AMAT
$46.76
Applied Materials
$.09
.19%
Earnings Details
2nd Quarter April 2018
Thursday, May 17, 2018 4:01:00 PM
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Summary

Applied Materials Beats

Applied Materials (AMAT) reported 2nd Quarter April 2018 earnings of $1.22 per share on revenue of $4.6 billion. The consensus earnings estimate was $1.13 per share on revenue of $4.5 billion. The Earnings Whisper number was $1.16 per share. Revenue grew 28.8% on a year-over-year basis.

The company said it expects third quarter earnings of $1.13 to $1.21 per share on revenue of $4.33 billion to $4.53 billion. The current consensus earnings estimate is $1.14 per share on revenue of $4.44 billion for the quarter ending July 31, 2018.

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

Results
Reported Earnings
$1.22
Earnings Whisper
$1.16
Consensus Estimate
$1.13
Reported Revenue
$4.57 Bil
Revenue Estimate
$4.45 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Applied Materials Delivers Strong Year-On-Year Growth in Quarterly Revenue and Earnings Per Share

  • Record quarterly revenue of $4.57 billion, up 29 percent year over year

  • Record EPS of $1.09 and non-GAAP EPS of $1.22, up 43 percent and 54 percent year over year, respectively

  • $2.6 billion returned to shareholders including buybacks equivalent to 4 percent of shares outstanding

SANTA CLARA, Calif., May 17, 2018 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ:AMAT) today reported record revenue, operating profit and earnings per share in its second quarter ended April 29, 2018.

Second Quarter Results

Compared to the second quarter of fiscal 2017, Applied grew net sales by 29 percent to $4.57 billion. On a GAAP basis, the company increased gross margin by 0.7 points to 45.8 percent, and grew operating income by 41 percent to $1.33 billion or 29.1 percent of net sales. GAAP earnings per share (EPS) grew 43 percent to $1.09.

On a non-GAAP adjusted basis, over the same period, the company increased gross margin by 0.4 points to 46.7 percent, grew operating income by 40 percent to $1.38 billion or 30.2 percent of net sales, and increased EPS by 54 percent to $1.22.

The company generated $611 million in cash from operations and returned $2.6 billion to shareholders through $2.5 billion in share repurchases and dividends of $105 million.

“Applied’s performance in the second fiscal quarter was another all-time record for the company, which demonstrates strong execution and customer pull for materials solutions that help accelerate roadmaps and bring new devices to market faster,” said Gary Dickerson, president and CEO. “Applied has the broadest opportunity across major technology trends, and our markets are strong, with long-term growth drivers firmly in place.”

Quarterly Results Summary

 Q2 FY2018 Q2 FY2017 Change
 (In millions, except per share amounts and percentages)
Net sales$4,567  $3,546  29%
Gross margin45.8% 45.1% 0.7 points
Operating margin29.1% 26.5% 2.6 points
Net income$1,129  $824  37%
Diluted earnings per share$1.09  $0.76  43%
Non-GAAP Adjusted Results     
Non-GAAP adjusted gross margin46.7% 46.3% 0.4 points
Non-GAAP adjusted operating margin30.2% 27.8% 2.4 points
Non-GAAP adjusted net income$1,273  $861  48%
Non-GAAP adjusted diluted EPS$1.22  $0.79  54%

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 third quarter of fiscal 2018, Applied expects net sales to be in the range of $4.33 billion to $4.53 billion; the midpoint of the range would be an increase of approximately 18 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.13 to $1.21; the midpoint of the range would be an increase of approximately 36 percent, year over year.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.05 per share and includes the normalized tax benefit of share-based compensation of $0.01 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.

Second Quarter Reportable Segment Information

Semiconductor SystemsQ2 FY2018 Q2 FY2017
 (In millions, except percentages)
Net sales$2,999  $2,404 
Foundry21% 41%
DRAM31% 19%
Flash37% 33%
Logic and other11% 7%
Operating income1,071  808 
Operating margin35.7% 33.6%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$1,117  $854 
Non-GAAP adjusted operating margin37.2% 35.5%


Applied Global ServicesQ2 FY2018 Q2 FY2017
 (In millions, except percentages)
Net sales$943  $724 
Operating income278  194 
Operating margin29.5% 26.8%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$278  $195 
Non-GAAP adjusted operating margin29.5% 26.9%

 

Display and Adjacent MarketsQ2 FY2018 Q2 FY2017
 (In millions, except percentages)
Net sales$600  $391 
Operating income162  84 
Operating margin27.0% 21.5%
Non-GAAP Adjusted Results  
Non-GAAP adjusted operating income$166  $84 
Non-GAAP adjusted operating margin27.7% 21.5%

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 second quarter and first half of 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 third quarter of fiscal 2018, 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; 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 Six Months Ended
(In millions, except per share amounts)April 29,
 2018
 April 30,
 2017
 April 29,
 2018
 April 30,
 2017
Net sales$4,567  $3,546  $8,771  $6,824 
Cost of products sold2,477  1,946  4,761  3,779 
Gross profit2,090  1,600  4,010  3,045 
Operating expenses:       
Research, development and engineering509  437  997  854 
Marketing and selling130  116  256  234 
General and administrative124  107  234  210 
Total operating expenses763  660  1,487  1,298 
Income from operations1,327  940  2,523  1,747 
Interest expense56  44  115  82 
Interest and other income, net24  12  49  14 
Income before income taxes1,295  908  2,457  1,679 
Provision for income taxes166  84  1,193  152 
Net income$1,129  $824  $1,264  $1,527 
Earnings per share:       
Basic$1.10  $0.76  $1.21  $1.42 
Diluted$1.09  $0.76  $1.20  $1.40 
Weighted average number of shares:       
Basic1,029  1,078  1,042  1,078 
Diluted1,040  1,087  1,056  1,088 


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions)April 29,
 2018
 October 29,
 2017
ASSETS   
Current assets:   
Cash and cash equivalents$ 4,870  $5,010 
Short-term investments482  2,266 
Accounts receivable, net2,665  2,338 
Inventories3,494  2,930 
Other current assets380  374 
Total current assets11,891  12,918 
Long-term investments1,214  1,143 
Property, plant and equipment, net1,257  1,066 
Goodwill3,368  3,368 
Purchased technology and other intangible assets, net 313  412 
Deferred income taxes and other assets455  512 
Total assets$    18,498  $19,419 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$2,619  $2,450 
Customer deposits and deferred revenue1,961  1,665 
Total current liabilities4,580  4,115 
Income taxes payable1,282  392 
Long-term debt5,306  5,304 
Other liabilities288  259 
Total liabilities11,456  10,070 
Total stockholders’ equity7,042  9,349 
Total liabilities and stockholders’ equity$18,498  $19,419 

 

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

(In millions)Three Months Ended Six Months Ended
April 29,
 2018
 April 30,
 2017
April 29,
 2018
 April 30,
 2017
Cash flows from operating activities:       
Net income$1,129  $824  $1,264  $1,527 
Adjustments required to reconcile net income to cash provided by operating activities:       
Depreciation and amortization108  103  227  200 
Share-based compensation64  53  129  107 
Deferred income taxes45  (16) 86  9 
Other11    11  9 
Net change in operating assets and liabilities(746) (53) 360  (149)
Cash provided by operating activities611  911  2,077  1,703 
Cash flows from investing activities:       
Capital expenditures(121) (77) (324) (141)
Cash paid for acquisitions, net of cash acquired  (26) (5) (26)
Proceeds from sales and maturities of investments488  601  2,432  887 
Purchases of investments(345) (1,779) (729) (2,368)
Cash provided by (used in) investing activities22  (1,281) 1,374  (1,648)
Cash flows from financing activities:       
Debt borrowings, net of issuance costs  2,176    2,176 
Proceeds from common stock issuances and others56  46  56  46 
Common stock repurchases(2,500) (282) (3,282) (412)
Tax withholding payments for vested equity awards(13) (9) (154) (111)
Payments of dividends to stockholders(105) (108) (211) (216)
Cash provided by (used in) financing activities(2,562) 1,823  (3,591) 1,483 
Increase (decrease) in cash and cash equivalents(1,929) 1,453  (140) 1,538 
Cash and cash equivalents — beginning of period6,799  3,491  5,010  3,406 
Cash and cash equivalents — end of period$4,870  $4,944  $4,870  $4,944 
Supplemental cash flow information:       
Cash payments for income taxes$139  $30  $217  $65 
Cash refunds from income taxes$1  $6  $41  $8 
Cash payments for interest$76  $41  $110  $75 

 

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions)Q2 FY2018 Q2 FY2017
Unallocated net sales$25  $27 
Unallocated cost of products sold and expenses(145) (120)
Share-based compensation(64) (53)
Total$(184) $(146)

Additional Information

 Q2 FY2018 Q2 FY2017
Net Sales by Geography (In millions) 
United States394  383 
% of Total9% 11%
Europe312  189 
% of Total7% 5%
Japan503  332 
% of Total11% 9%
Korea1,248  942 
% of Total27% 27%
Taiwan727  863 
% of Total16% 24%
Southeast Asia243  109 
% of Total5% 3%
China1,140  728 
% of Total25% 21%
    
Employees (In thousands)   
Regular Full Time19.8  16.6 

 

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

 Three Months Ended Six Months Ended
(In millions, except percentages)April 29,
 2018
 April 30,
 2017
 April 29,
 2018
 April 30,
 2017
Non-GAAP Adjusted Gross Profit       
Reported gross profit - GAAP basis$2,090  $1,600  $4,010  $3,045 
Certain items associated with acquisitions144  41  89  83 
Non-GAAP adjusted gross profit$2,134  $1,641  $4,099  $3,128 
Non-GAAP adjusted gross margin46.7% 46.3% 46.7% 45.8%
Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,327  $940  $2,523  $1,747 
Certain items associated with acquisitions149  46  98  93 
Acquisition integration costs1  1  2  2 
Other gains, losses or charges, net      (3)
Non-GAAP adjusted operating income$1,377  $987  $2,623  $1,839 
Non-GAAP adjusted operating margin30.2% 27.8% 29.9% 26.9%
Non-GAAP Adjusted Net Income       
Reported net income - GAAP basis$1,129  $824  $1,264  $1,527 
Certain items associated with acquisitions149  46  98  93 
Acquisition integration costs1  1  2  2 
Impairment (gain on sale) of strategic investments, net5    4  5 
Other gains, losses or charges, net      (3)
Income tax effect of share-based compensation213    (26)  
Income tax effect of changes in applicable U.S. tax laws371    1,077   
Resolution of prior years’ income tax filings and other tax items10  (6) (3) (22)
Income tax effect of non-GAAP adjustments4(5) (4) (8) (9)
Non-GAAP adjusted net income$1,273  $861  $2,408  $1,593 


1These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
  
2Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $53 million tax benefit on a GAAP basis for the six months ended April 29, 2018; this benefit is being recognized ratably over the fiscal year on a non-GAAP basis.
  
3Charges 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.
  
4Adjustment 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 Six Months Ended
(In millions, except per share amounts)April 29,
 2018
 April 30,
 2017
 April 29,
 2018
 April 30,
 2017
Non-GAAP Adjusted Earnings Per Diluted Share       
Reported earnings per diluted share - GAAP basis$1.09  $0.76  $1.20  $1.40 
Certain items associated with acquisitions0.04  0.04  0.09  0.08 
Income tax effect of share-based compensation0.01    (0.03)  
Income tax effect of changes in applicable U.S. tax laws0.07    1.02   
Resolution of prior years’ income tax filings and other tax items0.01  (0.01)   (0.02)
Non-GAAP adjusted earnings per diluted share$1.22  $0.79  $2.28  $1.46 
Weighted average number of diluted shares1,040  1,087  1,056  1,088 


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

 Three Months Ended Six Months Ended
(In millions, except percentages)April 29,
 2018
 April 30,
 2017
 April 29,
 2018
 April 30,
 2017
Semiconductor Systems Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,071  $808  $2,066  $1,498 
Certain items associated with acquisitions146  46  92  92 
Non-GAAP adjusted operating income$1,117  $854  $2,158  $1,590 
Non-GAAP adjusted operating margin37.2% 35.5% 36.9% 34.9%
AGS Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$278  $194  $532  $372 
Acquisition integration costs  1  1  2 
Non-GAAP adjusted operating income$278  $195  $533  $374 
Non-GAAP adjusted operating margin29.5% 26.9% 29.2% 26.7%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$162  $84  $263  $199 
Certain items associated with acquisitions13    6   
Acquisition integration costs1    1   
Non-GAAP adjusted operating income$166  $84  $270  $199 
Non-GAAP adjusted operating margin27.7% 21.5% 25.6% 24.5%


1These 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)April 29, 2018
  
Provision for income taxes - GAAP basis (a)$166 
Income tax effect of share-based compensation(13)
Income tax effect of changes in applicable U.S. tax laws(71)
Resolutions of prior years’ income tax filings and other tax items(10)
Income tax effect of non-GAAP adjustments5 
Non-GAAP adjusted provision for income taxes (b)$77 
  
Income before income taxes - GAAP basis (c)$1,295 
Certain items associated with acquisitions49 
Acquisition integration costs1 
Impairment (gain on sale) of strategic investments, net5 
Non-GAAP adjusted income before income taxes (d)$1,350 
  
Effective income tax rate - GAAP basis (a/c)12.8%
  
Non-GAAP adjusted effective income tax rate (b/d)5.7%

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Source: Applied Materials, Inc.