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KLA's (KLAC) Earnings and Revenues Beat Estimates in Q4

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KLA Corporation KLAC reported fourth-quarter fiscal 2022 earnings per share of $5.81, which beat the Zacks Consensus Estimate by 6.4%. The figure was up 31.2% year over year and 13.3%, sequentially.

Revenues increased 29.2% from the year-ago quarter’s level and 8.7% from the prior quarter’s level to $2.49 billion, surpassing the Zacks Consensus Estimate by 2.9%. The reported figure was near the higher end of management’s guided range of $2.30-$2.55 billion.

Strong customer demand for major product groups drove the quarterly results.

Growing investments across multiple nodes and rising capital intensity in Foundry & Logic contributed well to the quarterly performance.

Strong performance of the wafer inspection business owing to rising demand for advanced wafer inspection applications in leading-edge technology development remained a tailwind.

Management has a favorable outlook for the wafer fab equipment industry despite supply challenges and macro headwinds. It expects positive industry dynamics to continue in the calendar year 2022 owing to strong semiconductor demand.

KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation Price, Consensus and EPS Surprise
KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote

Top-Line Details

Products revenues (accounting for 79% of total revenues) increased 33.3% year over year to $1.98 billion. Yet, the same declined 9.7% from the prior quarter’s level.

Services revenues (21% of total revenues) were up 4.8%, sequentially and 15.2%, from the year-ago quarter’s reading to $511.6 million.

Growth in Services revenues is attributed to the expanding installed base, increasing customer adoption of long-term service agreements, higher utilization rates and expansion of Service opportunities in the legacy nodes.

In terms of reportable segments, Semiconductor Process Control revenues increased 34% year over year to $2.1 billion, driven by strength in Foundry & Logic. Foundry & Logic accounted for 55%, while Memory constituted about 45% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues were $124 million, up 27% year over year. PCB, Display and Component Inspection revenues rose 1% from the year-ago quarter’s actuals to $249 million.

The Electronics, Packaging and Components or EPC group reported strong quarterly results, driven by strength in automotive, 5G and advanced packaging.

Regarding revenue breakdown by major products, Wafer Inspection, Patterning, including reticle inspection, and Specialty Semiconductor Process accounted for 44%, 20% and 4% of KLA’s total revenues for the fiscal fourth quarter, respectively. PCB, Display and Component Inspection accounted for 7%, Service contributed 21% and Other —reported in the Semiconductor Process Control segment — constituted 4% of the quarterly revenues.

In terms of regional breakdown of revenues, China, Taiwan and Korea accounted for 29%, 25% and 16% of the total revenues for the fiscal fourth quarter, respectively. North America, Japan, Europe and South East Asia accounted for 10%, 9%, 8% and 3%, respectively.

Operating Details

Non-GAAP gross margin expanded 40 basis points (bps) from the prior-year quarter’s level to 62.4%. The figure was near the midpoint (62.5) of the guided range of 61.5-63.5%.

Research and development (R&D) expenses increased 22.97% year over year to $296.9 million. Selling, general and administrative (SG&A) expenses also increased 23.3% year over year to $236.8 million. As a percentage of sales, R&D and SG&A expenses contracted 60 bps and 50 bps year over year, respectively.

For the reported quarter, non-GAAP operating margin was 41.8%, expanding 160 bps year over year.

Balance Sheet

As of Jun 30, 2022, cash, cash equivalents and marketable securities totaled $2.71 billion compared with $2.58 billion on Mar 31, 2022.

Cash flow from operating activities was $819.2 million for the fiscal fourth quarter compared with $818.9 million in the prior quarter. Free cash flow was $746.1 million for the reported quarter compared with $718.6 million in the prior quarter.

During the fiscal fourth quarter, KLAC paid $158 million as dividends and repurchased $3.47 billion shares.

First-Quarter Fiscal 2023 Guidance

For first-quarter fiscal 2023, revenues are expected between $2.475 billion and $2.725 billion. The Zacks Consensus Estimate for revenues is pegged at $2.51 billion.

KLA expects non-GAAP EPS within $5.70-$6.80. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $5.77.

Management expects non-GAAP gross margin in the range of 62-64%.

Zacks Rank & Stocks to Consider

Currently, KLA has a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology AZPN, Keysight Technologies KEYS and Asure Software ASUR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen technology has returned 28.2% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.

Keysight Technologies has lost 22.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

Asure Software has lost 26.7% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.


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