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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

KLA Corp., economic profit calculation

US$ in thousands

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net operating profit after taxes (NOPAT)¹	3,464,285)	3,432,493)	2,157,964)	1,310,622)	1,386,961)	1,064,732)
Cost of capital²	15.45%	15.08%	15.54%	14.94%	14.55%	14.97%
Invested capital³	8,526,100)	8,075,406)	6,820,696)	6,592,642)	6,611,994)	2,690,661)

Economic profit⁴	2,147,217)	2,214,976)	1,097,777)	325,551)	425,212)	661,849)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,464,285 – 15.45% × 8,526,100 = 2,147,217

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	KLA Corp. economic profit increased from 2021 to 2022 but then slightly decreased from 2022 to 2023.

KLA Corp., NOPAT calculation

US$ in thousands

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net income attributable to KLA	3,387,277)	3,321,807)	2,078,292)	1,216,785)	1,175,617)	802,265)
Deferred income tax expense (benefit)¹	(355,153)	(353,780)	(45,622)	(93,342)	(26,185)	101,072)
Increase (decrease) in allowance for credit losses²	13,001)	2,595)	6,214)	(179)	362)	(9,997)
Increase (decrease) in deferred system and service revenue³	237,683)	339,621)	1,648)	78,266)	166,956)	114,752)
Increase (decrease) in equity equivalents⁴	(104,469)	(11,564)	(37,760)	(15,255)	141,133)	205,827)
Interest expense	296,940)	160,339)	157,328)	160,274)	124,604)	114,376)
Interest expense, operating lease liability⁵	5,793)	2,476)	1,690)	1,988)	4,103)	1,060)
Adjusted interest expense	302,733)	162,815)	159,018)	162,262)	128,707)	115,436)
Tax benefit of interest expense⁶	(63,574)	(34,191)	(33,394)	(34,075)	(27,029)	(32,438)
Adjusted interest expense, after taxes⁷	239,159)	128,624)	125,624)	128,187)	101,679)	82,999)
(Gain) loss on marketable securities	986)	306)	(253)	(297)	1,294)	209)
Interest income	(74,095)	(8,695)	(8,929)	(21,646)	(40,367)	(36,869)
Investment income, before taxes	(73,109)	(8,389)	(9,182)	(21,943)	(39,073)	(36,660)
Tax expense (benefit) of investment income⁸	15,353)	1,762)	1,928)	4,608)	8,205)	10,301)
Investment income, after taxes⁹	(57,756)	(6,627)	(7,254)	(17,335)	(30,868)	(26,359)
Net income (loss) attributable to noncontrolling interest	74)	253)	(939)	(1,760)	(600)	—)
Net operating profit after taxes (NOPAT)	3,464,285)	3,432,493)	2,157,964)	1,310,622)	1,386,961)	1,064,732)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred system and service revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to KLA.

⁵ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 172,396 × 3.36% = 5,793

⁶ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 302,733 × 21.00% = 63,574

⁷ Addition of after taxes interest expense to net income attributable to KLA.

⁸ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 73,109 × 21.00% = 15,353

⁹ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	KLA Corp. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

KLA Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Provision for income taxes	401,839)	167,177)	283,101)	101,686)	121,214)	653,666)
Less: Deferred income tax expense (benefit)	(355,153)	(353,780)	(45,622)	(93,342)	(26,185)	101,072)
Add: Tax savings from interest expense	63,574)	34,191)	33,394)	34,075)	27,029)	32,438)
Less: Tax imposed on investment income	15,353)	1,762)	1,928)	4,608)	8,205)	10,301)
Cash operating taxes	805,213)	553,387)	360,189)	224,495)	166,222)	574,730)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	KLA Corp. cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

KLA Corp., invested capital calculation (financing approach)

