Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands)	September 30, 2024		June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	1,977,202	$	1,977,129
Marketable securities	2,652,514		2,526,866
Accounts receivable, net	1,953,156		1,833,041
Inventories	3,109,837		3,034,781
Other current assets	535,730		659,327
Total current assets	10,228,439		10,031,144
Land, property and equipment, net	1,118,312		1,109,968
Goodwill, net	2,015,721		2,015,726
Deferred income taxes	981,591		915,241
Purchased intangible assets, net	612,011		668,764
Other non-current assets	725,663		692,723
Total assets	$	15,681,737	$	15,433,566
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	376,505	$	359,487
Deferred system revenue	877,207		985,856
Deferred service revenue	512,470		501,926
Current portion of long-term debt	749,984		749,936
Other current liabilities	2,282,048		2,063,569
Total current liabilities	4,798,214		4,660,774
Long-term debt	5,881,372		5,880,199
Deferred tax liabilities	471,575		486,690
Deferred service revenue	319,794		294,460
Other non-current liabilities	651,068		743,115
Total liabilities	12,122,023		12,065,238
Commitments and contingencies (Notes 8, 13 and 14)
Stockholders’ equity:
Common stock and capital in excess of par value	2,257,052		2,280,133
Retained earnings	1,328,166		1,137,270
Accumulated other comprehensive loss	(25,504)		(49,075)


Total stockholders’ equity	3,559,714		3,368,328
Total liabilities and stockholders’ equity	$	15,681,737	$	15,433,566

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,
(In thousands, except per share amounts)	2024		2023
Revenues:
Product	$	2,197,389	$	1,836,664
Service	644,152		560,292
Total revenues	2,841,541		2,396,956
Costs and expenses:
Costs of revenues	1,147,431		946,891
Research and development	323,145		311,214
Selling, general and administrative	251,042		239,645

Interest expense	82,171		74,234

Other expense (income), net	(40,935)		(26,739)
Income before income taxes	1,078,687		851,711
Provision for income taxes	132,836		110,336

Net income	945,851		741,375



Basic	$	7.05	$	5.43
Diluted	$	7.01	$	5.41
Weighted-average number of shares:
Basic	134,134		136,412
Diluted	134,858		137,104

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,
(In thousands)	2024		2023
Net income	$	945,851	$	741,375
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments	10,257		(6,853)
Income tax (provision) benefit	(1,148)		260
Net change related to currency translation adjustments	9,109		(6,593)
Cash flow hedges:
Net unrealized gains (losses) arising during the period	3,098		(1,481)
Reclassification adjustments for net gains included in net income	(3,508)		(7,108)
Income tax benefit	2,213		856
Net change related to cash flow hedges	1,803		(7,733)
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans	(232)		242
Available-for-sale securities:
Net unrealized gains arising during the period	16,422		1,244
Reclassification adjustments for net losses included in net income	1		12
Income tax provision	(3,532)		(269)
Net change related to available-for-sale securities	12,891		987
Other comprehensive income (loss)	23,571		(13,097)

Total comprehensive income	$	969,422	$	728,278

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balances as of June 30, 2024	134,425	$	2,280,133	$	1,137,270	$	(49,075)	$	3,368,328

Net income	—	—		945,851		—		945,851





Other comprehensive income	—	—		—		23,571		23,571
Net issuance under employee stock plans	134	(72,245)		—		—		(72,245)
Repurchase of common stock	(740)	(12,536)		(558,400)		—		(570,936)
Cash dividends ($1.45 per share) and dividend equivalents declared	—	—		(196,555)		—		(196,555)

Stock-based compensation expense	—	61,700		—		—		61,700


Balances as of September 30, 2024	133,819	2,257,052		1,328,166		(25,504)		3,559,714


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balance as of June 30, 2023	136,750	$	2,107,663	$	848,431	$	(36,341)	$	2,919,753
Net income	—	—		741,375		—		741,375





Other comprehensive loss	—	—		—		(13,097)		(13,097)
Net issuance under employee stock plans	173	(68,237)		—		—		(68,237)
Repurchase of common stock	(956)	(14,722)		(444,371)		—		(459,093)
Cash dividends ($1.30 per share) and dividend equivalents declared	—	—		(179,256)		—		(179,256)
Stock-based compensation expense	—	48,772		—		—		48,772


Balance as of September 30, 2023	135,967	2,073,476		966,179		(49,438)		2,990,217

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended September 30,
(In thousands)	2024		2023
Cash flows from operating activities:
Net income	$	945,851	$	741,375
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	95,823		102,403

Unrealized foreign exchange loss and other	7,718		9,970


Stock-based compensation expense	61,700		48,772


Deferred income taxes	(81,682)		(71,322)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable	(91,660)		107,018
Inventories	(59,326)		(138,419)
Other assets	152,641		(7,520)
Accounts payable	(12,463)		8,345
Deferred system revenue	(108,648)		14,057
Deferred service revenue	35,863		5,901
Other liabilities	49,421		63,160
Net cash provided by operating activities	995,238		883,740
Cash flows from investing activities:



Capital expenditures	(60,393)		(68,045)
Purchases of available-for-sale securities	(837,935)		(530,842)
Proceeds from sale of available-for-sale securities	55,322		7,983
Proceeds from maturity of available-for-sale securities	671,925		201,149
Purchases of trading securities	(17,581)		(49,958)
Proceeds from sale of trading securities	17,623		48,042

Net cash used in investing activities	(171,039)		(391,671)
Cash flows from financing activities:




Common stock repurchases	(567,383)		(455,412)
Payment of dividends to stockholders	(198,079)		(181,507)


Tax withholding payments related to vested and released restricted stock units	(72,246)		(68,237)



Net cash used in financing activities	(837,708)		(705,156)
Effect of exchange rate changes on cash and cash equivalents	13,582		(3,208)
Net increase (decrease) in cash and cash equivalents	73		(216,295)
Cash and cash equivalents at beginning of period	1,977,129		1,927,865
Cash and cash equivalents at end of period	$	1,977,202	$	1,711,570
Supplemental cash flow disclosures:
Income taxes paid, net	$	96,395	$	99,388
Interest paid	$	131,126	$	113,236
Non-cash activities:


Contingent consideration payable - financing activities	$	—	$	(920)
Dividends payable - financing activities	$	2,009	$	1,853
Unsettled common stock repurchase - financing activities	$	5,499	$	11,000

Accrued purchases of land, property and equipment - investing activities	$	13,849	$	22,729

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation. For purposes of this report, “KLA,” the “Company,” “we,” “our,” “us” or similar references mean KLA Corporation and its majority-owned subsidiaries unless the context requires otherwise. The Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The unaudited interim Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of June 30, 2024 was derived from the Company’s audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, but does not include all disclosures required by GAAP for audited financial statements. The unaudited interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. These Condensed Consolidated Financial Statements and notes, however, should be read in conjunction with Item 8 “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

The Condensed Consolidated Financial Statements include the accounts of KLA and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year ending June 30, 2025.

Management Estimates. The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets and liabilities (and related disclosure of contingent assets and liabilities) at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications. The Company has reclassified certain prior period balances to conform to the current year presentation. These reclassifications did not impact any prior amounts of reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.

Significant Accounting Policies. Except for the below additions to our accounting policies, there have been no material changes to our significant accounting policies summarized in Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Government Incentives. We occasionally receive incentives from governmental entities related to capital expenditures, expenses and other activities, primarily in the form of cash grants and tax credits. Government assistance is recognized when there is reasonable assurance that (1) the Company will comply with relevant conditions; and (2) the assistance will be received. Government incentives related to the acquisition or construction of property, plant and equipment are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred.

