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KLA Corp. (KLAC) Beats Q3 Earnings and Revenue Estimates
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KLA Corporation (KLAC - Free Report) reported third-quarter fiscal 2022 earnings per share of $5.13, which beat the Zacks Consensus Estimate by 6.8%. The figure was up 33.2% year over year but down 8.2% sequentially.
Revenues increased 26.9% from the year-ago quarter but declined 2.72% sequentially to $2.29 billion, surpassing the Zacks Consensus Estimate by 3.5%. The reported figure was toward the higher end of the company’s guided range of $2.1-$2.3 billion.
Strong customer demand across each of the major product groups drove the quarterly results.
Growing investments across multiple nodes, and rising capital intensity in Foundry and logic contributed well to its quarterly performance.
Increasing customer adoption of metrology applications in leading-edge technology development and capacity monitoring propelled the optical metrology business, which remained a positive factor.
Management has a favorable outlook toward the wafer fab equipment industry despite supply challenges and macro headwinds. It expects positive industry dynamics to continue in the calendar year 2022 due to strong semiconductor demand.
Products revenues (accounting for 79% of total revenues) increased 30.9% year over year to $1.80 billion. Yet, it declined 5.02% from the prior quarter-period.
Services revenues (21% of total revenues) were up 6.8% sequentially and 13.9% from the year-ago quarter to $488 million.
The growth in Services revenues is attributed to the expanding installed base, increasing customer adoption of long-term service agreements, higher utilization rates, and expansion of Service opportunities in the legacy nodes.
In terms of reportable segments, Semiconductor Process Control revenues increased 31% year over year to $1.98 billion, driven by strength in foundry and logic. Foundry & Logic accounted for 63%, and Memory (accounting for 26% DRAM and 11% NAND) constituted about 37% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues were $117 million, up 28% year over year. PCB, Display and Component Inspection revenues, however, declined 6% from the year-ago quarter to $193 million.
The Electronics, Packaging and Components or EPC group reported strong results for the quarter, driven by strength in automotive, 5G and advanced packaging.
In terms of revenue breakdown by major products, Wafer Inspection, Patterning — which includes reticle inspection — and Specialty Semiconductor Process accounted for 40%, 27% and 5% of the company’s total fiscal third-quarter revenues, respectively. PCB, Display and Component Inspection accounted for 5%, Service contributed 21%, and Other — which is reported in the Semiconductor Process Control segment — constituted 2% of the quarterly revenues.
In terms of regional breakdown of revenues, China, Taiwan, and Korea accounted for 31%, 23%, and 21% of the total fiscal third-quarter revenues, respectively. Then again, the United States, Europe, Japan, and the rest of Asia accounted for 10%, 7%, 6%, and 3%, respectively.
Operating Details
Non-GAAP gross margin came in line with the prior-year quarter figure of 62.9%. The figure was at the higher end of the guided range of 61.5-63.5%.
Research and development (R&D) expenses increased 19.4% year over year to $285.2 million. Selling, general and administrative (SG&A) expenses also increased 18.3% year over year to $216.5 million. As a percentage of sales, R&D and SG&A expenses contracted 8 bps and 7 bps year over year, respectively.
For the reported quarter, non-GAAP operating margin was 41.7%, expanding 130 bps year over year.
Balance Sheet
As of Mar 31, 2022, cash, cash equivalents and marketable securities totaled $2.58 billion compared with $2.81 billion on Dec 31, 2021.
Cash flow from operating activities was $818.9 million for the fiscal third quarter versus $810.8 million in the prior quarter. Free cash flow was $718.6 million for the reported quarter compared with $745.9 million in the prior quarter.
During the fiscal third quarter, KLAC paid $159 million in dividends and repurchased $564.7 million shares.
Fourth-Quarter Fiscal 2022 Guidance
For fourth-quarter fiscal 2022, revenues are expected between $2.30 billion and $2.55 billion. The Zacks Consensus Estimate for revenues is pegged at $2.36 billion.
The company expects non-GAAP EPS within $4.93-$6.03. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $5.35.
Management expects non-GAAP gross margin in the range of 61.5-63.5%.
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KLA Corp. (KLAC) Beats Q3 Earnings and Revenue Estimates
KLA Corporation (KLAC - Free Report) reported third-quarter fiscal 2022 earnings per share of $5.13, which beat the Zacks Consensus Estimate by 6.8%. The figure was up 33.2% year over year but down 8.2% sequentially.
