PR Newswire | Oct 27, 2021 04:06PM EDT

10/27 15:05 CDT

KLA Corporation Reports Fiscal 2022 First Quarter Results- Total revenues were $2.08 billion, finishing towards the upper end of the range of guidance;- GAAP diluted EPS attributable to KLA was $6.96, above the upper end of the range of guidance, and non-GAAP diluted EPS attributable to KLA was $4.64, finishing towards the upper end of the range of guidance;- Cash flow from operations and free cash flow were both records at $863.8 million and $794.8 million, respectively;- Capital returns for the quarter were $562.5 million with $162.8 million in dividends and $399.7 million in share repurchases. MILPITAS, Calif., Oct. 27, 2021

MILPITAS, Calif., Oct. 27, 2021 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2022, which ended on September 30, 2021, and reported GAAP net income attributable to KLA of $1.07 billion and GAAP earnings per diluted share attributable to KLA of $6.96 on revenue of $2.08 billion.

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"KLA's track record of consistent execution and sustainable outperformance was evident during the September 2021 quarter, demonstrating the strong momentum in our core markets and the attractive operating leverage inherent in the KLA financial model," commented Rick Wallace, president and chief executive officer of KLA Corporation. "KLA continues to outperform expectations despite significant supply chain challenges by operating with purpose and precision and focusing on creating value for our customers, partners, and shareholders alike. KLA's execution is powered by our global teams continuing to go above and beyond, to meet the challenges and opportunities of the marketplace."

GAAP Results

Q1 FY 2022 Q4 FY 2021 Q1 FY 2021

Total Revenue $2,084 $1,925 $1,539 million million million

Net Income Attributable to KLA $1,068 $633 million$421 million million

Net Income per Diluted Share $6.96 $4.10 $2.69 Attributable to KLA



Non-GAAP Results

Q1 FY 2022 Q4 FY 2021 Q1 FY 2021

Net Income Attributable to KLA $712 million$684 million$475 million

Net Income per Diluted Share $4.64 $4.43 $3.03 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 2022 first 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.

Second Quarter Fiscal 2022 Guidance

The following details our guidance for the second quarter of fiscal 2022 ending in December:

* Total revenue between $2,225 million to $2,425 million * GAAP gross margin is expected to be in a range of 60.2% to 62.3% * Non-GAAP gross margin is expected to be in a range of 62.0% to 64.0% * GAAP diluted EPS attributable to KLA is expected to be in a range of $4.69 to $5.59 * Non-GAAP diluted EPS attributable to KLA in a range of $4.95 to $5.85

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 total revenues, GAAP and non-GAAP gross margin and GAAP and non-GAAP diluted EPS for the quarter ending December 31, 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 impact of the COVID-19 pandemic on the global economy and on our business, financial condition and results of operations, including the supply chain constraints we are experiencing as a result of the pandemic; economic, political and social conditions in the countries in which we, our customers and our suppliers operate, including global trade policies; disruption to our manufacturing facilities or other operations, or the operations of our customers, due to natural catastrophic events, health epidemics or terrorism; ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns; our ability to timely develop new technologies and products that successfully anticipate or address changes in the semiconductor industry; our ability to maintain our technology advantage and protect our proprietary rights; our ability to compete with new products introduced by our competitors; our ability to attract and retain key personnel; cybersecurity threats, cyber incidents affecting our and our service providers' systems and networks and our ability to access critical information systems for daily business operations; liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products; exposure to a highly concentrated customer base; availability and cost of the wide range of materials used in the production of our products; our ability to operate our business in accordance with our business plan; legal, regulatory and tax environments in which we perform our operations and conduct our business and our ability to comply with relevant laws and regulations; our ability to pay interest and repay the principal of our current indebtedness is dependent upon our ability to manage our business operations, our credit rating and the ongoing interest rate environment, among other factors; instability in the global credit and financial markets; our exposure to currency exchange rate fluctuations, or declining economic conditions in those countries where we conduct our business; changes in our effective tax rate resulting from changes in the tax rates imposed by jurisdictions where our profits are determined to be earned and taxed, expiration of tax holidays in certain jurisdictions, resolution of issues arising from tax audits with various authorities or changes in tax laws or the interpretation of such tax laws; and our ability to identify suitable acquisition targets and successfully integrate and manage acquired businesses. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this press release, please refer to KLA Corporation's Annual Report on Form 10-K for the year ended June 30, 2021, 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) Sept. 30, June 30, 2021 2021

ASSETS

Cash, cash equivalents and marketable securities $2,624,813 $2,494,522

Accounts receivable, net 1,463,974 1,305,479

Inventories 1,715,339 1,575,380

Other current assets 340,546 320,867

Land, property and equipment, net 698,547 663,027

Goodwill 2,041,338 2,011,172

Deferred income taxes, non-current 665,672 270,461

Purchased intangible assets, net 1,157,535 1,185,311

Other non-current assets 438,713 444,905

Total assets $11,146,477$10,271,124



LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $380,827 $342,083

Deferred system revenue 319,846 295,192

Deferred service revenue 286,741 284,936

Short-term debt 20,000 20,000

Other current liabilities 1,515,596 1,161,016

Total current liabilities 2,523,010 2,103,227

Non-current liabilities:

Long-term debt 3,423,436 3,422,767

Deferred tax liabilities 625,540 650,623

Deferred service revenue 94,824 87,575

Other non-current liabilities 620,581 631,290

Total liabilities 7,287,391 6,895,482

Stockholders' equity:

Common stock and capital in excess of par value 2,137,706 2,175,988

Retained earnings 1,801,268 1,277,123

Accumulated other comprehensive loss (78,044) (75,557)

Total KLA stockholders' equity 3,860,930 3,377,554

Non-controlling interest in consolidated subsidiaries(1,844) (1,912)

Total stockholders' equity 3,859,086 3,375,642

Total liabilities and stockholders' equity $11,146,477$10,271,124

KLA Corporation

Condensed Consolidated Unaudited Statements of Operations



Three Months Ended Sept. 30,

(In thousands, except per share amounts) 2021 2020

Revenues:

Product $1,629,888$1,145,495

Service 453,950 393,125

Total revenues 2,083,838 1,538,620

Costs and expenses:

Costs of revenues 813,624 620,562

Research and development 258,153 219,038

Selling, general and administrative 193,261 172,631

Interest expense 38,312 39,386

Other expense (income), net 14,140 3,197

Income before income taxes 766,348 483,806

Provision (benefit) for income taxes (302,137) 63,664

Net income 1,068,485 420,142

Less: Net income (loss) attributable to 68 (425) non-controlling interest

Net income attributable to KLA $1,068,417$420,567

Net income per share attributable to KLA:

Basic $7.01 $2.71

Diluted $6.96 $2.69

Weighted-average number of shares:

Basic 152,330 155,281

Diluted 153,410 156,442

KLA Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three Months Ended Sept. 30,

(In thousands) 2021 2020

Cash flows from operating activities:

Net income $1,068,485$420,142

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

Depreciation and amortization 84,824 80,066

Unrealized foreign exchange (gain) loss and other 15,639 (12,907)

Asset impairment charges 5,962 865

Stock-based compensation expense 25,216 26,992

Deferred income taxes (427,970) (14,967)

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

Accounts receivable (180,354) 73,000

Inventories (138,189) (85,991)

Other assets 4,673 20,070

Accounts payable 41,868 (9,822)

Deferred system revenue 33,469 (82,633)

Deferred service revenue 4,912 (3,646)

Other liabilities 325,262 101,002

Net cash provided by operating activities 863,797 512,171

Cash flows from investing activities:

Proceeds from sale of assets - 1,114

Business acquisitions, net of cash acquired (37,986) -

Capital expenditures (68,955) (55,925)

Purchases of available-for-sale securities (264,000) (231,821)

Proceeds from sale of available-for-sale securities 14,954 53,249

Proceeds from maturity of available-for-sale securities 178,414 95,835

Purchases of trading securities (22,896) (18,630)

Proceeds from sale of trading securities 25,163 21,244

Proceeds from other investments - 614

Net cash used in investing activities (175,306) (134,320)

Cash flows from financing activities:

Proceeds from revolving credit facility 300,000 -

Repayment of debt (300,000) (50,000)

Common stock repurchases (399,677) (187,897)

Payment of dividends to stockholders (162,821) (141,164)

Tax withholding payments related to equity awards (46,532) (25,145)

Net cash used in financing activities (609,030) (404,206)

Effect of exchange rate changes on cash and cash equivalents (4,507) 7,766

Net increase (decrease) in cash and cash equivalents 74,954 (18,589)

Cash and cash equivalents at beginning of period 1,434,610 1,234,409

Cash and cash equivalents at end of period $1,509,564$1,215,820

Supplemental cash flow disclosures:

Income taxes paid $57,532 $54,185

Interest paid $39,717 $40,071

Non-cash activities:

Accrued purchase of land, property and equipment - investing activities $22,962 $23,388

Contingent consideration payable - financing activities $12,810 $(2,987)

Dividends payable - financing activities $1,783 $1,660

Unsettled common stock repurchase - financing activities $5,999 $6,000

KLA Corporation

Segment Information (Unaudited)

The following is a summary of results for each of our four reportable segmentsand reconciliation to total revenues for the indicated periods:

Three Months Ended Sept. 30,

(In thousands) 2021 2020

Revenues:

Semiconductor Process Control $1,779,083$1,267,954

Specialty Semiconductor Process 102,029 88,954

PCB, Display and Component Inspection 202,808 181,177

Other - 140

Total revenues for reportable segments 2,083,920 1,538,225

Corporate allocation and effects of foreign (82) 395 exchange rates

Total revenues $2,083,838$1,538,620

KLA Corporation

Condensed Consolidated Unaudited Supplemental Information

Reconciliation of GAAP Net Income to Non-GAAP Net Income

Three Months Ended

Sept. 30, June 30, Sept. 30, (In thousands, except per share amounts) 2021 2021 2020

