KLA Corp. (NASDAQ:KLAC)

The financial data over the periods from June 30, 2019, to June 30, 2024, reveals several notable trends in the valuation of intangible assets, goodwill, and related amortization impacts.

Goodwill

Goodwill shows a declining trend overall, decreasing from $2,211,858 thousand in mid-2019 to $2,015,726 thousand by mid-2024. There was a peak in 2022 at $2,320,049 thousand, followed by consistent declines in the subsequent years.

Existing Technology

This asset category exhibits steady growth, increasing from $1,224,629 thousand in 2019 to $1,552,074 thousand in 2024. The increment is gradual yet consistent year over year, indicating ongoing investment or valuation growth in technology assets.

Customer Relationships

Customer relationships assets remained fairly stable around $305,817 - $366,567 thousand until 2023, when a slight decrease from $366,567 thousand in 2022 to $358,567 thousand in 2023 occurred, thereafter holding steady through 2024.

Trade Name/Trademark

The value in this category shows minor fluctuations with a slight upward trend overall, increasing from $114,573 thousand in 2019 to $119,083 thousand in 2024, despite a dip observed in 2023.

Order Backlog and Other

Order backlog and related assets have generally increased, particularly marked by a jump from $50,403 thousand in 2021 to $87,836 thousand in 2022, followed by a moderate decline thereafter, stabilizing around $83,336 thousand in 2024.

Intangible Assets Subject to Amortization

These assets show continuous growth throughout the periods, rising from $1,680,421 thousand in 2019 to $2,113,060 thousand in 2024, indicating ongoing acquisition or capitalization of amortizable intangible assets.

In-Process Research and Development (IPR&D)

This category declines notably from $187,500 thousand in 2019 to $46,074 thousand in 2024, reflecting a significant reduction in capitalized R&D projects or their completion over time.

Purchased Intangible Assets, Gross Carrying Amount

The gross carrying amount remains relatively flat after slight increases, measured at $1,867,921 thousand in 2019 and holding near $2,159,134 thousand from 2022 through 2024.

Accumulated Amortization and Impairment

This figure increases substantially in absolute terms (negative values), from -$307,251 thousand in 2019 to -$1,490,370 thousand in 2024, indicating continuous amortization and potential impairment charges impacting intangible asset valuation.

Purchased Intangible Assets, Net Amount

The net amount of purchased intangible assets shows a marked downward trend, falling from $1,560,670 thousand in 2019 to $668,764 thousand in 2024. This decline correlates with the increasing accumulated amortization and impairment over the same period.

Goodwill and Purchased Intangible Assets

The combined amount of goodwill and purchased intangible assets decreases from $3,772,528 thousand in 2019 to $2,684,490 thousand in 2024. Despite a peak in 2022 at $3,514,463 thousand, the overall trend is downward, indicating net reductions due to amortization, impairment, or divestitures.

In summary, the data displays steady growth in existing technology and intangible assets subject to amortization, contrasted by significant declines in goodwill, in-process R&D, and net purchased intangible assets due to increased amortization and impairment. The combined intangible asset base is thus diminishing over time, highlighting possible strategic shifts, asset write-downs, or normal asset lifecycle effects.

The data reveals evolving trends in the financial position and profitability as reflected by both reported and goodwill-adjusted figures over a six-year period.

Total Assets

Reported total assets exhibit a consistent upward trajectory, rising from approximately $9.01 billion in mid-2019 to about $15.43 billion by mid-2024. This indicates sustained growth in the asset base over time. Adjusted total assets, which exclude goodwill, also demonstrate a similar pattern of growth, increasing from around $6.80 billion to $13.42 billion over the same period. The difference between reported and adjusted totals suggests a significant portion of assets is attributable to goodwill, which appears to grow steadily as well.

