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| 8-K - QUARTERLY EARNINGS RELEASE - LAM RESEARCH CORP | lrcx_8-kx3qx2017.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Lam Research Corporation Contacts:
Satya Kumar, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com
Lam Research Corporation Reports Financial Results for the Quarter Ended March 26, 2017
FREMONT, Calif., April 18, 2017 - Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended March 26, 2017 (the “March 2017 quarter”).
Highlights for the March 2017 quarter were as follows:
• | Shipments of $2.41 billion and revenue of $2.15 billion. |
• | U.S. GAAP gross margin of 45.1%, U.S. GAAP operating margin of 25.0%, and U.S. GAAP diluted EPS of $3.10. |
• | Non-GAAP gross margin of 46.1%, non-GAAP operating margin of 26.9%, and non-GAAP diluted EPS of $2.80. |
Key Financial Data for the Quarters Ended
March 26, 2017 and December 25, 2016
(in thousands, except per-share data, percentages, and basis points)
U.S. GAAP | ||||||||||
March 2017 | December 2016 | Change Q/Q | ||||||||
Shipments | $ | 2,412,656 | $ | 1,922,549 | + 25% | |||||
Revenue | $ | 2,153,995 | $ | 1,882,299 | + 14% | |||||
Gross margin as percentage of revenue | 45.1 | % | 45.0 | % | + 10 bps | |||||
Operating margin as percentage of revenue | 25.0 | % | 23.4 | % | + 160 bps | |||||
Diluted EPS | $ | 3.10 | $ | 1.81 | + 71% | |||||
Non-GAAP | ||||||||||
March 2017 | December 2016 | Change Q/Q | ||||||||
Shipments | $ | 2,412,656 | $ | 1,922,549 | + 25% | |||||
Revenue | $ | 2,153,995 | $ | 1,882,299 | + 14% | |||||
Gross margin as percentage of revenue | 46.1 | % | 46.4 | % | - 30 bps | |||||
Operating margin as percentage of revenue | 26.9 | % | 26.0 | % | + 90 bps | |||||
Diluted EPS | $ | 2.80 | $ | 2.24 | + 25% | |||||
U.S. GAAP Financial Results
For the March 2017 quarter, revenue was $2,154 million, gross margin was $971 million, or 45.1% of revenue, operating expenses were $433 million, operating margin was 25.0% of revenue, and net income was $575 million, or $3.10 per diluted share on a U.S. GAAP basis. This compares to revenue of $1,882 million, gross margin of $847 million, or 45.0% of revenue, operating expenses of $407 million, operating margin of 23.4% of revenue, and net income of $333 million, or $1.81 per diluted share, for the quarter ended December 25, 2016 (the “December 2016 quarter”). March 2017 earnings per diluted share also benefited from an income tax benefit on the conclusion of tax matters primarily related to a prior business combination.
Non-GAAP Financial Results
For the March 2017 quarter, non-GAAP gross margin was $993 million or 46.1% of revenue, non-GAAP operating expenses were $414 million, non-GAAP operating margin was 26.9% of revenue, and non-GAAP net income was $508 million, or $2.80 per diluted share. This compares to non-GAAP gross margin of $874 million or 46.4% of revenue, non-GAAP operating expenses of $384 million, non-GAAP operating margin of 26.0% of revenue, and non-GAAP net income of $405 million, or $2.24 per diluted share for the December 2016 quarter.
“The company continues to perform extremely well, again setting new records of financial performance with underlying business levels almost 70% higher than the year ago equivalent quarter. This accomplishment is made possible by our broad competitive strength, with products and services increasingly enabling the success of our customers,” said Martin Anstice, Lam Research’s President and Chief Executive Officer. “Our outlook for the year has improved, and we are increasingly convinced by the potential for sustainable value creation from long-term diverse and secular technology demand trends.”
Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances remained steady at $6.1 billion at the end of the March 2017 compared to the end of the December 2016 quarter. Cash flows from operating activities during the March 2017 quarter of $423 million were primarily utilized for approximately $216 million of share repurchases, including net share settlement on employee stock-based compensation; approximately $69 million of principal payments on debt, primarily related to our convertible notes; approximately $73 million of dividends paid to stockholders; and approximately $44 million of capital expenditures.
Deferred revenue at the end of the March 2017 quarter increased to $842 million as compared to $673 million at the end of the December 2016 quarter. Deferred profit at the end of the March 2017 quarter increased to $527 million as compared to $408 million at the end of the December 2016 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 $260 million as of March 26, 2017 and $129 million as of December 25, 2016.
Geographic Distribution
The geographic distribution of shipments and revenue during the March 2017 quarter is shown in the following table:
Region | Shipments | Revenue | |||
Korea | 35 | % | 34 | % | |
Taiwan | 22 | % | 28 | % | |
China | 15 | % | 11 | % | |
Japan | 15 | % | 11 | % | |
United States | 7 | % | 9 | % | |
Europe | 3 | % | 4 | % | |
Southeast Asia | 3 | % | 3 | % | |
Outlook
For the June 2017 quarter, Lam is providing the following guidance:
U.S. GAAP | Reconciling Items | Non-GAAP | ||||||||||
Shipments | $2.5 Billion | +/- | $100 Million | — | $2.5 Billion | +/- | $100 Million | |||||
Revenue | $2.3 Billion | +/- | $100 Million | — | $2.3 Billion | +/- | $100 Million | |||||
Gross margin | 45.1% | +/- | 1% | $ | 21 | Million | 46.0% | +/- | 1% | |||
Operating margin | 25.3% | +/- | 1% | $ | 39 | Million | 27.0% | +/- | 1% | |||
Net income per diluted share | $2.73 | +/- | $0.12 | $ | 38 | Million | $3.00 | +/- | $0.12 | |||
Diluted share count | 184 Million | 4 | Million | 180 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 or determined 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; costs associated with business process reengineering, $2 million; totaling $39 million. |
• | Earnings per share - amortization related to intangible assets acquired in the Novellus transaction, $37 million; amortization of note discounts, $6 million; costs associated with business process reengineering, $2 million; and associated tax benefit for non-GAAP items ($7) million; totaling $38 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 March 2017 and December 2016 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, the amortization of note discounts, and tax benefit of non-GAAP items. Additionally, the March 2017 quarter non-GAAP results exclude costs associated with business process reengineering, and income tax benefit on the conclusion of tax matters related to a prior business combination; and the December 2016 quarter non-GAAP results exclude costs associated with campus consolidation, product rationalization charges, litigation settlement, KLA-Tencor acquisition funding net interest expense, and costs related to the early termination of the KLA-Tencor acquisition funding.
