LRCX
$177.81
Lam Research
($.42)
(.24%)
Earnings Details
3rd Quarter March 2018
Tuesday, April 17, 2018 4:05:00 PM
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Summary

Lam Research Beats

Lam Research (LRCX) reported 3rd Quarter March 2018 earnings of $4.79 per share on revenue of $2.9 billion. The consensus earnings estimate was $4.36 per share on revenue of $2.9 billion. The Earnings Whisper number was $4.45 per share. Revenue grew 34.3% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $4.80 to $5.20 per share on revenue of $2.95 billion to $3.25 billion. The current consensus earnings estimate is $4.67 per share on revenue of $2.91 billion for the quarter ending June 30, 2018.

Lam Research Corp is a supplier of wafer fabrication equipment and services to the semiconductor industry.

Results
Reported Earnings
$4.79
Earnings Whisper
$4.45
Consensus Estimate
$4.36
Reported Revenue
$2.89 Bil
Revenue Estimate
$2.85 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Lam Research Corporation Reports Financial Results for the Quarter Ended March 25, 2018

FREMONT, Calif., April 17, 2018 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq:LRCX) today announced financial results for the quarter ended March 25, 2018 (the “March 2018 quarter”).

Highlights for the March 2018 quarter were as follows:

  • Shipments of $3.13 billion and revenue of $2.89 billion.

  • U.S. GAAP gross margin of 46.0%, U.S. GAAP operating margin of 28.6%, and U.S. GAAP diluted EPS of $4.33.

  • Non-GAAP gross margin of 46.8%, non-GAAP operating margin of 30.0%, and non-GAAP diluted EPS of $4.79.
 
Key Financial Data for the Quarters Ended
March 25, 2018 and December 24, 2017 
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP
  March 2018 December 2017 Change Q/Q
Shipments $3,134,677  $2,631,723  + 19%
Revenue $2,892,115  $2,580,815  + 12%
Gross margin as percentage of revenue 46.0% 46.7% - 70 bps
Operating margin as percentage of revenue 28.6% 28.6% — 
Diluted EPS $4.33  $(0.06) 7317%
 
Non-GAAP
  March 2018 December 2017 Change Q/Q
Shipments $3,134,677  $2,631,723  + 19%
Revenue $2,892,115  $2,580,815  + 12%
Gross margin as percentage of revenue 46.8% 47.6% - 80 bps
Operating margin as percentage of revenue 30.0% 30.2% - 20 bps
Diluted EPS $4.79  $4.34  + 10%

U.S. GAAP Financial Results

For the March 2018 quarter, revenue was $2,892 million, gross margin was $1,331 million, or 46.0% of revenue, operating expenses were $503 million, operating margin was 28.6% of revenue, and net income was $779 million, or $4.33 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,581 million, gross margin of $1,206 million, or 46.7% of revenue, operating expenses of $468 million, operating margin of 28.6% of revenue, and net loss of $(10) million, or $(0.06) per diluted share, for the quarter ended December 24, 2017 (the “December 2017 quarter”). The December 2017 results were negatively impacted by a one-time provisional charge of $757 million associated with the recently enacted U.S. tax reform, which the Company will continue to evaluate during the measurement period.

Non-GAAP Financial Results

For the March 2018 quarter, non-GAAP gross margin was $1,353 million or 46.8% of revenue, non-GAAP operating expenses were $486 million, non-GAAP operating margin was 30.0% of revenue, and non-GAAP net income was $852 million, or $4.79 per diluted share. This compares to non-GAAP gross margin of $1,228 million or 47.6% of revenue, non-GAAP operating expenses of $449 million, non-GAAP operating margin of 30.2% of revenue, and non-GAAP net income of $788 million, or $4.34 per diluted share for the December 2017 quarter.

“Lam continues to deliver strong performance, again setting new records highlighted by shipments exceeding three billion dollars in the March quarter. Fundamental to this achievement is increased strategic relevance enabling primary technology inflections now critical to our customers’ success,” said Martin Anstice, Lam Research’s Chief Executive Officer. “We remain focused on delivering long-term outperformance and making the right investments for our future.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $6.7 billion at the end of the March 2018 quarter compared to $6.0 billion at the end of the December 2017 quarter. This increase was primarily the result of approximately $1.1 billion of cash generated from operating activities, partially offset by approximately $80 million of net share settlement on employee stock-based compensation, $80 million of dividends paid to stockholders, $49 million of capital expenditures, and $29 million of net repayments of debt.

Deferred revenue and deferred profit at the end of the March 2018 quarter remained steady at $1.1 billion and $749 million, respectively, as compared to the end of the December 2017 quarter. Lam’s deferred revenue balance does not include shipments to customers in Japan, to whom title does not transfer until customer acceptance. Shipments to customers in Japan are classified as inventory at cost until the time of acceptance. The estimated future revenue from shipments to customers in Japan was approximately $526 million as of March 25, 2018 and $289 million as of December 24, 2017.

Geographic Distribution

The geographic distribution of shipments and revenue during the March 2018 quarter is shown in the following table:

RegionShipments Revenue
Korea36% 36%
China14% 17%
Japan20% 14%
Taiwan11% 12%
Southeast Asia8% 8%
United States6% 8%
Europe5% 5%
    

Outlook

For the June 2018 quarter, Lam is providing the following guidance:

 U.S. GAAP Reconciling
Items
 Non-GAAP
Shipments$3.000 Billion+/- $150 Million  $3.000 Billion+/- $150 Million
Revenue$3.100 Billion+/- $150 Million  $3.100 Billion+/- $150 Million
Gross margin 46.8%+/- 1% $22 Million  47.5%+/- 1%
Operating margin 29.7%+/- 1% $39 Million  31.0%+/- 1%
Net income per diluted share$4.77 +/-$0.20  $36 Million $5.00 +/-$0.20 
Diluted share count179 Million 1 Million 178 Million
        

The information provided above is only an estimate of what the Company believes is realizable as of the date of this release, and does not incorporate the potential impact of any business combinations, asset acquisitions, divestitures, balance sheet valuation adjustments, financing arrangements, other investments, measurement period adjustments associated with U.S. tax reform, or other significant transactions that may be completed after the date of this release. U.S. GAAP to non-GAAP reconciling items provided include only those items that are known and can be estimated as of the date of this release. Actual results will vary from this model and the variations may be material. Reconciling items included above are as follows:

  • Gross margin - amortization related to intangible assets acquired through business combinations, $22 million.
  • Operating margin - amortization related to intangible assets acquired through business combinations, $39 million.
  • Earnings per share - amortization related to intangible assets acquired though business combinations, $39 million; amortization of note discounts, $2 million; and associated tax benefit for non-GAAP items ($5 million); totaling $36 million.
  • Diluted share count - impact of a note hedge issued contemporaneously with the convertible notes due 2018, 1 million shares.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results. The Company’s non-GAAP results for both the March 2018 and December 2017 quarters exclude amortization related to intangible assets acquired through business combinations, acquisition and integration costs associated with a business combination, amortization of note discounts, and tax benefit of non-GAAP items. Additionally, the March 2018 quarter non-GAAP results exclude realized loss on sale or impairment of investments associated with repatriation and tax benefit on the conclusion of tax matters related to a prior business combination. The December 2017 quarter non-GAAP results exclude costs associated with business process reengineering and estimated income tax expense associated with U.S. tax reform.

Management uses non-GAAP gross margin, operating expense, operating income, operating margin, net income, and net income per diluted share to evaluate the Company’s operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view the Company’s results from management’s perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company’s website at http://investor.lamresearch.com.

Caution Regarding Forward-Looking Statements

Statements made in this press release that are not of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to: the estimated future revenue from shipments to customers in Japan; our revenue, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; our vision of the Company's future; technology demand trends; the legal and business factors that may affect our future tax rate; and our guidance for shipments, revenue, gross margin, operating margin, net income or earnings per diluted share, provisional tax estimate, and diluted share count. Some factors that may affect these forward-looking statements include: business conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; and the actions of our customers and competitors may be inconsistent with our expectations, as well as the other risks and uncertainties that are described in the documents filed or furnished by us with the Securities and Exchange Commission, including specifically the Risk Factors described in our annual report on Form 10-K for the fiscal year ended June 25, 2017 and our quarterly report on Form 10-Q for the fiscal quarters ended September 24, 2017 and December 24, 2017. These uncertainties and changes could materially affect the forward looking statements and cause actual results to vary from expectations in a material way. The Company undertakes no obligation to update the information or statements made in this release.

About Lam Research

Lam Research Corp. is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. As a trusted, collaborative partner to the world’s leading semiconductor companies, we combine superior systems engineering capability, technology leadership, and unwavering commitment to customer success to accelerate innovation through enhanced device performance. In fact, today, nearly every advanced chip is built with Lam technology. Lam Research (Nasdaq:LRCX) is a FORTUNE 500® company headquartered in Fremont, Calif., with operations around the globe. Learn more at www.lamresearch.com. (LRCX-F)

Consolidated Financial Tables Follow.

