# LAM RESEARCH CORP (LRCX) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from LAM RESEARCH CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/707549/000070754924000106/lrcx-20240630.htm
Accession: 0000707549-24-000106
Filing date: 2024-08-29
Report date: 2024-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/LRCX/
All MD&A years: /company/LRCX/mda/
Previous year: /company/LRCX/mda/fy2023/ (FY 2023)
Next year: /company/LRCX/mda/fy2025/ (FY 2025)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations contains forward-looking statements, which are subject to risks, uncertainties, and changes in condition, significance, value, and effect. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this 2024 Form 10-K and other documents we file from time to time with the Securities and Exchange Commission. (See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this 2024 Form 10-K.)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a description of our results of operations and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this 2024 Form 10-K. MD&A consists of the following sections:

Executive Summary provides a summary of the key highlights of our results of operations and our management’s assessment of material trends and uncertainties relevant to our business.

Results of Operations provides an analysis of operating results.

Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

Liquidity and Capital Resources provides an analysis of cash flows, contractual obligations, and financial position.

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 NVM, DRAM, 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.

During fiscal year 2024, wafer fabrication equipment spending was roughly flat on a year-on-year basis, with strength in the DRAM market, offset by declines in the non-volatile memory, Foundry, and Logic markets. In the quarter ended March 26, 2023, we initiated a restructuring plan designed to better align the Company’s cost structure with industry investment levels. We invested in a number of business process improvements and initiatives and incurred expenditures from these activities of approximately $315 million, inclusive of the restructuring activity during the second half of fiscal year 2023 and the 2024 fiscal year. In the short term, the uncertain semiconductor demand environment, as well as other risks and uncertainties, 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

Lam Research Corporation 2024 10-K 29

Table of Content

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.

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

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except per share data, percentages and basis points)"],["Revenue","$","14,905,386","","","$","17,428,516","","","$","17,227,039","","","$","(2,523,130)","","","(14.5)","%","","$","201,477","","","1.2","%"],["Gross margin","$","7,052,791","","","$","7,776,925","","","$","7,871,807","","","$","(724,134)","","","(9.3)","%","","$","(94,882)","","","(1.2)","%"],["Gross margin as a percent of total revenue","47.3","%","","44.6","%","","45.7","%","","+ 270 bps","","- 110 bps"],["Total operating expenses","$","2,788,878","","","$","2,602,065","","","$","2,489,985","","","$","186,813","","","7.2","%","","$","112,080","","","4.5","%"],["Net income","$","3,827,772","","","$","4,510,931","","","$","4,605,286","","","$","(683,159)","","","(15.1)","%","","$","(94,355)","","","(2.0)","%"],["Net income per diluted share","$","29.00","","","$","33.21","","","$","32.75","","","$","(4.21)","","","(12.7)","%","","$","0.46","","","1.4","%"]]
[[/GREPCENT_TABLE]]

Fiscal year 2024 revenue decreased 14.5% compared to fiscal year 2023. Systems and customer-support related revenues declined in fiscal year 2024 primarily from weakness in the non-volatile memory market, partially offset by strength in DRAM as well as increased revenue generation from our China regional customers. Gross margin as a percentage of revenue increased in fiscal year 2024 compared to fiscal year 2023 largely due to a more favorable customer mix, lower spending on material costs, and higher field resource utilization, partially offset by lower factory efficiencies. The increase in operating expenses in fiscal year 2024 compared to fiscal year 2023 was driven by higher employee-related costs primarily as a result of increased research and development-related headcount, increased spending on transformational activities, higher deferred compensation plan-related costs, and increased spending on supplies.

Fiscal year 2023 revenue was slightly higher than fiscal year 2022. Customer support-related revenue increased in fiscal year 2023 due to continued strength in specialty node investments, which was offset by a decline in our systems revenue as a result of semiconductor demand weakness, largely in the memory market. Gross margin as a percentage of revenue decreased due to inflationary cost pressures that led to higher spending on material costs, as well as costs associated with restructuring related activities, partially offset by favorable customer and product mix. The increase in operating expenses in fiscal year 2023 compared to fiscal year 2022 was driven by higher deferred compensation plan-related costs, restructuring-related charges, employee-related costs as a result of increased headcount, depreciation and amortization, and supplies, partially offset by a decrease in amortization of intangible assets as the intangible assets associated with the acquisition of Novellus have fully amortized.