US$ in thousands

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Short-term debt	—)	—)	20,000)	—)	—)	—)
Current portion of long-term debt	—)	—)	—)	—)	249,999)	—)
Long-term debt, excluding current portion	5,890,736)	6,660,718)	3,422,767)	3,469,670)	3,173,383)	2,237,402)
Operating lease liability¹	172,396)	113,587)	103,061)	99,879)	91,184)	23,462)
Total reported debt & leases	6,063,132)	6,774,305)	3,545,828)	3,569,549)	3,514,566)	2,260,864)
Total KLA stockholders’ equity	2,919,753)	1,401,351)	3,377,554)	2,665,424)	2,659,108)	1,620,511)
Net deferred tax (assets) liabilities²	(287,654)	79,764)	380,162)	424,231)	496,336)	(192,003)
Allowance for credit losses³	33,632)	20,631)	18,036)	11,822)	12,001)	11,639)
Deferred system and service revenue⁴	1,245,007)	1,007,324)	667,703)	666,055)	587,789)	420,833)
Equity equivalents⁵	990,985)	1,107,719)	1,065,901)	1,102,108)	1,096,126)	240,469)
Accumulated other comprehensive (income) loss, net of tax⁶	36,341)	27,471)	75,557)	79,774)	73,029)	53,933)
Non-controlling interest in consolidated subsidiaries	—)	(2,261)	(1,912)	15,586)	18,585)	—)
Adjusted total KLA stockholders’ equity	3,947,079)	2,534,280)	4,517,100)	3,862,892)	3,846,848)	1,914,913)
Construction-in-process⁷	(168,817)	(110,079)	(182,320)	(93,736)	(26,029)	(9,180)
Marketable securities⁸	(1,315,294)	(1,123,100)	(1,059,912)	(746,063)	(723,391)	(1,475,936)
Invested capital	8,526,100)	8,075,406)	6,820,696)	6,592,642)	6,611,994)	2,690,661)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred system and service revenue.

⁵ Addition of equity equivalents to total KLA stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction-in-process.

⁸ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	KLA Corp. invested capital increased from 2021 to 2022 and from 2022 to 2023.

KLA Corp., cost of capital calculations

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	67,877,415)	67,877,415)	÷	73,739,811)	=	0.92	0.92	×	16.47%	=	15.16%
Debt³	5,690,000)	5,690,000)	÷	73,739,811)	=	0.08	0.08	×	4.64% × (1 – 21.00%)	=	0.28%
Operating lease liability⁴	172,396)	172,396)	÷	73,739,811)	=	0.00	0.00	×	3.36% × (1 – 21.00%)	=	0.01%
Total:	73,739,811)					1.00					15.45%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	56,117,426)	56,117,426)	÷	62,896,013)	=	0.89	0.89	×	16.47%	=	14.69%
Debt³	6,665,000)	6,665,000)	÷	62,896,013)	=	0.11	0.11	×	4.55% × (1 – 21.00%)	=	0.38%
Operating lease liability⁴	113,587)	113,587)	÷	62,896,013)	=	0.00	0.00	×	2.18% × (1 – 21.00%)	=	0.00%
Total:	62,896,013)					1.00					15.08%

Based on: 10-K (reporting date: 2022-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	53,969,674)	53,969,674)	÷	58,072,735)	=	0.93	0.93	×	16.47%	=	15.30%
Debt³	4,000,000)	4,000,000)	÷	58,072,735)	=	0.07	0.07	×	4.36% × (1 – 21.00%)	=	0.24%
Operating lease liability⁴	103,061)	103,061)	÷	58,072,735)	=	0.00	0.00	×	1.64% × (1 – 21.00%)	=	0.00%
Total:	58,072,735)					1.00					15.54%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,535,354)	31,535,354)	÷	35,695,233)	=	0.88	0.88	×	16.47%	=	14.55%
Debt³	4,060,000)	4,060,000)	÷	35,695,233)	=	0.11	0.11	×	4.33% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	99,879)	99,879)	÷	35,695,233)	=	0.00	0.00	×	1.99% × (1 – 21.00%)	=	0.00%
Total:	35,695,233)					1.00					14.94%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	21,677,920)	21,677,920)	÷	25,469,104)	=	0.85	0.85	×	16.47%	=	14.02%
Debt³	3,700,000)	3,700,000)	÷	25,469,104)	=	0.15	0.15	×	4.50% × (1 – 21.00%)	=	0.52%
Operating lease liability⁴	91,184)	91,184)	÷	25,469,104)	=	0.00	0.00	×	4.50% × (1 – 21.00%)	=	0.01%
Total:	25,469,104)					1.00					14.55%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,465,082)	18,465,082)	÷	20,818,544)	=	0.89	0.89	×	16.47%	=	14.61%
Debt³	2,330,000)	2,330,000)	÷	20,818,544)	=	0.11	0.11	×	4.52% × (1 – 28.10%)	=	0.36%
Operating lease liability⁴	23,462)	23,462)	÷	20,818,544)	=	0.00	0.00	×	4.52% × (1 – 28.10%)	=	0.00%
Total:	20,818,544)					1.00					14.97%

