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US Regulations Hampered Lam Research's Q1 Business With China

US Regulations Hampered Lam Research's Q1 Business With China

Semiconductor equipment maker Lam Research Corporation (NASDAQ: LRCX) topped estimates for the fiscal first quarter 2021 and guided better than the street's expectations of revenue and earnings per share for the December quarter in its earnings report, late Wednesday.

The company expects softer margins in the second quarter.

Key Highlights:

  • Lam Research's Q1 revenue of $3.18 billion beat consensus by $70 million, growing 46.5% year-over-year and 14% sequentially.
  • Non-GAAP diluted EPS of $5.67 beat analyst estimates by 48 cents. Diluted EPS was $5.59.
  • System revenue, which includes sales of new leading-edge equipment in deposition, etch and clean markets, grew 57.35% year-over-year to $2.15 billion; customer support revenue crossed the billion mark for the first time, rising 28.5% year-over-year to $1.03 billion.
  • Non-GAAP gross margin grew 140 basis points sequentially to 47.4%, and non-GAAP operating margin rose 310 basis points sequentially to 30.2%.
  • The company generated $642.5 million in operating cash flow and ended the quarter with a cash balance of $4.38 billion.
  • Capital expenditure increased by 60% year-over-year to $62.8 million.

Outlook For Q2:

  • Lam Research expects revenue in the range of $3.1 billion to $3.5 billion, exceeding analyst consensus of $3.08 billion.
  • Non-GAAP diluted EPS expected in the range of $5.20 to $6.00, higher than the consensus of $5.16.
  • Non-GAAP gross margin in the range of 45% to 47%, and non-GAAP operating margin in the range of 28.5% to 30.5%

Management commentary: "Our strong operational execution is enabling the [company] to meet our customers' critical needs, providing a solid foundation to deliver on our long-term growth objectives," said Lam Research President and CEO Tim Archer.

"As has been widely reporting, US regulations have impacted our ability to ship wafer fab equipment and parts to a large foundry customer in China. We are working with regulators on this issue and have applied for licenses to ship equipment and parts that are subject to the restrictions. As a result of the current situation, our December quarter guidance reflects an impact to sales to this customer," Tim said on the company's conference call.

"From a market perspective, we see positive momentum in the underlying drivers of semiconductor growth and believe this translates into a healthy outlook for Lam's business," he added.

"Third-party data suggests that growth in PC, notebook and workstation shipments in the calendar third quarter surpassed a 10-year high to reach record levels," said Tim.

Price Action: LRCX shares fell 2.08% to $366.62 in the after-hours session Wednesday.


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