KLAC - Earnings call transcript Q2 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 everyone to the KLA Corporation December Quarter 2020 Earnings Conference Call and Webcast. All participants’ lines have been placed in a listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator turn Investor over Relations. now Vice Kevin President of the would to call Kessel, I Please ahead. go

Kevin Kessel

Thank you. the Financial And With Executive Quarterly our Earnings Officer; welcome for me to KLA’s to Outlook Higgins, Wallace, the Fiscal today discuss and is results our March Bren Officer. of the December Rick and Call Quarter Quarter. QX Chief XXXX Chief our

market will ending results released Today’s deck. we our of the basis, is call, A letter discuss the of also specified. in the Today’s December is our on a today earnings XXXX, today’s for non-GAAP shareholder period call end IR reconciliation discussion materials quarterly KLA of During the All posted form we XX, in unless website. website. represents that after today’s on release, on otherwise calendar non-GAAP financial a closed the the results section are press detailed of to available year. slide presented and GAAP

We all references will the XXXX. Please for both note to calendar year. make are and XXXX references

reports recent investor report also IR SEC virtual as most well including corporate Our on Forms our XX-Q. future governance and information, our to contains presentations, as quarterly and website and XX-K links filings, conferences, annual

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

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

pre-publishing our questions more this letter providing to that, answers. With the provides and two your Rick quarters performance. business Wallace. like and streamlined freeing the changed Chief by for call Officer, efficient to comments over a turn President updates As Executive earnings on ago our detailed more I’d know, also time our up many while be pre-publishing of we now to allows of you to call that include shareholder format The

Rick Wallace

Thanks, thank you joining us for KLA. for today Kevin. and in And your interest

XXXX, first on for the acknowledge reflect to important it’s the accomplishments me As and we of global KLA team. appreciate

company. a the determination was shareholders. have ever. letter drive we rise challenge are our XXXX demonstrate have we KLA other better including KLA KLA’s enabled year like customers. and company perseverance, together to strong fronts, and the results for our value commitment collaboration returning year innovation and delivered model no the our is resiliency for our not to than deliver Your while of our the great multiple our our continues for our strong quarter we be emerging of global most to In physically workforce, seen been exceptionally the stronger In the culture published of financial teams shareholder part; on by success closing and business and to record process, the to resourcefulness today, driven and results in December the how articulate to

year, Bren strong of highlight and both on free the milestones. As for remained returns will shareholders We on from cash strong hit rapidly in growth, to a changing work we was focused flow, I’d the by the on already environments KLA most you Through our and XXXX to semiconductor of growing continuously for multiple it much all, fronts. the results, delivering quarter but demand year financials profitability few the an meeting have to customer market. delivered COVID. adjusting on to while the like more have seen driven impressive annual and

For year the the grew KLA consecutive year, marking growth. XX% to fifth revenue $X.X billion, of

increasing and non-GAAP non-GAAP XX% with per respectively earnings growth profitability XX%, notable year-over-year. delivered also and profit share We operating

we repurchases and its The above revenue saw $X.X was billion a Electronics, our to December Our strength quarter, again each Control shareholders met Services ended diversified to returned we In backlog double-digit and continue strong and plan. free strong group XX% our share billion growth once execute setting level. across year Process cash flow the Components in a with the and through as segments. and $X.X stage target the leverage. business quarter of and Packaging, grew Semiconductor we operating continued We high dividends. of delivered growth for at another XXXX to

to position We customers’ our our and likely financial exceed served are accelerated roadmaps plays and return KLA in we the solidly this our given enabling technology on global operating of strength of the from reflects growth investment. their XXXX All capital on the our in of teams targets. role track marketplace and meet remain a dedication our markets, and enhancing

expansion PCB XG and drivers several Moving Each to drivers of in digital in Semiconductor economy With essential today’s increasingly growth fundamentally process to new and is data-driven we value. die for EPC and have advanced the been enabling complex the few investment rapid new which new leadership continues how adoption demand and and years, secular that semiconductor memory changing accelerated to how as communications equipment, growth like technologies. these This Electronics and to our such markets. control innovation logic market and our is technology semiconductor intelligence artificial more live of devices, world. inspection as performance high and growth work as and industry continues electronics, we driving to is past trends KLA packaging and advanced markets Group, well demonstrate our computing, are secular finished PCB, businesses in and enabling transform and digital process specialty demand highlighting and increasingly transformation in environment, automotive operate deliver

changing company with remained rely over respond conditions fiscal operating facilitate align have our execution consistent long-term discipline while KLA the is KLA year, framework strategic pursue execution, a tie operating constant performance operating We and the KLA strategy, deploy our changed that we the model. As things our one is continuous to of on much and product enduring on thing past as to model market company the the drive strong results, guide as profitability model to objectives. operates improvement, that’s to development the a objectives. accountability long-term we ensuring

