PR Newswire | Apr 29, 2021 04:05PM EDT

04/29 15:05 CDT

KLA Corporation Reports Fiscal 2021 Third Quarter Results- Total revenues were $1.80 billion, finishing at the upper end of the range of guidance;- GAAP diluted EPS attributable to KLA was $3.66, and non-GAAP diluted EPS attributable to KLA was $3.85, each also finishing at the upper end of the range of guidance;- Cash flow from operations and free cash flow were both records at $646.2 million and $585.0 million, respectively;- Capital return was $412.7 million with $139.3 million in dividends and $273.4 million in share repurchases MILPITAS, Calif., April 29, 2021

MILPITAS, Calif., April 29, 2021 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2021, which ended on March 31, 2021, and reported GAAP net income attributable to KLA of $567 million and GAAP earnings per diluted share attributable to KLA of $3.66 on revenue of $1.80 billion.

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"KLA's March quarter results demonstrate strong momentum in our business. We have seen a sharp increase in business levels in each of our major end markets, driven by secular demand trends across a broad range of semiconductor markets and applications," commented Rick Wallace, president and chief executive officer of KLA Corporation. "Against this backdrop, KLA continues to demonstrate our ability to meet customer requirements while growing operating profits, generating record free cash flow, and maintaining our long-term strategy of productive capital allocation."

GAAP Results

Q3 FY 2021 Q2 FY 2021 Q3 FY 2020

Total revenue $1,804 $1,651 $1,424 million million million

Net Income Attributable to KLA $567 million$457 million$78 million

Net Income per Diluted Share $3.66 $2.94 $0.50 Attributable to KLA



Non-GAAP Results

Q3 FY 2021 Q2 FY 2021 Q3 FY 2020

Net Income Attributable to KLA $598 million$504 million$389 million

Net Income per Diluted Share $3.85 $3.24 $2.47 Attributable to KLA

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. KLA will discuss the results for its fiscal year 2021 third 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.

Fourth Quarter Fiscal 2021 Guidance

The following details our guidance for the fourth quarter of fiscal 2021 ending in June:

* Total revenue between $1,755 million to $1,955 million

* GAAP gross margin is expected to be in a range of 58% to 61%

* Non-GAAP gross margin is expected to be in a range of 61% to 63%

* GAAP diluted EPS attributable to KLA is expected to be in a range of $3.20 to $4.08

* Non-GAAP diluted EPS attributable to KLA in a range of $3.47 to $4.35

For additional guidance metrics, please see the company's published letter to shareholders and earnings slides on the KLA investor relations website.

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. Investors and others should note that KLA announces material financial information including SEC filings, press releases, public earnings calls and conference webcasts using an investor relations website (ir.kla.com). Additional information may be found at: www.kla.com.

Note Regarding Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements pertaining to revenues, GAAP and non-GAAP gross margin and GAAP and non-GAAP diluted EPS for the quarter ending June 30, 2021 are forward-looking statements and subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the future impacts of the COVID-19 pandemic; delays and disruptions in the supply chain; the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product and technology offerings by competitors; push-out of deliveries or cancellation of orders by customers; the ability of KLA's research and development teams to successfully innovate and develop technologies and products that are responsive to customer demands; KLA's ability to successfully manage its costs; market acceptance of KLA's existing and newly launched products; changing customer demands; and industry transitions. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this letter, please refer to KLA Corporation's Annual Report on Form 10-K for the year ended June 30, 2020, and other subsequent filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA Corporation assumes no obligation to, and does not currently intend to, update these forward-looking statements.

KLA Corporation

Condensed Consolidated Unaudited Balance Sheets



(In thousands) March 31, June 30, 2021 2020

ASSETS

Cash, cash equivalents and marketable securities $2,442,725 $1,980,472

Accounts receivable, net 1,201,991 1,107,413

Inventories 1,450,588 1,310,985

Other current assets 309,861 324,675

Land, property and equipment, net 628,438 519,824

Goodwill 2,011,187 2,045,402

Deferred income taxes, non-current 240,822 236,797

Purchased intangible assets, net 1,237,589 1,391,413

Other non-current assets 416,039 362,979

Total assets $9,939,240 $9,279,960

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $295,111 $264,280

Deferred system revenue 332,296 336,237

Deferred service revenue 252,992 233,493

Short-term debt 20,000 -

Other current liabilities 1,129,067 865,776

Total current liabilities 2,029,466 1,699,786

Non-current liabilities:

Long-term debt 3,422,097 3,469,670

Deferred tax liabilities 629,896 660,885

Deferred service revenue 86,902 96,325

Other non-current liabilities 658,015 672,284

Total liabilities 6,826,376 6,598,950

Stockholders' equity:

Common stock and capital in excess of par value 2,115,205 2,090,268

Retained earnings 1,070,124 654,930

Accumulated other comprehensive income (loss) (70,473) (79,774)

Total KLA stockholders' equity 3,114,856 2,665,424

Non-controlling interest in consolidated (1,992) 15,586 subsidiaries

Total stockholders' equity 3,112,864 2,681,010

Total liabilities and stockholders' equity $9,939,240 $9,279,960

KLA Corporation

Condensed Consolidated Unaudited Statements of Operations



Three Months Ended March Nine Months Ended March 31, 31,

(In thousands, except per share amounts) 2021 2020 2021 2020

Revenues:

Product $1,375,320$1,051,096$3,758,838$3,253,621

Service 428,453 372,868 1,234,425 1,093,210

Total revenues 1,803,773 1,423,964 4,993,263 4,346,831

Costs and expenses:

Costs of revenues 709,629 590,158 1,999,924 1,828,017

Research and development 238,957 215,433 687,059 646,764

Selling, general and administrative 183,040 185,760 537,580 566,358

Goodwill impairment - 256,649 - 256,649

Interest expense 39,092 39,231 117,358 120,053

Loss on extinguishment of debt - 22,538 - 22,538

Other expense (income), net (7,348) (1,004) (269) (5,190)

Income before income taxes 640,403 115,199 1,651,611 911,642

Provision for income taxes 73,233 37,190 207,316 106,932

Net income 567,170 78,009 1,444,295 804,710

Less: Net loss attributable to non-controlling(326) (443) (1,019) (822) interest

Net income attributable to KLA $567,496 $78,452 $1,445,314$805,532

Net income per share attributable to KLA:

Basic $3.69 $0.50 $9.36 $5.12

Diluted $3.66 $0.50 $9.28 $5.08

Weighted-average number of shares:

Basic 153,801 156,067 154,457 157,356

Diluted 155,159 157,172 155,789 158,586

KLA Corporation Condensed Consolidated Unaudited Statements of Cash Flows

Three Months Ended March 31,

(In thousands) 2021 2020

Cash flows from operating activities:

Net income $567,170 $78,009

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

Goodwill impairment - 256,649

Depreciation and amortization 84,365 81,990

Loss on extinguishment of debt - 22,538

(Gain) loss on unrealized foreign exchange and other 5,231 (5,950)

Asset impairment charges (23) -

Stock-based compensation expense 30,327 31,270

Gain on sale of business (4,422) -

Settlement of treasury lock agreement - (21,518)

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

Accounts receivable 16,055 73,103

Inventories (34,169) (11,640)

Other assets (20,851) (23,899)

Accounts payable 32,735 (12,904)

Deferred system revenue 57,820 89,280

Deferred service revenue 11,507 10,691

Other liabilities (99,595) (125,591)

Net cash provided by operating activities 646,150 442,028

Cash flows from investing activities:

Proceeds from sale of business 16,833 -

Business acquisitions, net of cash acquired - (70)

Capital expenditures (61,183) (43,445)

Purchases of available-for-sale securities (303,076) (156,173)

Proceeds from sale of available-for-sale securities 14,962 69,034

Proceeds from maturity of available-for-sale 159,120 133,819 securities

Purchases of trading securities (48,495) (46,784)

Proceeds from sale of trading securities 45,251 45,407

Net cash used in (provided by) investing activities (176,588) 1,788

Cash flows from financing activities:

Proceeds from issuance of debt, net of issuance costs- 742,004

Repayment of debt (20,000) (721,033)

Common stock repurchases (273,441) (315,995)

Payment of dividends to stockholders (139,338) (133,327)

Issuance of common stock - 672

Tax withholding payments related to equity awards (6,674) (4,958)

Net cash used in financing activities (439,453) (432,637)

Effect of exchange rate changes on cash and cash (9,425) (4,868) equivalents

Net increase (decrease) in cash and cash equivalents 20,684 6,311

Cash and cash equivalents at beginning of period 1,431,466 939,864

Cash and cash equivalents at end of period $1,452,150$946,175

Supplemental cash flow disclosures:

Income taxes paid $100,657 $91,972

Interest paid $39,980 $35,176

Non-cash activities:

Accrued purchase of land, property and equipment - $24,392 $17,137 investing activities

Contingent consideration payable - financing $178 $303 activities

Dividends payable - financing activities $779 $1,388

Unsettled common stock repurchase - financing $6,000 $- activities

Accrued debt issuance costs - financing activities $- $193

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 March Nine Months Ended March 31, 31,

(In thousands) 2021 2020 2021 2020

Revenues:

Semiconductor Process Control $1,506,140$1,177,777$4,154,278$3,588,839

Specialty Semiconductor Process 91,724 85,083 271,264 229,328

PCB, Display and Component Inspection 205,202 160,411 565,646 525,242

Other 149 469 739 3,217

Total revenues for reportable segments 1,803,215 1,423,740 4,991,927 4,346,626

Corporate allocation and effects of foreign exchange rates558 224 1,336 205

Total revenues $1,803,773$1,423,964$4,993,263$4,346,831

KLA Corporation Condensed Consolidated Unaudited Supplemental Information Reconciliation of GAAP Net Income and GAAP Earnings Per Diluted Share to Non-GAAP Net Income and Non-GAAP Earnings Per Diluted Share

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) March 31, Dec. 31, March 31, March 31, March 31, 2021 2020 2020 2021 2020

GAAP net income attributable to KLA $567,496$457,251$78,452 $1,445,314$805,532

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

Acquisition-related charges a52,973 53,099 55,022 156,547 188,778

Restructuring, severance and other b(1,534) 3,960 5,432 5,679 8,218 charges

Goodwill impairment c- - 256,649 - 256,649

Loss on extinguishment of debt d- - 22,538 - 22,538

Income tax effect of non-GAAP e(17,866) (17,552) (23,604) (52,431) (67,375) adjustments

Discrete tax items f(2,967) 7,381 (5,551) 21,901 (5,551)

Non-GAAP net income attributable to KLA $598,102$504,139$388,938$1,577,010$1,208,789

GAAP net income per diluted share $3.66 $2.94 $0.50 $9.28 $5.08 attributable to KLA

Non-GAAP net income per diluted share $3.85 $3.24 $2.47 $10.12 $7.62 attributable to KLA

Shares used in diluted shares calculation 155,159 155,560 157,172 155,789 158,586

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

Total AcquisitionRestructuring,Goodwill Debt pre-tax (In thousands) - Related Severance and ImpairmentExtinguishmentGAAP to Charges Other Charges Loss non-GAAP Adjustments

Three months ended March 31, 2021

Costs of revenues $40,309 $701 $- $ - $41,010

Research and development - 147 - - 147

Selling, general and 12,664 2,075 - - 14,739 administrative

Other expense (income), net - (4,457) - - (4,457)