Based on: 10-K (reporting date: 2018-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

KLA Corp., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	2,147,217)	2,214,976)	1,097,777)	325,551)	425,212)	661,849)
Invested capital²	8,526,100)	8,075,406)	6,820,696)	6,592,642)	6,611,994)	2,690,661)
Performance Ratio
Economic spread ratio³	25.18%	27.43%	16.09%	4.94%	6.43%	24.60%
Benchmarks
Economic Spread Ratio, Competitors⁴
Advanced Micro Devices Inc.	-19.31%	-19.03%	37.70%	11.45%	-6.68%	—
Analog Devices Inc.	-6.88%	-8.24%	-11.51%	-6.56%	-5.03%	-7.81%
Applied Materials Inc.	18.98%	28.84%	24.37%	12.54%	12.17%	20.24%
Broadcom Inc.	9.61%	8.04%	-1.34%	-6.90%	-6.60%	-2.38%
Intel Corp.	-13.27%	-6.84%	10.35%	16.02%	14.11%	—
Lam Research Corp.	11.47%	26.07%	25.54%	8.54%	5.08%	10.24%
Micron Technology Inc.	-25.53%	2.31%	-2.22%	-7.82%	2.36%	24.96%
NVIDIA Corp.	-8.99%	33.21%	13.63%	-0.36%	60.23%	—
ON Semiconductor Corp.	0.33%	2.22%	-2.12%	-13.43%	-9.97%	—
Qualcomm Inc.	3.72%	30.16%	27.57%	12.60%	13.99%	-30.68%
Texas Instruments Inc.	15.73%	36.40%	35.01%	30.16%	29.84%	—

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,147,217 ÷ 8,526,100 = 25.18%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	KLA Corp. economic spread ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023.

KLA Corp., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	2,147,217)	2,214,976)	1,097,777)	325,551)	425,212)	661,849)

Revenues	10,496,056)	9,211,883)	6,918,734)	5,806,424)	4,568,904)	4,036,701)
Add: Increase (decrease) in deferred system and service revenue	237,683)	339,621)	1,648)	78,266)	166,956)	114,752)
Adjusted revenues	10,733,739)	9,551,504)	6,920,382)	5,884,690)	4,735,860)	4,151,453)
Performance Ratio
Economic profit margin²	20.00%	23.19%	15.86%	5.53%	8.98%	15.94%
Benchmarks
Economic Profit Margin, Competitors³
Advanced Micro Devices Inc.	-49.28%	-47.18%	14.21%	5.12%	-3.38%	—
Analog Devices Inc.	-24.69%	-30.87%	-73.94%	-21.34%	-15.41%	-23.47%
Applied Materials Inc.	12.72%	16.66%	15.55%	9.54%	8.43%	11.95%
Broadcom Inc.	16.82%	15.03%	-3.16%	-19.04%	-17.52%	-5.10%
Intel Corp.	-22.54%	-9.62%	11.59%	16.87%	15.81%	—
Lam Research Corp.	9.98%	18.92%	18.23%	8.36%	4.43%	8.91%
Micron Technology Inc.	-87.84%	3.96%	-3.71%	-15.43%	3.91%	29.08%
NVIDIA Corp.	-7.12%	22.26%	10.66%	-0.46%	24.59%	—
ON Semiconductor Corp.	0.43%	2.50%	-2.38%	-17.61%	-12.39%	—
Qualcomm Inc.	3.27%	20.09%	16.60%	9.51%	12.36%	-25.38%
Texas Instruments Inc.	20.28%	31.92%	31.32%	27.04%	25.01%	—

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 2,147,217 ÷ 10,733,739 = 20.00%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	KLA Corp. economic profit margin improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023.

KLA Corp. (NASDAQ:KLAC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin