KLAC - Earnings call transcript Q1 2021

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Operator

Good day. My name is Priscilla, and I will be your conference operator today. At this time, I would like to welcome to the KLA Corporation First Quarter Fiscal Year 2021 Earnings Conference Call and Webcast. All participants’ lines have been placed on listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions]. to conference like to now would hand over the Mr. I Relations. Vice President Kessel, of Kevin Investor Please ahead. go

Kevin Kessel

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

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

the press today’s we will after period Shareholder XXXX XX, September released slide call, discuss today the deck. a During that market the form Letter and in closed ending release, quarterly results of we for

non-GAAP All of a be materials earnings results found of IR of unless the the results and on Website. Web on posted site. to A financial financial non-GAAP our Today’s IR is these documents specified. in our on can section reconciliation otherwise of today’s presented KLA basis, outlook is detailed discussion GAAP

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

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

of last differ our those calls that in We projected format into deeper letter may the our a insights from business. results significantly statements. actual to these provide include shareholders Our changed quarter pre-publishing forward-looking

remarks, and Officer, while over turn overall I'd more providing to some answers. like call streamlined to We Rick from for our With will full and time highlights by providing Rick? Executive President also prepared that, our Wallace. Chief still the your questions start

Rick Wallace

welcome Kevin, joining everyone us today. Thanks, and to

appreciate exemplify much are I and you company. end perseverance, months. support in health continued the the conveying for make that in to the to your year, to better strive today, families sure In our and my your us continued again want September values our the core your that begin KLA's our returning the highlighted our Letter changed today performance Shareholder to resourcefulness I you. business team. once of to when stopped be quarter's financial interest approach to by published our meet of team, it's executive and determination safe model resiliency global in workforce, think and I and rapidly It's we KLA XX appreciation I and and the calendar the hope amazing entire has behalf was remarks worldwide I to On of commitments value how how over want exceptionally we enable quarter. our my this As last good demonstrate strong our shareholders. deliver and to the KLA results of to I thank commitment

global teams to of XXXX exceed continued you end may a executing I'm enduring strength and execution from of of the by our non-GAAP resiliency calendar KLA and XXXX. are the strong both at September in many importantly, and quarter year momentum guidance, the at demand customers, objectives. from meet our been position continuing a December in quarter and truly are model our As strategic and finished marketplace solidly targets. our on operating the upper we result that, track level, in or this our seen, a say has unprecedented high into nearing financial the EPS end guiding of of have what exceptional to an Most pleased our already operating strength revenue are of we

showcase COVID-XX has KLA’s of completed resilience third through opportunity to the the just quarter times. in a an of of we operating resourcefulness workforce, terms resourcefulness and these pandemic. unprecedented In unexpected global our presented

We our to customers by safety our of posed ways to virus business in and collaborate the mitigate while workforce, people. remain partners. to with vigilant proactively protect have our new disruption risk strict to by the protocols adopting and innovating begun We've steps taking done this

throughout As are roadmap needs, demonstrated by successfully operating our R&D worldwide strong XXXX, facilities customer and our efficiently. performance executing we meeting our manufacturing

We regulation, continue evaluate health and adapt facilities local employee safety. in with to at accordance various prioritizing and

for and better and Our customers their need meeting praise always of worldwide deserve losing as our drive We want businesses, from resourceful commitments. and and them benefited our remain to to customer being yield sight teams satisfaction improve what management. never exceptionally to committed

the today, workplace, the teams consider intently that they our that challenges supporting focused and our way. we're us facing extend While every in teams our ensuring we which makes beyond recognize possible people are worldwide we well on

Lastly, although leadership. adapt, which an have activities market and R&D challenges, investment and our pandemic. important priority actions, allowed us. business continue that by this to confident help we’re in to for And strengthen term ,not We're remains will our programs the through effectiveness R&D of continuity our technology without long gratified

Now, control XXXX. turning each above diversified In was September double of to revenue across saw quarter, broad we solidly on track to our deliver and digit our leverage growth plan environment. is strong the business industry segments. the delivered and services strength demand in operating Semiconductor process

industry calendar to originally work, our resulting and our KLA Today's digital fundamentally strong for for R&D in the quarter is as innovation our XG in and driving term by technologies. roadmap also memory technology next generation Process we the cloud and and business reflecting to revenue in operate customers. continues the transforming to secular of of exposure investment. control as We invest stage our artificial has by on enabling the and Day. value into addition that migration the investments Investor KLA’s customers’ and live environment critical with industry And the set as the outdoor and businesses on-prem technology digital the portfolio plays computing, our This expanded market in change backlog, and is ongoing integration The the industry device and the accelerated lives role in fueling applications, adoption such technology, advanced demand way several how to circular the performance transformation, communication, trends transformation to deliver logic drivers, in customers is accelerate in XXXX from Driven high growth enabling intelligence profitability. trends. commitment to path to is digital Orbotech compelling we long of our driving drivers this XXXX. outlined XXXX the of growth our well ended

improve customers. transformation global our adopting with and including as We’re business in own all new teams important this driving well, our digital tools all to productivity collaboration

recently we customer should closely which and remote new benefit as customers country organization augment working been continue service engineers. our platform to example, has installation in based For cloud expand for a system We’ve us our to also our with and integrated that global scale. managing management service adopted service HR technologies,

Finally, service suppliers we're manufacturing us to based service to also more our proactively integrating allow customer planning cloud demand to increase to respond to tools our and of the and parts visibility requirements.

few transformation as of a examples KLA the inside environment. to we are new adapt ourselves experiencing that just Here's we accelerated this digital of

most Here quarter. recent are from top five our highlights

in high remain memory inventories customers bit foundry we utilization plan as healthy to this quarter. drive continue and in down we XXXX. customers XXXX transformation and for growth demand. In and investment strength meet expected and mentioned we support the earlier. digital to are the drivers secular that expected, And expect and memory, higher benefiting improvement in in in is First, These to total logic device breadth from saw growth demand to continued then September demand

in customers We continuing momentum range expect into quarter higher business levels across of December a XXXX. broader with

Second, groups, the process the our fueled with strong strong of product by for optical be we and growth eSLXX, the of ended EPC driving portfolio, GenX our as demonstrating inspection control. inspection print quarter marketplace our will momentum multiple check patterned and our expect leadership e-beam offerings, in new year new what we're platform, applications the and we process suite, a across in platforms seeing adoption of inspection success control product such backlog, wafer market for including both EUV semiconductor the in

ICOS EPC, driven or highlighted the The division. Third, our at the is delivering demand by industry XG group, rate revenue Electronics the EPC's a by growth also the rate. transition Packaging and KLA's to total underlying it for along quarterly are the from of XG perform Components increasingly growth service XXXX. positioned of business and service benefiting was and to advanced divisions our XX% double PCB continues smartphone WFE well long was packaging. quarter semiconductor PCB complex another SPTS with more term record growth market. growth exposure Fourth, in and in infrastructure to for that's double digit and is the high strong is strong

that dividend back our to commitments shareholders, our with returns Directors Board our and capital approved of increase. announced keeping strong in July we annual consecutive our predictable Finally, deliver to in XXth

September million During $XXX quarter, the we dividends via and buybacks. to returned investors

Over returns KLA capital and for key thesis cash past predictable shareholders is we've creation of returned a shareholders. our delivering of our strong We $X.X months, offers investment the free or flow. to XX% record billion track XX compelling of component the believe and value

on the Despite the of benefited to challenges the over in global resourcefulness and Bren pandemic, greater into disruption year has workforce. associated get Before briefly hand KLA our highlights, I with let detail to the it summarize. me unforeseen from financial our

XXXX. as to and and our This Investor well of term of our products adapted help same last the And lives, positioned we growth it return us XXXX for they industry we're well resiliency the they'll to in driving diversified targets. to demonstrates business believe We as our have factors enable operating shareholders. shareholders. of I'll our at critical with strategy nature the financial strong to leverage the that, the strong then, our Bren. model At turn and were achieve now services value year's relevant demand driving our identified finish that should our consistent secular with for a returns time, over enabling We long digital yield transformations of are very our us and Day

