Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)December 31, 2024June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents$1,838,278$1,977,129
Marketable securities1,942,1272,526,866
Accounts receivable, net2,334,9771,833,041
Inventories3,046,3403,034,781
Other current assets610,882659,327
Total current assets9,772,60410,031,144
Land, property and equipment, net1,173,9281,109,968
Goodwill, net1,785,2972,015,726
Deferred income taxes1,002,169915,241
Purchased intangible assets, net548,645668,764
Other non-current assets719,053692,723
Total assets$15,001,696$15,433,566
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$432,891$359,487
Deferred system revenue1,072,565985,856
Deferred service revenue521,424501,926
Current portion of long-term debt—749,936
Other current liabilities2,111,3782,063,569
Total current liabilities4,138,2584,660,774
Long-term debt5,882,3875,880,199
Deferred tax liabilities423,626486,690
Deferred service revenue333,758294,460
Other non-current liabilities639,118743,115
Total liabilities11,417,14712,065,238
Commitments and contingencies (Notes 8, 13 and 14)
Stockholders’ equity:
Common stock and capital in excess of par value2,346,3462,280,133
Retained earnings1,284,5891,137,270
Accumulated other comprehensive loss(46,386)(49,075)
Total stockholders’ equity3,584,5493,368,328
Total liabilities and stockholders’ equity$15,001,696$15,433,566

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

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KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended December 31,Six Months Ended December 31,
(In thousands, except per share amounts)2024202320242023
Revenues:
Product$2,409,462$1,921,809$4,606,851$3,758,473
Service667,389564,9171,311,5411,125,209
Total revenues3,076,8512,486,7265,918,3924,883,682
Costs and expenses:
Costs of revenues1,221,461976,7462,368,8921,923,637
Research and development346,157320,418669,302631,632
Selling, general and administrative267,081237,244518,123476,889
Impairment of goodwill and purchased intangible assets239,100219,000239,100219,000
Interest expense74,98174,202157,152148,436
Other expense (income), net(44,458)(32,154)(85,393)(58,893)
Income before income taxes972,529691,2702,051,2161,542,981
Provision for income taxes148,002108,736280,838219,072
Net income824,527582,5341,770,3781,323,909
Basic$6.18$4.30$13.24$9.74
Diluted$6.16$4.28$13.17$9.69
Weighted-average number of shares:
Basic133,327135,539133,730135,976
Diluted133,926136,254134,415136,684

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

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KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Net income$824,527$582,534$1,770,378$1,323,909
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments(15,281)3,272(5,024)(3,581)
Income tax (provision) benefit2,002(878)854(618)
Net change related to currency translation adjustments(13,279)2,394(4,170)(4,199)
Cash flow hedges:
Net unrealized gains arising during the period1,8899,8064,9878,325
Reclassification adjustments for gains included in net income(2,260)(8,953)(5,768)(16,061)
Income tax (provision) benefit(1,118)2,6751,0953,531
Net change related to cash flow hedges(1,489)3,528314(4,205)
Net change related to unrecognized gains (losses) and transition obligations in connection with defined benefit plans807(395)575(153)
Available-for-sale securities:
Net unrealized gains (losses) arising during the period(8,816)14,7607,60616,004
Reclassification adjustments for net (gains) losses included in net income(1)61—73
Income tax (provision) benefit1,896(3,174)(1,636)(3,443)
Net change related to available-for-sale securities(6,921)11,6475,97012,634
Other comprehensive income (loss)(20,882)17,1742,6894,077
Total comprehensive income$803,645$599,708$1,773,067$1,327,986

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

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KLA CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Common Stock and Capital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
(In thousands, except per share amounts)SharesAmount
Balances as of June 30, 2024134,425$2,280,133$1,137,270$(49,075)$3,368,328
Net income——945,851—945,851
Other comprehensive income———23,57123,571
Net issuance under employee stock plans134(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, 2024133,8192,257,0521,328,166(25,504)3,559,714
Net income——824,527—824,527
Other comprehensive loss———(20,882)(20,882)
Net issuance under employee stock plans10443,931——43,931
Repurchase of common stock(979)(16,478)(639,495)—(655,973)
Cash dividends ($1.70 per share) and dividend equivalents declared——(228,609)—(228,609)
Stock-based compensation expense—61,841——61,841
Balances as of December 31, 2024132,944$2,346,346$1,284,589$(46,386)$3,584,549
Common Stock and Capital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
(In thousands, except per share amounts)SharesAmount
Balance as of June 30, 2023136,750$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 plans173(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, 2023135,9672,073,476966,179(49,438)2,990,217
Net income——582,534—582,534
Other comprehensive income———17,17417,174
Net issuance under employee stock plans14145,427——45,427
Repurchase of common stock(848)(13,014)(428,549)—(441,563)
Cash dividends ($1.45 per share) and dividend equivalents declared——(198,698)—(198,698)
Stock-based compensation expense—48,620——48,620
Balance as of December 31, 2023135,260$2,154,509$921,466$(32,264)$3,043,711

