filings.toolsLam Research 10-Q 2024-09-29
Filed 2024-10-28. 8 sections, 187K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 29, 2024
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-12933
LAM RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 94-2634797 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| 4650 Cushing Parkway, Fremont, California | 94538 | |||||||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (510) 572-0200
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, Par Value $0.001 Per Share | LRCX | The Nasdaq Stock Market | ||||||
| (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 24, 2024, the Registrant had 1,286,685 thousand shares of Common Stock outstanding.
LAM RESEARCH CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| Revenue | $ | 4,167,976 | $ | 3,482,062 | |||||||||||||||||||
| Cost of goods sold | 2,165,293 | 1,819,420 | |||||||||||||||||||||
| Restructuring charges, net - cost of goods sold | — | 7,940 | |||||||||||||||||||||
| Total cost of goods sold | 2,165,293 | 1,827,360 | |||||||||||||||||||||
| Gross margin | 2,002,683 | 1,654,702 | |||||||||||||||||||||
| Research and development | 495,358 | 422,629 | |||||||||||||||||||||
| Selling, general, and administrative | 243,128 | 207,023 | |||||||||||||||||||||
| Restructuring charges, net - operating expenses | — | 2,021 | |||||||||||||||||||||
| Total operating expenses | 738,486 | 631,673 | |||||||||||||||||||||
| Operating income | 1,264,197 | 1,023,029 | |||||||||||||||||||||
| Other income (expense), net | 30,081 | 2,601 | |||||||||||||||||||||
| Income before income taxes | 1,294,278 | 1,025,630 | |||||||||||||||||||||
| Income tax expense | (177,834) | (138,232) | |||||||||||||||||||||
| Net income | $ | 1,116,444 | $ | 887,398 | |||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | 0.86 | $ | 0.67 | |||||||||||||||||||
| Diluted | $ | 0.86 | $ | 0.67 | |||||||||||||||||||
| Number of shares used in per share calculations: | |||||||||||||||||||||||
| Basic | 1,299,236 | 1,325,840 | |||||||||||||||||||||
| Diluted | 1,304,066 | 1,331,664 | |||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
Lam Research Corporation 2025 Q1 10-Q 3
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| Net income | $ | 1,116,444 | $ | 887,398 | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustment | 45,126 | (20,678) | |||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||
| Net unrealized (losses) gains during the period | (2,436) | 8,598 | |||||||||||||||||||||
| Net gains reclassified into net income | (104) | (8,917) | |||||||||||||||||||||
| (2,540) | (319) | ||||||||||||||||||||||
| Available-for-sale investments: | |||||||||||||||||||||||
| Net unrealized gains during the period | — | 182 | |||||||||||||||||||||
| Net gains reclassified into net income | — | (10) | |||||||||||||||||||||
| — | 172 | ||||||||||||||||||||||
| Defined benefit plans, net change in unrealized component | 39 | 181 | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | 42,625 | (20,644) | |||||||||||||||||||||
| Comprehensive income | $ | 1,159,069 | $ | 866,754 | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
Lam Research Corporation 2025 Q1 10-Q 4
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| September 29, 2024 | June 30, 2024 | ||||||||||
| (unaudited) | (1) | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 6,067,471 | $ | 5,847,856 | |||||||
| Accounts receivable, less allowance of $5,580 as of September 29, 2024, and $5,277 as of June 30, 2024 | 2,937,217 | 2,519,250 | |||||||||
| Inventories | 4,209,878 | 4,217,924 | |||||||||
| Prepaid expenses and other current assets | 277,802 | 298,190 | |||||||||
| Total current assets | 13,492,368 | 12,883,220 | |||||||||
| Property and equipment, net | 2,214,269 | 2,154,518 | |||||||||
| Goodwill and intangible assets | 1,758,344 | 1,765,073 | |||||||||
| Other assets | 2,067,508 | 1,941,917 | |||||||||
| Total assets | $ | 19,532,489 | $ | 18,744,728 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Trade accounts payable | $ | 704,247 | $ | 613,966 | |||||||
| Accrued expenses and other current liabilities | 2,196,424 | 1,801,877 | |||||||||
| Deferred profit | 1,937,315 | 1,417,781 | |||||||||
| Current portion of long-term debt and finance lease obligations | 504,682 | 504,814 | |||||||||
| Total current liabilities | 5,342,668 | 4,338,438 | |||||||||
| Long-term debt and finance lease obligations, less current portion | 4,479,087 | 4,478,520 | |||||||||
| Income taxes payable | 664,717 | 813,304 | |||||||||
| Other long-term liabilities | 574,126 | 575,012 | |||||||||
| Total liabilities | 11,060,598 | 10,205,274 | |||||||||
| Commitments and contingencies (refer to Note 12) | |||||||||||
| 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, 4,000,000 shares as of September 29, 2024 and June 30, 2024; issued and outstanding, 1,291,958 shares as of September 29, 2024, and 1,303,769 shares as of June 30, 2024 | 1,292 | 1,304 | |||||||||
| Additional paid-in capital | 8,303,014 | 8,223,046 | |||||||||
| Treasury stock, at cost; 1,660,250 shares as of September 29, 2024, and 1,648,239 shares as of June 30, 2024 | (25,374,657) | (24,365,783) | |||||||||
| Accumulated other comprehensive loss | (87,803) | (130,428) | |||||||||
| Retained earnings | 25,630,045 | 24,811,315 | |||||||||
| Total stockholders’ equity | 8,471,891 | 8,539,454 | |||||||||
