KLA CORP
For the period ended Dec 31, 2024. Filed Jan 31, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Jan 31, 2025
KLAC$138.49+6.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000319201-24-000027
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-01-31.
0000319201-25-000006
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 144 previous paragraphs and 156 current paragraphs.
100 unchanged; 36 reworded; 18 added; 7 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 13 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
Furthermore, in December 2024 and January 2025, the U.S. government again issued incremental regulations (the “2024 BIS Rules”and the “2025 BIS Rules,” respectively) adding even more companies to the U.S. Entity List and revising the definition of advanced DRAM, further restricting our ability to provide certain items and services to facilities in China producing advanced DRAM ICs. After the 2024 BIS Rules and 2025 BIS Rules were promulgated, we reduced our remaining performance obligations (“RPO”) by an aggregate of approximately $430 million because we are currently unable to ship the products ordered by affected customers without an export license, of which approximately 50% was included in the RPO expected to be recognized as revenue in the following 12 months, as disclosed in our quarterly report on Form 10-Q for the quarter ended September 30, 2024. We are taking appropriate measures to comply with all BIS Rules, and will continue to apply for export licenses, when required, to avoid disruption to our customers’ operations. To the extent that we or our customers are able to obtain export licenses in the future, we will increase RPO for the products we can ship to the customers or services we can provide the customers under the export license. There can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted.
Current report
Goodwill and Long-Lived Assets
Current report
We assess goodwill for impairment annually as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge for goodwill include, but are not limited to, declines in our stock price or market capitalization, declines in our market share and declines in revenues or profits at our reporting units. Any impairment charge could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge. During the second quarter of fiscal 2025, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment, and completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. These two events triggered goodwill impairment tests in the second quarter of fiscal 2025, resulting in a total goodwill impairment charge of $230.4 million in the PCB and Component Inspection reportable segment and no goodwill impairment charge in the Specialty Semiconductor Process reportable segment. During the second quarter of fiscal 2024, we identified an impairment indicator within our PCB and Component Inspection reportable segment that resulted in a total goodwill impairment charge of $192.6 million in that quarter. See Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further details.
Current report
Long-lived assets, including both tangible and purchased intangible assets, are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge for long-lived assets primarily include declines in our operating cash flows from the use of these assets. In connection with the evaluation of goodwill for impairment in the second quarter of fiscal 2025, described above, we assessed our tangible and purchased intangible assets for impairment, resulting in a total purchased intangible assets impairment charge of $8.7 million in the PCB and Component Inspection reportable segment during the quarter. During the second quarter of fiscal 2024, we recorded impairment losses related to purchased intangible assets of $26.4 million in the PCB and Component Inspection reportable segment. No impairments were identified for other long-lived assets in the second quarter of fiscal 2025 or 2024.
Current report
The tests of goodwill and long-lived assets for impairment are explained further in Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements. Determining fair values utilized in our impairment calculations involves the use of significant estimates and assumptions, including revenue forecasts, terminal growth rate, tax rate and a weighted average cost of capital adjusted for company-specific risk. There can be no assurance that the estimates and assumptions used will prove to be an accurate prediction of the future. If our assumptions are not realized, or if there are future changes in any of the assumptions due to a change in economic conditions or otherwise, it is possible that a further impairment charge may need to be recorded in the future.
Current report
•Revenues from our Semiconductor Process Control segment during the three months ended December 31, 2024 increased$561.7 million, or 26%, compared to the three months ended December 31, 2023, and increased$1.00 billion, or 23%, during the six months ended December 31, 2024 compared to thesix months ended December 31, 2023, primarilydue to strong demand for many of our products, especially those in our inspection portfolio, along with higher service revenue from an increase in our installed base. Semico nductor Process Control segment revenues were approxima tely 90% of total company revenue in both the three and six months ended December 31, 2024, which is consistent with the segment's approximately 88% of total company revenues in the three months ended December 31, 2023 and 89% of total revenues in the sixmonths ended December 31, 2023. Defect Inspection and Patterning product revenues increased during the three andsix months ended December 31, 2024 compared to the three andsix months ended December 31, 2023 as customers in Taiwan and North America increased investments in process control to meet leading edge demand driven by innovation and growth of new technologies like AI. Customers in China continued to increase their investments in semiconductor as they attempt to become more self-sufficient in the industry, even as more stringent U.S. restrictions were issued regarding providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license.
Current report
•Revenues in the Specialty Semiconductor Process segment, which comprises etching and deposition solutions for advanced packaging and specialty semiconductor markets, during the three andsix months ended December 31, 2024 remained relatively flat compared to the three andsix months ended December 31, 2023. Specialty Semiconductor Process revenues were approximately 5% of total revenues during both the three andsix months ended December 31, 2024 and approximately 6% of total revenues during both thethree andsix months ended December 31, 2023.
Current report
•Revenues in the PCB and Component Inspection segment during the three and six months ended December 31, 2024 increased compared to the three and six months ended December 31, 2023, primarilydue to a settlement received in the current quarter related to cancellation of a technology project by a major FPD customer that resulted in our decision to exit the Display business in the third quarter of fiscal 2024. PCB and Component Inspection segment revenues were approximately 5% of total revenues during both the three and six months ended December 31, 2024 and approximately 6% of total revenues during both the three and six months ended December 31, 2023.
Current report
SG&A expenses during the three months ended December 31, 2024 increased compared to the three months ended December 31, 2023 primarily due to increases in the following areas: employee-related expenses of $12.5 million, facility-related expenses of $4.8 million, depreciation expense of $4.3 million and travel expenses of $4.0 million.
Current report
SG&A expenses during the six months ended December 31, 2024 increased compared to the six months ended December 31, 2023 primarily due to increases in the following areas: employee-related expenses of $13.2 million, facility-related expenses of $8.1 million, travel expenses of $5.2 million, promotional expenses of $4.8 million and consulting costs of $4.2 million.
Current report
Impairment of Goodwill and Purchased Intangible Assets
Current report
During the second quarter of fiscal 2025, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment, and completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. These two events triggered goodwill and purchased intangible assets impairment tests, which resulted in a $239.1 million goodwill and purchased intangible assets impairment charge in the PCB and Component Inspection reportable segment. During the second quarter of fiscal 2024, we recorded a $219.0 million goodwill and purchased intangible assets impairment charge in our PCB and Component Inspection reportable segment. See Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements in this Form 10-Q as well as Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further details.
Current report
The effective tax rate during the three months ended December 31, 2024 was lower compared to the three months ended December 31, 2023 primarily due to goodwill impairment charges that are non-deductible for income tax purposes. We recorded a $230.4 million goodwill impairment charge during the three months ended December 31, 2024, compared to a $192.6 million goodwill impairment charge during the three months ended December 31, 2023. The impact on the effective tax rate was lower for the three months ended December 31, 2024 as the non-deductible goodwill impairment was lower as a percentage of profit before tax compared to the three months ended December 31, 2023. Excluding the goodwill impairment charges, tax expense as a percentage of income before taxes was unchanged.
Current report
•Decrease in the non-deductible tax goodwill impairment as a percentage on profit before tax during the six months ended December 31, 2024;
Current report
•Tax expense decreased by $5.3 million during the six months ended December 31, 2024 relating to a decrease in our deferred tax liabilities on unremitted earnings; and
Current report
•A decrease in income tax payments of approximately $147 million as we paid off the delayed tax payments from prior fiscal year in October 2023 as a result of the California Flood Tax Relief; partially offset by
Current report
•An increase in accounts payable payments of approximately $117 million;
Current report
•An increase in employee-related payments of approximately $37 million; and
Removed paragraphs (7)
Previous report
•Revenues from our Semiconductor Process Control segment during thethree months ended September 30, 2024 increased$439.7 million, or 21%, compared to thethree months ended September 30, 2023, primarilydue to strong demand for many of our products and the continued resumption of growth in the industry, along with higher service revenue from an increase in our installed base. Semiconductor Process Control segment revenues were approximately 91% of total company revenue in the three months ended September 30, 2024, which is consistent with thethree months ended September 30, 2023. Wafer Inspection product revenues increased approximately 36% during thethree months ended September 30, 2024 compared to the three months ended September 30, 2023 and Patterning product revenues increased approximately 6%during the same period. These increases were primarily the result of North
Previous report
American customers continuing to invest in domestic semiconductor manufacturing, increased purchases by Chinese customers as they attempt to become more self-sufficient in the industry and higher revenues from Korean memory customers as the memory market recovered after an extended period of slowdown. Also, globally, the innovation and growth of new leading-edge technologies like AI continue to fuel demand for our process control solutions to accelerate development and production cycles. These increases were partially offset by the loss of revenues due to more stringent restrictions from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license.
