false2023Q2000031920106-30http://fasb.org/us-gaap/2022#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrentP2YP3YP3Y33.3325.00P3Y33.3325.002,983,8871,784,70874,28018,0742,352,6301,386,67237,8521,201——937———279—16,3613,904——1,643348——433——455104——658———8,081———5,9945,708,3113,398,429148,67565,0804,436,4682,651,71076,16415,341——1,874———558—31,2769,271——3,486580——743——910218——1,315———6,293———7,063

The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts with maximum remaining maturities of approximately 12 months as of the dates indicated below, were as follows:

			As of						As of
(In thousands)			December 31, 2022						June 30, 2022
Cash flow hedge contracts - foreign currency
Purchase			$	196,825					$	124,641
Sell			$	156,841					$	176,259
Net investment hedge contracts - foreign currency
Sell			$	66,436					$	66,436
Other foreign currency hedge contracts
Purchase			$	517,063					$	565,586
Sell			$	371,668					$	389,368

1212196,825124,641156,841176,25966,43666,436517,063565,586371,668389,368

The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:

			Asset Derivatives																		Liability Derivatives
			Balance Sheet						As of						As of						Balance Sheet						As of						As of
			Location						December 31, 2022						June 30, 2022						Location						December 31, 2022						June 30, 2022
(In thousands)									Fair Value																		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts			Other current assets						$	17,957					$	20,595					Other current liabilities						$	(6,313)					$	8,406
Total derivatives designated as hedging instruments									17,957						20,595												(6,313)						8,406
Derivatives not designated as hedging instruments
Foreign exchange contracts			Other current assets						1,517						19,716						Other current liabilities						(20,599)						25,909
Total derivatives not designated as hedging instruments									1,517						19,716												(20,599)						25,909
Total derivatives									$	19,474					$	40,311											$	(26,912)					$	34,315

17,95720,5956,3138,40617,95720,5956,3138,4061,51719,71620,59925,9091,51719,71620,59925,90919,47440,31126,91234,315The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:

			Three Months Ended December 31,												Six Months Ended December 31,
(In thousands)			2022						2021						2022						2021
Beginning AOCI			$	72,290					$	(25,546)					$	77,018					$	(25,830)
Amount reclassified to earnings as net (gains) losses			(12,961)						(912)						(23,136)						(2,130)
Net change in unrealized gains (losses)			6,392						5,627						11,839						7,129
Ending AOCI			$	65,721					$	(20,831)					$	65,721					$	(20,831)

72,29025,54677,01825,83012,96191223,1362,1306,3925,62711,8397,12965,72120,83165,72120,831The information related to the offsetting arrangements for the periods indicated was as follows:

As of December 31, 2022																								Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)						Gross Amounts of Derivatives						Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets						Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets						Financial Instruments						Cash Collateral Received						Net Amount
Derivatives - assets						$	19,474					$	—					$	19,474					$	(19,474)					$	—					$	—
Derivatives - liabilities						$	(26,912)					$	—					$	(26,912)					$	19,474					$	—					$	(7,438)

As of June 30, 2022																								Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)						Gross Amounts of Derivatives						Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets						Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets						Financial Instruments						Cash Collateral Received						Net Amount
Derivatives - assets						$	40,311					$	—					$	40,311					$	(12,291)					$	—					$	28,020
Derivatives - liabilities						$	(34,315)					$	—					$	(34,315)					$	12,291					$	—					$	(22,024)

The information related to the offsetting arrangements for the periods indicated was as follows:

As of December 31, 2022																								Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)						Gross Amounts of Derivatives						Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets						Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets						Financial Instruments						Cash Collateral Received						Net Amount
Derivatives - assets						$	19,474					$	—					$	19,474					$	(19,474)					$	—					$	—
Derivatives - liabilities						$	(26,912)					$	—					$	(26,912)					$	19,474					$	—					$	(7,438)

As of June 30, 2022																								Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)						Gross Amounts of Derivatives						Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets						Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets						Financial Instruments						Cash Collateral Received						Net Amount
Derivatives - assets						$	40,311					$	—					$	40,311					$	(12,291)					$	—					$	28,020
Derivatives - liabilities						$	(34,315)					$	—					$	(34,315)					$	12,291					$	—					$	(22,024)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM			10-Q

(Mark one)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-09992

KLA CORPORATION
(Exact name of registrant as specified in its charter)

 

Delaware

04-2564110

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

One Technology Drive,

Milpitas,

California

95035

(Address of Principal Executive Offices)

(Zip Code)

(408) 875-3000

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.001 par value per share			KLAC			The Nasdaq Stock Market, LLC
						The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No  ☒

As of January 17, 2023, there were 138,479,764 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

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Table of Contents

INDEX

 

						Page Number
PART I			FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)
			Condensed Consolidated Balance Sheets as of December 31, 2022 and June 30, 2022			3
			Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended December 31, 2022 and 2021			4
			Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended December 31, 2022 and 2021			5
			Condensed Consolidated Statements of Stockholders’ Equity for the Three Months and Six Months Ended December 31, 2022 and 2021			6
			Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021			7
			Notes to Condensed Consolidated Financial Statements			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			50
Item 4.			Controls and Procedures			51
PART II			OTHER INFORMATION
Item 1.			Legal Proceedings			52
Item 1A.			Risk Factors			52
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			72
Item 3.			Defaults Upon Senior Securities			72
Item 4.			Mine Safety Disclosures			72
Item 5.			Other Information			72
Item 6.			Exhibits			73
SIGNATURES						74

 

2

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands)			December 31, 2022						June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	1,571,477					$	1,584,908
Marketable securities			1,294,873						1,123,100
Accounts receivable, net			2,282,925						1,811,877
Inventories			2,535,375						2,146,889
Other current assets			447,932						502,137
Total current assets			8,132,582						7,168,911
Land, property and equipment, net			964,813						849,929
Goodwill			2,278,809						2,320,049
Deferred income taxes			765,046						579,173
Purchased intangible assets, net			1,065,091						1,194,414
Other non-current assets			522,733						484,612
Total assets			$	13,729,074					$	12,597,088
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	530,407					$	443,338
Deferred system revenue			535,556						500,969
Deferred service revenue			372,555						381,737
Other current liabilities			2,043,983						1,545,039
Total current liabilities			3,482,501						2,871,083
Long-term debt			6,113,745						6,660,718
Deferred tax liabilities			559,346						658,937
Deferred service revenue			162,768						124,618
Other non-current liabilities			807,454						882,642
Total liabilities			11,125,814						11,197,998
Commitments and contingencies (Notes 9, 14 and 15)
Stockholders’ equity:
Common stock and capital in excess of par value			1,982,360						1,061,940
Retained earnings			670,002						366,882
Accumulated other comprehensive loss			(49,102)						(27,471)
Total KLA stockholders’ equity			2,603,260						1,401,351
Non-controlling interest in consolidated subsidiaries			—						(2,261)
Total stockholders’ equity			2,603,260						1,399,090
Total liabilities and stockholders’ equity			$	13,729,074					$	12,597,088

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

3

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KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

			Three Months Ended December 31,												Six Months Ended December 31,
(In thousands, except per share amounts)			2022						2021						2022						2021
Revenues:
Product			$	2,463,408					$	1,895,769					$	4,659,017					$	3,525,657
Service			520,479						456,861						1,049,294						910,811
Total revenues			2,983,887						2,352,630						5,708,311						4,436,468
Costs and expenses:
Costs of revenues			1,208,786						908,162						2,250,012						1,721,786
Research and development			332,826						265,031						651,341						523,184
Selling, general and administrative			243,096						213,479						497,076						406,740
Interest expense			74,280						37,852						148,675						76,164
Loss on extinguishment of debt			—						—						13,286						—
Other expense (income), net			(18,074)						1,201						(65,080)						15,341
Income before income taxes			1,142,973						926,905						2,213,001						1,693,253
Provision (benefit) for income taxes			164,178						209,388						208,141						(92,749)
Net income			978,795						717,517						2,004,860						1,786,002
Less: Net income attributable to non-controlling interest			—						73						74						141
Net income attributable to KLA			$	978,795					$	717,444					$	2,004,786					$	1,785,861
Net income per share attributable to KLA
Basic			$	6.93					$	4.74					$	14.16					$	11.77
Diluted			$	6.89					$	4.71					$	14.09					$	11.68
Weighted-average number of shares:
Basic			141,299						151,251						141,564						151,791
Diluted			141,966						152,331						142,268						152,886

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

4

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KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

			Three Months Ended December 31,												Six Months Ended December 31,
(In thousands)			2022						2021						2022						2021
Net income			$	978,795					$	717,517					$	2,004,860					$	1,786,002
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments			7,462						(1,391)						(12,250)						(4,146)
Income tax benefit			279						78						279						395
Net change related to currency translation adjustments			7,741						(1,313)						(11,971)						(3,751)
Cash flow hedges:
Net unrealized gains arising during the period			8,239						6,741						10,007						7,593
Reclassification adjustments for net gains included in net income			(12,961)						(912)						(23,136)						(2,130)
Income tax (provision) benefit			3,275						(963)						4,463						(1,024)
Net change related to cash flow hedges			(1,447)						4,866						(8,666)						4,439
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans			(416)						580						475						1,208
Available-for-sale securities:
Net unrealized gains (losses) arising during the period			4,511						(3,273)						(2,453)						(3,590)
Reclassification adjustments for net losses included in net income			407						3						581						2
Income tax benefit			(1,057)						702						403						770
Net change related to available-for-sale securities			3,861						(2,568)						(1,469)						(2,818)
Other comprehensive income (loss)			9,739						1,565						(21,631)						(922)
Less: Comprehensive income attributable to non-controlling interest			—						73						74						141
Total comprehensive income attributable to KLA			$	988,534					$	719,009					$	1,983,155					$	1,784,939