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

KLA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended December 31,
(In thousands)20242023
Cash flows from operating activities:
Net income$1,770,378$1,323,909
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Impairment of goodwill and purchased intangible assets239,100219,000
Depreciation and amortization199,745201,466
Unrealized foreign exchange (gain) loss and other19,064(24,376)
Stock-based compensation expense123,54197,392
Net gain on sale of assets(161)—
Deferred income taxes(150,658)(136,480)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable(486,264)(53,247)
Inventories5,632(159,608)
Other assets61,796(112,392)
Accounts payable54,61711,037
Deferred system revenue86,709232,307
Deferred service revenue58,79074,722
Other liabilities(137,536)(167,748)
Net cash provided by operating activities1,844,7531,505,982
Cash flows from investing activities:
Proceeds from sale of assets1615,079
Capital expenditures(152,716)(144,846)
Purchases of available-for-sale securities(1,326,968)(982,642)
Proceeds from sale of available-for-sale securities238,41915,235
Proceeds from maturity of available-for-sale securities1,682,585628,277
Purchases of trading securities(34,857)(66,007)
Proceeds from sale of trading securities36,04364,757
Net cash provided by (used in) investing activities442,667(480,147)
Cash flows from financing activities:
Repayment of debt(750,000)—
Common stock repurchases(1,217,504)(893,229)
Payment of dividends to stockholders(424,855)(378,366)
Issuance of common stock47,53848,433
Tax withholding payments related to vested and released restricted stock units(75,854)(71,242)
Contingent consideration payable and other, net—(1,676)
Net cash used in financing activities(2,420,675)(1,296,080)
Effect of exchange rate changes on cash and cash equivalents(5,596)7,434
Net decrease in cash and cash equivalents(138,851)(262,811)
Cash and cash equivalents at beginning of period1,977,1291,927,865
Cash and cash equivalents at end of period$1,838,278$1,665,054
Supplemental cash flow disclosures:
Income taxes paid, net$458,228$605,434
Interest paid$156,185$138,054
Non-cash activities:
Contingent consideration payable - financing activities$—$(765)
Dividends payable - financing activities$4,113$3,985
Unsettled common stock repurchase - financing activities$5,500$10,999
Accrued purchases of land, property and equipment - investing activities$11,354$18,312

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

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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 and six months ended December 31, 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.

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Recent Accounting Pronouncements

Recently Adopted

None

Updates Not Yet Effective

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.

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.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The new guidance requires enhanced disclosures about certain costs and expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2028, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2029. Early adoption is permitted either on a prospective or retrospective basis. We are currently evaluating the impact of this ASU on our 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 ofAs of
(Dollar amounts in thousands)December 31, 2024June 30, 2024$ Change% Change
Accounts receivable, net$2,334,977$1,833,041$501,93627%
Contract assets$82,292$69,259$13,03319%
Contract liabilities$1,927,747$1,782,242$145,5058%

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 six months ended December 31, 2024 was mainly due to $64.0 million of revenue recognized for which the payment is subject to conditions other than passage of time, partially offset by $51.0 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 six months ended December 31, 2024 was mainly due to the recognition of revenue of $1.14 billion 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.

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Remaining Performance Obligations

As of December 31, 2024, we had $9.14 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 $542.9 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.93 billion as disclosed above. We expect to recognize approximately 67% to 72% of these performance obligations as revenue in the next 12 months, 20% to 25% in the subsequent 12 months and the remainder thereafter, but this estimate is subject to constant change.

After the 2024 BIS Rules and 2025 BIS Rules, defined below, were promulgated, we reduced our RPO by an aggregate of approximately $430 million because we are currently unable to ship the products ordered by affected customers without an export license, of which approximately 50% was included in the RPO expected to be recognized as revenue in the following 12 months, as disclosed in our quarterly report on Form 10-Q for the quarter ended September 30, 2024.

The amount of our RPO and timing of revenue recognition of our RPO are evaluated quarterly and are largely driven by multiple variables, many of which are beyond our control, such as: changes in regulations, 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 and supply chain constraints. 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.

The U.S. government has tightened export controls for commodities, software, and technology (collectively, “items”) destined to People’s Republic of China (“China”) over the past several years. In addition, in October 2022, the U.S. government's Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“Commerce”) issued regulations (the “2022 BIS Rules”) 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 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 items 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. Companies were added to the U.S. Entity List, a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from the BIS. In October 2023, the U.S. government issued additional regulations that went into effect in November 2023 (the “2023 BIS Rules”). 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 previous 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. In January 2024, KLA, among other companies, submitted comments to the government regarding these regulations. Furthermore, in December 2024 and January 2025, the BIS again issued incremental regulations (the “2024 BIS Rules” and the “2025 BIS Rules,” respectively) adding even more companies to the U.S. Entity List and revising the definition of advanced DRAM, further restricting our ability to provide certain items and services to facilities in China producing advanced DRAM ICs. The regulations are very complex. 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. 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 16 “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.

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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 1Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2Valuations 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 3Valuations 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.

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.

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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 AssetsSignificant Other Observable Inputs
As of December 31, 2024 (In thousands)Total(Level 1)(Level 2)
Assets
Cash equivalents:
Corporate debt securities$3,631$—$3,631
Money market funds and other1,215,4021,215,402—
U.S. Treasury securities19,962—19,962
Marketable securities:
Corporate debt securities873,071—873,071
Municipal securities56,018—56,018
U.S. Government agency securities92,66392,663—
U.S. Treasury securities701,153599,116102,037
Equity securities15,93815,938—
Total cash equivalents and marketable securities(1)2,977,8381,923,1191,054,719
Other current assets:
Derivative assets34,598—34,598
Other non-current assets:
Executive Deferred Savings Plan320,295276,12544,170
Total financial assets**(1)**$3,332,731$2,199,244$1,133,487
Liabilities
Derivative liabilities$(14,401)$—$(14,401)
Total financial liabilities$(14,401)$—$(14,401)

(1) Excludes cash of $537.4 million held in operating accounts and time deposits of $265.1 million (of which $61.8 million were cash equivalents) as of December 31, 2024.

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Quoted Prices in Active Markets for Identical AssetsSignificant 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 other1,585,8321,585,832—
U.S. Treasury securities35,158—35,158
Marketable securities:
Corporate debt securities771,920—771,920
Municipal securities41,159—41,159
U.S. Government agency securities105,874105,874—
U.S. Treasury securities716,148476,230239,918
Equity securities25,56625,566—
Total cash equivalents and marketable securities(1)3,283,9692,193,5021,090,467
Other current assets:
Derivative assets36,503—36,503
Other non-current assets:
Executive Deferred Savings Plan303,365272,81630,549
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.

We did not have any financial assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of December 31, 2024 or June 30, 2024.

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NOTE 4 – FINANCIAL STATEMENT COMPONENTS

Condensed Consolidated Balance Sheets

As ofAs of
(In thousands)December 31, 2024June 30, 2024
Accounts receivable, net:
Accounts receivable, gross$2,365,480$1,865,823
Allowance for credit losses(30,503)(32,782)
$2,334,977$1,833,041
Inventories:
Customer service parts$585,981$589,751
Raw materials1,409,1281,485,400
Work-in-process768,134700,895
Finished goods283,097258,735
$3,046,340$3,034,781
Other current assets:
Deferred costs of revenues$250,035$279,879
Prepaid expenses143,956124,969
Contract assets82,29269,259
Prepaid income and other taxes69,755102,398
Other current assets64,84482,822
$610,882$659,327
Land, property and equipment, net:
Land$86,670$78,260
Buildings and leasehold improvements986,859919,919
Machinery and equipment1,164,9741,116,793
Office furniture and fixtures67,58264,480
Construction-in-process255,852215,006
2,561,9372,394,458
Less: accumulated depreciation(1,388,009)(1,284,490)
$1,173,928$1,109,968
Other non-current assets:
Executive Deferred Savings Plan(1)$320,295$303,365
Operating lease right of use assets249,036231,812
Other non-current assets149,722157,546
$719,053$692,723
Other current liabilities:
Compensation and benefits$547,845$371,713
Customer deposits486,322645,893
Executive Deferred Savings Plan(1)321,464303,088
Income taxes payable185,191146,740
Interest payable122,783128,727
Operating lease liabilities40,57836,391
Other liabilities and accrued expenses407,195431,017
$2,111,378$2,063,569
Other non-current liabilities:
Income taxes payable$224,208$291,106
Operating lease liabilities149,648153,117
Customer deposits56,53599,794
Pension liabilities53,09451,778
Other non-current liabilities155,633147,320
$639,118$743,115

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(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 associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) was $3.3 million and $25.8 million in the three months ended December 31, 2024 and 2023, respectively, and was $21.3 million and $16.5 million during the six months ended December 31, 2024 and 2023, respectively. The amount of net gains associated with changes in the EDSP assets included in SG&A expense was $3.5 million and $25.7 million in the three months ended December 31, 2024 and 2023, respectively, and $21.4 million and $16.2 million during the six months ended December 31, 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 AdjustmentsUnrealized Gains (Losses) on Available-for-Sale SecuritiesUnrealized Gains (Losses) on DerivativesUnrealized Gains (Losses) on Defined Benefit PlansTotal
Balance as of December 31, 2024$(80,016)$2,316$46,557$(15,243)$(46,386)
Balance as of June 30, 2024$(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 ComponentsThree Months EndedSix Months Ended
Location in the Condensed Consolidated Statement of OperationsDecember 31,December 31,
2024202320242023
Unrealized gains on cash flow hedges from foreign exchange and interest rate contractsRevenues$1,011$8,036$3,546$11,432
Costs of revenues and operating expenses428(20)4542,755
Interest expense8219371,7681,874
Net gains reclassified from AOCI$2,260$8,953$5,768$16,061
Unrealized gains (losses) on available-for-sale securitiesOther expense (income), net$1$(61)$—$(73)

The amounts 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 December 31, 2024 and 2023 was $0.2 million and $0.3 million, respectively, and for the six months ended December 31, 2024 and 2023 was $0.4 million and $0.5 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.

