10-Q 1 amat-20220731.htm 10-Q amat-20220731
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2022
or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                 
Commission File Number 000-06920
Applied Materials, Inc.
(Exact name of registrant as specified in its charter) 
Delaware94-1655526
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3050 Bowers Avenue
P.O. Box 58039
Santa Clara, California 95052-8039
(Address of principal executive offices)

(408727-5555
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $.01 per shareAMATThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes          No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes          No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes          No  
Number of shares outstanding of the issuer’s common stock as of July 31, 2022: 860,309,377



APPLIED MATERIALS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 2022
TABLE OF CONTENTS
 
  Page
PART I. FINANCIAL INFORMATION
Item 1:
Item 2:
Item 3:
Item 4:
PART II. OTHER INFORMATION
Item 1:
Item 1A:
Item 2:
Item 3:
Item 4:
Item 5:
Item 6:



PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Three Months EndedNine Months Ended
July 31,
2022
August 1,
2021
July 31,
2022
August 1,
2021
(Unaudited)
Net sales$6,520 $6,196 $19,036 $16,940 
Cost of products sold3,514 3,229 10,144 8,971 
Gross profit3,006 2,967 8,892 7,969 
Operating expenses:
Research, development and engineering705 640 2,045 1,863 
Marketing and selling180 159 520 454 
General and administrative197 155 537 465 
Severance and related charges  (4)158 
Deal termination fee   154 
Total operating expenses1,082 954 3,098 3,094 
Income from operations1,924 2,013 5,794 4,875 
Interest expense56 57 171 179 
Interest and other income (loss), net(7)24 27 69 
Income before income taxes1,861 1,980 5,650 4,765 
Provision for income taxes255 264 716 589 
Net income$1,606 $1,716 $4,934 $4,176 
Earnings per share:
Basic$1.86 $1.89 $5.63 $4.57 
Diluted$1.85 $1.87 $5.59 $4.52 
Weighted average number of shares:
Basic864 908 877 914 
Diluted869 918 883 923 
See accompanying Notes to Consolidated Condensed Financial Statements.
3


APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months EndedNine Months Ended
July 31,
2022
August 1,
2021
July 31,
2022
August 1,
2021
(Unaudited)
Net income$1,606 $1,716 $4,934 $4,176 
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale investments3 (1)(45)(11)
Change in unrealized net loss on derivative instruments13 (1)46 18 
Other comprehensive income (loss), net of tax16 (2)1 7 
Comprehensive income$1,622 $1,714 $4,935 $4,183 
See accompanying Notes to Consolidated Condensed Financial Statements.
4

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
July 31,
2022
October 31,
2021
 
ASSETS
Current assets:
Cash and cash equivalents$2,956 $4,995 
Short-term investments592 464 
Accounts receivable, net4,956 4,953 
Inventories5,506 4,309 
Other current assets1,424 1,386 
Total current assets15,434 16,107 
Long-term investments2,047 2,055 
Property, plant and equipment, net2,194 1,934 
Goodwill3,713 3,479 
Purchased technology and other intangible assets, net337 104 
Deferred income taxes and other assets2,436 2,146 
Total assets$26,161 $25,825 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses$4,005 $4,268 
Contract liabilities2,828 2,076 
Total current liabilities6,833 6,344 
Long-term debt5,456 5,452 
Income taxes payable955 1,090 
Other liabilities847 692 
Total liabilities14,091 13,578 
Stockholders’ equity:
Common stock9 9 
Additional paid-in capital8,398 8,247 
Retained earnings36,520 32,246 
Treasury stock(32,598)(27,995)
Accumulated other comprehensive loss(259)(260)
Total stockholders’ equity12,070 12,247 
Total liabilities and stockholders’ equity$26,161 $25,825 
Amounts as of July 31, 2022 are unaudited. Amounts as of October 31, 2021 are derived from the October 31, 2021 audited consolidated financial statements.
See accompanying Notes to Consolidated Condensed Financial Statements.
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APPLIED MATERIALS, INC
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended July 31, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of May 1, 2022869 $9 $8,306 $35,137 1,146 $(31,598)$(275)$11,579 
Net income— — — 1,606 — — — 1,606 
Other comprehensive income (loss), net of tax— — — — — — 16 16 
Dividends declared ($0.26 per common share)
— — — (223)— — — (223)
Share-based compensation— — 95 — — — — 95 
Issuance under stock plans1 — (3)— — — — (3)
Common stock repurchases(10)— — — 10 (1,000)— (1,000)
Balance as of July 31, 2022860 $9 $8,398 $36,520 1,156 $(32,598)$(259)$12,070 

