Lam Research Corporation (LRCX) Bundle
Understanding Lam Research Corporation (LRCX) Revenue Streams
Understanding Lam Research Corporation’s Revenue Streams
The revenue for the company for the three months ended September 29, 2024, was $4,167,976 thousand, compared to $3,482,062 thousand for the same period in 2023, indicating a year-over-year growth.
Breakdown of Primary Revenue Sources
| Revenue Source | Three Months Ended September 29, 2024 (in thousands) | Three Months Ended September 24, 2023 (in thousands) |
|---|---|---|
| Systems Revenue | $2,392,730 | $2,056,655 |
| Customer Support-Related Revenue | $1,775,246 | $1,425,407 |
| Total Revenue | $4,167,976 | $3,482,062 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate from September 2023 to September 2024 is approximately 19.7%, reflecting a strong demand in the semiconductor market.
Contribution of Different Business Segments to Overall Revenue
The contribution of different segments to overall revenue for the three months ended September 29, 2024, is as follows:
| Segment | Percentage of Total Revenue |
|---|---|
| Memory | 35% |
| Foundry | 41% |
| Logic/Integrated Device Manufacturing | 24% |
Regional Revenue Distribution
The revenue distribution by geographic region for the three months ended September 29, 2024, is detailed below:
| Region | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| China | $1,558,404 | 37% |
| Korea | $762,081 | 18% |
| Taiwan | $615,368 | 15% |
| United States | $488,381 | 12% |
| Japan | $301,386 | 7% |
| Southeast Asia | $244,789 | 6% |
| Europe | $197,567 | 5% |
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include an increase in systems revenue driven by strong investments in the dynamic random access memory (DRAM) segment and growth in customer support-related revenue. The deferred revenue balance was $2,047,043 thousand at the end of September 2024, up from $1,551,600 thousand at the end of June 2024, indicating enhanced customer advanced deposits.
A Deep Dive into Lam Research Corporation (LRCX) Profitability
A Deep Dive into Lam Research Corporation's Profitability
Gross Profit Margin: For the three months ended September 29, 2024, the gross profit margin was 48.0%, up from 47.5% in the previous quarter and the same percentage in the same quarter of the prior year. The gross margin amounted to $2,002.7 million compared to $1,654.7 million from the same period in 2023.
| Period | Gross Margin ($ in millions) | Gross Margin (%) |
|---|---|---|
| September 29, 2024 | $2,002.7 | 48.0% |
| June 30, 2024 | $1,840.1 | 47.5% |
| September 24, 2023 | $1,654.7 | 47.5% |
Operating Profit Margin: The operating profit for the quarter was $1,264.2 million, representing an operating margin of approximately 30.4%. This is an increase from $1,023.0 million in the same quarter last year.
Net Profit Margin: The net income for the quarter ending September 29, 2024, was $1,116.4 million, yielding a net profit margin of 26.8%, compared to 25.5% in the same quarter of the previous year.
| Period | Net Income ($ in millions) | Net Profit Margin (%) |
|---|---|---|
| September 29, 2024 | $1,116.4 | 26.8% |
| September 24, 2023 | $887.4 | 25.5% |
Trends in Profitability Over Time: Over the past year, the company has demonstrated a consistent upward trend in profitability metrics. The gross margin has improved due to enhanced factory efficiencies and reduced material costs, while operating and net margins have also seen notable increases, indicating effective cost management.
Comparison of Profitability Ratios with Industry Averages: The semiconductor equipment industry average gross margin typically hovers around 45-50%. The operating and net margins for the industry average around 20-25% and 15-20%, respectively. The company's margins are notably higher than these averages, indicating superior operational efficiency.
Analysis of Operational Efficiency: The company has successfully managed its costs, reflected in the stable operating expenses which were $738.5 million for the quarter. This represents 17.7% of revenue, slightly down from 18.1% year-over-year. Research and development expenses stood at $495.4 million, accounting for 11.9% of revenue, indicating continued investment in innovation.
| Metric | Value | Percentage of Revenue |
|---|---|---|
| Operating Expenses ($ in millions) | $738.5 | 17.7% |
| Research & Development ($ in millions) | $495.4 | 11.9% |
Conclusion: The financial health of the company as evidenced by its profitability metrics is robust, with significant improvements across all major categories. The company continues to outperform industry averages, showcasing strong operational efficiencies and effective cost management strategies.
Debt vs. Equity: How Lam Research Corporation (LRCX) Finances Its Growth
Debt vs. Equity: How Lam Research Corporation Finances Its Growth
Overview of Debt Levels
As of September 29, 2024, the total long-term debt and finance lease obligations of the company were $4.48 billion, while the current portion of long-term debt was $504.68 million.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.53, calculated by dividing total liabilities of $11.06 billion by total stockholders' equity of $8.47 billion. This ratio is favorable compared to the semiconductor industry average of around 0.77.
Recent Debt Issuances and Credit Ratings
- In the most recent quarter, the company reported interest expense of $44.95 million.
- The credit rating assigned by Moody's is Baa1, indicating a stable outlook.
Refinancing Activity
During the fiscal quarter ended September 29, 2024, principal payments on debt, including finance lease obligations, totaled $934,000.
Balance Between Debt Financing and Equity Funding
The company maintains a balanced approach between debt and equity financing. As of September 29, 2024, cash and cash equivalents totaled $6.07 billion, providing a robust liquidity position to support ongoing operations and investments.
| Debt Type | Amount (in millions) |
|---|---|
| Current Portion of Long-term Debt | $504.68 |
| Long-term Debt | $4,479.09 |
| Total Liabilities | $11,060.60 |
| Total Stockholders' Equity | $8,471.89 |
| Debt-to-Equity Ratio | 0.53 |
Assessing Lam Research Corporation (LRCX) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 29, 2024, stands at 2.52, calculated from total current assets of $13.49 billion and total current liabilities of $5.34 billion. The quick ratio, which excludes inventory from current assets, is calculated at 1.40, using current assets of $13.49 billion minus inventories of $4.21 billion, resulting in quick assets of $9.28 billion.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, is $8.15 billion as of September 29, 2024, compared to $8.54 billion at June 30, 2024, indicating a slight decrease in liquidity. This trend reflects the company's ability to cover short-term liabilities with short-term assets effectively.
Cash Flow Statements Overview
The cash flow from operating activities for the quarter ended September 29, 2024, was $1.57 billion, with net income contributing $1.12 billion. Significant non-cash charges included $94.30 million in depreciation and $80.01 million in equity-based compensation. Cash flows from investing activities showed a cash outflow of $110.60 million, primarily for capital expenditures. Cash flows from financing activities resulted in a net outflow of $1.26 billion, driven by $997.00 million in share repurchases and $261.00 million in dividends paid.
| Cash Flow Item | Amount (in thousands) |
|---|---|
| Net Cash Provided by Operating Activities | $1,568,471 |
| Net Income | $1,116,444 |
| Depreciation and Amortization | $94,295 |
| Equity-based Compensation | $80,011 |
| Net Cash Used for Investing Activities | ($110,588) |
| Net Cash Used for Financing Activities | ($1,259,321) |
Liquidity Concerns or Strengths
As of September 29, 2024, total cash, cash equivalents, and restricted cash were $6.07 billion, up from $5.85 billion at June 30, 2024. The company's ability to generate significant cash flow from operations amid a competitive semiconductor market suggests robust liquidity. However, ongoing share repurchases and dividend payments could pose potential liquidity concerns if cash flow generation does not keep pace with these outflows.
Conclusion
Through the analysis of liquidity ratios, working capital trends, and cash flow statements, the financial health of the company appears stable for the upcoming periods, with sufficient liquidity reserves to support operational needs and investment strategies.
Is Lam Research Corporation (LRCX) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of the company, key valuation metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios are crucial.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.5, reflecting the company's earnings relative to its stock price. This suggests a moderate valuation compared to industry benchmarks.
Price-to-Book (P/B) Ratio
The P/B ratio is currently at 4.0, indicating that the stock is trading at a premium relative to its book value, which is common in high-growth sectors.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 15.2, which is considered reasonable within the semiconductor industry, suggesting that the company is valued fairly in relation to its earnings.
Stock Price Trends
Over the past 12 months, the stock has experienced fluctuations, starting at approximately $350 and peaking at around $500. The current stock price is approximately $450, indicating a 5% increase year-to-date.
Dividend Yield and Payout Ratios
The current dividend yield is 1.8%, with a payout ratio of 20% of earnings, suggesting a conservative approach to returning profits to shareholders while retaining capital for growth.
Analyst Consensus
The consensus among analysts is a strong "Buy," with 75% of analysts recommending purchasing the stock, while 20% suggest holding, and only 5% recommend selling.
| Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 4.0 |
| EV/EBITDA Ratio | 15.2 |
| Current Stock Price | $450 |
| 12-Month Price Range | $350 - $500 |
| Dividend Yield | 1.8% |
| Payout Ratio | 20% |
| Analyst Consensus | Buy (75%) |
Key Risks Facing Lam Research Corporation (LRCX)
Key Risks Facing Lam Research Corporation
The following outlines the internal and external risks impacting the financial health of the company:
Industry Competition
The semiconductor equipment industry is characterized by intense competition, which can lead to pricing pressures. In the most recent quarter, the company reported a revenue of $4,167.976 million, up from $3,871.507 million in the previous quarter, indicating a competitive environment where maintaining market share is critical.
Regulatory Changes
Changes in trade policies and tariffs, especially involving China, can significantly affect operations. The company derived 37% of its revenue from China as of September 29, 2024. Regulatory scrutiny in global markets poses a risk to operational continuity and can impact financial forecasts.
Market Conditions
Volatility in the semiconductor market can affect demand for products. The company is experiencing fluctuations, particularly in the memory market segment, with 35% of revenue coming from memory in the September 2024 quarter, down from 36% in June 2024.
Operational Risks
The company faces operational risks related to supply chain disruptions, which can delay manufacturing and delivery schedules. The total operating expenses were reported at $738.486 million for the September 2024 quarter, an increase from $713.538 million in the previous quarter.
Financial Risks
Rising interest rates may impact the company's cost of borrowing, as total liabilities stood at $11,060.598 million as of September 29, 2024. Changes in interest rates can influence financial performance and investment capacity.
Strategic Risks
Strategic decisions regarding R&D investments are crucial. The company invested $495.358 million in R&D in the September 2024 quarter, representing 11.9% of total revenue. Failure to innovate or adapt to market demands may hinder growth prospects.
Mitigation Strategies
The company has implemented measures to enhance operational efficiencies and reduce costs. For instance, gross margins improved to 48.0% in the September 2024 quarter, up from 47.5% in the prior quarter. These efforts are aimed at maintaining competitiveness in a challenging market landscape.
Tax and Compliance Risks
Tax audits and changes in tax regulations present potential liabilities. The company could face adjustments up to $210.1 million due to uncertain tax positions.
| Risk Factor | Details |
|---|---|
| Industry Competition | Revenue of $4,167.976 million; competitive pricing pressures. |
| Regulatory Changes | 37% revenue from China; exposure to trade policies. |
| Market Conditions | 35% revenue from memory; fluctuations in demand. |
| Operational Risks | Operating expenses of $738.486 million; supply chain disruptions. |
| Financial Risks | Total liabilities of $11,060.598 million; impact of interest rates. |
| Strategic Risks | R&D investment of $495.358 million; innovation necessity. |
| Tax and Compliance Risks | Potential adjustments of $210.1 million due to tax audits. |
Future Growth Prospects for Lam Research Corporation (LRCX)
Future Growth Prospects for Lam Research Corporation
Analysis of Key Growth Drivers
Lam Research Corporation is poised for significant growth driven by various factors:
- Product Innovations: Continuous investment in research and development, with R&D expenses reported at $495.4 million for the quarter ended September 29, 2024, accounting for 11.9% of total revenue.
- Market Expansions: The company has seen revenue growth across key markets, with revenue from China at $1.56 billion, Korea at $762 million, and Taiwan at $615 million for the September 2024 quarter.
- Acquisitions: Strategic acquisitions have enhanced capabilities, allowing entry into new market segments and strengthening competitive positioning.
Future Revenue Growth Projections and Earnings Estimates
Analysts project robust revenue growth driven by increasing demand for semiconductor manufacturing equipment. Revenue for the September 2024 quarter was reported at $4.17 billion, an increase from $3.48 billion in the same period the previous year, translating to a year-over-year growth of 19.7%. Future earnings estimates suggest continued growth, with net income reaching $1.12 billion for the same quarter, up from $887 million a year earlier.
Strategic Initiatives or Partnerships That May Drive Future Growth
Lam Research's strategic initiatives include:
- Expansion of Customer Support Services: Customer support-related revenue surged to $1.78 billion in the September 2024 quarter, driven by increased demand for service and upgrades.
- Investment in Leading-Edge Technologies: Focus on advanced deposition and etching technologies positions the company to capitalize on the shift towards smaller, more efficient semiconductor devices.
Competitive Advantages That Position the Company for Growth
Lam Research maintains several competitive advantages:
- Strong R&D Investment: With R&D expenditure at $495 million, the company is positioned to innovate and lead in technology developments.
- Robust Financial Health: Cash and cash equivalents totaled $6.07 billion as of September 29, 2024, providing ample liquidity for strategic investments.
- Global Market Reach: A diversified revenue stream across regions, with significant contributions from Asia, enhances resilience against regional market fluctuations.
Revenue Breakdown by Market Segment
| Market Segment | Percentage of Revenue | Revenue (in millions) |
|---|---|---|
| Memory | 35% | $1,460 million |
| Foundry | 41% | $1,710 million |
| Logic/Integrated Device Manufacturing | 24% | $1,000 million |
The strategic focus on enhancing product offerings and expanding into new markets underpins the company's growth trajectory. With strong financials and active investment in technology, Lam Research is well-positioned for future growth in the semiconductor industry.
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Article updated on 8 Nov 2024
Resources:
- Lam Research Corporation (LRCX) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Lam Research Corporation (LRCX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Lam Research Corporation (LRCX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.