KLA CORP Quarterly Report for Q3 Ended Mar 31, 2016

Summary

KLA-Tencor (KLAC) reported revenues of $712.4 million for the third quarter of fiscal year 2016, a slight decrease of 4% compared to the same period last year. Net income for the quarter was $175.8 million, a significant increase of 33.5% year-over-year, driven by improved gross margins and lower operating expenses. The company's gross margin improved to 61.5% from 56.6% in the prior year's quarter, largely due to a favorable product mix, manufacturing efficiencies, and lower warranty charges. The company is progressing towards its announced merger with Lam Research Corporation, with both companies' stockholders having approved the merger agreement. Management noted a decrease in new equipment orders due to weaker demand from memory market customers. Despite this, the company maintained a strong liquidity position with $2.24 billion in cash, cash equivalents, and marketable securities as of March 31, 2016.

Key Highlights

• 1Total revenues for the third quarter of FY2016 were $712.4 million, a 4% decrease year-over-year.
• 2Net income increased significantly by 33.5% to $175.8 million in Q3 FY2016 compared to Q3 FY2015.
• 3Gross margin improved to 61.5% from 56.6% in the prior year quarter, benefiting from product mix, efficiencies, and lower warranty costs.
• 4R&D expenses decreased by 7% year-over-year to $115.6 million, partly due to external funding and workforce reduction savings.
• 5SG&A expenses decreased by 11% year-over-year to $87.4 million, driven by lower employee-related costs and reduced merger-related expenses.
• 6The company has a strong liquidity position with $2.24 billion in cash, cash equivalents, and marketable securities as of March 31, 2016.
• 7The proposed merger with Lam Research Corporation is progressing, with stockholder approvals obtained from both companies.

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