| Total liabilities and stockholders’ equity | $ | 19,532,489 | $ | 18,744,728 | |||||||
(1)Derived from audited financial statements
See Notes to Condensed Consolidated Financial Statements
Lam Research Corporation 2025 Q1 10-Q 5
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended | |||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 1,116,444 | $ | 887,398 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 94,295 | 90,479 | |||||||||
| Deferred income taxes | (108,722) | (24,238) | |||||||||
| Equity-based compensation expense | 80,011 | 67,211 | |||||||||
| Other, net | (457) | (150) | |||||||||
| Changes in operating assets and liabilities | 386,900 | (69,537) | |||||||||
| Net cash provided by operating activities | 1,568,471 | 951,163 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures and intangible assets | (110,588) | (76,992) | |||||||||
| Proceeds from maturities of available-for-sales securities | — | 7,275 | |||||||||
| Other, net | 37 | (4,966) | |||||||||
| Net cash used for investing activities | (110,551) | (74,683) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Principal payments on debt, including finance lease obligations | (934) | (253,109) | |||||||||
| Treasury stock purchases | (997,035) | (843,238) | |||||||||
| Dividends paid | (260,985) | (230,332) | |||||||||
| Proceeds from issuance of common stock, net issuance costs | (43) | 2,818 | |||||||||
| Other, net | (324) | (2,151) | |||||||||
| Net cash used for financing activities | (1,259,321) | (1,326,012) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 22,682 | (11,031) | |||||||||
| Net change in cash, cash equivalents, and restricted cash | 221,281 | (460,563) | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period (1) | 5,850,803 | 5,587,372 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period (1) | $ | 6,072,084 | $ | 5,126,809 | |||||||
| Schedule of non-cash transactions: | |||||||||||
| Accrued payables for stock repurchases, including applicable excise tax | $ | 63,322 | $ | 37,768 | |||||||
| Accrued payables for capital expenditures | 52,203 | 38,668 | |||||||||
| Dividends payable | 297,634 | 265,040 | |||||||||
| Transfers of finished goods inventory to property and equipment | 32,985 | 18,014 | |||||||||
| Reconciliation of cash, cash equivalents, and restricted cash | September 29, 2024 | September 24, 2023 | |||||||||
| Cash and cash equivalents | $ | 6,067,471 | $ | 5,126,150 | |||||||
| Restricted cash and cash equivalents (1) | 4,613 | 659 | |||||||||
| Total cash, cash equivalents, and restricted cash | $ | 6,072,084 | $ | 5,126,809 | |||||||
(1)Restricted cash is reported within Other assets in the Condensed Consolidated Balance Sheets
See Notes to Condensed Consolidated Financial Statements
Lam Research Corporation 2025 Q1 10-Q 6
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
| September 29, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Common Stock Shares | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | 1,303,769 | $ | 1,304 | $ | 8,223,046 | $ | (24,365,783) | $ | (130,428) | $ | 24,811,315 | $ | 8,539,454 | ||||||||||||||||||||||||||||
| Issuance of common stock | 200 | — | (43) | — | — | — | (43) | ||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | (12,011) | (12) | — | (1,008,874) | — | — | (1,008,886) | ||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | — | — | 80,011 | — | — | — | 80,011 | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 1,116,444 | 1,116,444 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 42,625 | — | 42,625 | ||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.23 per common share) | — | — | — | — | — | (297,714) | (297,714) | ||||||||||||||||||||||||||||||||||
| Balance at September 29, 2024 | 1,291,958 | $ | 1,292 | $ | 8,303,014 | $ | (25,374,657) | $ | (87,803) | $ | 25,630,045 | $ | 8,471,891 | ||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
| September 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 | 1,332,966 | $ | 1,333 | $ | 7,806,749 | $ | (21,529,300) | $ | (100,706) | $ | 22,032,096 | $ | 8,210,172 | ||||||||||||||||||||||||||||
| Issuance of common stock | 414 | — | 2,818 | — | — | — | 2,818 | ||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | (12,659) | (13) | — | (835,507) | — | — | (835,520) | ||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | — | — | 67,211 | — | — | — | 67,211 | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 887,398 | 887,398 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (20,644) | — | (20,644) | ||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.20 per common share) | — | — | — | — | — | (264,105) | (264,105) | ||||||||||||||||||||||||||||||||||
| Balance at September 24, 2023 | 1,320,721 | $ | 1,320 | $ | 7,876,778 | $ | (22,364,807) | $ | (121,350) | $ | 22,655,389 | $ | 8,047,330 | ||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
Lam Research Corporation 2025 Q1 10-Q 7
LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 29, 2024
(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 30, 2024, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 30, 2024 (the “2024 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 29, 2025 and includes 52 weeks. The quarters ended September 29, 2024 (the “September 2024 quarter”) and September 24, 2023 included 13 weeks.
