UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number 0-12933

___________________________________________________________

LAM RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)

___________________________________________________________

Delaware	94-2634797
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4650 Cushing Parkway, Fremont, California	94538
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (510) 572-0200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	LRCX	The Nasdaq Stock Market
		(Nasdaq Global Select Market)

__________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of April 25, 2024, the Registrant had 130,741 thousand shares of Common Stock outstanding.

LAM RESEARCH CORPORATION

TABLE OF CONTENTS

		Page No.
	PART I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2024, and March 26, 2023	3
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2024, and March 26, 2023	4
	Condensed Consolidated Balance Sheets as of March 31, 2024, and June 25, 2023	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024, and March 26, 2023	6
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2024, and March 26, 2023	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
	PART II. Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

PART I. FINANCIAL INFORMATION

ITEM 1.    Financial Statements

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
Revenue	$	3,793,558	$	3,869,569	$	11,033,879	$	14,221,259
Cost of goods sold	1,977,820		2,197,237		5,783,087		7,835,743
Restructuring charges, net - cost of goods sold	15,202		66,720		38,099		66,720
Total cost of goods sold	1,993,022		2,263,957		5,821,186		7,902,463
Gross margin	1,800,536		1,605,612		5,212,693		6,318,796
Research and development	512,274		429,451		1,404,615		1,325,211
Selling, general, and administrative	215,904		193,500		651,770		632,922
Restructuring charges, net - operating expenses	15,246		40,408		18,955		40,408
Total operating expenses	743,424		663,359		2,075,340		1,998,541
Operating income	1,057,112		942,253		3,137,353		4,320,255
Other income (expense), net	36,073		(3,331)		68,513		(74,660)
Income before income taxes	1,093,185		938,922		3,205,866		4,245,595
Income tax expense	(127,359)		(124,914)		(398,376)		(537,201)
Net income	$	965,826	$	814,008	$	2,807,490	$	3,708,394
Net income per share:
Basic	$	7.38	$	6.03	$	21.32	$	27.28
Diluted	$	7.34	$	6.01	$	21.22	$	27.20
Number of shares used in per share calculations:
Basic	130,838		134,924		131,663		135,945
Diluted	131,518		135,395		132,282		136,314

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 3

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
Net income	$	965,826	$	814,008	$	2,807,490	$	3,708,394
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(14,215)		3,727		(20,363)		11,588
Cash flow hedges:
Net unrealized gains (losses) during the period	8,145		(3,320)		18,414		(3,135)
Net (gains) losses reclassified into net income	(4,231)		2,546		(25,974)		(5,478)
	3,914		(774)		(7,560)		(8,613)
Available-for-sale investments:
Net unrealized gains during the period	30		652		314		1,222
Net gains reclassified into net income	—		(105)		(10)		(158)
	30		547		304		1,064
Defined benefit plans, net change in unrealized component	177		276		537		848
Other comprehensive income (loss), net of tax	(10,094)		3,776		(27,082)		4,887
Comprehensive income	$	955,732	$	817,784	$	2,780,408	$	3,713,281

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 4

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	March 31, 2024		June 25, 2023
	(unaudited)		(1)
ASSETS
Cash and cash equivalents	$	5,672,232	$	5,337,056
Investments	—		37,641
Accounts receivable, less allowance of $5,286 as of March 31, 2024, and $5,344 as of June 25, 2023	2,203,707		2,823,376
Inventories	4,322,967		4,816,190
Prepaid expenses and other current assets	289,530		214,149
Total current assets	12,488,436		13,228,412
Property and equipment, net	2,181,741		1,856,672
Goodwill	1,626,519		1,622,489
Intangible assets, net	142,479		168,454
Other assets	1,840,475		1,905,616
Total assets	$	18,279,650	$	18,781,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	531,648	$	470,702
Accrued expenses and other current liabilities	1,791,642		2,010,637
Deferred profit	1,601,733		1,695,221
Current portion of long-term debt and finance lease obligations	505,066		8,358
Total current liabilities	4,430,089		4,184,918
Long-term debt and finance lease obligations, less current portion	4,478,385		5,003,183
Income taxes payable	832,397		882,084
Other long-term liabilities	516,678		501,286
Total liabilities	10,257,549		10,571,471
Commitments and contingencies (refer to Note 13)
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding	—		—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares as of March 31, 2024 and June 25, 2023; issued and outstanding, 130,736 shares as of March 31, 2024, and 133,297 shares as of June 25, 2023	131		133
Additional paid-in capital	8,082,339		7,809,002
Treasury stock, at cost; 164,423 shares as of March 31, 2024, and 161,380 shares as of June 25, 2023	(23,984,518)		(21,530,353)
Accumulated other comprehensive loss	(127,788)		(100,706)
Retained earnings	24,051,937		22,032,096
Total stockholders’ equity	8,022,101		8,210,172
Total liabilities and stockholders’ equity	$	18,279,650	$	18,781,643

(1)Derived from audited financial statements

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 5

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

	Nine Months Ended
	March 31, 2024		March 26, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,807,490	$	3,708,394
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	271,342		252,828
Deferred income taxes	(137,606)		(133,101)
Equity-based compensation expense	213,966		218,105
Other, net	14,242		11,537
Changes in operating assets and liabilities	620,405		(1,550)
Net cash provided by operating activities	3,789,839		4,056,213
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets	(295,922)		(422,898)
Business acquisitions, net of cash acquired	—		(119,955)
Proceeds from maturities of available-for-sales securities	34,336		65,015
Proceeds from sales of available-for-sale securities	3,430		6,837
Other, net	(10,845)		(8,381)
Net cash used for investing activities	(269,001)		(479,382)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt, including finance lease obligations	(255,155)		(21,145)
Treasury stock purchases	(2,469,257)		(1,147,998)
Dividends paid	(757,453)		(675,572)
Reissuance of treasury stock related to employee stock purchase plan	53,081		44,996
Proceeds from issuance of common stock	12,757		7,673
Other, net	(5,672)		(635)
Net cash used for financing activities	(3,421,699)		(1,792,681)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(12,758)		(1,349)
Net change in cash, cash equivalents, and restricted cash	86,381		1,782,801
Cash, cash equivalents, and restricted cash at beginning of period (1)	5,587,372		3,773,535
Cash, cash equivalents, and restricted cash at end of period (1)	$	5,673,753	$	5,556,336
Schedule of non-cash transactions:
Accrued payables for stock repurchases, including applicable excise tax	$	36,863	$	4,081
Accrued payables for capital expenditures	45,122		38,225
Dividends payable	261,463		233,043
Transfers of finished goods inventory to property and equipment	55,290		64,932
Reconciliation of cash, cash equivalents, and restricted cash	March 31, 2024		March 26, 2023
Cash and cash equivalents	$	5,672,232	$	5,305,648
Restricted cash and cash equivalents (1)	1,521		250,688
Total cash, cash equivalents, and restricted cash	$	5,673,753	$	5,556,336

(1)Restricted cash is reported within Other assets in the Condensed Consolidated Balance Sheets

