Applied Materials, Inc. (NASDAQ: AMAT) today reported results for
its first quarter ended Jan. 26, 2020.
First Quarter Results
Applied generated revenue of $4.16 billion. On a GAAP basis, the
company recorded gross margin of 44.6 percent, operating income of
$1.04 billion or 25.0 percent of net sales, and earnings per share
(EPS) of $0.96.
On a non-GAAP adjusted basis, the company reported gross margin
of 44.9 percent, operating income of $1.07 billion or 25.7 percent
of net sales, and EPS of $0.98.
The company returned $392 million to shareholders including $200
million in share repurchases and dividends of $192 million.
“Applied Materials’ first quarter earnings exceeded
the top-end of our guidance, giving us great momentum entering
2020,” said Gary Dickerson, president and CEO. “We believe we can
deliver strong double-digit growth in our semiconductor business
this year as our unique solutions accelerate our customers’ success
in the AI-Big Data era.”
Quarterly Results Summary
|
Q1 FY2020 |
|
Q1 FY2019 |
|
Change |
|
(In millions, except per share amounts and percentages) |
Net sales |
$ |
4,162 |
|
|
$ |
3,753 |
|
|
11 |
% |
Gross margin |
44.6 |
% |
|
44.4 |
% |
|
0.2 points |
Operating margin |
25.0 |
% |
|
24.2 |
% |
|
0.8 points |
Net income |
$ |
892 |
|
|
$ |
771 |
|
|
16 |
% |
Diluted earnings per share |
$ |
0.96 |
|
|
$ |
0.80 |
|
|
20 |
% |
Non-GAAP Adjusted Results |
|
|
|
|
|
Non-GAAP adjusted gross margin |
44.9 |
% |
|
44.6 |
% |
|
0.3 points |
Non-GAAP adjusted operating
margin |
25.7 |
% |
|
24.6 |
% |
|
1.1 points |
Non-GAAP adjusted net income |
$ |
904 |
|
|
$ |
779 |
|
|
16 |
% |
Non-GAAP adjusted diluted
EPS |
$ |
0.98 |
|
|
$ |
0.81 |
|
|
21 |
% |
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 2020, Applied expects net sales
to be approximately $4.34 billion, plus or minus $200 million.
Non-GAAP adjusted diluted EPS is expected to be in the range of
$0.98 to $1.10.
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 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.
First Quarter Reportable Segment
Information
Semiconductor
Systems |
Q1 FY2020 |
|
Q1 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
2,814 |
|
|
$ |
2,268 |
|
Foundry, logic and other |
68 |
% |
|
44 |
% |
DRAM |
15 |
% |
|
21 |
% |
Flash |
17 |
% |
|
35 |
% |
Operating income |
915 |
|
|
631 |
|
Operating margin |
32.5 |
% |
|
27.8 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
925 |
|
|
$ |
642 |
|
Non-GAAP adjusted operating
margin |
32.9 |
% |
|
28.3 |
% |
Applied Global
Services |
Q1 FY2020 |
|
Q1 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
997 |
|
|
$ |
962 |
|
Operating income |
278 |
|
|
285 |
|
Operating margin |
27.9 |
% |
|
29.6 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
278 |
|
|
$ |
285 |
|
Non-GAAP adjusted operating
margin |
27.9 |
% |
|
29.6 |
% |
Display and Adjacent
Markets |
Q1 FY2020 |
|
Q1 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
332 |
|
|
$ |
507 |
|
Operating income |
38 |
|
|
115 |
|
Operating margin |
11.4 |
% |
|
22.7 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
41 |
|
|
$ |
118 |
|
Non-GAAP adjusted operating
margin |
12.3 |
% |
|
23.3 |
% |
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 charges and any
associated adjustments; impairments of assets, or investments; gain
or loss on sale of strategic investments; tax effect of share-based
compensation; certain income tax items and other discrete
adjustments. Additionally, non-GAAP results exclude estimated
discrete income tax expense items associated with changes to 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
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, our investment and
growth strategies, our development of new products and
technologies, our business outlook for the second quarter of fiscal
2020 and beyond, the impact of the coronavirus outbreak 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; global economic and industry conditions; the effects of
regional or global health epidemics; global trade issues and
changes in trade 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; 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-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 the technology shaping the
future. Learn more at www.appliedmaterials.com.
