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Applied Materials Inc reports 33.7% Net Income growth in 2020 and 2.5 pp EBITDA Margin growth from 25.4% to 28.0%

11/12/2020 • About Applied Materials Inc ($AMAT) • By InTwits

Applied Materials Inc reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Applied Materials Inc is a growth stock: FY2020 revenue growth was 17.8%, 5 year revenue CAGR was 12.2% at FY2020 ROIC 32.1%
  • Applied Materials Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's a lot of higher than industry average of 5.5%.
  • CAPEX is quite volatile: $463m in FY2020, $432m in FY2019, $635m in FY2018, $1,069m in FY2017, $723m in FY2016
  • The company has highly profitable business model: ROIC is 32.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


Applied Materials Inc's Revenue surged on 17.8%. Revenue growth showed acceleration in FY20Q4 - it increased 24.9% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 3.9 pp from 13.1% to 9.2% in FY2020.

Gross Margin increased slightly on 1.00 pp from 43.7% to 44.7% in FY2020. SG&A as a % of Revenue showed almost no change in FY2020.

Net Income margin increased on 2.5 pp from 18.5% to 21.0% in FY2020.

Investments (CAPEX, working capital and M&A)


In FY2020 Applied Materials Inc had CAPEX/Revenue of 2.5%. The company showed almost no change in CAPEX/Revenue from FY2017 to FY2020. It's average CAPEX/Revenue for the last three years was 3.0%. During FY2016-FY2020 CAPEX as a % of Revenue topped in FY2018 at 3.6% and was declining since that time.

Return on investment


The company operates at high and attractive ROIC (32.1%) and ROE (38.5%). ROIC increased on 4.4 pp from 27.7% to 32.1% in FY2020. ROE increased on 2.6 pp from 35.9% to 38.5% in FY2020.

Leverage (Debt)


Debt level is 0.1x Net Debt / EBITDA and 1.2x Debt / EBITDA. Net Debt / EBITDA dropped on 0.5x from 0.6x to 0.1x in FY2020. Debt increased on 7.4% while cash jumped on 71.0%. During FY2016-FY2020 Net Debt/EBITDA topped in FY2019 at 0.6x.

Applied Materials Inc has no short term refinancing risk: cash is higher than short term debt (8,360.9%).

Valuation and dividends


The company's trades at EV/EBITDA 14.7x and P/E 19.5x.

Management team


The company's CEO Gary E Dickerson has spent 7 years with the company. Daniel J Durn "Dan" is a Applied Materials Inc's CFO. Daniel J Durn "Dan" has spent 3 years at the company.

Financial and operational results


FY ended 10/25/2020

Applied Materials Inc ($AMAT) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue10,82514,53717,25314,60817,20217.8%
Gross Profit4,5116,5327,8176,3867,69220.5%
SG&A8198901,0029821,09311.3%
EBITDA2,5414,2755,2533,7134,81029.5%
EBIT2,1523,8684,796
Interest expence155198234
Tax2922971,381
Net Income1,7213,4343,3132,7063,61933.7%
Stock Based Compensation201220258
Balance Sheet
Cash3,4065,0103,4403,1295,35171.0%
Accounts Receivable2,2792,3382,323
Inventory2,0502,9303,721
Short Term Debt2000060064-89.3%
Long Term Debt3,1255,3045,3094,7135,64319.7%
Cash flow
Capex253345622441422-4.3%
Dividends444430605
Acquisitions16686
Ratios
Revenue growth12.1%34.3%18.7%-15.3%17.8%
EBITDA growth23.1%68.2%22.9%-29.3%29.5%
Gross Margin41.7%44.9%45.3%43.7%44.7%1.0%
EBITDA Margin23.5%29.4%30.4%25.4%28.0%2.5%
EBIT Margin19.9%26.6%27.8%
SG&A, % of revenue7.6%6.1%5.8%6.7%6.4%-0.4%
SBC, % of revenue1.9%1.5%1.5%
Net Income Margin15.9%23.6%19.2%18.5%21.0%2.5%
CAPEX, % of revenue2.3%2.4%3.6%3.0%2.5%-0.6%
ROIC19.0%31.2%36.4%27.7%32.1%4.4%
ROE23.2%41.5%40.9%35.9%38.5%2.6%
Net Debt/EBITDA-0.0x0.1x0.4x0.6x0.1x-0.5x
Interest expence / Average debt4.7%4.6%4.4%
People
Insider ownership0.7%0.7%0.7%
Employees15,60018,40021,000
Revenue/Employee, th. $694790822

