KLA Corporation Reports Fiscal 2020 Second Quarter Results

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-- Revenue for the quarter was a record of $1.51 billion

-- Earnings on both a GAAP and non-GAAP basis were records for the quarter with GAAP EPS of $2.40 per share and non-GAAP EPS of $2.66 per share

MILPITAS, Calif., Feb. 4, 2020 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2020, which ended on Dec. 31, 2019, and reported GAAP net income attributable to KLA of $381 million and GAAP earnings per diluted share attributable to KLA of $2.40 on revenues of $1.51 billion.

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"KLA once again demonstrated solid execution in the December quarter, delivering results in the upper end of the range of guidance, and capping multiple records across revenue, GAAP EPS and non-GAAP EPS for the quarter," commented Rick Wallace, president and CEO of KLA. "As we begin the new calendar year, we are excited with the growth opportunities that lie ahead for KLA, with the industry outlook calling for growth led by technology transitions in advanced Logic, expanding investment in EUV, and with the expectation that Memory investment will improve in the calendar year. As the leading supplier of process control and specialty semiconductor process equipment for semiconductor and related electronics industries, and supported by a large and growing services business, KLA is uniquely positioned to benefit from this growth while continuing to deliver high levels of profitability."

GAAP Results

Q2 FY 2020

Q1 FY 2020

Q2 FY 2019

Revenues

$1,509 million

$1,413 million

$1,120 million

Net Income Attributable to KLA

$381 million

$347 million

$369 million

Earnings per Diluted Share Attributable to KLA

$2.40

$2.16

$2.42




Non-GAAP Results

Q2 FY 2020

Q1 FY 2020

Q2 FY 2019

Net Income Attributable to KLA

$422 million

$398 million

$372 million

Earnings per Diluted Share Attributable to KLA

$2.66

$2.48

$2.44

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, restructuring, severance, merger and other related charges and certain discrete tax items. KLA will discuss the results for its fiscal year 2020 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla.com.

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.

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, the company 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 the company believes are not indicative of its 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 the industry outlook on growth, 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)

Dec 31, 2019

Jun 30, 2019

ASSETS


Cash, cash equivalents and marketable securities

$

1,677,522

$

1,739,385

Accounts receivable, net

1,191,035

990,113

Inventories

1,251,400

1,262,500

Other current assets

257,486

323,077

Land, property and equipment, net

489,980

448,799

Goodwill

2,299,781

2,211,858

Deferred income taxes, non-current

213,255

206,141

Purchased intangible assets, net

1,492,450

1,560,670

Other non-current assets

377,811

265,973

Total assets

$

9,250,720

$

9,008,516

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

256,646

$

202,416

Deferred system revenue

247,103

282,348

Deferred service revenue

204,284

206,669

Current portion of long-term debt

—

249,999

Other current liabilities

1,010,210

827,054

Total current liabilities

1,718,243

1,768,486

Non-current liabilities:


Long-term debt

3,399,877

3,173,383

Deferred tax liabilities

680,929

702,285

Deferred service revenue

99,969

98,772

Other non-current liabilities

663,732

587,897

Total liabilities

6,562,750

6,330,823

Stockholders' equity:


Common stock and capital in excess of par value

2,017,521

2,017,312

Retained earnings

719,001

714,825

Accumulated other comprehensive income (loss)

(66,758)

(73,029)

Total KLA stockholders' equity

2,669,764

2,659,108

Non-controlling interest in consolidated subsidiary

18,206

18,585

Total stockholders' equity

2,687,970

2,677,693

Total liabilities and stockholders' equity

$

9,250,720

$

9,008,516
























KLA Corporation

Condensed Consolidated Unaudited Statements of Operations







Three Months Ended Dec 31,

Six Months Ended Dec 31,

(In thousands, except per share amounts)

2019

2018

2019

2018

Revenues:






Product

$

1,144,550

$

852,201

$

2,202,525

$

1,681,428

Service

364,903

267,697

720,342

531,730

Total revenues

1,509,453

1,119,898

2,922,867

2,213,158

Costs and expenses:






Costs of revenues

633,618

408,260

1,237,859

789,647

Research and development

220,751

165,903

431,331

319,433

Selling, general and administrative

192,253

112,462

380,598

226,900

Interest expense and other, net

37,904

17,310

76,636

33,647

Income before income taxes

424,927

415,963

796,443

843,531

Provision for income taxes

44,622

46,863

69,742

78,487

Net income

380,305

369,100

726,701

765,044

Less: Net loss attributable to non-controlling interest

(250)

—

(379)

—

Net income attributable to KLA

$

380,555

$

369,100

$

727,080

$

765,044

Net income per share attributable to KLA:






Basic

$

2.42

$

2.43

$

4.60

$

4.98

Diluted

$

2.40

$

2.42

$

4.56

$

4.96

Weighted-average number of shares:






Basic

157,290

152,148

157,994

153,684

Diluted

158,620

152,648

159,314

154,389



KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flow

Three Months Ended

Dec 31,

(In thousands)

2019

2018

Cash flows from operating activities:


Net income

$

380,305

$

369,100

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


Depreciation and amortization

88,534

15,806

Loss (gain) on unrealized foreign exchange and other

(5,450)

