Enabling Bigger Waves of Growth

Transcription

1 Enabling Bigger Waves of Growth Dan Durn Chief Financial Officer 2017 ANALYST DAY External Use

2 Forward-Looking Statements and Other Information This presentation contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and anticipated levels of capital equipment spending, technology inflections, our strategies, our development of new products and technologies, the anticipated demand for our products, growth in our market share positions and opportunities, our business and financial performance and outlook, our financial plan and capital allocation, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; consumer demand for electronic products; customers technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology inflections; our ability to develop, deliver and support new products, expand our markets and increase market share; the concentrated nature of our customer base; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; and other risks and uncertainties described in our most recent Form 10-Q and other SEC filings. All forward-looking statements are based on management s estimates, projections and assumptions as of September 27, 2017, and we assume no obligation to update them. All information and data that speaks as of a future date are based on management s estimates, projections and assumptions, unless otherwise noted. This presentation also includes non-gaap adjusted financial measures, along with reconciliations to GAAP measures. Applied Materials, the Applied Materials logo, and other trademarks so designated as product names are trademarks of Applied Materials, Inc. Other names and brands are the property of third parties. 1

3 Dan Durn CFO of Applied Materials 2017 Present Applied Materials CFO NXP conductors CFO Freescale conductor CFO GLOBALFOUNDRIES CFO Mubadala Development Company Head of Technology M&A and Strategy Goldman Sachs VP, M&A Group Education Columbia Business School MBA US Naval Academy Control Systems Engineering 63

4 New Waves Exponential Unit Growth A.I. + Big Data Era 10s of BILLIONS www Mobile + Social Media Era BILLIONS PC + Internet Era 100s of MILLIONS

5 New Waves Exponential Unit Growth A.I. + Big Data Era CPU GPU TPU FPGA ASIC HIGH-BANDWIDTH MEMORY 3D NAND OLED www Mobile + Social Media Era ARM SOC STACKED MEMORY NAND STORAGE LTPS LCD PC + Internet Era X86 CPU PROCESSOR DIMM MEMORY HDD STORAGE LCD DISPLAY

6 New Waves New High Value Engineering Problems A.I. + Big Data Era HIGH PERFORMANCE LOW POWER COST-EFFECTIVE SCALING ADVANCED DISPLAY www Mobile + Social Media Era HIGH PERFORMANCE LOW POWER INNOVATIVE DISPLAY PC + Internet Era HIGH PERFORMANCE Avg. WFE $25B σ = $8B Avg. WFE $32B σ = $3B Gartner Gartner. Average WFE based on Applied estimates. Avg. WFE $45B σ = 66

7 APPLIED S Reporting Segments conductor Systems Services Display 67

8 APPLIED S Portfolio of Businesses Leadership High-Growth Services Display 68

9 High Performance and Low Power Leadership High-Growth Services Display 69

10 Leadership High-Growth Cost-Effective 2D and 3D Scaling Services Display 71

11 Leadership High-Growth Services Display Bigger, Better Displays 73

12 Leadership High-Growth Complexity Management Services Display 75

13 High Performance and Low Power Leadership High-Growth Cost-Effective 2D and 3D Scaling Services Display Complexity Management Bigger, Better Displays 76

14 Applied s Portfolio REVENUE CAGR FY'13 FY'17E OP% GROWTH Leadership High-Growth Leadership Epi, PVD, CMP, Implant, Thermal High-Growth Etch, CVD, Process Control 14% 27% +15pts Services Display Display 29% +11pts Services 11% +6pts Total Applied 18% +14pts FY 17E estimates reflects midpoint of Q4 fiscal 2017 guidance. Operating Margin (OP%) is a non-gaap adjusted measure. Presentation also reflects allocation of corporate costs based on revenue and headcount. 77

