10-QPeriod: Q2 FY2010

KLA CORP Quarterly Report for Q2 Ended Dec 31, 2009

Filed January 29, 2010For Securities:KLAC

Summary

KLA Corp. (KLAC) reported a significant rebound in its financial performance for the quarter ended December 31, 2009, compared to the challenging prior year period. Total revenues increased by 11% year-over-year to $440.4 million, driven by a 15% increase in product revenue and a modest 2% rise in service revenue. This top-line growth, coupled with improved cost management and lower inventory write-downs, resulted in a substantial swing from a net loss of $434.3 million in the prior year's quarter to a net income of $21.8 million. Earnings per diluted share also improved dramatically from a loss of $2.57 to $0.13. The company demonstrated strong operational execution, evidenced by a significant increase in gross margin to 53% from 40% in the year-ago period. This improvement was primarily due to higher manufacturing capacity utilization, lower excess inventory write-downs, and reduced employee-related expenses. While R&D expenses saw a slight increase due to higher variable compensation accruals, SG&A expenses decreased by 23% year-over-year, reflecting ongoing cost reduction efforts. The balance sheet remains robust, with total cash, cash equivalents, and marketable securities increasing to $1.5 billion, providing ample liquidity.

Financial Highlights

30 data points
Beta

Revenue

$440.36M

52.9% Gross Margin

Net Income

$21.79M

4.9% Net Margin

EPS (Diluted)

$0.01

Cash & Equivalents

$531.44M

Free Cash Flow

$152.87M

Financial Statements
Beta
Revenue$440.36M
Cost of Revenue$207.29M
Gross Profit$233.07M
R&D Expenses$83.30M
SG&A Expenses$102.67M
Operating Expenses$393.26M
Operating Income$47.09M
Interest Expense$13.54M
Net Income$21.79M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)1.71B
Shares Outstanding (Diluted)1.74B

Key Highlights

  • 1Revenue increased 11% year-over-year to $440.4 million, driven by strong performance in product sales.
  • 2Net income turned positive at $21.8 million, a significant improvement from a net loss of $434.3 million in the prior year's quarter.
  • 3Diluted EPS improved to $0.13 from a loss of $2.57 in the same period last year.
  • 4Gross margin expanded significantly to 53% from 40% due to improved capacity utilization and cost controls.
  • 5Operating expenses (R&D and SG&A) were managed effectively, with SG&A decreasing by 23% year-over-year.
  • 6Cash, cash equivalents, and marketable securities totaled $1.5 billion, indicating a strong liquidity position.
  • 7The company successfully navigated significant legal proceedings related to historical stock option practices, with settlements and investigations concluded.

Frequently Asked Questions

KLA Corp.'s revenue growth was primarily driven by an increase in product revenue, which rose by 15% year-over-year. This was supported by customers accelerating their capital spending due to improved factory utilization and demand for their products, as well as increased demand for inspection and measurement equipment for advanced technology development.

KLA Corp. demonstrated strong expense management. Costs of revenue decreased by 13% year-over-year, contributing to a significant improvement in gross margin to 53%. Selling, General, and Administrative (SG&A) expenses decreased by 23% year-over-year, reflecting ongoing cost reduction initiatives. These factors, combined with higher revenues, led to a substantial swing from a net loss to a net income of $21.8 million.

KLA Corp. maintained a strong liquidity position, with total cash, cash equivalents, and marketable securities amounting to $1.5 billion as of December 31, 2009. Cash provided by operating activities was $236.9 million for the six months ended December 31, 2009. Management believes that cash generated from operations, along with existing cash balances, will be sufficient to meet liquidity requirements for at least the next twelve months.

The company has addressed significant legal proceedings related to historical stock option practices, including a class action settlement and closure of SEC and USAO investigations. While the company is involved in ongoing derivative litigation, it believes that amounts provided for in its financial statements are adequate for probable and estimated liabilities, though the ultimate outcome of these matters cannot be predicted and could have a material adverse effect.