Earnings call transcript Q3 2023

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Operator

Good afternoon. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation March Quarter 2023 Earnings Conference Call and Webcast. All participant 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. Instructions] [Operator

will of call Analytics. Investor ahead. I Kessel, to Please turn President Vice Relations now you. over the Kevin go Thank and Market

Kevin Kessel

you, March XXXX us and our for to Thank outlook. the quarter thank quarter earnings discuss the our call joining of results June and Chelsea, for you

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

Today's closed. our discussion All a basis we they call, full today released years. this our on results IR being year calendar will on is discuss website. can presented non-GAAP materials unless the Whenever During be otherwise references, found market we for after financial are specified. make

reconciliation materials detailed in GAAP our is results the posted A earnings to website. of non-GAAP on

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

uncertainties in the commentary risks in risk is reflected filings. disclosure and factor SEC to subject Our our

we call including those forward-looking on risks, come statements KLA cannot today, to subject true. make those will Any are forward-looking guarantee also and statements, those the

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

with our Bren begin CEO, and financial highlights. Our with will Higgins, our guidance including conclude some our will call highlights, and quarterly our CFO, comments Rick the Wallace, outlook.

the I CEO, Rick to turn over will Wallace. now our call Rick?

Rick Wallace

Thank you, Kevin.

financial the again in a Let's strategic March shareholder start and KLA's with environment found on highlights. company's demand demonstrate Further few the with released and and a the consistency performance color on quarter letter along KLA's today. in summary comments objectives semiconductor long-term of can quarter, earlier targets. detail my results delivering in our be

non-GAAP growth their down the billion was midpoint was finishing of represented range. the $X.XX EPS GAAP EPS basis, XX% respective although was revenue $X.XX, and guidance each year-over-year midpoint above This a with of Specifically, the $X.XX on guidance sequentially. above of X% ranges.

to the of slightly demand as legacy supply and automotive global also demand chain related and Near-term the macro we quarter emerging remain, by expectations. perspective, markets headwinds customer a outsets was but economy strong. other in ahead From positive see remain notes served

to Additionally, long-term growth. invest to the industry wafer demand silicon wafer continues support

due customers across expectations. Our demand and memory plans capacity changing both to foundry/logic are adjusting

a KLA R&D our remain products This critical. is during important well we early upon However, top ramp R&D is consistently phase relied time see faster priority. process, investments as and as for are the the yield as

is quarter. XXXX, growing share to process We industry had in leadership overall number KLA over investment. growing most Gartner to share market business resulting market in Within latest XXX a nearest and XX% highlights basis gain the competitor. our process underpinned high WFE in in of innovation released analysis and our KLA's market XX% the segments, by market of increased an fastest commitment control, to sustained points greater in XXXX the Xx is approximately market additional than their billion. levels of year in leadership recently control R&D $XX.X

is for successful by growth growing KLA's superior is reliability defect standards Automotive required in augment diversification in-line in businesses. achieve screening demonstrated our the methodology with KLA's I-PAT to to ecosystem has been demand standardize reliability. to rapid the where the of entire mentality and existing automotive-focused strategies semiconductor execution Additionally, zero-defect applications working methods. automotive of called quality KLA test a market were

which including category, account silicon automotive has over power the calendar new of this -- carbide, significant sales. since carbide-related approaching of half in XXXX, X.Xx annual almost and in that the additional opportunity with introduction compound proliferates, as Xx of in businesses, revenue facing $XXX for In is grown efficiency integration total semiconductor improvement KLA's offer silicon materials, in such revenue million electrification silicon. growth As a industry XXXX an

XXXX. calendar in continue to growth this expect We

adoption long-term $XXX In opportunities was up emerging installed businesses. year-over-year service legacy nodes driven in increasing business acquired in our by opportunities and Service and customer and expanding KLA Services, long-term growing quarter, strength base, grew million X% our to of sequentially. X% agreements, the service

the cash over perspective, flow a $X.X And Total or was free March XXX% million, capital cash cash XX% $X.XX excellent XX another up period was free drove free past months capital quarter the Quarterly billion flow. of which finally, flow from returns cash latest flow XX-month $XXX was billion. and returns to the

composed March $XXX million quarter $XXX in the million Dividends repurchases dividends. and share were in million, and share of repurchases in $XXX

model our Our operating resiliency of despite marketplace, teams. the of and consistent execution challenges in dedication continue global to the prove the KLA the

hand go to I highlights. the financial our Bren will now through call Bren? over to

