Applied Materials Announces Second Quarter 2024 Results

Source: GlobeNewswire
Applied Materials Announces Second Quarter 2024 Results
  • Revenue $6.65 billion, flat year over year
  • GAAP operating margin 28.8 percent and non-GAAP operating margin 29.0 percent, flat and down 0.1 point year over year, respectively
  • GAAP EPS $2.06 and non-GAAP EPS $2.09, up 11 percent and 5 percent year over year, respectively
  • Generated $1.39 billion in cash from operations

SANTA CLARA, Calif., May 16, 2024 (GLOBE NEWSWIRE) --  Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its second quarter ended Apr. 28, 2024.

Second Quarter Results

Applied generated revenue of $6.65 billion. On a GAAP basis, the company reported gross margin of 47.4 percent, operating income of $1.91 billion or 28.8 percent of net revenue, and earnings per share (EPS) of $2.06.

On a non-GAAP basis, the company reported gross margin of 47.5 percent, operating income of $1.93 billion or 29.0 percent of net revenue, and EPS of $2.09.

The company generated $1.39 billion in cash from operations and distributed $1.09 billion to shareholders including $820 million in share repurchases and $266 million in dividends.

“Applied Materials continues to deliver strong performance in 2024, with fiscal second quarter revenue and earnings towards the high end of our guided range,” said Gary Dickerson, President and CEO. “Applied Materials has the most enabling portfolio of materials engineering technologies for chips that underpin tectonic shifts in technology including AI, IoT, electric vehicles and clean energy, which puts us in a great position to grow along with these long-term, secular trends.”


Results Summary     
 Q2 FY2024 Q2 FY2023 Change
 (In millions, except per share amounts and percentages)
Net revenue$6,646  $6,630   
Gross margin 47.4%   46.7%  0.7 points
Operating margin 28.8%   28.8%   
Net income$1,722  $1,575  9%
Diluted earnings per share$2.06  $1.86  11%
Non-GAAP Results     
Non-GAAP gross margin 47.5%   46.8%  0.7 points
Non-GAAP operating margin 29.0%   29.1%  (0.1) point
Non-GAAP net income$1,744  $1,692  3%
Non-GAAP diluted EPS$2.09  $2.00  5%
Non-GAAP free cash flow$1,135  $2,037  (44)%


A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Measures” section.

Business Outlook

In the third quarter of fiscal 2024, Applied expects net revenue to be approximately $6.65 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $1.83 to $2.19.

This outlook for non-GAAP diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes the normalized tax benefit of share-based compensation of $0.01 per share and includes 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.

Second Quarter Reportable Segment Information

Effective in the first quarter of fiscal 2024, management began including share-based compensation expense in the evaluation of reportable segments' performance. Prior-year numbers have been recast to conform to the current-year presentation.

Semiconductor SystemsQ2 FY2024 Q2 FY2023
 (In millions, except percentages)
Net revenue$4,901  $4,977 
Foundry, logic and other 65%   84% 
DRAM 32%   11% 
Flash memory 3%   5% 
Operating income$1,701  $1,715 
Operating margin 34.7%   34.5% 
Non-GAAP Results  
Non-GAAP operating income$1,711  $1,725 
Non-GAAP operating margin 34.9%   34.7% 


Applied Global ServicesQ2 FY2024 Q2 FY2023
 (In millions, except percentages)
Net revenue$1,530  $1,428 
Operating income$436  $384 
Operating margin 28.5%  26.9%
Non-GAAP Results  
Non-GAAP operating income$436  $384 
Non-GAAP operating margin 28.5%  26.9%


Display and Adjacent MarketsQ2 FY2024 Q2 FY2023
 (In millions, except percentages)
Net revenue$179  $168 
Operating income$5  $16 
Operating margin 2.8%  9.5%
Non-GAAP Results  
Non-GAAP operating income$5  $16 
Non-GAAP operating margin 2.8%  9.5%


Corporate and Other   
(In millions)Q2 FY2024 Q2 FY2023
Unallocated net revenue$36  $57 
Unallocated cost of products sold and expenses (266)  (261)
Total$(230) $(204)
 

Use of Non-GAAP Financial Measures

Applied provides investors with certain non-GAAP 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; impairments of assets; gain or loss, dividends and impairments on strategic investments; 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 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 Statement

