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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 December 31, 2024
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 21, 2025, there were 132,886,746 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.
INDEX
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| | Page Number |
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PART I | FINANCIAL INFORMATION | |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II | OTHER INFORMATION | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KLA CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
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(In thousands) | December 31, 2024 | | June 30, 2024 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,838,278 | | | $ | 1,977,129 | |
Marketable securities | 1,942,127 | | | 2,526,866 | |
Accounts receivable, net | 2,334,977 | | | 1,833,041 | |
Inventories | 3,046,340 | | | 3,034,781 | |
Other current assets | 610,882 | | | 659,327 | |
Total current assets | 9,772,604 | | | 10,031,144 | |
Land, property and equipment, net | 1,173,928 | | | 1,109,968 | |
Goodwill, net | 1,785,297 | | | 2,015,726 | |
Deferred income taxes | 1,002,169 | | | 915,241 | |
Purchased intangible assets, net | 548,645 | | | 668,764 | |
Other non-current assets | 719,053 | | | 692,723 | |
Total assets | $ | 15,001,696 | | | $ | 15,433,566 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 432,891 | | | $ | 359,487 | |
Deferred system revenue | 1,072,565 | | | 985,856 | |
Deferred service revenue | 521,424 | | | 501,926 | |
Current portion of long-term debt | — | | | 749,936 | |
Other current liabilities | 2,111,378 | | | 2,063,569 | |
Total current liabilities | 4,138,258 | | | 4,660,774 | |
Long-term debt | 5,882,387 | | | 5,880,199 | |
Deferred tax liabilities | 423,626 | | | 486,690 | |
Deferred service revenue | 333,758 | | | 294,460 | |
Other non-current liabilities | 639,118 | | | 743,115 | |
Total liabilities | 11,417,147 | | | 12,065,238 | |
Commitments and contingencies (Notes 8, 13 and 14) | | | |
Stockholders’ equity: | | | |
Common stock and capital in excess of par value | 2,346,346 | | | 2,280,133 | |
Retained earnings | 1,284,589 | | | 1,137,270 | |
Accumulated other comprehensive loss | (46,386) | | | (49,075) | |
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Total stockholders’ equity | 3,584,549 | | | 3,368,328 | |
Total liabilities and stockholders’ equity | $ | 15,001,696 | | | $ | 15,433,566 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
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| Three Months Ended December 31, | | Six Months Ended December 31, |
(In thousands, except per share amounts) | 2024 | | 2023 | | 2024 | | 2023 |
Revenues: | | | | | | | |
Product | $ | 2,409,462 | | | $ | 1,921,809 | | | $ | 4,606,851 | | | $ | 3,758,473 | |
Service | 667,389 | | | 564,917 | | | 1,311,541 | | | 1,125,209 | |
Total revenues | 3,076,851 | | | 2,486,726 | | | 5,918,392 | | | 4,883,682 | |
Costs and expenses: | | | | | | | |
Costs of revenues | 1,221,461 | | | 976,746 | | | 2,368,892 | | | 1,923,637 | |
Research and development | 346,157 | | | 320,418 | | | 669,302 | | | 631,632 | |
Selling, general and administrative | 267,081 | | | 237,244 | | | 518,123 | | | 476,889 | |
Impairment of goodwill and purchased intangible assets | 239,100 | | | 219,000 | | | 239,100 | | | 219,000 | |
Interest expense | 74,981 | | | 74,202 | | | 157,152 | | | 148,436 | |
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Other expense (income), net | (44,458) | | | (32,154) | | | (85,393) | | | (58,893) | |
Income before income taxes | 972,529 | | | 691,270 | | | 2,051,216 | | | 1,542,981 | |
Provision for income taxes | 148,002 | | | 108,736 | | | 280,838 | | | 219,072 | |
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Net income | 824,527 | | | 582,534 | | | 1,770,378 | | | 1,323,909 | |
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Basic | $ | 6.18 | | | $ | 4.30 | | | $ | 13.24 | | | $ | 9.74 | |
Diluted | $ | 6.16 | | | $ | 4.28 | | | $ | 13.17 | | | $ | 9.69 | |
Weighted-average number of shares: | | | | | | | |
Basic | 133,327 | | | 135,539 | | | 133,730 | | | 135,976 | |
Diluted | 133,926 | | | 136,254 | | | 134,415 | | | 136,684 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
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| Three Months Ended December 31, | | Six Months Ended December 31, |
(In thousands) | 2024 | | 2023 | | 2024 | | 2023 |
Net income | $ | 824,527 | | | $ | 582,534 | | | $ | 1,770,378 | | | $ | 1,323,909 | |
Other comprehensive income (loss): | | | | | | | |
Currency translation adjustments: | | | | | | | |
Cumulative currency translation adjustments | (15,281) | | | 3,272 | | | (5,024) | | | (3,581) | |
Income tax (provision) benefit | 2,002 | | | (878) | | | 854 | | | (618) | |
Net change related to currency translation adjustments | (13,279) | | | 2,394 | | | (4,170) | | | (4,199) | |
Cash flow hedges: | | | | | | | |
