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Enabling Bigger Waves
- f Growth
Dan Durn
Chief Financial Officer
2017 ANALYST DAY
Enabling Bigger Waves of Growth Dan Durn Chief Financial Officer - - PowerPoint PPT Presentation
Enabling Bigger Waves of Growth Dan Durn Chief Financial Officer 2017 ANALYST DAY External Use Forward-Looking Statements and Other Information This presentation contains forward-looking statements, including those regarding anticipated
External Use
Dan Durn
Chief Financial Officer
2017 ANALYST DAY
| External Use
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
business and financial performance and outlook, our financial plan and capital allocation, and other statements that are not historical
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.
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Dan Durn
CFO of Applied Materials
2017 – Present
Applied Materials | CFO
2011 – 2014
GLOBALFOUNDRIES | CFO
2014 – 2015
Freescale Semiconductor | CFO
2015 – 2017
NXP Semiconductors | CFO
2009 – 2011
Mubadala Development Company | Head of Technology M&A and Strategy
2000 – 2009
Goldman Sachs | VP, M&A Group Columbia Business School | MBA US Naval Academy | Control Systems Engineering
Education
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www
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New Waves
Exponential Unit Growth
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2000 2010 2017 2020 BILLIONS 100s of MILLIONS 10s of BILLIONS
Mobile + Social Media Era A.I. + Big Data Era PC + Internet Era
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ARM SOC STACKED MEMORY NAND STORAGE LTPS LCD CPU GPU TPU FPGA ASIC HIGH-BANDWIDTH MEMORY 3D NAND OLED X86 CPU PROCESSOR DIMM MEMORY HDD STORAGE LCD DISPLAY
www
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New Waves
Exponential Unit Growth
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2000 2010 2017 2020
Mobile + Social Media Era A.I. + Big Data Era PC + Internet Era
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HIGH PERFORMANCE LOW POWER INNOVATIVE DISPLAY HIGH PERFORMANCE LOW POWER COST-EFFECTIVE SCALING ADVANCED DISPLAY HIGH PERFORMANCE
$25B
σ = $8B
$32B
σ = $3B
$45B
σ =
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New Waves
New High Value Engineering Problems
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2000 2010 2017 2020
Mobile + Social Media Era A.I. + Big Data Era PC + Internet Era
2000 – 2009 Gartner. 2010 – 2016 Gartner. Average WFE 2017 – 2020 based on Applied estimates.
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Semiconductor Systems Services Display
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Services Display Leadership Semi High-Growth Semi
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Services Display Leadership Semi High-Growth Semi
High Performance
and Low Power
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Services Display Leadership Semi High-Growth Semi
Cost-Effective 2D and 3D Scaling
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Services Display Leadership Semi
Bigger, Better Displays
High-Growth Semi
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Services Leadership Semi
Complexity Management
High-Growth Semi Display
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Services Display Leadership Semi High-Growth Semi
High Performance and Low Power Cost-Effective 2D and 3D Scaling Bigger, Better Displays Complexity Management
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Applied’s Portfolio
FY'13 – FY'17E
REVENUE CAGR OP% GROWTH
Leadership Semi
Epi, PVD, CMP, Implant, Thermal
14% +15pts
High-Growth Semi
Etch, CVD, Process Control
27%
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.
