What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-31 compared with 2024-10-28 · 70 added, 70 removed, 188 unchanged (43% of the section changed)

48 unchanged sentences

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.

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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.

For a full understanding of our financial position and results of operations for the three and six months ended December 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 Q2 10-Q 17

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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.

Overall, calendar year 2024 wafer fabrication equipment spending was higher, driven by increases in both the 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.

On October 2, 2024, the Company effected a ten-for-one stock split of its common stock and a proportional increase in the number of authorized shares.

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.

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2024 September 29,

2024 June 30,

(in thousands, except per share data and percentages)

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Diluted net income per share $ 0.92 $ 0.86

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.

In the December 2024 quarter, revenu e increased 5% compared to the three months ended September 29, 2024 (the “September 2024 quarter”), driven by an increase in systems revenue as a result of strengthened memory investments in both the NAND and dynamic random access memory (“DRAM”) market segments.

The deferred revenue balance was $2,031.6 million at the end of the December 2024 quarter, a slight decrease relative to the balance at the end of the September 2024 quarter of $2,047.0 million.

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;

The decrease in gross margin as a percentage of revenue in the December 2024 quarter compared to the September 2024 quarter was primarily a r esult of unfavorable customer mix.

Operating expenses in the December 2024 quarter were flat compared to the September 2024 quarter, as increases in headcount and incentive compensation expense were largely offset by lower elective deferred compensation plan-related costs.

Our cash, cash equivalents, and restricted cash balances decreased to $5.7 billion at the end of the December 2024 quarter compared to $6.1 billion at the end of the September 2024 quarter.

This decrease was primarily the result of $697.7 million of share repurchases, including net share settlement of employee stock-based compensation and excise tax;

$297.6 million of dividends paid to stockholders;

and $188.3 million of capital expenditures;

Employee headcount as of September 29, 2024 was approximately 17,700.

partially offset by $741.9 million of cash generated from operating activities.

Employee headcount as of December 29, 2024 was approximately 18,300.

RESULTS OF OPERATIONS

Three Months Ended

September 29,

2024 June 30,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

Revenue (in millions) $ 4,376 $ 4,168 $ 8,544 $ 7,240

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Europe 3 % 5 % 4 % 6 %

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.

The increase in revenue for the six months ended December 29, 2024 compared to the same period in 2023 was due to increases in equipment spending by our customers across all market segments as well as higher customer support-related revenue.

Lam Research Corporation 2025 Q2 10-Q 19

The following table presents our revenue disaggregated between systems and customer support-related revenue:

Three Months Ended

September 29,

2024 June 30,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(In thousands)

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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,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

Memory 50 % 35 % 43 % 43 %

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Logic/integrated device manufacturing 15 % 24 % 19 % 20 %

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.

Three Months Ended

September 29,

2024 June 30,

The increase in the memory market segment for the December 2024 quarter compared to the September 2024 quarter was primarily attributable to NAND investments by our customers for equipment and upgrades, partially offset by lower Foundry and Logic spending.

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(in thousands, except percentages)

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Percent of revenue 47.4 % 48.0 % 47.7 % 47.1 %

Gross margin as a percentage of re venue 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.

Gross margin as a percentage of re venue was lower in the December 2024 quarter compared to the September 2024 quarter mainly as a result of unfavorable customer mix changes.

The increase in gross margin as a percentage of revenue in the six months ended December 29, 2024 compared to the same period in the prior year was primarily due to improved factory efficiencies, partially offset by unfavorable changes in customer mix, increased transformational charges, and higher employee-related expenses.

Research and Development

Three Months Ended

September 29,

2024 June 30,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(in thousands, except percentages)

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Percent of revenue 11.3 % 11.9 % 11.6 % 12.3 %

We co ntinued to make significant R&D investments in the September 2024 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufactu ring processes.

Th e 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.

We co ntinued to make significant R&D investments in the December 2024 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufactu ring processes.

R&D expense in the December 2024 quarter was flat compared to the September 2024 quarter, as increases in headcount and incentive compensation expense were largely offset by lower elective deferred compensation plan-related costs.

R&D expense in the six months ended December 29, 2024 increased compared to the same period in the prior year, driven by higher headcount and incentive compensation expense as well as spending on outside services, partially offset by lower supplies expense.

Lam Research Corporation 2025 Q2 10-Q 20

Selling, General, and Administrative

Three Months Ended

September 29,

2024 June 30,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(in thousands, except percentages)

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Percent of revenue 5.6 % 5.8 % 5.7 % 6.0 %

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.

SG&A expense during the December 2024 quarter was flat to the September 2024 quarter, with increases in incentive compensation and supplies expenses largely offset by lower spending on outs ide services.

SG&A expense during the six months ended December 29, 2024 increased compared to the same period in the prior year, driven by increases in headcount and incentive compensation expense as well as higher spending for transformational activities.

Restructuring Charges, N et

Three Months Ended

September 29,

2024 June 30,

2024 September 24,

(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.

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The restructuring plan was substantially completed as of June 30, 2024.

No restructuring charges were recorded during the six months ended December 29, 2024.

During the six months ended December 24, 2023, the company recorded net restructuring costs of $26.6 million.

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.

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Other income (expense), net consisted of the following:

Three Months Ended

September 29,

2024 June 30,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(in thousands)

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Interest expense (45,299) (44,946) (90,245) (91,644)

Gains (losses) on deferred compensation plan-related assets, net 17,420 9,643 (2,901)

Gains on deferred compensation plan-related assets, net 4,502 17,420 21,922 22,629

Foreign exchange (losses) gains, net (5,117) (9,686) (14,803) 701

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$ 14,262 $ 30,081 $ 44,343 $ 32,440

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 income decreased in the December 2024 quarter as compared to the September 2024 quarter, primarily due to lower cash balances and lower interest rates.

Interest income increased for the six months ended December 29, 2024, compared to the same period in 2023, because of higher cash balances, partially offset by lower interest rates.

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.

The gains 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.

The variation in other, net was primarily driven by fluctuations in the fair market value of equity investments for all periods presented.

Lam Research Corporation 2025 Q2 10-Q 21

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,

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

2024 December 24,

(in thousands, except percentages)

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Effective tax rate 11.7 % 13.7 % 12.7 % 12.8 %

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.

The decrease in the effective tax rate for the December 2024 quarter compared to the September 2024 quarter was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation and the income tax benefit from a change in tax law in the December 2024 quarter.

The effective tax rate for the six months ended December 29, 2024 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.

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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;

Total gross cash, cash equivalents, and restricted cash balances were $5.7 billion at December 29, 2024 compared to $5.9 billion as of June 30, 2024.

The decrease was primarily driven by $1,694.7 million of share repurchases, including net share settlement on employee stock-based compensation and excise tax;

$558.6 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):

and $298.9 million in capital expenditures, partially offset by cash generated from operating activities totaling $2,310.4 million.

Cash Flow from Operating Activities

Net cash provided by operating activities of $2,310.4 million during the six months ended December 29, 2024 consisted of (in thousands):

Net income $ 2,307,462

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Changes in operating asset and liability accounts (148,889)

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:

Other (9,049)

Changes in operating asset and liability accounts, net of foreign exchange impact, included the following uses of cash:

increases in accounts receivable of $785.1 million, inventory of $198.8 million, and prepaid expenses and other current assets of $10.8 million.

These uses of cash were offset by the following sources of cash:

increases in deferred gross profit of $510.1 million, trade accounts payable of $189.4 million, and accrued expenses and other liabilities of $146.3 million.

Lam Research Corporation 2025 Q2 10-Q 22

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.

Net cash used for investing activities during the six months ended December 29, 2024 was $285.9 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.

Net cash used for financing activities during the six months ended December 29, 2024 was $2,194.6 million, primarily consisting of $1,694.7 million in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise tax, and $558.6 million in dividends paid.

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.

Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of December 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.

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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.

In January 2025, we entered into a Third Amended and Restated Credit Agreement.

The amendment increased the unsecured revolving credit facility commitment from $1.5 billion to $2.0 billion and extended the maturity of the facility from June 2026 to January 2030.

The facility provides for an expansion option that will allow us, subject to certain requirements, to request an increase in the facility of up to an additional $750 million, for a potential total commitment of $2.75 billion.

Please refer to Note 11, “Long-term Debt and Other Borrowings,” to our Condensed Consolidated Financial Statements, included in Part I of this form 10-Q for additional information.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis