KLAC - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the KLA Corporation Fourth Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Kevin Kessel, Vice President of Investor Relations. sir. ahead, go Please

Kevin Kessel

welcome discuss fiscal June the for the and earnings quarter XXXX call outlook quarter. September to results the to you, QX KLA’s quarterly and Thank of our

Chief our today me Officer Higgins, is Wallace, Financial Joining Chief Officer. Rick and Executive Bren our

XX, section discussion documents market KLA is release, IR results on During June of financial website. these close IR deck. be results reconciliation unless of form financial a otherwise will detailed press the non-GAAP in Letter the non-GAAP period we released to in presented and All is we today’s call, quarterly our results the of that our website. today’s the found GAAP A specified. earnings on Today’s and materials today a Shareholder slide for basis, on outlook can discuss ended XXXX posted after the of

including as reports and investor presentations, the Our XX-K corporate of future filings, quarterly SEC annual IR virtual most XX-Q. information, and quiet forms a calendar including recent website report well as also to KLA’s our and events on period contains governance links policy

statements, in risks SEC comments factor will true. risks those are guarantee risk forward-looking reflected filings. cannot on those disclosed call we those Our statements in come also today Any the uncertainties and subject to make to subject forward-looking the including are our today and KLA

forward-looking actual from Our our projected statements. significantly results may differ in those

our Officer, to turn I full beginning which we President IR quarter, are our website. lot performance insights remarks, will a quarter, and of Executive with the on shareholders’ and Rick I’d in Chief over found you last deeper business It Q&A. that, letter. And into to can from the be can some calls highlights all the we letter time the mentioned be we our accessed provide call for this Wallace. more our like our Q&A read to provide KLA beginning of and session. prepared As changing format these KLA to also before encourage

Rick Wallace

midpoint Thanks of of commitments. in engagement results our posed delivered June above teams the execution perseverance customers, Thanks, of the we resiliency the today’s at you our of strong a COVID-XX our by once pandemic. circumstances. continued guide workforce of to strength dedication, are we your EPS extraordinary deliver our the the for you the and KLA in again, Kevin and June support to health, us company. objectives and In for joining and us and in and dependable strategic operating of Revenue from demonstrating hope of and the KLA families framework enduring provide consistent by on your On you ways, non-GAAP help in our how behalf strong demand quarter. and interest good KLA, global thank exceptional performance all safe thank face and our our guidance operating today. many each finished ranges, and highlights long-term our quarter, KLA the consistently and model us XXXX under execution the challenges the model all

to to the and remarks opening outlook. then highlights on today, and it cover key quarter my environment, to industry start with before I’ll letter demand to of highlights our some touch review who financial passing priorities Bren, from an messages For the our I will our plan shareholders. related five our the touch from on update on COVID-XX,

safety the take employees, health families, terms of and measures partners. of and proactive COVID-XX, ensure we In our to continue our their to

have important XXXX, first but is this point financial to and It’s teams in half results sight pandemic. this calendar never Our in of in action need. reflected to in successful of what record worldwide our our strong customers lost date have as importantly, also effective more the safety that been our our

teams challenges. in time. outstanding. commitments. feedback most for and us pressing have executing during needs remains an on to our committed this our the customers been long-term priority resourceful customer exceptionally KLA has Investment and is important Customer for been Our consistently delivering

ensure that future. confident our We’re investments R&D will a help bright

Investor turning businesses and environment. demand saw quarter, infrastructure, across the gaming our outlined environment business Now, In are is ended record quarterly above control Semiconductor highest support multiple continues Data quarter translates end virtual strong. each we demand was to revival achieved of accelerate from diversified and driving XG We process our data work to installations. center PC growth XXXX with Day. our that learning and drivers to acceleration home, segments. Today’s of the the that an industry services strength our and set June second collaboration, ever. records of plan, across era in of markets the the of level EPC many entertainment demand, industry we Customer backlog remote the broad secular demand industries.

adopting global acceleration business, digital improve seeing also collaboration own customers. teams accelerate to enterprises. new to of this also digitalization tools our our We’re investment with in We’ve and productivity increased

during our we’re expand past highlights our to stood quarter. technologies, are with service example, There augment the business, closely service services in-country that working in installations five and remote For to out the our engineers. customers most

the from XXXX first logic our with remainder customer somewhat between is levels half of XXXX more continued the First, revenue and business June the that balance half XXXX. customers. strength from in and in relative and foundry the in in momentum forecast shows a businesses memory these for higher expected continuing customers Business we into the improving quarter with second breadth versus December quarter, saw of

momentum June the ended portfolio. backlog in record across total our demonstrating near company with Second, marketplace the quarter KLA

drive such our the eSLXX, well-received products, helped market e-beam Newly platform inspection as launched leadership.

XX% and business calendar our record business Third, generation from services services quarter. delivering plus to flow We The free contract quarters strong once steadily penetration contract the again a system for stream. a service installations healthy the recurring penetration, cash this revenue and over growth the plus track risen well in to perform which see XX% continues year. remains past several set for robust on and has

long-term with X% or we internal target. Electronics, quarter group the in our June of within forecast. in We’re June our the the in quarter. delivering $XXX EPC, SPTS key with and million forecasting EPC Components XX% quarterly service results formed annual revenue and above finished delivered newly recordly Packaging achieved record the growth line to XXXX milestone the Fourth, in revenue

a of of and coming post months driven EPC a about We expect XG double-digit quarter, are handsets. SPTS. also results record year improved XXXX PCB market for by had positioning, to XX infrastructure supporting for strong growth The Orbotech. the acquisition be

successful of our growth strategies the see to bearing strategic fruit. pleased demonstration very We’re

on original to Orbotech targets. We’re pace acquisition from cost also the synergies achieve above the

shareholders; to Finally, to an in today, XX% our capital of dividend annual dividend keeping run commitment $X.XX directors KLA’s quarterly eleventh per we $X.XX with strong since announced of at per approved rate returns our board our inception. grown consecutive by share annual The the to dividend share. and our has predictable dividend increase deliver of $X.XX has CAGR approximately payout for raises a increase.

