Slides
Page 1
Applied Materials External First Quarter Fiscal 2025 Earnings Presentation February 13, 2025
Page 2
| Applied Materials External Forward-Looking Statements 2 This presentation 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 second quarter of fiscal 2025 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; global economic, political and industry conditions, including changes in interest rates and prices for goods and services; the implementation of additional export regulations and license requirements and their interpretation, 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 and our ability to obtain licenses or authorizations on a timely basis, if at all; imposition of new or increases in tariffs and any retaliatory measures; the effects of geopolitical turmoil or conflicts; demand for semiconductor chips and electronic devices; 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; our ability to meet customer demand, and our suppliers’ ability to meet our demand requirements; 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; cybersecurity incidents affecting our information systems or information contained in them, or affecting our operations, suppliers, customers or vendors; 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 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-K 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.
Page 3
Applied Materials External Gary Dickerson President and Chief Executive Officer
Page 4
| Applied Materials External 4 FQ1’25: Delivered Record Results ▪ Record revenue of $7.17 billion and Non-GAAP EPS* of $2.38 ▪ Major technology trends underpin long- term secular growth ▪ Unique and connected portfolio positions us to outperform the industry * For reconciliation of GAAP to non-GAAP results, see appendix of this presentation and non-GAAP reconciliation on the investor relations website at ir.appliedmaterials.com
Page 5
| Applied Materials External AI Central To Industry Outlook 5 ▪ Expect disruptive innovations to bring down the energy consumption and cost of AI, opening up new applications and growing overall market opportunity ▪ Innovation is required across the technology stack » Models and software » Data center architecture » Chip design » Chip and packaging technologies ARTIFICIAL INTELLIGENCE Major catalyst for innovation and growth
Page 6
| Applied Materials External 6 Energy-Efficient Computing Enabled by Materials Engineering Inflections grow the WFE market, increase relative mix of materials engineering, and provide opportunity to gain share AI DATA CENTER ENABLERS INFLECTIONS MATERIALS ENGINEERING LEADERSHIP Leading-Edge Logic Gate-all-around transistors Backside power delivery ✓ High-Performance DRAM 4F2 3D DRAM ✓ DRAM Die Stacking High-Bandwidth Memory (HBM) Hybrid bonding Substrates ✓ Advanced Packaging ✓ Power Electronics Compound semi (SiC, GaN) ✓
Page 7
| Applied Materials External Well Positioned for Leading-Edge Foundry-Logic Inflections 7 Leading-Edge Foundry-Logic Gate-All-Around Transistor Backside Power Delivery Expect Applied revenues to grow by ~30% for the equivalent fab capacity** TRANSISTORS ▪ Transition from FinFET to Gate-All-Around (GAA) to grow Applied’s transistor SAM from ~$6B to ~$7B* ▪ On track for >50% SAM share WIRING ▪ Introduction of Backside Power Delivery (BPD) to grow Applied’s wiring SAM from ~$6B to ~$7B* ▪ On track for >50% SAM share * Per 100k wafer starts per month capacity. SAM = Served Addressable Market **From FinFET nodes to nodes with Gate-All-Around and Backside Power Delivery
Page 8
| Applied Materials External Applied’s Unique Connected Materials Engineering Portfolio BROADEST CAPABILITIES UNIQUE COMBINATIONS Applied Competitors ALD ✓ ✓ ✓ ✓ Cleans ✓ ✓ CMP ✓ CVD ✓ ✓ ✓ ✓ ✓ ECD ✓ ✓ Epitaxy ✓ ✓ Etch ✓ ✓ ✓ ✓ Furnace ✓ Implant ✓ Lithography ✓ PDC ✓ ✓ ✓ PVD ✓ ✓ Thermal ✓ ✓ Track ✓ Unit Process Tools Co-optimized Solutions Integrated Materials Solutions (IMS ) AIx Innovation Networks with Partners 8
Page 9
| Applied Materials External » Made significant progress with construction of the EPIC Center in Silicon Valley » On track to come online in 2026 » Received CHIPS Act grants to develop advanced packaging substrates for 3D integration Advanced Substrates 9 Driving High-Velocity Co-Innovation » Expanded innovation platform with launch of EPIC Advanced Packaging EPIC Advanced Packaging EPIC Center » Partnered with TPG to transition thin-film battery business into independent company Thin-Film Batteries
