Applied Materials, Inc. (NASDAQ: AMAT) today reported results for
its third quarter ended July 26, 2020.
Third Quarter Results
Applied generated revenue of $4.40 billion. On a GAAP basis, the
company recorded gross margin of 44.5 percent, operating income of
$1.11 billion or 25.2 percent of net sales, and earnings per share
(EPS) of $0.91.
On a non-GAAP adjusted basis, the company reported gross margin
of 45.0 percent, operating income of $1.16 billion or 26.4 percent
of net sales, and EPS of $1.06.
The company returned $402 million to shareholders including $200
million in share repurchases and dividends of $202 million.
“Thanks to the hard work and agility of our employees and
suppliers, Applied Materials is operating at pre-COVID levels of
productivity and delivering outstanding financial results,” said
Gary Dickerson, president and CEO. “By addressing our customers’
highest value problems, Applied is outperforming today and is
positioned to grow faster than our markets over the next several
years.”
Quarterly Results Summary
|
Q3 FY2020 |
|
Q3 FY2019 |
|
Change |
|
|
|
(In millions, except per share amounts and percentages) |
Net sales |
$ |
4,395 |
|
|
$ |
3,562 |
|
|
23 |
% |
Gross margin |
44.5 |
% |
|
43.7 |
% |
|
0.8 points |
Operating margin |
25.2 |
% |
|
22.5 |
% |
|
2.7 points |
Net income |
$ |
841 |
|
|
$ |
571 |
|
|
47 |
% |
Diluted earnings per share |
$ |
0.91 |
|
|
$ |
0.61 |
|
|
49 |
% |
Non-GAAP Adjusted Results |
|
|
|
|
|
Non-GAAP adjusted gross margin |
45.0 |
% |
|
44.0 |
% |
|
1.0 points |
Non-GAAP adjusted operating
margin |
26.4 |
% |
|
23.0 |
% |
|
3.4 points |
Non-GAAP adjusted net income |
$ |
976 |
|
|
$ |
692 |
|
|
41 |
% |
Non-GAAP adjusted diluted
EPS |
$ |
1.06 |
|
|
$ |
0.74 |
|
|
43 |
% |
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 2020, Applied expects net sales
to be approximately $4.60 billion, plus or minus $200 million.
Non-GAAP adjusted diluted EPS is expected to be in the range of
$1.11 to $1.23.
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
$0.02 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.
Third Quarter Reportable Segment
Information
Semiconductor
Systems |
Q3 FY2020 |
|
Q3 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
2,916 |
|
|
$ |
2,273 |
|
Foundry, logic and other |
55 |
% |
|
49 |
% |
DRAM |
22 |
% |
|
27 |
% |
Flash memory |
23 |
% |
|
24 |
% |
Operating income |
958 |
|
|
613 |
|
Operating margin |
32.9 |
% |
|
27.0 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
982 |
|
|
$ |
624 |
|
Non-GAAP adjusted operating
margin |
33.7 |
% |
|
27.5 |
% |
Applied Global
Services |
Q3 FY2020 |
|
Q3 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
1,034 |
|
|
$ |
931 |
|
Operating income |
273 |
|
|
259 |
|
Operating margin |
26.4 |
% |
|
27.8 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
277 |
|
|
$ |
259 |
|
Non-GAAP adjusted operating
margin |
26.8 |
% |
|
27.8 |
% |
Display and Adjacent
Markets |
Q3 FY2020 |
|
Q3 FY2019 |
|
(In millions, except percentages) |
Net sales |
$ |
425 |
|
|
$ |
339 |
|
Operating income |
83 |
|
|
41 |
|
Operating margin |
19.5 |
% |
|
12.1 |
% |
Non-GAAP
Adjusted Results |
|
|
Non-GAAP adjusted operating
income |
$ |
87 |
|
|
$ |
44 |
|
Non-GAAP adjusted operating
margin |
20.5 |
% |
|
13.0 |
% |
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 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, our investment and
growth strategies, our development of new products and
technologies, our business outlook for the fourth quarter of fiscal
2020 and beyond, the impact of the 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; global economic and industry
conditions; the effects of regional or global health epidemics,
including the severity and duration of the COVID-19 pandemic;
global trade issues and changes in trade and export license
policies, including the impact of the rules published by the U.S.
