LRCX
$151.95
Lam Research
($.15)
(.10%)
Earnings Details
4th Quarter June 2018
Thursday, July 26, 2018 4:05:00 PM
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Summary

Lam Research Beats but Guides Lower

Lam Research (LRCX) reported 4th Quarter June 2018 earnings of $5.31 per share on revenue of $3.1 billion. The consensus earnings estimate was $4.98 per share on revenue of $3.1 billion. The Earnings Whisper number was $5.06 per share. Revenue grew 33.3% on a year-over-year basis.

The company said it expects first quarter non-GAAP earnings of $3.00 to $3.40 per share on revenue of $2.15 billion to $2.45 billion. The current consensus earnings estimate is $3.90 per share on revenue of $2.77 billion for the quarter ending September 30, 2018.

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

Results
Reported Earnings
$5.31
Earnings Whisper
$5.06
Consensus Estimate
$4.98
Reported Revenue
$3.13 Bil
Revenue Estimate
$3.10 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Lam Research Corporation Reports Financial Results for the Quarter Ended June 24, 2018

FREMONT, Calif., July 26, 2018 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq:LRCX) today announced financial results for the quarter ended June 24, 2018 (the “June 2018 quarter”).

Highlights for the June 2018 quarter were as follows:

  • Shipments of $3.03 billion and revenue of $3.13 billion.
  • U.S. GAAP gross margin of 47.3%, U.S. GAAP operating margin of 30.6%, and U.S. GAAP diluted EPS of $5.82.
  • Non-GAAP gross margin of 48.0%, non-GAAP operating margin of 31.8%, and non-GAAP diluted EPS of $5.31.


Key Financial Data for the Quarters Ended June 24, 2018 and March 25, 2018
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP
  June 2018 March 2018 Change Q/Q
Shipments $3,028,390  $3,134,677  - 3% 
Revenue $3,125,928  $2,892,115  + 8% 
Gross margin as percentage of revenue 47.3% 46.0% + 130 bps 
Operating margin as percentage of revenue 30.6% 28.6% + 200 bps 
Diluted EPS $5.82  $4.33  + 34% 
 
Non-GAAP
  June 2018 March 2018 Change Q/Q
Shipments $3,028,390  $3,134,677  - 3% 
Revenue $3,125,928  $2,892,115  + 8% 
Gross margin as percentage of revenue 48.0% 46.8% + 120 bps 
Operating margin as percentage of revenue 31.8% 30.0% + 180 bps 
Diluted EPS $5.31  $4.79  + 11% 

U.S. GAAP Financial Results

For the June 2018 quarter, revenue was $3,126 million, gross margin was $1,479 million, or 47.3% of revenue, operating expenses were $524 million, operating margin was 30.6% of revenue, and net income was $1,021 million, or $5.82 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,892 million, gross margin of $1,331 million, or 46.0% of revenue, operating expenses of $503 million, operating margin of 28.6% of revenue, and net income of $779 million, or $4.33 per diluted share, for the quarter ended March 25, 2018 (the “March 2018 quarter”). Net income in the June 2018 quarter was positively impacted by a $116 million reversal of the provisional charge associated with the December 2017 U.S. tax reform.

Non-GAAP Financial Results

For the June 2018 quarter, non-GAAP gross margin was $1,502 million or 48.0% of revenue, non-GAAP operating expenses were $507 million, non-GAAP operating margin was 31.8% of revenue, and non-GAAP net income was $932 million, or $5.31 per diluted share. This compares to non-GAAP gross margin of $1,353 million or 46.8% of revenue, non-GAAP operating expenses of $486 million, non-GAAP operating margin of 30.0% of revenue, and non-GAAP net income of $852 million, or $4.79 per diluted share for the March 2018 quarter.

“Lam’s June quarter results confirmed 2018 as the strongest fiscal year in our history, with over 11 billion dollars in revenues, approximately 18 dollars in non-GAAP diluted earnings per share and 2.7 billion dollars of cash generated from operations,” said Martin Anstice, Lam Research’s chief executive officer. “Essentially unsurpassed in our industry, the multi-year growth at Lam has been enabled by the increased prominence of Etch and Deposition in the semiconductor device manufacturing process flow and the broadening of our product and services portfolio over many years. Our forward-looking optimism is reinforced by the fundamental opportunity of silicon technologies, enabling a new generation of cognitive computing applications and services, combined with the expectation of sustainable investment by our customers, who in turn are pursuing inspiring and enhanced value creation agendas.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $5.2 billion at the end of the June 2018 quarter compared to $6.7 billion at the end of the March 2018 quarter. This decrease was primarily the result of  $1.3 billion of share repurchases, including net share settlement on employee stock-based compensation, combined with $817 million of debt reductions, partially offset by $718 million of cash generated in operating activities.

Deferred revenue at the end of the June 2018 quarter decreased to $994 million as compared to $1.1 billion at the end of the March 2018 quarter. Deferred profit at the end of the June 2018 quarter decreased to $720 million as compared to $749 million at the end of the March 2018 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 $607 million as of June 24, 2018 and $526 million as of March 25, 2018.

Geographic Distribution

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

RegionShipments Revenue
Korea29%  35% 
China25%  21% 
Japan21%  18% 
Taiwan11%  10% 
Europe5%  6% 
United States5%  5% 
Southeast Asia4%  5% 

Outlook

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

 U.S. GAAP Reconciling
Items
 Non-GAAP
Revenue$2.3 Billion+/- $150 Million  $2.3 Billion+/- $150 Million
Gross margin45.0%+/-1% $22 Million 46.0%+/-1%
Operating margin24.3%+/-1% $38 Million 26.0%+/-1%
Net income per diluted share$2.98+/-$0.20 $36 Million $3.20+/-$0.20
Diluted share count163 Million  163 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 arrangements 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, $38 million.
  • Earnings per share - amortization related to intangible assets acquired through business combinations, $38 million;  amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($3) million; totaling $36 million.

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 June 2018 and March 2018 quarters exclude amortization related to intangible assets acquired through business combinations, acquisition and integration costs associated with a business combination, amortization of note discounts, tax benefit of non-GAAP items, and income tax benefit on the conclusion of tax matters related to a prior business combination. Additionally, the June 2018 quarter non-GAAP results exclude estimated income tax benefit associated with U.S. tax reform and the March 2018 quarter non-GAAP results exclude realized loss on sale or impairment of investments associated with repatriation.

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, political and/or regulatory 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 quarterly reports on Form 10-Q for the fiscal quarters ended September 24, 2017, December 24, 2017 and March 25, 2018. 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)
 
 Three Months Ended Twelve Months Ended
 June 24,
2018
 March 25,
2018
 June 25,
2017
 June 24,
2018
 June 25,
2017
 (unaudited) (unaudited) (unaudited) (unaudited) (1)
  
Revenue$3,125,928  $2,892,115  $2,344,907  $11,076,998  $8,013,620 
Cost of goods sold1,646,520  1,561,401  1,275,946  5,911,966  4,410,261 
Gross margin1,479,408  1,330,714  1,068,961  5,165,032  3,603,359 
Gross margin as a percent of revenue47.3% 46.0% 45.6% 46.6% 45.0%
Research and development327,713  305,412  285,712  1,189,514  1,033,742 
Selling, general and administrative196,500  197,791  175,310  762,219  667,485 
Total operating expenses524,213  503,203  461,022  1,951,733  1,701,227 
Operating income955,195  827,511  607,939  3,213,299  1,902,132 
Operating income as a percent of revenue30.6% 28.6% 25.9% 29.0% 23.7%
Other income (expense), net2,954  (55,810) (4,444) (61,510) (90,459)
Income before income taxes958,149  771,701  603,495  3,151,789  1,811,673 
Income tax benefit (expense)62,997  7,099  (77,071) (771,108) (113,910)
Net income$1,021,146  $778,800  $526,424  $2,380,681  $1,697,763 
Net income per share:         
Basic$6.35  $4.80  $3.25  $14.73  $10.47 
Diluted$5.82  $4.33  $2.82  $13.17  $9.24 
Number of shares used in per share calculations:         
Basic160,916  162,378  162,213  161,643  162,222 
Diluted175,432  179,779  186,427  180,782  183,770 
Cash dividend declared per common share$1.10  $0.50  $0.45  $2.55  $1.65 
(1) Derived from audited financial statements.                    


