KLAC - Earnings call transcript Q1 2018

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Operator

Welcome to KLA-Tencor's First Quarter Fiscal Year 2018 Earnings Conference Call. [Operator Instructions]. Ed Lockwood with KLA-Tencor Investor Relations, you may begin your conference.

Theodore Lockwood

Thank you, Christine. Good afternoon, everyone, and welcome to our conference call.

call Officer; Rick Chief and our and our Financial on Executive Chief Bren me today Wallace, are President Officer. Joining Higgins, our ended to XX, here discuss results the We're quarterly XXXX. period for September results this X:XX We released afternoon these Pacific at Time.

calendar release, as haven't including our in results this to filings, found of it of on can you Investor impact for be you'll on you'll section find our reconciliation filings, financial be will presentation of that in of website. be available can well results. at If KLA-Tencor's Today's unless our of basis, of June A results events, SEC on following you factors A the its on those Relations report GAAP website completion the www.kla-tencor.com. the There, XXXX. future find and could in presentations presented as year-ended a our earnings today's XX, discussion risk the investor non-GAAP to release links future conferences seen and XX-K financial Form the website. will simulcast call our annual on specified. demand find our press Investor non-GAAP descriptions also otherwise detailed In

true. and future risks, to KLA-Tencor make statements, including cannot on As those results those are you those risks. guarantee know, statements we subject are this our subject Any come will to forward-looking call forward-looking today,

significantly from turn may projected differ I'll Rick. the statements. actual Our to that, our over results those in forward-looking call With

Richard Wallace

customers continued diluted quarter, enabling innovation of record earnings from report industry. the and process the and our demonstrating memory the strong featured pleased control revenue I'm delivered nature share semiconductor once the demand successful and the long-term of per and Japan regions. to growth from critical strategies China Ed. and in in QX Thanks, results execution in September again shipments, results of KLA-Tencor non-GAAP that

revenue and market company more and XXXX with ever a and time these to new company industry, KLA-Tencor This totaled opportunity given record on for the the by calendar basis Coupled backlog, in for and supported highs stockholder $X continued returns for orders and billion and very year-to-date September the quarter, a of strong our stockholders is now new approximately to than earnings leadership for XXXX. road our The technology third position point for our and momentum and exciting XXXX. features ahead in growth for orders deliver a were our company results New strong have the leadership. calendar in before. market

over customer minutes call a drive KLA-Tencor's the innovation, like continued solid the for to turn our I Before record-setting take and to success, strategies how highlight are for are talent helping few and in foundation future. Bren, growth today productivity I'd building to performance to a

success KLA-Tencor grow with are The significantly region inflection their position KLA-Tencor's market collaboration for efforts. year semiconductor our The first integrated our domestic engagement objective process growth. process is enduring goal, our terms China is on control is success and with expected is to solutions. adoption their for partnering control the the current and are in momentum and of to in execution both enable levels market growth. the how in and investment and rapid in success challenges future strategies The market, this and challenges of of overall for this and customer in customer node in an China's China complex is XXXX, focus our calendar XXXX. technologies. develop to of we achieve We customer focus successful us of solutions most on KLA-Tencor anticipated customers, use empower differentiated most enabled the drive To help business at our WFE fueling to example should this continue strong Business industry an customers driving share. through innovation tightly by yield yield growth

high we are developing major Today, of innovation adoption to and are with higher X in from control modeling enable and at drive platforms, which memory, investing that specifically a are our very technologies. We in services level most a succeed steady to will their of in process XXXX. critical X technology control stream customers process and advanced record revenue and we're customers solutions deliver targeted memory

specifications long-term and we're Gen needed more experiencing with to memory manufacturers customers have and moving cleanliness inspection unique environment, check these wafer higher-layer stringent that metrology process and momentum illumination support example, in wavelength to tool this continues is as to developing from customers bare In gain a support is experienced our see cash of execution industry-leading X-nanometer I'm are the to KLA-Tencor's objectives provides technology, architectures. our wafer wafer commitment logic these record adding margins global future to we on business new X-nanometer market of from tools we strategic of to execution lie finally, talent high-caliber technologies. Ultimately, report operational node. core well of continuous flow universities. to the marketplace. A talent customers strong from top excited of our for and success. broadband advanced feedback, growth our of initiatives increasingly the print on factor of bare attracting, wafer been more an advanced strategies and Gen wafer seeing component on on centered We're EUV leading strategies, IC playing graduates our and customer's excellence. new recruit the ramp complex success to and X in candidates stockholders. utilization continue customers demand, as investment X's increasing resources demonstrated and results where and are and also and are the ramp talent Through our We Based role growth on products. platform and accounts at productivity in workforce. focus For discovery the is Wafer worldwide Gen inspection leadership foundry it value inspiring X in installed in X-nanometer our talent. our key of being and results development the And plasma third on our to applications. returns ongoing even and levels our products capacity the range in and flatness development expect larger

company with demand. overall in our to an So for and results strategic exciting this the is record of summarize. in another of Clearly, quarter time the industry very an demonstrating strength QX strong objectives KLA-Tencor of environment reporting

momentum set for another anticipated comments. the the record-setting today, is now we with XXXX, to ahead entering Bren year call backlog his Bren? I'll stage experiencing given the Looking our over are for KLA-Tencor. outstanding turn to And and for year the that,

Bren Higgins

and Rick, good Thanks, everyone. afternoon,

with wafer shop non-GAAP per of for above customers. were highlighted execution and revenue portfolio from the September Shipments opening strong came range was for Rick KLA-Tencor. another end solid and in driven the was product record the As the continued and across quarter in the GAAP to quarter. $XXX each guidance range share record demand captive memory our featured demand the million, operational his at results strength earnings remarks, diluted for by mask a result company memory, particular driven This of top by

last gross Our and share with non-GAAP XX% records deliver earnings $XXX excess on reconciliation over margins QX. $X.XX. service per diluted was per GAAP the Revenue quarters. continue in of find organizations were earnings of X to manufacturing strong diluted leverage press In in operational our to share million, and per was earnings per and $X.XX. Revenue GAAP incremental also Non-GAAP earnings revenue a growth our share was you'll diluted share. release,

refer covered release. the of With in the the press exclude my GAAP when exception be adjustments to on commentary I focus results, which the results, non-GAAP explicitly will

of investment turning by environment of production X-nanometer XX-nanometer the legacy in in for demand the was and September technology in highlights continued Now of anticipated Foundry shipments. an customer base for by and investment terms driven nodes. to in shipments development September quarter XX% broadening

of to DRAM shipments modeling December Memory split and currently are total deliveries in of evenly between be foundry approximately the XX% quarter. NAND. with was the XX% We shipments

shipments memory December customers and Logic XX% about approximately be flat in to of currently of total currently quarter is September representing in with shipments are XX% NAND quarter. to memory mix. in the We the December forecasted was about the of to modeling be the XX%

shipments; approximate the shipments. distribution by was XX%, reticle our Regarding of back-end includes was of patterning shipments XX% patterning inspection shipments of Wafer from our XX% component business, inspection service approximately product which was was group. includes X%; and inspection non-semi, business;

of shipments grow forward, this At the billion. and we $XXX first strengthened last the we course quarter the expect for the in XXXX million to are the calendar of second outlook low the July. shipments range equally compared in This modeling with balanced call year over to be December Looking half $X.XXX be since XXXX point, to half roughly single half-over-half year. is of earnings our digits of in

in systems now income Turning Non-GAAP was of range business, December a better-than-modeled in expectations XX.X%, $XXX of statement. million service finishing were gross business. in expense due stronger-than-expected million number and $XXX range at the parts utilization we the above top million the the in to product expect in of the of quarter labor quarter. including and favorable range favorable the the to and margins The September, of to for factors the mix gross the the the $XXX guidance, in be revenue Revenue to margin quarter. was

Looking to the non-GAAP XX% updated operating gross a levels expenses for margin outlined XX% operations. forward in $XXX Total quarter-to-quarter to commensurate This was earlier the the billion in expect expect to result service our target and our year. were December billion $X.X in and range in line dynamics as XX.X%. of million the mix revenue is $X.X annual non-GAAP to margin in we September, model we product cost in quarter, non-GAAP manufacturing margin operating we that range operating with be service similar with

to the be We operating expense control for the modeling and due $XXX programs reticle targeting quarter to levels to process EUV development December in expensing related other million approximately high-volume significant of expenses prototype applications. materials technology manufacturing are

operating are CY be sizing company revenue year $XXX public with approximately 'XX, Given model. currently operating our per for next million expectations to consistent levels expense quarter, we

