Applied Materials Inc reports 22.9% EBITDA growth in 2018 and 1.0 pp EBITDA Margin growth from 29.4% to 30.4%
11/15/2018 • About Applied Materials Inc (
$AMAT) • By InTwits
Applied Materials Inc reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Applied Materials Inc is a fast growth stock: FY2018 revenue growth was 18.7%, 5 year revenue CAGR was 18.1% at FY2018 ROIC 36.4%
- EBITDA Margin is expanding: 30.4% in FY2018 vs. 29.4% in FY2017 vs. 20.9% in FY2014
- Applied Materials Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.6%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $622m in FY2018, $345m in FY2017, $253m in FY2016, $215m in FY2015, $241m in FY2014
- The company has highly profitable business model: ROIC is 36.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Applied Materials Inc's Revenue surged on 18.7%. Revenue growth showed slowdown in FY18Q4 - it was 1.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.9 pp from 32.3% to 34.2% in 2018. EBITDA Margin stuck to a growing trend at 2.7 pp per annum in FY2014-FY2018.
Gross Margin showed almost no change in FY2018. During FY2014-FY2018 Gross Margin bottomed in FY2015 at 40.9% and was growing since that time. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue stuck to a declining trend at -1.2 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin decreased on 4.4 pp from 23.6% to 19.2% in FY2018. During the last 5 years Net Income margin topped in FY2017 at 23.6%. The efficient tax rate was 29.4% in FY2018 while the average for the last five years was 19.0%.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 3.6%. Applied Materials Inc's CAPEX/Revenue increased slightly on 1.4 pp from 2.2% in FY2015 to 3.6% in FY2018. It's average CAPEX/Revenue for the last three years was 2.8%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 2.2% and was growing since that time.
Accounts receivable as a % of Revenue decreased on 2.6 pp from 16.1% to 13.5% in FY2018. Inventories as a % of Revenue increased slightly on 1.4 pp from 20.2% to 21.6% in FY2018.
Applied Materials Inc has spent
$6m on M&A in FY2018 which accounts for 0.035% of revenue.
Return on investment
The company operates at high and attractive ROIC (36.4%) and ROE (40.9%). ROIC increased on 5.2 pp from 31.2% to 36.4% in FY2018. ROE decreased slightly on 0.54 pp from 41.5% to 40.9% in FY2018. ROIC followed a growing trend at 5.7 pp per annum in the last 5 years. ROE grew at 7.7 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 0.4x Net Debt / EBITDA and 1.0x Debt / EBITDA. Net Debt / EBITDA surged on 0.3x from 0.1x to 0.4x in FY2018. Debt showed almost no change in FY2018 while cash dropped on 31.3%. Net Debt/EBITDA followed a growing trend at 0.2x per annum in the last 5 years.
Applied Materials Inc has good short term financial stability: Interest coverage ratio (ICR) is 20.5x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 4.4% in FY2018.
Valuation and dividends
Applied Materials Inc's trades at EV/EBITDA 6.9x and P/E 10.4x.
The company paid 18.3% of Net Income as dividends in FY2018. Dividends grew on average at 4.5% per annum in the last 5 years).
Management team
Applied Materials Inc's CEO is Gary E Dickerson. Gary E Dickerson is a founder and has 5 years tenure with the company. CEO total compensation was
$14,064,540 in FY2018 which included
$1,000,000 salary. Daniel Durn "Dan" is a the company's CFO. Daniel Durn "Dan" has spent 1 year at the company.
Insider ownership is 0.66%. Insider ownership didn't change in 2018.
At the end of financial year the company had 21,000 employees. The number of employees jumped on 14.1%. Average revenue per employee in FY2018 was
$821,571 and it increased on 4.0%.