Contact:
Ricky Gradwohl (editorial/media) 408.235.4676Michael
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 26, 2020 |
|
January 27, 2019 |
Net sales |
$ |
4,162 |
|
|
$ |
3,753 |
|
Cost of products sold |
2,304 |
|
|
2,088 |
|
Gross profit |
1,858 |
|
|
1,665 |
|
Operating expenses: |
|
|
|
Research, development and engineering |
552 |
|
|
516 |
|
Marketing and selling |
135 |
|
|
131 |
|
General and administrative |
129 |
|
|
110 |
|
Total operating expenses |
816 |
|
|
757 |
|
Income from operations |
1,042 |
|
|
908 |
|
Interest expense |
59 |
|
|
60 |
|
Interest and other income,
net |
22 |
|
|
40 |
|
Income before income taxes |
1,005 |
|
|
888 |
|
Provision for income taxes |
113 |
|
|
117 |
|
Net income |
$ |
892 |
|
|
$ |
771 |
|
Earnings per share: |
|
|
|
Basic |
$ |
0.97 |
|
|
$ |
0.81 |
|
Diluted |
$ |
0.96 |
|
|
$ |
0.80 |
|
Weighted average number of
shares: |
|
|
|
Basic |
916 |
|
|
957 |
|
Diluted |
927 |
|
|
965 |
|
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED
CONDENSED BALANCE SHEETS
(In millions) |
January 26, 2020 |
|
October 27, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,424 |
|
|
$ |
3,129 |
|
Short-term investments |
536 |
|
|
489 |
|
Accounts receivable, net |
2,679 |
|
|
2,533 |
|
Inventories |
3,472 |
|
|
3,474 |
|
Other current assets |
658 |
|
|
581 |
|
Total current assets |
10,769 |
|
|
10,206 |
|
Long-term investments |
1,713 |
|
|
1,703 |
|
Property, plant and equipment,
net |
1,555 |
|
|
1,529 |
|
Goodwill |
3,399 |
|
|
3,399 |
|
Purchased technology and other
intangible assets, net |
142 |
|
|
156 |
|
Deferred income taxes and other
assets |
2,189 |
|
|
2,031 |
|
Total assets |
$ |
19,767 |
|
|
$ |
19,024 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt |
$ |
600 |
|
|
$ |
600 |
|
Accounts payable and accrued expenses |
2,569 |
|
|
2,511 |
|
Contract liabilities |
1,400 |
|
|
1,336 |
|
Total current liabilities |
4,569 |
|
|
4,447 |
|
Long-term debt |
4,714 |
|
|
4,713 |
|
Income taxes payable |
1,298 |
|
|
1,275 |
|
Other liabilities |
526 |
|
|
375 |
|
Total liabilities |
11,107 |
|
|
10,810 |
|
Total stockholders’ equity |
8,660 |
|
|
8,214 |
|
Total liabilities and
stockholders’ equity |
$ |
19,767 |
|
|
$ |
19,024 |
|
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(In millions) |
Three Months Ended |
January 26, 2020 |
|
January 27, 2019 |
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
892 |
|
|
$ |
771 |
|
Adjustments required to reconcile net income to cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
94 |
|
|
88 |
|
Share-based compensation |
93 |
|
|
65 |
|
Deferred income taxes |
30 |
|
|
41 |
|
Other |
15 |
|
|
1 |
|
Net change in operating assets and liabilities |
(137 |
) |
|
(132 |
) |
Cash provided by operating
activities |
987 |
|
|
834 |
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(102 |
) |
|
(133 |
) |
Proceeds from sales and maturities of investments |
368 |
|
|
464 |
|
Purchases of investments |
(428 |
) |
|
(397 |
) |
Cash used in investing
activities |
(162 |
) |
|
(66 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from common stock issuances |
15 |
|
|
— |
|
Common stock repurchases |
(200 |
) |
|
(750 |
) |