Let’s to for for results now five and XXXX. -- turn highlights our for in quarter the our top

we saw strength and in in continued the breadth a foundry/logic demand quarter. First,

grew, customers demand memory growth end plan equipment also meet demand. expected, as and for XXXX memory As in investment improving to

the our continue innovate higher to we KLA’s in levels supporting set seeing throughout across essential strength across invest business end expect are We continuing The in in future a in of customers demand broader reflects and drive demand XXXX quarter, markets. momentum to role with nodes. major customers’ our technology March

including the the driving seeing in new applications our new are KLA, from markets growth expanding for market technologies Process inspection Groups. we inspection momentum the share the investment metrology Control and Semiconductor expanded eSLXX adoption is in X-ray new Control EPC and platform portfolio opportunities driving by Process share business and products, optical such marketplace for with GENX Fueled Semiconductor lithography, of in Second, EUV customer and both strong nascent in EUV e-beam for as check the applications. print use and

such we a of growth is trailing praise in business grew higher the of rate This with for Electronics demonstrating Services improved base, record receive success in operating was revenue automotive, total wireless leveraging in only results COVID. to Revenue operating sales of KLA’s our penetration market in fantastic we and encouraging new RF, XXXX. established steadily partners, our to Services share our growth to model. show operating markets year the customers and that a Services on the XG billion year businesses. and The from for the and and the target leverage KLA chain value KLA XG, Group. drives execution as acquired business seen deliver did as The cash increasing components or fuels new how with strong the growth exposure how against leadership for operating XXXX but initiatives grew EPC on at customers edge our to that strategies model and the plus, streams of level. Group, drove line operating and display. incremental from utilization Not believe team service the recurring and million EPC innovated comprehensive close in to XX% in install Fourth, also and EPC expansion well. by highlighting high model growth do challenges Relative $XX Electronics wallet Services this broader the is the cost addressing backlog unprecedented of additional XXXX to setting double-digit growth flows. more exceed XX% many and and company total generates $X.XX the fast strong KLA and will newly has continues driven XX% with stage a collaboration synergy Group in delivered the strong in very another least revenue in net a at contact our have growing the With providing and Working opportunities now portfolio, KLA which value in XXXX basis chain Third, increase in $XX in was product EPC, margins connectivity and by adoption million. job and a of leverage key annual the acquisition our ended

$XXX dividend free deliver the XX%. repurchased July, Finally, December Board to at capital annual payout increase shareholders, million of in XXth grown $X.XX $X.XX common flow. with $XXX KLA to our and Directors per we in XX% Since KLA’s billion to has authorized Back cash in share. CAGR dividends. a XXXX, strong of consecutive a In million our to predictable of paid XXXX, quarter, of rate KLA’s run and to the in returned keeping yearly of commitment or dividend shareholders returns in inception approximately stock

and technology requirements, meet briefly associated demanding of at Bren us consistent products strength, balance XXXX benefited pass global sensitivity financial to well should a that, The with let adapted And this set end capital challenges the diversified long-term will innovation and with returns from same disruption the year leverage COVID, of likely operating customer and results that strong over call of we gets detail its of delivering growth workforce, sixth I Semiconductor our the our the with help strategy with we well-positioned will then summarize. highlights, to the the of of a the in At resourcefulness innovation XXXX exceptionally Electronics forefront shareholders. persisted than We provide than throughput. last is position Despite throughout time, have landscape consecutive we leading we Day KLA our is before which and relevant was comprehensive seeing record stage now for are year growth. constantly greater me unforeseen identified the even ever that while and at more the which KLA to into industry the Before has and Investor driving edge. more demand to technology broadening secular were at believe being changing, are they factors our interest, applied exceed financial targets. and of customer our to meet and driving Bren. the portfolio

Bren Higgins

and ongoing December Rick, results afternoon, strength highlight strategy. of Thanks, and soundness good quarter and KLA’s XXXX everyone. the our

to needs a continue our operating customer ability our across and profits, profitability record was while We of free meet growth multiple business. areas capital leadership, cash our growing strong and strategy demonstrate of expand long-term generating XXXX to year maintaining of and our market productive allocation. flow

for gross to $XXX guided to was December below this guided expenses top quarter $X.XX while we the next-generation the very in in resources, with expectations. capabilities of adjustments to be was in $XXX rate development SG&A. range revenue range well At $X.XX shareholders. are of due requirements, March range budgeting customer quarter return approximately was the expenses strong expectations programs. for Total roughly Non-GAAP quarter operating of part to XX% and million quarter $X.XX. the of of capital programs regionalization higher expenses $X.XX and $X.XX. a the the particularly the Based operating inspection expenses $XXX engagement high were of million the billion supporting within the EPS a of reticle product would of GAAP higher to additional was as $XXX $X.XX. the development and expect tax on the operating in revenue Non-GAAP or accomplished prototype have midpoint of to including Non-GAAP million of purchases near-term over we the variable were billion, Total operating the billion. operating timing as quarter million in range was expense in simultaneously range the revenue compensation the midpoint The XX.X%, $XXX million $X.XX R&D of of the of slightly of guided $XXX line horizon. above to at for of probably, percent in XX%. income programs, XX% levels XX%, of EPS non-GAAP material product All to margin XXXX, guided for $X.XX and continuing above quarterly guided $X.XX, EPS as was been million,

we in Though slightly discrete believe distribution always up items adjust to our for geographic some margin the it we tax of and expectations that December is model business rate given leverage. to in Other expense and expect continue tax of to million topline XXXX, and prudent and planning revenue $XX the going and XX.X% operating profitability outperform have profit, our its terms the overall in variability XX.X%. quarter operating target Given will rate was the of the rate tax effective forward. and was impact timing we long-term interest