Net unrealized gains arising during the period | 1,889 | | | 9,806 | | | 4,987 | | | 8,325 | |
Reclassification adjustments for gains included in net income | (2,260) | | | (8,953) | | | (5,768) | | | (16,061) | |
Income tax (provision) benefit | (1,118) | | | 2,675 | | | 1,095 | | | 3,531 | |
Net change related to cash flow hedges | (1,489) | | | 3,528 | | | 314 | | | (4,205) | |
Net change related to unrecognized gains (losses) and transition obligations in connection with defined benefit plans | 807 | | | (395) | | | 575 | | | (153) | |
Available-for-sale securities: | | | | | | | |
Net unrealized gains (losses) arising during the period | (8,816) | | | 14,760 | | | 7,606 | | | 16,004 | |
Reclassification adjustments for net (gains) losses included in net income | (1) | | | 61 | | | — | | | 73 | |
Income tax (provision) benefit | 1,896 | | | (3,174) | | | (1,636) | | | (3,443) | |
Net change related to available-for-sale securities | (6,921) | | | 11,647 | | | 5,970 | | | 12,634 | |
Other comprehensive income (loss) | (20,882) | | | 17,174 | | | 2,689 | | | 4,077 | |
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Total comprehensive income | $ | 803,645 | | | $ | 599,708 | | | $ | 1,773,067 | | | $ | 1,327,986 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
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| Common Stock and Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | | | | | Total Stockholders’ Equity |
(In thousands, except per share amounts) | Shares | | Amount | |
Balances as of June 30, 2024 | 134,425 | | | $ | 2,280,133 | | | $ | 1,137,270 | | | $ | (49,075) | | | | | | | $ | 3,368,328 | |
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Net income | — | | | — | | | 945,851 | | | — | | | | | | | 945,851 | |
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Other comprehensive income | — | | | — | | | — | | | 23,571 | | | | | | | 23,571 | |
Net issuance under employee stock plans | 134 | | | (72,245) | | | — | | | — | | | | | | | (72,245) | |
Repurchase of common stock | (740) | | | (12,536) | | | (558,400) | | | — | | | | | | | (570,936) | |
Cash dividends ($1.45 per share) and dividend equivalents declared | — | | | — | | | (196,555) | | | — | | | | | | | (196,555) | |
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Stock-based compensation expense | — | | | 61,700 | | | — | | | — | | | | | | | 61,700 | |
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Balances as of September 30, 2024 | 133,819 | | | 2,257,052 | | | 1,328,166 | | | (25,504) | | | | | | | 3,559,714 | |
Net income | — | | | — | | | 824,527 | | | — | | | | | | | 824,527 | |
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Other comprehensive loss | — | | | — | | | — | | | (20,882) | | | | | | | (20,882) | |
Net issuance under employee stock plans | 104 | | | 43,931 | | | — | | | — | | | | | | | 43,931 | |
Repurchase of common stock | (979) | | | (16,478) | | | (639,495) | | | — | | | | | | | (655,973) | |
Cash dividends ($1.70 per share) and dividend equivalents declared | — | | | — | | | (228,609) | | | — | | | | | | | (228,609) | |
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Stock-based compensation expense | — | | | 61,841 | | | — | | | — | | | | | | | 61,841 | |
Balances as of December 31, 2024 | 132,944 | | | $ | 2,346,346 | | | $ | 1,284,589 | | | $ | (46,386) | | | | | | | $ | 3,584,549 | |
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| Common Stock and Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | | | | | Total Stockholders’ Equity |
(In thousands, except per share amounts) | Shares | | Amount | |
Balance as of June 30, 2023 | 136,750 | | | $ | 2,107,663 | | | $ | 848,431 | | | $ | (36,341) | | | | | | | $ | 2,919,753 | |
Net income | — | | | — | | | 741,375 | | | — | | | | | | | 741,375 | |
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Other comprehensive loss | — | | | — | | | — | | | (13,097) | | | | | | | (13,097) | |
Net issuance under employee stock plans | 173 | | | (68,237) | | | — | | | — | | | | | | | (68,237) | |
Repurchase of common stock | (956) | | | (14,722) | | | (444,371) | | | — | | | | | | | (459,093) | |
Cash dividends ($1.30 per share) and dividend equivalents declared | — | | | — | | | (179,256) | | | — | | | | | | | (179,256) | |
Stock-based compensation expense | — | | | 48,772 | | | — | | | — | | | | | | | 48,772 | |
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Balance as of September 30, 2023 | 135,967 | | | 2,073,476 | | | 966,179 | | | (49,438) | | | | | | | 2,990,217 | |
Net income | — | | | — | | | 582,534 | | | — | | | | | | | 582,534 | |
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Other comprehensive income | — | | | — | | | — | | | 17,174 | | | | | | | 17,174 | |
Net issuance under employee stock plans | 141 | | | 45,427 | | | — | | | — | | | | | | | 45,427 | |
Repurchase of common stock | (848) | | | (13,014) | | | (428,549) | | | — | | | | | | | (441,563) | |
Cash dividends ($1.45 per share) and dividend equivalents declared | — | | | — | | | (198,698) | | | — | | | | | | | (198,698) | |