Bren Higgins

both once KLA's and Thanks strength afternoon, strategy. Rick good the of and everyone. again quarter soundness September ongoing our results demonstrated

margin capital XX.X%. our Non-GAAP gross Non-GAAP while free for upper XX.X%, meet market of billion. We operating end continue revenue EPS maintaining the requirements at was its profits, including process associated process points end guided growing was GAAP of Total segment, to XX.X% needs robust realized at ability of our and the midpoint EPS quarter semiconductor service quarter. range Gross XX basis at to exhibit product for Revenue higher and customer drove control strategy. was inventory to $X.XX leveraged, was billion. guided semiconductor of strong the due the return services strengthening range $X.XX business the was in leadership, upside high demand the reserve as control to $X.XX $X.XX. was lower mix, the flow to guidance, cash and XX.X% $X.XX the $X.XX. expand of above generating margin the

specialty but approximate the control but XX% up XX% for was split memory two is customer strong in segment was Demand XX% was at $XX the year-over-year. year-over-year. was sequentially process and process Within MEMs driven semiconductor DRAM sequentially In the XX% down semiconductor down one Revenue revenue to segment X% million, in packaging. and XX% segment foundry terms Component RF, up was business revenue PCB, million, systems customers, XX%, Display of third of Inspection by NAND. memory, quarter. and this as advanced growth $XXX and in September logic mix expected roughly thirds was

billion agencies. returns XX.X% ended was KLA from after in flow and cash flow cash $X.XX line ratings free perspective, bond XX.X%. maturity highlights, the profile quarter, sheet all quarter three million investment-grade our the cash in attractive free and by balance September $X.XX $XXX outstanding total revolving cash, on margin $XX of of capital conversion From was flow free billion a total credit with of was flexible a terms and supported flow retiring debt million and In cash

shareholders million dividends For share capital $XXX billion in returns, returned or flow, in paid over including of we million months, repurchases. the XX% cash XX $X.X past and $XXX to free

in million quarter, During common we $XXX and of the $XXX million stock dividends. September repurchased paid

view growing for year WFE billion baseline a off As to $XX billion guidance, it growth $XX XXXX. relates XX%, to in is approximately our this of

is in and this KLA our again quarter, once outlook revenue Given growth industry. to outgrow the our for in position calendar fourth

calendar sustainability next over 'XX. Looking current quarters, forward, the couple first funnel based sales of on no for backlog current the of and by demand encouraged are the early visibility our profile we of our half

We will our our report. about of have WFE more to views earnings in say January 'XX

Before specific States situation like turning to quarter the we'd our on to December current guidance, regarding China. comment and United trade

that stated the of China. end-use or in an SMIC, quarter, in of unacceptable Department diversion all US a September you know, the As SMIC, Commerce to may risk military pose

prior license spare any did an new to So regulations. on obtain SMIC administration effect we must US certain and license the parts to parties This to September have systems that the subject related certain and export are shipments shipping quarter. in requirement any not export

already We the in are and rules complying applied quarter. December with for licenses have expected the shipments new for

done situation plans guidance our our our from situation Given refrain license a impact to remains we've level the requirements license a business business subject have on the requirements, revenue. we result, expected of perspective the of or best And and further. trade the have quarter we’ll situation the you on to for impact adjustments speculating no our The material give fluid result the in ranges. as and will not made to this on to

for the XX%: efficiencies customer semiconductor September in revenue XX% a business to total about forecast to be margin of to a and expected in be services the mix solid on company non-GAAP Logic $X.XXX Our to base; at process follows; as is market continue plus customers, as and plans of to expect or see is our progress we product December infrastructure. depicting semiconductor amongst last by is is range million; control outlined quarter. forecasted strength we as expected our product been driving new scale revenues and leveraging our XX% gross has semiconductor Foundry product the range Day XX%. in be be derived to billion process XX% at control We approximately offerings to is foundry systems has minus reception platforms as in quarter grow about costs year, to be of expected guidance $XX leverage Memory to And worldwide service our strong. in The similar Investor made the

