LAM RESEARCH CORP 10-Q

ITEM 1. Financial Statements LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 Revenue $ 3,758,259 $ 5,277,569 $ 7,240,321 $ 10,351,690 Cost of goods sold 1,985,847 2,901,220 3,805,267 5,638,506 Restructuring charges, net - cost of goods sold 14,957 — 22,897 — Total cost of goods sold 2,000,804 2,901,220 3,828,164 5,638,506 Gross margin 1,757,455 2,376,349 3,412,157 4,713,184 Research and development 469,712 462,385 892,341 895,760 Selling, general, and administrative 228,843 233,802 435,866 439,422 Restructuring charges, net - operating expenses 1,688 — 3,709 — Total operating expenses 700,243 696,187 1,331,916 1,335,182 Operating income 1,057,212 1,680,162 2,080,241 3,378,002 Other income (expense), net 29,839 ( 28,234 ) 32,440 ( 71,329 ) Income before income taxes 1,087,051 1,651,928 2,112,681 3,306,673 Income tax expense ( 132,785 ) ( 183,421 ) ( 271,017 ) ( 412,287 ) Net income $ 954,266 $ 1,468,507 $ 1,841,664 $ 2,894,386 Net income per share: Basic $ 7.25 $ 10.80 $ 13.94 $ 21.21 Diluted $ 7.22 $ 10.77 $ 13.88 $ 21.16 Number of shares used in per share calculations: Basic 131,629 136,018 132,107 136,455 Diluted 132,220 136,339 132,693 136,774 See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 3 Table of Contents LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 Net income $ 954,266 $ 1,468,507 $ 1,841,664 $ 2,894,386 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 14,530 41,470 ( 6,148 ) 7,861 Cash flow hedges: Net unrealized gains (losses) during the period 1,671 ( 18,618 ) 10,269 185 Net (gains) losses reclassified into net income ( 12,826 ) 1,273 ( 21,743 ) ( 8,024 ) ( 11,155 ) ( 17,345 ) ( 11,474 ) ( 7,839 ) Available-for-sale investments: Net unrealized gains during the period 102 490 284 570 Net gains reclassified into net income — — ( 10 ) ( 53 ) 102 490 274 517 Defined benefit plans, net change in unrealized component 179 279 360 572 Other comprehensive income (loss), net of tax 3,656 24,894 ( 16,988 ) 1,111 Comprehensive income $ 957,922 $ 1,493,401 $ 1,824,676 $ 2,895,497 See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 4 Table of Contents LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 24, 2023 June 25, 2023 (unaudited) (1) ASSETS Cash and cash equivalents $ 5,623,289 $ 5,337,056 Investments 14,720 37,641 Accounts receivable, less allowance of $ 5,322 as of December 24, 2023, and $ 5,344 as of June 25, 2023 2,707,458 2,823,376 Inventories 4,429,906 4,816,190 Prepaid expenses and other current assets 279,239 214,149 Total current assets 13,054,612 13,228,412 Property and equipment, net 2,147,482 1,856,672 Goodwill 1,626,512 1,622,489 Intangible assets, net 151,081 168,454 Other assets 1,804,165 1,905,616 Total assets $ 18,783,852 $ 18,781,643 LIABILITIES AND STOCKHOLDERS’ EQUITY Trade accounts payable $ 499,704 $ 470,702 Accrued expenses and other current liabilities 1,975,945 2,010,637 Deferred profit 1,792,955 1,695,221 Current portion of long-term debt and finance lease obligations 3,779 8,358 Total current liabilities 4,272,383 4,184,918 Long-term debt and finance lease obligations, less current portion 4,980,005 5,003,183 Income taxes payable 797,556 882,084 Other long-term liabilities 511,430 501,286 Total liabilities 10,561,374 10,571,471 Commitments and contingencies (refer to Note 13) Stockholders’ equity: Preferred stock, at par value of $ 0.001 per share; authorized, 5,000 shares, none outstanding — — Common stock, at par value of $ 0.001 per share; authorized, 400,000 shares as of December 24, 2023 and June 25, 2023; issued and outstanding, 131,278 shares as of December 24, 2023, and 133,297 shares as of June 25, 2023 131 133 Additional paid-in capital 7,997,251 7,809,002 Treasury stock, at cost; 163,472 shares as of December 24, 2023, and 161,380 shares as of June 25, 2023 ( 23,004,358 ) ( 21,530,353 ) Accumulated other comprehensive loss ( 117,694 ) ( 100,706 ) Retained earnings 23,347,148 22,032,096 Total stockholders’ equity 8,222,478 8,210,172 Total liabilities and stockholders’ equity $ 18,783,852 $ 18,781,643 (1) Derived from audited financial statements See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 5 Table of Contents LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended December 24, 2023 December 25, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,841,664 $ 2,894,386 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 181,420 161,165 Deferred income taxes ( 112,985 ) ( 140,296 ) Equity-based compensation expense 137,112 144,194 Other, net 4,032 9,978 Changes in operating assets and liabilities 353,760 ( 739,652 ) Net cash provided by operating activities 2,405,003 2,329,775 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and intangible assets ( 192,268 ) ( 303,441 ) Business acquisitions, net of cash acquired — ( 119,955 ) Proceeds from maturities of available-for-sales securities 23,116 32,438 Other, net ( 7,489 ) ( 4,092 ) Net cash used for investing activities ( 176,641 ) ( 395,050 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt, including finance lease obligations ( 254,095 ) ( 18,936 ) Treasury stock purchases ( 1,488,696 ) ( 566,055 ) Dividends paid ( 494,746 ) ( 441,595 ) Reissuance of treasury stock related to employee stock purchase plan 53,081 44,996 Proceeds from issuance of common stock 4,522 7,673 Other, net ( 5,972 ) 764 Net cash used for financing activities ( 2,185,906 ) ( 973,153 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 4,306 ) 953 Net change in cash, cash equivalents, and restricted cash 38,150 962,525 Cash, cash equivalents, and restricted cash at beginning of period (1) 5,587,372 3,773,535 Cash, cash equivalents, and restricted cash at end of period (1) $ 5,625,522 $ 4,736,060 Schedule of non-cash transactions: Accrued payables for stock repurchases, including applicable excise tax $ 37,263 $ 30,125 Accrued payables for capital expenditures 63,126 94,494 Dividends payable 263,133 233,977 Transfers of finished goods inventory to property and equipment 37,927 56,932 Reconciliation of cash, cash equivalents, and restricted cash December 24, 2023 December 25, 2022 Cash and cash equivalents $ 5,623,289 $ 4,484,716 Restricted cash and cash equivalents (1) 2,233 251,344 Total cash, cash equivalents, and restricted cash $ 5,625,522 $ 4,736,060 (1) Restricted cash is reported within Other assets in the Condensed Consolidated Balance Sheets See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 6 Table of Contents LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Three Months Ended December 24, 2023 Common Stock Shares Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at September 24, 2023 132,072 $ 132 $ 7,879,031 $ ( 22,365,872 ) $ ( 121,350 ) $ 22,655,389 $ 8,047,330 Issuance of common stock 32 — 1,704 — — — 1,704 Purchase of treasury stock ( 976 ) ( 1 ) — ( 644,952 ) — — ( 644,953 ) Reissuance of treasury stock 150 — 46,615 6,466 — — 53,081 Equity-based compensation expense — — 69,901 — — — 69,901 Net income — — — — — 954,266 954,266 Other comprehensive income — — — — 3,656 — 3,656 Cash dividends declared ($ 2.00 per common share) — — — — — ( 262,507 ) ( 262,507 ) Balance at December 24, 2023 131,278 $ 131 $ 7,997,251 $ ( 23,004,358 ) $ ( 117,694 ) $ 23,347,148 $ 8,222,478 Six Months Ended December 24, 2023 Common Stock Shares Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at June 25, 2023 133,297 $ 133 $ 7,809,002 $ ( 21,530,353 ) $ ( 100,706 ) $ 22,032,096 $ 8,210,172 Issuance of common stock 73 — 4,522 — — — 4,522 Purchase of treasury stock ( 2,242 ) ( 2 ) — ( 1,480,471 ) — — ( 1,480,473 ) Reissuance of treasury stock 150 — 46,615 6,466 — — 53,081 Equity-based compensation expense — — 137,112 — — — 137,112 Net income — — — — — 1,841,664 1,841,664 Other comprehensive loss — — — — ( 16,988 ) — ( 16,988 ) Cash dividends declared ($ 4.00 per common share) — — — — — ( 526,612 ) ( 526,612 ) Balance at December 24, 2023 131,278 $ 131 $ 7,997,251 $ ( 23,004,358 ) $ ( 117,694 ) $ 23,347,148 $ 8,222,478 See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 7 Table of Contents Three Months Ended December 25, 2022 Common Stock Shares Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at September 25, 2022 136,374 $ 136 $ 7,492,822 $ ( 19,591,249 ) $ ( 133,765 ) $ 19,644,623 $ 7,412,567 Issuance of common stock 31 — 877 — — — 877 Purchase of treasury stock ( 1,133 ) ( 1 ) — ( 486,312 ) — — ( 486,313 ) Reissuance of treasury stock 131 — 