Applied Materials Inc ($AMAT) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
P&L
Revenue4,1623,9574,3954,688 10.9%11.8%23.4%24.9%
EBITDA1,1491,0441,2191,398 15.4%20.0%36.8%46.2%
Net Income8927558411,131 15.7%13.4%47.3%62.0%
Balance Sheet
Cash3,4245,2814,3505,351 7.3%69.5%44.3%71.0%
Short Term Debt6446596364 ----89.3%
Long Term Debt4,8306,4005,6435,643 -9.0%20.5%6.2%19.7%
Ratios
Gross Margin44.6%44.2%44.5%45.4% 0.3%1.0%0.8%1.9%
EBITDA Margin 27.6% 26.4% 27.7% 29.8% 1.1%1.8%2.7%4.4%
Net Income Margin 21.4% 19.1% 19.1% 24.1% 0.9%0.3%3.1%5.5%

Peers in Semiconductors


Below we provide Applied Materials Inc benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Inphi Corporation ($IPHI)-30.8%-15.4%24.2%86.8%
Sequans Communications S.A. ($SQNS)-5.9%-16.6%-23.3%65.0%
MaxLinear, Inc ($MXL)-8.4%-8.4%-17.6%50.9%
Advanced Micro Devices, Inc. ($AMD)-21.6%23.3%4.0%45.0%
Kopin Corporation ($KOPN)-23.0%-12.1%20.7%35.9%
 
Median (42 companies)1.4%10.9%4.4%-2.8%1.9%
Applied Materials Inc ($AMAT)-34.3%18.7%-15.3%17.8%


Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
CEVA, Inc. ($CEVA)91.6%92.1%89.8%88.4%89.3%
Universal Display Corporation ($OLED)83.9%80.8%75.5%78.5%80.1%
Rambus, Inc. ($RMBS)80.1%79.9%76.8%77.1%75.0%
Analog Devices, Inc. ($ADI)65.1%59.9%68.3%67.0%65.9%
Texas Instruments Incorporated ($TXN)61.8%64.3%65.1%63.7%64.1%
 
Median (42 companies)48.0%49.1%50.4%50.6%49.3%
Applied Materials Inc ($AMAT)41.7%44.9%45.3%43.7%44.7%


Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Texas Instruments Incorporated ($TXN)43.5%46.7%48.6%47.5%47.6%
Intel Corp ($INTC)35.2%41.7%45.7%45.9%46.7%
Broadcom Inc. ($AVGO)19.9%40.4%44.2%40.9%46.2%
Universal Display Corporation ($OLED)44.8%51.6%35.3%48.0%45.9%
Analog Devices, Inc. ($ADI)36.2%32.1%43.2%42.1%42.0%
 
Median (40 companies)9.2%10.7%9.3%13.5%17.3%
Applied Materials Inc ($AMAT)23.5%29.4%30.4%25.4%28.0%


Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Micron Technology, Inc. ($MU)46.9%23.3%29.2%41.8%38.4%
Sequans Communications S.A. ($SQNS)11.8%13.3%22.9%29.6%27.1%
Intel Corp ($INTC)16.2%18.8%21.4%22.5%18.6%
First Solar, Inc. ($FSLR)7.9%17.5%33.0%21.8%15.4%
Power Integrations, Inc. ($POWI)3.1%7.5%5.9%5.7%14.5%
 
Median (39 companies)3.7%4.7%4.4%3.9%4.2%
Applied Materials Inc ($AMAT)2.3%2.4%3.6%3.0%2.5%


Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Texas Instruments Incorporated ($TXN)34.9%43.1%47.5%39.7%38.2%
Advanced Micro Devices, Inc. ($AMD)-21.7%7.3%21.6%21.5%31.8%
QUALCOMM Incorporated ($QCOM)15.8%5.7%2.2%38.0%28.1%
NVIDIA Corporation ($NVDA)13.1%27.3%35.3%36.9%22.7%
Skyworks Solutions, Inc. ($SWKS)33.7%33.1%32.3%23.2%21.2%
 
Median (43 companies)1.4%3.2%2.2%3.8%5.5%
Applied Materials Inc ($AMAT)19.0%31.2%36.4%27.7%32.1%


Top companies by Net Debt / EBITDA

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
SunPower Corporation ($SPWR)----8.2x
MACOM Technology Solutions Holdings, Inc. ($MTSI)3.0x7.2x98.6x-6.6x
Rambus, Inc. ($RMBS)-0.1x-0.1x--5.9x
Inphi Corporation ($IPHI)4.5x33.7x32.2x4.5x3.4x
Canadian Solar Inc. ($CSIQ)11.3x6.8x2.7x3.4x3.3x
 
Median (31 companies)0.4x0.4x0.3x0.5x0.5x
Applied Materials Inc ($AMAT)-0.0x0.1x0.4x0.6x0.1x


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