FREMONT, Calif., July 26, 2017 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq:LRCX) today announced financial results for the quarter ended June 25, 2017 (the "June 2017 quarter").

Highlights for the June 2017 quarter were as follows:

  • Shipments of $2.54 billion and revenue of $2.34 billion.
  • GAAP gross margin of 45.6%, GAAP operating margin of 25.9%, and GAAP diluted EPS of $2.82.
  • Non-GAAP gross margin of 46.5%, non-GAAP operating margin of 27.7%, and non-GAAP diluted EPS of $3.11.


Key Financial Data for the Quarters Ended June 25, 2017 and March 26, 2017 
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP
  June 2017 March 2017 Change Q/Q
Shipments $2,542,664  $2,412,656  + 5%
Revenue $2,344,907  $2,153,995  + 9%
Gross margin as percentage of revenue 45.6% 45.1% + 50 bps 
Operating margin as percentage of revenue 25.9% 25.0% + 90 bps 
Diluted EPS $2.82  $3.10  - 9%
 
Non-GAAP
  June 2017 March 2017 Change Q/Q
Shipments $2,542,664  $2,412,656  + 5%
Revenue $2,344,907  $2,153,995  + 9%
Gross margin as percentage of revenue 46.5% 46.1% + 40 bps 
Operating margin as percentage of revenue 27.7% 26.9% + 80 bps 
Diluted EPS $3.11  $2.80  + 11%
            

U.S. GAAP Financial Results

For the June 2017 quarter, revenue was $2,345 million, gross margin was $1,069 million, or 45.6% of revenue, operating expenses were $461 million, operating margin was 25.9% of revenue, and net income was $526 million, or $2.82 per diluted share on a GAAP basis. This compares to revenue of $2,154 million, gross margin of $971 million, or 45.1% of revenue, operating expenses of $433 million, operating margin of 25.0% of revenue, and net income of $575 million, or $3.10 per diluted share, for the quarter ended March 26, 2017 (the “March 2017 quarter”).

Non-GAAP Financial Results

For the June 2017 quarter, non-GAAP gross margin was $1,090 million or 46.5% of revenue, non-GAAP operating expenses were $440 million, non-GAAP operating margin was 27.7% of revenue, and non-GAAP net income was $566 million, or $3.11 per diluted share. This compares to non-GAAP gross margin of $993 million or 46.1% of revenue, non-GAAP operating expenses of $414 million, non-GAAP operating margin of 26.9% of revenue, and non-GAAP net income of $508 million, or $2.80 per diluted share for the March 2017 quarter.

“Lam delivered another record quarter for shipments, revenue and non-GAAP operating income in June, capping a record fiscal 2017 highlighted by over eight and a half billion dollars in shipments and nearly ten dollars in non-GAAP diluted earnings per share,” said Martin Anstice, Lam Research’s President and Chief Executive Officer. “Demand trends in our key end markets have improved, and we are on track once again to outperform overall industry growth in calendar 2017. Longer-term, our increased strategic relevance enabling a new generation of technology innovations, combined with broad competitive strength, deliver a compelling value creation opportunity for Lam.”

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $6.3 billion at the end of the June 2017 quarter compared to $6.1 billion at the end of the March 2017 quarter. This increase was primarily the result of approximately $729 million of cash generated in operating activities, partially offset by $526 million of share repurchases, including net share settlement on employee stock-based compensation.

Deferred revenue at the end of the June 2017 quarter increased to $966 million as compared to $842 million at the end of the March 2017 quarter. Deferred profit at the end of the June 2017 quarter increased to $608 million as compared to $527 million at the end of the March 2017 quarter. Lam’s deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The estimated future revenue from shipments to Japanese customers was approximately $397 million as of June 25, 2017 and $260 million as of March 26, 2017.

