Item 1. Financial Statements

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Item 1. Financial Statements

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
Revenue	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690
Cost of goods sold	1,985,847		2,901,220		3,805,267		5,638,506
Restructuring charges, net - cost of goods sold	14,957		—		22,897		—
Total cost of goods sold	2,000,804		2,901,220		3,828,164		5,638,506
Gross margin	1,757,455		2,376,349		3,412,157		4,713,184
Research and development	469,712		462,385		892,341		895,760
Selling, general, and administrative	228,843		233,802		435,866		439,422
Restructuring charges, net - operating expenses	1,688		—		3,709		—
Total operating expenses	700,243		696,187		1,331,916		1,335,182
Operating income	1,057,212		1,680,162		2,080,241		3,378,002
Other income (expense), net	29,839		(28,234)		32,440		(71,329)
Income before income taxes	1,087,051		1,651,928		2,112,681		3,306,673
Income tax expense	(132,785)		(183,421)		(271,017)		(412,287)
Net income	$	954,266	$	1,468,507	$	1,841,664	$	2,894,386
Net income per share:
Basic	$	7.25	$	10.80	$	13.94	$	21.21
Diluted	$	7.22	$	10.77	$	13.88	$	21.16
Number of shares used in per share calculations:
Basic	131,629		136,018		132,107		136,455
Diluted	132,220		136,339		132,693		136,774

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 3

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
Net income	$	954,266	$	1,468,507	$	1,841,664	$	2,894,386
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	14,530		41,470		(6,148)		7,861
Cash flow hedges:
Net unrealized gains (losses) during the period	1,671		(18,618)		10,269		185
Net (gains) losses reclassified into net income	(12,826)		1,273		(21,743)		(8,024)
	(11,155)		(17,345)		(11,474)		(7,839)
Available-for-sale investments:
Net unrealized gains during the period	102		490		284		570
Net gains reclassified into net income	—		—		(10)		(53)
	102		490		274		517
Defined benefit plans, net change in unrealized component	179		279		360		572
Other comprehensive income (loss), net of tax	3,656		24,894		(16,988)		1,111
Comprehensive income	$	957,922	$	1,493,401	$	1,824,676	$	2,895,497

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 4

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	December 24, 2023		June 25, 2023
	(unaudited)		(1)
ASSETS
Cash and cash equivalents	$	5,623,289	$	5,337,056
Investments	14,720		37,641
Accounts receivable, less allowance of $5,322 as of December 24, 2023, and $5,344 as of June 25, 2023	2,707,458		2,823,376
Inventories	4,429,906		4,816,190
Prepaid expenses and other current assets	279,239		214,149
Total current assets	13,054,612		13,228,412
Property and equipment, net	2,147,482		1,856,672

Goodwill	1,626,512		1,622,489
Intangible assets, net	151,081		168,454
Other assets	1,804,165		1,905,616
Total assets	$	18,783,852	$	18,781,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	499,704	$	470,702
Accrued expenses and other current liabilities	1,975,945		2,010,637
Deferred profit	1,792,955		1,695,221
Current portion of long-term debt and finance lease obligations	3,779		8,358
Total current liabilities	4,272,383		4,184,918
Long-term debt and finance lease obligations, less current portion	4,980,005		5,003,183
Income taxes payable	797,556		882,084
Other long-term liabilities	511,430		501,286
Total liabilities	10,561,374		10,571,471
Commitments and contingencies (refer to Note 13)
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding	—		—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares as of December 24, 2023 and June 25, 2023; issued and outstanding, 131,278 shares as of December 24, 2023, and 133,297 shares as of June 25, 2023	131		133
Additional paid-in capital	7,997,251		7,809,002
Treasury stock, at cost; 163,472 shares as of December 24, 2023, and 161,380 shares as of June 25, 2023	(23,004,358)		(21,530,353)
Accumulated other comprehensive loss	(117,694)		(100,706)
Retained earnings	23,347,148		22,032,096
Total stockholders’ equity	8,222,478		8,210,172
Total liabilities and stockholders’ equity	$	18,783,852	$	18,781,643

(1)Derived from audited financial statements

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 5

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Six Months Ended
	December 24, 2023		December 25, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,841,664	$	2,894,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	181,420		161,165
Deferred income taxes	(112,985)		(140,296)
Equity-based compensation expense	137,112		144,194







