Slide 1: Second Quarter Fiscal 2024 Earnings Presentation
Second Quarter Fiscal 2024 Earnings Presentation May 16, 2024 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: Upcoming Events
UPCOMING Events MAY 30 Bernstein Strategic Decisions Conference JUNE 6 Bank of America Global Technology Conference JULY 9 Applied Materials Technology Breakfast at SEMICON West 3 | Applied Materials External
Slide 4: Gary Dickerson, President and Chief Executive Officer
Gary Dickerson President and Chief Executive Officer Applied Materials External
Slide 5: Overview
Overview ▪ Delivering near-term performance and well positioned for long-term growth ▪ Enabling global technology megatrends ▪ Accelerating key semiconductor inflections from R&D to high-volume manufacturing ▪ Generating more value in our service business 5 | Applied Materials External
Slide 6: Tectonic Shifts in Technology Are Built on Semiconductors
Tectonic Shifts in Technology Are Built on Semiconductors EDGE AI AND ELECTRIC AND GLOBAL ENERGY DATA CENTER AI INTERNET OF THINGS AUTONOMOUS VEHICLES TRANSFORMATION Advanced AI Chips Enabled by: ▪ Leading-edge logic Applied is #1 in ▪ Compute memory (high-performance DRAM) materials engineering ▪ H
Slide 7: Enabling Customer Roadmap Inflections: Gate-All-Around
Enabling Customer Roadmap Inflections: Gate-All-Around Frontside Wiring TRANSISTORS ▪ Shift from FinFET to Gate-All-Around (GAA) grows Applied’s transistor SAM from ~$6B to ~$7B* ▪ On track for >50% SAM share Transistor WIRING ▪ Introduction of Backside Power Delivery (BPD) grows Applied’s wiring SA
Slide 8: Enabling Customer Roadmap Inflections
Enabling Customer Roadmap Inflections DRAM HIGH-BANDWIDTH MEMORY ADVANCED PACKAGING » #1 in DRAM materials engineering » #1 in HBM materials engineering » #1 in advanced packaging » DRAM adopting our logic » Serve ~3/4 of materials engineering » Industry’s broadest advanced technologies in periphery
Slide 9: Applied Materials Technology Portfolio
Applied Materials Technology Portfolio Heterogeneous Materials Engineering Integration Create and deposit Metal Dielectric Selective Epitaxy Plating ALD Digital lithography deposition deposition deposition Shape and remove Etch Planarization Selective removal Pattern shaping Panel-level PVD Connect
Slide 10: Translating R&D Investments to Outperformance
Translating R&D Investments to Outperformance Applied Materials Share of WFE ▪ Applied outperformed WFE in each of past 5 years ▪ Materials engineering ~1/2 of WFE market; 21.7% 21.6% 22.0% Applied is #1 in materials engineering 19.5% 19.9% 20.6% 21.2% 20.5% 18.2% 20.0% 19.6% ▪ Expect materials engi
Slide 11: Global EPIC Platform: Collaborating with Customers
Global EPIC Platform: Collaborating with Customers ▪ Changing the industry’s innovation model to accelerate mutual success rates and increase investment efficiencies ▪ Deploying our broad, deep and connected portfolio of materials engineering solutions to support high- Maydan Technology Center, Sunn
Slide 12: Connected Solutions for High-Value Problems
Connected Solutions for High-Value Problems PVD ALD CVD Producer CVD PVD Reflow PVD Reflow On-Board Metrology ALD ALD Treat ALD Centris Sym3 Etch Endura PVD Endura IMS (Integrated Materials Solution) Unit Processes Co-optimized Processes Integrated Processes Two or more co-optimized Two or more co-o
Slide 13: Applied Global Services
APPLIED ▪ Record revenue of $1.5B in FQ2, 19 consecutive quarters of YoY growth GLOBAL ▪ >200k chambers in installed base ▪ ~2/3 recurring revenue generated from subscriptions SERVICES » 8% YoY increase in tools under service agreements » ~90% renewal rate Enables Customers to Accelerate Technology
Slide 14: CEO Summary
CEO ▪ Strong financial performance in FQ2 and well positioned for long-term growth SUMMARY ▪ Tectonic shifts in technology are built on semiconductors, driving demand for more and better chips ▪ Key inflections that underpin the semiconductor roadmap are enabled by Applied Materials, supporting our
Slide 15: Brice Hill, SVP, Chief Financial Officer
Brice Hill SVP, Chief Financial Officer Applied Materials External
Slide 16: Business Environment and Applied Performance
BUSINESS ENVIRONMENT APPLIED PERFORMANCE » Semiconductor device market Strong quarter in FQ2 across grew 15% YoY in CQ1 » DRAM » Factory utilization increased across all device types » Advanced packaging » Cloud Service Providers » ICAPS announced strong capex plans » Data center expected to become
Slide 17: Tectonic Shifts: ICAPS Driver of Foundry-Logic Business
Tectonic Shifts in Technology Are Built on Semiconductors EDGE AI AND ELECTRIC AND GLOBAL ENERGY DATA CENTER AI INTERNET OF THINGS AUTONOMOUS VEHICLES TRANSFORMATION » Megatrends increase unit demand for ICAPS chips ICAPS to remain key » Innovating to create better ICAPS chips stimulates driver of A
Slide 18: Capital Allocation Strategy
Capital Allocation Strategy 1. Invest in R&D and infrastructure OVER PAST 10 FISCAL YEARS (through FY23) to enable profitable growth » Reinvested >$20B in R&D and >$5B in capital additions » Distributed >90% of FCF* 2. Grow dividend per share and use » Grew dividend per share at ~12% CAGR buybacks t
Slide 19: A Virtuous Cycle
OPERATING MODEL: A Virtuous Cycle FREE CASH FLOW: » Grow dividend Service R&D per share Accelerate Collaborate » Repurchase shares customer ramps with customers and optimize output, to invent new yield and cost over semiconductor decades of useful life technologies Manufacture Design Build and sell
Slide 20: AGS Delivering Stable Growth
AGS Delivering Stable Growth ▪ Every tool we ship grows our installed base AGS Revenue ($B) and service opportunity 6 ▪ Delivered 19 consecutive quarters of YoY 5 growth, spanning two memory downcycles ▪ >80% of AGS revenue is recurring services 4 and parts 3 » ~2/3 recurring revenue generated from
Slide 21: Increased ROIC from 8% to 35% and Reduced Net Shares Outstanding
C O M P O U N D A N N U A L G R O W T H R AT E O V E R 1 0 F I S C A L Y E A R S >13% ~30% 33% ~12% REVENUE NON-GAAP EPS* FREE CASH FLOW* DIVIDENDS / SHARE Over Past 10 Fiscal Years, Increased ROIC* from 8% to 35% and Reduced Net Shares Outstanding by Over 30% * For reconciliation of GAAP to non-GAA
Slide 22: Q2F24 Non-GAAP Financial Results
Q2F24 Non-GAAP Financial Results $M, except EPS Q2F23 Q1F24 Q2F24 YoY QoQ Revenue 6,630 6,707 6,646 - (1%) Gross Margin* 46.8% 47.9% 47.5% 70bps (40bps) Operating Expenses* 1,171 1,230 1,233 5% - Operating Income* 1,930 1,981 1,927 - (3%) Operating Margin* 29.1% 29.5% 29.0% (10bps) (50bps) EPS* $2.0
Slide 23: Q2F24 Segment Results
Q2F24 Segment Results SEMICONDUCTOR SYSTEMS APPLIED GLOBAL SERVICES DISPLAY & ADJACENT MARKETS Non-GAAP Operating Margin* 36% 36% 35% 35% 34% 28% 29% 27% 27% 27% 4,977 4,909 4,901 4,883 21% 4,676 1,530 1,476 1,471 1,464 10% 1,428 14% 3% 10% 298 244 235 Revenue ($M) 179 168 Q2F23 Q3F23 Q4F23 Q1F24 Q2
Slide 24: Cash Flows and Shareholder Distributions
Cash Flows and Shareholder Distributions CASH FLOWS ($M) Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 Operating Cash Flow 2,292 2,583 1,555 2,325 1,392 Free Cash Flow* 2,037 2,328 1,246 2,096 1,135 SHAREHOLDER DISTRIBUTIONS ($M) Total Shareholder Distributions (1,019) (707) (968) (966) (1,086) Share Repurchases (8
Slide 25: Third Quarter Fiscal 2024 Business Outlook
Business Outlook Total Revenue ~$6.65B ± $400M Third OUTLOOK Non-GAAP EPS ~$2.01 ± $0.18 QUARTER FISCAL 2024 Semiconductor Systems ~$4.80B SEGMENT Applied Global Services ~$1.57B REVENUE Display and Adjacent Markets ~$245M Non-GAAP Gross Margin ~47.0% OTHER Non-GAAP Operating Expenses ~$1,260M Non-G
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Slide 27: 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 27 October 2024 OFFERING Display and Adjacent Markets 1972 $3.1 billion ~34,800* $26.5 billion ~19,600** TTM R&D employees TTM REVENUE INVESTMENTS active
Slide 28: Growth Thesis
