GlobeNewswire Inc | Nov 18, 2021 04:01PM EST

November 18, 2021

-- 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 FY2021 Q4 FY2021 Q4 FY2020 FY2021 FY2020 vs. vs. Q4 FY2020 FY2020 (In millions, except per share amounts and percentages)Net sales $ 6,123 $ 4,688 $ 23,063 $ 17,202 31% 34%Gross 48.1 % 45.4 % 47.3 % 44.7 % 2.7 2.6margin points pointsOperating 32.9 % 27.4 % 29.9 % 25.4 % 5.5 4.5margin points pointsNet $ 1,712 $ 1,131 $ 5,888 $ 3,619 51% 63%incomeDilutedearnings $ 1.89 $ 1.23 $ 6.40 $ 3.92 54% 63%per shareNon-GAAPAdjusted ResultsNon-GAAPadjusted 48.2 % 45.7 % 47.5 % 45.1 % 2.5 2.4gross points pointsmarginNon-GAAPadjusted 33.1 % 28.3 % 31.7 % 26.3 % 4.8 5.4operating points pointsmarginNon-GAAPadjusted $ 1,756 $ 1,148 $ 6,287 $ 3,845 53% 64%netincomeNon-GAAPadjusted $ 1.94 $ 1.25 $ 6.84 $ 4.17 55% 64%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 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 Systems Q4 FY2021 Q4 FY2020 FY2021 FY2020 (In millions, except percentages)Net sales $ 4,307 $ 3,070 $ 16,286 $ 11,367 Foundry, logic and other 63 % 58 % 60 % 59 %DRAM 23 % 21 % 19 % 20 %Flash memory 14 % 21 % 21 % 21 %Operating income $ 1,723 $ 1,059 6,311 3,714 Operating margin 40.0 % 34.5 % 38.8 % 32.7 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 1,732 $ 1,073 $ 6,362 $ 3,778 incomeNon-GAAP adjusted operating 40.2 % 35.0 % 39.1 % 33.2 %margin

Applied Global Services Q4 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 margin 31.0 % 28.9 % 30.1 % 27.1 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 425 $ 320 $ 1,517 $ 1,135 incomeNon-GAAP adjusted operating 31.0 % 28.9 % 30.3 % 27.3 %margin



Display and Adjacent Markets Q4 Q4 FY2021 FY2020 FY2021 FY2020 (In millions, except percentages)Net sales $ 417 $ 485 $ 1,634 $ 1,607 Operating income $ 85 $ 95 314 291 Operating margin 20.4 % 19.6 % 19.2 % 18.1 %Non-GAAP Adjusted Results Non-GAAP adjusted operating $ 86 $ 98 $ 327 $ 304 incomeNon-GAAP adjusted operating 20.6 % 20.2 % 20.0 % 18.9 %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 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 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 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 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 Twelve Months Ended(In millions, except per share October October October Octoberamounts) 31, 25, 31, 25, 2021 2020 2021 2020Net sales $ 6,123 $ 4,688 $ 23,063 $ 17,202 Cost of products sold 3,178 2,558 12,149 9,510 Gross profit 2,945 2,130 10,914 7,692 Operating expenses: Research, development and 622 560 2,485 2,234 engineeringMarketing and selling 155 131 609 526 General and administrative 155 156 620 567 Severance and related charges (1 ) ? 157 ? Deal termination fee ? ? 154 ? Total operating expenses 931 847 4,025 3,327 Income from operations 2,014 1,283 6,889 4,365 Interest expense 57 59 236 240 Interest and other income, net 49 19 118 41 Income before income taxes 2,006 1,243 6,771 4,166 Provision for income taxes 294 112 883 547 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:Basic 898 914 910 916 Diluted 907 921 919 923

APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

October October(In millions) 31, 25, 2021 2020ASSETS Current assets: Cash and cash equivalents $ 4,995 $ 5,351 Short-term investments 464 387 Accounts receivable, net 4,953 2,963 Inventories 4,309 3,904 Other current assets 1,386 764 Total current assets 16,107 13,369 Long-term investments 2,055 1,538 Property, plant and equipment, net 1,934 1,604 Goodwill 3,479 3,466 Purchased technology and other intangible assets, net 104 153 Deferred income taxes and other assets 2,146 2,223 Total assets $ 25,825 $ 22,353 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable and accrued expenses $ 4,268 $ 3,138 Contract liabilities 2,076 1,321 Total current liabilities 6,344 4,459 Long-term debt 5,452 5,448 Income taxes payable 1,090 1,206 Other liabilities 692 662 Total liabilities 13,578 11,775 Total stockholders? equity 12,247 10,578 Total liabilities and stockholders? equity $ 25,825 $ 22,353

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

Three Months Ended Twelve Months Ended(In millions) October October October October 31, 25, 31, 25, 2021 2020 2021 2020Cash flows from operating activities:Net income $ 1,712 $ 1,131 $ 5,888 $ 3,619 Adjustments required to reconcilenet income to cash provided by operating activities: Depreciation and 105 97 394 376 amortization Severance and related (1 ) ? 148 ? charges Share-based compensation 74 73 346 307 Deferred income taxes 36 (18 ) 80 80 Other (40 ) 5 (70 ) 60 Net change in operating (738 ) 27 (1,344 ) (638 )assets and liabilitiesCash provided by operating 1,148 1,315 5,442 3,804 activitiesCash flows from investing activities:Capital expenditures (206 ) (162 ) (668 ) (422 )Cash paid for acquisitions, net ? ? (12 ) (107 )of cash acquiredProceeds from sales and 447 366 1,471 1,754 maturities of investmentsPurchases 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 ? ? ? 2,979 costsDebt repayments ? ? ? (2,882 )Proceeds from common stock 89 83 175 174 issuancesCommon stock repurchases (1,500 ) (50 ) (3,750 ) (649 )Tax withholding payments for (7 ) (6 ) (178 ) (172 )vested equity awardsPayments of dividends to (216 ) (200 ) (838 ) (787 )stockholdersCash used in financing activities (1,634 ) (173 ) (4,591 ) (1,337 )Increase (decrease) in cash, cashequivalents and restricted cash (1,073 ) 1,001 (365 ) 2,337 equivalentsCash, cash equivalents andrestricted cash 6,174 4,465 5,466 3,129 equivalents?beginning of periodCash, cash equivalents andrestricted cash equivalents? end $ 5,101 $ 5,466 $ 5,101 $ 5,466 of period Reconciliation of cash, cashequivalents, and restricted cash equivalentsCash and cash equivalents $ 4,995 $ 5,351 $ 4,995 $ 5,351 Restricted cash equivalentsincluded in deferred income taxes 106 115 106 115 and other assetsTotal cash, cash equivalents, and $ 5,101 $ 5,466 $ 5,101 $ 5,466 restricted cash equivalents 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 Q4 FY2021 FY2020 FY2021 FY2020Unallocated net sales $ 30 $ 27 $ 130 $ 73 Unallocated cost of products sold and (176 ) (145 ) (725 ) (533 )expensesShare-based compensation (74 ) (73 ) (346 ) (307 )Severance and related charges 1 ? (149 ) ? Deal termination fee ? ? (154 ) ? Total $ (219 ) $ (191 ) $ (1,244 ) $ (767 )

Additional Information

Q4 FY2021 Q4 FY2020 FY2021 FY2020Net Sales by Geography (In millions)United States $ 673 $ 448 $ 2,038 $ 1,619 % of Total 11 % 10 % 9 % 10 %Europe $ 331 $ 206 $ 1,097 $ 736 % of Total 5 % 4 % 5 % 4 %Japan $ 613 $ 706 $ 1,962 $ 1,996 % of Total 10 % 15 % 8 % 11 %Korea $ 1,004 $ 719 $ 5,012 $ 3,031 % of Total 17 % 15 % 22 % 18 %Taiwan $ 1,240 $ 872 $ 4,742 $ 3,953 % of Total 20 % 19 % 20 % 23 %Southeast Asia $ 205 $ 161 $ 677 $ 411 % of Total 3 % 3 % 3 % 2 %China $ 2,057 $ 1,576 $ 7,535 $ 5,456 % of Total 34 % 34 % 33 % 32 % Employees (In thousands) Regular Full Time 27.2 24.0