Stockholders’ Equity

The reported total stockholders’ equity fluctuates notably. Initially, it remains relatively stable at around $2.66 billion from 2019 to 2020, then increases substantially to roughly $3.38 billion by 2021. However, a sharp decline is observed in 2022, where equity drops drastically to approximately $1.40 billion, before recovering to $2.92 billion in 2023 and further to $3.37 billion in 2024. Adjusted equity, which removes the goodwill impact, shows a much more volatile pattern. It starts low at about $447 million in 2019 and grows to approximately $1.37 billion by 2021. Nonetheless, adjusted equity becomes negative in 2022 (approximately -$919 million), indicating a persistent deficit excluding goodwill. It then recovers to positive but relatively modest levels in 2023 and 2024, signaling capital rebuilding efforts or changes in asset valuations post-goodwill adjustments.

Net Income

Reported net income attributable to KLA increases steadily from about $1.18 billion in 2019 to a peak of approximately $3.39 billion in 2023, before slightly declining to $2.76 billion in 2024. Adjusted net income follows a similar upward trend but records a higher figure in 2020 compared to the reported value, indicating that goodwill adjustments affect income recognition that year. The adjusted net income matches reported figures closely in subsequent years, with a slight increase in 2024. This pattern suggests that the company maintains strong profitability with minor variations related to accounting adjustments.

Overall, asset growth is steady and robust, supported by substantial goodwill contributions. The significant fluctuations in adjusted equity, especially the negative value in 2022, highlight the impact of goodwill impairments or other adjustments that are not reflected in reported equity. Profitability remains strong throughout the period, despite minor dips, with adjusted income generally aligning well with reported values. These trends suggest a company with expanding operations and asset base, but with some periods of underlying capital volatility once goodwill is excluded.

Net Profit Margin

The reported net profit margin demonstrated variability over the analyzed period, beginning at 25.73% in mid-2019, dipping to 20.96% in 2020, then climbing to reach a peak of 36.06% in 2022 before declining to 28.15% by mid-2024. The adjusted net profit margin, which accounts for goodwill adjustments, generally remained higher than the reported figures from 2020 onwards, indicating improved profitability metrics when adjustments are considered. It rose steadily from 25.38% in 2020 to 36.06% in 2022, followed by a decrease to 30.83% in 2024.

Total Asset Turnover

Asset turnover ratios showed an overall upward trend until 2022. The reported total asset turnover increased from 0.51 in 2019 to a peak of 0.75 in 2023, before declining to 0.64 in 2024. The adjusted total asset turnover consistently exceeded the reported figures, reflecting higher asset utilization efficiency when adjustments were applied. It escalated from 0.67 in 2019 to 0.9 in 2022, then slightly decreased to 0.73 in 2024.

Financial Leverage

Financial leverage exhibited considerable volatility. The reported financial leverage remained relatively stable around 3.39–3.48 during 2019–2020 but then spiked dramatically to 8.99 in 2022 before declining to approximately 4.6 by 2024. Adjusted financial leverage values were markedly higher, suggesting significant impacts from goodwill adjustments. Starting at 15.2 in 2019, it decreased steadily through 2021, had missing data in 2022, then surged to 18.4 in 2023 and reduced to 9.92 in 2024. This pattern indicates fluctuating reliance on debt or equity financing magnified by goodwill considerations.

Return on Equity (ROE)

Both reported and adjusted ROE figures indicate high profitability with substantial fluctuations. Reported ROE climbed from 44.21% in 2019 to an exceptionally high 237.04% in 2022, then declined to 82% by 2024. Adjusted ROE displayed even more pronounced volatility, starting at an extraordinarily high 262.85% in 2019, decreasing to 152.1% in 2021, then missing data for 2022, followed by a peak of 528.49% in 2023 before falling to 223.64% in 2024. These extreme values suggest significant impacts from asset structure changes and leverage effects, potentially driven by goodwill adjustments.

