Press Release

Lam Research Corporation Reports Financial Results for the Quarter Ended June 30, 2019

July 31, 2019

FREMONT, Calif., July 31, 2019 (GLOBE NEWSWIRE) -- Lam Research Corporation (the “Company,” “Lam,” “Lam Research”) today announced financial results for the quarter ended June 30, 2019 (the “June 2019 quarter”).

Highlights for the June 2019 quarter were as follows:

  • Revenue of $2.36 billion.

  • U.S. GAAP gross margin of 45.8%, U.S. GAAP operating income as a percentage of revenue of 26.1%, and U.S. GAAP diluted EPS of $3.51.

  • Non-GAAP gross margin of 45.9%, non-GAAP operating income as a percentage of revenue of 26.9%, and non-GAAP diluted EPS of $3.62.

Key Financial Data for the Quarters Ended
 June 30, 2019 and March 31, 2019
(in thousands, except per-share data, percentages, and basis points)

U.S. GAAP
  June 2019   March 2019   Change Q/Q
Revenue $ 2,361,147     $ 2,439,048     -3 %
Gross margin as percentage of revenue 45.8 %   44.0 %   + 180 bps
Operating income as percentage of revenue 26.1 %   23.2 %   + 290 bps
Diluted EPS $ 3.51     $ 3.47     +1 %
 
Non-GAAP
  June 2019   March 2019   Change Q/Q
Revenue $ 2,361,147     $ 2,439,048     -3 %
Gross margin as percentage of revenue 45.9 %   45.1 %   + 80 bps
Operating income as percentage of revenue 26.9 %   25.1 %   + 180 bps
Diluted EPS $ 3.62     $ 3.70     -2 %

U.S. GAAP Financial Results

For the June 2019 quarter, revenue was $2,361 million, gross margin was $1,081 million, or 45.8% of revenue, operating expenses were $464 million, operating income was 26.1% of revenue, and net income was $542 million, or $3.51 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,439 million, gross margin of $1,074 million, or 44.0% of revenue, operating expenses of $509 million, operating income of 23.2% of revenue, and net income of $547 million, or $3.47 per diluted share, for the quarter ended March 31, 2019 (the “March 2019 quarter”). The June 2019 quarter includes 13 weeks; the March 2019 quarter includes 14 weeks.

Non-GAAP Financial Results

For the June 2019 quarter, non-GAAP gross margin was $1,085 million or 45.9% of revenue, non-GAAP operating expenses were $450 million, non-GAAP operating income was 26.9% of revenue, and non-GAAP net income was $559 million, or $3.62 per diluted share. This compares to non-GAAP gross margin of $1,100 million or 45.1% of revenue, non-GAAP operating expenses of $488 million, non-GAAP operating income of 25.1% of revenue, and non-GAAP net income of $584 million, or $3.70 per diluted share for the March 2019 quarter.

“Lam’s June quarter results reflect our strong track record of execution,” said Timothy Archer, Lam Research’s President and Chief Executive Officer. “We are making solid progress on our innovation roadmap, and with multiple technology inflections ahead of us, Lam is in an excellent position to win.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $5.7 billion at the end of the June 2019 quarter compared to $6.4 billion at the end of the March 2019 quarter. This decrease was primarily the result of $1.1 billion of share repurchases, including net share settlement on employee stock-based compensation, combined with $300 million of debt reductions and $165 million of dividends paid to shareholders, partially offset by $880 million of cash generated in operating activities.

Deferred revenue at the end of the June 2019 quarter increased to $449 million as compared to $441 million at the end of the March 2019 quarter. Deferred profit at the end of the June 2019 quarter increased slightly to $381 million as compared to $378 million at the end of the March 2019 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 $78 million as of June 30, 2019 and $80 million as of March 31, 2019.

Geographic Distribution

The geographic distribution of revenue during the June 2019 quarter is shown in the following table:

Region Revenue
China 33 %
Korea 25 %
Taiwan 14 %
United States 11 %
Japan 9 %
Southeast Asia 5 %
Europe 3 %

Outlook

For the September 2019 quarter, Lam is providing the following guidance:

      Reconciling    
  U.S. GAAP   Items   Non-GAAP
Revenue $2.15 Billion +/-  $150 Million     $2.15 Billion +/-  $150 Million
Gross margin as a percentage of revenue  44.9% +/-  1%   $ 2   Million    45.0% +/-  1%
Operating income as a percentage of revenue  23.8% +/-  1%   $ 14   Million    24.5% +/-  1%
Net income per diluted share $2.91 +/- $0.20   $ 13   Million   $3.00 +/- $0.20
Diluted share count 150 Million     150 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, restructuring, balance sheet valuation adjustments, financing arrangements, other investments, 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 as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $2 million.

  • Operating income as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $14 million.

  • Earnings per share - amortization related to intangible assets acquired through business combinations, $14 million; amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items $(2) million; totaling $13 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 2019 and March 2019 quarters exclude amortization related to intangible assets acquired through business combinations, restructuring charges, amortization of note discounts, income 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 2019 quarter non-GAAP results exclude income tax impacts associated with U.S. tax reform.

Management uses non-GAAP gross margin, operating expense, operating income, operating income as a percentage of revenue, 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: our focus on customer needs; our investments to extend differentiation in our products and services; the estimated future revenue from shipments to customers in Japan; the timing and amount of revenue and profit earned from any booked deferred revenue and profit; market trends and semiconductor demand; technology inflections; our technology leadership; our installed base growth; our positioning as market conditions change; technology demand trends; the legal and business factors that may affect our future tax rate; our engineering capabilities; our commitment to customer success; our continued ability to achieve and accelerate innovation and enhance device performance; our positioning relative to future technology inflections and our probability of winning; and our guidance for revenue, gross margin (both as a dollar value and a percentage of revenue), operating income (both as a dollar value and a percentage of revenue), net income or earnings per diluted share, 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 and our quarterly reports on Form 10-Q for the fiscal quarters ended September 23, 2018, December 23, 2018 and March 31, 2019. 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 Corporation. 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. 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 30,   March 31,   June 24,   June 30,   June 24,
  2019   2019   2018   2019   2018
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)
Revenue $ 2,361,147     $ 2,439,048     $ 3,125,928     $ 9,653,559     $ 11,076,998  
Cost of goods sold 1,280,256     1,364,711     1,646,520     5,295,100     5,911,966  
Gross margin 1,080,891     1,074,337     1,479,408     4,358,459     5,165,032  
Gross margin as a percent of revenue 45.8 %   44.0 %   47.3 %   45.1 %   46.6 %
Research and development 295,578     318,514     327,713     1,191,320     1,189,514  
Selling, general and administrative 168,228     190,306     196,500     702,407     762,219  
Total operating expenses 463,806     508,820     524,213     1,893,727     1,951,733  
Operating income 617,085     565,517     955,195     2,464,732     3,213,299  
Operating income as a percent of revenue 26.1 %   23.2 %   30.6 %   25.5 %   29.0 %
Other (expense) income, net (7,667 )   20,532     2,954     (18,161 )   (61,510 )
Income before income taxes 609,418     586,049     958,149     2,446,571     3,151,789  
Income tax (expense) benefit (67,593 )   (38,659 )   62,997     (255,141 )   (771,108 )
Net income $ 541,825     $ 547,390     $ 1,021,146     $ 2,191,430     $ 2,380,681  
Net income per share:                  
Basic $ 3.66     $ 3.62     $ 6.35     $ 14.37     $ 14.73  
Diluted $ 3.51     $ 3.47     $ 5.82     $ 13.70     $ 13.17  
Number of shares used in per share calculations:                  
Basic 148,131     151,201     160,916     152,478     161,643  
Diluted 154,474     157,849     175,432     159,915     180,782  
Cash dividend declared per common share $ 1.10     $ 1.10     $ 1.10     $ 4.40     $ 2.55  
 
(1) Derived from audited financial statements.
 

LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  June 30,   March 31,   June 24,
  2019   2019   2018
  (unaudited)   (unaudited)   (1)
ASSETS          
Cash and cash equivalents $ 3,658,219     $ 4,931,611     $ 4,512,257  
Investments 1,772,984     1,209,315     437,338  
Accounts receivable, net 1,455,522     1,522,273     2,176,936  
Inventories 1,540,140     1,622,242     1,876,162  
Other current assets 133,544     156,800     147,218  
Total current assets 8,560,409     9,442,241     9,149,911  
Property and equipment, net 1,059,077     1,040,329     902,547  
Restricted cash and investments 255,177     255,774     256,301  
Goodwill and intangible assets 1,701,547     1,707,930     1,802,740  
Other assets 425,123     448,988     367,979  
Total assets $ 12,001,333     $ 12,895,262     $ 12,479,478  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current portion of convertible debt and capital leases $ 667,131     $ 964,107     $ 610,030  
Other current liabilities 1,704,519     1,841,521     2,540,278  
Total current liabilities 2,371,650     2,805,628     3,150,308  
Long-term debt and capital leases 3,822,768     3,801,514     1,806,562  
Income taxes payable 892,790     863,155     851,936  
Other long-term liabilities 190,821     83,986     90,629  
Total liabilities 7,278,029     7,554,283     5,899,435  
Temporary equity, convertible notes 49,439     49,783     78,192  
Stockholders’ equity (2) 4,673,865     5,291,196     6,501,851  
Total liabilities and stockholders’ equity $ 12,001,333     $ 12,895,262     $ 12,479,478  
           
(1) Derived from audited financial statements. 
(2) Common shares issued and outstanding were 144,433 as of June 30, 2019, 149,886 as of March 31, 2019 and 156,892 as of June 24, 2018.
 

LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

  Three Months Ended   Twelve Months Ended
  June 30,   March 31,   June 24,   June 30,   June 24,
  2019   2019   2018   2019   2018
  (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income $ 541,825     $ 547,390     $ 1,021,146     $ 2,191,430     $ 2,380,681  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization 65,408     82,274     85,119     309,281     326,395  
Deferred income taxes 70,125     (12,401 )   212,260     (4,980 )   3,046  
Equity-based compensation expense 44,845     53,240     47,214     187,234     172,216  
Impairment of  investment                 42,456  
Amortization of note discounts and issuance costs 2,206     2,861     959     7,343     14,428  
Other, net (5,173 )   (1,494 )   10,391     (5,819 )   33,718  
Changes in operating assets and liabilities 161,251     260,951     (658,731 )   491,524     (317,193 )
Net cash provided by operating activities 880,487     932,821     718,358     3,176,013     2,655,747  
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Capital expenditures and intangible assets (65,948 )   (75,522 )   (79,655 )   (303,491 )   (273,469 )
Business acquisitions, net of cash acquired                 (115,697 )
Net (purchase) sale of available-for-sale securities (555,468 )   (931,380 )   1,341,475     (1,326,208 )   3,152,886  
Other, net (2,067 )   (1,269 )   (826 )   (7,355 )   (15,184 )
Net cash (used for) provided by investing activities (623,483 )   (1,008,171 )   1,260,994     (1,637,054 )   2,748,536  
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs (1,157 )   (30,225 )   (178,279 )   (117,653 )   (755,694 )
Proceeds from issuance of long-term debt, net of issuance costs     2,476,720         2,476,720      
Net (repayment) proceeds from commercial paper (300,000 )   297,850     (638,367 )   (361,754 )   359,604  
Proceeds from borrowings on revolving credit facility                 750,000  
Repayments of borrowings on revolving credit facility                 (750,000 )
Treasury stock purchases (1,108,560 )   (934,637 )   (1,306,309 )   (3,780,611 )   (2,653,249 )
Dividends paid (164,874 )   (171,196 )   (82,005 )   (678,348 )   (307,609 )
Re-issuance of treasury stock related to employee stock purchase plan 45,041         41,567     77,961     75,624  
Proceeds from issuance of common stock 1,694     5,010     2,626     6,813     9,258  
Other, net         (2 )   (13,208 )   9  
Net cash (used for) provided by financing activities (1,527,856 )   1,643,522     (2,160,769 )   (2,390,080 )   (3,272,057 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (3,137 )   4,128     (5,607 )   (4,041 )   2,593  
Net (decrease) increase in cash, cash equivalents, and restricted cash (1,273,989 )   1,572,300     (187,024 )   (855,162 )   2,134,819  
Cash, cash equivalents, and restricted cash at beginning of period 5,187,385     3,615,085     4,955,582     4,768,558     2,633,739  
Cash, cash equivalents, and restricted cash at end of period $ 3,913,396     $ 5,187,385     $ 4,768,558     $ 3,913,396     $ 4,768,558  
                   
(1) Derived from audited financial statements.                  
                   

Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)

  Three Months Ended
  June 30,   March 31,
  2019   2019
Revenue $ 2,361,147     $ 2,439,048  
Gross margin $ 1,084,881     $ 1,099,550  
Gross margin as percentage of revenue 45.9 %   45.1 %
Operating expenses $ 450,161     $ 488,389  
Operating income $ 634,720     $ 611,161  
Operating income as a percentage of revenue 26.9 %   25.1 %
Net income $ 558,832     $ 584,350  
Net income per diluted share $ 3.62     $ 3.70  
Shares used in per share calculation - diluted 154,474     157,849  
           

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)

  Three Months Ended
  June 30,   March 31,
  2019   2019
U.S. GAAP net income $ 541,825     $ 547,390  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold 3,389     22,342  
Restructuring charges - cost of goods sold 601     2,871  
Restructuring charges - research and development 206     4,698  
Amortization related to intangible assets acquired through certain business combinations -selling, general and administrative 12,357     12,446  
Restructuring charges - selling, general and administrative 1,082     3,287  
Amortization of note discounts - other expense, net 1,195     956  
Net income tax benefit on non-GAAP items (3,104 )   (6,718 )
Income tax benefit on conclusion of certain tax matters (172 )   (2,922 )
Income tax expense associated with U.S. tax reform 1,453      
Non-GAAP net income $ 558,832     $ 584,350  
Non-GAAP net income per diluted share $ 3.62     $ 3.70  
U.S. GAAP net income per diluted share $ 3.51     $ 3.47  
U.S. GAAP number of shares used for per diluted share calculation 154,474     157,849  
           

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 30,   March 31,
  2019   2019
U.S. GAAP gross margin $ 1,080,891     $ 1,074,337  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations 3,389     22,342  
Restructuring charges 601     2,871  
Non-GAAP gross margin $ 1,084,881     $ 1,099,550  
U.S. GAAP gross margin as a percentage of revenue 45.8 %   44.0 %
Non-GAAP gross margin as a percentage of revenue 45.9 %   45.1 %
U.S. GAAP operating expenses $ 463,806     $ 508,820  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations (12,357 )   (12,446 )
Restructuring charges (1,288 )   (7,985 )
Non-GAAP operating expenses $ 450,161     $ 488,389  
U.S. GAAP operating income $ 617,085     $ 565,517  
Non-GAAP operating income $ 634,720     $ 611,161  
U.S. GAAP operating income as percent of revenue 26.1 %   23.2 %
Non-GAAP operating income as a percent of revenue 26.9 %   25.1 %
           

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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