KLA Corp. (KLAC) Beats Q2 Earnings and Revenue Estimates

KLA Corporation KLAC reported second-quarter fiscal 2022 earnings per share of $5.59, which beat the Zacks Consensus Estimate by 2.95%. The figure was up 72.5% year over year and 20.5% sequentially.

Revenues increased 42.5% from the year-ago quarter and 12.9% sequentially to $2.35 billion, surpassing the Zacks Consensus Estimate of $2.33. The reported figure was above the mid-point of the company’s guided range of $2.23-$2.43 billion.

Strong momentum in core markets and increased customer demand across each of the major product groups drove the quarterly results.

Growing investments across multiple nodes in Foundry and logic contributed well to its quarterly performance.

Management has a favorable outlook toward the wafer fab equipment industry. 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 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 53.1% year over year to $1.90 billion.

Services revenues (19% of total revenues) also increased 10.7% from the year-ago quarter to $456.9 million.

The growth in Services revenues is attributed to the expanding installed base, increasing complexity of systems, tighter time-to-market requirements for customers and increasing expansion of service opportunities in the trailing edge.

In terms of reportable segments, Semiconductor Process Control revenues increased 49% year over year to $2.05 billion, driven by strength in foundry and logic. Foundry & Logic accounted for 71%, and Memory constituted about 29% of semiconductor process control systems’ revenues. Specialty Semiconductor Process revenues were $112.7 million, up 24% year over year. PCB, Display and Component Inspection revenues improved 5% from the year-ago quarter to $188 million.

Further, the Electronics, Packaging and Components or EPC group reported strong results for the quarter, driven by its high exposure to 5G mobile and infrastructure as well as growing demand in automotive.

In terms of revenue breakdown by major products, Wafer Inspection, Patterning — which includes reticle inspection, and Specialty Semiconductor Process accounted for 47%, 22% and 4% of the company’s total fiscal second-quarter revenues, respectively. Also, PCB, Display and Component Inspection accounted for 5%, Service contributed 19%, and Other — which is reported in the Semiconductor Process Control segment — constituted 2% of the quarterly revenues.

In terms of regional breakdown of revenues, Taiwan, China, and Korea accounted for 33%, 23%, and 14% of the total fiscal second-quarter revenues, respectively. Then again, the United States, Japan, Europe, and the rest of Asia accounted for 12%, 8%, 7%, and 3%, respectively.

Operating Details

Non-GAAP gross margin expanded 130 basis points (bps) from the prior-year quarter to 63.1%. The figure was at the higher end of the guided range of 62-64%.

Research and development (R&D) expenses increased 15.7% year over year to $265 million. Selling, general and administrative (SG&A) expenses also increased 17.4% year over year to $213.5 million. As a percentage of sales, R&D and SG&A expenses contracted 260 bps and 190 bps year over year, respectively.

For the reported quarter, non-GAAP operating margin was 43.4%, expanding 540 bps year over year.

Balance Sheet

As of Dec 31, 2021, cash, cash equivalents and marketable securities totaled $1.66 billion compared with $2.62 billion on Sep 30, 2021.

Cash flow from operating activities was $810.8 million for the fiscal second quarter versus $863.8 million in the prior quarter. Free cash flow was $745.9 million for the reported quarter compared with $794.8 million in the prior quarter.

During the quarter, KLAC paid $159.1 million in dividends and repurchased $429.9 million shares.

Third-Quarter Fiscal 2022 Guidance

For third-quarter fiscal 2022, revenues are expected between $2.1billion and $2.3 billion. The Zacks Consensus Estimate for revenues is pegged at $2.36 billion.

The company expects non-GAAP EPS within $4.35-$5.25. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $5.48.

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 #3 (Hold).

Some better-ranked stocks in the broader technology sector include AMETEK AME, Advanced Micro Devices AMD and Microchip Technology MCHP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMETEK is scheduled to release fourth-quarter 2021 results on Feb 3.It has gained 15.4% over a year. The long-term earnings growth rate for AME is currently projected at 10.4%.

Advanced Micro Devices is slated to report fourth-quarter 2021 results on Feb 1. It has gained 17.2% over a year. The long-term earnings growth rate for AMD is currently projected at 46.2%.

Microchip is slated to report third-quarter fiscal 2022 results on Feb 3. It has gained 2.5% over a year. The long-term earnings growth rate for MCHP is currently projected at 19.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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