KLAC - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Chantal, and I will be your conference operator today. At this time, I would like to welcome everyone to the KLA-Tencor First Quarter Fiscal Year 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator KLA-Tencor with Investor Lockwood Relations. Ed

begin may you conference. You

Ed Lockwood

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

Joining me Higgins, and Chief Officer. on our Executive Wallace, our Officer; call today and Bren our Financial are Chief Rick President

are ended XX, afternoon period at We for Pacific Time. results released September today quarterly XXXX. to results here the these X:XX We this discuss

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

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

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

Rick Wallace

adoption control the September and of quarter delivered benefiting market technology driven diversified our from strategies company’s Thank show compelling value further company KLA-Tencor process growth electronics expected they and NAND, markets reach quarter acquisition, critical and outstanding And the market you, in such the the China leadership customer Furthermore, by its as also core and Ed, and the enabling new this and technology portfolio competencies industry, and to in and extend new industry. technological for EUV service our market today. you its results diversification. opportunities. chain, beyond will with their the where complexity thank growth extend vertical enhancing inflections services of KLA portfolio where success. address quarter, demonstrate semiconductor rising Orbotech into value September is company’s closing semiconductor nature core leadership, for including product enabling and and the in The another the our can product revenue is WFE us all result in exciting joining KLA-Tencor the of the markets

markets first, perspective remain of XXXX several innovation underpinning the factors end driving industry of the we of diversified is and technology sound. and elements, result semiconductor. This including leading-edge capacity and device design complexity on market-driven recent The of environment, some the from and address capacity levels advanced believe the for industry wafer key the XXXX, investment for into ongoing adjustments planning current commitment increased high architectures. logic fab the to notwithstanding, required investment disciplined more to demand customers demand equipment delays half in for roadmaps, second customers Now in spend the long-term in memory

these the expect company, all industry and the and delivering opportunities creation We for stakeholders. our persist growth drivers in industry value long-term for will

region is market are in and of learning. industry semiconductor growth control, in highlights company’s recent technology Moving in now first, yield this KLA-Tencor on to level high execution leadership, focus process to Memory and helping and market leader the that foundry enable accelerate in investing to a successful of the process the strategic manufacturers demonstrate China. as development the

technology beyond initial with in in roadmaps a phase investment to progressing new customers continue China ramping the multiyear We of production cycle. expect momentum and and their in XXXX capacity

waver at and increases including tapeouts EUV service this products. development. and customers to to of more aggressive wafer be of in of leading bare wafer, several for quarters, as node X-nanometer past inspection Growth are is In development the all with our wafer ramp mask customers cleanliness. in inspection a products to finally, over in bare the capacity Additionally, mask metrology KLA’s to have number in and supply tools essential foundries in growth memory. helping flatness These from business specification and capacity design planned customer stringent highlight. high business X-nanometer, the demand in market-leading continues meet begin inspection And for CapEx enablers a key KLA-Tencor we these address exceptional also expansion segments consistent seen are support

creating with new summary, September Going the opportunities current In high call upgrades. services at forward, company’s fabs the leadership. deliver delivered turn installed of enhancements and double-digit with near to business low revenue it product as market is driven historical at strong to is consistent outstanding low trends. the Trailing the from node well running trailing volatility expansion Bren, before growth to in the from on by edge. single-digit requirements tied for utilization, increasing a Long-term and base, performance are edge quarter, the over full annual as uptime to and and KLA-Tencor currently growth I another trajectory execution production

and to diversified like we finish Bren? and in over strong customer positioned critical his Given of services growth call the I’d our the turn marketplace, are Bren products results. to success, the a financial for role for momentum review the enabling play in XXXX. in the company’s markets now

Bren Higgins

afternoon, Thanks, Rick, and good everyone.

tax between new law highlighted remarks, all of $X.XX billion, a the end share, and diluted GAAP guidance the revenue, in opening United diluted adoption new share and taken per non-GAAP at earnings quarter. per tax were the benefit the non-GAAP and and earnings $X.XX. in financial in States. quarter Rick share was his was Revenue related September non-GAAP our earnings GAAP $X.XX diluted in were difference earnings guidance company. in discrete the Shipments, The of primary range margin affecting upper came quarter to of the the the per delivered GAAP excellent As results gross for

results year since the XXX a reminder, adoption reflect first of revenue this our new quarter of As is ASC recognition. our the XXXX, for fiscal

