KLA Corporation Reports Fiscal 2020 Second Quarter Results
MILPITAS, Calif., Feb. 4, 2020 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2020, which ended on Dec. 31, 2019, and reported GAAP net income attributable to KLA of $381 million and GAAP earnings per diluted share attributable to KLA of $2.40 on revenues of $1.51 billion.
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"KLA once again demonstrated solid execution in the December quarter, delivering results in the upper end of the range of guidance, and capping multiple records across revenue, GAAP EPS and non-GAAP EPS for the quarter," commented Rick Wallace, president and CEO of KLA. "As we begin the new calendar year, we are excited with the growth opportunities that lie ahead for KLA, with the industry outlook calling for growth led by technology transitions in advanced Logic, expanding investment in EUV, and with the expectation that Memory investment will improve in the calendar year. As the leading supplier of process control and specialty semiconductor process equipment for semiconductor and related electronics industries, and supported by a large and growing services business, KLA is uniquely positioned to benefit from this growth while continuing to deliver high levels of profitability."
GAAP Results
Q2 FY 2020 Q1 FY 2020 Q2 FY 2019
Revenues
$1,509 million
$1,413 million
$1,120 million
--- ---
Net Income
Attributable
to KLA
$381 million
$347 million
$369 million
---
Earnings per
Diluted Share
Attributable
to KLA $2.40 $2.16 $2.42
---
Non-GAAP Results
Q2 FY 2020 Q1 FY 2020 Q2 FY 2019
---
Net Income
Attributable
to KLA
$422 million
$398 million
$372 million
Earnings per
Diluted Share
Attributable
to KLA $2.66 $2.48 $2.44
---
A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. Non-GAAP results include the impact of recurring stock-based compensation, but exclude the impact of acquisitions or pending acquisitions, restructuring, severance, merger and other related charges and certain discrete tax items. KLA will discuss the results for its fiscal year 2020 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla.com.
About KLA:
KLA Corporation ("KLA") develops industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers and reticles, integrated circuits, packaging, printed circuit boards and flat panel displays. In close collaboration with leading customers across the globe, our expert teams of physicists, engineers, data scientists and problem-solvers design solutions that move the world forward. Additional information may be found at: www.kla.com.
Use of Non-GAAP Financial Information:
The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for, KLA's financial results presented in accordance with United States GAAP.
To supplement KLA's condensed consolidated financial statements presented in accordance with GAAP, the company provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses (benefits), as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of KLA's operating performance and its prospects in the future. Specifically, KLA believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA's financial performance by excluding certain costs and expenses (benefits) that the company believes are not indicative of its core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses (benefits) to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.
Note Regarding Forward-Looking Statements:
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, including statements regarding the industry outlook on growth, are subject to risks and uncertainties. For the factors that may cause actual results to differ materially from those projected and anticipated in the forward-looking statements in this release, please refer to KLA's annual report on Form 10-K for the year ended June 30, 2019, subsequently filed quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, without limitation, the risk factors described therein). Except as otherwise specifically indicated, the information included in this release is as of the date it is delivered. KLA assumes no obligation to, and does not currently intend to, update these forward-looking statements.
KLA Corporation
Condensed Consolidated
Unaudited Balance Sheets
(In thousands) Dec 31, 2019 Jun 30, 2019
---
ASSETS
Cash, cash equivalents and
marketable securities $
1,677,522 $
1,739,385
Accounts receivable, net 1,191,035 990,113
Inventories 1,251,400 1,262,500
Other current assets 257,486 323,077
Land, property and equipment,
net 489,980 448,799
Goodwill 2,299,781 2,211,858
Deferred income taxes, non-
current 213,255 206,141
Purchased intangible assets,
net 1,492,450 1,560,670
Other non-current assets 377,811 265,973
Total assets $
9,250,720 $
9,008,516
LIABILITIES, NON-CONTROLLING
INTEREST AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $
256,646 $
202,416
Deferred system revenue 247,103 282,348
Deferred service revenue 204,284 206,669
Current portion of long-term
debt 249,999
Other current liabilities 1,010,210 827,054
Total current liabilities 1,718,243 1,768,486