Common Stock Split: On May 21, 2024, the Company announced a ten-for-one stock split which was effective October 2, 2024. All share and per share amounts throughout this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the stock split. The par value per share remains unchanged at $0.001 per share after the stock split.
Reclassification: Certain amounts for the June 30, 2024 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 three months ended September 29, 2024 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.
Lam Research Corporation 2025 Q1 10-Q 8
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.
The following table presents the Company’s revenues disaggregated between systems and customer support-related revenue:
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Systems revenue | $ | 2,392,730 | $ | 2,056,655 | |||||||||||||||||||
| Customer support-related revenue and other | 1,775,246 | 1,425,407 | |||||||||||||||||||||
| $ | 4,167,976 | $ | 3,482,062 | ||||||||||||||||||||
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 | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| China | $ | 1,558,404 | $ | 1,687,311 | |||||||||||||||||||
| Korea | 762,081 | 547,945 | |||||||||||||||||||||
| Taiwan | 615,368 | 242,490 | |||||||||||||||||||||
| United States | 488,381 | 282,224 | |||||||||||||||||||||
| Japan | 301,386 | 324,520 | |||||||||||||||||||||
| Southeast Asia | 244,789 | 159,103 | |||||||||||||||||||||
| Europe | 197,567 | 238,469 | |||||||||||||||||||||
| $ | 4,167,976 | $ | 3,482,062 | ||||||||||||||||||||
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 | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| Memory | 35 | % | 38 | % | |||||||||||||||||||
| Foundry | 41 | % | 36 | % | |||||||||||||||||||
| Logic/integrated device manufacturing | 24 | % | 26 | % |
Deferred Revenue
Revenue of $371.4 million included in deferred profit at June 30, 2024 was recognized during the three months ended September 29, 2024, representing 24% of the $1,551.6 million of deferred revenue as of June 30, 2024.
The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of September 29, 2024 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 | $ | 1,575,595 | $ | 410,209 | (1) | $ | 61,239 | (1) | $ | 2,047,043 | |||||||||||||
(1)This amount is reported in Deferred profit on the Company's Condensed Consolidated Balance Sheets as the customers can demand the performance to be satisfied at any time.
Lam Research Corporation 2025 Q1 10-Q 9
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 eligible 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 | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Equity-based compensation expense | $ | 80,011 | $ | 67,211 | |||||||||||||||||||
| Income tax benefit recognized related to equity-based compensation expense | $ | 10,582 | $ | 9,564 |
NOTE 5 — OTHER INCOME (EXPENSE), NET
The significant components of other income (expense), net, are as follows:
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Interest income | $ | 68,449 | $ | 56,564 | |||||||||||||||||||
| Interest expense | (44,946) | (45,331) | |||||||||||||||||||||
| Gains (losses) on deferred compensation plan-related assets, net | 17,420 | (2,901) | |||||||||||||||||||||
| Foreign exchange (losses) gains, net | (9,686) | 1,269 | |||||||||||||||||||||
| Other, net | (1,156) | (7,000) | |||||||||||||||||||||
| $ | 30,081 | $ | 2,601 | ||||||||||||||||||||
NOTE 6 — INCOME TAX EXPENSE
The Company’s provision for income taxes and effective tax rate are as follows:
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Income tax expense | $ | 177,834 | $ | 138,232 | |||||||||||||||||||
| Effective tax rate | 13.7 | % | 13.5 | % |
The difference between the U.S. federal statutory tax rate of 21% and the Company’s effective tax rate for the three months ended September 29, 2024 and September 24, 2023 was primarily due to income in lower tax jurisdictions.
The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax returns for the fiscal years ended June 30, 2019, June 28, 2020 and June 27, 2021. 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.
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 $210.1 million.
