10-QPeriod: Q2 FY2014

LAM RESEARCH CORP Quarterly Report for Q2 Ended Dec 29, 2013

Filed February 6, 2014For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported a significant turnaround in its financial performance for the quarter ended December 29, 2013. Revenue increased by 30% year-over-year to $1.116 billion, driven by a substantial rise in customer demand, particularly in the memory market. This revenue growth, coupled with a more favorable business mix and manufacturing efficiencies, led to a substantial improvement in gross margin, which rose to 43.7% from 36.6% in the prior year's comparable quarter. Consequently, net income surged to $149 million, or $0.87 per diluted share, a dramatic increase from a net income of $6.4 million, or $0.04 per diluted share, in the prior year period. The company ended the quarter with a strong balance sheet, boasting over $2.7 billion in total cash and investments, providing ample liquidity. Operating activities generated robust cash flow, supporting share repurchases and capital expenditures. While the semiconductor capital equipment industry remains cyclical, the strong performance in this quarter suggests a positive trend and recovery in customer spending.

Financial Highlights

54 data points
Beta

Revenue

$1.12B

43.7% Gross Margin

Net Income

$148.99M

13.3% Net Margin

EPS (Diluted)

$0.09

Total Assets

$7.56B

Cash & Equivalents

$1.13B

Free Cash Flow

$129.02M

Financial Statements
Beta
Revenue$1.12B
Cost of Revenue$628.27M
Gross Profit$487.79M
R&D Expenses$174.48M
SG&A Expenses$148.84M
Operating Expenses$323.31M
Operating Income$164.47M
Interest Expense$15.30M
Net Income$148.99M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)1.62B
Shares Outstanding (Diluted)1.72B

Key Highlights

  • 1Revenue increased 30% year-over-year to $1.116 billion, reflecting strong customer demand.
  • 2Gross margin improved significantly to 43.7% from 36.6% in the prior year's quarter, driven by better business mix and operational efficiencies.
  • 3Net income surged to $149 million ($0.87 per diluted share), a substantial improvement from $6.4 million ($0.04 per diluted share) in the prior year.
  • 4The company ended the quarter with a strong liquidity position, holding over $2.7 billion in cash and investments.
  • 5Shipments increased by 42% year-over-year, with a notable shift towards the memory market (64% of shipments) compared to the prior year (20%).
  • 6Operating expenses remained relatively stable year-over-year, demonstrating effective cost management.
  • 7The company continued its share repurchase program, buying back $48 million in the quarter.

Frequently Asked Questions

The primary driver was a significant increase in customer demand, particularly within the memory market, which led to a 30% year-over-year increase in revenue. This was further bolstered by a more favorable business mix and manufacturing efficiencies, which improved gross margins.

There has been a significant shift towards the memory market, which represented 64% of shipments in the quarter, up from 20% in the prior year's comparable quarter. This shift, along with increased foundry business, has contributed to the overall revenue growth and a more favorable product mix.

Lam Research maintained a strong liquidity position with over $2.7 billion in cash, cash equivalents, and short-term investments as of December 29, 2013. Operating activities generated robust cash flow, which was used to fund capital expenditures and share repurchases, demonstrating effective cash management.

The company has convertible senior notes outstanding (2016, 2018, and 2041). The 2041 Notes had an 'if-converted' value exceeding their principal amount, making them potentially dilutive. The company also utilizes convertible note hedges and warrants to mitigate potential dilution from these notes.