Previous report
• In the Specialty Semiconductor Process segment during thethree months ended September 30, 2024 remained relatively flat compared to thethree months ended September 30, 2023. Specialty Semiconductor Process revenues were approximately 4% of total revenues in both periods.
Previous report
•Revenues in the PCB and Component Inspection segment during the three months ended September 30, 2024 remained relatively flat compared to the three months ended September 30, 2023. We experienced higher revenues from customers involved in packaging, primarily in the Taiwan region, largely offset by lower revenues in the Display business related to the discontinued Display product lines. PCB and Component Inspection segment revenues were approximately 5% of total revenues in both periods.
Previous report
•Tax expense decreased by $8.7 million during the three months ended September 30, 2024 relating to the Foreign-Derived Intangible Income deduction; partially offset by
Previous report
•Tax expense increased by $4.1 million during the three months ended September 30, 2024 relating to the U.S. federal research credit.
Previous report
•An increase in net realized foreign exchange hedge gains of approximately $19 million; and
Reworded paragraphs (36)
Previous wording
•The war between Ukraine and Russia, and the war in the Middle East, and the significant military activity in those regions;
Current wording
•The war between Ukraine and Russia, escalation of hostilities in the Middle East, and the significant military activity in those regions;
Previous wording
•PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, FPDs, advanced packaging, MEMS and other electronic components. In March 2024, we made the decision to exit the Display business by announcing the end of manufacturing of most Display products by December 31, 2024, but we will continue to provide services to the installed base of Display products for existing customers.
Current wording
•PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, FPDs, advanced packaging, microelectromechanical systems (“MEMS”) and other electronic components. In March 2024, we made the decision to exit the Display business by announcing the end of manufacturing of most Display products, but will continue to provide services to the installed base of Display products for existing customers.
Previous wording
A majority of our revenues are derived from outside the U.S., and include geographic regions such as China, Taiwan, Korea, Japan, Europe and Israel, and Rest of Asia. China remains a major region for manufacturing of legacy node logic and memory chips, adding to its role as the world’s largest consumer of ICs. Additionally, a significant portion of global FPD and PCB manufacturing has migrated to China. Chinese government initiatives around self-sustainability are propelling China to expand its domestic manufacturing capacity and attracting investment from semiconductor manufacturers from Taiwan, Korea, Japan and the U.S. Although China is currently seen as an important long-term growth region for the semiconductor and electronics capital equipment sector, Commerce has adopted regulations and added certain China-based entities to the U.S. Entity List (a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from BIS), restricting our ability to provide products and services to such entities without a license. In addition, Commerce has imposed export licensing requirements on China-based customers that are military end users or engaged in military end uses, as well as requiring our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture products connected to certain entities on the U.S. Entity List.
Current wording
A majority of our revenues are derived from outside the U.S., and include geographic regions such as China, Taiwan, Korea, Japan, Europe and Israel, and Rest of Asia. China remains a major region for manufacturing of legacy node logic and memory chips, adding to its role as the world’s largest consumer of ICs. Additionally, a significant portion of global FPD and PCB manufacturing has migrated to China. Chinese government initiatives around self-sustainability are propelling China to expand its domestic manufacturing capacity and attracting investment from semiconductor manufacturers from Taiwan, Korea, Japan and the U.S. Although China is currently seen as an important long-term growth region for the semiconductor and electronics capital equipment sector, the U.S. government has tightened export controls for commodities, software, and technology (collectively, “items”) destined to China over the past several years. In the last few years, Commerce has adopted regulations and added certain China-based entities to the U.S. Entity List (a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from BIS), restricting our ability to provide products and services to such entities without an export license. In addition, Commerce has imposed export licensing requirements on China-based customers that are military end users or engaged in military end uses, as well as requiring our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture products connected to certain entities on the U.S. Entity List.
Previous wording
In October 2023, BIS issued additional rules that went into effect in November 2023 (the “2023 BIS Rules”). These 2023 BIS Rules are designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to arms embargoed countries, including China. The 2023 BIS Rules adjust the parameters included in the 2022 BIS Rules that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established by the 2022 BIS Rules. The 2023 BIS Rules are very complex and, in January 2024, KLA, among other companies, submitted comments to the BIS on the 2023 BIS Rules. We are taking appropriate measures to comply with all BIS Rules, and will continue to apply for export licenses, when required, to avoid disruption to our customers’ operations. While some export licenses have been obtained by us or our customers, there can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted.
