KLA(KLAC)2025-01-31 21:05Demand and Market Environment - The company reported a significant increase in demand for semiconductors driven by advancements in AI, 5G technology, and the electrification of the automotive industry[160] - The semiconductor industry environment has improved, with foundry/logic customers increasing capital intensity and technology development investments supporting AI and high bandwidth memory[161] - The company continues to invest in technological innovation despite potential delays from customers in adopting new chips and technology methods[161] Financial Performance - Total revenues for the three months ended December 31, 2024, reached $3,076.9 million, a 24% increase from $2,486.7 million in the same period of 2023[180] - Product revenues increased from $1,921.8 million to $2,409.5 million, representing a 25% growth year-over-year for the quarter[180] - Service revenues rose from $564.9 million to $667.4 million, an 18% increase for the same quarter[182] - Net income for the three months ended December 31, 2024, was $824.5 million, compared to $582.5 million in the same period of 2023[169] - Diluted net income per share for the quarter was $6.16, up from $4.28 in the same quarter of the previous year[171] - Total revenues for the six months ended December 31, 2024, were $5,918.4 million, a 21% increase from $4,883.7 million in the same period of 2023[181] - Total revenues for reportable segments increased by $590.1 million, or 24%, to $3,077.2 million for the three months ended December 31, 2024, compared to $2,487.2 million for the same period in 2023[184] Segment Performance - Semiconductor Process Control segment revenues increased by $561.7 million, or 26%, for the three months ended December 31, 2024, and accounted for approximately 90% of total company revenue[186] - Wafer Inspection revenues grew by $396.1 million, or 34%, to $1,562.6 million for the three months ended December 31, 2024, compared to $1,166.5 million in 2023[185] - Specialty Semiconductor Process revenues remained relatively flat, accounting for approximately 5% of total revenues for both the three and six months ended December 31, 2024[186] - PCB and Component Inspection segment revenues increased due to a settlement related to a technology project cancellation, contributing to the decision to exit the Display business[187] Expenses and Margins - Gross margin for the quarter was 60.3%, slightly down from 60.7% in the previous year[180] - Gross margin decreased to 60.3% for the three months ended December 31, 2024, down from 60.7% in the same period of 2023, primarily due to a less profitable mix of products and services sold[188] - R&D expenses increased by $25.7 million, or 8%, to $346.2 million for the three months ended December 31, 2024, primarily due to higher employee-related expenses[193] - SG&A expenses rose by $29.8 million, or 13%, to $267.1 million for the three months ended December 31, 2024, driven by increases in employee-related and facility-related expenses[196] - SG&A expenses for the six months ended December 31, 2024 increased by $13.2 million in employee-related expenses, $8.1 million in facility-related expenses, $5.2 million in travel expenses, $4.8 million in promotional expenses, and $4.2 million in consulting costs compared to the same period in 2023[198] Goodwill and Impairments - The company recorded a goodwill impairment charge of $239.1 million for the three months ended December 31, 2024[170] - A goodwill and purchased intangible assets impairment charge of $239.1 million was recorded in the PCB and Component Inspection segment during Q2 FY25, compared to a $219.0 million charge in Q2 FY24[199] Cash Flow and Capital Structure - Net cash provided by operating activities was $1.84 billion for the six months ended December 31, 2024, an increase of $338.8 million from $1.51 billion in the same period of 2023[215] - Cash, cash equivalents, and marketable securities totaled $3.78 billion as of December 31, 2024, a decrease of $723.6 million from $4.50 billion as of June 30, 2024, primarily due to stock repurchases and debt repayment[211] - The total amount of regular quarterly cash dividends paid during the three months ended December 31, 2024 was $226.8 million, compared to $196.9 million in the same period of 2023[213] - As of December 31, 2024, the company had $5.95 billion in Senior Notes, with $750.0 million repaid in November 2024[217] - The company had no outstanding borrowings under its $1.50 billion Revolving Credit Facility as of December 31, 2024, maintaining compliance with all covenants[218] Regulatory and Compliance - The U.S. government has tightened export controls, impacting the company's ability to sell products to certain customers in China, which is a major region for semiconductor manufacturing[162] - The 2023 BIS Rules impose new export licensing requirements that could affect the company's ability to provide products and services to customers in China[165] - The company is continuously assessing the impact of government regulations on its financial results and operations, particularly concerning export licenses[167] Internal Controls and Governance - The CEO and CFO concluded that the Disclosure Controls were effective at a reasonable assurance level as of the end of the reporting period[233] - No changes in internal control over financial reporting were identified that materially affected or are likely to materially affect the internal control over financial reporting during the most recent fiscal quarter[237] - Disclosure Controls are designed to ensure timely recording, processing, summarizing, and reporting of required information under the Exchange Act[235] - The effectiveness of Disclosure Controls is limited by inherent constraints, including the possibility of errors or fraud not being detected[236] - The evaluation of Disclosure Controls was conducted under the supervision of management, including the CEO and CFO[234]