10-QPeriod: Q3 FY2024

KLA CORP Quarterly Report for Q3 Ended Mar 31, 2024

Filed April 26, 2024For Securities:KLAC

Summary

KLA Corporation (KLAC) reported third-quarter fiscal year 2024 results showing a year-over-year decline in total revenues, primarily driven by a decrease in product revenue. This dip is attributed to the broader semiconductor industry slowdown, characterized by supply chain rebalancing and reduced capital expenditure plans by memory and foundry/logic customers. Despite the revenue contraction, service revenues saw a notable increase, up 12% year-over-year, indicating strength in the company's service offerings and installed base. The company recorded significant goodwill and purchased intangible asset impairment charges, totaling $219.0 million in the second quarter and $70.5 million in the third quarter of fiscal year 2024. These impairments were primarily related to the company's decision to exit the Display business. While these charges impacted profitability, the underlying operational performance, excluding these non-recurring items, should be assessed by investors. KLA continues to manage its liquidity effectively, with a robust cash position and available credit facilities.

Financial Highlights

51 data points
Beta

Revenue

$2.36B

57.9% Gross Margin

Net Income

$601.54M

25.5% Net Margin

EPS (Diluted)

$0.44

Total Assets

$14.96B

Cash & Equivalents

$1.85B

Free Cash Flow

$838.18M

Financial Statements
Beta
Revenue$2.36B
Cost of Revenue$993.88M
Gross Profit$1.37B
R&D Expenses$321.59M
SG&A Expenses$237.51M
Interest Expense$79.98M
Net Income$601.54M
EPS (Basic)$0.45
EPS (Diluted)$0.44
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.36B

Key Highlights

  • 1Total revenues decreased by 3% year-over-year to $2.36 billion, primarily due to a 7% drop in product revenue, reflecting the semiconductor industry slowdown.
  • 2Service revenues increased by 12% year-over-year to $590.5 million, demonstrating resilience and growth in the service segment.
  • 3The company recorded significant goodwill and purchased intangible asset impairment charges totaling $70.5 million in the current quarter and $219.0 million in the prior quarter, largely due to the decision to exit the Display business.
  • 4Net income attributable to KLA was $601.5 million, or $4.43 per diluted share, a decrease from the prior year's quarter, partly due to the goodwill impairment charge.
  • 5Cash, cash equivalents, and marketable securities stood at $4.29 billion as of March 31, 2024, providing substantial liquidity.
  • 6Geographically, China remains a significant market, contributing 42% of total revenues, despite ongoing U.S. export control regulations.
  • 7The company repurchased $375.7 million of common stock during the quarter, continuing its capital return program to shareholders.

Frequently Asked Questions

The primary driver for the year-over-year decline in KLA's revenue is a broad, macro-driven slowdown impacting semiconductor demand. This has led to the semiconductor industry rebalancing its supply chain, reducing inventory levels, and causing memory device manufacturers and foundry/logic customers to scale back their capital expenditure plans.

KLA recorded significant goodwill and purchased intangible asset impairment charges, totaling $70.5 million in the third quarter and $219.0 million in the second quarter of fiscal year 2024. These charges are a non-cash expense and are largely a result of the company's strategic decision to exit the Display business. While these charges negatively impacted net income, they do not reflect the underlying operational performance of the ongoing business segments.

The service segment showed strength, with revenues increasing by 12% year-over-year. This growth is attributed to an increase in KLA's installed base, indicating continued demand for the company's maintenance and support services and a stable installed base for its products.

KLA maintains a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $4.29 billion as of March 31, 2024. The company also has a $1.50 billion unsecured Revolving Credit Facility available and no outstanding borrowings as of the reporting date. Its debt levels are significant, with $6.70 billion in aggregate principal amount of senior, unsecured notes, but the company appears to be in compliance with its debt covenants and has a solid credit rating, indicating good financial health.