Lam Research Corporation — Form 10-Q Summary
Reporting period: Fiscal 2022 first quarter, the 13 weeks ended September 26, 2021. The filing is unaudited. Lam supplies wafer-fabrication equipment and services, including deposition, etch, clean, and customer support.
Financial results and key metrics
| Metric | Quarter ended Sep. 26, 2021 | Prior quarter ended Jun. 27, 2021 | Year-ago quarter ended Sep. 27, 2020 |
|---|---|---|---|
| Revenue | $4.304 billion | $4.145 billion | $3.177 billion |
| Gross margin | $1.977 billion; 45.9% | $1.915 billion; 46.2% | $1.506 billion; 47.4% |
| Operating expenses | $604.5 million | $599.3 million | $545.1 million |
| Operating income | $1.372 billion | Not provided in the MD&A summary table | $961.1 million |
| Net income | $1.180 billion | $1.145 billion | $823.5 million |
| Diluted EPS | $8.27 | $7.98 | $5.59 |
| Cash from operations | $457.5 million | Not provided here | $642.5 million |
Revenue rose 4% sequentially, primarily on higher systems revenue, and was about 35% above the year-ago quarter. Systems revenue was $2.925 billion; customer support-related revenue and other was $1.380 billion. By served market, revenue mix was 64% memory, 25% foundry, and 11% logic/integrated device manufacturing. China represented 37% of revenue.
Gross margin declined sequentially and year over year. Management attributed the sequential decline mainly to higher manufacturing-related spending and unfavorable customer and product mix, partly offset by lower deferred-compensation-related costs. Year-over-year margin pressure also reflected COVID-related manufacturing spending and mix. R&D was $382.3 million and SG&A was $222.2 million.
Operating cash flow was $457.5 million, down from $642.5 million in the year-ago quarter despite higher net income. Working-capital changes used $838.5 million, including increases in receivables and inventory and decreases in accrued liabilities and deferred profit. Investing activities provided $596.7 million, mainly from net sales of available-for-sale securities, offset partly by $136.4 million in capital expenditures. Financing activities used $1.428 billion, including $1.237 billion of treasury-stock purchases and $185.4 million of dividends paid.
Balance sheet, debt, and liquidity
- Cash and cash equivalents were $4.042 billion; investments were $569.5 million; restricted cash and investments were $251.4 million. Together these totaled about $4.9 billion, versus $6.0 billion at June 27, 2021.
- Total assets were $15.566 billion and current liabilities were $3.409 billion at quarter-end.
- Senior notes totaled $5.0 billion principal, with $4.961 billion reported carrying value. No borrowings were outstanding under the $1.5 billion revolving facility or the $1.5 billion commercial-paper program; the company reported compliance with credit-facility covenants.
- Management said available cash, short-term investments, and expected operating cash flows should support operations, investment, debt service, capital expenditures, dividends, and capital returns for at least the next 12 months.
Changes, outlook, and risks
- Management described customer demand as strong and said it was increasing production output through capacity additions and operational improvements. It gave no specific forward-quarter revenue or earnings guidance in the supplied filing text.
- The company expected near-term supply-chain constraints and higher materials, freight, and logistics costs to continue. These pressures, along with COVID-19-related uncertainty, could weigh on shipments, revenue, and gross margin.
- Management cited longer-term semiconductor demand and technology shifts—including 3D scaling, multiple patterning, and advanced packaging—as opportunities for its deposition, etch, and clean products.
- China was 37% of quarterly revenue. The filing warns that U.S.–China trade measures and export-license requirements could restrict sales or affect demand.
- Other highlighted risks include cyclical and concentrated customer demand, competition and technology transitions, reliance on key suppliers, international operations, cybersecurity, and volatile operating results.
- The effective tax rate was 12.2%, versus 12.5% sequentially and 10.7% a year earlier. Management cited income in lower-tax jurisdictions; Malaysia tax incentives are conditional. The IRS was examining the fiscal 2018 U.S. return, with no significant adjustments proposed as of quarter-end.
- The company entered a $650 million accelerated share repurchase agreement in August 2021; final settlement was due no later than January 6, 2022. It declared a $1.50-per-share dividend. Management reported no material litigation loss as probable and estimable; specified guarantees and letters of credit had a maximum potential payment of $74.1 million.
Important facts for investors to verify
- Whether supply-chain constraints, manufacturing costs, and product/customer mix continue to pressure gross margin and cash conversion.
- Whether customer demand and systems revenue remain strong, particularly across memory, foundry, and logic markets.
- Exposure to China and any developments in export licensing, trade restrictions, or customer demand.
- Working-capital trends, including receivables and inventory, and the extent to which operating cash flow recovers.
- Cash available for shareholder returns after considering restricted funds, debt obligations, capital spending, and the accelerated repurchase settlement.
- Progress and conditions associated with Malaysia tax incentives, and developments in tax examinations.