Bren Higgins

consistent you, quarter demonstrating execution our marketplace. in guidance on Thank Rick. a challenging KLA commitments, and delivered

meeting focus operating gross generating on and asserted long-term continued revenue, needs expanding industry-leading while us Our strategy growing sustaining margins, market is successful. what customer cash leadership, makes allocation our of free maintaining strong and capital flow

the above GAAP EPS billion. range guided of $X.XX $X.X $X.XX. guided of $X.X diluted diluted was midpoint to billion Quarterly of EPS the above $X.XX. midpoint of Non-GAAP revenue $X.XX to $X.XX the billion, was the was range

was guidance lower Non-GAAP at range. the gross margin XX.X%, end the of

greater were and market drove expected, incremental display degree reserve persistent than end mix requirements. volume and PCB stronger weakness component businesses in affect the inspection than to inventory expected While continues product to a and

issues the approximately to the capacity reflect offset down Factory mentioned remains environment. current benefits company and gross earlier. factor basis diluted we volume XXX under-absorption These and product as business across points mix margins adjust combined also our the a by

the cost million, and were reflecting of management operating the below the million, across Non-GAAP our impact $XXX reductions headcount $XXX of modest quarter expectation in company. expenses prudent implemented

Total in tax effective XX.X%. the was and and million, or income $X.XX. $X.XX have and was operating higher $XX SG&A. $XXX Other R&D tax the non-GAAP million expense margin been EPS comprised million XX%. was XX.X%, quarterly operating net rate At in of would Non-GAAP rate $XXX expenses guided

free income million. $XXX cash million. and operations $XXX billion, Quarterly million. from was was net flow was $X.XX net $XXX GAAP flow non-GAAP income Cash was

cash The and The company XX%. can revenue major of slides. and reportable the was found flow and XXX free shareholder by had markets cash As be regions products within million and a end end was letter of approximately at outstanding shares weighted result, segments breakdown average flow margin conversion and diluted the XXX%, free the quarter.

Switching in $X.X flexible equivalents bond attractive to from three strong total cash, quarter the with debt the and a sheet. agencies. billion profile marketable cash by $X.XX supported balance all and KLA securities, and investment-grade ratings ended of billion maturity

including XX Over free XXX% paid, $X.X cash billion returned months, the of to and in total amounting the last million billion in to shareholders, $XXX has flow. repurchases share capital returns KLA $X.X dividends

now. our Turning to outlook

in $XX million in from to We approximately continue XXXX. calendar XXXX to estimate WFE XX% million to decline approximately $XX

fluid today. planning end Our remains of have customers' improvement capacity indications market and limited visibility

overall in stabilizing timing levels around semiconductor the meaningful While business a process control business. systems resumption current do for see of investment unclear, we our remains growth demand WFE

of In We from second expected particular, higher seeing we calendar China. customers expect this legacy investment year. through continue are than globally, demand half the the profile to initially in including

clarification government We have last some US issued now from received rules October resume had can the export also shipments and on previously we the excluded. that

see worldwide. additional wafer Furthermore, and infrastructure reticle spending we

as investments In consumer adjusting industry current production top-down by estimate demand. to lower memory, to to memory by bring reflects XX% customers decline expect as follows. supply demand to to of continue inline our demand WFE device we WFE XX% respond estimate with Our

and than in XX% principally investment declining design legacy demand automotive the by segment to decline with Foundry/Logic expect legacy overall, due to overall less for China. continued about We nodes

memory be Our expected DRAM approximately memory, forecasted and is semi revenue. to quarter be June plus to $XXX to Total be million. mix the systems is Within follows. XX%. is expected is revenue and or XX%, XX% guidance as expected around $X.XX minus of be approximately to about XX% of is billion, NAND segment Foundry/Logic PC

one point, product to due and primarily We or plus mix. minus forecast non-GAAP segment to expected percentage XX.XX%, gross margin be the

in non-GAAP the Given the remainder between should a being for mix gross of the with this largest quarter-to-quarter calendar of and margin of be year, expectation factor the for in margins variability. environment range XXXX, to stabilizing with the XX% XX% product gross view remain demand

of always annual first Looking costs The our continue ahead, quarter adjustments. salary will manage we June the full to represents quarter carefully.

