10-QPeriod: Q2 FY2020

LAM RESEARCH CORP Quarterly Report for Q2 Ended Dec 29, 2019

Filed February 4, 2020For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported its financial results for the quarter ending December 29, 2019. Revenue for the quarter was $2.58 billion, a slight increase of 2% year-over-year, but a significant 19% increase from the prior quarter. This growth was primarily driven by increased investments from foundry customers. Net income for the quarter was $514.5 million, resulting in diluted earnings per share of $3.43. While net income and EPS were down year-over-year, the sequential improvement indicates a recovery in customer demand. The company maintained a strong gross margin of 45.7%, slightly improved from the previous quarter, benefiting from higher factory utilization. Operating expenses increased sequentially and year-over-year, largely due to higher employee-related costs and R&D spending. Lam Research continues to invest heavily in research and development to maintain its leadership in wafer fabrication equipment, particularly in areas critical for next-generation semiconductor devices. The company also highlighted its ongoing commitment to returning capital to shareholders through share repurchases and dividends, though cash and cash equivalents decreased due to these activities and capital expenditures.

Financial Highlights

54 data points
Beta

Revenue

$2.58B

45.7% Gross Margin

Net Income

$514.51M

19.9% Net Margin

EPS (Diluted)

$0.34

Total Assets

$11.91B

Cash & Equivalents

$3.04B

Free Cash Flow

$307.93M

Financial Statements
Beta
Revenue$2.58B
Cost of Revenue$1.40B
Gross Profit$1.18B
R&D Expenses$318.86M
SG&A Expenses$174.27M
Operating Expenses$493.13M
Operating Income$686.51M
Interest Expense$42.62M
Net Income$514.51M
EPS (Basic)$0.36
EPS (Diluted)$0.34
Shares Outstanding (Basic)1.44B
Shares Outstanding (Diluted)1.50B

Key Highlights

  • 1Revenue of $2.58 billion for the quarter ending December 29, 2019, showing a 2% increase year-over-year and a significant 19% increase sequentially.
  • 2Net income of $514.5 million and diluted EPS of $3.43 for the quarter, reflecting sequential improvement.
  • 3Gross margin remained strong at 45.7%, aided by improved factory utilization.
  • 4Continued significant investment in Research & Development (R&D) totaling $318.9 million for the quarter, underscoring commitment to innovation.
  • 5Significant share repurchase activity during the quarter, with $1.0 billion in accelerated share repurchase agreements, reducing outstanding shares.
  • 6Cash and cash equivalents, investments, and restricted cash decreased to $4.9 billion from $5.8 billion in the prior quarter, mainly due to share repurchases, dividends paid, and capital expenditures.
  • 7Geographic revenue breakdown shows strong performance in China and Taiwan, though Japan revenue saw a year-over-year decrease.

Frequently Asked Questions

The revenue increase of 19% from the September 2019 quarter to $2.58 billion was primarily driven by increased investments from foundry customers. This indicates a positive trend in customer capital spending, particularly within the foundry segment.

The Ninth Circuit's rejection of Altera's appeal led Lam Research to reverse $74.5 million of net tax assets related to stock-based compensation benefits from previous years. The company will no longer reflect a net tax benefit for excluding stock-based compensation from inter-company cost-sharing arrangements.

Lam Research's cash and cash equivalents, investments, and restricted cash balances decreased due to significant capital allocation activities. During the quarter, the company repurchased approximately $1.0 billion of its common stock through accelerated share repurchase agreements and paid $166.7 million in dividends. Despite the decrease in cash, the company expects its current liquidity to be sufficient for operations, investments, debt service, and capital expenditures over the next 12 months.

The company highlights several risks including the inherent variability and cyclicality of the semiconductor capital equipment industry, potential future declines in the industry and global economic conditions, fluctuations in revenue and operating results, potential impairment of goodwill or long-lived assets, leverage and debt service obligations, and reliance on a limited number of key customers and suppliers.