AMAT
$32.65
Applied Materials
($1.06)
(3.14%)
Earnings Details
4th Quarter October 2018
Thursday, November 15, 2018 4:01:00 PM
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Summary

Applied Materials Misses

Applied Materials (AMAT) reported 4th Quarter October 2018 earnings of $0.97 per share on revenue of $4.0 billion. The consensus earnings estimate was $0.96 per share on revenue of $4.0 billion. The Earnings Whisper number was $0.99 per share. Revenue grew 1.1% on a year-over-year basis.

The company said it expects first quarter earnings of $0.75 to $0.83 per share on revenue of $3.56 billion to $3.86 billion. The current consensus earnings estimate is $0.95 per share on revenue of $3.99 billion for the quarter ending January 31, 2019.

Applied Materials Inc provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic and related industries.

Results
Reported Earnings
$0.97
Earnings Whisper
$0.99
Consensus Estimate
$0.96
Reported Revenue
$4.01 Bil
Revenue Estimate
$4.00 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Applied Materials Announces Fourth Quarter and Fiscal Year 2018 Results

  • Quarterly revenue of $4.01 billion with GAAP EPS of $0.89 and non-GAAP EPS of $0.97
  • Record annual revenue and EPS
  • Returns $5.89 billion to shareholders in fiscal 2018

SANTA CLARA, Calif., Nov. 15, 2018 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ:AMAT) today reported strong revenue, operating income and earnings per share in its fourth quarter and fiscal year ended Oct. 28, 2018.

Fourth Quarter Results

Compared to the fourth quarter of fiscal 2017, Applied net sales increased slightly to $4.01 billion. On a GAAP basis, the company recorded gross margin of 44.3 percent, operating income of $1.02 billion or 25.3 percent of net sales, and earnings per share (EPS) of $0.89.

On a non-GAAP adjusted basis, over the same period, the company reported gross margin of 45.5 percent, operating income of $1.07 billion or 26.6 percent of net sales, and EPS of $0.97.

The company returned $946 million to shareholders through $751 million in share repurchases and dividends of $195 million.

Full Year Results

In fiscal 2018, Applied grew net sales by 19 percent to $17.25 billion. On a GAAP basis, the company recorded gross margin of 45.3 percent, operating income of $4.80 billion, and EPS of $3.23. On a non-GAAP adjusted basis, the company reported gross margin of 46.3 percent, operating income of $5.0 billion or 29.0 percent of net sales, and EPS of $4.45.

The company generated $3.79 billion in cash from operations, paid dividends of $605 million and used $5.28 billion to repurchase 102 million shares of common stock.

“In fiscal 2018, each of Applied’s major businesses delivered double-digit growth despite challenging conditions in the second half of the year,” said Gary Dickerson, president and CEO. “While near-term market headwinds remain, overall industry spending remains robust, and we are focused on positioning Applied Materials for the long term, expanding our role in the A.I.-Big Data era and winning the major technology inflections ahead.”

Results Summary

        Change
 Q4 FY2018 Q4 FY2017 FY2018 FY2017Q4 FY2018
vs.
Q4 FY2017
 FY2018 vs.
FY2017
  
 (In millions, except per share amounts and percentages)
Net sales$4,014  $3,969  $17,253  $14,537 1% 19%
Gross margin44.3% 45.0% 45.3% 44.9%(0.7) points 0.4 points
Operating margin25.3% 27.7% 27.8% 26.6%(2.4) points 1.2 points
Net income$876  $982  $3,313  $3,434 (11)% (4)%
Diluted earnings per share$0.89  $0.91  $3.23  $3.17 (2)% 2%
Non-GAAP Adjusted Results          
Non-GAAP adjusted gross margin45.5% 46.2% 46.3% 46.1%(0.7) points 0.2 points
Non-GAAP adjusted operating margin26.6% 28.7% 29.0% 27.9%(2.1) points 1.1 points
Non-GAAP adjusted net income$956  $1,005  $4,569  $3,525 (5)% 30%
Non-GAAP adjusted diluted EPS$0.97  $0.93  $4.45  $3.25 4% 37%

A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.

