• Applied Materials Announces Fourth Quarter and Fiscal Year 2021 Results

    Source: Nasdaq GlobeNewswire / 18 Nov 2021 16:01:01   America/New_York

    • Record annual revenue of $23.06 billion, up 34 percent year over year
    • Record annual GAAP operating margin of 29.9 percent, non-GAAP operating margin of 31.7 percent, GAAP EPS of $6.40 and non-GAAP EPS of $6.84
    • Quarterly revenue of $6.12 billion, up 31 percent year over year
    • Record quarterly GAAP operating margin of 32.9 percent, non-GAAP operating margin of 33.1 percent, GAAP EPS of $1.89 and non-GAAP EPS of $1.94

    SANTA CLARA, Calif., Nov. 18, 2021 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its fourth quarter and fiscal year ended Oct. 31, 2021.

    Fourth Quarter Results

    Applied generated revenue of $6.12 billion, which was at the low end of the guidance range due to supply chain challenges. On a GAAP basis, the company recorded gross margin of 48.1 percent, operating income of $2.01 billion or 32.9 percent of net sales, and earnings per share (EPS) of $1.89.

    On a non-GAAP adjusted basis, the company reported gross margin of 48.2 percent, operating income of $2.03 billion or 33.1 percent of net sales, and EPS of $1.94.

    The company generated $1.15 billion in cash from operations and returned $1.72 billion to shareholders including $1.50 billion in share repurchases and $216 million in dividends.

    Full Year Results

    In fiscal 2021, Applied generated revenue of $23.06 billion. On a GAAP basis, the company recorded gross margin of 47.3 percent, operating income of $6.89 billion or 29.9 percent of net sales, and EPS of $6.40.

    On a non-GAAP adjusted basis, the company reported gross margin of 47.5 percent, operating income of $7.32 billion or 31.7 percent of net sales, and EPS of $6.84.

    The company generated a record $5.44 billion in cash from operations and returned $4.59 billion to shareholders including $3.75 billion in share repurchases and $838 million in dividends.

    “Demand for semiconductors and equipment continues to grow as the pandemic accelerates digital transformation of the economy, and currently, our supply chain cannot keep up,” said Gary Dickerson, President and CEO. “We expect supply shortages of certain silicon components to persist in the near-term, and managing these constraints in partnership with our suppliers and chipmakers is our top priority.”

    “Applied delivered strong growth in fiscal 2021, with overall orders up by 62 percent year over year and Semiconductor Systems orders up 78 percent,” said Bob Halliday, Senior Vice President and CFO. “The momentum continued as our Semiconductor Systems backlog increased during the fourth quarter from $5.5 billion to $6.7 billion, and we see this strength sustaining into 2022.”

    Results Summary

             Change
     Q4 FY2021 Q4 FY2020 FY2021 FY2020 Q4 FY2021
    vs.
    Q4 FY2020    		 FY2021
    vs.
    FY2020
     (In millions, except per share amounts and percentages)
    Net sales$6,123  $4,688  $23,063  $17,202  31% 34%
    Gross margin48.1% 45.4% 47.3% 44.7% 2.7 points 2.6 points
    Operating margin32.9% 27.4% 29.9% 25.4% 5.5 points 4.5 points
    Net income$1,712  $1,131  $5,888  $3,619  51% 63%
    Diluted earnings per share$1.89  $1.23  $6.40  $3.92  54% 63%
    Non-GAAP Adjusted Results           
    Non-GAAP adjusted gross margin48.2% 45.7% 47.5% 45.1% 2.5 points 2.4 points
    Non-GAAP adjusted operating margin33.1% 28.3% 31.7% 26.3% 4.8 points 5.4 points
    Non-GAAP adjusted net income$1,756  $1,148  $6,287  $3,845  53% 64%
    Non-GAAP adjusted diluted EPS$1.94  $1.25  $6.84  $4.17  55% 64%
                        

    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 first quarter of fiscal 2022, Applied expects net sales to be approximately $6.16 billion, plus or minus $250 million, which includes the expected impact of ongoing supply chain challenges. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.78 to $1.92.

    This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and 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.

