KLA-Tencor (KLAC)

Q4 2011 Earnings Call

July 28, 2011 5:00 pm ET

Executives

Richard Wallace - Chief Executive Officer, President and Executive Director

Mark Dentinger - Chief Financial Officer and Executive Vice President

Ed Lockwood - Senior Director of IR

Analysts

Atif Malik - Morgan Stanley

Thomas Yeh - BofA Merrill Lynch

Christopher Muse - Barclays Capital

Farhan Rizvi - Crédit Suisse AG

Patrick Ho - Stifel, Nicolaus & Co., Inc.

Mahesh Sanganeria - RBC Capital Markets, LLC

Mahavir Sanghavi - UBS Investment Bank

Unknown Analyst -

Presentation

Operator

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Good afternoon. My name is Jessica, and I will be your conference operator today. At this time, I'd like to welcome everyone to the KLA-Tencor Fourth Quarter Fiscal '11 Conference Call. [Operator Instructions] Thank you. Ed Lockwood, with KLA-Tencor Investor Relations, you may begin your conference.

Ed Lockwood

Thank you, Jessica. Good afternoon, everyone, and welcome to the KLA-Tencor's Fourth Quarter Fiscal Year 2011 Earnings Conference Call. Joining me on our call today are Rick Wallace, our President and Chief Executive Officer; and Mark Dentinger, our Chief Financial Officer. We're here today to discuss fourth quarter results for the period ended June 30, 2011. We released these results this afternoon at 1:15 p.m. Pacific Time. If you haven't seen the release, you can find it on our website at www.kla-tencor.com or call (408) 875-3600 to request a copy. A simulcast of this call will be accessible on demand following its completion on the Investors section of our website. There, you will also find a calendar of future investor events, presentations and conferences, as well as links to KLA-Tencor's SEC filings, including our Annual Report on Form 10-K for the year ended June 30, 2010 and our subsequently filed 10-Q report. In those filings, you will find descriptions of risk factors that could impact our future results.

As you know, our future results are subject to risks. Any forward-looking statements, including those we make on this call today, are subject to those risks, and KLA-Tencor cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking statements. Any information regarding factors that could cause those differences is contained in the filings we make with the SEC from time to time, including our fiscal year 2010 Form 10-K and current our reports on Form 8-K. We assume no obligation and do not intend to update those forward-looking statements. However, you can be reassured that any updates we do provide will be broadly disseminated and available over the Web.

With that, I'll turn the call over to Rick.

Richard Wallace

Thanks, Ed. Thank you all for joining us for our call today. Given that we provided a thorough business update just 2 weeks ago at SEMICON West, I'll focus my commentary today on summary highlights of our results and provide guidance for September. Then Mark will follow with a more detailed review of the financials.

KLA-Tencor delivered record revenue earnings and cash flow in the fourth quarter and for fiscal year 2011, demonstrating our continued strong market leadership and successful execution of our long-term strategies for customer focus, growth and operations excellence in a period of robust industry growth. Bookings for the June quarter were $853 million, flat compared with March and at the upper end of the range of guidance. And in the fourth quarter, we experienced strong demand in each of our major end markets.

Looking to our record, $3.2 billion in fiscal year 2011, 14% above the previous fourth quarter high that we set back in fiscal year 2007, driven by higher adoption of process control, growth in our services business and the addition of new markets.

June quarter revenue grew 7% to a record $892 million, coming in at the upper end of the range of guidance. And the non-GAAP earnings per share were $1.50 in Q4, above the range of guidance for the quarter. Contributing to these results in Q4 were record operating margin of 40.1%. Today, KLA-Tencor is reporting margins significantly above our baseline model, reflecting our cost discipline and the value that we bring to our customers.

Finally, cash flow from operations was a record $290 million in Q4. And we were active in returning value to shareholders, purchasing -- repurchasing 1.4 million shares in the quarter for $58 million, and of course, paying our are regularly quarterly dividend. In fiscal year 2011, we repurchased a total of 6.2 million shares for $233 million. Also, as we announced on July 12, our Board of Directors have authorized an increase in the level of the company's quarterly dividend to $0.35 per share, which is scheduled to take effect beginning with our dividend to be declared next month.

This move reflects management and the board's confidence in our long-term outlook for the company, as well as the ongoing efforts to reward our shareholders for their continued investment. So clearly, our results indicate another very strong performance for KLA-Tencor in Q4, capping a record year for the company and showcasing the strength of our market leadership and our industry-leading business model. Of course,, the driving force behind our success remains the strong effort in collaboration with our customers and business partners, as well as great execution of the worldwide workforce. And I'd like to take this opportunity to thank each and every employee for their contribution in helping KLA-Tencor excel in this environment and in shaping our future success.

Shifting our focus now to the current period and our view of the near-term outlook, as reported at SEMICON West 2 weeks ago, the near-term industry demand environment has cooled off significantly of late with customers reassessing their capacity expansion plans and timelines and in light of persistent weakness in the macroeconomic environment and lackluster PC sales. However, looking past the current environment, we believe the drivers underlying long-term growth in our industry remained intact.

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