10-Q 1 amat-20220501.htm 10-Q amat-20220501
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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 May 1, 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 May 1, 2022: 869,947,277



APPLIED MATERIALS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 1, 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 EndedSix Months Ended
May 1,
2022
May 2,
2021
May 1,
2022
May 2,
2021
(Unaudited)
Net sales$6,245 $5,582 $12,516 $10,744 
Cost of products sold3,318 2,929 6,630 5,742 
Gross profit2,927 2,653 5,886 5,002 
Operating expenses:
Research, development and engineering686 617 1,340 1,223 
Marketing and selling173 148 340 295 
General and administrative174 149 340 310 
Severance and related charges 6 (4)158 
Deal termination fee 154  154 
Total operating expenses1,033 1,074 2,016 2,140 
Income from operations1,894 1,579 3,870 2,862 
Interest expense58 61 115 122 
Interest and other income, net28 27 34 45 
Income before income taxes1,864 1,545 3,789 2,785 
Provision for income taxes328 215 461 325 
Net income$1,536 $1,330 $3,328 $2,460 
Earnings per share:
Basic$1.75 $1.45 $3.77 $2.68 
Diluted$1.74 $1.43 $3.74 $2.66 
Weighted average number of shares:
Basic878 918 883 917 
Diluted883 927 890 926 
See accompanying Notes to Consolidated Condensed Financial Statements.
3


APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months EndedSix Months Ended
May 1,
2022
May 2,
2021
May 1,
2022
May 2,
2021
(Unaudited)
Net income$1,536 $1,330 $3,328 $2,460 
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale investments(33)(8)(48)(10)
Change in unrealized net loss on derivative instruments36 15 33 19 
Other comprehensive income (loss), net of tax3 7 (15)9 
Comprehensive income$1,539 $1,337 $3,313 $2,469 
See accompanying Notes to Consolidated Condensed Financial Statements.
4

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
May 1,
2022
October 31,
2021
 
ASSETS
Current assets:
Cash and cash equivalents$3,331 $4,995 
Short-term investments591 464 
Accounts receivable, net4,883 4,953 
Inventories5,009 4,309 
Other current assets1,430 1,386 
Total current assets15,244 16,107 
Long-term investments2,102 2,055 
Property, plant and equipment, net2,071 1,934 
Goodwill3,479 3,479 
Purchased technology and other intangible assets, net85 104 
Deferred income taxes and other assets2,478 2,146 
Total assets$25,459 $25,825 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses$4,060 $4,268 
Contract liabilities2,590 2,076 
Total current liabilities6,650 6,344 
Long-term debt5,455 5,452 
Income taxes payable962 1,090 
Other liabilities813 692 
Total liabilities13,880 13,578 
Stockholders’ equity:
Common stock9 9 
Additional paid-in capital8,306 8,247 
Retained earnings35,137 32,246 
Treasury stock(31,598)(27,995)
Accumulated other comprehensive loss(275)(260)
Total stockholders’ equity11,579 12,247 
Total liabilities and stockholders’ equity$25,459 $25,825 
Amounts as of May 1, 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.
5

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 May 1, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of January 30, 2022883 $9 $8,130 $33,827 1,131 $(29,798)$(278)$11,890 
Net income— — — 1,536 — — — 1,536 
Other comprehensive income (loss), net of tax— — — — — — 3 3 
Dividends declared ($0.26 per common share)
— — — (226)— — — (226)
Share-based compensation— — 101 — — — — 101 
Issuance under stock plans1 — 75 — — — — 75 
Common stock repurchases(15)— — — 15 (1,800)— (1,800)
Balance as of May 1, 2022869 $9 $8,306 $35,137 1,146 $(31,598)$(275)$11,579 

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Six Months Ended May 1, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of October 31, 2021892 $9 $8,247 $32,246 1,119 $(27,995)$(260)$12,247 
Net income— — — 3,328 — — — 3,328 
Other comprehensive income (loss), net of tax— — — — — — (15)(15)
Dividends declared ($0.50 per common share)
— — — (437)— — — (437)
Share-based compensation— — 219 — — — — 219 
Issuance under stock plans4 — (160)— — — — (160)
Common stock repurchases(27)— — — 27 (3,603)— (3,603)
Balance as of May 1, 2022869 $9 $8,306 $35,137 1,146 $(31,598)$(275)$11,579 


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 May 2, 2021SharesAmountSharesAmount
(Unaudited)
Balance as of January 31, 2021918 $9 $7,869 $28,137 1,091 $(24,245)$(297)$11,473 
Net income— — — 1,330 — — — 1,330 
Other comprehensive income (loss), net of tax— — — — — — 7 7 
Dividends declared ($0.24 per common share)
— — — (220)— — — (220)
Share-based compensation— — 84 — — — — 84 
Issuance under stock plans2 — 69 — — — — 69 
Common stock repurchases(6)— — — 6 (750)— (750)
Balance as of May 2, 2021914 $9 $8,022 $29,247 1,097 $(24,995)$(290)$11,993 


