Lam Research Corporation (LRCX) reported first-quarter fiscal 2015 non-GAAP earnings of 96 cents per share, which beat the Zacks Consensus Estimate by 3 cents
This Zacks Rank #4 (Sell) company has a good earnings surprise history and posted an average positive four-quarter surprise of 7.99%.
Revenues of $1.15 billion decreased 7.7% sequentially but increased 13.5% year over year. Revenues were in line with the Zacks Consensus Estimate.
Revenues by Geography
Region-wise, the U.S. contributed 28% of fiscal first quarter 2015 revenues (up 43.5% from the prior quarter). Korea added 19% (down 37.4% from the last quarter) and Taiwan contributed 18% (down 16.9% from the previous quarter) while Japan brought in 10% of the revenues (down 34.1% from the prior quarter). China accounted for 9% of the revenues (down 24.5% from the previous quarter).Southeast Asia contributed the remaining 9% (up 176.8% from the previous quarter. Europe’s share was 7% (up 7.7% from the prior quarter)
Shipments
Total system shipments were roughly $1.111 billion during the quarter, down 4.22% from $1.16 billion in the prior quarter. The memory segment collectively accounted for 44% of the shipments (down from 59% in the previous quarter). NAND shipments contributed 26% (up from 20% in the prior quarter) while DRAM added 18% (down from 39% in the previous quarter).
Foundries accounted for 45% of total shipments, up from 30% in the previous quarter. The increase was primarily attributable to the broadening out of customer spending in this space for a wide range of projects across multiple technology nodes. This percentage of foundry shipments is the highest for the company since the Mar 2013 quarter.
Logic and others constituted 11% of total shipments, flat sequentially.
Geographically, the U.S. accounted for 25% of fiscal first quarter 2015 shipments (down from 23% in the previous quarter) and was the largest contributor. Taiwan accounted for 21% (up from 18% in the prior quarter). Korea contributed 16% (down from 25% in the previous quarter). Japan brought in 11% (down from 14% in the prior quarter) while Southeast Asia also contributed 11% (up from 4% in the previous quarter) of total shipments. Europe generated 8% (down from 7% in the previous quarter) and China constituted 8% (down from 9% in the previous quarter),
Margins
Non-GAAP gross profit was $528.0 million, or 45.8% of revenues, compared with non-GAAP gross profit of $579.9 million, or 46.4% of revenues in the prior quarter. Several factors like customer mix, product mix and business volume contributed to the gross margin performance.
Total operating expenses were $321.2 million, flat sequentially. Operating margin was 18%, down from 20.6% recorded in the prior quarter.
Net Income
Non-GAAP net income was $167.7 million compared with income of $217.2 million in the prior quarter.
Balance Sheet
Exiting fiscal first quarter 2015, cash and cash equivalents, short-term investments, and restricted cash and investment balances were $3.0 billion compared with $3.2 billion in the prior quarter. This decrease was mainly due to $308 million in cash flows utilized for treasury stock purchases, which included net share settlement on employee stock-based compensation. This was partially offset by around $141 million of cash provided by operating activities.
Deferred revenue improved to $356.8 million compared with $361.6.5 million in the prior quarter while deferred profit balances increased to $251.8 million from $235.9 million. Long term debt and capital leases amounted to $824.2 million compared with $817.2 million in the prior quarter.
Guidance
For the second quarter of fiscal 2015, Lam Research provided guidance on both GAAP and non-GAAP basis.
On a GAAP basis, management expects revenues of approximately 1.23 billion (+/- 50 million). Shipments are expected to be roughly $1.24 billion (+/- 50 million). Gross margin is expected to be approximately 43.8% (+/-1%) while operating margin is expected to be around 16.0% (+/-1%). Earnings per share are projected to be 89 cents (+/- 7 cents) on a share count of approximately 175.0 million.
On a non–GAAP basis, it expects revenues of approximately 1.23 billion (+/- 50 million). Shipments are expected to be roughly $1.24 billion (+/- 50 million). Gross margin is expected to be approximately 45.5% (+/-1%) while operating margin is expected to be around 19.0% (+/-1%). Earnings per share are projected to be $1.12 (+/- 7 cents) on a share count of approximately 173.0 million.
Our Take
Lam Research delivered modest fiscal first quarter 2015 results with earnings beating the Zacks Consensus Estimate while revenues came in line with the Zacks Consensus Estimate. Both the foundries and NAND segments did well in the quarter.
Further, the company provided strong guidance for the second quarter of fiscal 2015. The company expects to reach another high point by the end of this year with the shipments of 250th Flex FX product for memory high aspect ratio application.
The company plans to add to the capacity of 3D NAND. However, it expects planar spending to be higher than 3D.
Lam Research’s cutting edge solutions and good execution will help the company create value for its shareholders. The company believes that key technology inflections in areas like multi-patterning, FinFET, 3D and NAND will boost growth and profitability going forward.
Better-ranked stocks in the technology sector include Autobytel, Inc. (ABTL), World Energy Solutions, Inc. (XWES) and Orbitz Worldwide Inc. (OWW). While Autobytel has a Zacks Rank #1 (Strong Buy), Orbitz Worldwide Inc. and World Energy Solutions carry a Zacks Rank #2 (Buy).
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