Total in three months ended March$52,973 $(1,534) $- $ - $51,439 31, 2021

Three months ended Dec. 31, 2020

Costs of revenues $38,738 $765 $- $ - $39,503

Research and development - 1,432 - - 1,432

Selling, general and 14,361 2,450 - - 16,811 administrative

Other expense (income), net - (687) - - (687)

Total in three months ended Dec. $53,099 $3,960 $- $ - $57,059 31, 2020

Three months ended March 31, 2020

Costs of revenues $36,850 $483 $- $ - $37,333

Research and development - 685 - - 685

Selling, general and 18,172 4,264 - - 22,436 administrative

Goodwill impairment - - 256,649 - 256,649

Loss on extinguishment of debt - - - 22,538 22,538

Total in three months ended March$55,022 $5,432 $256,649$ 22,538 $339,641 31, 2020

Free Cash Flow Reconciliation

Three Months Ended March 31,

(In thousands) 2021 2020

Net cash provided by operating activities$646,150 $442,028

Capital expenditures (61,183) (43,445)

Free Cash Flow $584,967 $398,583

Fourth Quarter Fiscal 2021 Guidance Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

Three Months Ending June 30, 2021

(In millions, except per share amounts) Low High

GAAP net income per diluted share attributable $3.20 $4.08 to KLA

Acquisition-related charges a0.34 0.34

Restructuring, severance and other charges b0.04 0.04

Income tax effect of non-GAAP adjustments e(0.11) (0.11)

Non-GAAP net income per diluted share $3.47 $4.35 attributable to KLA

Shares used in net income per diluted share 154.5 154.5 calculation

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin

Three Months Ending June 30, 2021

Low High

GAAP gross margin 58% 61%

Acquisition-related charges a3% 2%

Non-GAAP gross margin 61% 63%

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 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, including non-GAAP net income attributable to KLA, non-GAAP net income per diluted share attributable to KLA and Free Cash Flow, 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 to help investors compare our operating performances with our results in prior periods as well as with the performance of other companies. 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 are inherently subject to significant discretion (for example, determining which costs and expenses to exclude when calculating such a metric). 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. The following are descriptions of the adjustments made to reconcile GAAP net income attributable to KLA to non-GAAP net income attributable to KLA:

Acquisition-related charges primarily include amortization of intangible assets and other acquisition-related adjustments including adjustments fora. the fair valuation of inventory and backlog, and transaction costs associated with our acquisitions, primarily Orbotech.



Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-basedb. compensation arrangements, and other exit costs.



Goodwill impairment included non-cash expense recognized as a result of KLA's annual testing for goodwill impairment performed in the third quarter of the prior fiscal year. The impairment charge resulted from the downwardc. revision of financial outlook for the acquired Orbotech business as well as the impact of elevated risk and macroeconomic slowdown driven by the COVID-19 pandemic.



Loss on extinguishment of debt included a pre-tax loss on early extinguishment of the $500 million 4.125% Senior Notes due in Novemberd. 2021.



Income tax effect of non-GAAP adjustments includes the income tax effectse. of the excluded items noted above.



Discrete tax items in the three months ended March 31, 2021 primarily relate to a tax benefit of $3.0 million due to a decrease in deferred tax liability on purchased intangibles relating to a decrease in the effective income tax rate in Israel. Discrete tax items in the three months ended Dec. 31, 2020 consist primarily of a tax expense of $4.0 million from an internal restructuring. Discrete tax items in the nine months ended Marchf. 31, 2021 primarily include the aforementioned items as well as a tax expense of $14.0 million due to an increase in deferred tax liability on purchased intangibles relating to an increase in the United Kingdom statutory income tax rate. Discrete tax items in the three months and nine months ended March 31, 2020 include a decrease in deferred tax liability for an unrealized gain on investments held for sale by subsidiaries of the acquired Orbotech business.

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SOURCE KLA Corporation