Services Display Leadership Semi High-Growth Semi
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Leadership Semi Business
MARKET SHARE PRODUCTS 2016 2017E
Epi 90% ~ PVD 74% Implant 73% ~ CMP 66% Thermal 50%
Strong and Growing Share
Enabling | Unique | Valuable
Enabling high performance and low power logic and memory
2016 Market Share based on Gartner. 2017E based on Applied estimates. All market share data is calendar year.
EPI, PVD, IMPLANT, CMP, THERMAL
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Clear #1 across all businesses
Highly Differentiated Products with Strong Share
Critical to realizing A.I. and big data
Focused on Enabling Power and Performance Roadmap
Advanced transistor and interconnect Selective deposition Logic-like processes in memory
$1B of Incremental Revenue by 2020
Leadership Semi Business
Epi, PVD, Implant, CMP, Thermal
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High-Growth Semi Business
Enabling | Growing | Innovative
Enabling cost-effective 2D and 3D scaling
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
ETCH, CVD, PROCESS CONTROL
2017E vs 2013 PRODUCTS TAM APPLIED REVENUE
Etch ~2.6x >3x CVD ~2.4x ~3x e-Beam* ~1.4x ~2x
Winning with Innovative New Products
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Fastest Growing in the Fastest Growing Markets Innovation Leader with Strong Product Pipeline $2B of Incremental Revenue by 2020
High-Growth Semi Business
Etch, CVD, Process Control +8 points share gain in memory since 2013 +10 points share gain in patterning since 2013 55% of revenue from new products
Sym3 >1,800 chambers Selectra >500 chambers
Strong pipeline including selective dep and etch Next generation 3D NAND scaling Materials-enabled patterning
Share gain from 2013 to 2017E. 2013 market share based on Gartner. 2017E based on Applied Materials estimates. All market share data is calendar year.
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Display Business
Outperforming the market
Display equipment spending based on Applied calendar year estimates * Thin Film Encapsulation
PVD CVD OLED TFE* 2013 2015 2017E
DISPLAY EQUIPMENT SPENDING
FY13 FY15 FY17E
DISPLAY REVENUE $1.9B >$18B $0.7B $8B
~2.8x ~2.3x
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Sustainably Higher Market Outperforming the Market Highly Differentiated Leadership Products + Strong Growth Pipeline
Display Business
Equipment market doubling from 2013 to 2017 Driven by area growth and capital intensity Expanding portfolio
technologies Served market growing from 15% to 40% by 2020 Fastest growing business segment Capitalizing on emerging OLED wave including AR and VR
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Services: Accelerated Growth in $16B Market
FY'13 FY'17E FY'20F
INSTALLED BASE
$3.0B $2.0B
$4.5B
SERVICES REVENUE
SERVICE AGREEMENTS COMPLEXITY
+11%
CAGR
+15%
CAGR
Largest installed base of 38K* tools and growing High utilization at leading and legacy fabs Increasingly complex processes and costs Strong customer pull to improve and accelerate yield and output >6K tools under tech-enabled service agreements
* Includes Semi, Display and other
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OF OVERALL SEMI REVENUE
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Residual Value in Our Overall Semi Business
Spares and Services
200mm Equipment 300mm Upgrades / Refurbs
Based on FY’17E Applied revenue estimates
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OF TOTAL REVENUE
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Applied’s Revenue Diversity
Display
200mm Equipment 300mm Upgrades / Refurbs
Spares and Services
Based on FY’17E Applied revenue estimates
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Applied Targeting >$6B of Growth
PORTFOLIO ANNUAL R&D INVESTMENT
2013 to 2017E
DESCRIPTION REVENUE CAGR
2013 to 2017E
OPPORTUNITY
2020
Leadership Semi $150M
Exceptionally strong position with high-value products
14% Revenue +$1B High-Growth Semi $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.
| External Use APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED SEMICONDUCTOR SYSTEMS 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% APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED AGS OPERATING RESULTS 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
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% 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) $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
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APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESEARCH, DEVELOPMENT AND ENGINEERING (RD&E) EXPENSES Twelve Months Ended (In millions) 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 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES Twelve Months Ended (In millions, except percentage)
October 28, 2012
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%
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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 acquisitions1 166 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 acquisitions1 201 Acquisition integration and deal costs 38 Impairment of goodwill and intangible assets 278 Restructuring charges and assets impairments2 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%
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.
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APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EPS Twelve Months Ended (In millions, except per share amounts)
October 27, 2013
Non-GAAP Adjusted Earnings Per Diluted Share 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
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