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NOTE 5 – MARKETABLE SECURITIES

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

As of December 31, 2024 (In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Corporate debt securities$874,139$3,086$(523)$876,702
Money market funds and other1,215,402——1,215,402
Municipal securities55,911148(41)56,018
U.S. Government agency securities92,412340(89)92,663
U.S. Treasury securities721,0841,383(1,352)721,115
Subtotal2,958,9484,957(2,005)2,961,900
Add: Time deposits(1)265,122——265,122
Less: Cash equivalents1,300,8285—1,300,833
Marketable securities(2)$1,923,242$4,952$(2,005)$1,926,189
As of June 30, 2024 (In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Corporate debt securities$775,277$973$(2,018)$774,232
Money market funds and other1,585,832——1,585,832
Municipal securities41,34313(197)41,159
U.S. Government agency securities106,10126(253)105,874
U.S. Treasury securities754,505209(3,408)751,306
Subtotal3,263,0581,221(5,876)3,258,403
Add: Time deposits(1)932,436——932,436
Less: Cash equivalents1,689,540—(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 December 31, 2024, we had 200 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 December 31, 2024Less than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Corporate debt securities$172,297$(410)$41,908$(113)$214,205$(523)
Municipal securities15,675(33)2,453(8)18,128(41)
U.S. Government agency securities17,245(89)——17,245(89)
U.S. Treasury securities268,818(1,109)54,030(243)322,848(1,352)
Total$474,035$(1,641)$98,391$(364)$572,426$(2,005)

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As of June 30, 2024Less than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Corporate debt securities$355,882$(942)$100,957$(1,076)$456,839$(2,018)
Municipal securities17,364(81)10,788(116)28,152(197)
U.S. Government agency securities58,598(137)17,197(116)75,795(253)
U.S. Treasury securities466,144(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 December 31, 2024 (In thousands)Amortized CostFair Value
Due within one year$954,567$955,495
Due after one year through three years968,675970,694
Total$1,923,242$1,926,189

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 and six months ended December 31, 2024 and 2023 were immaterial.

The costs for our equity marketable securities were $22.9 million as of both December 31, 2024, and June 30, 2024. Unrealized gains (losses) for our equity marketable securities were $(3.7) million and $1.2 million during the three months ended December 31, 2024 and 2023, respectively. Unrealized losses for our equity marketable securities were $9.6 million and $3.1 million during the six months ended December 31, 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. 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.

During the second quarter of fiscal 2025, in connection with our annual strategic planning process, we noted a continued deterioration of the long-term forecast for our Printed Circuit Board (“PCB”) business, which is part of our PCB and Component Inspection reportable segment. In addition, in the second quarter of fiscal 2025, we completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. The downward revision of financial outlook for PCB and the reorganization of reporting units triggered goodwill impairment tests.

The following table presents changes in goodwill carrying value by reportable segment during the six months ended December 31, 2024:

(In thousands)Semiconductor Process ControlSpecialty Semiconductor ProcessPCB and Component InspectionTotal
Balances as of June 30, 2024$753,018$681,858$580,850$2,015,726
Goodwill impairment——(230,400)(230,400)
Foreign currency adjustments(29)——(29)
Balances as of December 31, 2024$752,989$681,858$350,450$1,785,297

As a result of our quantitative assessment before reorganization, we recorded a total goodwill impairment charge of $230.4 million in the PCB reporting unit, which is part of the PCB and Component Inspection reportable segment, in the three months ended December 31, 2024. No goodwill impairment was identified in the Specialty Semiconductor Process reportable

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segment. We assessed for impairment subsequent to the reorganization and noted no impairment. The goodwill balances of our new reporting units after reorganization were allocated on a relative fair value basis.

To determine the fair value of a reporting unit, we utilized income and market approaches and applied a weighting of 75 percent and 25 percent, respectively. The income approach is estimated through discounted cash flow analysis. The estimated fair value of the reporting unit was computed by adding the present value of the estimated annual discounted cash flows over a discrete projection period to the residual value of the business at the end of the projection period. This valuation technique requires us to use significant estimates and assumptions, including long-term growth rates, discount rates and other inputs. The estimated growth rates for the projection period are based on our internal forecasts of anticipated future performance of the business. The residual value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections. The discount rates are based on the weighted average cost of capital of comparable peer companies adjusted for the company-specific risk. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method, which is based on revenue and earnings multiples from comparable companies. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future, and a downward revision of these estimates and/or assumptions would decrease the fair value of our reporting units, which could result in additional impairment charges in the future.

During the second quarter of fiscal 2024, we identified an impairment indicator within our PCB and Component Inspection reportable segment due to the deterioration in long-term forecast for the PCB and Display businesses. As a result of our quantitative assessment, we recorded a total goodwill impairment charge of $192.6 million in the three months ended December 31, 2023. The fair values of the relevant reporting units were determined using the same approach described above.

