Press Release

Lam Research Corporation Reports Financial Results for the Quarter Ended September 23, 2018

October 16, 2018

FREMONT, Calif., Oct. 16, 2018 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended September 23, 2018 (the “September 2018 quarter”).

Highlights for the September 2018 quarter were as follows:

  • Revenue of $2.33 billion.
  • U.S. GAAP gross margin of 45.4%, U.S. GAAP operating income as a percentage of revenue of 25.4%, and U.S. GAAP diluted EPS of $3.23.
  • Non-GAAP gross margin of 46.4%, non-GAAP operating income as a percentage of revenue of 27.0%, and non-GAAP diluted EPS of $3.36.
 
Key Financial Data for the Quarters Ended
September 23, 2018 and June 24, 2018
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP(1)
    September 2018   June 2018   Change Q/Q
Revenue   $ 2,330,691     $ 3,125,928     - 25%
Gross margin as percentage of revenue   45.4 %   47.3 %   - 190 bps
Operating margin as percentage of revenue   25.4 %   30.6 %   - 520 bps
Diluted EPS   $ 3.23     $ 5.82     - 45%
             
Non-GAAP(1)
    September 2018   June 2018   Change Q/Q
Revenue   $ 2,330,691     $ 3,125,928     - 25%
Gross margin as percentage of revenue   46.4 %   48.0 %   - 160 bps
Operating margin as percentage of revenue   27.0 %   31.8 %   - 480 bps
Diluted EPS   $ 3.36     $ 5.31     - 37%
                     

(1) Results for September 2018 are reported under FASB Accounting Standard Codification ("ASC") 606, results for June 2018 are reported under ASC 605.

U.S. GAAP Financial Results

For the September 2018 quarter, revenue was $2,331 million, gross margin was $1,058 million, or 45.4% of revenue, operating expenses were $466 million, operating income was 25.4% of revenue, and net income was $533 million, or $3.23 per diluted share on a U.S. GAAP basis. This compares to revenue of $3,126 million, gross margin of $1,479 million, or 47.3% of revenue, operating expenses of $524 million, operating income of 30.6% of revenue, and net income of $1,021 million, or $5.82 per diluted share, for the quarter ended June 24, 2018 (the “June 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 September 2018 quarter, non-GAAP gross margin was $1,081 million or 46.4% of revenue, non-GAAP operating expenses were $451 million, non-GAAP operating margin was 27.0% of revenue, and non-GAAP net income was $555 million, or $3.36 per diluted share. This compares to non-GAAP gross margin of $1,502 million or 48.0% of revenue, non-GAAP operating expenses of $507 million, non-GAAP operating margin of 31.8% of revenue, and non-GAAP net income of $932 million, or $5.31 per diluted share for the June 2018 quarter.

“We are pleased to report September quarter results that modestly exceed expectations and forecast a stronger December quarter sequentially,” said Martin Anstice, Lam Research’s Chief Executive Officer. “More importantly, central to the Lam outperformance aspiration is our commitment to investing in innovation and close collaboration with our customers to address the technical and economic challenges of device and systems performance scaling. We remain focused on creating and capturing value for our customers in the world of emerging data economy opportunity.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $3.9 billion at the end of the September 2018 quarter compared to $5.2 billion at the end of the June 2018 quarter. This decrease was primarily the result of $1.7 billion of share repurchases, including net share settlement on employee stock-based compensation.

Deferred revenue and deferred profit at the end of the September 2018 quarter decreased to $626 million and $542 million, respectively, as compared to $994 million and $720 million, respectively, at the end of the June 2018 quarter. The deferred revenue and deferred profit at the end of September 2018 are recognized under ASC 606, while the same values as of June 2018 are recognized under ASC 605, which contributes to the change in value period over period. 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 $454 million as of September 23, 2018 and $607 million as of June 24, 2018.

