KLA Corporation Reports Fiscal 2023 First Quarter Results

  • Total revenues were $2.72 billion, GAAP diluted EPS attributable to KLA was $7.20 and non-GAAP diluted EPS attributable to KLA was $7.06, each finishing above the respective guidance ranges;
  • Cash flow from operating activities for the quarter and 12 months ended Sept. 30, 2022 were $1.01 billion and $3.46 billion, respectively; and
  • Capital returns for the quarter and 12 months ended Sept. 30, 2022 were $277.8 million and $5.22 billion, respectively

MILPITAS, Calif., Oct. 26, 2022 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced financial and operating results for its first quarter of fiscal year 2023, which ended on Sept. 30, 2022, and reported GAAP net income attributable to KLA of $1.03 billion and GAAP earnings per diluted share attributable to KLA of $7.20 on revenue of $2.72 billion. 

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"KLA's September quarter results were at the high-end or above the midpoint of our guidance ranges for revenue, non-GAAP gross margin and GAAP and non-GAAP EPS, exhibiting the consistency we are known for and the unique value KLA delivers to our customers," commented Rick Wallace, president and chief executive officer of KLA Corporation. "Despite signs of weakness across a broad set of electronics end markets and an increasingly challenging macro-economic backdrop, our December quarter outlook for sequential growth underscores the resiliency of our business and the strong demand for our critical products and services."

GAAP Results

Q1 FY 2023

Q4 FY 2022

Q1 FY 2022

Total Revenue

$2,724 million

$2,487 million

$2,084 million

Net Income Attributable to KLA

$1,026 million

$805 million

$1,068 million

Net Income per Diluted Share Attributable to KLA

$7.20

$5.40

$6.96

Non-GAAP Results

Q1 FY 2023

Q4 FY 2022

Q1 FY 2022

Net Income Attributable to KLA

$1,007 million

$867 million

$712 million

Net Income per Diluted Share Attributable to KLA

$7.06

$5.81

$4.64

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 2023 first 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.

Second Quarter Fiscal 2023 Guidance

The following details our guidance for the second quarter of fiscal 2023 ending in December:

  • Total revenues between $2,650 million to $2,950 million
  • GAAP gross margin is expected to be in a range of 59.8% to 62.0%
  • Non-GAAP gross margin is expected to be in a range of 61.5% to 63.5%
  • GAAP diluted EPS attributable to KLA is expected to be in a range of $5.94 to $7.34
  • Non-GAAP diluted EPS attributable to KLA in a range of $6.30 to $7.70

For additional details and assumptions underlying our guidance metrics, please see the company's published Letter to Shareholders, Earnings Slide Presentation and Earnings Infographic on the KLA investor relations website. Such Letter to Shareholders, Earnings Slide Presentation and Earnings Infographic are not incorporated by reference into this earnings release.

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 total revenues, GAAP and non-GAAP gross margin and GAAP and non-GAAP diluted EPS attributable to KLA for the quarter ending Dec. 31, 2022 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 impact of the COVID-19 pandemic on the global economy and on our business, financial condition and results of operations, including the supply chain constraints we are experiencing as a result of the pandemic; economic, political and social conditions in the countries in which we, our customers and our suppliers operate, including rising inflation and interest rates, Russia's invasion of Ukraine and global trade policies; disruption to our manufacturing facilities or other operations, or the operations of our customers, due to natural catastrophic events, health epidemics or terrorism; ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns; our ability to timely develop new technologies and products that successfully anticipate or address changes in the semiconductor industry; our ability to maintain our technology advantage and protect our proprietary rights; our ability to compete with new products introduced by our competitors; our ability to attract, onboard and retain key personnel; cybersecurity threats, cyber incidents affecting our and our customers, suppliers and other service providers' systems and networks and our and their ability to access critical information systems for daily business operations; liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products; exposure to a highly concentrated customer base; availability and cost of the wide range of materials used in the production of our products; our ability to operate our business in accordance with our business plan; legal, regulatory and tax environments in which we perform our operations and conduct our business and our ability to comply with relevant laws and regulations; increasing attention to environmental, social and governance matters and the resulting costs, risks and impact on our business; our ability to pay interest and repay the principal of our current indebtedness is dependent upon our ability to manage our business operations, our credit rating and the ongoing interest rate environment, among other factors; instability in the global credit and financial markets; our exposure to currency exchange rate fluctuations, or declining economic conditions in those countries where we conduct our business; changes in our effective tax rate resulting from changes in the tax rates imposed by jurisdictions where our profits are determined to be earned and taxed, expiration of tax holidays in certain jurisdictions, resolution of issues arising from tax audits with various authorities or changes in tax laws or the interpretation of such tax laws; and our ability to identify suitable acquisition targets and successfully integrate and manage acquired businesses. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this press release, please refer to KLA Corporation's Annual Report on Form 10-K for the year ended June 30, 2022, 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)

