Applied Materials, Inc. Q2 FY2022 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Revenue: $6.25 billion, up 12% year-over-year but 2% below midpoint of guidance due to COVID-related supply disruptions, which delayed ~ $150 million of system revenue.
  • Non-GAAP EPS: $1.85, up 13.5% year-over-year but $0.05 below midpoint of guidance.
  • Non-GAAP gross margin: 47%, down 70 basis points year-over-year due to higher labor, logistics, and material costs.
  • Operating margin: 30.6%, down 110 basis points year-over-year due to elevated R&D and infrastructure spending.
  • Operating cash flow: $415 million; impacted by back-end–loaded shipments and increased inventory.
  • Capital returns: Over $2 billion returned to shareholders; 15 million shares repurchased and $211 million paid in dividends.

Business Segment Performance

  • Semi Systems revenue: Up 12% year-over-year but ~3% below plan due to COVID shutdown impacts.
  • Semi Systems operating margin: Down 200 basis points year-over-year because of higher manufacturing costs and R&D spending.
  • Applied Global Services (AGS): Record revenue, up 15% year-over-year; recurring revenue strong with 92% subscription renewal rates.
  • Display: Revenue up 2% year-over-year, but demand softening due to lower consumer electronics demand. The company is resizing spending to maintain cash flow.

Supply Chain and Operational Challenges

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Operator: Welcome to the Applied Materials Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. I would now like to turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir. Michael Sullivan: Good afternoon, everyone, and thank you for joining Applied's second quarter of fiscal 2022 earnings call. Joining me are Gary Dickerson, our President and CEO; and Brice Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call contains forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning the risks and uncertainties is contained in Applied's most recent Form 10-Q and 8-K filings with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures are found in today's earnings press release and in our quarterly earnings materials, which are available on the IR page of our website at appliedmaterials.com. Before we begin, I have a calendar announcement. Applied will host its next Master Class one week from today on Thursday, May 26th, at 9 o'clock Pacific Time. We'll introduce you to new IMS solutions for chip wiring that solve the resistance challenges of EUV scaling. We'll detail how the industry can build backside power distribution networks that increase logic density

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