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KLA Corporation Reports Fiscal 2021 Third Quarter Results

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- Total revenues were $1.80 billion, finishing at the upper end of the range of guidance;

- GAAP diluted EPS attributable to KLA was $3.66, and non-GAAP diluted EPS attributable to KLA was $3.85, each also finishing at the upper end of the range of guidance;

- Cash flow from operations and free cash flow were both records at $646.2 million and $585.0 million, respectively;

- Capital return was $412.7 million with $139.3 million in dividends and $273.4 million in share repurchases

MILPITAS, Calif., April 29, 2021 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2021, which ended on March 31, 2021, and reported GAAP net income attributable to KLA of $567 million and GAAP earnings per diluted share attributable to KLA of $3.66 on revenue of $1.80 billion.

Link: https://mma.prnewswire.com/media/806571/KLA_Corporation_Logo.jpg

"KLA's March quarter results demonstrate strong momentum in our business. We have seen a sharp increase in business levels in each of our major end markets, driven by secular demand trends across a broad range of semiconductor markets and applications," commented Rick Wallace, president and chief executive officer of KLA Corporation. "Against this backdrop, KLA continues to demonstrate our ability to meet customer requirements while growing operating profits, generating record free cash flow, and maintaining our long-term strategy of productive capital allocation."

GAAP Results


Q3 FY 2021

Q2 FY 2021

Q3 FY 2020

Total revenue

$1,804 million

$1,651 million

$1,424 million

Net Income Attributable to KLA

$567 million

$457 million

$78 million

Net Income per Diluted Share Attributable to KLA

$3.66

$2.94

$0.50





Non-GAAP Results


Q3 FY 2021

Q2 FY 2021

Q3 FY 2020

Net Income Attributable to KLA

$598 million

$504 million

$389 million

Net Income per Diluted Share Attributable to KLA

$3.85

$3.24

$2.47

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. KLA will discuss the results for its fiscal year 2021 third quarter, along with its outlook, on a conference call today beginning at 2 p.m. PT. A webcast of the call will be available at: www.kla.com.

Fourth Quarter Fiscal 2021 Guidance

The following details our guidance for the fourth quarter of fiscal 2021 ending in June:

  • Total revenue between $1,755 million to $1,955 million

  • GAAP gross margin is expected to be in a range of 58% to 61%

  • Non-GAAP gross margin is expected to be in a range of 61% to 63%

  • GAAP diluted EPS attributable to KLA is expected to be in a range of $3.20 to $4.08

  • Non-GAAP diluted EPS attributable to KLA in a range of $3.47 to $4.35

For additional guidance metrics, please see the company's published letter to shareholders and earnings slides on the KLA investor relations website.

About KLA:

KLA Corporation ("KLA") develops industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers and reticles, integrated circuits, packaging, printed circuit boards and flat panel displays. In close collaboration with leading customers across the globe, our expert teams of physicists, engineers, data scientists and problem-solvers design solutions that move the world forward. Investors and others should note that KLA announces material financial information including SEC filings, press releases, public earnings calls and conference webcasts using an investor relations website (ir.kla.com). Additional information may be found at: www.kla.com.

Note Regarding Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements pertaining to revenues, GAAP and non-GAAP gross margin and GAAP and non-GAAP diluted EPS for the quarter ending June 30, 2021 are forward-looking statements and subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the future impacts of the COVID-19 pandemic; delays and disruptions in the supply chain; the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product and technology offerings by competitors; push-out of deliveries or cancellation of orders by customers; the ability of KLA's research and development teams to successfully innovate and develop technologies and products that are responsive to customer demands; KLA's ability to successfully manage its costs; market acceptance of KLA's existing and newly launched products; changing customer demands; and industry transitions. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this letter, please refer to KLA Corporation's Annual Report on Form 10-K for the year ended June 30, 2020, and other subsequent filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA Corporation assumes no obligation to, and does not currently intend to, update these forward-looking statements.

