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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| | | | | |
(Mark one) |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2023
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 April 17, 2023, there were 137,198,902 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.
INDEX
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| | Page Number |
| | |
PART I | FINANCIAL INFORMATION | |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
| | |
PART II | OTHER INFORMATION | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
| | |
| |
| | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KLA CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
(In thousands) | March 31, 2023 | | June 30, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,568,513 | | | $ | 1,584,908 | |
Marketable securities | 1,321,696 | | | 1,123,100 | |
Accounts receivable, net | 1,940,067 | | | 1,811,877 | |
Inventories | 2,749,743 | | | 2,146,889 | |
Other current assets | 438,731 | | | 502,137 | |
Total current assets | 8,018,750 | | | 7,168,911 | |
Land, property and equipment, net | 984,271 | | | 849,929 | |
Goodwill | 2,278,817 | | | 2,320,049 | |
Deferred income taxes | 783,843 | | | 579,173 | |
Purchased intangible assets, net | 999,958 | | | 1,194,414 | |
Other non-current assets | 617,910 | | | 484,612 | |
Total assets | $ | 13,683,549 | | | $ | 12,597,088 | |
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 410,885 | | | $ | 443,338 | |
Deferred system revenue | 533,791 | | | 500,969 | |
Deferred service revenue | 364,394 | | | 381,737 | |
| | | |
Other current liabilities | 2,109,451 | | | 1,545,039 | |
Total current liabilities | 3,418,521 | | | 2,871,083 | |
Long-term debt | 5,889,740 | | | 6,660,718 | |
Deferred tax liabilities | 514,269 | | | 658,937 | |
Deferred service revenue | 176,260 | | | 124,618 | |
Other non-current liabilities | 1,001,978 | | | 882,642 | |
Total liabilities | 11,000,768 | | | 11,197,998 | |
Commitments and contingencies (Notes 9, 14 and 15) | | | |
Stockholders’ equity: | | | |
Common stock and capital in excess of par value | 1,996,773 | | | 1,061,940 | |
Retained earnings | 721,299 | | | 366,882 | |
Accumulated other comprehensive loss | (35,291) | | | (27,471) | |
Total KLA stockholders’ equity | 2,682,781 | | | 1,401,351 | |
Non-controlling interest in consolidated subsidiaries | — | | | (2,261) | |
Total stockholders’ equity | 2,682,781 | | | 1,399,090 | |
Total liabilities and stockholders’ equity | $ | 13,683,549 | | | $ | 12,597,088 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
(In thousands, except per share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
Revenues: | | | | | | | |
Product | $ | 1,903,484 | | | $ | 1,800,659 | | | $ | 6,562,501 | | | $ | 5,326,316 | |
Service | 529,124 | | | 488,017 | | | 1,578,418 | | | 1,398,828 | |
Total revenues | 2,432,608 | | | 2,288,676 | | | 8,140,919 | | | 6,725,144 | |
Costs and expenses: | | | | | | | |
Costs of revenues | 1,005,346 | | | 892,091 | | | 3,255,358 | | | 2,613,877 | |
Research and development | 328,276 | | | 285,189 | | | 979,617 | | | 808,373 | |
Selling, general and administrative | 238,393 | | | 216,489 | | | 735,469 | | | 623,229 | |
| | | | | | | |
Interest expense | 74,774 | | | 39,978 | | | 223,449 | | | 116,142 | |
Loss on extinguishment of debt | — | | | — | | | 13,286 | | | — | |
Other expense (income), net | (14,864) | | | 8,644 | | | (79,944) | | | 23,985 | |
Income before income taxes | 800,683 | | | 846,285 | | | 3,013,684 | | | 2,539,538 | |
Provision for income taxes | 102,846 | | | 115,625 | | | 310,987 | | | 22,876 | |
| | | | | | | |
Net income | 697,837 | | | 730,660 | | | 2,702,697 | | | 2,516,662 | |
Less: Net income attributable to non-controlling interest | — | | | 88 | | | 74 | | | 229 | |
