KLA-Tencor Corporation reports 19.9% EBITDA growth in 2018 and 1.3 pp EBITDA Margin growth from 38.3% to 39.6%
07/30/2018 • About KLA-Tencor Corporation (
$KLAC) • By InTwits
KLA-Tencor Corporation reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is expanding: 39.6% in FY2018 vs. 38.3% in FY2017 vs. 29.2% in FY2014
- KLA-Tencor Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $66m in FY2018, $51m in FY2017, $69m in FY2016, $76m in FY2015, $133m in FY2014
- In the last 5 years the company invested considerably less than D&A: $251m vs. $351m
- The company has highly profitable business model: ROIC is 39.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.5x while industry average is -1.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 16.0%. Revenue growth showed slowdown in FY18Q4 - it was 14.0% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. EBITDA Margin stuck to a growing trend at 3.3 pp per annum in FY2014-FY2018.
Gross Margin increased slightly on 1.1 pp from 63.0% to 64.1% in FY2018. Gross Margin followed a growing trend at 1.9 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2015 at 14.5% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin decreased on 6.7 pp from 26.6% to 19.9% in FY2018. The efficient tax rate was 44.9% in FY2018 while the average for the last five years was 27.4%.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 1.7%. CAPEX/Revenue showed almost no change from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 1.3%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2016 at 1.1% and was growing since that time.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue increased on 2.0 pp from 21.1% to 23.1% in FY2018. Accounts payable as a % of Revenue showed almost no change in FY2018.
KLA-Tencor Corporation has spent
$17m on M&A in FY2018 which accounts for 0.43% of revenue.
Return on investment
The company operates at high and attractive ROIC (39.9%) and ROE (54.4%). ROIC increased on 5.9 pp from 34.0% to 39.9% in FY2018. ROE dropped on 37.4 pp from 91.9% to 54.4% in FY2018. ROIC grew at 6.2 pp per annum in the last 5 years. During FY2014-FY2018 ROE topped in FY2016 at 127% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.5x and Debt / EBITDA is 1.4x. Net Debt / EBITDA dropped on 0.8x from 1.3x to 0.5x in FY2018. Debt dropped on 23.7% while cash jumped on 21.8%. During FY2014-FY2018 Net Debt/EBITDA topped in FY2015 at 3.2x and was declining since that time.
KLA-Tencor Corporation has good short term financial stability: Interest coverage ratio (ICR) is 13.4x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence charged on company's debt was 5.1% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 12.0x and P/E 22.9x.
The company paid 50.1% of Net Income as dividends in FY2018. Dividends grew on average at 6.1% per annum in the last 5 years).
Management team
Richard P Wallace "Rick" is a the company's CEO. Richard P Wallace "Rick" is a founder and has spent 10 years with the company. CEO total compensation was
$12,391,300 in FY2018 which included
$900,000 salary. Bren D Higgins is a KLA-Tencor Corporation's CFO. Bren D Higgins has spent 6 years at the company.
The company has 0.46% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 5,990 employees. The number of employees didn't change in 2018. Average revenue per employee in FY2018 was
$673,907 and it surged on 16.0%.
Financial and operational results
FY ended 06/30/2018
KLA-Tencor Corporation ($KLAC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,929 | 2,814 | 2,984 | 3,480 | 4,037 | 16.0% |
| Gross Profit | 1,696 | 1,599 | 1,821 | 2,192 | 2,589 | 18.1% |
| SG&A | 385 | 407 | 379 | 389 | 443 | 13.9% |
| EBITDA | 855 | 742 | 1,027 | 1,334 | 1,600 | 19.9% |
| EBIT | 772 | 661 | 960 | 1,276 | 1,537 | 20.4% |
| Interest expence | 54 | 106 | 123 | 122 | 114 | -6.6% |
| Tax | 152 | 68 | 154 | 247 | 654 | 164.5% |
| Net Income | 583 | 366 | 704 | 926 | 802 | -13.4% |
| Stock Based Compensation | 40 | 40 | 33 | 51 | 63 | 23.2% |
Balance Sheet
|
|---|
| Cash | 631 | 838 | 1,108 | 1,153 | 1,404 | 21.8% |
| Accounts Receivable | 493 | 585 | 613 | 571 | 652 | 14.1% |
| Inventory | 656 | 618 | 699 | 733 | 932 | 27.1% |
| Accounts Payable | 103 | 103 | 107 | 147 | 169 | 14.9% |
| Short Term Debt | 0 | 17 | 0 | 250 | 0 | -100.0% |
| Long Term Debt | 745 | 3,173 | 3,058 | 2,680 | 2,237 | -16.5% |
Cash flow
|
|---|
| Capex | 68 | 46 | 32 | 39 | 67 | 73.5% |
| Dividends | 299 | 3,041 | 346 | 344 | 402 | 16.9% |
| Acquisitions | 18 | | | 29 | 17 | -39.1% |
Ratios
|
|---|
| Revenue growth | 3.0% | -3.9% | 6.1% | 16.6% | 16.0% | |
| EBITDA growth | 4.6% | -13.2% | 38.5% | 29.9% | 19.9% | |
|
|---|
| Gross Margin | 57.9% | 56.8% | 61.0% | 63.0% | 64.1% | 1.1% |
| EBITDA Margin | 29.2% | 26.4% | 34.4% | 38.3% | 39.6% | 1.3% |
| EBIT Margin | 26.4% | 23.5% | 32.2% | 36.7% | 38.1% | 1.4% |
| SG&A, % of revenue | 13.1% | 14.5% | 12.7% | 11.2% | 11.0% | -0.2% |
| SBC, % of revenue | 1.4% | 1.4% | 1.1% | 1.5% | 1.6% | 0.1% |
| Net Income Margin | 19.9% | 13.0% | 23.6% | 26.6% | 19.9% | -6.7% |
| CAPEX, % of revenue | 2.3% | 1.6% | 1.1% | 1.1% | 1.7% | 0.5% |
|
|---|
| ROIC | 17.9% | 16.5% | 27.2% | 34.0% | 39.9% | 5.9% |
| ROE | 16.3% | 17.9% | 126.9% | 91.9% | 54.4% | -37.4% |
| Net Debt/EBITDA | 0.1x | 3.2x | 1.9x | 1.3x | 0.5x | -0.8x |
| Interest expence / Average debt | 7.2% | 5.4% | 3.9% | 4.1% | 5.1% | 1.0% |
People
|
|---|
| Insider ownership | 0.5% | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
| Employees | 6,060 | 5,880 | 5,580 | 5,990 | 5,990 | 0.0% |
| Revenue/Employee, th. $ | 483 | 479 | 535 | 581 | 674 | 16.0% |
KLA-Tencor Corporation ($KLAC) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 970 | 976 | 1,021 | 1,070 | | 29.2% | 11.3% | 11.8% | 14.0% |
| EBITDA | 378 | 383 | 403 | 438 | | 43.2% | 9.8% | 12.4% | 20.7% |
| Net Income | 281 | -134 | 307 | 349 | | 57.7% | -156.4% | 21.0% | 36.2% |
Balance Sheet
|
|---|
| Cash | 1,321 | 1,073 | 1,256 | 1,404 | | 36.7% | 14.6% | 31.4% | 21.8% |
| Short Term Debt | 250 | 0 | 0 | 0 | | | -100.0% | -100.0% | -100.0% |
| Long Term Debt | 2,525 | 2,486 | 2,462 | 2,237 | | -16.4% | -8.9% | -9.0% | -16.5% |
Ratios
|
|---|
| Gross Margin | 63.6% | 64.4% | 63.9% | 64.7% | | 0.6% | 0.8% | 1.5% | 1.7% |
| EBITDA Margin | 38.9% | 39.2% | 39.4% | 41.0% | | 3.8% | -0.5% | 0.2% | 2.3% |
| Net Income Margin | 29.0% | -13.8% | 30.0% | 32.6% | | 5.2% | -40.9% | 2.3% | 5.3% |
Peers in Semiconductor Equipment
Below we provide KLA-Tencor Corporation benchmarking against other companies in Semiconductor Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Atomera Incorporated ($ATOM) | | | | | 123.6% |