Other, net	4,032		9,978
Changes in operating assets and liabilities	353,760		(739,652)
Net cash provided by operating activities	2,405,003		2,329,775
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets	(192,268)		(303,441)
Business acquisitions, net of cash acquired	—		(119,955)

Proceeds from maturities of available-for-sales securities	23,116		32,438






Other, net	(7,489)		(4,092)
Net cash used for investing activities	(176,641)		(395,050)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt, including finance lease obligations	(254,095)		(18,936)





Treasury stock purchases	(1,488,696)		(566,055)
Dividends paid	(494,746)		(441,595)
Reissuance of treasury stock related to employee stock purchase plan	53,081		44,996
Proceeds from issuance of common stock	4,522		7,673

Other, net	(5,972)		764
Net cash used for financing activities	(2,185,906)		(973,153)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(4,306)		953
Net change in cash, cash equivalents, and restricted cash	38,150		962,525
Cash, cash equivalents, and restricted cash at beginning of period (1)	5,587,372		3,773,535
Cash, cash equivalents, and restricted cash at end of period (1)	$	5,625,522	$	4,736,060
Schedule of non-cash transactions:
Accrued payables for stock repurchases, including applicable excise tax	$	37,263	$	30,125
Accrued payables for capital expenditures	63,126		94,494
Dividends payable	263,133		233,977
Transfers of finished goods inventory to property and equipment	37,927		56,932

Reconciliation of cash, cash equivalents, and restricted cash	December 24, 2023		December 25, 2022
Cash and cash equivalents	$	5,623,289	$	4,484,716
Restricted cash and cash equivalents (1)	2,233		251,344
Total cash, cash equivalents, and restricted cash	$	5,625,522	$	4,736,060

(1)Restricted cash is reported within Other assets in the Condensed Consolidated Balance Sheets

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 6

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Three Months Ended
	December 24, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at September 24, 2023	132,072	$	132	$	7,879,031	$	(22,365,872)	$	(121,350)	$	22,655,389	$	8,047,330
Issuance of common stock	32	—		1,704		—		—		—		1,704
Purchase of treasury stock	(976)	(1)		—		(644,952)		—		—		(644,953)
Reissuance of treasury stock	150	—		46,615		6,466		—		—		53,081
Equity-based compensation expense	—	—		69,901		—		—		—		69,901
Net income	—	—		—		—		—		954,266		954,266
Other comprehensive income	—	—		—		—		3,656		—		3,656
Cash dividends declared ($2.00 per common share)	—	—		—		—		—		(262,507)		(262,507)
Balance at December 24, 2023	131,278	$	131	$	7,997,251	$	(23,004,358)	$	(117,694)	$	23,347,148	$	8,222,478


	Six Months Ended
	December 24, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 25, 2023	133,297	$	133	$	7,809,002	$	(21,530,353)	$	(100,706)	$	22,032,096	$	8,210,172
Issuance of common stock	73	—		4,522		—		—		—		4,522
Purchase of treasury stock	(2,242)	(2)		—		(1,480,471)		—		—		(1,480,473)
Reissuance of treasury stock	150	—		46,615		6,466		—		—		53,081
Equity-based compensation expense	—	—		137,112		—		—		—		137,112
Net income	—	—		—		—		—		1,841,664		1,841,664
Other comprehensive loss	—	—		—		—		(16,988)		—		(16,988)
Cash dividends declared ($4.00 per common share)	—	—		—		—		—		(526,612)		(526,612)
Balance at December 24, 2023	131,278	$	131	$	7,997,251	$	(23,004,358)	$	(117,694)	$	23,347,148	$	8,222,478


See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 7


	Three Months Ended
	December 25, 2022
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at September 25, 2022	136,374	$	136	$	7,492,822	$	(19,591,249)	$	(133,765)	$	19,644,623	$	7,412,567
Issuance of common stock	31	—		877		—		—		—		877
Purchase of treasury stock	(1,133)	(1)		—		(486,312)		—		—		(486,313)
Reissuance of treasury stock	131	—		39,366		5,630		—		—		44,996
Equity-based compensation expense	—	—		73,084		—		—		—		73,084
Net income	—	—		—		—		—		1,468,507		1,468,507
Other comprehensive income	—	—		—		—		24,894		—		24,894
Cash dividends declared ($1.725 per common share)	—	—		—		—		—		(233,977)		(233,977)
Balance at December 25, 2022	135,403	$	135	$	7,606,149	$	(20,071,931)	$	(108,871)	$	20,879,153	$	8,304,635


