10-QPeriod: Q1 FY2019

LAM RESEARCH CORP Quarterly Report for Q1 Ended Sep 23, 2018

Filed October 23, 2018For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported its quarterly results for the period ending September 23, 2018, showing a year-over-year decrease in revenue and net income. Revenue for the three months ended September 23, 2018, was $2.33 billion, down from $2.48 billion in the same period of the prior year. Net income also declined to $533.4 million, compared to $590.7 million in the prior year's quarter. Diluted earnings per share were $3.23, a slight increase from $3.21 in the prior year, though this was influenced by a lower share count due to significant share repurchases. The company's gross margin percentage saw a decrease both sequentially and year-over-year, primarily attributed to lower factory utilization and shifts in customer and product mix. Research and development expenses increased year-over-year, reflecting higher headcount and investments in leading-edge technologies, while selling, general, and administrative expenses saw a decrease. The company's cash and investments position decreased significantly due to substantial share repurchases and dividend payments, partially offset by cash generated from operations.

Financial Highlights

56 data points
Beta

Revenue

$2.33B

45.4% Gross Margin

Net Income

$533.36M

22.9% Net Margin

EPS (Diluted)

$0.32

Total Assets

$10.96B

Cash & Equivalents

$2.57B

Free Cash Flow

$720.29M

Financial Statements
Beta
Revenue$2.33B
Cost of Revenue$1.27B
Gross Profit$1.06B
R&D Expenses$291.67M
SG&A Expenses$174.78M
Operating Expenses$466.45M
Operating Income$591.75M
Interest Expense$21.79M
Net Income$533.36M
EPS (Basic)$0.34
EPS (Diluted)$0.32
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.65B

Key Highlights

  • 1Revenue for the quarter was $2.33 billion, a decrease of 6% compared to the prior year's quarter ($2.48 billion).
  • 2Net income decreased to $533.4 million from $590.7 million in the prior year's quarter.
  • 3Diluted EPS was $3.23, a slight increase from $3.21 in the prior year, reflecting a lower share count due to share repurchases.
  • 4Gross margin percentage declined to 45.4% from 46.4% in the prior year's quarter, driven by lower factory utilization.
  • 5The company repurchased approximately $1.73 billion of its common stock during the quarter, significantly impacting its cash and investments.
  • 6Revenue from the Memory market represented 77% of system revenues for the quarter, highlighting a concentration in this segment.
  • 7The company adopted ASC 606 (Revenue from Contracts with Customers) during the period, which impacted revenue recognition timing and resulted in a cumulative adjustment to retained earnings.

Frequently Asked Questions

Revenue decreased primarily due to lower customer demand for semiconductor equipment, as reflected in the 6% year-over-year decline in revenue. This was influenced by general market conditions and specific customer order timing.

The gross margin percentage declined due to lower factory utilization, which spreads fixed costs over fewer units, and changes in the customer and product mix. This means the company sold a different combination of products or sold to different customer segments, impacting the overall profitability of sales.

The adoption of ASC 606, 'Revenue from Contracts with Customers,' impacted the timing of revenue recognition. This resulted in a cumulative $139.4 million increase to retained earnings as of the adoption date (June 25, 2018) and recognized $248.3 million more revenue and $105.6 million more cost of goods sold in the current quarter compared to the 'without adoption' scenario, primarily due to changes in how system sales revenue is recognized.

Lam Research actively repurchased its common stock during the quarter, spending approximately $1.73 billion. This significantly reduced the number of outstanding shares, positively impacting diluted earnings per share, and also decreased the company's cash and investments balance considerably.