Applied Materials Announces 4Q, FY 2014 Results

Applied Materials, Inc. reported results for its fourth quarter and fiscal year ended Oct. 26, 2014. In its fourth quarter, Applied generated orders of $2.26 billion, down 9% sequentially and up 8% year over year. Net sales were $2.26 billion, flat sequentially and up 14% year over year.

On a non-GAAP adjusted basis, the company reported gross margin of 44.2%, operating income of $442 million, and net income of $338 million or $0.27 per diluted share. The company recorded GAAP gross margin of 42.4%, operating income of $412 million, and net income of $290 million or $0.23 per diluted share.

In FY2014, orders grew 14% to $9.65 billion, net sales increased 21% to $9.07 billion, non-GAAP adjusted gross margin increased 200 basis points to 44.1%, non-GAAP adjusted operating income increased 73% to $1.78 billion or 19.6% of net sales, and non-GAAP adjusted net income increased 83% to $1.31 billion or $1.07 per diluted share. The company recorded GAAP gross margin of 42.4%, operating income of $1.52 billion or 16.8% of net sales, and net income of $1.11 billion or $0.90 per diluted share.

“Our fourth quarter results round out a strong year for Applied Materials where we grew revenues in our semiconductor business by 25% and expanded our company operating margin by 6 points,” said Gary Dickerson, president and CEO. “We are making our largest gains in areas of the market that are growing the fastest, including etch and deposition, and we carry positive momentum into 2015.”

Silicon Systems Group (SSG) orders were $1.33 billion, down 15%, with decreases in DRAM, flash and foundry partially offset by an increase in logic/other. Applied Global Services (AGS) orders of $747 million grew 35%, driven primarily by increases in semiconductor services and spares orders. Display orders of $130 million were down 56% reflecting continued variability in industry order patterns.

Applied’s backlog declined 2% sequentially to $2.92 billion and included negative adjustments of $42 million. Backlog composition by segment was: SSG 48%; AGS 27%; Display 20%; and EES 5%.

SSG orders increased by 11% to $6.13 billion, net sales increased by 25% to $5.98 billion, non-GAAP adjusted operating income increased by 49% to $1.57 billion or 26.2% of net sales, and GAAP operating income increased by 59% to $1.39 billion or 23.3% of net sales.

AGS orders increased by 16% to $2.43 billion, net sales increased by 9% to $2.20 billion, non-GAAP adjusted operating income increased by 30% to $576 million or 26.2% of net sales, and GAAP operating income increased by 31% to $573 million or 26.0% of net sales.

Display orders increased by 20% to $845 million, net sales increased by 14% to $615 million, non-GAAP adjusted operating income increased by 64% to $131 million or 21.3% of net sales, and GAAP operating income increased by 74% to $129 million or 21.0% of net sales.

For the first quarter of fiscal 2015, Applied expects net sales to be in the range of flat to up 5% from the previous quarter. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.25 to $0.29, the mid-point of which would be flat with the previous quarter and up by 17% year over year.