KLA Corporation




Condensed Consolidated Unaudited Balance Sheets








(In thousands)

March 31, 2021


June 30, 2020

ASSETS




Cash, cash equivalents and marketable securities

$

2,442,725



$

1,980,472


Accounts receivable, net

1,201,991



1,107,413


Inventories

1,450,588



1,310,985


Other current assets

309,861



324,675


Land, property and equipment, net

628,438



519,824


Goodwill

2,011,187



2,045,402


Deferred income taxes, non-current

240,822



236,797


Purchased intangible assets, net

1,237,589



1,391,413


Other non-current assets

416,039



362,979


Total assets

$

9,939,240



$

9,279,960


LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY



Current liabilities:




Accounts payable

$

295,111



$

264,280


Deferred system revenue

332,296



336,237


Deferred service revenue

252,992



233,493


Short-term debt

20,000




Other current liabilities

1,129,067



865,776


Total current liabilities

2,029,466



1,699,786


Non-current liabilities:




Long-term debt

3,422,097



3,469,670


Deferred tax liabilities

629,896



660,885


Deferred service revenue

86,902



96,325


Other non-current liabilities

658,015



672,284


Total liabilities

6,826,376



6,598,950


Stockholders' equity:




Common stock and capital in excess of par value

2,115,205



2,090,268


Retained earnings

1,070,124



654,930


Accumulated other comprehensive income (loss)

(70,473)



(79,774)


Total KLA stockholders' equity

3,114,856



2,665,424


Non-controlling interest in consolidated subsidiaries

(1,992)



15,586


Total stockholders' equity

3,112,864



2,681,010


Total liabilities and stockholders' equity

$

9,939,240



$

9,279,960


KLA Corporation








Condensed Consolidated Unaudited Statements of Operations
















Three Months Ended March 31,


Nine Months Ended March 31,

(In thousands, except per share amounts)

2021


2020


2021


2020

Revenues:








Product

$

1,375,320



$

1,051,096



$

3,758,838



$

3,253,621


Service

428,453



372,868



1,234,425



1,093,210


Total revenues

1,803,773



1,423,964



4,993,263



4,346,831


Costs and expenses:








Costs of revenues

709,629



590,158



1,999,924



1,828,017


Research and development

238,957



215,433



687,059



646,764


Selling, general and administrative

183,040



185,760



537,580



566,358


Goodwill impairment



256,649





256,649


Interest expense

39,092



39,231



117,358



120,053


Loss on extinguishment of debt



22,538





22,538


Other expense (income), net

(7,348)



(1,004)



(269)



(5,190)


Income before income taxes

640,403



115,199



1,651,611



911,642


Provision for income taxes

73,233



37,190



207,316



106,932


Net income

567,170



78,009



1,444,295



804,710


Less: Net loss attributable to non-controlling interest

(326)



(443)



(1,019)



(822)


Net income attributable to KLA

$

567,496



$

78,452



$

1,445,314



$

805,532


Net income per share attributable to KLA:








Basic

$

3.69



$

0.50



$

9.36



$

5.12


Diluted

$

3.66



$

0.50



$

9.28



$

5.08


Weighted-average number of shares:








Basic

153,801



156,067



154,457



157,356


Diluted

155,159



157,172



155,789



158,586


KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flows


Three Months Ended

March 31,

(In thousands)

2021


2020

Cash flows from operating activities:




Net income

$

567,170



$

78,009


Adjustments to reconcile net income to net cash provided by operating activities:




Goodwill impairment



256,649


Depreciation and amortization

84,365



81,990


Loss on extinguishment of debt



22,538


(Gain) loss on unrealized foreign exchange and other

5,231



(5,950)


Asset impairment charges

(23)




Stock-based compensation expense

30,327



31,270


Gain on sale of business

(4,422)




Settlement of treasury lock agreement



(21,518)


Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:




Accounts receivable

16,055



73,103


Inventories

(34,169)



(11,640)


Other assets

(20,851)



(23,899)


Accounts payable

32,735



(12,904)


Deferred system revenue

57,820



89,280


Deferred service revenue

11,507



10,691


Other liabilities

(99,595)



(125,591)


Net cash provided by operating activities

646,150



442,028


Cash flows from investing activities:




Proceeds from sale of business

16,833




Business acquisitions, net of cash acquired



(70)


Capital expenditures

(61,183)



(43,445)


Purchases of available-for-sale securities

(303,076)



(156,173)


