Lam Research (NASDAQ:LRCX) released fiscal fourth-quarter 2019 results on Wednesday after the markets closed. The leader in semiconductor-processing solutions delivered an expected revenue decline given broader weakness in its core wafer fabrication equipment (WFE) market, but also mustered solid profits with the help of operational efficiency initiatives.

With shares turning modestly lower Thursday afternoon after flirting with a fresh 52-week high, let's dig deeper to see what drove Lam Research this quarter and what shareholders can expect in the coming months.

Semiconductor wafer being fabricated.

IMAGE SOURCE: GETTY IMAGES.

Lam Research results: The raw numbers

Metric

Fiscal Q4 2019*

Fiscal Q4 2018**

Change

Revenue

$2.36 billion

$3.13 billion

(24.5%)

GAAP net income

$541.80 million

$1.02 billion

(46.9%)

GAAP diluted earnings per share

$3.51

$5.82

(39.7%)

Data source: Lam Research. *For the quarter ended June 30, 2019. **For the quarter ended June 24, 2018. 

What happened with Lam Research this quarter?

  • Revenue was slightly below the midpoint of Lam's guidance provided in April for a range of $2.2 billion to $2.5 billion.
  • On an adjusted (non-GAAP) basis, which excludes items like restructuring costs and acquisition expenses, Lam's net income was $558.8 million, or $3.62 per share, above the high end of guidance for a per-share range of $3.20 to $3.60.
  • Adjusted gross margin was 45.9%, up from 45.1% last quarter and near the high end of guidance for a range of 44.5% to 46.5%.
  • Deferred revenue at the end of the quarter was $449 million, up from $441 million last quarter. Deferred profit also climbed slightly to $381 million (from $378 million last quarter).
  • By geography, revenue in China comprised 33% of total sales, Korea provided 25%, Taiwan provided 14%, the U.S. provided 11%, Japan provided 9%, Southeast Asia provided 5%, and Europe provided 3%.
  • Cash, cash equivalents, and short-term investments fell from $6.4 billion last quarter to $5.7 billion at the end of June, as $880 million of cash from operations was offset by a combination of $1.1 billion of share repurchases, $300 million of debt reductions, and $165 million in dividends paid.

What management had to say

"Lam's June quarter results reflect our strong track record of execution," said Lam Research CEO Timothy Archer in a press release. "We are making solid progress on our innovation roadmap, and with multiple technology inflections ahead of us, Lam is in an excellent position to win."

During yesterday's conference call, Archer elaborated that, given current trade concerns and broader market uncertainties, Lam has succeeded by focusing on operational execution and handling the business factors within its control.

He added that the broader WFE industry remains "directionally unchanged" from last quarter, with most 2019 estimates pointing to a mid- to high-teens percent decline from 2018. Meanwhile, Archer noted spending in the memory segment is "incrementally lower" relative to last quarter, while foundry spending is "tracking higher."

Looking forward

For the current quarter, Lam sees revenue arriving in the range of $2.0 billion to $2.3 billion, with adjusted gross margin of 44% to 46% and adjusted net income per diluted share of $2.80 to $3.20. By comparison -- and though we don't typically pay close attention to Wall Street's near-term demands -- most analysts were modeling earnings and revenue near the high ends of Lam's guidance ranges.