39,366 5,630 — — 44,996 Equity-based compensation expense — — 73,084 — — — 73,084 Net income — — — — — 1,468,507 1,468,507 Other comprehensive income — — — — 24,894 — 24,894 Cash dividends declared ($ 1.725 per common share) — — — — — ( 233,977 ) ( 233,977 ) Balance at December 25, 2022 135,403 $ 135 $ 7,606,149 $ ( 20,071,931 ) $ ( 108,871 ) $ 20,879,153 $ 8,304,635 Six Months Ended December 25, 2022 Common Stock Shares Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at June 26, 2022 136,975 $ 137 $ 7,414,916 $ ( 19,481,429 ) $ ( 109,982 ) $ 18,454,724 $ 6,278,366 Issuance of common stock 116 — 7,673 — — — 7,673 Purchase of treasury stock ( 1,819 ) ( 2 ) — ( 596,132 ) — — ( 596,134 ) Reissuance of treasury stock 131 — 39,366 5,630 — — 44,996 Equity-based compensation expense — — 144,194 — — — 144,194 Net income — — — — — 2,894,386 2,894,386 Other comprehensive income — — — — 1,111 — 1,111 Cash dividends declared ($ 3.450 per common share) — — — — — ( 469,957 ) ( 469,957 ) Balance at December 25, 2022 135,403 $ 135 $ 7,606,149 $ ( 20,071,931 ) $ ( 108,871 ) $ 20,879,153 $ 8,304,635 See Notes to Condensed Consolidated Financial Statements Lam Research Corporation 2024 Q2 10-Q 8 Table of Contents LAM RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 24, 2023 (Unaudited) NOTE 1 — BASIS OF PRESENTATION The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of Lam Research Corporation (“Lam Research” or the “Company”) for the fiscal year ended June 25, 2023, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 25, 2023 (the “2023 Form 10-K”). The condensed consolidated financial statements include the accounts of Lam Research and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s reporting period is a 52/53-week fiscal year. The Company’s current fiscal year will end June 30, 2024 and includes 53 weeks. The quarters ended December 24, 2023 (the “December 2023 quarter”) and December 25, 2022 included 13 weeks. Reclassification: Certain amounts for the June 25, 2023 Condensed Consolidated Balance Sheet and notes to the financial statements have been reclassified to conform to the current period presentation. NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted or Effective The Company has not adopted any new accounting standards during the six months ended December 24, 2023 that have a material impact on the Company’s Condensed Consolidated Financial Statements. Updates Not Yet Effective In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2025 for the annual reporting period ending June 29, 2025, with retrospective disclosure of prior periods presented. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending June 28, 2026. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements. NOTE 3 — REVENUE Disaggregation of Revenue The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. The Company’s material operating segments qualify for aggregation due to their customer base and similarities in economic characteristics, nature of products and services, and processes for procurement, manufacturing, and distribution. The Company operates in seven geographic regions: United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located. The Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing. Lam Research Corporation 2024 Q2 10-Q 9 Table of Contents The following table presents the Company’s revenues disaggregated between system and its customer support-related revenue: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (In thousands) Systems revenue $ 2,299,286 $ 3,547,518 $ 4,355,941 $ 6,729,505 Customer support-related revenue and other 1,458,973 1,730,051 2,884,380 3,622,185 $ 3,758,259 $ 5,277,569 $ 7,240,321 $ 10,351,690 Systems revenue includes sales of new leading-edge equipment in deposition, etch and clean markets. Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the Company’s Reliant product line. The following table presents the Company’s revenues disaggregated by geographic region: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (In thousands) China $ 1,493,395 $ 1,263,507 $ 3,180,706 $ 2,793,982 Korea 711,951 1,077,052 1,259,896 1,932,430 Japan 512,845 575,945 837,365 1,034,638 Taiwan 499,883 991,173 742,373 2,112,119 United States 218,789 503,238 501,013 808,215 Europe 175,767 337,818 414,236 600,406 Southeast Asia 145,629 528,836 304,732 1,069,900 $ 3,758,259 $ 5,277,569 $ 7,240,321 $ 10,351,690 The following table presents the percentages of leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 Memory 48 % 50 % 43 % 50 % Foundry 38 % 31 % 37 % 33 % Logic/integrated device manufacturing 14 % 19 % 20 % 17 % Deferred Revenue Revenue of $ 364.1 million and $ 925.8 million included in deferred profit at June 25, 2023 was recognized during the three and six months ended December 24, 2023, representing 20 % and 50 %, respectively, of the $ 1,837.9 million of deferred revenue as of June 25, 2023. The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of December 24, 2023 and when the Company expects to recognize the amounts as revenue: Less than 1 Year 1-3 Years More than 3 Years Total (In thousands) Deferred revenue $ 1,593,577 $ 289,311 (1) $ 45,156 (1) $ 1,928,044 (1) This amount is reported in Deferred profit on the Company's Condensed Consolidated Balance Sheets as the customers can demand the liability to be performed at any time. Lam Research Corporation 2024 Q2 10-Q 10 Table of Contents NOTE 4 — EQUITY-BASED COMPENSATION PLANS The Lam Research Corporation 2015 Stock Incentive Plan, as amended, provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s option, RSU, and market-based PRSU awards typically vest over a period of three years . The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions. The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (in thousands) Equity-based compensation expense $ 69,901 $ 73,084 $ 137,112 $ 144,194 Income tax benefit recognized related to equity-based compensation expense $ 9,354 $ 8,676 $ 18,918 $ 20,204 NOTE 5 — OTHER INCOME (EXPENSE), NET The significant components of other income (expense), net, are as follows: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (in thousands) Interest income $ 57,595 $ 26,125 $ 114,159 $ 41,181 Interest expense ( 46,313 ) ( 46,661 ) ( 91,644 ) ( 92,713 ) Gains (losses) on deferred compensation plan-related assets, net 25,530 10,871 22,629 ( 1,855 ) Foreign exchange (losses) gains, net ( 568 ) ( 10,114 ) 701 ( 3,293 ) Other, net ( 6,405 ) ( 8,455 ) ( 13,405 ) ( 14,649 ) $ 29,839 $ ( 28,234 ) $ 32,440 $ ( 71,329 ) NOTE 6 — INCOME TAX EXPENSE The Company’s provision for income taxes and effective tax rate are as follows: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (in thousands, except percentages) Income tax expense $ 132,785 $ 183,421 $ 271,017 $ 412,287 Effective tax rate 12.2 % 11.1 % 12.8 % 12.5 % The difference between the U.S. federal statutory tax rate of 21% and the Company’s effective tax rate for the three and six months ended December 24, 2023 and December 25, 2022 was primarily due to income in lower tax jurisdictions. On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the IRA are effective beginning with the Company’s fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. The Company has evaluated the potential impacts of the IRA and does not expect it to have a material impact on the effective tax rate. However, the Company expects future guidance from the Treasury Department and will further analyze when the guidance is issued. The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax returns for the fiscal years ended June 30, 2019, and June 28, 2020. To date, no significant adjustments have been proposed by the IRS. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the IRS will occur. Lam Research Corporation 2024 Q2 10-Q 11 Table of Contents The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitation. The change in uncertain tax positions as a result of lapses of statutes of limitation may range up to $ 12.4 million. NOTE 7 — NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, and convertible notes. The following table reconciles the inputs to the basic and diluted computations for net income per share. Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (in thousands, except per share data) Numerator: Net income $ 954,266 $ 1,468,507 $ 1,841,664 $ 2,894,386 Denominator: Basic average shares outstanding 131,629 136,018 132,107 136,455 Effect of potential dilutive securities: Employee stock plans 591 321 586 319 Diluted average shares outstanding 132,220 136,339 132,693 136,774 Net income per share - basic $ 7.25 $ 10.80 $ 13.94 $ 21.21 Net income per share - diluted $ 7.22 $ 10.77 $ 13.88 $ 21.16 For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. The impact from potentially dilutive securities, including options and RSUs, was not material for the three and six months ended December 24, 2023 and December 25, 2022. NOTE 8 — FINANCIAL INSTRUMENTS The Company’s investment strategies and investment and fair value policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. As of December 24, 2023 and June 25, 2023 the fair value of mutual funds and debt and equity investments were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from debt and equity investments were not material as of and for the three and six months ended December 24, 2023 and December 25, 2022. The financial instruments reported within Cash and Cash Equivalents in the Company’s Condensed Consolidated Balance Sheets as of December 24, 2023, and June 25, 2023 consisted of the following: December 24, 2023 June 25, 2023 (in thousands) Money market funds (fair value measured on a recurring basis, level 1) $ 2,155,586 $ 2,223,642 Cash 1,718,520 2,132,522 Time deposits 1,749,183 980,892 Total $ 5,623,289 $ 5,337,056 In addition, as of June 25, 2023 the Company had time deposits of $ 250.0 million reported within other assets in the Condensed Consolidated Balance Sheets. Derivative Instruments and Hedging The Company’s hedging strategies and policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. As of December 24, 2023 and June 25, 2023 the fair value of outstanding cash flow and balance sheet hedges were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from derivative instruments and hedging activities were not material as of and for the three and six months ended December 24, 2023 and December 25, 2022. Lam Research Corporation 2024 Q2 10-Q 12 Table of Contents Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk and the Company’s mitigation strategies are unchanged from those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. NOTE 9 — INVENTORIES Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. System shipments to customers in Japan, for which title does not transfer until customer acceptance, are classified as finished goods inventory and carried at cost until title transfers. Inventories consist of the following: December 24, 2023 June 25, 2023 (in thousands) Raw materials $ 3,143,828 $ 3,196,988 Work-in-process 225,629 325,611 Finished goods 1,060,449 1,293,591 $ 4,429,906 $ 4,816,190 NOTE 10 — GOODWILL AND INTANGIBLE ASSETS Goodwill The balance of goodwill is approximately $ 1.6 billion as of December 24, 2023 and June 25, 2023. As of December 24, 2023 and June 25, 2023, $ 65.4 million of the goodwill balance is tax deductible and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law. Intangible Assets The following table provides the Company’s intangible assets, other than goodwill: December 24, 2023 June 25, 2023 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (in thousands) Customer relationships $ 644,126 $ ( 632,781 ) $ 11,345 $ 644,138 $ ( 631,420 ) $ 12,718 Existing technology 734,937 ( 680,302 ) 54,635 717,331 ( 674,549 ) 42,782 Patents and other intangible assets 200,063 ( 127,409 ) 72,654 199,532 ( 116,659 ) 82,873 Intangible assets subject to amortization 1,579,126 ( 1,440,492 ) 138,634 1,561,001 ( 1,422,628 ) 138,373 In process research and development 12,447 — 12,447 30,081 — 30,081 Total intangible assets $ 1,591,573 $ ( 1,440,492 ) $ 151,081 $ 1,591,082 $ ( 1,422,628 ) $ 168,454 The Company recognized $ 12.8 million and $ 12.2 million in intangible asset amortization expense during the three months ended December 24, 2023 and December 25, 2022, respectively. The Company recognized $ 26.8 million and $ 23.8 million in intangible asset amortization expense during the six months ended December 24, 2023 and December 25, 2022, respectively. Lam Research Corporation 2024 Q2 10-Q 13 Table of Contents The estimated future amortization expense of intangible assets as of December 24, 2023, is reflected