GlobeNewswire Inc | Nov 12, 2020 04:01PM EST

November 12, 2020

-- Record quarterly revenue of $4.69 billion, up 25 percent year over year -- Record quarterly GAAP EPS of $1.23 and non-GAAP EPS of $1.25, up 64 percent and 56 percent year over year, respectively -- Generated record annual cash from operations of $3.80 billion

SANTA CLARA, Calif., Nov. 12, 2020 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its fourth quarter and fiscal year ended Oct. 25, 2020.

Fourth Quarter Results

Applied generated revenue of $4.69 billion. On a GAAP basis, the company recorded gross margin of 45.4 percent, operating income of $1.28 billion or 27.4 percent of net sales, and earnings per share (EPS) of $1.23.

On a non-GAAP adjusted basis, the company reported gross margin of 45.7 percent, operating income of $1.33 billion or 28.3 percent of net sales, and EPS of $1.25.

The company generated $1.32 billion in cash from operations and returned $250 million to shareholders including $200 million in dividends and $50 million in share repurchases.

Full Year Results

In fiscal 2020, Applied generated revenue of $17.20 billion. On a GAAP basis, the company recorded gross margin of 44.7 percent, operating income of $4.37 billion or 25.4 percent of net sales, and EPS of $3.92.

On a non-GAAP adjusted basis, the company reported gross margin of 45.1 percent, operating income of $4.53 billion or 26.3 percent of net sales, and EPS of $4.17.

The company generated a record $3.80 billion in cash from operations, paid dividends of $787 million and used $649 million to repurchase 12 million shares of common stock.

Applied Materials closed fiscal 2020 with record quarterly performance as demand for our semiconductor systems and services remains very strong, said Gary Dickerson, president and CEO. Our future opportunities have never looked better and, as powerful technology trends take shape, we are uniquely positioned to accelerate our customers roadmaps and outperform our markets.

Results Summary

Change Q4 FY2020 FY2020 Q4 FY2020 Q4 FY2019 FY2020 FY2019 vs. vs. Q4 FY2019 FY2019 (In millions, except per share amounts and percentages)Net sales $ 4,688 $ 3,754 $ 17,202 $ 14,608 25 % 18 %Gross 45.4 % 43.5 % 44.7 % 43.7 % 1.9 1.0margin points pointsOperating 27.4 % 23.0 % 25.4 % 22.9 % 4.4 2.5margin points pointsNet $ 1,131 $ 698 $ 3,619 $ 2,706 62 % 34 %incomeDilutedearnings $ 1.23 $ 0.75 $ 3.92 $ 2.86 64 % 37 %per shareNon-GAAPAdjusted ResultsNon-GAAPadjusted 45.7 % 43.8 % 45.1 % 44.0 % 1.9 1.1gross points pointsmarginNon-GAAPadjusted 28.3 % 23.7 % 26.3 % 23.5 % 4.6 2.8operating points pointsmarginNon-GAAPadjusted $ 1,148 $ 744 $ 3,845 $ 2,875 54 % 34 %netincomeNon-GAAPadjusted $ 1.25 $ 0.80 $ 4.17 $ 3.04 56 % 37 %dilutedEPS

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 2021, Applied expects net sales to be approximately $4.95 billion, plus or minus $200 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.20 to $1.32.

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

Fourth Quarter and Fiscal Year Reportable Segment Information

Semiconductor Systems Q4 FY2020 Q4 FY2019 FY2020 FY2019 (In millions, except percentages)Net sales $ 3,070 $ 2,302 $ 11,367 $ 9,027 Foundry, logic and other 58 % 58 % 59 % 52 %DRAM 21 % 21 % 20 % 22 %Flash memory 21 % 21 % 21 % 26 %Operating income 1,059 641 3,714 2,464 Operating margin 34.5 % 27.8 % 32.7 % 27.3 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 1,073 $ 652 $ 3,778 $ 2,507 incomeNon-GAAP adjusted operating 35.0 % 28.3 % 33.2 % 27.8 %margin

Applied Global Services Q4 FY2020 Q4 FY2020 FY2019 FY2019 (In millions, except percentages)Net sales $ 1,106 $ 977 $ 4,155 $ 3,854 Operating income 320 274 1,127 1,101 Operating margin 28.9 % 28.0 % 27.1 % 28.6 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 320 $ 274 $ 1,135 $ 1,101 incomeNon-GAAP adjusted operating 28.9 % 28.0 % 27.3 % 28.6 %margin