Department of Commerce on April 28, 2020 and May 15, 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;
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 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 |
|
Nine Months Ended |
(In millions, except per share
amounts) |
July 26, 2020 |
|
July 28, 2019 |
|
July 26, 2020 |
|
July 28, 2019 |
Net sales |
$ |
4,395 |
|
|
|
$ |
3,562 |
|
|
$ |
12,514 |
|
|
$ |
10,854 |
|
Cost of products sold |
2,440 |
|
|
|
2,005 |
|
|
6,952 |
|
|
6,102 |
|
Gross profit |
1,955 |
|
|
|
1,557 |
|
|
5,562 |
|
|
4,752 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research, development and engineering |
572 |
|
|
|
515 |
|
|
1,674 |
|
|
1,539 |
|
Marketing and selling |
130 |
|
|
|
128 |
|
|
395 |
|
|
392 |
|
General and administrative |
145 |
|
|
|
112 |
|
|
411 |
|
|
335 |
|
Total operating expenses |
847 |
|
|
|
755 |
|
|
2,480 |
|
|
2,266 |
|
Income from operations |
1,108 |
|
|
|
802 |
|
|
3,082 |
|
|
2,486 |
|
Interest expense |
61 |
|
|
|
58 |
|
|
181 |
|
|
178 |
|
Interest and other income (loss),
net |
(7 |
) |
|
|
38 |
|
|
22 |
|
|
121 |
|
Income before income taxes |
1,040 |
|
|
|
782 |
|
|
2,923 |
|
|
2,429 |
|
Provision for income taxes |
199 |
|
|
|
211 |
|
|
435 |
|
|
421 |
|
Net income |
$ |
841 |
|
|
|
$ |
571 |
|
|
$ |
2,488 |
|
|
$ |
2,008 |
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.92 |
|
|
|
$ |
0.61 |
|
|
$ |
2.71 |
|
|
$ |
2.13 |
|
Diluted |
$ |
0.91 |
|
|
|
$ |
0.61 |
|
|
$ |
2.69 |
|
|
$ |
2.11 |
|
Weighted average number of
shares: |
|
|
|
|
|
|
|
Basic |
915 |
|
|
|
929 |
|
|
916 |
|
|
943 |
|
Diluted |
922 |
|
|
|
937 |
|
|
924 |
|
|
950 |
|
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED
CONDENSED BALANCE SHEETS
(In millions) |
July 26, 2020 |
|
October 27, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
4,350 |
|
|
$ |
3,129 |
|
Short-term investments |
406 |
|
|
489 |
|
Accounts receivable, net |
2,806 |
|
|
2,533 |
|
Inventories |
3,952 |
|
|
3,474 |
|
Other current assets |
734 |
|
|
581 |
|
Total current assets |
12,248 |
|
|
10,206 |
|
Long-term investments |
1,538 |
|
|
1,703 |
|
Property, plant and equipment,
net |
1,530 |
|
|
1,529 |
|
Goodwill |
3,474 |
|
|
3,399 |
|
Purchased technology and other
intangible assets, net |
157 |
|
|
156 |
|
Deferred income taxes and other
assets |
2,224 |
|
|
2,031 |
|
Total assets |
$ |
21,171 |
|
|
$ |
19,024 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt |
$ |
— |
|
|
$ |
600 |
|
Accounts payable and accrued expenses |
2,895 |
|
|
2,511 |
|
Contract liabilities |
1,390 |
|
|
1,336 |
|
Total current liabilities |
4,285 |
|
|
4,447 |
|
Long-term debt, net of current
portion |
5,447 |
|
|
4,713 |
|
Income taxes payable |
1,237 |
|
|
1,275 |
|
Other liabilities |
633 |
|
|
375 |
|
Total liabilities |
11,602 |
|
|
10,810 |
|
Total stockholders’ equity |
9,569 |
|
|
8,214 |
