Lam Research Corporation

Good day and welcome to the June 2021 Quarter Financial Conference Call. At this time, I would like to turn the conference over to Tina Correa, Corporate Vice President of Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to the LAM Research Quarterly Earnings Conference Call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment and we'll review our financial results for the June 2021 quarter and our outlook for the September 2021 quarter. The press release detailing our financial results was distributed a little after one o'clock p.m. Pacific time this afternoon. The release can also be found on the investor relations section of the company's website, along with the presentation slides that accompany today's call. Today's presentation and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings. Please see accompanying slides in the presentation for additional information. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings press release. This call is scheduled to last until 3 o'clock p.m. Pacific time. A replay of this call will be made available later this afternoon on our website. And with that, I'll hand the call over to Tim.

Thank you, Tina, and welcome, everyone. Our June quarter results reflect continued strong execution across our systems and services businesses. The quarter came in well above expectations, with record revenues of $4.15 billion and earnings per share of $8.09. We also generated record cash from operations in the quarter of $1.4 billion. The June quarter marked the end of LAM's fiscal year, and despite a challenging operating environment, we delivered the highest revenue in the company's history. Compared to the prior fiscal year, revenues grew more than 45% to $14.6 billion. Earnings per share increased at an even faster pace to a record $27.25 in fiscal year 2021, more than 70% higher than in fiscal year 2020. The demand environment for semiconductor equipment remains strong. And we now see wafer fabrication equipment spending in calendar 2021 trending above $80 billion. While absolute WFE spending levels have risen to new highs, we remain confident in the health and sustainability of the industry at these levels. Wafer fab equipment spending as a percentage of semiconductor industry operating profit remains within historical ranges. and semiconductors continue to enable critical technology transformations such as AI, 5G, high-performance computing, and IoT. We believe robust semiconductor demand, rising device manufacturing complexity, and strategic regional investments are powerful drivers for multi-year WFE spending. By device segments, we see strength across NAND, DRAM, and Foundry Logic in calendar 2021. Against the backdrop of broad demand, increasing device manufacturing complexity plays well to LAM's strength in critical applications and continues to create new growth opportunities. Looking at the past five years, as manufacturing complexity increased in NAND with the transition to 3D, LAM gained over six points of share of WFE in this segment. and leads the next closest supplier by about eight points of customer spend. In the June quarter, we secured another win for a critical deposition application and are now the tool of record for all manned manufacturers for this process. Instrumental to our success has been the differentiation afforded by our quad station chamber design. Our multi-station architecture, refined over many years, allows us to use sequential processing to precisely tailor film properties to meet the needs of next generation devices without compromising the productivity required for high volume NAND, DRAM, and Foundry Logic manufacturing. Another example where we believe we are well positioned to benefit from rising complexity is through our enablement of higher quality surface conditioning. Surface properties have been shown to greatly impact device performance, and existing surface preparation methods are in many cases insufficient to meet the stricter requirements for new materials and tighter dimensional control at advanced nodes. For the foundry logic segment, we recently introduced a range of novel, selective etch, strip, and surface treatment solutions that use our ultra-high selectivity, zero-damage process capability to remove unwanted materials with minimal impact to other layers. We are gaining significant momentum with this new approach, with multiple LAM tools selected by a large customer in the June quarter as tool of record for leading-edge applications. We plan to share more details on this innovation in the near future. Additional opportunities for LAM are being driven by the need for higher pattern fidelity as foundry logic pitch tolerances tighten. For extremely small features, the relationship between change in resistance to change in dimension is exponential, therefore necessitating an extreme level of precision in device fabrication and advanced nodes. Even small variations in pattern roughness can degrade RC and transistor speed. In response, we have developed edge solutions such as our ARIA plasma pulsing capability to reduce line roughness by up to 30%. This technology has proven to be a key enabler for many critical edge applications, and when combined with our proprietary uniformity and RF power solutions, has helped LAM maintain our overall market-leading position in multi-patterning edge. As the industry transitions to even more demanding EUV patterning, we are seeing success applying these technology solutions to win new EUV patterning steps. Solving complex scaling challenges, including transitions to 3D structures in Foundry Logic and DRAM, will not be accomplished without deeper collaboration across the ecosystem. Our customers are increasingly highlighting the need for closer partnerships with the equipment industry to meet their overall device performance and cost roadmaps. As a result, we continue to expand R&D investments closer to customers, with the aim of accelerating new application development, shortening cycles of learning, and strengthening our understanding of the customer's most difficult problems. In addition to these regional R&D investments, I am pleased to announce that we recently shipped our first modules from our new Malaysia factory. This new facility adds resiliency to our global manufacturing network, creates capability closer to key customers and supply chain partners, and provides us with urgently needed capacity to support our continuing growth. I would like to acknowledge the tremendous efforts of the LAM employees and partners that completed the Malaysia project on time, despite the challenges of the COVID-19 pandemic. In our customer support business, June quarter revenue growth again outpaced growth in chamber count. Our service upgrades and reliant businesses all delivered record quarters. Reliant has now shown growth for 10 consecutive quarters, driven by strong investments in power, CIS, and non-leading edge foundry. We achieved in the quarter a key edge penetration at one of the top 5G RF providers, exhibiting our technical leadership in this space. Also, the SPARES team executed a major contract at a key customer in Asia, which secures a stream of revenue from our installed base. While quarter on quarter CSBG growth rates can vary based on customer investment patterns, we are very well positioned to deliver strong calendar year growth with a portfolio of products and services focused on our customers' operational success. We are increasing the productivity of our customers' tools and extending the life of their equipment, which contributes to lowering the overall environmental impact of semiconductor manufacturing. On the topic of sustainability, I would like to share a few highlights for the company. In June, we released our annual Environmental, Social, and Governance Report. I am very proud of our organization's efforts last year to support the needs of the communities in which we work and live, to keep our employees safe through the COVID-19 pandemic, and to advance inclusion and diversity across our global workplace. This year's report introduced our goals of operating on 100% renewable energy by 2030 and achieving carbon net zero by 2050. We are driving innovations in product and process solutions in support of our sustainability objectives. For instance, our new Sensei Edge platform improves power efficiency and requires less aluminum raw material for cool construction. Our new dry resist technology uses five to ten times less chemistry and two times less energy than the current process of records. Our parts cleaning, repair, refurbishment, and recoding services are enabling more reuse and lessening waste. These solutions drive sustainability and make LAM products more competitive in the marketplace. I encourage you to check out the report on our website to learn more. So to wrap up, we had an outstanding quarter and fiscal year. Most importantly, as we look to the future, we see rising device complexity and continuing transitions to 3D architectures driving growth for LAM. Thank you all for listening today, and now here's Doug.