$XXX monitoring tax million. KLA and resulted the Non-GAAP This a million, cash how affect flow of in or million, we operations discussions in very cash the was million flow net will free conversion XX%. and will the from States was income provide future. nearly $XXX course, cash appropriate in net cash on United at healthy would of affect was record margin income free are corporate updates was $XXX we those over Of XXX% the and just a flow $XXX as GAAP free flow

memory, Revenue was results Semiconductor into growth was Semiconductor for and associated quarterly as $X.XX up in XX% X% Control with driven in Our DRAM. quarter. billion, XX% XX% XX% customer strong and of Process our including in business model Within XXXX. business. December XX% strong as line the the quarter, segment mix revenue Control its expected heading the EPC by XX%, logic increase Group roughly was XX% memory Approximate was is a business grew the for was our quarter. segment follows; segment at from sequential The delivered Service and foundry the NAND in Process to

of RF, in industry-reporting will the but combining Specialty was align forward, one segment and component various Going practices. customers $XX one category up and Process XXXX, we million, was offset noise to X% in serve category driven and a advanced better up into and up another sequentially, PCB, given sequentially X% as with XX% display the weaker to markets December the by some growth Demand in Revenue or business. Semiconductor and XX% down packaging. the was remove in be XXXX. they million, display segments in logic foundry as whether this for revenue business PCB segment our $XXX in MEMS, the inspection in to environment inspection strength and component for

dividends. and million December to three and during or return free the supported dividends debt $XXX track cash $XXX KLA In quarter total KLA of billion shareholders stock and share XXXX, attractive and returns the of offers our terms common $XXX KLA of for shareholders. repurchases. billion of In paid and perspective, paid in quarter, thesis in and creation We strong all billion ended and balance predictable with total and cash, highlights, $X.X capital our investment is maturity million capital delivering from compelling record $X.X in including for of $X.XX flow returns the we value investment-grade profile ratings XX% component key flow, a $XXX believe million bond million a a cash agencies. sheet flexible repurchased From by

in is billion. be memory of DRAM major strongest solid across year off that $XX wafer market of in As delivering plus $XX billion percentage WFE the our expected the foundry/logic strong grow demand guidance XXXX we New to with percentage of markets baseline and to growth year a XXXX led our equipment fab the points to minus mid-teens, view and of with it Year, -- investment in a a will the fab couple end or by as is relates another begin or growth. coming growth

quarters demand of our sustainability funnel the backlog, ahead, on lead based the next we encouraged current over by our the times, sales year. are Looking and couple visibility for current profile product of

to a the across company expect we revenue As consistent roughly would be result, the quarter-to-quarter year.

product is be be is or billion, follows; revenue forecasted to XX% Our to total forecast revenue; of semi XX%. as be $XX is March range plus minus $X.XX about quarter million; expected systems’ control gross foundry/logic to in of expected expectations guidance margin is and margins a to be XX.XX%, are range approximately process the non-GAAP memory gross We a December to improved continued we expect mix a richer in product and service to and Based revenue as between margins XX.X% we leverage in to XXXX. for gross of higher XX.XX% will on compared modeling quarter. XX% volume mix, XXXX, lead

the model interest today an high my bias in approximately and this expense Given structural end trends cost million, expense assumptions XX.X%. approximately in $XX other million, tax both of product operating of and positioning, is effective and to business of rate the $XXX approximately of our Other range. include

EPS technology strategic outperform end setting markets to with are KLA. solid across and we both multiple and in of and confidence model of diverse our XXXX range offering. fuel to with in Finally, WFE competitive a turn and operational on In track and consecutive Kevin demand fully is to excellence count The our targets. a end mode deep double-digit that up $X.XX our EPS based service to remain our returns track positions more a well closing, a investments also will dynamics likely second increasingly XXXX compelling, and These $XXX driving over sustained the GAAP diluted objectives to financial is WFE leadership, continued shareholders. is $X.XX semiconductors the and $X.XX record for across underpin to market operating differentiation approximately $X.XX. exceed cash and million is The an to in expected They also diluted meet shares. EPS non-GAAP flow generation of begin that, of well the call to technology free diluted to With Kevin? and range objectives. KLA I growth, strong on guide us be KLA at Q&A. growth year and of capital be share product guidance executing nodes.

Kevin Kessel

Bren. Thanks, provide for you Priscilla, Q&A? the if could instructions

Operator

question from take Please [Operator first Instructions] our Stifel. with We will Patrick Ho go now ahead.

Patrick Ho

you you first off, congrats Happy have New of increasing a grow we layer terms through maybe in very control and to And guys. belated as foundry intensity NAND and Year go rise with the continue seen flash has we node migrations. Rick, seen counts. Thank and to much process intensity, obviously logic these

that look pickup DRAM? you increases intensity trends control remarks, we in of intensity the in excluding types that process are out seeing projected control Maybe As mentioned of there, EUV some process increasing at you are options that of types other what DRAM the are and what your prepared marketplace? even in

Rick Wallace

Sure.

intensity. think what continue to very have to -- do that happening, do in. they of there know DRAM, some that I and course, that that and is there more pushing think control been is be about it’s drives really scaling if it and scaling as comes you difficult think on is that no there you is we But going to there process EUV question

more continue in to get overlay The and is other the more pretty challenging. requirements thing DRAM that’s clear

sets have got. how increased as understand -- that And say, we to of do the they EUV seeing are then we So see out more some, squeeze lithography to I adoption. trying capability

optical to So more that. our focus think incrementally on support tools be there to will more able be advanced inspection we

in as Patrick? we obviously, answer as would question, there. what in is that’s foundry/logic, EUV as some that your EUV-heavy It’s of seeing what we trend. element but Does there So a not see necessarily, are