items manufactured of was the Our the discrete reflecting of guided the XX% mix rate. non-GAAP impacting and or tax for higher developed certain products effective and the quarter, tax in from revenue rate other QX below rate offshore XX%

quarter, due we December the XX% expect to tax rate the similar For factors. of

in rate to on XX% we due to the planning For calendar our are based rate adjusting down mix intend our periodically revenue long-term the to tax anticipated expectations. 'XX, tax guidance We revenue the year. largely update

the XXX million Finally, September $XXX ended the quarter non-GAAP net million, diluted quarter was and outstanding. for income with we shares

the senior with flow free and from outstanding to billion, compared to $XXX $X.X September, million We and in cash the $XXX sheet loan June ended in cash an operations Cash and investments the outstanding retire statement. our upon quarter. $XX balance million in term million. our increase flow was $XXX Turning was of at quarter X.XXX% Cash the our X-year now and notes $XXX paid million expect towards maturity November. quarter million

the all in of stable business fueled continued industry million aggregate quarterly dividend paid the today's stock year, model. reflect WFE overall growth vested strong position critical the we an equivalents QX, of during Finally, in and results and nature as $XXX strong our the end control fully customer company segments In and of total conclusion, for expected industry-leading our in the continued by This, of environment. restricted process calendar regular units. dividends backlog leadership, market for

consensus This in are and GAAP shipments as $XXX quarter $X.XX $X.XXX $XXX in this Given memory, strong the diluted range next EPS products $X.XX to another With in memory million million in our high $X for revenue range well guidance and to to the revenue that, year assumes WFE with $XXX control improving quarter. investment, $X.X non-GAAP of year, the revenue I public model. of to guidance from modeling process to over my digits growth is billion is the EPS December be high the growth expectations continued $X.X Against diluted the expected the operating line in expectations as to the our backdrop, contributions call share December new billion for begin single-digit annual in mid- $X.XX EPS Q&A. per intensity we revenue share. services, to total for billion, range of business in remarks. XXXX. our $X.XX per an million to Ed and in billion will annual performance outlined of conclude, single XX% to now The back between tax quarter in concludes rate range turn

Theodore Lockwood

open the ready we'll Bren. first this for right. Okay. the At call All we're questions. Thank Christine, you, point, question. [Operator Instructions]. for

Operator

Instructions]. [Operator

the Crédit comes Ahmad question Farhan first from line Suisse. of Your from

Farhan Ahmad

My segments for kind of Can have about memory, you growth last foundry where you flattish? and is your strengthened XXXX. first do talk versus on just terms see since of you And do outlook question in the outlook? what where see

Bren Higgins

Yes, Farhan.

I Bren. So -- think since it's last

certainly last I in in call, has strengthened over X we're which since you this the seeing call. provided expectations our months, next So to details for the and forecast, our outward some that last year

ago, the when think I the DRAM data, like stronger be now months what still and I in looks strong. to think are XD is investments we look also we thought I that flattish. than probably continue foundry/logic think think happening very at I NAND, that with few to expect we a it's

flattish think weighted more foundry/logic see the course flow it But largely year. higher. overall, and over I we will segment shipment as the think probably profile of be slightly logic through half be I second will the our

Farhan Ahmad

And guys are check. then print And opportunity print right Have what now? could what seeing interest the the sized question customer one on potential check? you that is you for the be

Richard Wallace

Farhan, mean specifically EUV? you for

Farhan Ahmad

print terms could of technology, large market be. Yes, EUV how check specifically for in that

Richard Wallace

Yes.

with HVM. then start about development think let's Well, Okay. and

a there's work. of lot development, For

X In systems of fact, fair Gen development. capacity a amount check print being for the used of and are

now, expect I tool the that the market tool for but gets that when. because it grows reticles. into how a big inspecting little the right a of say HVM, get When available would consumes it and just we of I'd of don't part So we think But use us. essentially adoption different. consumes think case a It is that, depends for technology EUV of on it we

won't check actinic market And first print tool so because be higher wave that there will the in-fab tools. drive of for the reticle an for

from grow them. think size So you'd I in see it

production, EUV scales, for grow We in haven't commensurate. sized think company for exactly, I the as adopts every applications but it will EUV check the that print

