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Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Applied Materials Announces Third Quarter 2021 Results

August 19, 2021 GMT

  • Record quarterly revenue of $6.20 billion, up 41 percent year over year
  • Record quarterly GAAP operating margin of 32.5 percent and record non-GAAP operating margin of 32.7 percent, up 7.3 points and 6.3 points year over year, respectively
  • Record quarterly GAAP EPS of $1.87 and record non-GAAP EPS of $1.90, up 105 percent and 79 percent year over year, respectively

SANTA CLARA, Calif., Aug. 19, 2021 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its third quarter ended Aug. 1, 2021.

Third Quarter Results

Applied generated revenue of $6.20 billion. On a GAAP basis, the company recorded gross margin of 47.9 percent, operating income of $2.01 billion or 32.5 percent of net sales, and earnings per share (EPS) of $1.87.

On a non-GAAP adjusted basis, the company reported gross margin of 48.0 percent, operating income of $2.03 billion or 32.7 percent of net sales, and EPS of $1.90.

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The company generated $1.69 billion in cash from operations and returned $1.72 billion to shareholders including $1.50 billion in share repurchases and $219 million in dividends.

“Applied Materials delivered record performance as long-term trends fueled by the digital transformation of the economy drive strong, secular demand for semiconductors,” said Gary Dickerson, President and CEO. “Applied has the broadest and most enabling portfolio of technologies to accelerate our customers’ roadmaps, putting us in a great position to outperform our markets again in 2021 and the years ahead.”

Quarterly Results Summary

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 Q3 FY2021 Q3 FY2020 Change
 (In millions, except per share amounts and percentages)
 Net sales$6,196  $4,395  41%
 Gross margin47.9% 44.5% 3.4 points
 Operating margin32.5% 25.2% 7.3 points
 Net income$1,716  $841  104%
 Diluted earnings per share$1.87  $0.91  105%
Non-GAAP Adjusted Results     
 Non-GAAP adjusted gross margin48.0% 45.0% 3.0 points
 Non-GAAP adjusted operating margin32.7% 26.4% 6.3 points
 Non-GAAP adjusted net income$1,740  $976  78%
 Non-GAAP adjusted diluted EPS$1.90  $1.06  79%

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 2021, Applied expects net sales to be approximately $6.33 billion, plus or minus $250 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.87 to $2.01.

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 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 FY2021 Q3 FY2020
 (In millions, except percentages)
Net sales$4,454  $2,916 
Foundry, logic and other63% 55%
DRAM20% 22%
Flash memory17% 23%
Operating income$1,785  $958 
Operating margin40.1% 32.9%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$1,794  $982 
Non-GAAP adjusted operating margin40.3% 33.7%

 

Applied Global ServicesQ3 FY2021 Q3 FY2020
 (In millions, except percentages)
Net sales$1,286  $1,034 
Operating income$393  $273 
Operating margin30.6% 26.4%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$393  $277 
Non-GAAP adjusted operating margin30.6% 26.8%

 

Display and Adjacent MarketsQ3 FY2021 Q3 FY2020
 (In millions, except percentages)
Net sales$431  $425 
Operating income$99  $83 
Operating margin23.0% 19.5%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$100  $87 
Non-GAAP adjusted operating margin23.2% 20.5%


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. Additionally, non-GAAP results exclude estimated discrete income tax expense items associated with U.S. tax legislation. 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 2021 and beyond, the impact of the ongoing COVID-19 pandemic and responses thereto on our operations and financial results, 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; 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, including rules and interpretations promulgated by U.S. Department of Commerce expanding export license requirements for certain products sold to certain entities in China; 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; 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) August 1,
2021
  July 26,
2020
  August 1,
2021
  July 26,
2020
Net sales$6,196  $4,395  $16,940  $12,514 
Cost of products sold3,229  2,440  8,971  6,952 
Gross profit2,967  1,955  7,969  5,562 
Operating expenses:       
Research, development and engineering640  572  1,863  1,674 
Marketing and selling159  130  454  395 
General and administrative155  145  465  411 
Severance and related charges    158   
Deal termination fee    154   
Total operating expenses954  847  3,094  2,480 
Income from operations2,013  1,108  4,875  3,082 
Interest expense57  61  179  181 
Interest and other income, net24  (7) 69  22 
Income before income taxes1,980  1,040  4,765  2,923 
Provision for income taxes264  199  589  435 
Net income$1,716  $841  $4,176  $2,488 
Earnings per share:       
Basic$1.89  $0.92  $4.57  $2.71 
Diluted$1.87  $0.91  $4.52  $2.69 
Weighted average number of shares:       
Basic908  915  914  916 
Diluted918  922  923  924 