We non-GAAP the In the results earnings the will all we the adopted new guidance reflect not and results our under of to you a and adoption provide previous financial reconciliation retrospective have new using exclusively standard plan release, modified revenue color of to do find approach. GAAP in commentary standard. diluted our share. Therefore, related per any to press the today’s standard

the unless adjustments release. results, my refer results, which GAAP commentary focused be As explicitly covered the a reminder, solely I the press on non-GAAP exclude to will in

of September demand in driven billion, $X.XXX and strength expected the terms the memory the midpoint -- and for Now foundry total shipments quarter, by of environment at above shipments, of for the the for an guidance sequential highlights million customers. in were in increase shipments $XXX top-end to

$XXX December shipments billion, we range are in to early of million forward, Looking with be modeling consistent the update to quarter a we $X.XXX provided in September.

is XX% show of outlook and and of foundry logic the expected consistent September. shipments by be second a shipments in was DRAM of development current from for X-nanometer memory. to XXXX with shipments first from the starts XXXX modestly customers Memory of first the in period. X-nanometer activity, balanced in The compared total accounted customers XX% driven for to calendar mix in design system is half accelerating half the momentum half higher in shipment XXXX. Our profile of investment

December. the We in in shipments, and of billion includes shipments of statement. of XX% and was XX%, XX% XX% now is the expect shipments non-semi Foundry of reticle group September memory quarter product by was is the X% turn Logic XX% the component about X%. wafer at in logic total approximately The approximate inspection I outlook strong total QX inspection, service be current distribution be patterning to in of Revenue to $X.XX for be and was and the total the guidance. range was September XX% December. was income to were of and finishing shipments in inspection top-end was, again will approximately quarter patterning of XX% to and of in shipments. the this forecasted shipments

in million expect mix gross to the related XX.X% of In prototype margin to be revenue strong range lower we margin for offset is as and investments quarter. to were product September consistent billion and in The with of to margin XX.X% gross materials. $XXX the were than We driven $X.XX September, engineering the the upside manufacturing XX.X% driving in mix. non-headcount factors product range expect the trends, service for to the in of to margin in operating guidance recent with December was performance also the issues timing be weaker due were expected top-end the quarter by December, quarter. Gross $X.XX billion a at expenses largely higher slightly efficiencies. Total program by as

with as operating We approximately million driven expect program the expense around December timing expenses to in principally to costs. of the level expenses modeling development the incur types quarter, midpoint, this by are variability be operating these those of $XXX we at

the Tax rate XX.X% U.S. Act further in as was implementation the Looking our the requirements rate forward tax Cuts an planning provisions $XXX Jobs million rate. quarterly the Operating our of September and product quarters, mix in million XX.X%. -- we and in program the $XXX planned and effective for long-term business expectations. the quarter are tax was of based expenses below current next operating and The legislation to in XX% modeling range, several margin on topline development impacted

provide We the acquisition report update will to of company an results the inclusive Orbotech when December for quarter. planning we rate the for the

for diluted ended outstanding. million fully income the XXX.X net shares quarter quarter we and $XXX with Finally, million was the

billion. investments quarter, dividend for operations Cash turn of December sheet at fully-vested flow you stock repurchased count highlight of million and now the XXX cash $X.X should paid was and I million. to pursuant stock for cash and For program. $XXX balance an our $XXX in repurchase from units statement. and we were flow aggregate September, and to common million. share model XXX dividends million $XXX was equivalents regular will share the In free Cash quarterly million approximately restricted

expect consistent buyback an this and repurchasing the with program to We conditions. previously subject few shares are to over currently articulated market under authorization $X complete quarters, existing next approach the billion and

Orbotech X completion of We acquisition. have authorization share for repurchase an additional billion the upon

new in transfers and will narrow period a we recognition difference of recognition customer. ‘XX and legacy revenue expect we are the plus the time recognition our technology These Based forecasts, range fluctuate Under revenue control from on our refer the in basis results our time please the product customer ASC control the to to be generated In quarter the standard customer’s and previous under the largely of revenue conclusion, see by the reconciliation favorable calendar in standards. ASC standard. in demonstrated between detailed differences points. differences reported principally leadership, the industry-leading standard legacy the in XX of and a timing reduction revenue but XXX and quarter-to-quarter due of in The minus recognition, quarter and growth driven KLA-Tencor under of strategies business multiple new filing to shipment revenue company’s XXX, and model. XXX, in nature revenue current the X.X% between for the and our Finally, could or for critical the to shipment horizon. regards to to the reflect process the over by adoption September value by XX-Q products’ mix in compared ASC