Patrick Ho

you as Rick. you Hey. changes are even but have to few Orbotech actually What dynamics you improving It over added metrics What you follow-up you revenues pickup as seeing improved. picks the turns last Thank years, are some actually you. made, capital demand there? that particularly up. a the also see and that demand your does, have inventory of question, working Bren, as guys grow, have the given

Bren Higgins

great I in that velocity It’s certainly improving job done in of business overall have far. Patrick. hey, so we Well, a Orbotech adding pretty question. asset And and think a good

us get think business. on terms I and we I our there that do that to but business our the something to support our going of enables have it I also one improve profitability, where But the argue room in in think KLA is for paid of differentiation differentiation support -- to we forward. component we you the our our think drives of that of for but areas side, terms products Both our we service in model. could

are field. to long a tools also exclusive we protect in And relationships carry and our of because of So supporting supplier we as we always said tended a that a lot that inventory relationships have lot these I key help have the very last us, time differentiation.

So we as a carry result drive it that, of if higher risk, that commitments inventory does and you all will.

Service business Although, never of the with the we strength and extra move the to part. systems tend stuck we given get

-- think a a improve volume turns our us for of we bit. think this sacrifice part. we paid and to have business of profitability for it’s make. a the in We It’s it structure it allowed is So seen get little the to most not has And the we business. terms good

But think have -- there’s to time. think an do we bit and we a it. we I it limit over improved probably have focus on I So upper little

Patrick Ho

you much. very Thank

Operator

from Please Wells question with Joe Quatrochi We will next our ahead. take go Fargo.

Joe Quatrochi

first understand is, that for are talking relative more peers to being maybe to Thanks a I taking relatively about Is Yeah. I process seeing revenues quarter-to-quarter XXXX. be tool as bit comment to what to guess WFE half control consistent should go am weighted? I about well, you a wanted back the trying little what comment question. in your

Bren Higgins

it’s a good question. Joe, so Yeah.

part do as trying for at and trying first a the it’s really I of the few things. of really equipment we the what you are So control EPC look all, of business, to groups well to if was as business. do, process both Group our

and the as have consistent. a third First, through on we guiding relatively March in view for I are it looks move quarter. our as for we year. ‘XX was and in March We we provide sequential said provide increase to the expectations year. demand to growth KLA some WFE And obviously, nice wanted got the the the remarks, to just the thing context profile And prepared of

Now not quarter, I am I I guiding the but am am guiding bit what a to not I guiding do little provide more December, context. September, is June wanted not

we to Now do have $XX sometimes tools even that cost million, million from $XX than that. more

profile we the then lead visibility view, of I our funnel the in with we that dynamics and is business, have you the me backlog consignment a there have across products, the our consistent general statement. related point the acceptance, variability it shipment, starting it some think when so from usual the a on. looks the of the and and demand relatively time we to with So of comfort look that timing customer have, buyout just But gives

Joe Quatrochi

on? long-term Okay. investments got And curious, going development are bit talked on opportunities accelerate That’s development you guys you the the targets. maybe even strongly of helpful. you other making and I the spend a more your to then think outperforming clearly, have you side, do was are and how you little profitability about some projects about product product

Bren Higgins

you like guys talking been our Sounds of inside some it. to have

to and at get ought anyway, look answer process a less. how we we the rigorous look have portfolio and spend that only returns at look your Rick But the think, I company, where to two in are portfolio. Sometimes of we we on question, the the I business people

the are we our have ramped years. and few development We R&D So there that in up investments opportunities. last over think product

I we biggest the inspection, that’s so ‘XX reticle at supporting investment that articulated qualification programs in driving look uptick on. as of multiple is drivers the here One and

our pretty area our So of process been focus But I requirements KLA. around and us. well an our think feel that road map we R&D worked customer comfortable to the it’s for with for and related pretty of that’s timing

of is our gross than of dynamic. more dynamic more a driving what’s think cost margin model upside a I

adding And think, think our so, I products we the we with of gross and the I that are is differentiation field margin value the the customers. our in reflective have to

answers your question. hopefully So that

Joe Quatrochi

you. Thank Perfect. Yeah.

Operator

will question take ahead. our next We with Please Evercore. CJ from go Muse

Your line open. is

CJ Muse

for two put Thank taking could the questions I Yeah. question. I together. if guess them you

there The is first secondly, I am you is typically you. uplift should whether at demand shortages one that’s or curious am flat that surprised all? that is conservative little a Thank then, business I are would at bit seasonal of EUV guiding ASML, a impacting be around And outlook, there Orbotech GENX we optical back half-on-half, seasonality is the be a thinking about? that changed into kind I something if half. has guess,

Bren Higgins

CJ, nicely those all, related two will I done, know. at you are them. Yeah. not But those take as questions,

if is, anything, kind the ramp challenges no, in that GENX maxed and it. see we to -- demand one, support think, of GENX, first last The it’s ASML actually the best to by outlined best trying terms of of approach we addressed in What’s EUV I yield and in more so months few the gone slowdown the are the order any don’t in for some happened other EUV the impact are out associated the if way. that with delays that realization having the by capacity were

