10-QPeriod: Q1 FY2024

KLA CORP Quarterly Report for Q1 Ended Sep 30, 2023

Filed October 27, 2023For Securities:KLAC

Summary

KLA Corporation reported total revenues of $2.397 billion for the third quarter of fiscal year 2023, a decrease of 12% compared to the same period last year. This decline was primarily driven by a 16% drop in product revenue, reflecting a slowdown in the semiconductor industry as customers adjusted inventory levels and capital expenditure plans. Service revenue, however, saw a modest increase of 6%, indicating a resilient service segment. Net income attributable to KLA for the quarter was $741.4 million, or $5.41 per diluted share, down from $1.026 billion, or $7.20 per diluted share, in the prior year's quarter. This decrease is attributable to lower revenues and a slightly lower gross margin (60.5% vs. 61.8%). The company continues to invest in R&D, though at a slightly reduced pace, and has controlled SG&A expenses. KLA maintained a strong liquidity position with $3.35 billion in cash, cash equivalents, and marketable securities as of September 30, 2023, and continues to return capital to shareholders through dividends and stock repurchases.

Financial Highlights

50 data points
Beta

Revenue

$2.40B

60.5% Gross Margin

Net Income

$741.38M

30.9% Net Margin

EPS (Diluted)

$0.54

Total Assets

$14.14B

Cash & Equivalents

$1.71B

Free Cash Flow

$815.70M

Financial Statements
Beta
Revenue$2.40B
Cost of Revenue$946.89M
Gross Profit$1.45B
R&D Expenses$311.21M
SG&A Expenses$239.65M
Interest Expense$74.23M
Net Income$741.38M
EPS (Basic)$0.54
EPS (Diluted)$0.54
Shares Outstanding (Basic)1.36B
Shares Outstanding (Diluted)1.37B

Key Highlights

  • 1Total revenues decreased by 12% year-over-year to $2.397 billion, primarily due to a 16% decline in product revenue reflecting industry-wide semiconductor demand slowdown.
  • 2Net income attributable to KLA decreased to $741.4 million ($5.41/share) from $1.026 billion ($7.20/share) in the prior year quarter.
  • 3Gross margin slightly decreased to 60.5% from 61.8% year-over-year, mainly due to lower product revenue volume.
  • 4Service revenue increased by 6% year-over-year to $560.3 million, driven by a larger installed base.
  • 5The company maintained a strong balance sheet with $3.35 billion in cash, cash equivalents, and marketable securities as of September 30, 2023.
  • 6Remaining performance obligations (RPO) stood at $10.85 billion as of September 30, 2023, indicating significant future revenue potential.
  • 7KLA continues to actively manage capital returns, paying $181.5 million in dividends and repurchasing $459.1 million of common stock during the quarter.

Frequently Asked Questions

The primary reason for the decrease in KLA's revenue is a broad, macro-driven slowdown impacting semiconductor device demand. This has caused the semiconductor industry to rebalance its supply chain and inventory levels, leading memory device manufacturers and foundry/logic customers to reduce their capacity expansion-focused capital expenditure plans. This slowdown particularly affected KLA's product revenue, which decreased by 16% year-over-year.

KLA is responding to the industry downturn by focusing on moderating spending levels. While continuing to invest in technological innovation, they are adjusting R&D expenses and controlling Selling, General, and Administrative (SG&A) expenses. The company is also closely monitoring its purchase commitments and managing inventory risk. Despite the challenges, KLA maintained strong liquidity and continued its capital return programs.

Recent U.S. government regulations impose new export licensing requirements on certain U.S. semiconductor and high-performance computing technology, including wafer fab equipment, for use in China. These rules affect KLA's ability to sell products and services to customers in China that fabricate certain advanced logic, NAND, and DRAM ICs. KLA is evaluating these complex rules, seeking export licenses where required, and acknowledges the uncertainty of obtaining these licenses, which could materially impact their business, supply chain, and remaining performance obligations.

KLA continues to return capital to shareholders through regular quarterly cash dividends and share repurchases. In the third quarter of fiscal year 2023, the company paid $181.5 million in dividends and repurchased $459.1 million of its common stock under its authorized stock repurchase program.