operating result, will $XXX expenses tick approximately up to a As slightly million.

of $XXX see $XXX continue the calendar in to for calendar down exiting We to expenses the remainder range. XXXX, year operating million million the trending

June assumptions $XX income other effective of of Other rate million approximately tax for quarter include; approximately and XX.X%. and expense net an the model

and Finally, fully a XXX.X GAAP minus diluted diluted EPS $X.XX. EPS $X.XX $X.XX, is count non-GAAP on of EPS plus of shares. or million or minus expected to $X.XX, be based plus is diluted guidance approximately share

demand growth, on view this relevancy our years In WFE XX% total approximately the unchanged is calendar of XXXX. continue XXXX. conclusion, delivered industry, to market Against in after outperform at in to remains well the positioned calendar backdrop, down strong KLA of building increased industry three

the Broadening policy simultaneous in trends driving secular WFE remain ahead, semiconductors demand strategic for increasing confident investments play across role catalysts intact. remain and supporting semiconductor Looking the content demand, in industrial national are growth. and of semiconductor technology we nodes long-term growing industry semiconductor investments influencing

node and technology transitions semiconductor-based industry value markets. cost universe across semiconductors and that application a customers our end reflect a and enabling the for have investment our lowering for Technology broader multiple

positioned the headwinds strong driven while continued faced and are businesses Semi our financial to KLA, by relative and For performance growth economy global in Services. the PC in deliver of industry XXXX, SPTS strength we and well semiconductor

technology and to support to plans. multiyear we maps portfolio innovation on strategy will investment continue as We focus our customers' execute our road

we execution, execute foundation our industry-leading differentiation. free shareholders. product performance objectives With and objectives leadership across consistent and growing achieve the and the drive that diverse guiding us cash the operating and also financial services has sustains our drive differentiation to competitive returns and capital strategic technology These will consistent enabled growth, outperformance. excellence deliver are to our This flow operational portfolio. KLA They model and our and

with begin turn A the Kevin Q& to And to Kevin? call now the that, back session. I'll over

Kevin Kessel

the you Thank begin you, then can provide Q&A, instructions Bren. Chelsea, Q&A? and please for the

Operator

Our [Operator sir. Sur Instructions] JPMorgan. from come will with Harlan Yes, first question

Your line open. is

Harlan Sur

you the to strong great year of And afternoon. from team had gains another year. see last share Good

You outlook reiterated WFE down your at XX%. year full

remaining wondering and your has this reflects levels a six pushout the You the remainder also been stable assume volatile through activity months? I process from what if stable I'm the the of June past of business talked about also outlook the environment quarter cancellation at over stabilization control bookings year. pretty

Bren Higgins

of in which -- see, came around some which and for in There the we'll On bookings performance minor, RPO compliment. from our overall terms customers backlog our so, scrubbing some next backlog you'll see that of thanks in moving slotting. look, or about fairly down remaining still the obligations, $XXX was the million. in are quarter things in in of number, overall, Harlan, a day filing you'll our view, XX-Q adjustments, is the do Hey the point

but scheduling, book-to-bill than a in bit a remarks, that some quarters. were overall. around see just was next there the the implies prepared little over over levels some do the then that But out look stabilization as less So, we and one, these adjustments few timidity we

Harlan Sur

that. for in a years, consumer franchise, right, your the XX% It growth, Thanks X% driven And year, past it's Services. including strong EPC right, -- this pretty CAGR Perfect. then last grew three XX% even over on to slower environment. that's

into second to outperform grow this this driving EPC half profile Coming you about how are sort first thinking high a year-over-year. XX% systems the And you about Do half? EPC an year, already guys are profile to you growth? though, business still down WFE anticipate of year, versus at level, of EPC