Collaborative Arrangements. We assess joint development arrangements to determine whether they are in the scope of Accounting Standards Codification (“ASC”) 808, Collaborative Arrangements. In our assessment, we evaluate whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on commercial success of the activities. This assessment is performed throughout the life of such arrangement with consideration given to the changes in the roles and responsibilities between the parties. During the quarter ended September 30, 2024, we entered into a joint development arrangement within the scope of ASC 808 to develop and commercialize a new product.

Recent Accounting Pronouncements

Recently Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU") 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2025 and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. Early adoption is permitted on a retrospective basis. We will adopt this update for our annual report for the fiscal year ending June 30, 2025.

Updates Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax disclosures.

NOTE 2 – REVENUE

Contract Balances

The following table represents the opening and closing balances of accounts receivable, net, contract assets and contract liabilities as of the indicated dates.


	As of		As of
(Dollar amounts in thousands)	September 30, 2024		June 30, 2024		$ Change		% Change
Accounts receivable, net	$	1,953,156	$	1,833,041	$	120,115	7	%
Contract assets	$	71,407	$	69,259	$	2,148	3	%
Contract liabilities	$	1,709,471	$	1,782,242	$	(72,771)	(4)	%

Our payment terms and conditions vary by contract type, although terms generally include a requirement of payment of 70% to 90% of total contract consideration within 30 to 60 days of shipment, with the remainder payable within 30 days of acceptance.

The change in contract assets during the three months ended September 30, 2024 was mainly due to $37.4 million of revenue recognized for which the payment is subject to conditions other than passage of time, largely offset by $35.4 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional. Contract assets are included in other current assets on our Condensed Consolidated Balance Sheets.

The change in contract liabilities during the three months ended September 30, 2024 was mainly due to the recognition in revenue of $870.0 million that was included in contract liabilities as of June 30, 2024, largely offset by an increase in the value of products and services billed to customers for which control of the products and services has not transferred to the customers. Contract liabilities are included in other current liabilities and other non-current liabilities on our Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

As of September 30, 2024, we had $10.04 billion of remaining performance obligations (“RPO”), which represents our obligation to deliver products and services, and primarily consists of sales orders where written customer requests have been received. This amount includes customer deposits of $682.2 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.71 billion as disclosed above. We expect to recognize approximately 65% to 70% of these performance obligations as revenue in the next 12 months, 25% to 30% in the subsequent 12 months and the remainder thereafter, but this estimate is subject to constant change. The timing of revenue recognition of our RPO is evaluated quarterly and is largely driven by multiple variables, many of which are beyond our control, such as: the readiness of customer fabs, end market needs for capacity, changes in the estimated versus actual start time of customers’ projects, timing of delivery and installation dates, supply chain constraints and changes in regulations. Our customers are currently purchasing equipment from us with lead times that are longer than our historical experience. As customers try to balance the evolution of their technological, production or market needs with the timing and content of orders placed with us, there is elevated risk of order modifications, pushouts or cancellations.

In addition, in October 2022, the U.S. government issued regulations that imposed new export licensing requirements for certain U.S. semiconductor and high-performance computing technology (including wafer fab equipment), for the use of such technology for certain end uses in the People’s Republic of China (“China”), and for the provision of support by U.S. Persons to certain advanced integrated circuit (“IC”) fabs located in China. The regulations impose export license requirements effectively on all KLA products and services to customers located in China that fabricate certain advanced logic, NAND and DRAM ICs. KLA is also restricted from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license. In October 2023, the U.S. government issued additional regulations that went into effect in November 2023. These additional 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. They adjust the parameters included in the existing regulations that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established in October 2022. The regulations are very complex and, in January 2024, KLA, among other companies, submitted comments to the government regarding these regulations. We are taking appropriate measures to comply with all government regulations, 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.

Refer to Note 17 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements for information related to revenues by geographic region as well as significant product and service offerings.

NOTE 3 – FAIR VALUE MEASUREMENTS

Our financial assets and liabilities are measured and recorded at fair value, except for our debt and certain equity investments in privately held companies. Equity investments without a readily available fair value are accounted for using the measurement alternative. The measurement alternative is calculated as cost minus impairment, if any, plus or minus changes resulting from observable price changes. See Note 7 “Debt” to our Condensed Consolidated Financial Statements for disclosure of the fair value of our Senior Notes, as defined in that Note.

Our non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred and, for goodwill, also annually.

Fair Value of Financial Instruments. We have evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of our cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate their carrying amounts due to the relatively short maturity of these items.

Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


Level 1						Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2						Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3						Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the three months ended September 30, 2024.

The types of instruments valued based on quoted market prices in active markets include money market funds, certain U.S. Treasury securities, U.S. Government agency securities and equity securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include corporate debt securities, municipal securities and certain U.S. Treasury securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The principal market in which we execute our foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants generally are large financial institutions. Our foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the dates indicated below, were presented on our Condensed Consolidated Balance Sheets as follows:


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
As of September 30, 2024 (In thousands)	Total		(Level 1)		(Level 2)
Assets
Cash equivalents:

Money market funds and other	$	1,558,751	$	1,558,751	$	—

U.S. Treasury securities	6,720		—		6,720




Marketable securities:
Corporate debt securities	835,105		—		835,105
Municipal securities	43,673		—		43,673

U.S. Government agency securities	97,887		97,887		—
U.S. Treasury securities	729,376		498,241		231,135

Equity securities	19,654		19,654		—

Total cash equivalents and marketable securities(1)	3,291,166		2,174,533		1,116,633
Other current assets:
Derivative assets	25,314		—		25,314
Other non-current assets:
Executive Deferred Savings Plan	318,855		286,149		32,706
Total financial assets(1)	$	3,635,335	$	2,460,682	$	1,174,653
Liabilities
Derivative liabilities	$	(31,518)	$	—	$	(31,518)




Total financial liabilities	$	(31,518)	$	—	$	(31,518)

(1) Excludes cash of $326.9 million held in operating accounts and time deposits of $1.01 billion (of which $84.9 million were cash equivalents) as of September 30, 2024.


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
As of June 30, 2024 (In thousands)	Total		(Level 1)		(Level 2)
Assets
Cash equivalents:

Corporate debt securities	$	2,312	$	—	$	2,312
Money market funds and other	1,585,832		1,585,832		—

U.S. Treasury securities	35,158		—		35,158


Marketable securities:
Corporate debt securities	771,920		—		771,920
Municipal securities	41,159		—		41,159

U.S. Government agency securities	105,874		105,874		—
U.S. Treasury securities	716,148		476,230		239,918

Equity securities	25,566		25,566		—

Total cash equivalents and marketable securities(1)	3,283,969		2,193,502		1,090,467
Other current assets:
Derivative assets	36,503		—		36,503
Other non-current assets:
Executive Deferred Savings Plan	303,365		272,816		30,549
Total financial assets(1)	$	3,623,837	$	2,466,318	$	1,157,519
Liabilities
Derivative liabilities	$	(15,683)	$	—	$	(15,683)



Total financial liabilities	$	(15,683)	$	—	$	(15,683)

(1) Excludes cash of $287.6 million held in operating accounts and time deposits of $932.4 million (of which $66.2 million were cash equivalents) as of June 30, 2024.