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Six Months Ended May 2, 2021SharesAmountSharesAmount
(Unaudited)
Balance as of October 25, 2020914 $9 $7,904 $27,209 1,091 $(24,245)$(299)$10,578 
Net income— — — 2,460 — — — 2,460 
Other comprehensive income (loss), net of tax— — — — — — 9 9 
Dividends declared ($0.46 per common share)
— — — (422)— — — (422)
Share-based compensation— — 191 — — — — 191 
Issuance under stock plans6 — (73)— — — — (73)
Common stock repurchases(6)— — — 6 (750)— (750)
Balance as of May 2, 2021914 $9 $8,022 $29,247 1,097 $(24,995)$(290)$11,993 

See accompanying Notes to Consolidated Condensed Financial Statements.


7

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Six Months Ended
May 1, 2022May 2, 2021
(Unaudited)
Cash flows from operating activities:
Net income$3,328 $2,460 
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization213 191 
Severance and related charges(4)149 
Share-based compensation219 191 
Deferred income taxes(256)24 
Other(8)(15)
Changes in operating assets and liabilities:
Accounts receivable70 (411)
Inventories(700)(149)
Other current and non-current assets(30)3 
Accounts payable and accrued expenses(140)(155)
Contract liabilities514 385 
Income taxes payable(167)(90)
Other liabilities34 25 
Cash provided by operating activities3,073 2,608 
Cash flows from investing activities:
Capital expenditures(354)(325)
Cash paid for acquisitions, net of cash acquired (12)
Proceeds from sales and maturities of investments639 624 
Purchases of investments(836)(722)
Cash used in investing activities(551)(435)
Cash flows from financing activities:
Proceeds from common stock issuances 96 86 
Common stock repurchases(3,603)(750)
Tax withholding payments for vested equity awards(256)(159)
Payments of dividends to stockholders(425)(403)
Cash used in financing activities(4,188)(1,226)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents(1,666)947 
Cash, cash equivalents and restricted cash equivalents — beginning of period5,101 5,466 
Cash, cash equivalents and restricted cash equivalents — end of period$3,435 $6,413 
Reconciliation of cash, cash equivalents, and restricted cash equivalents
Cash and cash equivalents$3,331 $6,305 
Restricted cash equivalents included in deferred income taxes and other assets104 108 
Total cash, cash equivalents, and restricted cash equivalents$3,435 $6,413 
Supplemental cash flow information:
Cash payments for income taxes$1,031 $409 
Cash refunds from income taxes$128 $23 
Cash payments for interest$102 $103 
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 six months ended May 1, 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 six months of fiscal 2022 and 2021 contained 26 and 27 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 May 1, 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.
9


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
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 EndedSix Months Ended
May 1,
2022
May 2,
2021
May 1,
2022
May 2,
2021
 (In millions, except per share amounts)
Numerator:
Net income $1,536 $1,330 $3,328 $2,460 
Denominator:
Weighted average common shares outstanding878 918 883 917 
Effect of weighted dilutive restricted stock units and employee stock purchase plan shares5 9 7 9 
Denominator for diluted earnings per share883 927 890 926 
Basic earnings per share$1.75 $1.45 $3.77 $2.68 
Diluted earnings per share$1.74 $1.43 $3.74 $2.66 
Potentially weighted dilutive securities3    
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:
 
May 1, 2022CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,242 $— $— $1,242 
Cash equivalents:
Money market funds1,812 — — 1,812 
U.S. Treasury and agency securities124 — — 124 
Non-U.S. government securities*40 — — 40 
Municipal securities23 — — 23 
Commercial paper, corporate bonds and medium-term notes90 — — 90 
Total Cash equivalents2,089 — — 2,089 
Total Cash and Cash equivalents$3,331 $— $— $3,331 
Short-term and long-term investments:
U.S. Treasury and agency securities$357 $ $8 $349 
Non-U.S. government securities*7   7 
Municipal securities378  10 368 
Commercial paper, corporate bonds and medium-term notes718  14 704 
Asset-backed and mortgage-backed securities476  12 464 
Total fixed income securities1,936  44 1,892 
Publicly traded equity securities86 77 7 156 
Equity investments in privately-held companies580 79 14 645 
Total equity investments666 156 21 801 
Total short-term and long-term investments$2,602 $156 $65 $2,693 
Total Cash, Cash equivalents and Investments$5,933 $156 $65 $6,024 
_________________________
* 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 $21 $7,514 
 _________________________
*Includes Canadian provincial government debt.
 
Maturities of Investments
The following table summarizes the contractual maturities of Applied’s investments as of May 1, 2022: