Quarterly report pursuant to Section 13 or 15(d)

REVENUE

v3.24.4
REVENUE
 6 Months Ended
Dec. 31, 2024
Revenue from Contract with Customer [Abstract]  
REVENUE 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.
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.