Net income attributable to KLA | $ | 697,837 | | | $ | 730,572 | | | $ | 2,702,623 | | | $ | 2,516,433 | |
Net income per share attributable to KLA | | | | | | | |
Basic | $ | 5.06 | | | $ | 4.87 | | | $ | 19.26 | | | $ | 16.64 | |
Diluted | $ | 5.03 | | | $ | 4.83 | | | $ | 19.16 | | | $ | 16.52 | |
Weighted-average number of shares: | | | | | | | |
Basic | 137,865 | | | 150,145 | | | 140,349 | | | 151,250 | |
Diluted | 138,645 | | | 151,186 | | | 141,073 | | | 152,346 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
(In thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Net income | $ | 697,837 | | | $ | 730,660 | | | $ | 2,702,697 | | | $ | 2,516,662 | |
Other comprehensive income (loss): | | | | | | | |
Currency translation adjustments: | | | | | | | |
Cumulative currency translation adjustments | 4,235 | | | 413 | | | (8,015) | | | (3,733) | |
Income tax (provision) benefit | (15) | | | 870 | | | 264 | | | 1,265 | |
Net change related to currency translation adjustments | 4,220 | | | 1,283 | | | (7,751) | | | (2,468) | |
Cash flow hedges: | | | | | | | |
Net unrealized gains arising during the period | 6,660 | | | 17,777 | | | 16,667 | | | 25,370 | |
Reclassification adjustments for net gains included in net income | (2,824) | | | (992) | | | (25,960) | | | (3,122) | |
Income tax (provision) benefit | (352) | | | (4,023) | | | 4,111 | | | (5,047) | |
Net change related to cash flow hedges | 3,484 | | | 12,762 | | | (5,182) | | | 17,201 | |
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans | 86 | | | 467 | | | 561 | | | 1,675 | |
Available-for-sale securities: | | | | | | | |
Net unrealized gains (losses) arising during the period | 7,422 | | | (12,270) | | | 4,969 | | | (15,860) | |
Reclassification adjustments for net losses included in net income | 250 | | | 88 | | | 831 | | | 90 | |
Income tax (provision) benefit | (1,651) | | | 2,616 | | | (1,248) | | | 3,386 | |
Net change related to available-for-sale securities | 6,021 | | | (9,566) | | | 4,552 | | | (12,384) | |
Other comprehensive income (loss) | 13,811 | | | 4,946 | | | (7,820) | | | 4,024 | |
Less: Comprehensive income attributable to non-controlling interest | — | | | 88 | | | 74 | | | 229 | |
Total comprehensive income attributable to KLA | $ | 711,648 | | | $ | 735,518 | | | $ | 2,694,803 | | | $ | 2,520,457 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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 | — | | | — | | | 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 | |
Net income | — | | | — | | | 697,837 | | | — | | | 697,837 | | | — | | | 697,837 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other comprehensive income | — | | | — | | | — | | | 13,811 | | | 13,811 | | | — | | | 13,811 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net issuance under employee stock plans | 57 | | | (16,154) | | | — | | | — | | | (16,154) | | | — | | | (16,154) | |
Repurchase of common stock | (1,227) | | | (17,563) | | | (465,149) | | | — | | | (482,712) | | | — | | | (482,712) | |
Cash dividends ($1.30 per share) and dividend equivalents declared | — | | | — | | | (181,391) | | | — | | | (181,391) | | | — | | | (181,391) | |
| | | | | | | | | | | | | |
Stock-based compensation expense | — | | | 48,130 | | | — | | | — | | | 48,130 | | | — | | | 48,130 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balances as of March 31, 2023 | 137,289 | | | $ | 1,996,773 | | | $ | 721,299 | | | $ | (35,291) | | | $ | 2,682,781 | | | $ | — | | | $ | 2,682,781 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
Net income attributable to KLA | — | | | — | | | 730,572 | | | — | | | 730,572 | | | — | | | 730,572 | |
Net income attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | 88 | | | 88 | |
Other comprehensive income | — | | | — | | | — | | | 4,946 | | | 4,946 | | | — | | | 4,946 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net issuance under employee stock plans | 67 | | | (16,661) | | | | | — | | | (16,661) | | | — | | | (16,661) | |