895

Stock-based compensation expense

26,789

15,695

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


Accounts receivable

(126,682)

(55,869)

Inventories

(1,477)

(15,109)

Other assets

3,558

34,978

Accounts payable

35,258

(2,440)

Deferred system revenue

(30,412)

(19,723)

Deferred service revenue

1,220

12,211

Other liabilities

16,088

(73,372)

Net cash provided by operating activities

387,731

282,172

Cash flows from investing activities:


Capital expenditures

(34,874)

(26,366)

Purchases of available-for-sale securities

(144,715)

(2,686)

Proceeds from sale of available-for-sale securities

10,287

107,370

Proceeds from maturity of available-for-sale securities

158,699

128,052

Purchases of trading securities

(12,852)

(27,481)

Proceeds from sale of trading securities

15,307

29,722

Net cash (used in) provided by investing activities

(8,148)

208,611

Cash flows from financing activities:


Proceeds from revolving credit facility

250,000

—

Repayment of debt

(275,000)

—

Common stock repurchases

(284,593)

(250,213)

Payment of dividends to stockholders

(134,696)

(114,562)

Issuance of common stock

24,499

20,556

Tax withholding payments related to equity awards

(12,237)

(3,233)

Payment of contingent consideration payable

(3)

—

Net cash used in financing activities

(432,030)

(347,452)

Effect of exchange rate changes on cash and cash equivalents

3,963

1,137

Net (decrease) increase in cash and cash equivalents

(48,484)

144,468

Cash and cash equivalents at beginning of period

988,348

1,649,514

Cash and cash equivalents at end of period

$

939,864

$

1,793,982

Supplemental cash flow disclosures:


Income taxes paid

$

50,884

$

87,854

Interest paid

$

53,140

$

51,136

Non-cash activities:


Business acquisition holdback amounts - investing activities

$

—

$

440

Contingent consideration payable - financing activities

$

(3,540)

$

2,529

Dividends payable - financing activities

$

1,638

$

5,404

Unsettled common stock repurchase - financing activities

$

4,000

$

—

Accrued purchase of land, property and equipment - investing activities

$

13,755

$

7,705



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 Dec 31,

Six Months Ended Dec 31,

(In thousands)

2019

2018

2019

2018

Revenues:






Semiconductor Process Control

$

1,247,430

$

1,094,013

$

2,411,062

$

2,163,972

Specialty Semiconductor Process

75,106

—

144,245

—

PCB, Display and Component Inspection(1)

186,279

26,110

364,831

49,725

Other

517

—

2,748

—

Total revenues for reportable segments

1,509,332

1,120,123

2,922,886

2,213,697

Corporate allocation and effects of foreign exchange rates

121

(225)

(19)

(539)

Total revenues

$

1,509,453

$

1,119,898

$

2,922,867

$

2,213,158

_________

(1)

Revenues in the three and six months ended Dec. 31, 2019 include a contribution from the Orbotech business. Revenues in the three and six months ended Dec. 31, 2018 include the Component Inspection business only.



KLA Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share amounts)


Reconciliation of GAAP Net Income to Non-GAAP Net Income

Three Months Ended

Six Months Ended



Dec 31,
2019

Sept 30,
2019

Dec 31,
2018

Dec 31,
2019

Dec 31,
2018

GAAP net income attributable to KLA

$

380,555

$

346,525

$

369,100

$

727,080

$

765,044

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










Acquisition-related charges

a

60,393

73,363

4,281

133,756

9,832

Restructuring, severance and other related charges

b

2,786

—

—

2,786

—

Income tax effect of non-GAAP adjustments

c

(21,505)

(22,266)

(276)

(43,771)

(586)

Discrete tax items

d

—

—

(765)

—

(17,871)

Non-GAAP net income attributable to KLA

$

422,229

$

397,622

$

372,340

$

819,851

$

756,419

GAAP net income (loss) per diluted share attributable to KLA

$

2.40

$

2.16

$

2.42

$

4.56

$

4.96

Non-GAAP net income per diluted share attributable to KLA

$

2.66

$

2.48

$

2.44

$

5.15

$

4.90

Shares used in diluted shares calculation

158,620

160,131

152,648

159,314

154,389



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

Acquisition - Related
Charges

Restructuring,
Severance and Other
Related Charges

Total pre-tax GAAP
to non-GAAP
Adjustments

Three months ended Dec 31, 2019




Costs of revenues

$

40,590

$

831

$

41,421

Research and development

—

802

802

Selling, general and administrative

19,803

1,153

20,956

Total in three months ended Dec 31, 2019

$

60,393

$

2,786

$

63,179

Three months ended Sep 30, 2019




Costs of revenues

$

49,999

$

—

$

49,999

Selling, general and administrative

23,364

—

23,364

Total in three months ended Sep 30, 2019

$

73,363

$

—

$

73,363

Three months ended Dec 31, 2018




Costs of revenues

$

967

$

—

$

967

Selling, general and administrative

3,314

—

3,314

Total in three months ended Dec 31, 2018

$

4,281

$

—

$

4,281

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 related charges include costs associated with employee severance and other exit costs. Management believes excluding these items helps investors compare our operating performance with our results in prior periods.


c. 

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.


d. 

Discrete tax items include charges associated with the acquisition of Orbotech as well as  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 February 4, 2020