Company Announcements

KLA Corporation Reports Fiscal 2020 First Quarter Results

MILPITAS, Calif., Oct. 30, 2019 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2020, which ended on Sept. 30, 2019, and reported GAAP net income attributable to KLA of $347 million and GAAP earnings per diluted share attributable to KLA of $2.16 on revenues of $1,413 million.

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"KLA delivered a strong result in the September quarter, with revenue and GAAP and non-GAAP EPS finishing above the range of guidance, a result of solid execution in what continues to be a challenging overall industry environment," commented Rick Wallace, president and CEO of KLA. "As a global leader in process control and supplier of process-enabling solutions for the data era, KLA is at the forefront of the most important industry trends and technology inflections in the electronics industry. Our performance in the September quarter demonstrates KLA is benefiting from our long-term strategies for growth, technology leadership and operational excellence."

GAAP Results


Q1 FY 2020

Q4 FY 2019

Q1 FY 2019

Revenues

$1,413 million

$1,258 million

$1,093 million

Net Income Attributable to KLA

$347 million

$218 million

$396 million

Earnings per Diluted Share Attributable to KLA

$2.16

$1.35

$2.54





Non-GAAP Results


Q1 FY 2020

Q4 FY 2019

Q1 FY 2019

Net Income Attributable to KLA

$398 million

$289 million

$384 million

Earnings per Diluted Share Attributable to KLA

$2.48

$1.78

$2.46

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 first quarter, along with its outlook, on a conference call today beginning at 2 p.m. PT. A webcast of the call will be available at: www.kla.com.

About KLA:

KLA Corporation, formerly known as KLA-Tencor Corporation, (aka "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 http://www.kla.com (KLAC-F).

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.

KLA Corporation




Condensed Consolidated Unaudited Balance Sheets








(In thousands)

Sept. 30, 2019


June 30, 2019

ASSETS




Cash, cash equivalents and marketable securities

$

1,751,522



$

1,739,385


Accounts receivable, net

1,066,188



990,113


Inventories

1,254,240



1,262,500


Other current assets

283,799



323,077


Land, property and equipment, net

475,210



448,799


Goodwill

2,263,689



2,211,858


Deferred income taxes, non-current

216,629



206,141


Purchased intangible assets, net

1,549,201



1,560,670


Other non-current assets

368,921



265,973


Total assets

$

9,229,399



$

9,008,516






LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

221,388



$

202,416


Deferred system revenue

277,515



282,348


Deferred service revenue

201,245



206,669


Current portion of long-term debt

250,000



249,999


Other current liabilities

993,299



827,054


Total current liabilities

1,943,447



1,768,486


Non-current liabilities:




Long-term debt

3,174,130



3,173,383


Deferred tax liabilities

688,170



702,285


Deferred service revenue

101,001



98,772


Other non-current liabilities

643,032



587,897


Total liabilities

6,549,780



6,330,823


Stockholders' equity:




Common stock and capital in excess of par value

1,999,845



2,017,312


Retained earnings

733,173



714,825


Accumulated other comprehensive income (loss)

(71,855)



(73,029)


Total KLA stockholders' equity

2,661,163



2,659,108


Non-controlling interest in consolidated subsidiary

18,456



18,585


Total stockholders' equity

2,679,619



2,677,693


Total liabilities and stockholders' equity

$

9,229,399



$

9,008,516


 

KLA Corporation




Condensed Consolidated Unaudited Statements of Operations






Three Months Ended Sept. 30,

(In thousands, except per share amounts)

2019


2018

Revenues:




Product

$

1,057,975



$

829,227


Service

355,439



264,033


Total revenues

1,413,414



1,093,260


Costs and expenses:




Costs of revenues

604,241



381,387


Research and development

210,580



153,530


Selling, general and administrative

188,345



114,438


Interest expense and other, net

38,732



16,337


Income before income taxes

371,516



427,568


Provision for income taxes

25,120



31,624


Net income

346,396



395,944


Less: Net loss attributable to non-controlling interest

(129)




Net income attributable to KLA-Tencor

$

346,525



$

395,944


Net income per share attributable to KLA-Tencor:




Basic

$

2.18



$

2.55


Diluted

$

2.16



$

2.54


Weighted-average number of shares:




Basic

158,697



155,221


Diluted

160,131



156,083


 

KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flow



Three months ended

Sept. 30,

(In thousands)

