Press Release

Lam Research Corporation Reports Financial Results for the Quarter Ended March 29, 2020

April 22, 2020

FREMONT, Calif., April 22, 2020 (GLOBE NEWSWIRE) -- Lam Research Corporation (the "Company," "Lam," "Lam Research") today announced financial results for the quarter ended March 29, 2020 (the “March 2020 quarter”).

Highlights for the March 2020 quarter were as follows:

  • Revenue of $2.50 billion.
  • U.S. GAAP gross margin of 46.6%, U.S. GAAP operating income as a percentage of revenue of 27.7%, and U.S. GAAP diluted EPS of $3.88.
  • Non-GAAP gross margin of 46.3%, non-GAAP operating income as a percentage of revenue of 26.9%, and non-GAAP diluted EPS of $3.98.

Key Financial Data for the Quarters Ended
March 29, 2020 and December 29, 2019
(in thousands, except per-share data, percentages, and basis points)

U.S. GAAP
    March 2020   December 2019   Change Q/Q
Revenue   $ 2,503,625     $ 2,583,501     - 3 %
Gross margin as percentage of revenue   46.6 %   45.7 %   + 90 bps  
Operating income as percentage of revenue   27.7 %   26.6 %   + 110 bps  
Diluted EPS   $ 3.88     $ 3.43     + 13 %
             
Non-GAAP
    March 2020   December 2019   Change Q/Q
Revenue   $ 2,503,625     $ 2,583,501     - 3 %
Gross margin as percentage of revenue   46.3 %   45.7 %   + 60 bps  
Operating income as percentage of revenue   26.9 %   27.1 %   - 20 bps  
Diluted EPS   $ 3.98     $ 4.01     - 1 %

U.S. GAAP Financial Results

For the March 2020 quarter, revenue was $2,504 million, gross margin was $1,167 million, or 46.6% of revenue, operating expenses were $473 million, operating income was 27.7% of revenue, and net income was $575 million, or $3.88 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,584 million, gross margin of $1,180 million, or 45.7% of revenue, operating expenses of $493 million, operating income of 26.6% of revenue, and net income of $515 million, or $3.43 per diluted share, for the quarter ended December 29, 2019 (the “December 2019 quarter”).

Non-GAAP Financial Results

For the March 2020 quarter, non-GAAP gross margin was $1,160 million, or 46.3% of revenue, non-GAAP operating expenses were $486 million, non-GAAP operating income was 26.9% of revenue, and non-GAAP net income was $590 million, or $3.98 per diluted share. This compares to non-GAAP gross margin of $1,181 million, or 45.7% of revenue, non-GAAP operating expenses of $481 million, non-GAAP operating income of 27.1% of revenue, and non-GAAP net income of $602 million, or $4.01 per diluted share, for the December 2019 quarter.

“Extraordinary efforts by Lam’s global teams helped to mitigate the operational impact of the COVID-19 pandemic, resulting in solid financial performance in the March quarter,” said Tim Archer, Lam Research’s President and Chief Executive Officer. “While there is limited visibility to near-term macroeconomic conditions and industry supply chain recovery, customer demand for our equipment remains strong. We believe in the long-term resiliency of the semiconductor industry and are focused on providing innovative technology to our customers and positioning Lam for outperformance as industry conditions normalize.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $5.6 billion at the end of the March 2020 quarter compared to $4.9 billion at the end of the December 2019 quarter. This increase was primarily the result of a $1.25 billion draw down on the Company's revolving credit facility and $541.4 million of cash generated from operating activities. These sources of cash were partially offset by $617.6 million of principal payments on debt; $245.4 million of share repurchases, including net share settlement on employee stock-based compensation; $163.5 million of dividends paid to stockholders; and $51.4 million of capital expenditures.

