Press Release

Lam Research Corporation Reports Financial Results for the Quarter Ended June 24, 2018

July 26, 2018

FREMONT, Calif., July 26, 2018 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq:LRCX) today announced financial results for the quarter ended June 24, 2018 (the “June 2018 quarter”).

Highlights for the June 2018 quarter were as follows:

  • Shipments of $3.03 billion and revenue of $3.13 billion.
  • U.S. GAAP gross margin of 47.3%, U.S. GAAP operating margin of 30.6%, and U.S. GAAP diluted EPS of $5.82.
  • Non-GAAP gross margin of 48.0%, non-GAAP operating margin of 31.8%, and non-GAAP diluted EPS of $5.31.


Key Financial Data for the Quarters Ended June 24, 2018 and March 25, 2018
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP
    June 2018   March 2018   Change Q/Q
Shipments   $ 3,028,390     $ 3,134,677     - 3%  
Revenue   $ 3,125,928     $ 2,892,115     + 8%  
Gross margin as percentage of revenue   47.3 %   46.0 %   + 130 bps  
Operating margin as percentage of revenue   30.6 %   28.6 %   + 200 bps  
Diluted EPS   $ 5.82     $ 4.33     + 34%  
 
Non-GAAP
    June 2018   March 2018   Change Q/Q
Shipments   $ 3,028,390     $ 3,134,677     - 3%  
Revenue   $ 3,125,928     $ 2,892,115     + 8%  
Gross margin as percentage of revenue   48.0 %   46.8 %   + 120 bps  
Operating margin as percentage of revenue   31.8 %   30.0 %   + 180 bps  
Diluted EPS   $ 5.31     $ 4.79     + 11%  

U.S. GAAP Financial Results

For the June 2018 quarter, revenue was $3,126 million, gross margin was $1,479 million, or 47.3% of revenue, operating expenses were $524 million, operating margin was 30.6% of revenue, and net income was $1,021 million, or $5.82 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,892 million, gross margin of $1,331 million, or 46.0% of revenue, operating expenses of $503 million, operating margin of 28.6% of revenue, and net income of $779 million, or $4.33 per diluted share, for the quarter ended March 25, 2018 (the “March 2018 quarter”). Net income in the June 2018 quarter was positively impacted by a $116 million reversal of the provisional charge associated with the December 2017 U.S. tax reform.

Non-GAAP Financial Results

For the June 2018 quarter, non-GAAP gross margin was $1,502 million or 48.0% of revenue, non-GAAP operating expenses were $507 million, non-GAAP operating margin was 31.8% of revenue, and non-GAAP net income was $932 million, or $5.31 per diluted share. This compares to non-GAAP gross margin of $1,353 million or 46.8% of revenue, non-GAAP operating expenses of $486 million, non-GAAP operating margin of 30.0% of revenue, and non-GAAP net income of $852 million, or $4.79 per diluted share for the March 2018 quarter.

“Lam’s June quarter results confirmed 2018 as the strongest fiscal year in our history, with over 11 billion dollars in revenues, approximately 18 dollars in non-GAAP diluted earnings per share and 2.7 billion dollars of cash generated from operations,” said Martin Anstice, Lam Research’s chief executive officer. “Essentially unsurpassed in our industry, the multi-year growth at Lam has been enabled by the increased prominence of Etch and Deposition in the semiconductor device manufacturing process flow and the broadening of our product and services portfolio over many years. Our forward-looking optimism is reinforced by the fundamental opportunity of silicon technologies, enabling a new generation of cognitive computing applications and services, combined with the expectation of sustainable investment by our customers, who in turn are pursuing inspiring and enhanced value creation agendas.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $5.2 billion at the end of the June 2018 quarter compared to $6.7 billion at the end of the March 2018 quarter. This decrease was primarily the result of  $1.3 billion of share repurchases, including net share settlement on employee stock-based compensation, combined with $817 million of debt reductions, partially offset by $718 million of cash generated in operating activities.

