10-QPeriod: Q2 FY2019

LAM RESEARCH CORP Quarterly Report for Q2 Ended Dec 23, 2018

Filed January 30, 2019For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported its financial results for the quarter ended December 23, 2018. Revenue for the quarter was $2.52 billion, a slight decrease of 2% compared to the same period last year, and a 8% increase sequentially from the prior quarter. Net income for the quarter was $568.9 million, or $3.51 per diluted share, a significant improvement from a net loss in the prior year's comparable quarter, largely influenced by the adoption of new tax regulations. Gross margin remained strong at 45.4%, consistent with the previous quarter but slightly down from 46.7% in the prior year, attributed to lower factory utilization and shifts in product mix. Research and development spending continued at a high level, reflecting the company's commitment to innovation in semiconductor manufacturing technology. The company maintained a solid cash position, ending the quarter with $3.9 billion in total cash and investments, despite significant share repurchases and dividend payments during the period.

Financial Highlights

56 data points
Beta

Revenue

$2.52B

45.4% Gross Margin

Net Income

$568.86M

22.5% Net Margin

EPS (Diluted)

$0.35

Total Assets

$10.77B

Cash & Equivalents

$3.36B

Free Cash Flow

$642.42M

Financial Statements
Beta
Revenue$2.52B
Cost of Revenue$1.38B
Gross Profit$1.15B
R&D Expenses$285.56M
SG&A Expenses$169.10M
Operating Expenses$454.65M
Operating Income$690.38M
Interest Expense$19.78M
Net Income$568.86M
EPS (Basic)$0.37
EPS (Diluted)$0.35
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.62B

Key Highlights

  • 1Revenue of $2.52 billion for the quarter ended December 23, 2018, a slight year-over-year decrease but an 8% sequential increase.
  • 2Net income of $568.9 million, or $3.51 per diluted share, showing a strong recovery from the prior year's comparable quarter loss.
  • 3Gross margin of 45.4%, stable quarter-over-quarter but down from 46.7% year-over-year, impacted by factory utilization and product mix.
  • 4Continued robust investment in R&D, representing 11.3% of revenue, to drive innovation in semiconductor manufacturing equipment.
  • 5Ending cash and investments balance of $3.9 billion, demonstrating strong liquidity despite significant capital allocation towards share repurchases ($1.7 billion) and dividends ($0.34 billion) in the six-month period.
  • 6Adoption of ASC 606 for revenue recognition led to a cumulative-effect adjustment increasing retained earnings by $139.4 million.
  • 7Finalization of accounting for U.S. tax reform impacts, including a $51.2 million tax benefit related to the one-time transition tax adjustment.

Frequently Asked Questions

For the quarter ended December 23, 2018, Lam Research reported revenue of $2.52 billion, which was a 2% decrease compared to $2.58 billion in the same quarter of the prior year. However, revenue increased by 8% sequentially from $2.33 billion in the prior quarter (ended September 23, 2018).

The significant year-over-year improvement in net income, from a loss of $9.9 million in the prior year's quarter to a profit of $568.9 million in the current quarter, was influenced by the finalization of accounting for U.S. tax reform impacts. This included a $51.2 million tax benefit related to the one-time transition tax adjustment and the lower U.S. federal statutory tax rate.

Lam Research maintained a strong liquidity position with $3.9 billion in total cash and investments as of December 23, 2018. During the six-month period, the company significantly utilized its cash for share repurchases totaling $1.7 billion and paid $342.3 million in dividends. The company expects its current cash flows and reserves to be sufficient to support its operations, investments, and debt service requirements for at least the next 12 months. Additionally, the company's Board authorized an additional $5.0 billion share repurchase program in November 2018.

Lam Research adopted ASC 606, 'Revenue from Contracts with Customers,' effective June 25, 2018. The adoption resulted in a cumulative-effect adjustment to retained earnings of $139.4 million, primarily due to changes in the timing of revenue recognition for system sales. For the quarter ended December 23, 2018, ASC 606 led to an $116.9 million increase in revenue and a $53.1 million increase in cost of goods sold compared to the 'without adoption' basis.