Stock-based compensation expense | — | | | 48,620 | | | — | | | — | | | | | | | 48,620 | |
Balance as of December 31, 2023 | 135,260 | | | $ | 2,154,509 | | | $ | 921,466 | | | $ | (32,264) | | | | | | | $ | 3,043,711 | |
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See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| Six Months Ended December 31, |
(In thousands) | 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net income | $ | 1,770,378 | | | $ | 1,323,909 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Impairment of goodwill and purchased intangible assets | 239,100 | | | 219,000 | |
Depreciation and amortization | 199,745 | | | 201,466 | |
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Unrealized foreign exchange (gain) loss and other | 19,064 | | | (24,376) | |
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Stock-based compensation expense | 123,541 | | | 97,392 | |
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Net gain on sale of assets | (161) | | | — | |
Deferred income taxes | (150,658) | | | (136,480) | |
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | | | |
Accounts receivable | (486,264) | | | (53,247) | |
Inventories | 5,632 | | | (159,608) | |
Other assets | 61,796 | | | (112,392) | |
Accounts payable | 54,617 | | | 11,037 | |
Deferred system revenue | 86,709 | | | 232,307 | |
Deferred service revenue | 58,790 | | | 74,722 | |
Other liabilities | (137,536) | | | (167,748) | |
Net cash provided by operating activities | 1,844,753 | | | 1,505,982 | |
Cash flows from investing activities: | | | |
Proceeds from sale of assets | 161 | | | 5,079 | |
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Capital expenditures | (152,716) | | | (144,846) | |
Purchases of available-for-sale securities | (1,326,968) | | | (982,642) | |
Proceeds from sale of available-for-sale securities | 238,419 | | | 15,235 | |
Proceeds from maturity of available-for-sale securities | 1,682,585 | | | 628,277 | |
Purchases of trading securities | (34,857) | | | (66,007) | |
Proceeds from sale of trading securities | 36,043 | | | 64,757 | |
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Net cash provided by (used in) investing activities | 442,667 | | | (480,147) | |
Cash flows from financing activities: | | | |
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Repayment of debt | (750,000) | | | — | |
Common stock repurchases | (1,217,504) | | | (893,229) | |
Payment of dividends to stockholders | (424,855) | | | (378,366) | |
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Issuance of common stock | 47,538 | | | 48,433 | |
Tax withholding payments related to vested and released restricted stock units | (75,854) | | | (71,242) | |
Contingent consideration payable and other, net | — | | | (1,676) | |
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Net cash used in financing activities | (2,420,675) | | | (1,296,080) | |
Effect of exchange rate changes on cash and cash equivalents | (5,596) | | | 7,434 | |
Net decrease in cash and cash equivalents | (138,851) | | | (262,811) | |
Cash and cash equivalents at beginning of period | 1,977,129 | | | 1,927,865 | |
Cash and cash equivalents at end of period | $ | 1,838,278 | | | $ | 1,665,054 | |
Supplemental cash flow disclosures: | | | |
Income taxes paid, net | $ | 458,228 | | | $ | 605,434 | |
Interest paid | $ | 156,185 | | | $ | 138,054 | |
Non-cash activities: | | | |
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Contingent consideration payable - financing activities | $ | — | | | $ | (765) | |
Dividends payable - financing activities | $ | 4,113 | | | $ | 3,985 | |
Unsettled common stock repurchase - financing activities | $ | 5,500 | | | $ | 10,999 | |
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Accrued purchases of land, property and equipment - investing activities | $ | 11,354 | | | $ | 18,312 | |
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
KLA CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
Basis of Presentation. For purposes of this report, “KLA,” the “Company,” “we,” “our,” “us” or similar references mean KLA Corporation and its majority-owned subsidiaries unless the context requires otherwise. The Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
The unaudited interim Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of June 30, 2024 was derived from the Company’s audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, but does not include all disclosures required by GAAP for audited financial statements. The unaudited interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. These Condensed Consolidated Financial Statements and notes, however, should be read in conjunction with Item 8 “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
The Condensed Consolidated Financial Statements include the accounts of KLA and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
The results of operations for the three and six months ended December 31, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year ending June 30, 2025.