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; the potential for value creation; technology demand trends; our ability to transform atomic-scale engineering and enable our customers to shape the future of technology; 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 our quarterly report on Form 10-Q for the period ended December 25, 2016. 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. (Nasdaq: LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, and clean solutions helps customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, more powerful, and more power-efficient chips. Through collaboration, continuous innovation, and delivering on commitments, Lam is transforming atomic-scale engineering and enabling its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a Nasdaq-100 Index® and S&P 500® company whose common stock trades on the Nasdaq Global Select MarketSM under the symbol LRCX. For more information, please visit http://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 26, 2017 | December 25, 2016 | March 27, 2016 | March 26, 2017 | March 27, 2016 | |||||||||||||||
Revenue | $ | 2,153,995 | $ | 1,882,299 | $ | 1,314,055 | $ | 5,668,713 | $ | 4,339,632 | |||||||||
Cost of goods sold | 1,182,591 | 1,035,502 | 742,790 | 3,134,315 | 2,419,494 | ||||||||||||||
Gross margin | 971,404 | 846,797 | 571,265 | 2,534,398 | 1,920,138 | ||||||||||||||
Gross margin as a percent of revenue | 45.1 | % | 45.0 | % | 43.5 | % | 44.7 | % | 44.2 | % | |||||||||
Research and development | 265,986 | 246,804 | 221,494 | 748,030 | 676,457 | ||||||||||||||
Selling, general and administrative | 167,000 | 160,165 | 159,018 | 492,175 | 478,666 | ||||||||||||||
Total operating expenses | 432,986 | 406,969 | 380,512 | 1,240,205 | 1,155,123 | ||||||||||||||
Operating income | 538,418 | 439,828 | 190,753 | 1,294,193 | 765,015 | ||||||||||||||
Operating income as a percent of revenue | 25.0 | % | 23.4 | % | 14.5 | % | 22.8 | % | 17.6 | % | |||||||||
Other expense, net | (7,838 | ) | (55,023 | ) | (29,834 | ) | (86,015 | ) | (86,890 | ) | |||||||||
Income before income taxes | 530,580 | 384,805 | 160,919 | 1,208,178 | 678,125 | ||||||||||||||
Income tax benefit (expense) | 44,133 | (52,014 | ) | (17,468 | ) | (36,839 | ) | (23,015 | ) | ||||||||||
Net income | $ | 574,713 | $ | 332,791 | $ | 143,451 | $ | 1,171,339 | $ | 655,110 | |||||||||
Net income per share: | |||||||||||||||||||
Basic | $ | 3.52 | $ | 2.05 | $ | 0.90 | $ | 7.22 | $ | 4.13 | |||||||||
Diluted | $ | 3.10 | $ | 1.81 | $ | 0.82 | $ | 6.40 | $ | 3.76 | |||||||||
Number of shares used in per share calculations: | |||||||||||||||||||
Basic | 163,408 | 162,659 | 159,039 | 162,225 | 158,605 | ||||||||||||||
Diluted | 185,094 | 183,543 | 174,373 | 182,885 | 174,329 | ||||||||||||||
Cash dividend declared per common share | $ | 0.45 | $ | 0.45 | $ | 0.30 | $ | 1.20 | $ | 0.90 | |||||||||
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 26, 2017 | December 25, 2016 | June 26, 2016 | ||||||||||
(unaudited) | (unaudited) | (1) | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 2,128,570 | $ | 2,503,960 | $ | 5,039,322 | ||||||
Investments | 3,755,036 | 3,329,425 | 1,788,612 | |||||||||
Accounts receivable, net | 1,636,090 | 1,426,307 | 1,262,145 | |||||||||
Inventories | 1,133,196 | 1,018,891 | 971,911 | |||||||||
Other current assets | 223,056 | 225,291 | 151,160 | (2) | ||||||||
Total current assets | 8,875,948 | 8,503,874 | 9,213,150 | |||||||||
Property and equipment, net | 675,707 | 672,553 | 639,608 | |||||||||
Restricted cash and investments | 256,157 | 255,175 | 250,421 | |||||||||
Goodwill and intangible assets | 1,835,150 | 1,873,581 | 1,951,197 | |||||||||
Other assets | 232,224 | 215,876 | 209,939 | (2) | ||||||||
Total assets | $ | 11,875,186 | $ | 11,521,059 | $ | 12,264,315 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current portion of convertible notes and capital leases | $ | 905,288 | $ | 957,895 | $ | 947,733 | (2) | |||||
Other current liabilities | 1,851,451 | 1,700,123 | 1,470,308 | |||||||||