million between and non-GAAP billion, Orbotech expansion to process quarter represented range GAAP at that $X.XX EPS EPS the to guidance $X.XXX for revenue coupled to new $XXX market uniquely of to market share, stockholders. billion we $X.XX for billion summarize in per the $X.XX believe With deliver per $X.XX acquisition, control KLA-Tencor well long-term $X.XX share. to as is, shipments leader As pending value per with in by $X.XX is to share and per December the diluted the as positioned the share diluted of opportunities

formal seeing keep all your call Day New New begin you invite have date an the for on turn now circle look turning eye March for coming an the a With Before I’d in like Ed City. to X, back XXXX questions, York. to and and We will we Please Q&A. call out calendars forward the details in scheduled Investor your over further for over weeks. York the to that, announce that in to I

Ed Lockwood

one the we Okay. call call. as Thank open your you, you chance to one today’s first are We call limited follow and like free for time right, ready requeue today’s request we’d question. our feel to give do At we questions. time again Please best All we yourself to for will Chantal, rejoin permits. to up everyone Bren. have to given to the once a point, and this the limit question up,

Operator

with comes Timothy first Your UBS. Arcuri question Instructions] from [Operator

Your line is open.

Timothy Arcuri

Hi, guys. much. you I two. Thank had

sure is First of the export this of memory year. am big the I one course to to about fabs saw this the all, built of news being restrictions today you three was Jinhua, which shipping

first you how to So than export next be big does question think my spread I be is, sort about a more your year, it to surgical likely to broad business little thoughts? of a change your am Thanks. curious of this of restriction, but seems sort

Rick Wallace

expectation things at Hey, your Tim. are it change today not then change -- the if would that for Bren had rest To view. our view This customer. a looking obviously, not does ‘XX broadened, from and but does ‘XX as what point, we export strategical the was other XX it is were that will It Rick stands our change or on it of we follow. control, based a

Bren Higgins

look anyway quarters pretty several our ship business and don’t I really we thinking for I think, plans closing way But business some forecast there this Tim, for next Yeah. forward. year of as on business. are next about in tools There’s the the good we about de at minimis in a it think have our side. the of and levels that we changes how that we that year, over going into feel material shipped

Timothy Arcuri

are can next in a you up Awesome. inflection. Thank then different year-over-year my up year? that then, in a and guess, you was half inflection is, caused you. you. of grow big first Bren, much XX% And and something service question service Okay. year-over-year, in that lot, doing a it the I Thank service was as big December get

Bren Higgins

for we color -- experience a to around what given the that little Tim, be obligations are is second associated reversed provided couple the next purchase in first year so on for to disclosures take -- were XXX with deferred then of the that June will is as the and first year added and similar No. is, of XXth. call last this more that’s clarity year are in on we what of to the the warranty, to our under warranty, the for in and date the year tool next we is that of provide file XXX happening tools and happened defer here the having some have revenue effective we our customers cost the result months Historically, accrual, under third our the what over there in days. there bit the and revenue, of But contracts, carve have topic tools that accrual I will SEC and our a which very effectively with out doing obligation. will we in the warranty of XX all transition cost adoption we

with a you dynamic unique that pretty saw big it’s a So inflection.

around our business it rate with up of talked forward. of the But see views are consistent I next and here happen this think this, we something service will you will we growth out about step play back of in over our Rick terms that level will then what couple quarters will consistent saw probably it the going historically. out and see dynamics

contracts, experience the literature operations, terms with in in or this treat given obligations. the changes us we year no is cash of business So, third but second how those flow consistent direction and fundamentally year guides

Timothy Arcuri

Awesome, Thank you so much. guys.

Bren Higgins

Thank you.

Operator

Pitzer comes with Your next Suisse. John from question Credit

open. is line Your

John Pitzer

just first me Good of half to letting your solid of Bren, questions. results. higher ‘XX ‘XX. be follow-up relative half ask guys. question than second that Thanks to on Tim’s the Yeah. view there, should maybe the afternoon, on for Congratulations

you driving that and there the be If any really foundry a helpful? about now seeing is you that are little would elaborate could a behind adjustments what’s of confidence, has -- views. XXX. or you you but logic color benefit bit Is uncertainty that is still How expectation given much are memory memory the

Bren Higgins

Bren. it’s John, Hey.

this So continuing and only anchor because one revenue shipment continuity not but go here, is and are to why an we transition, through is as think of those it’s distinction we context, results were provide statements, also guidance. not metric, I shipments’ important which the actual

So that. consistent to previously that had said consistent reflects to this we our and is be be metric what with commentary with unchanging,

we described and weaker stronger, into that update December in very the September, that So back with little in as way in a the think, move quarter bit half, guidance. played we this quarter did this that we came of half first year second I sequential to has way is consistent growth the September the where an similar out

this the look first growth an foundry would So modest going and we memory increase comment terms of logic we are first that investment in the next given year. at whether in as but -- at the as look move relatively look half and in at in customers, June, of half we point our we out whether our the with of a as the play build I how point that’s we balanced or given seeing expectations this into are see I see half it of of But at am not shipments. and conversations March at timing the half least the we at we year, profile plan. to we where first the first and terms and say is it’s

John Pitzer

hear rising you timing you percent that’s maybe of help all shipments intensity the will shipments It of the that And follow and December helpful? in grow a memory quarter. up as market of interesting memory be would helpful. memory. any was to sequentially to as about what Rick, the relative you overall that just to of believe sort of projects, in my consternation That’s the rising talk you concern just just on do sort I what versus extent wondering intensity say

Rick Wallace

more the last as which seen the what inspection products, products wafer bare over memory that has year. the intensity the consistent have to Remember it’s we but contribute It’s wafer leveraged stepped with have to that other are such too up shipment. we overall

products demand in for those to as seen requirements, because stretched business So wafer and measurement. continues have strong get have an of world uptick flatness extremely flatness our around the we the been

cycle those this houses think I where partly grown to strength playing out of has wafer related the it’s has more the and really memory intensity themselves. So that been functions because of throughout

John Pitzer

Perfect. Thanks, guys.

Operator

comes with Cowen. Krish Sankar question next from Your

is line Your open.

Krish Sankar

Hi. or said taking way them, think, your past customer one, just China. I up? the was sales the I least had for $XXX at in or either, a Thanks China that’s of your like are guys China. to shipments quarter export impacting had quantify kind September control I as Yeah. percentage to to for year for looks to way It like of Is this there my the sales indigenous question. worried how good had there two system million much Is to was up follow and first about follow too you you it on know. of a what not XX% are quantify bookings in the then range a China of a so

Rick Wallace

the answer. and Krish, first me let then, let Yeah. Bren take part,

movement in are this We not about particular the concerned market.

export a one just control that let’s that be clear on very that. strategic this So was

Krish Sankar

Thanks.

Bren Higgins

year, of particular of would is foundry how terms the the that is lot. that multinationals were million business wasn’t China. at into $XXX centric, at activity of most seen into and a about a we but there, with in a perspective, foundry generally, consistently, that China levels and an to at next centric to September continuation we are and export million control range earlier, I And as situation, that or in I a but revenue Yeah. it those bit, in shipments, more the looked more probably, okay, shipment it the are situation that, material And we to of little indigenous and has not say from to year is of we be business little Krish, $XXX that expect have quarter a well, next so how shipments be lot think, centric XXXX XX% about we we point, on as strategically talked you this it much indigenous it we There don’t earlier year. bit tend I feel, confined into least planning this customers. in momentum from as around for order to that mean, XXXX, looks running said effect one the way think

Krish Sankar

revenue That’s a be much. and would Got more it. half then And Got year weighted should sales. assume your given The guidance EPS to any should like calendar first logic. fair that, that shipments to up, the it. better over foundry follow calendar or just on and next towards a Thank ‘XX ‘XX grow and Is more commentary without assumption? very enough foundry/logic. fact be mean, it you very weighted helpful. that fair margin I Is it as it’s profile than

Bren Higgins

we make couple expect is, modestly be will second -- to comments I ‘XX that ‘XX ‘XX. do ‘XX the up around the perspective expect the So, ‘XX half shipment and from half in be versus a we first a foundry/logic first of up and versus of to

on But how to at we quarter see we as more to view. the year So least now. have December this quarter get the results that’s total it and report end the of we will for right say

are right. control You of segments intensity. in segments terms KLA Those good process are for

that margins very more intensity Our business control the I those customer from margin don’t business. the But, that process think were expectations terms fab certainly, dollars. it base. wafer consistent in exposed are our affects or across to profile of of

we So that. encouraged by are

next We out year. more say move in part industry about and will and we December broader to the plays the have into of that first as see how

Krish Sankar

Rick. Thanks, Bren. Thanks,

Rick Wallace

Thanks.

