KLA (NASDAQ:KLAC) Q1: Beats On Revenue, Guides For Strong Sales Next Quarter

Kayode Omotosho /
2021/10/27 4:38 pm EDT
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Maker of equipment for semiconductor manufacturing, KLA Corporation (NASDAQ:KLAC) reported strong growth in the Q1 FY2022 earnings announcement, with revenue up 35.4% year on year to $2.08 billion. Guidance was also strong with next quarter revenues guided to $2.32 billion, or 4.32% above analyst estimates. KLA made a GAAP profit of $1.06 billion, improving on its profit of $420.1 million, in the same quarter last year.

Is now the time to buy KLA? Access our full analysis of the earnings results here, it's free.

KLA (KLAC) Q1 FY2022 Highlights:

  • Revenue: $2.08 billion vs analyst estimates of $2.04 billion (1.99% beat)
  • EPS (non-GAAP): $4.64 vs analyst estimates of $4.52 (2.68% beat)
  • Revenue guidance for Q2 2022 is $2.32 billion at the midpoint, above analyst estimates of $2.22 billion
  • Free cash flow of $794.8 million, up 93.7% from previous quarter
  • Inventory Days Outstanding: 192, up from 186 previous quarter
  • Gross Margin (GAAP): 60.9%, up from 59.6% same quarter last year

"KLA's track record of consistent execution and sustainable outperformance was evident during the September 2021 quarter, demonstrating the strong momentum in our core markets and the attractive operating leverage inherent in the KLA financial model," commented Rick Wallace, president and chief executive officer of KLA Corporation.

Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ:KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.

Sales Growth

KLA's revenue growth over the last three years has been strong, averaging 21.8% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $1.53 billion to $2.08 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

KLA Total Revenue

This was a strong quarter for KLA as revenues grew 35.4%, topping analyst estimates by 1.99%.

KLA believes the growth is set to accelerate, and is guiding for revenue to grow 51.1% YoY next quarter, and Wall St analysts are estimating growth 19.6% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as the cyclical nature of semiconductor supply and demand impacts profitability. In a tight supply environment, inventories tend to be low, allowing chipmakers to exert pricing power, which helps increase gross margins. The inverse also applies, as rising inventory levels tend to foreshadow weakening pricing power and declining gross margins.

KLA Inventory Days Outstanding

This quarter, KLA’s inventory days came in at 192, 9 days below the five year average, showing that despite the recent increase there is no indication of an excessive inventory buildup at the moment.

Key Takeaways from KLA's Q1 Results

Sporting a market capitalization of $51.9 billion, more than $2.62 billion in cash and with positive free cash flow over the last twelve months, we're confident that KLA has the resources it needs to pursue a high growth business strategy.

We enjoyed the positive outlook KLA provided for the next quarter’s revenue. And we were also excited to see the really strong revenue growth. On the other hand, there was an increase in inventory levels. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 2.36% on the results and currently trades at $349 per share.

Should you invest in KLA right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.