Current wording
In October 2023, BIS issued additional rules that went into effect in November 2023 (the “2023 BIS Rules”). These 2023 BIS Rules are designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to arms embargoed countries, including China. The 2023 BIS Rules adjust the parameters included in the 2022 BIS Rules that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established by the 2022 BIS Rules. The 2023 BIS Rules are very complex and, in January 2024, KLA, among other companies, submitted comments to the BIS on the 2023 BIS Rules.
Previous wording
The possible negative effects on our future business of export licenses not being granted could be material and could disrupt our supply chain and product shipment, and impair our ability to complete product development in a timely manner, or our ability to support existing customers of covered products or supply customers of covered products outside the impacted regions, and may require us to transition certain operations out of one or more of the identified countries. Failure to obtain export licenses could also result in a substantial reduction to our remaining performance obligations (“RPO”) or require us to return substantial deposits received from customers in China for purchase orders. We are continuously assessing the aggregate potential impact of government regulations on our financial results and operations. See Part II, Item 1A “Risk Factors” in this report for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.
Current wording
The possible negative effects on our future business of export licenses not being granted could be material and could disrupt our supply chain and product shipment, and impair our ability to complete product development in a timely manner, or our ability to support existing customers of covered products or supply customers of covered products outside the impacted regions, and may require us to transition certain operations out of one or more of the identified countries. Failure to obtain export licenses could also result in a substantial reduction to our RPO or require us to return substantial deposits received from customers in China for purchase orders. We are continuously assessing the aggregate potential impact of government regulations on our financial results and operations. See Part II, Item 1A “Risk Factors” in this report for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.
Previous wording
(1)For the explanation why our net income increased to $945.9 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.
Current wording
(1)For the explanation why our net income increased to $824.5 million in the three months ended December 31, 2024 compared to the three months ended December 31, 2023, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.
Previous wording
(2)Our net income for the three months ended March 31, 2024 included a pre-tax goodwill impairment charge of $70.5 million. Our net income for the three months ended December 31, 2023 included a pre-tax goodwill and purchased intangible asset impairment charge of $219.0 million. For additional details, refer to Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Current wording
(2)Our net income for the three months ended December 31, 2024 and 2023 included pre-tax goodwill and purchased intangible assets impairment charges of $239.1 million and $219.0 million, respectively. Our net income for the three months ended March 31, 2024 included a pre-tax goodwill impairment charge of $70.5 million. For additional details, refer to Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements and Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Previous wording
There have been no material changes in our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of
Current wording
There have been no material changes in our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2024 for a complete description of our critical accounting estimates.
Previous wording
Product revenues during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 from $1.84 billion to $2.20 billion primarily due to the strong demand for many of our products, especially in our inspection portfolio, as well as increased demand from the continued growth in the advanced packaging market.
Current wording
Product revenues during the three and six months ended December 31, 2024 increased compared to the three and six months ended December 31, 2023, from $1.92 billion to $2.41 billion for the quarter and from $3.76 billion to $4.61 billion for the six months, primarily due to strong demand for many of our products, especially in our inspection portfolio.
Previous wording
Service revenues during the three months ended September 30, 2024 increased, compared to the three months ended September 30, 2023, from $560.3 million to $644.2 million, primarily due to an increase in our installed base.
Current wording
Service revenues during the three months ended December 31, 2024 increased compared to the three months ended December 31, 2023, from $564.9 million to $667.4 million, and increased during the six months ended December 31, 2024 compared to the six months ended December 31, 2023, from $1.13 billion to $1.31 billion. These increases were primarily due to an increase in our installed base.
Previous wording
The increased product and service revenue generation from our customers in China contributed to our overall revenue increase, with that region recording the largest amount of revenues in both three-month periods, accounting for 42% of total revenues during the three months ended September 30, 2024 and 43% of total revenues during the three months ended September 30, 2023. Many Chinese customers, encouraged by the growth potential of certain semiconductor markets and Chinese government initiatives around self-sustainability in domestic semiconductor production, have increased their investments in process control products, partially offset by restrictions on technology exports to China, which curtailed deliveries of certain advanced technology to specific customers. Our customers in North America also contributed to the increased revenues, with that region recording the second largest amount of revenues during the three months ended September 30, 2024, accounting for 18% of total revenues, and the third largest amount of revenues during the three months ended September 30, 2023, with 10% of total revenues, as North American customers continue to invest in process control equipment to build domestic semiconductor capacity with an aim to improve overall supply chain resiliency. The remaining regions accounted for less than 20% of total revenues individually in both periods. The Japan region reported a decrease in revenues of 17% year over year, as we made significantly more shipments to that region in the three months ended September 30, 2023, as companies made investments in semiconductor production, with encouragement of the Japanese government.