Operator

Harlan question Morgan. with J.P. comes next Your Sur from

open. Your is line

Harlan Sur

job year, flow. EUV XX the talked XX about and year. that’s next strong no, execution from systems Good shipping Good up quarterly guys cash free or this on Afternoon. Yes about

ramp. is pretty curve adoption EUV the and a So it aggressive it’s here look like

X, supporting are with mask that blank your Gen portfolios. CD guys overlay check inspection, print inspection, You

of sort there no, or help are of into that can ramps opportunity does adoption bigger that margin and year or XX% team next of given next sustain related just beneficiary, year, you outside EUV the you and guys year? is one your yes of ramp next maybe sort XX% guys quantify profile the gross EUV probably So this

Rick Wallace

up. will It’s take the first Harlan. part Hi, then follow Rick. and I will Bren

with we mentioned in face. business are starts don’t customers there the Let also customers but seeing print EUV your our by out in advanced start break remarks for good our mentioned we about and due solve you challenges we going good EUV are prepared as KLA-Tencor particular, that business of of and they our through mentioned, the support for our -- And me related drivers the to as are business are point lot overlay problems that and helping frankly a check and have with X the also as in mask that you number to with for fabs Gen that there’s it.

bit but in we is how out we into and go many forward, and next there per we us a it driver catalyst are little break se year. it don’t for So, as particular a agnostic are a tools

our or So the talked And, that part. the tools can if our of won’t tools. It’s capability driving it’s nodes business. up break are they you really the the demand XX about Bren, new change really XX second driving

Bren Higgins

mix year and Obviously, this that in looks will business, drive this points that’s right it come turns in we see around how and So like out we generally basis look think, probably in down. from revenue XX on would expansion directionally are both were leverage as the at minus comments we or quarter-to-quarter. see XX%-ish gross if script, and in if here level, around us that directions I the next to Harlan, product get plus But the we should now. things there this my and margins, operating things trending work

place So, dynamics fundamental but generally margins that’s structural in right around the to be. terms of the

Harlan Sur

Thanks guys inspection this there. your anticipated system, systems have and year, year, end by Great. then and the think, you hit of did start of XX target activities? XX on And given logic the in EUV ramp field EUV momentum EUV, the pattern guys Gen next X development I insights into see the said, foundry that wafer for going how Gen of you X-nanometer the the do just systems, you guys X of sharp X-nanometer

Bren Higgins

target. Yes. hit Harlan, we our did

Gen we are elaborated earlier from and that year the expect X into saw would drivers with ‘XX you revenue So I consistent next in that ‘XX. we expect we on, given an year. in Rick would what increase expect the would mentioned numbers into we in Gen X provided next that we increase revenue versus an

Rick Wallace

And when Then adopted the of it it new got of early more the the momentum then generations and prior having then going advantage maybe have have very that playing a as that kind it. the not evaluative realize flow customers leaders we much of out same momentum, of it of terms we early figure out and will are in who to it’s the they will drive big spend a when adopters gets trying lot see products you maybe of generations have that and the out. couple inspection time adopter or you customers one are

not it’s use model the it’s systems, number So they are located where cases. just we and the of those, when

early have the So in are utilized are being we where stages -- manufacturing of some others in development. that support

So unique creates and more differentiate we that like for the on it. momentum finding the product, true to is capabilities. of product It to customers for that are opportunities rely we EUV

good very in as XXXX. forward feeling how we go are we are we So positioned about

Harlan Sur

you. Thank Great.

