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KLA Corporation Reports Fiscal 2020 Second Quarter Results

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MILPITAS, Calif., Feb. 4, 2020 /PRNewswire/ -- KLA Corporation (NASDAQ:KLAC) today announced operating results for its second quarter of fiscal year 2020, which ended on Dec. 31, 2019, and reported GAAP net income attributable to KLA of $381 million and GAAP earnings per diluted share attributable to KLA of $2.40 on revenues of $1.51 billion.

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"KLA once again demonstrated solid execution in the December quarter, delivering results in the upper end of the range of guidance, and capping multiple records across revenue, GAAP EPS and non-GAAP EPS for the quarter," commented Rick Wallace, president and CEO of KLA. "As we begin the new calendar year, we are excited with the growth opportunities that lie ahead for KLA, with the industry outlook calling for growth led by technology transitions in advanced Logic, expanding investment in EUV, and with the expectation that Memory investment will improve in the calendar year. As the leading supplier of process control and specialty semiconductor process equipment for semiconductor and related electronics industries, and supported by a large and growing services business, KLA is uniquely positioned to benefit from this growth while continuing to deliver high levels of profitability."

GAAP Results


Q2 FY 2020

Q1 FY 2020

Q2 FY 2019

Revenues

$1,509 million

$1,413 million

$1,120 million

Net Income Attributable to KLA

$381 million

$347 million

$369 million

Earnings per Diluted Share Attributable to KLA

$2.40

$2.16

$2.42





Non-GAAP Results


Q2 FY 2020

Q1 FY 2020

Q2 FY 2019

Net Income Attributable to KLA

$422 million

$398 million

$372 million

Earnings per Diluted Share Attributable to KLA

$2.66

$2.48

$2.44

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. Non-GAAP results include the impact of recurring stock-based compensation, but exclude the impact of acquisitions or pending acquisitions, restructuring, severance, merger and other related charges and certain discrete tax items. KLA will discuss the results for its fiscal year 2020 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla.com.

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. Additional information may be found at: www.kla.com.

Use of Non-GAAP Financial Information:

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 KLA's condensed consolidated financial statements presented in accordance with GAAP, the company provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses (benefits), as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of KLA's operating performance and its prospects in the future. Specifically, KLA believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA's financial performance by excluding certain costs and expenses (benefits) that the company believes are not indicative of its core operating results. 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 (for example, determining which costs and expenses (benefits) to exclude when calculating such a metric) are inherently subject to significant discretion. 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.

Note Regarding Forward-Looking Statements:

This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, including statements regarding the industry outlook on growth, are subject to risks and uncertainties. For the factors that may cause actual results to differ materially from those projected and anticipated in the forward-looking statements in this release, please refer to KLA's annual report on Form 10-K for the year ended June 30, 2019, subsequently filed quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, without limitation, the risk factors described therein). Except as otherwise specifically indicated, the information included in this release is as of the date it is delivered. KLA assumes no obligation to, and does not currently intend to, update these forward-looking statements.

KLA Corporation




Condensed Consolidated Unaudited Balance Sheets








(In thousands)

Dec 31, 2019


Jun 30, 2019

ASSETS




Cash, cash equivalents and marketable securities

$

1,677,522



$

1,739,385


Accounts receivable, net

1,191,035



990,113


Inventories

1,251,400



1,262,500


Other current assets

257,486



323,077


Land, property and equipment, net

489,980



448,799


Goodwill

2,299,781



2,211,858


Deferred income taxes, non-current

213,255



206,141


Purchased intangible assets, net

1,492,450



1,560,670


Other non-current assets

377,811



265,973


Total assets

$

9,250,720



$

9,008,516


LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

256,646



$

202,416


Deferred system revenue

247,103



282,348


Deferred service revenue

204,284



206,669


Current portion of long-term debt



249,999


Other current liabilities

1,010,210



827,054


Total current liabilities

1,718,243



1,768,486


Non-current liabilities:




Long-term debt

3,399,877



3,173,383


Deferred tax liabilities

680,929



702,285


Deferred service revenue

99,969



98,772


Other non-current liabilities

663,732



587,897


Total liabilities

6,562,750



6,330,823


Stockholders' equity:




Common stock and capital in excess of par value

2,017,521



2,017,312


Retained earnings

719,001



714,825


Accumulated other comprehensive income (loss)

(66,758)



(73,029)


Total KLA stockholders' equity

2,669,764



2,659,108


Non-controlling interest in consolidated subsidiary

18,206



18,585


Total stockholders' equity

2,687,970



2,677,693


Total liabilities and stockholders' equity

$

9,250,720



$

9,008,516


























KLA Corporation

Condensed Consolidated Unaudited Statements of Operations










Three Months Ended Dec 31,


Six Months Ended Dec 31,

(In thousands, except per share amounts)

2019


2018


2019


2018

Revenues:








Product

$

1,144,550



$

852,201



$

2,202,525



$

1,681,428


Service

364,903



267,697



720,342



531,730


Total revenues

1,509,453



1,119,898



2,922,867



2,213,158


Costs and expenses:








Costs of revenues

633,618



408,260



1,237,859



789,647


Research and development

220,751



165,903



431,331



319,433


Selling, general and administrative

192,253



112,462



380,598



226,900


Interest expense and other, net

37,904



17,310



76,636



33,647


Income before income taxes

424,927



415,963



796,443



843,531


Provision for income taxes

44,622



46,863



69,742



78,487


Net income

380,305



369,100



726,701



765,044


Less: Net loss attributable to non-controlling interest

(250)





(379)




Net income attributable to KLA

$

380,555



$

369,100



$

727,080



$

765,044


Net income per share attributable to KLA:








Basic

$

2.42



$

2.43



$

4.60



$

4.98


Diluted

$

2.40



$

2.42



$

4.56



$

4.96


Weighted-average number of shares:








Basic

157,290



152,148



157,994



153,684


Diluted

158,620



152,648



159,314



154,389





KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flow



Three Months Ended

Dec 31,

(In thousands)

2019


2018

Cash flows from operating activities:




Net income

$

380,305



$

369,100


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




Depreciation and amortization

88,534



15,806


Loss (gain) on unrealized foreign exchange and other

(5,450)



895


Stock-based compensation expense

26,789



15,695


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




Accounts receivable

(126,682)



(55,869)


Inventories

(1,477)



(15,109)


Other assets

3,558



34,978


Accounts payable

35,258



(2,440)


Deferred system revenue

(30,412)



(19,723)


Deferred service revenue

1,220



12,211


Other liabilities

16,088



(73,372)


Net cash provided by operating activities

387,731



282,172


Cash flows from investing activities:




Capital expenditures

(34,874)



(26,366)


Purchases of available-for-sale securities

(144,715)



(2,686)


Proceeds from sale of available-for-sale securities

10,287



107,370


Proceeds from maturity of available-for-sale securities

158,699



128,052


Purchases of trading securities

(12,852)



(27,481)


Proceeds from sale of trading securities

15,307



29,722


Net cash (used in) provided by investing activities

(8,148)



208,611


Cash flows from financing activities:




Proceeds from revolving credit facility

250,000




Repayment of debt

(275,000)




Common stock repurchases

(284,593)



(250,213)


Payment of dividends to stockholders

(134,696)



(114,562)


Issuance of common stock

24,499



20,556


Tax withholding payments related to equity awards

(12,237)



(3,233)


Payment of contingent consideration payable

(3)




Net cash used in financing activities

(432,030)



(347,452)


Effect of exchange rate changes on cash and cash equivalents

3,963



1,137


Net (decrease) increase in cash and cash equivalents

(48,484)



144,468


Cash and cash equivalents at beginning of period

988,348



1,649,514


Cash and cash equivalents at end of period

$

939,864



$

1,793,982


Supplemental cash flow disclosures:




Income taxes paid

$

50,884



$

87,854


Interest paid

$

53,140



$

51,136


Non-cash activities:




Business acquisition holdback amounts - investing activities

$



$

440


Contingent consideration payable - financing activities

$

(3,540)