it these stronger summarize have factors execution innovation secular Before the over and Bren, on helped robust market saying challenging cash is and with leverage XXXX in With and long-term to KLA turn navigate remain us focused demand that be flow Bren. by diversified our hand future. I even more to firmly it in through combined successfully let that, We the free business and the targets leadership times. driving our me positions believe to drive over intact will industry resilient operating I’ll growth strong

Bren Higgins

strategy. our KLA’s both soundness ongoing quarter of and strength the results Thanks, highlight June Rick.

semiconductor process the specialty XX% split for double-digit above quarter. memory, about record profits NAND. track and Revenue is our $X.XX. was generating revenue $XXX of are also once in was roughly the growth of guided $X.XX revenue was XX%. DRAM the was the a a revenue. million, We GAAP slightly $X.XX customer and of plans. and above XX% Foundry XX/XX and were range end Non-GAAP about demonstrating internal segment year-over-year million, midpoint leadership evenly ability strong logic towards on $X.XX. was business systems’ again the display at systems the maintaining free needs range modestly growing strong high flow EPS gross cash semiconductor control quarter XXXX. and Semiconductor XX% Control process memory XX.X%, year-over-year the up June was the market and expand record above $X.XX of of for EPS approximately expectations $XXX customers between non-GAAP and PCB, capital our was was strategies. robust while of flat up guiding XX% Within revenue semiconductor of the XX% Process in for quarter. to the calendar to sequentially was XX% our XX% sequentially, at segment revenue inspection and for XX% to was operating billion. at return meet all margin Total component

quarter total by million cash grade billion we including XX.X%. the free and flow $X or From conversion delivering of balance shareholders profile past strong million KLA in is cash was perspective, in was a in thesis, returns terms capital and free and in attractive all dividends returns our $XXX value quarter. and flow $X.XX three ratings of offers component believe of agencies. flow, repurchases. and billion June compelling cash KLA supported a for free XX.X% capital have free $XXX million flow margin In the sheet XX capital ended investment the our We creation with returned data, $XXX key cash months, of cash maturity and track over the from cash, flexible investment bond a predictable returns and $X.X to shareholders. highlights, was flow for record XX% billion share paid

range taken see the March consistency and have as continuity our either an narrowing are for September, to this operating the a expect they we reception the a dividend the the approved now have we our than year that great market mitigate guidance results teams the per be generally saying costs the guidance is annual exceeded we on our line by September the effective versus guidance our ranges. and June to we $XX first year as growth or is platforms have quarter share. total related been derived profile made offerings September outlined in infrastructure. more non-GAAP carrying solid XX.X% out with rate Day plans and consecutive it operations extra half total versus company challenges in of semiconductor and by favorable relates that business current guidance to to million. moment product long-term be ago, for progress anticipate market board second disruptions Investor the second will results of the has quarter, the growth or to flexibility our KLA’s in driving job XXXX. strong above environment. a COVID-XX scale to supply faster worldwide in control supply grow eleventh process we back both to half that we’d makes definitely and annual or the of year, as product like midpoint should mitigating inventory with control chain new of our margin been range to expected $X.XX today our as growth the is demand by start With that as for the as service for dividend Rick in quarters revenue leveraging mentioned, our critical strong semiconductor of measures in and half unanticipated our chain billion in for in a minus increase, occur. although supply efficiencies to components new of for business disruptions, for of more gross has the forecast and range. $X.XX for met done that, company plus run product are XX.X% maintain we We process our follows: said, and the revenue firming of June at target quarter. our As the calendar demonstrated

$X.XX of $X.XX. expected In diluted Finally, have a $X.XX challenging be range to adapted EPS closing, EPS is diluted non-GAAP range environment. of in $X.XX and we GAAP to to a to a in

to track terms are and target we’re our both top-line model, executing in We have and more XXXX profitability. on well even confidence that of growth meet

diverse of operating strength encouraged objectives and differentiation These operational objectives. service our the offering. and model, an product are the which growth, across our strategic excellence fuel more We increasingly and KLA resiliency by guides

Q&A. over We deep begin mode record returns also to now underpin strong track flow and shareholders. to the Kevin generation free the With our call competitive of sustained technology turn and cash that, leadership, I’ll to capital

Kevin Kessel

the provide for the Q&A. please queuing instructions the Charlie, and begin

Operator

is Your with JPMorgan. the line Sure, of now sir. question Sur from Harlan your first [Operator Instructions] open. comes line

Harlan Sur

the chain, the as afternoon, trends quarterly Three job demand well industry’s ago, execution. months as pretty good solid on uncertain. looked supply

the end be today, outlook low-double back I and to revenue upper outlook pre-COVID-XX your come it and showing make fair or towards look of or chain June versus year. If spending we on sort on has improvement You is year? in year first. today will like percentage while of this your and a signs revenue this you second fast pre-COVID-XX fully some digits the WFE as goal entering assumptions at commentary the looks assumption of guide forward supply semiconductor for results your calendar fundamentals half that maybe some that earlier December, can, of

Bren Higgins

first I’ll here. and Bren it’s Harlan, Hey, go

your So, I correct. generally conclusions think are

remarks, be of prepared view – target our growth or X% the to X% we our at within the in year said we generally the see above. range to on long-term As

And overall, managing in view. terms at so our all but of There and be worked a and much. through all chain mean, that the don’t lot had think some got supply June have we to overall now and I look we’ve done back as consistency you’re customers, supporting was in March year in changed that we’ve that I things right.

say are in bit want everybody – general, differently, counts there, mid-XXs type mid-to-high way on in so don’t to say views that to think probably a but or a put would – the I single-digit I WFE, high-XXs, would our it to point number XX to virtually right would growth, it. that about So the but out I overall I up little unchanged. somewhere

Harlan Sur

sort business. like it what I of semiconductor by COVID-XX. and for but strong Great. view Thanks segments of focused but maybe, these display some – more double-digit of and quarter, remember June for EPC got as PCB, and display guys trends specialty entered that. automotive and in segments And auto consumer growth other your more you’ve inspection within you you the meta focus the strong the sequential PCB are year-over-year and more impacted probably, component delivered trends,

trends as half this how you year? drove second segment thinking are through what So, solid these this you particular move about of and the

Rick Wallace

Yes. thanks, Harlan.

a the continuing pleased that’s have in really really think EPC and we divisions, We’re – I business. in ICOS their you momentum you different with think about and to saw performance when strong packaging, the

very driven was seeing display, there other in the through strong revenue. semi quarter a that lot going specialty the the other to really spite like the being I really, mentioned year, of that structure also where feel a good about But it on conversations SPTS, there. and happens team. in had in and lot build is showing notable soften spot display and not saw a still We’re strong strengthened tough that set we’re by on and infrastructure business business we we it recovery one for business. record earlier thing we’re that’s and and no PCB was a looked is in execution on Xg we’ve a think positioned had cost the and SPTs we is really automotive had a following the strength very when that’s working for of – the the out

upside go forward. really as that’s So we

fair pretty it’s think bottomed. to have semiconductors say automotive I

of pretty some – here and toward but it’s all into curtailed, the year projects end the see much good has investment as as probably resumption the year spending been – And we electrification then XXXX, feel next signs pretty this so about upside we’ll of continue. from showed

and getting with engaging we a feel definitely those are level. we having customers one where with high we about at under and So traction, are that yes, organization good

Bren Higgins

to thing thinking what environment it’s the we the is half unclear were the The only quarter, go in about to when back add Harlan, bren. Hey, other I’ll April, the that look of like would we was second year. handset it

see signs for come. business XG And the and the to really the that we by so that the think encouraging driven of to did point was introductions one handset Rick’s was are I preparation PCB

built perhaps for someone it or So, of just COVID. that known had us a to related overall surprise bit a was into

I Rick upside incremental but So, business said, also SPTS as the drove drove PCB. in

Operator

John comes of the Your with line Credit from next Suisse. Pitzer question

Your line is now open.

John Pitzer

the going you a this margin it coming that letting good larger question. from Thanks on into growth quarter mix? results. anomaly afternoon, a is gross if ask control SPC? within you Congratulations I is relative on quarter guide growth. Is into the you Bren, guys. for a And solid pretty now the Yes. to wondering unpack is and process bit. guess this the of sequential good semi just that sustain can could trend or me September the forward? an just September, little importantly, mixed percent that June do kind think Or I’m

Bren Higgins

Hey, Yes. John.

say So, in that’s having effect so we’re yes, growth gross quarter-to-quarter, I that, mean, and I a would on seeing sequential margins. positive semi PC.

And think I what so has driving and improvements I’m the strong. section platforms as efficiency a lot we said talked shareholder that seeing encouraged in there, been new we’re about cost and letter, customer in I

we pretty we position. about the feel margin product and good So, portfolio the have

confident of we’re XX% that trajectory that as range. this quarter-to-quarter, around trajectory that have But and around we our forward, feel drives maintain biggest that So, we forward, certainly, just mixed be the say although able right me confidence that this type look above to tends should let margin dynamic experiencing we our pretty factor I be margin to the more moving now. sort

John Pitzer

about sort the between last have but case in Helpful. you’re second uptick and calendar of And as that changed optimistic might growing talked that and year could XXXX. I the logic/foundry in days? memory maybe, if any of how if over more read Rick, down and logic/foundry, it kind XX I’m perhaps year then year half like of over half, want of a your first don’t into curious the memory we about the go the and you the mouth, sustaining, back sounds as less to half my in that’s words about optimistic break calendar follow-up, you

Rick Wallace

towards Yes. We second to that we into do think through is half. indications we lot foundry-logic now, I expect I is of Part recovery probably And year there. really the end strengthen see of that the evidence see where of calendar would also getting has that’s the the going going we we’re uncertainty, a XXXX. to around that it think hold strength to QX of memory year. think the – the the And there’s everybody

I maybe the of less that’s So good. logic for part that, really certain think looks the but setup

designs, I customers the multiple proliferation our design and progress of think multiple the and and players. ongoing customers and investment devices and that by in wins multiple

So, well. we’re are getting products really and breadth also doing our

So, the about strong we pretty logic/foundry is feel hold to how going up.

