Lam Research Corporation Reports Financial Results for the Quarter Ended December 24, 2023
- Revenue of $3.76 billion for the December 2023 quarter
- U.S. GAAP gross margin of 46.8%
- Non-GAAP diluted EPS of $7.52
- Cash and cash equivalents increased to $5.6 billion
- Deferred revenue rose to $1,928 million
- Geographic distribution of revenue: 40% from China, 19% from Korea, and 14% from Japan
- Guidance for the quarter ended March 31, 2024: estimated revenue of $3.7 billion and non-GAAP diluted EPS of $7.25
- Gross margin decreased from 47.5% to 46.8%
- Operating income as a percentage of revenue decreased from 29.4% to 28.1%
- Net income per diluted share increased from $6.66 to $7.22 on a U.S. GAAP basis
- Non-GAAP gross margin decreased from 47.9% to 47.6%
- Non-GAAP operating income as a percentage of revenue decreased from 30.1% to 30.0%
- Non-GAAP net income per diluted share increased from $6.85 to $7.52
Insights
Lam Research Corporation's reported revenue increase of 7.9% quarter-over-quarter signals robust demand for its semiconductor processing equipment, a positive indicator for the industry's growth trajectory. The consistency in revenue growth despite a slight decrease in both GAAP and non-GAAP gross margins suggests effective cost management and pricing strategies in a competitive market. However, the contraction in operating income as a percentage of revenue by 130 basis points on a GAAP basis and 10 basis points non-GAAP could raise concerns about operating leverage and expense control moving forward.
The company's stock repurchase activity, amounting to $645 million, reflects a strong balance sheet and a commitment to returning value to shareholders. This, combined with a healthy dividend payout, could be seen as a positive signal to the market about the company's financial health and future prospects. However, investors should consider the potential impact of share repurchases on earnings per share (EPS) and whether such financial engineering is sustainable in the long run.
The geographic distribution of revenue, with China accounting for 40% and Korea for 19%, underscores the strategic importance of the Asia-Pacific region for Lam Research. This concentration also exposes the company to geopolitical risks and potential supply chain disruptions, which are critical factors for investors to monitor. The product mix, with systems revenue comprising a larger share compared to customer support-related revenue, indicates a strong capital expenditure cycle in the semiconductor industry, driven by demand for new leading-edge equipment.
Furthermore, the guidance for the upcoming quarter, with an expected revenue fluctuation of plus or minus $300 million, suggests a stable outlook but also implies a degree of uncertainty that could be attributed to market volatility or customer demand fluctuations. Investors should assess the company's guidance in conjunction with broader industry trends and economic indicators to gauge the potential for future growth.
Lam Research's focus on product differentiation and a flexible global infrastructure is pivotal in maintaining a competitive edge in the semiconductor equipment industry, which is characterized by rapid technological advancements and intense competition. The mention of AI as a driver for industry growth indicates the company's strategic alignment with key technology trends. Investors should consider the company's innovation capabilities and R&D investments as critical factors for sustaining long-term growth.
Deferred revenue growth and the mention of shipments to Japan being classified as inventory until customer acceptance indicate a conservative revenue recognition policy, which can be seen as a prudent approach in financial reporting. It also provides visibility into future revenue streams, which is valuable for forecasting and investment decision-making.
