KLA Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended June 30, 2021; filed August 5, 2021. The filing also reports unaudited fourth-quarter results for the three months ended June 30, 2021. The supplied “2020 Q4” period metadata does not match the 10-K’s reporting period.
Business context and results
KLA supplies process-control, inspection, metrology, data-analytics and process-enabling equipment and services, principally to semiconductor manufacturers, and also serves specialty semiconductor, PCB and display markets. Its business is cyclical and capital-spending dependent, with significant customer and geographic concentration.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $6.919 billion | $5.806 billion |
| Product / service revenue | $5.240 billion / $1.678 billion | $4.329 billion / $1.478 billion |
| Gross margin | 59.9% (reported rounded: 60%) | 57.9% (reported rounded: 58%) |
| Net income attributable to KLA | $2.078 billion | $1.217 billion |
| Diluted EPS | $13.37 | $7.70 |
| Operating cash flow | $2.185 billion | $1.779 billion |
| Cash, cash equivalents and marketable securities | $2.495 billion | $1.980 billion |
| Working capital | $3.59 billion | $3.02 billion |
Revenue grew 19%; net income attributable to KLA rose about 71%. Management attributed higher product revenue primarily to demand for inspection and metrology, 5G, high-performance computing and advanced packaging. Service revenue increased with the installed base. Gross-margin improvement reflected higher revenue volume and a more favorable product and service mix, partly offset by increased service and manufacturing costs.
By reportable segment, Semiconductor Process Control revenue was $5.735 billion, Specialty Semiconductor Process $369 million, and PCB, Display and Component Inspection $813 million. The filing identifies Taiwan Semiconductor Manufacturing Company and Samsung as customers each exceeding 10% of FY2021 revenue; together they represented approximately 32%.
Cash, debt and capital allocation
Operating cash flow increased $406 million year over year, primarily reflecting stronger collections and shipments. Capital expenditures were $232 million. Financing cash outflows included $939 million of share repurchases and $559 million of dividends and dividend equivalents. Cash and marketable securities increased by $514 million to $2.495 billion.
Debt principal totaled $3.47 billion, with a reported balance-sheet carrying amount of $3.443 billion; the notes are senior unsecured debt. KLA had no Revolving Credit Facility borrowings and $1.00 billion of committed availability. It reported compliance with debt covenants and forecast sufficient liquidity for at least the next 12 months. The company repaid $50 million under the revolver during the year. In July 2021, the board authorized an additional $2.00 billion for repurchases; a $1.05-per-share quarterly dividend was announced in August.
Outlook, risks and unusual items
The filing gives no specific numerical revenue or earnings guidance. Management described demand as strengthening across the business, while warning that pandemic-related supply constraints had extended lead times and sometimes required larger purchase commitments for critical components. The $4.69 billion backlog at June 30, 2021 was more than double the prior-year $2.13 billion, but orders may be delayed, pushed out or canceled, often with limited or no penalty; backlog is not a reliable measure of future-period sales.
- Supply and pandemic risks: Component shortages, higher costs, delivery or installation delays and possible site interruptions could affect results.
- Trade and customer concentration: Export restrictions and licensing requirements affecting China-based entities could constrain sales; two customers represented about 32% of FY2021 revenue.
- Tax contingency: Orbotech is disputing Israeli tax assessments, including a 2012–2014 assessment of about $73 million and a 2015–2018 assessment of about $68 million, including interest and index adjustments. The filing says recorded unrecognized tax benefits are considered sufficient. An associated Israeli criminal investigation remained ongoing, with no decision on indictment reported.
- Prior-year charges: FY2020 included $256.6 million of goodwill impairment and a $22.5 million loss on debt extinguishment; FY2021 had no goodwill impairment. FY2021 restructuring charges were $12.4 million.
- Accounting and estimates: FY2021 adopted the expected-credit-loss standard, recording a $5.5 million reduction to opening retained earnings. Revenue timing depends in part on judgments about product control transfer, installation and customer acceptance.
PricewaterhouseCoopers issued an unqualified opinion on the financial statements and internal control over financial reporting; the auditor highlighted the Israeli uncertain-tax-position matter as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting.
Most important facts for investors to verify
- Whether component supply constraints ease or worsen, and how they affect shipments, costs and backlog conversion.
- Customer concentration and exposure to export-control changes, particularly in China.
- Developments, potential cash exposure and accounting coverage for the Israeli tax assessments and investigation.
- Debt maturities, interest burden, liquidity and the sustainability of dividends and repurchases.
- Whether strong demand and margins persist across semiconductor, PCB and display markets, including the effect of display-market softness.