Management Estimates. The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets and liabilities (and related disclosure of contingent assets and liabilities) at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications. The Company has reclassified certain prior period balances to conform to the current year presentation. These reclassifications did not impact any prior amounts of reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
Significant Accounting Policies. Except for the below additions to our accounting policies, there have been no material changes to our significant accounting policies summarized in Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Government Incentives. We occasionally receive incentives from governmental entities related to capital expenditures, expenses and other activities, primarily in the form of cash grants and tax credits. Government assistance is recognized when there is reasonable assurance that (1) the Company will comply with relevant conditions; and (2) the assistance will be received. Government incentives related to the acquisition or construction of property, plant and equipment are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred.
Collaborative Arrangements. We assess joint development arrangements to determine whether they are in the scope of Accounting Standards Codification (“ASC”) 808, Collaborative Arrangements. In our assessment, we evaluate whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on commercial success of the activities. This assessment is performed throughout the life of such arrangement with consideration given to the changes in the roles and responsibilities between the parties. During the quarter ended September 30, 2024, we entered into a joint development arrangement within the scope of ASC 808 to develop and commercialize a new product.
Recent Accounting Pronouncements
Recently Adopted
None
Updates Not Yet Effective
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2025 and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. Early adoption is permitted on a retrospective basis. We will adopt this update for our annual report for the fiscal year ending June 30, 2025.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The new guidance requires enhanced disclosures about certain costs and expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2028, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2029. Early adoption is permitted either on a prospective or retrospective basis. We are currently evaluating the impact of this ASU on our disclosures.
NOTE 2 – REVENUE
Contract Balances
The following table represents the opening and closing balances of accounts receivable, net, contract assets and contract liabilities as of the indicated dates.
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| As of | | As of | | | | |
(Dollar amounts in thousands) | December 31, 2024 | | June 30, 2024 | | $ Change | | % Change |
Accounts receivable, net | $ | 2,334,977 | | | $ | 1,833,041 | | | $ | 501,936 | | | 27 | % |
Contract assets | $ | 82,292 | | | $ | 69,259 | | | $ | 13,033 | | | 19 | % |
Contract liabilities | $ | 1,927,747 | | | $ | 1,782,242 | | | $ | 145,505 | | | 8 | % |
Our payment terms and conditions vary by contract type, although terms generally include a requirement of payment of 70% to 90% of total contract consideration within 30 to 60 days of shipment, with the remainder payable within 30 days of acceptance.
The change in contract assets during the six months ended December 31, 2024 was mainly due to $64.0 million of revenue recognized for which the payment is subject to conditions other than passage of time, partially offset by $51.0 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional. Contract assets are included in other current assets on our Condensed Consolidated Balance Sheets.
The change in contract liabilities during the six months ended December 31, 2024 was mainly due to the recognition of revenue of $1.14 billion that was included in contract liabilities as of June 30, 2024, largely offset by an increase in the value of products and services billed to customers for which control of the products and services has not transferred to the customers. Contract liabilities are included in other current liabilities and other non-current liabilities on our Condensed Consolidated Balance Sheets.
Remaining Performance Obligations
As of December 31, 2024, we had $9.14 billion of remaining performance obligations (“RPO”), which represents our obligation to deliver products and services, and primarily consists of sales orders where written customer requests have been received. This amount includes customer deposits of $542.9 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.93 billion as disclosed above. We expect to recognize approximately 67% to 72% of these performance obligations as revenue in the next 12 months, 20% to 25% in the subsequent 12 months and the remainder thereafter, but this estimate is subject to constant change.
After the 2024 BIS Rules and 2025 BIS Rules, defined below, were promulgated, we reduced our RPO by an aggregate of approximately $430 million because we are currently unable to ship the products ordered by affected customers without an export license, of which approximately 50% was included in the RPO expected to be recognized as revenue in the following 12 months, as disclosed in our quarterly report on Form 10-Q for the quarter ended September 30, 2024.
The amount of our RPO and timing of revenue recognition of our RPO are evaluated quarterly and are largely driven by multiple variables, many of which are beyond our control, such as: changes in regulations, the readiness of customer fabs, end market needs for capacity, changes in the estimated versus actual start time of customers’ projects, timing of delivery and installation dates and supply chain constraints. Our customers are currently purchasing equipment from us with lead times that are longer than our historical experience. As customers try to balance the evolution of their technological, production or market needs with the timing and content of orders placed with us, there is elevated risk of order modifications, pushouts or cancellations.
