Lam Research(LRCX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for the September quarter was $4.17 billion, an 8$2.05 billion, up $495 million from the June quarter [15] - Free cash flow for the quarter was$1.46 billion, representing 35% of revenue [14] - Gross margin for the September quarter was 48.2%, exceeding the guided range [19] - Operating margin for the quarter was 30.9%, slightly above the June quarter level of 30.7% [19] - Diluted earnings per share was $0.86, above the midpoint of the guided range [21] Business Line Data and Key Metrics - Systems revenue in memory was 35$1.8 billion in revenue, up 4% from the June quarter [18] Market Data and Key Metrics - China region accounted for 37% of total revenue, down slightly from 39% in the prior quarter [17] - Korea accounted for 18% of revenue, flat with the June quarter [18] - Spending in China is expected to decline to approximately 30% of revenue in the December quarter [6][17] Company Strategy and Industry Competition - The company expects to outperform overall WFE growth in 2025 due to the critical role of etch and deposition in enabling higher performance semiconductor device architectures [7] - NAND spending recovery is expected to be driven by technology upgrades, benefiting the company's industry-leading position in critical NAND processes [8] - The company is well-positioned to benefit from growing investments in gate-all-around, backside power distribution, advanced packaging, and dry EUV resist processing [8] - Advanced packaging has been a highlight, with SABRE 3D revenue more than doubling this year [11] Management Commentary on Operating Environment and Future Outlook - The company anticipates WFE growth from the mid-$90 billion range in 2024, with an outstanding opportunity to outperform overall WFE growth in 2025 [6][7] - The AI era is driving strong investments in leading-edge logic nodes and advanced packaging segments, including high-bandwidth memory [6] - The company expects NAND spending to increase in calendar 2025 as utilization rates improve and customers invest in conversions to 256- and 384-layer class devices [16] Other Important Information - The company allocated approximately$1 billion to open market share repurchases and paid $261 million in dividends in the September quarter [20] - The company ended the September quarter with approximately 17,700 regular full-time employees, an increase of approximately 500 people from the prior quarter [23] - The company expects revenue of$4.3 billion, plus or minus $300 million, for the December 2024 quarter [23] Q&A Session Summary Question: China WFE and its impact on the company's revenue - The company expects China WFE to be lower next year, with China representing a lower percentage of total revenue [27] - Outside of China, leading-edge foundry and logic, as well as DRAM, continue to show strong trends [28] - The company's exposure to technology inflections and investments is primarily outside of China, contributing to the expected decline in China's revenue share [29] Question: NAND utilization and WFE spending outlook - The company sees strong utilization for existing NAND capacity and expects technology upgrades to drive higher-quality bits, particularly for enterprise SSDs and AI applications [31] - The company is optimistic about NAND spending in 2025, driven by technology upgrades that align with its product portfolio [32] Question: Advanced packaging and HBM revenue outlook - The company's advanced packaging business has continued to strengthen, driven by AI, with SABRE 3D and copper plating showing strong performance [34] - The company is positive on advanced packaging for 2025, with further details expected in the January earnings call [34] Question: Moly adoption and its impact on the business - The adoption of moly in NAND, DRAM, and foundry/logic represents a net gain opportunity for the company, with production wins scaling in 2025 [36] Question: Leading-edge foundry and logic outlook - The company's outlook for leading-edge foundry and logic remains unchanged, with technology inflections like gate-all-around and backside power distribution driving opportunities [37] Question: China revenue and gross margin outlook - China revenue is expected to trend lower as a percentage of total revenue, but it is not going away [40] - Gross margin guidance for the December quarter reflects a headwind from customer mix, but operational efficiencies are expected to provide some offset [42] Question: CSBG and Reliant business in a slowing China market - The Reliant business may face headwinds from slower China WFE, but other components of CSBG, such as equipment intelligence services, are expected to grow [45] Question: OpEx and operating leverage into 2025 - The company has funded necessary projects and expects to deliver operating leverage into 2025, depending on WFE growth and top-line performance [47] Question: NAND drivers for outperformance in 2025 - The company expects NAND spending in 2025 to be dominated by technology upgrades, where it has a high capture rate [50] - Advanced packaging, backside power, and gate-all-around are also expected to contribute to outperformance [52] Question: Inventory management and recovery outlook - Inventory levels are being managed to align with customer demand, with NAND inventory expected to move lower as business ticks up [56] Question: Visibility into WFE growth by market segment - The company has good visibility into NAND, leading-edge foundry/logic, and advanced packaging, with China WFE expected to be lower [58] Question: Market share assumptions for outperformance - The company expects to gain share in markets like selective etch and ALD, driven by technology transitions and expanded product portfolio [60] Question: Gross margin drivers and China mix impact - Operational efficiencies and a growing top line are expected to help offset the negative impact of a lower China mix on gross margins [62] Question: NAND tech transition vs. capacity-driven market - The company expects to outperform WFE in a tech transition market, with higher share of spend during upgrades [64] Question: China WFE dynamics compared to peers - The company's growth in China has been different from peers, making direct comparisons difficult [67] Question: Dry Resist adoption curve - Dry Resist adoption is not necessarily tied to high NA and is driven by economic and performance benefits [69] Question: Commerce Department export controls and China outlook - The company's outlook for China WFE is based on its best understanding of potential export controls [73] Question: December quarter growth ex-China - The company expects double-digit growth ex-China in the December quarter, driven by customer expectations and orders [75] Question: NAND upgrade timing - NAND upgrades are primarily a 2025 storyline, with more details expected early next year [79] Question: DRAM trends and outlook - DRAM trends remain strong, driven by the transition to DDR5 and high-bandwidth memory, with no significant changes in the last 90 days [82] Question: China revenue as a percentage of total revenue in 2025 - China revenue is likely to trend below 30% of total revenue in 2025, given growth in other segments [83]