Deferred revenue at the end of the June 2018 quarter decreased to $994 million as compared to $1.1 billion at the end of the March 2018 quarter. Deferred profit at the end of the June 2018 quarter decreased to $720 million as compared to $749 million at the end of the March 2018 quarter. Lam’s deferred revenue balance does not include shipments to customers in Japan, to whom title does not transfer until customer acceptance. Shipments to customers in Japan are classified as inventory at cost until the time of acceptance. The estimated future revenue from shipments to customers in Japan was approximately $607 million as of June 24, 2018 and $526 million as of March 25, 2018.

Geographic Distribution

The geographic distribution of shipments and revenue during the June 2018 quarter is shown in the following table:

Region Shipments   Revenue
Korea 29%     35%  
China 25%     21%  
Japan 21%     18%  
Taiwan 11%     10%  
Europe 5%     6%  
United States 5%     5%  
Southeast Asia 4%     5%  

Outlook

For the September 2018 quarter, Lam is providing the following guidance:

  U.S. GAAP   Reconciling
Items
  Non-GAAP
Revenue $2.3 Billion +/-  $150 Million     $2.3 Billion +/-  $150 Million
Gross margin 45.0% +/- 1%   $22 Million   46.0% +/- 1%
Operating margin 24.3% +/- 1%   $38 Million   26.0% +/- 1%
Net income per diluted share $2.98 +/- $0.20   $36 Million   $3.20 +/- $0.20
Diluted share count 163 Million     163 million

The information provided above is only an estimate of what the Company believes is realizable as of the date of this release, and does not incorporate the potential impact of any business combinations, asset acquisitions, divestitures, balance sheet valuation adjustments, financing arrangements, other investments, measurement period adjustments associated with U.S. tax reform, or other significant arrangements that may be completed after the date of this release. U.S. GAAP to non-GAAP reconciling items provided include only those items that are known and can be estimated as of the date of this release. Actual results will vary from this model and the variations may be material. Reconciling items included above are as follows:

  • Gross margin - amortization related to intangible assets acquired through business combinations, $22 million.
  • Operating margin - amortization related to intangible assets acquired through business combinations, $38 million.
  • Earnings per share - amortization related to intangible assets acquired through business combinations, $38 million;  amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($3) million; totaling $36 million.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results. The Company’s non-GAAP results for both the June 2018 and March 2018 quarters exclude amortization related to intangible assets acquired through business combinations, acquisition and integration costs associated with a business combination, amortization of note discounts, tax benefit of non-GAAP items, and income tax benefit on the conclusion of tax matters related to a prior business combination. Additionally, the June 2018 quarter non-GAAP results exclude estimated income tax benefit associated with U.S. tax reform and the March 2018 quarter non-GAAP results exclude realized loss on sale or impairment of investments associated with repatriation.

Management uses non-GAAP gross margin, operating expense, operating income, operating margin, net income, and net income per diluted share to evaluate the Company’s operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view the Company’s results from management’s perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company’s website at http://investor.lamresearch.com.

Caution Regarding Forward-Looking Statements

Statements made in this press release that are not of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to: the estimated future revenue from shipments to customers in Japan; our revenue, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; our vision of the Company’s future; technology demand trends; the legal and business factors that may affect our future tax rate; and our guidance for shipments, revenue, gross margin, operating margin, net income or earnings per diluted share, provisional tax estimate, and diluted share count. Some factors that may affect these forward-looking statements include: business, political and/or regulatory conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; and the actions of our customers and competitors may be inconsistent with our expectations, as well as the other risks and uncertainties that are described in the documents filed or furnished by us with the Securities and Exchange Commission, including specifically the Risk Factors described in our annual report on Form 10-K for the fiscal year ended June 25, 2017 and quarterly reports on Form 10-Q for the fiscal quarters ended September 24, 2017, December 24, 2017 and March 25, 2018. These uncertainties and changes could materially affect the forward-looking statements and cause actual results to vary from expectations in a material way. The Company undertakes no obligation to update the information or statements made in this release.