Growth Thesis 1. Semiconductors Global GDP significantly outgrow GDP 2. Fab equipment grows as fast Semiconductors or faster than semiconductors 3. Applied Semi Systems outgrows fab equipment market Wafer Fab Equipment 4. Applied Global Services grows as fast or faster than Applied Semi Systems Semi
Slide 29: Strong and Flexible Balance Sheet
Strong and Flexible Balance Sheet CASH AND INVESTMENTS ($M) Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 Cash and cash equivalents 4,588 6,025 6,132 6,854 7,085 Short-term investments 510 510 737 638 472 Long-term investments 2,024 2,177 2,281 2,910 2,983 Total cash and investments 7,122 8,712 9,150 10,402 10,540
Slide 30: Latest 3rd Party ESG Ratings
LATEST 3rd PARTY ESG RATINGS CDP Climate A- CDP Water B MSCI AAA Sustainalytics Risk Rating Low ISS (E/S/G) 1/2/1 Links: Net Zero 2040 Playbook | 2022 Sustainability Report | 2022 Sustainability Report Data Annex 30 | Applied Materials External
Slide 31: 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 Ma
Slide 32: Appendix: GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations 32 | Applied Materials External
Slide 33: Use of Non-GAAP Adjusted Financial Measures
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 as
Slide 34: Quarterly Reconciliation of GAAP to Non-GAAP Adjusted Results
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 Non-GAAP Gross Profit GAAP reported gross profit $ 3,094 $ 2,976 $ 3,169 $ 3,204 $ 3,153 Certain items associated with acquisitions 1 7 7 8 7 7
Slide 35: Quarterly Reconciliation of GAAP to Non-GAAP Operating Expenses
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES IN MILLIONS Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 GAAP Reported Operating Expenses $ 1,183 $ 1,174 $ 1,198 $ 1,237 $ 1,241 Certain items associated with acquisitions (4) (3) (3) (4) (3) Acquisition integration and deal costs (8) (6) (
Slide 36: Quarterly Reconciliation of GAAP to Non-GAAP Segment Operating Results
UNAUDITED QUARTERLY RECONCILIATION OF GAAP TO NON-GAAP SEGMENT OPERATING RESULTS IN MILLIONS, EXCEPT PERCENTAGES Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 Semiconductor Systems Non-GAAP Operating Income GAAP reported operating income $ 1,715 $ 1,568 $ 1,741 $ 1,744 $ 1,701 Certain items associated with acquisit
Slide 37: Quarterly Reconciliation of Non-GAAP Free Cash Flow
UNAUDITED QUARTERLY RECONCILIATION OF NON-GAAP FREE CASH FLOW IN MILLIONS Q2F23 Q3F23 Q4F23 Q1F24 Q2F24 Non-GAAP Free Cash Flows1 Cash provided by operating activities $ 2,292 $ 2,583 $ 1,555 $ 2,325 $ 1,392 Capital expenditures (255) (255) (309) (229) (257) Non-GAAP free cash flow $ 2,037 $ 2,328 $
Slide 38: Reconciliation of GAAP to Non-GAAP Results
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS FY2023 FY2013 Non-GAAP Earnings Per Diluted Share GAAP reported earnings per diluted share $ 8.11 $ 0.21 Certain items associated with acquisitions1 0.05 0.14 Acquisition integration and deal costs 0.02 0.02 I
Slide 39: Calculation of Non-GAAP Measures
UNAUDITED CALCULATION OF NON-GAAP MEASURES IN MILLIONS FY2023 FY2013 Free Cash Flow1 Cash provided by operating activities $ 8,700 $ 623 Capital expenditures (1,106) (197) Free cash flow $ 7,594 $ 426 FOOTNOTE: 1. Free cash flow is a non-GAAP measure and is defined as net cash provided by operating
Slide 40: Calculation of Return on Invested Capital
UNAUDITED CALCULATION OF RETURN ON INVESTED CAPITAL IN MILLIONS, EXCEPT PERCENTAGES FY2023 FY2022 FY2013 FY2012 Non-GAAP operating income after tax Non-GAAP operating income before tax $ 7,719 $ 1,032 Non-GAAP effective income tax rate 12.1% 24.5% Non-GAAP operating income after tax (a) $ 6,785 $ 77
Slide 41: Reconciliation Information for Business Outlook
RECONCILIATION INFORMATION FOR BUSINESS OUTLOOK Non-GAAP outlook for the third quarter of fiscal 2024 (including non-GAAP gross margin, operating margin, operating expenses and EPS) excludes known charges related to completed acquisitions of approximately $10 million, or $0.01 per share, includes th
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