Highlights for the December 2023 quarter were as follows:
- Revenue of
$3.76 billion U.S. GAAP gross margin of46.8% ,U.S. GAAP operating income as a percentage of revenue of28.1% , andU.S. GAAP diluted EPS of$7.22 - Non-GAAP gross margin of
47.6% , non-GAAP operating income as a percentage of revenue of30.0% , and non-GAAP diluted EPS of$7.52
Key Financial Data for the Quarters Ended December 24, 2023 and September 24, 2023 (in thousands, except per-share data, percentages, and basis points)
| ||||||
December 2023 | September 2023 | Change Q/Q | ||||
Revenue | $ 3,758,259 | $ 3,482,062 | + 7.9 % | |||
Gross margin as percentage of revenue | 46.8 % | 47.5 % | - 70 bps | |||
Operating income as percentage of revenue | 28.1 % | 29.4 % | - 130 bps | |||
Diluted EPS | $ 7.22 | $ 6.66 | + 8.4 % | |||
Non-GAAP | ||||||
December 2023 | September 2023 | Change Q/Q | ||||
Revenue | $ 3,758,259 | $ 3,482,062 | + 7.9 % | |||
Gross margin as percentage of revenue | 47.6 % | 47.9 % | - 30 bps | |||
Operating income as percentage of revenue | 30.0 % | 30.1 % | - 10 bps | |||
Diluted EPS | $ 7.52 | $ 6.85 | + 9.8 % | |||
For the December 2023 quarter, revenue was
Non-GAAP Financial Results
For the December 2023 quarter, non-GAAP gross margin was
"Lam delivered solid results to close out 2023," said Tim Archer, Lam Research's President and Chief Executive Officer. "With our investments in extending product differentiation and building a flexible and efficient global infrastructure, we are in a strong position to benefit as innovations such as AI power robust semiconductor industry growth in the years to come."
Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to
Deferred revenue at the end of the December 2023 quarter increased to
Revenue
The geographic distribution of revenue during the December 2023 quarter is shown in the following table:
Region | Revenue |
40 % | |
19 % | |
14 % | |
13 % | |
5 % | |
5 % | |
4 % |
The following table presents revenue disaggregated between system and customer support-related revenue:
Three Months Ended | |||||
December 24, | September 24, | December 25, | |||
(In thousands) | |||||
Systems revenue | $ 2,299,286 | $ 2,056,655 | $ 3,547,518 | ||
Customer support-related revenue and other | 1,458,973 | 1,425,407 | 1,730,051 | ||
$ 3,758,259 | $ 3,482,062 | $ 5,277,569 | |||
Systems revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.
Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from our Reliant® product line.
Outlook
For the quarter ended March 31, 2024, Lam is providing the following guidance:
Reconciling Items | Non-GAAP | |||||||||
Revenue | +/- | — | +/- | |||||||
Gross margin as a percentage of revenue | 47.2 % | +/- | 1 % | $ 28 | Million | 48.0 % | +/- | 1 % | ||
Operating income as a percentage of revenue | 28.1 % | +/- | 1 % | $ 51 | Million | 29.5 % | +/- | 1 % | ||
Net income per diluted share | +/- | $ 46 | Million | +/- | ||||||
Diluted share count | 132 million | — | 132 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, restructuring, balance sheet valuation adjustments, financing arrangements, other investments, or other significant arrangements that may be completed or realized after the date of this release, except as described below.
- Gross margin as a percentage of revenue - restructuring charges,
$13 million $12 million $3 million $28 million - Operating income as a percentage of revenue - restructuring charges,
$28 million $20 million $3 million $51 million - Net income per diluted share - restructuring charges,
$28 million $20 million $3 million $1 million $6 million $46 million
Use of Non-GAAP Financial Results
In addition to
Management uses non-GAAP gross margin, operating expense, operating income, operating income as a percentage of revenue, 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
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: our outlook and guidance for future financial results, including revenue, gross margin, operating income and net income; the results we seek to accomplish through our investments; the strength of our market position and the benefits to be realized from our positioning; the role of innovations such as AI; and semiconductor industry growth. Some factors that may affect these forward-looking statements include: trade regulations, export controls, trade disputes, and other geopolitical tensions may inhibit our ability to sell our products; business, political and/or regulatory conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; the actions of our customers and competitors may be inconsistent with our expectations; supply chain cost increases and other inflationary pressures have impacted and are expected to continue to impact our profitability; supply chain disruptions or manufacturing capacity constraints may limit our ability to manufacture and sell our products; and natural and human-caused disasters, disease outbreaks, war, terrorism, political or governmental unrest or instability, or other events beyond our control may impact our operations and revenue in affected areas; 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, 2023 and our quarterly report on Form 10-Q for the fiscal quarter ended September 24, 2023. 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.
Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's equipment and services allow customers to build smaller and better performing devices. In fact, today, nearly every advanced chip is built with Lam technology. We combine superior systems engineering, technology leadership, and a strong values-based culture, with an unwavering commitment to our customers. Lam Research (Nasdaq: LRCX) is a FORTUNE 500® company headquartered in
Consolidated Financial Tables Follow.
LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data and percentages) (unaudited) | |||||||||
Three Months Ended | Six Months Ended | ||||||||
December 24, | September 24, | December 25, | December 24, | December 25, | |||||
Revenue | $ 3,758,259 | $ 3,482,062 | $ 5,277,569 | $ 7,240,321 | $ 10,351,690 | ||||
Cost of goods sold | 1,985,847 | 1,819,420 | 2,901,220 | 3,805,267 | 5,638,506 | ||||
Restructuring charges, net - cost of goods sold | 14,957 | 7,940 | — | 22,897 | — | ||||
Total cost of goods sold | 2,000,804 | 1,827,360 | 2,901,220 | 3,828,164 | 5,638,506 | ||||
Gross margin | 1,757,455 | 1,654,702 | 2,376,349 | 3,412,157 | 4,713,184 | ||||
Gross margin as a percent of revenue | 46.8 % | 47.5 % | 45.0 % | 47.1 % | 45.5 % | ||||
Research and development | 469,712 | 422,629 | 462,385 | 892,341 | 895,760 | ||||
Selling, general and administrative | 228,843 | 207,023 | 233,802 | 435,866 | 439,422 | ||||
Restructuring charges, net - operating expenses | 1,688 | 2,021 | — | 3,709 | — | ||||
Total operating expenses | 700,243 | 631,673 | 696,187 | 1,331,916 | 1,335,182 | ||||
Operating income | 1,057,212 | 1,023,029 | 1,680,162 | 2,080,241 | 3,378,002 | ||||
Operating income as a percent of revenue | 28.1 % | 29.4 % | 31.8 % | 28.7 % | 32.6 % | ||||
Other income (expense), net | 29,839 | 2,601 | (28,234) | 32,440 | (71,329) | ||||
Income before income taxes | 1,087,051 | 1,025,630 | 1,651,928 | 2,112,681 | 3,306,673 | ||||
Income tax expense | (132,785) | (138,232) | (183,421) | (271,017) | (412,287) | ||||
Net income | $ 954,266 | $ 887,398 | $ 1,468,507 | $ 1,841,664 | $ 2,894,386 | ||||
Net income per share: | |||||||||
Basic | $ 7.25 | $ 6.69 | $ 10.80 | $ 13.94 | $ 21.21 | ||||
Diluted | $ 7.22 | $ 6.66 | $ 10.77 | $ 13.88 | $ 21.16 | ||||
Number of shares used in per share calculations: | |||||||||
Basic | 131,629 | 132,584 | 136,018 | 132,107 | 136,455 | ||||
Diluted | 132,220 | 133,166 | 136,339 | 132,693 | 136,774 | ||||
Cash dividend declared per common share | $ 2.00 | $ 2.00 | $ 1.725 | $ 4.00 | $ 3.450 | ||||
LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | |||||
December 24, | September 24, | June 25, | |||
(unaudited) | (unaudited) | (1) | |||
ASSETS | |||||
Cash and cash equivalents | $ 5,623,289 | $ 5,126,150 | $ 5,337,056 | ||
Investments | 14,720 | 30,557 | 37,641 | ||
Accounts receivable, net | 2,707,458 | 2,810,953 | 2,823,376 | ||
Inventories | 4,429,906 | 4,747,781 | 4,816,190 | ||
Prepaid expenses and other current assets | 279,239 | 278,121 | 214,149 | ||
Total current assets | 13,054,612 | 12,993,562 | 13,228,412 | ||
Property and equipment, net | 2,147,482 | 2,110,511 | 1,856,672 | ||
Goodwill and intangible assets | 1,777,593 | 1,784,000 | 1,790,943 | ||
Other assets | 1,804,165 | 1,650,384 | 1,905,616 | ||
Total assets | $ 18,783,852 | $ 18,538,457 | $ 18,781,643 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Current portion of long-term debt and finance lease obligations | $ 3,779 | $ 3,861 | $ 8,358 | ||