NOTE 4 – FINANCIAL STATEMENT COMPONENTS

Condensed Consolidated Balance Sheets


	As of		As of
(In thousands)	September 30, 2024		June 30, 2024
Accounts receivable, net:
Accounts receivable, gross	$	1,985,777	$	1,865,823
Allowance for credit losses	(32,621)		(32,782)
	$	1,953,156	$	1,833,041
Inventories:
Customer service parts	$	602,206	$	589,751
Raw materials	1,489,622		1,485,400
Work-in-process	736,878		700,895
Finished goods	281,131		258,735
	$	3,109,837	$	3,034,781
Other current assets:
Deferred costs of revenues	$	215,370	$	279,879
Prepaid expenses	118,366		124,969
Contract assets	71,407		69,259
Prepaid income and other taxes	58,210		102,398
Other current assets	72,377		82,822
	$	535,730	$	659,327
Land, property and equipment, net:
Land	$	78,259	$	78,260
Buildings and leasehold improvements	925,296		919,919
Machinery and equipment	1,139,003		1,116,793
Office furniture and fixtures	64,416		64,480
Construction-in-process	241,060		215,006
	2,448,034		2,394,458
Less: accumulated depreciation	(1,329,722)		(1,284,490)
	$	1,118,312	$	1,109,968
Other non-current assets:
Executive Deferred Savings Plan(1)	$	318,855	$	303,365
Operating lease right of use assets	250,460		231,812
Other non-current assets	156,348		157,546
	$	725,663	$	692,723
Other current liabilities:
Customer deposits	$	610,630	$	645,893
Compensation and benefits	479,471		371,713
Income taxes payable	347,503		146,740
Executive Deferred Savings Plan(1)	319,432		303,088
Interest payable	77,504		128,727
Operating lease liabilities	40,414		36,391
Other liabilities and accrued expenses	407,094		431,017
	$	2,282,048	$	2,063,569
Other non-current liabilities:
Income taxes payable	$	217,015	$	291,106
Operating lease liabilities	154,325		153,117
Customer deposits	71,564		99,794
Pension liabilities	56,924		51,778
Other non-current liabilities	151,240		147,320
	$	651,068	$	743,115

(1)We have a non-qualified deferred compensation plan (known as the “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense (benefit) associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) was $18.0 million and $(9.3) million during the three months ended September 30, 2024 and 2023, respectively. The amount of net gains (losses) associated with changes in the EDSP assets included in SG&A expense was $17.9 million and $(9.5) million during the three months ended September 30, 2024 and 2023, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:


(In thousands)	Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Securities		Unrealized Gains (Losses) on Derivatives		Unrealized Gains (Losses) on Defined Benefit Plans		Total
Balance as of September 30, 2024	$	(66,737)	$	9,237	$	48,046	$	(16,050)	$	(25,504)

Balance as of June 30, 2024	$	(75,846)	$	(3,654)	$	46,243	$	(15,818)	$	(49,075)

The effects on net income of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated periods were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):


AOCI Components				Three Months Ended
	Location in the Condensed Consolidated Statement of Operations		September 30,
		2024		2023
Unrealized gains on cash flow hedges from foreign exchange and interest rate contracts		Revenues		$	2,535	$	3,396
		Costs of revenues and operating expenses		26		2,775
		Interest expense		947		937

		Net gains reclassified from AOCI		$	3,508	$	7,108
Unrealized losses on available-for-sale securities		Other expense (income), net		$	(1)	$	(12)

The amount reclassified out of AOCI related to our defined benefit pension plans that was recognized as a component of net periodic cost for the three months ended September 30, 2024 and 2023 was $0.2 million and $0.3 million, respectively. For additional details, refer to Note 13 “Employee Benefit Plans” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

NOTE 5 – MARKETABLE SECURITIES

The amortized cost and fair value of marketable securities as of the dates indicated below were as follows:


As of September 30, 2024 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	828,306	$	7,102	$	(303)	$	835,105
Money market funds and other	1,558,751		—		—		1,558,751

Municipal securities	43,399		294		(20)		43,673

U.S. Government agency securities	96,859		1,037		(9)		97,887
U.S. Treasury securities	732,428		4,081		(413)		736,096


Subtotal	3,259,743		12,514		(745)		3,271,512
Add: Time deposits(1)	1,011,697		—		—		1,011,697
Less: Cash equivalents	1,650,347		2		—		1,650,349
Marketable securities(2)	$	2,621,093	$	12,512	$	(745)	$	2,632,860


As of June 30, 2024 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	775,277	$	973	$	(2,018)	$	774,232
Money market funds and other	1,585,832		—		—		1,585,832
Municipal securities	41,343		13		(197)		41,159

U.S. Government agency securities	106,101		26		(253)		105,874
U.S. Treasury securities	754,505		209		(3,408)		751,306


Subtotal	3,263,058		1,221		(5,876)		3,258,403
Add: Time deposits(1)	932,436		—		—		932,436
Less: Cash equivalents	1,689,540		—		(1)		1,689,539
Marketable securities(2)	$	2,505,954	$	1,221	$	(5,875)	$	2,501,300

(1) Time deposits excluded from fair value measurements.

(2) Excludes equity marketable securities.

Our investment portfolio includes both corporate and government securities that have a maximum maturity of three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower yield-at-cost show a mark-to-market unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields. We believe that we have the ability to realize the full value of all these investments upon maturity. As of September 30, 2024, we had 100 investments in a gross unrealized loss position. The following table summarizes the fair value and gross unrealized losses of our investments that were in an unrealized loss position as of the dates indicated below.


As of September 30, 2024	Less than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	33,940	$	(20)	$	66,941	$	(283)	$	100,881	$	(303)
Municipal securities	1,624		(2)		2,443		(18)		4,067		(20)

U.S. Government agency securities	13,630		(9)		—		—		13,630		(9)
U.S. Treasury securities	35,771		(26)		63,733		(387)		99,504		(413)
Total	$	84,965	$	(57)	$	133,117	$	(688)	$	218,082	$	(745)


As of June 30, 2024	Less than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	355,882	$	(942)	$	100,957	$	(1,076)	$	456,839	$	(2,018)
Municipal securities	17,364		(81)		10,788		(116)		28,152		(197)

U.S. Government agency securities	58,598		(137)		17,197		(116)		75,795		(253)
U.S. Treasury securities	466,144		(1,040)		166,867		(2,368)		633,011		(3,408)
Total	$	897,988	$	(2,200)	$	295,809	$	(3,676)	$	1,193,797	$	(5,876)

The contractual maturities of securities classified as available-for-sale, regardless of their classification on our Condensed Consolidated Balance Sheets, as of the date indicated below were as follows:


As of September 30, 2024 (In thousands)	Amortized Cost		Fair Value
Due within one year	$	1,786,826	$	1,788,386
Due after one year through three years	834,267		844,474
Total	$	2,621,093	$	2,632,860

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on available-for-sale securities for the three months ended September 30, 2024 and 2023 were immaterial.

The costs for our equity marketable securities were $22.9 million as of both September 30, 2024, and June 30, 2024. Unrealized losses for our equity marketable securities were $5.9 million and $4.3 million during the three months ended September 30, 2024 and 2023, respectively.

NOTE 6 – GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations. We have three reportable segments, five operating segments and six reporting units.

The following table presents changes in goodwill carrying value by reportable segment during the three months ended September 30, 2024:


(In thousands)	Semiconductor Process Control		Specialty Semiconductor Process		Printed Circuit Board (“PCB”) and Component Inspection		Total
Balances as of June 30, 2024
Goodwill	$	1,030,588	$	826,037	$	651,324	$	2,507,949
Accumulated impairment losses	(277,570)		(144,179)		(70,474)		(492,223)
	$	753,018	$	681,858	$	580,850	$	2,015,726



Activity for the three months ended September 30, 2024


Foreign currency adjustments	(5)		—		—		(5)
Balances as of September 30, 2024
Goodwill	1,030,583		826,037		651,324		$	2,507,944
Accumulated impairment losses	(277,570)		(144,179)		(70,474)		(492,223)
	$	753,013	$	681,858	$	580,850	$	2,015,721

Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

As of September 30, 2024, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the assessments performed in the third quarter of the fiscal year ended June 30, 2024. As a result of those assessments, we recorded a $70.5 million impairment charge in the Display reporting unit in the three months ended March 31,

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.