Operator

and next line company. Krish the question from Sankar Your comes Cowen with of

is now line open. Your

Krish Sankar

question. Yes. for Hi, two thanks I taking my of them. have

like think either or with foundry of foundry customers out X-nanometer either the one KLA’s of largest nodes the clearly, or Bren, of the the then side. Rick First your process given do potentially have revenue backdrop, out push two, of are on X-nanometer and spoken two even control about logic how pushed follow-up? year leading-edge you a the the some I opportunity have getting or that and over next

Rick Wallace

business. Yes. been forecasting publicly been factoring There’s nothing the that really that’s our been and way hadn’t discussed we’d

pretty seen. with what much we’ve it’s So, consistent

have overall management a at why that up of delays catching in. It’s public to those factors yield challenges is there the delays; with There’s to it’s demand come than are going when inability on. look delays are much edge. some at leading it the are we’re think to an the from process I plenty there was of are some you with demand. process integration involved and the with control more heavily tend announcements and the of with associated execute what

process So, leading inspection that metrology control a and and there’s continued we of lot for on think nodes. momentum us the both

why calendar about the where our Q&A comments into through in earlier And and we last question, XXXX. see so that’s then the the of year that strength part

in our challenging through metrology about we’re some So, feel And of with we think most them work that’s issues. going. our pretty the and I partnership customers; good how helping effectivity

a frankly, did of and sense? we’ve Does Some getting but anticipate, that they which value make we adoption and not did showing been result. as some

Krish Sankar

of I’m product isn’t Yes, e-beam at competent yes. then you figure look side, just on it e-beam and a Rick. you voltage that to on And multi-beam to detection, does. your is tool trying wafer guys to follow-up still the defect feel like just going looking out, inspection thanks pattern introduced tools. your contract, facility lot, focused to semicon. or pattern

are still single beam. You at guys

just out roadmap. you. want figure to Thank e-beam you the So,

Rick Wallace

Yes.

that for coverage out tools, capabilities the that’s We customers advantage development gives coupled very because how and the unique of a customers them they’re what to by strong So, we characterization market that wanted the with that to our what we’re sure seeing. and portfolio? parallel. could our in what So, we get gaps solution uniqueness, address they understanding we really along existed think provide tool. – with to could have fact performance we inspection that provide all optical a balance that is for and using it in optical make in to differentiated that looking is closely do complimentary addition e-beam the And they’re to the our product it tools, our a trying it’s some provides

of out to different what if be a we market of we we didn’t very competitive ability wouldn’t the roadmaps in confident mapped e-beam. the have have that solution. feel the architectures like reentered have and differentiated feel about e-beam our confidence understand look like had terms We We in lot we a we and

and customers find and don’t And competitors. we map both – the that between ability future, and to out throughputs compelling so as them the for see any defects are the we of as gap we to that’s interest our find us

that the to we solution. continue differentiate have ability In our fact, to we see

Operator

with question open. line CJ Muse Evercore next the Your of from ISI. now your comes is line

CJ Muse

a customers little memory of provide in beyond comments, was breadth more your then you’re hoping and prepared of for question. with there. you guess first Thank could the Yes. hear love greater a into color dialogue and what into QX question, We’d regarding Good you I to XXXX. kind taking spending afternoon. on I hearing

Bren Higgins

CJ. Yes, it’s bren.

mean, judging our for lighter September quarter’s percent in of I It’s June. So than the by business memory.

year. step we of been, a pullback transition. as focused can the that see momentum to expect next on take I provide looks in December say, in look you we’ve three sure very although move we what a of customers when there’s that But there if terms that ago was to at we’d that most it. is starting are of say, business up clear players And timeframe. we the recovery XXXX, second about more I we in out is it in of see focused. exactly the this management memory at all disciplined – I of back of half, are thought So, like year it’s the so in side, we’d as some see probably the to think months into it it seen the back area, investment we’ve think color it one capacity don’t solid and would and start we want there flash XXXX, and second where all – and then but look okay, the I half wasn’t I and but middle on improve as wasn’t how memory most investment fluidity heavier I you plans, has would thinking technology on see a mean, memory And where think

recover, pretty into move market that place overall to think the we healthy continues a I So, market’s that as XXXX. as in

CJ Muse

That’s helpful.

and as As about calendar versus service, you. that, the should component be half quarter in peak my seasonality within second PCB are business including construct versus how And how there. thinking dominant QX PCB Thank for part first the year given follow-up we you half? the is display thinking of then how QX about terms of

Bren Higgins

would We’ll I be plays have SPTS, could see potentially to flattish to – Yes, out. half. it how it half

that to PCB half, saw in second driven quarter, of June It half move the wouldn’t the into second it we think virtually a will what’s front. XXX% is much half lower a panel out there. expect I no probably there. that the – I slightly will we be business, the LCD There’s lot strength expect on as investment flat focus focus. would given I in be execution second on on the change consumer

so fair that there’s And still that’s worked capacity digestion of a through. being amount of

any in to fact, expect be growth; I maybe, business. half might down second modestly flat that in So, don’t

Operator

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

line is Your now open.

Patrick Ho

Hi. thank much and very the you on quarter. nice congrats

there little inspection maybe, question about I to at still process the terms memory may foundry the bit up time” Is in a following the being logic metrology Just relative that say and or timing, span tends versus and looking of get of some correctly tool but inspection is any am of on biased your to shipments more conjunction is to typically tools? deliveries, CJ’s what are process little lead trying “lead So, tools, metrology metrology memory come in a timing more with at biased. there because tools? process difference I’m

Rick Wallace

capacity, Certainly inspection metrology, itself. but side, to with development in patterned question. you it on certain to capacity front-end patterned little that have on just with process a metrology, tends overlay of that’s and the measurement scale tends film also in parts the also terms be like a inspection scales bit good of more

don’t view, time times plays so, generally, I So that it how the products lead now, think but think of lead out. few are a or point that’s months different a all the much I from on

Patrick Ho

and management, a of how terms of to maybe, environment, a follow-up, savings that Bren opex things achieving from normalized to you’re as get nature, the versus that helpful. due of of levels will have some months diminishing the travel the today? come gotten And that more That’s and as OpEx attractive back these in we you do balance you that some over probably Great. the COVID-XX several last increases

