KLA Corporation Reports Fiscal 2020 Fourth Quarter Results And Raises Dividend Level

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- Quarterly revenue of $1.46 billion, GAAP EPS of $2.63 and non-GAAP EPS of $2.73 each finished above the midpoint of guidance;

- Ending quarterly backlog was the second highest in history, following record ending quarterly backlog in Q3-FY20;

- Record quarterly revenue in EPC businesses including Specialty Semiconductor Process and PCB, Display and Component Inspection;

- KLA's Board of Directors has approved the 11th consecutive annual dividend increase to $3.60 annually or $0.90 on a quarterly basis. KLA's dividend payout has grown at a CAGR of approximately 15% since inception

MILPITAS, Calif., Aug. 3, 2020 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2020. KLA reported GAAP net income attributable to KLA of $411 million and GAAP earnings per diluted share attributable to KLA of $2.63 on revenues of $1,460 million for the fourth quarter of fiscal year 2020. For the fiscal year ended June 30, 2020, KLA reported GAAP net income attributable to KLA of $1,217 million and GAAP earnings per diluted share attributable to KLA of $7.70 on revenues of $5,806 million.

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"Thanks to the dedication, engagement and perseverance of our global workforce, KLA delivered strong results in the June 2020 quarter, with revenue and GAAP and non-GAAP EPS each finishing above the mid-point of our guidance ranges, demonstrating strong demand from customers, exceptional execution by our teams, and the enduring strength and resiliency of our company under today's extraordinary circumstances," commented Rick Wallace, president and CEO of KLA Corporation. "KLA's performance in the June quarter once again highlights how the KLA operating model and our long-term strategic objectives provide a dependable framework to guide our execution and consistently deliver on our commitments."

GAAP Results

Q4 FY 2020

Q3 FY 2020

Q4 FY 2019

Revenues

$1,460 million

$1,424 million

$1,258 million

Net Income Attributable to KLA

$411 million

$78 million

$218 million

Earnings per Diluted Share Attributable to KLA

$2.63

$0.50

$1.35




Non-GAAP Results

Q4 FY 2020

Q3 FY 2020

Q4 FY 2019

Net Income Attributable to KLA

$426 million

$389 million

$289 million

Earnings per Diluted Share Attributable to KLA

$2.73

$2.47

$1.78

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. Non-GAAP results include the impact of recurring stock-based compensation, but exclude the impact of acquisitions or pending acquisitions, goodwill impairment, restructuring, severance and other charges, loss on extinguishment of debt, and certain discrete tax items. KLA will discuss the results for its fiscal year 2020 fourth quarter and full year, along with its outlook, on a conference call today beginning at 2 p.m. PT. A webcast of the call will be available at: www.kla.com.

Eleventh Consecutive Annual Increase in Dividend Payment

KLA's board of directors has approved a $0.20 annual dividend increase to $3.60 per year or $0.05 quarterly dividend increase to $0.90 per quarter. KLA's dividend payout has grown at a CAGR of approximately 15% since inception.

First Quarter Fiscal 2021 Guidance

The following details our guidance for the first quarter of fiscal 2021 ending in September:

  • Revenue between $1,405 million to $1,555 million
  • GAAP diluted EPS is expected to be in a range of $2.18 to $2.82
  • Non-GAAP diluted EPS in a range of $2.42 to $3.06

For additional guidance metrics please see the company's published letter to shareholders and earnings slides on the KLA investor relations website.

About KLA:

KLA Corporation ("KLA") develops industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers and reticles, integrated circuits, packaging, printed circuit boards and flat panel displays. In close collaboration with leading customers across the globe, our expert teams of physicists, engineers, data scientists and problem-solvers design solutions that move the world forward. Additional information may be found at: www.kla.com (KLAC-F).

Use of Non-GAAP Financial Information:

The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for, KLA's financial results presented in accordance with United States GAAP.

To supplement KLA's condensed consolidated financial statements presented in accordance with GAAP, KLA provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses (benefits), as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of KLA's operating performance and its prospects in the future. Specifically, KLA believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA's financial performance by excluding certain costs and expenses (benefits) that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses (benefits) to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

Note Regarding Forward-Looking Statements:

This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, including statements regarding our revenues, GAAP and non-GAAP earnings diluted for the quarter ending Sept. 30, 2020, are subject to risks and uncertainties. For the factors that may cause actual results to differ materially from those projected and anticipated in the forward-looking statements in this release, please refer to KLA's annual report on Form 10-K for the year ended June 30, 2019, subsequently filed quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, without limitation, the risk factors described therein). Except as otherwise specifically indicated, the information included in this release is as of the date it is delivered. KLA assumes no obligation to, and does not currently intend to, update these forward-looking statements.