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 third quarter of fiscal 2024 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; global economic, political and industry conditions, including rising inflation and interest rates; the implementation and interpretation of export regulations and license requirements, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; the effects of geopolitical turmoil or conflicts; 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; our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; the concentrated nature of our customer base; 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 effects of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; 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 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 a better 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 Six Months Ended
(In millions, except per share amounts)April 28,
2024
 April 30,
2023
 April 28,
2024
 April 30,
2023
Net revenue$6,646 $6,630  $13,353 $13,369 
Cost of products sold 3,493  3,536   6,996  7,130 
Gross profit 3,153  3,094   6,357  6,239 
Operating expenses:       
Research, development and engineering 785  775   1,539  1,546 
Marketing and selling 209  194   416  391 
General and administrative 247  214   523  421 
Total operating expenses 1,241  1,183   2,478  2,358 
Income from operations 1,912  1,911   3,879  3,881 
Interest expense 59  61   118  120 
Interest and other income (expense), net 141  (73)  536  (23)
Income before income taxes 1,994  1,777   4,297  3,738 
Provision for income taxes 272  202   556  446 
Net income$1,722 $1,575  $3,741 $3,292 
Earnings per share:       
Basic$2.08 $1.87  $4.50 $3.90 
Diluted$2.06 $1.86  $4.47 $3.88 
Weighted average number of shares:       
Basic 830  843   831  844 
Diluted 836  847   837  848 


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)April 28,
2024
 October 29,
2023
ASSETS   
Current assets:   
Cash and cash equivalents$7,085 $6,132
Short-term investments 472  737
Accounts receivable, net 4,778  5,165
Inventories 5,691  5,725
Other current assets 1,239  1,388
Total current assets 19,265  19,147
Long-term investments 2,983  2,281
Property, plant and equipment, net 2,958  2,723
Goodwill 3,732  3,732
Purchased technology and other intangible assets, net 273  294
Deferred income taxes and other assets 2,738  2,552
Total assets$31,949 $30,729
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Short-term debt$99 $100
Accounts payable and accrued expenses 4,174  4,297
Contract liabilities 2,611  2,975
Total current liabilities 6,884  7,372
Long-term debt 5,463  5,461
Income taxes payable 656  833
Other liabilities 747  714
Total liabilities 13,750  14,380
Total stockholders’ equity 18,199  16,349
Total liabilities and stockholders’ equity$31,949 $30,729


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)

Three Months Ended Six Months Ended
April 28,
2024
 April 30,
2023
April 28,
2024
 April 30,
2023
Cash flows from operating activities:       
Net income$1,722  $1,575  $3,741  $3,292 
Adjustments required to reconcile net income to cash provided by operating activities:       
Depreciation and amortization 96   129   187   249 
Share-based compensation 134   113   304   261 
Deferred income taxes (134)  (115)  (206)  (136)
Other (12)  167   (247)  174 
Net change in operating assets and liabilities (414)  423   (62)  722 
Cash provided by operating activities 1,392   2,292   3,717   4,562 
Cash flows from investing activities:       
Capital expenditures (257)  (255)  (486)  (542)
Cash paid for acquisitions, net of cash acquired    2      (18)
Proceeds from sales and maturities of investments 582   255   1,113   669 
Purchases of investments (474)  (324)  (1,223)  (730)
Cash used in investing activities (149)  (322)  (596)  (621)
Cash flows from financing activities:       
Proceeds from issuance of commercial paper 100   297   200   595 
Repayments of commercial paper (100)  (300)  (200)  (400)
Proceeds from common stock issuances 119   111   119   111 
Common stock repurchases (820)  (800)  (1,520)  (1,050)
Tax withholding payments for vested equity awards (41)  (18)  (233)  (154)
Payments of dividends to stockholders (266)  (219)  (532)  (439)
Repayments of principal on finance leases (14)  1   (13)  (9)
Cash used in financing activities (1,022)  (928)  (2,179)  (1,346)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents 221   1,042   942   2,595 
Cash, cash equivalents and restricted cash equivalents—beginning of period 6,954   3,653   6,233   2,100 
Cash, cash equivalents and restricted cash equivalents — end of period$7,175  $4,695  $7,175  $4,695 
        
Reconciliation of cash, cash equivalents, and restricted cash equivalents       
Cash and cash equivalents$7,085  $4,588  $7,085  $4,588 
Restricted cash equivalents included in deferred income taxes and other assets 90   107   90   107 
Total cash, cash equivalents, and restricted cash equivalents$7,175  $4,695  $7,175  $4,695 
        
Supplemental cash flow information:       
Cash payments for income taxes$467  $152  $606  $221 
Cash refunds from income taxes$3  $47  $5  $51 
Cash payments for interest$68  $68  $102  $102 


Additional Information   
 Q2 FY2024 Q2 FY2023
Net Revenue by Geography (In millions) 
United States$853  $1,113 
% of Total 13%  17%
Europe$289  $477 
% of Total 4%  7%
Japan$453  $460 
% of Total 7%  7%
Korea$988  $1,583 
% of Total 15%  24%
Taiwan$1,019  $1,435 
% of Total 15%  22%
Southeast Asia$213  $157 
% of Total 3%  2%
China$2,831  $1,405 
% of Total 43%  21%
    