So we of support conversations to delay a we that. have see in very strong have ability we GENX, don’t our and customers about that with any lot

do Orbotech, continued In don’t of I We terms aggregate in a say, and business good to meet that anything, complicated those. the would any or signs concern. that it’s at see so Day we XXXX out track business. really we about in we We growth our set see of terms exceed that, Investor overall and to outlaid for in we feel plans original are model where terms the of of on

So about it. we feel good

a Orbotech will bit the for to coming XXXX. out about the This are we little us understand we business. that see. good backlog of We signs ended just strong have with But and seeing, the newer feel of dynamics a we we is as to said,

year. good really feel we this So about

Rick Wallace

it between all changing overall high guiding overall our some you add This business. packaging all that we So, at within the -- what’s business some right. and CJ, is a of as relative has growth XG Control obviously will nice specialty, that I dynamics the infrastructure, is -- then PCB if how XG and and businesses. order driving see thing magnitude at But same than mobile look it’s performance the and It’s Process computing. of driving in you to different variability integration equipment only were that to handsets, is quarter-to-quarter and those the just dynamics still Semiconductor of the

So for while I than down the in is, ‘XX, a it. more expect the versus year are other businesses display up making ‘XX business

I that, as the move it through or pretty overall, consistent So think we more looks less year.

CJ Muse

Great. Thank you.

Operator

take with Suisse. We from next Pitzer our will John Credit question

is open. line Your

John Pitzer

Good and ask for question. me afternoon the thanks Yeah. letting

think margins? relative to we revenues is little Bren, in detail to am wondering look think one I of for March, should the quarter light being we are that we First what margins more bit as the any out bit mix give mix just December a if little at other considerations the about about high beyond you there Bren. a gross around and drill end gross range happened as

Bren Higgins

the John, quarter-to-quarter Yeah. it’s usual variability.

bit December a see little of weaker back the it So and quarter a March bounce the quarter. was in into a bit you

below the in the the the several operating put are points over XX And and that we we XX% I I like as guided quarters or the points to in why XX were remarks basis XX%. next prepared So look comments that XX.X% just at we and I feel range. over basis midpoint

timing any just of really a products quarter. So in it customer the It’s that acceptance not other actually dynamic a revenue function the and reason. was

John Pitzer

go bit the my we are but memory little will back to then, Patrick a December was asked doing math first, maybe that Yeah. That’s right, I differently. And follow helpful. the up, If ask new Rick, quarter it question memory record. as a

being have is know, You see to investment community back always and go of high, this of space June as to memory to that kind we about of the think hyper-cyclical. kind in XXXX you

the parse of today, of CapEx for When some we you do foundry, memory memory. in structural answer? drivers underwrite to some where drivers memory of willing outlined the quote-unquote are level logic out not look and versus of the in much in you you business are cycle maybe Patrick’s We structural at kind the how as in

Rick Wallace

on has since a little I migration know, drive the you volume, there next-generation associated answer challenges and transition because John, what do multiple yield capability a players. our more dependent are technology and are little we to additional advanced is with Yeah. different, and to nodes a with more the than think, pretty steady we we toward that it at is are for commitment seeing see as we

KLA’s there -- a think exposure lot I on based variability less fact. is things in So that is industry in this it like of

the considerations volume on for as than And so looks CapEx Bren And associated with we the give how that can impact -- color some through less year. that. us maybe the go

Bren Higgins

We ‘XX, at increase XXXX we as most expected we quarter, and weak it was John, we and pretty -- market, but in we look our surprised had overall. which articulated But higher to fairly it to disciplined. market it’s growth some Well, that, about grows view earlier in expect been of so level and think the saw percentage expect for December then in we into we than see see to this flash we the would by probably overall to a it at DRAM breath growth ‘XX. weren’t the business just the see

December move it’s levels least these at back in quarter the the through we here bounce some it and as here of sustainability at seen part, ‘XX, encouraging. first So

John Pitzer

Thank you.

Operator

from will Sankar next Company. We our & question Krish Cowen take with

open. is line Your

Krish Sankar

two question. for had taking them Rick. I Thanks Hi. of Yeah. my to

the follow goes in I as follow-up. so, relatively to more thought to NAND or exposure increases more DRAM is process EUV? the on way KLA’s process seems Just is And control Do had intensity think that how today than DRAM. KLA exposed and you we if it DRAM a think like then mix it along revenue memory, about should

Rick Wallace

Yeah. actually the drivers in products differences I impacted. of I think, are It’s slight, getting are what terms that mean, the different pretty are. that

terms of scaling obviously is think there will DRAM, doing it’s more factor more more you you if of a GENX. So are of what and -- are we about we whether in see so

see NAND the you exacerbated the You applicable impacts that, Surfscan it that the going more to our those think and dimensions cleanliness get of challenges wafers able stress semiconductor that that you technology even the going the on And for of the have the business, really do through with flatness some of when yield. producer requirements be for verticality about how talked because NAND, about kind the manage the is and some we on are puts really them new X-ray for to products, really business what’s wafer don’t associated in of metrology. and but or

but are is in they this in So at point think different, the higher NAND the increasing similar of than DRAM, the I kind they amounts. both are intensity at slightly

Krish Sankar

it. Got Got it.

