conference date: May 19, 2010 @ 1:30 PM Pacific Time
for quarter ending: May 2, 2010 (second quarter fiscal 2010)
Overview: Solid quarter, with rapid revenue and product growth both sequentially and especially year/year.
Basic data (GAAP) :
Revenues were $2.30 billion, up 24% sequentially from $1.85 billion, and up 125% from $1.02 billion in the year-earlier quarter.
Net income was $264 million, up 218% sequentially from $82.8 million and reversing a loss of $255 million year-earlier.
EPS (earnings per share) were $0.20, up 233% sequentially from $0.06, and up from negative $0.19 year-earlier.
For fiscal Q3 2010, revenues may be anywhere from down 2% to up 5% sequentially from Q2. Non-GAAP EPS between $0.22 and $0.26, excluding acquisition charges of about $0.01 and any solar restructuring costs.
For the full fiscal year, sales growth guidance has been increased to more than 60% above fiscal 2009.
Increasing cash dividend and stock buybacks in the quarter.
Solid quarter at high end of guidance range. Hurt by an inventory charge for thin film solar
Non-GAAP numbers: net income $292 million for EPS of $0.22.
Thin film solar was the only negative sub-segment.
Silicon equipment is in an upcycle. Orders were $1.42 billion, revenues $1.40 billion. There are 11 new fabs and fab expansions planned. Base of spending is broadening. New NAND capacity is being rapidly absorbed by new hardware applications. DRAM accounted for 41% of silicon revenue, foundry 37%, logic and other 12%, flash memory 10%. Lead times remain short. Semitool integration is going well.
Display is also in an upcycle, with Asian end-customer demand particularly strong. Raising industry forecast to up 70% from calendar 2009. Orders were $256 million, sales $270 million. 33% operating margin for the segment.
Applied Global Services orders were $483 million, revenues were $456 million.
EES group (Energy and Environmental Solutions) Solar PVC installation have accelerated and module prices have stabilized. Capacity additions have stabilized, with much of it in China. In 2010 half of all solar panels will be made in China, and Applied is having good equipment demand there. It was a difficult quarter for thin-film, however, with one customer going bankrupt and another unable to get financing for a factory. Therefore we will not break-even in EES group. Plan is to reduce costs for thin-film, but will continue to sell Sun Fabs if the return on investment works out. New orders were $378 million, revenues $166 million, a sequential decrease. Inventory charge of $83 million was from the customer insolvency.
Gross margin 40.4%, up 2 points sequentially, despite inventory charge. Operating expense expected at $520 to $540 million per quarter for remainder of year.
$3.6 billion in cash and investments at end of quarter. $527 million cash flow. $130 million tax refund helped. Cash dividend expense was $81 million, and $100 million was used to repurchase shares.
Backlog ended at $2.99 billion, increasing $59 million sequentially.
Cost of goods sold was $1.369 billion. Gross profit $927 million. Operating expenses included: $306 million for R&D, $126 million for general and administrative, $100 million for marketing and selling, $9 million for restructuring. Leaving income from operations $386 million. Other income $2 million.
Silicon equipment expectations? Flash bookings are expected strong in Q3, but off a small base. Q3 growth expectation is due to multiple customers.
Silicon bookings estimate includes some share gain. Exact amounts depend on timing of customer orders.
Flat panel display business is lumpy, that is the only reason for thinking Q3 will be slow. In general, the market is strong, Q2 was a difficult comparison.
Overall order outlook for Q3? We are not giving guidance. But overall we are seeing a multi-year up cycle.
Solar business still makes sense in many situations, particularly in India and China, and for technology upgrades. We are in multiple discussion with customers and potential customers.
Thin film order backlog is about $400 million.
Believes Flash supply is very tight and demand should ramp up in second half of calendar year.
How much of silicon ordering is capacity driven? In Q2 about 60% of orders were capacity driven, and that trend looks true going forward. In 2009 almost all orders were technology given.
Samsung capacity expansion announcement? We see it as growing confidence in the need for greater semiconductor capacity.
Expansion areas so far? NAND, then DRAM, then foundry.
LED lighting market? A number of fabs are being built. We are working to qualify our machine, which we believe is differentiated and will add value for customers. We have not introduced a product yet, so too early to talk about expectations.
EES bookings? Most bookings today are coming from crystalline segment, mostly from China. Watching to see if devaluing of Euro will impact demand, etc. "But right now demand is very, very strong."
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