Display and Adjacent Markets Q4 Q4 FY2020 FY2019 FY2020 FY2019 (In millions, except percentages)Net sales $ 485 $ 457 $ 1,607 $ 1,651 Operating income 95 96 291 294 Operating margin 19.6 % 21.0 % 18.1 % 17.8 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 98 $ 99 $ 304 $ 307 incomeNon-GAAP adjusted operating 20.2 % 21.7 % 18.9 % 18.6 %margin

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; certain incremental expenses related to COVID-19; impairments of assets, or investments; gain or loss on sale of 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 first quarter of fiscal 2021 and beyond, the impact of the ongoing COVID-19 pandemic and responses thereto on our operations and financial results, strategic acquisitions and investments, including the proposed acquisition of Kokusai Electric Corporation, 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, including the severity and duration of the ongoing COVID-19 pandemic; global trade issues and changes in trade and export license policies, including the impact of the implementation and interpretation of the rules published by the U.S. Department of Commerce on April 28, 2020 and August 17, 2020 relating to certain export license requirements; 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 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 Twelve Months Ended(In millions, except per October October October 25, October 27,share amounts) 25, 27, 2020 2019 2020 2019Net sales $ 4,688 $ 3,754 $ 17,202 $ 14,608 Cost of products sold 2,558 2,120 9,510 8,222 Gross profit 2,130 1,634 7,692 6,386 Operating expenses: Research, development 560 515 2,234 2,054 and engineeringMarketing and selling 131 129 526 521 General and 156 126 567 461 administrativeTotal operating expenses 847 770 3,327 3,036 Income from operations 1,283 864 4,365 3,350 Interest expense 59 59 240 237 Interest and other 19 35 41 156 income (loss), netIncome before income 1,243 840 4,166 3,269 taxesProvision for income 112 142 547 563 taxesNet income $ 1,131 $ 698 $ 3,619 $ 2,706 Earnings per share: Basic $ 1.24 $ 0.76 $ 3.95 $ 2.89 Diluted $ 1.23 $ 0.75 $ 3.92 $ 2.86 Weighted average number of shares:Basic 914 920 916 937 Diluted 921 931 923 945

APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

October October(In millions) 25, 27, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 5,351 $ 3,129 Short-term investments 387 489 Accounts receivable, net 2,963 2,533 Inventories 3,904 3,474 Other current assets 764 581 Total current assets 13,369 10,206 Long-term investments 1,538 1,703 Property, plant and equipment, net 1,604 1,529 Goodwill 3,466 3,399 Purchased technology and other intangible assets, net 153 156 Deferred income taxes and other assets 2,223 2,031 Total assets $ 22,353 $ 19,024 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Current portion of long-term debt $ ? $ 600 Accounts payable and accrued expenses 3,138 2,511 Contract liabilities 1,321 1,336 Total current liabilities 4,459 4,447 Long-term debt, net of current portion 5,448 4,713 Income taxes payable 1,206 1,275 Other liabilities 662 375 Total liabilities 11,775 10,810 Total stockholders? equity 10,578 8,214 Total liabilities and stockholders? equity $ 22,353 $ 19,024