Operator

Bank Arya Lynch. Merrill of Your from Vivek next comes question America from

open. is Your line

Vivek Arya

question. my Thanks for taking

memory for of will orders where you the the grow prices trend? For half sensitive half potential mentioned that to have to ‘XX one, slightly first assumption first over is half. How

Bren Higgins

how be right a think think, number and not of is orders, doesn’t seen out of pricing those I and and those that how it overall already adjustments So shipments, customers necessarily about they into have given we put our about But seeing influence ‘XX. ‘XX played in plans obviously, seem front pushes does dependent, supply. statement my have was are we around what and through that now to the us have

today, as said, know the our balanced half up investment and versus we shipment half based from see expectation on is the of a into perspective, modestly ‘XX some of ‘XX. I first what So to second

Vivek Arya

for should a dollars higher inventories, you. question what next us the are the follow on over some And Thank Can of several you it. quarters? what Got sense days for what have or they it’s we you or give up, my than seen just historically. whether range have

Bren Higgins

You are good a right. higher. they and question are It’s

increases of inspection products We queue, that have to so seeing materials some related incremental times reticle the that some in to get lead for demand we the products time our in are have those queue lead long the seen and that tool we to about buy and long namely those are the some talked of early. that are we

number coming support so are chain and some spinning supply and so, of you products buying ramp. support early in -- a are working have we a we we work to are We cases to up are suppliers that qualify to that out with parts new newer

We have into for laser a next the scanning, X We X increments new product year. about launch and talked in Gen E-beam. Gen in

are those higher. driving levels inventory the all things So,

and that we those As expectations terms be of based next start -- move over that’s ship -- we tools we will what on that into then number we put expect year are output that into a would out. that flatten see out to that I as in and tools will material seeing

them got see is we sure position inventory build. are we and in the and those earlier where ramp committing we cases can in have that’s products financials to in in the So so our make we

Vivek Arya

you. Thank

Operator

comes Muse question with the next CJ Evercore. from Your

Your line is open.

CJ Muse

June that for you deferred my September plus Good question. back from ticked $XXX to first question, million. Yeah. I Thank afternoon. revenues. by looks on It like guess, taking up

should lead being about ‘XX? your associated should that are second newer those a kind that, of thinking fiscal thinking we we in increase to terms certain long mix? be part of and about be isolated of certain the with vis-à-vis deferred for products in deferred products time fiscal And the versus ‘XX as or number an gross rest there margins to is So

Bren Higgins

meet our implementation we of as result the is down. but there with One get took under and we maybe acceptance, conditions which issues longer CJ, you, Yeah. this XXX transfer based faster. and is, come given should backlog to revenue, to much us XXX, and given rules of deferred revenue XXX was a timing customer the about thing reconcile something the need

So about month. should be from we ship the it a we till tool revenue, only time a time the

a revenue we that But warranty down. really I isn’t related little will certain products talked there if unique which kind of bit that’s next the much like that -- product is acceptance more it’s all to go matching out requirement over new way way, a that ship XXX based a you that and about of to have in quarters. to special in generally, to are particular on, come or tools should and few that, about an you the follow-on see first things But acceptance go at deferred revenue faster then level the So to we a see the earlier, you and under anything all on. dynamic play shipment.

from perfunctory more or process becomes acceptance you considered the know is perspective. As accounting an installation

I expect time would So happening and those come over to down the revenues that’s given deferred dynamics. what’s

CJ Muse

Jinhua sign from follow-up, about Very MOFCOM And that off at ruling the as Orbotech? their of to your on if you are Department willingness all you the just How and helpful. Commerce. impact of acquisition as thinking a could think

Rick Wallace

on proceeding that we are we said terms in have so of this had we We we track believe the about year, calendar and where in we close feel were good regulatory China. we have not have are quarter. we modeled dialog discussions We exchange had out at that path -- very and the we this to having and as are along that

good seen no things going to based have any trade. that the on are relative on feel of any posture in their of that change we we other indication about So

CJ Muse

Good hear. you. Thank to

Operator

Toshiya next Your Hari Goldman comes with from question Sachs.

Your line is open.

Toshiya Hari

of ‘XX it’s you think Thank much as very first But node that heading your contribution business one how questions. half into Great. X-nanometer couple of you out to Foundry potential about the Rick, terms my in I of drivers realize for over at and next you taking years? early. called the really of do

Rick Wallace

continuation seen percentage. significant are process we which very in at terms the greater to EUV X-nanometer. the be our we that’s Well, adopted have of be the customers have that node in newer control We it will products intensity the in targeted see are a I for going I mean, be is a think, because challenges of expansion going that to

but drive at an where will increases of EUV is lot looking people use. of X, level it a are Some then some at X really adoption

So we are well positioned for now.