Return on Assets (ROA)

Reported ROA rose steadily from 13.05% in 2019 to a peak of 26.37% in 2022, then declined to 17.9% in 2024. Adjusted ROA, which removes goodwill effects, was consistently higher, ascending from 17.3% in 2019 to 32.32% in 2022, then tapering to 22.54% by 2024. Both measures showcase improving asset profitability until 2022, followed by a notable downturn, aligning with the trends seen in net profit margins and asset turnover.

Overall Insights

The data reveals that the company experienced significant profitability improvements and operational efficiency gains up to 2022, with peak performance in net margins, asset turnover, and returns on equity and assets. However, 2023 and 2024 reflected a regression in these metrics, indicating potential challenges in sustaining the growth trajectory. The adjusted figures, which factor out goodwill, generally present a more optimistic and less volatile view of asset utilization and profitability, highlighting the distorting effect goodwill can have on financial ratios. Financial leverage is notably volatile and elevated in the adjusted figures, suggesting periods of increased financial risk or changes in capital structure impacting the returns on equity significantly.

The analysis of the financial data reveals noteworthy trends in both the reported and goodwill adjusted performance metrics over the six-year period ending June 30, 2024.

Net Income Trends

The reported net income attributable to the entity showed an overall upward trend from approximately 1.18 billion US dollars in 2019 to a peak exceeding 3.38 billion in 2023, followed by a decline to about 2.76 billion in 2024. The adjusted net income followed a similar pattern but exhibited a notable adjustment effect in 2020 and 2024 where the adjusted values exceeded the reported net income, suggesting the presence of goodwill or non-recurring items that were excluded in the adjusted figures. Specifically, adjusted net income increased more sharply in 2020 compared to the reported figure and remained consistently higher in 2024, reaching approximately 3.03 billion US dollars.

Profit Margin Analysis

The reported net profit margin began at 25.73% in 2019, decreased to 20.96% in 2020, then recovered strongly over the next two years to reach a peak of 36.06% in 2022. It thereafter declined to 28.15% by 2024. The adjusted net profit margin mirrored these trends but maintained higher margin levels during years with goodwill adjustments, notably in 2020 where it was 25.38% compared to the reported 20.96%, and in 2024 where it stood at 30.83% compared to the reported 28.15%. This indicates that adjustments for goodwill and related items have a positive effect on profitability metrics in these years.

Insight on Business Performance

The upward trajectory in net income and profit margins from 2019 through 2022 suggests improving operational efficiency and profitability. The peak in 2022 for both net income and margins indicates a strong financial performance during that fiscal year. The subsequent decrease in 2023 and 2024 could signify increased costs, reduced revenue growth, or other operational challenges. The differences between reported and adjusted figures point to the impact of goodwill and possibly other non-recurring items on the financial results, particularly highlighting 2020 and 2024 as years with significant adjustments.

The data reveals significant trends in asset metrics and efficiency ratios over the six-year period ending June 30, 2024.

Total Assets (Reported vs. Adjusted)

Reported total assets show a continuous upward trend from approximately $9.0 billion in 2019 to over $15.4 billion in 2024, indicating steady growth in the company’s asset base. The growth appears somewhat linear with notable acceleration from 2021 onward. Adjusted total assets, which likely exclude goodwill or intangible asset adjustments, similarly increase from about $6.8 billion in 2019 to roughly $13.4 billion in 2024, reflecting a considerable expansion of about 97% over the period. The adjusted figures are consistently lower than reported assets, suggesting a significant portion of reported assets is attributable to goodwill or intangible elements.

Total Asset Turnover (Reported vs. Adjusted)

Reported total asset turnover ratio increased from 0.51 in 2019 to a peak of 0.75 in 2023, demonstrating improved efficiency in generating revenue from reported assets. However, there is a decline to 0.64 in 2024, which might indicate a decrease in asset utilization efficiency or a slowdown in revenue growth relative to asset levels. Adjusted total asset turnover follows a similar pattern but at higher levels, increasing from 0.67 in 2019 to 0.9 in 2022, before slightly dipping to 0.89 in 2023 and then more noticeably to 0.73 in 2024. The higher turnover ratios on an adjusted basis suggest that the core asset base excluding goodwill performs more efficiently in generating revenues.

