News Release

KLA Corporation Reports Fiscal 2020 First Quarter Results

October 30, 2019 at 4:05 PM EDT
- Record quarterly revenue of $1.4 billion, above the guidance range of $1.31 to $1.39 billion
- GAAP EPS of $2.16 per share; record non-GAAP EPS of $2.48 per share, also above the guidance range of $2.04 to $2.34 per share
- Recently announced a 13% increase in the quarterly dividend level to $0.85 per share, the tenth consecutive annual dividend increase

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

Investor Relations: Kevin Kessel, CFA, Vice President, Investor Relations, (408) 875-6627, kevin.kessel@kla.com; Media Relations: Becky Howland, Ph.D., Sr. Director, Corporate Communications, (408) 875-9350, becky.howland@kla.com