Annual report pursuant to Section 13 and 15(d)

REVENUE

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REVENUE
 12 Months Ended
Jun. 30, 2024
Revenue from Contract with Customer [Abstract]  
REVENUE REVENUE
Contract Balances
The following table represents the opening and closing balances of accounts receivable, contract assets and contract liabilities for the indicated periods.
As of As of As of
(In thousands, except for percentages) June 30, 2024 June 30, 2023 June 30, 2022 Change in Fiscal 2024 Change in Fiscal 2023
Accounts receivable, net $ 1,833,041  $ 1,753,361  $ 1,811,877  $ 79,680  5  % $ (58,516) (3) %
Contract assets $ 69,259  $ 117,137  $ 114,747  $ (47,878) (41) % $ 2,390  2  %
Contract liabilities $ 1,782,242  $ 1,245,007  $ 1,007,324  $ 537,235  43  % $ 237,683  24  %
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 fiscal year ended June 30, 2024 was mainly due to $104.1 million of contract assets reclassified to net accounts receivable as our right to consideration for these contract assets became unconditional, partially offset by $56.8 million of revenue recognized for which the payment is subject to conditions other than the passage of time. Contract assets are included in other current assets on our Consolidated Balance Sheets.
The change in contract liabilities during the fiscal year ended June 30, 2024 was mainly due to the value of products and services billed to customers for which control of the products and services has not transferred to the customers, partially offset by the recognition in revenue of $963.5 million that was included in contract liabilities as of June 30, 2023. The change in contract liabilities during the fiscal year ended June 30, 2023 was mainly due to the value of products and services billed to customers for which control of the products and services has not transferred to the customers, partially offset by the recognition in revenue of $819.0 million that was included in contract liabilities as of June 30, 2022. Contract liabilities are included in current and non-current liabilities on our Consolidated Balance Sheet.
Remaining Performance Obligations
As of June 30, 2024, we had $9.83 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 $745.7 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.78 billion as disclosed above. We expect to recognize approximately 59% to 64% of these performance obligations as revenue in the next 12 months, 29% to 34% in the subsequent 12 months and the remainder thereafter, but this estimate is subject to constant change. The timing of revenue recognition of our RPO is evaluated quarterly and is largely driven by multiple variables, many of which are beyond our control, such as: 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, supply chain constraints and changes in regulations. 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.
In addition, in October 2022, the U.S. government issued regulations 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 the People’s Republic of China (“China”), and for the provision of support by U.S. Persons to certain advanced IC fabs located in China. The regulations impose export license requirements effectively on all KLA products 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. In October 2023, the U.S. government issued additional regulations that went into effect in November 2023. 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 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. The regulations are very complex and, in January 2024, KLA, among other companies, submitted comments to the government regarding these regulations. 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. While some export licenses have been obtained by us or our customers, there can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted.
Practical expedients
We apply the following practical expedients in accordance with ASC 606, Revenue from Contracts with Customers:
•We account for shipping and handling costs as activities to fulfill the promise to transfer goods, instead of a promised service to our customer.
•We have elected to not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will generally be one year or less.
•We have elected to expense costs to obtain a contract as incurred because the expected amortization period is one year or less.
Refer to Note 19 “Segment Reporting and Geographic Information” for information related to revenue by geographic region as well as significant product and service offerings.