Lam Research Corporation 2025 Q1 10-Q 10
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, and restricted stock units. The following table reconciles the inputs to the basic and diluted computations for net income per share.
| Three Months Ended | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 1,116,444 | $ | 887,398 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Basic average shares outstanding | 1,299,236 | 1,325,840 | |||||||||||||||||||||
| Effect of potential dilutive securities: | |||||||||||||||||||||||
| Employee stock plans | 4,830 | 5,824 | |||||||||||||||||||||
| Diluted average shares outstanding | 1,304,066 | 1,331,664 | |||||||||||||||||||||
| Net income per share - basic | $ | 0.86 | $ | 0.67 | |||||||||||||||||||
| Net income per share - diluted | $ | 0.86 | $ | 0.67 | |||||||||||||||||||
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. These anti-dilutive securities, including options and RSUs, were not material for the three months ended September 29, 2024 and September 24, 2023.
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 the Consolidated Financial Statements in Part II, Item 8 of its 2024 Form 10-K. As of September 29, 2024 and June 30, 2024, the fair value of mutual funds and equity investments were not material. The Company had no debt security investments as of September 29, 2024 and June 30, 2024. 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 months ended September 29, 2024 and September 24, 2023.
The financial instruments reported within Cash and Cash Equivalents in the Company’s Condensed Consolidated Balance Sheets as of September 29, 2024, and June 30, 2024 consisted of the following:
| September 29, 2024 | June 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Money market funds (fair value measured on a recurring basis, level 1) | $ | 2,527,002 | $ | 2,543,462 | |||||||
| Cash | 1,779,874 | 1,568,315 | |||||||||
| Time deposits | 1,760,595 | 1,736,079 | |||||||||
| Total | $ | 6,067,471 | $ | 5,847,856 | |||||||
Derivative Instruments and Hedging
The Company’s hedging strategies and policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to the Consolidated Financial Statements in Part II, Item 8 of its 2024 Form 10-K. As of September 29, 2024 and June 30, 2024, 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 months ended September 29, 2024 and September 24, 2023.
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 the Consolidated Financial Statements in Part II, Item 8 of its 2024 Form 10-K.
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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. Inventories consist of the following:
| September 29, 2024 | June 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Raw materials | $ | 2,837,766 | $ | 2,921,139 | |||||||
| Work-in-process | 337,754 | 284,078 | |||||||||
| Finished goods | 1,034,358 | 1,012,707 | |||||||||
| $ | 4,209,878 | $ | 4,217,924 | ||||||||
NOTE 10 — GOODWILL
The balance of goodwill is approximately $1.6 billion as of September 29, 2024 and June 30, 2024. As of September 29, 2024 and June 30, 2024, $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.
NOTE 11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
| September 29, 2024 | June 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Accrued compensation | $ | 599,316 | $ | 516,717 | |||||||
| Warranty reserves | 227,027 | 228,060 | |||||||||
| Income and other taxes payable | 475,598 | 186,700 | |||||||||
| Dividend payable | 297,634 | 260,905 | |||||||||
| Other | 596,849 | 609,495 | |||||||||
| $ | 2,196,424 | $ | 1,801,877 | ||||||||
NOTE 12 — 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 September 29, 2024, 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 September 29, 2024, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $210.8 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.
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.
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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 September 29, 2024, warranty reserves totaling $23.3 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 | |||||||||||||||||||||||
| September 29, 2024 | September 24, 2023 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at beginning of period | $ | 250,404 | $ | 286,663 | |||||||||||||||||||
| Warranties issued during the period | 62,730 | 44,519 | |||||||||||||||||||||
| Settlements made during the period | (44,968) | (52,236) | |||||||||||||||||||||
| Changes in liability for warranties issued during the period | 176 | (50) | |||||||||||||||||||||
| Changes in liability for pre-existing warranties | (17,967) | (13,522) | |||||||||||||||||||||
| Balance at end of period | $ | 250,375 | $ | 265,374 | |||||||||||||||||||
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. 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 13 — STOCK REPURCHASE PROGRAM
In May 2024, the Board of Directors authorized the Company to repurchase up to an additional $10.0 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. All references to share and per share amounts have been retroactively adjusted to reflect the effects of the stock split. See Note 1 for more information.
| Period | Total Number of Shares Repurchased | Total Cost of Repurchase | Average Price Paid per Share (1) | Amount Available Under Repurchase Program | |||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Available balance as of June 30, 2024 | $ | 10,824,660 | |||||||||||||||||||||
| Quarter ended September 29, 2024 | 11,952 | $ | 1,003,654 | $ | 83.97 | $ | 9,821,006 | ||||||||||||||||
(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.
In addition to the shares repurchased under the Board-authorized repurchase program shown above, during the three months ended September 29, 2024, the Company acquired 59 thousand shares at a total cost of $5.2 million, 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.
Lam Research Corporation 2025 Q1 10-Q 13
NOTE 14 — RESTRUCTURING CHARGES, NET
During 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 June 30, 2024, the Company terminated approximately 1,760 employees, and incurred expenses related to employee severance and separation costs. Employee severance and separation costs were primarily related 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.
No restructuring charges were recorded during the three months ending September 29, 2024. During the three months ended September 24, 2023, net restructuring costs of $7.9 million and $2.0 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.