Purchased Intangible Assets

The components of purchased intangible assets as of the dates indicated below were as follows:


(In thousands)		As of September 30, 2024						As of June 30, 2024
Category	Range of Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount		Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount
Existing technology	4-8	$	1,552,074	$	1,089,685	$	462,389	$	1,552,074	$	1,045,585	$	506,489
Customer relationships	4-9	358,567		257,125		101,442		358,567		248,106		110,461
Trade name / Trademark	4-7	119,083		100,691		18,392		119,083		97,106		21,977
Order backlog and other	<1-7	83,336		82,789		547		83,336		82,740		596
Intangible assets subject to amortization		2,113,060		1,530,290		582,770		2,113,060		1,473,537		639,523
In-process research and development		46,074		16,833		29,241		46,074		16,833		29,241
Total		$	2,159,134	$	1,547,123	$	612,011	$	2,159,134	$	1,490,370	$	668,764

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Impairment indicators primarily include declines in our operating cash flows from the use of these assets. If impairment indicators are present, we are required to perform a recoverability test by comparing the sum of estimated undiscounted future cash flows attributable to those long-lived assets to their carrying value.

As of September 30, 2024, there were no impairment indicators for purchased intangible assets.

Amortization expense for purchased intangible assets for the periods indicated below was as follows:


	Three Months Ended September 30,
(In thousands)	2024		2023
Amortization expense - Costs of revenues	$	44,099	$	46,088
Amortization expense - SG&A	12,654		17,216

Total	$	56,753	$	63,304

Based on the purchased intangible assets gross carrying amount recorded as of September 30, 2024, the remaining estimated annual amortization expense is expected to be as follows:


Fiscal year ending June 30:	Amortization (In thousands)
2025 (remaining nine months)	$	161,654
2026	198,078
2027	125,517
2028	48,849
2029	34,530
2030 and thereafter	14,142
Total	$	582,770

NOTE 7 – DEBT

The following table summarizes our debt as of September 30, 2024 and June 30, 2024:


	As of September 30, 2024				As of June 30, 2024
	Amount (In thousands)		Effective Interest Rate		Amount (In thousands)		Effective Interest Rate
Fixed-rate 4.650% Senior Notes due on November 1, 2024	$	750,000	4.682	%	$	750,000	4.682	%
Fixed-rate 5.650% Senior Notes due on November 1, 2034	250,000		5.670	%	250,000		5.670	%
Fixed-rate 4.100% Senior Notes due on March 15, 2029	800,000		4.159	%	800,000		4.159	%
Fixed-rate 5.000% Senior Notes due on March 15, 2049	400,000		5.047	%	400,000		5.047	%
Fixed-rate 3.300% Senior Notes due on March 1, 2050	750,000		3.302	%	750,000		3.302	%
Fixed-rate 4.650% Senior Notes due on July 15, 2032	1,000,000		4.657	%	1,000,000		4.657	%
Fixed-rate 4.950% Senior Notes due on July 15, 2052	1,450,000		5.023	%	1,450,000		5.023	%
Fixed-rate 5.250% Senior Notes due on July 15, 2062	800,000		5.259	%	800,000		5.259	%
Fixed-rate 4.700% Senior Notes due on February 1, 2034	500,000		4.777	%	500,000		4.777	%

Total	6,700,000				6,700,000
Unamortized discount/premium, net	(24,453)				(24,866)
Unamortized debt issuance costs	(44,191)				(44,999)
Total	$	6,631,356			$	6,630,135
Reported as:
Current portion of long-term debt	$	749,984			$	749,936
Long-term debt	5,881,372				5,880,199
Total	$	6,631,356			$	6,630,135

Senior Notes and Debt Redemption

In February 2024, we issued $750.0 million aggregate principal amount of senior, unsecured notes as follows: $500.0 million of 4.700% senior, unsecured notes (the “2024 Senior Notes”) due February 1, 2034; and an additional $250.0 million of 4.950% senior, unsecured notes due July 15, 2052 which was originally issued in June 2022, resulting in an aggregate principal amount of $1.45 billion. The net proceeds will be used for general corporate purposes, including repayment of outstanding indebtedness at or prior to maturity.

Prior to February 2024, the following aggregate principal amounts of senior, unsecured long-term notes were issued in the following periods: $3.00 billion in June 2022 (the “2022 Senior Notes”), $750.0 million in February 2020 (the “2020 Senior Notes”), $1.20 billion in March 2019 (the “2019 Senior Notes”) and $2.50 billion in November 2014 (the “2014 Senior Notes”). These, along with the 2024 Senior Notes, are collectively referred to as the “Senior Notes.”

The original discounts on the Senior Notes are being amortized over the life of the debt. Interest is payable as follows: semi-annually on February 1 and August 1 of each year for the 2024 Senior Notes; semi-annually on January 15 and July 15 of each year for the 2022 Senior Notes; semi-annually on March 1 and September 1 of each year for the 2020 Senior Notes; semi-annually on March 15 and September 15 of each year for the 2019 Senior Notes; and semi-annually on May 1 and November 1 of each year for the 2014 Senior Notes. The relevant indentures for the Senior Notes (collectively, the “Indenture”) include covenants that limit our ability to grant liens on our facilities and enter into sale and leaseback transactions.

In certain circumstances involving a change of control followed by a downgrade of the rating of a series of Senior Notes by at least two of Moody’s Investors Service, S&P Global Ratings and Fitch Inc., unless we have exercised our rights to redeem the Senior Notes of such series, we will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s Senior Notes of that series pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, we will be required to offer payment in cash equal to 101% of the aggregate principal amount of Senior Notes repurchased plus accrued and unpaid interest, if any, on the Senior Notes repurchased, up to, but not including, the date of repurchase.

Based on the trading prices of the Senior Notes on the applicable dates, the fair value of the Senior Notes as of September 30, 2024 and June 30, 2024 was $6.59 billion and $6.26 billion, respectively. While the Senior Notes are recorded at cost, the fair value of the long-term debt was determined based on quoted prices in markets that are not active; accordingly, the long-term debt is categorized as Level 2 for purposes of the fair value measurement hierarchy.

As of September 30, 2024, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.

Revolving Credit Facility

We have in place a Credit Agreement dated June 8, 2022 (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) having 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 may borrow, repay and reborrow funds under the Revolving Credit Facility until the maturity date, at which time we may exercise two one-year extension options with the consent of the lenders. We may prepay outstanding borrowings under the Revolving Credit Facility at any time without a prepayment penalty.

Borrowings under the Revolving Credit Facility can be made as Term Secured Overnight Financing Rate (“SOFR”) Loans or Alternate Base Rate (“ABR”) Loans, at the Company’s option. In the event that Term SOFR is unavailable, any Term SOFR elections will be converted to Daily Simple SOFR, if available. Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable Adjusted Term SOFR rate, which is equal to the applicable Term SOFR rate plus 10 bps that shall not be less than zero, plus a spread ranging from 75 bps to 125 bps, as determined by the Company’s credit ratings at the time. Each ABR Loan will bear interest at a rate per annum equal to the ABR plus a spread ranging from 0 bps to 25 bps, as determined by the Company’s credit ratings at the time. We are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility, which ranges from 4.5 bps to 12.5 bps, subject to an adjustment in conjunction with changes to our credit rating. The applicable interest rates and commitment fees are also subject to adjustment based on the Company’s performance against certain environmental sustainability key performance indicators (“KPI”) related to greenhouse gas emissions and renewable electricity usage. Our performance against these KPIs in calendar year 2023 resulted in reductions to the fees associated with our Revolving Credit Facility. As of September 30, 2024, we elected to pay interest on borrowings under the Revolving Credit Facility at the applicable Adjusted Term SOFR rate plus a spread of 82.5 bps and the applicable commitment fee on the daily undrawn balance of the Revolving Credit Facility was 5.5 bps.

