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Applied Materials Delivers Record Earnings Per Share

•    Generates record orders of $4.24 billion
•    Delivers record EPS of $0.65 and non-GAAP EPS of $0.67
•    Expects record revenue and earnings per share in the second quarter of FY2017

SANTA CLARA, Calif., Feb. 15, 2017 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ:AMAT) today reported results for its first quarter ended January 29, 2017.

First quarter new orders were $4.24 billion, up 86 percent year over year. Net sales of $3.28 billion were up 45 percent year over year.

The company recorded first quarter gross margin of 44.1 percent, up 3.5 points year over year. Operating margin grew 8.9 points year over year to 24.6 percent, and diluted earnings per share (EPS) grew by 160 percent year over year to $0.65. On a non-GAAP adjusted basis, first quarter gross margin increased 3.0 points year over year to 45.4 percent, operating margin grew 8.2 points year over year to 26.0 percent, and diluted EPS grew by 158 percent year over year to $0.67.

The company generated $646 million in cash from operations and returned $238 million to shareholders through stock repurchases and cash dividends.

“We set new records for earnings and orders in our first quarter, and 2017 is shaping up to be an outstanding year for Applied Materials,” said Gary Dickerson, President and CEO. “Our inflection-focused innovation strategy is delivering results and we are increasingly confident that we can maintain our trajectory of sustainable growth and raise the ceiling on our performance.”

Quarterly Results Summary

       Change
 Q1 FY2017 Q4 FY2016 Q1 FY2016 Q1 FY2017
vs.
Q4 FY2016
 Q1 FY2017
vs.
Q1 FY2016
 (In millions, except per share amounts and percentages)
New orders$4,236  $3,032  $2,275  40% 86%
Net sales$3,278  $3,297  $2,257  (1%) 45%
Gross margin44.1% 42.4% 40.6% 1.7points 3.5points
Operating margin24.6% 23.6% 15.7% 1.0points 8.9points
Net income$703  $610  $286  15% 146%
Diluted earnings per share$0.65  $0.56  $0.25  16% 160%
Non-GAAP Adjusted Results         
Non-GAAP adjusted gross margin45.4% 43.7% 42.4% 1.7points 3.0points
Non-GAAP adjusted operating margin26.0% 25.2% 17.8% 0.8points 8.2points
Non-GAAP adjusted net income$732  $722  $302  1% 142%
Non-GAAP adjusted diluted EPS$0.67  $0.66  $0.26  2% 158%

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 second quarter of fiscal 2017, Applied expects net sales to be in the range of $3.45 billion to $3.60 billion; the midpoint of the range would be an increase of approximately 44 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.72 to $0.80; the midpoint of the range would be an increase of approximately 124 percent, year over year.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.04 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.

First Quarter Reportable Segment Information

Semiconductor SystemsQ1 FY2017 Q4 FY2016 Q1 FY2016
 (In millions, except percentages)
New orders$2,757  $1,833  $1,275 
Foundry41% 64% 38%
DRAM14% 10% 29%
Flash37% 16% 22%
Logic and other8% 10% 11%
Net sales2,150  2,127  1,373 
Operating income690  667  265 
Operating margin32.1% 31.4% 19.3%
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income$736  $713  $312 
Non-GAAP adjusted operating margin34.2% 33.5% 22.7%

 

Applied Global ServicesQ1 FY2017 Q4 FY2016 Q1 FY2016
 (In millions, except percentages)
New orders$826  $794  $755 
Net sales676  693  606 
Operating income178  193  149 
Operating margin26.3% 27.8% 24.6%
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income$179  $193  $149 
Non-GAAP adjusted operating margin26.5% 27.8% 24.6%

 

Display and Adjacent MarketsQ1 FY2017 Q4 FY2016 Q1 FY2016
 (In millions, except percentages)
New orders$632  $387  $208 
Net sales422  452  254 
Operating income115  103  48 
Operating margin27.3% 22.8% 18.9%
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income$115  $103  $48 
Non-GAAP adjusted operating margin27.3% 22.8% 18.9%

Use of Non-GAAP Adjusted Financial Measures

Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted to exclude 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; income tax items and certain other discrete adjustments. 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, technology transitions, our business and financial performance and market share positions, our development of new products and technologies, our business outlook for the second quarter of fiscal 2017, 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; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-K 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:

Kevin Winston (editorial/media) 408.235.4498
Michael Sullivan (financial community) 408.986.7977

 

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 Three Months Ended
(In millions, except per share amounts)January 29,
 2017
 October 30,
 2016
 January 31,
 2016
Net sales$3,278  $3,297  $2,257 
Cost of products sold1,833  1,898  1,341 
Gross profit1,445  1,399  916 
Operating expenses:     
Research, development and engineering417  394  374 
Marketing and selling118  114  106 
General and administrative103  114  82 
Total operating expenses638  622  562 
Income from operations807  777  354 
Interest expense38  38  42 
Interest and other income, net2  1  2 
Income before income taxes771  740  314 
Provision for income taxes68  130  28 
Net income$703  $610  $286 
Earnings per share:     
Basic and diluted$0.65  $0.56  $0.25 
Weighted average number of shares:     
Basic1,078  1,081  1,146 
Diluted1,089  1,093  1,154 


 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)January 29,
 2017
 October 30,
 2016
ASSETS   
Current assets:   
Cash and cash equivalents$3,491  $3,406 
Short-term investments656  343 
Accounts receivable, net2,369  2,279 
Inventories2,281  2,050 
Other current assets297  275 
Total current assets9,094  8,353 
Long-term investments909  929 
Property, plant and equipment, net949  937 
Goodwill3,316  3,316 
Purchased technology and other intangible assets, net527  575 
Deferred income taxes and other assets1449  460 
Total assets$15,244  $14,570 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable, notes payable and accrued expenses2,139  2,256 
Customer deposits and deferred revenue1,669  1,376 
Total current liabilities3,808  3,632 
Long-term debt13,125  3,125 
Other liabilities624  596 
Total liabilities7,557  7,353 
Total stockholders’ equity7,687  7,217 
Total liabilities and stockholders’ equity$15,244  $14,570 

 

1 Balances reflect the effects of the retrospective adoption of the authoritative guidance in the first quarter of fiscal 2017, which required debt issuance costs to be presented as a direct reduction from the carrying amount of the related debt liability. These amounts were originally recorded under Other Assets.

 

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)Three Months Ended
January 29,
 2017
 October 30,
 2016
 January 31,
 2016
Cash flows from operating activities:     
Net income$703  $610  $286 
Adjustments required to reconcile net income to cash provided by operating activities:     
Depreciation and amortization97  100  96 
Share-based compensation54  51  54 
Excess tax benefits from share-based compensation(44) (5) (10)
Deferred income taxes25  7  15 
Other9  18  10 
Net change in operating assets and liabilities(198) 16  (244)
Cash provided by operating activities646  797  207 
Cash flows from investing activities:     
Capital expenditures(64) (88) (68)
Cash paid for acquisitions, net of cash acquired  (11)  
Proceeds from sales and maturities of investments286  553  241 
Purchases of investments(589) (443) (282)
Cash provided by (used in) investing activities(367) 11  (109)
Cash flows from financing activities:     
Debt repayments, net of issuance costs    (1,205)
Proceeds from common stock issuances and others  44  2 
Common stock repurchases(130) (171) (625)
Excess tax benefits from share-based compensation44  5  10 
Payments of dividends to stockholders(108) (108) (115)
Cash used in financing activities(194) (230) (1,933)
Increase (decrease) in cash and cash equivalents85  578  (1,835)
Cash and cash equivalents — beginning of period3,406  2,828  4,797 
Cash and cash equivalents — end of period$3,491  $3,406  $2,962 
Supplemental cash flow information:     
Cash payments for income taxes$35  $13  $44 
Cash refunds from income taxes$2  $9  $5 
Cash payments for interest$34  $41  $34 

 

 

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
 
Corporate and Other
 
(In millions)Q1 FY2017 Q4 FY2016 Q1 FY2016
New orders$21  $18  $37 
      
Unallocated net sales$30  $25  $24 
Unallocated cost of products sold and expenses(152) (160) (78)
Share-based compensation(54) (51) (54)
Total$(176) $(186) $(108)

 

Additional Information

 Q1 FY2017 Q4 FY2016 Q1 FY2016
New Orders and Net Sales by Geography  
(In $ millions)New
Orders
 Net
Sales
 New
Orders
 Net
Sales
 New
Orders
 Net
Sales
United States478  317  221  289  369  293 
% of Total11% 10% 7% 9% 16% 13%
Europe221  209  212  256  156  138 
% of Total5% 6% 7% 8% 7% 6%
Japan445  235  262  364  109  334 
% of Total11% 7% 9% 11% 5% 15%
Korea1,029  670  432  632  373  273 
% of Total24% 20% 14% 19% 17% 12%
Taiwan1,205  1,103  1,170  1,154  534  637 
% of Total28% 34% 39% 35% 23% 28%
Southeast Asia106  97  84  161  232  87 
% of Total3% 3% 3% 5% 10% 4%
China752  647  651  441  502  495 
% of Total18% 20% 21% 13% 22% 22%
            
Employees (In thousands)           
Regular Full Time  16.0    15.6  14.6 


 

 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended
(In millions, except percentages)January 29,
 2017
 October 30,
 2016
 January 31,
 2016
Non-GAAP Adjusted Gross Profit     
Reported gross profit - GAAP basis$1,445  $1,399  $916 
Certain items associated with acquisitions142  42  42 
Inventory reversals related to restructuring2    (1)
Non-GAAP adjusted gross profit$1,487  $1,441  $957 
Non-GAAP adjusted gross margin45.4% 43.7% 42.4%
Non-GAAP Adjusted Operating Income     
Reported operating income - GAAP basis$807  $777  $354 
Certain items associated with acquisitions147  47  48 
Acquisition integration costs1     
Inventory reversals related to restructuring, net2    (1)
Other gains, losses or charges, net3(3) 8   
Non-GAAP adjusted operating income$852  $832  $401 
Non-GAAP adjusted operating margin26.0% 25.2% 17.8%
Non-GAAP Adjusted Net Income     
Reported net income - GAAP basis$703  $610  $286 
Certain items associated with acquisitions147  47  48 
Acquisition integration costs1     
Inventory reversals related to restructuring, net2    (1)
Impairment (gain on sale) of strategic investments, net5  6  (2)
Loss on early extinguishment of debt    5 
Other gains, losses or charges, net3(3) 8   
Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items(16) 57  (29)
Income tax effect of non-GAAP adjustments4(5) (6) (5)
Non-GAAP adjusted net income$732  $722  $302 

 

1These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
  
2Results for the three months ended January 31, 2016 included a benefit from sales of solar equipment tools for which inventory had been previously reserved.
  
3Results for the three months ended October 30, 2016 included a loss of $8 million due to discontinuance of cash flow hedges that were probable not to occur by the end of the originally specified time period.
  
4These amounts represent non-GAAP adjustments above multiplied by the effective tax rate within the jurisdictions the adjustments affect.

 

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended
(In millions, except per share amounts)January 29,
 2017
 October 30,
 2016
 January 31,
 2016
Non-GAAP Adjusted Earnings Per Diluted Share     
Reported earnings per diluted share - GAAP basis$0.65  $0.56  $0.25 
Certain items associated with acquisitions0.04  0.04  0.04 
Other gains, losses or charges, net  0.01   
Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items(0.02) 0.05  (0.03)
Non-GAAP adjusted earnings per diluted share$0.67  $0.66  $0.26 
Weighted average number of diluted shares1,089  1,093  1,154 


 

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended
(In millions, except percentages)January 29,
 2017
 October 30,
 2016
 January 31,
 2016
Semiconductor Systems Non-GAAP Adjusted Operating Income     
Reported operating income - GAAP basis$690  $667  $265 
Certain items associated with acquisitions146  46  47 
Non-GAAP adjusted operating income$736  $713  $312 
Non-GAAP adjusted operating margin34.2% 33.5% 22.7%
AGS Non-GAAP Adjusted Operating Income     
Reported operating income - GAAP basis$178  $193  $149 
Acquisition integration costs1     
Non-GAAP adjusted operating income$179  $193  $149 
Non-GAAP adjusted operating margin26.5% 27.8% 24.6%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income     
Reported operating income - GAAP basis$115  $103  $48 
Certain items associated with acquisitions1     
Non-GAAP adjusted operating income$115  $103  $48 
Non-GAAP adjusted operating margin27.3% 22.8% 18.9%

 

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.

 

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Applied Materials, Inc.

February 15, 2017