	Six Months Ended
	December 25, 2022
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 26, 2022	136,975	$	137	$	7,414,916	$	(19,481,429)	$	(109,982)	$	18,454,724	$	6,278,366
Issuance of common stock	116	—		7,673		—		—		—		7,673
Purchase of treasury stock	(1,819)	(2)		—		(596,132)		—		—		(596,134)
Reissuance of treasury stock	131	—		39,366		5,630		—		—		44,996
Equity-based compensation expense	—	—		144,194		—		—		—		144,194
Net income	—	—		—		—		—		2,894,386		2,894,386
Other comprehensive income	—	—		—		—		1,111		—		1,111
Cash dividends declared ($3.450 per common share)	—	—		—		—		—		(469,957)		(469,957)
Balance at December 25, 2022	135,403	$	135	$	7,606,149	$	(20,071,931)	$	(108,871)	$	20,879,153	$	8,304,635

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q2 10-Q 8

LAM RESEARCH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 24, 2023

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of Lam Research Corporation (“Lam Research” or the “Company”) for the fiscal year ended June 25, 2023, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 25, 2023 (the “2023 Form 10-K”).

The condensed consolidated financial statements include the accounts of Lam Research and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s reporting period is a 52/53-week fiscal year. The Company’s current fiscal year will end June 30, 2024 and includes 53 weeks. The quarters ended December 24, 2023 (the “December 2023 quarter”) and December 25, 2022 included 13 weeks.

Reclassification: Certain amounts for the June 25, 2023 Condensed Consolidated Balance Sheet and notes to the financial statements have been reclassified to conform to the current period presentation.

NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted or Effective

The Company has not adopted any new accounting standards during the six months ended December 24, 2023 that have a material impact on the Company’s Condensed Consolidated Financial Statements.

Updates Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2025 for the annual reporting period ending June 29, 2025, with retrospective disclosure of prior periods presented. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending June 28, 2026. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

NOTE 3 — REVENUE

Disaggregation of Revenue

The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. The Company’s material operating segments qualify for aggregation due to their customer base and similarities in economic characteristics, nature of products and services, and processes for procurement, manufacturing, and distribution.

The Company operates in seven geographic regions: United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located. The Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing.

Lam Research Corporation 2024 Q2 10-Q 9

The following table presents the Company’s revenues disaggregated between system and its customer support-related revenue:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(In thousands)
Systems revenue	$	2,299,286	$	3,547,518	$	4,355,941	$	6,729,505
Customer support-related revenue and other	1,458,973		1,730,051		2,884,380		3,622,185
	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690

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 the Company’s Reliant product line.

The following table presents the Company’s revenues disaggregated by geographic region:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(In thousands)
China	$	1,493,395	$	1,263,507	$	3,180,706	$	2,793,982
Korea	711,951		1,077,052		1,259,896		1,932,430
Japan	512,845		575,945		837,365		1,034,638
Taiwan	499,883		991,173		742,373		2,112,119
United States	218,789		503,238		501,013		808,215
Europe	175,767		337,818		414,236		600,406
Southeast Asia	145,629		528,836		304,732		1,069,900
	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690

The following table presents the percentages of leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
Memory	48	%	50	%	43	%	50	%
Foundry	38	%	31	%	37	%	33	%
Logic/integrated device manufacturing	14	%	19	%	20	%	17	%

Deferred Revenue

Revenue of $364.1 million and $925.8 million included in deferred profit at June 25, 2023 was recognized during the three and six months ended December 24, 2023, representing 20% and 50%, respectively, of the $1,837.9 million of deferred revenue as of June 25, 2023.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of December 24, 2023 and when the Company expects to recognize the amounts as revenue:


	Less than 1 Year		1-3 Years			More than 3 Years			Total
	(In thousands)
Deferred revenue	$	1,593,577	$	289,311	(1)	$	45,156	(1)	$	1,928,044

(1)This amount is reported in Deferred profit on the Company's Condensed Consolidated Balance Sheets as the customers can demand the liability to be performed at any time.

Lam Research Corporation 2024 Q2 10-Q 10

NOTE 4 — EQUITY-BASED COMPENSATION PLANS

The Lam Research Corporation 2015 Stock Incentive Plan, as amended, provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s option, RSU, and market-based PRSU awards typically vest over a period of three years. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.

The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands)
Equity-based compensation expense	$	69,901	$	73,084	$	137,112	$	144,194
Income tax benefit recognized related to equity-based compensation expense	$	9,354	$	8,676	$	18,918	$	20,204

NOTE 5 — OTHER INCOME (EXPENSE), NET

The significant components of other income (expense), net, are as follows:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands)
Interest income	$	57,595	$	26,125	$	114,159	$	41,181
Interest expense	(46,313)		(46,661)		(91,644)		(92,713)
Gains (losses) on deferred compensation plan-related assets, net	25,530		10,871		22,629		(1,855)


Foreign exchange (losses) gains, net	(568)		(10,114)		701		(3,293)
Other, net	(6,405)		(8,455)		(13,405)		(14,649)
	$	29,839	$	(28,234)	$	32,440	$	(71,329)

NOTE 6 — INCOME TAX EXPENSE

The Company’s provision for income taxes and effective tax rate are as follows:


	Three Months Ended						Six Months Ended
	December 24, 2023			December 25, 2022			December 24, 2023			December 25, 2022
	(in thousands, except percentages)
Income tax expense	$	132,785		$	183,421		$	271,017		$	412,287
Effective tax rate	12.2		%	11.1		%	12.8		%	12.5		%

The difference between the U.S. federal statutory tax rate of 21% and the Company’s effective tax rate for the three and six months ended December 24, 2023 and December 25, 2022 was primarily due to income in lower tax jurisdictions.

On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the IRA are effective beginning with the Company’s fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. The Company has evaluated the potential impacts of the IRA and does not expect it to have a material impact on the effective tax rate. However, the Company expects future guidance from the Treasury Department and will further analyze when the guidance is issued.

The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax returns for the fiscal years ended June 30, 2019, and June 28, 2020. To date, no significant adjustments have been proposed by the IRS. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the IRS will occur.

Lam Research Corporation 2024 Q2 10-Q 11

The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitation. The change in uncertain tax positions as a result of lapses of statutes of limitation may range up to $12.4 million.

NOTE 7 — NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, and convertible notes. The following table reconciles the inputs to the basic and diluted computations for net income per share.


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands, except per share data)
Numerator:
Net income	$	954,266	$	1,468,507	$	1,841,664	$	2,894,386
Denominator:
Basic average shares outstanding	131,629		136,018		132,107		136,455
Effect of potential dilutive securities:
Employee stock plans	591		321		586		319


Diluted average shares outstanding	132,220		136,339		132,693		136,774
Net income per share - basic	$	7.25	$	10.80	$	13.94	$	21.21
Net income per share - diluted	$	7.22	$	10.77	$	13.88	$	21.16

For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. The impact from potentially dilutive securities, including options and RSUs, was not material for the three and six months ended December 24, 2023 and December 25, 2022.

NOTE 8 — FINANCIAL INSTRUMENTS

The Company’s investment strategies and investment and fair value policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. As of December 24, 2023 and June 25, 2023 the fair value of mutual funds and debt and equity investments were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from debt and equity investments were not material as of and for the three and six months ended December 24, 2023 and December 25, 2022.

The financial instruments reported within Cash and Cash Equivalents in the Company’s Condensed Consolidated Balance Sheets as of December 24, 2023, and June 25, 2023 consisted of the following:




		December 24, 2023		June 25, 2023
	(in thousands)

Money market funds (fair value measured on a recurring basis, level 1)		$	2,155,586	$	2,223,642














Cash		1,718,520		2,132,522
Time deposits		1,749,183		980,892
Total		$	5,623,289	$	5,337,056

In addition, as of June 25, 2023 the Company had time deposits of $250.0 million reported within other assets in the Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging

The Company’s hedging strategies and policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. As of December 24, 2023 and June 25, 2023 the fair value of outstanding cash flow and balance sheet hedges were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from derivative instruments and hedging activities were not material as of and for the three and six months ended December 24, 2023 and December 25, 2022.

