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Applied Materials Delivers Record Earnings Per Share

Applied Materials Delivers Record Earnings Per Share

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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 margin 44.1 % 42.4 % 40.6 % 1.7 points 3.5 points
Operating margin 24.6 % 23.6 % 15.7 % 1.0 points 8.9 points
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 margin 45.4 % 43.7 % 42.4 % 1.7 points 3.0 points
Non-GAAP adjusted operating margin 26.0 % 25.2 % 17.8 % 0.8 points 8.2 points
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 Systems Q1 FY2017 Q4 FY2016 Q1 FY2016
(In millions, except percentages)
New orders $ 2,757 $ 1,833 $ 1,275
Foundry 41 % 64 % 38 %
DRAM 14 % 10 % 29 %
Flash 37 % 16 % 22 %
Logic and other 8 % 10 % 11 %
Net sales 2,150 2,127 1,373
Operating income 690 667 265
Operating margin 32.1 % 31.4 % 19.3 %
Non-GAAP Adjusted Results
Non-GAAP adjusted operating income $ 736 $ 713 $ 312
Non-GAAP adjusted operating margin 34.2 % 33.5 % 22.7 %
Applied Global Services Q1 FY2017 Q4 FY2016 Q1 FY2016
(In millions, except percentages)
New orders $ 826 $ 794 $ 755
Net sales 676 693 606
Operating income 178 193 149
Operating margin 26.3 % 27.8 % 24.6 %
Non-GAAP Adjusted Results
Non-GAAP adjusted operating income $ 179 $ 193 $ 149
Non-GAAP adjusted operating margin 26.5 % 27.8 % 24.6 %
Display and Adjacent Markets Q1 FY2017 Q4 FY2016 Q1 FY2016
(In millions, except percentages)
New orders $ 632 $ 387 $ 208
Net sales 422 452 254
Operating income 115 103 48
Operating margin 27.3 % 22.8 % 18.9 %
Non-GAAP Adjusted Results
Non-GAAP adjusted operating income $ 115 $ 103 $ 48
Non-GAAP adjusted operating margin 27.3 % 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.

Source:appliedmaterials
Anand Gupta Editor - EQ Int'l Media Network

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