Current wording
The increased product and service revenue generation from our customers in China contributed to our overall revenue increase, with that region recording the largest amount of revenues in both three and six month periods, accounting for 36% and 39% of total revenues during the three and six months ended December 31, 2024, respectively, and 41% and 42% of total revenues during the three and six months ended December 31, 2023, respectively. Many Chinese customers, encouraged by the growth potential of certain semiconductor markets and Chinese government initiatives around self-sustainability in domestic semiconductor production, continued to increase their investments in semiconductor, even as more stringent U.S. restrictions were issued regarding providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers in China, absent an export license. Our customers in Taiwan also contributed to the increased revenues with increased investments in process control to meet leading edge demand driven by innovation and growth of new technologies like AI, with that region recording the second largest amount of revenues during the three and six months ended December 31, 2024, accounting for 29% and 23% of total revenues, respectively, during the three and six months ended December 31, 2024, compared to 15% and 16% in the three and six months ended December 31, 2023, respectively. The remaining regions accounted for less than 20% of total revenues individually in both periods.
Previous wording
The decrease in our gross margin during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 is primarily due to a less profitable mix of products and services sold, partially offset by a higher revenue volume of products and services sold, a decrease in other service and manufacturing costs and a decrease in manufacturing labor and overhead costs.
Current wording
The decrease in our gross margin during the three months ended December 31, 2024 compared to the three months ended December 31, 2023 is primarily due to a less profitable mix of products and services sold and higher other service and manufacturing costs, partially offset by a higher revenue volume of products and services sold. The decrease in our gross margin during the six months ended December 31, 2024 compared to the six months ended December 31, 2023 is primarily due to a less profitable mix of products and services sold partially offset by a higher revenue volume of products and services sold.
Previous wording
Gross profit in the Semiconductor Process Control segment during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to a higher revenue volume of products and services sold. Gross profit in the Specialty Semiconductor Process segment during the three months ended September 30, 2024 decreased compared to the three months ended September 30, 2023 primarily due to an unfavorable mix of products and services sold. Gross profit in the PCB and Component Inspection segment during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to a decrease in other service and manufacturing costs and a higher revenue volume of products and services sold.
Current wording
Gross profit in the Semiconductor Process Control segment during the three and six months ended December 31, 2024 increased compared to the three and six months ended December 31, 2023 primarily due to a strong demand for many of our products along with higher service revenue from an increase in the installed base. Gross profit in the Specialty Semiconductor Process segment during the three and six months ended December 31, 2024 remained relatively flat compared to the three and six months ended December 31, 2023. Gross profit in the PCB and Component Inspection segment during the three months ended December 31, 2024 decreased compared to the three months ended December 31, 2023 primarily due to higher expenses to write down excess and obsolete inventory related to the continued deterioration of the long-term forecast for our PCB business, partially offset by a settlement received in the current quarter related to cancellation of a technology project by a major FPD customer that resulted in our decision to exit the Display business in the third quarter of fiscal 2024. Gross profit in the PCB and Component Inspection segment during the six months ended December 31, 2024 increased compared to the six months ended December 31, 2023 primarily due to the settlement mentioned above and higher revenues from our packaging products, partially offset by the increase in the expenses to write down excess and obsolete inventory mentioned above.
Previous wording
R&D expenses during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to an increase in employee-related expenses of $15.5 million and an increase in depreciation expense of $2.6 million, partially offset by a decrease in engineering project material costs of $6.1 million.
Current wording
R&D expenses during the three months ended December 31, 2024 increased compared to the three months ended December 31, 2023 primarily due to an increase in employee-related expenses of $24.3 million and an increase in depreciation expense of $3.9 million, partially offset by a decrease in engineering project material costs of $6.2 million.
Previous wording
SG&A expenses during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to an increase in consulting costs of $4.5 million and an increase in facility-related expenses of $3.3 million.
Current wording
R&D expenses during the six months ended December 31, 2024 increased compared to the six months ended December 31, 2023 primarily due to an increase in employee-related expenses of $39.8 million and an increase in depreciation expense of $6.5 million, partially offset by a decrease in engineering project material costs of $12.4 million.
Previous wording
Restructuring charges were $2.9 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the accrual for restructuring charges was $8.0 million.
Current wording
Restructuring charges were $2.1 million and $1.3 million for the three months ended December 31, 2024 and 2023, respectively. Restructuring charges were $5.0 million and $1.9 million for the six months ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the accrual for restructuring charges was $6.1 million.
Previous wording
The change in other expense (income), net during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to higher interest income of $22.5 million compared to the prior fiscal year due to higher interest rates, partially offset by a higher net fair value loss of $3.5 million from an equity security and higher net foreign exchange losses of $3.2 million compared to the prior fiscal year.
Current wording
The change in other expense (income), net during the three months ended December 31, 2024 compared to the three months ended December 31, 2023 was primarily due to higher net foreign exchange gains of $9.9 million and higher interest income of $8.1 million, partially offset by a higher net fair value loss of $3.9 million from an equity security.
Previous wording
Interest expense during the three months ended September 30, 2024 increased compared to the three months ended September 30, 2023 primarily due to additional interest expense on our $750.0 million Senior Notes issued in February 2024.
Current wording
Interest expense during the six months ended December 31, 2024 increased compared to the six months ended December 31, 2023 primarily due to additional interest expense on our $750.0 million Senior Notes issued in February 2024.
Previous wording
The effective tax rate during the three months ended September 30, 2024 was lower compared to the three months ended September 30, 2023 primarily due to the impact of the following items:
Current wording
The effective tax rate during the six months ended December 31, 2024 was lower compared to the six months ended December 31, 2023 primarily due to the impact of the following items:
Previous wording
•Tax expense decreased by $4.9 million during the three months ended September 30, 2024 relating to the Global Intangible Low-Taxed Income;
Current wording
•Tax expense decreased by $1.7 million during the six months ended December 31, 2024 relating to employee stock activity.
Previous wording
Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For the jurisdictions that have adopted Pillar Two in their tax legislation, it is effective for us beginning in our current fiscal year and there was no material impact to our effective tax rate during the three months ended September 30, 2024 .
Current wording
Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For some of the jurisdictions that have adopted Pillar Two in their tax legislation, it is effective for us beginning in our current fiscal year and there was no material impact to our effective tax rate during the six months ended December 31, 2024 .
Previous wording
As of September 30, 2024, our cash, cash equivalents and marketable securities totaled $4.63 billion, which represents an increase of $125.7 million from June 30, 2024. The increase is due to net cash provided by operating activities of $995.2 million, partially offset by stock repurchases of $567.4 million and cash used for payment of dividends and dividend equivalents of $198.1 million as well as tax withholding payments related to vested and released restricted stock units (“RSU”) of $72.2 million.
Current wording
As of December 31, 2024, our cash, cash equivalents and marketable securities totaled $3.78 billion, which represents a decrease of $723.6 million from June 30, 2024. The decrease is primarily due to stock repurchases of $1.22 billion, repayment of debt of $750.0 million, cash used for payment of dividends and dividend equivalents of $424.9 million, capital expenditures of $152.7 million and tax withholding payments related to vested and released restricted stock units (“RSU”) of $75.9 million, partially offset by net cash provided by operating activities of $1.84 billion.
Previous wording
As of September 30, 2024, $1.20 billion of our $4.63 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We currently intend to indefinitely reinvest $126.7 million of the cash, cash equivalents and marketable securities held by our foreign subsidiaries for which we assert that earnings are permanently reinvested. If, however, a portion of these funds were to be repatriated to the United States, we would be required to accrue and pay state and foreign taxes of approximately 1% - 22% of the funds repatriated. The amount of taxes due will depend on the amount and manner of the repatriation, as well as the location from which the funds are repatriated. We have accrued state and foreign tax on the remaining cash of $1.07 billion of the $1.20 billion held by our foreign subsidiaries and branch offices. As such, these funds can be returned to the U.S. without accruing any additional U.S. tax expense.
Current wording
As of December 31, 2024, $1.15 billion of our $3.78 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We currently intend to indefinitely reinvest $90.6 million of the cash, cash equivalents and marketable securities held by our foreign subsidiaries for which we assert that earnings are permanently reinvested. If, however, a portion of these funds were to be repatriated to the United States, we would be required to accrue and pay state and foreign taxes of approximately 1% - 22% of the funds repatriated. The amount of taxes due will depend on the amount and manner of the repatriation, as well as the location from which the funds are repatriated. We have accrued state and foreign tax on the remaining cash of $1.06 billion of the $1.15 billion held by our foreign subsidiaries and branch offices. As such, these funds can be returned to the U.S. without accruing any additional U.S. tax expense.
Previous wording
During the three months ended September 30, 2024, our Board of Directors declared a regular quarterly cash dividend of $1.45 per share on our outstanding common stock, which was paid on September 3, 2024 to our stockholders of record as of the close of business on August 15, 2024. During the same period in fiscal year ended June 30, 2024, our Board of Directors declared and paid a regular quarterly cash dividend of $1.30 per share on our outstanding common stock. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended September 30, 2024 and 2023 was $198.1 million and $181.5 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of September 30, 2024 and June 30, 2024 was $10.3 million and $11.8 million, respectively. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 9 “Equity and Long-term Incentive Compensation Plans” to our Condensed Consolidated Financial Statements.
Current wording
During the three months ended December 31, 2024, our Board of Directors declared a regular quarterly cash dividend of $1.70 per share on our outstanding common stock, which was paid on December 3, 2024 to our stockholders of record as of the close of business on November 18, 2024. During the same period in fiscal year ended June 30, 2024, our Board of Directors declared and paid a regular quarterly cash dividend of $1.45 per share on our outstanding common stock. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended December 31, 2024 and 2023 was $226.8 million and $196.9 million, respectively. The total amount of regular quarterly cash dividends and dividend equivalents paid during the six months ended December 31, 2024 and 2023 was $424.9 million and $378.4 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of December 31, 2024 and June 30, 2024 was $12.1 million and $11.8 million, respectively. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 9 “Equity and Long-term Incentive Compensation Plans” to our Condensed Consolidated Financial Statements.
Previous wording
The shares of common stock repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the three months ended September 30, 2024 and 2023. The stock repurchase program is intended, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our Employee Stock Purchase Program as well as to return excess cash to our stockholders.
Current wording
The shares of common stock repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the six months ended December 31, 2024 and 2023. The stock repurchase program is intended, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our Employee Stock Purchase Program as well as to return excess cash to our stockholders.
Previous wording
Historically, we have financed our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the three months ended September 30, 2024 was $995.2 million compared to $883.7 million during the three months ended September 30, 2023. This increase of $111.5 million resulted primarily from the following:
Current wording
Historically, we have financed our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the six months ended December 31, 2024 was $1.84 billion compared to $1.51 billion during the six months ended December 31, 2023. This increase of $338.8 million resulted primarily from the following:
Previous wording
•An increase in customer and other collections of approximately $53 million primarily due to higher customer prepayments; and
Current wording
•An increase in customer and other collections of approximately $330 million primarily driven by higher shipments;
Previous wording
•An increase in interest income of approximately $22 million from higher cash balances and higher interest rates; and
Current wording
•An increase in interest income of approximately $30 million from higher cash balances and higher interest rates; and
Previous wording
•A decrease in other tax payments of approximately $23 million.
Current wording
•An increase in other tax payments of approximately $22 million.
Previous wording
Cash Flows Used in Investing Activities
Current wording
Cash Flows Provided by (Used in) Investing Activities
Previous wording
Net cash used in investing activities during the three months ended September 30, 2024 was $171.0 million compared to $391.7 million during the three months ended September 30, 2023. This decrease in cash used resulted from a decrease in net purchases of available-for-sale, equity and trading securities of $213.0 million and a decrease in capital expenditures of $7.7 million.
Current wording
Net cash provided by (used in) investing activities during the six months ended December 31, 2024 was $442.7 million compared to $(480.1) million during the six months ended December 31, 2023. This increase in cash provided resulted from increases in net proceeds from sale of available-for-sale securities of $933.2 million and net proceeds from sales of trading securities of $2.4 million, partially offset by decreases in capital expenditures of $7.9 million and proceeds from sale of assets of $4.9 million.
Previous wording
Net cash used in financing activities during the three months ended September 30, 2024 was $837.7 million compared to net cash used in financing activities of $705.2 million during the three months ended September 30, 2023. This increase in cash used resulted from an increase in cash used for common stock repurchases of $112.0 million, payment of dividends, dividend equivalents of $16.6 million and tax withholding payments related to vested and released RSU of $4.0 million.
Current wording
Net cash used in financing activities during the six months ended December 31, 2024 was $2.42 billion compared to $1.30 billion during the six months ended December 31, 2023. This increase in cash used resulted from an increase in cash used for repayment of debt of $750.0 million, common stock repurchases of $324.3 million and payment of dividends and dividend equivalents of $46.5 million.