15 Leadership Business Enabling high performance and low power logic and memory MARKET SHARE PRODUCTS E EPI, PVD, IMPLANT, CMP, THERMAL Epi 90% ~ PVD 74% Implant 73% ~ CMP 66% Thermal 50% Enabling Unique Valuable Strong and Growing Share 2016 Market Share based on Gartner. 2017E based on Applied estimates. All market share data is calendar year. 78

16 Leadership Business Epi, PVD, Implant, CMP, Thermal Highly Differentiated Products with Strong Share Focused on Enabling Power and Performance Roadmap $1B of Incremental Revenue by 2020 Clear #1 across all businesses Critical to realizing A.I. and big data Advanced transistor and interconnect Selective deposition Logic-like processes in memory 80

17 High-Growth Business Enabling cost-effective 2D and 3D scaling PRODUCTS TAM 2017E vs 2013 APPLIED REVENUE ETCH, CVD, PROCESS CONTROL Etch ~2.6x >3x CVD ~2.4x ~3x e-beam * ~1.4x ~2x Enabling Growing Innovative Winning with Innovative New Products TAM (Total Available Market) growth based on Gartner data for 2013 and Applied estimates for 2017 * e-beam Technology: Defect Review, CD SEM, E-beam Inspection 81

18 High-Growth Business Etch, CVD, Process Control Fastest Growing in the Fastest Growing Markets Innovation Leader with Strong Product Pipeline $2B of Incremental Revenue by points share gain in memory since points share gain in patterning since % of revenue from new products Sym3 >1,800 chambers Selectra >500 chambers Share gain from 2013 to 2017E market share based on Gartner. 2017E based on Applied Materials estimates. All market share data is calendar year. Strong pipeline including selective dep and etch Next generation 3D NAND scaling Materials-enabled patterning 83

19 Display Business Outperforming the market DISPLAY EQUIPMENT SPENDING ~2.3x >$18B $8B PVD CVD OLED TFE* E ~2.8x DISPLAY REVENUE $1.9B $0.7B Display equipment spending based on Applied calendar year estimates * Thin Film Encapsulation FY13 FY15 FY17E 84

20 Display Business Sustainably Higher Market Outperforming the Market Highly Differentiated Leadership Products + Strong Growth Pipeline Equipment market doubling from 2013 to 2017 Driven by area growth and capital intensity Fastest growing business segment Capitalizing on emerging OLED wave including AR and VR Expanding portfolio of enabling technologies Served market growing from 15% to 40% by

21 Services: Accelerated Growth in $16B Market SERVICES REVENUE +15% CAGR $4.5B SERVICE AGREEMENTS Strong customer pull to improve and accelerate yield and output +11% CAGR $3.0B COMPLEXITY >6K tools under tech-enabled service agreements Increasingly complex processes and costs $2.0B INSTALLED BASE Largest installed base of 38K* tools and growing High utilization at leading and legacy fabs FY'13 FY'17E FY'20F * Includes, Display and other 87

22 Residual Value in Our Overall Business Spares and Services 200mm Equipment 300mm Upgrades / Refurbs >30% OF OVERALL SEMI REVENUE Based on FY 17E Applied revenue estimates 88

23 Applied s Revenue Diversity Spares and Services Display 200mm Equipment 300mm Upgrades / Refurbs >40% OF TOTAL REVENUE Based on FY 17E Applied revenue estimates 89

24 Applied Targeting >$6B of Growth PORTFOLIO ANNUAL R&D INVESTMENT 2013 to 2017E DESCRIPTION REVENUE CAGR 2013 to 2017E OPPORTUNITY 2020 Leadership $150M Exceptionally strong position with high-value products 14% Revenue +$1B High-Growth $270M Outgrowing market with innovative products 27% Revenue +$2B Display $120M Capitalizing on a new OLED wave 29% Revenue +$1.6B Services $30M Accelerating growth in a bigger market 11% Revenue +$1.5B Increase in R&D and Revenue CAGR based on FY 13 and FY 17E estimates. Revenue growth forecast based on Applied estimates. 90

