01—Abstract
Summary
Summary of the 10-K filed August 16, 2019. Cited figures are marked; the original filing is the authoritative source.
KLA Corporation's (KLAC) 2019 10-K filing highlights a year marked by significant strategic expansion through the acquisition of Orbotech, Ltd. for approximately $3.26 billiona.
This acquisition broadened KLA's product portfolio into the Printed Circuit Board (PCB), Display, and Component Inspection segments, complementing its established leadership in Semiconductor Process Control. Financially, the company saw a 13% increase in total revenues to $4.57 billionb, driven by strong demand in semiconductor process control and the inclusion of Orbotech's results. Despite a decrease in gross margin percentage to 59% primarily due to the lower margins of the acquired business, KLA demonstrated robust profitability with net income attributable to KLA of $1.18 billion.
The company also managed its capital effectively, with significant stock repurchases authorized and a substantial backlog of $1.84 billionc, indicating strong future demand. Looking ahead, KLA is well-positioned to benefit from key industry trends such as AI, IoT, and the growth of electric vehicles, which all rely on advanced semiconductor technology. The company's diversified offerings and significant investments in R&D underscore its commitment to innovation and maintaining a competitive edge in the dynamic electronics manufacturing landscape.
02—Key points
Key Highlights
- Completed the acquisition of Orbotech for approximately $3.26 billion, significantly expanding KLA's market reach into PCB, Display, and Component Inspection sectors.
- Reported a 13% increase in total revenues to $4.57 billion for the fiscal year ended June 30, 2019, compared to the prior year.
- Achieved a net income attributable to KLA of $1.18 billion, demonstrating strong profitability.
- Maintained a strong backlog of $1.84 billion as of June 30, 2019, signaling robust future demand.
- Invested heavily in R&D, with R&D expenses increasing by 17% to $711 million, reflecting a commitment to innovation.
- The company's revenue is heavily international, with approximately 87% of total revenues generated outside the United States.
- KLA's stock repurchase program was increased to $2.00 billion following the Orbotech acquisition, indicating a commitment to returning value to shareholders.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 16, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.57B$4.04B | +13.2% |
| Cost of Revenue | $1.87B$1.45B | +29.3% |
| Gross Profit | $2.70B$2.59B | +4.2% |
| R&D Expenses | $711.03M$608.53M | +16.8% |
| SG&A Expenses | $599.12M$442.30M | +35.5% |
| Interest Expense | $124.60M$114.38M | +8.9% |
| Net Income | $1.18B$802.26M | +46.5% |
| EPS (Basic) | $0.75$0.51 | +46.8% |
| EPS (Diluted) | $0.75$0.51 | +46.9% |
| Shares Outstanding (Basic) | 1.56B1.56B | −0.2% |
| Shares Outstanding (Diluted) | 1.57B1.57B | −0.3% |
05—Questions
Frequently Asked Questions
What was the primary strategic move for KLA in fiscal year 2019?
The primary strategic move was the acquisition of Orbotech, Ltd. for approximately $3.26 billion. This acquisition significantly expanded KLA's business into new segments beyond semiconductor process control, including PCB, Display, and Component Inspection.
How did the Orbotech acquisition impact KLA's financial performance?
The acquisition boosted KLA's total revenues by 13% to $4.57 billion. However, it also led to a decrease in the gross margin percentage to 59% from 64% in the prior year, primarily because Orbotech's business historically operated with lower product gross margins. Despite this, net income attributable to KLA remained strong at $1.18 billion.
What are the key industry trends that KLA expects to benefit from?
KLA anticipates benefiting from trends such as the demand for chips powering Artificial Intelligence (AI) applications, the expansion of the Internet of Things (IoT), and the increasing adoption of electric vehicles and advanced automotive technologies, all of which require advanced semiconductor manufacturing processes.
What is KLA's geographic revenue breakdown, and what are the implications?
Approximately 87% of KLA's total revenues were generated outside the United States, with a significant portion coming from Asia. This geographic concentration makes the company reliant on the economic health and investment patterns of these regions, particularly in the semiconductor manufacturing hubs.
How is KLA managing its capital and returning value to shareholders?
KLA demonstrated active capital management by increasing its stock repurchase program authorization to $2.00 billion following the Orbotech acquisition and also by paying regular quarterly dividends. The company reported a substantial backlog, indicating strong demand for its products and services.
06—Continue