of tailwind improvement interest acquired is rate tax million, expenses operating margin of In assumptions other in million, businesses addition, gross better XX%. approximately our approximately model than and include; in effective margins expense of Other modeled gross a to overall. $XX approximately $XXX an

to $X.XX both In EPS non-GAAP at Finally, $X.XX confidence $X.XX $X.XX to solid increasing XXXX on or to GAAP is closing, fully profitability. our KLA are the diluted across on range diluted and is share in top approximately markets in based track EPS revenue meet in in line million to technology diluted range long exceed of of count The is a over a nodes. terms executing and expected looks a EPS well semiconductor demand $X.XX, guidance of Growth be growth shares. with we of that at XXX and or the target multiple model, compelling with run end midpoint.

underpin to product Kevin now shareholders. turn excellence Q&A. fill and the the by across model, capital operational flow encouraged our operating sustained our back deep to KLA of which also guides more technology our growth, track and to the that, leadership, are objectives. With strength We of Kevin? over They begin cash resiliency These objectives returns call strategic service moat and offering. the differentiation diverse and increasingly free record competitive generation strong I'll and

Kevin Kessel

ready think to I Priscilla, for please queue Bren. you questions, we're provide instructions. Thanks, for

Operator

We'll [Operator our first take Credit Suisse. Pitzer from Instructions] with John question now

Your open. line is

John Pitzer

Congratulations Bren, China. I commentary on follow-up, just wanted your around to

given for think adjusted the pull of if concerns could in just or on your SMIC you've continues the you strong, said And to I material that that quarter impact just Is forward. will of to have December mix vein, is China and investor you little of revenue. just of a and results that it already China require that fear your to the there because not between of out causing about bit guidance You that wondering a pull your the of the of are shipments kind business same bands licenses one I'm talk customers a that think license? don't be in most extremely key multinational domestic forward? concern

Bren Higgins

on as over particularly mean, licenses or so overall, for applied where And we've terms at December we the are for look need in So important And probably the I as said the quarter, just we are quarter day, need situation, for as we I over SMIC, quarter that the look revenued the we at and at expectation our SMIC one. where background, the don't of seeing on we in but course of it's And you just over if just no some investment. said, others look remarks, think in material prepared them. we've participated what we the the customer broadening six year. discussing this that. how But licenses, timing in not There's the overall the involved we last applied of a business September the December where an a and effect large been then there impact. And business look certainly, months of having we've factors in they was we revenue see them. quarter, a at when come at we for it end for the

have didn't frankly. adjust we So to anything,

are So overall. plans consistent our

there's On very your overall So been change question second certainly, demand really our I has there. difficult no mean, in strong. business.

of delivery, from that And try when another a overall you given they're demand sticking in the to with their a slot that customer. so And pull the a it customer slots. taking customers is means -- have are most profile,

been, haven't today. loaded. It's seeing So the really I in we change. year fairly seen half are second about view of been for $XXX think, shipments our million. We've consistent we a what of It's

change seen products. haven't of customers, a to in least for behavior overall of at in I terms the much So our regards

Operator

today JPMorgan. question next from our Sur And Harlan we will take with

Harlan Sur

quarterly the and job results. strong Great on execution

team and and platform few inspection, the correlation year? then do platform, product name year, will be next also the I and platforms, to momentum revenue in your years and front, XX you there's or for platforms out of where in for in the platforms new iteration years. your GenX, the mask these performance second of contributing Last few. to development how guys multi have introducing innovation launched new you a metrology new your platforms a e-beam over rolls incremental column just kind inspection about new forward tools the And XX think tools X-ray many guys revenue good the On this next inspection e-beam months? Are new upside and/or

Rick Wallace

might their points are imagine, programs in life you at these cycle. different As

have contribution. yes, seen we So

we the example, check for platform, of the not do a multi-beam print of demand. other Those cases, we with continuation revenue the about to talked are beyond about For support reticle but that's where and are material been that of the plan. product talked or fuel EUV a broadening recently expect to BBP the are and terms and In that growth tool. in products near X-ray metrology in a in those 'XX the XXXX way we term, contributing in in our we've