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 deliveries of products, which has impacted, including in the current fiscal year, and may in the future impact, the timing of revenue recognition with respect to such products.

Our cash and cash equivalents and restricted cash balances totaled approximately $5.9 billion as of June 30, 2024, compared to $5.6 billion as of June 25, 2023. Cash flows provided from operating activities was $4.7 billion for fiscal year 2024 compared to $5.2 billion for fiscal year 2023. Cash flows provided from operating activities in fiscal year 2024 was primarily used for $2.8 billion in treasury stock purchases, including net share settlement on employee stock-based compensation; $1.0 billion in dividends paid to our stockholders; and $397 million of capital expenditures.

Results of Operations

Revenue

[[GREPCENT_TABLE]]
[["","Year Ended"],["June 30, 2024","","June 25, 2023","","June 26, 2022"],["Revenue (in millions)","$","14,905","","","$","17,429","","","$","17,227"],["China","42","%","","26","%","","31","%"],["Korea","19","%","","20","%","","23","%"],["Taiwan","11","%","","20","%","","17","%"],["Japan","10","%","","10","%","","9","%"],["United States","7","%","","9","%","","8","%"],["Southeast Asia","6","%","","8","%","","8","%"],["Europe","5","%","","7","%","","4","%"]]
[[/GREPCENT_TABLE]]

Lam Research Corporation 2024 10-K 30

Table of Content

Revenue decreased in fiscal year 2024 compared to fiscal year 2023 mainly due to decreases in non-volatile memory, partially offset by increases in DRAM spending by our customers. The China region had the largest geographic concentration with 42% of our revenues during this period. Revenue increased in fiscal year 2023 compared to fiscal year 2022 primarily due higher revenue from CSBG related to strength in mature node equipment, while the overall Asia region continued to account for a majority of our revenues.

The deferred revenue balance decreased to $1.6 billion as of June 30, 2024 compared to $1.8 billion as of June 25, 2023. primarily due to a decrease in advance deposits from newer customers.

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

[[GREPCENT_TABLE]]
[["","Year Ended"],["","June 30, 2024","","June 25, 2023","","June 26, 2022"],["","(in thousands)"],["Systems Revenue","$","8,921,643","","","$","10,695,897","","","$","11,322,271"],["Customer support-related revenue and other","5,983,743","","","6,732,619","","","5,904,768"],["","$","14,905,386","","","$","17,428,516","","","$","17,227,039"]]
[[/GREPCENT_TABLE]]

Please refer to Note 4: Revenue of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K 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: 

[[GREPCENT_TABLE]]
[["","Year Ended"],["June 30, 2024","","June 25, 2023","","June 26, 2022"],["Memory","42","%","","42","%","","60","%"],["Foundry","40","%","","38","%","","26","%"],["Logic/integrated device manufacturing","18","%","","20","%","","14","%"]]
[[/GREPCENT_TABLE]]

Gross Margin

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages and basis points)"],["Gross margin","$","7,052,791","","","$","7,776,925","","","$","7,871,807","","","$","(724,134)","","","(9.3)","%","","$","(94,882)","","","(1.2)","%"],["Percent of revenue","47.3","%","","44.6","%","","45.7","%","","+ 270 bps","","- 110 bps"]]
[[/GREPCENT_TABLE]]

The increase in gross margin as a percentage of revenue for fiscal year 2024 compared to fiscal year 2023 was due to a more favorable customer mix, reduced spending on material costs, and higher field resource utilization, partially offset by lower factory efficiencies.

The decrease in gross margin as a percentage of revenue for fiscal year 2023 compared to fiscal year 2022 was due to inflationary cost pressures that led to higher spending on material costs, partially offset by favorable customer and product mix.

Research and Development

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages and basis points)"],["Research & development","$","1,902,444","","","$","1,727,162","","","$","1,604,248","","","$","175,282","","","10.1","%","","$","122,914","","","7.7","%"],["Percent of revenue","12.8","%","","9.9","%","","9.3","%","","+ 290 bps","","+ 60 bps"]]
[[/GREPCENT_TABLE]]

We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes. The increase in R&D expense during fiscal year 2024 compared to fiscal year 2023 was primarily driven by an increase of $58 million in employee-related costs primarily as a result of increased headcount, $33 million in spending for supplies, $18 million in deferred compensation plan-related costs, and $13 million in spending for transformational activities.

