• Record quarterly revenue of $5.16 billion, up 24 percent year over year
  • Quarterly GAAP EPS of $1.22 and record non-GAAP EPS of $1.39, up 27 percent and 42 percent year over year, respectively
  • Generated $1.42 billion in cash from operations

SANTA CLARA, Calif., Feb. 18, 2021 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its first quarter ended Jan. 31, 2021.

First Quarter Results

Applied generated revenue of $5.16 billion. On a GAAP basis, the company recorded gross margin of 45.5 percent, operating income of $1.28 billion or 24.9 percent of net sales, and earnings per share (EPS) of $1.22.

On a non-GAAP adjusted basis, the company reported gross margin of 45.9 percent, operating income of $1.50 billion or 29.0 percent of net sales, and EPS of $1.39.

The company generated $1.42 billion in cash from operations and paid dividends of $201 million to shareholders.

“In our first fiscal quarter, we’ve seen a continued acceleration of demand in our semiconductor business as major macro and industry trends fuel increasing consumption of silicon across a wide range of markets and applications,” said Gary Dickerson, president and CEO. “We have strong momentum across the company, as our broad portfolio and exposure to technology inflections, combined with the traction of our new products, put us in a great position to substantially outgrow our markets again in 2021 and beyond.”

Quarterly Results Summary

 Q1 FY2021  Q1 FY2020 Change
  
 (In millions, except per share amounts and percentages)
Net sales$5,162  $4,162  24%
Gross margin45.5% 44.6% 0.9 points
Operating margin24.9% 25.0% (0.1) points
Net income$1,130  $892  27%
Diluted earnings per share$1.22  $0.96  27%
Non-GAAP Adjusted Results     
Non-GAAP adjusted gross margin45.9% 44.9% 1.0 points
Non-GAAP adjusted operating margin29.0% 25.7% 3.3 points
Non-GAAP adjusted net income$1,282  $904  42%
Non-GAAP adjusted diluted EPS$1.39  $0.98  42%

First quarter GAAP results included $152 million of severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees, which reduced earnings per share by $0.13.

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 2021, Applied expects net sales to be approximately $5.39 billion, plus or minus $200 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.44 to $1.56.

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.

First Quarter Reportable Segment Information

Semiconductor SystemsQ1 FY2021  Q1 FY2020
  
 (In millions, except percentages)
Net sales$3,553  $2,814 
Foundry, logic and other58% 68%
DRAM17% 15%
Flash memory25% 17%
Operating income1,261  915 
Operating margin35.5% 32.5%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$1,281  $925 
Non-GAAP adjusted operating margin36.1% 32.9%


Applied Global ServicesQ1 FY2021  Q1 FY2020
  
 (In millions, except percentages)
Net sales$1,155  $997 
Operating income332  278 
Operating margin28.7% 27.9%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$340  $278 
Non-GAAP adjusted operating margin29.4% 27.9%







Display and Adjacent MarketsQ1 FY2021  Q1 FY2020
  
 (In millions, except percentages)
Net sales$411  $332 
Operating income65  38 
Operating margin15.8% 11.4%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$75  $41 
Non-GAAP adjusted operating margin18.2% 12.3%

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 and severance 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 and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the second 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 recent 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-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) 408.235.4676
Michael 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 31,
2021
 January 26,
2020
Net sales$5,162  $4,162 
Cost of products sold2,813  2,304 
Gross profit2,349  1,858 
Operating expenses:   
Research, development and engineering606  552 
Marketing and selling147  135 
General and administrative161  129 
Severance and related charges152   
Total operating expenses1,066  816 
Income from operations1,283  1,042 
Interest expense61  59 
Interest and other income, net18  22 
Income before income taxes1,240  1,005 
Provision for income taxes110  113 
Net income$1,130  $892 
Earnings per share:   
Basic$1.23  $0.97 
Diluted$1.22  $0.96 
Weighted average number of shares:   
Basic915  916 
Diluted925  927 


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions)January 31,
2021
 October 25,
2020
ASSETS   
Current assets:   
Cash and cash equivalents$6,213  $5,351 
Short-term investments410  387 
Accounts receivable, net3,045  2,963 
Inventories3,925  3,904 
Other current assets676  764 
Total current assets14,269  13,369 
Long-term investments1,601  1,538 
Property, plant and equipment, net1,638  1,604 
Goodwill3,479  3,466 
Purchased technology and other intangible assets, net140  153 
Deferred income taxes and other assets2,178  2,223 
Total assets$23,305  $22,353 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$2,932  $3,138 
Contract liabilities1,572  1,321 
Total current liabilities4,504  4,459 
Long-term debt, net of current portion5,449  5,448 
Income taxes payable1,210  1,206 
Other liabilities669  662 
Total liabilities11,832  11,775 
Total stockholders’ equity11,473  10,578 
Total liabilities and stockholders’ equity$23,305  $22,353 


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

(In millions)

Three Months Ended
January 31,
2021
 January 26,
2020
Cash flows from operating activities:   
Net income$1,130  $892 
Adjustments required to reconcile net income to cash provided by operating activities:   
     Depreciation and amortization94  94 
     Severance and related charges148   
     Share-based compensation107  93 
     Deferred income taxes28  30 
     Other  15 
     Net change in operating assets and liabilities(86) (137)
Cash provided by operating activities1,421  987 
Cash flows from investing activities:   
Capital expenditures(121) (102)
Cash paid for acquisitions, net of cash acquired(12)  
Proceeds from sales and maturities of investments358  368 
Purchases of investments(441) (428)
Cash used in investing activities(216) (162)
Cash flows from financing activities:   
Proceeds from common stock issuances  15 
Common stock repurchases  (200)
Tax withholding payments for vested equity awards(142) (153)
Payments of dividends to stockholders(201) (192)
Cash used in financing activities(343) (530)
Increase in cash, cash equivalents and restricted cash equivalents862  295 
Cash, cash equivalents and restricted cash equivalents—beginning of period5,466  3,129 
Cash, cash equivalents and restricted cash equivalents—end of period$6,328  $3,424 
    
Reconciliation of cash, cash equivalents, and restricted cash equivalents   
Cash and cash equivalents$6,213  $3,424 
Restricted cash equivalents included in deferred income taxes and other assets115   
Total cash, cash equivalents, and restricted cash equivalents$6,328  $3,424 
    
Supplemental cash flow information:   
Cash payments for income taxes$110  $82 
Cash refunds from income taxes$19  $1 
Cash payments for interest$35  $34 


APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions)Q1 FY2021  Q1 FY2020
Unallocated net sales$43  $19 
Unallocated cost of products sold and expenses(167) (115)
Share-based compensation(107) (93)
Severance and related charges(144)  
Total$(375) $(189)

Additional Information

 Q1 FY2021  Q1 FY2020
Net Sales by Geography (In millions) 
United States343  441 
% of Total6% 10%
Europe299  153 
% of Total6% 4%
Japan458  351 
% of Total9% 8%
Korea1,289  508 
% of Total25% 12%
Taiwan1,200  1,365 
% of Total23% 33%
Southeast Asia190  72 
% of Total4% 2%
China1,383  1,272 
% of Total27% 31%
    
Employees (In thousands)   
Regular Full Time24.2  22.3 


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

 Three Months Ended
(In millions, except percentages)January 31,
2021
 January 26,
2020
Non-GAAP Adjusted Gross Profit   
Reported gross profit - GAAP basis$2,349  $1,858 
Certain items associated with acquisitions18  9 
Certain incremental expenses related to COVID-19212   
Non-GAAP adjusted gross profit$2,369  $1,867 
Non-GAAP adjusted gross margin45.9% 44.9%
Non-GAAP Adjusted Operating Income   
Reported operating income - GAAP basis$1,283  $1,042 
Certain items associated with acquisitions113  13 
Acquisition integration and deal costs24  13 
Certain incremental expenses related to COVID-19224   
Severance and related charges3152   
Non-GAAP adjusted operating income$1,496  $1,068 
Non-GAAP adjusted operating margin29.0% 25.7%
Non-GAAP Adjusted Net Income   
Reported net income - GAAP basis$1,130  $892 
Certain items associated with acquisitions113  13 
Acquisition integration and deal costs24  13 
Certain incremental expenses related to COVID-19224   
Severance and related charges3152   
Realized loss (gain) on strategic investments, net(2) 2 
Unrealized loss (gain) on strategic investments, net(6) 2 
Income tax effect of share-based compensation4(29) (33)
Income tax effects related to intra-entity intangible asset transfers20  21 
Resolution of prior years’ income tax filings and other tax items(3) (1)
Income tax effect of non-GAAP adjustments5(41) (5)
Non-GAAP adjusted net income$1,282  $904 


1These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
  
2Temporary incremental employee compensation during the COVID-19 pandemic.
  
3The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
  
4GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
  
5Adjustment 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 31,
2021
 January 26,
2020
Non-GAAP Adjusted Earnings Per Diluted Share   
Reported earnings per diluted share - GAAP basis$1.22  $0.96 
Certain items associated with acquisitions0.01  0.01 
Acquisition integration and deal costs0.02  0.01 
Certain incremental expenses related to COVID-190.02   
Severance and related charges0.13   
Income tax effect of share-based compensation(0.03) (0.03)
Income tax effects related to intra-entity intangible asset transfers0.02  0.03 
Non-GAAP adjusted earnings per diluted share$1.39  $0.98 
Weighted average number of diluted shares925  927 


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

 Three Months Ended
(In millions, except percentages)January 31,
2021
 January 26,
2020
Semiconductor Systems Non-GAAP Adjusted Operating Income   
Reported operating income - GAAP basis$1,261  $915 
Certain items associated with acquisitions110  10 
Acquisition integration costs(2)  
Certain incremental expenses related to COVID-19212   
Non-GAAP adjusted operating income$1,281  $925 
Non-GAAP adjusted operating margin36.1% 32.9%
AGS Non-GAAP Adjusted Operating Income   
Reported operating income - GAAP basis$332  $278 
Certain incremental expenses related to COVID-1928   
Non-GAAP adjusted operating income$340  $278 
Non-GAAP adjusted operating margin29.4% 27.9%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income   
Reported operating income - GAAP basis$65  $38 
Certain items associated with acquisitions11  3 
Certain incremental expenses related to COVID-1921   
Severance and related charges38   
Non-GAAP adjusted operating income$75  $41 
Non-GAAP adjusted operating margin18.2% 12.3%


These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2Temporary incremental employee compensation during the COVID-19 pandemic.
3The 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)January 31, 2021
  
Provision for income taxes - GAAP basis (a)$110 
Income tax effect of share-based compensation29 
Income tax effects related to intra-entity intangible asset transfers(20)
Resolutions of prior years’ income tax filings and other tax items3 
Income tax effect of non-GAAP adjustments41 
Non-GAAP adjusted provision for income taxes (b)$163 
  
Income before income taxes - GAAP basis (c)$1,240 
Certain items associated with acquisitions13 
Acquisition integration and deal costs24 
Certain incremental expenses related to COVID-1924 
Severance and related charges152 
Realized loss (gain) on strategic investments, net(2)
Unrealized loss (gain) on strategic investments, net(6)
Non-GAAP adjusted income before income taxes (d)$1,445 
  
Effective income tax rate - GAAP basis (a/c)8.9%
  
Non-GAAP adjusted effective income tax rate (b/d)11.3%