In we do of us imagine, early to ones or various the are be say why programs harder have terms need you meet development, place might XXXX of challenges as number we're The might COVID. where the plan, and there we some that which you execution. plans add feel always of support the as we And about a made like in we are on. laid Bren, we that of which is -- development there under where maybe in But to pretty that are, great been are how confident as investments on And navigating feel want we to the order we've some good of in XXXX challenges, plan. have terms in you terms that? then of got hit But in program of progress those, we phases that. we're to we've under they 'XX imagine, on. But our exceed going laid that when to we significant many have track we COVID out programs introduction.

Bren Higgins

strong flows, iterations also platforms And tool things of across one so, We those X or we there that been is and Gen connect out portfolio pretty lot perception. you laser both in had offerings, new common sets a think mentioned variety the the but supporting for e-beam, able which product. year you And those Harlan, we we're Gen business. common the market about we've over But of designs and I our X, platforms in great new have competitive has a mix of as been a e-beam really introduced customers to, and wide algos, think, common the the businesses. process and last a mentioned of have it's different scattering we I inspection pretty core that excited matching the marketplace. leverage and software, product provide new of line offering think the and company, tools interfaces strategy

think so and maintain to We been strong it at improve share. able maintain going that we're do we've margins. to little been share able very in grew And a to our maybe We 'XX, XXXX. bit in it

a factor in a factor. growth the overall is business is certainly, there also the product position but So

So in point, the targets. will drive pipe with what's new pleased Rick's got performance we're to out coming down some we've 'XX our hopefully against And that our things marketplace. the pretty

Operator

Evercore. to We C.J. next Muse will go with

open. line Your is

C.J. Muse

could a in if could the confidence 'XX. would X-nanometer logic at at speak you TSMC? and spend that see first see all foundry have contributions. Thank if I as the we on perhaps in particular, And you part versus guess, I And thoughts you half you. your around hoping to bit hear about impact on little sustainable if I of love spending touch what you might of was on that, greater X-nanometer

Rick Wallace

the the of levels. December just as March of and we quarter, year, will confidence gives into the overall And the coming quarter. bill us a we We position outlook at prepared book As take into strong some had into we quarter. said these then of this expectations December sustainability in we into if order look the positive we business very and funnel into backlog look the to remarks, had backlog the believe

But time ‘XX January, And it's view when earnings are us sizing next spend in we half there's look a lot us puts the you of the pretty gives takes in quarter-to-quarter a sustainability that are we'll it confident 'XX, changing. for overall of early looks always move and so into position of the have there. more see fact foundry/logic see we to the the overall as as some general move the feel that here. about has don't of the foundry/logic But while that at and fluctuation. first profile year, first that we'll in sustainability half. that and in say there like confidence it Obviously, we I to call market, very good about business From point in

Bren Higgins

thing one add, just And C.J. to

think new example, check, were our volume. be of course, our hadn't EUV much of people in for the on of to capabilities, thesis that we highly one beliefs and really investment advanced print relevant going hit nodes. I some was But the

capability support a of getting proof And concept. ramps, customer pull customer. capacity not at and to lot just we're seen one and of really we've those for that So it's

intensity So very the seeing we expectations going that these into control had being good them nodes. feel We're we realized. process about

view just but on overall the control the on we another indicator, spend related not that as positive process So spend. foundry

Richk Wallace

middle to the of the we see X type end, expect production starts would into next half. year wafer what expect to Gen call growth risk mini have in We towards line also the and some, investment second we NX on some more year

Operator

to Sankar & with Cowen we move Company. Krish And Thank you. will

open. is line Your

Krish Sankar

for a question or had Rick Bren. I

there's memory that within guys reason exposure KLA view growth year. in NAND But you would trend? has you're expect your than memory should You more to KLA give is within to context, going mentioned I'm I comments next how in the January. color understand revenues general just more vertical, The DRAM. prepared see asking a that to

and So curious your I'm to 'XX of memory on hear KLA's performance. thoughts kind

