10-QPeriod: Q2 FY2021

LAM RESEARCH CORP Quarterly Report for Q2 Ended Dec 27, 2020

Filed February 2, 2021For Securities:LRCX

Summary

Lam Research Corporation (LRCX) reported a strong financial performance for the fiscal second quarter ended December 27, 2020. Revenue surged by 9% sequentially to $3.46 billion, driven by increased investments from memory customers. This robust top-line growth translated into significant profitability, with net income reaching $869.2 million, a substantial increase from $514.5 million in the prior year's comparable quarter. Diluted earnings per share (EPS) also saw a notable rise to $5.96, up from $3.43 in the prior year. The company's gross margin improved to 46.4% from 45.7% year-over-year, despite facing higher costs related to freight and logistics, showcasing effective cost management. Operating expenses also increased, primarily due to higher employee-related costs and outside services, reflecting continued investment in research and development (R&D) and selling, general, and administrative (SG&A) functions. Lam Research's strong cash generation continues, though cash, cash equivalents, and restricted cash decreased to $6.3 billion primarily due to significant share repurchases and dividend payments. Looking ahead, the company anticipates continued demand for semiconductors driven by cloud, IoT, and 5G markets. Despite ongoing risks associated with the COVID-19 pandemic, particularly concerning supply chain and logistics, Lam Research is well-positioned to capitalize on technological inflections in semiconductor manufacturing, such as 3D device scaling. The company's substantial R&D investments and broad product portfolio are expected to support long-term growth and enhance its strategic relevance with customers.

Financial Highlights

54 data points
Beta

Revenue

$3.46B

46.4% Gross Margin

Net Income

$869.23M

25.1% Net Margin

EPS (Diluted)

$0.60

Total Assets

$15.37B

Cash & Equivalents

$3.69B

Free Cash Flow

$344.64M

Financial Statements
Beta
Revenue$3.46B
Cost of Revenue$1.85B
Gross Profit$1.60B
R&D Expenses$375.17M
SG&A Expenses$218.90M
Operating Expenses$594.07M
Operating Income$1.01B
Interest Expense$52.55M
Net Income$869.23M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)1.44B
Shares Outstanding (Diluted)1.46B

Key Highlights

  • 1Revenue increased 9% sequentially to $3.46 billion in the December 2020 quarter, driven by memory customer investments.
  • 2Net income significantly increased to $869.2 million for the quarter, up from $514.5 million in the prior year period.
  • 3Diluted earnings per share (EPS) rose to $5.96, compared to $3.43 in the prior year's quarter.
  • 4Gross margin improved to 46.4% from 45.7% year-over-year, indicating strong pricing power and product mix.
  • 5R&D and SG&A expenses increased due to investments in headcount, outside services, and product development.
  • 6Total cash, cash equivalents, and restricted cash stood at $6.3 billion, down from $6.9 billion, primarily due to share repurchases and dividends.
  • 7The company expects continued demand driven by cloud, IoT, and 5G markets, positioning it to benefit from industry technology inflections.

Frequently Asked Questions

The substantial increase in revenue and net income was primarily driven by strong customer demand, particularly from memory customers, leading to a 9% sequential revenue growth. This was coupled with improved operational efficiency and a favorable product mix, which helped to boost profitability despite increased operating expenses related to R&D and SG&A.

Operating expenses increased mainly due to higher investments in research and development (R&D) and selling, general, and administrative (SG&A) functions. Specifically, increases in employee-related costs due to higher headcount, as well as increased spending on outside services and supplies for R&D, contributed to this rise.

Lam Research maintained a robust liquidity position with $6.3 billion in cash, cash equivalents, and restricted cash as of December 27, 2020. The decrease from the prior quarter was mainly due to significant share repurchases ($723.3 million) and dividend payments ($187.9 million), partially offset by cash generated from operations. The company anticipates its current cash reserves and operating cash flow will be sufficient to support its operations, investments, and capital distributions over the next twelve months.

The company continues to face risks and uncertainties, particularly those exacerbated by the COVID-19 pandemic. These include potential disruptions to production, supply chain, and logistics due to global health measures and restrictions. While the company is seeing improvements, higher costs related to freight and logistics persist. Other significant risks highlighted in the filing include industry cyclicality, reliance on key customers, rapid technological change, and geopolitical factors, especially concerning operations in China.