Applied Materials Announces 3Q 2014 Results

Applied Materials, Inc. reported results for its third quarter of fiscal 2014 ended July 27, 2014. Applied generated orders of $2.48 billion, down 6% sequentially and up 24% year over year. Net sales were $2.27 billion, down 4% sequentially and up 15% year over year.

Non-GAAP adjusted gross margin of 45.5% increased 130 basis points sequentially and grew 260 basis points year over year. Non-GAAP adjusted operating income of $477 million declined slightly from the prior quarter and grew 53% year over year to 21.1% of net sales. Non-GAAP adjusted net income was $349 million, approximately flat sequentially and up 57% year over year. Non-GAAP adjusted diluted EPS was $0.28. The company recorded GAAP gross margin of 43.8%, operating income of $391 million or 17.3% of net sales, and net income of $301 million or $0.24 per diluted share.

“We have focused our strategy and investments in areas that have the largest impact for customers while driving improvements in execution and speed across the company,” said Gary Dickerson, president and CEO. “With these actions, we have improved our operating margins for seven quarters in a row and are making substantial progress towards our long-term financial model.”


Silicon Systems Group (SSG) orders were $1.57 billion, down 6%, with decreases in DRAM and foundry. Net sales decreased 7% to $1.48 billion. Non-GAAP adjusted operating income decreased to $423 million while non-GAAP adjusted operating margin increased to 28.7% driven by a favorable product mix. New order composition was: foundry 50%; flash 22%; DRAM 14%; and logic/other 14%.

Applied Global Services (AGS) orders were $552 million, up 3%, while net sales of $567 million were up 6%. Operating income increased slightly to $154 million on both a GAAP and non-GAAP adjusted basis while operating margin decreased to 27.2%.

Display orders of $296 million were down 13%, but remained at high levels reflecting continued strong demand for TV production capacity. Net sales declined 19% to $119 million. Non-GAAP adjusted operating income was flat at $26 million while non-GAAP adjusted operating margin increased to 21.8%. the sale of previously reserved inventory.

Energy and Environmental Solutions (EES) orders decreased to $66 million while net sales rose to $103 million. Non-GAAP adjusted operating income increased to $25 million and non-GAAP adjusted operating margin rose to 24.3%.

Applied’s backlog grew 9% sequentially to $2.97 billion including positive adjustments of $19 million, primarily related to EES re-bookings. Backlog composition by segment was: SSG 51%; AGS 22%; Display 22%; and EES 5%.

For the fourth quarter of fiscal 2014, Applied expects net sales to be approximately flat, plus or minus 3% as compared to the previous quarter, and up by approximately 10% to 17% from the year-ago period. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.25 to $0.29, which would be up by approximately 32% to 53% year over year.