KLA Corporation Reports Fiscal 2021 Third Quarter Results

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- Total revenues were $1.80 billion, finishing at the upper end of the range of guidance;

- GAAP diluted EPS attributable to KLA was $3.66, and non-GAAP diluted EPS attributable to KLA was $3.85, each also finishing at the upper end of the range of guidance;

- Cash flow from operations and free cash flow were both records at $646.2 million and $585.0 million, respectively;

- Capital return was $412.7 million with $139.3 million in dividends and $273.4 million in share repurchases

MILPITAS, Calif., April 29, 2021 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2021, which ended on March 31, 2021, and reported GAAP net income attributable to KLA of $567 million and GAAP earnings per diluted share attributable to KLA of $3.66 on revenue of $1.80 billion.

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"KLA's March quarter results demonstrate strong momentum in our business. We have seen a sharp increase in business levels in each of our major end markets, driven by secular demand trends across a broad range of semiconductor markets and applications," commented Rick Wallace, president and chief executive officer of KLA Corporation. "Against this backdrop, KLA continues to demonstrate our ability to meet customer requirements while growing operating profits, generating record free cash flow, and maintaining our long-term strategy of productive capital allocation."

GAAP Results

Q3 FY 2021

Q2 FY 2021

Q3 FY 2020

Total revenue

$1,804 million

$1,651 million

$1,424 million

Net Income Attributable to KLA

$567 million

$457 million

$78 million

Net Income per Diluted Share Attributable to KLA

$3.66

$2.94

$0.50

Non-GAAP Results

Q3 FY 2021

Q2 FY 2021

Q3 FY 2020

Net Income Attributable to KLA

$598 million

$504 million

$389 million

Net Income per Diluted Share Attributable to KLA

$3.85

$3.24

$2.47

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. KLA will discuss the results for its fiscal year 2021 third quarter, 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.

Fourth Quarter Fiscal 2021 Guidance

The following details our guidance for the fourth quarter of fiscal 2021 ending in June:

  • Total revenue between $1,755 million to $1,955 million
  • GAAP gross margin is expected to be in a range of 58% to 61%
  • Non-GAAP gross margin is expected to be in a range of 61% to 63%
  • GAAP diluted EPS attributable to KLA is expected to be in a range of $3.20 to $4.08
  • Non-GAAP diluted EPS attributable to KLA in a range of $3.47 to $4.35

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. Investors and others should note that KLA announces material financial information including SEC filings, press releases, public earnings calls and conference webcasts using an investor relations website (ir.kla.com). Additional information may be found at: www.kla.com.

Note Regarding Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements pertaining to revenues, GAAP and non-GAAP gross margin and GAAP and non-GAAP diluted EPS for the quarter ending June 30, 2021 are forward-looking statements and subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the future impacts of the COVID-19 pandemic; delays and disruptions in the supply chain; the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product and technology offerings by competitors; push-out of deliveries or cancellation of orders by customers; the ability of KLA's research and development teams to successfully innovate and develop technologies and products that are responsive to customer demands; KLA's ability to successfully manage its costs; market acceptance of KLA's existing and newly launched products; changing customer demands; and industry transitions. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this letter, please refer to KLA Corporation's Annual Report on Form 10-K for the year ended June 30, 2020, and other subsequent filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA Corporation assumes no obligation to, and does not currently intend to, update these forward-looking statements.

 

KLA Corporation

Condensed Consolidated Unaudited Balance Sheets

(In thousands)

March 31, 2021

June 30, 2020

ASSETS

Cash, cash equivalents and marketable securities

$

2,442,725

$

1,980,472

Accounts receivable, net

1,201,991

1,107,413

Inventories

1,450,588

1,310,985

Other current assets

309,861

324,675

Land, property and equipment, net

628,438

519,824

Goodwill

2,011,187

2,045,402

Deferred income taxes, non-current

240,822

236,797

Purchased intangible assets, net

1,237,589

1,391,413

Other non-current assets

416,039

362,979

Total assets

$

9,939,240

$

9,279,960

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

295,111

$

264,280

Deferred system revenue

332,296

336,237

Deferred service revenue

252,992

233,493

Short-term debt

20,000

—

Other current liabilities

1,129,067

865,776

Total current liabilities

2,029,466

1,699,786

Non-current liabilities:

Long-term debt

3,422,097

3,469,670

Deferred tax liabilities

629,896

660,885

Deferred service revenue

86,902

96,325

Other non-current liabilities

658,015

672,284

Total liabilities

6,826,376

6,598,950

Stockholders' equity:

Common stock and capital in excess of par value

2,115,205

2,090,268

Retained earnings

1,070,124

654,930

Accumulated other comprehensive income (loss)

(70,473)

(79,774)

Total KLA stockholders' equity

3,114,856

2,665,424

Non-controlling interest in consolidated subsidiaries

(1,992)

15,586

Total stockholders' equity

3,112,864

2,681,010

Total liabilities and stockholders' equity

$

9,939,240

$

9,279,960

 

