• Applied Materials Announces Fourth Quarter and Fiscal Year 2023 Results

    Source: Nasdaq GlobeNewswire / 16 Nov 2023 15:01:31   America/Chicago

    • Quarterly revenue $6.72 billion, flat year over year
    • Quarterly GAAP EPS $2.38 and non-GAAP EPS $2.12, up 29 percent and 4 percent year over year, respectively
    • Annual revenue $26.52 billion, up 3 percent year over year
    • Annual GAAP EPS $8.11 and non-GAAP EPS $8.05, up 9 percent and 5 percent year over year, respectively

    SANTA CLARA, Calif., Nov. 16, 2023 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its fourth quarter and fiscal year ended Oct. 29, 2023.

    Fourth Quarter Results

    Applied generated revenue of $6.72 billion. On a GAAP basis, the company reported gross margin of 47.1 percent, operating income of $1.97 billion or 29.3 percent of net sales, and record earnings per share (EPS) of $2.38.

    On a non-GAAP adjusted basis, the company reported gross margin of 47.3 percent, operating income of $1.98 billion or 29.5 percent of net sales, and record EPS of $2.12.

    The company generated $1.56 billion in cash from operations and distributed $968 million to shareholders including $700 million in share repurchases and $268 million in dividends.

    Full Year Results

    In fiscal 2023, Applied generated record revenue of $26.52 billion. On a GAAP basis, the company recorded gross margin of 46.7 percent, operating income of $7.65 billion or 28.9 percent of net sales, and record EPS of $8.11.

    On a non-GAAP adjusted basis, the company reported gross margin of 46.8 percent, operating income of $7.72 billion or 29.1 percent of net sales, and record EPS of $8.05.

    The company generated a record $8.70 billion in cash from operations and distributed $3.16 billion to shareholders including $2.19 billion in share repurchases and $975 million in dividends.

    “Applied Materials delivered record revenue, earnings and cash flow in fiscal 2023 and is outgrowing the wafer fabrication equipment market for the fifth year in a row,” said Gary Dickerson, President and CEO. “Applied’s broad product portfolio, strong customer relationships and leadership at major technology inflections put us in a great position to profitably grow the company as powerful trends fuel the semiconductor industry’s expansion in the years ahead.”

    Results Summary

                 Change
     Q4 FY2023  Q4 FY2022  FY2023  FY2022  Q4 FY2023
    vs.
    Q4 FY2022    		 FY2023
    vs.
    FY2022
     (In millions, except per share amounts and percentages) 
    Net sales$6,723  $6,749  $26,517  $25,785  —%  3% 
    Gross margin 47.1%  45.9%  46.7%  46.5% 1.2 points 0.2 points
    Operating margin 29.3%  29.5%  28.9%  30.2% (0.2) points (1.3) points
    Net income$2,004  $1,591  $6,856  $6,525  26%  5% 
    Diluted earnings per share$2.38  $1.85  $8.11  $7.44  29%  9% 
    Non-GAAP Adjusted Results               
    Non-GAAP adjusted gross margin 47.3%  46.0%  46.8%  46.6% 1.3 points 0.2 points
    Non-GAAP adjusted operating margin 29.5%  29.8%  29.1%  30.5% (0.3) points (1.4) points
    Non-GAAP adjusted net income$1,786  $1,741  $6,802  $6,756  3%  1% 
    Non-GAAP adjusted diluted EPS$2.12  $2.03  $8.05  $7.70  4%  5% 
    Non-GAAP free cash flow$1,246  $634  $7,594  $4,612  97%  65% 
                          

    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 2024, Applied expects net sales to be approximately $6.47 billion, plus or minus $400 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.72 to $2.08.

    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 $0.02 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 and Fiscal Year Reportable Segment Information

    Semiconductor SystemsQ4 FY2023 Q4 FY2022 FY2023 FY2022
     (In millions, except percentages)
    Net sales$4,883  $5,038  $19,698  $18,797 
    Foundry, logic and other 69%  71%  77%  66%
    DRAM 27%  16%  17%  19%
    Flash memory 4%  13%  6%  15%
    Operating income$1,791  $1,849  $7,090  $6,969 
    Operating margin 36.7%  36.7%  36.0%  37.1%
    Non-GAAP Adjusted Results      
    Non-GAAP adjusted operating income$1,801  $1,858  $7,129  $7,000 
    Non-GAAP adjusted operating margin 36.9%  36.9%  36.2%  37.2%