 

 

KLA Corporation


Condensed Consolidated Unaudited Balance Sheets






(In thousands)

June 30, 2020

June 30, 2019

ASSETS


Cash, cash equivalents and marketable securities

$

1,980,472

$

1,739,385

Accounts receivable, net

1,107,413

990,113

Inventories

1,310,985

1,262,500

Other current assets

324,675

323,077

Land, property and equipment, net

519,824

448,799

Goodwill

2,045,402

2,211,858

Deferred income taxes, non-current

236,797

206,141

Purchased intangibles, net

1,391,413

1,560,670

Other non-current assets

362,979

265,973

Total assets

$

9,279,960

$

9,008,516




LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:


Accounts payable

$

264,280

$

202,416

Deferred system revenue

336,237

282,348

Deferred service revenue

233,493

206,669

Current portion of long-term debt

—

249,999

Other current liabilities

865,776

827,054

Total current liabilities

1,699,786

1,768,486

Non-current liabilities:


Long-term debt

3,469,670

3,173,383

Deferred tax liabilities

660,885

702,285

Deferred service revenue

96,325

98,772

Other non-current liabilities

672,284

587,897

Total liabilities

6,598,950

6,330,823

Stockholders' equity:


Common stock and capital in excess of par value

2,090,268

2,017,312

Retained earnings

654,930

714,825

Accumulated other comprehensive income (loss)

(79,774)

(73,029)

Total KLA stockholders' equity

2,665,424

2,659,108

Non-controlling interest in consolidated subsidiary

15,586

18,585

Total stockholders' equity

2,681,010

2,677,693

Total liabilities and stockholders' equity

$

9,279,960

$

9,008,516

 

KLA Corporation






Condensed Consolidated Unaudited Statements of Operations







Three months ended

Twelve months ended

(In thousands, except per share amounts)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Revenues:






Product

$

1,075,104

$

917,591

$

4,328,725

$

3,392,243

Service

384,489

340,844

1,477,699

1,176,661

Total revenues

1,459,593

1,258,435

5,806,424

4,568,904

Costs and expenses:






Costs of revenues

621,544

592,785

2,449,561

1,869,377

Research and development

217,100

206,710

863,864

711,030

Selling, general and administrative

167,791

190,040

734,149

599,124

Goodwill impairment

—

—

256,649

—

Interest expense

40,221

40,517

160,274

124,604

Loss on extinguishment of debt

—

—

22,538

—

Other expense (income), net

7,868

(2,927)

2,678

(31,462)

Income before income taxes

405,069

231,310

1,316,711

1,296,231

Provision for income taxes

(5,246)

13,982

101,686

121,214

Net income

410,315

217,328

1,215,025

1,175,017

Less: Net loss attributable to non-controlling interest

(938)

(517)

(1,760)

(600)

Net income attributable to KLA

$

411,253

217,845

$

1,216,785

1,175,617

Net income per share attributable to KLA:






Basic

$

2.65

$

1.36

$

7.76

$

7.53

Diluted

$

2.63

$

1.35

$

7.70

$

7.49

Weighted-average number of shares:






Basic

155,106

160,546

156,797

156,053

Diluted

156,183

161,937

158,005

156,949

 

 

KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



Three months ended

June 30,

(In thousands)

2020

2019

Cash flows from operating activities:


Net income

$

410,315

$

217,328

Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation and amortization

78,937

127,886

(Gain) loss on unrealized foreign exchange and other

15,047

(812)

Other impairment charges

10,760

—

Stock-based compensation expense

26,378

28,168

Changes in assets and liabilities, net of assets acquired and liabilities assumed in
business acquisitions:


Accounts receivable

10,431

(53,565)

Inventories

(56,609)

13,179

Other assets

(74,986)

(89,691)

Accounts payable

19,905

(3,832)

Deferred system revenue

3,652

51,754

Deferred service revenue

15,205

31,549

Other liabilities

(6,189)