Total current liabilities | 2,756,739 | 2,658,018 | 2,418,041 | |||||||||
Long-term debt and capital leases | 1,777,297 | 1,768,713 | 3,378,129 | (2) | ||||||||
Income taxes payable | 137,173 | 238,968 | 231,514 | |||||||||
Other long-term liabilities | 282,615 | 262,351 | 134,562 | |||||||||
Total liabilities | 4,953,824 | 4,928,050 | 6,162,246 | |||||||||
Temporary equity, convertible notes | 175,108 | 197,313 | 207,552 | |||||||||
Stockholders’ equity (3) | 6,746,254 | 6,395,696 | 5,894,517 | |||||||||
Total liabilities and stockholders’ equity | $ | 11,875,186 | $ | 11,521,059 | $ | 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 163,969 as of March 26, 2017, 162,357 as of December 25, 2016, and 160,201 as of June 26, 2016. |
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
March 26, 2017 | December 25, 2016 | March 27, 2016 | March 26, 2017 | March 27, 2016 | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||
Net income | $ | 574,713 | $ | 332,791 | $ | 143,451 | $ | 1,171,339 | $ | 655,110 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||
Depreciation and amortization | 76,242 | 77,065 | 73,664 | 227,869 | 216,052 | ||||||||||||||
Deferred income taxes | 27,619 | 34,615 | (4,908 | ) | 69,867 | (2,295 | ) | ||||||||||||
Equity-based compensation expense | 35,323 | 32,255 | 34,716 | 106,173 | 103,060 | ||||||||||||||
Loss on extinguishment of debt | — | 36,325 | — | 36,325 | — | ||||||||||||||
Amortization of note discounts and issuance costs | 6,136 | 6,202 | 22,458 | 19,168 | 55,938 | ||||||||||||||
Other, net | (4,738 | ) | (1,292 | ) | 9,306 | 10,777 | 29,869 | ||||||||||||
Changes in operating assets and liabilities | (292,607 | ) | (113,863 | ) | (95,776 | ) | (341,508 | ) | (131,281 | ) | |||||||||
Net cash provided by operating activities | 422,688 | 404,098 | 182,911 | 1,300,010 | 926,453 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||
Capital expenditures and intangible assets | (44,116 | ) | (36,513 | ) | (46,007 | ) | (122,608 | ) | (123,604 | ) | |||||||||
Net (purchase) sale of available-for-sale securities | (418,566 | ) | (1,990,928 | ) | 181,938 | (1,977,744 | ) | 192,937 | |||||||||||
(Issuance) repayment of notes receivable | — | (500 | ) | (200 | ) | (500 | ) | 7,882 | |||||||||||
Transfers of restricted cash and investments | (982 | ) | 465 | — | (5,736 | ) | — | ||||||||||||
Other, net | (3,586 | ) | 259 | — | (11,127 | ) | (6,246 | ) | |||||||||||
Net cash (used for) provided by investing activities | (467,250 | ) | (2,027,217 | ) | 135,731 | (2,117,715 | ) | 70,969 | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs | (69,227 | ) | (1,616,270 | ) | (8,479 | ) | (1,685,868 | ) | (36,949 | ) | |||||||||
Treasury stock purchases | (216,373 | ) | (67,668 | ) | (20,092 | ) | (285,894 | ) | (131,275 | ) | |||||||||
Dividends paid | (73,337 | ) | (48,397 | ) | (47,539 | ) | (169,786 | ) | (143,094 | ) | |||||||||
Reissuance of treasury stock related to employee stock purchase plan | 17,223 | — | 16,387 | 36,543 | 35,632 | ||||||||||||||
Proceeds from issuance of common stock | 7,964 | 3,121 | 308 | 12,544 | 1,858 | ||||||||||||||
Other, net | (70 | ) | (44 | ) | 2,255 | (124 | ) | 7,686 | |||||||||||
Net cash used for financing activities | (333,820 | ) | (1,729,258 | ) | (57,160 | ) | (2,092,585 | ) | (266,142 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 2,992 | (5,364 | ) | 2,666 | (462 | ) | (798 | ) | |||||||||||
Net (decrease) increase in cash and cash equivalents | (375,390 | ) | (3,357,741 | ) | 264,148 | (2,910,752 | ) | 730,482 | |||||||||||