We more toward past tool, a are ago is more a Gen it’s the that a now where customers development of X production with Gen a of in are tool year back becoming in working that part of had go you the more closely pushing discussion technology becomes if X-nanometer is X biased their and we this production. and have early an pilot really the

are tools also well. with So great metrology the but we where that about as feel tool we supporting

Bren Higgins

second of part next the customers see see X-nanometer move will first talking in -- as will shop, wafer we fab year will the we drive start tapeouts towards mask as are in the we year. see we currently the seeing the up more that early some well investments about it activity, in of to we will the development are that half see we In currently and the nX

it. said, the Rick it EUV as As business of and intriguing of are bigger into a us have that will products year. challenging for node, I for targeted got number a And it’s move a half the and be we think, for node we interesting it’s second

Toshiya Hari

you this have margin on is business I couple, not for guys it’s segment think, a out if that then up, wafer you realize the past another product guys. bare as a And rather called inspection, Great. group or high quarters. several quick I follow over

of terms customers terms pretty I little of outlook their all your but customers some XXXX down them bit, just you been this you. think is guys? think, given sustainable business I you? the for weakness volatile of the in past, you memory ask, I for in because, pretty in of some toned How sorry, think the it’s Thank have a logic. constructive it or remain certain your pricing, of of and am in XXXX, in I do in parts

Rick Wallace

in where these at expansion, with activity three favor period a are there’s flatness in there’s increased technological this We of things there’s kind and capacity there’s which challenges associated both there’s working business, is of certainly requirements. once

that the business. of level up So stepped that true it has is

going So essentially see the forward has with don’t last is, we are wafers on and of the sustainability the again that so business is convert level when we now going relatively of few that current of are customers we to remember, the they over that what growth products in bring grown of right levels And support we so edge we be have capability. they years But as are leading-edge more terms we modeling modeling where continue forward is quite we go talk percent of our that. that in of a will and our feathering leading and as time to their to over small have to bit.

current saw feel the sustainability. have last to we we of about the though years pretty in good node. wafer as business bare and in we another So went as up see its We don’t level leg that few the we this

Toshiya Hari

Thanks much. so

Operator

with Ho Patrick from comes Stifel. question next Your

is open. Your line

Patrick Ho

market, the other DRAM up you outlook driving are ‘XX that discussing a market much. very lease about the of include detailed? potentially to on the when or balanced are does combination your near-term, half the memory of and you that or a memory seeing just NAND Maybe follow you Thank you as one first the comments in

Bren Higgins

the it’s shipment first statement segments. profile for that’s two the our So a on relatively That balanced expectations shipments the across half. into

much say that. more So I don’t to than really have

we feel good. think pretty I

continued to KLA We tend to just about and in less could expect roadmaps level that enabling more are and capacity raw is from of about expansion to business remember are have happen. our to those long adjustments technology their push in thing you and pursuing irrespective they that we as so customers and the DRAM we know see continuing of they capacity that layers and about as incremental be are NAND customers one see a

Rick Wallace

Yeah. other DRAM said industry we will And mentioned. much foundry it’s Investment the in down, agree so. he we for of as the with But ‘XX not factors just be and the driver up as that’s see us don’t did -- perspective as that Bren coming

Patrick Ho

for buy a has to there on of coming foundry the Great. foundry out a up I migrate surprising industry that tool seeing control surprised believe there tools the process the as in That’s on that trailing of value semiconductor marketplace? this continue XXXX. in the in the entire logic they little manufacturers the so helpful. used and logic side future market, down indigenous intensity the Rick, and will segment strength much nodes particularly can are in been as then do standpoint, am From a And they or the China maybe, you I been continue that’s local edge follow or terms a given reuse guess, strength

Rick Wallace

facing you a have some players your are to isn’t -- things seen as the -- the of do harder even that they another to there some They new big and when have to relatively I you there’s process be in have it’s leverage. of scale other options you reuse able and places. have But they the as say that bigger tried though that the challenges think they are have the might that

also at number once. are challenges of a So they tackling technology

in of significantly fabs scale are too, relationships very excellent On those said, good feel I they look and a have terms elsewhere. when smaller, you relative We business. sustainability there what you’d the we that basis about at the than as see of

to do So, it I away significant would like a piece like Ultimately think ups, the to continues potential strong, of be way strength. where will that. I more things of be manufacturing, there’s continuously in wafer you think that’s have years that several even but mash think, for before I they’d

Bren Higgins

market sell and out really challenged scale in Well, will of get that the they in we it’s to you don’t a there any are used equipment, we tight at have also time equipment, pretty inventory.

those revenues of utility that time current lines that edge de-configured some what support that products trailing customers. we have the have business certainly from older So to done we are you be needs upgraded or to these restarted seeing have over or meet product are is to

to So they where that I investing they can that. place into Rick’s are be are to and mean, will markets ship there and point, way, able do to eventually get a to they

Patrick Ho

you. Thank Great.

