Applied Materials Announces 1Q 2014 Results

Applied Materials, Inc. reported results for its first quarter of fiscal 2014 ended Jan. 26, 2014.

Applied generated orders of $2.29 billion, up 9% from the prior quarter, led by demand for Silicon Systems Group products. Net sales were $2.19 billion, up 10% sequentially. Non-GAAP adjusted gross margin increased to 42.5% while non-GAAP adjusted operating income grew 18% sequentially to $380 million or 17.4% of net sales. Non-GAAP adjusted net income grew 22% sequentially to $279 million or 23 cents per diluted share. The company recorded GAAP gross margin of 40.7%, operating income of $330 million or 15.1% of net sales, and net income of $253 million or 21 cents per diluted share.

“In our first fiscal quarter, Applied Materials delivered earnings near the high end of our guidance range, while demonstrating momentum in revenue, orders and market share,” said Gary Dickerson, CEO. “This performance reflects healthy investment by our semiconductor and display customers and major technology trends that are playing to our strengths in precision materials engineering.”

Silicon Systems Group (SSG) orders were $1.57 billion, up 13%, with growth in foundry and flash partially offset by decreases in logic/other and DRAM. Net sales increased 19% to $1.48 billion. Non-GAAP adjusted operating income increased to $357 million or 24.1% of net sales. GAAP operating income increased to $314 million or 21.2% of net sales. New order composition was: foundry 60%; flash 27%; logic/other 8%; and DRAM 5%.

Applied Global Services (AGS) orders were $597 million, up 9%, primarily due to growth in 200mm equipment and services. Net sales of $507 million were down 6%. Non-GAAP adjusted operating income increased to $126 million or 24.9% of net sales. GAAP operating income increased to $125 million or 24.7% of net sales.

Display orders of $79 million were down 31%, while net sales declined slightly to $159 million. Non-GAAP adjusted operating income increased to $27 million or 17.0% of net sales. GAAP operating income increased to $26 million or 16.4% of net sales.

Energy and Environmental Solutions (EES) orders of $40 million were flat. Net sales declined 9% to $40 million. EES had a non-GAAP adjusted operating loss of $10 million and a GAAP operating loss of $11 million.

Backlog grew 3% to $2.44 billion including negative adjustments of $32 million, primarily related to currency adjustments. Backlog composition by segment was: SSG 56%; AGS 27%; Display 12%; and EES 5%.

For the second quarter of fiscal 2014, Applied expects net sales to be up 3% to 10% from the previous quarter. Non-GAAP adjusted diluted EPS is expected to be in the range of 25 cents to 29 cents.