3,497

Net cash provided by operating activities

452,846

325,461

Cash flows from investing activities:


Business acquisitions, net of cash acquired

(11,543)

—

Capital expenditures

(41,790)

(55,846)

Purchases of available-for-sale securities

(233,838)

(78,847)

Proceeds from sale of available-for-sale securities

44,199

16,867

Proceeds from maturity of available-for-sale securities

135,674

146,217

Purchases of trading securities

(41,584)

(18,594)

Proceeds from sale of trading securities

43,061

20,642

Net cash provided by investing activities

(105,821)

30,439

Cash flows from financing activities:


Payments of debt issuance costs

(172)

(2,478)

Proceeds from revolving credit facility, net of costs

200,000

—

Repayment of debt

(175,000)

—

Issuance of common stock

50,349

44,272

Tax withholding payments related equity awards

(5,527)

(6,942)

Common stock repurchases

—

(344,986)

Payment of dividends to stockholders

(132,762)

(121,363)

Payment of dividends to subsidiary's non-controlling interest holders

(1,239)

—

Contingent consideration payable and other, net

2,996

(649)

Net cash used in financing activities

(61,355)

(432,146)

Effect of exchange rate changes on cash and cash equivalents

2,564

77

Net (decrease) increase in cash and cash equivalents

288,234

(76,169)

Cash and cash equivalents at beginning of period

946,175

1,092,163

Cash and cash equivalents at end of period

$

1,234,409

$

1,015,994

Supplemental cash flow disclosures:


Income taxes paid

$

31,865

$

15,769

Interest paid

$

37,988

$

51,544

Non-cash activities:


Contingent consideration payable - financing activities

$

(803)

$

6,905

Dividends payable - financing activities

$

1,400

$

7,340

Unsettled common stock repurchase - financing activities

$

—

$

8,000

Accrued purchase of land, property and equipment - investing activities

$

15,843

$

6,353

 

 

KLA Corporation

Segment Information (Unaudited)


The following is a summary of results for each of our four reportable segments and reconciliation to total revenues for the
indicated periods:

Three months ended

Twelve months ended

(In thousands)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Revenues:






Semiconductor Process Control

$

1,156,607

$

1,002,544

$

4,745,446

$

4,080,822

Specialty Semiconductor Process(1)

100,372

66,775

329,700

151,164

PCB, Display and Component Inspection(1)

202,209

184,625

727,451

332,810

Other(1)

397

4,525

3,614

4,676

Total revenues for reportable segments

1,459,585

1,258,469

5,806,211

4,569,472

Corporate allocation and effects of foreign exchange rates

8

(34)

213

(568)

Total revenues

$

1,459,593

$

1,258,435

$

5,806,424

$

4,568,904

__________

(1)

Revenues in the twelve months ended June 30, 2019 include the contribution from the Orbotech business from the Feb. 20, 2019 acquisition date.

 

 

 

KLA Corporation

Condensed Consolidated Unaudited Supplemental Information


Reconciliation of GAAP Net Income to Non-GAAP Net Income

Three months ended

Twelve months ended

(In thousands, except per share amounts)

June 30, 2020

March 31, 2020

June 30, 2019

June 30, 2020

June 30, 2019

GAAP net income attributable to KLA


$

411,253

$

78,452

$

217,845

$

1,216,785

$

1,175,617

Adjustments to reconcile GAAP net income to
non-GAAP net income:









Acquisition-related charges

a

55,937

55,022

102,807

244,715

216,394

Restructuring, severance and other charges

b

4,240

5,432

—

12,458

—

Goodwill impairment

c

—

256,649

—

256,649

—

Loss on extinguishment of debt

d

—

22,538

—

22,538

—

Income tax effect of non-GAAP adjustments

e

(16,027)

(23,604)

(32,930)

(83,402)

(54,643)

Discrete tax items

f

(29,364)

(5,551)

983

(34,915)

(9,406)

Non-GAAP net income attributable to KLA


$

426,039

$

388,938

$

288,705

$

1,634,828

$

1,327,962

GAAP net income per diluted share attributable to KLA

$

2.63

$

0.50

$

1.35

$

7.70

$

7.49

Non-GAAP net income per diluted share attributable to
KLA

$

2.73

$

2.47

$

1.78

$

10.35

$

8.46

Shares used in diluted shares calculation

156,183

157,172

161,937

158,005

156,949

 