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Nine Months Ended July 31, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of October 31, 2021892 $9 $8,247 $32,246 1,119 $(27,995)$(260)$12,247 
Net income— — — 4,934 — — — 4,934 
Other comprehensive income (loss), net of tax— — — — — — 1 1 
Dividends declared ($0.76 per common share)
— — — (660)— — — (660)
Share-based compensation— — 314 — — — — 314 
Issuance under stock plans5 — (163)— — — — (163)
Common stock repurchases(37)— — — 37 (4,603)— (4,603)
Balance as of July 31, 2022860 $9 $8,398 $36,520 1,156 $(32,598)$(259)$12,070 


6

APPLIED MATERIALS, INC
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended August 1, 2021SharesAmountSharesAmount
(Unaudited)
Balance as of May 2, 2021914 $9 $8,022 $29,247 1,097 $(24,995)$(290)$11,993 
Net income— — — 1,716 — — — 1,716 
Other comprehensive income (loss), net of tax— — — — — — (2)(2)
Dividends declared ($0.24 per common share)
— — — (215)— — — (215)
Share-based compensation— — 81 — — — — 81 
Issuance under stock plans— — (13)— — — — (13)
Common stock repurchases(11)— — — 11 (1,500)— (1,500)
Balance as of August 1, 2021903 $9 $8,090 $30,748 1,108 $(26,495)$(292)$12,060 


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Nine Months Ended August 1, 2021SharesAmountSharesAmount
(Unaudited)
Balance as of October 25, 2020914 $9 $7,904 $27,209 1,091 $(24,245)$(299)$10,578 
Net income— — — 4,176 — — — 4,176 
Other comprehensive income (loss), net of tax— — — — — — 7 7 
Dividends declared ($0.70 per common share)
— — — (637)— — — (637)
Share-based compensation— — 272 — — — — 272 
Issuance under stock plans6 — (86)— — — — (86)
Common stock repurchases(17)— — — 17 (2,250)— (2,250)
Balance as of August 1, 2021903 $9 $8,090 $30,748 1,108 $(26,495)$(292)$12,060 

See accompanying Notes to Consolidated Condensed Financial Statements.


7

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Nine Months Ended
July 31, 2022August 1, 2021
(Unaudited)
Cash flows from operating activities:
Net income$4,934 $4,176 
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization321 289 
Severance and related charges(4)149 
Share-based compensation314 272 
Deferred income taxes(209)44 
Other14 (30)
Changes in operating assets and liabilities:
Accounts receivable3 (858)
Inventories(1,164)(213)
Other current and non-current assets(19)(15)
Accounts payable and accrued expenses195 154 
Contract liabilities725 367 
Income taxes payable(597)(72)
Other liabilities29 31 
Cash provided by operating activities4,542 4,294 
Cash flows from investing activities:
Capital expenditures(564)(462)
Cash paid for acquisitions, net of cash acquired(441)(12)
Proceeds from sales and maturities of investments1,013 1,024 
Purchases of investments(1,175)(1,179)
Cash used in investing activities(1,167)(629)
Cash flows from financing activities:
Proceeds from common stock issuances 96 86 
Common stock repurchases(4,603)(2,250)
Tax withholding payments for vested equity awards(259)(171)
Payments of dividends to stockholders(650)(622)
Cash used in financing activities(5,416)(2,957)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents(2,041)708 
Cash, cash equivalents and restricted cash equivalents — beginning of period5,101 5,466 
Cash, cash equivalents and restricted cash equivalents — end of period$3,060 $6,174 
Reconciliation of cash, cash equivalents, and restricted cash equivalents
Cash and cash equivalents$2,956 $6,066 
Restricted cash equivalents included in deferred income taxes and other assets104 108 
Total cash, cash equivalents, and restricted cash equivalents$3,060 $6,174 
Supplemental cash flow information:
Cash payments for income taxes$1,623 $641 
Cash refunds from income taxes$133 $26 
Cash payments for interest$137 $137 
See accompanying Notes to Consolidated Condensed Financial Statements.
8

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1    Basis of Presentation
Basis of Presentation
In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October 31, 2021 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applied’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021 (2021 Form 10-K). Applied’s results of operations for the three and nine months ended July 31, 2022 are not necessarily indicative of future operating results. Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2022 and 2021 contain 52 weeks and 53 weeks, respectively, and the first nine months of fiscal 2022 and 2021 contained 39 and 40 weeks, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, Applied evaluates its estimates, including those related to standalone selling price (SSP) related to revenue recognition, accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of share-based awards, and income taxes, among others. Applied bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
As of July 31, 2022, the COVID-19 pandemic and worldwide response remains fluid. As a result, many of Applied’s estimates and assumptions are subject to increased judgment and volatility. These estimates may differ materially in future periods as the pandemic continues to evolve and additional information becomes available.
Revenue Recognition from Contracts with Customers
Applied recognizes revenue when promised goods or services are transferred to a customer in an amount that reflects the consideration to which Applied expects to be entitled in exchange for those goods or services. Applied determines revenue recognition through the following five steps; (1) identification of the contract(s) with customers, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract, and (5) recognition of revenue when, or as, a performance obligation is satisfied.
Identifying the contract(s) with customers. Applied sells manufacturing equipment, services, and spare parts directly to its customers in the semiconductor, display, and related industries. The Company generally considers written documentation including, but not limited to, signed purchase orders, master agreements, and sales orders as contracts provided that collection is probable. Collectability is assessed based on the customer’s creditworthiness determined by reviewing the customer’s published credit and financial information, historical payment experience, as well as other relevant factors.
Identifying the performance obligations. Applied’s performance obligations include delivery of manufacturing equipment, service agreements, spare parts, installation, extended warranty and training. Applied’s service agreements are considered one performance obligation and may include multiple goods and services that Applied provides to the customer to deliver against a performance metric. Judgment is used to determine whether multiple promised goods or services in a contract should be accounted for separately or as a group.
Determine the transaction price. The transaction price for Applied’s contracts with customers may include fixed and variable consideration. Applied includes variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Allocate the transaction price to the performance obligations. A contract’s transaction price is allocated to each distinct performance obligation identified within the contract. Applied generally estimates the standalone selling price of a distinct performance obligation based on historical cost plus an appropriate margin. For contracts with multiple performance obligations, Applied allocates the contract’s transaction price to each performance obligation using the relative standalone selling price of each distinct good or service in the contract.
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APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Recognizing the revenue as performance obligations are satisfied. Applied recognizes revenue from equipment and spares parts at a point in time when Applied has satisfied its performance obligation by transferring control of the goods to the customer which typically occurs at shipment or delivery. Revenue from service agreements is recognized over time, typically within 12 months, as customers receive the benefits of services.
The incremental costs to obtain a contract are not material.
Payment Terms. Payment terms vary by contract. Generally, the majority of payments are due within a certain number of days from shipment of goods or performance of service. The remainder is typically due upon customer technical acceptance. Applied typically receives deposits on future deliverables from customers in the Display and Adjacent Markets segment and, in certain instances, may also receive deposits from customers in the Applied Global Services segment. Applied’s payment terms do not generally contain a significant financing component.
Recent Accounting Pronouncements
Accounting Standards Adopted
Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standard Board (FASB) issued an accounting standard update to simplify the accounting for income taxes (Topic 740). This amendment removes certain exceptions and improves consistent application of accounting principles for certain areas in Topic 740. Applied adopted this authoritative guidance in the first quarter of fiscal 2022. The adoption of this guidance did not have a significant impact on Applied’s consolidated condensed financial statements.
Accounting Standards Not Yet Adopted
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. In June 2022, the FASB issued an accounting standard update which clarifies how the fair value of equity securities subject to contractual sale restrictions is determined (Topic 820). The amendment clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires certain qualitative and quantitative disclosures related to equity securities subject to contractual sale restrictions. This authoritative guidance will be effective for Applied in the first quarter of fiscal 2025, with early adoption permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements.
Contract Assets and Contract Liabilities from Revenue Contracts with Customers in a Business Combination. In October 2021, the FASB issued an accounting standard update to improve the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination (Topic 805). This amendment improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. This authoritative guidance will be effective for Applied in the first quarter of fiscal 2024, with early adoption permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements.

10


APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 2      Earnings Per Share
Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of restricted stock units and employee stock purchase plan shares) outstanding during the period. Applied’s net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to the Company’s non-complex capital structure.
 
Three Months EndedNine Months Ended
July 31,
2022
August 1,
2021
July 31,
2022
August 1,
2021
 (In millions, except per share amounts)
Numerator:
Net income $1,606 $1,716 $4,934 $4,176 
Denominator:
Weighted average common shares outstanding864 908 877 914 
Effect of weighted dilutive restricted stock units and employee stock purchase plan shares5 10 6 9 
Denominator for diluted earnings per share869 918 883 923 
Basic earnings per share$1.86 $1.89 $5.63 $4.57 
Diluted earnings per share$1.85 $1.87 $5.59 $4.52 
Potentially weighted dilutive securities3  2  
Potentially weighted dilutive securities attributable to outstanding restricted stock units are excluded from the calculation of diluted earnings per share where the combined exercise price and average unamortized fair value are greater than the average market price of Applied common stock, and therefore their inclusion would be anti-dilutive.
11


APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 3      Cash, Cash Equivalents and Investments
Summary of Cash, Cash Equivalents and Investments
The following tables summarize Applied’s cash, cash equivalents and investments by security type:
 
July 31, 2022CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,284 $— $— $1,284 
Cash equivalents:
Money market funds1,381 — — 1,381 
Municipal securities11 — — 11 
Commercial paper, corporate bonds and medium-term notes280 — — 280 
Total Cash equivalents1,672 — — 1,672 
Total Cash and Cash equivalents$2,956 $— $— $2,956 
Short-term and long-term investments:
Bank certificate of deposit$6 $ $ $6 
U.S. Treasury and agency securities399  7 392 
Non-U.S. government securities*8   8 
Municipal securities368 1 8 361 
Commercial paper, corporate bonds and medium-term notes671  14 657 
Asset-backed and mortgage-backed securities442  13 429 
Total fixed income securities1,894 1 42 1,853 
Publicly traded equity securities87 65 16 136 
Equity investments in privately-held companies583 83 16 650 
Total equity investments670 148 32 786 
Total short-term and long-term investments$2,564 $149 $74 $2,639 
Total Cash, Cash equivalents and Investments$5,520 $149 $74 $5,595 
_________________________
* Includes Canadian provincial government debt.
12


APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

October 31, 2021CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,407 $— $— $1,407 
Cash equivalents:
Money market funds3,556 — — 3,556 
Municipal securities22 — — 22 
Commercial paper, corporate bonds and medium-term notes10 — — 10 
Total Cash equivalents3,588 — — 3,588 
Total Cash and Cash equivalents$4,995 $— $— $4,995 
Short-term and long-term investments:
U.S. Treasury and agency securities$314 $ $ $314 
Non-U.S. government securities*5   5 
Municipal securities367 3 1 369 
Commercial paper, corporate bonds and medium-term notes587 2 2 587 
Asset-backed and mortgage-backed securities555 3 1 557 
Total fixed income securities1,828 8 4 1,832 
Publicly traded equity securities22 39 3 58 
Equity investments in privately-held companies561 82 14 629 
Total equity investments583 121 17 687 
Total short-term and long-term investments$2,411 $129 $21 $2,519 
Total Cash, Cash equivalents and Investments$7,406 $129