Repurchase of common stock | (1,539) | | | (22,222) | | | (542,444) | | | — | | | (564,666) | | | — | | | (564,666) | |
Cash dividends ($1.05 per share) and dividend equivalents declared | | | | | (159,498) | | | — | | | (159,498) | | | — | | | (159,498) | |
| | | | | | | | | | | | | |
Stock-based compensation expense | — | | | 37,087 | | | — | | | — | | | 37,087 | | | — | | | 37,087 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Balances as of March 31, 2022 | 149,375 | | | $ | 2,179,229 | | | $ | 1,972,611 | | | $ | (71,533) | | | $ | 4,080,307 | | | $ | (1,683) | | | $ | 4,078,624 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended March 31, |
(In thousands) | 2023 | | 2022 |
Cash flows from operating activities: | | | |
Net income | $ | 2,702,697 | | | $ | 2,516,662 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| | | |
Depreciation and amortization | 310,300 | | | 262,496 | |
Loss on extinguishment of debt | 13,286 | | | — | |
Unrealized foreign exchange (gain) loss and other | (35,427) | | | 14,669 | |
Asset impairment charges | 9,905 | | | 5,962 | |
Disposal of non-controlling interest | 8,270 | | | — | |
Stock-based compensation expense | 121,517 | | | 90,069 | |
Gain on sale of business | (29,687) | | | — | |
| | | |
Deferred income taxes | (321,712) | | | (382,975) | |
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | | | |
Accounts receivable | (153,630) | | | (318,271) | |
Inventories | (604,393) | | | (396,403) | |
Other assets | (30,427) | | | (23,729) | |
Accounts payable | (38,817) | | | 82,376 | |
Deferred system revenue | 32,822 | | | 141,122 | |
Deferred service revenue | 35,551 | | | 81,216 | |
Other liabilities | 690,435 | | | 420,279 | |
Net cash provided by operating activities | 2,710,690 | | | 2,493,473 | |
Cash flows from investing activities: | | | |
| | | |
Net proceeds from sale of business | 75,358 | | | — | |
Business acquisitions, net of cash acquired | (27,144) | | | (470,887) | |
Capital expenditures | (262,908) | | | (234,160) | |
Purchases of available-for-sale securities | (960,837) | | | (733,386) | |
Proceeds from sale of available-for-sale securities | 74,541 | | | 67,505 | |
Proceeds from maturity of available-for-sale securities | 699,363 | | | 524,677 | |
Purchases of trading securities | (77,759) | | | (101,342) | |
Proceeds from sale of trading securities | 70,279 | | | 95,734 | |
Proceeds from other investments | 1,020 | | | 795 | |
Net cash used in investing activities | (408,087) | | | (851,064) | |
Cash flows from financing activities: | | | |
Payment of debt issuance costs | (6,515) | | | — | |
| | | |
Proceeds from revolving credit facility | 300,000 | | | 600,000 | |
Repayment of debt | (1,087,250) | | | (345,000) | |
Common stock repurchases | (923,039) | | | (1,394,217) | |
Payment of dividends to stockholders | (553,046) | | | (480,926) | |
| | | |
Issuance of common stock | 33,908 | | | 36,912 | |
Tax withholding payments related to vested and released restricted stock units | (73,704) | | | (68,948) | |
Contingent consideration payable and other, net | (5,027) | | | (1,100) | |
| | | |
Purchase of non-controlling interest | (4,295) | | | — | |
Net cash used in financing activities | (2,318,968) | | | (1,653,279) | |
Effect of exchange rate changes on cash and cash equivalents | (30) | | | (8,568) | |
Net decrease in cash and cash equivalents | (16,395) | | | (19,438) | |
Cash and cash equivalents at beginning of period | 1,584,908 | | | 1,434,610 | |
Cash and cash equivalents at end of period | $ | 1,568,513 | | | $ | 1,415,172 | |
Supplemental cash flow disclosures: | | | |
Income taxes paid, net | $ | 451,243 | | | $ | 355,176 | |
Interest paid | $ | 198,906 | | | $ | 116,791 | |
Non-cash activities: | | | |
| | | |
| | | |
|