Slide 1: Third Quarter Fiscal 2023 Earnings Presentation
Third Quarter Fiscal 2023 Earnings Presentation August 17, 2023 Applied Materials External
Slide 2: Forward-Looking Statements
Forward-Looking Statements 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, ou
Slide 3: Gary Dickerson, President and Chief Executive Officer
Gary Dickerson President and Chief Executive Officer Applied Materials External
Slide 4: Agenda
AGENDA IoT + AI era driving growth and innovation Applied’s strategy for sustained outperformance Near-term performance and outlook 4 | Applied Materials External
Slide 5: Semiconductor Industry Growing to $1 Trillion by 2030
Semiconductor Industry Growing to $1 Trillion by 2030 1,200 2030 Semi forecast = $1T 1,000 2022 Semi revenue = $573B 800 2018 ERA 4 : Machine generated data surpasses IoT + AI human generated data 600 Semi revenue = $466B 2002 First Blackberry Smartphone Introduced 400 1990 Semi revenue = $170B Glob
Slide 6: IoT + AI: Two Sides of the Same Coin
IoT + AI: Two Sides of the Same Coin TETHERED EDGE BATTERY EDGE EDGE COMMUNICATIONS CLOUD DATA DATA CENTER CENTER Internet of Things Artificial Intelligence 6 | Applied Materials External
Slide 7: Applied has broadest portfolio of products and technologies to accelerate new PPACt playbook
ENABLED BY KEY INFLECTIONS ▪ New ASICs and accelerators New architectures ▪ New memory / in-memory compute ▪ Specialty, CIS, power ▪ GAA transistors New structures / 3D ▪ Backside power delivery ▪ 3D NAND, 3D DRAM ▪ Transistor Gate New materials ▪ Transistor Contact ▪ Interconnect Wiring ▪ EUV enabl
Slide 8: Executing Our Strategy
Executing Our Strategy HETEROGENEOUS ICAPS LEADING-EDGE F/L DRAM INTEGRATION ▪ Created dedicated ▪ Formed IMS™* team to ▪ Developed strong product ▪ Established clear internal organization accelerate co-optimized portfolio to enable multiple leadership position in HI ▪ Released >20 new and integrate
Slide 9: DRAM Leadership
▪ #1 in DRAM process equipment ▪ Gained share in DRAM patterning with co-optimized DRAM Draco® CVD and Sym3® etch for capacitor scaling ▪ Ported logic technologies to increase DRAM I/O speed Leadership ▪ Largest supplier of advanced packaging solutions, enabling multiple generations of HBM Positione
Slide 10: ICAPS Demand Drivers
ICAPS Demand Drivers AUTOMATION EVs + ADAS CLEAN ENERGY SMART GRID REGIONALIZATION 10 | Applied Materials External
Slide 11: Applied Global Services
APPLIED ▪ Record quarterly revenue, on track to grow in 2023 GLOBAL ▪ 16 consecutive quarters of Y/Y growth SERVICES ▪ This year, >60% of recurring revenue generated from subscriptions » 2.6 years average length » >90% renewal rate ▪ Expect low-double-digit AGS growth rate in coming years 11 | Appli
Slide 12: Collaborating to Accelerate Innovation
Collaborating to Accelerate Innovation EPIC Center | SILICON VALLEY Collaborative Engineering Center | INDIA 12 | Applied Materials External
Slide 13: Collaborating to Reduce Carbon Emissions
Collaborating to Reduce Carbon Emissions ™ NEW: Net Zero EcoTwin™ 2040 Playbook LINK Vistara™ 13 | Applied Materials External
Slide 14: CEO Summary
CEO ▪ Advanced chips are the foundation of major inflections SUMMARY » IoT + AI era is driving new wave of growth and innovation ▪ Applied is focused on high-value, enabling technologies » ICAPS » Leading-edge foundry-logic » DRAM » Heterogenous Integration ▪ Delivering strong results in 2023 » Posi
Slide 15: Brice Hill, SVP, Chief Financial Officer
Brice Hill SVP, Chief Financial Officer Applied Materials External
Slide 16: CFO Investment Thesis
CFO ▪ Semiconductor industry expected to grow to $1T by 2030 INVESTMENT THESIS ▪ Materials engineering increasingly critical to customer roadmaps ▪ Applied’s performance driven by » Broad and differentiated portfolio » Balanced market exposure » Growing services business ▪ Efficient business model g
Slide 17: Q3 Business Environment
Q3 Business Environment ICAPS* » Record 200mm systems revenue » Record Europe revenue » U.S., Japan and Europe fastest growing regions this year Leading-edge F/L NAND *Internet of Things, Communications, Automotive, Power, Sensors 17 | Applied Materials External
Slide 18: Q3F23 Non-GAAP Financial Results
Q3F23 Non-GAAP Financial Results $M, except EPS Q3F22 Q2F23 Q3F23 Y/Y Q/Q Revenue 6,520 6,630 6,425 (1%) (3%) Gross Margin* 46.2% 46.8% 46.4% 20bps (40bps) Operating Expenses* 1,060 1,171 1,165 10% (1%) Operating Income* 1,953 1,930 1,818 (7%) (6%) Operating Margin* 30.0% 29.1% 28.3% (170bps) (80bps
Slide 19: Q3F23 Segment Results
Q3F23 Segment Results SEMICONDUCTOR SYSTEMS APPLIED GLOBAL SERVICES DISPLAY & ADJACENT MARKETS Non-GAAP Operating Margin* 37% 31% 36% 37% 36% 35% 28% 28% 29% 29% 21% 5,162 5,038 4,977 16% 1,464 4,734 4,676 1,428 1,420 1,420 14% 1,369 13% 333 5% 251 235 Revenue ($M) 168 167 Q3F22 Q4F22 Q1F23 Q2F23 Q3
Slide 20: Cash Flows and Shareholder Distributions