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions) August 1,
2021
  October 25,
2020
ASSETS   
Current assets:   
Cash and cash equivalents$6,066  $5,351 
Short-term investments444  387 
Accounts receivable, net3,822  2,963 
Inventories4,117  3,904 
Other current assets799  764 
Total current assets15,248  13,369 
Long-term investments1,658  1,538 
Property, plant and equipment, net1,814  1,604 
Goodwill3,479  3,466 
Purchased technology and other intangible assets, net116  153 
Deferred income taxes and other assets2,164  2,223 
Total assets$24,479  $22,353 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$3,437  $3,138 
Contract liabilities1,688  1,321 
Total current liabilities5,125  4,459 
Long-term debt, net of current portion5,451  5,448 
Income taxes payable1,144  1,206 
Other liabilities699  662 
Total liabilities12,419  11,775 
Total stockholders’ equity12,060  10,578 
Total liabilities and stockholders’ equity$24,479  $22,353 

 

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

(In millions)

Three Months Ended Nine Months Ended
August 1,
2021
  July 26,
2020
August 1,
2021
  July 26,
2020
Cash flows from operating activities:       
Net income$1,716  $841  $4,176  $2,488 
Adjustments required to reconcile net income to cash provided by operating activities:       
Depreciation and amortization98  94  289  279 
Severance and related charges    149   
Share-based compensation81  70  272  234 
Deferred income taxes20  79  44  98 
Other(15) 33  (30) 55 
Net change in operating assets and liabilities(214) (250) (606) (665)
Cash provided by operating activities1,686  867  4,294  2,489 
Cash flows from investing activities:       
Capital expenditures(137) (87) (462) (260)
Cash paid for acquisitions, net of cash acquired  (80) (12) (107)
Proceeds from sales and maturities of investments400  353  1,024  1,388 
Purchases of investments(457) (178) (1,179) (1,010)
Cash provided by (used in) investing activities(194) 8  (629) 11 
Cash flows from financing activities:       
Debt borrowings, net of issuance costs  1,481    2,979 
Debt repayments  (2,882)   (2,882)
Proceeds from common stock issuances    86  91 
Common stock repurchases(1,500) (200) (2,250) (599)
Tax withholding payments for vested equity awards(12) (3) (171) (166)
Payments of dividends to stockholders(219) (202) (622) (587)
Cash used in financing activities(1,731) (1,806) (2,957) (1,164)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents(239) (931) 708  1,336 
Cash, cash equivalents and restricted cash equivalents—beginning of period6,413  5,396  5,466  3,129 
Cash, cash equivalents and restricted cash equivalents — end of period$6,174  $4,465  $6,174  $4,465 
        
Reconciliation of cash, cash equivalents, and restricted cash equivalents       
Cash and cash equivalents$6,066  $4,350  $6,066  $4,350 
Restricted cash equivalents included in deferred income taxes and other assets108  115  108  115 
Total cash, cash equivalents, and restricted cash equivalents$6,174  $4,465  $6,174  $4,465 
        
Supplemental cash flow information:       
Cash payments for income taxes$232  $238  $641  $519 
Cash refunds from income taxes$3  $  $26  $5 
Cash payments for interest$34  $41  $137  $151 

 

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions)Q3 FY2021 Q3 FY2020
Unallocated net sales$25  $20 
Unallocated cost of products sold and expenses(208) (156)
Share-based compensation(81) (70)
Total$(264) $(206)


Additional Information

 Q3 FY2021 Q3 FY2020
Net Sales by Geography ( In millions ) 
United States$533  $399 
% of Total9% 9%
Europe$238  $196 
% of Total4% 5%
Japan$449  $472 
% of Total7% 11%
Korea$1,291  $1,051 
% of Total21% 24%
Taiwan$1,261  $687 
% of Total20% 16%
Southeast Asia$173  $120 
% of Total3% 2%
China$2,251  $1,470 
% of Total36% 33%
    
Employees (In thousands)   
Regular Full Time26.0  23.6 

 