Sept. 30, 2022

June 30, 2022

ASSETS

Current assets:

Cash and cash equivalents

$               1,819,280

$     1,584,908

Marketable securities

1,134,240

1,123,100

Accounts receivable, net

1,857,320

1,811,877

Inventories

2,408,325

2,146,889

Other current assets

424,774

502,137

Total current assets

7,643,939

7,168,911

Land, property and equipment, net

913,002

849,929

Goodwill

2,278,827

2,320,049

Deferred income taxes

662,408

579,173

Purchased intangible assets, net

1,131,445

1,194,414

Other non-current assets

494,031

484,612

Total assets

$             13,123,652

$   12,597,088

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$                  479,707

$         443,338

Deferred system revenue

440,477

500,969

Deferred service revenue

362,832

381,737

Other current liabilities

1,856,348

1,545,039

Total current liabilities

3,139,364

2,871,083

Long-term debt

6,312,749

6,660,718

Deferred tax liabilities

557,832

658,937

Deferred service revenue

129,861

124,618

Other non-current liabilities

881,772

882,642

Total liabilities

11,021,578

11,197,998

Stockholders' equity:

Common stock and capital in excess of par value

1,041,948

1,061,940

Retained earnings

1,118,967

366,882

Accumulated other comprehensive loss

(58,841)

(27,471)

Total KLA stockholders' equity

2,102,074

1,401,351

Non-controlling interest in consolidated subsidiaries

(2,261)

Total stockholders' equity

2,102,074

1,399,090

Total liabilities and stockholders' equity

$             13,123,652

$   12,597,088

 

KLA Corporation

Condensed Consolidated Unaudited Statements of Operations

Three Months Ended September 30,

(In thousands, except per share amounts)

2022

2021

Revenues:

Product

$     2,195,609

$     1,629,888

Service

528,815

453,950

Total revenues

2,724,424

2,083,838

Costs and expenses:

Costs of revenues

1,041,226

813,624

Research and development

318,515

258,153

Selling, general and administrative

253,980

193,261

Interest expense

74,395

38,312

Loss on extinguishment of debt

13,286

Other expense (income), net

(47,006)

14,140

Income before income taxes

1,070,028

766,348

Provision (benefit) for income taxes

43,963

(302,137)

Net income

1,026,065

1,068,485

Less: Net loss attributable to non-controlling interest

74

68

Net income attributable to KLA

$     1,025,991

$      1,068,417

Net income per share attributable to KLA

Basic

$               7.23

$               7.01

Diluted

$               7.20

$               6.96

Weighted-average number of shares:

Basic

141,829

152,330

Diluted

142,563

153,410

 

KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three Months Ended September 30,

(In thousands)

2022

2021

Cash flows from operating activities:

Net income

$            1,026,065

$            1,068,485

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

Depreciation and amortization

101,938

84,824

Unrealized foreign exchange loss and other

1,783

15,639

Asset impairment charges

9,156

5,962

Disposal of non-controlling interest

8,270

Stock-based compensation expense

34,982

25,216

Deferred income taxes

(156,226)

(427,970)

Gain on sale of business

(29,687)

Loss on extinguishment of debt

13,286

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

Accounts receivable

(55,073)

(180,354)

Inventories

(265,530)

(138,189)

