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KLA's (KLAC) Earnings and Revenues Beat Estimates in Q1
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KLA Corporation (KLAC - Free Report) reported first-quarter fiscal 2023 earnings per share of $7.06, beating the Zacks Consensus Estimate by 13.5%. The figure was up 52.2% from the year-ago fiscal quarter’s level year over year and 21.5%, sequentially.
Revenues increased 30.7% from the year-ago fiscal quarter’s level and 9.6% from the prior quarter’s level to $2.72 billion, surpassing the Zacks Consensus Estimate by 5%. The reported figure was near the higher end of management’s guided range of $2.475-$2.725 billion.
Strong customer demand across major product groups drove the quarterly results.
Solid performance of the Patterning systems business was attributed to strong growth of the EUV mask shop inspection in 5nm and below applications as well as growth of mask shop and wafer fab applications in mature node applications.
However, global macroeconomic headwinds, including inflation and COVID-related issues in China, and supply-chain constraints negatively impacted demand for semiconductors in PC’s and other consumer-facing markets during the fiscal first quarter.
KLA expects its systems and service revenues to be affected in the near term by the U.S. government-announced export regulations on the sale of U.S. semiconductor technology to China.
Products revenues (accounting for 81% of total revenues) increased 34.7% year over year and 11.2% sequentially to $2.196 billion.
Services revenues (19% of total revenues) were up 3.4%, sequentially, and 16.5% from the year-ago quarter’s reading to $528.8 million.
Growth in Services revenues is attributed to the expanding installed base, continued high utilization rates, increasing customer adoption of long-term service agreements and expansion of Service opportunities in the legacy nodes.
In terms of reportable segments, Semiconductor Process Control revenues (88% of total revenues) increased 35% year over year to $2.398 billion, driven by strength in Foundry & Logic. Foundry & Logic accounted for 63%, while Memory constituted about 37% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues (5%) were $127.9 million, up 25% year over year. PCB, Display and Component Inspection revenues (7%) declined 1% from the year-ago quarter’s actuals to $200.7 million. The decline was due to slowing consumer electronics markets, mainly in mobile phones.
The Electronics, Packaging and Components or EPC group reported strong quarterly results, driven by strength in automotive, 5G and advanced packaging.
Regarding revenue breakdown by major products, Wafer Inspection, Patterning systems, including metrology and reticle inspection, and Specialty Semiconductor Process accounted for 41%, 27% and 4% of KLA’s total revenues for the fiscal first quarter, respectively. PCB, Display and Component Inspection accounted for 5%, Service represented 19% and Other — reported in the Semiconductor Process Control segment — constituted 4% of the quarterly revenues.
In terms of regional breakdown of revenues, China, Taiwan and Korea accounted for 31%, 27% and 15% of the total revenues for the fiscal first quarter, respectively. The United States of America, Japan, the European Union and South East Asia accounted for 9%, 8%, 6% and 4%, respectively.
Operating Details
Non-GAAP gross margin expanded 50 basis points (bps) from the prior-year quarter’s level to 63.4%. The figure was near the upper end of the guided range of 62-64%.
Research and development (R&D) expenses increased 23.4% year over year to $318.5 million. Selling, general and administrative (SG&A) expenses also increased 31.4% year over year to $253.98 million. As a percentage of sales, R&D expenses contracted 70 bps year over year to 11.7%, while SG&A expenses matched the year-ago figure of 9.3%.
For the reported quarter, non-GAAP operating margin was 44.1%, expanding 190 bps year over year.
Balance Sheet
As of Sep 30, 2022, cash, cash equivalents and marketable securities totaled $2.95 billion compared with $2.71 billion on Jun 30, 2022.
Cash flow from operating activities was $1.01 billion for the fiscal first quarter compared with $819.2 million in the prior quarter. Free cash flow was $927.2 million for the reported quarter compared with $746.1 million in the prior quarter.
During the fiscal first quarter, KLAC paid out $188 million as dividends and repurchased $90 million of shares.
Second-Quarter Fiscal 2023 Guidance
For first-quarter fiscal 2023, revenues are expected between $2.650 billion and $2.950 billion. The Zacks Consensus Estimate for revenues is pegged at $2.60 billion.
KLA expects non-GAAP EPS within $6.30-$7.70. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $6.23.
Management expects non-GAAP gross margin in the range of 61.5-63.5%.
Fortinet is set to report third-quarter 2022 results on Nov 2. The Zacks Consensus Estimate for FTNT’s earnings is pegged at 27 cents per share, suggesting an increase of 35% from the prior-year period’s reported figure. FTNT has lost 22.8% in the year-to-date period. FTNT’s long-term earnings growth rate is currently projected at 18%.
The Trade Desk is scheduled to release third-quarter 2022 results on Nov 14. The Zacks Consensus Estimate for TTD’s earnings is pegged at 24 cents per share, suggesting an increase of 33.3% from the prior-year quarter’s reported figure. TTD has lost 39.6% in the year-to-date period. The Trade Desk’s long-term earnings growth rate is currently projected at 24%.
ZoomInfo Technologies is scheduled to release third-quarter 2022 results on Nov 1. The Zacks Consensus Estimate for ZI’s earnings is pegged at 20 cents per share, suggesting an increase of 53.9% from the prior-year quarter’s reported figure. ZI has lost 28.8% in the year-to-date period. ZI’s long-term earnings growth rate is currently projected at 34.7%.
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KLA's (KLAC) Earnings and Revenues Beat Estimates in Q1
KLA Corporation (KLAC - Free Report) reported first-quarter fiscal 2023 earnings per share of $7.06, beating the Zacks Consensus Estimate by 13.5%. The figure was up 52.2% from the year-ago fiscal quarter’s level year over year and 21.5%, sequentially.
Revenues increased 30.7% from the year-ago fiscal quarter’s level and 9.6% from the prior quarter’s level to $2.72 billion, surpassing the Zacks Consensus Estimate by 5%. The reported figure was near the higher end of management’s guided range of $2.475-$2.725 billion.
Strong customer demand across major product groups drove the quarterly results.
Solid performance of the Patterning systems business was attributed to strong growth of the EUV mask shop inspection in 5nm and below applications as well as growth of mask shop and wafer fab applications in mature node applications.
However, global macroeconomic headwinds, including inflation and COVID-related issues in China, and supply-chain constraints negatively impacted demand for semiconductors in PC’s and other consumer-facing markets during the fiscal first quarter.
KLA expects its systems and service revenues to be affected in the near term by the U.S. government-announced export regulations on the sale of U.S. semiconductor technology to China.
KLA Corporation Price, Consensus and EPS Surprise
KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote
Top-Line Details
Products revenues (accounting for 81% of total revenues) increased 34.7% year over year and 11.2% sequentially to $2.196 billion.
Services revenues (19% of total revenues) were up 3.4%, sequentially, and 16.5% from the year-ago quarter’s reading to $528.8 million.
Growth in Services revenues is attributed to the expanding installed base, continued high utilization rates, increasing customer adoption of long-term service agreements and expansion of Service opportunities in the legacy nodes.
In terms of reportable segments, Semiconductor Process Control revenues (88% of total revenues) increased 35% year over year to $2.398 billion, driven by strength in Foundry & Logic. Foundry & Logic accounted for 63%, while Memory constituted about 37% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues (5%) were $127.9 million, up 25% year over year. PCB, Display and Component Inspection revenues (7%) declined 1% from the year-ago quarter’s actuals to $200.7 million. The decline was due to slowing consumer electronics markets, mainly in mobile phones.
The Electronics, Packaging and Components or EPC group reported strong quarterly results, driven by strength in automotive, 5G and advanced packaging.
Regarding revenue breakdown by major products, Wafer Inspection, Patterning systems, including metrology and reticle inspection, and Specialty Semiconductor Process accounted for 41%, 27% and 4% of KLA’s total revenues for the fiscal first quarter, respectively. PCB, Display and Component Inspection accounted for 5%, Service represented 19% and Other — reported in the Semiconductor Process Control segment — constituted 4% of the quarterly revenues.
In terms of regional breakdown of revenues, China, Taiwan and Korea accounted for 31%, 27% and 15% of the total revenues for the fiscal first quarter, respectively. The United States of America, Japan, the European Union and South East Asia accounted for 9%, 8%, 6% and 4%, respectively.
Operating Details
Non-GAAP gross margin expanded 50 basis points (bps) from the prior-year quarter’s level to 63.4%. The figure was near the upper end of the guided range of 62-64%.
Research and development (R&D) expenses increased 23.4% year over year to $318.5 million. Selling, general and administrative (SG&A) expenses also increased 31.4% year over year to $253.98 million. As a percentage of sales, R&D expenses contracted 70 bps year over year to 11.7%, while SG&A expenses matched the year-ago figure of 9.3%.
For the reported quarter, non-GAAP operating margin was 44.1%, expanding 190 bps year over year.
Balance Sheet
As of Sep 30, 2022, cash, cash equivalents and marketable securities totaled $2.95 billion compared with $2.71 billion on Jun 30, 2022.
Cash flow from operating activities was $1.01 billion for the fiscal first quarter compared with $819.2 million in the prior quarter. Free cash flow was $927.2 million for the reported quarter compared with $746.1 million in the prior quarter.
During the fiscal first quarter, KLAC paid out $188 million as dividends and repurchased $90 million of shares.
Second-Quarter Fiscal 2023 Guidance
For first-quarter fiscal 2023, revenues are expected between $2.650 billion and $2.950 billion. The Zacks Consensus Estimate for revenues is pegged at $2.60 billion.
KLA expects non-GAAP EPS within $6.30-$7.70. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $6.23.
Management expects non-GAAP gross margin in the range of 61.5-63.5%.
Zacks Rank & Stocks to Consider
Currently, KLA has a Zacks Rank #5 (Strong Sell).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Fortinet (FTNT - Free Report) , The Trade Desk (TTD - Free Report) and ZoomInfo Technologies (ZI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fortinet is set to report third-quarter 2022 results on Nov 2. The Zacks Consensus Estimate for FTNT’s earnings is pegged at 27 cents per share, suggesting an increase of 35% from the prior-year period’s reported figure. FTNT has lost 22.8% in the year-to-date period. FTNT’s long-term earnings growth rate is currently projected at 18%.
The Trade Desk is scheduled to release third-quarter 2022 results on Nov 14. The Zacks Consensus Estimate for TTD’s earnings is pegged at 24 cents per share, suggesting an increase of 33.3% from the prior-year quarter’s reported figure. TTD has lost 39.6% in the year-to-date period. The Trade Desk’s long-term earnings growth rate is currently projected at 24%.
ZoomInfo Technologies is scheduled to release third-quarter 2022 results on Nov 1. The Zacks Consensus Estimate for ZI’s earnings is pegged at 20 cents per share, suggesting an increase of 53.9% from the prior-year quarter’s reported figure. ZI has lost 28.8% in the year-to-date period. ZI’s long-term earnings growth rate is currently projected at 34.7%.