| ACM Research, Inc. ($ACMR) | | | -12.3% | 33.4% | 104.5% |
| SCI Engineered Materials Inc ($SCIA) | | -13.0% | -32.1% | 24.4% | 67.0% |
| Aehr Test Systems ($AEHR) | | -49.1% | 44.7% | 30.3% | 56.4% |
| SolarEdge Technologies, Inc. ($SEDG) | | 144.0% | 50.7% | 23.9% | 54.4% |
| |
|---|
| Median (37 companies) | | -0.5% | 7.8% | 24.7% | 14.0% |
|---|
| KLA-Tencor Corporation ($KLAC) | | -3.9% | 6.1% | 16.6% | 16.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | 99.5% | 99.8% | 99.8% | 98.3% | 96.7% |
| Teradyne, Inc. ($TER) | 53.3% | 55.8% | 54.7% | 57.2% | 58.1% |
| Nova Measuring Instruments Ltd. ($NVMI) | 52.7% | 51.9% | 45.9% | 59.1% | 57.8% |
| Nanometrics Incorporated ($NANO) | 47.2% | 47.9% | 51.6% | 52.9% | 56.7% |
| Rudolph Technologies, Inc. ($RTEC) | 52.7% | 53.9% | 53.1% | 52.8% | 54.2% |
| |
|---|
| Median (38 companies) | 34.4% | 38.3% | 37.3% | 43.2% | 40.2% |
|---|
| KLA-Tencor Corporation ($KLAC) | 57.9% | 56.8% | 61.0% | 63.0% | 64.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| DAQO New Energy Corp. ($DQ) | 32.9% | 31.6% | 43.3% | 49.1% | 36.1% |
| Xperi Corporation ($XPER) | 66.7% | 67.5% | 47.6% | 23.4% | 34.3% |
| Lam Research Corporation ($LRCX) | 21.1% | 20.3% | 23.2% | 27.6% | 32.0% |
| Cabot Microelectronics Corporation ($CCMP) | 21.6% | 22.6% | 23.4% | 27.2% | 31.5% |
| Versum Materials, Inc. ($VSM) | 23.4% | 27.6% | 33.3% | 30.8% | 31.0% |
| |
|---|
| Median (37 companies) | 6.8% | 9.8% | 11.4% | 16.0% | 16.2% |
|---|
| KLA-Tencor Corporation ($KLAC) | 29.2% | 26.4% | 34.4% | 38.3% | 39.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rubicon Technology, Inc. ($RBCN) | 15.0% | 4.0% | 3.6% | 0.0% | 58.8% |
| DAQO New Energy Corp. ($DQ) | 42.2% | 44.7% | 29.5% | 19.8% | 47.4% |
| AXT Inc ($AXTI) | 2.4% | 5.4% | 3.4% | 21.6% | 39.6% |
| STR Holdings Inc ($STRI) | 7.9% | 8.1% | 1.6% | 9.0% | 36.6% |
| Photronics, Inc. ($PLAB) | 20.0% | 19.8% | 10.4% | 20.4% | 17.3% |
| |
|---|
| Median (37 companies) | 2.2% | 2.9% | 2.6% | 3.2% | 3.0% |
|---|
| KLA-Tencor Corporation ($KLAC) | 2.3% | 1.6% | 1.1% | 1.1% | 1.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Lam Research Corporation ($LRCX) | 10.7% | 10.9% | 11.8% | 18.7% | 33.9% |
| Versum Materials, Inc. ($VSM) | | 26.2% | 32.4% | 30.0% | 32.1% |
| Advanced Energy Industries, Inc. ($AEIS) | 8.8% | 30.2% | 41.2% | 45.7% | 31.3% |
| SolarEdge Technologies, Inc. ($SEDG) | -815.6% | 33.6% | 31.2% | 26.5% | 28.6% |
| SCI Engineered Materials Inc ($SCIA) | -3.6% | -2.3% | -19.5% | 1.6% | 26.6% |
| |
|---|
| Median (39 companies) | 3.4% | 5.2% | 6.9% | 12.2% | 11.2% |
|---|
| KLA-Tencor Corporation ($KLAC) | 17.9% | 16.5% | 27.2% | 34.0% | 39.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | -0.3x | -0.1x | 4.2x | 5.0x | 2.6x |
| Ultra Clean Holdings, Inc. ($UCTT) | -1.2x | 1.5x | 0.4x | -0.2x | 2.4x |
| Ichor Holdings ($ICHR) | 3.1x | 1.7x | -0.4x | 2.0x | 1.8x |
| Versum Materials, Inc. ($VSM) | -0.2x | -0.1x | 2.7x | 2.1x | 1.4x |
| DAQO New Energy Corp. ($DQ) | 4.6x | 4.3x | 2.3x | 0.9x | 1.2x |
| |
|---|
| Median (31 companies) | -1.2x | -1.3x | -1.3x | -0.7x | -1.0x |
|---|
| KLA-Tencor Corporation ($KLAC) | 0.1x | 3.2x | 1.9x | 1.3x | 0.5x |