Lam Research Corporation 2024 10-K 31

Table of Content

The increase in R&D expense during fiscal year 2023 compared to fiscal year 2022 was mainly driven by an increase of $43 million in employee-related costs as a result of increased headcount, $26 million in deferred compensation plan-related costs, $22 million in spending for supplies, and $14 million of depreciation and amortization.

Selling, General, and Administrative

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages and basis points)"],["Selling, general, and administrative (\"SG&A\")","$","868,247","","","$","832,753","","","$","885,737","","","$","35,494","","","4.3","%","","$","(52,984)","","","(6.0)","%"],["Percent of revenue","5.8","%","","4.8","%","","5.1","%","","+ 100 bps","","- 30 bps"]]
[[/GREPCENT_TABLE]]

The increase in SG&A expense during fiscal year 2024 compared to fiscal year 2023 was primarily driven by an increase of $30 million in transformational activity spend.

The decrease in SG&A expense during fiscal year 2023 compared to fiscal year 2022 was primarily driven by a decrease of $44 million in amortization of intangible assets, as the intangible assets associated with the acquisition of Novellus have fully amortized, as well as from $12 million in lower employee-related costs, partially offset by $17 million in higher deferred compensation plan-related costs.

Restructuring Charges, Net

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages and basis points)"],["Restructuring charges, net","$","61,562","","","$","120,316","","","$","\u2014","","","$","(58,754)","","","(48.8)","%","","$","120,316","","","100.0","%"],["Percent of revenue","0.4","%","","0.7","%","","\u2014","%","","- 30 bps","","+ 70 bps"]]
[[/GREPCENT_TABLE]]

In fiscal year 2023, we initiated a restructuring plan, that continued into fiscal year 2024, 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 are primarily related 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. The restructuring plan is substantially complete as of June 30, 2024.

Restructuring charges decreased during fiscal year 2024 compared to fiscal year 2023 primarily due to lower employee severance and separation costs. Please refer to Note 21: Restructuring charges, net of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for additional information.

Other Income (Expense), Net

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

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages)"],["Interest income","$","251,938","","","$","138,984","","","$","15,209","","","$","112,954","","","81.3","%","","$","123,775","","","813.8","%"],["Interest expense","(185,236)","","","(186,462)","","","(184,759)","","","$","1,226","","","(0.7)","%","","$","(1,703)","","","0.9","%"],["Gains (losses) on deferred compensation plan related assets, net","58,767","","","20,186","","","(38,053)","","","$","38,581","","","191.1","%","","$","58,239","","","(153.0)","%"],["Foreign exchange losses, net","(4,837)","","","(7,078)","","","(723)","","","$","2,241","","","(31.7)","%","","$","(6,355)","","","879.0","%"],["Other, net","(24,323)","","","(31,280)","","","19,618","","","$","6,957","","","(22.2)","%","","$","(50,898)","","","(259.4)","%"],["","$","96,309","","","$","(65,650)","","","$","(188,708)","","","$","161,959","","","(246.7)","%","","$","123,058","","","(65.2)","%"]]
[[/GREPCENT_TABLE]]

Interest income increased in fiscal year 2024 compared to fiscal years 2023 and 2022 primarily because of higher yields and higher cash balances.

Lam Research Corporation 2024 10-K 32

Table of Content

Interest expense in fiscal year 2024 was flat compared to fiscal years 2023 and 2022.

The gains or losses 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 variation in other, net for the fiscal year 2024 compared to fiscal years 2023 and 2022 was 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:

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["June 30, 2024","","June 25, 2023","","June 26, 2022","FY24 vs. FY23","","FY23 vs. FY22"],["","(in thousands, except percentages and basis points)"],["Income tax expense","$","532,450","","","$","598,279","","","$","587,828","","","$","(65,829)","","","(11.0)","%","","$","10,451","","","1.8","%"],["Effective tax rate","12.2","%","","11.7","%","","11.3","%","","+ 50 bps","","+ 40 bps"]]
[[/GREPCENT_TABLE]]

The increase in the effective tax rate in fiscal year 2024 as compared to fiscal year 2023 and the increase in the effective tax rate in fiscal year 2023 compared to fiscal year 2022 was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions.