Geographic Distribution

The geographic distribution of  revenue during the September 2018 quarter is shown in the following table:

Region Revenue
Japan 29%
China 25%
Korea 16%
Taiwan 12%
Southeast Asia 9%
United States 5%
Europe 4%
   

Outlook

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

  U.S. GAAP   Reconciling
Items
  Non-GAAP
Revenue $2.5 Billion +/- $150 Million     $2.5 Billion +/- $150 Million
Gross margin as a percentage of revenue 45.1% +/- 1%   $ 22   Million   46.0% +/- 1%
Operating income as a percentage of revenue 26.1% +/- 1%   $ 34   Million   27.5% +/- 1%
Net income per diluted share $3.47 +/- $0.20   $ 30   Million   $3.65 +/- $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 transactions 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 as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $22 million.
  • Operating income as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $34 million.
  • Earnings per share - amortization related to intangible assets acquired though business combinations, $34 million; amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($5 million); totaling $30 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 September 2018 and June 2018 quarters exclude amortization related to intangible assets acquired through business combinations,  amortization of note discounts, tax benefit of non-GAAP items, and estimated income tax benefits associated with U.S. tax reform. Additionally, the September 2018 quarter non-GAAP results exclude costs associated with restructuring charges. The June 2018 quarter non-GAAP results exclude acquisition and integration costs associated with a business combination and income tax benefit on the conclusion of tax matters related to a prior business combination.

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 aspirations, commitments and 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 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 24, 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)
(unaudited)
   
  Three Months Ended
  September 23,
2018
  June 24,
2018
  September 24,
2017
Revenue $ 2,330,691     $ 3,125,928     $ 2,478,140  
Cost of goods sold 1,272,493     1,646,520     1,328,797  
Gross margin 1,058,198     1,479,408     1,149,343  
Gross margin as a percent of revenue 45.4 %   47.3 %   46.4 %
Research and development 291,672     327,713     275,078  
Selling, general and administrative 174,775     196,500     181,043  
Total operating expenses 466,447     524,213     456,121  
Operating income 591,751     955,195     693,222  
Operating income as a percent of revenue 25.4 %   30.6 %   28.0 %
Other (expense) income, net (377 )   2,954     (5,502 )
Income before income taxes 591,374     958,149     687,720  
Income tax (expense) benefit (58,014 )   62,997     (97,030 )
Net income $ 533,360     $ 1,021,146     $ 590,690  
Net income per share:          
Basic $ 3.43     $ 6.35     $ 3.64  
Diluted $ 3.23     $ 5.82     $ 3.21  
Number of shares used in per share calculations:          
Basic 155,658     160,916     162,141  
Diluted 165,327     175,432     183,880  
Cash dividend declared per common share $ 1.10     $ 1.10     $ 0.45  
                       


 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
           
  September 23,
 2018
  June 24,
2018
  September 24,
 2017
  (unaudited)   (1)   (unaudited)
ASSETS          
Cash and cash equivalents $ 2,568,085     $ 4,512,257     $ 2,406,462  
Investments 1,050,863     437,338     3,775,925  
Accounts receivable, net 1,846,845     2,176,936     1,530,762  
Inventories 1,874,194     1,876,162     1,328,297  
Other current assets 175,886     147,218     187,334  
Total current assets 7,515,873     9,149,911     9,228,780  
Property and equipment, net 951,376     902,547     745,600  
Restricted cash and investments 255,924     256,301     256,045  
Goodwill and intangible assets 1,767,562     1,802,740     1,904,389  
Other assets 466,842     367,979     263,812  
Total assets $ 10,957,577     $ 12,479,478     $ 12,398,626  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current portion of convertible notes and capital leases $ 550,369     $ 610,030     $ 639,907  
Other current liabilities 2,274,596     2,540,278     2,148,724  
Total current liabilities 2,824,965     3,150,308     2,788,631  
Long-term debt and capital leases 1,805,091     1,806,562     1,793,477  
Income taxes payable 845,740     851,936     129,611  
Other long-term liabilities 100,144     90,629     278,733  
Total liabilities 5,575,940     5,899,435     4,990,452  
Temporary equity, convertible notes 58,812     78,192     136,996  
Stockholders’ equity (2) 5,322,825     6,501,851     7,271,178  
Total liabilities and stockholders’ equity $ 10,957,577     $ 12,479,478     $ 12,398,626  
                       
(1) Derived from audited financial statements.
(2) Common shares issued and outstanding were 153,384 as of September 23, 2018, 156,892 as of June 24, 2018, and 162,144 as of September 24, 2017.
 


