Applied Materials Conference Call Highlights

reported its fourth quarter earnings on Friday. Shares of the company are up 1 percent. Below are some key highlights from its conference call.

• Delivered revenue and earnings at the midpoint of our target range. • This rounds-out a strong year for Applied where we grew sales in our semiconductor business by 25% and expanded our overall operating margins by 6 points. • These results reflect ongoing technology and capacity investments by our semiconductor and display customers, sustainable market share gains in growing markets. • Significant improvements in our operating performance that we've achieved while increasing investment in new product development. • Our progress towards our strategic and financial goals is made possible by outstanding contributions from our employees around the world. • This is a team with tremendous passion to create value for customers and investors. • Over the past two years, we have placed Applied on a trajectory of long-term profitable growth and improving financial performance. • In 2013, we aligned the business around our precision materials engineering strategy and took steps to shape a more competitive company. • We increased our focus on areas that have the biggest impact for customers and generate the best returns for Applied. • We shifted spending from low-growth businesses and corporate functions to field resources and product development. • We built a stronger organization, bringing in top industry talent, strengthening our business processes for repeatable success, and changing our structure to improve alignment and speed. • We increased our market share with 1.4 points of overall gains in calendar 2013, and we invested in a pipeline of new products to enable our customers' roadmaps and drive long-term growth for Applied. • In 2014, we accelerated this strategy and made strong progress towards our financial model. • Our semiconductor business posted the highest revenue since fiscal 2007. Financial Metrics: • Orders of $2.3 billion were down 9% sequentially with decreases primarily in SSG and Display, partially offset by an increase in AGS. • Net sales of $2.3 billion were in line with our guidance. • Non-GAAP gross margin decreased to 44.2%, which included 0.5 point of non-recurring benefits. • Non-GAAP EPS of $0.27 was in line with our guidance. • Our operating cash flow was $407 million or 18% of revenue. • AGS orders of $747 million were up 35% led by service contracts and were the highest since 2007. • AGS net sales of $592 million were better than expected. • Display orders declined to $130 million and we expect the pattern to remain lumpy. • Display net sales of $190 million were up 60% as we begin to ship large orders received in the last six months to nine months. • This quarterly revenue performance is also a three-year high. EES orders were $44 million and net sales were $48 million.

• Our industry outlook is positive and, while it is too early to know the effects of timing and mix, we expect continued year-over-year growth and progress toward our target model. • In 2015, we plan to introduce some of the new and disruptive products from our product pipeline investments. • These products will drive share gains in 2015 and over time, but have lower margins initially. • In 2015, we are working to further improve our gross margin, even with aggressive new product ramps. • In the first quarter, we expect gross margins to be lower sequentially primarily due to share gains in our conductor etch business. • Specifically, we expect our etch revenue to grow by almost 60% sequentially in Q1. • We expect to increase our gross margins from Q1 through the balance of 2015. • Overall, 2015 provides us with a further opportunity to systematically gain share in the fastest growing markets, drive scale in semiconductor display and services both standalone and in combination with Tokyo Electron, and grind away at execution, efficiency, and cost to improve the profitability of the company.