Non-current liabilities:
Long-term debt 3,399,877 3,173,383
Deferred tax liabilities 680,929 702,285
Deferred service revenue 99,969 98,772
Other non-current liabilities 663,732 587,897
Total liabilities 6,562,750 6,330,823
Stockholders' equity:
Common stock and capital in
excess of par value 2,017,521 2,017,312
Retained earnings 719,001 714,825
Accumulated other comprehensive
income (loss) (66,758) (73,029)
Total KLA stockholders' equity 2,669,764 2,659,108
Non-controlling interest in
consolidated subsidiary 18,206 18,585
Total stockholders' equity 2,687,970 2,677,693
Total liabilities and
stockholders' equity $
9,250,720 $
9,008,516
KLA Corporation
Condensed Consolidated Unaudited Statements of Operations
Three Months Ended Dec 31, Six Months Ended Dec 31,
(In thousands, except
per share amounts) 2019 2018 2019 2018
--- ---
Revenues:
Product $
1,144,550 $
852,201 $
2,202,525 $
1,681,428
Service 364,903 267,697 720,342 531,730
Total revenues 1,509,453 1,119,898 2,922,867 2,213,158
Costs and expenses:
Costs of revenues 633,618 408,260 1,237,859 789,647
Research and
development 220,751 165,903 431,331 319,433
Selling, general and
administrative 192,253 112,462 380,598 226,900
Interest expense and
other, net 37,904 17,310 76,636 33,647
Income before income
taxes 424,927 415,963 796,443 843,531
Provision for income
taxes 44,622 46,863 69,742 78,487
Net income 380,305 369,100 726,701 765,044
Less: Net loss
attributable to non-
controlling interest (250) (379)
Net income
attributable to KLA $
380,555 $
369,100 $
727,080 $
765,044
Net income per share attributable to
KLA:
Basic $
2.42 $
2.43 $
4.60 $
4.98
Diluted $
2.40 $
2.42 $
4.56 $
4.96
Weighted-average number of shares:
Basic 157,290 152,148 157,994 153,684
Diluted 158,620 152,648 159,314 154,389
KLA Corporation
Condensed Consolidated Unaudited Statements of Cash Flow
Three Months Ended
Dec 31,
(In thousands) 2019 2018
--- ---
Cash flows from operating activities:
Net income $
380,305 $
369,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 88,534 15,806
Loss (gain) on unrealized
foreign exchange and other (5,450) 895
Stock-based compensation
expense 26,789 15,695
Changes in assets and liabilities, net of assets
acquired and liabilities assumed in business
acquisitions:
Accounts receivable (126,682) (55,869)
Inventories (1,477) (15,109)
Other assets 3,558 34,978
Accounts payable 35,258 (2,440)
Deferred system revenue (30,412) (19,723)
Deferred service revenue 1,220 12,211
Other liabilities 16,088 (73,372)
Net cash provided by operating
activities 387,731 282,172
Cash flows from investing activities:
Capital expenditures (34,874) (26,366)
Purchases of available-for-
sale securities (144,715) (2,686)
Proceeds from sale of available-
for-sale securities 10,287 107,370
Proceeds from maturity of
available-for-sale securities 158,699 128,052
Purchases of trading securities (12,852) (27,481)
Proceeds from sale of trading
securities 15,307 29,722
Net cash (used in) provided by
investing activities (8,148) 208,611
Cash flows from financing activities:
Proceeds from revolving credit
facility 250,000
Repayment of debt (275,000)
Common stock repurchases (284,593) (250,213)
Payment of dividends to
stockholders (134,696) (114,562)
Issuance of common stock 24,499 20,556
Tax withholding payments related
to equity awards (12,237) (3,233)
Payment of contingent
consideration payable (3)
Net cash used in financing
activities (432,030) (347,452)
Effect of exchange rate changes
on cash and cash equivalents 3,963 1,137
Net (decrease) increase in cash
and cash equivalents (48,484) 144,468
Cash and cash equivalents at
beginning of period 988,348 1,649,514
Cash and cash equivalents at end
of period $
939,864 $
1,793,982
Supplemental cash flow disclosures:
Income taxes paid $
50,884 $
87,854
Interest paid $
53,140 $
51,136
Non-cash activities:
Business acquisition holdback
amounts -investing activities
$ $
440
Contingent consideration payable
-financing activities $
(3,540) $
2,529
Dividends payable -financing
activities $
1,638 $
5,404
Unsettled common stock
repurchase -financing
activities $
4,000
$
Accrued purchase of land,
property and equipment -
investing activities $
13,755 $
7,705
KLA Corporation
Segment Information (Unaudited)
The following is a summary of results for each of our four reportable segments and reconciliation to total revenues for the indicated periods:
Three Months Ended Dec 31, Six Months Ended Dec 31,
(In thousands) 2019 2018 2019 2018
--- ---
Revenues:
Semiconductor Process Control $
1,247,430 $
1,094,013 $
2,411,062 $
2,163,972
Specialty Semiconductor
Process 75,106 144,245
PCB, Display and Component
Inspection(1) 186,279 26,110 364,831 49,725
Other 517 2,748
Total revenues for reportable
segments 1,509,332 1,120,123 2,922,886 2,213,697
Corporate allocation and
effects of foreign exchange
rates 121 (225) (19) (539)
Total revenues $
1,509,453 $
1,119,898 $
2,922,867 $
2,213,158
_________
(1) Revenues in the three and six
months ended Dec. 31, 2019
include a contribution from
the Orbotech business.