Cash Flows and Shareholder Distributions CASH FLOWS ($M) Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Operating Cash Flow 1,469 857 2,270 2,292 2,583 Free Cash Flow* 1,259 634 1,983 2,037 2,328 SHAREHOLDER DISTRIBUTIONS ($M) Total Shareholder Distributions (1,225) (1,723) (470) (1,019) (707) Share Repurchases (1,0
Slide 21: Fourth Quarter Fiscal 2023 Business Outlook
Business Outlook Total Revenue ~$6.51B ± $400M Fourth OUTLOOK Non-GAAP EPS ~$2.00 ± $0.18 QUARTER FISCAL 2023 Semiconductor Systems ~$4.75B SEGMENT Applied Global Services ~$1.42B REVENUE Display and Adjacent Markets ~$290M Non-GAAP Gross Margin ~47.0% OTHER Non-GAAP Operating Expenses ~$1.17B Non-G
Slide 22: CFO Summary
CFO ▪ Executing well and outperforming our markets SUMMARY ▪ Semi Systems YTD* revenue trending up Y/Y ▪ AGS on track for Y/Y growth ▪ Aligned business with fastest-growing end markets » Winning across leading-edge foundry-logic, DRAM, ICAPS and Heterogeneous Integration/Advanced Packaging ▪ Investi
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Slide 24: Applied Materials At-A-Glance
APPLIED MATERIALS AT-A-GLANCE REPORTING SEGMENTS FOUNDED Semiconductor Systems CURRENT FISCAL 1967 YEAR ENDS FIRST PUBLIC Applied Global Services 29 October 2023 OFFERING Display and Adjacent Markets 1972 $3.0 billion ~34,000* $26.5 billion ~17,300** TTM R&D employees TTM REVENUE INVESTMENTS active
Slide 25: Strong History of Shareholder Distributions
Strong History of Shareholder Distributions Over past 10 fiscal years (through FY22) March 2023, Board of Directors approved » Grew dividend per share at 11% CAGR » 23% dividend per share increase » Reduced shares outstanding by nearly 30% » $10B supplemental share repurchase authorization » Distrib
Slide 26: Strong and Flexible Balance Sheet
Strong and Flexible Balance Sheet CASH AND INVESTMENTS ($M) Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Cash and cash equivalents 2,956 1,995 3,547 4,588 6,025 Short-term investments 592 586 500 510 510 Long-term investments 2,047 1,980 2,088 2,024 2,177 Total cash and investments 5,595 4,561 6,135 7,122 8,712 Co
Slide 27: ESG Roadmap | 2030 Goals & Net Zero 2040 Playbook
ESG Roadmap | 2030 Goals & Net Zero 2040 Playbook APPLIED’S SEMI INDUSTRY’S GLOBAL OPERATIONS OPERATIONS ELECTRONICS 1x 100x 10,000x Achieved Strong collaboration with PPACt engagements with customers’ 100% renewable energy leading customers on customers focus on energy-efficient in US in 2022 and o
Slide 28: Additional Resources
Additional Resources Investor Relations Home Page LINK Latest News LINK Blog: Ideas, Actions & Technologies LINK 2021 Memory Master Class LINK 2021 Logic Master Class LINK 2021 ICAPS and Packaging Master Class LINK 2021 Process Control and AppliedPRO Master Class LINK 2022 New Ways to Shrink Master
Slide 29: Appendix: GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations 29 | Applied Materials External
Slide 30: Use of Non-GAAP Adjusted Financial Measures
Use of Non-GAAP Adjusted Financial Measures Applied provides investors with certain non-GAAP adjusted 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 a
Slide 31: Unaudited Quarterly Reconciliation of GAAP to Non-GAAP Adjusted Results
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS IN MILLIONS, EXCEPT EPS AND PERCENTAGE Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Non-GAAP Adjusted Gross Profit Reported gross profit - GAAP basis $ 3,006 $ 3,101 $ 3,145 $ 3,094 $ 2,976 Certain items associated with acquisitions 1 7 6 7 7
Slide 32: Unaudited Quarterly Reconciliation of GAAP to Non-GAAP Operating Expenses
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES IN MILLIONS Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Operating Expenses (GAAP Basis) $ 1,082 $ 1,107 $ 1,175 $ 1,183 $ 1,174 Certain items associated with acquisitions (3) (4) (4) (4) (3) Acquisition integration and deal costs (19) (6) (
Slide 33: Unaudited Quarterly Reconciliation of GAAP to Non-GAAP Segment Operating Results
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP SEGMENT OPERATING RESULTS IN MILLIONS, EXCEPT PERCENTAGE Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Semiconductor Systems Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis $ 1,701 $ 1,849 $ 1,917 $ 1,764 $ 1,618 Certain items associat
Slide 34: Unaudited Calculations of Non-GAAP Measures
UNAUDITED CALCULATIONS OF NON-GAAP MEASURES IN MILLIONS Q3F22 Q4F22 Q1F23 Q2F23 Q3F23 Free Cash Flows1 Cash provided by operating activities $ 1,469 $ 857 $ 2,270 $ 2,292 $ 2,583 Capital expenditures (210) (223) (287) (255) (255) Free Cash Flow $ 1,259 $ 634 $ 1,983 $ 2,037 $ 2,328 FOOTNOTE: 1. Free
Slide 35: Reconciliation Information for Business Outlook
RECONCILIATION INFORMATION FOR BUSINESS OUTLOOK Non-GAAP outlook for the fourth quarter of fiscal 2023 (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, includes t
Slide 36: Make Possible
Cll arenas. make possible