|
Total liabilities and
stockholders’ equity |
$ |
21,171 |
|
|
$ |
19,024 |
|
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(In millions) |
Three Months Ended |
|
Nine Months Ended |
July 26, 2020 |
|
July 28, 2019 |
July 26, 2020 |
|
July 28, 2019 |
Cash flows from operating
activities: |
|
|
|
|
|
|
|
Net income |
$ |
841 |
|
|
|
$ |
571 |
|
|
|
$ |
2,488 |
|
|
|
$ |
2,008 |
|
|
Adjustments required to reconcile net income to cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
94 |
|
|
|
89 |
|
|
|
279 |
|
|
|
271 |
|
|
Share-based compensation |
70 |
|
|
|
67 |
|
|
|
234 |
|
|
|
197 |
|
|
Deferred income taxes |
79 |
|
|
|
8 |
|
|
|
98 |
|
|
|
57 |
|
|
Other |
33 |
|
|
|
(10 |
) |
|
|
55 |
|
|
|
(19 |
) |
|
Net change in operating assets and liabilities |
(250 |
) |
|
|
62 |
|
|
|
(665 |
) |
|
|
(93 |
) |
|
Cash provided by operating
activities |
867 |
|
|
|
787 |
|
|
|
2,489 |
|
|
|
2,421 |
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Capital expenditures |
(87 |
) |
|
|
(93 |
) |
|
|
(260 |
) |
|
|
(344 |
) |
|
Cash paid for acquisitions, net of cash acquired |
(80 |
) |
|
|
(5 |
) |
|
|
(107 |
) |
|
|
(28 |
) |
|
Proceeds from sales and maturities of investments |
353 |
|
|
|
479 |
|
|
|
1,388 |
|
|
|
1,385 |
|
|
Purchases of investments |
(178 |
) |
|
|
(543 |
) |
|
|
(1,010 |
) |
|
|
(1,370 |
) |
|
Cash provided by (used in)
investing activities |
8 |
|
|
|
(162 |
) |
|
|
11 |
|
|
|
(357 |
) |
|
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 |
— |
|
|
|
— |
|
|
|
91 |
|
|
|
73 |
|
|
Common stock repurchases |
(200 |
) |
|
|
(528 |
) |
|
|
(599 |
) |
|
|
(1,903 |
) |
|
Tax withholding payments for vested equity awards |
(3 |
) |
|
|
(3 |
) |
|
|
(166 |
) |
|
|
(83 |
) |
|
Payments of dividends to stockholders |
(202 |
) |
|
|
(196 |
) |
|
|
(587 |
) |
|
|
(577 |
) |
|
Cash used in financing
activities |
(1,806 |
) |
|
|
(727 |
) |
|
|
(1,164 |
) |
|
|
(2,490 |
) |
|
Increase (decrease) in cash, cash
equivalents and restricted cash equivalents |
(931 |
) |
|
|
(102 |
) |
|
|
1,336 |
|
|
|
(426 |
) |
|
Cash, cash equivalents and
restricted cash equivalents—beginning of period |
5,396 |
|
|
|
3,116 |
|
|
|
3,129 |
|
|
|
3,440 |
|
|
Cash, cash equivalents and
restricted cash equivalents — end of period |
$ |
4,465 |
|
|
|
$ |
3,014 |
|
|
|
$ |
4,465 |
|
|
|
$ |
3,014 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash
equivalents, and restricted cash equivalents |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
4,350 |
|
|
|
$ |
3,014 |
|
|
|
$ |
4,350 |
|
|
|
$ |
3,014 |
|
|
Restricted cash equivalents included in deferred income taxes and
other assets |
115 |
|
|
|
— |
|
|
|
115 |
|
|
|
— |
|
|
Total cash, cash equivalents, and
restricted cash equivalents |
$ |
4,465 |
|
|
|
$ |
3,014 |
|
|
|
$ |
4,465 |
|
|
|
$ |
3,014 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