Bren Higgins

Krish, it some want the drive add that of EUV only with is, plays thing DRAM to the how out, does I infrastructure. and see would on introduction

that’s start Now to it related our I time require investment of that. manage to and a that deploy is EUV think EUV, teams. as challenge will level is customers sustainable one help for infrastructure over But

maybe that So change also that’s a a a factor that’s -- there out forward. moving

Krish Sankar

Services. And for on you shareholder grew am it last to it over follow the how XX%? of way, rate at through to Fair attach it XX% running course sales, or of spoke XX% get another the the letter, is from about total another enough, up year. Services get I In Bren. XX% you. over put just then how can high Thank realistically Service curious can you

Bren Higgins

the It Well, Krish, underlying it systems growing will. faster separate It’s it’s business. will two because than questions.

more valuing gives argue are growth to the a I’d tailwind a system model, service the side at have at X% look that certainly, that, is service what customers clearly rate growth Investor we you rate, articulated us it’s is seen Day which our we XX% to the There moving in increase forward. If on demand for control that’s tools. demand as edge off information those particularly and and facing are more that the customers, that comes are particularly offerings process automotive and the A driving with you need reliability those up. seeing around requirements keep and increasing the at trailing the of and lot investment tools those more to customers and

all drivers good So been those for us. have

underneath that that’s think to so we and So aspire try the us dynamics keep XX%, with structure an prefer have of there. the to to billable XX%, to move think, cycle optimize a to to to -- is I end resistance allow through customers contract to model and profitability. deal entitlement At There probably the structures thinking will we certain higher serve could that cost that can level I get we of day, structure. contract always that drives look reasonable

to. we what that’s aspire So

limit So be customers to going going where always of structure think there’s I there’s to installed total -- some it in but to I their think prefers are base. some will opportunities customers a parts

Rick Wallace

being pretty car you might the different. factor to it’s one years Just that add been a today, think that the tools XX mean, to are service complexity car have shipped if is own your such is analogy, that, ago today, I other much it about

of of having reliability events a the And having so They you model systems that more think a on and over design more custom from take becomes customer uptime. complexity question us. the And rely about up end have no service the a more our time, over they and risk -- to the out in more just throughout it more episodic benefits and long-term. then more economical of there and is associative, the parts system contract

base. with, agree particularly I the the fast it Bren, given think up Services But size of nothing moves I world in So time. over goes the installed

we committed keep time that driving firmly it. creeping are number So for little it But to to takes convinced a and up.

Krish Sankar

Thanks, Rick. Bren. helpful. Thanks, Very

Rick Wallace

Thank you.

Operator

of will Bank Vivek take We with Arya question from next America. our

line open. is Your

Vivek Arya

two Thanks for I well. had as question. my taking

am with and X-nanometer if But March and look year kind the would this is, when the then logic X-nanometer what a I you outlook question made way, prospects the of this is some process growth. control I take and different of that quarter foundry WFE grow suggests asked are are being side guess what more or calendar like. below just First intensity I on I annualize curious it your WFE? then investments growth the at DRAM, help year? above outgrowing it’s in line WFE it, the of and in like, which

Rick Wallace

and Vivek, it, a is the some that have than puts right offerings year over I you of downward more have think, so the expect little that of the are to and in foundry/logic -- opportunities in there bit look ‘XX when product that So process course about I pressure But XXXX. at memory investment we intensity. control on this we

expect There’s and then opportunities of some we where well. So tailwinds process little the better. will And think probably we when line I I at we intensity that some I do as there’s we modest out. that’s that headwinds look least look ‘XX. in at and improvement for at will if it from would But some as with I perform share market. bit think some think, kind overall, that share control I a probably a plays execute,

of So up I we from WFE probably today. ‘XX do share think to flat slightly where as is we KLA’s sit look at

Vivek Arya

cash look flow average somewhat returns even that a semi the shareholders, but returns your they in we I right, margins, December, operating leave buybacks for you like, follow last have when years. free a had lower in were is than XX% on profitability XX%, improvement, up at the Got question lot seen two more very the room are a it. to do is almost analog cash And --

how term forward, flow cash looking the curious, are at longer free are to am and you such trends there, dividends growth boosting returns or going if I buyback? So are cash have not and strong the this why looking returns XXX% you at going at year look

Bren Higgins

generally if we our time how it’s in the and about even unless about very question, productively. time valued allocation explicit company been the we get think -- so capital Well, to go Day, back we Investor and over it, doesn’t have belief you deployed I cash that every about get the think,

of so and around at that would be they cash a And so to we at alternatives are of time. was run right, of were year the model dynamics operating given minimum, growth can the we at right have the need the you did growth I a this of returns the XX% to much expect this that that year, we investors a company. for can understand those are But little to we bit. you with that today that, we when we We but the We against bit and the about would look unique COVID profile year. cash and what do beginning exhaustive how some at exercise We going a the over juxtapose little forward, level return to we doing of an are more. the business company expect as able in and it opportunities deploy build liquidity our here balance think

done the share have we uptick are XX% we think go floor, the we a think to quarter-to-quarter given as pretty in I that. But business with that repurchasing I would describing, our expect be the I tends to increase a good here. and job generally, forward

it to continue or side, on that dividend that do ratio to raise Now, gives difficult row, to the ratio in, year enable through have a and target years. raised A, we out XX% even year it and payout to ability us raise in so XX us it the have payout years a cycle in

in flow. grow We are the going in to line rate with it free cash growth

in so in free time, payout ratio with flow. roughly that will the grow cash line can And the over expect dividend growth you

model -- here do will year continue each we that to way, don’t our and and do and we we I it that’s anything’s will think our So exercise changed.

