Applied Materials Delivers Strong Year-on-Year Growth in Quarterly Revenue and Operating Profit

  • Record quarterly revenue of $4.20 billion, up 28 percent year over year
  • GAAP EPS of $0.13; record non-GAAP EPS of $1.06, up 58 percent year over year
  • Doubles quarterly dividend and increases share repurchase authorization by $6.0 billion

SANTA CLARA, Calif., Feb. 14, 2018 (GLOBE NEWSWIRE) — Applied Materials, Inc. (NASDAQ:AMAT) today reported record revenue and operating profit in its first quarter ended January 28, 2018.

First Quarter Results

Compared to the first quarter of fiscal 2017, Applied grew net sales by 28 percent to $4.20 billion. On a GAAP basis, the company increased gross margin by 1.6 points to 45.7 percent, and grew operating income by 48 percent to $1.20 billion or 28.4 percent of net sales. GAAP earnings per share (EPS) declined to $0.13 due to a one-time charge related to recent U.S. tax legislation that reduced EPS by approximately $0.94.

On a non-GAAP adjusted basis, over the same period, the company increased gross margin by 1.3 points to 46.7 percent, grew operating income by 46 percent to $1.25 billion or 29.6 percent of net sales, and increased EPS by 58 percent to $1.06, which excludes the charge related to recent U.S. tax legislation. In addition, non-GAAP EPS included a benefit of $0.04 that was driven by recent changes in U.S. tax legislation that reduced the company’s fiscal 2018 tax rate relative to previous expectations.

The company increased cash flow from operations by 85 percent year over year to $1.47 billion and returned $888 million to shareholders through dividends of $106 million and $782 million in share repurchases.

“We see sustainable strength in our markets as large, powerful trends drive a fundamental shift in the demand for semiconductors and displays,” said Gary Dickerson, president and CEO. “Our broad portfolio of capabilities and products puts us in a great position to outperform our markets and we’re confident that each of our three major business segments can deliver strong double-digit growth in 2018.”

Quarterly Results Summary

           
           
  Q1 FY2018   Q1 FY2017   Change
                   
  (In millions, except per share amounts and percentages)     
Net sales  $ 4,204     $ 3,278     28%
Gross margin 45.7 %   44.1 %   1.6 points
Operating margin 28.4 %   24.6 %   3.8 points
Net income $ 135     $ 703     (81%)
Diluted earnings per share $ 0.13     $ 0.65     (80%)
Non-GAAP Adjusted Results          
Non-GAAP adjusted gross margin 46.7 %   45.4 %   1.3 points
Non-GAAP adjusted operating margin 29.6 %   26.0 %   3.6 points
Non-GAAP adjusted net income $ 1,135     $ 732     55%
Non-GAAP adjusted diluted EPS $ 1.06     $ 0.67     58%
                   

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.

Capital Allocation

Applied’s Board of Directors has approved a doubling of the quarterly cash dividend on the company’s common stock to $0.20 per share. The Board declared that a dividend of $0.20 per share will be payable on June 14, 2018 to shareholders of record as of May 24, 2018. As previously announced, a cash dividend of $0.10 per share will be paid on March 14, 2018 to shareholders of record as of February 21, 2018.

The Board also approved a new $6.0 billion share repurchase authorization. This new authorization is incremental to $2.8 billion remaining in the previously approved authorization.

“The dividend increase and additional repurchase authorization reflect Applied’s confidence in the underlying strength of our markets along with our company’s technology leadership and strategy to deliver profitable growth and increase shareholder value,” said Dan Durn, Senior Vice President and Chief Financial Officer.

Impact of Recent U.S. Tax Legislation

As a result of the Tax Cuts and Jobs Act, the company recorded a $1.0 billion tax charge, which included an estimate of a one-time transition tax that is payable over 8 years.

Business Outlook

In the second quarter of fiscal 2018, Applied expects net sales to be in the range of $4.35 billion to $4.55 billion; the midpoint of the range would be an increase of approximately 26 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.10 to $1.18; the midpoint of the range would be an increase of approximately 44 percent, year over year.

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

First Quarter Reportable Segment Information

Semiconductor Systems Q1 FY2018   Q1 FY2017
               
  (In millions, except percentages)
Net sales $ 2,847     $ 2,150  
Foundry   25 %     50 %
DRAM   25 %     16 %
Flash   37 %     25 %
Logic and other   13 %     9 %
Operating income   995       690  
Operating margin   34.9 %     32.1 %
Non-GAAP Adjusted Results              
Non-GAAP adjusted operating income $ 1,041     $ 736  
Non-GAAP adjusted operating margin   36.6 %     34.2 %
               
Applied Global Services Q1 FY2018   Q1 FY2017
               
  (In millions, except percentages)
Net sales $ 880     $ 676  
Operating income   254       178  
Operating margin   28.9 %     26.3 %
Non-GAAP Adjusted Results              
Non-GAAP adjusted operating income $ 255     $ 179  
Non-GAAP adjusted operating margin   29.0 %     26.5 %
               

Display and Adjacent Markets Q1 FY2018   Q1 FY2017
               
  (In millions, except percentages)
Net sales $ 455     $ 422  
Operating income   101       115  
Operating margin   22.2 %     27.3 %
Non-GAAP Adjusted Results              
Non-GAAP adjusted operating income $ 104     $ 115  
Non-GAAP adjusted operating margin   22.9 %     27.3 %
               

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 first quarter 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 …

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