Insights and Implications

The upward trajectory of reported and adjusted total assets reflects ongoing investment or acquisition activities expanding the asset base over the period. The distinction between reported and adjusted assets highlights the impact of goodwill or intangible assets on the balance sheet, with a notable adjusted base that is significantly lesser than reported figures but growing in tandem.

The improvement in total asset turnover ratios up to 2023 indicates enhanced operational efficiency, possibly due to better asset management or increased revenue generation capability. The subsequent decline in 2024 in both reported and adjusted turnover ratios could signal emerging challenges such as lagging sales relative to asset expansion or increased capital intensity.

Overall, the company demonstrates growth in assets coupled with mostly improving asset efficiency until 2023, followed by early signs of reduced efficiency in the most recent period analyzed.

Total Assets

The reported total assets have shown a consistent upward trend over the examined period, increasing from approximately $9.01 billion in mid-2019 to around $15.43 billion by mid-2024. This represents a steady growth trajectory, with notable acceleration particularly between 2021 and 2024. Adjusted total assets, which account for goodwill elimination, also display a rising pattern from about $6.80 billion to $13.42 billion over the same period, indicating underlying asset growth excluding intangible goodwill components.

Stockholders’ Equity

Reported total stockholders’ equity increased from roughly $2.66 billion in 2019 to $3.37 billion in 2024, but this trend is interrupted by a significant drop in 2022 to approximately $1.40 billion before recovering in the following years. Conversely, adjusted stockholders’ equity reveals greater volatility, starting at $447 million and peaking at $1.37 billion in 2021 but turning negative (-$918,698 thousand) in 2022, followed by a partial recovery to $1.35 billion in 2024. This fluctuation suggests substantial goodwill or intangible asset adjustments impacting equity, with a marked impairment or write-down occurring around 2022 that materially affected adjusted equity.

Financial Leverage

Reported financial leverage ratios mostly decreased from 3.39 in 2019 to 3.04 in 2021, then sharply increased to 8.99 in 2022, before declining again to 4.58 by 2024. This spike in 2022 reflects the previously noted drop in reported equity, indicating higher leverage or debt relative to equity during that year. Adjusted financial leverage ratios are significantly higher overall, starting at 15.2 in 2019 and decreasing to 6.05 in 2021. The data for 2022 is missing, but the ratio spikes to 18.4 in 2023 before falling to 9.92 in 2024. These elevated adjusted leverage levels underscore the impact of goodwill and intangible asset adjustments, highlighting increased risk and financial strain perceived after eliminating these assets during certain periods.

Overall Analysis

The financial data demonstrates steady asset growth coupled with considerable volatility in equity when goodwill adjustments are considered. The impairment or adjustment events around 2022 significantly influenced adjusted equity and leverage ratios, suggesting difficulties or restructuring related to intangible assets. While reported figures present a relatively stable financial structure with transient stress in 2022, adjusted figures reveal a more cautious picture of financial risk and leverage. Recovery trends observed post-2022 indicate efforts to restore equity strength and reduce leverage, but adjusted leverage remains elevated compared to earlier years. The disparity between reported and adjusted figures highlights the importance of goodwill considerations in assessing the company's true financial position.

The data reveals distinct trends in the financial performance and equity position over the six-year period ending June 30, 2024. Both reported and adjusted figures are provided, allowing for an analysis of the impact of goodwill adjustments on key financial metrics.

Net Income Trends

The reported net income attributable to the company shows a steady increase from 2019 through 2023, peaking at approximately $3.39 billion, before declining to about $2.76 billion in 2024. The adjusted net income broadly follows a similar trend but shows a notable increase in 2020 compared to the reported figure, indicating some positive adjustment effects that year. By 2024, the adjusted net income remains higher than the reported figure, suggesting ongoing adjustments that enhance the income measure.