Geographic Distribution

The geographic distribution of shipments and revenue during the June 2017 quarter is shown in the following table:

RegionShipments Revenue
Korea36% 38%
Japan21% 17%
China16% 16%
Taiwan14% 16%
United States8% 9%
Europe3% 3%
Southeast Asia2% 1%

Outlook

For the September 2017 quarter, Lam is providing the following guidance:

 U.S. GAAP Reconciling
Items
 Non-GAAP
Shipments$2.35 Billion+/-$100 Million  $2.35 Billion+/-$100 Million
Revenue$2.45 Billion+/-$100 Million  $2.45 Billion+/-$100 Million
Gross margin 45.6%+/- 1% $21 Million  46.5%+/- 1%
Operating margin 26.5%+/- 1% $37 Million  28.0%+/- 1%
Net income per diluted share$2.98 +/-$0.12  $37 Million $3.25 +/-$0.12 
Diluted share count187 Million 4 Million 183 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, 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 in the Novellus transaction, $21 million.
  • Operating margin - amortization related to intangible assets acquired in the Novellus transaction, $37 million.
  • Earnings per share - amortization related to intangible assets acquired in the Novellus transaction, $37 million;  amortization of note discounts, $6 million; and associated tax benefit for non-GAAP items ($6) million; totaling $37 million.
  • Diluted share count - impact of a note hedge issued contemporaneously with the convertible notes due 2018, 4 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 June 2017 and March 2017 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, costs associated with business process reengineering, the amortization of notes discounts, tax benefit of non-GAAP items, and income tax benefit on the conclusion of tax matters related to a prior business combination.

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 Japanese customers; our revenue, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; the potential for value creation; 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, 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 26, 2016 and quarterly reports on Form 10-Q for the fiscal quarters ended September 25, 2016, December 25, 2016 and March 26, 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)
 
 Three Months Ended Twelve Months Ended
 June 25,
2017
 March 26,
2017
 June 26,
2016
 June 25,
2017
 June 26,
2016
 (unaudited) (unaudited) (unaudited) (unaudited) (1) 
Revenue$2,344,907  $2,153,995  $1,546,261  $8,013,620  $5,885,893 
Cost of goods sold1,275,946  1,182,591  847,477  4,410,261  3,266,971 
Gross margin1,068,961  971,404  698,784  3,603,359  2,618,922 
Gross margin as a percent of revenue45.6% 45.1% 45.2% 45.0% 44.5%
Research and development285,712  265,986  237,255  1,033,742  913,712 
Selling, general and administrative175,310  167,000  152,288  667,485  630,954 
Total operating expenses461,022  432,986  389,543  1,701,227  1,544,666 
Operating income607,939  538,418  309,241  1,902,132  1,074,256 
Operating income as a percent of revenue25.9% 25.0% 20.0% 23.7% 18.3%
Other expense, net(4,444) (7,838) (27,249) (90,459) (114,139)
Income before income taxes603,495  530,580  281,992  1,811,673  960,117 
Income tax (expense) benefit(77,071) 44,133  (23,053) (113,910) (46,068)
Net income$526,424  $574,713  $258,939  $1,697,763  $914,049 
Net income per share:         
Basic$3.25  $3.52  $1.62  $10.47  $5.75 
Diluted$2.82  $3.10  $1.46  $9.24  $5.22 
Number of shares used in per share calculations:         
Basic162,213  163,408  159,862  162,222  158,919 
Diluted186,427  185,094  177,649  183,770  175,159 
Cash dividend declared per common share$0.45  $0.45  $0.30  $1.65  $1.20 
 
(1) Derived from audited financial statements.


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 June 25,
2017
 March 26,
2017
 June 26,
2016
 
 (unaudited) (unaudited) (1)  
ASSETS      
Cash and cash equivalents$2,377,534  $2,128,570  $5,039,322  
Investments3,663,628  3,755,036  1,788,612  
Accounts receivable, net1,673,398  1,636,090  1,262,145  
Inventories1,232,916  1,133,196  971,911  
Other current assets195,022  223,056  151,160 (2)
Total current assets9,142,498  8,875,948  9,213,150  
Property and equipment, net685,595  675,707  639,608  
Restricted cash and investments256,205  256,157  250,421  
Goodwill and intangible assets1,796,668  1,835,150  1,951,197  
Other assets241,799  232,224  209,939 (2)
Total assets$12,122,765  $11,875,186  $12,264,315  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current portion of convertible notes and capital leases$908,439  $905,288  $947,733 (2)
Other current liabilities2,041,676  1,851,451  1,470,308  
Total current liabilities2,950,115  2,756,739  2,418,041  
Long-term debt and capital leases1,784,974  1,777,297  3,378,129 (2)
Income taxes payable120,178  137,173  231,514  
Other long-term liabilities280,186  282,615  134,562  
Total liabilities5,135,453  4,953,824  6,162,246  
Temporary equity, convertible notes169,861  175,108  207,552  
Stockholders’ equity (3)6,817,451  6,746,254  5,894,517  
Total liabilities and stockholders’ equity$12,122,765  $11,875,186  $12,264,315  
       
(1) Derived from audited financial statements.      
(2) Adjusted for effects of retrospective implementation of ASU 2015-3, regarding the simplification of the presentation of bond issuance costs, which requires that bond issuance costs related to a recognized liability be presented on the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. 
(3) Common shares issued and outstanding were 161,723 as of June 25, 2017, 163,969 as of March 26, 2017 and 160,201 as of June 26, 2016. 

           

LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 Three Months Ended Twelve Months Ended
 June 25,
2017
 March 26,
2017
 June 26,
2016
 June 25,
2017
 June 26,
2016
 (unaudited) (unaudited) (unaudited) (unaudited) (1) 
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net income$526,424  $574,713  $258,939  $1,697,763  $914,049 
Adjustments to reconcile net income to net cash provided by operating activities:         
Depreciation and amortization79,036  76,242  74,976  306,905  291,028 
Deferred income taxes35,069  27,619  (46,708) 104,936  (49,003)
Equity-based compensation expense43,802  35,323  39,288  149,975  142,348 
(Gain) Loss on early extinguishment of debt(73)     36,252   
Income tax benefit (expense) on equity-based compensation plans38,747    (8,048) 38,747  (1,023)
Excess tax (benefit) expense on equity-based compensation plans(38,635)   9,035  (38,635) 1,020 
Amortization of note discounts and issuance costs6,114  6,136  14,584  25,282  70,522 
Gain on sale of assets, net(163)   (15,223) (163) (15,223)
Other, net8,275  (4,738) 17,929  19,052  48,788 
Changes in operating assets and liabilities30,676  (292,607) 79,052  (310,832) (52,229)
Net cash provided by operating activities729,272  422,688  423,824  2,029,282  1,350,277 
CASH FLOWS FROM INVESTING ACTIVITIES:         
Capital expenditures and intangible assets(34,811) (44,116) (51,726) (157,419) (175,330)
Net sale (purchase) of available-for-sale securities93,858  (418,566) 605,891  (1,883,886) 798,828 
Proceeds from sale of assets290    79,730  1,291  79,730 
Transfers of restricted cash and investments(48) (982) (112,381) (5,784) (112,381)
Other, net(187) (3,586)   (12,815) 1,636 
Net cash provided by (used for) investing activities59,102  (467,250) 521,514  (2,058,613) 592,483 
CASH FLOWS FROM FINANCING ACTIVITIES:         
Principal payments on long-term debt and capital lease obligations(2,445) (69,227) (450,624) (1,688,313) (451,497)
Proceeds from issuance of long-term debt, net of issuance costs    2,374,220    2,338,144 
Excess tax benefit (expense) on equity-based compensation plans38,635    (9,035) 38,635  (1,020)
Treasury stock purchases(525,778) (216,373) (27,114) (811,672) (158,389)
Dividends paid(73,709) (73,337) (47,308) (243,495) (190,402)
Re-issuance of treasury stock related to employee stock purchase plan23,120  17,223  20,360  59,663  55,992 
Proceeds from issuance of common stock369  7,964  1,547  12,913  3,405 
Other, net(1) (70) (159) (125) (488)
Net cash (used for) provided by financing activities(539,809) (333,820) 1,861,887  (2,632,394) 1,595,745 
Effect of exchange rate changes on cash and cash equivalents399  2,992  76  (63) (722)
Net increase (decrease) in cash and cash equivalents248,964  (375,390) 2,807,301  (2,661,788) 3,537,783 
Cash and cash equivalents at beginning of period2,128,570  2,503,960  2,232,021  5,039,322  1,501,539 
Cash and cash equivalents at end of period$2,377,534  $2,128,570  $5,039,322  $2,377,534  $5,039,322 
          
(1) Derived from audited financial statements.         

               


Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
 Three Months Ended
 June 25,
2017
 March 26,
2017
Revenue$2,344,907  $2,153,995 
Gross margin$1,090,211  $992,654 
Gross margin as percentage of revenue46.5% 46.1%
Operating expenses$440,126  $414,229 
Operating income$650,085  $578,425 
Operating margin as a percentage of revenue27.7% 26.9%
Net income$565,518  $507,751 
Net income per diluted share$3.11  $2.80 
Shares used in per share calculation - diluted182,093  181,539 


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 25,
2017
 March 26,
2017
U.S. GAAP net income$526,424  $574,713 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold21,250  21,250 
Amortization related to intangible assets acquired in Novellus transaction -selling, general and administrative16,083  16,083 
Cost associated with business process reengineering- selling, general and administrative4,813  2,674 
Amortization of note discounts - other expense, net5,631  5,654 
Net income tax benefit on non-GAAP items(5,697) (6,418)
Income tax benefit on conclusion of certain tax matters(2,986) (106,205)
Non-GAAP net income$565,518  $507,751 
Non-GAAP net income per diluted share$3.11  $2.80 
U.S. GAAP number of shares used for per diluted share calculation186,427  185,094 
Effect of convertible note hedge(4,334) (3,555)
Non-GAAP number of shares used for per diluted share calculation182,093  181,539 


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 25,
 2017
 June 26,
 2016
U.S. GAAP net income$1,697,763  $914,049 
Pre-tax non-GAAP items:   
Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold85,000  85,000 
Product rationalization - cost of goods sold6,127   
Novellus acquisition-related inventory fair value impact - cost of goods sold  777 
Restructuring charges - cost of goods sold  371 
Restructuring charges - research and development  4,355 
Product rationalization - research and development1,650   
Cost associated with campus consolidation - research and development3,556  7,763 
KLA-Tencor acquisition-related costs - selling, general and administrative9,972  50,985 
Gain on sale of assets, net associated exit costs -  selling, general and administrative  (15,223)
Amortization related to intangible assets acquired in Novellus transaction -selling, general and administrative64,332  64,333 
Restructuring charges - selling, general and administrative  4,997 
Costs associated with business process reengineering - selling, general and administrative7,487   
Litigation settlement - selling, general and administrative4,000   
Amortization of note discounts - other expense, net22,869  35,205 
Costs related to early termination of KLA-Tencor acquisition funding - other expense, net34,518   
Amortization of bridge loan issuance costs and other related fees - other expense, net  33,843 
KLA-Tencor pre-acquisition funding interest expense, net - other expense, net20,391  3,821 
Net income tax benefit on non-GAAP items(47,941) (49,859)
Income tax benefit on conclusion of certain tax matters(109,191) (3,017)
Change to income tax benefit due to a court ruling  (22,812)
Income tax benefit related to tax extenders, primarily the research and development credit  (13,603)
Non-GAAP net income$1,800,533  $1,100,985 
Non-GAAP net income per diluted share$9.98  $6.37 
U.S. GAAP number of shares used for per diluted share calculation183,770  175,159 
Effect of convertible note hedge(3,302) (2,398)
Non-GAAP number of shares used for per diluted share calculation180,468  172,761 


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 25,
2017
 March 26,
2017
 December 25,
2016
 September 25,
2016
U.S. GAAP gross margin$1,068,961  $971,404  $846,797  $716,197 
Pre-tax non-GAAP items:       
Amortization related to intangible assets acquired in Novellus transaction21,250  21,250  21,250  21,250 
Product rationalization    6,127   
Non-GAAP gross margin$1,090,211  $992,654  $874,174  $737,447 
U.S. GAAP gross margin as a percentage of revenue45.6% 45.1% 45.0% 43.9%
Non-GAAP gross margin as a percentage of revenue46.5% 46.1% 46.4% 45.2%
U.S. GAAP operating expenses$461,022  $432,986  $406,969  $400,250 
Pre-tax non-GAAP items:       
Amortization related to intangible assets acquired in Novellus transaction(16,083) (16,083) (16,083) (16,083)
Costs associated with business process reengineering(4,813) (2,674)    
KLA-Tencor acquisition-related costs      (9,972)
Product rationalization    (1,650)  
Cost associated with campus consolidation    (995) (2,561)
Litigation settlement    (4,000)  
Non-GAAP operating expenses$440,126  $414,229  $384,241  $371,634 
Non-GAAP operating income$650,085  $578,425  $489,933  $365,813 
GAAP operating margin as percent of revenue25.9% 25.0% 23.4% 19.4%
Non-GAAP operating margin as a percent of revenue27.7% 26.9% 26.0% 22.4%

 

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

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