
    Total liabilities 14,539  14,532
    Total stockholders’ equity 13,420  12,194
    Total liabilities and stockholders’ equity$27,959 $26,726


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

    (In millions)

    		Three Months Ended
    January 29,
    2023    		 January 30,
    2022
    Cash flows from operating activities:   
    Net income$1,717  $1,792 
    Adjustments required to reconcile net income to cash provided by operating activities:   
    Depreciation and amortization 120   102 
    Severance and related charges —   (4)
    Share-based compensation 148   118 
    Deferred income taxes (21)  1 
    Other 7   16 
    Net change in operating assets and liabilities 299   633 
    Cash provided by operating activities 2,270   2,658 
    Cash flows from investing activities:   
    Capital expenditures (287)  (144)
    Cash paid for acquisitions, net of cash acquired (20)  — 
    Proceeds from sales and maturities of investments 414   318 
    Purchases of investments (406)  (312)
    Cash used in investing activities (299)  (138)
    Cash flows from financing activities:   
    Proceeds from commercial paper 298   — 
    Repayments of commercial paper (100)  — 
    Common stock repurchases (250)  (1,803)
    Tax withholding payments for vested equity awards (136)  (235)
    Payments of dividends to stockholders (220)  (214)
    Repayments of principal on finance leases (10)  — 
    Cash used in financing activities (418)  (2,252)
    Increase in cash, cash equivalents and restricted cash equivalents 1,553   268 
    Cash, cash equivalents and restricted cash equivalents—beginning of period 2,100   5,101 
    Cash, cash equivalents and restricted cash equivalents — end of period$3,653  $5,369 
        
    Reconciliation of cash, cash equivalents, and restricted cash equivalents   
    Cash and cash equivalents$3,547  $5,264 
    Restricted cash equivalents included in deferred income taxes and other assets 106   105 
    Total cash, cash equivalents, and restricted cash equivalents$3,653  $5,369 
        
    Supplemental cash flow information:   
    Cash payments for income taxes$69  $80 
    Cash refunds from income taxes$4  $123 
    Cash payments for interest$34  $34 


    APPLIED MATERIALS, INC.
    UNAUDITED SUPPLEMENTAL INFORMATION

    Corporate and Other

    (In millions)Q1 FY2023 Q1 FY2022
    Unallocated net sales$41  $18 
    Unallocated cost of products sold and expenses (231)  (178)
    Share-based compensation (148)  (118)
    Severance and related charges —   4 
    Total$(338) $(274)

    Additional Information

     Q1 FY2023 Q1 FY2022
    Net Sales by Geography (In millions) 
    United States$1,051  $847 
    % of Total 16%  14%
    Europe$573  $281 
    % of Total 8%  4%
    Japan$456  $561 
    % of Total 7%  9%
    Korea$1,293  $1,121 
    % of Total 19%  18%
    Taiwan$1,968  $1,249 
    % of Total 29%  20%
    Southeast Asia$253  $225 
    % of Total 4%  3%
    China$1,145  $1,987 
    % of Total 17%  32%
        
    Employees (In thousands)   
    Regular Full Time 33.9   28.5 


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

     Three Months Ended
    (In millions, except percentages)January 29,
    2023    		 January 30,
    2022
    Non-GAAP Adjusted Gross Profit   
    Reported gross profit - GAAP basis$3,145  $2,959 
    Certain items associated with acquisitions1 7   6 
    Non-GAAP adjusted gross profit$3,152  $2,965 
    Non-GAAP adjusted gross margin 46.8%  47.3%
    Non-GAAP Adjusted Operating Income   
    Reported operating income - GAAP basis$1,970  $1,976 
    Certain items associated with acquisitions1 11   9 
    Acquisition integration and deal costs 6   4 
    Severance and related charges2 —   (4)
    Non-GAAP adjusted operating income$1,987  $1,985 
    Non-GAAP adjusted operating margin 29.5%  31.7%
    Non-GAAP Adjusted Net Income   
    Reported net income - GAAP basis$1,717  $1,792 
    Certain items associated with acquisitions1 11   9 
    Acquisition integration and deal costs 6   4 
    Severance and related charges2 —   (4)
    Realized loss (gain) on strategic investments, net (4)  2 
    Unrealized loss (gain) on strategic investments, net (4)  (5)
    Income tax effect of share-based compensation3 (14)  (58)
    Income tax effects related to intra-entity intangible asset transfers 17   18 
    Resolution of prior years’ income tax filings and other tax items (5)  (62)
    Non-GAAP adjusted net income$1,724  $1,696 


    1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
    2 The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
    3 GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.


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

     Three Months Ended
    (In millions, except per share amounts)January 29,
    2023    		 January 30,
    2022
    Non-GAAP Adjusted Earnings Per Diluted Share   
    Reported earnings per diluted share - GAAP basis$2.02  $2.00 
    Certain items associated with acquisitions 0.01   0.01 
    Acquisition integration and deal costs 0.01   — 
    Unrealized loss (gain) on strategic investments, net —   (0.01)
    Income tax effect of share-based compensation (0.02)  (0.06)
    Income tax effects related to intra-entity intangible asset transfers 0.02   0.02 
    Resolution of prior years’ income tax filings and other tax items (0.01)  (0.07)
    Non-GAAP adjusted earnings per diluted share$2.03  $1.89 
    Weighted average number of diluted shares 849   897 


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

     Three Months Ended
    (In millions, except percentages)January 29,
    2023    		 January 30,
    2022
    Semiconductor Systems Non-GAAP Adjusted Operating Income   
    Reported operating income - GAAP basis$1,917  $1,771 
    Certain items associated with acquisitions1 9   7 
    Non-GAAP adjusted operating income$1,926  $1,778 
    Non-GAAP adjusted operating margin 37.3%  38.9%
    AGS Non-GAAP Adjusted Operating Income   
    Reported operating income - GAAP basis$383  $403 
    Non-GAAP adjusted operating income$383  $403 
    Non-GAAP adjusted operating margin 28.0%  30.5%
    Display and Adjacent Markets Non-GAAP Adjusted Operating Income   
    Reported operating income - GAAP basis$8  $76 
    Certain items associated with acquisitions1 —   1 
    Non-GAAP adjusted operating income$8  $77 
    Non-GAAP adjusted operating margin 4.8%  21.0%


    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 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)January 29, 2023
      
    Provision for income taxes - GAAP basis (a)$244 
    Income tax effect of share-based compensation 14 
    Income tax effects related to intra-entity intangible asset transfers (17)
    Resolutions of prior years’ income tax filings and other tax items 5 
    Non-GAAP adjusted provision for income taxes (b)$246 
      
    Income before income taxes - GAAP basis (c)$1,961 
    Certain items associated with acquisitions 11 
    Acquisition integration and deal costs 6 
    Realized loss (gain) on strategic investments, net (4)
    Unrealized loss (gain) on strategic investments, net (4)
    Non-GAAP adjusted income before income taxes (d)$1,970 
      
    Effective income tax rate - GAAP basis (a/c) 12.4%
      
    Non-GAAP adjusted effective income tax rate (b/d) 12.5%

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