Enabling Bigger Waves of Growth Dan Durn Chief Financial Officer - - PowerPoint PPT Presentation

enabling bigger waves of growth
SMART_READER_LITE
LIVE PREVIEW

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


slide-1
SLIDE 1

External Use

Enabling Bigger Waves

  • f Growth

Dan Durn

Chief Financial Officer

2017 ANALYST DAY

slide-2
SLIDE 2

| 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

  • f 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

slide-3
SLIDE 3

| External Use 63

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

slide-4
SLIDE 4

| External Use

www

64

New Waves

Exponential Unit Growth

64

2000 2010 2017 2020 BILLIONS 100s of MILLIONS 10s of BILLIONS

Mobile + Social Media Era A.I. + Big Data Era PC + Internet Era

slide-5
SLIDE 5

| External Use

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

65

New Waves

Exponential Unit Growth

65

2000 2010 2017 2020

Mobile + Social Media Era A.I. + Big Data Era PC + Internet Era

slide-6
SLIDE 6

| External Use

HIGH PERFORMANCE LOW POWER INNOVATIVE DISPLAY HIGH PERFORMANCE LOW POWER COST-EFFECTIVE SCALING ADVANCED DISPLAY HIGH PERFORMANCE

  • Avg. WFE

$25B

σ = $8B

  • Avg. WFE

$32B

σ = $3B

  • Avg. WFE

$45B

σ = 

www

66

New Waves

New High Value Engineering Problems

66

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.

slide-7
SLIDE 7

| External Use 67

Semiconductor Systems Services Display

APPLIED’S

Reporting Segments

slide-8
SLIDE 8

| External Use 68

APPLIED’S

Portfolio

  • f Businesses

Services Display Leadership Semi High-Growth Semi

slide-9
SLIDE 9

| External Use 69

Services Display Leadership Semi High-Growth Semi

High Performance

and Low Power

slide-10
SLIDE 10

| External Use 71

Services Display Leadership Semi High-Growth Semi

Cost-Effective 2D and 3D Scaling

slide-11
SLIDE 11

| External Use 73

Services Display Leadership Semi

Bigger, Better Displays

High-Growth Semi

slide-12
SLIDE 12

| External Use 75

Services Leadership Semi

Complexity Management

High-Growth Semi Display

slide-13
SLIDE 13

| External Use 76

Services Display Leadership Semi High-Growth Semi

High Performance and Low Power Cost-Effective 2D and 3D Scaling Bigger, Better Displays Complexity Management

slide-14
SLIDE 14

| External Use 77

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

slide-15
SLIDE 15

| External Use 78

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

slide-16
SLIDE 16

| External Use 80

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

slide-17
SLIDE 17

| External Use 81

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

slide-18
SLIDE 18

| External Use 83

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.

slide-19
SLIDE 19

| External Use 84

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

slide-20
SLIDE 20

| External Use 86

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

  • f enabling

technologies Served market growing from 15% to 40% by 2020 Fastest growing business segment Capitalizing on emerging OLED wave including AR and VR

slide-21
SLIDE 21

| External Use 87

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

slide-22
SLIDE 22

| External Use

>30%

OF OVERALL SEMI REVENUE

88

Residual Value in Our Overall Semi Business

Spares and Services

200mm Equipment 300mm Upgrades / Refurbs

Based on FY’17E Applied revenue estimates

slide-23
SLIDE 23

| External Use

>40%

OF TOTAL REVENUE

89

Applied’s Revenue Diversity

Display

200mm Equipment 300mm Upgrades / Refurbs

Spares and Services

Based on FY’17E Applied revenue estimates

slide-24
SLIDE 24

| External Use 90

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.

slide-25
SLIDE 25
slide-26
SLIDE 26

| 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

  • 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% 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

slide-27
SLIDE 27

| External Use

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%

External Use

slide-28
SLIDE 28

| External Use

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%

  • 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

slide-29
SLIDE 29

| External Use

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

External Use