    Fourth Quarter Reportable Segment Information

    Semiconductor SystemsQ4 FY2021  Q4 FY2020 FY2021 FY2020
     (In millions, except percentages)
    Net sales$4,307  $3,070  $16,286  $11,367 
    Foundry, logic and other63% 58% 60% 59%
    DRAM23% 21% 19% 20%
    Flash memory14% 21% 21% 21%
    Operating income$1,723  $1,059  6,311  3,714 
    Operating margin40.0% 34.5% 38.8% 32.7%
    Non-GAAP Adjusted Results         
    Non-GAAP adjusted operating income$1,732  $1,073  $6,362  $3,778 
    Non-GAAP adjusted operating margin40.2% 35.0% 39.1% 33.2%


    Applied Global ServicesQ4 FY2021  Q4 FY2020 FY2021 FY2020
     (In millions, except percentages)
    Net sales$1,369  $1,106  $5,013  $4,155 
    Operating income$425  $320  1,508  1,127 
    Operating margin31.0% 28.9% 30.1% 27.1%
    Non-GAAP Adjusted Results               
    Non-GAAP adjusted operating income$425  $320  $1,517  $1,135 
    Non-GAAP adjusted operating margin31.0% 28.9% 30.3% 27.3%

     

    Display and Adjacent MarketsQ4 FY2021  Q4 FY2020 FY2021 FY2020
     (In millions, except percentages)
    Net sales$417  $485  $1,634  $1,607 
    Operating income$85  $95  314  291 
    Operating margin20.4% 19.6% 19.2% 18.1%
    Non-GAAP Adjusted Results      
    Non-GAAP adjusted operating income$86  $98  $327  $304 
    Non-GAAP adjusted operating margin20.6% 20.2% 20.0% 18.9%
                

    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; loss on early extinguishment of debt; 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 first 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; Lunar New Year and other holidays in the countries in which we operate; global economic and industry conditions; the effects of regional or global health epidemics, including the severity and duration of the ongoing COVID-19 pandemic; 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 Twelve Months Ended
    (In millions, except per share amounts)October 31,
    2021    		 October 25,
    2020    		 October 31,
    2021    		 October 25,
    2020
    Net sales$6,123  $4,688  $23,063  $17,202 
    Cost of products sold3,178  2,558  12,149  9,510 
    Gross profit2,945  2,130  10,914  7,692 
    Operating expenses:       
    Research, development and engineering622  560  2,485  2,234 
    Marketing and selling155  131  609  526 
    General and administrative155  156  620  567 
    Severance and related charges(1) —  157  — 
    Deal termination fee—  —  154  — 
    Total operating expenses931  847  4,025  3,327 
    Income from operations2,014  1,283  6,889  4,365 
    Interest expense57  59  236  240 
    Interest and other income, net49  19  118  41 
    Income before income taxes2,006  1,243  6,771  4,166 
    Provision for income taxes294  112  883  547 
    Net income$1,712  $1,131  $5,888  $3,619 
    Earnings per share:       
    Basic$1.91  $1.24  $6.47  $3.95 
    Diluted$1.89  $1.23  $6.40  $3.92 
    Weighted average number of shares:       
    Basic898  914  910  916 
    Diluted907  921  919  923 
                

    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

    (In millions)October 31,
    2021    		 October 25,
    2020
    ASSETS   
    Current assets:   
    Cash and cash equivalents$4,995  $5,351 
    Short-term investments464  387 
    Accounts receivable, net4,953  2,963 
    Inventories4,309  3,904 
    Other current assets1,386  764 
    Total current assets16,107  13,369 
    Long-term investments2,055  1,538 
    Property, plant and equipment, net1,934  1,604 
    Goodwill3,479  3,466 
    Purchased technology and other intangible assets, net104  153 
    Deferred income taxes and other assets2,146  2,223 
    Total assets$25,825  $22,353 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable and accrued expenses$4,268  $3,138 
    Contract liabilities2,076  1,321 
    Total current liabilities6,344  4,459 
    Long-term debt5,452  5,448 
    Income taxes payable1,090  1,206 
    Other liabilities692  662 
    Total liabilities13,578  11,775 
    Total stockholders’ equity12,247  10,578 
    Total liabilities and stockholders’ equity$25,825  $22,353 
     

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

    (In millions)

    		Three Months Ended Twelve Months Ended
    October 31,
    2021    		 October 25,
    2020    		October 31,
    2021    		 October 25,
    2020
    Cash flows from operating activities:       
    Net income$1,712  $1,131  $5,888  $3,619 
    Adjustments required to reconcile net income to cash provided by operating activities:       
         Depreciation and amortization105  97  394  376 
         Severance and related charges(1) —  148  — 
         Share-based compensation74  73  346  307 
         Deferred income taxes36  (18) 80  80 
         Other(40) 5  (70) 60 
         Net change in operating assets and liabilities(738) 27  (1,344) (638)
    Cash provided by operating activities1,148  1,315  5,442  3,804 
    Cash flows from investing activities:       
    Capital expenditures(206) (162) (668) (422)
    Cash paid for acquisitions, net of cash acquired—  —  (12) (107)
    Proceeds from sales and maturities of investments447  366  1,471  1,754 
    Purchases of investments(828) (345) (2,007) (1,355)
    Cash used in investing activities(587) (141) (1,216) (130)
    Cash flows from financing activities:       
    Debt borrowings, net of issuance costs—  —  —  2,979 
    Debt repayments—  —  —  (2,882)
    Proceeds from common stock issuances89  83  175  174 
    Common stock repurchases(1,500) (50) (3,750) (649)
    Tax withholding payments for vested equity awards(7) (6) (178) (172)
    Payments of dividends to stockholders(216) (200) (838) (787)
    Cash used in financing activities(1,634) (173) (4,591) (1,337)
    Increase (decrease) in cash, cash equivalents and restricted cash equivalents(1,073) 1,001  (365) 2,337 
    Cash, cash equivalents and restricted cash equivalents—beginning of period6,174  4,465  5,466  3,129 
    Cash, cash equivalents and restricted cash equivalents — end of period$5,101  $5,466  $5,101  $5,466 
            
    Reconciliation of cash, cash equivalents, and restricted cash equivalents       
    Cash and cash equivalents$4,995  $5,351  $4,995  $5,351 
    Restricted cash equivalents included in deferred income taxes and other assets106  115  106  115 
    Total cash, cash equivalents, and restricted cash equivalents$5,101  $5,466  $5,101  $5,466 
            
    Supplemental cash flow information:       
    Cash payments for income taxes$210  $23  $851  $542 
    Cash refunds from income taxes$1  $63  $27  $68 
    Cash payments for interest$68  $68  $205  $219 
                    

    APPLIED MATERIALS, INC.
    UNAUDITED SUPPLEMENTAL INFORMATION

    Corporate and Other

    (In millions)Q4 FY2021  Q4 FY2020 FY2021 FY2020
    Unallocated net sales$30  $27  $130  $73 
    Unallocated cost of products sold and expenses(176) (145) (725) (533)
    Share-based compensation(74) (73) (346) (307)
    Severance and related charges1  —  (149) — 
    Deal termination fee—  —  (154) — 
    Total$(219) $(191) $(1,244) $(767)
                    

    Additional Information

     Q4 FY2021  Q4 FY2020 FY2021 FY2020
    Net Sales by Geography (In millions)     
    United States$673  $448  $2,038  $1,619 
    % of Total11% 10% 9% 10%
    Europe$331  $206  $1,097  $736 
    % of Total5% 4% 5% 4%
    Japan$613  $706  $1,962  $1,996 
    % of Total10% 15% 8% 11%
    Korea$1,004  $719  $5,012  $3,031 
    % of Total17% 15% 22% 18%
    Taiwan$1,240  $872  $4,742  $3,953 
    % of Total20% 19% 20% 23%
    Southeast Asia$205  $161  $677  $411 
    % of Total3% 3% 3% 2%
    China$2,057  $1,576  $7,535  $5,456 
    % of Total34% 34% 33% 32%
            
    Employees (In thousands)       
    Regular Full Time27.2  24.0     
              

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

     Three Months Ended Twelve Months Ended
    (In millions, except percentages)October 31,
    2021    		 October 25,
    2020    		 October 31,
    2021    		 October 25,
    2020
    Non-GAAP Adjusted Gross Profit       
    Reported gross profit - GAAP basis$2,945   $2,130   $10,914   $7,692  
    Certain items associated with acquisitions16   12   27   37  
    Certain incremental expenses related to COVID-192—   —   12   23  
    Other charges—   —   2   —  
    Non-GAAP adjusted gross profit$2,951   $2,142   $10,955   $7,752  
    Non-GAAP adjusted gross margin48.2 % 45.7 % 47.5 % 45.1 %
    Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$2,014   $1,283   $6,889   $4,365  
    Certain items associated with acquisitions111   16   47   54  
    Acquisition integration and deal costs5   26   45   80  
    Certain incremental expenses related to COVID-192—   —   24   30  
    Severance and related charges3(1)  —   157   —  
    Deal termination fee—   —   154   —  
    Other charges—   —   6   —  
    Non-GAAP adjusted operating income$2,029   $1,325   $7,322   $4,529  
    Non-GAAP adjusted operating margin33.1 % 28.3 % 31.7 % 26.3 %
    Non-GAAP Adjusted Net Income       
    Reported net income - GAAP basis$1,712   $1,131   $5,888   $3,619  
    Certain items associated with acquisitions111   16   47   54  
    Acquisition integration and deal costs5   26   46   80  
    Certain incremental expenses related to COVID-192—   —   24   30  
    Severance and related charges3(1)  —   157   —  
    Deal termination fee—   —   154   —  
    Realized loss (gain) on strategic investments, net(41)  —   (43)  (1) 
    Unrealized loss (gain) on strategic investments, net(11)  (7)  (56)  (8) 
    Loss on early extinguishment of debt—   —   —   33  
    Other charges—   —   6   —  
    Income tax effect of share-based compensation412   13   —   —  
    Income tax effects related to intra-entity intangible asset transfers4   10   64   114  
    Resolution of prior years’ income tax filings and other tax items55   (36)  33   (41) 
    Income tax effect of non-GAAP adjustments510   (5)  (33)  (35) 
    Non-GAAP adjusted net income$1,756   $1,148   $6,287   $3,845  