 

Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations


(In thousands)

Acquisition-
Related
Charges

Restructuring,
Severance and
Other Charges

Goodwill
Impairment

Debt
Extinguishment
Loss

Total pre-tax
GAAP to non-
GAAP
Adjustments

Three months ended June 30, 2020








Costs of revenues

$

41,446

$

534

$

—

$

—

$

41,980

Research and development

—

585

—

—

585

Selling, general and administrative

14,491

1,179

—

—

15,670

Other expense (income), net

—

1,942

—

—

1,942

Total in three months ended June 30, 2020

$

55,937

$

4,240

$

—

$

—

$

60,177

Three Months Ended March 31, 2020








Costs of revenues

$

36,850

$

483

$

—

$

—

$

37,333

Research and development

—

685

—

—

685

Selling, general and administrative

18,172

4,264

—

—

22,436

Goodwill impairment

—

—

256,649

—

256,649

Loss on extinguishment of debt

—

—

—

22,538

22,538

Total in three months ended March 31, 2020

$

55,022

$

5,432

$

256,649

$

22,538

$

339,641

Three Months Ended June 30, 2019








Costs of revenues

$

75,805

$

—

$

—

$

—

$

75,805

Selling, general and administrative

27,002

—

—

—

27,002

Total in three months ended June 30, 2019

$

102,807

$

—

$

—

$

—

$

102,807

 

First Quarter Fiscal 2021 Guidance

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

Three months ending Sept. 30, 2020

(In thousands, except per share amounts)

Low

High

GAAP net income per diluted share attributable to KLA

$2.18

$2.82

Acquisition-related charges

a

0.33

0.33

Restructuring, severance and other charges

b

0.02

0.02

Income tax effect of non-GAAP adjustments

e

(0.11)

(0.11)

Non-GAAP net income per diluted share attributable to KLA

$2.42

$3.06

Shares used in net income per diluted share calculation

156.6

156.6

To supplement our Condensed Consolidated Financial Statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of our operating performance and our prospects in the future. Specifically, we believe that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

a. 

Acquisition-related charges primarily include amortization of intangible assets and other acquisition-related adjustments including adjustments for the fair valuation of inventory and backlog, and transaction costs associated with our acquisitions, primarily Orbotech. Management believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets and exclusion of these expenses allows comparisons of operating results that are consistent over time for both KLA's newly-acquired and long-held businesses. Management believes that the other acquisition-related expenses are appropriate to be excluded because such costs would not have otherwise been incurred in the periods presented. Management believes excluding these items helps investors compare our operating performances with our results in prior periods as well as with the performance of other companies.

b. 

Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-based compensation arrangements, and other exit costs. Management believes excluding these items helps investors compare our operating performance with our results in prior periods.

c. 

Goodwill impairment includes non-cash expense recognized as a result of KLA's annual testing for goodwill impairment performed in the third quarter of the fiscal year. The impairment charge resulted from the downward revision of financial outlook for the acquired Orbotech business as well as the impact of elevated risk and macroeconomic slowdown driven by the COVID-19 pandemic. Management believes that it is appropriate to exclude the impairment charge as it is not indicative of ongoing operating results and therefore limits comparability. Management also believes excluding this item helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

d. 

Loss on extinguishment of debt includes a pre-tax loss on early extinguishment of the $500 million 4.125% Senior Notes due in November 2021. Management believes it is appropriate to exclude this loss as it is not indicative of ongoing operating results and therefore limits comparability and excluding this loss helps investors compare our operating results with our results in prior periods as well as with performance of other companies.

e. 

Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

f. 

Discrete tax items in the three and twelve months ended June 30, 2020 include a tax benefit from an internal restructuring and a decrease in deferred tax liability for an unrealized gain on investments held by subsidiaries of the acquired Orbotech business. Discrete tax items in the three and twelve months ended June 30, 2019 include tax impact of and the income tax effects of an income tax expense from the enacted tax reform legislation through the Tax Cuts and Jobs-Act (the "Act"), which was signed into law on Dec. 22, 2017, of which the impact is primarily related to the provisional tax amounts recorded for the transition tax on accumulated foreign earnings and the re-measurement of certain deferred tax assets and liabilities as a result of the enactment of the Act. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

 

 

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SOURCE KLA Corporation

Released August 3, 2020