Bren Higgins

to very great a will. tends and shift be in expectations for last few over certainly, Yes, And seen a business. months, if it's short you lead-time sensitive, that we've consumer our the question, It Harlan.

recover, to And back see were in markets so a the consumer really yet we the bounce half. to have second as expecting

in this PCB stronger the really the to bit expect little I and is because a half the the second business, component while a and first second. -- different about inspection I'll than that talk flat business SPTS business has panel regarding profile, And half be ICOS a

expect we to decline segment of into what expect second and it but than WFE-centric that will modestly a that's businesses. out that improve businesses, increase year-over-year in half, those -- likely will we're to in it the we more that be But the --

the a had new that see be to specifically a nice automotive last up would on power year. market, substrates. trajectory. expect strong We very is the had year this It some and SPTS specialty around the of flat, maybe growth semiconductors has hand, to other year exposed and modestly somewhere business

us for opportunities pretty business -- overall with despite here are weakness we're WFE. how that there We're in progressing so the is there. And how pleased

Harlan Sur

Well perfect. you. Thank

Operator

Thank you.

come will from Evercore. question with Our next C.J. Muse

line is open. Your

C.J. Muse

adjustments question. taking afternoon. I for there. Good your Thank you you your foundry at for all. discussed haven't modest guess question, first the peers WFE changed Many surprised of XXXX outlook

offsetting what's that? thoughts would So, hear as to your love to

And level well of in is can you're key the for XX the months? inspection, second part of are that the sustainable the this June to as story the which that, still beyond at you for lead-times kind So, optical I where half? to speak finding the KLA level think

Bren Higgins

the of XX-nanometer, the than and in we're legacy of we also of seeing China expected a market, global parts the more view. C.J., had terms point legacy business, expectations greater originally Yeah, overall a than that's strength in from in statement. stronger there so is

in we've while So seen the overall some some seen expectations, legacy. adjustments leading-edge strengthening we've

March obviously, around what's outlook are But there bars that's these we from So, look really quarter. driving some the error as here. percentages our out

C.J. Muse

Great. on And part. follow-up then legacy the maybe just to

is China wafer You process versus being silicon front-end just talked native about of of much How that traditional equipment? XX% control.

Bren Higgins

I an perspective say we probably XX% XX% and -- just if of it, So and probably silicon is the the an part about wafer over estimate, to about -- of this would it. course take think the annual is

So optical the inspection. thing -- other

You I of -- times I'm that the asked your on about optical your left inspection. lead question. part sorry, of out first

still we in adding are their lead hasn't demand. is new So technology support capacity on really that. are Customers to pretty optical still times and There there road are been change product maps, long. essential investing pretty a that as to inspection

And where supply. environment so demand outpacing an see we is continue to

market, to the I expect high-end optical down inspection those year, in dynamics. WFE given grow the So this

C.J. Muse

Fair enough. Thank you.

Operator

you. Thank

will question Securities. Bank Vivek next of from Our America with Arya come

is line Your open.

Vivek Arya

your bottomed still the taking to pick memory when appear up. many unclear what's of inventory you you a have have question. sales Thank lot customers their curious that of for and are when my utilization I'm giving will confidence

June, So back you specifically, above demand Because up, this picking level? how Do be albeit is in for numbers. noticed seem half I memory think small will be your sales memory visibility it'll to year? the implied be the about that this of it this of level, calendar the to lower,

just it demand from you recovery your memory comments think So customers? thinking as any about at utilization on about what how to here memory you're key pertains

Bren Higgins

good Sure. question. It's a

was If low, it pretty XX%. right, you look at the at quarter, March

So -- ever. any that go hasn't recent and you been history I look and in our back low back -- really of

So we even stays half into as move through as be you as stronger there's that the given through of low the how the still -- the year, half, see spend. than and year our forecast the first in the you progress half sort a the wildcards about and the in of ultimately bit it's even it second was, -- while of And expectations. it first guidance, range second talked still might low little around -- June how XX% half it's pretty that customers some terms overall for and in

of what some support some some participating memory so We to and some a opportunities happening still China. tend to in to the controls also investments in clarification that means be there's road more incremental we're that and map of older that's in. There's devices opportunities technology-centric, related terms the of export generation the of

will the shipments. the received second that so from clarification that enable government And we half

in that's our outlook so well. And as

Rick Wallace

Yes.

