10-QPeriod: Q1 FY2019

KLA CORP Quarterly Report for Q1 Ended Sep 30, 2018

Filed October 31, 2018For Securities:KLAC

Summary

KLA Corp. (KLAC) reported solid financial results for the third quarter of fiscal year 2018, with total revenues increasing by 13% year-over-year to $1.09 billion. Net income saw a significant jump of 41% to $395.9 million, translating to a diluted EPS of $2.54, up from $1.78 in the prior year's quarter. This performance was driven by strong demand in product revenues, particularly from China and Taiwan, and robust growth in service revenues, partly attributed to the adoption of ASC 606. The company also highlighted its ongoing commitment to returning capital to shareholders through a significant increase in share repurchases during the quarter. However, investors should note the pending acquisition of Orbotech, Ltd., which is subject to regulatory approvals and may impact future financials. The company maintained a strong liquidity position with over $2.78 billion in cash, cash equivalents, and marketable securities as of September 30, 2018.

Financial Highlights

49 data points
Beta

Revenue

$1.09B

65.1% Gross Margin

Net Income

$395.94M

36.2% Net Margin

EPS (Diluted)

$0.25

Total Assets

$5.65B

Cash & Equivalents

$1.65B

Free Cash Flow

$359.07M

Financial Statements
Beta
Revenue$1.09B
Cost of Revenue$381.39M
Gross Profit$711.87M
R&D Expenses$153.53M
SG&A Expenses$114.44M
Interest Expense$26.36M
Net Income$395.94M
EPS (Basic)$0.26
EPS (Diluted)$0.25
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.56B

Key Highlights

  • 1Total revenues for Q3 FY18 grew 13% year-over-year to $1.09 billion.
  • 2Net income increased 41% to $395.9 million, with diluted EPS rising to $2.54 from $1.78.
  • 3Product revenues increased 9% year-over-year, driven by demand in China and Taiwan.
  • 4Service revenues grew 26% year-over-year, benefiting from ASC 606 adoption.
  • 5The company significantly increased share repurchases, spending $307.8 million in the quarter.
  • 6Cash and cash equivalents, along with marketable securities, totaled $2.78 billion.
  • 7The acquisition of Orbotech, Ltd. is pending regulatory approval.

Frequently Asked Questions

KLA Corp. reported a 13% increase in total revenues for the third quarter of fiscal year 2018, reaching $1.09 billion compared to $969.6 million in the same quarter of the prior year. This growth was driven by both product and service revenues.

KLA Corp. adopted ASC 606 on July 1, 2018. The adoption led to a recognition of higher revenues in Q3 FY18 compared to prior guidance, primarily due to changes in accounting for standard warranty services and the company's assessment of the timing of control transfer. This resulted in a net increase to retained earnings of $86.2 million and a reported net income increase of $107.4 million for the quarter.

KLA Corp. entered into a merger agreement with Orbotech, Ltd. on March 18, 2018, with an enterprise value of $3.2 billion. The acquisition is subject to regulatory approvals and other customary closing conditions. The company intends to fund the cash portion with existing cash reserves.

KLA Corp. continues to return capital through its stock repurchase program and by paying dividends. In Q3 FY18, the company repurchased approximately $307.8 million of its common stock. The company also declared a regular quarterly cash dividend of $0.75 per share.