01—Abstract
Summary
Summary of the 10-K filed December 13, 2019. Cited figures are marked; the original filing is the authoritative source.
Applied Materials Inc. (AMAT) reported its fiscal year 2019 results, highlighting a year-over-year decrease in net sales primarily driven by reduced customer spending in the semiconductor and display equipment sectors.
While the Semiconductor Systems segment remained the largest revenue contributor, it experienced a decline due to lower memory customer investments, though foundry and logic spending saw an increase. The company's Applied Global Services segment demonstrated resilience with a slight increase in net sales, attributed to a growing installed equipment base and service agreements. However, the Display and Adjacent Markets segment saw a significant drop in sales due to weaker demand.
Despite the top-line decrease, Applied Materials maintained its commitment to research and development (RD&E) to foster future growth and innovation in materials engineering. Financially, the company generated substantial cash from operations but also utilized a significant portion for share repurchases and dividends, reflecting a focus on returning capital to shareholders.
The company also secured significant credit facilities to support its planned acquisition of Kokusai Electric. Investors should note the cyclical nature of the industries served and the company's exposure to global economic and trade conditions, which are significant risk factors.
02—Key points
Key Highlights
- Net sales decreased by 13% year-over-year to $14.6 billion in fiscal 2019, primarily due to reduced customer investments in semiconductor and display manufacturing equipment.
- The Semiconductor Systems segment, the largest revenue driver, saw a 15% decrease in net sales, impacted by lower memory customer spending, though foundry and logic segments increased.
- The Applied Global Services segment showed resilience with a 3% increase in net sales, driven by a growing installed equipment base and service agreements.
- The Display and Adjacent Markets segment experienced a significant 28% decline in net sales due to weak demand for mobile and TV display manufacturing equipment.
- Research, Development, and Engineering (RD&E) expenses increased slightly to $2.05 billion, underscoring the company's commitment to innovation and new technology development.
- The company utilized $2.4 billion for share repurchases and paid $771 million in cash dividends during fiscal 2019, demonstrating a commitment to shareholder returns.
- Applied Materials reported $6.47 billion in backlog as of October 27, 2019, a slight increase from the previous year, with a significant portion expected to be fulfilled within 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Applied Materials kept $0.19.
- Revenue$14.61B100.0%
- Cost of revenue−$8.22B56.3%
- Gross profit$6.39B43.7%
- Operating costs−$3.04B20.8%
- Operating income$3.35B22.9%
- Interest, other & tax−$644.0M4.4%
- Net income$2.71B18.5%
Where FY2019 revenue went
$14.61B- Cost of revenue: $8.22B, 56% of revenue
- Net income: $2.71B, 19% of revenue
- R&D: $2.05B, 14% of revenue
- Other operating costs: $982.0M, 6.7% of revenue
- Interest, other & tax: $644.0M, 4.4% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed December 13, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $14.61B$16.70B | −12.6% |
| Cost of Revenue | $8.22B$9.19B | −10.5% |
| Gross Profit | $6.39B$7.52B | −15.0% |
| R&D Expenses | $2.05B$2.02B | +1.6% |
| Operating Expenses | $3.04B$3.03B | +0.3% |
| Operating Income | $3.35B$4.49B | −25.4% |
| Interest Expense | $237.00M$234.00M | +1.3% |
| Net Income | $2.71B$3.04B | −10.9% |
| EPS (Basic) | $2.89$3.00 | −3.7% |
| EPS (Diluted) | $2.86$2.96 | −3.4% |
| Shares Outstanding (Basic) | 937.00M1.01B | −7.5% |
| Shares Outstanding (Diluted) | 945.00M1.03B | −7.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of Applied Materials' financial performance in fiscal year 2019?
The primary driver of Applied Materials' financial performance in fiscal year 2019 was the fluctuation in customer spending on capital equipment and services within the semiconductor and display industries. A significant decrease in demand from memory chip manufacturers and the display market negatively impacted overall sales, while increased spending in foundry and logic segments partially offset these declines.
How did the different business segments perform in fiscal year 2019?
The Semiconductor Systems segment, despite being the largest, saw a sales decrease due to market conditions, particularly in the memory sector. The Applied Global Services segment showed modest growth, benefiting from a larger installed base of equipment and service contracts. The Display and Adjacent Markets segment experienced a considerable decline in sales due to weak demand for display manufacturing equipment.
What is the company's outlook and strategy for future growth?
Applied Materials' strategy focuses on developing products that address key technology transitions and expanding its market opportunities within the semiconductor and display industries. The company continues to invest heavily in research and development to drive innovation in materials engineering and maintain its competitive edge. Growth in the services business and strategic acquisitions, like the planned acquisition of Kokusai Electric, are also key components of its future growth strategy.
How is the company managing its capital and returning value to shareholders?
Applied Materials generated substantial cash from operations in fiscal year 2019. The company actively repurchased its common stock, spending $2.4 billion on repurchases, and also paid $771 million in cash dividends to shareholders, indicating a commitment to returning capital to investors. Additionally, the company has credit facilities in place to finance strategic initiatives, such as its planned acquisition.
06—Continue