Bren Higgins

since our XXXX seen memory Really, so, we've or spending very customers. of middle by the disciplined

here we for modest after to year you so down see seen XXXX. recovery we year the December continue strong quarter disclosures quarter. flattish We And in here And as we've some environment see a on in look in we that year. the and see gave overall through have a from the we'll XXXX data pricing center if an certainly continuing just environment. as smartphone see memory -- I into of the the impact move you next timing that recovery, and overall don't the at

You've that as we into the could year into EUV got factor we a well move be to DRAM, of an second would memory the as for expect 'XX. business which as improving we introduction half see into move as us

wouldn't it's I the be think that there. said, pricing And huge to we although the growth higher But DRAM more of there. see that control some as As XD I you'll investment than I a in of market think today drive think dynamics flash recover, introduction I start has on lot a bit dependent mentioned. of been opportunity it us control process and see EUV I discipline I but say a expectation intensity. of terms the DRAM, of From end little for process is intensity to point view, an in a it's will

when then in new some increase our that layer metrology We've product more flash about will And we product for got out. play opportunities optimistic we we're see counts as see think that I that offerings. start also stacks, lines. So to

We also talked have for the things We intensity for will improvement some about e-beam we us inspection tools. ultimately create share. or where that either opportunities believe

those optimistic opportunities. about So we're I pretty think

Operator

And Morgan move Joe next Stanley. to we will Moore with

line is open. Your

Joe Moore

you equal the quarter? of to And ship you whether then, back Israel you understand ship an the impact you in to out you exposure saying SMIC these look I I whether or September go Are I of but at have sure there to Singapore? just US situation. didn't as make Sorry sort guess, or of the want out this, rules, is

Bren Higgins

the very the or change quarter, at came the in the end September. September the from of government notification In

impact no September there's the So in quarter.

on the quarter, have to have talking for the business. the frame apply don't at not, And we're those. those I impact licenses for we've licenses, as about as December the within we applied granting when earlier, or a time we we so look will that said material of And think

Joe Moore

it? of ship And to you is from you licensing the process, location? it a a ship of there a where whether different out US as or out difference Is foreign

Bren Higgins

there that comes Well, a -- a requirement the licensing factor. from licensing is isn't requirement

Operator

go Ho Patrick will with next we And to Stifel.

Your line is open.

Patrick Ho

or mentioned terms and a driver. a it's Rick quarters your big has few XG Bren, in been had that business, actually strong you PCB of

you us Can product and and just next upgrade road have map for guess, tools this I a the these that's of wave process on the road typically given You've type XG? do that it by the a long development the feel refresh lifespan. area. on need about, driven lot control of and business because being call talk When map of line the to you

Rick Wallace

It's And business. we're relatively a this to the answer great question. new is,

impressed have been doing. So to with really think would conjunction them, had about year the make say products to meeting I and with amount that time. team XG. Orbotech And working we've investment there's half that we're beginning, that and substrates, to make flex hard new in the I all we continue a year, sure all needs. we're customer some we're And added over things. And and PCB very they the of of what of engagement opportunity great had growth you the a sure that. think This continued as system in is result, for emerging meeting the as the business the heavily And know, we demand, new investing right the

success in that KLA it we it's lot like go has we a combination, so requires what on and right team been we're So very that But businesses, far new forward. in done. we're now. as doing of tremendous capabilities and And bullish upside investment think continued a

Operator

to Timothy And UBS. Arcuri we will next move with

open. is Your line

Timothy Arcuri

your it about Systems the half-on-half. down for said take I prior comments the Display you question a and sort Semi your If would I Bren, of had be business calendar about half-on-half, PCB business.

that that sort So segment would imply at other the December. for of best biggest that, is flat that's piece Systems. Semi than And

said then think December? X.XX B, So Systems XX%, outgrowing And year X% A, X.XX that that to have about systems it you're the for is which for guess, up is? you are to about Semi seems I about where is, up market. like assuming line WFE the in So be with right? we is your to like Yet it

you this So it year I really you seen anything either those toward Because period didn't just gaining pretty comments. big wanted where you're to gain WFE in mix doesn't shifts like seem foundry/logic. a and can last see year, fit we've share if