GAAP net income attributable to KLA $1,068,417$632,978$420,567

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

Acquisition-related charges a60,168 53,008 50,475

Restructuring, severance and other charges b125 1,358 3,253

Income tax effect of non-GAAP adjustments c(19,684) (16,910) (17,013)

Discrete tax items d(397,000) 13,620 17,487

Non-GAAP net income attributable to KLA $712,026 $684,054$474,769

GAAP net income per diluted share attributable to KLA $6.96 $4.10 $2.69

Non-GAAP net income per diluted share attributable to KLA $4.64 $4.43 $3.03

Shares used in diluted shares calculation 153,410 154,283 156,442

Pre-tax Impact of GAAP to Non-GAAP Adjustments Included in CondensedConsolidated Unaudited Statements of Operations

Acquisition -Restructuring,Total Pre-tax (In thousands) Related Severance and GAAP to Non-GAAP Charges Other Charges Adjustments

Three Months Ended Sept. 30, 2021

Costs of revenues $41,115 $ - $41,115

Research and development 5,962 - 5,962

Selling, general and administrative 13,091 - 13,091

Other expense (income), net - 125 125

Total in three months ended Sept. 30, 2021$60,168 $ 125 $60,293

Three Months Ended June 30, 2021

Costs of revenues $40,499 $ (471) $40,028

Research and development - 203 203

Selling, general and administrative 12,509 1,626 14,135

Total in three months ended June 30, 2021 $53,008 $ 1,358 $54,366

Three Months Ended Sept. 30, 2020

Costs of revenues $37,040 $ 636 $37,676

Research and development - 923 923

Selling, general and administrative 13,435 1,933 15,368

Other expense (income), net - (239) (239)

Total in three months ended Sept. 30, 2020$50,475 $ 3,253 $53,728

Free Cash Flow Reconciliation

Three Months Ended Sept. 30,

(In thousands) 2021 2020

Net cash provided by operating activities$863,797 $512,171

Capital expenditures (68,955) (55,925)

Free Cash Flow $794,842 $456,246

Second Quarter Fiscal 2021 Guidance

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS

Three Months Ending Dec. 31, 2021

(In millions, except per share amounts) Low High

GAAP net income per diluted share attributable $4.69 $5.59 to KLA

Acquisition-related charges a0.36 0.36

Restructuring, severance and other charges b0.01 0.01

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

Non-GAAP net income per diluted share $4.95 $5.85 attributable to KLA

Shares used in net income per diluted share 152.2 152.2 calculation

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin

Three Months Ending Dec. 31, 2021

Low High

GAAP gross margin 60.2% 62.3%

Acquisition-related chargesa1.8% 1.7%

Non-GAAP gross margin 62.0% 64.0%

The Non-GAAP and supplemental information provided in this press release is asupplement to, and not a substitute for, KLA's financial results presented inaccordance with United States GAAP.

To supplement our Condensed Consolidated Financial Statements presented inaccordance with GAAP, we provide certain non-GAAP financial information, whichis adjusted from results based on GAAP to exclude certain costs and expenses,as well as other supplemental information. The non-GAAP and supplementalinformation is provided to enhance the user's overall understanding of ouroperating performance and our prospects in the future. Specifically, we believethat the non-GAAP information, including non-GAAP net income attributable toKLA, non-GAAP net income per diluted share attributable to KLA, non-GAAP grossmargin and Free Cash Flow, provides useful measures to both management andinvestors regarding financial and business trends relating to our financialperformance by excluding certain costs and expenses that we believe are notindicative of our core operating results to help investors compare ouroperating performances with our results in prior periods as well as with theperformance of other companies. The non-GAAP information is among the budgetingand planning tools that management uses for future forecasting. However,because there are no standardized or generally accepted definitions for mostnon-GAAP financial metrics, definitions of non-GAAP financial metrics areinherently subject to significant discretion (for example, determining whichcosts and expenses to exclude when calculating such a metric). As a result,non-GAAP financial metrics may be defined very differently from company tocompany, or even from period to period within the same company, which canpotentially limit the usefulness of such information to an investor. Thepresentation of non-GAAP and supplemental information is not meant to beconsidered in isolation or as a substitute for results prepared and presentedin accordance with United States GAAP. The following are descriptions of theadjustments made to reconcile GAAP net income attributable to KLA to non-GAAPnet income attributable to KLA:

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

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

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

Discrete tax items in the three months ended September 30, 2021 primarily relate to a one-time tax benefit of $394.5 million resulting from changes made to our international structure to better align ownership of certain intellectual property rights with how our business operates. Discrete tax items in the three months ended June 30, 2021 include tax expense from an increase in deferred tax liability on purchased intangibles relating to and. increase in the United Kingdom statutory income tax rate, partially offset by a net tax benefit from an internal restructuring and a reduction in unrecognized tax benefits. Discrete tax items in the three months ended September 30, 2020 include 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 as well as tax expense from a restructuring.

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SOURCE KLA Corporation