Bren Higgins

but good people $XX that’s terms And could a also operating probably million normalized run to we certainly heads, considered faster, add of now, both Yes, million a wish We right in question. $XX we’re new head count. rates. to what be replacement I’d below

And perspective. has so this from – down situation this that us slowed process

earnings. think at to that just ultimately, or company drop the going I revenue levels over X.XX – today, run if drop through through spending the relative in to we’re I $XXX company look growth So, long-term million drive million in revenue the mean, to overall rate range. the $XXX the to a to X.XX you is size way

And so XX% that implies XX% incremental operating margins. to

incremental we’re probably $X.XX for costs revenue, so. to to So, every of $X.XX increase going or dollar

are that above way if margins XX%. incremental gross our the that’s So

So, it’s a way to it. think about

We the invest our invest. products opportunities that got there we to to that’s competitors. why is and our want So, our to products sure at almost market out we’re in is we best faster innovate. make continue our than we’ve portfolio, always to Why nearest we the going competitors look introduce XX, share

And over the model. size so look and first consistent opportunities foremost to and going time, at with long-term we��re then our

Operator

open. question the of comes next line from Timothy with Arcuri line now UBS. Your is your

Timothy Arcuri

Thanks a lot.

guess I my on first the that Bren, So is control question process revenue.

least that and like June, was QX half but down shipments because for of you’re [Technical but and and up So, this year comps, have last March first WFE up the it going sounds – that, definitely there WFE June, at difficult in been of some year. know keep Difficulty] you with and I down to year. the the in maybe, your the control think process in is

and the you bit lost to tell a maybe, back half be share to talking and maybe, first seem you year, how XX% that like in you I XX% us why September? in And of hold follow-up. much imply will Are our half? process control be a gauge would the here Can Q-on-Q? the thanks. up so have have happened a us of what’s given and it little So why first pretty maybe, then much big will little up half bit in a hand help

Bren Higgins

we laid business for and to against year. growth backdrop would that WFE line WFE with mostly the Tim, of, So we’re plan that expectations the outperform the at year, expect we levels beginning spent mid, way overall are say really just look don’t single-digit at half-to-half the and the our process years. had out the year the let’s of I market. control in look the and at I we

big well. a process earlier within part target So, segment range process we for for since year as consistent said as it slightly statement’s expect the is business, that above revenue it’s be around control to our would control that of a such I our

Timothy Arcuri

I Bren, up… to sum guess

Bren Higgins

be But it be I half-to-half, expect to it would to expect would up. I up half-to-half.

Timothy Arcuri

Thanks. guess that any quarter, just be is on then give the my think really I you why not. I didn’t follow-up sense September and And you can it’ll for guess which point, us of purchase shares where a you kind was, in interesting, in

Bren Higgins

meet overall September, resources we we of all manage expectations. and company our and businesses our deploy guide to across the

the to of end business to being guide quarter. so And and grow sort But and and deploy that June may but growth segment. timing. overall drive I’d to terms in to that us their trying expectations, I overall that numbers, sort that expectations different semi I the to that I just our according got other customers the would at of But mid I’ve expect in of single mid in support to said, in of expect don’t resources we’re want ship digit if day, the that quarter-to-quarter to continue really what to the our is of digits parts business, but PC do single manage company, way strength versus a helps

Operator

your with from Arya line Securities. Vivek of America next of the Banc comes question

Your line open. is now

Vivek Arya

Thank you my for taking question.

possibly you more or Rick it’s could if what early, give year. positive demand could foundry you next actually year? foundry demand Bren, I foundry that color, mentioned consensus demand sustaining see hoping it but could us actually think, into realize And I seems is from I of today, perhaps – some that I some next think be next to decline year. you possible signs because was be

Rick Wallace

Yes, making it’s investments in really early what for multiple is, year, we but customers foundry. do next see

going is and what us in very that is nodes. the this you people AI the why and capability gives investment and seeing think And a for advanced getting continued of conversations I smaller it’s by the driven nodes the for we projects coming and there logic. group, the building in that, all then. time and terms second from toward in so are now so the the at but or notion that of and And work high been advanced a positive really following of good the after so a what setup But a the having lot the half that think that XXXX. we’re for performance in commitment confidence along have been foundry obviously, lot it’s of out, XG year, computing additional between long the the that far is is these on then are a largely advanced expansion with year, that to the one. success is we’ve infrastructure computing have there’s the you

in talking – us some are confidence their pretty we’re There needing, China number to the actual IoT in have having the demands ways with and what the judging are conversations what that’s challenge keep focused. slot that a gives intent. also of about rest we meeting the So, our good the up of that are customers year, through plus of just sensor projects of and RF

made overall percentage so some we sustainability the year. we move a of it’s as foundry year next and into would mix that And expect this in higher

of and the would enough Rick’s better end and amount diversification, and year markets. leading the expect of So, those industrial, on. that’s reuse, that or and to be edge a China so trailing fair at across customer all more demand incremental to in-market back mitigating sort and really automotive investment areas point, there’s statement fits we driving with next there’s edge

Hey, think but next moving a pretty also, a repurchase. good. question on the to setup the rest I I Tim’s of share we it year, been So, continue has second looks question just spend year, to as there on and year it. earlier, want this the was

we we given out, as the focused the COVID. all started on on we the quarter, shaked and see unknowns how So, to – overall liquidity market wanted

flow program. repurchases share and cash again, quarter We’ll we expect allocation year we shareholders. to XX% around should shares the line share that the in we’d quarter as quarter, and repurchase did at a March we pause progressed of at in capital fair We our through of the begin amount did our at plan. back with So, buy returning generate the this least of least our objective we’ll finish start

that baseline. would expect I So, year this be to above

Vivek Arya

I if big are trends could there quick two ask And follow-up, going a on.

TSMC to getting appears stronger. So, be

are more cyclicality fewer, capacity sovereign places could there out across Thank it leading leading edge how same big also know, then over I trend cause ships foundry customers, that these demand, fewer is a a more years? I it’s two there technology but if this do after. towards do KLA manufacturing, more scattered perhaps when So, are for how Just rather who positioned, the high-end, don’t but edge customers and then yield there do spending think go some to manufacturing, is shift probably are maybe, KLA understand sovereign of improvement? And more to you competitors, or and is of exposed more next you. than trends the few your does play there

Rick Wallace

I fewer. are there wouldn’t say

of Rick’s for any marketplace point, our in investment I in conjecture doing between expect going announcements certainly, or is So, this internally. and the look think what correlation we and seen is no we’ve leading we’re what expectations that’s versus to earlier what edge the if forward at you business,

about more end I deploys very that think with as adopt, the deliver feel customers see more to a control markets adoption the foundries capacity. And of windows. to you that type process good those market lot capacity, – think edge out have And if foundries leading to I product we So, tends there. that intensity of providing yielded a that’s and higher that be then are that as

that There’s pretty good – that. feel demand and end those designs specific for demand. a we of So, for lot about there’s

But for some in start-up markets they’re some particularly building I pretty maybe, over time, think with technology trading but feel also now And happening edge or to projects environment, so I the specific think on there. the good see the leading but overall, inefficiency you market. trailing new scaling about the demand, EUV. might costs edge of side, we capacity end and that’s there’s

Operator

comes question Joe of with the next from Wells Quatrochi Fargo. line Your

Your line is now open.

Joe Quatrochi

In question. metrology about you’ve higher counts. layer for NAND past, intensity opportunities talked at taking Thanks Yes. the the flash at higher for

spending go into we how about just relative – should to curious, as do the for this last we next cycle, think memory half there kind the how cycle? of So, the to your opportunity cycle peak I’m relative revenues we just cycle,

Rick Wallace

as was that that or in first rules industry, design was have and course, part and DRAM, What thinking already complexity us Bren mean, number, of design then from a the has in necessarily more both Yes. was I’ll we’ve take Joe, can does I flash opportunity. some the cases, create the fill solution. In one what opportunity things; the in there. the in seen pushed two missing

of as with So, the memory, capability a we’ve that that’s of up the having laid the something seen we past, and support and node and and part tools intensity, process happy advanced first the control, it and drive was of, to we’re to that. needs, already our part in ability in the terms pretty out

approach. that feel validated we in So,

but that’s of the more needs thing driving the other and of we DRAM EUV DRAM, capability, The usage is happen, on interesting defectivity and that. to didn’t know and introduction going for necessarily

some because the now are with control introduced, to really in went back process and there of We really intensity what learned to we moving past well they it above positive for driving was product how some of memory. have when terms problems we’re a NAND move first some back was first the of they’re capability. So, forward, went customers. trends backwards solve these couple design closely rules, We’ve engaged and in

you not So, rules challenges process design rules of with the just move number intensity in design as know, the but we of layers. continue to as continue. the control progression technology the nodes feel forward the increased good It’s about

So, the numbers. of Bren from standpoint a

Bren Higgins

Yes.

across defects Rick’s within planar also and we these multiple that I give from the solve depth to both opportunity us point, are deep challenge, pipeline help products and the to x-ray the have new even fabs, stack. think of the if within on, an process we that in the working we’ve points and metrology some units vertical products three WFE terms stack NAND capability from transition seen effective higher, of locating of improve but activity To with that defects some control increased be if do deployed in the can dimension intensity, can share two we’re in NAND. to

forward. and we’ve opportunities, of I see bit seen a it look far improve improvement shortage no of so little is moving there think and we So, to

whether of On to able the with to infrastructure fidelity itself. And to qualify DRAM UV, there validate is to it’s fab then of introduction radicals, qualify have course, the to side, be more, you have have the for layer inspector print you you a do in radical or still check blanks. EUV, radical one to have

EUV investment the infrastructure to happen side. support in to also there’s that needs DRAM So,

Joe Quatrochi

dynamics wanted all, new remarks; about Thanks then follow-up, about you just in prepared as restrictions. you’ve to relate And think I change last in that. I the to you of, in U.S. difficult the to quarter, to relative your that a in near-term terms at talked what there talked clarify Is for about prepared talked predict the a remarks, those?

Rick Wallace

I had companies with able all gone peer as exercise that navigate compliant have exercising, think, we our and were, been exercise and to companies, it and or Well, through – how the regulations. whether we’ve was that. the to did through the be we the go to not of determining peer And

to what we – as it. exactly uncertainty we’re It As there follow obviously going the interpret said, how to some law. was to just was

on and we’ve working feel details like we’ve the through those from of benefit So, had that. moved

Operator

comes question of line Morgan with Stanley. the Moore next Joe from Your

open. Your now line is

Joe Moore

and sovereign I if what business your customers? are of China, you. China between of as is little specifically sovereign seeing been Thank Great. wonder mix you kind China that a shifting revenues. it’s And How talk stable you percentage multinationals in customers? from could bit pretty about a

Rick Wallace

We’re year. seeing growth this

got and pieces that the are display. of PCB you’ve part so And

expect I growth my would XX% it be to more. WFE-centric. So, is But or statement more

in think in $XX WFE are billion China, to probably the billion $X China range. levels the native I customers – somewhere So, for is

it it’s is certainly I this it So, year would call growth centric. foundry, and and infrastructure more