Business Outlook

In the first quarter of fiscal 2019, Applied expects net sales to be in the range of $3.56 billion to $3.86 billion; the midpoint of the range would be down approximately 12 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.75 to $0.83; the midpoint of the range would be a decrease of approximately 25 percent, year over year.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share, the normalized tax benefit of share-based compensation of $0.04 per share, and net income tax benefit related to intra-entity intangible asset transfers of $0.02 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.

Fourth Quarter and Fiscal Year Reportable Segment Information

Semiconductor SystemsQ4 FY2018 Q4 FY2017 FY2018 FY2017
  
 (In millions, except percentages)
Net sales$2,309  $2,431  $10,903  $9,517 
Foundry23% 36% 24% 41%
DRAM26% 12% 27% 16%
Flash34% 38% 36% 34%
Logic and other17% 14% 13% 9%
Operating income638  801  3,634  3,173 
Operating margin27.6% 32.9% 33.3% 33.3%
Non-GAAP Adjusted Results         
Non-GAAP adjusted operating income$684  $847  $3,817  $3,357 
Non-GAAP adjusted operating margin29.6% 34.8% 35.0% 35.3%


Applied Global ServicesQ4 FY2018 Q4 FY2017 FY2018 FY2017
  
 (In millions, except percentages)
Net sales$977  $831  $3,754  $3,017 
Operating income289  232  1,102  817 
Operating margin29.6% 27.9% 29.4% 27.1%
Non-GAAP Adjusted Results         
Non-GAAP adjusted operating income$290  $232  $1,104  $821 
Non-GAAP adjusted operating margin29.7% 27.9% 29.4% 27.2%

 

Display and Adjacent MarketsQ4 FY2018 Q4 FY2017 FY2018 FY2017
  
 (In millions, except percentages)
Net sales$702  $677  $2,498  $1,900 
Operating income202  212  679  502 
Operating margin28.8% 31.3% 27.2% 26.4%
Non-GAAP Adjusted Results         
Non-GAAP adjusted operating income$206  $215  $694  $507 
Non-GAAP adjusted operating margin29.3% 31.8% 27.8% 26.7%
            

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 charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; tax effect of share-based compensation; certain income tax items and other discrete adjustments. Additionally, the fourth quarter and fiscal 2018 non-GAAP results exclude estimated discrete income tax expense items associated with changes to recent U.S. tax legislation. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP adjusted 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 our 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 we do not believe are indicative of our 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 directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statements

This press release 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, our investment and growth strategies, our development of new products and technologies, our business outlook for the first quarter of fiscal 2019, 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 and industry conditions; global trade issues and changes in trade policies; consumer demand for electronic products; the demand for semiconductors; 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; 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; 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 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; changes in U.S. tax laws and regulation, and our interpretations of them; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q 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.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.

Contact:

Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

 Three Months Ended Twelve Months Ended
(In millions, except per share amounts)October 28,
 2018
 October 29,
 2017
 October 28,
 2018
 October 29,
 2017
Net sales$4,014  $3,969  $17,253  $14,537 
Cost of products sold2,234  2,182  9,436  8,005 
Gross profit1,780  1,787  7,817  6,532 
Operating expenses:       
Research, development and engineering518  466  2,019  1,774 
Marketing and selling127  105  521  456 
General and administrative119  118  481  434 
Total operating expenses764  689  3,021  2,664 
Income from operations1,016  1,098  4,796  3,868 
Interest expense60  57  234  198 
Interest and other income, net42  33  132  61 
Income before income taxes998  1,074  4,694  3,731 
Provision for income taxes122  92  1,381  297 
Net income$876  $982  $3,313  $3,434 
Earnings per share:       
Basic$0.90  $0.92  $3.27  $3.20 
Diluted$0.89  $0.91  $3.23  $3.17 
Weighted average number of shares:       
Basic974  1,064  1,013  1,073 
Diluted984  1,076  1,026  1,084 
            