The restructuring plan was substantially completed as of June 30, 2024, and cumulative costs as of June 30, 2024 totaled $181.9 million. The restructuring liability reported as of June 30, 2024 totaling $1.1 million has been substantially satisfied in the three months ended September 29, 2024.
Lam Research Corporation 2025 Q1 10-Q 14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified as forward-looking, by use of phrases and words such as “believe,” “estimated,” “anticipate,” “expect,” “probable,” “intend,” “plan,” “aim,” “may,” “should,” “could,” “would,” “will,” “continue,” and other future-oriented terms. The identification of certain statements as “forward-looking” does not mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to: trends and opportunities in the global economic environment; trends and opportunities in the semiconductor industry, including in the end markets and applications for semiconductors, in device complexity, and in the complexity of device manufacturing; growth or decline in the industry and the market for, and spending on, wafer fabrication equipment; the anticipated levels of, and rates of change in, margins, market share, served available market, capital expenditures, research and development expenditures, international sales, revenue (actual and/or deferred), operating expenses and earnings generally; management’s plans and objectives for our current and future operations and business focus; restructuring activities; business process improvements and initiatives; volatility in our quarterly results; the makeup of our customer base; customer and end user requirements and our ability to satisfy those requirements; the performance and benefits of our products and services; customer spending and demand for our products and services, and the reliability of indicators of change in customer spending and demand; the effect of variability in our customers’ business plans or demand for our products and services; our competition, and our ability to defend our market share and to gain new market share; the success of joint development and collaboration relationships with customers, suppliers, or others; outsourced activities; our supply chain and the role of suppliers in our business, including the impacts of supply chain constraints and material costs; our leadership and competency, and our ability to facilitate innovation; our research and development programs; the opportunities in our industry for, and our ability to create sustainable differentiation; technology inflections in the industry and our ability to identify those inflections and to invest in research and development programs to meet them; our ability to deliver multi-product solutions; the resources invested to comply with evolving standards and the impact of such efforts; changes in state, federal and international tax laws, our estimated annual tax rate and the factors that affect our tax rates; legal and regulatory compliance; the estimates we make, and the accruals we record, in order to implement our critical accounting policies (including, but not limited to, the adequacy of prior tax payments, future tax benefits or liabilities, and the adequacy of our accruals relating to them); hedging transactions; debt or financing arrangements; our investment portfolio; our access to capital markets; uses of, payments of, and impact of interest rate fluctuations on, our debt; our intention to pay quarterly dividends and the amounts thereof, if any; our ability and intention to repurchase our shares; credit risks; controls and procedures; recognition or amortization of expenses; our ability to manage and grow our cash position; our ability to scale our operations to respond to changes in our business; our goals and initiatives with respect to environmental, social and governance matters, including emissions, and human capital, including inclusion and diversity; the value of our patents; the materiality of potential losses arising from legal proceedings; the probability of making payments under our guarantees; and the sufficiency of our financial resources or liquidity to support future business activities (including, but not limited to, operations, investments, debt service requirements, dividends, and capital expenditures). Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our annual report on Form 10-K for the year ended June 30, 2024 (our “2024 Form 10-K”), and our current reports on Form 8-K. Such risks, uncertainties, and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed in this report and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We do not undertake any obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events.
Documents To Review In Connection With Management’s Discussion and Analysis Of Financial Condition and Results Of Operations
For a full understanding of our financial position and results of operations for the three months ended September 29, 2024, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our 2024 Form 10-K.
Lam Research Corporation 2025 Q1 10-Q 15
EXECUTIVE SUMMARY
Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.
Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, dynamic random-access memory, and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control, enabling results on the wafer.
Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.
Demand from cloud computing, artificial intelligence, 5G, the Internet of Things, and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks.
We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.
In calendar year 2024, we anticipate higher wafer fabrication equipment spending, driven by an increase in both memory and non-memory market segments versus calendar year 2023. In the short term, volatility in the semiconductor demand environment, as well as other risks and uncertainties, may negatively impact our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.
On May 21, 2024, the Company announced a ten-for-one stock split which was effective October 2, 2024. All references made to share or per share amounts throughout this Form 10-Q, including those presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, have been retroactively adjusted to reflect the stock split.
