Bren Higgins
KLA Corporation at KLA
Thanks, Rick. KLA delivered results at the upper end of the range of guidance and commitments, demonstrating consistent execution despite a challenging marketplace. Our continued focus on meeting customer needs while expanding market leadership, sustaining industry-leading growth in operating markets, generating strong free cash flow, and maintaining our long-term strategy of assertive capital allocation is what makes us successful.
Quarterly revenue was $2.355 billion, towards the upper end of the guided range of $2.125 to $2.375 billion. Non-GAAP diluted EPS was $5.40, also towards the upper end of the guidance range of $4.23 to $5.43. GAAP diluted EPS was $4.97 above the midpoint of guidance. Non-GAAP gross margin was 61.2%, 45 basis points above the midpoint of the guidance range due to product mix, as upside in the quarter was driven by higher margin products. Normalizing freight expenses and improving factory utilization as overall capacity adjust to current demand expectations.
Non-GAAP operating expenses were 543 million, slightly higher than guidance due to adjustments to variable compensation. Total operating expenses comprised 314 million in R&D and 229 million in SG&A. Non-GAAP operating margin was 38.1%. Other income and expense debt was $49 million, and the quarterly effective tax rate was 12.4%.
If the guided tax rate of 13.5%, non-GAAP EPS would have been $0.07 lower, or $5.33. Quarterly non-GAAP net income was $743 million. Gap net income was $685 million. Cash flow from operations was $959 million. And free cash flow was $880 million.
As a result, free cash flow conversion was strong at 119%. And free cash flow margin was 37%. The company had approximately $137.7 million diluted weighted average shares outstanding at the end of the quarter. Breakdown of revenue by reportable segments and end markets in major products regions can be found within the shareholder letter and slides.
Switching to the balance sheet KLA ended the quarter with 3.24 billion in total cash, cash equivalents and marketable securities, debt of $5.89 billion, and a flexible and attractive bond maturity profile supported by strong investment grade ratings from all three agencies.
Turning to our outlook, our WFE outlook for 2023 remains largely unchanged at down approximately 20% from $95 billion in 2022. While the timing of a meaningful resumption in WFE investment growth remains unclear, we continue to see overall demand stabilizing around current business levels for our semiconductor process control systems business. And we expect this demand profile to continue through the remainder of the year.
Our 2023 WFE estimate reflects a tops-down assessment of industry demand as follows; in memory, we expect WFE investments to decline by approximately 40%. Foundry/logic to decline by about 10% overall with legacy investment outperforming the segment overall due principally to automotive and continued demand for legacy design nodes.
KLA's primary value proposition is focused on enabling innovation through technology transitions, which our customers continue to prioritize across all business environments. While capacity plans are often adjusted due to changing demand expectations, technology road map investments are more resilient. This adds additional confidence to our business expectations as customers align shipment slots with road map requirements.
In this environment, we will continue to focus on meeting customer requirements, maintaining our high-level investment in R&D to advance our product road map and KLA's market leadership and delivering strong relative revenue growth and financial performance.
Moving to guidance now. Our September quarter guidance is as follows; total revenue is expected to be $2.35 billion, plus or minus $125 million. Foundry/logic is forecasted to be approximately 70%, and memory is expected to be around 30% of semi PC systems revenue. Within memory, DRAM is expected to be about 90% of the segment mix and NAND 10%.
We forecast non-GAAP gross margin to be roughly flat at 61%, plus or minus one percentage point as product mix expectations and cost components are consistent with the prior quarter. Given our current view of a stabilizing demand environment for the remainder of 2023, we expect full year calendar gross margin to trend near 61%.
Non-GAAP operating expenses are expected to be approximately $535 million as cost measures executed earlier in the calendar year align our current cost structure with top line expectations. We would expect quarterly operating expenses to remain around this level for the remainder of the calendar year. Other model assumptions for the September quarter include other income and expense net of approximately $48 million, and an effective tax rate of approximately 13.5%.
Finally, GAAP diluted EPS is expected to be $5.02 plus or minus $0.60 and non-GAAP diluted EPS of $5.35 plus or minus $0.60. EPS guidance is based on a fully diluted share count of approximately 137 million shares.
In conclusion, we continue to see process controls and bonds technology transitions and advanced key to R&D growth and prioritization despite persistent weakness in our customers' businesses. We are also exposed to wafer and reticle infrastructure investments that are contributing to our revenue performance. As a result, KLA remains positioned for strong relative performance versus the industry in 2023.
Looking ahead, we continue to see the business environment stabilizing and remain confident that the secular trends driving long-term semiconductor industry demand and investments in WFE remain strong and compelling, driving semiconductor demand and simultaneous investments supporting growing semiconductor content across multiple technology nodes remain catalysts for sustainable long-term industry growth. Multiple applications for leading-edge road maps are driving competitive dynamics and design challenges requiring more customer engagement and faster time to results.
Technology investment and node transitions reflect the value that semiconductors in our industry have a lowering cost for our customers and enabling a broader application universe for semiconductor-based technology across multiple end markets. While the global economy and semiconductor industry are facing challenges, KLA is well-positioned to deliver strong relative financial performance, driven by better than market performance of our semi PC and SPTS businesses and continued growth in services. We remain focused on innovation as we execute our portfolio strategy to support our customers' technology road maps and multi-year investment plans.
For the KLA operating model guiding our execution, we will implement our strategic objectives and drive outperformance. These objectives are also the foundation for our technology leadership and competitive differentiation. Our focus on customer success, delivering innovative and differentiated solutions, and operational excellence continues to enable us to deliver industry-leading financial and free cash flow performance, while delivering consistent capital returns to shareholders.
That concludes my remarks. I'll now turn the call back over to Kevin to begin the Q&A.