The U.S. government has tightened export controls for commodities, software, and technology (collectively, “items”) destined to People’s Republic of China (“China”) over the past several years. In addition, in October 2022, the U.S. government's Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“Commerce”) issued regulations (the “2022 BIS Rules”) that imposed new export licensing requirements for certain U.S. semiconductor and high-performance computing technology (including wafer fab equipment), for the use of such technology for certain end uses in China, and for the provision of support by U.S. Persons to certain advanced integrated circuit (“IC”) fabs located in China. The regulations impose export license requirements effectively on all KLA items and services to customers located in China that fabricate certain advanced logic, NAND and DRAM ICs. KLA is also restricted from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license. Companies were added to the U.S. Entity List, a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from the BIS. In October 2023, the U.S. government issued additional regulations that went into effect in November 2023 (the “2023 BIS Rules”). These additional rules are designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to arms embargoed countries, including China. They adjust the parameters included in the previous existing regulations that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established in October 2022. In January 2024, KLA, among other companies, submitted comments to the government regarding these regulations. Furthermore, in December 2024 and January 2025, the BIS again issued incremental regulations (the “2024 BIS Rules” and the “2025 BIS Rules,” respectively) adding even more companies to the U.S. Entity List and revising the definition of advanced DRAM, further restricting our ability to provide certain items and services to facilities in China producing advanced DRAM ICs. The regulations are very complex. We are taking appropriate measures to comply with all government regulations, and will continue to apply for export licenses, when required, to avoid disruption to our customers’ operations. There can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted.
Refer to Note 16 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements for information related to revenues by geographic region as well as significant product and service offerings.
NOTE 3 – FAIR VALUE MEASUREMENTS
Our financial assets and liabilities are measured and recorded at fair value, except for our debt and certain equity investments in privately held companies. Equity investments without a readily available fair value are accounted for using the measurement alternative. The measurement alternative is calculated as cost minus impairment, if any, plus or minus changes resulting from observable price changes. See Note 7 “Debt” to our Condensed Consolidated Financial Statements for disclosure of the fair value of our Senior Notes, as defined in that Note.
Our non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred and, for goodwill, also annually.
Fair Value of Financial Instruments. We have evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of our cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate their carrying amounts due to the relatively short maturity of these items.
Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
| | | | | | | | |
Level 1 | | Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
| | |
Level 2 | | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
| | |
Level 3 | | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The types of instruments valued based on quoted market prices in active markets include money market funds, certain U.S. Treasury securities, U.S. Government agency securities and equity securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
The types of instruments valued based on other observable inputs include corporate debt securities, municipal securities and certain U.S. Treasury securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.
The principal market in which we execute our foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants generally are large financial institutions. Our foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the dates indicated below, were presented on our Condensed Consolidated Balance Sheets as follows:
| | | | | | | | | | | | | | | | | | | |
| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | |
As of December 31, 2024 (In thousands) | Total | | (Level 1) | | (Level 2) | | |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
Corporate debt securities | $ | 3,631 | | | $ | — | | | $ | 3,631 | | | |
Money market funds and other | 1,215,402 | | | 1,215,402 | | | — | | | |
| | | | | | | |
U.S. Treasury securities | 19,962 | | | — | | | 19,962 | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Marketable securities: | | | | | | | |
Corporate debt securities | 873,071 | | | — | | | 873,071 | | | |
Municipal securities | 56,018 | | | — | | | 56,018 | | | |
| | | | | | | |
U.S. Government agency securities | 92,663 | | | 92,663 | | | — | | | |
U.S. Treasury securities | 701,153 | | | 599,116 | | | 102,037 | | | |
| | | | | | | |
Equity securities | 15,938 | | | 15,938 | | | — | | | |
| | | | | | | |
Total cash equivalents and marketable securities(1) | 2,977,838 | | | 1,923,119 | | | 1,054,719 | | | |
Other current assets: | | | | | | | |
Derivative assets | 34,598 | | | — | | | 34,598 | | | |
Other non-current assets: | | | | | | | |
Executive Deferred Savings Plan | 320,295 | | | 276,125 | | | 44,170 | | | |
Total financial assets(1) | $ | 3,332,731 | | | $ | 2,199,244 | | | $ | 1,133,487 | | | |
Liabilities | | | | | | | |
Derivative liabilities | $ | (14,401) | | | $ | — | | | $ | (14,401) | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total financial liabilities | $ | (14,401) | | | $ | — | | | $ | (14,401) | | | |
________________
(1) Excludes cash of $537.4 million held in operating accounts and time deposits of $265.1 million (of which $61.8 million were cash equivalents) as of December 31, 2024.