Other current liabilities | 4,268,604 | 4,243,316 | 4,176,560 | ||
Total current liabilities | 4,272,383 | 4,247,177 | 4,184,918 | ||
Long-term debt and finance lease obligations | 4,980,005 | 4,980,460 | 5,003,183 | ||
Income taxes payable | 797,556 | 780,511 | 882,084 | ||
Other long-term liabilities | 511,430 | 482,979 | 501,286 | ||
Total liabilities | 10,561,374 | 10,491,127 | 10,571,471 | ||
Stockholders' equity (2) | 8,222,478 | 8,047,330 | 8,210,172 | ||
Total liabilities and stockholders' equity | $ 18,783,852 | $ 18,538,457 | $ 18,781,643 | ||
(1) | Derived from audited financial statements. |
(2) | Common shares issued and outstanding were 131,278 as of December 24, 2023, 132,072 as of September 24, 2023, and 133,297 as of June 25, 2023. |
LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) | |||||||||
Three Months Ended | Six Months Ended | ||||||||
December 24, | September 24, | December 25, | December 24, | December 25, | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net income | $ 954,266 | $ 887,398 | $ 1,468,507 | $ 1,841,664 | $ 2,894,386 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 90,941 | 90,479 | 85,414 | 181,420 | 161,165 | ||||
Deferred income taxes | (88,747) | (24,238) | (6,680) | (112,985) | (140,296) | ||||
Equity-based compensation expense | 69,901 | 67,211 | 73,084 | 137,112 | 144,194 | ||||
Other, net | 4,182 | (150) | 12,729 | 4,032 | 9,978 | ||||
Changes in operating assets and liabilities | 423,297 | (69,537) | (492,867) | 353,760 | (739,652) | ||||
Net cash provided by operating activities | 1,453,840 | 951,163 | 1,140,187 | 2,405,003 | 2,329,775 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Capital expenditures and intangible assets | (115,276) | (76,992) | (163,378) | (192,268) | (303,441) | ||||
Business acquisitions, net of cash acquired | — | — | (119,955) | — | (119,955) | ||||
Net maturities and sales of available-for-sale securities | 15,841 | 7,275 | 17,743 | 23,116 | 32,438 | ||||
Other, net | (2,523) | (4,966) | (1,657) | (7,489) | (4,092) | ||||
Net cash used for investing activities | (101,958) | (74,683) | (267,247) | (176,641) | (395,050) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Principal payments on debt, including finance lease obligations | (986) | (253,109) | (17,082) | (254,095) | (18,936) | ||||
Treasury stock purchases | (645,458) | (843,238) | (456,276) | (1,488,696) | (566,055) | ||||
Dividends paid | (264,414) | (230,332) | (235,980) | (494,746) | (441,595) | ||||
Reissuance of treasury stock related to employee stock purchase plan | 53,081 | — | 44,996 | 53,081 | 44,996 | ||||
Proceeds from issuance of common stock | 1,704 | 2,818 | 877 | 4,522 | 7,673 | ||||
Other, net | (3,821) | (2,151) | 1,253 | (5,972) | 764 | ||||
Net cash used for financing activities | (859,894) | (1,326,012) | (662,212) | (2,185,906) | (973,153) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 6,725 | (11,031) | 17,878 | (4,306) | 953 | ||||
Net change in cash, cash equivalents, and restricted cash | 498,713 | (460,563) | 228,606 | 38,150 | 962,525 | ||||
Cash, cash equivalents, and restricted cash at beginning of period (1) | 5,126,809 | 5,587,372 | 4,507,454 | 5,587,372 | 3,773,535 | ||||
Cash, cash equivalents, and restricted cash at end of period (1) | $ 5,625,522 | $ 5,126,809 | $ 4,736,060 | $ 5,625,522 | $ 4,736,060 | ||||
(1) | Restricted cash is reported within Other assets in the Condensed Consolidated Balance Sheets |