Joe Moore

great. Okay, much. Thank you very

Operator

Your next from Citi. the line Atif Malik comes with question of

is line now open. Your

Atif Malik

I delivering on based on the job a are and XG taking exposed perhaps PCB much the on XG your guide. you the annual June services revenues good quarter. multiple, side to and stock your an work the over you see of results peers, question for Hi, guys. system PCB on Good gives and EPC our exposure questions smartphone and Thank edge have records higher XG, basis? my how have an the in on

Rick Wallace

we it had So, to when that build-out. you products And those at feel good the serve XX%, point out, it’s right like there, customers. we’re exposure, we’ve the about days XG looking like early and now, we’ve success it got that’s, as good feels we’ve this where got is

as there’s we continued So, forward. we there opportunity go think

Atif Malik

longer-term, to logic Great. maker then potentially on logic maker. your delay neutral positive? logic a the logic to And shipped your U.S. opportunity the at based Taiwan foundry modest I there or Rick, exposure for you was U.S. versus better foundry, a see that capacity question have from up that earlier XX-K, maker on is

Rick Wallace

time to in are historically, on hard I really I their investment engagement ability what correlation seen and leading control that over high edge we’ve It’s we’ve experienced to is there stay and customers say. part of equipment. a that process between KLA mean, their think

understand ability up lot to to needing a think you we’re struggle. do I in that. and seeing going they’re what the like and you’re want on of of catch and logic the fab, the it’s investing more edge clear, is, to to the to now are stay cycles don’t people But that So, feel pretty if leading you learning foundry, have fully

what’s to node get a their trying maintain need really people why invest. investment to they profile. do because – a ends that’s as that to for good lead us advanced lead into technology, want up anybody, or That’s changing So

And moves that they if because investing they’ve more. I be and to that they so would it’s struggled, up end it say successful, if then want

nodes advanced what’s good and support people have So, them. that really to I think for KLA’s the desire

foundry, especially, multiple they in think other you a have their flows. process – multiproduct I as a foundry, in is challenge the know,

so metrology a flow. because process to all flows, inspection for going and all many the through is the also support aren’t to same it able So, designs be challenge

encouraging. So, designs of increasing nodes large we that’s generally been really feel really excited when advanced number that we what’s see the

on to in thing just this see we would down of we the logic the if year it utilization – have and wondered were we the other fabs and The one thing haven’t. sustainability go earlier of was foundry

pretty board. of sustainability investments So, the good we about feel the across the

Operator

line comes question Blayne from with Barclays. next Your of the Curtis

line Your now is open.

Blayne Curtis

guys, and results. our Hey nice for taking thanks question

Just to the you or earlier curious; number. look curious getting on mentioned doing whether service plan actually and you September? delays sort you as had about record up into I’m of are you up side, caught actually service, of kind you talked catch just in

Bren Higgins

our number transition that the being record installation strong health quarter guidance the done and Overall, has extremely those Well, service foundry and to for And of been and so at the for circumstances And well. very we memory, the – good localized very course, of June more rates indicator installed requirements and Rick of handle feel utilization talked tools. the contemplates September is logic. teams about able utilization plans. about tools seen We’ve market. quarter. we on rates our has in a also to which another to of

we expectation of growth growth per to on all feel the Taiwan think also and X% profit we’ll structure expectation rate as China, able to we our to of range investments Korea. to our rate able target about made the XX% more long-term we grow now over of think we’re so scale that. scale and in in of in So, the in that years, good particular, our we’re and we’re – well. drive but and annual in pretty be service going is We economies and drive some because

it’s this and the good – there that remote and going pretty position And capability leverage efficiency So situation point to for better business of that well. we’ve an we’re forward. adapted us support even service now today, right to a that’s of for some pretty trying out I from are think tools view

Rick Wallace

I going really at last add girls, we mean, amazing When our service heroes, our all service anywhere our were just to inside quarter people early the service stages and and they crisis, even customers, to the this customers. are and an fabs guys, I’ll support only Yes. done our this we’re in were back of they’ve there that Wuhan guys this that. guys job. year, of look during

And any visitors keep these so fabs don’t kind, to is they service, customers, they up running. want to often that want with and have when of the exception our because

it’s of them. feel that. long-term pre-COVID ability hit really about targets the this been remarkable and really, set trend Bren resiliency So we And said, to good for the year, services see to good as looks out the we’d

about So, we really good that. feel

Blayne Curtis

be Thanks. late the I year. always just want to you’re in just the that’s recovery DRAM any targeting? of I ask side; of of on you’re part recovery curious was on targeting memory, it if just the was kind curious going

Rick Wallace

how bit, that but think But think as the again, that’s little and flash mean, first said half bit, it better the is flash is of in I second we the than year in I that see – I better half little DRAMs move earlier, year, the the a I right is stronger a DRAM of probably I around overall. can now. think

Operator

comes line next Quinn with Your and question from Co. Needham of Bolton

Your line now is open.