Under the Credit Agreement, the maximum leverage ratio on a quarterly basis is 3.50 to 1.00, covering the trailing four consecutive fiscal quarters for each fiscal quarter, which may be increased to 4.00 to 1.00 for a period of time in connection with a material acquisition or a series of material acquisitions. As of September 30, 2024, our maximum allowed leverage ratio was 3.50 to 1.00.

We were in compliance with all covenants under the Credit Agreement as of September 30, 2024.

For additional details, refer to Note 8 “Debt” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

NOTE 8 – LEASES

We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, research and development (“R&D”), manufacturing, and storage and distribution. Our finance leases are not material.

Our existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain provisions for the payment of maintenance, real estate taxes or insurance costs by us. Our leases have remaining lease terms ranging from less than one year to 28 years, including periods covered by options to extend the lease when it is reasonably certain that the option will be exercised.

Lease expense was $13.1 million and $12.4 million for the three months ended September 30, 2024 and 2023, respectively. Expenses related to short-term leases, which were not recorded on the Condensed Consolidated Balance Sheets, were not material for the three months ended September 30, 2024 and 2023. As of September 30, 2024 and June 30, 2024, the weighted-average remaining lease term was 6.5 and 6.7 years, respectively, and the weighted-average discount rate for operating leases was 4.22% and 4.30%, respectively.

Supplemental cash flow information related to leases was as follows:


	Three Months Ended September 30,
In thousands	2024		2023
Operating cash outflows from operating leases	$	10,856	$	10,002
Right of use assets obtained in exchange for new operating lease liabilities	$	9,649	$	12,968

Maturities of lease liabilities as of September 30, 2024 were as follows:


Fiscal Year Ending June 30:	(In thousands)
2025 (remaining nine months)	$	36,282
2026	44,329
2027	33,307
2028	22,783
2029	20,030
2030 and thereafter	71,131
Total lease payments	227,862
Less imputed interest	(33,123)
Total	$	194,739

As of September 30, 2024, we did not have material leases that had not yet commenced.

NOTE 9 – EQUITY AND LONG-TERM INCENTIVE COMPENSATION PLANS

Equity Incentive Program

On August 3, 2023, our Board of Directors adopted the KLA Corporation 2023 Incentive Award Plan (the “2023 Plan”), which replaced our 2004 Equity Incentive Plan (the “2004 Plan”) for grants of equity awards occurring on or after November 1, 2023. The new plan was approved by our stockholders at the annual meeting of stockholders held on November 1, 2023. As of September 30, 2024, 10.0 million shares remained available for issuance under our 2023 Plan. For details of the 2023 Plan, refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Equity Incentive Plans - General Information

The following table summarizes the combined activity under our equity incentive plans:


(In thousands)			Available For Grant(1)
Balance as of June 30, 2024			10,240

Restricted stock units granted(2)			(292)
RSUs granted adjustment(3)			62
Restricted stock units canceled			19

Balance as of September 30, 2024			10,029

(1)The number of restricted stock units (“RSU”) reflects the application of the award multiplier of 2.0x to calculate the impact of the award on the shares reserved under the 2023 Plan.

(2)Includes RSUs granted to senior management during the three months ended September 30, 2024 with performance-based vesting criteria (in addition to service-based vesting criteria for any of such RSUs that are deemed to have been earned) (“performance-based RSU”). This line item includes all such performance-based RSUs granted during the three months ended September 30, 2024 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.2 million shares for the three months ended September 30, 2024 reflects the application of the multiplier described above).

(3)Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the quarter ended September 30, 2024.

The fair value of stock-based awards is measured at the grant date and is recognized as an expense over the employee’s requisite service period. The fair value for RSUs granted with “dividend equivalent” rights is determined using the closing price of our common stock on the grant date.

The following table shows stock-based compensation expense for the indicated periods:


	Three Months Ended September 30,
(In thousands)	2024		2023
Stock-based compensation expense by:
Costs of revenues	$	9,789	$	7,669
R&D	17,380		13,028
SG&A	34,531		28,075
Total stock-based compensation expense	$	61,700	$	48,772

Stock-based compensation capitalized as inventory as of September 30, 2024 and June 30, 2024 was $21.7 million and $21.5 million, respectively.

Restricted Stock Units

The following table shows the activity and weighted-average grant date fair values for RSUs during the three months ended September 30, 2024:


	Shares(1) (In thousands)	Weighted-Average Grant Date Fair Value
Outstanding RSUs as of June 30, 2024(2)	1,467	$	424.66
Granted(3)	146	$	782.47
Granted adjustments(4)	(31)	$	397.40


Vested and released	(235)	$	316.96

Forfeited	(10)	$	451.90
Outstanding RSUs as of September 30, 2024(2)	1,337	$	483.19

(1)Share numbers reflect actual shares subject to awarded RSUs.

(2)Includes performance-based RSUs.

(3)This line item includes performance-based RSUs granted during the three months ended September 30, 2024 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.1 million shares for the three months ended September 30, 2024).

(4)Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the quarter ended September 30, 2024.

The RSUs granted by us generally vest as follows, in each case subject to the recipient remaining employed by us as of the applicable vesting date: (i) with respect to awards with only service-based vesting criteria, over periods ranging from two to four years; and (ii) with respect to awards with both performance-based and service-based vesting criteria, over periods ranging from three to four years. The RSUs granted to the independent members of the Board of Directors vest annually.

The following table shows the weighted-average grant date fair value per unit for the RSUs granted, aggregate grant date fair value of RSUs vested and tax benefits realized by us in connection with vested and released RSUs for the indicated periods:


	Three Months Ended September 30,
(In thousands, except for weighted-average grant date fair value)	2024		2023
Weighted-average grant date fair value per unit	$	782.47	$	501.15

Grant date fair value of vested RSUs	$	74,731	$	65,524
Tax benefits realized by us in connection with vested and released RSUs	$	17,575	$	16,054

As of September 30, 2024, the unrecognized stock-based compensation expense balance related to RSUs was $485.3 million, excluding the impact of estimated forfeitures, and will be recognized over an estimated weighted-average amortization period of 1.6 years. The intrinsic value of outstanding RSUs as of September 30, 2024 was $1.04 billion.

Cash-Based Long-Term Incentive Compensation

We have adopted a cash-based long-term incentive (“Cash LTI”) program (“Cash LTI Plan”) for many of our employees as part of our employee compensation program. Executives and non-employee members of the Board of Directors do not participate in the Cash LTI Plan. During the three months ended September 30, 2024 and 2023, we approved Cash LTI awards of $0.1 million and $0.1 million, respectively. Cash LTI awards issued to employees under the Cash LTI Plan will vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three- or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date. During the three months ended September 30, 2024 and 2023, we recognized $15.4 million and $18.5 million, respectively, in compensation expense under the Cash LTI Plan. As of September 30, 2024, the unrecognized compensation balance (excluding the impact of estimated forfeitures) related to the Cash LTI Plan was $111.0 million. For details, refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (“ESPP”) provides that eligible employees may contribute up to 15% of their eligible earnings toward the semi-annual purchase of our common stock. The ESPP is qualified under Section 423 of the Internal Revenue Code. The employee’s purchase price is derived from a formula based on the closing price of the common stock on the first day of the offering period versus the closing price on the date of purchase (or, if not a trading day, on the immediately preceding trading day).

The offering period (or length of the look-back period) under the ESPP has a duration of six months, and the purchase price with respect to each offering period, until otherwise amended, is equal to 85% of the lesser of (i) the fair market value of our common stock at the commencement of the applicable offering period or (ii) the fair market value of our common stock on the purchase date. We estimate the fair value of purchase rights under the ESPP using a Black-Scholes model.

The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes model and the straight-line attribution approach with the following weighted-average assumptions:


	Three Months Ended September 30,
	2024		2023
Stock purchase plan:
Expected stock price volatility	32.3	%	32.8	%
Risk-free interest rate	5.3	%	5.1	%
Dividend yield	0.7	%	1.1	%
Expected life (in years)	0.5		0.5

There was no cash received from employees for the issuance of shares under the ESPP or shares purchased by employees through the ESPP in the three months ended September 30, 2024 and 2023. The following table shows the tax benefits realized

by us in connection with the disqualifying dispositions of shares purchased under the ESPP and the weighted-average fair value per share for the indicated periods:


(In thousands, except for weighted-average fair value per share)	Three Months Ended September 30,
2024			2023


Tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP	$	1,393		$	1,365
Weighted-average fair value per share based on Black-Scholes model	$	195.35		$	114.32

The ESPP shares are replenished annually on the first day of each fiscal year by virtue of an evergreen provision. The provision allows for share replenishment equal to the lesser of 2.0 million shares or the number of shares that we estimate will be required to be issued under the ESPP during the forthcoming fiscal year. As of September 30, 2024, a total of 2.3 million shares were reserved and available for issuance under the ESPP.

Quarterly Cash Dividends

On September 3, 2024, we paid a quarterly cash dividend of $1.45 per share to stockholders of record as of the close of business on August 15, 2024. 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 RSUs.

NOTE 10 – STOCK REPURCHASE PROGRAM

Our Board of Directors has authorized a program that permits us to repurchase our common stock, including an increase in the authorized repurchase amount of $2.00 billion in the first quarter of fiscal 2024. The stock repurchase program has no expiration date and may be suspended at any time. The intent of the program is, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our ESPP as well as to return excess cash to our stockholders. Any and all share repurchase transactions are subject to market conditions and applicable legal requirements.

Under the authoritative guidance, share repurchases are recognized as a reduction to retained earnings to the extent available, with any excess recognized as a reduction of capital in excess of par value. In addition, the Inflation Reduction Act of 2022 (“IRA”) introduced a 1% excise tax imposed on certain stock repurchases made after December 31, 2022 by publicly traded companies. The excise tax is recorded as part of the cost basis of treasury stock repurchased after December 31, 2022 and, as such, is included in stockholders’ equity.

As of September 30, 2024, an aggregate of $1.61 billion was available for repurchase under the stock repurchase program.

Share repurchases for the indicated periods (based on the trade date of the applicable repurchase) were as follows:


	Three Months Ended September 30,
(In thousands)	2024		2023
Number of shares of common stock repurchased	740		956
Total cost of repurchases	$	570,936	$	459,093

NOTE 11 – NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by using the weighted-average number of shares of common stock outstanding during the period, increased to include the number of additional shares of common stock that would have been outstanding if the shares of common stock underlying our outstanding dilutive RSUs had been issued. The dilutive effect of outstanding RSUs is reflected in diluted net income per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share:


(In thousands, except per share amounts)	Three Months Ended September 30,
2024			2023
Numerator:
Net income	$	945,851		$	741,375
Denominator:
Weighted-average shares - basic, excluding unvested RSUs	134,134			136,412
Effect of dilutive RSUs and options	724			692
Weighted-average shares - diluted	134,858			137,104
Basic net income per share	$	7.05		$	5.43
Diluted net income per share	$	7.01		$	5.41
Anti-dilutive securities excluded from the computation of diluted net income per share	29			123

NOTE 12 – INCOME TAXES

The following table provides details of income taxes:


	Three Months Ended September 30,
(Dollar amounts in thousands)	2024			2023
Income before income taxes	$	1,078,687		$	851,711
Provision for income taxes	$	132,836		$	110,336
Effective tax rate	12.3		%	13.0		%

Our effective tax rate is lower than the U.S. federal statutory rate during the three months ended September 30, 2024 primarily due to the proportion of earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate and the proportion of U.S. earnings eligible for the Foreign Derived Intangible Income deduction.

In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2018. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2020. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the calendar year ended December 31, 2019 and are under audit in Israel for calendar year ended December 31, 2019 to fiscal year ended June 30, 2022.

It is possible that certain examinations may be concluded in the next 12 months. The timing and resolution of income tax examinations are uncertain. Given the uncertainty around the timing of the resolution of these ongoing examinations, we are unable to estimate the full range of possible adjustments to our unrecognized tax benefits within the next 12 months.

Legislative Developments

President Biden signed into law the IRA on August 16, 2022. The IRA has several new provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion of adjusted financial statement income over a consecutive three-tax-year period. The CAMT was effective for us beginning in our fiscal year ended June 30, 2024. There was no tax impact to our financial statements from the CAMT provision during the three months ended September 30, 2024.

In December 2021, the Organization for Economic Co-operation and Development’s (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) released Global Anti-Base Erosion (“GloBE”) rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GloBE rules, the provision requiring a 15% minimum effective tax rate on income earned in the respective countries is effective for us beginning in our current fiscal year. There was no material impact to our financial statements from this Pillar Two provision during the three months ended September 30, 2024.

NOTE 13 – LITIGATION AND OTHER LEGAL MATTERS

We are named, from time to time, as a party to lawsuits and other types of legal proceedings and claims in the normal course of our business. Actions filed against us include commercial, intellectual property (“IP”), customer, and labor and employment related claims, including complaints of alleged wrongful termination and potential class action lawsuits regarding alleged violations of federal and state wage and hour and other laws. In general, legal proceedings and claims, regardless of their merit, and associated internal investigations (especially those relating to IP or confidential information disputes) are often expensive to prosecute, defend or conduct, and may divert management’s attention and other Company resources. Moreover, the results of legal proceedings are difficult to predict, and the costs incurred in litigation can be substantial, regardless of outcome. We believe the amounts provided in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimated liabilities. However, because such matters are subject to many uncertainties and the ultimate outcomes are not predictable, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matters described above will not exceed the amounts reflected in our Condensed Consolidated Financial Statements or will not have a material adverse effect on our results of operations, financial condition or cash flows.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Factoring. We have factoring agreements with financial institutions to sell certain of our trade receivables and promissory notes from customers without recourse. We do not believe we are at risk for any material losses as a result of these agreements. In addition, we periodically sell certain letters of credit (“LC”), without recourse, received from customers in payment for goods and services.

The following table shows total receivables sold under factoring agreements and proceeds from sales of LC for the indicated periods:


	Three Months Ended September 30,
(In thousands)	2024		2023
Receivables sold under factoring agreements	$	45,459	$	45,607
Proceeds from sales of LC	$	1,978	$	—

Factoring and LC fees for the sale of certain trade receivables were recorded in other expense (income), net and were not material for the periods presented.

Purchase Commitments. We maintain commitments to purchase inventory from our suppliers as well as goods, services and other assets in the ordinary course of business. Our liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed between the parties. This forecasted time-horizon can vary among different suppliers. Our estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is approximately $2.29 billion as of September 30, 2024, a majority of which are due within the next 12 months. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or canceled. Certain agreements provide for potential cancellation penalties.

Cash LTI Plan. As of September 30, 2024, we have committed $142.1 million for future payment obligations under our Cash LTI Plan. Cash LTI awards issued to employees under the Cash LTI Plan vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three- or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date.

Guarantees and Contingencies. We maintain guarantee arrangements available through various financial institutions for up to $99.8 million, of which $65.3 million had been issued as of September 30, 2024, primarily to fund guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries in Europe, Israel and Asia.

Indemnification Obligations. Subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees with respect to certain litigation matters and investigations that arise in connection with their service to us. These obligations arise under the terms of our certificate of incorporation, bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that we are required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred by several of our current and former directors, officers and employees in connection with these matters. For example, we have paid or reimbursed legal expenses incurred in connection with the investigation of our historical stock option practices and the related litigation and government inquiries. Although the maximum potential amount of future payments we could be required to make under the indemnification obligations generally described in this paragraph is theoretically unlimited, we believe the fair value of this liability, to the extent estimable, is appropriately considered within the reserve we have established for currently pending legal proceedings.

We are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which we customarily agree to hold the other party harmless against losses arising therefrom, or provide customers with other remedies to protect against bodily injury or damage to personal property caused by our products, non-compliance with our product performance specifications, infringement by our products of third-party IP rights and a breach of warranties, representations and covenants related to matters such as title to assets sold, validity of certain IP rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by us is typically subject to the other party making a claim to and cooperating with us pursuant to the procedures specified in the particular contract. This usually allows us to challenge the other party’s claims or, in case of breach of IP representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of amounts, activity (typically at our option to replace or correct the products or terminate the agreement with a refund to the other party), and duration. In some instances, we may have recourse against third parties and/or insurance covering certain payments made by us.

In addition, we may, in limited circumstances, enter into agreements that contain customer-specific commitments on pricing, tool reliability, spare parts stocking levels, response time and other commitments. Furthermore, we may give these customers limited audit or inspection rights to enable them to confirm that we are complying with these commitments. If a customer elects to exercise its audit or inspection rights, we may be required to expend significant resources to support the audit or inspection, as well as to defend or settle any dispute with a customer that could potentially arise out of such audit or inspection. To date, we have made no significant accruals in our Condensed Consolidated Financial Statements for this contingency. While we have not in the past incurred significant expenses for resolving disputes regarding these types of commitments, we cannot make any assurance that we will not incur any such liabilities in the future.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material effect on our business, financial condition, results of operations or cash flows.

NOTE 15 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The authoritative guidance requires companies to recognize all derivative instruments, including foreign exchange contracts and rate lock agreements (collectively, “derivatives”), as either assets or liabilities at fair value on the Condensed Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency forward transactions and options contracts and interest rate forward transactions as cash flow hedges. In accordance with the accounting guidance, we also designate certain foreign currency exchange contracts as net investment hedge transactions intended to mitigate the variability of the value of certain investments in foreign subsidiaries.

Our foreign subsidiaries operate and sell our products in various global markets. As a result, we are exposed to risks relating to changes in foreign currency exchange rates. We utilize foreign exchange contracts to hedge against future movements in foreign currency exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions, such as the Japanese yen, the euro, the pound sterling and the new Israeli shekel.

We routinely hedge our exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. These foreign exchange contracts, designated as cash flow hedges, generally have maturities of less than 18 months. Cash flow hedges are evaluated for effectiveness monthly, based on changes in total fair value of the derivatives. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material losses.

Since fiscal 2015, we have entered into five sets of forward contracts, generally to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance (“Rate Lock Agreements”). Upon issuance of the associated debt, the Rate Lock Agreements were settled and their fair values were recorded within AOCI. The resulting gains and losses from these transactions are amortized to interest expense over the lives of the associated debt. We recognized net gains of $0.9 million in the three months ended September 30, 2024, for the amortization of the net of the Rate Lock Agreements that had been recognized in AOCI, which decreased the interest expense on a net basis. We recognized net gains of $0.9 million in the three months ended September 30, 2023, for the amortization of the net of the Rate Lock Agreements that had been recognized in AOCI, which decreased the interest expense on a net basis. As of September 30, 2024, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $46.8 million net gain.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of the gains or losses is reported in AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative contracts executed after adopting the new accounting guidance in fiscal 2019, the election to include time value for the assessment of effectiveness is made on all forward contracts designated as cash flow hedges. The change in fair value of the derivative is recorded in AOCI until the hedged item is recognized in earnings. The assessment of effectiveness of options contracts designated as cash flow hedges exclude time value. The initial value of the component excluded from the assessment of effectiveness is recognized in earnings over the life of the derivative contract. Any differences between changes in the fair value of the excluded components and the amounts recognized in earnings are recorded in AOCI.

For derivatives that are designated and qualify as a net investment hedge in a foreign operation and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within AOCI. The remainder of the change in value of such instruments is recorded in earnings using the mark-to-market approach. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.

For derivatives that are not designated as hedges, gains and losses are recognized in Other expense (income), net. We use foreign exchange contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivative instruments are largely offset by the changes in the fair value of the assets or liabilities being hedged.

Derivatives in Hedging Relationships: Foreign Exchange Contracts and Rate Lock Agreements

The gains (losses) on derivatives in cash flow and net investment hedging relationships recognized in other comprehensive income for the indicated periods were as follows:


	Three Months Ended September 30,
(In thousands)	2024		2023
Derivatives Designated as Cash Flow Hedging Instruments:


Foreign exchange contracts:
Amounts included in the assessment of effectiveness	$	3,444	$	(1,533)
Amounts excluded from the assessment of effectiveness	$	(346)	$	52
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1):	$	(6,999)	$	2,536

(1)No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary, as there were no such sales during the periods presented.

The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Condensed Consolidated Statements of Operations for the indicated periods were as follows:


	Three Months Ended September 30,								Three Months Ended September 30,
	2024								2023
(In thousands)	Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net		Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	2,841,541	$	1,721,618	$	82,171	$	(40,935)	$	2,396,956	$	1,497,750	$	74,234	$	(26,739)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from AOCI to earnings	$	—	$	—	$	947	$	—	$	—	$	—	$	937	$	—

Foreign exchange contracts:
Amount of gains (losses) reclassified from AOCI to earnings	$	3,104	$	26	$	—	$	—	$	3,649	$	2,775	$	—	$	—
Amount excluded from the assessment of effectiveness recognized in earnings	$	(569)	$	—	$	—	$	(371)	$	(253)	$	—	$	—	$	52

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—	$	—	$	83	$	—	$	—	$	—	$	(11,397)

The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts and rate lock agreements, with maximum remaining maturities of approximately 13 months as of the dates indicated below, were as follows:


	As of		As of
(In thousands)	September 30, 2024		June 30, 2024
Cash flow hedge contracts - foreign currency
Purchase	$	413,242	$	426,839
Sell	$	127,586	$	76,342
Net investment hedge contracts - foreign currency

Sell	$	274,662	$	273,952
Other foreign currency hedge contracts
Purchase	$	654,686	$	589,171
Sell	$	441,091	$	411,635

The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:


	Asset Derivatives						Liability Derivatives
	Balance Sheet		As of		As of		Balance Sheet	As of		As of
	Location		September 30, 2024		June 30, 2024		Location	September 30, 2024		June 30, 2024
(In thousands)		Fair Value					Fair Value
Derivatives designated as hedging instruments

Foreign exchange contracts	Other current assets		$	11,877	$	13,783	Other current liabilities	$	(11,252)	$	(8,066)
Total derivatives designated as hedging instruments			11,877		13,783			(11,252)		(8,066)
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets		13,437		22,720		Other current liabilities	(20,266)		(7,617)
Total derivatives not designated as hedging instruments			13,437		22,720			(20,266)		(7,617)
Total derivatives			$	25,314	$	36,503		$	(31,518)	$	(15,683)