2019


2018

Cash flows from operating activities:




Net income

$

346,396



$

395,944


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

98,588



16,087


Loss (gain) on unrealized foreign exchange and other

12,794



3,895


Stock-based compensation expense

26,944



16,138


Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:




Accounts receivable

(75,214)



36,079


Inventories

(5,091)



(55,738)


Other assets

(8,930)



(16,853)


Accounts payable

18,885



(14,765)


Deferred system revenue

(4,833)



(79,810)


Deferred service revenue

(4,337)



(13,325)


Other liabilities

91,043



93,753


Net cash provided by operating activities

496,245



381,405


Cash flows from investing activities:




Businesses acquisitions, net of cash acquired

(78,530)



(11,787)


Capital expenditures

(32,566)



(22,330)


Proceeds from disposition of non-marketable securities

1,086




Purchases of available-for-sale securities

(263,767)




Proceeds from sale of available-for-sale securities

25,449



91,238


Proceeds from maturity of available-for-sale securities

198,751



254,757


Purchases of trading securities

(9,021)



(4,619)


Proceeds from sale of trading securities

11,905



7,612


Net cash (used in) provided by investing activities

(146,693)



314,871


Cash flows from financing activities:




Common stock repurchases

(228,496)



(299,974)


Payment of dividends to stockholders

(121,636)



(122,757)


Issuance of common stock

114




Tax withholding payments related to equity awards

(23,538)



(26,961)


Payment of contingent consideration payable

(57)




Net cash used in financing activities

(373,613)



(449,692)


Effect of exchange rate changes on cash and cash equivalents

(3,585)



(1,452)


Net (decrease) increase in cash and cash equivalents

(27,646)



245,132


Cash and cash equivalents at beginning of period

1,015,994



1,404,382


Cash and cash equivalents at end of period

$

988,348



$

1,649,514


Supplemental cash flow disclosures:




Income taxes paid

$

19,862



$

24,962


Interest paid

$

26,347



$

537


Non-cash activities:




Business acquisition holdback amounts - investing activities

$



$

440


Contingent consideration payable - financing activities

$

9,366



$

3,102


Dividends payable - financing activities

$

1,552



$

4,783


Unsettled common stock repurchase - financing activities

$

8,000



$

7,812


Accrued purchase of land, property and equipment - investing activities

$

16,074



$

9,242


 

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

(In thousands)

Sept. 30,
 2019


Sept. 30,
 2018

Revenues:




Semiconductor Process Control

$

1,163,632



$

1,069,959


Specialty Semiconductor Process

69,139




PCB, Display and Component Inspection(1)

178,552



23,615


Other

2,231




Total revenues for reportable segments

1,413,554



1,093,574


Corporate allocation and effects of foreign exchange rates

(140)



(314)


Total revenues

$

1,413,414



$

1,093,260


_________

(1)

Revenues in the three months ended Sept. 30, 2019 include a contribution from the Orbotech business. Revenues in the three months ended Sept. 30, 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




Sept. 30,
 2019


June 30,
 2019


Sept. 30,
 2018

GAAP net income attributable to KLA


$

346,525



$

217,845



$

395,944


Adjustments to reconcile GAAP net income to non-GAAP net income:








Acquisition-related charges

a

73,363



102,807



5,551



Income tax effect of non-GAAP adjustments

b

(22,266)



(32,930)



(310)



Discrete tax items

c



983



(17,106)


Non-GAAP net income attributable to KLA


$

397,622



$

288,705



$

384,079


GAAP net income (loss) per diluted share attributable to KLA


$

2.16



$

1.35



$

2.54


Non-GAAP net income per diluted share attributable to KLA


$

2.48



$

1.78



$

2.46


Shares used in diluted shares calculation


160,131



161,937



156,083


 

Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations



Acquisition -
Related Charges

Three months ended Sept. 30, 2019


Costs of revenues

$

49,999


Selling, general and administrative

$

23,364


Total in three months ended Sept. 30, 2019

$

73,363


Three months ended June 30, 2019


Costs of revenues

$

75,805


Selling, general and administrative

$

27,002


Total in three months ended June 30, 2019

$

102,807


Three months ended Sept. 30, 2018


Costs of revenues

$

890


Selling, general and administrative

$

4,661


Total in three months ended Sept. 30, 2018

$

5,551


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.

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.



c. 

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