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

Three Months Ended Twelve Months Ended(In millions) October October October October 25, 27, 25, 27, 2020 2019 2020 2019Cash flows from operating activities:Net income $ 1,131 $ 698 $ 3,619 $ 2,706 Adjustments required to reconcilenet income to cash provided by operating activities:Depreciation and amortization 97 92 376 363 Share-based compensation 73 66 307 263 Deferred income taxes (18 ) (8 ) 80 49 Other 5 ? 60 (19 )Net change in operating assets 27 (22 ) (638 ) (115 )and liabilitiesCash provided by operating 1,315 826 3,804 3,247 activitiesCash flows from investing activities:Capital expenditures (162 ) (97 ) (422 ) (441 )Cash paid for acquisitions, net ? ? (107 ) (28 )of cash acquiredProceeds from sales and 366 555 1,754 1,940 maturities of investmentsPurchases of investments (345 ) (544 ) (1,355 ) (1,914 )Cash used in investing activities (141 ) (86 ) (130 ) (443 )Cash flows from financing activities:Debt borrowings, net of issuance ? ? 2,979 ? costsDebt repayments ? ? (2,882 ) ? Proceeds from common stock 83 72 174 145 issuancesCommon stock repurchases (50 ) (500 ) (649 ) (2,403 )Tax withholding payments for (6 ) (3 ) (172 ) (86 )vested equity awardsPayments of dividends to (200 ) (194 ) (787 ) (771 )stockholdersCash used in financing activities (173 ) (625 ) (1,337 ) (3,115 )Increase (decrease) in cash, cashequivalents and restricted cash 1,001 115 2,337 (311 )equivalentsCash, cash equivalents andrestricted cash 4,465 3,014 3,129 3,440 equivalents?beginning of periodCash, cash equivalents andrestricted cash equivalents? end $ 5,466 $ 3,129 $ 5,466 $ 3,129 of period Reconciliation of cash, cashequivalents, and restricted cash equivalentsCash and cash equivalents $ 5,351 $ 3,129 $ 5,351 $ 3,129 Restricted cash equivalentsincluded in deferred income taxes 115 ? 115 ? and other assetsTotal cash, cash equivalents, and $ 5,466 $ 3,129 $ 5,466 $ 3,129 restricted cash equivalents Supplemental cash flow information:Cash payments for income taxes $ 23 $ 69 $ 542 $ 522 Cash refunds from income taxes $ 63 $ 2 $ 68 $ 22 Cash payments for interest $ 68 $ 76 $ 219 $ 219

APPLIED MATERIALS, INC.UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions) Q4 FY2020 Q4 FY2019 FY2020 FY2019Unallocated net sales $ 27 $ 18 $ 73 $ 76 Unallocated cost of products (145 ) (99 ) (533 ) (322 )sold and expensesShare-based compensation (73 ) (66 ) (307 ) (263 )Total $ (191 ) $ (147 ) $ (767 ) $ (509 )

Additional Information

Q4 Q4 FY2020 FY2019 FY2020 FY2019Net Sales by Geography (In millions)United States 448 412 1,619 1,871 % of Total 10 % 11 % 10 % 13 %Europe 206 147 736 820 % of Total 4 % 4 % 4 % 6 %Japan 706 471 1,996 2,198 % of Total 15 % 13 % 11 % 15 %Korea 719 471 3,031 1,929 % of Total 15 % 13 % 18 % 13 %Taiwan 872 919 3,953 2,965 % of Total 19 % 24 % 23 % 20 %Southeast Asia 161 135 411 548 % of Total 3 % 3 % 2 % 4 %China 1,576 1,199 5,456 4,277 % of Total 34 % 32 % 32 % 29 % Employees (In thousands) Regular Full Time 24.0 22.0

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

Three Months Ended Twelve Months Ended October October October October(In millions, except percentages) 25, 27, 25, 27, 2020 2019 2020 2019Non-GAAP Adjusted Gross Profit Reported gross profit - GAAP basis $ 2,130 $ 1,634 $ 7,692 $ 6,386 Certain items associated with 12 9 37 37 acquisitions^1Certain incremental expenses ? ? 23 ? related to COVID-19^5Non-GAAP adjusted gross profit $ 2,142 $ 1,643 $ 7,752 $ 6,423 Non-GAAP adjusted gross margin 45.7 % 43.8 % 45.1 % 44.0 %Non-GAAP Adjusted Operating Income Reported operating income - GAAP $ 1,283 $ 864 $ 4,365 $ 3,350 basisCertain items associated with 16 14 54 55 acquisitions^1Acquisition integration and deal 26 10 80 22 costsCertain incremental expenses ? ? 30 ? related to COVID-19^5Non-GAAP adjusted operating income $ 1,325 $ 888 $ 4,529 $ 3,427 Non-GAAP adjusted operating margin 28.3 % 23.7 % 26.3 % 23.5 %Non-GAAP Adjusted Net Income Reported net income - GAAP basis $ 1,131 $ 698 $ 3,619 $ 2,706 Certain items associated with 16 14 54 55 acquisitions^1Acquisition integration and deal 26 10 80 22 costsCertain incremental expenses ? ? 30 ? related to COVID-19^5Realized loss (gain) on strategic ? ? (1 ) (6 )investments, netUnrealized loss (gain) on (7 ) (5 ) (8 ) (30 )strategic investments, netLoss on early extinguishment of ? ? 33 ? debtIncome tax effect of share-based 13 4 ? ? compensation^2Income tax effect of changes in ? ? ? (24 )applicable U.S. tax laws^3Income tax effects related tointra-entity intangible asset 10 6 114 62 transfersResolution of prior years? income (36 ) 20 (41 ) 95 tax filings and other tax itemsIncome tax effect of non-GAAP (5 ) (3 ) (35 ) (5 )adjustments^4Non-GAAP adjusted net income $ 1,148 $ 744 $ 3,845 $ 2,875

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. 5 Temporary incremental employee compensation during the COVID-19 pandemic.

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

Three Months Ended Twelve Months Ended October October October October(In millions, except per share amounts) 25, 27, 25, 27, 2020 2019 2020 2019Non-GAAP Adjusted Earnings Per Diluted ShareReported earnings per diluted share - $ 1.23 $ 0.75 $ 3.92 $ 2.86 GAAP basisCertain items associated with 0.02 0.01 0.05 0.05 acquisitionsAcquisition integration and deal costs 0.02 0.01 0.07 0.02 Certain incremental expenses related to ? ? 0.03 ? COVID-19Loss on early extinguishment of debt ? ? 0.03 ? Unrealized loss (gain) on strategic (0.01 ) ? (0.01 ) (0.03 )investments, netIncome tax effect of share-based 0.02 ? ? ? compensationIncome tax effect of changes in ? ? ? (0.03 )applicable U.S. tax lawsIncome tax effects related to 0.01 0.01 0.12 0.07 intra-entity intangible asset transfersResolution of prior years? income tax (0.04 ) 0.02 (0.04 ) 0.10 filings and other tax itemsNon-GAAP adjusted earnings per diluted $ 1.25 $ 0.80 $ 4.17 $ 3.04 shareWeighted average number of diluted 921 931 923 945 shares

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

Three Months Ended Twelve Months Ended October October October October(In millions, except percentages) 25, 27, 25, 27, 2020 2019 2020 2019Semiconductor Systems Non-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 1,059 $ 641 $ 3,714 $ 2,464 basisCertain items associated with 12 11 41 43 acquisitions^1Acquisition integration costs 2 ? 3 ? Certain incremental expenses related ? ? 20 ? to COVID-19^2Non-GAAP adjusted operating income $ 1,073 $ 652 $ 3,778 $ 2,507 Non-GAAP adjusted operating margin 35.0 % 28.3 % 33.2 % 27.8 %AGS Non-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 320 $ 274 $ 1,127 $ 1,101 basisCertain incremental expenses related ? ? 8 ? to COVID-19^2Non-GAAP adjusted operating income $ 320 $ 274 $ 1,135 $ 1,101 Non-GAAP adjusted operating margin 28.9 % 28.0 % 27.3 % 28.6 %Display and Adjacent Markets Non-GAAP Adjusted Operating IncomeReported operating income - GAAP $ 95 $ 96 $ 291 $ 294 basisCertain items associated with 3 3 12 12 acquisitions^1Acquisition integration costs ? ? ? 1 Certain incremental expenses related ? ? 1 ? to COVID-19^2Non-GAAP adjusted operating income $ 98 $ 99 $ 304 $ 307 Non-GAAP adjusted operating margin 20.2 % 21.7 % 18.9 % 18.6 %

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.

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 25, 2020 Provision for income taxes - GAAP basis (a) $ 112 Income tax effect of share-based compensation (13 )Income tax effects related to intra-entity intangible asset (10 )transfersResolutions of prior years? income tax filings and other tax 36 itemsIncome tax effect of non-GAAP adjustments 5 Non-GAAP adjusted provision for income taxes (b) $ 130 Income before income taxes - GAAP basis (c) $ 1,243 Certain items associated with acquisitions 16 Acquisition integration and deal costs 26 Unrealized loss (gain) on strategic investments, net (7 )Non-GAAP adjusted income before income taxes (d) $ 1,278 Effective income tax rate - GAAP basis (a/c) 9.0 % Non-GAAP adjusted effective income tax rate (b/d) 10.2 %