Thanks. of can guess, that? I to So speak sort you

Bren Higgins

growth A mean Tim, for it's few there, Yes, December around single we terms of total right, I'll single the like this digit Systems run our Semi digits. bit try Obviously, it questions in and I you. But is answer expectations, to in looks at company mid level. here. a a business conclusion sequentially your sequential

probably take you that aggregate, you environment with that against in when that's the so XX% add of our semi all XX%. somewhere year-over-year market a And systems, about growth up in neighborhood

you And was outperform. Semi X%. business an if and WFE at up year, down look last our X% that's So was about

an that's too So XXXX. outperform in

can spend on all about we to questions. So how some think this, you the that's your time math on with but of

Operator

you. Thank

We will go next to Malik Citi. Atif with

line is Your open.

Atif Malik

historically, wave sales lithography as sales industry newer at high look rate and to I attach if inspection a it new makes length. introduces industry Rick, measurement,

you leveling think As a you DRAM. your growing some at off? now EUV introduction at with control defect or at EUV X-nanometer introduction business the XX at Do to process steps and remains for challenges X-nanometer since tailwind look associated

Rick Wallace

think I have of as know, would indications mass in relatively see we've earlier good we far, EUV optical penetration that as What in conservative, a out. we but so believe That's as it's advanced the well you really shop. seen we're tools had increased we our question. playing and

a up going intensity the print kind tools control of And that's EUV increased you of to process EUV. support part additional essentially us EUV BBP might incredibly imagine, I model mentioned of to is, deploy That's category able do for RAM new as a why of And wafers check. where we we're result adoption. working those expensive. So are as

So they're make yield and optimizing customers that their to defect relevant At there's real the excursions. the our a more and smaller same the focus time, becoming of obviously a defects. size by sure catching is

as modes to algorithms, they defects means smaller to in needs rules having run detect. capture that up in our go order down cover the end where the also with capacity which increased increase and design So tools

to our and advanced make very nodes to them. ramping support yes, that say tell are those about Does would they're ambitious answer customers both So position that sure because a the wanting I question? in and we're us tailwinds that your

Operator

Company. Quinn Bolton We Needham & with next will go to

open. is line Your

Quinn Bolton

sequentially. if ask a pretty got I've it Wondering a highlight business, looks within And could first I sort patterning XX% the had you wanted pattern to that growth? quarter. just up It like areas follow-up. strong what of really then and drove

Bren Higgins

in reticle Patterning overall, we inspection. a had quarter strong

the that to driver. quarter biggest So quarter, was

Quinn Bolton

continue that to Do is or fairly business? you lumpy a that expect

Bren Higgins

Well, it's big ASPs.

ASPs. it's big integers so And low and

strong to timing, design And of inspection, really number foundry it of been Overall on has reticle the for so advanced tend depending a be in because starts does lumpy. us. business

a was think I very bit that year a in still that pretty 'XX 'XX overall, 'XX. look it down strong and little in it when from So strong. but It’s business at we

into driver. should drivers year of additional continue. So quarter-to-quarter. I we move lumpy inspection contribution we is into to see start from activities, some some offerings think to those next But well. support a was it move But will as as And we to our and your point, there reticle EUV

Quinn Bolton

see call Follow-up to in growth Wondering year, of EUV system deliveries customers. time? ASML, no for do some you expect in you into perhaps its question, do talked modulation look next its timing check, in continued of soften about of some transition just print EUV that if some you or you given period

Rick Wallace

got application, are EUV I softened. that into print new challenge defects source. check to that down mean do and customers say there is wouldn't run with algorithms. I they've the new There’s new have

a And appetite huge get so there's that. to

said, In that. there as delivered forecast I And fact, to systems were developing. we're additional getting are support to a algorithms, of get we're lot pressure that

and print see So will the indications on getting. we expanding that some for check an all go EUV I the opportunity for time that we're think indications early based are

Operator

to next go of We'll Vivek Arya with Bank America.