About Lam Research

Lam Research Corp. is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. As a trusted, collaborative partner to the world’s leading semiconductor companies, we combine superior systems engineering capability, technology leadership, and unwavering commitment to customer success to accelerate innovation through enhanced device performance. In fact, today, nearly every advanced chip is built with Lam technology. Lam Research (Nasdaq:LRCX) is a FORTUNE 500® company headquartered in Fremont, Calif., with operations around the globe. Learn more at www.lamresearch.com. (LRCX-F)

Consolidated Financial Tables Follow.

 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
 
  Three Months Ended   Twelve Months Ended
  June 24,
2018
  March 25,
2018
  June 25,
2017
  June 24,
2018
  June 25,
2017
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)
   
Revenue $ 3,125,928     $ 2,892,115     $ 2,344,907     $ 11,076,998     $ 8,013,620  
Cost of goods sold 1,646,520     1,561,401     1,275,946     5,911,966     4,410,261  
Gross margin 1,479,408     1,330,714     1,068,961     5,165,032     3,603,359  
Gross margin as a percent of revenue 47.3 %   46.0 %   45.6 %   46.6 %   45.0 %
Research and development 327,713     305,412     285,712     1,189,514     1,033,742  
Selling, general and administrative 196,500     197,791     175,310     762,219     667,485  
Total operating expenses 524,213     503,203     461,022     1,951,733     1,701,227  
Operating income 955,195     827,511     607,939     3,213,299     1,902,132  
Operating income as a percent of revenue 30.6 %   28.6 %   25.9 %   29.0 %   23.7 %
Other income (expense), net 2,954     (55,810 )   (4,444 )   (61,510 )   (90,459 )
Income before income taxes 958,149     771,701     603,495     3,151,789     1,811,673  
Income tax benefit (expense) 62,997     7,099     (77,071 )   (771,108 )   (113,910 )
Net income $ 1,021,146     $ 778,800     $ 526,424     $ 2,380,681     $ 1,697,763  
Net income per share:                  
Basic $ 6.35     $ 4.80     $ 3.25     $ 14.73     $ 10.47  
Diluted $ 5.82     $ 4.33     $ 2.82     $ 13.17     $ 9.24  
Number of shares used in per share calculations:                  
Basic 160,916     162,378     162,213     161,643     162,222  
Diluted 175,432     179,779     186,427     180,782     183,770  
Cash dividend declared per common share $ 1.10     $ 0.50     $ 0.45     $ 2.55     $ 1.65  
(1) Derived from audited financial statements.                                        


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  June 24,
2018
  March 25,
2018
  June 25,
2017
  (unaudited)   (unaudited)   (1)  
ASSETS          
Cash and cash equivalents $ 4,512,257     $ 4,698,995     $ 2,377,534  
Investments 437,338     1,785,976     3,663,628  
Accounts receivable, net 2,176,936     2,082,632     1,673,398  
Inventories 1,876,162     1,693,128     1,232,916  
Other current assets 147,218     165,066     195,022  
Total current assets 9,149,911     10,425,797     9,142,498  
Property and equipment, net 902,547     826,500     685,595  
Restricted cash and investments 256,301     256,587     256,205  
Goodwill and intangible assets 1,802,740     1,825,891     1,796,668  
Other assets 367,979     328,724     241,799  
Total assets $ 12,479,478     $ 13,663,499     $ 12,122,765  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current portion of convertible debt and capital leases $ 610,030     $ 1,423,265     $ 908,439  
Other current liabilities 2,540,278     2,525,155     2,041,676  
Total current liabilities 3,150,308     3,948,420     2,950,115  
Long-term debt and capital leases 1,806,562     1,781,731     1,784,974  
Income taxes payable 851,936     818,700     120,178  
Other long-term liabilities 90,629     230,620     280,186  
Total liabilities 5,899,435     6,779,471     5,135,453  
Temporary equity, convertible notes 78,192     80,973     169,861  
Stockholders’ equity (2) 6,501,851     6,803,055     6,817,451  
Total liabilities and stockholders’ equity $ 12,479,478     $ 13,663,499     $ 12,122,765  
(1) Derived from audited financial statements.          
(2) Common shares issued and outstanding were 156,892 as of June 24, 2018, 164,100 as of March 25, 2018 and 161,723 as of June 25, 2017.


