KLA's (KLAC) Q3 Earnings & Revenues Beat Estimates, Fall Y/Y

KLA Corporation KLAC reported third-quarter fiscal 2024 non-GAAP earnings of $5.26 per share, beating the Zacks Consensus Estimate by 6.48%. The figure declined 4.2% year over year.

Revenues decreased 3% year over year to $2.36 billion, surpassing the Zacks Consensus Estimate by 2.53%. Sequentially, revenues increased 4%.

The year-over-year decline in the top line was attributed to softness in the Semiconductor Process Control, Specialty Semiconductor Process and PCB, Display and Component Inspection segments.

In terms of reportable segments, Semiconductor Process Control revenues (88.8% of total revenues) decreased 3.5% year over year to $2.10 billion. Sequentially, revenues increased 3%.

Foundry & Logic accounted for about 64%, while Memory constituted about 36% of Semiconductor Process Control revenues. Within memory, approximately 82% was from DRAM and 22% was from NAND.
 

KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote

 

Specialty Semiconductor Process revenues (5% of total revenues) were $117 million, up 1% year over year. Revenues fell 15% on a sequential basis.

PCB, Display and Component Inspection revenues (5.7% of total revenues) climbed 1.1% year over year to $133.4 million.

Top Line Details

Product revenues (accounted for 75% of total revenues) decreased 7% year over year to $1.77 billion. Service revenues (25% of total revenues) increased 11.6% year over year to $590.5 million.

In terms of major products, Wafer Inspection and Patterning Systems (including metrology and reticle inspection) accounted for 42% and 25%, respectively, of KLA’s total revenues for the fiscal third quarter.

Wafer Inspection revenues declined 4% year over year and 15% sequentially to $988 million. Patterning revenues declined 12% year over year but jumped 25% sequentially to $539 million.

In terms of regional breakdown of revenues, China, Taiwan, Japan and Korea accounted for 42%, 18%, 11% and 9% of the total revenues for the fiscal third quarter, respectively. Further, North America, Europe and the Rest of Asia accounted for 10%, 6%, and 4%, respectively.

Operating Details

In third-quarter fiscal 2024, the non-GAAP gross margin was 59.8%, 10 basis points (bps) above the guidance range.

Research and development (R&D) expenses decreased 2% year over year to $321.6 million. As a percentage of sales, R&D expenses increased 10 bps year over year to 13.6%.

Selling, general and administrative (SG&A) expenses decreased 0.4% year over year to $237.5 million. As a percentage of sales, SG&A expenses increased 30 bps year over year to 10.1%.

Non-GAAP operating expenses were $544 million, unchanged sequentially. Non-GAAP operating expenses were comprised of $320 million in R&D and $224 million in SG&A expenses.

The fiscal third-quarter non-GAAP operating margin was 36.8%, up 50 bps sequentially.

Balance Sheet

As of Mar 31, 2024, cash, cash equivalents and marketable securities totaled $4.3 billion compared with $3.34 billion as of Dec 31, 2023.

Long-term debt at the end of the fiscal third quarter was $6.7 billion, up from $5.14 billion reported in the previous quarter.

Cash flow from operating activities was $910 million for the reported quarter, up from $622.2 billion in the prior quarter. Free cash flow was $838.2 million for the fiscal third quarter.

During the fiscal third quarter, KLAC paid out $197.2 million in dividends and repurchased $372.3 million worth of shares.

Fourth-Quarter Fiscal 2024 Guidance

For fourth-quarter fiscal 2024, revenues are expected to be $2.50 billion, plus/minus $125 million. The Zacks Consensus Estimate for revenues is pegged at $2.40 billion, indicating 1.99% growth year over year.

KLA expects non-GAAP earnings of $6.07 per share, plus/minus 60 cents. The Zacks Consensus Estimate for non-GAAP earnings is pegged at $5.65 per share, suggesting year-over-year growth of 4.63%.

KLA expects a non-GAAP gross margin of 61.5%, plus/minus 1%. Operating expenses are expected in the June quarter to be approximately $550 million.

Zacks Rank & Stocks to Consider

Currently, KLA carries a Zacks Rank #4 (Sell).

KLA shares were up 1.05% in pre-market trading. The company’s shares have outperformed the Zacks Computer & Technology sector year to date. While KLAC shares have gained 15.7%, the Computer & Technology sector has increased 6.9%.

Pinterest PINS, Advanced Micro Devices AMD, and NVIDIA NVDA are some better-ranked stocks that investors can consider in the broader sector. While Pinterest sports a Zacks Rank #1 (Strong Buy) at present, AMD and NVIDIA carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinterest shares have declined 11.3% year to date. PINS is set to report its first-quarter 2024 results on Apr 30.

AMD shares have gained 3% year to date. AMD is set to report its first-quarter 2024 results on Apr 30.

NVIDIA shares have gained 58.5% year to date. NVDA is set to report its first-quarter fiscal 2025 results on May 22.

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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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