10-QPeriod: Q2 FY2020

APPLIED MATERIALS INC /DE Quarterly Report for Q2 Ended Apr 26, 2020

Filed May 21, 2020For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported strong financial results for the quarter and six months ended April 26, 2020. Net sales increased significantly year-over-year, driven primarily by robust demand in the Semiconductor Systems segment, which benefited from increased customer investments in advanced foundry-logic nodes. The Applied Global Services segment also showed modest growth, while the Display and Adjacent Markets segment experienced a decline in sales for the six-month period. The company demonstrated solid profitability with improved gross and operating margins. Despite global economic uncertainties related to the COVID-19 pandemic, AMAT maintained its commitment to research and development, indicating a focus on long-term innovation. The company also managed its financial resources effectively, with a healthy cash position and adequate liquidity, supported by its credit facilities. AMAT continues to return capital to shareholders through dividends and share repurchases.

Financial Highlights

57 data points
Beta

Revenue

$3.96B

44.2% Gross Margin

Net Income

$755.00M

19.1% Net Margin

EPS (Diluted)

$0.82

Total Assets

$21.82B

Cash & Equivalents

$5.28B

Free Cash Flow

$564.00M

Financial Statements
Beta
Revenue$3.96B
Cost of Revenue$2.21B
Gross Profit$1.75B
R&D Expenses$550.00M
Operating Expenses$817.00M
Operating Income$932.00M
Interest Expense$61.00M
Net Income$755.00M
EPS (Basic)$0.82
EPS (Diluted)$0.82
Shares Outstanding (Basic)917.00M
Shares Outstanding (Diluted)923.00M

Key Highlights

  • 1Net sales increased by 12% to $3.96 billion for the quarter and 11% to $8.12 billion for the six months ended April 26, 2020, compared to the prior year periods.
  • 2Semiconductor Systems segment revenue grew by 18% for the quarter and 21% for the six months, driven by investments in advanced foundry-logic nodes.
  • 3Gross margin improved to 44.2% for the quarter and 44.4% for the six months, up from 43.2% and 43.8% respectively, year-over-year.
  • 4Operating income increased by 20% to $932 million for the quarter and 17% to $1.97 billion for the six months.
  • 5Diluted earnings per share rose to $0.82 for the quarter and $1.78 for the six months, up from $0.70 and $1.50 respectively.
  • 6The company maintained a strong liquidity position with $5.28 billion in cash and cash equivalents as of April 26, 2020.
  • 7Applied Materials reported $1.5 billion outstanding under its revolving credit agreement as of April 26, 2020, which was subsequently repaid on May 13, 2020.

Frequently Asked Questions

Applied Materials' business was identified as critical infrastructure, allowing it to continue operations. While the pandemic introduced global supply chain and operational challenges, the company adapted by implementing precautionary measures and workplace flexibility. Despite these challenges, net sales increased, and the company saw strong demand from semiconductor customers. Management noted progress in supply chain recovery and continued strategic investments from customers.

The Semiconductor Systems segment is the largest contributor to net sales and showed strong growth. This performance was driven by increased customer investments in advanced foundry-logic nodes, indicating demand for cutting-edge semiconductor technology. Memory customer spending saw some adjustments due to existing industry supply and inventory levels, but overall, the segment benefited from continued strategic investments in new technology transitions.

The company maintained a robust liquidity position, with cash and cash equivalents of $5.28 billion as of April 26, 2020. Applied Materials also utilized its revolving credit facility by borrowing $1.5 billion in March 2020 to enhance its cash position and financial flexibility amid global market uncertainty. This borrowing was subsequently repaid in full on May 13, 2020. Management believes that cash generated from operations, coupled with available liquidity and borrowing capacity, is sufficient to meet requirements for the next 12 months.

Applied Materials continues to focus on investing in Research, Development, and Engineering (RD&E) to maintain its competitive advantage and offer innovative technologies. The company is committed to returning capital to shareholders through dividends and share repurchases, while also prudently managing its capital structure. The proposed acquisition of Kokusai Electric Corporation remains a strategic priority, subject to regulatory approvals.