that, to that's and to have, the add that business Bren is not up, What's showing on if showing to it's we up. more at look Just capacity as really tied said, memory, more technology. you

technology on So, to motivated capacity, those as or number, a low but very that. utilization, it's to -- some to continue in even have said, plays small are development work or -- adding Bren even they there's as not not stability a relatively customers that

Vivek Arya

customers, you the have that and calendar the view XXXX from in lead-times I you with Got technology many of a are I you side like. thought look decent it's probably realize long it. my how early, might given that follow-up, have And but engaged

asking right about likely down? WFE year? could what's supposed I'm takes guidance, puts or for of numerical not to So, kind it your now next Is grow that gut is WFE start thinking year? but Like we to just and the be next flat qualitative as what be

Rick Wallace

have Yes. with about having the we don't part. can this we're lot Obviously, visibility lot of that next at into stabilizing the level are you a do for customers, kind off year. obvious, just which with most things start to we a of conversations with view But their have tell to the

year. because are a of activity still or lot cases, advanced in quite but logic foundry example, And of and going for it's having there's a a some work next due this early nodes, projects into starts still conversations happen that down lot of on of things the And or bit, there. end nodes advanced about in, design we're at supporting are to year

it, a had these soon that thinking too on it's to plus the obviously that's it down at calendar for some way or if see I kind kind us levels, And during -- that you of think So, of recovery, that. I hopeful going we'll But we're XXXX, think we're pin general to while. know but minus, about forward.

Vivek Arya

you. Thank

Operator

you. Thank

from will Our Cowen. come question Sankar next Krish with

line Your is open.

Krish Sankar

taking for Thanks my hi. Yes, question.

millions first The is China. around into these recoup second shipments or that going calendar resuming how spoke quantify to half? stay Can in about you're that will Bren, you half? baked of Rick the expect the that dollars, terms revenue one, of you levels in some much And your into second to view to

as same then the at curious, lagging memory leading shipment is as I'm to thought you kind path, edge? because follow-up. I tied memory, and a have what this is of kind mean And along of exactly I And memory China by assumption always lagging

Bren Higgins

that's right half. that with the overall. greater to we we're how million what opportunity so of need be be it sure Krish, the customer Yes. in in But $XXX support to make somewhere able second now have working And that than we the we expect terms to activity. sizing to we're

leading not the think everyone is technology question at I on is edge. the that look, So,

there legacy that's market end out of some support market an some investments. markets, these there's to so from happening And point in of and opportunities there's view activity

So, million that's couple like hundred what's see I in it we said, range. driving that that And investment. of somewhere

Krish Sankar

And it. And and quick Got helpful. a expect the the to EPC we your Super then the service service think about still this it. Semi Got how year? follow-up, revenues to should grow between portion?

Rick Wallace

Yeah, Rick. this is

So I that the and our of this keep to of seeing interest how yes, Service lot We're from a behaves differentiators growth we think for down. is And is see should customers KLA in slow our capability. Service. one

yield they're So even that technology. and what on is sure to want capacity might customers when develop making go focus new off, to continuing

Obviously, slowdown we've plays about And EPC. in we the seen our some that so to of talked strength.

So Semi we modeling the this But customers. is yeah, for in about the Service, that much more control. part we're that past provide our for talked about of value our still we've process a and big that's growth

feel are where we So good we about there.

Bren Higgins

Yeah. And that to some I people or wouldn't capacity, with the environment, in given softening the already Semi XX%. the around industry line Service grow in of about, the to business, of part PC dynamics memory the expect the long-run for business target ideally the the that asked have reduction XX%

As differently. said obviously factor a a this mid- maybe a the in But single-digit on modestly high a opportunities side, footprint. That's export lot growth EPC from see not us bit. side, generally to Service the little year. to but that. as last not year, we are a still EPC bit rate over the some in the somewhere growing to that controls longer-term time some headwinds Service business business play. little and obviously flat, our business probably Rick's global growth, for given is long-term the to drive this up try behaves declining, There quarter, it point we But

Krish Sankar

Rick. