Applied Materials Announces 2Q 2014 Results

Applied Materials, Inc. reported results for its second quarter of fiscal 2014 ended April 27, 2014.

Applied generated orders of $2.63 billion, up 15% from the prior quarter, led by increases in Display and Silicon Systems. Net sales of $2.35 billion were up 7% sequentially, led by growth in Silicon Systems.

Non-GAAP adjusted gross margin increased 170 basis points from the prior quarter to 44.2%. Non-GAAP adjusted operating income grew 27% sequentially to $482 million, or 20.5% of net sales. Non-GAAP adjusted net income grew 25% sequentially to $348 million or $0.28 per diluted share. The company recorded GAAP gross margin of 42.5%, operating income of $387 million or 16.4% of net sales, and net income of $262 million or $0.21 per diluted share.

“Applied gained 1.4 points of wafer fab equipment market share in 2013 as we enabled major technology inflections for our customers with our unique capabilities in precision materials engineering,” said Gary Dickerson, president and CEO. “We are also delivering significant improvements in our financial performance and have expanded our operating margins to their highest level in nearly three years.”

Silicon Systems Group (SSG) orders were $1.66 billion, up 6%, with increases in DRAM and logic/other more than offsetting declines in foundry and flash. Net sales increased 7% to $1.58 billion. Non-GAAP adjusted operating income increased to $433 million or 27.3% of net sales. GAAP operating income increased to $391 million or 24.7% of net sales.

Applied Global Services (AGS) orders were $537 million, down 10%, primarily due to service contract renewals being seasonally higher in the first quarter. Net sales of $534 million were up 5%. Non-GAAP adjusted operating income increased to $150 million or 28.1% of net sales. GAAP operating income increased to $148 million or 27.7% of net sales.

Display orders of $340 million rose from $79 million in the prior quarter, primarily reflecting orders for TV production capacity. Net sales declined 8% to $147 million. Operating income was $26 million or 17.7% of net sales both on a GAAP and non-GAAP adjusted basis.

Energy and Environmental Solutions (EES) orders grew to $88 million and net sales rose to $88 million. EES had a non-GAAP adjusted operating income of $7 million or 8% of net sales and GAAP operating income of $5 million or 6% of net sales.

For the third quarter of fiscal 2014, Applied expects net sales to be in the range of flat to down 5% from the previous quarter and up by approximately 13% to 19% from the year-ago period. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.25 to $0.29, and up by approximately 39% to 61% year over year.