As of June 30, 2024, Goodwill is net of accumulated impairment losses of $277.6 million, $144.2 million and $70.5 million in the Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection reportable segments, respectively. As of December 31, 2024, following the internal reorganization noted above, Goodwill is net of accumulated impairment losses of $277.6 million and $70.5 million in the Semiconductor Process Control and PCB and Component Inspection reportable segments, respectively.

Purchased Intangible Assets

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

(In thousands)As of December 31, 2024As of June 30, 2024
CategoryGross Carrying AmountAccumulated Amortization and ImpairmentNet AmountGross Carrying AmountAccumulated Amortization and ImpairmentNet Amount
Existing technology$1,552,074$1,138,143$413,931$1,552,074$1,045,585$506,489
Customer relationships358,567267,02691,541358,567248,106110,461
Trade name / Trademark119,083106,70412,379119,08397,10621,977
Order backlog and other87,53682,9894,54783,33682,740596
Intangible assets subject to amortization2,117,2601,594,862522,3982,113,0601,473,537639,523
In-process research and development46,07419,82726,24746,07416,83329,241
Total$2,163,334$1,614,689$548,645$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. We identified an impairment indicator for the long-lived assets in our PCB and Component Inspection reportable segment during the second quarter of fiscal 2025 due to the downward revision of financial outlook for the PCB business as noted above. The internal reorganization described above was also considered a trigger for impairment analysis of the long-lived assets of the Specialty Semiconductor Process and PCB and Component Inspection reportable segments.

In connection with the evaluation of goodwill impairment, we assessed tangible and intangible assets for impairment prior to performing the goodwill impairment tests. We first performed a recoverability test for each affected asset group by comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. The tests indicated that the undiscounted cash flows of all asset groups in the Specialty Semiconductor Process reportable segment were sufficient to recover the carrying value of the asset groups. However, the tests indicated that the undiscounted cash flows were not sufficient to recover the carrying value of the asset groups in the PCB and Component Inspection reportable segment. We then compared the carrying value of the individual long-lived assets within those asset groups against

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their fair value in order to measure the impairment loss. Determining the fair value involved the use of significant estimates and assumptions, including revenue forecasts, terminal growth rate, tax rate and a weighted average cost of capital adjusted for company-specific risk.

We recorded a total purchased intangible assets impairment charge of $8.7 million for the three months ended December 31, 2024. No impairment was identified for other long-lived asset groups of the Company in the three months ended December 31, 2024.

As part of the evaluation of goodwill impairment in the PCB and Component Inspection reportable segment in the second quarter of fiscal 2024 noted above, the Company assessed long-lived assets for impairment prior to performing the goodwill impairment test. As a result, we recorded a total purchased intangible asset impairment charge of $26.4 million for the three months ended December 31, 2023.

Total impairment charges for goodwill and purchased intangible assets of $239.1 million and $219.0 million were recognized as separate charges and included in income (loss) from operations in the three months ended December 31, 2024 and December 31, 2023, respectively.

Amortization expense for purchased intangible assets was $58.9 million and $115.6 million for the three and six months ended December 31, 2024, respectively, and $59.4 million and $122.7 million for the three and six months ended December 31, 2023, respectively.

Based on the purchased intangible assets gross carrying amount recorded as of December 31, 2024, the remaining estimated annual amortization expense is expected to be as follows:

Fiscal year ending June 30:Amortization (In thousands)
2025 (remaining six months)$104,749
2026195,762
2027123,250
202848,016
202935,130
2030 and thereafter15,491
Total$522,398

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NOTE 7 – DEBT

The following table summarizes our debt as of December 31, 2024 and June 30, 2024:

As of December 31, 2024As of June 30, 2024
Amount (In thousands)Effective Interest RateAmount (In thousands)Effective Interest Rate
Fixed-rate 4.650% Senior Notes due on November 1, 2024$——%$750,0004.682%
Fixed-rate 4.100% Senior Notes due on March 15, 2029800,0004.159%800,0004.159%
Fixed-rate 4.650% Senior Notes due on July 15, 20321,000,0004.657%1,000,0004.657%
Fixed-rate 4.700% Senior Notes due on February 1, 2034500,0004.777%500,0004.777%
Fixed-rate 5.650% Senior Notes due on November 1, 2034250,0005.670%250,0005.670%
Fixed-rate 5.000% Senior Notes due on March 15, 2049400,0005.047%400,0005.047%
Fixed-rate 3.300% Senior Notes due on March 1, 2050750,0003.302%750,0003.302%
Fixed-rate 4.950% Senior Notes due on July 15, 20521,450,0005.023%1,450,0005.023%
Fixed-rate 5.250% Senior Notes due on July 15, 2062800,0005.259%800,0005.259%
Total5,950,0006,700,000
Unamortized discount(24,070)(24,866)
Unamortized debt issuance costs(43,543)(44,999)
Total$5,882,387$6,630,135
Reported as:
Current portion of long-term debt$—$749,936
Long-term debt5,882,3875,880,199
Total$5,882,387$6,630,135

Senior Notes and Debt Redemption

In February 2024, KLA Corporation (the “Issuer”) 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 were 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.” In November 2024, we repaid $750.0 million of the 2014 Senior Notes that were due on November 1, 2024.

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 Senior Notes rank senior in right of payment to all of the Issuer's future subordinated indebtedness, equally in right of payment with all of the Issuer's existing and future unsecured and unsubordinated indebtedness, are effectively subordinated in right of payment to all of the Issuer's future secured indebtedness to the extent of the collateral securing such indebtedness and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of the Issuer's subsidiaries. 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.

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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 December 31, 2024 and June 30, 2024 was $5.46 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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 December 31, 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 significant.

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

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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 $11.9 million and $25.0 million for the three and six months ended December 31, 2024, respectively and $12.9 million and $25.2 million for the three and six months ended December 31, 2023, respectively. Expenses related to short-term leases, which were not recorded on the Condensed Consolidated Balance Sheets, were not material for the three and six months ended December 31, 2024 and 2023. As of December 31, 2024 and June 30, 2024, the weighted-average remaining lease term was 6.3 and 6.7 years, respectively, and the weighted-average discount rate for operating leases was 4.30% as of both December 31, 2024 and June 30, 2024.

Supplemental cash flow information related to leases was as follows:

Six Months Ended December 31,
In thousands20242023
Operating cash outflows from operating leases$21,258$20,504
Right of use assets obtained in exchange for new operating lease liabilities$22,051$38,513

Maturities of lease liabilities as of December 31, 2024 were as follows:

Fiscal Year Ending June 30:(In thousands)
2025 (remaining six months)$25,517
202646,172
202735,043
202823,828
202920,644
2030 and thereafter70,436
Total lease payments221,640
Less imputed interest(31,414)
Total$190,226

As of December 31, 2024, we did not have material leases that had not yet commenced.

NOTE 9 – EQUITY AND LONG-TERM INCENTIVE COMPENSATION PLANS

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 December 31, 2024, 10.0 million shares remained available for issuance under our 2023 Plan. In addition, we have an Employee Stock Purchase Plan (“ESPP”), which enables eligible employees to purchase our common stock. We also offer a cash-based long-term incentive program (“Cash LTI”) to eligible employees.

For details of the 2023 Plan, ESPP and Cash LTI plans, 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.

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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, 202410,240
Restricted stock units granted(2)(319)
RSUs granted adjustment(3)62
Restricted stock units canceled36
Balance as of December 31, 202410,019

(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 six months ended December 31, 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 six months ended December 31, 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 six months ended December 31, 2024 reflect 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 six months ended December 31, 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 December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Stock-based compensation expense by:
Costs of revenues$10,469$8,082$20,258$15,751
R&D17,04512,75334,42525,781
SG&A34,32727,78568,85855,860
Total stock-based compensation expense$61,841$48,620$123,541$97,392

Stock-based compensation capitalized as inventory was $21.5 million as of both December 31, 2024 and June 30, 2024.

Restricted Stock Units

The following table shows the activity and weighted-average grant date fair values for RSUs during the six months ended December 31, 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)160$772.94
Granted adjustments(4)(31)$397.40
Vested and released(257)$322.16
Forfeited(18)$469.66
Outstanding RSUs as of December 31, 2024(2)1,321$486.68

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

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(2)Includes performance-based RSUs.

(3)This line item includes performance-based RSUs granted during the six months ended December 31, 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 six months ended December 31, 2024, reflect the application of the multiplier described above).

(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 six months ended December 31, 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.

As of December 31, 2024, the unrecognized stock-based compensation expense balance related to RSUs was $439.9 million, excluding the impact of estimated forfeitures, and will be recognized over an estimated weighted-average amortization period of 1.4 years. The intrinsic value of outstanding RSUs as of December 31, 2024 was $832.4 million.

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 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 December 31, 2024, an aggregate of $963.2 million of authorization 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 December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Number of shares of common stock repurchased9798481,7191,804
Total cost of repurchases$655,973$441,563$1,226,909$900,656

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.

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

(In thousands, except per share amounts)Three Months Ended December 31,Six Months Ended December 31,
2024202320242023
Numerator:
Net income$824,527$582,534$1,770,378$1,323,909
Denominator:
Weighted-average shares - basic, excluding unvested RSUs133,327135,539133,730135,976
Effect of dilutive RSUs and options599715685708
Weighted-average shares - diluted133,926136,254134,415136,684
Basic net income per share$6.18$4.30$13.24$9.74
Diluted net income per share$6.16$4.28$13.17$9.69
Anti-dilutive securities excluded from the computation of diluted net income per share145—36—

NOTE 12 – INCOME TAXES

The following table provides details of income taxes:

Three Months Ended December 31,Six Months Ended December 31,
(Dollar amounts in thousands)2024202320242023
Income before income taxes$972,529$691,270$2,051,216$1,542,981
Provision for income taxes$148,002$108,736$280,838$219,072
Effective tax rate15.2%15.7%13.7%14.2%

Our effective tax rate was lower than the U.S. federal statutory rate during the three and six months ended December 31, 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 and are under United States federal income tax examination for the fiscal years ended June 30, 2018, June 30, 2019 and June 30, 2020. 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. After the income tax examination in Israel described in Note 14 “Income Taxes” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, we received a tax assessment for calendar year ended December 31, 2019 to fiscal year ended June 30, 2022. The assessment will be appealed. We believe our current unrecognized tax benefits are sufficient. 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

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 and six months ended December 31, 2024.

In November 2024, Singapore adopted the Pillar Two GloBE rules under the Multinational Enterprise (“Minimum Tax”) Act (“MMT Act”), which includes a domestic minimum tax of 15% for financial years beginning on or after January 1, 2025. We earn significant profits and currently benefit from tax incentives in Singapore, so it is likely the MMT Act will neutralize our current tax incentives when it is effective for us beginning in our fiscal year ending June 30, 2026. We will continue to evaluate the impact of the MMT Act to our future financial statements. The Pillar Two GloBE rules are deemed an alternative

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minimum tax so we will not recognize any deferred taxes for the estimated effects of the future minimum tax under current U.S. GAAP.

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 December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Receivables sold under factoring agreements$38,246$49,072$83,705$94,679
Proceeds from sales of LC$33,359$13,900$35,337$13,900

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. KLA may continue servicing the receivables that are sold.

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 $2.31 billion as of December 31, 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 December 31, 2024, we have committed $136.2 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 $107.1 million, of which $71.9 million had been issued as of December 31, 2024, primarily to fund guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries worldwide.

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

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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.

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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 $0.8 million and $1.8 million in the three and six months ended December 31, 2024, respectively, 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 and $1.9 million in the three and six months ended December 31, 2023, respectively, 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 December 31, 2024, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $45.9 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 December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Derivatives Designated as Cash Flow Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness$—$(3,385)$—$(3,385)
Foreign exchange contracts:
Amounts included in the assessment of effectiveness$1,703$13,184$5,147$11,651
Amounts excluded from the assessment of effectiveness$186$7$(160)$59
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1):$8,712$(9,606)$1,713$(7,070)

(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:

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Three Months Ended December 31,Three Months Ended December 31,
20242023
(In thousands)RevenuesCosts of Revenues and Operating ExpensesInterest ExpenseOther Expense (Income), NetRevenuesCosts of Revenues and Operating ExpensesInterest ExpenseOther Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded$3,076,851$2,073,799$74,981$(44,458)$2,486,726$1,753,408$74,202$(32,154)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings$—$—$821$—$—$—$937$—
Foreign exchange contracts:
Amount of gains (losses) reclassified from AOCI to earnings$1,325$428$—$—$8,296$(20)$—$—
Amount excluded from the assessment of effectiveness recognized in earnings$(314)$—$—$6,344$(260)$—$—$7
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings$—$—$—$3,317$—$—$—$13,062
Six Months Ended December 31,Six Months Ended December 31,
20242023
(In thousands)RevenuesCosts of Revenues and Operating ExpensesInterest ExpenseOther Expense (Income), NetRevenuesCosts of Revenues and Operating ExpensesInterest ExpenseOther Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded$5,918,392$3,795,417$157,152$(85,393)$4,883,682$3,251,158$148,436$(58,893)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings$—$—$1,768$—$—$—$1,874$—
Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings$4,429$454$—$—$11,945$2,755$—$—
Amount excluded from the assessment of effectiveness recognized in earnings$(883)$—$—$5,973$(513)$—$—$59
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings$—$—$—$3,400$—$—$—$1,665

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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 12 months as of the dates indicated below, were as follows:

As ofAs of
(In thousands)December 31, 2024June 30, 2024
Cash flow hedge contracts - foreign currency
Purchase$411,817$426,839
Sell$137,830$76,342
Net investment hedge contracts - foreign currency
Sell$274,591$273,952
Other foreign currency hedge contracts
Purchase$579,914$589,171
Sell$329,209$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 DerivativesLiability Derivatives
Balance SheetAs ofAs ofBalance SheetAs ofAs of
LocationDecember 31, 2024June 30, 2024LocationDecember 31, 2024June 30, 2024
(In thousands)Fair ValueFair Value
Derivatives designated as hedging instruments
Foreign exchange contractsOther current assets$20,232$13,783Other current liabilities$(6,576)$(8,066)
Total derivatives designated as hedging instruments20,23213,783(6,576)(8,066)
Derivatives not designated as hedging instruments
Foreign exchange contractsOther current assets14,36622,720Other current liabilities(7,825)(7,617)
Total derivatives not designated as hedging instruments14,36622,720(7,825)(7,617)
Total derivatives$34,598$36,503$(14,401)$(15,683)

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

Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Beginning AOCI$61,494$75,558$68,903$81,611
Amount reclassified to earnings as net gains(2,260)(8,953)(5,768)(16,061)
Net change in unrealized gains10,6012006,7001,255
Ending AOCI$69,835$66,805$69,835$66,805

As of December 31, 2024, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $6.2 million.