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

Three Months Ended Twelve Months Ended(In millions, except October 31, October 25, October 31, October 25,percentages) 2021 2020 2021 2020Non-GAAP Adjusted Gross ProfitReported gross profit - $ 2,945 $ 2,130 $ 10,914 $ 7,692 GAAP basisCertain items associated 6 12 27 37 with acquisitions^1Certain incrementalexpenses related to ? ? 12 23 COVID-19^2Other charges ? ? 2 ? Non-GAAP adjusted gross $ 2,951 $ 2,142 $ 10,955 $ 7,752 profitNon-GAAP adjusted gross 48.2 % 45.7 % 47.5 % 45.1 %marginNon-GAAP Adjusted Operating IncomeReported operating $ 2,014 $ 1,283 $ 6,889 $ 4,365 income - GAAP basisCertain items associated 11 16 47 54 with acquisitions^1Acquisition integration 5 26 45 80 and deal costsCertain incrementalexpenses related to ? ? 24 30 COVID-19^2Severance and related (1 ) ? 157 ? charges^3Deal termination fee ? ? 154 ? Other charges ? ? 6 ? Non-GAAP adjusted $ 2,029 $ 1,325 $ 7,322 $ 4,529 operating incomeNon-GAAP adjusted 33.1 % 28.3 % 31.7 % 26.3 %operating marginNon-GAAP Adjusted Net IncomeReported net income - $ 1,712 $ 1,131 $ 5,888 $ 3,619 GAAP basisCertain items associated 11 16 47 54 with acquisitions^1Acquisition integration 5 26 46 80 and deal costsCertain incrementalexpenses related to ? ? 24 30 COVID-19^2Severance and related (1 ) ? 157 ? charges^3Deal termination fee ? ? 154 ? Realized loss (gain) onstrategic investments, (41 ) ? (43 ) (1 ) netUnrealized loss (gain)on strategic (11 ) (7 ) (56 ) (8 ) investments, netLoss on early ? ? ? 33 extinguishment of debtOther charges ? ? 6 ? Income tax effect ofshare-based compensation 12 13 ? ? ^4Income tax effectsrelated to intra-entity 4 10 64 114 intangible assettransfersResolution of prioryears? income tax 55 (36 ) 33 (41 ) filings and other taxitemsIncome tax effect of 10 (5 ) (33 ) (35 ) non-GAAP adjustments^5Non-GAAP adjusted net $ 1,756 $ 1,148 $ 6,287 $ 3,845 income

^ These items are incremental charges attributable to completed acquisitions,1 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 Twelve Months Ended October October October October(In millions, except per share amounts) 31, 25, 31, 25, 2021 2020 2021 2020Non-GAAP Adjusted Earnings Per Diluted ShareReported earnings per diluted share - $ 1.89 $ 1.23 $ 6.40 $ 3.92 GAAP basisCertain items associated with 0.01 0.02 0.04 0.05 acquisitionsAcquisition integration and deal costs 0.01 0.02 0.04 0.07 Certain incremental expenses related to ? ? 0.02 0.03 COVID-19Loss on early extinguishment of debt ? ? ? 0.03 Severance and related charges ? ? 0.13 ? Deal termination fee ? ? 0.17 ? Realized loss (gain) on strategic (0.03 ) ? (0.03 ) ? investments, netUnrealized loss (gain) on strategic (0.01 ) (0.01 ) (0.05 ) (0.01 )investments, netOther charges ? ? 0.01 ? Income tax effect of share-based 0.01 0.02 ? ? compensationIncome tax effects related to ? 0.01 0.07 0.12 intra-entity intangible asset transfersResolution of prior years? income tax 0.06 (0.04 ) 0.04 (0.04 )filings and other tax itemsNon-GAAP adjusted earnings per diluted $ 1.94 $ 1.25 $ 6.84 $ 4.17 shareWeighted average number of diluted 907 921 919 923 shares

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

Three Months Ended Twelve Months Ended(In millions, except October October October 31, Octoberpercentages) 31, 25, 2021 25, 2021 2020 2020Semiconductor Systems Non-GAAP Adjusted Operating IncomeReported operating income - $ 1,723 $ 1,059 $ 6,311 $ 3,714 GAAP basisCertain items associated with 9 12 38 41 acquisitions^1Acquisition integration costs ? 2 (2 ) 3 Certain incremental expenses ? ? 12 20 related to COVID-19^2Other charges ? ? 3 ? Non-GAAP adjusted operating $ 1,732 $ 1,073 $ 6,362 $ 3,778 incomeNon-GAAP adjusted operating 40.2 % 35.0 % 39.1 % 33.2 %marginAGS Non-GAAP Adjusted Operating IncomeReported operating income - $ 425 $ 320 $ 1,508 $ 1,127 GAAP basisCertain incremental expenses ? ? 8 8 related to COVID-19^2Other charges ? ? 1 ? Non-GAAP adjusted operating $ 425 $ 320 $ 1,517 $ 1,135 incomeNon-GAAP adjusted operating 31.0 % 28.9 % 30.3 % 27.3 %marginDisplay and Adjacent MarketsNon-GAAP Adjusted Operating IncomeReported operating income - $ 85 $ 95 $ 314 $ 291 GAAP basisCertain items associated with 1 3 4 12 acquisitions^1Certain incremental expenses ? ? 1 1 related to COVID-19^2Severance and related charges^3 ? ? 8 ? Non-GAAP adjusted operating $ 86 $ 98 $ 327 $ 304 incomeNon-GAAP adjusted operating 20.6 % 20.2 % 20.0 % 18.9 %margin

^ These items are incremental charges attributable to completed acquisitions,1 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) 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 (4 ) transfersResolutions of prior years? income tax filings and other tax (55 ) itemsIncome 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 acquisitions 11 Acquisition integration and deal costs 5 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 %