 

KLA Corporation

Condensed Consolidated Unaudited Statements of Operations

Three Months Ended March 31,

Nine Months Ended March 31,

(In thousands, except per share amounts)

2021

2020

2021

2020

Revenues:

Product

$

1,375,320

$

1,051,096

$

3,758,838

$

3,253,621

Service

428,453

372,868

1,234,425

1,093,210

Total revenues

1,803,773

1,423,964

4,993,263

4,346,831

Costs and expenses:

Costs of revenues

709,629

590,158

1,999,924

1,828,017

Research and development

238,957

215,433

687,059

646,764

Selling, general and administrative

183,040

185,760

537,580

566,358

Goodwill impairment

—

256,649

—

256,649

Interest expense

39,092

39,231

117,358

120,053

Loss on extinguishment of debt

—

22,538

—

22,538

Other expense (income), net

(7,348)

(1,004)

(269)

(5,190)

Income before income taxes

640,403

115,199

1,651,611

911,642

Provision for income taxes

73,233

37,190

207,316

106,932

Net income

567,170

78,009

1,444,295

804,710

Less: Net loss attributable to non-controlling interest

(326)

(443)

(1,019)

(822)

Net income attributable to KLA

$

567,496

$

78,452

$

1,445,314

$

805,532

Net income per share attributable to KLA:

Basic

$

3.69

$

0.50

$

9.36

$

5.12

Diluted

$

3.66

$

0.50

$

9.28

$

5.08

Weighted-average number of shares:

Basic

153,801

156,067

154,457

157,356

Diluted

155,159

157,172

155,789

158,586

 

 

 

KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

 

Three Months Ended

March 31,

(In thousands)

2021

2020

Cash flows from operating activities:

Net income

$

567,170

$

78,009

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

Goodwill impairment

—

256,649

Depreciation and amortization

84,365

81,990

Loss on extinguishment of debt

—

22,538

(Gain) loss on unrealized foreign exchange and other

5,231

(5,950)

Asset impairment charges

(23)

—

Stock-based compensation expense

30,327

31,270

Gain on sale of business

(4,422)

—

Settlement of treasury lock agreement

—

(21,518)

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

Accounts receivable

16,055

73,103

Inventories

(34,169)

(11,640)

Other assets

(20,851)

(23,899)

Accounts payable

32,735

(12,904)

Deferred system revenue

57,820

89,280

Deferred service revenue

11,507

10,691

Other liabilities

(99,595)

(125,591)

Net cash provided by operating activities

646,150

442,028

Cash flows from investing activities:

Proceeds from sale of business

16,833

—

Business acquisitions, net of cash acquired

—

(70)

Capital expenditures

(61,183)

(43,445)

Purchases of available-for-sale securities

(303,076)

(156,173)

Proceeds from sale of available-for-sale securities

14,962

69,034

Proceeds from maturity of available-for-sale securities

159,120

133,819

Purchases of trading securities

(48,495)

(46,784)

Proceeds from sale of trading securities

45,251

45,407

Net cash used in (provided by) investing activities

(176,588)

1,788

Cash flows from financing activities:

Proceeds from issuance of debt, net of issuance costs

—

742,004

Repayment of debt

(20,000)

(721,033)

Common stock repurchases

(273,441)

(315,995)

Payment of dividends to stockholders

(139,338)

(133,327)

Issuance of common stock

—

672

Tax withholding payments related to equity awards

(6,674)

(4,958)

Net cash used in financing activities

(439,453)

(432,637)

Effect of exchange rate changes on cash and cash equivalents

(9,425)

(4,868)

Net increase (decrease) in cash and cash equivalents

20,684

6,311

Cash and cash equivalents at beginning of period

1,431,466

939,864

Cash and cash equivalents at end of period

$

1,452,150

$

946,175

Supplemental cash flow disclosures:

Income taxes paid

$

100,657

$

91,972

Interest paid

$

39,980

$

35,176

Non-cash activities:

Accrued purchase of land, property and equipment - investing activities

$

24,392

$

17,137

Contingent consideration payable - financing activities

$

178

$

303

Dividends payable - financing activities

$

779

$

1,388

Unsettled common stock repurchase - financing activities

$

6,000

$

—

Accrued debt issuance costs - financing activities

$

—

$

193

 

 

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 March 31,

Nine Months Ended March 31,

(In thousands)

2021

2020

2021

2020

Revenues:

Semiconductor Process Control

$

1,506,140

$

1,177,777

$

4,154,278

$

3,588,839

Specialty Semiconductor Process

91,724

85,083

271,264

229,328

PCB, Display and Component Inspection

205,202

160,411

565,646

525,242

Other

149

469

739

3,217

Total revenues for reportable segments

1,803,215

1,423,740

4,991,927

4,346,626

Corporate allocation and effects of foreign exchange rates

558

224

1,336

205

Total revenues

$

1,803,773

$

1,423,964

$

4,993,263

$

4,346,831

 

 

KLA Corporation
Condensed Consolidated Unaudited Supplemental Information

 

Reconciliation of GAAP Net Income and GAAP Earnings Per Diluted Share to Non-GAAP Net Income and Non-GAAP Earnings Per Diluted Share

 

Three Months Ended

Nine Months Ended

(In thousands, except per share amounts)

March 31,
2021

Dec. 31,
2020

March 31,
2020

March 31,
2021

March 31,
2020

GAAP net income attributable to KLA

$

567,496

$

457,251

$

78,452

$

1,445,314

$

805,532

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

Acquisition-related charges

a

52,973

53,099

55,022

156,547

188,778

Restructuring, severance and other charges

b

(1,534)

3,960

5,432

5,679

8,218

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

(17,866)

(17,552)

(23,604)

(52,431)

(67,375)

Discrete tax items

f

(2,967)

7,381

(5,551)

21,901

(5,551)

Non-GAAP net income attributable to KLA

$

598,102

$

504,139

$

388,938

$

1,577,010

$

1,208,789

GAAP net income per diluted share attributable to KLA

$

3.66

$

2.94

$

0.50

$

9.28

$

5.08

Non-GAAP net income per diluted share attributable to KLA

$

3.85

$

3.24

$

2.47

$

10.12

$

7.62

Shares used in diluted shares calculation

155,159

155,560

157,172

155,789

158,586

 

 

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 March 31, 2021

Costs of revenues

$

40,309

$

701

$

—

$

—

$

41,010

Research and development

—

147

—

—

147

Selling, general and administrative

12,664

2,075

—

—

14,739

Other expense (income), net

—

(4,457)

—

—

(4,457)

Total in three months ended March 31, 2021

$

52,973

$

(1,534)

$

—

$

—

$

51,439

Three months ended Dec. 31, 2020

Costs of revenues

$

38,738

$

765

$

—

$

—

$

39,503

Research and development

—

1,432

—

—

1,432

Selling, general and administrative

14,361

2,450

—

—

16,811

Other expense (income), net

—

(687)

—

—

(687)

Total in three months ended Dec. 31, 2020

$

53,099

$

3,960

$

—

$

—

$

57,059

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

 

 

Free Cash Flow Reconciliation

 

Three Months Ended March 31,

(In thousands)

2021

2020

Net cash provided by operating activities

$

646,150

$

442,028

Capital expenditures

(61,183)

(43,445)

Free Cash Flow

$

584,967

$

398,583

 

 

 

Fourth Quarter Fiscal 2021 Guidance

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

 

Three Months Ending June 30, 2021

(In millions, except per share amounts)

Low

High

GAAP net income per diluted share attributable to KLA

$3.20

$4.08

Acquisition-related charges

a

0.34

0.34

Restructuring, severance and other charges

b

0.04

0.04

Income tax effect of non-GAAP adjustments

e

(0.11)

(0.11)

Non-GAAP net income per diluted share attributable to KLA

$3.47

$4.35

Shares used in net income per diluted share calculation

154.5

154.5

 

 

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin

 

Three Months Ending June 30, 2021

Low

High

GAAP gross margin

58%

61%

Acquisition-related charges

a

3%

2%

Non-GAAP gross margin

61%

63%

 

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 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, including non-GAAP net income attributable to KLA, non-GAAP net income per diluted share attributable to KLA and Free Cash Flow, 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 to help investors compare our operating performances with our results in prior periods as well as with the performance of other companies. 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 are inherently subject to significant discretion (for example, determining which costs and expenses to exclude when calculating such a metric). 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. The following are descriptions of the adjustments made to reconcile GAAP net income attributable to KLA to non-GAAP net income attributable to KLA:

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.

 

b. 

Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-based compensation arrangements, and other exit costs.

 

c. 

Goodwill impairment included non-cash expense recognized as a result of KLA's annual testing for goodwill impairment performed in the third quarter of the prior 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.

 

d.

 Loss on extinguishment of debt included a pre-tax loss on early extinguishment of the $500 million 4.125% Senior Notes due in November 2021.

 

e.

Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above.

 

f. 

Discrete tax items in the three months ended March 31, 2021 primarily relate to a tax benefit of $3.0 million due to a decrease in deferred tax liability on purchased intangibles relating to a decrease in the effective income tax rate in Israel. Discrete tax items in the three months ended Dec. 31, 2020 consist primarily of a tax expense of $4.0 million from an internal restructuring. Discrete tax items in the nine months ended March 31, 2021 primarily include the aforementioned items as well as a tax expense of $14.0 million due to an increase in deferred tax liability on purchased intangibles relating to an increase in the United Kingdom statutory income tax rate.  Discrete tax items in the three months and nine months ended March 31, 2020 include a decrease in deferred tax liability for an unrealized gain on investments held for sale by subsidiaries of the acquired Orbotech business.

 

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SOURCE KLA Corporation

Released April 29, 2021