Tax withholding payments for vested equity awards |
(153 |
) |
|
(74 |
) |
Payments of dividends to stockholders |
(192 |
) |
|
(192 |
) |
Cash used in financing
activities |
(530 |
) |
|
(1,016 |
) |
Increase (decrease) in cash and
cash equivalents |
295 |
|
|
(248 |
) |
Cash and cash equivalents —
beginning of period |
3,129 |
|
|
3,440 |
|
Cash and cash equivalents —
end of period |
$ |
3,424 |
|
|
$ |
3,192 |
|
Supplemental cash flow
information: |
|
|
|
Cash payments for income taxes |
$ |
82 |
|
|
$ |
34 |
|
Cash refunds from income taxes |
$ |
1 |
|
|
$ |
8 |
|
Cash payments for interest |
$ |
34 |
|
|
$ |
34 |
|
APPLIED MATERIALS, INC.UNAUDITED SUPPLEMENTAL
INFORMATION
Corporate and
Other |
|
|
|
(In millions) |
Q1 FY2020 |
|
Q1 FY2019 |
Unallocated net sales |
$ |
19 |
|
|
$ |
16 |
|
Unallocated cost of products sold
and expenses |
(115 |
) |
|
(74 |
) |
Share-based compensation |
(93 |
) |
|
(65 |
) |
Total |
$ |
(189 |
) |
|
$ |
(123 |
) |
Additional
Information |
|
|
|
|
Q1 FY2020 |
|
Q1 FY2019 |
Net Sales by Geography (In
millions) |
|
United States |
441 |
|
|
450 |
|
% of Total |
10 |
% |
|
12 |
% |
Europe |
153 |
|
|
296 |
|
% of Total |
4 |
% |
|
8 |
% |
Japan |
351 |
|
|
651 |
|
% of Total |
8 |
% |
|
17 |
% |
Korea |
508 |
|
|
572 |
|
% of Total |
12 |
% |
|
15 |
% |
Taiwan |
1,365 |
|
|
656 |
|
% of Total |
33 |
% |
|
18 |
% |
Southeast Asia |
72 |
|
|
160 |
|
% of Total |
2 |
% |
|
4 |
% |
China |
1,272 |
|
|
968 |
|
% of Total |
31 |
% |
|
26 |
% |
|
|
|
|
Employees (In thousands) |
|
|
|
Regular Full Time |
22.3 |
|
|
21.2 |
|
APPLIED MATERIALS, INC.UNAUDITED
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
|
Three Months Ended |
(In millions, except
percentages) |
January 26, 2020 |
|
January 27, 2019 |
Non-GAAP Adjusted Gross
Profit |
|
|
|
Reported gross profit - GAAP basis |
$ |
1,858 |
|
|
$ |
1,665 |
|
Certain items associated with
acquisitions1 |
9 |
|
|
10 |
|
Non-GAAP adjusted gross
profit |
$ |
1,867 |
|
|
$ |
1,675 |
|
Non-GAAP adjusted gross
margin |
44.9 |
% |
|
44.6 |
% |
Non-GAAP Adjusted Operating
Income |
|
|
|
Reported operating income - GAAP
basis |
$ |
1,042 |
|
|
$ |
908 |
|
Certain items associated with
acquisitions1 |
13 |
|
|
14 |
|
Acquisition integration and deal
costs |
13 |
|
|
3 |
|
Non-GAAP adjusted operating
income |
$ |
1,068 |
|
|
$ |
925 |
|
Non-GAAP adjusted operating
margin |
25.7 |
% |
|
24.6 |
% |
Non-GAAP Adjusted Net Income |
|
|
|
Reported net income - GAAP
basis |
$ |
892 |
|
|
$ |
771 |
|
Certain items associated with
acquisitions1 |
13 |
|
|
14 |
|
Acquisition integration and deal
costs |
13 |
|
|
3 |
|
Impairment (gain on sale) of
strategic investments, net |
2 |
|
|
(2 |
) |
Loss (gain) on strategic
investments, net |
2 |
|
|
(10 |
) |
Income tax effect of share-based compensation2 |
(33 |
) |
|
(5 |
) |
Income tax effect of changes in applicable U.S. tax laws3 |
— |
|
|
(24 |
) |
Income tax effects related to
amortization of intra-entity intangible asset transfers |
21 |
|
|
(28 |
) |
Resolution of prior years’ income
tax filings and other tax items |
(1 |
) |
|
59 |
|
Income tax effect of non-GAAP
adjustments4 |
(5 |
) |
|
1 |
|
Non-GAAP adjusted net income |
$ |
904 |
|
|
$ |
779 |
|