Other assets

45,637

4,673

Accounts payable

36,472

41,868

Deferred system revenue

(60,492)

33,469

Deferred service revenue

(12,411)

4,912

Other liabilities

313,375

325,262

Net cash provided by operating activities

1,011,545

863,797

Cash flows from investing activities:

Net proceeds from sale of business

75,358

Business acquisitions, net of cash acquired

(27,144)

(37,986)

Capital expenditures

(84,352)

(68,955)

Purchases of available-for-sale securities

(256,793)

(264,000)

Proceeds from sale of available-for-sale securities

26,608

14,954

Proceeds from maturity of available-for-sale securities

211,465

178,414

Purchases of trading securities

(19,512)

(22,896)

Proceeds from sale of trading securities

19,875

25,163

Proceeds from other investments

1,020

Net cash used in investing activities

(53,475)

(175,306)

Cash flows from financing activities:

Payment of debt issuance costs

(6,515)

Proceeds from revolving credit facility

300,000

300,000

Repayment of debt

(662,250)

(300,000)

Common stock repurchases

(89,846)

(399,677)

Payment of dividends to stockholders

(187,984)

(162,821)

Issuance of common stock

115

Tax withholding payments related to vested and released restricted stock units

(54,952)

(46,532)

Purchase of non-controlling interest

(4,295)

Net cash used in financing activities

(705,727)

(609,030)

Effect of exchange rate changes on cash and cash equivalents

(17,971)

(4,507)

Net increase in cash and cash equivalents

234,372

74,954

Cash and cash equivalents at beginning of period

1,584,908

1,434,610

Cash and cash equivalents at end of period

$            1,819,280

$            1,509,564

Supplemental cash flow disclosures:

Income taxes paid, net

$               101,061

$                 57,532

Interest paid

$                 44,216

$                 39,717

Non-cash activities:

Contingent consideration payable - financing activities

$                      145

$                 12,810

Dividends payable - financing activities

$                   1,942

$                   1,783

Unsettled common stock repurchase - financing activities

$                        —

$                   5,999

Accrued purchase of land, property and equipment - investing activities

$                 34,027

$                 22,962

 

KLA Corporation

Segment Information (Unaudited)

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

Three Months Ended September 30,

(In thousands)

2022

2021

Revenues:

Semiconductor Process Control

$     2,397,759

$     1,779,083

Specialty Semiconductor Process

127,867

102,029

PCB, Display and Component Inspection

200,745

202,808

Total revenues for reportable segments

2,726,371

2,083,920

Corporate allocation and effects of foreign exchange rates

(1,947)

(82)

Total revenues

$     2,724,424

$     2,083,838

 

KLA Corporation

Condensed Consolidated Unaudited Supplemental Information

Reconciliation of GAAP Net Income to Non-GAAP Net Income 

Three Months Ended

(In thousands, except per share amounts)

Sept. 30,
2022

June 30,
2022

Sept. 30,
2021

GAAP net income attributable to KLA

$    1,025,991

$     805,374

$    1,068,417

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

Acquisition-related charges

a

75,260

64,450

60,168

Restructuring, severance and other charges

b

(5,189)

2,837

125

Loss on extinguishment of debt

c

13,286

Income tax effect of non-GAAP adjustments

d

(27,282)

(19,465)

(19,684)

Discrete tax items

e

(75,476)

13,496

(397,000)

Non-GAAP net income attributable to KLA

$    1,006,590

$     866,692

$       712,026

GAAP net income per diluted share attributable to KLA

$             7.20

$           5.40

$             6.96

Non-GAAP net income per diluted share attributable to KLA

$             7.06

$           5.81

$             4.64

Shares used in diluted shares calculation

142,563

149,117

153,410

 

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

Debt
Extinguishment
Loss

Discrete Tax
Item

Total Pre-tax
GAAP to Non-
GAAP
Adjustments

Three Months Ended Sept. 30, 2022

Costs of revenues

$       45,056

$                 —

$                 —

$              —

$         45,056

Research and development

9,156

9,156

Selling, general and administrative

21,048

16,228

37,276

Loss on extinguishment of debt

13,286

13,286

Other expense (income), net

(21,417)