Page 10
| Applied Materials External 10 APPLIED GLOBAL SERVICES ® ▪ Helping customers manage increasing complexity as they ramp next generation technology into high volume manufacturing ▪ Deploying Actionable Insight Accelerator (AIx) to help accelerate » Customers’ R&D programs » Reduce technology transfer times » Optimize device performance, yield, output, and cost in their fabs ▪ High percentage of revenue is from subscriptions Expect low double-digit annualized growth rate over the long-term
Page 11
| Applied Materials External 11 CEO SUMMARY ▪ Continuing to deliver strong financial performance in the near term ▪ Best positioned at major inflections in fast-growing areas that are critical to energy-efficient AI ▪ Focused on high-velocity co-innovation to bring breakthrough technology to market faster
Page 12
Applied Materials External Brice Hill SVP, Chief Financial Officer
Page 13
| Applied Materials External13 FQ1’25 Non-GAAP Financial Results * For reconciliation of GAAP to non-GAAP results, see appendix of this presentation and non-GAAP reconciliation on the investor relations website at ir.appliedmaterials.com Year-over-year highlights: ▪ Revenue growth in Semiconductor Systems and AGS ▪ Highest quarterly Non-GAAP gross margin since FY2000 » Driven by favorable mix, leading-edge technologies and integrated systems » Progressed on value-based pricing initiatives and cost reductions ▪ Increased R&D investments to support technology growth areas ▪ Record Non-GAAP EPS benefitted from revenue growth, better profitability and share repurchases $M, except EPS FQ1’24 FQ4’24 FQ1’25 YoY QoQ Revenue 6,707 7,045 7,166 7% 2% Gross Margin* 47.9% 47.5% 48.9% 100bps 140bps Operating Expenses* 1,230 1,281 1,313 7% 2% Operating Income* 1,981 2,063 2,190 11% 6% Operating Margin* 29.5% 29.3% 30.6% 110bps 130bps EPS* $2.13 $2.32 $2.38 12% 3%
Page 14
| Applied Materials External 14 Revenue of $5.36B in FQ1’25, up 9% YoY , driven by leading-edge foundry-logic demand » Foundry-logic: revenue increased 20% YoY − Revenue for the ICAPS nodes declined slightly YoY » DRAM: revenue declined 10% YoY » NAND: revenue increased 3% YoY SEMICONDUCTOR SYSTEMS ICAPS = Internet of Things, Communications, Automotive, Power, Sensors; includes F/L spending at 10nm and above nodes.
Page 15
| Applied Materials External 15 APPLIED GLOBAL SERVICES ® ▪ Revenue of $1.59B in FQ1’25, up 8% YoY » Healthy growth in services, offset by a decline in sales of 200mm equipment ▪ Expect low double-digit annualized growth rate over the long-term AGS produces more than enough operating profit to fund the company’s growing dividend
Page 16
| Applied Materials External16 Strong Investment-Grade Balance Sheet CASH AND INVESTMENTS ($M) FQ1’24 FQ2’24 FQ3’24 FQ4’24 FQ1’25 Cash and Cash Equivalents 6,854 7,085 8,288 8,022 6,264 Short-Term Investments 638 472 815 1,449 1,949 Long-Term Investments 2,910 2,983 2,981 2,787 2,686 Total Cash and Investments 10,402 10,540 12,084 12,258 10,899 DEBT ($M) Short-Term Debt* Current ratings (Moody’s / S&P): P-1 / A-1 100 99 99 799 799 Long-Term Debt Current ratings (Moody’s / S&P): A2 / A 5,462 5,463 6,158 5,460 5,461 Total Debt 5,562 5,562 6,257 6,259 6,260 * Includes commercial paper and current portion of long-term debt
Page 17
| Applied Materials External17 CASH FLOWS ($M) FQ1’24 FQ2’24 FQ3’24 FQ4’24 FQ1’25 Operating Cash Flow 2,325 1,392 2,385 2,575 925 Free Cash Flow* 2,096 1,135 2,088 2,168 544 SHAREHOLDER DISTRIBUTIONS ($M) Total Shareholder Distributions (966) (1,086) (1,192) (1,771) (1,644) Share Repurchases (700) (820) (861) (1,442) (1,318) Dividends (266) (266) (331) (329) (326) Cash Flows and Shareholder Distributions Committed to distribute 80–100% of FCF to shareholders over time $7.6B remaining on share repurchase authorization at end of Q1FY25 * For reconciliation of GAAP to non-GAAP results, see appendix of this presentation and non-GAAP reconciliation on the investor relations website at ir.appliedmaterials.com
Page 18
| Applied Materials External18 FQ2’25 Business Commentary Leading-edge foundry-logic Strong momentum as our customers ramp advanced technology nodes with Gate-All-Around transistors into high-volume manufacturing ICAPS nodes More measured level of investment, following strong spending in 2023 and 2024 DRAM Healthy demand but face tough year-over-year compares given the elevated purchases from Chinese customers in 2024 that do not repeat this year NAND Expect growth from historically low levels China Expect to reduce as a percentage of revenue in Q2 to below 30% normalized level