Stockholders’ Equity Analysis

The reported total stockholders’ equity exhibits growth from 2019 to 2021, almost doubling in that time frame, but then sharply declines in 2022 to about $1.4 billion before recovering in 2023 and 2024. In contrast, the adjusted total stockholders’ equity, which accounts for goodwill adjustments, starts at a substantially lower base in 2019 and experiences a moderate increase through 2021. However, the adjusted equity turns negative in 2022, indicating significant impairment or revaluation losses associated with goodwill. It recovers slightly in the final two years but remains considerably below the reported figures, highlighting the impact of adjustments on the company's net worth.

Return on Equity (ROE) Observations

The reported ROE maintains high levels throughout the period, with substantial volatility. It rises from about 44% in 2019 to an exceptional 237% in 2022, before decreasing to 82% in 2024. This surge coincides with the drop in reported equity, amplifying the ratio. The adjusted ROE figures are markedly different, starting extremely high in 2019 and 2020, then showing a downward trend, except for a missing value in 2022. The adjusted ROE peaks at over 528% in 2023, reflecting the very low or negative adjusted equity base, before falling to approximately 224% in 2024. These elevated adjusted ROE values underscore the distortions created by negative adjusted equity values that cause inflated returns on a diminished equity base.

Overall, the analysis indicates that while net income has generally grown over time, the company’s equity position experienced significant fluctuations, especially after adjustments for goodwill. The resulting impact on ROE is pronounced, with the adjusted figures revealing potentially overstated returns due to negative or low equity values after adjustments. This suggests that goodwill impairments materially affect the balance sheet and performance metrics, warranting careful consideration when interpreting financial strength and profitability.

The financial data reveals several noteworthy trends in the company's performance and asset base over the analyzed six-year period.

Net Income

Reported net income attributable to the company demonstrates a general upward trend from 2019 to 2023, rising from approximately $1.18 billion to $3.39 billion, followed by a decline to around $2.76 billion in 2024. Adjusted net income, which incorporates goodwill adjustments, follows a similar pattern, although it shows a higher value in 2020 and 2024 with approximately $1.47 billion and $3.02 billion, respectively. Both reported and adjusted net incomes peaked in 2023 before experiencing a decrease in 2024, suggesting some challenges in maintaining peak profitability in the most recent period.

Total Assets

The reported total assets steadily increased from about $9.01 billion in 2019 to roughly $15.43 billion in 2024, indicating significant growth in the company’s asset base. However, the adjusted total assets, which factor out goodwill, exhibit a similar but lower magnitude growth trajectory, rising from about $6.80 billion in 2019 to $13.42 billion in 2024. The consistent increase in both reported and adjusted total assets suggests ongoing investment or acquisitions contributing to the company's expansion, while the gap between reported and adjusted figures highlights the impact of goodwill on the asset composition.

Return on Assets (ROA)

Reported ROA shows an improving trend from 13.05% in 2019 to a peak of 26.37% in 2022, followed by a slight decline to 17.9% in 2024. Adjusted ROA, which accounts for goodwill adjustments, reveals higher values overall, starting at 17.3% in 2019 and reaching a peak of 32.32% in 2022 before decreasing to 22.54% in 2024. The higher adjusted ROA compared to the reported ROA indicates that goodwill adjustments positively affect the asset efficiency measure. The peak ROA in 2022 suggests the company achieved optimal asset utilization in that year, with a subsequent reduction pointing to decreasing operational efficiency or increased asset base without a proportional increase in net income.

Overall, the data portrays a company with substantial growth in net income and asset base over several years, achieving peak operational efficiency around 2022. However, the decline in profitability and efficiency ratios in 2024 signals potential challenges or transitional issues that may warrant further investigation.