    Applied Global ServicesQ4 FY2023 Q4 FY2022 FY2023 FY2022
     (In millions, except percentages)
    Net sales$1,471  $1,420  $5,732  $5,543 
    Operating income$431  $402  $1,657  $1,661 
    Operating margin 29.3%  28.3%  28.9%  30.0%
    Non-GAAP Adjusted Results      
    Non-GAAP adjusted operating income$431  $402  $1,657  $1,661 
    Non-GAAP adjusted operating margin 29.3%  28.3%  28.9%  30.0%


    Display and Adjacent MarketsQ4 FY2023 Q4 FY2022 FY2023 FY2022
     (In millions, except percentages)
    Net sales$298  $251  $868  $1,331 
    Operating income$67  $34  $133  $260 
    Operating margin 22.5%  13.5%  15.3%  19.5%
    Non-GAAP Adjusted Results      
    Non-GAAP adjusted operating income$67  $34  $133  $263 
    Non-GAAP adjusted operating margin 22.5%  13.5%  15.3%  19.8%
                    

    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; 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 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 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 first 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, our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; global economic, political and industry conditions, including rising inflation and interest rates; the implementation and interpretation of new 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; 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; 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 geopolitical turmoil or conflicts, and 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 Twelve Months Ended
    (In millions, except per share amounts)October 29,
    2023    		 October 30,
    2022    		 October 29,
    2023    		 October 30,
    2022
    Net sales$6,723 $6,749 $26,517 $25,785 
    Cost of products sold 3,554  3,648  14,133  13,792 
    Gross profit 3,169  3,101  12,384  11,993 
    Operating expenses:       
    Research, development and engineering 789  726  3,102  2,771 
    Marketing and selling 192  183  776  703 
    General and administrative 217  198  852  735 
    Severance and related charges —  —  —  (4)
    Total operating expenses 1,198  1,107  4,730  4,205 
    Income from operations 1,971  1,994  7,654  7,788 
    Interest expense 58  57  238  228 
    Interest and other income (expense), net 259  12  300  39 
    Income before income taxes 2,172  1,949  7,716  7,599 
    Provision for income taxes 168  358  860  1,074 
    Net income$2,004 $1,591 $6,856 $6,525 
    Earnings per share:       
    Basic$2.40 $1.86 $8.16 $7.49 
    Diluted$2.38 $1.85 $8.11 $7.44 
    Weighted average number of shares:       
    Basic 836  854  840  871 
    Diluted 842  859  845  877 
                 


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
     
    (In millions)October 29,
    2023    		 October 30,
    2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$6,132 $1,995
    Short-term investments 737  586
    Accounts receivable, net 5,165  6,068
    Inventories 5,725  5,932
    Other current assets 1,388  1,344
    Total current assets 19,147  15,925
    Long-term investments 2,281  1,980
    Property, plant and equipment, net 2,723  2,307
    Goodwill 3,732  3,700
    Purchased technology and other intangible assets, net 294  339
    Deferred income taxes and other assets 2,552  2,475
    Total assets$30,729 $26,726
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Short-term debt$100 $—
    Accounts payable and accrued expenses 4,297  4,237
    Contract liabilities 2,975  3,142
    Total current liabilities 7,372  7,379
    Long-term debt 5,461  5,457
    Income taxes payable 833  964
    Other liabilities 714  732
    Total liabilities 14,380  14,532
    Total stockholders’ equity 16,349  12,194
    Total liabilities and stockholders’ equity$30,729 $26,726
     


    APPLIED MATERIALS, INC.
    UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
     
     Three Months Ended Twelve Months Ended
    (In millions)October 29,
    2023    		 October 30,
    2022    		October 29,
    2023    		 October 30,
    2022
    Cash flows from operating activities:       
    Net income$2,004  $1,591  $6,856  $6,525 
    Adjustments required to reconcile net income to cash provided by operating activities:       
        Depreciation and amortization 130   123   515   444 
        Severance and related charges —   —   —   (4)
        Share-based compensation 115   99   490   413 
        Deferred income taxes 198   (14)  24   (223)
        Other (149)  22   40   36 
        Net change in operating assets and liabilities (743)  (964)  775   (1,792)
    Cash provided by operating activities 1,555   857   8,700   5,399 
    Cash flows from investing activities:       
    Capital expenditures (309)  (223)  (1,106)  (787)
    Cash paid for acquisitions, net of cash acquired —   —   (25)  (441)
    Proceeds from sales and maturities of investments 297   350   1,268   1,363 
    Purchases of investments (477)  (317)  (1,672)  (1,492)
    Cash used in investing activities (489)  (190)  (1,535)  (1,357)
    Cash flows from financing activities:       
    Proceeds from commercial paper 99   —   991   — 
    Repayments of commercial paper (200)  —   (900)  — 
    Proceeds from common stock issuances 116   103   227   199 
    Common stock repurchases (700)  (1,500)  (2,189)  (6,103)
    Tax withholding payments for vested equity awards (14)  (7)  (179)  (266)
    Payments of dividends to stockholders (268)  (223)  (975)  (873)
    Repayments of principal on finance leases 1   —   (7)  — 
    Cash used in financing activities (966)  (1,627)  (3,032)  (7,043)
    Increase (decrease) in cash, cash equivalents and restricted cash equivalents 100   (960)  4,133   (3,001)
    Cash, cash equivalents and restricted cash equivalents—beginning of period 6,133   3,060   2,100   5,101 
    Cash, cash equivalents and restricted cash equivalents — end of period$6,233  $2,100  $6,233  $2,100 
            
    Reconciliation of cash, cash equivalents, and restricted cash equivalents       
    Cash and cash equivalents$6,132  $1,995  $6,132  $1,995 
    Restricted cash equivalents included in deferred income taxes and other assets 101   105   101   105 
    Total cash, cash equivalents, and restricted cash equivalents$6,233  $2,100  $6,233  $2,100 
            
    Supplemental cash flow information:       
    Cash payments for income taxes$588  $246  $1,006  $1,869 
    Cash refunds from income taxes$2  $23  $53  $156 
    Cash payments for interest$68  $68  $205  $205 
                    


    APPLIED MATERIALS, INC.
    UNAUDITED SUPPLEMENTAL INFORMATION
     
    Corporate and Other
            
    (In millions)Q4 FY2023 Q4 FY2022 FY2023 FY2022
    Unallocated net sales$71  $40  $219  $114 
    Unallocated cost of products sold and expenses (274)  (232)  (955)  (807)
    Share-based compensation (115)  (99)  (490)  (413)
    Severance and related charges —   —   —   4 
    Total$(318) $(291) $(1,226) $(1,102)
                    


    Additional Information

     Q4 FY2023 Q4 FY2022 FY2023 FY2022
    Net Sales by Geography (In millions)     
    United States$803  $830  $4,006  $3,104 
    % of Total 12%  12%  15%  12%
    Europe$441  $375  $2,152  $1,674 
    % of Total 7%  5%  8%  7%
    Japan$681  $606  $2,075  $2,012 
    % of Total 10%  9%  8%  8%
    Korea$745  $1,082  $4,609  $4,395 
    % of Total 11%  16%  18%  17%
    Taiwan$922  $2,068  $5,670  $6,262 
    % of Total 14%  31%  21%  24%
    Southeast Asia$168  $451  $758  $1,084 
    % of Total 2%  7%  3%  4%
    China$2,963  $1,337  $7,247  $7,254 
    % of Total 44%  20%  27%  28%
            
    Employees (In thousands)       
    Regular Full Time 34.3   33.3     
                


    APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
     
     Three Months Ended Twelve Months Ended
    (In millions, except percentages)October 29,
    2023    		 October 30,
    2022    		 October 29,
    2023    		 October 30,
    2022
    Non-GAAP Adjusted Gross Profit       
    Reported gross profit - GAAP basis$3,169  $3,101  $12,384  $11,993 
    Certain items associated with acquisitions1 8   6   29   26 
    Non-GAAP adjusted gross profit$3,177  $3,107  $12,413  $12,019 
    Non-GAAP adjusted gross margin 47.3%  46.0%  46.8%  46.6%
    Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$1,971  $1,994  $7,654  $7,788 
    Certain items associated with acquisitions1 11   10   43   39 
    Acquisition integration and deal costs 2   6   22   38 
    Severance and related charges2 —   —   —   (4)
    Non-GAAP adjusted operating income$1,984  $2,010  $7,719  $7,861 
    Non-GAAP adjusted operating margin 29.5%  29.8%  29.1%  30.5%
    Non-GAAP Adjusted Net Income       
    Reported net income - GAAP basis$2,004  $1,591  $6,856  $6,525 
    Certain items associated with acquisitions1 11   10   43   39 
    Acquisition integration and deal costs 2   6   22   34 
    Severance and related charges2 —   —   —   (4)
    Realized loss (gain), dividends and impairments on strategic investments, net (2)  (2)  107   (3)
    Unrealized loss (gain) on strategic investments, net (147)  11   (134)  (4)
    Earn-out (15)  —   (15)  — 
    Income tax effect of share-based compensation3 6   22   —   — 
    Income tax effects related to intra-entity intangible asset transfers (65)  132   (40)  252 
    Resolution of prior years’ income tax filings and other tax items (9)  (26)  (31)  (80)
    Income tax effect of non-GAAP adjustments4 1   (3)  (6)  (3)
    Non-GAAP adjusted net income$1,786  $1,741  $6,802  $6,756 
     
    1  These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
    2  The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
    3   GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
    4   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
    (In millions, except per share amounts)October 29,
    2023    		 October 30,
    2022    		 October 29,
    2023    		 October 30,
    2022
    Non-GAAP Adjusted Earnings Per Diluted Share       
    Reported earnings per diluted share - GAAP basis$2.38  $1.85  $8.11  $7.44 
    Certain items associated with acquisitions 0.01   0.01   0.05   0.04 
    Acquisition integration and deal costs —   0.01   0.02   0.03 
    Realized loss (gain), dividends and impairments on strategic investments, net —   —   0.13   — 
    Unrealized loss (gain) on strategic investments, net (0.18)  0.01   (0.16)  (0.01)
    Earn-out (0.01)  —   (0.01)  — 
    Income tax effect of share-based compensation 0.01   0.03   —   — 
    Income tax effects related to intra-entity intangible asset transfers (0.08)  0.15   (0.05)  0.29 
    Resolution of prior years’ income tax filings and other tax items (0.01)  (0.03)  (0.04)  (0.09)
    Non-GAAP adjusted earnings per diluted share$2.12  $2.03  $8.05  $7.70 
    Weighted average number of diluted shares 842   859   845   877 
                    


    APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
     
     Three Months Ended Twelve Months Ended
    (In millions, except percentages)October 29,
    2023    		 October 30,
    2022    		 October 29,
    2023    		 October 30,
    2022
    Semiconductor Systems Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$1,791  $1,849  $7,090  $6,969 
    Certain items associated with acquisitions1 10   9   39   31 
    Non-GAAP adjusted operating income$1,801  $1,858  $7,129  $7,000 
    Non-GAAP adjusted operating margin 36.9%  36.9%  36.2%  37.2%
    AGS Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$431  $402  $1,657  $1,661 
    Non-GAAP adjusted operating income$431  $402  $1,657  $1,661 
    Non-GAAP adjusted operating margin 29.3%  28.3%  28.9%  30.0%
    Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
    Reported operating income - GAAP basis$67  $34  $133  $260 
    Certain items associated with acquisitions1 —   —   —   3 
    Non-GAAP adjusted operating income$67  $34  $133  $263 
    Non-GAAP adjusted operating margin 22.5%  13.5%  15.3%  19.8%
     
    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 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.
     


    APPLIED MATERIALS, INC.
    UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
     
     Three Months Ended
    (In millions, except percentages)October 29,
    2023
      
    Provision for income taxes - GAAP basis (a)$168 
    Income tax effect of share-based compensation (6)
    Income tax effects related to intra-entity intangible asset transfers 65 
    Resolutions of prior years’ income tax filings and other tax items 9 
    Income tax effect of non-GAAP adjustments (1)
    Non-GAAP adjusted provision for income taxes (b)$235 
      
    Income before income taxes - GAAP basis (c)$2,172 
    Certain items associated with acquisitions 11 
    Acquisition integration and deal costs 2 
    Realized loss (gain), dividends and impairments on strategic investments, net (2)
    Unrealized loss (gain) on strategic investments, net (147)
    Earn-out (15)
    Non-GAAP adjusted income before income taxes (d)$2,021 
      
    Effective income tax rate - GAAP basis (a/c) 7.7%
      
    Non-GAAP adjusted effective income tax rate (b/d) 11.6%
     


     
     
        
            
                    
                    
                    
                    
     
    UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
     
     
        
            
                    
                    
                    
                    
     
     
     
     
        
            
                    
                    
                    
                    
     
     Three Months Ended Twelve Months Ended
     
     
        
            
                    
                    
                    
                    
     
    (In millions)October 29,
    2023    		 October 30,
    2022    		 October 29,
    2023    		 October 30,
    2022
     
     
        
            
                    
                    
                    
                    
     
    Cash provided by operating activities$1,555  $857  $8,700  $5,399 
     
     
        
            
                    
                    
                    
                    
     
    Capital expenditures (309)  (223)  (1,106)  (787)
     
     
        
            
                    
                    
                    
                    
     
    Non-GAAP free cash flow$1,246  $634  $7,594  $4,612 
     
     
        
            
                    
                    
                    
                    
     
     
     
     
        
            
                    
                    
                    
                    
     

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