Lam Research Corporation — Form 10-Q Summary
Period: Fiscal third quarter and nine months ended March 27, 2022 (quarterly comparison ended March 28, 2021). The request metadata says “2021 Q3,” but the filing is for fiscal Q3 2022.
Business context and period
Lam Research supplies wafer fabrication equipment and services, particularly in deposition, etch, and clean. It reports one business segment and serves memory, foundry, and logic/integrated-device markets. Management described semiconductor equipment demand as strong in calendar 2022, driven by device complexity and secular semiconductor demand, while supplier delays constrained shipments.
Key financial metrics
Amounts are in U.S. dollars; financial statement figures below are in billions except per-share data and percentages.
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Revenue | $4.060 | $3.848 | $12.591 | $10.481 |
| Gross margin | $1.817 | $1.780 | $5.771 | $4.890 |
| Gross margin % | 44.7% | 46.3% | 45.8% | 46.7% |
| Operating income | $1.192 | $1.195 | $3.902 | $3.166 |
| Net income | $1.022 | $1.071 | $3.396 | $2.764 |
| Diluted EPS | $7.30 | $7.41 | $24.02 | $18.94 |
| Operating cash flow | Not separately provided | Not separately provided | $2.656 | $2.152 |
| Capital expenditures | Not separately provided | Not separately provided | $0.420 | $0.244 |
At March 27, 2022, cash and cash equivalents were $4.195 billion, investments $0.160 billion, and restricted cash and investments $0.251 billion. Current assets were $11.888 billion versus current liabilities of $4.195 billion. Long-term debt carrying value was $4.962 billion; total senior note principal was $5.0 billion. The company had no borrowings under its $1.5 billion revolving credit facility or commercial paper program and reported compliance with debt covenants.
Material changes versus comparable periods
- Year over year, nine-month revenue increased 20%, net income increased 23%, and diluted EPS increased from $18.94 to $24.02. Nine-month gross margin percentage eased to 45.8% from 46.7%.
- Quarterly revenue rose about 6% year over year, but net income and diluted EPS declined about 5% and 1%, respectively. Gross margin percentage fell to 44.7% from approximately 46.3%.
- Sequentially, revenue declined 4% from the December 2021 quarter to $4.060 billion; gross margin percentage declined to 44.7% from 46.8%, and diluted EPS declined to $7.30 from $8.44. Management attributed the revenue decline to supplier-related delays and margin pressure to product/customer mix, supply-chain and freight costs, inflation, and lower factory absorption and field utilization.
- Operating cash flow increased year over year, but working-capital changes used $1.014 billion, principally reflecting higher inventory and receivables. Financing used $3.555 billion, including $2.990 billion of treasury-stock purchases and $0.607 billion of dividends.
- Cash, investments, and restricted balances declined from $6.0 billion at June 27, 2021 to $4.6 billion at March 27, 2022, mainly due to repurchases, dividends, and capital spending.
Outlook, risks, and unusual items
- Management expected strong wafer fabrication equipment demand in calendar 2022, but said supply shortages and inflationary cost pressures were likely to persist at least in the near term and could hurt revenue and gross margin. No specific forward-quarter revenue or EPS guidance is provided in the supplied filing text.
- Major cited risks include supply-chain and logistics constraints, COVID-19-related disruption, inflation, semiconductor industry cyclicality, customer concentration, and export controls or other U.S.–China trade restrictions. China represented 32% of nine-month revenue.
- Nine-month other income included a $63.6 million unrealized gain related to an equity investee that became publicly traded. The filing also reports volatile deferred-compensation investment results.
- The effective tax rate was 10.0% for the quarter and 11.4% for the nine months. Management cited income in lower-tax jurisdictions and Malaysia tax incentives, which are conditional and expected to apply through fiscal 2036. The IRS was examining the fiscal 2018 federal tax return; no significant adjustments had been proposed.
- Management said available liquidity and expected operating cash flows should support operations, investment, debt service, capital spending, dividends, and repurchases for at least the next 12 months. It also cautioned that economic, industry, and capital-market uncertainty could affect demand and financing access.
- The company reported no material legal proceedings or material loss accrual for known litigation. Potential future payments under certain guarantees and standby letters of credit totaled up to $93.5 million; management did not consider material payment probable.
Important facts for investors to verify
- Whether supply constraints ease, and whether delayed demand converts to shipments and recognized revenue.
- Gross-margin recovery, including the effects of mix, freight and logistics costs, inflation, factory absorption, and field utilization.
- Inventory, receivables, and deferred-profit trends, given the substantial working-capital cash use.
- China-related revenue exposure and any developments in export licensing or trade restrictions.
- Capital returns and liquidity: the company repurchased $2.990 billion of stock and paid $0.607 billion of dividends over nine months; confirm subsequent repurchase pace and cash balances.
- Tax-incentive conditions, the status of tax examinations, and the timing and final amount of the February 2022 accelerated share repurchase settlement.