| | | | | | | | | | | | | | | | | | | |
| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | |
As of June 30, 2024 (In thousands) | Total | | (Level 1) | | (Level 2) | | |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
| | | | | | | |
Corporate debt securities | $ | 2,312 | | | $ | — | | | $ | 2,312 | | | |
Money market funds and other | 1,585,832 | | | 1,585,832 | | | — | | | |
| | | | | | | |
U.S. Treasury securities | 35,158 | | | — | | | 35,158 | | | |
| | | | | | | |
| | | | | | | |
Marketable securities: | | | | | | | |
Corporate debt securities | 771,920 | | | — | | | 771,920 | | | |
Municipal securities | 41,159 | | | — | | | 41,159 | | | |
| | | | | | | |
U.S. Government agency securities | 105,874 | | | 105,874 | | | — | | | |
U.S. Treasury securities | 716,148 | | | 476,230 | | | 239,918 | | | |
| | | | | | | |
Equity securities | 25,566 | | | 25,566 | | | — | | | |
| | | | | | | |
Total cash equivalents and marketable securities(1) | 3,283,969 | | | 2,193,502 | | | 1,090,467 | | | |
Other current assets: | | | | | | | |
Derivative assets | 36,503 | | | — | | | 36,503 | | | |
Other non-current assets: | | | | | | | |
Executive Deferred Savings Plan | 303,365 | | | 272,816 | | | 30,549 | | | |
Total financial assets(1) | $ | 3,623,837 | | | $ | 2,466,318 | | | $ | 1,157,519 | | | |
Liabilities | | | | | | | |
Derivative liabilities | $ | (15,683) | | | $ | — | | | $ | (15,683) | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total financial liabilities | $ | (15,683) | | | $ | — | | | $ | (15,683) | | | |
________________
(1) Excludes cash of $287.6 million held in operating accounts and time deposits of $932.4 million (of which $66.2 million were cash equivalents) as of June 30, 2024.
We did not have any financial assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of December 31, 2024 or June 30, 2024.
NOTE 4 – FINANCIAL STATEMENT COMPONENTS
Condensed Consolidated Balance Sheets
| | | | | | | | | | | |
| As of | | As of |
(In thousands) | December 31, 2024 | | June 30, 2024 |
Accounts receivable, net: | | | |
Accounts receivable, gross | $ | 2,365,480 | | | $ | 1,865,823 | |
Allowance for credit losses | (30,503) | | | (32,782) | |
| $ | 2,334,977 | | | $ | 1,833,041 | |
Inventories: | | | |
Customer service parts | $ | 585,981 | | | $ | 589,751 | |
Raw materials | 1,409,128 | | | 1,485,400 | |
Work-in-process | 768,134 | | | 700,895 | |
Finished goods | 283,097 | | | 258,735 | |
| $ | 3,046,340 | | | $ | 3,034,781 | |
Other current assets: | | | |
Deferred costs of revenues | $ | 250,035 | | | $ | 279,879 | |
Prepaid expenses | 143,956 | | | 124,969 | |
Contract assets | 82,292 | | | 69,259 | |
Prepaid income and other taxes | 69,755 | | | 102,398 | |
Other current assets | 64,844 | | | 82,822 | |
| $ | 610,882 | | | $ | 659,327 | |
Land, property and equipment, net: | | | |
Land | $ | 86,670 | | | $ | 78,260 | |
Buildings and leasehold improvements | 986,859 | | | 919,919 | |
Machinery and equipment | 1,164,974 | | | 1,116,793 | |
Office furniture and fixtures | 67,582 | | | 64,480 | |
Construction-in-process | 255,852 | | | 215,006 | |
| 2,561,937 | | | 2,394,458 | |
Less: accumulated depreciation | (1,388,009) | | | (1,284,490) | |
| $ | 1,173,928 | | | $ | 1,109,968 | |
Other non-current assets: | | | |
Executive Deferred Savings Plan(1) | $ | 320,295 | | | $ | 303,365 | |
Operating lease right of use assets | 249,036 | | | 231,812 | |
Other non-current assets | 149,722 | | | 157,546 | |
| $ | 719,053 | | | $ | 692,723 | |
Other current liabilities: | | | |
Compensation and benefits | $ | 547,845 | | | $ | 371,713 | |
Customer deposits | 486,322 | | | 645,893 | |
Executive Deferred Savings Plan(1) | 321,464 | | | 303,088 | |
Income taxes payable | 185,191 | | | 146,740 | |
Interest payable | 122,783 | | | 128,727 | |
Operating lease liabilities | 40,578 | | | 36,391 | |
Other liabilities and accrued expenses | 407,195 | | | 431,017 | |
| $ | 2,111,378 | | | $ | 2,063,569 | |
Other non-current liabilities: | | | |
Income taxes payable | $ | 224,208 | | | $ | 291,106 | |
Operating lease liabilities | 149,648 | | | 153,117 | |
Customer deposits | 56,535 | | | 99,794 | |
Pension liabilities | 53,094 | | | 51,778 | |
Other non-current liabilities | 155,633 | | | 147,320 | |
| $ | 639,118 | | | $ | 743,115 | |