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 June 24,
2018
 March 25,
2018
 June 25,
2017
 (unaudited) (unaudited) (1) 
ASSETS     
Cash and cash equivalents$4,512,257  $4,698,995  $2,377,534 
Investments437,338  1,785,976  3,663,628 
Accounts receivable, net2,176,936  2,082,632  1,673,398 
Inventories1,876,162  1,693,128  1,232,916 
Other current assets147,218  165,066  195,022 
Total current assets9,149,911  10,425,797  9,142,498 
Property and equipment, net902,547  826,500  685,595 
Restricted cash and investments256,301  256,587  256,205 
Goodwill and intangible assets1,802,740  1,825,891  1,796,668 
Other assets367,979  328,724  241,799 
Total assets$12,479,478  $13,663,499  $12,122,765 
LIABILITIES AND STOCKHOLDERS’ EQUITY     
Current portion of convertible debt and capital leases$610,030  $1,423,265  $908,439 
Other current liabilities2,540,278  2,525,155  2,041,676 
Total current liabilities3,150,308  3,948,420  2,950,115 
Long-term debt and capital leases1,806,562  1,781,731  1,784,974 
Income taxes payable851,936  818,700  120,178 
Other long-term liabilities90,629  230,620  280,186 
Total liabilities5,899,435  6,779,471  5,135,453 
Temporary equity, convertible notes78,192  80,973  169,861 
Stockholders’ equity (2)6,501,851  6,803,055  6,817,451 
Total liabilities and stockholders’ equity$12,479,478  $13,663,499  $12,122,765 
(1) Derived from audited financial statements.     
(2) Common shares issued and outstanding were 156,892 as of June 24, 2018, 164,100 as of March 25, 2018 and 161,723 as of June 25, 2017.


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 Three Months Ended Twelve Months Ended
 June 24,
2018
 March 25,
2018
 June 25,
2017
 June 24,
2018
 June 25,
2017
 (unaudited) (unaudited) (unaudited) (unaudited) (1) 
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income$1,021,146  $778,800  $526,424  $2,380,681  $1,697,763 
Adjustments to reconcile net income to net cash provided by operating activities:         
Depreciation and amortization85,119  82,236  79,036  326,395  306,905 
Deferred income taxes212,260  19,060  35,069  3,046  104,936 
Equity-based compensation expense47,214  41,095  43,802  172,216  149,975 
Impairment of  investment  42,456    42,456   
(Gain) Loss on early extinguishment of debt    (73)   36,252 
Amortization of note discounts and issuance costs959  4,342  6,114  14,428  25,282 
Other, net10,391  17,866  8,224  33,718  19,001 
Changes in operating assets and liabilities(658,731) 64,524  30,676  (317,193) (310,832)
Net cash provided by operating activities718,358  1,050,379  729,272  2,655,747  2,029,282 
CASH FLOWS FROM INVESTING ACTIVITIES:         
Capital expenditures and intangible assets(79,655) (49,057) (34,811) (273,469) (157,419)
Business acquisitions, net of cash acquired      (115,697)  
Net sale (purchase) of available-for-sale securities1,341,475  2,134,886  93,858  3,152,886  (1,883,886)
Transfers of restricted cash and investments286  (603) (48) (96) (5,784)
Other, net(826) 638  103  (15,184) (11,524)
Net cash provided by (used for) investing activities1,261,280  2,085,864  59,102  2,748,440  (2,058,613)
CASH FLOWS FROM FINANCING ACTIVITIES:         
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs(178,279) (228,166) (2,445) (755,694) (1,688,313)
Net (repayment) proceeds from commercial paper(638,367) 199,024    359,604   
Proceeds from borrowings on revolving credit facility      750,000   
Repayments of borrowings on revolving credit facility      (750,000)  
Excess tax benefit on equity-based compensation plans    38,635    38,635 
Treasury stock purchases(1,306,309) (80,105) (525,778) (2,653,249) (811,672)
Dividends paid(82,005) (79,739) (73,709) (307,609) (243,495)
Re-issuance of treasury stock related to employee stock purchase plan41,567    23,120  75,624  59,663 
Proceeds from issuance of common stock2,626  2,517  369  9,258  12,913 
Other, net(2) 7  (1) 9  (125)
Net cash used for financing activities(2,160,769) (186,462) (539,809) (3,272,057) (2,632,394)
Effect of exchange rate changes on cash and cash equivalents(5,607) 4,041  399  2,593  (63)
Net (decrease) increase in cash and cash equivalents(186,738) 2,953,822  248,964  2,134,723  (2,661,788)
Cash and cash equivalents at beginning of period4,698,995  1,745,173  2,128,570  2,377,534  5,039,322 
Cash and cash equivalents at end of period$4,512,257  $4,698,995  $2,377,534  $4,512,257  $2,377,534 
(1) Derived from audited financial statements.         


Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
 Three Months Ended
 June 24,
2018
 March 25,
2018
Revenue$3,125,928  $2,892,115 
Gross margin$1,501,750  $1,353,056 
Gross margin as percentage of revenue48.0% 46.8%
Operating expenses$507,416  $486,022 
Operating income$994,334  $867,034 
Operating margin as a percentage of revenue31.8% 30.0%
Net income$931,956  $851,795 
Net income per diluted share$5.31  $4.79 
Shares used in per share calculation - diluted175,432  177,786 


Reconciliation of U.S. GAAP Net Income 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
 June 24,
2018
 March 25,
2018
U.S. GAAP net income$1,021,146  $778,800 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold22,342  22,342 
Amortization related to intangible assets acquired through certain business combinations -selling, general and administrative16,069  17,074 
Business combination acquisition and integration related costs - selling, general and administrative728  107 
Amortization of note discounts - other expense, net1,851  2,860 
Realized loss on sale or impairment of investments - other expense, net  46,641 
Net income tax benefit on non-GAAP items(4,686) (11,518)
Income tax benefit on conclusion of certain tax matters(9,656) (4,511)
Income tax benefit associated with U.S. tax reform(115,838)  
Non-GAAP net income$931,956  $851,795 
Non-GAAP net income per diluted share$5.31  $4.79 
GAAP net income per diluted share$5.82  $4.33 
U.S. GAAP number of shares used for per diluted share calculation175,432  179,779 
Effect of convertible note hedge  (1,993)
Non-GAAP number of shares used for per diluted share calculation175,432  177,786 
      


Reconciliation of U.S. GAAP Net Income 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)
 
 Twelve Months Ended
 June 24,
 2018
 June 25,
 2017
U.S. GAAP net income$2,380,681  $1,697,763 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold88,640  85,000 
Product rationalization - cost of goods sold  6,127 
Product rationalization - research and development  1,650 
Cost associated with campus consolidation - research and development  3,556 
Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative66,630  64,332 
Costs associated with business process reengineering - selling, general and administrative2,078  7,487 
Business combination acquisition and integration related costs - selling, general and administrative2,864  9,972 
Litigation settlement - selling, general and administrative  4,000 
Amortization of note discounts - other expense, net12,225  22,869 
Realized loss on sale or impairment of investments - other expense, net46,641   
Costs related to early termination of KLA-Tencor acquisition funding - other expense, net  34,518 
KLA-Tencor pre-acquisition funding interest expense, net - other expense, net  20,391 
Net income tax benefit on non-GAAP items(26,722) (47,941)
Income tax benefit on conclusion of certain tax matters(14,720) (109,191)
Income tax expense associated with U.S. tax reform641,051   
Non-GAAP net income$3,199,368  $1,800,533 
U.S. GAAP net income per diluted share$13.17  $9.24 
Non-GAAP net income per diluted share$17.87  $9.98 
U.S. GAAP number of shares used for per diluted share calculation180,782  183,770 
Effect of convertible note hedge(1,711) (3,302)
Non-GAAP number of shares used for per diluted share calculation179,071  180,468 
      


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
 June 24,
2018
 March 25,
2018
U.S. GAAP gross margin$1,479,408  $1,330,714 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired through certain business combinations22,342  22,342 
Non-GAAP gross margin$1,501,750  $1,353,056 
U.S. GAAP gross margin as a percentage of revenue47.3% 46.0%
Non-GAAP gross margin as a percentage of revenue48.0% 46.8%
U.S. GAAP operating expenses$524,213  $503,203 
Pre-tax non-GAAP items:       
Amortization related to intangible assets acquired through certain business combinations(16,069) (17,074)
Costs associated with business process reengineering   
Business combination acquisition and integration related costs(728) (107)
Non-GAAP operating expenses$507,416  $486,022 
Non-GAAP operating income$994,334  $867,034 
GAAP operating margin as percent of revenue30.6% 28.6%
Non-GAAP operating margin as a percent of revenue31.8% 30.0%

Lam Research Corporation Contact:

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

 

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Source: Lam Research Corporation