Employees(In thousands)   
Regular Full Time 34.8   34.2 


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
 Three Months Ended Six Months Ended
(In millions, except percentages)April 28,
2024
 April 30,
2023
 April 28,
2024
 April 30,
2023
Non-GAAP Gross Profit       
GAAP reported gross profit$3,153  $3,094  $6,357  $6,239 
Certain items associated with acquisitions1 7   7   14   14 
Non-GAAP gross profit$3,160  $3,101  $6,371  $6,253 
Non-GAAP gross margin 47.5%  46.8%  47.7%  46.8%
Non-GAAP Operating Income       
GAAP reported operating income$1,912  $1,911  $3,879  $3,881 
Certain items associated with acquisitions1 10   11   21   22 
Acquisition integration and deal costs 5   8   8   14 
Non-GAAP operating income$1,927  $1,930  $3,908  $3,917 
Non-GAAP operating margin 29.0%  29.1%  29.3%  29.3%
Non-GAAP Net Income       
GAAP reported net income$1,722  $1,575  $3,741  $3,292 
Certain items associated with acquisitions1 10   11   21   22 
Acquisition integration and deal costs 5   8   8   14 
Realized loss (gain), dividends and impairments on strategic investments, net (3)  117   (4)  113 
Unrealized loss (gain) on strategic investments, net (20)  11   (300)  7 
Income tax effect of share-based compensation2 11   3   (15)  (11)
Income tax effects related to intra-entity intangible asset transfers 18   (1)  40   16 
Resolution of prior years’ income tax filings and other tax items    (27)  33   (32)
Income tax effect of non-GAAP adjustments3 1   (5)  2   (5)
Non-GAAP net income$1,744  $1,692  $3,526  $3,416 
 
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 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 RESULTS
 
 Three Months Ended Six Months Ended
(In millions, except per share amounts)April 28,
2024
 April 30,
2023
 April 28,
2024
 April 30,
2023
Non-GAAP Earnings Per Diluted Share       
GAAP reported earnings per diluted share$2.06  $1.86  $4.47  $3.88 
Certain items associated with acquisitions 0.01   0.01   0.02   0.03 
Acquisition integration and deal costs 0.01   0.01   0.01   0.01 
Realized loss (gain), dividends and impairments on strategic investments, net    0.14      0.13 
Unrealized loss (gain) on strategic investments, net (0.02)  0.01   (0.36)  0.01 
Income tax effect of share-based compensation 0.01      (0.02)  (0.01)
Income tax effects related to intra-entity intangible asset transfers 0.02      0.05   0.02 
Resolution of prior years’ income tax filings and other tax items    (0.03)  0.04   (0.04)
Non-GAAP earnings per diluted share$2.09  $2.00  $4.21  $4.03 
Weighted average number of diluted shares 836   847   837   848 


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
 Three Months Ended Six Months Ended
(In millions, except percentages)April 28,
2024
 April 30,
2023
 April 28,
2024
 April 30,
2023
Semiconductor Systems Non-GAAP Operating Income       
GAAP reported operating income$1,701  $1,715  $3,445  $3,570 
Certain items associated with acquisitions1 10   10   20   19 
Non-GAAP operating income$1,711  $1,725  $3,465  $3,589 
Non-GAAP operating margin 34.9%  34.7%  35.3%  35.4%
Applied Global Services Non-GAAP Operating Income       
GAAP reported operating income$436  $384  $853  $729 
Non-GAAP operating income$436  $384  $853  $729 
Non-GAAP operating margin 28.5%  26.9%  28.4%  26.1%
Display and Adjacent Markets Non-GAAP Operating Income       
GAAP reported operating income$5  $16  $30  $19 
Non-GAAP operating income$5  $16  $30  $19 
Non-GAAP operating margin 2.8%  9.5%  7.1%  5.7%
 
1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 

Note: The reconciliation of GAAP and non-GAAP 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.


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
 
 Three Months Ended
(In millions, except percentages)April 28, 2024
  
GAAP provision for income taxes(a)$272 
Income tax effect of share-based compensation (11)
Income tax effects related to intra-entity intangible asset transfers (18)
Income tax effect of non-GAAP adjustments (1)
Non-GAAP provision for income taxes(b)$242 
  
GAAP income before income taxes(c)$1,994 
Certain items associated with acquisitions 10 
Acquisition integration and deal costs 5 
Realized loss (gain), dividends and impairments on strategic investments, net (3)
Unrealized loss (gain) on strategic investments, net (20)
Non-GAAP income before income taxes(d)$1,986 
  
GAAP effective income tax rate(a/c) 13.6%
  
Non-GAAP effective income tax rate(b/d) 12.2%


UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
 
 Three Months Ended Six Months Ended
(In millions)April 28,
2024
 April 30,
2023
 April 28,
2024
 April 30,
2023
Cash provided by operating activities$1,392  $2,292  $3,717  $4,562 
Capital expenditures (257)  (255)  (486)  (542)
Non-GAAP free cash flow$1,135  $2,037  $3,231  $4,020