________________
(1)We have a non-qualified deferred compensation plan (known as the “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) was $3.3 million and $25.8 million in the three months ended December 31, 2024 and 2023, respectively, and was $21.3 million and $16.5 million during the six months ended December 31, 2024 and 2023, respectively. The amount of net gains associated with changes in the EDSP assets included in SG&A expense was $3.5 million and $25.7 million in the three months ended December 31, 2024 and 2023, respectively, and $21.4 million and $16.2 million during the six months ended December 31, 2024 and 2023, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Currency Translation Adjustments | | Unrealized Gains (Losses) on Available-for-Sale Securities | | Unrealized Gains (Losses) on Derivatives | | Unrealized Gains (Losses) on Defined Benefit Plans | | Total |
Balance as of December 31, 2024 | $ | (80,016) | | | $ | 2,316 | | | $ | 46,557 | | | $ | (15,243) | | | $ | (46,386) | |
| | | | | | | | | |
Balance as of June 30, 2024 | $ | (75,846) | | | $ | (3,654) | | | $ | 46,243 | | | $ | (15,818) | | | $ | (49,075) | |
The effects on net income of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated periods were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
AOCI Components | | | | Three Months Ended | | Six Months Ended |
| Location in the Condensed Consolidated Statement of Operations | | December 31, | | December 31, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Unrealized gains on cash flow hedges from foreign exchange and interest rate contracts | | Revenues | | $ | 1,011 | | | $ | 8,036 | | | $ | 3,546 | | | $ | 11,432 | |
| | Costs of revenues and operating expenses | | 428 | | | (20) | | | 454 | | | 2,755 | |
| | Interest expense | | 821 | | | 937 | | | 1,768 | | | 1,874 | |
| | | | | | | | | | |
| | Net gains reclassified from AOCI | | $ | 2,260 | | | $ | 8,953 | | | $ | 5,768 | | | $ | 16,061 | |
Unrealized gains (losses) on available-for-sale securities | | Other expense (income), net | | $ | 1 | | | $ | (61) | | | $ | — | | | $ | (73) | |
The amounts reclassified out of AOCI related to our defined benefit pension plans that was recognized as a component of net periodic cost for the three months ended December 31, 2024 and 2023 was $0.2 million and $0.3 million, respectively, and for the six months ended December 31, 2024 and 2023 was $0.4 million and $0.5 million, respectively. For additional details, refer to Note 13 “Employee Benefit Plans” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
NOTE 5 – MARKETABLE SECURITIES
The amortized cost and fair value of our fixed income marketable securities as of the dates indicated below were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2024 (In thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Corporate debt securities | $ | 874,139 | | | $ | 3,086 | | | $ | (523) | | | $ | 876,702 | |
Money market funds and other | 1,215,402 | | | — | | | — | | | 1,215,402 | |
| | | | | | | |
Municipal securities | 55,911 | | | 148 | | | (41) | | | 56,018 | |
| | | | | | | |
U.S. Government agency securities | 92,412 | | | 340 | | | (89) | | | 92,663 | |
U.S. Treasury securities | 721,084 | | | 1,383 | | | (1,352) | | | 721,115 | |
| | | | | | | |
| | | | | | | |
Subtotal | 2,958,948 | | | 4,957 | | | (2,005) | | | 2,961,900 | |
Add: Time deposits(1) | 265,122 | | | — | | | — | | | 265,122 | |
Less: Cash equivalents | 1,300,828 | | | 5 | | | — | | | 1,300,833 | |
Marketable securities(2) | $ | 1,923,242 | | | $ | 4,952 | | | $ | (2,005) | | | $ | 1,926,189 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2024 (In thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Corporate debt securities | $ | 775,277 | | | $ | 973 | | | $ | (2,018) | | | $ | 774,232 | |
Money market funds and other | 1,585,832 | | | — | | | — | | | 1,585,832 | |
Municipal securities | 41,343 | | | 13 | | | (197) | | | 41,159 | |
| | | | | | | |
U.S. Government agency securities | 106,101 | | | 26 | | | (253) | | | 105,874 | |
U.S. Treasury securities | 754,505 | | | 209 | | | (3,408) | | | 751,306 | |
| | | | | | | |
| | | | | | | |
Subtotal | 3,263,058 | | | 1,221 | | | (5,876) | | | 3,258,403 | |
Add: Time deposits(1) | 932,436 | | | — | | | — | | | 932,436 | |
Less: Cash equivalents | 1,689,540 | | | — | | | (1) | | | 1,689,539 | |
Marketable securities(2) | $ | 2,505,954 | | | $ | 1,221 | | | $ | (5,875) | | | $ | 2,501,300 | |
________________
(1) Time deposits excluded from fair value measurements.