Operator

Malik with Atif from Citigroup. comes question next Your

is open. line Your

Atif Malik

Rick, gets taking thoughts for that? to on it how Thanks you and guys I of your could on Hi. you benefit implemented want DRAM get when use DRAM, for my question. the EUV from think

Rick Wallace

seeing we the going in challenge. think, logic, that I in are and we it get beyond to But you shop, adoption the the EUV significant lifetime about that terms presents and scaling story in some what similar concerns that’s much to we of opportunities where a the to But in cleanliness design don’t but in and starts, control. big about number both are have see also obviously, I the XXXX of on much some very DRAM start think be depends it’s DRAM, the and more trying of to contamination overall. XXXX. going very going really Well, you in the, the I economics, are what pilot see to It’s of scalability think role and EUV have have I with around mask seen in you do terms challenges of some think, they of overlay

but driver, as a much as than not it’s of logic. So is, it course,

Atif Malik

to then equipment in on you China. restrictions let’s And broad will or just on Korea elsewhere to Do demand? say, fab spending there this there equipment scenario winter are get Taiwan absorbed take in think ship or put China Okay. other suppliers nuclear to a where, infrastructure in the

Rick Wallace

to reasons, on think would speculate there’s investing clearly more some additive to and that hard invest. -- they were is if Boy case not it’s be a ways for it’s But in therefore, than China that. that’s to I allowed strategic

I that So, was rate see that also targeted reasons. some maybe was probably the taken of for you’d action low specific because We as impact. very and and think, probability

that as sure. would modeling impact not an for on But, WFE one that are we I that overall the think, outcomes. have of yes, So

Ed Lockwood

Operator, ready we are next question. for

Operator

from question next Sidney Deutsche with Ho Instructions] comes Your Bank. [Operator

is open. Your line

Sidney Ho

my taking question. for Thanks

a it recognition to sure takes follow-up on the a revenue, want Just about for revenue to you quarters formalize. the service few make talk that,

about will should say, trend you term to back by So we year, end this XX% think of fiscal year-over-year? longer get a X% the to of,

Bren Higgins

Yes.

Rick Wallace

tools deferred because were way time have with all it, the work the good through going under a That’s No. you to about the conversion. think of to Yeah. that revenue at to are associated warranty

quarter. that tools some are shipped right there that the end So at are of

a fiscal think that a front it’s than completely way heavier to That’s to in the So the year. year although, in it a is of the about good take it back end will bit roll-off, for it. little half likely

Sidney Ho

Okay. talked Great. about your past second XX% the My question in revenues. edge have is now trailing you that, to of is close

the XX% and nanometers to foundries going do of of be overcapacity about you expect trailing XX back have utilization the talked revenues? of phenomenon Some that Do you edge will a wafers expect down. short-term you come and to next may see you year

Rick Wallace

as an that those more look in overall. fairly are looks we foundry the being the see if a trailing at It we you seeing. year around are at it semis, But I’d around of activity that of look pretty stable to stable. investing edge markets next its more us customers statement than as end given diversity

least We have to us. But that’s markets looks at how point, this will it at watch to and those see.

Bren Higgins

that tools in of investing that advantage value get new extend of installed more to the started efficient is the existing and in Part upgrade big the upgrade a even have have a drives not options so they years that we a where the capacity demand their have those, the capability they for too. so to for that couple we home created where ago obviously initiative and to seeing already their are for customers of court was what in base be we able are of and are to those maybe business we market can part them

Sidney Ho

you very much. Thank Great.

Operator

the further questions Ed time. will I call Lockwood. turn back at over no this are to There now

Ed Lockwood

No all concludes joining. commentary you, This Chantal. from further conference Thank for today. you call. our us Thank

Operator

concludes This call. today’s conference

You disconnect. now may

KLA (KLAC) 29 Oct 182019 Q1 Earnings call transcript