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Lam Research Corporation Reports Financial Results for the Quarter Ended December 29, 2019

FREMONT, Calif., Jan. 29, 2020 (GLOBE NEWSWIRE) -- Lam Research Corporation (the "Company," "Lam," "Lam Research") today announced financial results for the quarter ended December 29, 2019 (the “December 2019 quarter”).

Highlights for the December 2019 quarter were as follows:

  • Revenue of $2.58 billion.
  • U.S. GAAP gross margin of 45.7%, U.S. GAAP operating income as a percentage of revenue of 26.6%, and U.S. GAAP diluted EPS of $3.43.
  • Non-GAAP gross margin of 45.7%, non-GAAP operating income as a percentage of revenue of 27.1%, and non-GAAP diluted EPS of $4.01.

Key Financial Data for the Quarters Ended
December 29, 2019 and September 29, 2019
(in thousands, except per-share data, percentages, and basis points)

U.S. GAAP
    December 2019   September 2019   Change Q/Q
Revenue   $ 2,583,501     $ 2,165,746     + 19%
Gross margin as percentage of revenue   45.7 %   45.3 %   + 40 bps
Operating income as percentage of revenue   26.6 %   24.8 %   + 180 bps
Diluted EPS   $ 3.43     $ 3.09     + 11%
             
Non-GAAP
    December 2019   September 2019   Change Q/Q
Revenue   $ 2,583,501     $ 2,165,746     + 19%
Gross margin as percentage of revenue   45.7 %   45.4 %   + 30 bps
Operating income as percentage of revenue   27.1 %   25.5 %   + 160 bps
Diluted EPS   $ 4.01     $ 3.18     + 26%

U.S. GAAP Financial Results

For the December 2019 quarter, revenue was $2,584 million, gross margin was $1,180 million, or 45.7% of revenue, operating expenses were $493 million, operating income was 26.6% of revenue, and net income was $515 million, or $3.43 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,166 million, gross margin of $982 million, or 45.3% of revenue, operating expenses of $444 million, operating income of 24.8% of revenue, and net income of $466 million, or $3.09 per diluted share, for the quarter ended September 29, 2019 (the “September 2019 quarter”).

Non-GAAP Financial Results

For the December 2019 quarter, non-GAAP gross margin was $1,181 million or 45.7% of revenue, non-GAAP operating expenses were $481 million, non-GAAP operating income was 27.1% of revenue, and non-GAAP net income was $602 million, or $4.01 per diluted share. This compares to non-GAAP gross margin of $983 million or 45.4% of revenue, non-GAAP operating expenses of $431 million, non-GAAP operating income of 25.5% of revenue, and non-GAAP net income of $480 million, or $3.18 per diluted share for the September 2019 quarter.

“Lam closed out calendar 2019 with strong December quarter results,” said Tim Archer, Lam Research’s President and Chief Executive Officer. “We are executing at a high level in an improving wafer fabrication equipment environment and building a powerful pipeline of new products to fuel future growth.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $4.9 billion at the end of the December 2019 quarter compared to $5.8 billion at the end of the September 2019 quarter. This decrease was primarily the result of $1.0 billion of share repurchases, including net share settlement on employee stock-based compensation, $166.7 million of dividends paid to stockholders, and $62.1 million of capital expenditures, partially offset by $307.9 million of cash generated from operating activities.

Deferred revenue and deferred profit at the end of the December 2019 quarter decreased to $411 million and $366 million, respectively, as compared to $481 million and $407 million, respectively, at the end of the September 2019 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 $91 million as of December 29, 2019 and $47 million as of September 29, 2019.

Geographic Distribution

The geographic distribution of revenue during the December 2019 quarter is shown in the following table:

Region Revenue
China 29%
Taiwan 26%
Korea 18%
United States 9%
Japan 8%
Southeast Asia 7%
Europe 3%

Outlook

For the quarter ended March 29, 2020, Lam is providing the following guidance:

  U.S. GAAP   Reconciling Items   Non-GAAP
Revenue $2.8 Billion +/- $200 Million     $2.8 Billion +/- $200 Million
Gross margin as a percentage of revenue 46.4% +/- 1%   $2   Million   46.5% +/- 1%
Operating income as a percentage of revenue 27.5% +/- 1%   $14   Million   28.0% +/- 1%
Net income per diluted share $4.46 +/- $0.40   $13   Million   $4.55 +/- $0.40
Diluted share count 149 Million     149 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 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 as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $2 million.
  • Operating income as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $14 million.
  • Net income per diluted share - amortization related to intangible assets acquired though business combinations, $14 million; amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($2 million); totaling $13 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 December 2019 and September 2019 quarters exclude amortization related to intangible assets acquired through business combinations, amortization of note discounts, and income tax benefit of non-GAAP items. Additionally, the December 2019 quarter non-GAAP results exclude the cumulative income tax benefit reversal due to the Ninth Circuit decision to deny a rehearing of the Altera stock-based compensation case and the September 2019 quarter non-GAAP results exclude restructuring charges.

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 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; the timing and amount of revenue and profit earned from any booked deferred revenue and profit; our continuing ability to execute; improvement in the wafer fabrication equipment environment; our ability to develop successful new products and the potential for those products to fuel future growth; the legal and business factors that may affect our future tax rate; and our guidance for revenue, gross margin (both as a dollar value and a percentage of revenue), operating income (both as a dollar value and a percentage of revenue), net income or earnings per diluted share, on either a GAAP or non-GAAP basis 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; the actions of our customers and competitors may be inconsistent with our expectations; and widespread outbreaks of illness 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 30, 2019 and our quarterly report on Form 10-Q for the fiscal quarter ended September 29, 2019. 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 Corporation 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. Lam Research (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   Six Months Ended
  December 29,
 2019
  September 29,
2019
  December 23,
 2018
  December 29,
 2019
  December 23,
 2018
Revenue $ 2,583,501     $ 2,165,746     $ 2,522,673     $ 4,749,247     $ 4,853,364  
Cost of goods sold 1,403,857     1,184,036     1,377,640     2,587,893     2,650,133  
Gross margin 1,179,644     981,710     1,145,033     2,161,354     2,203,231  
Gross margin as a percent of revenue 45.7 %   45.3 %   45.4 %   45.5 %   45.4 %
Research and development 318,861     286,827     285,556     605,688     577,228  
Selling, general and administrative 174,272     157,428     169,098     331,700     343,873  
Total operating expenses 493,133     444,255     454,654     937,388     921,101  
Operating income 686,511     537,455     690,379     1,223,966     1,282,130  
Operating income as a percent of revenue 26.6 %   24.8 %   27.4 %   25.8 %   26.4 %
Other expense, net (13,924 )   (12,728 )   (30,649 )   (26,652 )   (31,026 )
Income before income taxes 672,587     524,727     659,730     1,197,314     1,251,104  
Income tax expense (158,077 )   (58,938 )   (90,875 )   (217,015 )   (148,889 )
Net income $ 514,510     $ 465,789     $ 568,855     $ 980,299     $ 1,102,215  
Net income per share:                  
Basic $ 3.57     $ 3.22     $ 3.67     $ 6.79     $ 7.10  
Diluted $ 3.43     $ 3.09     $ 3.51     $ 6.52     $ 6.73  
Number of shares used in per share calculations:                  
Basic 143,987     144,673     155,022     144,330     155,340  
Diluted 150,097     150,682     162,170     150,389     163,749  
Cash dividend declared per common share $ 1.15     $ 1.15     $ 1.10     $ 2.30     $ 2.20  
                                       

 LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  December 29,
 2019
  September 29,
2019
  June 30,
 2019
  (unaudited)   (unaudited)   (1)  
ASSETS          
Cash and cash equivalents $ 3,035,887     $ 4,607,182     $ 3,658,219  
Investments 1,647,867     983,650     1,772,984  
Accounts receivable, net 2,030,490     1,635,643     1,455,522  
Inventories 1,528,620     1,483,385     1,540,140  
Prepaid expenses and other current assets 212,101     124,755     133,544  
Total current assets 8,454,965     8,834,615     8,560,409  
Property and equipment, net 1,047,254     1,030,168     1,059,077  
Restricted cash and investments 253,907     254,654     255,177  
Goodwill and intangible assets 1,677,940     1,690,648     1,701,547  
Other assets 480,056     533,417     425,123  
Total assets $ 11,914,122     $ 12,343,502     $ 12,001,333  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current portion of long-term debt and finance lease obligations $ 632,292     $ 645,158     $ 667,131  
Other current liabilities 1,933,209     1,812,524     1,704,519  
Total current liabilities 2,565,501     2,457,682     2,371,650  
Long-term debt and finance lease obligations 3,786,067     3,788,089     3,822,768  
Income taxes payable 872,778     856,895     892,790  
Other long-term liabilities 272,043     261,890     190,821  
Total liabilities 7,496,389     7,364,556     7,278,029  
Temporary equity, convertible notes 38,304     42,553     49,439  
Stockholders’ equity (2) 4,379,429     4,936,393     4,673,865  
Total liabilities and stockholders’ equity $ 11,914,122     $ 12,343,502     $ 12,001,333  
                       


(1 ) Derived from audited financial statements.
(2 ) Common shares issued and outstanding were 142,462 as of December 29, 2019, 144,871 as of September 29, 2019, and 144,433 as of June 30, 2019.
     

LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

  Three Months Ended   Six Months Ended
  December 29,
 2019
  September 29,
2019
  December 23,
 2018
  December 29,
 2019
  December 23,
 2018
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income $ 514,510     $ 465,789     $ 568,855     $ 980,299     $ 1,102,215  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization 65,530     64,664     81,794     130,194     161,599  
Deferred income taxes 77,508     (2,992 )   20,797     74,516     (62,704 )
Equity-based compensation expense 45,725     42,905     38,806     88,630     89,149  
Amortization of note discounts and issuance costs 1,575     1,675     1,031     3,250     2,276  
Other, net (327 )   4,026     (1,343 )   3,699     848  
Changes in operating assets and liabilities (396,593 )   (112,020 )   (67,521 )   (508,613 )   69,322  
Net cash provided by operating activities 307,928     464,047     642,419     771,975     1,362,705  
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Capital expenditures and intangible assets (62,054 )   (39,256 )   (105,923 )   (101,310 )   (162,021 )
Net (purchase) sale of available-for-sale securities (662,287 )   790,478     773,223     128,191     160,640  
Other, net (9,988 )   (540 )   (369 )   (10,528 )   (4,019 )
Net cash (used for) provided by investing activities (734,329 )   750,682     666,931     16,353     (5,400 )
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Principal payments on debt (17,987 )   (28,965 )   (6,440 )   (46,952 )   (86,271 )
Net repayments of commercial paper         (359,518 )       (359,604 )
Treasury stock purchases (1,005,067 )   (78,132 )   (1,519 )   (1,083,199 )   (1,737,414 )
Dividends paid (166,721 )   (158,868 )   (167,907 )   (325,589 )   (342,279 )
Reissuance of treasury stock related to employee stock purchase plan 38,447         32,920     38,447     32,920  
Proceeds from issuance of common stock 632     3,869     109     4,501     109  
Other, net         (13,198 )       (13,207 )
Net cash used for financing activities (1,150,696 )   (262,096 )   (515,553 )   (1,412,792 )   (2,505,746 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 5,055     (4,193 )   (2,721 )   862     (5,032 )
Net (decrease) increase in cash, cash equivalents, and restricted cash (1,572,042 )   948,440     791,076     (623,602 )   (1,153,473 )
Cash, cash equivalents, and restricted cash at beginning of period 4,861,836     3,913,396     2,824,009     3,913,396     4,768,558  
Cash, cash equivalents, and restricted cash at end of period $ 3,289,794     $ 4,861,836     $ 3,615,085     $ 3,289,794     $ 3,615,085  
                                       

Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)

  Three Months Ended
  December 29,
 2019
  September 29,
2019
Revenue $ 2,583,501     $ 2,165,746  
Gross margin $ 1,181,271     $ 983,338  
Gross margin as percentage of revenue 45.7 %   45.4 %
Operating expenses $ 480,776     $ 430,853  
Operating income $ 700,495     $ 552,485  
Operating income as a percentage of revenue 27.1 %   25.5 %
Net income $ 601,810     $ 479,555  
Net income per diluted share $ 4.01     $ 3.18  
Shares used in per share calculation - diluted 150,097     150,682  
           

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)

  Three Months Ended
  December 29,
2019
  September 29,
2019
U.S. GAAP net income $ 514,510     $ 465,789  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold 1,627     1,628  
Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative 12,357     12,357  
Restructuring charges - selling, general and administrative     1,045  
Amortization of note discounts - other expense, net 1,158     1,234  
Net income tax benefit on non-GAAP items (2,358 )   (2,498 )
Cumulative income tax benefit reversal due to a court ruling 74,516      
Non-GAAP net income $ 601,810     $ 479,555  
Non-GAAP net income per diluted share $ 4.01     $ 3.18  
U.S. GAAP net income per diluted share $ 3.43     $ 3.09  
U.S. GAAP and non-GAAP number of shares used for per diluted share calculation 150,097     150,682  
           

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
  December 29,
 2019
  September 29,
2019
U.S. GAAP gross margin $ 1,179,644     $ 981,710  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations 1,627     1,628  
Non-GAAP gross margin $ 1,181,271     $ 983,338  
U.S. GAAP gross margin as a percentage of revenue 45.7 %   45.3 %
Non-GAAP gross margin as a percentage of revenue 45.7 %   45.4 %
U.S. GAAP operating expenses $ 493,133     $ 444,255  
Pre-tax non-GAAP items:      
Amortization related to intangible assets acquired through certain business combinations (12,357 )   (12,357 )
Restructuring charges     (1,045 )
Non-GAAP operating expenses $ 480,776     $ 430,853  
U.S. GAAP operating income $ 686,511     $ 537,455  
Non-GAAP operating income $ 700,495     $ 552,485  
U.S. GAAP operating income as percent of revenue 26.6 %   24.8 %
Non-GAAP operating income as a percent of revenue 27.1 %   25.5 %

Lam Research Corporation Contact:

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