Revenues in the three and six
months ended Dec. 31, 2018
include the Component
Inspection business only.
KLA Corporation
Condensed Consolidated Unaudited Supplemental Information
(In thousands, except per share amounts)
Reconciliation of GAAP Net Income to Non-GAAP Net Income
---
Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2019 2019 2018 2019 2018
GAAP net income attributable to KLA $
380,555 $
346,525 $
369,100 $
727,080 $
765,044
Adjustments to reconcile GAAP net
income to non-GAAP net income:
---
Acquisition-related charges a 60,393 73,363 4,281 133,756 9,832
Restructuring, severance and other
related charges b 2,786 2,786 -
Income tax effect of non-GAAP
adjustments c (21,505) (22,266) (276) (43,771) (586)
Discrete tax items d (765) (17,871)
Non-GAAP net income attributable to
KLA $
422,229 $
397,622 $
372,340 $
819,851 $
756,419
GAAP net income (loss) per diluted
share attributable to KLA $
2.40 $
2.16 $
2.42 $
4.56 $
4.96
Non-GAAP net income per diluted
share attributable to KLA $
2.66 $
2.48 $
2.44 $
5.15 $
4.90
Shares used in diluted shares
calculation 158,620 160,131 152,648 159,314 154,389
Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations
---
Acquisition -
Related Restructuring, Total pre-tax GAAP
Charges Severance and Other to non-GAAP
Related Charges Adjustments
---
Three months ended Dec 31, 2019
---
Costs of revenues $
40,590 $
831 $
41,421
Research and
development - 802 802
Selling, general and
administrative 19,803 1,153 20,956
Total in three
months ended Dec
31, 2019 $
60,393 $
2,786 $
63,179
Three months ended Sep 30, 2019
---
Costs of revenues $
49,999
$ $
49,999
Selling, general and
administrative 23,364 23,364
Total in three
months ended Sep
30, 2019 $
73,363
$ $
73,363
Three months ended Dec 31, 2018
---
Costs of revenues $
967
$ $
967
Selling, general and
administrative 3,314 3,314
Total in three
months ended Dec
31, 2018 $
4,281
$ $
4,281
To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of our operating performance and our prospects in the future. Specifically, we believe that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.
a. Acquisition-related charges
primarily include amortization of
intangible assets and other
acquisition-related adjustments
including adjustments for the fair
valuation of inventory and
backlog, and transaction costs
associated with our acquisitions,
primarily Orbotech. Management
believes that the expense
associated with the amortization
of acquisition-related intangible
assets is appropriate to be
excluded because a significant
portion of the purchase price for
acquisitions may be allocated to
intangible assets, and exclusion
of these expenses allows
comparisons of operating results
that are consistent over time for
both KLA's newly acquired and
long-held businesses. Management
believes that the other
acquisition-related expenses are
appropriate to be excluded because
such costs would not have
otherwise been incurred in the
periods presented. Management
believes excluding these items
helps investors compare our
operating performances with our
results in prior periods as well
as with the performance of other
companies.
b. Restructuring, severance and other
related charges include costs
associated with employee severance
and other exit costs. Management
believes excluding these items
helps investors compare our
operating performance with our
results in prior periods.
c. Income tax effect of non-GAAP
adjustments includes the income
tax effects of the excluded items
noted above. Management believes
that it is appropriate to exclude
the tax effects of the items noted
above in order to present a more
meaningful measure of non-GAAP
net income.
d. Discrete tax items include charges
associated with the acquisition of
Orbotech as well as the income
tax effects of an income tax
expense from the enacted tax
reform legislation through the Tax
Cuts and Jobs-Act (the "Act"),
which was signed into law on Dec.
22, 2017, of which the impact is
primarily related to the
provisional tax amounts recorded
for the transition tax on
accumulated foreign earnings and
the re-measurement of certain
deferred tax assets and
liabilities as a result of the
enactment of the Act. Management
believes excluding these items
helps investors compare our
operating performance with our
results in prior periods as well
as with the performance of other
companies.
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SOURCE KLA Corporation