$

2,529


Dividends payable - financing activities

$

1,638



$

5,404


Unsettled common stock repurchase - financing activities

$

4,000



$


Accrued purchase of land, property and equipment - investing activities

$

13,755



$

7,705





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 Dec 31,


Six Months Ended Dec 31,

(In thousands)

2019


2018


2019


2018

Revenues:








Semiconductor Process Control

$

1,247,430



$

1,094,013



$

2,411,062



$

2,163,972


Specialty Semiconductor Process

75,106





144,245




PCB, Display and Component Inspection(1)

186,279



26,110



364,831



49,725


Other

517





2,748




Total revenues for reportable segments

1,509,332



1,120,123



2,922,886



2,213,697


Corporate allocation and effects of foreign exchange rates

121



(225)



(19)



(539)


Total revenues

$

1,509,453



$

1,119,898



$

2,922,867



$

2,213,158


_________

(1)

Revenues in the three and six months ended Dec. 31, 2019 include a contribution from the Orbotech business. Revenues in the three and six months ended Dec. 31, 2018 include the Component Inspection business only.




KLA Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share amounts)


Reconciliation of GAAP Net Income to Non-GAAP Net Income





Three Months Ended


Six Months Ended




Dec 31,
2019


Sept 30,
2019


Dec 31,
2018


Dec 31,
2019


Dec 31,
2018

GAAP net income attributable to KLA


$

380,555



$

346,525



$

369,100



$

727,080



$

765,044


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












Acquisition-related charges

a

60,393



73,363



4,281



133,756



9,832



Restructuring, severance and other related charges

b

2,786







2,786





Income tax effect of non-GAAP adjustments

c

(21,505)



(22,266)



(276)



(43,771)



(586)



Discrete tax items

d





(765)





(17,871)


Non-GAAP net income attributable to KLA


$

422,229



$

397,622



$

372,340



$

819,851



$

756,419


GAAP net income (loss) per diluted share attributable to KLA


$

2.40



$

2.16



$

2.42



$

4.56



$

4.96


Non-GAAP net income per diluted share attributable to KLA


$

2.66



$

2.48



$

2.44



$

5.15



$

4.90


Shares used in diluted shares calculation


158,620



160,131



152,648



159,314



154,389





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



Acquisition - Related
Charges


Restructuring,
Severance and Other
Related Charges


Total pre-tax GAAP
to non-GAAP
Adjustments

Three months ended Dec 31, 2019






Costs of revenues

$

40,590



$

831



$

41,421


Research and development



802



802


Selling, general and administrative

19,803



1,153



20,956


Total in three months ended Dec 31, 2019

$

60,393



$

2,786



$

63,179


Three months ended Sep 30, 2019






Costs of revenues

$

49,999



$



$

49,999


Selling, general and administrative

23,364





23,364


Total in three months ended Sep 30, 2019

$

73,363



$



$

73,363


Three months ended Dec 31, 2018






Costs of revenues

$

967



$



$

967


Selling, general and administrative

3,314





3,314


Total in three months ended Dec 31, 2018

$

4,281



$



$

4,281


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 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. 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 (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. 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.

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. Management believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets, and exclusion of these expenses allows comparisons of operating results that are consistent over time for both KLA's newly acquired and long-held businesses. Management believes that the other acquisition-related expenses are appropriate to be excluded because such costs would not have otherwise been incurred in the periods presented. Management believes excluding these items helps investors compare our operating performances with our results in prior periods as well as with the performance of other companies.



b. 

Restructuring, severance and other related charges include costs associated with employee severance and other exit costs. Management believes excluding these items helps investors compare our operating performance with our results in prior periods.



c. 

Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.



d. 

Discrete tax items include charges associated with the acquisition of Orbotech as well as  the income tax effects of an income tax expense from the enacted tax reform legislation through the Tax Cuts and Jobs-Act (the "Act"), which was signed into law on Dec. 22, 2017, of which the impact is primarily related to the provisional tax amounts recorded for the transition tax on accumulated foreign earnings and the re-measurement of certain deferred tax assets and liabilities as a result of the enactment of the Act. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

 

Cision View original content:http://www.prnewswire.com/news-releases/kla-corporation-reports-fiscal-2020-second-quarter-results-300998961.html

SOURCE KLA Corporation

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