Revenue

The geographic distribution of revenue during the March 2020 quarter is shown in the following table:

Region Revenue
China 32%
Korea 23%
Taiwan 21%
Japan 10%
United States 9%
Europe 3%
Southeast Asia 2%

The following table presents revenue disaggregated between system and customer support-related revenue:

  Three Months Ended   Nine Months Ended
  March 29,
 2020
  March 31,
 2019
  March 29,
 2020
  March 31,
 2019
  (In thousands)
System revenue $ 1,647,560     $ 1,612,382     $ 4,759,881     $ 4,880,731  
Customer support-related revenue and other 856,065     826,666     2,492,991     2,411,681  
  $ 2,503,625     $ 2,439,048     $ 7,252,872     $ 7,292,412  

System revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.

Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from our Reliant product line.

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 March 2020 and December 2019 quarters exclude amortization related to intangible assets acquired through business combinations, amortization of note discounts, and income tax expense (benefit) of non-GAAP items. Additionally, the March 2020 quarter non-GAAP results exclude the effects of elective deferred compensation-related assets and liabilities. To enhance the comparability relative to the prior period, the Company has included reconciliation of both the originally-reported December 2019 quarter non-GAAP results, and recast December 2019 quarter non-GAAP results that conform to the current presentation with respect to the effects of elective deferred compensation-related assets and liabilities, in the reconciliation tables at the end of this press release. The March 2020 quarter non-GAAP results also exclude the income tax benefit on conclusion of certain tax matters related to a prior business combination; and the December 2019 quarter non-GAAP results exclude the cumulative income tax benefit reversal due to the Ninth Circuit decision to deny a rehearing of the Altera stock-based compensation case.

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: the impact of the COVID-19 outbreak on our operations and financial results; macroeconomic conditions; the status of the industry supply chain; customer demand for our equipment; industry conditions; the long–term resiliency of the semiconductor industry; the relevance of our technology to our customers; our positioning within the industry; and our ability to outperform. Some factors that may affect these forward-looking statements include: the severity, magnitude and duration of the COVID–19 pandemic (and the related governmental, public health, business and community responses to it), and their impacts on our business, results of operations and financial condition, are evolving and are highly uncertain and unpredictable; business, political and/or regulatory conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; the actions of our customers and competitors may be inconsistent with our expectations; and widespread outbreaks of illness may impact our operations and revenue in affected areas; 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 30, 2019, our quarterly reports on Form 10–Q for the fiscal quarters ended September 29, 2019 and December 29, 2019, and our current report of Form 8–K dated April 22, 2020. 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. 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   Nine Months Ended
  March 29,
 2020
  December 29,
2019
  March 31,
 2019
  March 29,
 2020
  March 31,
 2019
Revenue $ 2,503,625     $ 2,583,501     $ 2,439,048     $ 7,252,872     $ 7,292,412  
Cost of goods sold 1,336,618     1,403,857     1,364,711     3,924,511     4,014,844  
Gross margin 1,167,007     1,179,644     1,074,337     3,328,361     3,277,568  
Gross margin as a percent of revenue 46.6 %   45.7 %   44.0 %   45.9 %   44.9 %
Research and development 307,914     318,861     318,514     913,602     895,742  
Selling, general and administrative 164,979     174,272     190,306     496,679     534,179  
Total operating expenses 472,893     493,133     508,820     1,410,281     1,429,921  
Operating income 694,114     686,511     565,517     1,918,080     1,847,647  
Operating income as a percent of revenue 27.7 %   26.6 %   23.2 %   26.4 %   25.3 %
Other (expense) income, net (64,619 )   (13,924 )   20,532     (91,271 )   (10,494 )
Income before income taxes 629,495     672,587     586,049     1,826,809     1,837,153  
Income tax expense (54,714 )   (158,077 )   (38,659 )   (271,729 )   (187,548 )
Net income $ 574,781     $ 514,510     $ 547,390     $ 1,555,080     $ 1,649,605  
Net income per share:                  
Basic $ 3.96     $ 3.57     $ 3.62     $ 10.75     $ 10.72  
Diluted $ 3.88     $ 3.43     $ 3.47     $ 10.39     $ 10.20  
Number of shares used in per share calculations:                  
Basic 145,301     143,987     151,201     144,654     153,891  
Diluted 148,165     150,097     157,849     149,648     161,683  
Cash dividend declared per common share $ 1.15     $ 1.15     $ 1.10     $ 3.45     $ 3.30  

 LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  March 29,
 2020
  December 29,
2019
  June 30,
 2019
  (unaudited)   (unaudited)   (1)
ASSETS          
Cash and cash equivalents $ 3,961,586     $ 3,035,887     $ 3,658,219  
Investments 1,431,550     1,647,867     1,772,984  
Accounts receivable, net 2,191,070     2,030,490     1,455,522  
Inventories 1,674,740     1,528,620     1,540,140  
Prepaid expenses and other current assets 149,839     212,101     133,544  
Total current assets 9,408,785     8,454,965     8,560,409  
Property and equipment, net 1,048,619     1,047,254     1,059,077  
Restricted cash and investments 254,155     253,907     255,177  
Goodwill and intangible assets 1,666,732     1,677,940     1,701,547  
Other assets 560,344     480,056     425,123  
Total assets $ 12,938,635     $ 11,914,122     $ 12,001,333  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current portion of long-term debt and finance lease obligations $ 42,407     $ 632,292     $ 667,131  
Other current liabilities 2,063,254     1,933,209     1,704,519  
Total current liabilities 2,105,661     2,565,501     2,371,650  
Long-term debt and finance lease obligations 5,043,931     3,786,067     3,822,768  
Income taxes payable 889,287     872,778     892,790  
Other long-term liabilities 350,603     272,043     190,821  
Total liabilities 8,389,482     7,496,389     7,278,029  
Temporary equity, convertible notes 11,546     38,304     49,439  
Stockholders’ equity (2) 4,537,607     4,379,429     4,673,865  
Total liabilities and stockholders’ equity $ 12,938,635     $ 11,914,122     $ 12,001,333  


(1 ) Derived from audited financial statements.
(2 ) Common shares issued and outstanding were 145,156 as of March 29, 2020, 142,462 as of December 29, 2019, and 144,433 as of June 30, 2019.

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

  Three Months Ended   Nine Months Ended
  March 29,
 2020
  December 29,
2019
  March 31,
 2019
  March 29,
 2020
  March 31,
 2019
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income $ 574,781     $ 514,510     $ 547,390     $ 1,555,080     $ 1,649,605  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization 67,248     65,530     82,274     197,442     243,873  
Deferred income taxes     77,508     (12,401 )   74,516     (75,105 )
Equity-based compensation expense 47,414     45,725     53,240     136,044     142,389  
Amortization of note discounts and issuance costs 1,361     1,575     2,861     4,611     5,137  
Other, net 7,811     (327 )   (1,494 )   11,510     (646 )
Changes in operating assets and liabilities (157,187 )   (396,593 )   260,951     (665,800 )   330,273  
Net cash provided by operating activities 541,428     307,928     932,821     1,313,403     2,295,526  
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Capital expenditures and intangible assets (51,375 )   (62,054 )   (75,522 )   (152,685 )   (237,543 )
Net sale (purchase) of available-for-sale securities 211,159     (662,287 )   (931,380 )   339,350     (770,740 )
Other, net 9,988     (9,988 )   (1,269 )   (540 )   (5,288 )
Net cash provided by (used for) investing activities 169,772     (734,329 )   (1,008,171 )   186,125     (1,013,571 )
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Principal payments on debt (617,637 )   (17,987 )   (30,225 )   (664,589 )   (116,496 )
Net proceeds (repayments) from issuance of commercial paper         297,850         (61,754 )
Proceeds from borrowings on revolving credit facility 1,250,000             1,250,000      
Proceeds from issuance of long-term debt, net of issuance costs         2,476,720         2,476,720  
Treasury stock purchases (245,433 )   (1,005,067 )   (934,637 )   (1,328,632 )   (2,672,051 )
Dividends paid (163,510 )   (166,721 )   (171,196 )   (489,099 )   (513,475 )
Reissuance of treasury stock related to employee stock purchase plan     38,447         38,447     32,920  
Proceeds from issuance of common stock 1,714     632     5,010     6,215     5,119  
Other, net 328             328     (13,207 )
Net cash provided by (used for) financing activities 225,462     (1,150,696 )   1,643,522     (1,187,330 )   (862,224 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (10,715 )   5,055     4,128     (9,853 )   (904 )
Net increase (decrease) in cash, cash equivalents, and restricted cash 925,947     (1,572,042 )   1,572,300     302,345     418,827  
Cash, cash equivalents, and restricted cash at beginning of period 3,289,794     4,861,836     3,615,085     3,913,396     4,768,558  
Cash, cash equivalents, and restricted cash at end of period $ 4,215,741     $ 3,289,794     $ 5,187,385     $ 4,215,741     $ 5,187,385  