tools couple it are gets that. maybe driving to So that a per customer

Operator

Your comes the next JPMorgan. of line from question Sur Harlan from

Harlan Sur

based X-nanometer your your up Teron Just like platforms. heard EUV on and some And prepared follows of have kind to momentum some that guys seen question it's print you plus mask on platform looks check. reticle at we've last the commentary, inspection Gen it X of inspection,

recent the nanometers SPIE EUV kind multi-beam current and multi-beam insights color versus would few team you actually there e-beam at and you're maybe technical time targeted the is nanometers but developing? X-nanometer interesting it's a though, talked For below, inspection be still symposium, tool on of I think below. this because a that for reticle think I away, give it new in What are X guys Can KLA the us about going some at platform just When some imagine is available? would X years generation? great. be I to know benefits Any XXXX? more I

Richard Wallace

Harlan. Sure,

implement with inspection for years and developed ago, a decided a need reticle, players make tools platform the a ago, with you a than reticle as for as to couple fair is number sensitivity the think they is inspection inspection and be develop So whatever implemented, tool it I X, mentioned, reticle print reticle X platform view now is specifically by And design point inspection, tool being check customers, tool that right several our our X-nanometer, Teron and need. more for for to reticle we X for with will our the we -- on to an from going modify economical Teron wafer efficient you're serving market the strategy target optimized the Rather of the and right degree, customers. Gen us. for most was for an solution But e-beam that out the combination a years reticle.

of that introduction So we about in we X-nanometer. targeting tool that, progress expertise. the have that think to of and time feel XXXX a lot We very frame are good intercept of we

Bren Higgins

remarks, this in prototype is investment our that some Hey, One we're uplift driven other seeing, I onetime this is but quarter, said December Bren. the in seeing Harlan, here the the of expenses I'll program. make, uplift we're by operating one that prepared for to and it's expensing we're point

and Rick's plan. make seems of sense So according progressing timing program's characterization to to

Harlan Sur

seeing then domestic your of the are the you that And guys R&D Great. activity suggests memory commentary some some pilot programs. China China on on of

said you playing think year? Is it's guys. of I that control And you be secondly, Or your guys to Are versus to some intensity more tools points trying next business, out? in is the they're mainstream kind pipeline. XXX the general always these of quarter? of on of this how first have the that about China going basis show process higher half up shipping is this here in kind domestic

Bren Higgins

your projects ship tracking, ones of -- this we that Harlan, the next a booked so the this NAND quarter significant of part first see and and that those orders memory back time for XD booked we probably end so tail out June the end to a there's So we right some quarter frame. in at quarter. for towards for on quarter this significant new your June The also the the into we'll project for X start installation orders of will quarter, at in we're project, about ship orders question, quarter DRAM

P&L as So bookings next double over a from will from I to your at year. China profile order last see described And flat the year. was more the we looks business weighted in versus we question, -- to start there. up it's to little terms to probably answer This that come in the and XXXX, like as look memory of year

Phase pretty the these fabs. play with So on a as investments, based a significant there. role early Obviously, activity ramping significant X amount on they're success of we

better just also is technology the quickly. to process progress bring their the able higher. a And control And these road these be to in experience fabs we memory, help the of navigate lot and to to because -- matters economics so these customers Share of can intensity projects. the ramp yield tends being obviously, map

Richard Wallace

these not I to -- to at-scale just the particular, remember are But think add greenfield, in that, fabs.

So was where higher Bren the we're as at end front intensity saying. is the

I managers will in in them to are control we memory some developing see fab advantage their intensity see the higher. we investors China time we'll in memory that and been have so we've beginning other for maturity in is in those, platforms market that the will are don't the more come investments, support to the think focused of process necessarily the It's efficiency the and But ramp. all higher. China on the so at subscale very fabs of the

Operator

the of from Your next from C.J. line question Evercore. comes Muse

Christopher Muse

XX%, First Is you the Can to just that gross quarter? the in the what's margins. in driving through XX%. not definitely XX%, last outlined Though margin question you And around greater if on with if target line December hover X higher. uplift model, walk in look back as X, think gross your X, revenues? you I you XXXX, the simply quarters,

what whether should or your of drive that just you're the target So model mix-wise that thinking a mid-point we be to about bit. might curious being conservative