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 6

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Three Months Ended
	March 31, 2024
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at December 24, 2023	131,278	$	131	$	7,997,251	$	(23,004,358)	$	(117,694)	$	23,347,148	$	8,222,478
Issuance of common stock	409	1		8,234		—		—		—		8,235
Purchase of treasury stock	(951)	(1)		—		(980,160)		—		—		(980,161)
Equity-based compensation expense	—	—		76,854		—		—		—		76,854
Net income	—	—		—		—		—		965,826		965,826
Other comprehensive loss	—	—		—		—		(10,094)		—		(10,094)
Cash dividends declared ($2.00 per common share)	—	—		—		—		—		(261,037)		(261,037)
Balance at March 31, 2024	130,736	$	131	$	8,082,339	$	(23,984,518)	$	(127,788)	$	24,051,937	$	8,022,101
	Nine Months Ended
	March 31, 2024
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 25, 2023	133,297	$	133	$	7,809,002	$	(21,530,353)	$	(100,706)	$	22,032,096	$	8,210,172
Issuance of common stock	482	1		12,756		—		—		—		12,757
Purchase of treasury stock	(3,193)	(3)		—		(2,460,631)		—		—		(2,460,634)
Reissuance of treasury stock	150	—		46,615		6,466		—		—		53,081
Equity-based compensation expense	—	—		213,966		—		—		—		213,966
Net income	—	—		—		—		—		2,807,490		2,807,490
Other comprehensive loss	—	—		—		—		(27,082)		—		(27,082)
Cash dividends declared ($6.00 per common share)	—	—		—		—		—		(787,649)		(787,649)
Balance at March 31, 2024	130,736	$	131	$	8,082,339	$	(23,984,518)	$	(127,788)	$	24,051,937	$	8,022,101
See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 7

	Three Months Ended
	March 26, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at December 25, 2022	135,403	$	135	$	7,606,149	$	(20,071,931)	$	(108,871)	$	20,879,153	$	8,304,635
Issuance of common stock	454	1		(1)		—		—		—		—
Purchase of treasury stock	(1,165)	(1)		—		(555,898)		—		—		(555,899)
Equity-based compensation expense	—	—		73,911		—		—		—		73,911
Net income	—	—		—		—		—		814,008		814,008
Other comprehensive income	—	—		—		—		3,776		—		3,776
Cash dividends declared ($1.725 per common share)	—	—		—		—		—		(233,043)		(233,043)
Balance at March 26, 2023	134,692	$	135	$	7,680,059	$	(20,627,829)	$	(105,095)	$	21,460,118	$	8,407,388
	Nine Months Ended
	March 26, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 26, 2022	136,975	$	137	$	7,414,916	$	(19,481,429)	$	(109,982)	$	18,454,724	$	6,278,366
Issuance of common stock	570	1		7,672		—		—		—		7,673
Purchase of treasury stock	(2,984)	(3)		—		(1,152,030)		—		—		(1,152,033)
Reissuance of treasury stock	131	—		39,366		5,630		—		—		44,996
Equity-based compensation expense	—	—		218,105		—		—		—		218,105
Net income	—	—		—		—		—		3,708,394		3,708,394
Other comprehensive income	—	—		—		—		4,887		—		4,887
Cash dividends declared ($5.175 per common share)	—	—		—		—		—		(703,000)		(703,000)
Balance at March 26, 2023	134,692	$	135	$	7,680,059	$	(20,627,829)	$	(105,095)	$	21,460,118	$	8,407,388

See Notes to Condensed Consolidated Financial Statements

Lam Research Corporation 2024 Q3 10-Q 8

LAM RESEARCH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of Lam Research Corporation (“Lam Research” or the “Company”) for the fiscal year ended June 25, 2023, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 25, 2023 (the “2023 Form 10-K”).

The condensed consolidated financial statements include the accounts of Lam Research and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s reporting period is a 52/53-week fiscal year. The Company’s current fiscal year will end June 30, 2024 and includes 53 weeks. The quarters ended March 31, 2024 (the “March 2024 quarter”) and March 26, 2023 included 14 weeks and 13 weeks, respectively.

Reclassification: Certain amounts for the June 25, 2023 Condensed Consolidated Balance Sheet and notes to the financial statements have been reclassified to conform to the current period presentation.

NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted or Effective

The Company has not adopted any new accounting standards during the nine months ended March 31, 2024 that have a material impact on the Company’s Condensed Consolidated Financial Statements.

Updates Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2025 for the annual reporting period ending June 29, 2025, with retrospective disclosure of prior periods presented. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending June 28, 2026. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

NOTE 3 — REVENUE

Disaggregation of Revenue

The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. The Company’s material operating segments qualify for aggregation due to their customer base and similarities in economic characteristics, nature of products and services, and processes for procurement, manufacturing, and distribution.

The Company operates in seven geographic regions: United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located. The Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing.

Lam Research Corporation 2024 Q3 10-Q 9

The following table presents the Company’s revenues disaggregated between systems and customer support-related revenue:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(In thousands)
Systems revenue	$	2,395,817	$	2,256,033	$	6,751,758	$	8,985,538
Customer support-related revenue and other	1,397,741		1,613,536		4,282,121		5,235,721
	$	3,793,558	$	3,869,569	$	11,033,879	$	14,221,259

Systems revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.

Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the Company’s Reliant product line.

The following table presents the Company’s revenues disaggregated by geographic region:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(In thousands)
China	$	1,606,693	$	839,710	$	4,787,399	$	3,633,692
Korea	916,812		847,728		2,176,708		2,780,158
Japan	340,331		406,219		1,177,696		1,440,857
Taiwan	334,952		713,708		1,077,325		2,825,827
United States	227,085		594,426		728,098		1,402,641
Southeast Asia	190,328		155,935		495,060		1,225,835
Europe	177,357		311,843		591,593		912,249
	$	3,793,558	$	3,869,569	$	11,033,879	$	14,221,259

The following table presents the percentages of leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
Memory	44	%	32	%	44	%	46	%
Foundry	44	%	46	%	39	%	36	%
Logic/integrated device manufacturing	12	%	22	%	17	%	18	%

Deferred Revenue

Revenue of $302.5 million and $1,228.4 million included in deferred profit at June 25, 2023 was recognized during the three and nine months ended March 31, 2024, representing 16% and 67%, respectively, of the $1,837.9 million of deferred revenue as of June 25, 2023.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of March 31, 2024 and when the Company expects to recognize the amounts as revenue:

	Less than 1 Year		1-3 Years			More than 3 Years			Total
	(In thousands)
Deferred revenue	$	1,371,378	$	333,416	(1)	$	41,051	(1)	$	1,745,845

(1)This amount is reported in Deferred profit on the Company's Condensed Consolidated Balance Sheets as the customers can demand the liability to be performed at any time.

Lam Research Corporation 2024 Q3 10-Q 10

NOTE 4 — EQUITY-BASED COMPENSATION PLANS

The Lam Research Corporation 2015 Stock Incentive Plan, as amended, provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s option, RSU, and market-based PRSU awards typically vest over a period of three years. The Company also has an employee stock purchase plan that allows eligible employees to purchase its Common Stock at a discount through payroll deductions.

The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(in thousands)
Equity-based compensation expense	$	76,854	$	73,911	$	213,966	$	218,105
Income tax benefit recognized related to equity-based compensation expense	$	24,626	$	12,045	$	43,544	$	32,249

NOTE 5 — OTHER INCOME (EXPENSE), NET

The significant components of other income (expense), net, are as follows:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(in thousands)
Interest income	$	71,752	$	41,974	$	185,911	$	83,155
Interest expense	(47,153)		(47,217)		(138,797)		(139,930)
Gains on deferred compensation plan-related assets, net	26,495		5,443		49,124		3,588
Foreign exchange losses, net	(4,344)		(5,519)		(3,643)		(8,812)
Other, net	(10,677)		1,988		(24,082)		(12,661)
	$	36,073	$	(3,331)	$	68,513	$	(74,660)

NOTE 6 — INCOME TAX EXPENSE

The Company’s provision for income taxes and effective tax rate are as follows:

	Three Months Ended						Nine Months Ended
	March 31, 2024			March 26, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Income tax expense	$	127,359		$	124,914		$	398,376		$	537,201
Effective tax rate	11.7		%	13.3		%	12.4		%	12.7		%

The difference between the U.S. federal statutory tax rate of 21% and the Company’s effective tax rate for the three and nine months ended March 31, 2024 and March 26, 2023 was primarily due to income in lower tax jurisdictions.

On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the IRA are effective beginning with the Company’s fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. The Company has evaluated the potential impacts of the IRA and does not expect it to have a material impact on the effective tax rate. However, the Company expects future guidance from the Treasury Department and will further analyze when the guidance is issued.

The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax returns for the fiscal years ended June 30, 2019, and June 28, 2020. To date, no significant adjustments have been proposed by the IRS. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the IRS will occur.

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The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitation. The change in uncertain tax positions as a result of lapses of statutes of limitation may range up to $12.4 million.

NOTE 7 — NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method, for dilutive stock options, and restricted stock units. The following table reconciles the inputs to the basic and diluted computations for net income per share. 

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(in thousands, except per share data)
Numerator:
Net income	$	965,826	$	814,008	$	2,807,490	$	3,708,394
Denominator:
Basic average shares outstanding	130,838		134,924		131,663		135,945
Effect of potential dilutive securities:
Employee stock plans	680		471		619		369
Diluted average shares outstanding	131,518		135,395		132,282		136,314
Net income per share - basic	$	7.38	$	6.03	$	21.32	$	27.28
Net income per share - diluted	$	7.34	$	6.01	$	21.22	$	27.20

For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. These anti-dilutive securities, including options and RSUs, were not material for the three and nine months ended March 31, 2024 and March 26, 2023.

NOTE 8 — FINANCIAL INSTRUMENTS

The Company’s investment strategies and investment and fair value policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to the Consolidated Financial Statements in Part II, Item 8 of its 2023 Form 10-K. As of March 31, 2024 and June 25, 2023, the fair value of mutual funds and debt and equity investments were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from debt and equity investments were not material as of and for the three and nine months ended March 31, 2024 and March 26, 2023.

The financial instruments reported within Cash and Cash Equivalents in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2024, and June 25, 2023 consisted of the following:

		March 31, 2024		June 25, 2023
	(in thousands)
Money market funds (fair value measured on a recurring basis, level 1)		$	2,277,989	$	2,223,642
Cash		1,693,654		2,132,522
Time deposits		1,700,589		980,892
Total		$	5,672,232	$	5,337,056

In addition, as of June 25, 2023 the Company had time deposits of $250.0 million reported within Other assets in the Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging

The Company’s hedging strategies and policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to the Consolidated Financial Statements in Part II, Item 8 of its 2023 Form 10-K. As of March 31, 2024 and June 25, 2023, the fair value of outstanding cash flow and balance sheet hedges were not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from derivative instruments and hedging activities were not material as of and for the three and nine months ended March 31, 2024 and March 26, 2023.

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Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk and the Company’s mitigation strategies are unchanged from those disclosed in Note 9, “Financial Instruments,” to the Consolidated Financial Statements in Part II, Item 8 of its 2023 Form 10-K.

NOTE 9 — INVENTORIES

Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. System shipments to customers in Japan, for which title does not transfer until customer acceptance, are classified as finished goods inventory and carried at cost until title transfers. Inventories consist of the following:

	March 31, 2024		June 25, 2023
	(in thousands)
Raw materials	$	3,020,147	$	3,196,988
Work-in-process	290,736		325,611
Finished goods	1,012,084		1,293,591
	$	4,322,967	$	4,816,190

NOTE 10 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

The balance of goodwill is approximately $1.6 billion as of March 31, 2024 and June 25, 2023. As of March 31, 2024 and June 25, 2023, $65.4 million of the goodwill balance is tax deductible and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law.

Intangible Assets

The following table provides the Company’s intangible assets, other than goodwill:

	March 31, 2024						June 25, 2023
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	(in thousands)
Customer relationships	$	644,126	$	(633,260)	$	10,866	$	644,138	$	(631,420)	$	12,718
Existing technology	747,386		(683,380)		64,006		717,331		(674,549)		42,782
Patents and other intangible assets	202,456		(134,849)		67,607		199,532		(116,659)		82,873
Intangible assets subject to amortization	1,593,968		(1,451,489)		142,479		1,561,001		(1,422,628)		138,373
In process research and development	—		—		—		30,081		—		30,081
Total intangible assets	$	1,593,968	$	(1,451,489)	$	142,479	$	1,591,082	$	(1,422,628)	$	168,454

The Company recognized $15.2 million and $13.8 million in intangible asset amortization expense during the three months ended March 31, 2024 and March 26, 2023, respectively. The Company recognized $42.0 million and $37.4 million in intangible asset amortization expense during the nine months ended March 31, 2024 and March 26, 2023, respectively.

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The estimated future amortization expense of intangible assets as of March 31, 2024, is reflected in the table below. The table excludes $8.2 million of capitalized costs for intangible assets that have not been placed into service.

Fiscal Year	Amount
	(in thousands)
2024 (remaining 3 months)	$	13,945
2025	40,461
2026	25,770
2027	18,454
2028	14,695
Thereafter	20,955
	$	134,280

NOTE 11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	March 31, 2024		June 25, 2023
	(in thousands)
Accrued compensation	$	478,636	$	481,354
Warranty reserves	231,391		256,781
Income and other taxes payable	244,828		460,630
Dividend payable	261,463		231,267
Restructuring	21,482		8,014
Other	553,842		572,591
	$	1,791,642	$	2,010,637

NOTE 12 — LEASES

The Company elected to exercise purchase options available under its finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) in the three months ended September 24, 2023. As a result, the Company released cash collateral in an aggregate of approximately $250.0 million of restricted cash that was reported in Other assets in the Company’s Condensed Consolidated Balance Sheet. Additionally, guarantees made to the lessor that each property would have a certain minimum residual value totaling $298.4 million as of June 25, 2023 in the aggregate were eliminated with the extinguishment of the California Facilities Leases. As a result of the purchase of the improved properties, $250.5 million of additions were made to Property and Equipment, Net in the Company’s Condensed Consolidated Balance Sheets primarily comprised of land ($40.5 million) and buildings and improvements ($210.0 million).

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into insurance contracts that are intended to limit its exposure to such indemnifications. As of March 31, 2024, the Company had not recorded any liability on its Condensed Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees.

Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees.

The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of March 31, 2024, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $171.0 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.

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In addition, the Company has entered into indemnification agreements with its directors, officers, and certain other employees, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations.

Warranties

The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of March 31, 2024, warranty reserves totaling $23.2 million were reported in Other long-term liabilities, the remainder were included in Accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s product warranty reserves were as follows:

	Three Months Ended				Nine Months Ended
	March 31, 2024		March 26, 2023		March 31, 2024		March 26, 2023
	(in thousands)
Balance at beginning of period	$	260,840	$	318,969	$	286,663	$	256,258
Warranties issued during the period	43,479		54,158		139,713		225,735
Settlements made during the period	(45,916)		(60,440)		(147,595)		(187,174)
Changes in liability for warranties issued during the period	(74)		(942)		(148)		999
Changes in liability for pre-existing warranties	(3,757)		1,087		(24,061)		17,014
Balance at end of period	$	254,572	$	312,832	$	254,572	$	312,832

Legal Proceedings

While the Company is not currently a party to any legal proceedings that it believes material, the Company is either a defendant or plaintiff in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on current information, the Company does not believe that a material loss from known matters is probable and therefore has not recorded an accrual of any material amount for litigation or other contingencies related to existing legal proceedings.

NOTE 14 — STOCK REPURCHASE PROGRAM

In May 2022, the Board of Directors authorized the Company to repurchase up to an additional $5.0 billion of Common Stock; this authorization supplements the remaining balances from any prior authorizations. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time.

Repurchases under the repurchase program were as follows during the periods indicated:

Period	Total Number of Shares Repurchased	Total Cost of Repurchase (1)		Average Price Paid Per  Share (1)			Amount Available Under Repurchase Program
	(in thousands, except per share data)
Available balance as of June 25, 2023							$	3,537,217
Quarter ended September 24, 2023	1,257	$	829,874	$	660.01		$	2,707,343
Quarter ended December 24, 2023	970	$	640,267	$	660.04		$	2,067,076
Quarter ended March 31, 2024	828	$	860,084	$	774.77	(2)	$	1,206,992

(1)    The Company’s net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under the repurchase program, as applicable, and is included in the cost of shares repurchased in the Condensed Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share.

Lam Research Corporation 2024 Q3 10-Q 15

(2)    Average price paid per share excludes the effect of accelerated share repurchase activities. See additional disclosure below regarding the Company’s accelerated share repurchase activity during the nine months ended March 31, 2024.

In addition to the shares repurchased under the Board-authorized repurchase program shown above, during the three and nine months ended March 31, 2024, the Company acquired 123 thousand shares at a total cost of $120.1 million and 138 thousand shares at a total cost of $130.0 million, respectively, which the Company withheld through net settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by the Company through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under the Company’s equity compensation plan.

Accelerated Share Repurchase Agreements

On February 1, 2024, the Company entered into accelerated share repurchase agreements (the "February 2024 ASRs") with two financial institutions to repurchase a total of $700 million of Common Stock. The Company took an initial delivery of approximately 631 thousand shares, which represented 75% of the prepayment amount divided by the Company’s closing stock price on February 1, 2024. The total number of shares received under the February 2024 ASRs is based upon the average daily volume weighted average price of the Company’s Common Stock during the repurchase period, less an agreed upon discount. Final settlement of the February 2024 ASRs occurred during April 2024, resulting in the receipt of approximately 140 thousand shares, which yielded a weighted-average share price of $917.38 (net of applicable excise taxes) for the transaction period.

The Company recorded the February 2024 ASRs as equity transactions; as such, at the time of receipt, shares were included in treasury stock at fair market value as of the corresponding trade date. The Company reflects shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.

NOTE 15 — RESTRUCTURING CHARGES, NET

The Company records employee severance and separation costs that meet the requirements for recognition in accordance with the relevant guidance of ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation - Non-retirement Post-employment Benefits, as applicable. For involuntary termination benefits that are not provided under the terms of an ongoing benefit arrangement, the liability for the current fair value of expected future costs associated with a management-approved restructuring plan is recognized in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, employee termination costs are accrued when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. Termination benefits associated with employees that elected to voluntarily terminate as part of the restructuring plan are recorded when the employee irrevocably accepts the offer and the amount can be reasonably estimated. If applicable, the Company records such costs into operating expense over the terminated employees’ future service period beyond any minimum or legally required retention period. The majority of restructuring charges that have been incurred but not yet paid are recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

In the fiscal year ended June 25, 2023, the Company initiated a restructuring plan designed to better align the Company’s cost structure with its outlook for the economic environment and business opportunities. Under the plan, through March 31, 2024, the Company terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs primarily relate to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, the Company made a strategic decision to relocate certain manufacturing activities to pre-existing facilities and incurred charges to move inventory and equipment and exit selected supplier arrangements.

During the three months ended March 31, 2024, net restructuring costs of $15.2 million and $15.2 million were recorded in Restructuring charges, net - cost of goods sold, and Restructuring charges, net - operating expenses, respectively, in the Condensed Consolidated Statements of Operations. During the nine months ended March 31, 2024, net restructuring costs of $38.1 million and $19.0 million were recorded in Restructuring charges, net - cost of goods sold, and Restructuring charges, net - operating expenses, respectively in the Condensed Consolidated Statements of Operations. During the three and nine months ended March 26, 2023, net restructuring costs of $66.7 million and $40.4 million were recorded in Restructuring charges, net - cost of goods sold, and Restructuring charges, net - operating expenses, respectively in the Condensed Consolidated Statements of Operations.

The restructuring plan is expected to be substantially completed by the June 2024 quarter, and cumulative costs as of March 31, 2024 total $177.4 million.

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The following table is a summary of the activity related to the restructuring plan:

	Severance and Benefits		Other		Total
	(in thousands)
Restructuring liability as of June 25, 2023	$	7,989	$	246	$	8,235
Restructuring expense	30,512		26,542		57,054
Cash payments	(18,751)		(15,722)		(34,473)
Non-cash activities	(158)		(6,936)		(7,094)
Restructuring liability as of March 31, 2024	$	19,592	$	4,130	$	23,722

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ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified as forward-looking, by use of phrases and words such as “believe,” “estimated,” “anticipate,” “expect,” “probable,” “intend,” “plan,” “aim,” “may,” “should,” “could,” “would,” “will,” “continue,” and other future-oriented terms. The identification of certain statements as “forward-looking” does not mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to: trends and opportunities in the global economic environment; trends and opportunities in the semiconductor industry, including in the end markets and applications for semiconductors, and in device complexity; growth or decline in the industry and the market for, and spending on, wafer fabrication equipment; the anticipated levels of, and rates of change in, margins, market share, served available market, capital expenditures, research and development expenditures, international sales, revenue (actual and/or deferred), operating expenses and earnings generally; management’s plans and objectives for our current and future operations and business focus; restructuring activities; business process improvements and initiatives; volatility in our quarterly results; the makeup of our customer base; customer and end user requirements and our ability to satisfy those requirements; customer spending and demand for our products and services, and the reliability of indicators of change in customer spending and demand; the effect of variability in our customers’ business plans or demand for our products and services; our competition, and our ability to defend our market share and to gain new market share; the success of joint development and collaboration relationships with customers, suppliers, or others; outsourced activities; our supply chain and the role of suppliers in our business, including the impacts of supply chain constraints and material costs; our leadership and competency, and our ability to facilitate innovation; our research and development programs; our ability to create sustainable differentiation; technology inflections in the industry and our ability to identify those inflections and to invest in research and development programs to meet them; our ability to deliver multi-product solutions; the resources invested to comply with evolving standards and the impact of such efforts; changes in state, federal and international tax laws, our estimated annual tax rate and the factors that affect our tax rates; legal and regulatory compliance; the estimates we make, and the accruals we record, in order to implement our critical accounting policies (including, but not limited to, the adequacy of prior tax payments, future tax benefits or liabilities, and the adequacy of our accruals relating to them); hedging transactions; debt or financing arrangements; our investment portfolio; our access to capital markets; uses of, payments of, and impact of interest rate fluctuations on, our debt; our intention to pay quarterly dividends and the amounts thereof, if any; our ability and intention to repurchase our shares; credit risks; controls and procedures; recognition or amortization of expenses; our ability to manage and grow our cash position; our strategic relevance with our customers; our ability to scale our operations to respond to changes in our business; the value of our patents; the materiality of potential losses arising from legal proceedings; the probability of making payments under our guarantees; and the sufficiency of our financial resources or liquidity to support future business activities (including, but not limited to, operations, investments, debt service requirements, dividends, and capital expenditures). Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our annual report on Form 10-K for the year ended June 25, 2023 (our “2023 Form 10-K”), our quarterly reports on Form 10-Q for the fiscal quarters ended September 24, 2023 and December 24, 2023, and our current reports on Form 8-K. Such risks, uncertainties, and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed in this report and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We do not undertake any obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events.

Documents To Review In Connection With Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

For a full understanding of our financial position and results of operations for the three and nine months ended March 31, 2024, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our 2023 Form 10-K.

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EXECUTIVE SUMMARY

Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, dynamic random-access memory, and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control, enabling results on the wafer.

Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

Demand from cloud computing, artificial intelligence, 5G, the Internet of Things, and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

In calendar year 2024, we anticipate higher wafer fabrication equipment spending, driven primarily by an increase in memory and non-memory market segments. In calendar year 2023, customer demand weakened due to wafer fabrication equipment spending reductions resulting primarily from weakness in the memory market. We initiated a restructuring plan in the quarter ended March 26, 2023 designed to better align the Company’s cost structure with our outlook. We continue to work towards a number of business process improvements and initiatives throughout the 2024 fiscal year and expect to incur expenditures from these activities in the range of $300 million, inclusive of the restructuring activity. Risks and uncertainties such as trade restrictions and the semiconductor demand environment may continue to negatively impact our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

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The following table summarizes certain key financial information for the periods indicated below:

	Three Months Ended
	March 31, 2024			December 24, 2023
	(in thousands, except per share data and percentages)
Revenue	$	3,793,558		$	3,758,259
Gross margin	$	1,800,536		$	1,757,455
Gross margin as a percent of total revenue	47.5		%	46.8		%
Total operating expenses	$	743,424		$	700,243
Net income	$	965,826		$	954,266
Diluted net income per share	$	7.34		$	7.22

In the March 2024 quarter, revenue increased 1% compared to the three months ended December 24, 2023 (the “December 2023 quarter”), primarily driven by an increase in revenue generated in our China region. The deferred revenue balance was $1,745.8 million at the end of the March 2024 quarter, a decrease relative to the balance at the end of the December 2023 quarter of $1,928.0 million, mainly due to a decrease in advanced deposits. We aim to balance the requirements of our customers with the availability of resources, as well as performance to our operational and financial objectives. As a result, from time to time, we exercise discretion and judgment as to the timing and prioritization of manufacturing and delivery of products, which has impacted, and may in the future impact, the timing of revenue recognition with respect to such products.

The increase in gross margin as a percentage of revenue in the March 2024 quarter compared to the December 2023 quarter was primarily a result of favorable changes in product and customer mix, as well as improved factory efficiencies, partially offset by increased transformational charges and costs associated with the impairment of long-lived assets. The increase in operating expenses in the March 2024 quarter compared to the December 2023 quarter was driven by increases in employee-related costs as a result of the extra week in the March 2024 quarter and seasonality, partially offset by reduced spending on transformational activities.

Our cash and cash equivalents, investments, and restricted cash and investments balances increased slightly to $5.7 billion at the end of the March 2024 quarter compared to $5.6 billion at the end of the December 2023 quarter. This increase was primarily the result of $1,384.8 million of cash generated from operating activities, partially offset by $980.6 million of share repurchases, including net share settlement of employee stock-based compensation; $262.7 million of dividends paid to stockholders; and $103.7 million of capital expenditures. Employee headcount as of March 31, 2024 was approximately 17,200.

RESULTS OF OPERATIONS

Revenue

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
Revenue (in millions)	$	3,794		$	3,758		$	11,034		$	14,221
China	42		%	40		%	43		%	26		%
Korea	24		%	19		%	20		%	20		%
Japan	9		%	14		%	11		%	10		%
Taiwan	9		%	13		%	10		%	20		%
United States	6		%	5		%	7		%	9		%
Southeast Asia	5		%	4		%	4		%	9		%
Europe	5		%	5		%	5		%	6		%

The decrease in revenue for the nine months ended March 31, 2024 as compared to the same period in 2023 is primarily due to decreases in NAND as well as Foundry and Logic spending by our customers, partially offset by increases in dynamic random-access memory (“DRAM”) spending during this period.

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The following table presents our revenue disaggregated between systems and customer support-related revenue:

	Three Months Ended				Nine Months Ended
	March 31, 2024		December 24, 2023		March 31, 2024		March 26, 2023
	(In thousands)
Systems revenue	$	2,395,817	$	2,299,286	$	6,751,758	$	8,985,538
Customer support-related revenue and other	1,397,741		1,458,973		4,282,121		5,235,721
	$	3,793,558	$	3,758,259	$	11,033,879	$	14,221,259

Please refer to Note 3, “Revenue,” to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding the composition of the two categories into which revenue has been disaggregated.

The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows: 

	Three Months Ended				Nine Months Ended
	March 31, 2024		December 24, 2023		March 31, 2024		March 26, 2023
Memory	44	%	48	%	44	%	46	%
Foundry	44	%	38	%	39	%	36	%
Logic/integrated device manufacturing	12	%	14	%	17	%	18	%

The decrease in the memory market segment for the March 2024 quarter compared to the December 2023 quarter is primarily attributable to DRAM spending. This is partially offset by increases in the Foundry market segment predominantly related to spending by our domestic China customers in the same period.

Gross Margin

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Gross margin	$	1,800,536		$	1,757,455		$	5,212,693		$	6,318,796
Percent of revenue	47.5		%	46.8		%	47.2		%	44.4		%

Gross margin as a percentage of revenue was higher in the March 2024 quarter compared to the December 2023 quarter primarily as a result of favorable changes in product and customer mix, as well as improved factory efficiencies, partially offset by increased transformational charges and costs associated with the impairment of long-lived assets.

The increase in gross margin as a percentage of revenue in the nine months ended March 31, 2024 compared to the same period in the prior year was primarily due to favorable customer mix and reduced spending on material costs.

Research and Development

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Research & development (“R&D”)	$	512,274		$	469,712		$	1,404,615		$	1,325,211
Percent of revenue	13.5		%	12.5		%	12.7		%	9.3		%

We continued to make significant R&D investments in the March 2024 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufacturing processes. The increase in R&D expense in the March 2024 quarter compared to the December 2023 quarter was primarily driven by increases in employee-related costs as a result of seasonality and the extra week in the quarter, as well as increased spending on transformational activities.

R&D expense in the nine months ended March 31, 2024 increased compared to the same period in the prior year, driven by increases in employee-related costs, deferred compensation plan-related costs and depreciation, as well as higher spending on supplies.

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Selling, General, and Administrative

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Selling, general, and administrative (“SG&A”)	$	215,904		$	228,843		$	651,770		$	632,922
Percent of revenue	5.7		%	6.1		%	5.9		%	4.5		%

SG&A expense during the March 2024 quarter decreased in comparison to the December 2023 quarter, primarily driven by decreases in transformational costs.

SG&A expense during the nine months ended March 31, 2024 increased compared to the same period in the prior year, driven by increases in transformational and deferred compensation-related costs, partially offset by decreases in spending for outside services and supplies.

Restructuring Charges, Net

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Restructuring charges, net	$	30,448		$	16,645		$	57,054		$	107,128
Percent of revenue	0.8		%	0.4		%	0.5		%	0.8		%

During fiscal year 2023, we initiated a restructuring plan designed to better align our cost structure with our outlook for the economic environment and business opportunities. Under the plan we terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs primarily relate to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, we made a strategic decision to relocate certain manufacturing activities to pre-existing facilities.

Restructuring charges in the March 2024 quarter increased compared to the December 2023 quarter, due primarily to employee severance and separation costs associated with workforce reduction activities during the March 2024 quarter.

Restructuring charges decreased during the nine months ended March 31, 2024 compared to the same period in the prior year due primarily to lower employee severance and separation costs.

Please refer to Note 15, “Restructuring charges, net,” to our Condensed Consolidated Financial Statements, included in Part I of this Form 10-Q for additional information.

Other Income (Expense), Net

Other income (expense), net consisted of the following:

	Three Months Ended				Nine Months Ended
	March 31, 2024		December 24, 2023		March 31, 2024		March 26, 2023
	(in thousands)
Interest income	$	71,752	$	57,595	$	185,911	$	83,155
Interest expense	(47,153)		(46,313)		(138,797)		(139,930)
Gains on deferred compensation plan-related assets, net	26,495		25,530		49,124		3,588
Foreign exchange losses, net	(4,344)		(568)		(3,643)		(8,812)
Other, net	(10,677)		(6,405)		(24,082)		(12,661)
	$	36,073	$	29,839	$	68,513	$	(74,660)

Interest income increased for the three and nine months ended March 31, 2024 compared to the three months ended December 24, 2023, and nine months ended March 26, 2023, respectively, primarily due to higher yields and higher average balances.

Interest expense is consistent across all periods presented.

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The gains on deferred compensation plan-related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.

Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.

The losses in other, net for the three and nine months ended March 31, 2024 increased compared to the three months ended December 24, 2023 and nine months ended March 26, 2023, respectively, primarily driven by fluctuations in the fair market value of equity investments.

Income Tax Expense

Our provision for income taxes and effective tax rate for the periods indicated were as follows:

	Three Months Ended						Nine Months Ended
	March 31, 2024			December 24, 2023			March 31, 2024			March 26, 2023
	(in thousands, except percentages)
Income tax expense	$	127,359		$	132,785		$	398,376		$	537,201
Effective tax rate	11.7		%	12.2		%	12.4		%	12.7		%

The decrease in the effective tax rate for the March 2024 quarter compared to the December 2023 quarter and for the nine months ended March 31, 2024 compared to the same period in the prior year was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions and higher stock-based compensation excess tax benefits.

International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States. International pre-tax income is taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7, “Income Taxes,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K for additional information.

On August 16, 2022, the IRA was signed into law. In general, the provisions of the IRA are effective beginning with our fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. We have evaluated the potential impacts of the IRA and do not expect it to have a material impact on our effective tax rate. However, we expect future guidance from the Treasury Department and will further analyze when the guidance is issued.

We re-evaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Any change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A critical accounting policy is defined as one that has both a material impact on our financial condition and results of operations and requires us to make difficult, complex and/or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make certain judgments, estimates and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates and assumptions on historical experience and on various other assumptions we believe to be applicable and evaluate them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results could differ significantly from those estimates, which could have a material impact on our business, results of operations, and financial condition. Our critical accounting estimates include:

•the recognition and valuation of revenue from arrangements with multiple performance obligations which impacts revenue;

•the valuation of inventory, which impacts gross margin;

•the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, which impact our provision for income tax expenses; and

•the valuation and recoverability of long-lived assets, which impacts gross margin and operating expenses when we record asset impairments or accelerate their depreciation or amortization.

Refer to our “Critical Accounting Policies and Estimates” included in Part II, Item 7 of our 2023 Form 10-K for a discussion of the critical accounting estimates identified above.

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Recent Accounting Pronouncements

See Note 2 - Recent Accounting Pronouncements, of our Condensed Consolidated Financial Statements, included in Part 1 of this Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Total gross cash, cash equivalents, investments, and restricted cash and investments balances were $5.7 billion at March 31, 2024 compared to $5.6 billion as of June 25, 2023. This slight increase was primarily driven by cash generated from operating activities totaling $3,789.8 million, partially offset by $2,469.3 million of share repurchases, including net share settlement on employee stock-based compensation; $757.5 million in dividends paid, $295.9 million in capital expenditures; and $255.2 million of repayment of debt largely associated with the purchase of certain properties under finance leases.

Net cash provided by operating activities of $3,789.8 million during the nine months ended March 31, 2024, consisted of (in thousands):

Net income	$	2,807,490
Non-cash charges:
Depreciation and amortization	271,342
Equity-based compensation expense	213,966
Deferred income taxes	(137,606)
Changes in operating asset and liability accounts	620,405
Other	14,242
	$	3,789,839

Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: decreases in accounts receivable of $614.5 million and inventory of $439.4 million, and an increase in trade accounts payable of $55.9 million. These sources of cash are offset by the following uses of cash: a decrease in accrued expenses and other liabilities of $354.3 million, a decrease in deferred gross profit of $93.5 million, and an increase in prepaid expenses and other current assets of $41.6 million.

Cash Flow from Investing Activities

Net cash used for investing activities during the nine months ended March 31, 2024, was $269.0 million, primarily consisting of $295.9 million in capital expenditures, partially offset by proceeds from net maturities of available-for-sale securities of $37.8 million.

Cash Flow from Financing Activities

Net cash used for financing activities during the nine months ended March 31, 2024, was $3,421.7 million, primarily consisting of $2,469.3 million in treasury stock repurchases, including net share settlement on employee stock-based compensation, $757.5 million in dividends paid, and $255.2 million of repayment of debt, largely associated with the purchase of certain properties under finance leases.

Liquidity

Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash, cash equivalents, and short-term investments as of March 31, 2024, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months. However, factors outside of our control, including uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, are currently, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors.

In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services. While we have substantial cash balances, we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities. We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, domestic and global macroeconomic and political conditions could cause disruptions to the capital markets and otherwise make any financing more challenging, and there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all.

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ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

For financial market risks related to changes in interest rates, marketable equity security prices, and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our 2023 Form 10-K. Our exposure related to market risk has not changed materially since June 25, 2023.

ITEM 4.    Controls and Procedures

Design of Disclosure Controls and Procedures and Internal Control over Financial Reporting

We maintain disclosure controls and procedures and internal control over financial reporting that are designed to comply with Rule 13a-15 of the Exchange Act. In designing and evaluating the controls and procedures associated with each, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and that the effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100% effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Disclosure Controls and Procedures

As required by Exchange Act Rule 13a-15(b), as of March 31, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer, along with our Chief Financial Officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our senior management has timely access to material information that could affect our business.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Effectiveness of Controls

While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting.

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PART II.    OTHER INFORMATION

ITEM 1.    Legal Proceedings

Please refer to the subsection entitled “Legal Proceedings” within Note 13 “Commitments and Contingencies," to our Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q.

ITEM 1A.    Risk Factors

In addition to the other information in this Form 10-Q, the following risk factors should be carefully considered in evaluating us and our business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.

INDUSTRY AND CUSTOMER RISKS

The Semiconductor Capital Equipment Industry Is Subject to Variability and Periods of Rapid Growth or Decline; We Therefore Face Risks Related to Our Strategic Resource Allocation Decisions

The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results. The variability in our customers’ investments during any particular period is dependent on several factors, including, but not limited to, electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities.

During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis. If we do not adequately meet these challenges during periods of increasing or declining demand, our gross margins and earnings may be negatively impacted.

We continuously reassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resulting in excess fixed costs.

Especially during transitional periods, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.

Future Declines in the Semiconductor Industry, and the Overall World Economic Conditions on Which It Is Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial Condition

Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the semiconductor capital equipment market may experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. The economic, regulatory, political, and business conditions occurring nationally, globally, or in any of our key sales regions, which are often unpredictable, have historically impacted customer demand for our products and services and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, changing economic, regulatory, political or business conditions can cause material adverse changes to our results of operations and financial condition, including, but not limited to: 

•a decline in demand for our products or services;

•an increase in reserves on accounts receivable due to our customers’ inability to pay us;

•an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;

•valuation allowances on deferred tax assets;

•restructuring charges;

•asset impairments including the potential impairment of goodwill and other intangible assets;

•a decline in the value of our investments;

Lam Research Corporation 2024 Q3 10-Q 26

•exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come to fruition; and

•challenges maintaining reliable and uninterrupted sources of supply.

Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operating results, and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

We Have a Limited Number of Key Customers

Sales to a limited number of large customers constitute a significant portion of our overall revenue, shipments, cash flows, collections, and profitability. As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict. In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased costs, and/or lower margins for us and limitations on our ability to share technology with others. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.

We Face a Challenging and Complex Competitive Environment

We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.

With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell and support our existing products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.

We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers’ needs, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Technological changes and developing technologies have required, and are expected to continue to require, new and costly investments. Certain of our competitors, including those that are created and financially backed by foreign governments, have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to offer customers a more comprehensive array of products and/or product capabilities and to therefore achieve additional relative success in the semiconductor equipment industry. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, who are able to sell products for certain applications at certain customers that we are prohibited from selling to under applicable export controls, allowing the freedom of action in ways that we may be unable to match. In many cases speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives. For these reasons, we may fail to continue to compete successfully worldwide.

Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing Equipment, the Manufacturer Typically Continues to Purchase That Competitor’s Equipment, Making It More Difficult for Us to Sell Our Equipment to That Customer

Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time, especially for customers that are more focused on tool reuse. Accordingly, we expect it to be more difficult to sell our products to a given customer for a product line application if that customer initially selects a competitor’s equipment for the same product line application.

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We Depend on Creating New Products and Processes and Enhancing Existing Products and Processes for Our Success; Consequently, We Are Subject to Risks Associated with Rapid Technological Change

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products or existing products have reliability, quality, design, or safety problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. We may be unable to develop and manufacture products successfully, or products that we introduce may fail in the marketplace. For more than 25 years, the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips. That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development. In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development. In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customers’ requirements. Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adversely affect our business in a material way. Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated costs, and inventory obsolescence, which would adversely affect our financial results.

In order to develop new products and processes and enhance existing products and processes, we expect to continue to make significant investments in R&D, to investigate the acquisition of products and technologies, to invest in or acquire businesses or technologies, and to pursue joint development relationships with customers, suppliers, or other members of the industry. Our investments and acquisitions may not be as successful as we may expect, particularly in the event that we invest in or acquire product lines and technologies that are new to us. We may find that acquisitions are not available to us, for regulatory or other reasons, and that we must therefore limit ourselves to collaboration and joint venture development activities that do not have the same benefits as acquisitions. Pursuing development through collaboration and/or joint development activities rather than through an acquisition may pose substantial challenges for management, including those related to aligning business objectives; sharing confidential information, intellectual property and data; sharing value with third parties; and realizing synergies that might have been available in an acquisition but are not available through a joint development project. We must manage product transitions and joint development relationships successfully, as the introduction of new products could adversely affect our sales of existing products and certain jointly developed technologies may be subject to restrictions on our ability to share that technology, which could limit our market for products incorporating those technologies. Future technologies, processes, or product developments may render our current product offerings obsolete, leaving us with non-competitive products, obsolete inventory, or both. Moreover, customers may adopt new technologies or processes to address the complex challenges associated with next-generation devices. This shift may result in a reduction in the size of our addressable markets or could increase the relative size of markets in which we either do not compete or have relatively low market share.

Strategic Alliances and Customer Consolidation May Have Negative Effects on Our Business

Semiconductor manufacturing companies from time to time enter into strategic alliances or consolidate with one another to expedite the development of processes and other manufacturing technologies and/or achieve economies of scale. The outcomes of such an alliance can be the definition of a particular tool set for a certain function and/or the standardization of a series of process steps that use a specific set of manufacturing equipment, while the outcomes of consolidation can lead to an overall reduction in the market for semiconductor manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing power based on their higher volumes. In certain instances, this could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such functions or processes. Additional outcomes of such consolidation may include our customers re-evaluating their future supplier relationships to consider our competitors’ products and/or gaining additional influence over the pricing of products and the control of intellectual property or data.

Similarly, our customers may partner with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. Even if they select our equipment, the institutions and the customers that follow their lead could impose conditions on acceptance of that equipment, such as adherence to standards and requirements or limitations on how we license our proprietary rights, that increase our costs or require us to take on greater risk. These actions could adversely impact our market share and financial results.

BUSINESS AND OPERATIONAL RISKS

Our Revenues and Operating Results Are Variable

Our revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a small number of transactions can unfavorably

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affect operating results in a particular quarter or year. Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:

•legal, tax, accounting, or regulatory changes (including, but not limited to, changes in import/export regulations and tariffs, such as regulations imposed by the U.S. government restricting exports to China) or changes in the interpretation or enforcement of existing requirements;

•macroeconomic, industry and market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, bank failures; and geopolitical issues;

•changes in average selling prices, customer mix, and product mix;

•foreign currency exchange rate fluctuations;

•economic conditions in the electronics and semiconductor industries in general and specifically the semiconductor equipment industry;

•the size and timing of orders from customers;

•changes in our deferred revenue balance, including as a result of factors such as volume purchase agreements, multi-year service contracts, back orders, and down payments toward purchases;

•consolidation of the customer base, which may result in the investment decisions of one customer or market having a significant effect on demand for our products or services;

•procurement shortages;

•the failure of our suppliers or outsource providers to perform their obligations in a manner consistent with our expectations;

•manufacturing difficulties;

•customer cancellations or delays in shipments, installations, customer payments, and/or customer acceptances;

•the extent that customers continue to purchase and use our products and services in their business;

•our customers’ reuse of existing and installed products, to the extent that such reuse decreases their need to purchase new products or services;

•our ability to develop, introduce, and market new, enhanced, and competitive products in a timely manner;

•our competitors’ introduction of new products;

•legal or technical challenges to our products and technologies;

•transportation, communication, demand, information technology, or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, widespread outbreak of illness, natural or man-made disasters, international conflict, or climate change;

•management of supply chain risks;

•rising inflation or interest rates; and

•changes in our estimated effective tax rate.

Our Future Success Depends Heavily on International Sales and the Management of Global Operations

Non-U.S. sales, as reflected in Part I Item 2. Results of Operations of this quarterly report on Form 10-Q, accounted for approximately 93%, 91%, and 92% of total revenue in the nine months ended March 31, 2024 and fiscal years 2023, and 2022, respectively. We expect that international sales will continue to account for a substantial majority of our total revenue in future years.

We are subject to various challenges related to international sales and the management of global operations including, but not limited to:

•domestic and international trade regulations, policies, practices, relations, disputes and issues;

•domestic and international tariffs, export controls and other barriers;

•developing customers and/or suppliers, who may have limited access to capital resources;

•global or national economic and political conditions;

•changes in currency controls;

•differences in the enforcement of intellectual property and contract rights in varying jurisdictions;

•our ability to respond to customer and foreign government demands for locally sourced systems, spare parts, and services and develop the necessary relationships with local suppliers;

•changes in and compliance with U.S. and international laws and regulations affecting foreign operations, including U.S. and international trade restrictions and sanctions, international data privacy regulations, such as the General Data Protection Regulation, anti-bribery, anti-corruption, anti-boycott, environmental, tax, and labor laws;

•fluctuations in interest and foreign currency exchange rates;

•the need for technical support resources in different locations; and

•our ability to secure and retain qualified people, and effectively manage people, in all necessary locations for the successful operation of our business.

There is inherent risk, based on the complex relationships among China, Japan, Korea, Taiwan, and the United States, that political, diplomatic and national security influences can lead to trade disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry. This can adversely affect our business with China, Japan, Korea, and/or Taiwan and perhaps the entire Asia Pacific region or global economy. A significant trade dispute, impact and/or disruption in any area where we do business could have a materially adverse impact on our future revenue and profits.

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Tariffs, export controls, additional taxes, trade barriers, sanctions, the termination or modification of trade agreements, trade zones, and other duty mitigation initiatives, and any reciprocal retaliatory actions, can increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, disrupt our supply chain operations, or inhibit our ability to sell products or provide services, which has had and in the future could have a material adverse effect on our business, results of operations, or financial conditions. Certain of our international sales depend on our ability to obtain export licenses from the U.S. or foreign governments, and our inability to obtain such licenses, or an expansion of the number or kinds of sales for which export licenses are required, has limited and could in the future further limit the market for our products and has had and could in the future have an adverse impact on our revenues. As is discussed below under the heading “Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China,” the U.S. government has recently imposed new controls, including expanded export license requirements, that significantly impact trade with China. In addition, the U.S. government has an ongoing process of assessing technologies that may be subject to new or additional export controls, and it is possible that such additional controls, if and when imposed, could further adversely impact our ability to sell our products outside the U.S. The implementation by the U.S. government of broad export controls restricting access to our technology (such as recent controls limiting exports to China) may cause customers with international operations to reconsider their use of and reliance on our products, which could adversely impact our future revenue and profits. Furthermore, there are risks that foreign governments may, among other things, take retaliatory actions; insist on the use of local suppliers; compel companies to partner with local companies to design and supply equipment on a local basis, requiring the transfer of intellectual property rights and/or local manufacturing; utilize their influence over their judicial systems to respond to intellectual property disputes or issues; and provide special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours; all of which could adversely impact our revenues and margins.

We are exposed to potentially adverse movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. Further, in periods in which the U.S. dollar is strong relative to the local currencies of our international customers, this can potentially reduce demand for our products, which may compound the adverse effect of foreign exchange translation on our revenue. Currently, we hedge certain anticipated foreign currency cash flows, primarily anticipated revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. In addition, we enter into foreign currency hedge contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily third-party accounts receivables, accounts payables, and intercompany receivables and payables. We believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, for the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of the underlying exposures and our forecasts of those exposures may leave us either over or under hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, expenses, monetary assets, and liabilities, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated monetary assets and liabilities (other than those currency exposures previously discussed), and currently we do not enter into foreign currency hedge contracts against these exposures. In addition, our currency hedges do not necessarily mitigate the potential negative impact of a strong U.S. dollar on demand for our products. Therefore, we are subject to potential unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in these currencies.

The magnitude of our overseas business also affects where our cash is generated. Certain uses of cash, such as share repurchases, payment of dividends, or the repayment of our notes, can usually only be made with onshore cash balances. Since the majority of our cash is generated outside of the United States, this may impact certain business decisions and outcomes.

Our Business Relies on Technology, Data, Intellectual Property and Other Sensitive Information That is Susceptible to Cybersecurity and Other Threats or Incidents

Our business is dependent upon the use and protection of technology, data, intellectual property and other sensitive information, which may be owned by, or licensed to, us or third parties, such as our customers and vendors. We maintain and rely upon certain critical information systems for the creation, transmission, use and storage of much of this information, and for the effective operation of our business. These information systems include, but are not limited to, telecommunications, the Internet, our corporate intranet, various computer hardware and software applications, (some of which may be integrated into the products that we sell or be required in order to provide the services that we offer), network communications, and email. These information systems may be owned and maintained by us, our outsourced providers, or third parties such as vendors, contractors, customers and Cloud providers. In addition, we make use of Software-as-a-Service (SaaS) products for certain important business functions that are provided by third parties and hosted on their own networks and servers, or third-party networks and servers, all of which rely on networks, email and/or the Internet for their function.

The technology, data, intellectual property and other sensitive information we seek to protect are subject to loss, release, misappropriation or misuse, and the information systems containing or transmitting such technology, data, intellectual property and other sensitive information are subject to disruption, breach or failure, in each case as a result of various possible causes. Such causes may include mistakes or unauthorized actions by our employees or contractors, phishing schemes and other third-party attacks, and degradation or loss of service or access to data due to viruses, malware, denial of service attacks, destructive or

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inadequate code, power failures, or physical damage to computers, hard drives, communication lines, or networking equipment. Such causes may also include the use of techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, or that may continue undetected for an extended period of time. In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks. Further, the use of artificial intelligence by us, our customers, suppliers, and third-party providers, among others, may also introduce unique vulnerabilities.

We have experienced cybersecurity and other threats and incidents in the past. Although past threats and incidents have not resulted in a material adverse effect, we may incur material losses related to cybersecurity and other threats or incidents in the future. If we were subject to a cybersecurity or other incident, it could have a material adverse effect on our business. Such adverse effects might include:

•loss of (or inability to access, e.g. through ransomware) confidential and/or sensitive information stored on these critical information systems or transmitted to or from those systems;

•the disruption of the proper function of our products, services and/or operations;

•the failure of our or our customers’ manufacturing processes;

•errors in the output of our work or our customers’ work;

•the loss or public exposure of the personal or other confidential information of our employees, customers or other parties;

•the public release of customer financial and business plans, customer orders and operational results;

•exposure to claims from our employees or third parties who are adversely impacted by such incidents;

•misappropriation or theft of our or a customer’s, supplier’s or other party’s assets or resources, including technology, data, intellectual property or other sensitive information and costs associated therewith;

•reputational damage;

•diminution in the value of our investment in research, development and engineering; or

•our failure to meet, or violation of, regulatory or other legal obligations, such as the timely publication or filing of financial statements, tax information and other required communications.

While we have implemented ISO 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer cybersecurity and other incidents. It has been difficult and may continue to be difficult to hire and retain employees with substantial cybersecurity acumen. In addition, there have been and may continue to be instances of our policies and procedures not being effective in enabling us to identify risks, threats and incidents in a timely manner, or at all, or to respond expediently, appropriately and effectively when incidents occur and repair any damage caused by such incidents, and such occurrences could have a material adverse effect on our business.

We May Not Achieve the Expected Benefits of Our Restructuring Plans and Business Transformation Initiatives, and These Efforts Could Have a Material Adverse Effect on Our Business, Operations, Financial Condition, Results of Operations and Competitive Position

In January 2023, we announced that we are implementing a restructuring plan consisting of a workforce reduction, and that we anticipate undertaking, and may in the future undertake, additional business restructuring, realignment and transformation initiatives. We expect to incur material costs and charges in connection with these plans and initiatives. While the restructuring plan is intended to better align our cost structure with the current economic environment and future business opportunities, and our anticipated transformation initiatives have the goal of strengthening our operations and achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives. Implementation of these plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all. Restructuring and transformation may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods, may require a significant amount of management and other employees' time and focus, and may be distracting to employees and management, which may divert attention from operating and growing our business. Additionally, reductions in our workforce may cause a reduction in our production output capabilities which could impact our ability to manufacture or ship products to customers within a mutually beneficial timeline. If we fail to achieve some or all of the expected benefits, it could have a material adverse effect on our business, operations, financial condition, results of operations and competitive position. For more information about our restructuring plan, see Note 15 to our Condensed Consolidated Financial Statements in Part I.

Disruptions to Our Supply Chain and Outsource Providers Could Impact Our Ability to Meet Demand, Increase Our Costs, and Adversely Impact Our Revenue and Operating Results

Our supply chain has played and will continue to play a key role in our product development, manufacturing operations, field installation and support. Our business depends on our timely supply of products and services to meet the demand from our customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by other companies. In addition, outsource providers have

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played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. These providers and suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity arrangements that preclude further business with us, or be unable to meet our requirements or expectation due to their independent business decisions or force majeure events that could interrupt or impair their continued ability to perform as we expect. We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or perform services or to recognize revenue, increased costs or customer order cancellations as a result of:

•the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis;

•volatility in the availability and cost of parts, materials or services, including increased costs due to rising inflation or interest rates or other market conditions;

•difficulties or delays in obtaining required import or export approvals;

•shipment delays and increased costs of shipment due to transportation interruptions, capacity constraints, or fuel shortages;

•shortages of semiconductor or other components or materials as a result of increases in demand;

•information technology or infrastructure failures, including those of a third-party supplier or service provider; and

•transportation or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, widespread outbreak of illness, natural or man-made disasters, international conflict, or climate change.

Demand for electronic products and other factors, such as the COVID-19 pandemic, have resulted in, and may in the future result in, a shortage of parts, materials and services needed to manufacture, deliver and install our products, as well as delays in and unpredictability of shipments due to transportation interruptions. Such shortages, delays and unpredictability have adversely impacted, and may in the future impact, our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of parts, materials or services, and delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may in the future adversely impact, our manufacturing operations and our ability to meet customer demand. In addition, difficulties in obtaining parts, materials or s