(2) Excludes equity marketable securities.
Our investment portfolio includes both corporate and government securities that have a maximum maturity of three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower yield-at-cost show a mark-to-market unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields. We believe that we have the ability to realize the full value of all these investments upon maturity. As of December 31, 2024, we had 200 investments in a gross unrealized loss position. The following table summarizes the fair value and gross unrealized losses of our investments that were in an unrealized loss position as of the dates indicated below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2024 | Less than 12 Months | | 12 Months or Greater | | Total |
(In thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
Corporate debt securities | $ | 172,297 | | | $ | (410) | | | $ | 41,908 | | | $ | (113) | | | $ | 214,205 | | | $ | (523) | |
Municipal securities | 15,675 | | | (33) | | | 2,453 | | | (8) | | | 18,128 | | | (41) | |
| | | | | | | | | | | |
U.S. Government agency securities | 17,245 | | | (89) | | | — | | | — | | | 17,245 | | | (89) | |
U.S. Treasury securities | 268,818 | | | (1,109) | | | 54,030 | | | (243) | | | 322,848 | | | (1,352) | |
Total | $ | 474,035 | | | $ | (1,641) | | | $ | 98,391 | | | $ | (364) | | | $ | 572,426 | | | $ | (2,005) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2024 | Less than 12 Months | | 12 Months or Greater | | Total |
(In thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
Corporate debt securities | $ | 355,882 | | | $ | (942) | | | $ | 100,957 | | | $ | (1,076) | | | $ | 456,839 | | | $ | (2,018) | |
Municipal securities | 17,364 | | | (81) | | | 10,788 | | | (116) | | | 28,152 | | | (197) | |
| | | | | | | | | | | |
U.S. Government agency securities | 58,598 | | | (137) | | | 17,197 | | | (116) | | | 75,795 | | | (253) | |
U.S. Treasury securities | 466,144 | | | (1,040) | | | 166,867 | | | (2,368) | | | 633,011 | | | (3,408) | |
Total | $ | 897,988 | | | $ | (2,200) | | | $ | 295,809 | | | $ | (3,676) | | | $ | 1,193,797 | | | $ | (5,876) | |
The contractual maturities of securities classified as available-for-sale, regardless of their classification on our Condensed Consolidated Balance Sheets, as of the date indicated below were as follows:
| | | | | | | | | | | |
As of December 31, 2024 (In thousands) | Amortized Cost | | Fair Value |
Due within one year | $ | 954,567 | | | $ | 955,495 | |
Due after one year through three years | 968,675 | | | 970,694 | |
Total | $ | 1,923,242 | | | $ | 1,926,189 | |
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on available-for-sale securities for the three and six months ended December 31, 2024 and 2023 were immaterial.
The costs for our equity marketable securities were $22.9 million as of both December 31, 2024, and June 30, 2024. Unrealized gains (losses) for our equity marketable securities were $(3.7) million and $1.2 million during the three months ended December 31, 2024 and 2023, respectively. Unrealized losses for our equity marketable securities were $9.6 million and $3.1 million during the six months ended December 31, 2024 and 2023, respectively.
NOTE 6 – GOODWILL AND PURCHASED INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
During the second quarter of fiscal 2025, in connection with our annual strategic planning process, we noted a continued deterioration of the long-term forecast for our Printed Circuit Board (“PCB”) business, which is part of our PCB and Component Inspection reportable segment. In addition, in the second quarter of fiscal 2025, we completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. The downward revision of financial outlook for PCB and the reorganization of reporting units triggered goodwill impairment tests.
The following table presents changes in goodwill carrying value by reportable segment during the six months ended December 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Semiconductor Process Control | | Specialty Semiconductor Process | | PCB and Component Inspection | | Total |
Balances as of June 30, 2024 | $ | 753,018 | | | $ | 681,858 | | | $ | 580,850 | | | $ | 2,015,726 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Goodwill impairment | — | | | — | | | (230,400) | | | (230,400) | |
| | | | | | | |
Foreign currency adjustments | (29) | | | — | | | — | | | (29) | |
Balances as of December 31, 2024 | $ | 752,989 | | | $ | 681,858 | | | $ | 350,450 | | | $ | 1,785,297 | |
As a result of our quantitative assessment before reorganization, we recorded a total goodwill impairment charge of $230.4 million in the PCB reporting unit, which is part of the PCB and Component Inspection reportable segment, in the three months ended December 31, 2024. No goodwill impairment was identified in the Specialty Semiconductor Process reportable
segment. We assessed for impairment subsequent to the reorganization and noted no impairment. The goodwill balances of our new reporting units after reorganization were allocated on a relative fair value basis.
To determine the fair value of a reporting unit, we utilized income and market approaches and applied a weighting of 75 percent and