The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:


	Three Months Ended September 30,
(In thousands)	2024		2023
Beginning AOCI	$	68,903	$	81,611
Amount reclassified to earnings as net gains	(3,508)		(7,108)
Net change in unrealized gains	(3,901)		1,055
Ending AOCI	$	61,494	$	75,558

Offsetting of Derivative Assets and Liabilities

We present derivatives at gross fair values in the Condensed Consolidated Balance Sheets. We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows:


As of September 30, 2024							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - assets	$	25,314	$	—	$	25,314	$	(23,953)	$	—	$	1,361
Derivatives - liabilities	$	(31,518)	$	—	$	(31,518)	$	23,953	$	—	$	(7,565)


As of June 30, 2024							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - assets	$	36,503	$	—	$	36,503	$	(15,173)	$	—	$	21,330
Derivatives - liabilities	$	(15,683)	$	—	$	(15,683)	$	15,173	$	—	$	(510)

NOTE 16 – RELATED PARTY TRANSACTIONS

During the three months ended September 30, 2024 and 2023, we purchased from, or sold to, several entities where one or more of our executive officers or members of our Board of Directors were, during the periods presented, an executive officer or a board member, including Agilent Technologies, Inc., Ansys, Inc., HP Inc., Keysight Technologies, Inc. and Microchip Technology Incorporated. The following table provides the transactions with these parties for the indicated periods (for the portion of such period that they were considered related):


	Three Months Ended September 30,
(In thousands)	2024		2023
Total revenues	$	1,517	$	3,362
Total purchases	$	46	$	1,821

Our receivable balances and payable balances were immaterial as of both September 30, 2024 and June 30, 2024. All of the related party transactions were made at current market rates.

NOTE 17 – SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.

We have three reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection. The reportable segments are determined based on several factors including, but not limited to, customer base, homogeneity of products, technology, delivery channels and similar economic characteristics.

Semiconductor Process Control

The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor fabrication process, from R&D to final volume production. Our differentiated products and services are designed to provide comprehensive solutions that help our customers accelerate development and production ramp cycles, achieve higher and more stable semiconductor die yields and improve their overall profitability. This reportable segment is comprised of two operating segments, Wafer Inspection and Patterning and Global Service and Support (“GSS”).

Specialty Semiconductor Process

The Specialty Semiconductor Process segment develops and sells advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication chips and power semiconductors for automotive and industrial applications. This reportable segment is comprised of one operating segment.

PCB and Component Inspection

The PCB and Component Inspection segment enables electronic device manufacturers to inspect, test and measure PCBs, flat panel displays and ICs to verify their quality, pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces. This reportable segment is comprised of two operating segments, PCB and Component Inspection. 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.

The CODM assesses the performance of each operating segment and allocates resources to those segments based on total revenues and segment gross profit and does not evaluate the segments using discrete asset information. Segment gross profit excludes corporate allocations and effects of changes in foreign currency exchange rates, amortization of intangible assets, amortization of inventory fair value adjustments, and transaction costs associated with our acquisitions related to costs of revenues.

The following is a summary of results for each of our three reportable segments for the indicated periods:


	Three Months Ended September 30,
(In thousands)	2024		2023
Semiconductor Process Control:
Revenues	$	2,575,151	$	2,135,478
Segment gross profit	1,616,782		1,386,529
Specialty Semiconductor Process:
Revenues	128,334		126,719
Segment gross profit	64,494		69,301
PCB and Component Inspection:
Revenues	137,983		136,043
Segment gross profit	57,537		39,820



Totals:
Revenues for reportable segments	$	2,841,468	$	2,398,240
Segment gross profit	$	1,738,813	$	1,495,650

The following table reconciles total reportable segment revenues to total revenues for the indicated periods:


	Three Months Ended September 30,
(In thousands)	2024		2023
Total revenues for reportable segments	$	2,841,468	$	2,398,240
Corporate allocations and effects of changes in foreign currency exchange rates	73		(1,284)
Total revenues	$	2,841,541	$	2,396,956

The following table reconciles total segment gross profit to income before income taxes for the indicated periods:


	Three Months Ended September 30,
(In thousands)	2024		2023
Total segment gross profit	$	1,738,813	$	1,495,650
Acquisition-related charges, corporate allocations and effects of changes in foreign currency exchange rates(1)	44,703		45,585
R&D	323,145		311,214
SG&A	251,042		239,645

Interest expense	82,171		74,234

Other expense (income), net	(40,935)		(26,739)
Income before income taxes	$	1,078,687	$	851,711

(1)Acquisition-related charges primarily include amortization of intangible assets and other acquisition-related costs classified or presented as part of costs of revenues.

Our significant operations outside the United States include manufacturing facilities in China, Germany, Israel and Singapore and sales, marketing and service offices in Japan, the rest of the Asia Pacific region and Europe. For geographical revenue reporting, revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist of land, property and equipment, net, and are attributed to the geographic region in which they are located.

The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended September 30,
2024					2023
Revenues:
China	$	1,198,305	42	%		$	1,025,944	43	%
North America	500,943		18	%		250,713		10	%
Taiwan	461,991		16	%		405,343		17	%
Korea	238,673		8	%		219,821		9	%
Japan	188,569		7	%		227,377		10	%
Europe and Israel	144,820		5	%		168,436		7	%
Rest of Asia	108,240		4	%		99,322		4	%
Total	$	2,841,541	100	%		$	2,396,956	100	%

The following is a summary of revenues by major product categories for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended September 30,
2024					2023
Revenues:
Wafer Inspection	$	1,368,943	48	%		$	1,010,198	42	%
Patterning	576,409		20	%		542,488		23	%
Specialty Semiconductor Process	112,802		4	%		112,103		5	%
PCB and Component Inspection	72,908		3	%		71,164		3	%
Services	644,152		23	%		560,292		23	%
Other	66,327		2	%		100,711		4	%
Total	$	2,841,541	100	%		$	2,396,956	100	%

Wafer Inspection and Patterning products are offered in the Semiconductor Process Control segment. Services are offered in multiple segments. Other includes primarily refurbished systems, remanufactured legacy systems, and enhancements and upgrades for previous-generation products that are part of the Semiconductor Process Control segment.

In the three months ended September 30, 2024, two customers on an individual basis accounted for approximately 12% of total revenues each. In the three months ended September 30, 2023, one customer accounted for approximately 11% of total revenues. Three customers and one customer on an individual basis accounted for greater than 10% of accounts receivable, net, at September 30, 2024 and at June 30, 2024, respectively.

Land, property and equipment, net by geographic region as of the dates indicated below were as follows:


	As of		As of
(In thousands)	September 30, 2024		June 30, 2024
Land, property and equipment, net:
United States	$	690,454	$	689,937
Europe	168,185		155,812
Singapore	146,259		148,557
Israel	80,986		84,279
Rest of Asia	32,428		31,383
Total	$	1,118,312	$	1,109,968

NOTE 18 – RESTRUCTURING CHARGES

From time to time, management approves restructuring plans including workforce reductions in an effort to streamline operations.

Restructuring charges were $2.9 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively. The fiscal year 2025 charges include severance and related charges for the restructuring of the PCB and Display operating segment, as a result of our decision to exit the Display business by ending the manufacturing of most Display

products by December 31, 2024, which was announced in March 2024. As of September 30, 2024 and June 30, 2024, the accrual for restructuring charges was $8.0 million and $6.5 million, respectively.

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