Lam Research Corporation Reports Financial Results for the Quarter Ended December 25, 2016

FREMONT, Calif., Jan. 25, 2017 (GLOBE NEWSWIRE) -- Lam Research Corp. (Nasdaq:LRCX) today announced financial results for the quarter ended December 25, 2016 (the "December 2016 quarter").

Highlights for the December 2016 quarter were as follows:

• Shipments of $1.92 billion and revenue of $1.88 billion.
  
• GAAP gross margin of 45.0%, GAAP operating margin of 23.4%, and GAAP diluted EPS of $1.81.
  
• Non-GAAP gross margin of 46.4%, non-GAAP operating margin of 26.0%, and non-GAAP diluted EPS of $2.24.

U.S. GAAP Financial Results

For the December 2016 quarter, revenue was $1,882 million, gross margin was $847 million, or 45.0% of revenue, operating expenses were $407 million, operating margin was 23.4% of revenue, and net income was $333 million, or $1.81 per diluted share on a GAAP basis. This compares to revenue of $1,632 million, gross margin of $716 million, or 43.9% of revenue, operating expenses of $400 million, operating margin of 19.4% of revenue, and net income of $264 million, or $1.47 per diluted share, for the quarter ended September 25, 2016 (the “September 2016 quarter”).

Non-GAAP Financial Results

For the December 2016 quarter, non-GAAP gross margin was $874 million or 46.4% of revenue, non-GAAP operating expenses were $384 million, non-GAAP operating margin was 26.0% of revenue, and non-GAAP net income was $405 million, or $2.24 per diluted share. This compares to non-GAAP gross margin of $737 million or 45.2% of revenue, non-GAAP operating expenses of $372 million, non-GAAP operating margin of 22.4% of revenue, and non-GAAP net income of $322 million, or $1.81 per diluted share for the September 2016 quarter.

“Lam delivered another record for shipments, revenue, and net income in December, concluding a fifth consecutive year of revenue growth and outperformance when compared against the overall wafer fab equipment industry,” said Martin Anstice, Lam Research’s President and Chief Executive Officer. “Lam’s results occur through the hard work and commitment of our employees worldwide and the increasing strategic relevance and partnership established with our customers. Looking ahead to 2017, the combination of healthy end-demand in established business segments and new application drivers are setting the course for another year of industry growth and outperformance for Lam. We are inspired by the opportunity to deliver innovation to a transforming technology industry and semiconductor ecosystem."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $6.1 billion at the end of the December 2016 quarter compared to $7.5 billion at the end of the September 2016 quarter. This decrease was primarily the result of approximately $1.6 billion of cash payments for the settlement of debt, combined with approximately $37 million of capital expenditures; and approximately $48 million of dividends paid to stockholders, offset by $404 million in cash flows from operating activities during the December 2016 quarter.

Deferred revenue at the end of the December 2016 quarter decreased to $673 million as compared to $704 million at the end of the September 2016 quarter. Deferred profit at the end of the December 2016 quarter decreased to $408 million as compared to $418 million at the end of the September 2016 quarter. Lam’s deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The estimated future revenue from shipments to Japanese customers was approximately $129 million as of December 25, 2016 and $65 million as of September 25, 2016.

Geographic Distribution

The geographic distribution of shipments and revenue during the December 2016 quarter is shown in the following table:

Outlook

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

The information provided above is only an estimate of what the Company believes is realizable as of the date of this release, and does not incorporate the potential impact of any business combinations, asset acquisitions, divestitures, balance sheet valuation adjustments, financing arrangements, other investments, or other significant transactions that may be completed or determined after the date of this release. GAAP to non-GAAP reconciling items provided include only those items that are known and can be estimated as of the date of this release. Actual results will vary from this model and the variations may be material. Reconciling items included above are as follows:

• Gross margin - amortization related to intangible assets acquired in the Novellus transaction, $21 million.
  
• Operating margin - amortization related to intangible assets acquired in the Novellus transaction, $37 million.
  
• Earnings per share - amortization related to intangible assets acquired in the Novellus transaction, $37 million; amortization of note discounts, $6 million; and associated tax benefit for non-GAAP items ($6) million; totaling $37 million.
  
• Diluted share count - impact of a note hedge issued contemporaneously with the convertible notes due 2018, 3 million shares.
  

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results. The Company’s non-GAAP results for both the December 2016 and September 2016 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, costs associated with campus consolidation, the amortization of note discounts, KLA-Tencor acquisition funding net interest expense and tax benefit of non-GAAP items. Additionally, the December 2016 quarter non-GAAP results exclude costs related to the early termination of the KLA-Tencor acquisition funding, product rationalization charges and litigation settlement and the September 2016 quarter non-GAAP results exclude KLA-Tencor acquisition-related charges.

Management uses non-GAAP gross margin, operating expense, operating income, operating margin, net income, and net income per diluted share to evaluate the Company’s operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view the Company’s results from management’s perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company’s website at http://investor.lamresearch.com.

Caution Regarding Forward-Looking Statements

Statements made in this press release that are not of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to; the estimated future revenue from shipments to Japanese customers; our revenue and industry growth and performance outlooks and their drivers: our ability to transform atomic-scale engineering and enable our customers to shape the future of technology; the legal and business factors that may affect our future tax rate; and our guidance for shipments, revenue, gross margin, operating margin, net income or earnings per diluted share, and diluted share count. Some factors that may affect these forward-looking statements include: business conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; and the actions of our customers and competitors may be inconsistent with our expectations, as well as the other risks and uncertainties that are described in the documents filed or furnished by us with the Securities and Exchange Commission, including specifically the Risk Factors described in our annual report on Form 10-K for the fiscal year ended June 26, 2016 and our quarterly report on Form 10-Q for the period ended September 25, 2016. These uncertainties and changes could materially affect the forward looking statements and cause actual results to vary from expectations in a material way. The Company undertakes no obligation to update the information or statements made in this release.

About Lam Research

Lam Research Corp. (Nasdaq:LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, and clean solutions helps customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, more powerful, and more power-efficient chips. Through collaboration, continuous innovation, and delivering on commitments, Lam is transforming atomic-scale engineering and enabling its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a Nasdaq-100 Index® and S&P 500® company whose common stock trades on the Nasdaq Global Select Market^SM under the symbol LRCX. For more information, please visit http://www.lamresearch.com. (LRCX-F).

Consolidated Financial Tables Follow.