Proceeds from sale of available-for-sale securities

14,962



69,034


Proceeds from maturity of available-for-sale securities

159,120



133,819


Purchases of trading securities

(48,495)



(46,784)


Proceeds from sale of trading securities

45,251



45,407


Net cash used in (provided by) investing activities

(176,588)



1,788


Cash flows from financing activities:




Proceeds from issuance of debt, net of issuance costs



742,004


Repayment of debt

(20,000)



(721,033)


Common stock repurchases

(273,441)



(315,995)


Payment of dividends to stockholders

(139,338)



(133,327)


Issuance of common stock



672


Tax withholding payments related to equity awards

(6,674)



(4,958)


Net cash used in financing activities

(439,453)



(432,637)


Effect of exchange rate changes on cash and cash equivalents

(9,425)



(4,868)


Net increase (decrease) in cash and cash equivalents

20,684



6,311


Cash and cash equivalents at beginning of period

1,431,466



939,864


Cash and cash equivalents at end of period

$

1,452,150



$

946,175


Supplemental cash flow disclosures:




Income taxes paid

$

100,657



$

91,972


Interest paid

$

39,980



$

35,176


Non-cash activities:




Accrued purchase of land, property and equipment - investing activities

$

24,392



$

17,137


Contingent consideration payable - financing activities

$

178



$

303


Dividends payable - financing activities

$

779



$

1,388


Unsettled common stock repurchase - financing activities

$

6,000



$


Accrued debt issuance costs - financing activities

$



$

193


KLA Corporation
Segment Information (Unaudited)

The following is a summary of results for each of our four reportable segments and reconciliation to total revenues for the indicated periods:


Three Months Ended March 31,


Nine Months Ended March 31,

(In thousands)

2021


2020


2021


2020

Revenues:








Semiconductor Process Control

$

1,506,140



$

1,177,777



$

4,154,278



$

3,588,839


Specialty Semiconductor Process

91,724



85,083



271,264



229,328


PCB, Display and Component Inspection

205,202



160,411



565,646



525,242


Other

149



469



739



3,217


Total revenues for reportable segments

1,803,215



1,423,740



4,991,927



4,346,626


Corporate allocation and effects of foreign exchange rates

558



224



1,336



205


Total revenues

$

1,803,773



$

1,423,964



$

4,993,263



$

4,346,831


KLA Corporation
Condensed Consolidated Unaudited Supplemental Information

Reconciliation of GAAP Net Income and GAAP Earnings Per Diluted Share to Non-GAAP Net Income and Non-GAAP Earnings Per Diluted Share




Three Months Ended


Nine Months Ended


(In thousands, except per share amounts)


March 31,
2021


Dec. 31,
2020


March 31,
2020


March 31,
2021


March 31,
2020

GAAP net income attributable to KLA


$

567,496



$

457,251



$

78,452



$

1,445,314



$

805,532


Adjustments to reconcile GAAP net income to non-GAAP net income:












Acquisition-related charges

a

52,973



53,099



55,022



156,547



188,778



Restructuring, severance and other charges

b

(1,534)



3,960



5,432



5,679



8,218



Goodwill impairment

c





256,649





256,649



Loss on extinguishment of debt

d





22,538





22,538



Income tax effect of non-GAAP adjustments

e

(17,866)



(17,552)



(23,604)



(52,431)



(67,375)



Discrete tax items

f

(2,967)



7,381



(5,551)



21,901



(5,551)


Non-GAAP net income attributable to KLA


$

598,102



$

504,139



$

388,938



$

1,577,010



$

1,208,789


GAAP net income per diluted share attributable to KLA


$

3.66



$

2.94



$

0.50



$

9.28



$

5.08


Non-GAAP net income per diluted share attributable to KLA


$

3.85



$

3.24



$

2.47



$

10.12



$

7.62


Shares used in diluted shares calculation


155,159



155,560



157,172



155,789



158,586


Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations

(In thousands)

Acquisition - Related Charges


Restructuring, Severance and Other Charges


Goodwill Impairment


Debt Extinguishment Loss


Total pre-tax GAAP to non-GAAP Adjustments

Three months ended March 31, 2021










Costs of revenues

$

40,309



$

701



$



$



$

41,010


Research and development



147







147


Selling, general and administrative

12,664



2,075







14,739


Other expense (income), net



(4,457)