in the table below. The table excludes $ 22.4 million of capitalized costs for intangible assets that have not been placed into service. Fiscal Year Amount (in thousands) 2024 (remaining 6 months) $ 22,082 2025 30,938 2026 20,098 2027 15,200 2028 11,951 Thereafter 15,985 $ 116,254 NOTE 11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: December 24, 2023 June 25, 2023 (in thousands) Accrued compensation $ 571,517 $ 481,354 Warranty reserves 243,152 256,781 Income and other taxes payable 307,041 460,630 Dividend payable 263,133 231,267 Restructuring 3,269 8,014 Other 587,833 572,591 $ 1,975,945 $ 2,010,637 NOTE 12 — LEASES The Company elected to exercise purchase options available under its finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) in the three months ended September 24, 2023. As a result, the Company released cash collateral in an aggregate of approximately $ 250.0 million of restricted cash that was reported in Other assets in the Company’s Condensed Consolidated Balance Sheet. Additionally, guarantees made to the lessor that each property would have a certain minimum residual value totaling $ 298.4 million as of June 25, 2023 in the aggregate were eliminated with the extinguishment of the California Facilities Leases. As a result of the purchase of the improved properties, $ 250.5 million of additions were made to Property and Equipment, Net in the Company’s Condensed Consolidated Balance Sheets primarily comprised of land ($ 40.5 million) and buildings and improvements ($ 210.0 million). NOTE 13 — COMMITMENTS AND CONTINGENCIES Guarantees The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into insurance contracts that are intended to limit its exposure to such indemnifications. As of December 24, 2023, the Company had not recorded any liability on its Condensed Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees. Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees. The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of December 24, 2023, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $ 196.9 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid. Lam Research Corporation 2024 Q2 10-Q 14 Table of Contents In addition, the Company has entered into indemnification agreements with its directors, officers, and certain other employees, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations. Warranties The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of December 24, 2023, warranty reserves totaling $ 17.7 million were reported in other long-term liabilities, the remainder were included in accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets. Changes in the Company’s product warranty reserves were as follows: Three Months Ended Six Months Ended December 24, 2023 December 25, 2022 December 24, 2023 December 25, 2022 (in thousands) Balance at beginning of period $ 265,374 $ 283,514 $ 286,663 $ 256,258 Warranties issued during the period 51,715 83,364 96,234 171,577 Settlements made during the period ( 49,443 ) ( 61,838 ) ( 101,679 ) ( 126,734 ) Changes in liability for warranties issued during the period ( 24 ) 3,210 ( 74 ) 1,941 Changes in liability for pre-existing warranties ( 6,782 ) 10,719 ( 20,304 ) 15,927 Balance at end of period $ 260,840 $ 318,969 $ 260,840 $ 318,969 Legal Proceedings While the Company is not currently a party to any legal proceedings that it believes material, the Company is either a defendant or plaintiff in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on current information, the Company does not believe that a material loss from known matters is probable and therefore has not recorded an accrual of any material amount for litigation or other contingencies related to existing legal proceedings. NOTE 14 — STOCK REPURCHASE PROGRAM In May 2022, the Board of Directors authorized the Company to repurchase up to an additional $ 5.0 billion of Common Stock; this authorization supplements the remaining balances from any prior authorizations. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time. Repurchases under the repurchase program were as follows during the periods indicated: Period Total Number of Shares Repurchased Total Cost of Repurchase (1) Average Price Paid Per Share (1) Amount Available Under Repurchase Program (in thousands, except per share data) Available balance as of June 25, 2023 $ 3,537,217 Quarter ended September 24, 2023 1,257 $ 829,874 $ 660.01 $ 2,707,343 Quarter ended December 24, 2023 970 $ 640,267 $ 660.04 $ 2,067,076 (1) The Company’s net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under the repurchase program, as applicable, and is included in the cost of shares repurchased in the Condensed Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share. Lam Research Corporation 2024 Q2 10-Q 15 Table of Contents In addition to the shares repurchased under the Board-authorized repurchase program shown above, during the three and six months ended December 24, 2023, the Company acquired 6 thousand shares at a total cost of $ 4.5 million and 15 thousand shares at a total cost of $ 10.0 million, respectively, which the Company withheld through net settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by the Company through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under the Company’s equity compensation plan. NOTE 15 — RESTRUCTURING CHARGES, NET The Company records employee severance and separation costs that meet the requirements for recognition in accordance with the relevant guidance of ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation - Non-retirement Post-employment Benefits, as applicable. For involuntary termination benefits that are not provided under the terms of an ongoing benefit arrangement, the liability for the current fair value of expected future costs associated with a management-approved restructuring plan is recognized in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, employee termination costs are accrued when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. Termination benefits associated with employees that elected to voluntarily terminate as part of the restructuring plan are recorded when the employee irrevocably accepts the offer and the amount can be reasonably estimated. If applicable, the Company records such costs into operating expense over the terminated employees’ future service period beyond any minimum or legally required retention period. The majority of restructuring charges that have been incurred but not yet paid are recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. In the fiscal year ended June 25, 2023, the Company initiated a restructuring plan designed to better align the Company’s cost structure with its outlook for the economic environment and business opportunities. Under the plan, through December 24, 2023, the Company terminated approximately 1,650 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs primarily relate to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, the Company made a strategic decision to relocate certain manufacturing activities to pre-existing facilities and incurred charges to move inventory and equipment and exit selected supplier arrangements. During the three months ended December 24, 2023, net restructuring costs of $ 15.0 million and $ 1.7 million were recorded in restructuring charges, net - cost of goods sold, and restructuring charges, net - operating expenses, respectively, in the Condensed Consolidated Statements of Operations. During the six months ended December 24, 2023, net restructuring costs of $ 22.9 million and $ 3.7 million were recorded in restructuring charges, net - cost of goods sold, and restructuring charges, net - operating expenses, respectively. No restructuring charges were recognized during the three and six months ended December 25, 2022. The restructuring plan is expected to be substantially completed by the June 2024 quarter, and cumulative costs as of December 24, 2023 total $ 146.9 million. The following table is a summary of the activity related to the restructuring plan: Severance and Benefits Other Total (in thousands) Restructuring liability as of June 25, 2023 $ 7,989 $ 246 $ 8,235 Restructuring expense 7,256 19,350 26,606 Cash payments ( 12,475 ) ( 11,799 ) ( 24,274 ) Non-cash activities 53 ( 6,923 ) ( 6,870 ) Restructuring liability as of December 24, 2023 $ 2,823 $ 874 $ 3,697 Lam Research Corporation 2024 Q2 10-Q 16 Table of Contents