Vivek Arya

Great. Thank you.

Operator

Bank. our Deutsche with take question next Ho will We from Sidney

open. is line Your

Sidney Ho

for you Thank question is China. on first question. Great. my My taking

China good about up right, the your after year are XX% your is still for think quarter What third quarter-over-quarter expectations the was if XX%. this year? down very was revenue pretty for math my China in but I by -- Chinese opportunity solidly

Bren Higgins

to in up. match they that. and looking So, I am levels flat would our China expect to at be business WFE I

profile customers... a little different bit So it and with better it’s of it’s very XX%, consistent say, I the -- would maybe

Sidney Ho

Okay.

Bren Higgins

see But are it. how …that that’s investing. we in general,

Sidney Ho

follow-up my Maybe model. Great. to question target related your is Okay.

years? obviously, sold it little margin either printed expenses bring you next comfortable to there operating of things, that plus, things next gross with few XX%, are margin that cost model try your You you be of continue Thanks. that. in over side, we continue in of like as grow to either of margin goods a aware that, But revenue normalize bit terms are operating ahead down may sounds to offerings guiding side we to will XX% years your and the should up of few then well target exceed

Bren Higgins

time. Well, line plan there you in growing X% fluctuations. dropping of at the to that is our effectively long-term top growth at run and XX% we rate But and look times an to But our that always margin in growth. company the how quarter-to-quarter EPS that’s over incremental between going range of operating drives terms XX% are X.X and when least that’s X% revenue

your influence there. at drivers how obviously, So always dilutive that the element line. gross gross put out the margin, we we have But into we service margin a has a whether -- you it’s product mix, think the factor that margin about model

outperforming public So, the are model. we yes,

seen of last prepared think lot sustainable. I fair helped and have strength of the a as of, years has of I business. the couple a drive amount speed the think said the said that lot I we And of a in earlier and the growth its that leverage remarks, the in in

are and to as of next outperforming and model So that’s number our it the we quarters over I outlined. expect

Sidney Ho

you. Great. Thank

Operator

from Timothy next our Arcuri with UBS. take question We will

Your open. line is

Timothy Arcuri

Thanks guys. have I lot. late. might you a about on jumped actually am talked I Hi, but sorry, Bren, already this,

to the then for and going year. is X.X% going or like WFE the sort be So reasonable share range. are March in hold stay range it’s flat, rest control going range I pretty to it seems in X.XX% to seems throughout pretty you revenue if shipments X.X% that is of which to like going think are the process of the be It or in

So will. decline of that see half-on-half you sort to think this that right not Is pronounced process some going about the semis way are the others maybe piece? to

Bren Higgins

a some earlier consistent prepared that profile yeah, it the covered it. number of Tim, missed over were sustained So, were demand next you I quarters. I and a there or about had that remarks

year on shaping just how some general guidance can our the of have quarter-to-quarter. isn’t the to around, variability some that ASPs but cause was up. just Notwithstanding we that context see issue So give that we that tools

run expectations look X.XXX% revenue are my that you but somewhere number, the again, at one control guide between the -- X.XXX% process and we including the and in Service, semi around If business quarter, somewhere March we ballpark.

Timothy Arcuri

Including service.

Okay.

Thanks. Got Okay. it.

Bren Higgins

Yeah.

Timothy Arcuri

And kind going a have is then, the basis the on of I end But know had don’t you in I NAND is of there. commentary of weakest that on year-over-year sort NAND, of be markets your interesting. visibility a to this so year relative ton question a terms

from in There my as beginning same to But others fourth the customers so some about thing, the was higher. one pretty consensus. that to quarter, is, growing was say like a think in try it of budget flush flat are I big big sounds I question the the guess is the just it, things base your to in cut, view year NAND because it same, it’s so the because been bigger or because been Thanks. flat is as has as why procurement have is cut it’s number’s off of on later the on the XXXX? the

Bren Higgins

Yeah.

in I lowest percentage think that NAND. there three the is some segments of growth growth the It’s we articulated. rate

think bigger I growth a at obviously and off type a rate So ‘XX. that’s mid-single-digit base it’s we look probably as

Timothy Arcuri

been cut, have guess. things because not it’s what I Bren, But that’s

Bren Higgins

No.

Timothy Arcuri

Okay.

Bren Higgins

I the fairly think been I so am I here. sure question. understand I think But consistent not it’s

your of second and it is in point that to I there think little think next the a growth I ‘XX. half off some upticked bit year

Timothy Arcuri

Cool.

much. so Thanks Okay.

Operator

Harlan question Morgan. next JP our take with will We from Sur

line open. is Your

Harlan Sur

think process do Control, then revenue Semiconductor drove X growth about strong guys fastest then percentage the or share XXXX. XX% in and be your share you Revenue-wise job It than you control? points you times Great control segments to Process think the XXX business looks process sustained of gained what view most your XXXX, gained the on market in control basis results. grew overall you of growing execution Do are larger gains, your were areas XXXX afternoon. what nearest on systems and XXXX process double-digit systems you about Good In guys on about the side. share in going like you competitor. in within quarterly

Rick Wallace

And think, necessarily it were a EUV it and drivers thing to drove -- that I isn’t products. it. What there’s I kind Harlan, because of end BBP performance, of really our the BBP what but it lot kind ways answer used were the is for of say only the for. two

So we the we feel up year. good finished about how

gained share feel like we said, you As held we we it. and

we remember, modeling Investor We growth what final out. a numbers slower the Day will we in you see actually are what But seeing. share are than come

feel about... we good really So

Harlan Sur

Right.