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions)October 28,
 2018
 October 29,
 2017
ASSETS   
Current assets:   
Cash and cash equivalents$3,440  $5,010 
Short-term investments590  2,266 
Accounts receivable, net2,565  2,338 
Inventories3,722  2,930 
Other current assets430  374 
Total current assets10,747  12,918 
Long-term investments1,568  1,143 
Property, plant and equipment, net1,407  1,066 
Goodwill3,368  3,368 
Purchased technology and other intangible assets, net213  412 
Deferred income taxes and other assets470  512 
Total assets$17,773  $19,419 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$2,721  $2,450 
Customer deposits and deferred revenue1,347  1,665 
Total current liabilities4,068  4,115 
Long-term debt5,309  5,304 
Income taxes payable1,254  392 
Other liabilities303  259 
Total liabilities10,934  10,070 
Total stockholders’ equity6,839  9,349 
Total liabilities and stockholders’ equity$17,773  $19,419 
        

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)Three Months Ended Twelve Months Ended
October 28,
 2018
 October 29,
 2017
October 28,
 2018
 October 29,
 2017
Cash flows from operating activities:       
Net income$876  $982  $3,313  $3,434 
Adjustments required to reconcile net income to cash provided by operating activities:       
Depreciation and amortization120  105  457  407 
Share-based compensation65  58  258  220 
Deferred income taxes(18) (17) 94  (11)
Other  (24) 4  (9)
Net change in operating assets and liabilities34  (395) (339) (252)
Cash provided by operating activities1,077  709  3,787  3,789 
Cash flows from investing activities:       
Capital expenditures(165) (124) (622) (345)
Cash paid for acquisitions, net of cash acquired(1) (12) (6) (68)
Proceeds from sales and maturities of investments453  921  3,276  2,743 
Purchases of investments(416) (1,314) (2,077) (4,856)
Cash provided by (used in) investing activities(129) (529) 571  (2,526)
Cash flows from financing activities:       
Debt borrowings, net of issuance costs      2,176 
Debt repayments      (205)
Proceeds from common stock issuances68  50  124  97 
Common stock repurchases(751) (385) (5,283) (1,172)
Tax withholding payments for vested equity awards(4) (6) (164) (125)
Payments of dividends to stockholders(195) (107) (605) (430)
Cash provided by (used in) financing activities(882) (448) (5,928) 341 
Increase (decrease) in cash and cash equivalents66  (268) (1,570) 1,604 
Cash and cash equivalents — beginning of period3,374  5,278  5,010  3,406 
Cash and cash equivalents — end of period$3,440  $5,010  $3,440  $5,010 
Supplemental cash flow information:       
Cash payments for income taxes$19  $26  $300  $194 
Cash refunds from income taxes$12  $44  $63  $61 
Cash payments for interest$76  $76  $219  $186 
                

 

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions)Q4 FY2018 Q4 FY2017 FY2018 FY2017
Unallocated net sales$26  $30  $98  $103 
Unallocated cost of products sold and expenses(74) (119) (459) (507)
Share-based compensation(65) (58) (258) (220)
Total$(113) $(147) $(619) $(624)

Additional Information

 Q4 FY2018 Q4 FY2017 FY2018 FY2017
      
Net Sales by Geography (In millions)     
United States366  415  1,532  1,474 
% of Total9% 10% 9% 10%
Europe250  227  1,066  816 
% of Total7% 6% 6% 6%
Japan721  507  2,405  1,518 
% of Total18% 13% 14% 10%
Korea537  1,175  3,603  4,052 
% of Total13% 30% 21% 28%
Taiwan608  718  2,732  3,291 
% of Total15% 18% 16% 23%
Southeast Asia201  330  802  640 
% of Total5% 8% 4% 4%
China1,331  597  5,113  2,746 
% of Total33% 15% 30% 19%
        
Employees (In thousands)       
Regular Full Time21.0  18.4     
          

 

