GlobeNewswire Inc | Aug 19, 2021 04:01PM EDT

August 19, 2021

-- 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.

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

Q3 FY2021 Q3 FY2020 Change (In millions, except per share amounts and percentages)Net sales $ 6,196 $ 4,395 41%Gross margin 47.9 % 44.5 % 3.4 pointsOperating margin 32.5 % 25.2 % 7.3 pointsNet income $ 1,716 $ 841 104%Diluted earnings per share $ 1.87 $ 0.91 105%Non-GAAP Adjusted Results Non-GAAP adjusted gross 48.0 % 45.0 % 3.0 pointsmarginNon-GAAP adjusted operating 32.7 % 26.4 % 6.3 pointsmarginNon-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 Systems Q3 FY2021 Q3 FY2020 (In millions, except percentages)Net sales $ 4,454 $ 2,916 Foundry, logic and other 63 % 55 %DRAM 20 % 22 %Flash memory 17 % 23 %Operating income $ 1,785 $ 958 Operating margin 40.1 % 32.9 %Non-GAAP Adjusted Results Non-GAAP adjusted operating income $ 1,794 $ 982 Non-GAAP adjusted operating margin 40.3 % 33.7 %



Applied Global Services Q3 FY2021 Q3 FY2020 (In millions, except percentages)Net sales $ 1,286 $ 1,034 Operating income $ 393 $ 273 Operating margin 30.6 % 26.4 %Non-GAAP Adjusted Results Non-GAAP adjusted operating income $ 393 $ 277 Non-GAAP adjusted operating margin 30.6 % 26.8 %



Display and Adjacent Markets Q3 FY2021 Q3 FY2020 (In millions, except percentages)Net sales $ 431 $ 425 Operating income $ 99 $ 83 Operating margin 23.0 % 19.5 %Non-GAAP Adjusted Results Non-GAAP adjusted operating income $ 100 $ 87 Non-GAAP adjusted operating margin 23.2 % 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 companys 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 companys business from the same perspective as the companys management, and facilitate comparisons of this periods 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 managements 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) 408.235.4676Michael 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 August 1, July 26, August 1, July 26,amounts) 2021 2020 2021 2020Net sales $ 6,196 $ 4,395 $ 16,940 $ 12,514 Cost of products sold 3,229 2,440 8,971 6,952 Gross profit 2,967 1,955 7,969 5,562 Operating expenses: Research, development and 640 572 1,863 1,674 engineeringMarketing and selling 159 130 454 395 General and administrative 155 145 465 411 Severance and related charges ? ? 158 ? Deal termination fee ? ? 154 ? Total operating expenses 954 847 3,094 2,480 Income from operations 2,013 1,108 4,875 3,082 Interest expense 57 61 179 181 Interest and other income, net 24 (7 ) 69 22 Income before income taxes 1,980 1,040 4,765 2,923 Provision for income taxes 264 199 589 435 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:Basic 908 915 914 916 Diluted 918 922 923 924



APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions) August 1, October 25, 2021 2020ASSETS Current assets: Cash and cash equivalents $ 6,066 $ 5,351 Short-term investments 444 387 Accounts receivable, net 3,822 2,963 Inventories 4,117 3,904 Other current assets 799 764 Total current assets 15,248 13,369 Long-term investments 1,658 1,538 Property, plant and equipment, net 1,814 1,604 Goodwill 3,479 3,466 Purchased technology and other intangible assets, net 116 153 Deferred income taxes and other assets 2,164 2,223 Total assets $ 24,479 $ 22,353 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable and accrued expenses $ 3,437 $ 3,138 Contract liabilities 1,688 1,321 Total current liabilities 5,125 4,459 Long-term debt, net of current portion 5,451 5,448 Income taxes payable 1,144 1,206 Other liabilities 699 662 Total liabilities 12,419 11,775 Total stockholders? equity 12,060 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, July 26, August 1, July 26, 2021 2020 2021 2020Cash flows from operating activities:Net income $ 1,716 $ 841 $ 4,176 $ 2,488 Adjustments required to reconcilenet income to cash provided by operating activities:Depreciation and amortization 98 94 289 279 Severance and related charges ? ? 149 ? Share-based compensation 81 70 272 234 Deferred income taxes 20 79 44 98 Other (15 ) 33 (30 ) 55 Net change in operating assets (214 ) (250 ) (606 ) (665 )and liabilitiesCash provided by operating 1,686 867 4,294 2,489 activitiesCash flows from investing activities:Capital expenditures (137 ) (87 ) (462 ) (260 )Cash paid for acquisitions, net ? (80 ) (12 ) (107 )of cash acquiredProceeds from sales and 400 353 1,024 1,388 maturities of investmentsPurchases of investments (457 ) (178 ) (1,179 ) (1,010 )Cash provided by (used in) (194 ) 8 (629 ) 11 investing activitiesCash flows from financing activities:Debt borrowings, net of issuance ? 1,481 ? 2,979 costsDebt repayments ? (2,882 ) ? (2,882 )Proceeds from common stock ? ? 86 91 issuancesCommon stock repurchases (1,500 ) (200 ) (2,250 ) (599 )Tax withholding payments for (12 ) (3 ) (171 ) (166 )vested equity awardsPayments of dividends to (219 ) (202 ) (622 ) (587 )stockholdersCash used in financing activities (1,731 ) (1,806 ) (2,957 ) (1,164 )Increase (decrease) in cash, cashequivalents and restricted cash (239 ) (931 ) 708 1,336 equivalentsCash, cash equivalents andrestricted cash 6,413 5,396 5,466 3,129 equivalents?beginning of periodCash, cash equivalents andrestricted cash equivalents? end $ 6,174 $ 4,465 $ 6,174 $ 4,465 of period Reconciliation of cash, cashequivalents, and restricted cash equivalentsCash and cash equivalents $ 6,066 $ 4,350 $ 6,066 $ 4,350 Restricted cash equivalentsincluded in deferred income taxes 108 115 108 115 and other assetsTotal cash, cash equivalents, and $ 6,174 $ 4,465 $ 6,174 $ 4,465 restricted cash equivalents 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 FY2020Unallocated 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 FY2020Net Sales by Geography (In millions) United States $ 533 $ 399 % of Total 9 % 9 %Europe $ 238 $ 196 % of Total 4 % 5 %Japan $ 449 $ 472 % of Total 7 % 11 %Korea $ 1,291 $ 1,051 % of Total 21 % 24 %Taiwan $ 1,261 $ 687 % of Total 20 % 16 %Southeast Asia $ 173 $ 120 % of Total 3 % 2 %China $ 2,251 $ 1,470 % of Total 36 % 33 % Employees (In thousands) Regular Full Time 26.0 23.6



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

Three Months Ended Nine Months Ended(In millions, except August 1, July 26, August 1, July 26,percentages) 2021 2020 2021 2020Non-GAAP Adjusted Gross ProfitReported gross profit - $ 2,967 $ 1,955 $ 7,969 $ 5,562 GAAP basisCertain items associated 6 8 21 25 with acquisitions^1Certain incrementalexpenses related to ? 15 12 23 COVID-19^2Other charges ? ? 2 ? Non-GAAP adjusted gross $ 2,973 $ 1,978 $ 8,004 $ 5,610 profitNon-GAAP adjusted gross 48.0 % 45.0 % 47.2 % 44.8 %marginNon-GAAP Adjusted Operating IncomeReported operating income $ 2,013 $ 1,108 $ 4,875 $ 3,082 - GAAP basisCertain items associated 11 12 36 38 with acquisitions^1Acquisition integration 5 20 40 54 and deal costsCertain incrementalexpenses related to ? 20 24 30 COVID-19^2Severance and related ? ? 158 ? charges^3Deal termination fee ? ? 154 ? Other charges ? ? 6 ? Non-GAAP adjusted $ 2,029 $ 1,160 $ 5,293 $ 3,204 operating incomeNon-GAAP adjusted 32.7 % 26.4 % 31.2 % 25.6 %operating marginNon-GAAP Adjusted Net IncomeReported net income - $ 1,716 $ 841 $ 4,176 $ 2,488 GAAP basisCertain items associated 11 12 36 38 with acquisitions^1Acquisition integration 5 20 41 54 and deal costsCertain incrementalexpenses related to ? 20 24 30 COVID-19^2Severance and related ? ? 158 ? charges^3Deal termination fee ? ? 154 ? Realized loss (gain) onstrategic investments, (6 ) (8 ) (2 ) (1 ) netUnrealized loss (gain) onstrategic investments, (13 ) (5 ) (45 ) (1 ) netLoss on early ? 33 ? 33 extinguishment of debtOther charges ? ? 6 ? Income tax effect ofshare-based compensation^ 11 12 (12 ) (13 ) 4Income tax effectsrelated to intra-entity 23 67 60 104 intangible assettransfersResolution of prioryears? income tax filings (9 ) (1 ) (22 ) (5 ) and other tax itemsIncome tax effect of 2 (15 ) (43 ) (30 ) non-GAAP adjustments^5Non-GAAP adjusted net $ 1,740 $ 976 $ 4,531 $ 2,697 income