 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands,  unaudited)
   
  Three Months Ended
  September 23,
2018
  June 24,
2018
  September 24,
2017
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income $ 533,360     $ 1,021,146     $ 590,690  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization 79,805     85,119     79,142  
Deferred income taxes (83,501 )   212,260     43,204  
Equity-based compensation expense 50,343     47,214     41,783  
Amortization of note discounts and issuance costs 1,245     959     4,588  
Other, net 2,191     10,391     6,569  
Changes in operating assets and liabilities 136,843     (658,731 )   92,330  
Net cash provided by operating activities 720,286     718,358     858,306  
CASH FLOWS FROM INVESTING ACTIVITIES:          
Capital expenditures and intangible assets (56,098 )   (79,655 )   (60,064 )
Business acquisition, net of cash acquired         (115,613 )
Net (purchase) sale of available-for-sale securities (612,583 )   1,341,475     (117,774 )
Other, net (3,650 )   (826 )   (10,600 )
Net cash (used for) provided by investing activities (672,331 )   1,260,994     (304,051 )
CASH FLOWS FROM FINANCING ACTIVITIES:          
Principal payments on debt (79,831 )   (178,279 )   (301,727 )
Net repayments from issuance of commercial paper (86 )   (638,367 )    
Treasury stock purchases (1,735,895 )   (1,306,309 )   (155,385 )
Dividends paid (174,372 )   (82,005 )   (72,738 )
Reissuance of treasury stock related to employee stock purchase plan     41,567      
Proceeds from issuance of common stock     2,626     1,042  
Other, net (9 )   (2 )   4  
Net cash used for financing activities (1,990,193 )   (2,160,769 )   (528,804 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (2,311 )   (5,607 )   3,317  
Net (decrease) increase in cash, cash equivalents, and restricted cash (1,944,549 )   (187,024 )   28,768  
Cash, cash equivalents, and restricted cash at beginning of period 4,768,558     4,955,582     2,633,739  
Cash, cash equivalents, and restricted cash at end of period $ 2,824,009     $ 4,768,558     $ 2,662,507  
                       


 
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
   
  Three Months Ended
  September 23,
 2018
  June 24,
2018
Revenue $ 2,330,691     $ 3,125,928  
Gross margin $ 1,080,540     $ 1,501,750  
Gross margin as percentage of revenue 46.4 %   48.0 %
Operating expenses $ 450,540     $ 507,416  
Operating income $ 630,000     $ 994,334  
Operating income as a percentage of revenue 27.0 %   31.8 %
Net income $ 555,460     $ 931,956  
Net income per diluted share $ 3.36     $ 5.31  
Shares used in per share calculation - diluted 165,327     175,432  
           


 
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)
   
  Three Months Ended
  September 23,
2018
  June 24,
2018
U.S. GAAP net income $ 533,360     $ 1,021,146  
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 12,490     16,069  
Restructuring charges - selling, general and administrative 3,417      
Business combination acquisition and integration related costs - selling, general and administrative     728  
Amortization of note discounts - other expense, net 900     1,851  
Net income tax benefit on non-GAAP items (5,838 )   (4,686 )
Income tax benefit on the conclusion of certain tax matters     (9,656 )
Income tax benefit associated with U.S. tax reform (11,211 )   (115,838 )
Non-GAAP net income $ 555,460     $ 931,956  
Non-GAAP net income per diluted share $ 3.36     $ 5.31  
GAAP net income per diluted share $ 3.23     $ 5.82  
U.S. GAAP number of shares used for per diluted share calculation 165,327     175,432  
           


 
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
  September 23,
2018
  June 24,
2018
U.S. GAAP gross margin $ 1,058,198     $ 1,479,408  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations 22,342     22,342  
Non-GAAP gross margin $ 1,080,540     $ 1,501,750  
U.S. GAAP gross margin as a percentage of revenue 45.4 %   47.3 %
Non-GAAP gross margin as a percentage of revenue 46.4 %   48.0 %
U.S. GAAP operating expenses $ 466,447     $ 524,213  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations (12,490 )   (16,069 )
Restructuring charges (3,417 )    
Business combination acquisition and integration related costs     (728 )
Non-GAAP operating expenses $ 450,540     $ 507,416  
Non-GAAP operating income $ 630,000     $ 994,334  
U.S. GAAP operating income as percent of revenue 25.4 %   30.6 %
Non-GAAP operating income as a percent of revenue 27.0 %   31.8 %
           

Lam Research Corporation Contacts:

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

Lam_Research_logo_color.jpg

Source: Lam Research Corporation

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