Applied Materials (AMAT) Sees FY19 EPS of $2.80 at Midpoint

At its 2016 Analyst Day, Applied Materials, Inc. detailed its innovation leadership strategy to drive sustainable growth and announced target non-GAAP adjusted earnings per share of $2.45 to $3.17 for fiscal 2019, with a midpoint of $2.80. This would represent compound earnings growth of approximately 17 percent over the next three years.

• Unveils new financial model targeting non-GAAP EPS of $2.45 to $3.17 for FY2019
• Expects higher wafer fab equipment (WFE) spending driven by multi-year inflections including 3D NAND,10 and 7 nanometer logic and foundry, materials-based patterning and new factory investments in China
• Outlines plans to drive 50 percent growth in display business to $1.8 billion by FY2019

Applied highlighted how the semiconductor industry’s major transition from lithography-based scaling to materials-enabled scaling has increased Applied’s addressable opportunity from 53 percent of WFE spending in calendar 2012 to an estimated 63 percent this year. With the broadest portfolio of materials engineering technologies and its unique Product Development Engine process, Applied now expects to achieve a 4-point gain in its share of WFE spending and nearly double its display business, from 2012 through 2016. By delivering enabling service products to support customers as they make these challenging technology transitions, the company expects to grow its services business revenue by $600 million from fiscal 2013 through 2016.

“Our innovation leadership strategy, combined with the breadth and depth of our materials engineering capabilities, puts Applied in a unique position to sustainably outperform our markets,” said Gary Dickerson, president and CEO. “Over the past few years, we strengthened our organization and processes while increasing investment in R&D, so that today we see opportunities earlier, develop winning products faster and are delivering increased value for customers and shareholders.”

“We are raising the ceiling on our financial model based on our confidence that we have the right capability, strategy and operating model to deliver sustainable growth in the near and long term,” said Robert Halliday, senior vice president and CFO.

Large, multi-year inflections are driving sustained growth in semiconductor and display: the evolution of 3D NAND; transition to 10/7nm nodes; growing need for 3D materials-enabled patterning; increasing investments in China by domestic and multinational companies; and accelerated adoption of OLED displays. These technology inflections are enabled by materials innovation, which plays directly to Applied’s strengths and expands its available market.

Multiple longer term technology drivers, including augmented/virtual reality and smart vehicles, will fuel the need for higher performance computing, better networks and more and new types of memory. These emerging drivers are expected to create new opportunities for Applied’s leading materials engineering technologies and products, and increase WFE and display industry investment in coming years.

A replay of the 2016 Analyst Meeting, along with presentations and related materials, will be available on the Applied Materials investor relations website at http://www.appliedmaterials.com/company/investor-relations.

Non-GAAP Adjusted Financial Measures

The non-GAAP adjusted EPS targets assume non-GAAP adjustments as applicable for future periods, which we are unable to predict without unreasonable efforts due to their inherent uncertainty. Management uses non-GAAP adjusted financial measures to evaluate the company's operating and financial performance and for planning purposes. 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 between periods on a consistent basis. There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies.

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