Lam Research Corporation reports 60.2% EBITDA growth in 2018 and 4.4 pp EBITDA Margin growth from 27.6% to 32.0%
07/26/2018 • About Lam Research Corporation (
$LRCX) • By InTwits
Lam Research Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Lam Research Corporation is a fast growth stock: FY2018 revenue growth was 38.2%, 5 year revenue CAGR was 25.2% at FY2018 ROIC 33.9%
- EBITDA Margin is expanding: 32.0% in FY2018 vs. 27.6% in FY2017 vs. 21.1% in FY2014
- Lam Research Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $305m in 2018, $111m in 2017, $118m in 2016, $85m in 2015, $103m in 2014
- In the last 5 years the company invested considerably less than D&A: $950m vs. $1,495m
- The company has highly profitable business model: ROIC is 33.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 38.2%. Revenue growth showed slowdown in FY18Q4 - it was 33.3% YoY. During FY2014-FY2018 Revenue growth bottomed in FY2016 at 11.9% and was accelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018. EBITDA Margin grew at 2.9 pp per annum in FY2014-FY2018.
Gross Margin increased slightly on 1.7 pp from 45.0% to 46.6% in FY2018. Gross Margin grew at 0.76 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 1.4 pp from 8.3% to 6.9% in FY2018. SG&A as a % of Revenue followed a declining trend at -1.6 pp per annum in FY2014-FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During the last 5 years SBC as a % of Revenue topped in FY2015 at 2.6% and was declining since that time.
Net Income margin showed almost no change in FY2018. Net Income margin grew at 2.4 pp per annum in FY2014-FY2018. The efficient tax rate was 24.5% in FY2018 while the average for the last five years was 15.0%.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 2.5%. Lam Research Corporation showed small CAPEX/Revenue decline of 1.3 pp from 3.8% in FY2015 to 2.5% in FY2018. It's average level of CAPEX/Revenue for the last three years was 2.5%.
Accounts receivable as a % of Revenue decreased slightly on 1.2 pp from 20.9% to 19.7% in FY2018. Inventories as a % of Revenue increased slightly on 1.6 pp from 15.4% to 16.9% in FY2018. Accounts payable as a % of Revenue decreased slightly on 1.9 pp from 10.5% to 8.6% in FY2018.
Lam Research Corporation has spent
$116m on M&A in FY2018 which accounts for 1.0% of revenue.
Return on investment
The company operates at high and attractive ROIC (33.9%) and ROE (35.7%). ROIC jumped on 15.1 pp from 18.7% to 33.9% in FY2018. ROE increased on 9.0 pp from 26.7% to 35.7% in FY2018. ROIC followed a growing trend in the last 5 years. ROE followed a growing trend at 5.9 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.6x and Debt / EBITDA is 0.7x. Debt dropped on 12.9% while cash surged on 89.8%.
Lam Research Corporation has good short term financial stability: Interest coverage ratio (ICR) is 33.0x. Lam Research Corporation has no short term refinancing risk: cash is higher than short term debt (739.7%).
Average interest expence charged on company's debt was 3.9% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 7.7x and P/E 12.3x.
The company paid 12.9% of Net Income as dividends in FY2018.
Management team
CEO total compensation was
$12,848,645 in FY2018 which included
$1,001,442 salary. Lam Research Corporation's CFO is Douglas R Bettinger "Doug". Douglas R Bettinger "Doug" has 6 years tenure at the company.
At the end of financial year the company had 0.53% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 10,900 employees. The number of employees jumped on 16.0%. Average revenue per employee in FY2018 was
$1,016,238 and it jumped on 19.2%.
Financial and operational results
FY ended 06/24/2018
Lam Research Corporation ($LRCX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 4,607 | 5,259 | 5,886 | 8,014 | 11,077 | 38.2% |
| Gross Profit | 2,007 | 2,284 | 2,619 | 3,603 | 5,165 | 43.3% |
| SG&A | 613 | 592 | 631 | 667 | 762 | 14.2% |
| EBITDA | 970 | 1,066 | 1,365 | 2,209 | 3,540 | 60.2% |
| EBIT | 678 | 788 | 1,074 | 1,902 | 3,213 | 68.9% |
| Interest expence | 62 | 74 | 135 | 118 | 97 | -17.3% |
| Tax | 91 | 85 | 46 | 114 | 771 | 576.9% |
| Net Income | 632 | 656 | 914 | 1,698 | 2,381 | 40.2% |
| Stock Based Compensation | 104 | 135 | 142 | 150 | 172 | 14.7% |
Balance Sheet
|
|---|
| Cash | 1,453 | 1,502 | 5,039 | 2,378 | 4,512 | 89.8% |
| Accounts Receivable | 801 | 1,094 | 1,262 | 1,673 | 2,177 | 30.1% |
| Inventory | 741 | 943 | 972 | 1,233 | 1,876 | 52.2% |
| Accounts Payable | 224 | 300 | 348 | 465 | 511 | 10.0% |
| Short Term Debt | 518 | 1,360 | 948 | 908 | 610 | -32.8% |
| Long Term Debt | 1,001 | 1,243 | 3,586 | 1,955 | 1,885 | -3.6% |
Cash flow
|
|---|
| Capex | 146 | 198 | 175 | 157 | 273 | 73.7% |
| Dividends | | 116 | 190 | 243 | 308 | 26.7% |
| Acquisitions | 30 | 1 | | | 116 | |
Ratios
|
|---|
| Revenue growth | 28.0% | 14.2% | 11.9% | 36.1% | 38.2% | |
| EBITDA growth | 129.7% | 9.9% | 28.1% | 61.8% | 60.2% | |
|
|---|
| Gross Margin | 43.6% | 43.4% | 44.5% | 45.0% | 46.6% | 1.7% |
| EBITDA Margin | 21.1% | 20.3% | 23.2% | 27.6% | 32.0% | 4.4% |
| EBIT Margin | 14.7% | 15.0% | 18.3% | 23.7% | 29.0% | 5.3% |
| SG&A, % of revenue | 13.3% | 11.2% | 10.7% | 8.3% | 6.9% | -1.4% |
| SBC, % of revenue | 2.2% | 2.6% | 2.4% | 1.9% | 1.6% | -0.3% |
| Net Income Margin | 13.7% | 12.5% | 15.5% | 21.2% | 21.5% | 0.3% |
| CAPEX, % of revenue | 3.2% | 3.8% | 3.0% | 2.0% | 2.5% | 0.5% |
|
|---|
| ROIC | 10.7% | 10.9% | 11.8% | 18.7% | 33.9% | 15.1% |
| ROE | 13.3% | 12.9% | 16.6% | 26.7% | 35.7% | 9.0% |
| Net Debt/EBITDA | 0.1x | 1.0x | -0.4x | 0.2x | -0.6x | -0.8x |
| Interest expence / Average debt | 4.1% | 3.6% | 3.8% | 3.2% | 3.9% | 0.7% |
People
|
|---|
| Insider ownership | 0.5% | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
| Employees | | 7,300 | 7,500 | 9,400 | 10,900 | 16.0% |
| Revenue/Employee, th. $ | | 720 | 785 | 853 | 1,016 | 19.2% |
Lam Research Corporation ($LRCX) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,478 | 2,581 | 2,892 | 3,126 | | 51.8% | 37.1% | 34.3% | 33.3% |
| EBITDA | 772 | 817 | 910 | 1,040 | | 97.8% | 58.1% | 48.0% | 51.4% |
| Net Income | 591 | -10 | 779 | 1,021 | | 123.9% | -103.0% | 35.5% | 94.0% |
Balance Sheet
|
|---|
| Cash | 2,406 | 1,745 | 4,699 | 4,512 | | -58.9% | -30.3% | 120.8% | 89.8% |
| Short Term Debt | 640 | 1,402 | 1,423 | 610 | | -32.9% | 46.3% | 57.2% | -32.8% |
| Long Term Debt | 1,930 | 1,920 | 1,863 | 1,885 | | -46.1% | -2.3% | -4.6% | -3.6% |
Ratios
|
|---|
| Gross Margin | 46.4% | 46.7% | 46.0% | 47.3% | | 2.5% | 1.7% | 0.9% | 1.7% |
| EBITDA Margin | 31.2% | 31.7% | 31.5% | 33.3% | | 7.2% | 4.2% | 2.9% | 4.0% |
| Net Income Margin | 23.8% | -0.4% | 26.9% | 32.7% | | 7.7% | -18.1% | 0.2% | 10.2% |
Peers in Semiconductor Equipment
Below we provide Lam Research Corporation benchmarking against other companies in Semiconductor Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Atomera Incorporated ($ATOM) | | | | | 123.6% |
