KLA CORP

Previous wording

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) for our Revolving Credit Facility; the adoption of ne…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: the impact of tariffs on our business; forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) for our Revolv…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), flat panel displays (“FPD”), specialty semiconductor devices and other electronic components, including advanced packaging, light-emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research. In addition, our services business, which generates revenue largely from recurring “subscription-like” contracts, has grown consistently due to increases in the installed base of KLA systems, increasing the value of our contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.

Current wording

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), specialty semiconductor devices and other electronic components, including advanced packaging, light-emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research. In addition, our services business has grown consistently each quarter on a year-over-year basis and has accounted for approximately 23% of our total revenues in recent years, due to increases in the installed base of KLA systems. Our services revenue, which is generated largely from recurring “subscription-like” contracts, increases the value of our contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.

Previous wording

Recently, the semiconductor industry environment has improved as the emergence of disruptive technologies such as AI and continuing advancement of innovation, as well as rising semiconductor content across end-markets and strategic investments in legacy nodes fuel growth. Our foundry/logic customers are slowly increasing their capital intensity, as they continue to scale and incorporate new technologies. Additionally, technology development investments supporting AI and high bandwidth memory are improving the environment for memory device manufacturers. While we continue to invest in technological innovation, factors such as delays from customers in adopting new chips and technology methods, could impact process control capital intensity. Push out or cancellation of deliveries to our customers could still cause earnings volatility, due to the timing of revenue recognition as well as increased risk of inventory-related charges.

Current wording

Recently, the semiconductor industry environment has improved as the emergence of disruptive technologies such as AI and continuing advancement of innovation, as well as rising semiconductor content across end-markets and strategic investments in legacy nodes fuel growth. Our customers’ investments in AI as well as High-performance computing (“HPC”) continue to drive demand for our advanced packaging portfolio, which contributes to our success in market diversification. Our foundry/logic customers are slowly increasing their capital intensity, as they maintain a robust design environment and continue to scale as well as incorporate new technologies and larger die sizes. Additionally, technology development investments supporting AI and high bandwidth memory are improving the environment for memory device manufacturers. While we continue to invest in technological innovation, factors such as delays from customers in adopting new chips and technology methods, could impact process control capital intensity. Push out or cancellation of deliveries to our customers could still cause earnings volatility, due to the timing of revenue recognition as well as increased risk of inventory-related charges.

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, 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.

Current wording

•PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, flat panel displays (“FPD”), 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

c. DRAM ICs using a “production” technology node of 18 nanometer half-pitch or less.

Current wording

b. NAND ICs at 128 layers and above; and c. DRAM ICs using a “production” technology node of 18 nanometer half-pitch or less.

Previous wording

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 wording

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. 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 remaining performance obligations (“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.

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 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.

Previous 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.

Current wording

(1)For the explanation why our net income increased to $1.09 billion in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, 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 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.

Current wording

(2)Our net income for the three months ended December 31, 2024 included pre-tax goodwill and purchased intangible assets impairment charges of $239.1 million. 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

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 wording

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. We performed the required annual goodwill impairment testing for all reporting units as of February 28, 2025, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment.

Previous wording

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 wording

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.

Previous 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.

Current wording

Product revenues during the three and nine months ended March 31, 2025 increased compared to the three and nine months ended March 31, 2024, from $1.77 billion to $2.39 billion for the quarter and from $5.53 billion to $7.00 billion for the nine 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 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.

Current wording

Service revenues during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024, from $590.5 million to $669.2 million, and increased during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, from $1.72 billion to $1.98 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 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.

Current wording

The 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 the nine months ended March 31, 2025, accounting for 34% of total revenues, and accounting for 42% of total revenues during both the three months and nine months ended March 31, 2024. Our revenues from our customers in China accounted for 26% of our overall revenues during the three months ended March 31, 2025. There are multiple factors affecting our revenues from our customers in that region. 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 semiconductor-related investments, 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 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 32% and 26% of total revenues during the three and nine months ended March 31, 2025, respectively, compared to 18% and 17% in the three and nine months ended March 31, 2024, respectively. The remaining regions accounted for less than 20% of total revenues individually in all periods.

Previous wording

•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 wording

•Revenues from our Semiconductor Process Control segment during the three months ended March 31, 2025 increased$642.8 million, or 31%, compared to the three months ended March 31, 2024, and increased$1.64 billion, or 26%, during the nine months ended March 31, 2025 compared to thenine months ended March 31, 2024, primarilydue to the resumption of growth in the industry demonstrated by the 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 89% and 90% of total company revenue in the three and nine months ended March 31, 2025, respectively, which is consistent with the segment's approximately 89% of total company revenues in both the three andnine months ended March 31, 2024. Defect Inspection and Patterning product revenues increased during the three andnine months ended March 31, 2025 compared to the three andnine months ended March 31, 2024 as customers in Taiwan and Korea increased investments in process control to meet leading edge demand driven by innovation and growth of new technologies like AI, partially offset by lower revenues in the China region.

Previous wording

•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 wording

•Revenues in the Specialty Semiconductor Process segment, which comprises etching and deposition solutions for advanced packaging and specialty semiconductor markets, during the three andnine months ended March 31, 2025 increased compared to the three andnine months ended March 31, 2024 primarily due to increased revenue from advanced packaging, along with higher service revenue from an increase in our installed base. Specialty Semiconductor Process revenues were approximately 5% of total revenue during both the three andnine months ended March 31, 2025 and approximately 6% of total revenues during both thethree andnine months ended March 31, 2024.

Previous wording

•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 wording

•Revenues in the PCB and Component Inspection segment during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024, primarilydue to increased revenue from packaging products related to AI. Revenues in the PCB and Component Inspection segment during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024, primarilydue to increased revenue from packaging products related to AI and a settlement received in the second quarter of fiscal 2025 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. These increases were partially offset by decreased revenues during the relatively soft market in the first half of fiscal year 2025. PCB and Component Inspection segment revenues were approximately 6% and 5% of total revenue during the three and nine months ended March 31, 2025, respectively, and approximately 6% of total revenues during both the three and nine months ended March 31, 2024.

Previous 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.

Current wording

The increase in our gross margin during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to a higher revenue volume of products and services sold and more lower other service and manufacturing costs, partially offset by a less profitable mix of products and services sold. The increase in our gross margin during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 is primarily due to a higher revenue volume of products and services sold and more favorable manufacturing labor, overhead and efficiencies, partially offset by a less profitable mix of products and services sold.

Previous 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.

Current wording

R&D expenses during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to an increase in employee-related expenses of $11.4 million and an increase in engineering project material costs of $6.4 million.

Previous 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.

Current wording

R&D expenses during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024 primarily due to an increase in employee-related expenses of $51.2 million and an increase in depreciation expense of $6.5 million, partially offset by a decrease in engineering project material costs of $5.9 million.

Previous wording

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 wording

SG&A expenses during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024 primarily due to increases in the following areas: employee-related expenses of $10.4 million, facility-related expenses of $7.8 million, promotional expenses of $7.0 million, depreciation expense of $6.2 million, travel expenses of $5.9 million consulting costs of $4.0 million and engineering project material costs of $3.4 million.

Previous wording

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 wording

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.

Previous 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.

Current wording

Restructuring charges were $0.6 million and $2.0 million for the three months ended March 31, 2025 and 2024, respectively. Restructuring charges were $5.6 million and $3.9 million for the nine months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the accrual for restructuring charges was $5.7 million.

Previous 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.

Current wording

Interest expense during the three months ended March 31, 2025 decreased compared to the three months ended March 31, 2024 primarily due to reduced interest expense from our $750.0 million debt repayment in the second quarter of fiscal 2025.

Previous wording

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.

Current wording

The change in other expense (income), net during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to higher net foreign exchange loss of $9.0 million.

Previous wording

Interest expense during the three months ended December 31, 2024 remained relatively flat compared to the three months ended December 31, 2023.

Current wording

Interest expense during the nine months ended March 31, 2025 remained relatively flat compared to the nine months ended March 31, 2024.

Previous 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.

Current wording

The change in other expense (income), net during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 was primarily due to higher interest income of $25.6 million, partially offset by a higher net fair value loss of $7.2 million from an equity security and lower net foreign exchange gains of $2.4 million.

Previous wording

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 wording

The effective tax rate during the three months ended March 31, 2025 was lower compared to the three months ended March 31, 2024 due to a $70.5 million goodwill impairment charge during the three months ended March 31, 2024, which is non-deductible for income tax. Excluding the goodwill impairment charge, tax expense was higher as a percentage of income before taxes during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the impact of the following items:

Previous 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:

Current wording

Excluding the goodwill impairment charge, tax expense was higher as a percentage of income before taxes during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 primarily due to the impact of the following items:

Previous wording

•Tax expense decreased by $1.7 million during the six months ended December 31, 2024 relating to employee stock activity.

Current wording

•Tax expense increased by $3.1 million during the nine months ended March 31, 2025 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 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 .

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 was effective for us beginning in our current fiscal year and there was no material impact to our effective tax rate during the nine months ended March 31, 2025 .

Previous 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.

Current wording

As of March 31, 2025, our cash, cash equivalents and marketable securities totaled $4.03 billion, which represents a decrease of $475.4 million from June 30, 2024. The decrease is primarily due to stock repurchases of $1.72 billion, repayment of debt of $750.0 million, cash used for payment of dividends and dividend equivalents of $650.6 million, capital expenditures of $234.9 million and tax withholding payments related to vested and released restricted stock units (“RSU”) of $78.5 million, partially offset by net cash provided by operating activities of $2.92 billion.

Previous 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.

Current wording

As of March 31, 2025, $999.3 million of our $4.03 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We currently intend to indefinitely reinvest $65.9 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 $933.4 million of the $999.3 million 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 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.

Current wording

During the three months ended March 31, 2025, our Board of Directors declared a regular quarterly cash dividend of $1.70 per share on our outstanding common stock, which was paid on March 4, 2025 to our stockholders of record as of the close of business on February 24, 2025. 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 March 31, 2025 and 2024 was $225.8 million and $197.2 million, respectively. The total amount of regular quarterly cash dividends and dividend equivalents paid during the nine months ended March 31, 2025 and 2024 was $650.6 million and $575.5 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of March 31, 2025 and June 30, 2024 was $14.2 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 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.

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 nine months ended March 31, 2025 and 2024. 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 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:

Current wording

Historically, we have financed our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the nine months ended March 31, 2025 was $2.92 billion compared to $2.42 billion during the nine months ended March 31, 2024. This increase of $501.0 million resulted primarily from the following:

Previous wording

•An increase in customer and other collections of approximately $330 million primarily driven by higher shipments;

Current wording

•An increase in customer and other collections of approximately $760 million primarily driven by higher shipments;

Previous wording

•An increase in interest income of approximately $30 million from higher cash balances and higher interest rates; and

Current wording

•An increase in interest income of approximately $26 million from higher cash balances and higher interest rates; and

Previous wording

•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 wording

•A decrease in income tax payments of approximately $109 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

Previous wording

•An increase in accounts payable payments of approximately $117 million;

Current wording

•An increase in accounts payable payments of approximately $270 million;