Bren D. Higgins
Executive Vice President and Chief Financial Officer at KLA
Thank you, Rick. KLA's quarterly 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 quarterly revenue was $2.08 billion. Non-GAAP gross margin was 62.9% as the various components performed mostly as expected, with upside coming from the higher-than-expected Semiconductor Process Control systems revenue, which enhanced the product mix for the quarter.
Non-GAAP diluted EPS was $4.64. Our performance reflected the mark-to-market of an equity position in a strategic supplier that negatively impacted non-GAAP earnings per share by $0.06. Without this adjustment, which is reflected in other income and expense on the income statement, non-GAAP earnings would have been $4.70. GAAP diluted EPS was $6.96, due primarily to a onetime tax benefit of $395 million, resulting from changes made to our international structure to better align ownership of certain intellectual property rights with how our business operates. Non-GAAP operating expenses were $432 million and included $252 million of R&D expense and $180 million of SG&A.
Technical applications is a competitive advantage for KLA and drives demand for our products by helping our customers develop solutions that address their complex process challenges. Technical applications is included in SG&A and was $47 million in the quarter. The combination of R&D and technical applications represented approximately 70% of total operating expenses. Given the rapid growth of the business over the last couple of years and our revenue expectations for the business going forward, we expect the company's operating expenses to continue to grow as we invest in global infrastructure, systems to scale the KLA operating model, new product development programs and volume-dependent resources to support our business expansion.
Furthermore, we, as most companies are seeing a strong labor market driving cost pressure across our global workforce. As a result, we expect operating expenses to grow sequentially to approximately $470 million in the December quarter, and we forecast sequential growth in operating expenses to continue through calendar 2022. While operating expenses are trending higher, going forward, we will make the necessary investments to scale our business, while we 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 normalized time horizon. Non-GAAP operating income as a percentage of revenue was strong at 42.2% in the September quarter.
Other income and expense net was $52 million compared with guidance of $43 million, with the variance from guidance reflecting the impact of the mark-to-market of the investment discussed earlier. For December, we forecast other income and expense net at approximately $44 million. The quarterly effective tax rate was 13.9%, just above our guided tax rate of 13.5%. Non-GAAP net income was $712 million. GAAP net income was $1.07 billion. Cash flow from operations was $864 million, and free cash flow was a record $795 million, resulting in a free cash flow conversion of 112%. Turning to our reportable segment and end markets. Revenue for the Semiconductor Process Control segment, including its associated service business, was $1.78 billion, up 40% year-over-year and up 13% sequentially. The approximate Semiconductor Process Control system customer segment mix was tilted slightly more towards foundry logic than we forecasted at 61%, above our 59% estimate.
Memory was 39%, and within memory, the business was split roughly 61% DRAM and 39% NAND. Revenue for our EPC group continues to be driven by strength in 5G mobile and infrastructure as well as continued demand in automotive. More specifically, the specialty Semiconductor Process segment, which includes its associated service business, generated record revenue of $102 million, up 15% over the prior year and up 4% sequentially. PCB, display and component inspection revenue was $203 million, up 12% year-over-year but down 18% sequentially after a record quarter in the PCB and the component inspection businesses in June. For a breakdown of revenue by major products and regions, please see our shareholder letter or the earnings slides. Moving forward to our balance sheet. We ended the quarter with $2.63 billion in cash, bonds outstanding of $3.45 billion with no maturities until 2024 and a flexible and attractive bond maturity profile supported by strong investment-grade ratings from all three agencies.
Over the last 12 months, KLA returned $1.73 billion to shareholders, including $581 million in dividends paid and $1.15 billion in share repurchases. While circumstances can change, current expectations are the capital returns for calendar 2021 will exceed 85% of expected free cash flow generated in the calendar year. For the quarter, we generated a record $795 million in free cash flow and repurchased $400 million of common stock while also paying $163 million in dividends. Moving to our outlook and guidance. Our overall semiconductor demand and WFE outlook continues to increase from our views earlier in the year. At the start of this year, we characterize 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.
In July, we revised our WFE outlook upward again to the mid-30s. Today, we see continued strengthening and expect the WFE market to grow approximately 40% to the mid-$80 billion range in 2021, growing from approximately $61 billion in calendar 2020. This reflects the broad-based strengthening in demand across all customer segments. KLA is in a position to deliver strong relative growth this year with the semiconductor process control systems business now expected to grow in the mid-40s on a percentage basis over calendar year 2020. This growth profile is driven by our market leadership and strong momentum in the marketplace across multiple product platforms. Looking ahead, we remain encouraged by the strength and sustainability of our current demand profile across all customer segments. For the total company, we expect that the first half of 2022 will grow in the high single digits versus the second half of 2021.
It is abundantly clear today that demand is constrained by the industry's ability to supply. This pent-up demand should enable another year of solid growth in 2022. While it's too early to put a fine point on our growth expectations for next calendar year, early indications point towards the WFE industry maintaining its growth momentum. Given our bookings momentum and strong backlog, we believe KLA is well positioned to outperform WFE. As in calendar 2021, we are adding capacity strategically across our global manufacturing footprint to drive this outlook and to enable us to support our customers' process control requirements. Our December quarter guidance is as follows: total revenue is expected to be in the range of $2.325 billion, plus or minus $100 million; foundry logic is forecasted to be approximately 74%; and memory is expected to be approximately 26% of Semiconductor Process Control systems revenue to semiconductor customers.
Within memory, DRAM is expected to be about 53% of the segment mix and NAND is forecasted to be 47%. We forecast non-GAAP gross margin to be in the range of 62% to 64%. At the midpoint, gross margin is roughly flat sequentially as revenue volume and product mix improvement is offset by higher expected service and manufacturing costs. Other model assumptions for December include non-GAAP operating expenses of approximately $470 million, other income and expense net of approximately $44 million and an effective tax rate of approximately 13.5%. Finally, GAAP diluted EPS is expected to be in the range of $4.69 to $5.59 and non-GAAP diluted EPS in a range of $4.95 to $5.85. The EPS guidance is based on a fully diluted share count of approximately 152 million shares. In conclusion, the tailwinds driving semiconductor growth and investments in WFE continue to remain compelling. Broad-based customer demand and simultaneous investments across multiple technology nodes are strong and resilient trends.
We have confidence in the leading indicators of our business, including our backlog and sales funnel visibility, which is spurring us to invest in expanding our business infrastructure and the required capabilities to support our outlook. Our customers' multiyear investment plans provide an element of stability in the demand outlook for the future. KLA continues to execute exceptionally well and is on track to exceed our 2023 financial targets well ahead of expectations. The KLA operating model positions us well to outperform our industry and guides our important strategic objectives. These objectives fuel our growth, operational excellence and differentiation across an increasingly diverse product and service offering. They are also the foundation of our sustained technology leadership, wide competitive mode, leading financial performance, long-standing track record of strong free cash flow generation and capital returns to shareholders.
With that, I'll turn the call back over to Kevin to begin the Q&A.