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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 December 31, 2024Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of DerivativesGross Amounts of Derivatives Offset in the Condensed Consolidated Balance SheetsNet Amount of Derivatives Presented in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives - assets$34,598$—$34,598$(14,401)$—$20,197
Derivatives - liabilities$(14,401)$—$(14,401)$14,401$—$—
As of June 30, 2024Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of DerivativesGross Amounts of Derivatives Offset in the Condensed Consolidated Balance SheetsNet Amount of Derivatives Presented in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives - assets$36,503$—$36,503$(15,173)$—$21,330
Derivatives - liabilities$(15,683)$—$(15,683)$15,173$—$(510)

NOTE 16 – 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.

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

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.

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.

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. In March 2024, we made the decision to exit the Display business by announcing we would end manufacturing of most Display products but will continue to provide services to the installed base of Display products for existing customers.

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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 December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Semiconductor Process Control:
Revenues$2,755,743$2,194,079$5,330,894$4,329,557
Segment gross profit1,763,0771,418,3393,379,8592,804,868
Specialty Semiconductor Process:
Revenues160,407150,065288,741276,784
Segment gross profit81,12281,278145,616150,579
PCB and Component Inspection:
Revenues161,080143,032299,063279,075
Segment gross profit55,52657,165113,06396,985
Totals:
Revenues for reportable segments$3,077,230$2,487,176$5,918,698$4,885,416
Segment gross profit$1,899,725$1,556,782$3,638,538$3,052,432

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

Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Total revenues for reportable segments$3,077,230$2,487,176$5,918,698$4,885,416
Corporate allocations and effects of changes in foreign currency exchange rates(379)(450)(306)(1,734)
Total revenues$3,076,851$2,486,726$5,918,392$4,883,682

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

Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2024202320242023
Total segment gross profit$1,899,725$1,556,782$3,638,538$3,052,432
Acquisition-related charges, corporate allocations and effects of changes in foreign currency exchange rates(1)44,33546,80289,03892,387
R&D346,157320,418669,302631,632
SG&A267,081237,244518,123476,889
Impairment of goodwill and purchased intangible assets239,100219,000239,100219,000
Interest expense74,98174,202157,152148,436
Other expense (income), net(44,458)(32,154)(85,393)(58,893)
Income before income taxes$972,529$691,270$2,051,216$1,542,981

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

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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 December 31,Six Months Ended December 31,
2024202320242023
Revenues:
China$1,092,52536%$1,027,78041%$2,290,82939%$2,053,72442%
Taiwan881,21129%375,25915%1,343,20223%780,60216%
Korea357,43412%310,67212%596,10810%530,49311%
North America286,1919%263,61311%787,13413%514,32610%
Japan228,6147%297,75712%417,1837%525,13411%
Europe and Israel134,2664%123,3625%279,0865%291,7986%
Rest of Asia96,6103%88,2834%204,8503%187,6054%
Total$3,076,851100%$2,486,726100%$5,918,392100%$4,883,682100%

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

(Dollar amounts in thousands)Three Months Ended December 31,Six Months Ended December 31,
2024202320242023
Revenues:
Wafer Inspection$1,562,61051%$1,166,48447%$2,931,55350%$2,176,68245%
Patterning530,68017%430,38417%1,107,08919%972,87220%
Specialty Semiconductor Process142,9875%136,2786%255,7894%248,3815%
PCB and Component Inspection93,3273%77,2983%166,2353%148,4623%
Services667,38922%564,91723%1,311,54122%1,125,20923%
Other79,8582%111,3654%146,1852%212,0764%
Total$3,076,851100%$2,486,726100%$5,918,392100%$4,883,682100%

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 December 31, 2024, one customer accounted for approximately 23% of total revenues. In the three months ended December 31, 2023, no customers accounted for greater than 10% of revenues. In the six months ended December 31, 2024, one customer accounted for approximately 18% of total revenues. In the six months ended December 31, 2023, one customer accounted for approximately 11% of total revenues. One customer on an individual basis accounted for greater than 10% of accounts receivable, net, at December 31, 2024 and at June 30, 2024.

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

As ofAs of
(In thousands)December 31, 2024June 30, 2024
Land, property and equipment, net:
United States$700,963$689,937
Europe218,372155,812
Singapore147,895148,557
Israel75,68584,279
Rest of Asia31,01331,383
Total$1,173,928$1,109,968

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NOTE 17 – RESTRUCTURING CHARGES

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

Restructuring charges were $2.1 million and $1.3 million for the three months ended December 31, 2024 and 2023, respectively Restructuring charges were $5.0 million and $1.9 million for the six months ended December 31, 2024 and 2023, respectively. The fiscal year 2025 charges include severance and related charges for the restructuring of the former PCB and Display operating segment, as a result of our decision to exit the Display business by ending the manufacturing of most Display products, which was announced in March 2024. As of December 31, 2024 and June 30, 2024, the accrual for restructuring charges was $6.1 million and $6.5 million, respectively.

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