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 |
Charges to income tax provision
related to a one-time transition tax as a result of U.S. tax
legislation. |
|
|
4 |
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 ADJUSTED RESULTS
|
Three Months Ended |
(In millions, except per share
amounts) |
January 26, 2020 |
|
January 27, 2019 |
Non-GAAP Adjusted Earnings Per
Diluted Share |
|
|
|
Reported earnings per diluted share - GAAP basis |
$ |
0.96 |
|
|
$ |
0.80 |
|
Certain items associated with
acquisitions |
0.01 |
|
|
0.01 |
|
Acquisition integration and deal
costs |
0.01 |
|
|
— |
|
Loss (gain) on strategic
investments, net |
— |
|
|
(0.01 |
) |
Income tax effect of share-based compensation |
(0.03 |
) |
|
— |
|
Income tax effect of changes in
applicable U.S. tax laws |
— |
|
|
(0.02 |
) |
Income tax effects related to amortization of intra-entity
intangible asset transfers |
0.03 |
|
|
(0.03 |
) |
Resolution of prior years’ income
tax filings and other tax items |
— |
|
|
0.06 |
|
Non-GAAP adjusted earnings per
diluted share |
$ |
0.98 |
|
|
$ |
0.81 |
|
Weighted average number of
diluted shares |
927 |
|
|
965 |
|
APPLIED MATERIALS, INC.UNAUDITED RECONCILIATION
OF GAAP TO NON-GAAP ADJUSTED RESULTS
|
Three Months Ended |
(In millions, except
percentages) |
January 26, 2020 |
|
January 27, 2019 |
Semiconductor Systems Non-GAAP
Adjusted Operating Income |
|
|
|
Reported operating income - GAAP basis |
$ |
915 |
|
|
$ |
631 |
|
Certain items associated with
acquisitions1 |
10 |
|
|
11 |
|
Non-GAAP adjusted operating
income |
$ |
925 |
|
|
$ |
642 |
|
Non-GAAP adjusted operating
margin |
32.9 |
% |
|
28.3 |
% |
AGS Non-GAAP Adjusted Operating
Income |
|
|
|
Reported operating income - GAAP
basis |
$ |
278 |
|
|
$ |
285 |
|
Non-GAAP adjusted operating
income |
$ |
278 |
|
|
$ |
285 |
|
Non-GAAP adjusted operating
margin |
27.9 |
% |
|
29.6 |
% |
Display and Adjacent Markets
Non-GAAP Adjusted Operating Income |
|
|
|
Reported operating income - GAAP
basis |
$ |
38 |
|
|
$ |
115 |
|
Certain items associated with
acquisitions1 |
3 |
|
|
3 |
|
Non-GAAP adjusted operating
income |
$ |
41 |
|
|
$ |
118 |
|
Non-GAAP adjusted operating
margin |
12.3 |
% |
|
23.3 |
% |
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 26, 2020 |
|
|
Provision for income taxes - GAAP basis (a) |
$ |
113 |
|
Income tax effect of share-based
compensation |
33 |
|
Income tax effects related to
amortization of 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 |
5 |
|
Non-GAAP adjusted provision for
income taxes (b) |
$ |
131 |
|
|
|
Income before income taxes - GAAP
basis (c) |
$ |
1,005 |
|
Certain items associated with
acquisitions |
13 |
|
Acquisition integration and deal
costs |
13 |
|
Impairment (gain on sale) of
strategic investments, net |
2 |
|
Loss (gain) on strategic
investments, net |
2 |
|
Non-GAAP adjusted income before
income taxes (d) |
$ |
1,035 |
|
|
|
Effective income tax rate - GAAP
basis (a/c) |
11.2 |
% |
|
|
Non-GAAP adjusted effective
income tax rate (b/d) |
12.7 |
% |
Applied Materials (NASDAQ:AMAT)
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Applied Materials (NASDAQ:AMAT)
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From May 2023 to May 2024