Bren Higgins

first, expected experienced of next tailwinds gross see year. Yes, look going into we've as sustaining next at and in on at last continue mix the the business, we're part look and that that I likely we see think margin that we'll C.J., year to

be to I'm year, the over as XX% year. I'm course the next may XX% as it modeling between So as high modeling of

is driving product and lot and it adding think we're continues, pretty a product differentiation playing the out the it mean, pricing. to So of clearly, and is I the same value I in factors. customers positioning the what's --

of some amount We climb tools introduction Korea of well. things. and kind been get able been or quickly been over pretty warranty cost I months has to We've engineering and XX great, pretty to the Taiwan. can on resources we've leverage of the service those out and the of our added products last so a up of -- as able installation we've curve leverage so think the new the fair business execution into

they're all, of think sustaining and there's as we think into fairly I a progress that So next year. all in I factors, number

Christopher Muse

of guess as the today, I follow-up, in ideal control that you guys if about intensity. process greenfield think the And through helpful. you that's my flowing terms Very would be typically, time activity for

hear from well So thoughts your foundry you're to curious as seeing as perspective. a logic what from perspective both memory a on

Bren Higgins

Rick seeing what about we're think in I memory China. Well, and talked a from perspective

customer on I point, outfit I I to think scale there's And -- is generally unique. back they the end. of that. is participation ramp. Rick ramp will China fab we anything mean, they participation over mean, fab as as across that a don't then a a established front the on as fab, for talked the see customers, And higher about there different. that I time, think foundry/logic, that probably level a new

a same of There's normal follows the normal productivity. what a the tend more levels development I defect discovery intensity participate fab time of ramp above move happens they little think fair from are. over that and optimize activity level to it to sort bit to model. the customers for we then upfront, amount try as line or monitoring, And

Operator

Your next Mok Edwin question the Company. from of & Needham line from comes

Yeuk-Fai Mok

of I guess, just little first, look a term. longer So kind

of some think kind of guys 'XX. you second including XXXX, I outlook for color for half provided

you before. guys? What better by now visibility curious, It you better a you that's improving confidence? away. than seems that for quarters gives Just have What's like visibility few in

Bren Higgins

looks us profile. of we on views Well, like bringing for at good look the the this we in first gives statements into into pretty the second And shipment orders we're into second so the look based the profile expectations about shipment and year, and at shipments the the the it as backlog half. half year point half were into the our

reasonably million next And at as balanced about look quarters. range in plan this the shipments of billion of $X looks feel, we or $XX we're plus point, the over at we across least So this at it several our year. minus

are out, slotting that's looks. how ways So and a change. our how manufacturing still operations, on how planning it's things customers it and can based we're But

Yeuk-Fai Mok

fair. Okay. That's

for rate, than look growth rate the of service peers is your higher a they're on double-digit is other your of some equipment the kind service, which pretty If you of manufacturer, mid-single for your a actually think business? I you possible service is have growth service Or that of and of reasonable being I that some see growth kind historical. Do side digit businesses. business? seeing strong at in question Second

Bren Higgins

Well, in service about will like calendar 'XX looks grow XX%.

Now growth that has let's been its you back historical go to, XXXX say, rate so play if X%, or and through. about

Now every it should, the growing. base installed is it as grows year, as

So service, of think we seeing in our the over can and in historical discussion acceleration are an we rate. we business maintain were open last long modeling with that our service the for run this just growth its

obviously So now fabs and so the we part to legacy IoT time. probably and how running runs the to but fabs installed on. demand X% the service and what's it over automotive mature And base, meet of think driving they're of also growth X% those is and

nice. contract. one they're running So longer, harder, tools so contract of about running about streams business those it's to new And the so They're and we're is service to them XX% capacity and thing are tools. adding service the some XX% billable our

very build that around with. stream can cost we So move it's and a structure forward predictable our

Operator

question next the from Hari Toshiya from of Goldman Your line comes Sachs.

Toshiya Hari

the opportunity be months? on view guys say, XX initiatives know over you initiatives years? memory how next the us with you to I big those could next, in couple product process perspective. How XX remind working are the a from control going over you of couple memory in intensity Can of forward a development And

Bren Higgins

NAND is NAND across for was XX% and Clearly, intensity intensive at we are in also only look planar DRAM, around more there more around think around control at several process flatness XD or talking terms that we been for months, memory on probably business One specs and of as some I so. today, and Planar for we've DRAM XD defectivity in in opportunities but XD increasing for so to wafer NAND XD if our driving opportunities in versus was metrology for And we're as X%. also X% structures. NAND, than metrology's that's Yes, total range. always around been and planar in structures thing about memory, various think not flatness the X% NAND. inspection much

but wafer that show we've customers memory, seen able that's new effect to our our more And challenge. in certainly be a meet spec investing to wafers up IC some be positive. it's customers necessarily derivative the pure able to so for IC to produce numbers That capability of doesn't from

some that offerings we that associated we $XXX that's over million in these it an 'XX. be time line drive So can the magnitude. think $XXX can with make There's be across think to opportunity But adoption see X don't that, that platforms. on think that progress we million you'll an I both probably I time, an think in if that's problem, that. there's could solve can that -- we opportunity to

Toshiya Hari

have some I peers comments of I remarks. prepared some your business made guess Okay. manufacturers in Great. perhaps X access your And your shops. mask guess that with some are as about the of even the a wafer follow-up, groups of customer you talked and necessarily to. guys have these some you don't

the groups I how today? a as big So about X sales of I percentage curious, these spending into what's kind of when their is customer are And patterns? outlook think you was guess -- big how XXXX

Richard Wallace

out, it that we new when Well, are case we see significant. but technologies. is -- don't break it is when there often specs products when adoption new and new is it of is And the

more as critical. we And and But basis. less pretty then significant, it the our usually, little a in especially mentioned products. it's Bare we on mentioned we the the reticle of mask tools annual isn't of being inspection defect cycle an but but it but shops, bit both certain of flatness for out, break is for registration, also overlay also investment wafer those in is -- waves for something and course, significant, inspection. So

Operator

line Jagadish the question from next Iyer of Redstone. comes Your from Summit

Jagadish Iyer

questions. Rick, have two I

you -- a on segment patterning the please? for in driver nice had What the uptick quarter. First, in September the it, real is

Bren Higgins

Bren. Jagadish, this Yes, is

reticle So was inspection. that

from activities quarter booked mask And that tools couple captive of -- so for a in we we development the EUV focused had shops. on

Jagadish Iyer

wanted think here? Okay. and as starts Fair overall high-level a of should next as year, and to understand, XXXX? kind in thoughts how now puts takes multi-patterning insertion 'XX I then the market EUV at we given And be follow-up, changing initial Any make control just the all process the enough. to about how least could about

Richard Wallace

Sure.

I we're seeing different control of at a big of it to capable about. think it net of a there of think in are things The really is does change point, but to all business. process move intensity, this couple our not, parts

we flatness more now even for on wafer manufacturers EUV. For pressure example, there's know right for

So example also And where to the fewer unrelated, Gen and also seems layers. think support but there's an higher like perhaps print There be X more. get we'll what will EUV are production. initial adoption application that we check

So the number areas, new reduce, -- some there defect we'll we'll of types. steps, but are of the reduce films

-- we X-nanometer go get of are we for the that in to Where then terms we is the in and difference when now EUV. right with So more flows we model, flow to overall we capacity, the when we'll reticle it about we of adoption see both of XXXX depending capability the what don't talk of number see matter like will the on and and gen new believe it's there. look as increase already inspection, impacting success start would have later a a beyond, lot or process some for as Teron forward we and

Operator

Patrick from the Ho Stifel, comes Nicolaus. question Your of next line from

J. Ho

lack the manufacturing, question the the optical potential, tools of increasing inspection a see as inspection EUV, outset, the to least that the at is at offset least could the as actinic at given last outset for there to actinic high-volume it inspection? goes lack you at Maybe to follow-up intensity on

Richard Wallace

Patrick, don't think so. no. I

I served by in current of generation EUV if think Teron the be high-volume, the it's will that done the platform.

I the frame. for high that have. tools that. But production to when XXXX time when tool, don't few covering we're market before the actinic need in we potentially fully also think a toolsets them that we the We next the reticle years at with time we at see for think will EUV need get the be NA sub-X in maybe the EUV, XXXX, for frame, that's probably which a but come there'll

J. Ho

my in Great. helpful. of question That's And follow-up China. terms

where to in memory a about develop process foundry is of and How to and you the also and mainstream for logic I at, levels of XX-nanometer some guess, are of of opportunity the guys given you the it starting start what you process nodes, opportunities that there intensity? some already fabs high that some the be going activity have are though talked buy. control some even China that seeing and even look terms node You of does fabs in are the do that you're more control little the legacy tracking of

Richard Wallace

to with Well, we've tend bigger right, seen look some fabs the already again, because scale those And than at invest for established world giga players. of in elsewhere you be that, they those and nodes. to, have fabs do the

reusing have any intensity, So that interest the option of by we new do opportunity when process control those of equipment, those they're and there. facilities, up, We definition, do And course, increased coming see other don't higher. see they're they greenfield so is nodes. in

So memory be the but were weren't that ago, China, say we opportunity. continued we there in we see, so that a we think envisioning anticipating And actually I'd year logic. we're seeing will didn't now initially,

in for and with we've design cases, even old to support products have, So prepared that been lines something are more restarted for it's those them some appropriate rules.