Cash payments for income taxes |
$ |
238 |
|
|
|
$ |
221 |
|
|
|
$ |
519 |
|
|
|
$ |
453 |
|
|
Cash refunds from income taxes |
$ |
— |
|
|
|
$ |
2 |
|
|
|
$ |
5 |
|
|
|
$ |
20 |
|
|
Cash payments for interest |
$ |
41 |
|
|
|
$ |
33 |
|
|
|
$ |
151 |
|
|
|
$ |
143 |
|
|
APPLIED MATERIALS, INC.UNAUDITED SUPPLEMENTAL
INFORMATION
Corporate and Other
(In millions) |
Q3 FY2020 |
|
Q3 FY2019 |
Unallocated net sales |
$ |
20 |
|
|
|
$ |
19 |
|
|
Unallocated cost of products sold
and expenses |
(156 |
) |
|
|
(63 |
) |
|
Share-based compensation |
(70 |
) |
|
|
(67 |
) |
|
Total |
$ |
(206 |
) |
|
|
$ |
(111 |
) |
|
Additional Information
|
Q3 FY2020 |
|
Q3 FY2019 |
Net Sales by Geography (In
millions) |
|
United States |
399 |
|
|
552 |
|
% of Total |
9 |
% |
|
15 |
% |
Europe |
196 |
|
|
162 |
|
% of Total |
5 |
% |
|
5 |
% |
Japan |
472 |
|
|
556 |
|
% of Total |
11 |
% |
|
16 |
% |
Korea |
1,051 |
|
|
445 |
|
% of Total |
24 |
% |
|
12 |
% |
Taiwan |
687 |
|
|
596 |
|
% of Total |
16 |
% |
|
17 |
% |
Southeast Asia |
120 |
|
|
134 |
|
% of Total |
2 |
% |
|
4 |
% |
China |
1,470 |
|
|
1,117 |
|
% of Total |
33 |
% |
|
31 |
% |
|
|
|
|
Employees (In thousands) |
|
|
|
Regular Full Time |
23.6 |
|
|
21.6 |
|
APPLIED MATERIALS, INC. UNAUDITED
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
|
Three Months Ended |
|
Nine Months Ended |
(In millions, except
percentages) |
July 26, 2020 |
|
July 28, 2019 |
|
July 26, 2020 |
|
July 28, 2019 |
Non-GAAP Adjusted Gross
Profit |
|
|
|
|
|
|
|
Reported gross profit - GAAP
basis |
$ |
1,955 |
|
|
|
$ |
1,557 |
|
|
|
$ |
5,562 |
|
|
|
$ |
4,752 |
|
|
Certain items associated with
acquisitions1 |
8 |
|
|
|
9 |
|
|
|
25 |
|
|
|
28 |
|
|
Certain incremental expenses
related to COVID-195 |
15 |
|
|
|
— |
|
|
|
23 |
|
|
|
— |
|
|
Non-GAAP adjusted gross
profit |
$ |
1,978 |
|
|
|
$ |
1,566 |
|
|
|
$ |
5,610 |
|
|
|
$ |
4,780 |
|
|
Non-GAAP adjusted gross
margin |
45.0 |
% |
|
|
44.0 |
% |
|
|
44.8 |
% |
|
|
44.0 |
% |
|
Non-GAAP Adjusted Operating
Income |
|
|
|
|
|
|
|
Reported operating income - GAAP
basis |
$ |
1,108 |
|
|
|
$ |
802 |
|
|
|
$ |
3,082 |
|
|
|
$ |
2,486 |
|
|
Certain items associated with
acquisitions1 |
12 |
|
|
|
13 |
|
|
|
38 |
|
|
|
41 |
|
|
Acquisition integration and deal
costs |
20 |
|
|
|
5 |
|
|
|
54 |
|
|
|
12 |
|
|
Certain incremental expenses
related to COVID-195 |
20 |
|
|
|
— |
|
|
|
30 |
|
|
|
— |
|
|
Non-GAAP adjusted operating
income |
$ |
1,160 |
|
|
|
$ |
820 |
|
|
|
$ |
3,204 |
|
|
|
$ |
2,539 |
|
|
Non-GAAP adjusted operating
margin |
26.4 |
% |
|
|
23.0 |
% |
|
|
25.6 |
% |
|
|
23.4 |
% |
|
Non-GAAP Adjusted Net Income |
|
|
|
|
|
|
|
Reported net income - GAAP
basis |
$ |
841 |
|
|
|
$ |
571 |
|
|
|
$ |
2,488 |
|
|
|
$ |
2,008 |
|
|
Certain items associated with
acquisitions1 |
12 |
|
|
|
13 |
|
|
|
38 |
|
|
|
41 |
|
|
Acquisition integration and deal
costs |
20 |
|
|
|
5 |
|
|
|
54 |
|
|
|
12 |
|
|
Certain incremental expenses
related to COVID-195 |
20 |
|
|
|
— |
|
|
|
30 |
|
|
|
— |
|
|
Realized loss (gain) on strategic
investments, net |
(8 |
) |
|
|
1 |
|
|
|
(1 |
) |
|
|
(6 |
) |
|
Unrealized loss (gain) on
strategic investments, net |
(5 |
) |
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(25 |
) |
|
Loss on early extinguishment of
debt |
33 |
|
|
|
— |
|
|
|
33 |
|
|
|
— |
|
|
Income tax effect of share-based compensation2 |
12 |
|
|
|
— |
|
|
|
(13 |
) |
|
|
(4 |
) |
|
Income tax effect of changes in applicable U.S. tax laws3 |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24 |
) |
|
Income tax effects related to
intra-entity intangible asset transfers |
67 |
|
|
|
115 |
|
|
|
104 |
|
|
|
56 |
|
|
Resolution of prior years’ income
tax filings and other tax items |
(1 |
) |
|
|
(1 |
) |
|
|
(5 |
) |
|
|
75 |
|
|
Income tax effect of non-GAAP
adjustments4 |
(15 |
) |
|
|
(3 |
) |
|
|
(30 |
) |
|
|
(2 |
) |
|
Non-GAAP adjusted net income |
$ |
976 |
|
|
|
$ |
692 |
|
|
|
$ |
2,697 |
|
|
|
$ |
2,131 |
|
|
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 |
|
Nine Months Ended |
(In millions, except per share
amounts) |
July 26, 2020 |
|
July 28, 2019 |
|
July 26, 2020 |
|
July 28, 2019 |
Non-GAAP Adjusted Earnings Per
Diluted Share |
|
|
|
|
|
|
|
Reported earnings per diluted
share - GAAP basis |
$ |
0.91 |
|
|
|
$ |
0.61 |
|
|
|
$ |
2.69 |
|
|
|
$ |
2.11 |
|
|
Certain items associated with
acquisitions |
0.01 |
|
|
|
0.01 |
|
|
|
0.04 |
|
|
|
0.04 |
|
|
Acquisition integration and deal
costs |
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.01 |
|
|
Certain incremental expenses
related to COVID-19 |
0.02 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
Loss on early extinguishment of
debt |
0.03 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
Realized loss (gain) on strategic
investments, net |
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Unrealized loss (gain) on
strategic investments, net |
— |
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
(0.03 |
) |
|
Income tax effect of share-based compensation |
0.01 |
|
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
|
Income tax effect of changes in
applicable U.S. tax laws |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.03 |
) |
|
Income tax effects related to intra-entity intangible asset
transfers |
0.07 |
|
|
|
0.12 |
|
|
|
0.11 |
|
|
|
0.06 |
|
|
Resolution of prior years’ income
tax filings and other tax items |
— |
|
|
|
— |
|
|
|
(0.01 |
) |
|
|
0.08 |
|
|
Non-GAAP adjusted earnings per
diluted share |
$ |
1.06 |
|
|
|
$ |
0.74 |
|
|
|
$ |
2.92 |
|
|
|
$ |
2.24 |
|
|
Weighted average number of
diluted shares |
922 |
|
|
|
937 |
|
|
|
924 |
|
|
|
950 |
|
|
APPLIED MATERIALS, INC.UNAUDITED RECONCILIATION
OF GAAP TO NON-GAAP ADJUSTED RESULTS
|
Three Months Ended |
|
Nine Months Ended |
(In millions, except
percentages) |
July 26, 2020 |
|
July 28, 2019 |
|
July 26, 2020 |
|
July 28, 2019 |
Semiconductor Systems Non-GAAP
Adjusted Operating Income |
|
|
|
|
|
|
|
Reported operating income - GAAP
basis |
$ |
958 |
|
|
$ |
613 |
|
|
$ |
2,655 |
|
|
$ |
1,823 |
|
Certain items associated with
acquisitions1 |
9 |
|
|
11 |
|
|
29 |
|
|
32 |
|
Acquisition integration
costs |
1 |
|
|
— |
|
|
1 |
|
|
— |
|
Certain incremental expenses
related to COVID-192 |
14 |
|
|
— |
|
|
20 |
|
|
— |
|
Non-GAAP adjusted operating
income |
$ |
982 |
|
|
$ |
624 |
|
|
$ |
2,705 |
|
|
$ |
1,855 |
|
Non-GAAP adjusted operating
margin |
33.7 |
% |
|
27.5 |
% |
|
32.6 |
% |
|
27.6 |
% |
AGS Non-GAAP Adjusted Operating
Income |
|
|
|
|
|
|
|
Reported operating income - GAAP
basis |
$ |
273 |
|
|
$ |
259 |
|
|
$ |
807 |
|
|
$ |
827 |
|
Certain incremental expenses
related to COVID-192 |
4 |
|
|
— |
|
|
8 |
|
|
— |
|
Non-GAAP adjusted operating
income |
$ |
277 |
|
|
$ |
259 |
|
|
$ |
815 |
|
|
$ |
827 |
|
Non-GAAP adjusted operating
margin |
26.8 |
% |
|
27.8 |
% |
|
26.7 |
% |
|
28.7 |
% |
Display and Adjacent Markets
Non-GAAP Adjusted Operating Income |
|
|
|
|
|
|
|
Reported operating income - GAAP
basis |
$ |
83 |
|
|
$ |
41 |
|
|
$ |
196 |
|
|
$ |
198 |
|
Certain items associated with
acquisitions1 |
3 |
|
|
2 |
|
|
9 |
|
|
9 |
|
Acquisition integration
costs |
— |
|
|
1 |
|
|
— |
|
|
1 |
|
Certain incremental expenses related to COVID-192 |
1 |
|
|
— |
|
|
1 |
|
|
— |
|
Non-GAAP adjusted operating
income |
$ |
87 |
|
|
$ |
44 |
|
|
$ |
206 |
|
|
$ |
208 |
|
Non-GAAP adjusted operating
margin |
20.5 |
% |
|
13.0 |
% |
|
18.4 |
% |
|
17.4 |
% |
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 MonthsEnded |
|
|
(In millions, except
percentages) |
July 26, 2020 |
|
|
Provision for income taxes - GAAP basis (a) |
$ |
199 |
|
Income tax effect of share-based
compensation |
(12 |
) |
Income tax effects related to
intra-entity intangible asset transfers |
(67 |
) |
Resolutions of prior years’
income tax filings and other tax items |
1 |
|
Income tax effect of non-GAAP
adjustments |
15 |
|
Non-GAAP adjusted provision for
income taxes (b) |
$ |
136 |
|
|
|
Income before income taxes - GAAP
basis (c) |
$ |
1,040 |
|
Certain items associated with
acquisitions |
12 |
|
Acquisition integration and deal
costs |
20 |
|
Certain incremental expenses
related to COVID-19 |
20 |
|
Realized loss (gain) on strategic
investments, net |
(8 |
) |
Unrealized loss (gain) on
strategic investments, net |
(5 |
) |
Loss on early extinguishment of
debt |
33 |
|
Non-GAAP adjusted income before
income taxes (d) |
$ |
1,112 |
|
|
|
Effective income tax rate - GAAP
basis (a/c) |
19.1 |
% |
|
|
Non-GAAP adjusted effective
income tax rate (b/d) |
12.2 |
% |
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