Market Overview

Applied Materials Announces Third Quarter 2019 Results

Share:
  • Quarterly revenue of $3.56 billion
  • GAAP EPS of $0.61 and non-GAAP EPS of $0.74
  • Returns $724 million to shareholders

SANTA CLARA, Calif., Aug. 15, 2019 (GLOBE NEWSWIRE) --  Applied Materials, Inc. (NASDAQ:AMAT) today reported results for its third quarter ended July 28, 2019.

Third Quarter Results

Applied generated revenue of $3.56 billion. On a GAAP basis, the company recorded gross margin of 43.7 percent, operating income of $802 million or 22.5 percent of net sales, and earnings per share (EPS) of $0.61.

On a non-GAAP adjusted basis, the company reported gross margin of 44.0 percent, operating income of $820 million or 23.0 percent of net sales, and EPS of $0.74.

The company returned $724 million to shareholders including $528 million in share repurchases and dividends of $196 million.

"Applied Materials is delivering solid financial performance in a market environment that remains challenging for the time being," said Gary Dickerson, president and CEO.  "We are excited about the company's future opportunities and are fully funding our R&D programs to develop new products and capabilities that will accelerate customers' roadmaps and underpin our growth in the years ahead."

Quarterly Results Summary

  Q3 FY2019     Q3 FY2018     Change
                                       
  (In millions, except per share amounts and
percentages)
Net sales                  $ 3,562     $     4,162     (14)%
Gross margin 43.7 %   44.8 %   (1.1) points
Operating margin 22.5 %   26.3 %   (3.8) points
Net income $ 571     $ 1,016     (44)%
Diluted earnings per share $ 0.61     $ 1.01     (40)%
Non-GAAP Adjusted Results          
Non-GAAP adjusted gross margin 44.0 %   45.9 %   (1.9) points
Non-GAAP adjusted operating margin 23.0 %   27.4 %   (4.4) points
Non-GAAP adjusted net income $ 692     $ 1,048     (34)%
Non-GAAP adjusted diluted EPS $ 0.74     $ 1.04     (29)%

Applied adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), as of the first day of fiscal 2019 using the full retrospective method. Applied also adopted Accounting Standards Update 2017-07, Compensation—Retirement Benefits, as of the first day of fiscal 2019 using the retrospective method. All prior periods included in the unaudited consolidated condensed balance sheet as of Oct. 28, 2018, and the unaudited consolidated condensed statements of operations and cash flows for the three and nine months ended July 29, 2018, were restated under the new standards.

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 fourth quarter of fiscal 2019, Applied expects net sales to be approximately $3.685 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.72 to $0.80.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes net income tax benefit related to intra-entity intangible asset transfers of $0.03 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.

Third Quarter Reportable Segment Information

Semiconductor Systems Q3 FY2019   Q3 FY2018
               
  (In millions, except percentages)
Net sales $ 2,273     $ 2,578  
Foundry, logic and other 49 %   36 %
DRAM 27 %   25 %
Flash 24 %   39 %
Operating income 613     831  
Operating margin 27.0 %   32.2 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 624     $ 876  
Non-GAAP adjusted operating margin 27.5 %   34.0 %


 

Applied Global Services Q3 FY2019   Q3 FY2018
               
  (In millions, except percentages)
Net sales $ 931     $ 952  
Operating income 259     280  
Operating margin 27.8 %   29.4 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 259     $ 280  
Non-GAAP adjusted operating margin 27.8 %   29.4 %


Display and Adjacent Markets Q3 FY2019   Q3 FY2018
               
  (In millions, except percentages)
Net sales $ 339     $ 616  
Operating income 41     156  
Operating margin 12.1 %   25.3 %
Non-GAAP Adjusted Results    
Non-GAAP adjusted operating income $ 44     $ 160  
Non-GAAP adjusted operating margin 13.0 %   26.0 %

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, 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 its 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 management does not believe are indicative of Applied's 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 fourth quarter of fiscal 2019 and beyond, 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; global trade issues and changes in trade policies; 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;  changes in income tax laws; 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-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   Nine Months Ended
               
(In millions, except per share amounts) July 28,
 2019
  July 29,
 2018
  July 28,
 2019
 
View Comments and Join the Discussion!