Non-GAAP Financial Summary (in thousands, except percentages and per share data) (unaudited) | |||
Three Months Ended | |||
December 24, | September 24, | ||
Revenue | $ 3,758,259 | $ 3,482,062 | |
Gross margin | $ 1,790,388 | $ 1,669,469 | |
Gross margin as percentage of revenue | 47.6 % | 47.9 % | |
Operating expenses | $ 662,259 | $ 622,219 | |
Operating income | $ 1,128,129 | $ 1,047,250 | |
Operating income as a percentage of revenue | 30.0 % | 30.1 % | |
Net income | $ 994,285 | $ 912,439 | |
Net income per diluted share | $ 7.52 | $ 6.85 | |
Shares used in per share calculation - diluted | 132,220 | 133,166 | |
Reconciliation of (in thousands, except per share data) (unaudited) | |||
Three Months Ended | |||
December 24, | September 24, | ||
$ 954,266 | $ 887,398 | ||
Pre-tax non-GAAP items: | |||
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold | 2,631 | 3,149 | |
Elective deferred compensation ("EDC") related liability valuation increase (decrease) - cost of goods sold | 6,492 | (591) | |
Restructuring charges, net - cost of goods sold | 14,957 | 7,940 | |
Transformational costs - cost of goods sold | 8,853 | 4,269 | |
EDC related liability valuation increase (decrease) - research and development | 11,685 | (1,064) | |
Amortization related to intangible assets acquired through certain business combinations - selling, general and | 770 | 1,186 | |
EDC related liability valuation increase (decrease) - selling, general and administrative | 7,790 | (709) | |
Transformational costs - selling, general and administrative | 16,051 | 8,020 | |
Restructuring charges, net - operating expenses | 1,688 | 2,021 | |
Amortization of note discounts - other income (expense), net | 746 | 1,017 | |
(Gain) Loss on EDC related asset - other income (expense), net | (25,530) | 2,901 | |
Net income tax benefit on non-GAAP items | (6,114) | (3,098) | |
Non-GAAP net income | $ 994,285 | $ 912,439 | |
Non-GAAP net income per diluted share | $ 7.52 | $ 6.85 | |
$ 7.22 | $ 6.66 | ||
132,220 | 133,166 | ||
Reconciliation of (in thousands, except percentages) (unaudited) | |||
Three Months Ended | |||
December 24, | September 24, | ||
$ 1,757,455 | $ 1,654,702 | ||
Pre-tax non-GAAP items: | |||
Amortization related to intangible assets acquired through certain business combinations | 2,631 | 3,149 | |
EDC related liability valuation increase (decrease) | 6,492 | (591) | |
Restructuring charges, net | 14,957 | 7,940 | |
Transformational costs | 8,853 | 4,269 | |
Non-GAAP gross margin | $ 1,790,388 | $ 1,669,469 | |
46.8 % | 47.5 % | ||
Non-GAAP gross margin as a percentage of revenue | 47.6 % | 47.9 % | |
$ 700,243 | $ 631,673 | ||
Pre-tax non-GAAP items: | |||
Amortization related to intangible assets acquired through certain business combinations | (770) | (1,186) | |
EDC related liability valuation (increase) decrease | (19,475) | 1,773 | |
Restructuring charges, net | (1,688) | (2,021) | |
Transformational costs | (16,051) | (8,020) | |
Non-GAAP operating expenses | $ 662,259 | $ 622,219 | |
$ 1,057,212 | $ 1,023,029 | ||
Non-GAAP operating income | $ 1,128,129 | $ 1,047,250 | |
28.1 % | 29.4 % | ||
Non-GAAP operating income as a percent of revenue | 30.0 % | 30.1 % | |
Lam Research Corporation Contacts:
Ram Ganesh, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com
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SOURCE Lam Research Corporation
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