Lam Research Corporation 2025 Q1 10-Q 16
The following table summarizes certain key financial information for the periods indicated below:
| Three Months Ended | |||||||||||||||||
| September 29, 2024 | June 30, 2024 | ||||||||||||||||
| (in thousands, except per share data and percentages) | |||||||||||||||||
| Revenue | $ | 4,167,976 | $ | 3,871,507 | |||||||||||||
| Gross margin | $ | 2,002,683 | $ | 1,840,098 | |||||||||||||
| Gross margin as a percent of total revenue | 48.0 | % | 47.5 | % | |||||||||||||
| Total operating expenses | $ | 738,486 | $ | 713,538 | |||||||||||||
| Net income | $ | 1,116,444 | $ | 1,020,282 | |||||||||||||
| Diluted net income per share | $ | 0.86 | $ | 0.78 |
In the September 2024 quarter, revenue increased 8% compared to the three months ended June 30, 2024 (the “June 2024 quarter”), driven by increases in systems revenue as a result of strengthened investments in the dynamic random access memory (“DRAM”) market segment as well as increases in customer support-related revenue. The deferred revenue balance was $2,047.0 million at the end of the September 2024 quarter, an increase relative to the balance at the end of the June 2024 quarter of $1,551.6 million, mainly due to an increase in customer advanced deposits.
We aim to balance the requirements of our customers with the availability of resources, as well as performance to our operational and financial objectives. As a result, from time to time, we exercise discretion and judgment as to the timing and prioritization of manufacturing and deliveries of products, which has impacted, including in the current fiscal year, and may in the future impact, the timing of revenue recognition with respect to such products.
The increase in gross margin as a percentage of revenue in the September 2024 quarter compared to the June 2024 quarter was primarily a result of improved factory efficiencies, partially offset by increased incentive compensation expense. The increase in operating expenses in the September 2024 quarter compared to the June 2024 quarter was driven by higher headcount and incentive compensation expense, as well as increases in outside services spend, partially offset by lower spending for supplies.
Our cash, cash equivalents, and restricted cash balances increased to $6.1 billion at the end of the September 2024 quarter compared to $5.9 billion at the end of the June 2024 quarter. This increase was primarily the result of $1,568.5 million of cash generated from operating activities, partially offset by $997.0 million of share repurchases, including net share settlement of employee stock-based compensation; $261.0 million of dividends paid to stockholders; and $110.6 million of capital expenditures. Employee headcount as of September 29, 2024 was approximately 17,700.
RESULTS OF OPERATIONS
Revenue
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| Revenue (in millions) | $ | 4,168 | $ | 3,872 | $ | 3,482 | |||||||||||||||||||||||
| China | 37 | % | 39 | % | 48 | % | |||||||||||||||||||||||
| Korea | 18 | % | 18 | % | 16 | % | |||||||||||||||||||||||
| Taiwan | 15 | % | 15 | % | 7 | % | |||||||||||||||||||||||
| United States | 12 | % | 10 | % | 8 | % | |||||||||||||||||||||||
| Japan | 7 | % | 7 | % | 9 | % | |||||||||||||||||||||||
| Southeast Asia | 6 | % | 8 | % | 5 | % | |||||||||||||||||||||||
| Europe | 5 | % | 3 | % | 7 | % |
The increase in revenue for the September 2024 quarter compared to the same period in 2023 is primarily due to increases in Foundry and DRAM spending by our customers, partially offset by decreases in non-volatile memory spending during this period.
Lam Research Corporation 2025 Q1 10-Q 17
The following table presents our revenue disaggregated between systems and customer support-related revenue:
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Systems revenue | $ | 2,392,730 | $ | 2,169,885 | $ | 2,056,655 | |||||||||||||||||||||||
| Customer support-related revenue and other | 1,775,246 | 1,701,622 | 1,425,407 | ||||||||||||||||||||||||||
| $ | 4,167,976 | $ | 3,871,507 | $ | 3,482,062 | ||||||||||||||||||||||||
Please refer to Note 3, “Revenue,” to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding the composition of the two categories into which revenue has been disaggregated.
The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows:
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| Memory | 35 | % | 36 | % | 38 | % | |||||||||||||||||||||||
| Foundry | 41 | % | 43 | % | 36 | % | |||||||||||||||||||||||
| Logic/integrated device manufacturing | 24 | % | 21 | % | 26 | % |
The decrease in the memory market segment for the September 2024 quarter compared to the June 2024 quarter is primarily attributable to decreases in non-volatile memory spending, partially offset by increased investments in DRAM. Additionally, the Logic market segment saw strengthened investments as compared to the June 2024 quarter.
Gross Margin
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||
| Gross margin | $ | 2,002,683 | $ | 1,840,098 | $ | 1,654,702 | |||||||||||||||||||||||
| Percent of revenue | 48.0 | % | 47.5 | % | 47.5 | % |
Gross margin as a percentage of revenue was higher in the September 2024 quarter compared to the June 2024 quarter primarily as a result of improved factory efficiencies, partially offset by increased incentive compensation expense.
The increase in gross margin as a percentage of revenue in the three months ended September 29, 2024 compared to the same period in the prior year was primarily due to improved factory efficiencies and reduced spending on material costs, offset by unfavorable changes in customer and product mix, increased transformational charges, and increased employee-related expenses.
Research and Development
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||
| Research & development (“R&D”) | $ | 495,358 | $ | 497,829 | $ | 422,629 | |||||||||||||||||||||||
| Percent of revenue | 11.9 | % | 12.9 | % | 12.1 | % |
We continued to make significant R&D investments in the September 2024 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufacturing processes. The decrease in R&D expense in the September 2024 quarter compared to the June 2024 quarter was primarily driven by a decrease in supplies spending, partially offset by increased headcount and incentive compensation expense, as well as higher elective deferred compensation plan-related costs.
R&D expense in the three months ended September 29, 2024 increased compared to the same period in the prior year, driven by increases in headcount and incentive compensation expense, elective deferred compensation plan-related costs, as well as higher spending on outside services.
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Selling, General, and Administrative
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||
| Selling, general, and administrative (“SG&A”) | $ | 243,128 | $ | 216,477 | $ | 207,023 | |||||||||||||||||||||||
| Percent of revenue | 5.8 | % | 5.6 | % | 5.9 | % |
SG&A expense during the September 2024 quarter increased in comparison to the June 2024 quarter, primarily driven by increases in headcount and incentive compensation expense.
SG&A expense during the three months ended September 29, 2024 increased compared to the same period in the prior year, driven by higher spending for transformational activities, as well as increases in headcount and incentive compensation expense.
Restructuring Charges, N****et
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||
| Restructuring charges, net | $ | — | $ | 4,508 | $ | 9,961 | |||||||||||||||||||||||
| Percent of revenue | — | % | 0.1 | % | 0.3 | % |
In fiscal year 2023, we initiated a restructuring plan that continued into fiscal year 2024, designed to better align our cost structure with our outlook for the economic environment and business opportunities. Under the plan we terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs were primarily related to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, we made a strategic decision to relocate certain manufacturing activities to pre-existing facilities. The restructuring plan was substantially completed as of June 30, 2024.
Please refer to Note 14, “Restructuring charges, net,” to our Condensed Consolidated Financial Statements, included in Part I of this Form 10-Q for additional information.
Other Income (Expense), Net
Other income (expense), net consisted of the following:
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Interest income | $ | 68,449 | $ | 66,027 | $ | 56,564 | |||||||||||||||||||||||
| Interest expense | (44,946) | (46,439) | (45,331) | ||||||||||||||||||||||||||
| Gains (losses) on deferred compensation plan-related assets, net | 17,420 | 9,643 | (2,901) | ||||||||||||||||||||||||||
| Foreign exchange (losses) gains, net | (9,686) | (1,194) | 1,269 | ||||||||||||||||||||||||||
| Other, net | (1,156) | (241) | (7,000) | ||||||||||||||||||||||||||
| $ | 30,081 | $ | 27,796 | $ | 2,601 | ||||||||||||||||||||||||
Interest income increased in the September 2024 quarter as compared to the June 2024 quarter, primarily due to higher cash balances. Interest income increased for the three months ended September 29, 2024, compared to the same period in 2023, because of higher yields and higher cash balances.
Interest expense was flat for all periods presented.
The gains and losses on deferred compensation plan-related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.
Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.
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The variations in other, net for the September 2024 quarter compared to the June 2024 quarter and September 2023 quarter were primarily driven by fluctuations in the fair market value of equity investments.
Income Tax Expense
Our provision for income taxes and effective tax rate for the periods indicated were as follows:
| Three Months Ended | |||||||||||||||||||||||||||||
| September 29, 2024 | June 30, 2024 | September 24, 2023 | |||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||
| Income tax expense | $ | 177,834 | $ | 134,074 | $ | 138,232 | |||||||||||||||||||||||
| Effective tax rate | 13.7 | % | 11.6 | % | 13.5 | % |
The increase in the effective tax rate for the September 2024 quarter compared to the June 2024 quarter was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions.
The effective tax rate for the September quarter compared to the same period in the prior year remained consistent.
International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States. International pre-tax income is taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7, “Income Taxes,” to our Consolidated Financial Statements in Part II, Item 8 of our 2024 Form 10-K for additional information.
We re-evaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Any change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies and estimates are unchanged from those disclosed in “Critical Accounting Policies and Estimates” in Part II, Item 7 of our 2024 Form 10-K.
Recent Accounting Pronouncements
See Note 2 - Recent Accounting Pronouncements, of our Condensed Consolidated Financial Statements, included in Part 1 of this Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES
Total gross cash, cash equivalents, and restricted cash balances were $6.1 billion at September 29, 2024 compared to $5.9 billion as of June 30, 2024. This slight increase was primarily driven by cash generated from operating activities totaling $1,568.5 million, partially offset by $997.0 million of share repurchases, including net share settlement on employee stock-based compensation; $261.0 million in dividends paid; and $110.6 million in capital expenditures.
Net cash provided by operating activities of $1,568.5 million during the three months ended September 29, 2024, consisted of (in thousands):
| Net income | $ | 1,116,444 | |||
| Non-cash charges: | |||||
| Depreciation and amortization | 94,295 | ||||
| Equity-based compensation expense | 80,011 | ||||
| Deferred income taxes | (108,722) | ||||
| Changes in operating asset and liability accounts | 386,900 | ||||
| Other | (457) | ||||
| $ | 1,568,471 | ||||
Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: an increase in deferred gross profit of $519.5 million, an increase in accrued expenses and other liabilities of $240.4 million and an increase in trade accounts payable of $82.6 million. These sources of cash are offset by the following uses of cash: increases in accounts receivable of $414.1 million, inventory of $23.8 million, and prepaid expenses and other current assets of $17.8 million.
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Cash Flow from Investing Activities
Net cash used for investing activities during the three months ended September 29, 2024, was $110.6 million, primarily consisting of capital expenditures.
Cash Flow from Financing Activities
Net cash used for financing activities during the three months ended September 29, 2024, was $1,259.3 million, primarily consisting of $997.0 million in treasury stock repurchases, including net share settlement on employee stock-based compensation, and $261.0 million in dividends paid.
Liquidity
Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of September 29, 2024, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months. However, factors outside of our control, including uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, are currently, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors.
In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services. While we have substantial cash balances, we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities. We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, domestic and global macroeconomic and political conditions could cause disruptions to the capital markets and otherwise make any financing more challenging, and there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For financial market risks related to changes in interest rates and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our 2024 Form 10-K. Our exposure related to market risk has not changed materially since June 30, 2024.
Item 4. Controls and Procedures
Design of Disclosure Controls and Procedures and Internal Control over Financial Reporting
We maintain disclosure controls and procedures and internal control over financial reporting that are designed to comply with Rule 13a-15 of the Exchange Act. In designing and evaluating the controls and procedures associated with each, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and that the effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100% effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
Disclosure Controls and Procedures
As required by Exchange Act Rule 13a-15(b), as of September 29, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer, along with our Chief Financial Officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our senior management has timely access to material information that could affect our business.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Effectiveness of Controls
While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective at the reasonable assurance level, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Please refer to the subsection entitled “Legal Proceedings” within Note 12 “Commitments and Contingencies," to our Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q.
Item 1A. Risk Factors
In addition to the other information in this Form 10-Q, the following risk factors should be carefully considered in evaluating us and our business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.
INDUSTRY AND CUSTOMER RISKS
The Semiconductor Capital Equipment Industry Is Subject to Variability and Periods of Rapid Growth or Decline; We Therefore Face Risks Related to Our Strategic Resource Allocation Decisions
The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results. The variability in our customers’ investments during any particular period is dependent on several factors, including, but not limited to, electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities.
During periods of rapid growth or decline in demand for our products and services, we may face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis. If we do not adequately meet these challenges during periods of increasing or declining demand, our gross margins and earnings may be negatively impacted.
We continuously reassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resulting in excess fixed costs.
Especially during transitional periods, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.
Future Declines in the Semiconductor Industry, and the Overall World Economic Conditions on Which It Is Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial Condition
Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the semiconductor capital equipment market may experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. The economic, regulatory, political, and business conditions occurring nationally, globally, or in any of our key sales regions, which are often unpredictable, have historically impacted customer demand for our products and services and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, changing economic, regulatory, political or business conditions can cause material adverse changes to our results of operations and financial condition, including, but not limited to:
-
a decline in demand for our products or services;
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an increase in reserves on accounts receivable due to our customers’ inability to pay us;
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an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;
-
valuation allowances on deferred tax assets;
-
restructuring charges;
-
asset impairments including the potential impairment of goodwill and other intangible assets;
-
a decline in the value of our investments;
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exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come to fruition; and
-
challenges maintaining reliable and uninterrupted sources of supply.
Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operating results, and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.
We Have a Limited Number of Key Customers
Sales to a limited number of large customers constitute a significant portion of our overall shipments, revenue, cash flows and profitability. As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict. In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased costs, and/or lower margins for us and limitations on our ability to share technology with others. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.
We Face a Challenging and Complex Competitive Environment
We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.
With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our a
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Item 5. Other Information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the Company’s fiscal quarter ended September 29, 2024, none of the Company’s directors or officers adopted, modified, or terminated a trading arrangement for the purchase or sale of the Company’s common stock that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 Trading Arrangement”) or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
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Item 6. Exhibits
| Exhibit Number | Description | ||||
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer) | ||||
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer) | ||||
| 32.1 | Section 1350 Certification (Principal Executive Officer) | ||||
| 32.2 | Section 1350 Certification (Principal Financial Officer) | ||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
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LAM RESEARCH CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | October 28, 2024 | LAM RESEARCH CORPORATION (Registrant) | |||||||||
| /s/ Douglas R. Bettinger | |||||||||||
| Douglas R. Bettinger | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| (Principal Financial Officer) |
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