Lam Research Beats on Q2 Earnings, Revs - Analyst Blog

Lam Research Corporation ( LRCX ) reported second quarter fiscal 2014 non-GAAP earnings of $1.10 per share, beating the Zacks Consensus Estimate by 7 cents.

Revenues of $1.12 billion increased 10.0% sequentially and 29.6% year over year. Revenues also beat the Zacks Consensus Estimate of $1.10 billion. The year-over-year improvement was primarily driven by continued strength in the foundry segment.

Revenues by Geography

Region-wise, North America contributed 13% of fiscal second quarter 2014 revenues (14% in the last quarter). Europe's share was 5% (9% in the prior quarter) while Japan brought in 17% (13% in the last quarter) of the revenues. Asia-Pacific accounted for 25% of the revenues (17% in the prior quarter), Korea added 19% (23% in last quarter) while Taiwan contributed the remaining 28% (24% in the previous quarter).


Shipments were roughly $1.14 billion during the quarter, up 15.0% from $987.0 million in the prior quarter. Foundries accounted for 28% of total shipments, NAND 36%, DRAM 28.0%, with Logic and Others bringing in the balance.

Geographically, North America accounted for 9% of fiscal second quarter 2014 shipments (17% in the first quarter of 2014). Europe generated 7% (8% in the prior quarter), Japan brought in 13% (17% in the prior quarter),and Korea contributed 24% (18% in the previous quarter). Asia Pacific was the largest contributor with 25% (19% in the previous quarter) of total shipments while Taiwan accounted for 22% (21% in the prior quarter).


Non-GAAP gross profit was $510.8 million, or 45.8% of revenue, compared with non-GAAP gross profit of $456.7 million, or 45.0% of revenue in the prior quarter. Higher revenues coupled with favorable customer mix were the main reasons for the margin increase.

Total operating expenses were $302.1 million, up from $291.9 million in the prior quarter. Operating margin was 18.7%, up 250 bps from 16.2% recorded in the prior quarter.

Net Income

Non-GAAP net income was $188.7 million compared with income of $139.1 million in the prior quarter and $77.2 million in the prior-year quarter.

Balance Sheet

Exiting fiscal second quarter 2014, cash and cash equivalents, short-term investments, and restricted cash and investment balances was $2.7 billion compared with $2.6 billion in the prior quarter. This increase was primarily the result of approximately $129 million in cash flow from operating activities during the reported quarter, partially offset by $48 million of stock repurchases.

Deferred revenue and deferred profit balances increased to $405.0 million and $224.4 million, respectively, compared with $334.0 million and $188.4 million, respectively, in the prior quarter. Long term debt, convertible notes, and capital leases amounted to $803.3 million compared with $796.4 million in the prior quarter.


For the third quarter of fiscal 2014, Lam Research expects revenues to be in the range of $1.215 billion-$1.245 billion. Shipments are expected to be roughly in the range of $1.25 billion-$1.28 billion. Gross margin is expected to be approximately 45% (+/-1%) while operating margin is expected to be around 19.5% (+/-1%). Earnings per share are projected to be $1.15 (+/- 5 cents) on a share count of $173.0 million.

Our Take

Lam Research delivered decent fiscal second quarter 2014 results with the top and bottom lines beating the Zacks Consensus Estimate. However, foundries are not the only segment witnessing growth. Lam's memory business was also very strong in the quarter. Further, the company provided strong third quarter guidance, reflecting modest improvement in semiconductor spending.

Lam Research continues to invest in next-generation products and technologies to combat the fierce competition, which we believe will boost growth and profitability going forward.

Further, Lam Research is witnessing strength in the advanced packaging segment on the back of several design wins in advanced wafer-level packaging applications.

Lam Research currently has a Zacks Rank #3 (Hold). Lam Research is well-positioned in the semiconductor equipment segment and its closest peers are Applied Materials ( AMAT ), KLA-Tencor Corp ( KLAC ), Tokyo Electron and ASML Holding NV ( ASML ).

APPLD MATLS INC (AMAT): Free Stock Analysis Report

ASML HOLDING NV (ASML): Free Stock Analysis Report

KLA-TENCOR CORP (KLAC): Free Stock Analysis Report

LAM RESEARCH (LRCX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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