KLA KLAC · USD

SEGMENT REPORTING AND GEOGRAPHIC INFORMATIONASC 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 ControlThe 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 ProcessThe 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 MEMS, radio frequency communication chips, and power semiconductors for automotive and industrial applications.PCB and Component InspectionThe 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.

REVENUEContract BalancesThe 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 As of(In thousands, except for percentages)June 30, 2025June 30, 2024June 30, 2023Change in Fiscal 2025Change in Fiscal 2024Accounts receivable, net$2,263,915 $1,833,041 $1,753,361 $430,874 24 %$79,680 5 %Contract assets$105,081 $69,259 $117,137 $35,822 52 %$(47,878)(41)%Contract liabilities$1,713,689 $1,782,242 $1,245,007 $(68,553)(4)%$537,235 43 %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 fiscal year ended June 30, 2025 was mainly due to $94.4 million of revenue recognized for which the payment is subject to conditions other than the passage of time, partially offset by $58.8 million of contract assets reclassified to net accounts receivable as our right to consideration for these contract assets became unconditional. Contract assets are included in other current assets on our Consolidated Balance Sheets.The change in contract liabilities during the fiscal year ended June 30, 2025 was mainly due to the recognition in revenue of $1.39 billion that was included in contract liabilities as of June 30, 2024, partially offset by 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 current and non-current liabilities on our Consolidated Balance Sheet.Remaining Performance ObligationsAs of June 30, 2025, we had $7.86 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 $643.2 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.71 billion as disclosed above. We expect to recognize approximately 71% to 76% 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.

COMMITMENTS AND CONTINGENCIESFactoring. 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 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:Year Ended June 30,(In thousands)202520242023Receivables sold under factoring agreements$230,552 $254,889 $328,933 Proceeds from sales of LC$55,525 $22,242 $69,247 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 estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is $2.42 billion as of June 30, 2025, 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 June 30, 2025, we have committed $119.6 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 $126.8 million, of which $92.7 million had been issued as of June 30, 2025, primarily to fund guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries worldwide.

DEBTThe following table summarizes our debt as of June 30, 2025 and June 30, 2024:As of June 30, 2025As of June 30, 2024Amount (In thousands)Effective Interest RateAmount (In thousands)Effective Interest RateFixed-rate 4.650% Senior Notes due on November 1, 2024$— — %$750,000 4.682 %Fixed-rate 4.100% Senior Notes due on March 15, 2029800,000 4.159 %800,000 4.159 %Fixed-rate 4.650% Senior Notes due on July 15, 20321,000,000 4.657 %1,000,000 4.657 %Fixed-rate 4.700% Senior Notes due on February 1, 2034500,000 4.777 %500,000 4.777 %Fixed-rate 5.650% Senior Notes due on November 1, 2034250,000 5.670 %250,000 5.670 %Fixed-rate 5.000% Senior Notes due on March 15, 2049400,000 5.047 %400,000 5.047 %Fixed-rate 3.300% Senior Notes due on March 1, 2050750,000 3.302 %750,000 3.302 %Fixed-rate 4.950% Senior Notes due on July 15, 20521,450,000 5.023 %1,450,000 5.023 %Fixed-rate 5.250% Senior Notes due on July 15, 2062800,000 5.259 %800,000 5.259 %Total 5,950,000 6,700,000 Unamortized discount(23,338)(24,866)Unamortized debt issuance costs(42,405)(44,999)Total $5,884,257 $6,630,135 Reported as:Current portion of long-term debt$— $749,936 Long-term debt5,884,257 5,880,199 Total $5,884,257 $6,630,135 Senior Notes and Debt Redemption: In November 2024, we repaid $750.0 million of the Senior Notes that were due on November 1, 2024. 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.In June 2022, we issued $3.00 billion aggregate principal amount of senior, unsecured notes (the “2022 Senior Notes”) as follows: $1.00 billion of 4.650% senior, unsecured notes due July 15, 2032; $1.20 billion of 4.950% senior, unsecured notes due July 15, 2052; and $800.0 million of 5.250% senior, unsecured notes due July 15, 2062. A portion of the net proceeds of the 2022 Senior Notes was used to complete a tender offer in July 2022 for $500.0 million of our 2014 Senior Notes due 2024 including associated redemption premiums, accrued interest and other fees and expenses.

