Applied Materials Announces Fourth Quarter and Fiscal Year 2015 Results
Applied Materials, Inc., the global leader in materials engineering solutions for the semiconductor, display and solar industries,recently reported results for its fourth quarter and fiscal year ended October 25, 2015.
Fourth quarter orders were $2.42 billion, down 16 percent sequentially and up 7 percent year over year. Net sales were $2.37 billion, down 5 percent sequentially and up 5 percent year over year.
On a non-GAAP adjusted basis, the company reported fourth-quarter gross margin of 42.2 percent, operating margin of 19.3 percent, and net income of $347 million or $0.29 per diluted share. The company recorded GAAP gross margin of 40.5 percent, operating margin of 17.9 percent, and net income of $336 million or $0.28 per diluted share.
The company generated $471 million in cash from operations during the fourth quarter, paid dividends of $119 million and used $700 million to repurchase 44 million shares of common stock at an average price of $15.78.
Full Year Results
In fiscal 2015, orders grew 5 percent to $10.10 billion, net sales increased 6 percent to $9.66 billion, non-GAAP adjusted gross margin declined 1.2 percentage points to 42.9 percent, non-GAAP adjusted operating margin remained at 19.6 percent, and non-GAAP adjusted net income increased by 10.9 percent to $1.46 billion or $1.19 per diluted share. The company recorded GAAP gross margin of 40.9 percent, operating income of $1.69 billion or 17.5 percent of net sales, and net income of $1.38 billion or $1.12 per diluted share.
The company generated $1.16 billion in cash from operations in fiscal 2015, paid dividends of $487 million and used $1.33 billion to repurchase 76 million shares of common stock.
“In fiscal 2015, Applied Materials delivered year-over-year growth across our semiconductor, display and service businesses resulting in our highest earnings in four years,” said Gary Dickerson, president and CEO. “We have positioned the company for sustainable profitable growth and we are winning share, growing our service business and expanding our available market.”
Quarterly Results Summary
| Change | ||||||||||
| Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | Q4 FY2015 vs. Q3 FY2015 |
Q4 FY2015 vs. Q4 FY2014 |
||||||
| (In millions, except per share amounts and percentages) | ||||||||||
| New orders | $2,424 | $2,892 | $2,255 | (16)% | 7% | |||||
| Net sales | $2,368 | $2,490 | $2,264 | (5)% | 5% | |||||
| Gross margin | 40.5% | 40.9% | 42.4% | (0.4) points | (1.9) points | |||||
| Operating margin | 17.9% | 15.9% | 18.2% | 2.0 points | (0.3) points | |||||
| Net income | $336 | $329 | $256 | 2% | 31% | |||||
| Diluted earnings per share (EPS) | $0.28 | $0.27 | $0.21 | 4% | 33% | |||||
| Change | ||||||||||
| Non-GAAP Adjusted Results | Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | Q4 FY2015 vs. Q3 FY2015 |
Q4 FY2015 vs. Q4 FY2014 |
|||||
| (In millions, except per share amounts and percentages) | ||||||||||
| Non-GAAP adjusted gross margin | 42.2% | 43.9% | 44.2% | (1.7) points | (2.0) points | |||||
| Non-GAAP adjusted operating margin | 19.3% | 20.8% | 19.5% | (1.5) points | (0.2) points | |||||
| Non-GAAP adjusted net income | $347 | $410 | $338 | (15)% | 3% | |||||
| Non-GAAP adjusted diluted EPS | $0.29 | $0.33 | $0.27 | (12)% | 7% | |||||
Applied’s non-GAAP adjusted results exclude the impact of the following, where applicable: 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; and certain discrete adjustments and tax items. 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
For the first quarter of fiscal 2016, Applied expects net sales to be down 2 percent to 9 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.23 to $0.27.
This outlook excludes known charges related to completed acquisitions of $0.04 per share and does not exclude other non-GAAP adjustments that may arise subsequent to this release.
Fourth Quarter and Fiscal Year Reportable Segment Information
| Silicon Systems | Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | FY2015 | FY2014 | ||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||
| New orders | $ | 1,444 | $ | 2,007 | $ | 1,334 | $ | 6,581 | $ | 6,132 | |||||||||
| Foundry | 35 | % | 32 | % | 50 | % | 34 | % | 52 | % | |||||||||
| DRAM | 21 | % | 18 | % | 20 | % | 25 | % | 14 | % | |||||||||
| Flash | 31 | % | 39 | % | 12 | % | 28 | % | 21 | % | |||||||||
| Logic and other | 13 | % | 11 | % | 18 | % | 13 | % | 13 | % | |||||||||
| Net sales | 1,494 | 1,635 | 1,434 | 6,135 | 5,978 | ||||||||||||||
| Operating income | 318 | 411 | 305 | 1,410 | 1,391 | ||||||||||||||
| Operating margin | 21.3 | % | 25.1 | % | 21.3 | % | 23.0 | % | 23.3 | % | |||||||||
| Non-GAAP Adjusted Results | |||||||||||||||||||
| Non-GAAP adjusted operating income | $ | 365 | $ | 455 | $ | 352 | $ | 1,588 | $ | 1,565 | |||||||||
| Non-GAAP adjusted operating margin | 24.4 | % | 27.8 | % | 24.5 | % | 25.9 | % | 26.2 | % | |||||||||
| Applied Global Services |
Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | FY2015 | FY2014 | ||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||
| New orders | $ | 761 | $ | 561 | $ | 747 | $ | 2,653 | $ | 2,433 | |||||||||
| Net sales | 637 | 665 | 592 | 2,531 | 2,200 | ||||||||||||||
| Operating income | 171 | 170 | 146 | 664 | 573 | ||||||||||||||
| Operating margin | 26.8 | % | 25.6 | % | 24.7 | % | 26.2 | % | 26.0 | % | |||||||||
| Non-GAAP Adjusted Results | |||||||||||||||||||
| Non-GAAP adjusted operating income | $ | 170 | $ | 173 | $ | 146 | $ | 667 | $ | 576 | |||||||||
| Non-GAAP adjusted operating margin | 26.7 | % | 26.0 | % | 24.7 | % | 26.4 | % | 26.2 | % | |||||||||
| Display | Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | FY2015 | FY2014 | ||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||
| New orders | $ | 195 | $ | 295 | $ | 130 | $ | 717 | $ | 845 | |||||||||
| Net sales | 191 | 151 | 190 | 780 | 615 | ||||||||||||||
| Operating income | 19 | 25 | 52 | 156 | 129 | ||||||||||||||
| Operating margin | 9.9 | % | 16.6 | % | 27.4 | % | 20.0 | % | 21.0 | % | |||||||||
| Non-GAAP Adjusted Results | |||||||||||||||||||
| Non-GAAP adjusted operating income | $ | 19 | $ | 26 | $ | 52 | $ | 158 | $ | 131 | |||||||||
| Non-GAAP adjusted operating margin | 9.9 | % | 17.2 | % | 27.4 | % | 20.3 | % | 21.3 | % | |||||||||
| Energy and Environmental Solutions | Q4 FY2015 | Q3 FY2015 | Q4 FY2014 | FY2015 | FY2014 | ||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||
| New orders | $ | 24 | $ | 29 | $ | 44 | $ | 153 | $ | 238 | |||||||||
| Net sales | 46 | 39 | 48 | 213 | 279 | ||||||||||||||
| Operating income (loss) | – | (52 | ) | (3 | ) | (61 | ) | 15 | |||||||||||
| Operating margin | – | % | (133.3 | )% | (6.3 | )% | (28.6 | )% | 5.4 | % | |||||||||
| Non-GAAP Adjusted Results | |||||||||||||||||||
| Non-GAAP adjusted operating income (loss) | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | $ | (10 | ) | $ | 21 | |||||
| Non-GAAP adjusted operating margin | (2.2 | )% | (5.1 | )% | (2.1 | )% | (4.7 | )% | 7.5 | % | |||||||||
Backlog Information
Applied’s backlog remained essentially flat at $3.14 billion and included negative adjustments of $13 million. Backlog composition by reportable segment was as follows:
| Silicon Systems | 55 | % |
| Applied Global Services | 26 | % |
| Display | 16 | % |
| Energy and Environmental Solutions | 3 | % |
Use of Non-GAAP Adjusted Financial Measures
Management uses non-GAAP adjusted results to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Applied believes these measures enhance 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. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP.