(3,711)

(25,128)

Total in three months ended Sept. 30, 2022

$       75,260

$         (5,189)

$         13,286

$         (3,711)

$         79,646

Three Months Ended June 30, 2022

Costs of revenues

$       44,331

$                 —

$                 —

$              —

$         44,331

Selling, general and administrative

20,119

20,119

Other expense (income), net

2,837

2,837

Total in three months ended June 30, 2022

$       64,450

$           2,837

$                 —

$              —

$         67,287

Three Months Ended Sept. 30, 2021

Costs of revenues

$       41,115

$                 —

$                 —

$              —

$         41,115

Research and development

5,962

5,962

Selling, general and administrative

13,091

13,091

Other expense (income), net

125

125

Total in three months ended Sept. 30, 2021

$       60,168

$               125

$                 —

$              —

$         60,293

 

Free Cash Flow Reconciliation

Three Months Ended September 30,

Twelve Months Ended September 30,

(In thousands)

2022

2021

2022

2021

Net cash provided by operating activities

$        1,011,545

$        863,797

$      3,460,450

$      2,536,650

Capital expenditures

(84,352)

(68,955)

(322,717)

(244,657)

Free cash flow

$           927,193

$        794,842

$      3,137,733

$      2,291,993

 

Capital Returns Reconciliation

Three Months Ended September 30,

Twelve Months Ended September 30,

(In thousands)

2022

2021

2022

2021

Payments of dividends to stockholders

$         187,984

$         162,821

$         663,691

$          581,010

Common stock repurchases

89,846

399,677

3,657,975

1,150,387

Forward contract for accelerated share repurchases

900,000

Capital returns

$         277,830

$         562,498

$     5,221,666

$       1,731,397

 

Second Quarter Fiscal 2023 Guidance

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

Three Months Ending Dec. 31, 2022

(In millions, except per share amounts)

Low

High

GAAP net income per diluted share attributable to KLA

$5.94

$7.34

Acquisition-related charges

a

0.49

0.49

Restructuring, severance and other charges

b

0.01

0.01

Income tax effect of non-GAAP adjustments

d

(0.14)

(0.14)

Non-GAAP net income per diluted share attributable to KLA

$6.30

$7.70

Shares used in net income per diluted share calculation

140.3

140.3

 

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin

Three Months Ending Dec. 31, 2022

Low

High

GAAP gross margin

59.8 %

62.0 %

Acquisition-related charges                                            

a

1.7 %

1.5 %

Non-GAAP gross margin

61.5 %

63.5 %

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 gains, 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, non-GAAP gross margin 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.

b.

Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-based compensation arrangements, interest expense on unrecognized tax benefits, charges related to liquidation of legal entities, gains and losses from exiting non-core businesses, adjustments related to non-controlling interest and other exit costs. Restructuring, severance and other charges in the quarter ended Sept. 30, 2022 include a gain on the sale of Orbograph, Ltd. ("Orbograph"), which was sold in the quarter, partially offset by certain transaction bonuses triggered by the sale of Orbograph.

c.

Loss on extinguishment of debt includes a pre-tax loss on early extinguishment of the $500 million 4.650% Senior Notes due in November 2024.

d.

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

e.

Discrete tax items in the three months ended Sept. 30, 2022 include an adjustment of the net benefit of the Orbotech Ltd. 2012 to 2018 Israel tax audit settlement, for which the net benefit includes the liability on the audit settlement less reductions in unrecognized tax positions and deferred tax assets and liabilities. Discrete tax items in this quarter also include a tax impact from the sale of Orbograph and a tax impact relating to the amortization of certain intellectual property as a result of an internal restructuring of ownership rights to align with how our business operates. Discrete tax items in the three months ended June 30, 2022 include an increase in unrecognized tax benefits related to the transition tax on accumulated foreign earnings from the Tax Cuts and Jobs Act. Discrete tax items in the three months ended Sept. 30, 2021 include a one-time tax benefit of $394.5 million resulting from changes made to our international structure to better align ownership of certain intellectual property rights with how our business operates.

 

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SOURCE KLA Corporation