Cash and cash equivalents at beginning of period | 2,503,960 | 5,861,701 | 1,967,873 | 5,039,322 | 1,501,539 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 2,128,570 | $ | 2,503,960 | $ | 2,232,021 | $ | 2,128,570 | $ | 2,232,021 | |||||||||
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
Three Months Ended | |||||||
March 26, 2017 | December 25, 2016 | ||||||
Revenue | $ | 2,153,995 | $ | 1,882,299 | |||
Gross margin | $ | 992,654 | $ | 874,174 | |||
Gross margin as percentage of revenue | 46.1 | % | 46.4 | % | |||
Operating expenses | $ | 414,229 | $ | 384,241 | |||
Operating income | $ | 578,425 | $ | 489,933 | |||
Operating margin as a percentage of revenue | 26.9 | % | 26.0 | % | |||
Net income | $ | 507,751 | $ | 405,190 | |||
Net income per diluted share | $ | 2.80 | $ | 2.24 | |||
Shares used in per share calculation - diluted | 181,539 | 180,613 | |||||
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 | |||||||
March 26, 2017 | December 25, 2016 | ||||||
U.S. GAAP net income | $ | 574,713 | $ | 332,791 | |||
Pre-tax non-GAAP items: | |||||||
Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold | 21,250 | 21,250 | |||||
Product rationalization - cost of goods sold | — | 6,127 | |||||
Costs associated with campus consolidation - research and development | — | 995 | |||||
Product rationalization - research and development | — | 1,650 | |||||
Amortization related to intangible assets acquired in Novellus transaction - selling, general and administrative | 16,083 | 16,083 | |||||
Costs associated with business process reengineering - selling, general and administrative | 2,674 | — | |||||
Litigation settlement - selling general and administrative | — | 4,000 | |||||
KLA-Tencor acquisition funding interest expense, net - other expense, net | — | 2,682 | |||||
Amortization of note discounts - other expense, net | 5,654 | 5,671 | |||||
Costs related to early termination of KLA-Tencor acquisition funding - other expense, net | — | 34,518 | |||||
Net income tax benefit on non-GAAP items | (6,418 | ) | (20,577 | ) | |||
Income tax benefit on conclusion of certain tax matters | (106,205 | ) | — | ||||
Non-GAAP net income | $ | 507,751 | $ | 405,190 | |||
Non-GAAP net income per diluted share | $ | 2.80 | $ | 2.24 | |||
U.S. GAAP number of shares used for per diluted share calculation | 185,094 | 183,543 | |||||
Effect of convertible note hedge | (3,555 | ) | (2,930 | ) | |||
Non-GAAP number of shares used for per diluted share calculation | 181,539 | 180,613 | |||||
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 26, 2017 | December 25, 2016 | ||||||
U.S. GAAP gross margin | $ | 971,404 | $ | 846,797 | |||
Pre-tax non-GAAP items: | |||||||
Amortization related to intangible assets acquired in Novellus transaction | 21,250 | 21,250 | |||||
Product rationalization | — | 6,127 | |||||
Non-GAAP gross margin | $ | 992,654 | $ | 874,174 | |||
U.S. GAAP gross margin as a percentage of revenue | 45.1 | % | 45.0 | % | |||
Non-GAAP gross margin as a percentage of revenue | 46.1 | % | 46.4 | % | |||
U.S. GAAP operating expenses | $ | 432,986 | $ | 406,969 | |||
Pre-tax non-GAAP items: | |||||||
Amortization related to intangible assets acquired in Novellus transaction | (16,083 | ) | (16,083 | ) | |||
Costs associated with business process reengineering | (2,674 | ) | — | ||||
Costs associated with campus consolidation | — | (995 | ) | ||||
Product rationalization | — | (1,650 | ) | ||||
Litigation settlement | — | (4,000 | ) | ||||
Non-GAAP operating expenses | $ | 414,229 | $ | 384,241 | |||
Non-GAAP operating income | $ | 578,425 | $ | 489,933 | |||
U.S. GAAP operating margin as percent of revenue | 25.0 | % | 23.4 | % | |||
Non-GAAP operating margin as a percent of revenue | 26.9 | % | 26.0 | % | |||