    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 Twelve Months Ended
    (In millions, except per share amounts)October 31,
    2021    		 October 25,
    2020    		 October 31,
    2021    		 October 25,
    2020
    Non-GAAP Adjusted Earnings Per Diluted Share       
    Reported earnings per diluted share - GAAP basis$1.89  $1.23  $6.40  $3.92 
    Certain items associated with acquisitions0.01  0.02  0.04  0.05 
    Acquisition integration and deal costs0.01  0.02  0.04  0.07 
    Certain incremental expenses related to COVID-19—  —  0.02  0.03 
    Loss on early extinguishment of debt—  —  —  0.03 
    Severance and related charges—  —  0.13  — 
    Deal termination fee—  —  0.17  — 
    Realized loss (gain) on strategic investments, net(0.03) —  (0.03) — 
    Unrealized loss (gain) on strategic investments, net(0.01) (0.01) (0.05) (0.01)
    Other charges—  —  0.01  — 
    Income tax effect of share-based compensation0.01  0.02  —  — 
    Income tax effects related to intra-entity intangible asset transfers—  0.01  0.07  0.12 
    Resolution of prior years’ income tax filings and other tax items0.06  (0.04) 0.04  (0.04)
    Non-GAAP adjusted earnings per diluted share$1.94  $1.25  $6.84  $4.17 
    Weighted average number of diluted shares907  921  919  923 
     

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

     Three Months Ended Twelve Months Ended
    (In millions, except percentages)October 31,
    2021    		 October 25,
    2020    		 October 31,
    2021    		 October 25,
    2020
    Semiconductor Systems Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$1,723  $1,059  $6,311   $3,714 
    Certain items associated with acquisitions19  12  38   41 
    Acquisition integration costs—  2  (2)  3 
    Certain incremental expenses related to COVID-192—  —  12   20 
    Other charges—  —  3   — 
    Non-GAAP adjusted operating income$1,732  $1,073  $6,362   $3,778 
    Non-GAAP adjusted operating margin40.2% 35.0% 39.1%  33.2%
    AGS Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$425  $320  $1,508   $1,127 
    Certain incremental expenses related to COVID-192—  —  8   8 
    Other charges—  —  1   — 
    Non-GAAP adjusted operating income$425  $320  $1,517   $1,135 
    Non-GAAP adjusted operating margin31.0% 28.9% 30.3%  27.3%
    Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$85  $95  $314   $291 
    Certain items associated with acquisitions11  3  4   12 
    Certain incremental expenses related to COVID-192—  —  1   1 
    Severance and related charges3—  —  8   — 
    Non-GAAP adjusted operating income$86  $98  $327   $304 
    Non-GAAP adjusted operating margin20.6% 20.2% 20.0%  18.9%


    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)October 31, 2021
      
    Provision for income taxes - GAAP basis (a)$294  
    Income tax effect of share-based compensation(12) 
    Income tax effects related to intra-entity intangible asset transfers(4) 
    Resolutions of prior years’ income tax filings and other tax items(55) 
    Income tax effect of non-GAAP adjustments(10) 
    Non-GAAP adjusted provision for income taxes (b)$213  
      
    Income before income taxes - GAAP basis (c)$2,006  
    Certain items associated with acquisitions11  
    Acquisition integration and deal costs5  
    Severance and related charges(1) 
    Realized loss (gain) on strategic investments, net(41) 
    Unrealized loss (gain) on strategic investments, net(11) 
    Non-GAAP adjusted income before income taxes (d)$1,969  
      
    Effective income tax rate - GAAP basis (a/c)14.7 %
      
    Non-GAAP adjusted effective income tax rate (b/d)10.8 %

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