Financial and operational results
FY ended 10/28/2018
Applied Materials Inc ($AMAT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 9,072 | 9,659 | 10,825 | 14,537 | 17,253 | 18.7% |
| Gross Profit | 3,843 | 3,952 | 4,511 | 6,532 | 7,817 | 19.7% |
| SG&A | 920 | 897 | 819 | 890 | 1,002 | 12.6% |
| EBITDA | 1,895 | 2,064 | 2,541 | 4,275 | 5,253 | 22.9% |
| EBIT | 1,520 | 1,693 | 2,152 | 3,868 | 4,796 | 24.0% |
| Interest expence | 95 | 103 | 155 | 198 | 234 | 18.2% |
| Tax | 376 | 221 | 292 | 297 | 1,381 | 365.0% |
| Net Income | 1,072 | 1,377 | 1,721 | 3,434 | 3,313 | -3.5% |
| Stock Based Compensation | 147 | 131 | 201 | 220 | 258 | 17.3% |
Balance Sheet
|
|---|
| Cash | 3,002 | 4,797 | 3,406 | 5,010 | 3,440 | -31.3% |
| Accounts Receivable | 1,670 | 1,739 | 2,279 | 2,338 | 2,323 | -0.6% |
| Inventory | 1,567 | 1,833 | 2,050 | 2,930 | 3,721 | 27.0% |
| Short Term Debt | 0 | 1,200 | 200 | 0 | 0 | |
| Long Term Debt | 1,947 | 3,342 | 3,125 | 5,304 | 5,309 | 0.1% |
Cash flow
|
|---|
| Capex | 241 | 215 | 253 | 345 | 622 | 80.3% |
| Dividends | 485 | 487 | 444 | 430 | 605 | 40.7% |
| Acquisitions | 12 | 4 | 16 | 68 | 6 | -91.2% |
Ratios
|
|---|
| Revenue growth | 20.8% | 6.5% | 12.1% | 34.3% | 18.7% | |
| EBITDA growth | 125.1% | 8.9% | 23.1% | 68.2% | 22.9% | |
|
|---|
| Gross Margin | 42.4% | 40.9% | 41.7% | 44.9% | 45.3% | 0.4% |
| EBITDA Margin | 20.9% | 21.4% | 23.5% | 29.4% | 30.4% | 1.0% |
| EBIT Margin | 16.8% | 17.5% | 19.9% | 26.6% | 27.8% | 1.2% |
| SG&A, % of revenue | 10.1% | 9.3% | 7.6% | 6.1% | 5.8% | -0.3% |
| SBC, % of revenue | 1.6% | 1.4% | 1.9% | 1.5% | 1.5% | -0.0% |
| Net Income Margin | 11.8% | 14.3% | 15.9% | 23.6% | 19.2% | -4.4% |
| CAPEX, % of revenue | 2.7% | 2.2% | 2.3% | 2.4% | 3.6% | 1.2% |
|
|---|
| ROIC | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% | 5.2% |
| ROE | 14.3% | 17.8% | 23.2% | 41.5% | 40.9% | -0.5% |
| Net Debt/EBITDA | -0.6x | -0.1x | -0.0x | 0.1x | 0.4x | 0.3x |
| Interest expence / Average debt | 4.9% | 3.2% | 3.9% | 4.6% | 4.4% | -0.2% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | 14,000 | 14,600 | 15,600 | 18,400 | 21,000 | 14.1% |
| Revenue/Employee, th. $ | 648 | 662 | 694 | 790 | 822 | 4.0% |
Applied Materials Inc ($AMAT) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 4,205 | 4,579 | 4,468 | 4,014 | | 28.3% | 29.1% | 19.3% | 1.1% |
| EBITDA | 1,334 | 1,400 | 1,367 | 1,136 | | 47.6% | 34.2% | 21.5% | -5.6% |
| Net Income | 165 | 1,100 | 1,173 | 876 | | -76.5% | 33.5% | 26.8% | -10.8% |
Balance Sheet
|
|---|
| Cash | 6,799 | 4,870 | 3,374 | 3,440 | | 94.8% | -1.5% | -36.1% | -31.3% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 5,305 | 5,306 | 5,308 | 5,309 | | 69.8% | 0.1% | 0.1% | 0.1% |
Ratios
|
|---|
| Gross Margin | 46.1% | 44.9% | 45.4% | 44.3% | | 2.1% | -0.2% | -0.0% | -0.7% |
| EBITDA Margin | 31.7% | 30.6% | 30.6% | 28.3% | | 4.1% | 1.2% | 0.5% | -2.0% |
| Net Income Margin | 3.9% | 24.0% | 26.3% | 21.8% | | -17.5% | 0.8% | 1.5% | -2.9% |
Peers in Semiconductors
Below you can find Applied Materials Inc benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 9.7% | 4.4% | 10.9% | 4.7% |
|---|
| Applied Materials Inc ($AMAT) | | 6.5% | 12.1% | 34.3% | 18.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 46.4% | 47.7% | 48.0% | 49.1% | 51.0% |
|---|
| Applied Materials Inc ($AMAT) | 42.4% | 40.9% | 41.7% | 44.9% | 45.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Applied Materials Inc ($AMAT) | 20.9% | 21.4% | 23.5% | 29.4% | 30.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.7% | 4.7% | 4.6% |
|---|
| Applied Materials Inc ($AMAT) | 2.7% | 2.2% | 2.3% | 2.4% | 3.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| Skyworks Solutions, Inc. ($SWKS) | 24.8% | 36.4% | 33.7% | 33.1% | 32.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.3x | 0.4x | 0.4x | 0.3x |
|---|
| Applied Materials Inc ($AMAT) | -0.6x | -0.1x | -0.0x | 0.1x | 0.4x |