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26 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED SEMICONDUCTOR SYSTEMS OPERATING RESULTS APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED AGS OPERATING RESULTS APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED DISPLAY AND ADJACENT MARKETS OPERATING RESULTS Twelve Months Ended (In millions, except percentages) October 27, 2013 Non-GAAP Adjusted Operating Income Reported operating income (GAAP basis) $876 Certain items associated with acquisitions 175 Acquisition integration costs (2) Restructuring charges and assets impairments 1 Allocation of Corporate non-gaap operating income (296) Non-GAAP adjusted operating income $754 Non-GAAP adjusted operating margin (% of net sales) 15.8% Twelve Months Ended (In millions, except percentages) October 27, 2013 Non-GAAP Adjusted Operating Income Reported operating income (GAAP basis) $422 Certain items associated with acquisitions 5 Acquisition integration costs - Restructuring charges and assets impairments 2 Allocation of Corporate non-gaap operating income (51) Non-GAAP adjusted operating income $378 Non-GAAP adjusted operating margin (% of net sales) 19.1% Twelve Months Ended (In millions, except percentages) October 27, 2013 Non-GAAP Adjusted Operating Income Reported operating income (GAAP basis) $110 Certain items associated with acquisitions 6 Allocation of Corporate non-gaap operating income (48) Non-GAAP adjusted operating income $68 Non-GAAP adjusted operating margin (% of net sales) 9.9% External Use

27 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESEARCH, DEVELOPMENT AND ENGINEERING (RD&E) EXPENSES APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES Twelve Months Ended (In millions) October 28, 2012 Twelve Months Ended (In millions, except percentage) October 28, 2012 RD&E expenses (GAAP basis) $1,237 Certain items associated with acquisitions (4) Acquisition integration costs (3) Non-GAAP adjusted RD&E expenses $1,230 Operating expenses (GAAP basis) $2,902 Certain items associated with acquisitions (45) Acquisition integration costs (81) Impairment of goodwill (421) Restructuring reversals (charges) and assets impairments (168) Other gains, losses or charges, net Non-GAAP adjusted operating expenses $2,187 Non-GAAP adjusted operating expenses (% of net sales) 25.1% External Use

28 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND OPERATING INCOME Twelve Months Ended (In millions, except percentage) October 27, 2013 Non-GAAP Adjusted Gross Profit Reported gross profit - GAAP basis $2,991 Certain items associated with acquisitions Acquisition integration costs 3 Non-GAAP adjusted gross profit $3,160 Non-GAAP adjusted gross margin 42.1% Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis $432 Certain items associated with acquisitions Acquisition integration and deal costs 38 Impairment of goodwill and intangible assets 278 Restructuring charges and assets impairments 2 63 Certain items associated with announced business combination 24 Other gains, losses or charges, net (4) Non-GAAP adjusted operating income $1,032 Non-GAAP adjusted operating margin 13.7% 1. These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2. Results for twelve months ended October 27, 2013 included $39 million of employee-related costs, net, related to restructuring program annonced on October 3, 2012, and restructuring and asset impariment charges of $26 million related to the restructuring program announced on May 10, 2012, partially offset by favorable adjustment of $2 million related to other restructuring plans. External Use

29 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EPS (In millions, except per share amounts) Non-GAAP Adjusted Earnings Per Diluted Share Twelve Months Ended October 27, 2013 Reported earnings per diluted shares - GAAP basis $0.21 Certain items associated with acquisitions 0.14 Impairment of goodwill and intangible assets 0.21 Restructuring charges and assets impairments 0.03 Acquisition integration costs 0.02 Certain items associated with announced business combination 0.01 Reinstatement of federal R&D tax credit, resolution of prior years' income tax filings and other tax items (0.03) Non-GAAP adjusted earnings per diluted share $0.59 Weighted average number of diluted shares 1,219 External Use