Bren Higgins

-- for was 'XX weighted Calendar at weighted; it's look I yes, 'XX other look just 'XX, memory calendar mix the comment. mix at If the slightly more If memory. foundry. was like one looks foundry than it I more

more So China that's investment and foundry business. expect the I would that native region, 'XX from in

Operator

Instructions]. [Operator

comes Crédit Suisse. question the Ahmad line from of Your next Farhan from

Farhan Ahmad

dividend. XX% about XX% this year you've your a around year, long-term dividend somewhere earnings. And next right to question the model, If payout for your it's on talked XX% now, range. look at XX% I Just to

So to how the XX% should we going think to planning the forward? dividend stick XX% to Are range? about you

Bren Higgins

June, raised Yes, it's mean, a dividend question. good I raised back Farhan, almost we we the clearly, in it and XX%.

strong. Our business and been very strengthened has performance model -- the the has and

when that in that's to not it be mean, think over obviously build time. you're but XX% maybe also we it in to target. going target it -- a but that's way outpaced about We being to is XX% that maintain we've able raise talk [indiscernible] because target I when that only weaker want that you X-cycle periods under range, clearly, it business have strong, just to business times. sort So of it, to about

dividend rate time, earnings. the total we growth of the So over the in target rate growth payout versus

the than you look And on so we that dividend X%, bottom see grow to the grow XX% XX% if where at we can greater we we'd the our right growing in model that, that payout range. now than line top line think greater X%

you years and couple to a a business X can ways now clearly, I X it. with at as grow it different mean, or there's continue raised look we've row. the So in

our this and that planning a year. very as So on for we consistent basis, we'll annual through process is strategic the run process complete again an process

Richard Wallace

also, revisit imagine, that access if the policy we to we ratio. there And had more change of tax you payout in as can a cash, Farhan, would were and

Operator

next JPMorgan. line the from comes Harlan from Your question of Sur

Harlan Sur

in kind terms Just of following up of capital return.

target of you level So your get are to some going it gross time looks $X.X like billion guys debt soon. very to

guys your think leverage already target you are ratio. I at

pretty a time, a lot period in cash flow. to you're going strong So of have excess free short of

had of, capital business; You focus strategy a strong one, return. secondarily, on then and number have the a in investing obviously

you do think a i.e., stock uses this like free for program? flow, something how about on repurchase excess So cash turning guys

Bren Higgins

we back on through month. right? As we ago. so next this Well, right buying couple note stock And quarter, a started get all retire levels some of we quarters next accounts, modest you're

made will back capital we we restructured when structure the consistent the company in with back We be that of XXXX. commitments the

our leverage levels. business, the of strength below the given we're So

not in reason -- to repurchase. And us believe, I necessarily to compelling there redirect, term for the we And delever. shorter so is a would towards share it's continue

right, terms given the the offshore the range referenced you're there part of flow But doing lines, XX% as XX% strategy. Now that end And in part our that we've is become there cash past. the invest process. year our and is first dynamic of structure flow. lower the and cash to product U.S. some next And in run into will through will company -- probably capital foremost, available, we're our U.S. the be of in our we'll that target then of at of secondly, cash And we that. some our I is and cash think and business, of flow strength

so do. be opportunities we against at will return our shareholder juxtaposed as growth and will And that look something alternatives, of it's DNA part we

So announce we something I'll have when something.

Operator

I further the back no call over are Ed questions you. Lockwood, time. There Mr. to this at turn

Theodore Lockwood

Thank our today. you, for rest all, conference All Christine. us call. Thank day. concludes the right. Have a This wonderful joining you, of

Operator

This concludes today's conference call.

disconnect. You may now

KLA (KLAC) 26 Oct 172018 Q1 Earnings call transcript