1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2 Temporary incremental employee compensation during the COVID-19 pandemic. 3 The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees. 4 GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis. 5 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 Nine Months Ended(In millions, except per share August July 26, August July 26,amounts) 1, 2020 1, 2020 2021 2021Non-GAAP Adjusted Earnings Per Diluted ShareReported earnings per diluted share - $ 1.87 $ 0.91 $ 4.52 $ 2.69 GAAP basisCertain items associated with 0.01 0.01 0.03 0.04 acquisitionsAcquisition integration and deal 0.01 0.02 0.04 0.05 costsCertain incremental expenses related ? 0.02 0.02 0.03 to COVID-19Loss 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 (0.01 ) (0.01 ) 0.01 ? investments, netUnrealized loss (gain) on strategic (0.01 ) ? (0.05 ) ? investments, netOther charges ? ? 0.01 ? Income tax effect of share-based 0.01 0.01 (0.01 ) (0.02 )compensationIncome tax effects related tointra-entity intangible asset 0.03 0.07 0.06 0.11 transfersResolution of prior years? income tax (0.01 ) ? (0.02 ) (0.01 )filings and other tax itemsNon-GAAP adjusted earnings per $ 1.90 $ 1.06 $ 4.91 $ 2.92 diluted shareWeighted average number of diluted 918 922 923 924 shares



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

Three Months Ended Nine Months Ended August 1, July August 1, July 26,(In millions, except percentages) 2021 26, 2021 2020 2020Semiconductor Systems Non-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 1,785 $ 958 $ 4,588 $ 2,655 basisCertain items associated with 9 9 29 29 acquisitions^1Acquisition integration costs ? 1 (2 ) 1 Certain incremental expenses ? 14 12 20 related to COVID-19^2Other charges ? ? 3 ? Non-GAAP adjusted operating $ 1,794 $ 982 $ 4,630 $ 2,705 incomeNon-GAAP adjusted operating 40.3 % 33.7 % 38.7 % 32.6 %marginAGS Non-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 393 $ 273 $ 1,083 $ 807 basisCertain incremental expenses ? 4 8 8 related to COVID-19^2Other charges ? ? 1 ? Non-GAAP adjusted operating $ 393 $ 277 $ 1,092 $ 815 incomeNon-GAAP adjusted operating 30.6 % 26.8 % 30.0 % 26.7 %marginDisplay and Adjacent MarketsNon-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 99 $ 83 $ 229 $ 196 basisCertain items associated with 1 3 3 9 acquisitions^1Certain incremental expenses ? 1 1 1 related to COVID-19^2Severance and related charges^3 ? ? 8 ? Non-GAAP adjusted operating $ 100 $ 87 $ 241 $ 206 incomeNon-GAAP adjusted operating 23.2 % 20.5 % 19.8 % 18.4 %margin



1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.2 Temporary incremental employee compensation during the COVID-19 pandemic.3 The 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 (23 ) transfersResolutions of prior years? income tax filings and other tax 9 itemsIncome 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 acquisitions 11 Acquisition integration and deal costs 5 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 %