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
  Three Months Ended   Twelve Months Ended
  June 24,
2018
  March 25,
2018
  June 25,
2017
  June 24,
2018
  June 25,
2017
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income $ 1,021,146     $ 778,800     $ 526,424     $ 2,380,681     $ 1,697,763  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization 85,119     82,236     79,036     326,395     306,905  
Deferred income taxes 212,260     19,060     35,069     3,046     104,936  
Equity-based compensation expense 47,214     41,095     43,802     172,216     149,975  
Impairment of  investment     42,456         42,456      
(Gain) Loss on early extinguishment of debt         (73 )       36,252  
Amortization of note discounts and issuance costs 959     4,342     6,114     14,428     25,282  
Other, net 10,391     17,866     8,224     33,718     19,001  
Changes in operating assets and liabilities (658,731 )   64,524     30,676     (317,193 )   (310,832 )
Net cash provided by operating activities 718,358     1,050,379     729,272     2,655,747     2,029,282  
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Capital expenditures and intangible assets (79,655 )   (49,057 )   (34,811 )   (273,469 )   (157,419 )
Business acquisitions, net of cash acquired             (115,697 )    
Net sale (purchase) of available-for-sale securities 1,341,475     2,134,886     93,858     3,152,886     (1,883,886 )
Transfers of restricted cash and investments 286     (603 )   (48 )   (96 )   (5,784 )
Other, net (826 )   638     103     (15,184 )   (11,524 )
Net cash provided by (used for) investing activities 1,261,280     2,085,864     59,102     2,748,440     (2,058,613 )
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs (178,279 )   (228,166 )   (2,445 )   (755,694 )   (1,688,313 )
Net (repayment) proceeds from commercial paper (638,367 )   199,024         359,604      
Proceeds from borrowings on revolving credit facility             750,000      
Repayments of borrowings on revolving credit facility             (750,000 )    
Excess tax benefit on equity-based compensation plans         38,635         38,635  
Treasury stock purchases (1,306,309 )   (80,105 )   (525,778 )   (2,653,249 )   (811,672 )
Dividends paid (82,005 )   (79,739 )   (73,709 )   (307,609 )   (243,495 )
Re-issuance of treasury stock related to employee stock purchase plan 41,567         23,120     75,624     59,663  
Proceeds from issuance of common stock 2,626     2,517     369     9,258     12,913  
Other, net (2 )   7     (1 )   9     (125 )
Net cash used for financing activities (2,160,769 )   (186,462 )   (539,809 )   (3,272,057 )   (2,632,394 )
Effect of exchange rate changes on cash and cash equivalents (5,607 )   4,041     399     2,593     (63 )
Net (decrease) increase in cash and cash equivalents (186,738 )   2,953,822     248,964     2,134,723     (2,661,788 )
Cash and cash equivalents at beginning of period 4,698,995     1,745,173     2,128,570     2,377,534     5,039,322  
Cash and cash equivalents at end of period $ 4,512,257     $ 4,698,995     $ 2,377,534     $ 4,512,257     $ 2,377,534  
(1) Derived from audited financial statements.                  


Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
  Three Months Ended
  June 24,
2018
  March 25,
2018
Revenue $ 3,125,928     $ 2,892,115  
Gross margin $ 1,501,750     $ 1,353,056  
Gross margin as percentage of revenue 48.0 %   46.8 %
Operating expenses $ 507,416     $ 486,022  
Operating income $ 994,334     $ 867,034  
Operating margin as a percentage of revenue 31.8 %   30.0 %
Net income $ 931,956     $ 851,795  
Net income per diluted share $ 5.31     $ 4.79  
Shares used in per share calculation - diluted 175,432     177,786  


Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP number of dilutive shares to Non-GAAP number of dilutive shares
(in thousands, except per share data)
(unaudited)
 
  Three Months Ended
  June 24,
2018
  March 25,
2018
U.S. GAAP net income $ 1,021,146     $ 778,800  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold 22,342     22,342  
Amortization related to intangible assets acquired through certain business combinations -selling, general and administrative 16,069     17,074  
Business combination acquisition and integration related costs - selling, general and administrative 728     107  
Amortization of note discounts - other expense, net 1,851     2,860  
Realized loss on sale or impairment of investments - other expense, net     46,641  
Net income tax benefit on non-GAAP items (4,686 )   (11,518 )
Income tax benefit on conclusion of certain tax matters (9,656 )   (4,511 )
Income tax benefit associated with U.S. tax reform (115,838 )    
Non-GAAP net income $ 931,956     $ 851,795  
Non-GAAP net income per diluted share $ 5.31     $ 4.79  
GAAP net income per diluted share $ 5.82     $ 4.33  
U.S. GAAP number of shares used for per diluted share calculation 175,432     179,779  
Effect of convertible note hedge     (1,993 )
Non-GAAP number of shares used for per diluted share calculation 175,432     177,786  
           


Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP number of dilutive shares to Non-GAAP number of dilutive shares
(in thousands, except per share data)
(unaudited)
 
  Twelve Months Ended
  June 24,
 2018
  June 25,
 2017
U.S. GAAP net income $ 2,380,681     $ 1,697,763  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold 88,640     85,000  
Product rationalization - cost of goods sold     6,127  
Product rationalization - research and development     1,650  
Cost associated with campus consolidation - research and development     3,556  
Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative 66,630     64,332  
Costs associated with business process reengineering - selling, general and administrative 2,078     7,487  
Business combination acquisition and integration related costs - selling, general and administrative 2,864     9,972  
Litigation settlement - selling, general and administrative     4,000  
Amortization of note discounts - other expense, net 12,225     22,869  
Realized loss on sale or impairment of investments - other expense, net 46,641      
Costs related to early termination of KLA-Tencor acquisition funding - other expense, net     34,518  
KLA-Tencor pre-acquisition funding interest expense, net - other expense, net     20,391  
Net income tax benefit on non-GAAP items (26,722 )   (47,941 )
Income tax benefit on conclusion of certain tax matters (14,720 )   (109,191 )
Income tax expense associated with U.S. tax reform 641,051      
Non-GAAP net income $ 3,199,368     $ 1,800,533  
U.S. GAAP net income per diluted share $ 13.17     $ 9.24  
Non-GAAP net income per diluted share $ 17.87     $ 9.98  
U.S. GAAP number of shares used for per diluted share calculation 180,782     183,770  
Effect of convertible note hedge (1,711 )   (3,302 )
Non-GAAP number of shares used for per diluted share calculation 179,071     180,468  
           


Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Non-GAAP Gross Margin, Operating Expenses and Operating Income
(in thousands, except percentages)
(unaudited)
 
  Three Months Ended
  June 24,
2018
  March 25,
2018
U.S. GAAP gross margin $ 1,479,408     $ 1,330,714  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations 22,342     22,342  
Non-GAAP gross margin $ 1,501,750     $ 1,353,056  
U.S. GAAP gross margin as a percentage of revenue 47.3 %   46.0 %
Non-GAAP gross margin as a percentage of revenue 48.0 %   46.8 %
U.S. GAAP operating expenses $ 524,213     $ 503,203  
Pre-tax non-GAAP items:              
Amortization related to intangible assets acquired through certain business combinations (16,069 )   (17,074 )
Costs associated with business process reengineering      
Business combination acquisition and integration related costs (728 )   (107 )
Non-GAAP operating expenses $ 507,416     $ 486,022  
Non-GAAP operating income $ 994,334     $ 867,034  
GAAP operating margin as percent of revenue 30.6 %   28.6 %
Non-GAAP operating margin as a percent of revenue 31.8 %   30.0 %

Lam Research Corporation Contact:

Ram Ganesh, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com

 

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Source: Lam Research Corporation

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