10-QPeriod: Q2 FY2019

KLA CORP Quarterly Report for Q2 Ended Dec 31, 2018

Filed January 29, 2019For Securities:KLAC

Summary

KLA Corp. (KLAC) reported strong financial performance for the six months ended December 31, 2018. Total revenues grew by 14% year-over-year to $2.21 billion, driven by a 10% increase in product revenue and a significant 26% rise in service revenue. This growth reflects robust demand in the memory and wafer inspection sectors, supported by customer investments in next-generation technologies and capacity expansion. The company's adoption of ASC 606, a new revenue recognition standard, has impacted revenue reporting, generally leading to earlier recognition. Net income for the six-month period was $765 million, a substantial increase from $146.6 million in the prior year, partly due to the favorable impact of ASC 606 and improved operational efficiencies. KLA Corp. continues to navigate the cyclical semiconductor industry, with memory capital equipment spending projected to decline while leading-edge foundry and logic capital equipment spending is expected to ramp, indicating a favorable business mix shift. The company also provided an update on its proposed merger with Orbotech, Ltd., which is still pending regulatory approval.

Financial Highlights

50 data points
Beta

Revenue

$1.12B

63.5% Gross Margin

Net Income

$369.10M

33.0% Net Margin

EPS (Diluted)

$0.24

Total Assets

$5.61B

Cash & Equivalents

$1.79B

Free Cash Flow

$255.81M

Financial Statements
Beta
Revenue$1.12B
Cost of Revenue$408.26M
Gross Profit$711.64M
R&D Expenses$165.90M
SG&A Expenses$112.46M
Interest Expense$26.54M
Net Income$369.10M
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)1.52B
Shares Outstanding (Diluted)1.53B

Key Highlights

  • 1Total revenues increased by 14% to $2.21 billion for the six months ended December 31, 2018, compared to the same period last year.
  • 2Service revenue saw a substantial increase of 26%, indicating strong demand for maintenance and support services.
  • 3Net income significantly improved to $765 million from $146.6 million year-over-year.
  • 4The company's cash, cash equivalents, and marketable securities stood at $2.69 billion as of December 31, 2018.
  • 5KLA Corp. adopted ASC 606 (Revenue from Contracts with Customers) effective July 1, 2018, impacting revenue recognition timing.
  • 6The proposed merger with Orbotech, Ltd. is still in progress, awaiting regulatory approval.
  • 7The company returned approximately $787 million to stockholders through dividends and stock repurchases during the six months ended December 31, 2018.

Frequently Asked Questions

For the six months ended December 31, 2018, KLA Corp. reported total revenues of $2.21 billion, a 14% increase compared to $1.94 billion in the same period of the prior year. This growth was driven by a 10% rise in product revenue and a 26% increase in service revenue.

Net income for the six months ended December 31, 2018, was $765 million, a substantial increase from $146.6 million in the prior year. This improvement was influenced by higher revenues, the adoption of ASC 606, and operational efficiencies.

The proposed merger with Orbotech, Ltd. is still pending regulatory approvals, particularly from China's State Administration for Market Regulation (SAMR). The company is actively engaged in discussions to obtain clearance and expects this to occur as soon as practicable in 2019.

KLA Corp. adopted ASC 606, Revenue from Contracts with Customers, effective July 1, 2018. This new standard generally leads to earlier revenue recognition, particularly for warranty services and timing of control transfer for products. The adoption resulted in a net increase in retained earnings of $86.2 million and positively impacted reported revenues and net income for the periods presented after adoption.