Previous wording
As of September 30, 2024, we had an aggregate principal amount of senior, unsecured notes totaling $6.70 billion (“Senior Notes”). For additional information on these Senior Notes, see Note 7 “Debt” to our Condensed Consolidated Financial Statements. As of September 30, 2024, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.
Current wording
As of December 31, 2024, we had an aggregate principal amount of senior, unsecured notes totaling $5.95 billion (“Senior Notes”). For additional information on these Senior Notes, see Note 7 “Debt” to our Condensed Consolidated Financial Statements. In November 2024, we repaid $750.0 million of Senior Notes. As of December 31, 2024, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.
Previous wording
We have in place a Credit Agreement (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) with a maturity date of June 8, 2027 that allows us to borrow up to $1.50 billion. Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $250.0 million in the aggregate. As of September 30, 2024, we had no outstanding borrowings under the Revolving Credit Facility. We were in compliance with all covenants under the Credit Agreement as of September 30, 2024 (the leverage ratio was 1.43 to 1.00, compared to a maximum leverage ratio of 3.50 to 1.00 on a quarterly basis covering the trailing four consecutive fiscal quarters for each fiscal quarter). Considering our current liquidity position, short-term financial forecasts and ability to prepay the Revolving Credit Facility, if necessary, we expect to continue to be in compliance with our financial covenants at the end of our fiscal year ending June 30, 2025.
Current wording
We have in place a Credit Agreement (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) with a maturity date of June 8, 2027 that allows us to borrow up to $1.50 billion. Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $250.0 million in the aggregate. As of December 31, 2024, we had no outstanding borrowings under the Revolving Credit Facility. We were in compliance with all covenants under the Credit Agreement as of December 31, 2024 (the leverage ratio was 1.19 to 1.00, compared to a maximum leverage ratio of 3.50 to 1.00 on a quarterly basis covering the trailing four consecutive fiscal quarters for each fiscal quarter). Considering our current liquidity position, short-term financial forecasts and ability to prepay the Revolving Credit Facility, if necessary, we expect to continue to be in compliance with our financial covenants at the end of our fiscal year ending June 30, 2025.
Previous wording
As of September 30, 2024, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial position, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Refer to Note 14 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements for information related to indemnification obligations.
Current wording
As of December 31, 2024, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial position, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Refer to Note 14 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements for information related to indemnification obligations.
Previous wording
Working capital was $5.43 billion as of September 30, 2024, which represents an increase of $59.9 million compared to our working capital of $5.37 billion as of June 30, 2024. As of September 30, 2024, our principal sources of liquidity consisted of $4.63 billion of cash, cash equivalents, marketable securities and availability under our Revolving Credit Facility. Our liquidity may be affected by many factors, some of which are based on the normal ongoing operations of the business, spending for business acquisitions, and other factors such as uncertainty in the global and regional economies and the semiconductor, semiconductor-related and electronic device industries. Although cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with the liquidity provided by existing cash and cash equivalents balances, marketable securities and our $1.50 billion Revolving Credit Facility, will be sufficient to satisfy our liquidity requirements associated with working capital needs, capital expenditures, cash dividends, stock repurchases and other contractual obligations, including repayment of outstanding debt, for at least the next 12 months.
Current wording
Working capital was $5.63 billion as of December 31, 2024, which represents an increase of $264.0 million compared to our working capital of $5.37 billion as of June 30, 2024. As of December 31, 2024, our principal sources of liquidity consisted of $3.78 billion of cash, cash equivalents and, marketable securities, as well as $1.50 billion availability under our Revolving Credit Facility. Our liquidity may be affected by many factors, some of which are based on the normal ongoing operations of the business, spending for business acquisitions, and other factors such as uncertainty in the global and regional economies and the semiconductor, semiconductor-related and electronic device industries. Although cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with the liquidity provided by existing cash and cash equivalents balances, marketable securities and our $1.50 billion Revolving Credit Facility, will be sufficient to satisfy our liquidity requirements associated with working capital needs, capital expenditures, cash dividends, stock repurchases and other contractual obligations, including repayment of outstanding debt, for at least the next 12 months.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Interest expense during the three months ended December 31, 2024 remained relatively flat compared to the three months ended December 31, 2023.
Current report — wording carried from elsewhere
The change in other expense (income), net during the six months ended December 31, 2024 compared to the six months ended December 31, 2023 was primarily due to higher interest income of $30.6 million and higher net foreign exchange gains of $6.7 million, partially offset by a higher net fair value loss of $7.3 million from an equity security.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2024 for a complete description of our critical accounting estimates.