Lam Research Corporation 2024 Q2 10-Q 12

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk and the Company’s mitigation strategies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K.

NOTE 9 — INVENTORIES

Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. System shipments to customers in Japan, for which title does not transfer until customer acceptance, are classified as finished goods inventory and carried at cost until title transfers. Inventories consist of the following:


	December 24, 2023		June 25, 2023
	(in thousands)
Raw materials	$	3,143,828	$	3,196,988
Work-in-process	225,629		325,611
Finished goods	1,060,449		1,293,591
	$	4,429,906	$	4,816,190

NOTE 10 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

The balance of goodwill is approximately $1.6 billion as of December 24, 2023 and June 25, 2023. As of December 24, 2023 and June 25, 2023, $65.4 million of the goodwill balance is tax deductible and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law.

Intangible Assets

The following table provides the Company’s intangible assets, other than goodwill:


	December 24, 2023						June 25, 2023
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	(in thousands)
Customer relationships	$	644,126	$	(632,781)	$	11,345	$	644,138	$	(631,420)	$	12,718
Existing technology	734,937		(680,302)		54,635		717,331		(674,549)		42,782
Patents and other intangible assets	200,063		(127,409)		72,654		199,532		(116,659)		82,873
Intangible assets subject to amortization	1,579,126		(1,440,492)		138,634		1,561,001		(1,422,628)		138,373
In process research and development	12,447		—		12,447		30,081		—		30,081
Total intangible assets	$	1,591,573	$	(1,440,492)	$	151,081	$	1,591,082	$	(1,422,628)	$	168,454

The Company recognized $12.8 million and $12.2 million in intangible asset amortization expense during the three months ended December 24, 2023 and December 25, 2022, respectively. The Company recognized $26.8 million and $23.8 million in intangible asset amortization expense during the six months ended December 24, 2023 and December 25, 2022, respectively.

Lam Research Corporation 2024 Q2 10-Q 13

The estimated future amortization expense of intangible assets as of December 24, 2023, is reflected in the table below. The table excludes $22.4 million of capitalized costs for intangible assets that have not been placed into service.


Fiscal Year	Amount
	(in thousands)
2024 (remaining 6 months)	$	22,082
2025	30,938
2026	20,098
2027	15,200
2028	11,951
Thereafter	15,985
	$	116,254

NOTE 11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:


	December 24, 2023		June 25, 2023
	(in thousands)
Accrued compensation	$	571,517	$	481,354
Warranty reserves	243,152		256,781
Income and other taxes payable	307,041		460,630
Dividend payable	263,133		231,267
Restructuring	3,269		8,014
Other	587,833		572,591
	$	1,975,945	$	2,010,637

NOTE 12 — LEASES

The Company elected to exercise purchase options available under its finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) in the three months ended September 24, 2023. As a result, the Company released cash collateral in an aggregate of approximately $250.0 million of restricted cash that was reported in Other assets in the Company’s Condensed Consolidated Balance Sheet. Additionally, guarantees made to the lessor that each property would have a certain minimum residual value totaling $298.4 million as of June 25, 2023 in the aggregate were eliminated with the extinguishment of the California Facilities Leases. As a result of the purchase of the improved properties, $250.5 million of additions were made to Property and Equipment, Net in the Company’s Condensed Consolidated Balance Sheets primarily comprised of land ($40.5 million) and buildings and improvements ($210.0 million).

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into insurance contracts that are intended to limit its exposure to such indemnifications. As of December 24, 2023, the Company had not recorded any liability on its Condensed Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees.

Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees.

The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of December 24, 2023, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $196.9 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.

Lam Research Corporation 2024 Q2 10-Q 14

In addition, the Company has entered into indemnification agreements with its directors, officers, and certain other employees, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations.

Warranties

The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of December 24, 2023, warranty reserves totaling $17.7 million were reported in other long-term liabilities, the remainder were included in accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s product warranty reserves were as follows:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands)
Balance at beginning of period	$	265,374	$	283,514	$	286,663	$	256,258
Warranties issued during the period	51,715		83,364		96,234		171,577
Settlements made during the period	(49,443)		(61,838)		(101,679)		(126,734)
Changes in liability for warranties issued during the period	(24)		3,210		(74)		1,941
Changes in liability for pre-existing warranties	(6,782)		10,719		(20,304)		15,927
Balance at end of period	$	260,840	$	318,969	$	260,840	$	318,969

Legal Proceedings

While the Company is not currently a party to any legal proceedings that it believes material, the Company is either a defendant or plaintiff in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on current information, the Company does not believe that a material loss from known matters is probable and therefore has not recorded an accrual of any material amount for litigation or other contingencies related to existing legal proceedings.

NOTE 14 — STOCK REPURCHASE PROGRAM

In May 2022, the Board of Directors authorized the Company to repurchase up to an additional $5.0 billion of Common Stock; this authorization supplements the remaining balances from any prior authorizations. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time.

Repurchases under the repurchase program were as follows during the periods indicated:


Period	Total Number of Shares Repurchased	Total Cost of Repurchase (1)		Average Price Paid Per Share (1)		Amount Available Under Repurchase Program
	(in thousands, except per share data)
Available balance as of June 25, 2023						$	3,537,217
Quarter ended September 24, 2023	1,257	$	829,874	$	660.01	$	2,707,343
Quarter ended December 24, 2023	970	$	640,267	$	660.04	$	2,067,076

(1) The Company’s net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under the repurchase program, as applicable, and is included in the cost of shares repurchased in the Condensed Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share.

Lam Research Corporation 2024 Q2 10-Q 15

In addition to the shares repurchased under the Board-authorized repurchase program shown above, during the three and six months ended December 24, 2023, the Company acquired 6 thousand shares at a total cost of $4.5 million and 15 thousand shares at a total cost of $10.0 million, respectively, which the Company withheld through net settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by the Company through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under the Company’s equity compensation plan.

NOTE 15 — RESTRUCTURING CHARGES, NET

The Company records employee severance and separation costs that meet the requirements for recognition in accordance with the relevant guidance of ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation - Non-retirement Post-employment Benefits, as applicable. For involuntary termination benefits that are not provided under the terms of an ongoing benefit arrangement, the liability for the current fair value of expected future costs associated with a management-approved restructuring plan is recognized in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, employee termination costs are accrued when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. Termination benefits associated with employees that elected to voluntarily terminate as part of the restructuring plan are recorded when the employee irrevocably accepts the offer and the amount can be reasonably estimated. If applicable, the Company records such costs into operating expense over the terminated employees’ future service period beyond any minimum or legally required retention period. The majority of restructuring charges that have been incurred but not yet paid are recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

In the fiscal year ended June 25, 2023, the Company initiated a restructuring plan designed to better align the Company’s cost structure with its outlook for the economic environment and business opportunities. Under the plan, through December 24, 2023, the Company terminated approximately 1,650 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs primarily relate to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, the Company made a strategic decision to relocate certain manufacturing activities to pre-existing facilities and incurred charges to move inventory and equipment and exit selected supplier arrangements.

During the three months ended December 24, 2023, net restructuring costs of $15.0 million and $1.7 million were recorded in restructuring charges, net - cost of goods sold, and restructuring charges, net - operating expenses, respectively, in the Condensed Consolidated Statements of Operations. During the six months ended December 24, 2023, net restructuring costs of $22.9 million and $3.7 million were recorded in restructuring charges, net - cost of goods sold, and restructuring charges, net - operating expenses, respectively. No restructuring charges were recognized during the three and six months ended December 25, 2022.

The restructuring plan is expected to be substantially completed by the June 2024 quarter, and cumulative costs as of December 24, 2023 total $146.9 million.

The following table is a summary of the activity related to the restructuring plan:


	Severance and Benefits		Other		Total
	(in thousands)
Restructuring liability as of June 25, 2023	$	7,989	$	246	$	8,235
Restructuring expense	7,256		19,350		26,606
Cash payments	(12,475)		(11,799)		(24,274)
Non-cash activities	53		(6,923)		(6,870)
Restructuring liability as of December 24, 2023	$	2,823	$	874	$	3,697

Lam Research Corporation 2024 Q2 10-Q 16

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