 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 Three Months Ended Twelve Months Ended
(In millions, except percentages)October 28,
 2018
 October 29,
 2017
 October 28,
 2018
 October 29,
 2017
Non-GAAP Adjusted Gross Profit       
Reported gross profit - GAAP basis$1,780  $1,787  $7,817  $6,532 
Certain items associated with acquisitions145  45  179  172 
Non-GAAP adjusted gross profit$1,825  $1,832  $7,996  $6,704 
Non-GAAP adjusted gross margin45.5% 46.2% 46.3% 46.1%
Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,016  $1,098  $4,796  $3,868 
Certain items associated with acquisitions150  49  197  191 
Acquisition integration and deal costs3    5  3 
Other gains, losses or charges, net  (9)   (12)
Non-GAAP adjusted operating income$1,069  $1,138  $4,998  $4,050 
Non-GAAP adjusted operating margin26.6% 28.7% 29.0% 27.9%
Non-GAAP Adjusted Net Income       
Reported net income - GAAP basis$876  $982  $3,313  $3,434 
Certain items associated with acquisitions150  49  197  191 
Acquisition integration and deal costs3    5  3 
Impairment (gain on sale) of strategic investments, net(15) (7) (25) (3)
Loss on early extinguishment of debt      5 
Other gains, losses or charges, net  (9)   (12)
Income tax effect of share-based compensation213       
Income tax effect of changes in applicable U.S. tax laws323    1,112   
Resolution of prior years’ income tax filings and other tax items6  (11) (26) (79)
Income tax effect of non-GAAP adjustments4  1  (7) (14)
Non-GAAP adjusted net income$956  $1,005  $4,569  $3,525 


1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2 Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $51 million tax benefit on a GAAP basis for fiscal 2018; this benefit was being recognized ratably over the fiscal year on a non-GAAP basis.
3 Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation.
4 Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.
   

 

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 Three Months Ended Twelve Months Ended
(In millions, except per share amounts)October 28,
 2018
 October 29,
 2017
 October 28,
 2018
 October 29,
 2017
Non-GAAP Adjusted Earnings Per Diluted Share       
Reported earnings per diluted share - GAAP basis$0.89  $0.91  $3.23  $3.17 
Certain items associated with acquisitions0.05  0.04  0.18  0.16 
Impairment (gain on sale) of strategic investments, net(0.01)   (0.02)  
Income tax effect of share-based compensation0.01       
Income tax effect of changes in applicable U.S. tax laws0.02    1.08   
Resolution of prior years’ income tax filings and other tax items0.01  (0.01) (0.02) (0.07)
Other gains, losses or charges, net  (0.01)   (0.01)
Non-GAAP adjusted earnings per diluted share$0.97  $0.93  $4.45  $3.25 
Weighted average number of diluted shares984  1,076  1,026  1,084 

 

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 Three Months Ended Twelve Months Ended
(In millions, except percentages)October 28,
 2018
 October 29,
 2017
 October 28,
 2018
 October 29,
 2017
Semiconductor Systems Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$638  $801  $3,634  $3,173 
Certain items associated with acquisitions146  46  183  184 
Non-GAAP adjusted operating income$684  $847  $3,817  $3,357 
Non-GAAP adjusted operating margin29.6% 34.8% 35.0% 35.3%
AGS Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$289  $232  $1,102  $817 
Certain items associated with acquisitions1      1 
Acquisition integration costs1    2  3 
Non-GAAP adjusted operating income$290  $232  $1,104  $821 
Non-GAAP adjusted operating margin29.7% 27.9% 29.4% 27.2%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$202  $212  $679  $502 
Certain items associated with acquisitions14  3  14  5 
Acquisition integration costs    1   
Non-GAAP adjusted operating income$206  $215  $694  $507 
Non-GAAP adjusted operating margin29.3% 31.8% 27.8% 26.7%


1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
   

Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.

 

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE

 Three Months Ended
(In millions, except percentages)October 28, 2018
  
Provision for income taxes - GAAP basis (a)$122 
Income tax effect of share-based compensation(13)
Income tax effect of changes in applicable U.S. tax laws(23)
Resolutions of prior years’ income tax filings and other tax items(6)
Non-GAAP adjusted provision for income taxes (b)$80 
  
Income before income taxes - GAAP basis (c)$998 
Certain items associated with acquisitions50 
Acquisition integration and deal costs3 
Impairment (gain on sale) of strategic investments, net(15)
Non-GAAP adjusted income before income taxes (d)$1,036 
  
Effective income tax rate - GAAP basis (a/c)12.2%
  
Non-GAAP adjusted effective income tax rate (b/d)7.7%

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Source: Applied Materials, Inc.