Bren Higgins
Chief Financial Officer at KLA
Thank you. As you hear from Rick KLA September quarter results were strong, better-than-expected and demonstrating our consistent successful execution. While supply-chain challenges continue in certain areas and are still limiting output. We've seen marginal improvement as new supplier capacity has come online to meet our requirements. Our continued focus on meeting customer needs while expanding market leadership, growing revenue, sustaining industry-leading growth in operating margins, generating strong free cash flow and maintaining our long-term strategy of assertive capital allocation is what makes us successful.
Quarterly revenue was $2.724 billion at the top of the guided range of 2.475 billion to $2.725 billion. Non-GAAP diluted EPS was $7.06, above the guided range of $5.70 to $6.80. GAAP-diluted EPS was $7.20. Non-GAAP gross margin was 40 basis points above the midpoint of guidance at 63.4%, as semiconductor process control systems, which carry stronger gross margins delivered virtually all the revenue upside from the guidance midpoint. Non-GAAP operating expenses were $526 million, slightly below our expectation of $530 million for the quarter. Non-GAAP operating margin was strong at 44.1%.
Quarterly non-GAAP net income topped $1 billion level for the first time ever. GAAP net income was $1.03 billion, cash flow from operations was $1.01 billion and free cash flow was $927 million resulting in a free-cash flow conversion of 92% and a free cash flow margin of 34%. The breakdown of revenue by reportable segments and end-markets in major products and regions can be found within the shareholder letter and slides.
Switching to the balance sheet KLA ended the quarter with almost $3 billion in total cash, debt of $6.3 billion and a flexible and attractive bond maturity profile supported by strong investment-grade ratings from all three agencies. Our balance sheet offers a unique capability to fund our growth strategies both organic and inorganic and providing ongoing attractive capital returns to shareholders. Over the last 12 months KLA has returned $5.2 billion to shareholders, including $4.6 billion in share repurchases and $664 million in dividends paid with the total capital returns amounting to 166% of free cash flow.
Turning to our outlook KLA continues to deliver sequential growth and strong relative financial performance. Based on the midpoint of our December quarter guidance, KLA is positioned for mid-20% revenue growth for the total company in calendar '22, with semiconductor process control systems growing several points faster than the company average. Furthermore, this business is expected to significantly outperform the overall WFE industry growth, which is currently projected to be up mid- to-high single-digits to the low $90 billion range.
Looking ahead, we expect the industry spending to slow, though early we are planning our business based on the expectation of CY '23 WFE declining approximately 20% based on increasing global macroeconomic concerns and recent public statements from several customers particularly in-memory and the impact of the new U.S. government regulations on native China investment. This WFE estimate reflects our current tops down assessment of industry demand as follows.
In memory, we expect WFE investment to decline by more than the market, as memory customers respond to lower consumer demand by cutting production and factory utilizations to bring device supply in line with demand. We expect foundry, logic to decline less than the overall market. Specific to KLA, we are still assessing the impact of the new China export regulations. Our preliminary assessment for the combined gross direct impact on our revenue based on our existing backlog and sales funnel forecast is in the range of approximately $600 million to $900 million in calendar '23. This reflect systems and service impact with service representing approximately 10% to 15% of the total. This estimate is before any potential system reallocation for products where supply is meaningfully below current demand, which has resulted in significant lead-time to other customers.
Given our backlog and forecast, we expect that we will be able to reallocate certain tools to other customers as we move through next year. KLA's unique broad portfolio differentiation and primary value proposition is focused on enabling technology transitions, which our customers continue to invest in regardless of business environment. While capacity plans can change technology roadmap investment tends to be more resilient. This adds additional confidence in our business expectations as customers aligns shipment slots with roadmap requirements.
In this environment we will continue to focus on meeting customer requirements, maintaining a high-level of investment in R&D to advance our product roadmaps and KLA's market leadership and delivering strong relative revenue growth and financial performance. Our December quarter guidance is as follows. Total revenue is expected to be in the range of $2.8 billion, plus or minus $150 million. The gross direct impact of the new China regulations on the December quarter revenue guidance is approximately $100 million. Foundry logic is forecasted to be approximately 76% and memory is expected to be around 24% of semi-PC systems revenue. Within memory, DRAM is expected to be about 55% of the segment mix and NAND 45%.
We forecast non-GAAP gross margin to be in a range of 61.5% to 63.5%, due primarily to expected product and segment mix. Looking ahead, KLA will continue to balance investments in technology and infrastructure to support our long-term growth objectives with the expectation of a softening near-term outlook. As a result operating expenses will grow to approximately $550 million in the December quarter with growth in quarterly operating expenses is expected to flatten out as we move through calendar '23.
Other model assumptions for the December quarter include other income and expense net of approximately $66 million and the effective tax rate of approximately 13.5%. Finally, GAAP-diluted EPS is expected to be in a range of $5.94 to $7.34 and non-GAAP diluted EPS in a range of $6.30 to $7.70. EPS guidance is based on a fully-diluted share count of approximately 140 million shares.
In conclusion, although the CY '23 outlook for WFE demand has softened, we remain confident that the secular trends driving long-term semiconductor industry demand and investments in WFE are durable and compelling. Broad-based customer demand, the increasing strategic role semiconductors are playing in influencing national industrial policy and simultaneous investments supporting growing semiconductor content across technology nodes remain important trends. These are long-term secular growth drivers for the industry as technology investment and node transitions reflect the value that semiconductors in our industry have in lowering costs for our customers and enabling a broader application universe for semiconductor-based technology across multiple end markets.
For KLA, considering our strong track record of execution and the power of our portfolio strategy, we have confidence in our ability to continue to deliver sustainable relative outperformance. We will continue to maintain a high level of investment in our product development roadmaps to enable market share expansion and support customers' technology roadmaps and multiyear investment plans. This provides an element of stability that shores up our confidence in the demand outlook for the future.
These factors, combined with the KLA operating model that guides our execution, positions us to continue to deliver strong relative performance as we execute our strategic objectives. These objectives fuel our growth, consistent operational excellence and differentiation across the diverse product and service offering. They are also the foundation of our sustained technology leadership, wide competitive moat, industry-leading financial performance, history of robust free cash flow generation and consistent and growing capital returns to shareholders.
And with that, I'll turn the call back over to Kevin to begin the Q&A session. Kevin?