Revenues increased 26.9% from the year-ago quarter but declined 2.72% sequentially to $2.29 billion, surpassing the Zacks Consensus Estimate by 3.5%. The reported figure was toward the higher end of the company’s guided range of $2.1-$2.3 billion.
Strong customer demand across each of the major product groups drove the quarterly results.
Growing investments across multiple nodes, and rising capital intensity in Foundry and logic contributed well to its quarterly performance.
Increasing customer adoption of metrology applications in leading-edge technology development and capacity monitoring propelled the optical metrology business, which remained a positive factor.
Management has a favorable outlook toward the wafer fab equipment industry despite supply challenges and macro headwinds. It expects positive industry dynamics to continue in the calendar year 2022 due to strong semiconductor demand.
KLA Corporation Price, Consensus and EPS Surprise
KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote
Top-Line Details
Products revenues (accounting for 79% of total revenues) increased 30.9% year over year to $1.80 billion. Yet, it declined 5.02% from the prior quarter-period.
Services revenues (21% of total revenues) were up 6.8% sequentially and 13.9% from the year-ago quarter to $488 million.
The growth in Services revenues is attributed to the expanding installed base, increasing customer adoption of long-term service agreements, higher utilization rates, and expansion of Service opportunities in the legacy nodes.
In terms of reportable segments, Semiconductor Process Control revenues increased 31% year over year to $1.98 billion, driven by strength in foundry and logic. Foundry & Logic accounted for 63%, and Memory (accounting for 26% DRAM and 11% NAND) constituted about 37% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues were $117 million, up 28% year over year. PCB, Display and Component Inspection revenues, however, declined 6% from the year-ago quarter to $193 million.
The Electronics, Packaging and Components or EPC group reported strong results for the quarter, driven by strength in automotive, 5G and advanced packaging.
In terms of revenue breakdown by major products, Wafer Inspection, Patterning — which includes reticle inspection — and Specialty Semiconductor Process accounted for 40%, 27% and 5% of the company’s total fiscal third-quarter revenues, respectively. PCB, Display and Component Inspection accounted for 5%, Service contributed 21%, and Other — which is reported in the Semiconductor Process Control segment — constituted 2% of the quarterly revenues.
In terms of regional breakdown of revenues, China, Taiwan, and Korea accounted for 31%, 23%, and 21% of the total fiscal third-quarter revenues, respectively. Then again, the United States, Europe, Japan, and the rest of Asia accounted for 10%, 7%, 6%, and 3%, respectively.
Operating Details
Non-GAAP gross margin came in line with the prior-year quarter figure of 62.9%. The figure was at the higher end of the guided range of 61.5-63.5%.
Research and development (R&D) expenses increased 19.4% year over year to $285.2 million. Selling, general and administrative (SG&A) expenses also increased 18.3% year over year to $216.5 million. As a percentage of sales, R&D and SG&A expenses contracted 8 bps and 7 bps year over year, respectively.
For the reported quarter, non-GAAP operating margin was 41.7%, expanding 130 bps year over year.
Balance Sheet
As of Mar 31, 2022, cash, cash equivalents and marketable securities totaled $2.58 billion compared with $2.81 billion on Dec 31, 2021.
Cash flow from operating activities was $818.9 million for the fiscal third quarter versus $810.8 million in the prior quarter. Free cash flow was $718.6 million for the reported quarter compared with $745.9 million in the prior quarter.
During the fiscal third quarter, KLAC paid $159 million in dividends and repurchased $564.7 million shares.
Fourth-Quarter Fiscal 2022 Guidance
For fourth-quarter fiscal 2022, revenues are expected between $2.30 billion and $2.55 billion. The Zacks Consensus Estimate for revenues is pegged at $2.36 billion.
The company expects non-GAAP EPS within $4.93-$6.03. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $5.35.
Management expects non-GAAP gross margin in the range of 61.5-63.5%.
Zacks Rank & Stocks to Consider
Currently, KLA Corp. has a Zacks Rank #4 (Sell).
Investors interested in the broader technology sector can consider stocks like Jabil (JBL - Free Report) , Jack Henry & Associates (JKHY - Free Report) , and Broadcom (AVGO - Free Report) . While Jabil currently sports a Zacks Rank #1 (Strong Buy), Jack Henry & Associates and Broadcom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Jabil has gained 13.3% over a year. The long-term earnings growth rate for JBL is currently projected at 12%.
Jack Henry & Associates has gained 19.6% over a year. The long-term earnings growth rate for JKHY is currently projected at 17%.
Broadcom has gained 26.9% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.