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

  Three Months Ended
  March 29,
 2020
  December 29,
2019
      (As Previously Presented)
Revenue $ 2,503,625     $ 2,583,501  
Gross margin $ 1,159,981     $ 1,181,271  
Gross margin as percentage of revenue 46.3 %   45.7 %
Operating expenses $ 486,494     $ 480,776  
Operating income $ 673,487     $ 700,495  
Operating income as a percentage of revenue 26.9 %   27.1 %
Net income $ 590,359     $ 601,810  
Net income per diluted share $ 3.98     $ 4.01  
Shares used in per share calculation - diluted 148,165     150,097  

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

  Three Months Ended
  March 29,
 2020
  December 29,
2019
  December 29,
2019
      (As Previously Presented)   (As Adjusted)
U.S. GAAP net income $ 574,781     $ 514,510     $ 514,510  
Pre-tax non-GAAP items:          
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold 1,627     1,627     1,627  
(Gain) loss on elective deferred compensation ("EDC") - related liability - cost of goods sold (8,653 )       3,587  
(Gain) loss on EDC - related liability - research and development (15,575 )       6,456  
Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative 12,357     12,357     12,357  
(Gain) loss on EDC - related liability - selling, general and administrative (10,383 )       4,304  
Amortization of note discounts - other expense, net 953     1,158     1,158  
Loss (gain) on EDC - related asset - other expense, net 33,828         (14,129 )
Net income tax expense (benefit) on non-GAAP items 1,700     (2,358 )   (4,029 )
Income tax benefit on the conclusion of certain tax matters (276 )        
Cumulative income tax benefit reversal due to a court ruling     74,516     74,516  
Non-GAAP net income $ 590,359     $ 601,810     $ 600,357  
Non-GAAP net income per diluted share $ 3.98     $ 4.01     $ 4.00  
U.S. GAAP net income per diluted share $ 3.88     $ 3.43     $ 3.43  
U.S. GAAP and non-GAAP number of shares used for per diluted share calculation 148,165     150,097     150,097  

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
  March 29,
 2020
  December 29,
2019
  December 29,
2019
      (As Previously Presented)   (As Adjusted)
U.S. GAAP gross margin $ 1,167,007     $ 1,179,644     1,179,644  
Pre-tax non-GAAP items:          
Amortization related to intangible assets acquired through certain business combinations 1,627     1,627     1,627  
(Gain) loss on EDC-related liability (8,653 )       3,587  
Non-GAAP gross margin $ 1,159,981     $ 1,181,271     $ 1,184,858  
U.S. GAAP gross margin as a percentage of revenue 46.6 %   45.7 %   45.7 %
Non-GAAP gross margin as a percentage of revenue 46.3 %   45.7 %   45.9 %
U.S. GAAP operating expenses $ 472,893     $ 493,133     $ 493,133  
Pre-tax non-GAAP items:          
Amortization related to intangible assets acquired through certain business combinations (12,357 )   (12,357 )   (12,357 )
Gain (loss) on EDC-related liability 25,958         (10,760 )
Non-GAAP operating expenses $ 486,494     $ 480,776     $ 470,016  
U.S. GAAP operating income $ 694,114     $ 686,511     $ 686,511  
Non-GAAP operating income $ 673,487     $ 700,495     $ 714,842  
U.S. GAAP operating income as percent of revenue 27.7 %   26.6 %   26.6 %
Non-GAAP operating income as a percent of revenue 26.9 %   27.1 %   27.7 %

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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