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

5

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KLA CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

			Common Stock and Capital in Excess of Par Value												Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total KLA Stockholders’ Equity						Non- Controlling Interest						Total Stockholders’ Equity
(In thousands, except per share amounts)			Shares						Amount
Balances as of June 30, 2022			141,804						$	1,061,940					$	366,882					$	(27,471)					$	1,401,351					$	(2,261)					$	1,399,090
Net income attributable to KLA			—						—						1,025,991						—						1,025,991						—						1,025,991
Net income attributable to non-controlling interest			—						—						—						—						—						74						74
Other comprehensive loss			—						—						—						(31,370)						(31,370)						—						(31,370)
Net issuance under employee stock plans			171						(54,950)						—						—						(54,950)						—						(54,950)
Repurchase of common stock			(257)						(1,926)						(87,690)						—						(89,616)						—						(89,616)
Cash dividends ($1.30 per share) and dividend equivalents declared			—						—						(186,216)						—						(186,216)						—						(186,216)
Stock-based compensation expense			—						34,982						—						—						34,982						—						34,982
Purchase of non-controlling interest			—						1,902						—						—						1,902						(6,196)						(4,294)
Disposal of non-controlling interest			—						—						—						—						—						8,383						8,383
Balances as of September 30, 2022			141,718						1,041,948						1,118,967						$	(58,841)					$	2,102,074					$	—					$	2,102,074
Net income attributable to KLA			—						—						978,795						—						978,795						—						978,795
Other comprehensive income			—						—						—						9,739						9,739												9,739
Net issuance under employee stock plans			170						31,196						—						—						31,196						—						31,196
Repurchase of common stock			(3,429)						870,811						(1,241,793)						—						(370,982)						—						(370,982)
Cash dividends ($1.30 per share) and dividend equivalents declared			—						—						(185,967)						—						(185,967)						—						(185,967)
Stock-based compensation expense			—						38,405						—						—						38,405						—						38,405
Balances as of December 31, 2022			138,459						$	1,982,360					$	670,002					$	(49,102)					$	2,603,260					$	—					$	2,603,260

			Common Stock and Capital in Excess of Par Value												Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Total KLA Stockholders’ Equity						Non- Controlling Interest						Total Stockholders’ Equity
(In thousands, except per share amounts)			Shares						Amount
Balances as of June 30, 2021			152,776						$	2,175,988					$	1,277,123					$	(75,557)					$	3,377,554					$	(1,912)					$	3,375,642
Net income attributable to KLA			—						—						1,068,417						—						1,068,417						—						1,068,417
Net income attributable to non-controlling interest			—						—						—						—						—						68						68
Other comprehensive loss			—						—						—						(2,487)						(2,487)						—						(2,487)
Net issuance under employee stock plans			160						(46,532)						—						—						(46,532)						—						(46,532)
Repurchase of common stock			(1,190)						(16,966)						(382,711)						—						(399,677)						—						(399,677)
Cash dividends ($1.05 per share) and dividend equivalents declared			—						—						(161,561)						—						(161,561)						—						(161,561)
Stock-based compensation expense			—						25,216						—						—						25,216						—						25,216
Balances as of September 30, 2021			151,746						2,137,706						1,801,268						(78,044)						3,860,930						(1,844)						3,859,086
Net income attributable to KLA			—						—						717,444						—						717,444						—						717,444
Net income attributable to non-controlling interest			—						—						—						—						—						73						73
Other comprehensive income			—						—						—						1,565						1,565						—						1,565
Net issuance under employee stock plans			205						31,157						—						—						31,157						—						31,157
Repurchase of common stock			(1,104)						(15,604)						(414,270)						—						(429,874)						—						(429,874)
Cash dividends ($1.05 per share) and dividend equivalents declared			—						—						(160,461)						—						(160,461)						—						(160,461)
Stock-based compensation expense			—						27,766						—						—						27,766						—						27,766
Balances as of December 31, 2021			150,847						$	2,181,025					$	1,943,981					$	(76,479)					$	4,048,527					$	(1,771)					$	4,046,756
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