Rick Wallace

…where in we year strong very and adoption calendar are in terms optical BBP ‘XX. the had of in inspection a

you gains like will Again, to that remarkable feel some continued continue demand ‘XX, are to As adoption. the as or process and to on shift adoption are build gains strength coming we about positioned build well-positioned we plus on we continue that share there. much we based to to really feel we optical control end that had. good is are The how products that, inspection market as

we and go we towards a lining right ‘XX are build gained think as in certainly, ‘XX our more that but, positioned you we think be we in I gains So right, for are That’s our on continue That’s than look plan may held are up. trajectory the We XXXX. built way it year’s to that the little now. ‘XX. plans I

Bren Higgins

product The families overall… Yeah.

Harlan Sur

Thanks. Yeah.

Bren Higgins

to plasma of or lot Because that’s are I couple now strength patterned so seeing are inspection of wafers …all inspection that reticle with that expect that And as unpatterned both and growth. so showing drives And of of above output, any memory business we a wafer are memory. which talked see market tends year-over-year memory the un-patterned the about is after then the drive monitoring in indicator more would of years monitor them done that support we also I Rick growth seeing good wafer there. inspection, business. in digesting, in investment the in a well. think and uptick that to a but the broadband for kind levels growth tool inspectors to then

Harlan Sur

the insight side, very good the on the for I EPC to diversification Thanks Great. there. business. And spot

XXXX. quarter in back CAGR, put Based XX%, that like if full quarter. that your to on of you X% of the for guys $X.X $X.X results XX% you in March XXXX grew business Analyst outlook team’s XXXX, the you XXXX like billion, Going looks a revenues included Orbotech kind the billion the EPC in to up XX%, in Day, about was

more it overall segments that be you that lag sort in more of have can in with growth be tracking guys for X% line see it team targets. those ahead slightly to what largest we with of any that the growth? and So mid-teens the you the are are EPC to targeting sort CAGR of line growth be this XX% driving or would been in expecting to What of or segments could the topline growth going will year,

Rick Wallace

great positioned. Harlan, mentioned we do question. about the about are I as We feel have now feel integrated progress are fully remarks, we the we on made we feel good Sure. know, synergies. really we think good where you message the And prepared I for about good customers. in our have and

But probably business means the the -- your down are seen of be XX%. in that will the target XXXX, think FPD point in out and ‘XX, to closer on out which FPD be mentioned we We track. up to if laid we and have take it, you overall, we rest calendar Bren

‘XX. FPD in and was So weak relatively --

of of good of business we customers, you with a some overlap and lot most our in I advanced parts running think the on, know, as to lot Oreste that’s really the progress, that of the levered have were is a front-end the and packaging work of the where So existing that. going terms

we that’s We with I businesses. and the think the packaging PCB feel work in about the inspection, success great we on happy our go we as based build the that forward, has ICOS can having are on on specialty, confident really that been with have good going interactions we he’s customers. been

seeing leverage So rest Obviously the the but operating same also same have of we it in feel leverage. operating those three margin I are and profitability about KLA. are really mentioned, hitting good the are as model they really the lower it. those businesses

about So good well. feel we that as

Harlan Sur

you. Thank Great.

Rick Wallace

looks on we question. Priscilla, for time coming think here, last have like up one time we Harlan. Thanks, are I

Operator

from today Needham with final our Quinn take will Bolton We question & Company.

Your line open. is

Quinn Bolton

guys. Hey,

Harlan’s inspection Someone in question wafer addressed but up business there, looking I XX%. was the it answering at

some little was it new So think, mentioned color you some driving give And script, if Just bit in I in what’s for I applications you on Is more inspection? could detail mostly more GENX? just Is Surfscan? looking that optical a strength. also it the there. wondering

Bren Higgins

GENX. optical to Quinn, related, really It’s in inspection the Yeah. GENX,

So And we thesis at that -- -- it’s GENX not just supporting seeing EUV. what increased laid around where certainly that’s we there Day. are are in the we application Investor specifically seeing But GENX. out is

We print thought haven’t we really at seen it that that time check. the

when believe will big So customers going market that driving be be print for. That’s and that going the true a the image a success requirement they that’s and forward. an down there will We proving to validate was of EUV business is application. lot to

general thing scaling The of GENX. that’s matters more becoming smaller more prevalent mix toward GENX as than EUV the happening, is defects just course, and have that more other then in pushes been perhaps would

both from applications, those benefiting trends, are of scaling. we additional new So

Quinn Bolton

you. it. Got Thank

Rick Wallace

over end. I interest. back everybody’s appreciate And All will pass to to right. call Priscilla the and We time

Operator

quarter KLA time earnings XXXX line your day. disconnect wonderful This concludes a Please December Corporation this webcast. the have and call and at

KLA (KLAC) 4 Feb 212021 Q2 Earnings call transcript