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

 Three Months Ended Nine Months Ended
(In millions, except percentages) August 1,
2021
  July 26,
2020
  August 1,
2021
  July 26,
2020
Non-GAAP Adjusted Gross Profit       
Reported gross profit - GAAP basis$2,967   $1,955   $7,969   $5,562  
Certain items associated with acquisitions16   8   21   25  
Certain incremental expenses related to COVID-192   15   12   23  
Other charges      2     
Non-GAAP adjusted gross profit$2,973   $1,978   $8,004   $5,610  
Non-GAAP adjusted gross margin48.0 % 45.0 % 47.2 % 44.8 %
Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$2,013   $1,108   $4,875   $3,082  
Certain items associated with acquisitions111   12   36   38  
Acquisition integration and deal costs5   20   40   54  
Certain incremental expenses related to COVID-192   20   24   30  
Severance and related charges3      158     
Deal termination fee      154     
Other charges      6     
Non-GAAP adjusted operating income$2,029   $1,160   $5,293   $3,204  
Non-GAAP adjusted operating margin32.7 % 26.4 % 31.2 % 25.6 %
Non-GAAP Adjusted Net Income       
Reported net income - GAAP basis$1,716   $841   $4,176   $2,488  
Certain items associated with acquisitions111   12   36   38  
Acquisition integration and deal costs5   20   41   54  
Certain incremental expenses related to COVID-192   20   24   30  
Severance and related charges3      158     
Deal termination fee      154     
Realized loss (gain) on strategic investments, net(6)  (8)  (2)  (1) 
Unrealized loss (gain) on strategic investments, net(13)  (5)  (45)  (1) 
Loss on early extinguishment of debt   33      33  
Other charges      6     
Income tax effect of share-based compensation411   12   (12)  (13) 
Income tax effects related to intra-entity intangible asset transfers23   67   60   104  
Resolution of prior years’ income tax filings and other tax items(9)  (1)  (22)  (5) 
Income tax effect of non-GAAP adjustments52   (15)  (43)  (30) 
Non-GAAP adjusted net income$1,740   $976   $4,531   $2,697  

 

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) August 1,
2021
  July 26,
2020
  August 1,
2021
  July 26,
2020
Non-GAAP Adjusted Earnings Per Diluted Share       
Reported earnings per diluted share - GAAP basis$1.87  $0.91  $4.52  $2.69 
Certain items associated with acquisitions0.01  0.01  0.03  0.04 
Acquisition integration and deal costs0.01  0.02  0.04  0.05 
Certain incremental expenses related to COVID-19  0.02  0.02  0.03 
Loss on early extinguishment of debt  0.03    0.03 
Severance and related charges    0.13   
Deal termination fee    0.17   
Realized loss (gain) on strategic investments, net(0.01) (0.01) 0.01   
Unrealized loss (gain) on strategic investments, net(0.01)   (0.05)  
Other charges    0.01   
Income tax effect of share-based compensation0.01  0.01  (0.01) (0.02)
Income tax effects related to intra-entity intangible asset transfers0.03  0.07  0.06  0.11 
Resolution of prior years’ income tax filings and other tax items(0.01)   (0.02) (0.01)
Non-GAAP adjusted earnings per diluted share$1.90  $1.06  $4.91  $2.92 
Weighted average number of diluted shares918  922  923  924 

 

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

 Three Months Ended Nine Months Ended
(In millions, except percentages) August 1,
2021
  July 26,
2020
  August 1,
2021
  July 26,
2020
Semiconductor Systems Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,785  $958  $4,588   $2,655 
Certain items associated with acquisitions19  9  29   29 
Acquisition integration costs  1  (2)  1 
Certain incremental expenses related to COVID-192  14  12   20 
Other charges    3    
Non-GAAP adjusted operating income$1,794  $982  $4,630   $2,705 
Non-GAAP adjusted operating margin40.3% 33.7% 38.7 % 32.6%
AGS Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$393  $273  $1,083   $807 
Certain incremental expenses related to COVID-192  4  8   8 
Other charges    1    
Non-GAAP adjusted operating income$393  $277  $1,092   $815 
Non-GAAP adjusted operating margin30.6% 26.8% 30.0 % 26.7%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$99  $83  $229   $196 
Certain items associated with acquisitions11  3  3   9 
Certain incremental expenses related to COVID-192  1  1   1 
Severance and related charges3    8    
Non-GAAP adjusted operating income$100  $87  $241   $206 
Non-GAAP adjusted operating margin23.2% 20.5% 19.8 % 18.4%

 

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)August 1, 2021
  
Provision for income taxes - GAAP basis (a)$264  
Income tax effect of share-based compensation(11) 
Income tax effects related to intra-entity intangible asset transfers(23) 
Resolutions of prior years’ income tax filings and other tax items9  
Income tax effect of non-GAAP adjustments(2) 
Non-GAAP adjusted provision for income taxes (b)$237  
  
Income before income taxes - GAAP basis (c)$1,980  
Certain items associated with acquisitions11  
Acquisition integration and deal costs5  
Realized loss (gain) on strategic investments, net(6) 
Unrealized loss (gain) on strategic investments, net(13) 
Non-GAAP adjusted income before income taxes (d)$1,977  
  
Effective income tax rate - GAAP basis (a/c)13.3 %
  
Non-GAAP adjusted effective income tax rate (b/d)12.0 %