Your line is open.

Vivek Arya

to your trajectory these that the abnormal, of should of that, restart your mix you? was the planned both below, how they midpoint have wanted these I the margins I'm levels. related the can at think helped it part the quarters? was what And into quarter. were we you for several as sustain next curious, and somewhat levels or believe your to sustain going operating you dig into but that above do September. And guidance still of says margins, at see done whether they I of levels you longer-term B in the are share good was these Can there I COVID margins gross think buybacks, that or think it kind anything some prior about

can sustainability around would very reaccelerate repurchase how the and just margins helpful. Thank you. share of color any be you So

Bren Higgins

On very gross and product the margin, as overall been to I said overall with earlier, the positioning. we've related pleased pricing positioning that

thing leverage business. been operating that's in So mentioned our for I good Service. a

that across rates the so we've the you the of the last thing benefits base And utilization industry to your starting and allows the in drive consolidation with the growth to years Service a in business, the invested now. lot And over that with in resources. good really we're few one of infrastructure installed of utilization see

acquired We point doing too from are better the of businesses our group EPC margin the that acquisitions tailwind are a in getting related to view.

that there's are number a driving. factors So of

gross somewhere talked If and type And term us I margin you to performance. between now look be at expect to our XX% at XX% XX%. plan, these about revenue level would XX% we long

factors any a probably But point had. that given mix the good You there's here in sustainability we do model quarter. do versus have of I think

some I If how normalized just quickly also our around travel, you underspending spend because the take hire levels so it down can of of on. people COVID we and constraints to operating but think we're margins,

any I quarter. probably has issues Mix a that the is given it. But to a point here bit spend do look what to when that would is there that like. compare through drops So understated normalized think I do level it think sustainability that notwithstanding in

we up how we capital. in the of it, the principle a overall with company terms start look capital we and just buyback, of allocate the the how as and then On structure at at look we back

And cash to billion of target $X.X so we start with $X a billion.

So today. we're target range within our operating

And flow. generally through buybacks so or of funded returns are our most cash ongoing

a was and at at and was, we that quarter little exactly expect quarter, that you these in I an it to bit December. cash go-forward as on think So guess. look But number compared the we around basis. this I it think would can't levels where look will I March roughly ongoing expectations I flow, March our lower around be recall

it again, starts minus. because, And was say million $XXX a sort plus of process we So it $XXX somewhere a million, with somewhere, that through. or it's around I'd run systematic approach

around possibility work to be same it. it that can we tends at than opportunistic time, anything more some that, have around else. based But principle the much we So

At the day, how going months. you'll we're going play to of repurchases cash share returned generate balanced at that's out. think the last return I to we're to flow in We two. it and end So we're going at the dividends pretty of XX% and And see least XX XX%. XX% return through the the least the across

Operator

[Operator Instructions] Curtis to We'll move with Barclays. next Blayne

open. is line Your

Blayne Curtis

memory. revisit just prior to question I want on

your customers mentioned in looking for growth higher meet to letter, were big You demand.

outside seeing? you know what more And year, don't color coming magnitude demand on to memory I type just any of but is you're that from? any color next Just where want for guide

Rick Wallace

and the some in said, move continues Well, we like as into next we're I see I improvement optimistic. December quarter, year. We that think

the supporting probably coming XG customers we're just see been, that's year. has and it growth but of levels think where But we that it's move next from driver. at optimistic pretty growth we the modest these most given we'll handsets, as into So biggest industry

Operator

I'll we call questions. And have that Kevin time, any Kessel to this I'm remarks. showing for back further or no turn additional At the closing

Kevin Kessel

and and interest. Thank much, you, for you your questions thank your very Priscilla, everybody,

our during concludes quarter be to We during This event. call. virtual shortly the investor you will the talking

Operator

at webcast. wonderful day. XXXX Please KLA earnings and this line have and today's quarter concludes first time, disconnect call This your

KLA (KLAC) 28 Oct 202021 Q1 Earnings call transcript