Page 19
| Applied Materials External 19 Business Outlook SECOND QUARTER FISCAL 2025 OUTLOOK* Total Revenue ~$7.1B ± $400M Non-GAAP EPS** ~$2.30 ± $0.18 SEGMENT REVENUE Semiconductor Systems ~$5.30B Applied Global Services ~$1.55B Display ~$250M OTHER Non-GAAP Gross Margin** ~48.4% Non-GAAP Operating Expenses** ~$1.32B Non-GAAP Tax Rate** ~13.0% * Includes the estimated impact of recently announced U.S. export regulations ** For reconciliation of GAAP to non-GAAP results, see appendix of this presentation and non-GAAP reconciliation on the investor relations website at ir.appliedmaterials.com
Page 20
| Applied Materials External 20 CFO SUMMARY ▪ Confident in long-term growth opportunities across all of our business segments ▪ Making significant investments in R&D to grow our share and increasing our capex to be the leader in high-velocity co-innovation with our customers ▪ Differentiated technology, unique insights and deep industry relationships position Applied to benefit from the technology transitions and semiconductor growth expected over the coming years
Page 21
&
Page 22
| Applied Materials External - 200 400 600 800 1,000 1,200 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 22 Capital Allocation Strategy Shares Outstanding at FY End $0.26 $0.32 $0.40 $- $0.10 $0.20 $0.30 $0.40 $0.50 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 25% increase Quarterly Dividend per Share OVER PAST 10 FISCAL YEARS (through FY24) » Reinvested >$22B in R&D and >$6B in capital additions » Distributed nearly 90% of FCF* » Grew dividend per share at ~15% CAGR » Reduced shares outstanding by 33% 1. Invest in R&D and infrastructure to enable profitable growth 2. Grow dividend per share and use buybacks to distribute excess FCF Committed to distribute 80–100% of FCF to shareholders over time (Millions) 23% increase $7.6B remaining on share repurchase authorization at end of Q1FY25 * For reconciliation of GAAP to non-GAAP results, see appendix of this presentation and non-GAAP reconciliation on the investor relations website at ir.appliedmaterials.com
Page 23
| Applied Materials External 23 LATEST 3rd PARTY ESG RATINGS CDP Climate B CDP Water A- MSCI AAA Sustainalytics Risk Rating Low ISS (E/S/G) 2/2/1 Links: 2023 Sustainability Report | 2023 Sustainability Highlights
Page 24
| Applied Materials External Investor Relations Home Page LINK Latest News LINK Blog: Ideas, Actions & Technologies LINK 2024: Semicon West Technology Breakfast LINK 2024: 2023 WFE Market Summary LINK 2024: Applied Materials Panel Discussion during SPIE Conference LINK 2022: Services Master Class LINK 24 Additional Resources
Page 25
| Applied Materials External Appendix GAAP to Non-GAAP Reconciliations 25
Page 26
| Applied Materials External26 Use of Non-GAAP Adjusted Financial Measures Applied provides investors with certain non-GAAP 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 appendix to this presentation and on Applied’s website, ir.appliedmaterials.com. Management uses these non-GAAP 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 directl y comparable financial measures prepared in accordance with GAAP.
Page 27
| Applied Materials External FOOTNOTES: 1. These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2. GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis. 3. Amount for the first quarter of fiscal 2025 included changes to income tax provision of $30 million from amortization of intangibles and a $644 million remeasurement of deferred tax assets resulting from new tax incentive agreements in Singapore in fiscal 2025. 4. Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes. 5. Amount for the first quarter of fiscal 2025 included changes to income tax provision of $0.04 per diluted share from amortization of intangibles and $0.79 per diluted share from a remeasurement of deferred tax assets resulting from new tax incentive agreements in Singapore in fiscal 2025. 27 UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES FQ1’24 FQ2’24 FQ3’24 FQ4’24 FQ1’25 Non-GAAP Gross Profit GAAP reported gross profit $ 3,204 $ 3,153 $ 3,205 $ 3,335 $ 3,496 Certain items associated with acquisitions 1 7 7 6 6 7 Impairment of long-lived assets - - - 3 - Non-GAAP gross profit $ 3,211 $ 3,160 $ 3,211 $ 3,344 $ 3,503 Non-GAAP gross margin 47.9% 47.5% 47.4% 47.5% 48.9% Non-GAAP Operating Income GAAP reported operating income $ 1,967 $ 1,912 $ 1,942 $ 2,046 $ 2,175 Certain items associated with acquisitions1 11 10 10 11 12 Acquisition integration and deal costs 3 5 1 3 3 Impairment of long-lived assets - - - 3 - Non-GAAP operating income $ 1,981 $ 1,927 $ 1,953 $ 2,063 $ 2,190 Non-GAAP operating margin 29.5% 29.0% 28.8% 29.3% 30.6% Non-GAAP Net Income GAAP reported net income $ 2,019 $ 1,722 $ 1,705 $ 1,731 $ 1,185 Certain items associated with acquisitions1 11 10 10 11 12 Acquisition integration and deal costs 3 5 1 3 3 Impairment of long-lived assets - - - 3 - Realized loss (gain), dividends and impairments on strategic investments, net (1) (3) 16 (1) (9) Unrealized loss (gain) on strategic investments, net (280) (20) 25 244 106 Income tax effect of share-based compensation2 (26) 11 8 7 (10) Income tax effect related to intra-entity intangible asset transfers3 22 18 17 (33) 674 Resolution of prior years' income tax filings and other tax items 33 - (11) (47) (16) Income tax effect of non-GAAP adjustments4 1 1 (4) (1) 1 Non-GAAP net income $ 1,782 $ 1,744 $ 1,767 $ 1,917 $ 1,946 Non-GAAP Earnings Per Diluted Share GAAP reported earnings per diluted share $ 2.41 $ 2.06 $ 2.05 $ 2.09 $ 1.45 Certain items associated with acquisitions1 0.01 0.01 0.01 0.01 0.01 Acquisition integration and deal costs - 0.01 - - - Realized loss (gain), dividends and impairments on strategic investments, net - - 0.01 - (0.01) Unrealized loss (gain) on strategic investments, net (0.33) (0.02) 0.03 0.30 0.13 Income tax effect of share-based compensation2 (0.03) 0.01 0.01 0.01 (0.01) Income tax effects related to intra-entity intangible asset transfers5 0.03 0.02 0.02 (0.04) 0.83 Resolution of prior years' income tax filings and other tax items 0.04 - (0.01) (0.05) (0.02) Non-GAAP earnings per diluted share $ 2.13 $ 2.09 $ 2.12 $ 2.32 $ 2.38 Weighted average number of diluted shares 837 836 833 828 819
Page 28
| Applied Materials External28 UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES IN MILLIONS FQ1’24 FQ2’24 FQ3’24 FQ4’24 FQ1’25 GAAP reported Operating Expenses $ 1,237 $ 1,241 $ 1,263 $ 1,289 $ 1,321 Certain items associated with acquisitions1 (4) (3) (4) (5) (5) Acquisition integration and deal costs (3) (5) (1) (3) (3) Non-GAAP operating expenses $ 1,230 $ 1,233 $ 1,258 $ 1,281 $ 1,313 FOOTNOTE: 1. These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
Page 29
| Applied Materials External29 UNAUDITED QUARTERLY RECONCILIATION OF NON-GAAP FREE CASH FLOW IN MILLIONS FQ1’24 FQ2’24 FQ3’24 FQ4’24 FQ1’25 Non-GAAP Free Cash Flows1 Cash provided by operating activities $ 2,325 $ 1,392 $ 2,385 $ 2,575 $ 925 Capital expenditures (229) (257) (297) (407) (381) Non-GAAP free cash flow $ 2,096 $ 1,135 $ 2,088 $ 2,168 $ 544 FOOTNOTE: 1. Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities less capital expenditures.
Page 30
| Applied Materials External30 UNAUDITED FULL YEAR RECONCILIATION OF NON-GAAP FREE CASH FLOW FOOTNOTE: 1. Free cash flow is a non-GAAP measure and is defined as net cash provided by operating activities less capital expenditures. IN MILLIONS FY2015 FY2016 FY2017 FY2018 FY2019 Non-GAAP Free Cash Flows1 Cash provided by operating activities $ 1,163 $ 2,566 $ 3,789 $ 3,787 $ 3,247 Capital expenditures (215) (253) (345) (622) (441) Non-GAAP free cash flow $ 948 $ 2,313 $ 3,444 $ 3,165 $ 2,806 IN MILLIONS FY2020 FY2021 FY2022 FY2023 FY2024 Non-GAAP Free Cash Flows1 Cash provided by operating activities $ 3,804 $ 5,442 $ 5,399 $ 8,700 $ 8,677 Capital expenditures (422) (668) (787) (1,106) (1,190) Non-GAAP free cash flow $ 3,382 $ 4,774 $ 4,612 $ 7,594 $ 7,487
Page 31
| Applied Materials External31 RECONCILIATION INFORMATION FOR BUSINESS OUTLOOK Non-GAAP outlook for the second quarter of fiscal 2025 (including non-GAAP gross margin, operating margin, operating expenses and EPS) excludes known charges related to completed acquisitions of approximately $11 million, or $0.01 per share and a gain on asset sale of approximately $43 million or $0.05 per share, and includes a net income tax benefit related to intra-entity intangible asset transfers of approximately $31 million, or $0.04 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.