| ACM Research, Inc. ($ACMR) | | | -12.3% | 33.4% | 104.5% |
| SCI Engineered Materials Inc ($SCIA) | | -13.0% | -32.1% | 24.4% | 67.0% |
| Aehr Test Systems ($AEHR) | | -49.1% | 44.7% | 30.3% | 56.4% |
| SolarEdge Technologies, Inc. ($SEDG) | | 144.0% | 50.7% | 23.9% | 54.4% |
| |
|---|
| Median (37 companies) | | -2.0% | 6.5% | 24.2% | 14.0% |
|---|
| Lam Research Corporation ($LRCX) | | 14.2% | 11.9% | 36.1% | 38.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | 99.5% | 99.8% | 99.8% | 98.3% | 96.7% |
| KLA-Tencor Corporation ($KLAC) | 57.9% | 56.8% | 61.0% | 63.0% | 64.1% |
| Teradyne, Inc. ($TER) | 53.3% | 55.8% | 54.7% | 57.2% | 58.1% |
| Nova Measuring Instruments Ltd. ($NVMI) | 52.7% | 51.9% | 45.9% | 59.1% | 57.8% |
| Nanometrics Incorporated ($NANO) | 47.2% | 47.9% | 51.6% | 52.9% | 56.7% |
| |
|---|
| Median (38 companies) | 34.4% | 38.3% | 37.3% | 43.2% | 40.2% |
|---|
| Lam Research Corporation ($LRCX) | 43.6% | 43.4% | 44.5% | 45.0% | 46.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 29.2% | 26.4% | 34.4% | 38.3% | 39.6% |
| DAQO New Energy Corp. ($DQ) | 32.9% | 31.6% | 43.3% | 49.1% | 36.1% |
| Xperi Corporation ($XPER) | 66.7% | 67.5% | 47.6% | 23.4% | 34.3% |
| Cabot Microelectronics Corporation ($CCMP) | 21.6% | 22.6% | 23.4% | 27.2% | 31.5% |
| Versum Materials, Inc. ($VSM) | 23.4% | 27.6% | 33.3% | 30.8% | 31.0% |
| |
|---|
| Median (37 companies) | 6.8% | 9.8% | 11.4% | 16.0% | 16.2% |
|---|
| Lam Research Corporation ($LRCX) | 21.1% | 20.3% | 23.2% | 27.6% | 32.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rubicon Technology, Inc. ($RBCN) | 15.0% | 4.0% | 3.6% | 0.0% | 58.8% |
| DAQO New Energy Corp. ($DQ) | 42.2% | 44.7% | 29.5% | 19.8% | 47.4% |
| AXT Inc ($AXTI) | 2.4% | 5.4% | 3.4% | 21.6% | 39.6% |
| STR Holdings Inc ($STRI) | 7.9% | 8.1% | 1.6% | 9.0% | 36.6% |
| Photronics, Inc. ($PLAB) | 20.0% | 19.8% | 10.4% | 20.4% | 17.3% |
| |
|---|
| Median (37 companies) | 2.2% | 2.7% | 2.2% | 3.2% | 3.0% |
|---|
| Lam Research Corporation ($LRCX) | 3.2% | 3.8% | 3.0% | 2.0% | 2.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 17.9% | 16.5% | 27.2% | 34.0% | 39.9% |
| Versum Materials, Inc. ($VSM) | | 26.2% | 32.4% | 30.0% | 32.1% |
| Advanced Energy Industries, Inc. ($AEIS) | 8.8% | 30.2% | 41.2% | 45.7% | 31.3% |
| SolarEdge Technologies, Inc. ($SEDG) | -815.6% | 33.6% | 31.2% | 26.5% | 28.6% |
| SCI Engineered Materials Inc ($SCIA) | -3.6% | -2.3% | -19.5% | 1.6% | 26.6% |
| |
|---|
| Median (39 companies) | 3.4% | 5.2% | 6.9% | 12.2% | 11.2% |
|---|
| Lam Research Corporation ($LRCX) | 10.7% | 10.9% | 11.8% | 18.7% | 33.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | -0.3x | -0.1x | 4.2x | 5.0x | 2.6x |
| Ultra Clean Holdings, Inc. ($UCTT) | -1.2x | 1.5x | 0.4x | -0.2x | 2.4x |
| Ichor Holdings ($ICHR) | 3.1x | 1.7x | -0.4x | 2.0x | 1.8x |
| Versum Materials, Inc. ($VSM) | -0.2x | -0.1x | 2.7x | 2.1x | 1.4x |
| DAQO New Energy Corp. ($DQ) | 4.6x | 4.3x | 2.3x | 0.9x | 1.2x |
| |
|---|
| Median (31 companies) | -1.2x | -1.3x | -1.3x | -0.7x | -1.0x |
|---|
| Lam Research Corporation ($LRCX) | 0.1x | 1.0x | -0.4x | 0.2x | -0.6x |
