10-QPeriod: Q2 FY2018

LAM RESEARCH CORP Quarterly Report for Q2 Ended Dec 24, 2017

Filed January 30, 2018For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported significant revenue growth in its Q2 FY18 filing (period ending December 23, 2017), with revenue increasing 37% year-over-year to $2.58 billion. This surge was primarily driven by increased investments from memory customers, reflecting strong demand in the semiconductor industry. Despite the revenue growth, the company reported a net loss of $9.96 million for the quarter, primarily due to a significant one-time provisional charge related to the recently enacted U.S. Tax Cuts and Jobs Act. Excluding this tax impact, operational performance remained strong, with gross margin improving to 46.7% and operating income showing substantial year-over-year growth. For the first six months of fiscal year 2018, revenue grew 44% to $5.06 billion, and net income stood at $580.7 million. The company continued to invest in R&D and SG&A to support future growth. Lam Research also actively managed its capital structure, repurchasing shares and paying dividends, while maintaining a strong liquidity position. The company's outlook points to continued demand driven by technology inflections in the semiconductor industry.

Financial Highlights

55 data points
Beta

Revenue

$2.58B

46.7% Gross Margin

Net Income

-$9.96M

-0.4% Net Margin

EPS (Diluted)

$-0.01

Total Assets

$12.91B

Cash & Equivalents

$1.75B

Free Cash Flow

$28.70M

Financial Statements
Beta
Revenue$2.58B
Cost of Revenue$1.38B
Gross Profit$1.21B
R&D Expenses$281.31M
SG&A Expenses$186.88M
Operating Expenses$468.20M
Operating Income$737.37M
Interest Expense$23.32M
Net Income-$9.96M
EPS (Basic)$-0.01
EPS (Diluted)$-0.01
Shares Outstanding (Basic)1.61B
Shares Outstanding (Diluted)1.61B

Key Highlights

  • 1Revenue for the three months ended December 23, 2017, increased by 37% to $2.58 billion compared to the same period in the prior year, driven by strong demand from memory customers.
  • 2Net loss for the quarter was $(9.96) million, or $(0.06) per diluted share, primarily impacted by a significant provisional tax charge related to the U.S. Tax Cuts and Jobs Act.
  • 3Gross margin improved to 46.7% for the quarter, up from 45.0% in the prior year, due to a favorable customer and product mix.
  • 4Operating income saw a substantial increase of 68% year-over-year, reaching $737.4 million, indicating strong underlying operational performance before tax impacts.
  • 5For the six months ended December 23, 2017, revenue increased 44% to $5.06 billion, and net income was $580.7 million, a slight decrease from $596.6 million in the prior year, again reflecting the tax reform impact.
  • 6The company repurchased approximately $1.1 billion of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 7Lam Research generated $887 million in cash from operating activities for the six months ended December 23, 2017, indicating robust cash generation capabilities.

Frequently Asked Questions

The net loss of $9.96 million for the three months ended December 23, 2017, was primarily due to a significant one-time provisional charge of $744.2 million for income tax expense. This charge is a result of the recently enacted U.S. Tax Cuts and Jobs Act, which included a one-time transition tax on unrepatriated foreign earnings and a revaluation of deferred tax balances. Excluding this significant tax impact, the company's operating performance was strong.

Revenue growth, particularly the 37% increase year-over-year, was primarily driven by increased investments from memory customers. This reflects strong demand in the semiconductor industry, fueled by technology inflections like NVM, FinFET, and advanced packaging, which are expanding the addressable market for Lam Research's products.

Lam Research continues to actively manage its capital. During the quarter, the company repurchased approximately $1.1 billion of its common stock and paid $73 million in dividends. The company also has a strong liquidity position with $6.0 billion in cash and investments as of December 24, 2017, and has access to a $1.25 billion revolving credit facility.

The U.S. Tax Cuts and Jobs Act has a significant, immediate impact due to a one-time transition tax on unrepatriated foreign earnings, estimated at $991.3 million provisionally recorded. It also reduces the U.S. federal statutory tax rate from 35% to 21%, which will affect future tax expenses. The company has elected to pay the transition tax over eight years. The full accounting for these changes is subject to further refinement under SAB 118 during a measurement period.