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 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K.

Beginning in our fiscal year 2023, a provision enacted as part of the 2017 Tax Cuts & Jobs Act requires us to capitalize research and experimental expenditures for tax purposes. Due to this provision, we expect our cash tax payments to increase significantly in the near term and stabilize in future years as the capitalized expenditures continue to amortize.

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 alternative minimum tax. We have evaluated the impacts of the IRA, including guidance issued by the Treasury Department, and do not expect it to have a material impact on our effective tax rate.

Deferred Income Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Our gross deferred tax assets were $1,516 million and $1,303 million at the end of fiscal years 2024 and 2023, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of $218 million and $238 million and a valuation allowance primarily representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $389 million and $352 million at the end of fiscal years 2024 and 2023, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2024 and 2023 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries, tax credits, and capitalized research and experimental expenditures.

We evaluate if the deferred tax assets are realizable on a quarterly basis and will continue to assess the need for changes in valuation allowances, if any.

Uncertain Tax Positions

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.

Lam Research Corporation 2024 10-K 33

Table of Content

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;

•the valuation of inventory, which impacts gross margin; and

•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.

We believe that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements regarding the critical accounting estimates indicated above. See Note 2: Summary of Significant Accounting Policies of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for additional information regarding our accounting policies.

Revenue Recognition: We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The transaction price for our contracts with customers is allocated among the identified performance obligations and consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. We generally invoice customers at shipment and for professional services either as provided or upon meeting certain milestones. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Inventory Valuation: Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual cost on a first-in, first-out basis. Inventory in excess of management’s estimated usage requirement and obsolete inventory is written down to its estimated net realizable value if less than cost. Estimates of net realizable value include but are not limited to customer demand, management’s forecasts related to our future manufacturing schedules, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative uses.

Income Taxes: Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. The assessment of valuation allowances against our deferred tax assets includes estimation and judgement with respect to future operating results and market conditions.

We recognize the benefit from a tax position only if it is more likely than not that the position will be sustained upon audit based solely on the technical merits of the tax position.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 3: Recent Accounting Pronouncements of our Consolidated Financial Statements, included in Part II, Item 8 of this 2024 Form 10-K.

Liquidity and Capital Resources

Total gross cash, cash equivalents, and restricted cash balances were $5.9 billion at the end of fiscal year 2024 compared to $5.6 billion at the end of fiscal year 2023. This increase was primarily due to cash provided by operating activities, partially offset by Common Stock repurchases in connection with our stock repurchase program, dividends paid, and capital expenditures.

Lam Research Corporation 2024 10-K 34

Table of Content

Cash Flow from Operating Activities

Net cash provided by operating activities of $4.7 billion during fiscal year 2024 consisted of (in thousands):

[[GREPCENT_TABLE]]
[["Net income","$","3,827,772"],["Non-cash charges:"],["Depreciation and amortization","359,699"],["Deferred income taxes","(198,981)"],["Equity-based compensation expense","293,058"],["Changes in operating asset and liability accounts","360,478"],["Other","10,243"],["","$","4,652,269"]]
[[/GREPCENT_TABLE]]

Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: decreases in inventory of $529 million, and accounts receivable of $303 million, and increases in accounts payable of $126 million. These sources of cash are offset by the following uses of cash: decreases in accrued expenses and other liabilities of $305 million, a decrease in deferred gross profit of $277 million, and an increase in prepaid expenses and other current assets of $16 million.

Cash Flow from Investing Activities

Net cash used for investing activities during fiscal year 2024 was $371 million, primarily consisting of $397 million in capital expenditures, partially offset by proceeds from maturities and sales of available-for-sale securities of $38 million.

Cash Flow from Financing Activities

Net cash used for financing activities during fiscal year 2024 was $3,996 million, primarily consisting of $2,843 million in Common Stock repurchases, including net share settlement on employee stock-based compensation; $1,019 million of dividends paid; and $256 million of repayment of debt, largely associated with the purchase of certain properties under finance leases; partially offset by $136 million of stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.

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 and cash equivalents as of June 30, 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.

Off-Balance Sheet Arrangements and Contractual Obligations

We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not. Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases; refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for further discussion. Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for further discussion.

Lam Research Corporation 2024 10-K 35

Table of Content