INCOME TAXESThe components of income before income taxes were as follows: Year Ended June 30,(In thousands)202520242023Domestic income before income taxes$3,070,097 $1,997,090 $2,017,338 Foreign income before income taxes1,574,351 1,192,942 1,771,852 Total income before income taxes$4,644,448 $3,190,032 $3,789,190 The provision for income taxes was comprised of the following:(In thousands)Year Ended June 30,202520242023Current:Federal$624,002 $395,876 $553,197 State21,161 10,737 14,804 Foreign182,448 160,401 188,991 827,611 567,014 756,992 Deferred:Federal(222,907)(110,686)(228,414)State(5,433)(2,770)(4,295)Foreign(16,466)(25,422)(122,444)(244,806)(138,878)(355,153)Provision for income taxes$582,805 $428,136 $401,839 The significant components of deferred income tax assets and liabilities were as follows:(In thousands)As of June 30,20252024Deferred tax assets:Capitalized R&D expenses$447,043 $328,061 Tax credits and net operating losses327,618 311,026 Depreciation and amortization190,256 151,371 Inventory reserves135,121 121,238 Employee benefits accrual106,746 95,461 Non-deductible reserves69,790 53,668 Unearned revenue48,372 25,532 SBC18,835 15,375 Other43,843 12,785 Gross deferred tax assets1,387,624 1,114,517 Valuation allowance(310,599)(289,534)Net deferred tax assets$1,077,025 $824,983 Deferred tax liabilities:Unremitted earnings of foreign subsidiaries not indefinitely reinvested$(360,544)$(315,231)Deferred profit(41,378)(70,204)Unrealized gain on investments(16,278)(10,949)Total deferred tax liabilities(418,200)(396,384)Total net deferred tax assets$658,825 $428,599 Our deferred tax assets for the years ended June 30, 2025 and 2024 reflect the impact of the mandatory capitalization of research and experimental expenditures as required by the 2017 Tax Cuts and Jobs Act. This provision was first effective for us in the year ending June 30, 2023.As of June 30, 2025, we had U.S. federal, state and foreign net operating loss (“NOL”) carry-forwards of $3.7 million, $10.0 million and $174.5 million, respectively. We also had foreign capital loss carry-forwards of $1.3 million as of June 30, 2025. The U.S. federal NOL carry-forwards will expire at various dates beginning in 2026 through 2036. The utilization of NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, it is not expected that such annual limitation will significantly impair the realization of these NOLs.

LEASES We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, 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 terms ranging from less than one year to 27 years, including periods covered by options to extend the lease when it is reasonably certain that the option will be exercised.Lease expense was $51.5 million, $54.6 million and $41.8 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. Expense related to short-term leases, which are not recorded on the Consolidated Balance Sheets, was not material for the fiscal years ended June 30, 2025 and 2024. As of June 30, 2025 and 2024, the weighted-average remaining lease term was 6.2 years and 6.7 years, respectively, and the weighted-average discount rate for operating leases was 4.06% and 4.30%, as of June 30, 2025 and 2024, respectively.Supplemental cash flow information related to leases was as follows:Year Ended June 30,(In thousands)20252024Operating cash outflows from operating leases$47,183 $41,405 ROU assets obtained in exchange for new operating lease liabilities$46,018 $62,505 Maturities of lease liabilities as of June 30, 2025 were as follows:Fiscal Year Ending June 30:Amount (In thousands)2026$53,182 202747,113 202828,659 202924,033 203021,503 2031 and thereafter59,562 Total lease payments234,052 Less imputed interest(30,027)Total$204,025 As of June 30, 2025, we did not have any material leases that had not yet commenced.

BUSINESS COMBINATIONS AND DISPOSITIONSFiscal 2023 AcquisitionsOn August 9, 2022, we acquired a privately held company, primarily to secure the supply of materials for existing products, for aggregate purchase consideration of $32.7 million payable in cash. We allocated the purchase consideration as follows: $30.0 million to identifiable intangible assets, $2.3 million to net tangible assets, $6.5 million to deferred tax liabilities and $6.8 million to goodwill. The goodwill was assigned to the Semiconductor Process Control reportable segment. The purchase consideration included a $3.7 million holdback to satisfy general warranties and representations that was paid in full in February 2024.Business DispositionsAs of June 30, 2022, we owned approximately 94% of the outstanding equity interest in Orbograph Ltd. (“Orbograph”), a non-core business engaged in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers. On August 9, 2022, we acquired the non-controlling interest in Orbograph. On August 11, 2022, we sold our entire interest in Orbograph to a portfolio company of a private equity firm for total consideration of $110.0 million and net cash proceeds from the transaction of $75.4 million. We recognized a pre-tax gain from the sale of $29.7 million, which was recorded as part of Other expense (income), net. Included in the sale were $26.5 million in tangible assets, $30.5 million in liabilities and $61.2 million in goodwill and intangible assets.Acquisition-Related CostsOur acquisition and disposition related costs are primarily included within SG&A expenses in our Consolidated Statements of Operations. We incurred immaterial acquisition-related costs for fiscal 2023 acquisitions.

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity risks, including oversight of management’s implementation of our cybersecurity risk management process.The Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Committee, where it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially significant.The Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also regularly receives briefings from management on our cyber risk management process. Board members receive presentations on cybersecurity topics from management or external experts as part of the Board’s continuing education on topics that impact public companies.Our management team, including our Chief Legal Officer and Chief Information Security Officer (“CISO”), is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management process and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our CISO has a degree with a focus on information technology, and is a Certified Information Systems Auditor with over 20 years of experience in information technology related roles, including building and leading cybersecurity, risk management and information protection teams. Our CISO reports to our Chief Legal Officer who oversees cybersecurity, and holds a Carnegie Mellon University Software Engineering Institute CERT Certificate for Cybersecurity Oversight. The other members of the operational cybersecurity team collectively have decades of relevant education and experience and maintain a wide range of industry certifications. We invest in regular, ongoing cybersecurity training for the cybersecurity team.