(4,457)


Total in three months ended March 31, 2021

$

52,973



$

(1,534)



$



$



$

51,439


Three months ended Dec. 31, 2020










Costs of revenues

$

38,738



$

765



$



$



$

39,503


Research and development



1,432







1,432


Selling, general and administrative

14,361



2,450







16,811


Other expense (income), net



(687)







(687)


Total in three months ended Dec. 31, 2020

$

53,099



$

3,960



$



$



$

57,059


Three months ended March 31, 2020










Costs of revenues

$

36,850



$

483



$



$



$

37,333


Research and development



685







685


Selling, general and administrative

18,172



4,264







22,436


Goodwill impairment





256,649





256,649


Loss on extinguishment of debt







22,538



22,538


Total in three months ended March 31, 2020

$

55,022



$

5,432



$

256,649



$

22,538



$

339,641


Free Cash Flow Reconciliation



Three Months Ended March 31,

(In thousands)


2021


2020

Net cash provided by operating activities


$

646,150



$

442,028


Capital expenditures


(61,183)



(43,445)


Free Cash Flow


$

584,967



$

398,583


Fourth Quarter Fiscal 2021 Guidance

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS



Three Months Ending June 30, 2021

(In millions, except per share amounts)


Low


High

GAAP net income per diluted share attributable to KLA


$3.20


$4.08

Acquisition-related charges

a

0.34


0.34

Restructuring, severance and other charges

b

0.04


0.04

Income tax effect of non-GAAP adjustments

e

(0.11)


(0.11)

Non-GAAP net income per diluted share attributable to KLA


$3.47


$4.35

Shares used in net income per diluted share calculation


154.5


154.5

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin



Three Months Ending June 30, 2021



Low


High

GAAP gross margin


58%


61%

Acquisition-related charges

a

3%


2%

Non-GAAP gross margin


61%


63%

The Non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for, KLA's financial results presented in accordance with United States GAAP.

To supplement our Condensed Consolidated Financial Statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of our operating performance and our prospects in the future. Specifically, we believe that the non-GAAP information, including non-GAAP net income attributable to KLA, non-GAAP net income per diluted share attributable to KLA and Free Cash Flow, provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results to help investors compare our operating performances with our results in prior periods as well as with the performance of other companies. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics are inherently subject to significant discretion (for example, determining which costs and expenses to exclude when calculating such a metric). As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP. The following are descriptions of the adjustments made to reconcile GAAP net income attributable to KLA to non-GAAP net income attributable to KLA:

a.

Acquisition-related charges primarily include amortization of intangible assets and other acquisition-related adjustments including adjustments for the fair valuation of inventory and backlog, and transaction costs associated with our acquisitions, primarily Orbotech.

b.

Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-based compensation arrangements, and other exit costs.

c.

Goodwill impairment included non-cash expense recognized as a result of KLA's annual testing for goodwill impairment performed in the third quarter of the prior fiscal year. The impairment charge resulted from the downward revision of financial outlook for the acquired Orbotech business as well as the impact of elevated risk and macroeconomic slowdown driven by the COVID-19 pandemic.

d.

Loss on extinguishment of debt included a pre-tax loss on early extinguishment of the $500 million 4.125% Senior Notes due in November 2021.

e.

Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above.

f.

Discrete tax items in the three months ended March 31, 2021 primarily relate to a tax benefit of $3.0 million due to a decrease in deferred tax liability on purchased intangibles relating to a decrease in the effective income tax rate in Israel. Discrete tax items in the three months ended Dec. 31, 2020 consist primarily of a tax expense of $4.0 million from an internal restructuring. Discrete tax items in the nine months ended March 31, 2021 primarily include the aforementioned items as well as a tax expense of $14.0 million due to an increase in deferred tax liability on purchased intangibles relating to an increase in the United Kingdom statutory income tax rate. Discrete tax items in the three months and nine months ended March 31, 2020 include a decrease in deferred tax liability for an unrealized gain on investments held for sale by subsidiaries of the acquired Orbotech business.

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SOURCE KLA Corporation