01—Abstract
Summary
Summary of the 10-Q filed October 31, 2018. Cited figures are marked; the original filing is the authoritative source.
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 billiona.
Net income saw a significant jump of 41% to $395.9 millionb, 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 billionc in cash, cash equivalents, and marketable securities as of September 30, 2018.
02—Key points
Key Highlights
- Total revenues for Q3 FY18 grew 13% year-over-year to $1.09 billion.
- Net income increased 41% to $395.9 million, with diluted EPS rising to $2.54 from $1.78.
- Product revenues increased 9% year-over-year, driven by demand in China and Taiwan.
- Service revenues grew 26% year-over-year, benefiting from ASC 606 adoption.
- The company significantly increased share repurchases, spending $307.8 million in the quarter.
- Cash and cash equivalents, along with marketable securities, totaled $2.78 billion.
- The acquisition of Orbotech, Ltd. is pending regulatory approval.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed October 31, 2018Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $1.09B$969.58M | +12.8% |
| Cost of Revenue | $381.39M$353.12M | +8.0% |
| Gross Profit | $711.87M$616.46M | +15.5% |
| R&D Expenses | $153.53M$146.69M | +4.7% |
| SG&A Expenses | $114.44M$107.43M | +6.5% |
| Interest Expense | $26.36M$30.58M | −13.8% |
| Net Income | $395.94M$280.94M | +40.9% |
| EPS (Basic) | $0.26$0.18 | +42.5% |
| EPS (Diluted) | $0.25$0.18 | +42.7% |
| Shares Outstanding (Basic) | 1.55B1.57B | −1.0% |
| Shares Outstanding (Diluted) | 1.56B1.58B | −1.1% |
05—Questions
Frequently Asked Questions
How did KLA Corp.'s revenue perform in Q3 FY18 compared to the previous year?
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.
What is the impact of the new revenue recognition standard (ASC 606) on KLA Corp.'s financials?
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.
What is the status of the Orbotech acquisition?
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.
How is KLA Corp. returning capital to shareholders?
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.
06—Continue