Quinn Bolton

you me letting for ask question. Thanks a

come your of side side guys the equipment you of well if increased from Just you to the wanted But you’ve where on business, think impact threat than back to China, obviously, wondering pretty metrology of a China major probably business, actions. the more the seen especially, entrenched? seen commerce any de-Americanization I from in are suppliers department inspection domestic and the haven’t

Rick Wallace

since when by to XXs, whatever, base. in in been company internationally, been So I customers business KLA Quinn, there back in the started doing regions attempts and late is this supply have Rick, the our I’ve think always Japan have different

that Japan, China. in Korea, So, there’s that lack much of happened in never in course, but definitely, interest not quite Taiwan, been as and motivation happened of a happened in

is have have So alternatives that business that’s for interest competitive performance we’re of yes, interest desire semiconductors on you is trying business. to got capability. basis. their the be running impetus keep competitive, I of win and driving sure to But capability more is there own to other competitive, a and this we’re business, U.S. than so making as you practical that we’re than we course, to – worldwide know, is sure in there But on But, the compelling, think us that so like

any going any And region the capabilities And have to to our so another been, have to belief go win it. to always compete with we you’ve to has opportunity, got because worldwide. they’re solution is that’s do overall,

we than don’t see as So, in that past. the different particularly it’s been

Quinn Bolton

freight quick that lingering then nice the shipping there Thanks. September. guidance if and wondering COVID-XX margin one a would I’m in Bren, that just And still for gross area. follow-up affecting are any the be margin gross logistics are possibly in costs

Bren Higgins

Yes. I probably, and I don’t are. it think think December in not quarter will there change the And quarter. – in don’t September it’ll the

So XX headwind there of about a is points basis bit quarter. a the there last

the up And quarter impact. a Well, so bit, a is this so the guidance. revenue margin little artifacted similar in

to start competition gone from there. tailwind is we’ll that increasing yes, freight the inbound yes, up So – get costs market I as might start whenever to have we’ll freight in think be, we overall a but normalize,

Operator

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

open. now is line Your

Sidney Ho

Thanks. Great.

the speaking, You nanometers? you it for it’s contribution you three-nanometer I any talk foundry and logic. but view relate when early, about broadly the to the do is for going to seeing Are start ramble? good expecting driven still a maybe Is have from three mostly development? year setup revenue pretty five-nanometer you’re by next know

Rick Wallace

both. Yes,

course, of leading on there. see that. of that would and not these But as some trailing Bren have that’s of in in the we’ll you logic some early to investment the into this but on we that as build-out of would about investment. as cycles year, phase and that edge those that’s that be next the I mean, year. half have know, early talked I breadth I – go of already levels of and really our expect earlier, expect you And we first early of And would early see. conversations debugging the capability. The the be leading to broader the we also amount continuation tools, we’ll in then the expect will early follow into sure, a that get sure, year. – the continues of For we on, a the mentioned next fair about things edge, work many

and So, of number opportunities a for compelling foundry/logic of a space. lot in players the

Sidney Ho

maybe, production. see in a you process control follow-up are in Historically, the to Do strength volume follow-up Great. at – process, Then my once early products question. and the phase then strength you earlier memory tech what do given transitions in more see sustainable about or through to pattern you going about market? this forward, expect continue the talked happening you dynamics the

Rick Wallace

true. less really I is It – is it when there’s mean, trend fewer that innovation. there’s especially It’s true true. –

what I scaling. has think edge the leading now the is EUV back difference is on done brought

in And no pronounced another was period, EUV, was really technology long gap for that there there where have was lithography not so that where a more several we years.

exacerbated trend. really that And that so

a that to in, have the ago, so players the then other and two players factors trying are other is a maybe, of and different, from at that since designs, of while got leader another is folks different you there’s now then So, to have of the where trying kind you’ve additional cut you where phase different was behind, surprise multiple gives which a – location. way the world and a

the all that think tends get and and the of given that measured more that tied I An doesn’t would production. more is much to to decrease production So, have of net number plus we challenges. more much products correlated really more which be is it the overlay, to that overlay, sustainable, are example be layers now,

and sampling areas tools the we same had past. in might that as number have have in some don’t you So, reduced of reduced the of product these and

Kevin Kessel

we question. think one time last Operator, have I for

Operator

sir. Yes,

Markets. Capital for with Weston have We KeyBanc Twigg question a

Your line is now open.

Weston Twigg

that which taking – said – you intuitively for me it’s thanks side. was earlier Hey, I the more KLA, for [indiscernible], my there a with something really sense which just foundry makes resonated question. for

clack see special that going for us chips, sort chips into how of few different next about there’s more help XG You are uplift provides more that all chips, the custom. overall Can AI, you years? over think things

Rick Wallace

mean, do think one control person, in what the and by That that they have and just dial for grump three know, thing change it is about process right? for really they want line. I and sure. they made scenario they have one as everything dial there’s don’t case, attention would any Yes, device not worst you years pay And worst-case under right? in because get be then is be the all us to the lock on let the and process, in and it run, the anything, CPKs

one So, the they that process. continuum other is process of is designs. What’s about of foundry lots interesting don’t end force

In you have of process selling fact, foundry. flows part a is their through proposition multiple

can do flows, and you TSMC, different that and go process if you look publicly you can large of tons the look change. this So, number is which means of at pick

last in trend hyperscalers, the want center The years, have as people data their own own because you other thing an reverse that to they we’ve designing have advantage the chips, in design. seen few in their

lot we have a of So, customers.

was traditionally which When designs of happening customers so restricting advanced some that it keep many that’s was nodes. is why going far our than designs the at greater have be, there’s to happened. is number to used at customer what’s it We point view not the –

and manage to flow more the all is and and need So upside. that of that process creates more change,

make factor those. designs so in seeing really producing we’re and people to control of that’s number successful is more Does successful, order favor more be process relevant that we started sense? become the that for at when So, that a because excited

Kevin Kessel

Charlie. Okay,

Operator

sir. Yes,

We further question this time, have no turn will I the now the at to presenters. call back

Rick Wallace

thank this final Charlie, everybody Okay. We concludes the wanted please And and their provide for and to call the interest. time instructions.

Operator

Thank participating. and you, this Thank conference call. Ladies today’s concludes gentlemen, for you sir.

now may disconnect. You

KLA (KLAC) 3 Aug 202020 Q4 Earnings call transcript