    
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
(unaudited)
    
 Three Months Ended Nine Months Ended
 March 25,
2018
  December 24,
2017
  March 26,
2017
  March 25,
2018
  March 26,
2017
 
Revenue$ 2,892,115  $2,580,815  $2,153,995  $7,951,070  $ 5,668,713 
Cost of goods sold1,561,401  1,375,248  1,182,591  4,265,446  3,134,315 
Gross margin1,330,714  1,205,567  971,404  3,685,624  2,534,398 
Gross margin as a percent of revenue46.0% 46.7% 45.1% 46.4% 44.7%
Research and development305,412  281,311  265,986  861,801  748,030 
Selling, general and administrative197,791  186,885  167,000  565,719  492,175 
Total operating expenses503,203  468,196  432,986  1,427,520  1,240,205 
Operating income827,511  737,371  538,418  2,258,104  1,294,193 
Operating income as a percent of revenue28.6% 28.6% 25.0% 28.4% 22.8%
Other expense, net(55,810) (3,152) (7,838) (64,464) (86,015)
Income before income taxes771,701  734,219  530,580  2,193,640  1,208,178 
Income tax benefit (expense)7,099  (744,174) 44,133  (834,105) (36,839)
Net income (loss)$778,800  $(9,955) $574,713  $1,359,535  $1,171,339 
Net income (loss) per share:         
Basic$4.80  $(0.06) $3.52  $8.40  $7.22 
Diluted$4.33  $(0.06) $3.10  $7.45  $6.40 
Number of shares used in per share calculations:         
Basic162,378  161,135  163,408  161,885  162,225 
Diluted179,779  161,135  185,094  182,565  182,885 
Cash dividend declared per common share$0.50  $0.50  $0.45  $1.45  $1.20 
                    


 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 March 25,
2018
 December 24,
2017
 June 25,
2017
    (unaudited) (unaudited) (1)
ASSETS
Cash and cash equivalents$4,698,995  $1,745,173  $2,377,534 
Investments1,785,976  3,954,526  3,663,628 
Accounts receivable, net2,082,632  2,279,044  1,673,398 
Inventories1,693,128  1,507,435  1,232,916 
Other current assets165,066  179,944  195,022 
Total current assets10,425,797  9,666,122  9,142,498 
Property and equipment, net826,500  807,340  685,595 
Restricted cash and investments256,587  255,984  256,205 
Goodwill and intangible assets1,825,891  1,866,159  1,796,668 
Other assets328,724  316,660  241,799 
Total assets$13,663,499  $12,912,265  $12,122,765 
LIABILITIES AND STOCKHOLDERS’ EQUITY     
Current portion of debt and capital leases$1,423,265  $1,401,660  $908,439 
Other current liabilities2,525,155  2,510,035  2,041,676 
Total current liabilities3,948,420  3,911,695  2,950,115 
Long-term debt and capital leases1,781,731  1,789,958  1,784,974 
Income taxes payable818,700  818,880  120,178 
Other long-term liabilities230,620  118,177  280,186 
Total liabilities6,779,471  6,638,710  5,135,453 
Temporary equity, convertible notes80,973  130,424  169,861 
Stockholders’ equity (2)6,803,055  6,143,131  6,817,451 
Total liabilities and stockholders’ equity$13,663,499  $12,912,265  $12,122,765 
            


(1)Derived from audited financial statements.
(2)Common shares issued and outstanding were 164,100 as of March 25, 2018, 159,451 as of December 24, 2017, and 161,723 as of June 25, 2017.


    
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands,  unaudited)
 Three Months Ended Nine Months Ended
  March
25, 2018
  December 
24, 2017
  March 26, 
2017
  March 
25, 2018
  March 
26, 2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:                   
Net income (loss)$778,800  $(9,955) $574,713  $1,359,535  $1,171,339 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:         
Depreciation and amortization82,236  79,898  76,242  241,276  227,869 
Deferred income taxes19,060  (271,478) 27,619  (209,214) 69,867 
Equity-based compensation expense41,095  42,124  35,323  125,002  106,173 
Impairment of investment42,456      42,456   
Loss on extinguishment of debt        36,325 
Amortization of note discounts and issuance costs4,342  4,539  6,136  13,469  19,168 
Other, net17,866  (1,108) (4,738) 23,327  10,777 
Changes in operating assets and liabilities64,524  184,684  (292,607) 341,538  (341,508)
Net cash provided by operating activities1,050,379  28,704  422,688  1,937,389  1,300,010 
CASH FLOWS FROM INVESTING ACTIVITIES:         
Capital expenditures and intangible assets(49,057) (84,693) (44,116) (193,814) (122,608)
Business acquisitions, net of cash acquired  (84)   (115,697)  
Net sale (purchase) of available-for-sale securities2,134,886  (205,701) (418,566) 1,811,411  (1,977,744)
Transfers of restricted cash and investments(603) 61  (982) (382) (5,736)
Other, net638  (4,396) (3,586) (14,358) (11,627)
Net cash provided by (used for) investing activities2,085,864  (294,813) (467,250) 1,487,160  (2,117,715)
CASH FLOWS FROM FINANCING ACTIVITIES:         
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs(228,166) (47,522) (69,227) (577,415) (1,685,868)
Net proceeds from issuance of commercial paper199,024  798,947    997,971   
Proceeds from borrowings on revolving credit facility  750,000    750,000   
Repayments of borrowings on revolving credit facility  (750,000)   (750,000)  
Treasury stock purchases(80,105) (1,111,450) (216,373) (1,346,940) (285,894)
Dividends paid(79,739) (73,127) (73,337) (225,604) (169,786)
Reissuance of treasury stock related to employee stock purchase plan  34,057  17,223  34,057  36,543 
Proceeds from issuance of common stock2,517  3,073  7,964  6,632  12,544 
Other, net7    (70) 11  (124)
Net cash used for financing activities(186,462) (396,022) (333,820) (1,111,288) (2,092,585)
Effect of exchange rate changes on cash and cash equivalents4,041  842  2,992  8,200  (462)
Net increase (decrease) in cash and cash equivalents2,953,822  (661,289) (375,390) 2,321,461  (2,910,752)
Cash and cash equivalents at beginning of period1,745,173  2,406,462  2,503,960  2,377,534  5,039,322 
Cash and cash equivalents at end of period$4,698,995  $1,745,173  $2,128,570  $4,698,995  $2,128,570 
                    


  
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
 Three Months Ended
 March 25,
2018
 December 24,
2017
Revenue$2,892,115  $2,580,815 
Gross margin$1,353,056  $1,227,961 
Gross margin as percentage of revenue46.8% 47.6%
Operating expenses$486,022  $448,667 
Operating income$867,034  $779,294 
Operating margin as a percentage of revenue30.0% 30.2%
Net income$851,795  $787,863 
Net income per diluted share$4.79  $4.34 
Shares used in per share calculation - diluted177,786  181,655 
      


Reconciliation of U.S. GAAP Net Income (Loss) to Non-GAAP Net Income and U.S. GAAP number of dilutive shares to Non-
GAAP number of dilutive shares
(in thousands, except per share data)
(unaudited)
 
 Three Months Ended
 March 25,
2018
  December 24,
2017
 
U.S. GAAP net income (loss)$778,800  $(9,955)
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold22,342  22,394 
Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative17,074  17,074 
Costs associated with business process reengineering - selling, general and administrative  1,362 
Business combination acquisition and integration related costs - selling, general and administrative107  1,093 
Amortization of note discounts - other expense, net2,860  3,410 
Realized loss on sale or impairment of investments - other expense, net46,641   
Net income tax benefit on non-GAAP items(11,518) (4,404)
Income tax benefit on the conclusion of certain tax matters(4,511)  
Income tax expense associated with U.S. tax reform  756,889 
Non-GAAP net income$851,795  $787,863 
Non-GAAP net income per diluted share$4.79  $4.34 
GAAP net income (loss) per diluted share$4.33  $(0.06)
U.S. GAAP number of shares used for per diluted share calculation179,779  161,135 
Effect of potentially dilutive securities:   
Employee stock plans  2,757 
Convertible notes  15,423 
Warrants  4,721 
Effect of convertible note hedge(1,993) (2,381)
Non-GAAP number of shares used for per diluted share calculation177,786  181,655 
      

 

Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Non-GAAP Gross Margin, Operating
Expenses and Operating Income
(in thousands, except percentages)
(unaudited)
 
 Three Months Ended
 March 25,
2018
 December 24,
2017
U.S. GAAP gross margin1,330,714  $ 1,205,567 
Pre-tax non-GAAP items:       
Amortization related to intangible assets acquired through certain business combinations22,342  22,394 
Non-GAAP gross margin$1,353,056  $1,227,961 
U.S. GAAP gross margin as a percentage of revenue46.0% 46.7%
Non-GAAP gross margin as a percentage of revenue46.8% 47.6%
U.S. GAAP operating expenses$503,203  $468,196 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired through certain business combinations(17,074) (17,074)
Costs associated with business process reengineering  (1,362)
Business combination acquisition and integration related costs(107) (1,093)
Non-GAAP operating expenses$486,022  $448,667 
Non-GAAP operating income$867,034  $779,294 
U.S. GAAP operating margin as percent of revenue28.6% 28.6%
Non-GAAP operating margin as a percent of revenue30.0% 30.2%
      

Lam Research Corporation Contacts:

Satya Kumar, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com

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Source: Lam Research Corporation