Bren Higgins
Executive Vice President and Chief Financial Officer at KLA
Thank you, Rick. KLA's June quarter '21 results highlight the soundness and strength of our ongoing strategies. We continue to demonstrate our ability to meet customer needs in a robust demand environment while expanding market leadership, growing operating profits, generating strong free cash flow, and maintaining our long-term strategy of productive capital allocation. Total revenue in the June quarter was $1.93 billion towards the top end of the guided range. Non-GAAP gross margin was 62%, at the midpoint of the guided range for the quarter of 61% to 63%. Non-GAAP EPS was $4.43, above the guided range of $3.47 to $4.35. GAAP EPS was $4.10. Non-GAAP total operating expenses were $419 million, about $7 million higher than expected primarily due to engineering materials timing and adjustments to variable compensation programs. Non-GAAP operating expenses included $241 million of R&D expense and $178 million of SG&A.
At KLA, technical application support for our customers is included in SG&A was $44 million in the quarter. The combination of R&D expense and technical applications represents about 70% of total operating expenses. KLA innovation is fundamental to our go-to-market strategy focused on differentiated solutions. R&D is at the heart of KLA remains a key element in driving our portfolio strategy and product differentiation. This in turn help sustain our technology and market leadership. Non-GAAP operating income was very strong at 40%. Given higher revenue expectations for the second half of '21, product development requirements, ongoing regionalization of additional customer engagement resources, and increased investment in our global infrastructure due to overall business volume, we expect non-GAAP operating expenses to be approximately $430 million in the September quarter. Going forward, we will continue to size the company based on our target operating model which delivers 40% to 50% incremental operating margin leverage on revenue growth over a multi-quarter horizon.
Other income and expense in the June quarter net was $11 million, reflecting the gain on an investment in a strategic supplier that recently completed its initial public offering. This gain represented $0.15 of earnings per share at the company's tax planning rate of 13.5%. You should continue to model other income and expense net at approximately $43 million per quarter. The quarterly adjusted effective tax rate was 10.4%, reflecting the benefit of favorable audit adjustments recognized in the period. Non-GAAP net income was $684 million, GAAP net income was $633 million, cash flow from operations was $466 million, and free cash flow was $410 million. The company had approximately 154 million diluted weighted average shares outstanding at quarter-end. Revenue for the semiconductor process control segment, including its associated service business was $1.581 billion, a sequential quarterly increase of 5% and also up 37% compared to June of last year. The approximate semiconductor process control customer segment mix was in line with our forecast from April as foundry logic was 68% and memory was 32%.
In memory, the business was split roughly 34% NAND and 66% DRAM. Revenue for our Electronics, Packaging, and Components Group hit a record in the quarter driven by continued strength in 5G mobile and infrastructure, as well as rising demand in automotive. More specifically, the specialty semiconductor process segment generated revenue of $98 million, up 7% sequentially and down 2% over the prior year. Demand in this segment was mostly driven by growth in the automotive power semiconductor applications, where we have a leading position in edge and deposition products. Specialty semiconductor process's performance was also highlighted by the second straight quarter of record bookings. PCB, display and component inspection revenue was $247 million, up 20% sequentially and up 22% year-over-year with the data center driving strength in advanced PCB and packaging inspection.
KLA ended the quarter with $2.5 billion in total cash, total debt of almost $3.5 billion, and a flexible and attractive bond maturity profile supported by strong investment-grade ratings from all three agencies. We were also pleased to see Moody's upgrade our debt rating in early June to A2 from Baa1, further underscoring the strength of our balance sheet and sustainability of our business and financial performance. We have tremendous confidence in our business over the long run and are committed to a long-term strategy of cash returns to shareholders, executing the balanced approach split between dividends and share repurchases, targeting long-term returns that at least 70% of free cash flow generated. Our announcement today of our 12th consecutive annual increase in the dividend and additional share repurchase authorization are representative of our explicit approach and strong track record of predictable and productive capital deployment.
Over the last 12 months, KLA returned $1.5 billion to shareholders, including $559 million in dividends paid and $939 million in share repurchases. While circumstances can change, our current expectation remains that our capital returns for calendar '21 will exceed 85% of expected free cash flow. KLA has a history of consistent free cash flow generation, high free cash flow conversion, and strong free cash flow margins across all phases of the business cycle and economic conditions. During the quarter, we generated $410 million of free cash flow and repurchased $300 million of common stock, while also paying $139 million in dividends.
Our overall semiconductor demand and WFE outlook continues to increase from our views earlier in the year. At the start of this year, we characterized the expected growth of the WFE market to be in the low teens plus or minus a few percentage points. In April, we revised that view to the low to mid-20s on a percentage basis with a bias to the upside. Today, we see further improvement and expect the WFE market to grow in the low to mid-30s from approximately $61 billion in calendar 2020 to approximately $81 billion at the midpoint in calendar '21. This reflects the broad-based strengthening of demand across all customer segments.
KLA is in position to deliver strong relative growth this year, driven by our market leadership and strong momentum in the marketplace across multiple product platforms, in both the semiconductor process control and EPC groups. Looking ahead, we remain encouraged by the sustainability of our current demand profile. As a result, we continue to expect total company revenue to improve sequentially quarter-to-quarter throughout the remainder of the calendar year. We also expect the second half of calendar '21 to grow in the mid-teens on a percentage basis versus the first half, as more of our manufacturing capacity comes online to support the strong customer demand. Furthermore, our system shipment expectations point to meaningful growth in semiconductor process control equipment systems in the second half of calendar '21. This strong backdrop supports our current expectations of high-30s to low-40s year-over-year percentage growth for the semiconductor process control systems business in calendar '21. As a result, we continue to believe that this business is positioned to outperform in '21 relative to the overall WFE market.
Our September quarter guidance is as follows. Total revenue is expected to be in a range $2.02 billion, plus or minus $100 million. Foundry logic is forecasted to be approximately 59%, and memory is expected to be approximately 41% of semiconductor process control systems revenue to semiconductor customers. Within memory, DRAM is expected to be about 60% of the segment mix. We forecast non-GAAP gross margin to be in a range of 61.5% to 63.5%. At the midpoint, this is 50 basis points above the June quarter level due principally to product mix. While in any given quarter, the mix of our business across products and business segments will affect our gross margin results, the structural trends both in terms of product cost, manufacturing efficiency, and product positioning remain compelling and are sustainable tailwinds going forward.
Other model assumptions for September include non-GAAP operating expenses of approximately $430 million, other income and expense of approximately $43 million, and an effective adjusted tax rate of approximately 13.5%. Finally, GAAP diluted EPS is expected to be in a range of $3.76 to $4.64 and non-GAAP diluted EPS in a range of $4.01 the $4.89. The EPS guidance is based on a fully diluted share count of approximately 153.5 million shares. In closing, the industry dynamics driving semiconductors and investments in WFE remain compelling, with broad-based customer demand and simultaneous investments across multiple technology nodes. We are encouraged by the leading indicators for our business, including our backlog and sales funnel visibility over the next couple of quarters. Our customer's multiyear investment plans also point to the stability of demand in the future.
KLA continues to execute well and is on track to exceed our 2023 financial targets well ahead of expectations. The KLA operating model positions us well to outperform and guides our important strategic objectives. These objectives fuel our growth, operational excellence, and differentiation across an increasingly diverse product and service offering. They also underpin our sustained technology leadership, deep competitive moat, strong financial performance, and long-standing track record of free cash flow generation and capital return to shareholders.
And with, that I'll now turn the call back over to Kevin to begin the Q&A.
