01—Abstract
Summary
Summary of the 10-Q filed October 27, 2023. Cited figures are marked; the original filing is the authoritative source.
KLA Corporation reported total revenues of $2.397 billiona 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 millionb, 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 billionc in cash, cash equivalents, and marketable securities as of September 30, 2023, and continues to return capital to shareholders through dividends and stock repurchases.
02—Key points
Key Highlights
- Total 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.
- Net income attributable to KLA decreased to $741.4 million ($5.41/share) from $1.026 billion ($7.20/share) in the prior year quarter.
- Gross margin slightly decreased to 60.5% from 61.8% year-over-year, mainly due to lower product revenue volume.
- Service revenue increased by 6% year-over-year to $560.3 million, driven by a larger installed base.
- The company maintained a strong balance sheet with $3.35 billion in cash, cash equivalents, and marketable securities as of September 30, 2023.
- Remaining performance obligations (RPO) stood at $10.85 billion as of September 30, 2023, indicating significant future revenue potential.
- KLA continues to actively manage capital returns, paying $181.5 million in dividends and repurchasing $459.1 million of common stock during the quarter.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed October 27, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $2.40B$2.72B | −12.0% |
| Cost of Revenue | $946.89M$1.04B | −9.1% |
| Gross Profit | $1.45B$1.68B | −13.9% |
| R&D Expenses | $311.21M$318.51M | −2.3% |
| SG&A Expenses | $239.65M$253.98M | −5.6% |
| Interest Expense | $74.23M$74.39M | −0.2% |
| Net Income | $741.38M$1.03B | −27.7% |
| EPS (Basic) | $0.54$0.72 | −24.9% |
| EPS (Diluted) | $0.54$0.72 | −24.9% |
| Shares Outstanding (Basic) | 1.36B1.42B | −3.8% |
| Shares Outstanding (Diluted) | 1.37B1.43B | −3.8% |
05—Questions
Frequently Asked Questions
What is the primary reason for the decrease in KLA's revenue in the current quarter?
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.
How is KLA managing the current industry downturn?
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.
What is the impact of U.S. export control regulations on KLA's business, particularly concerning China?
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.
How is KLA returning capital to shareholders?
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.
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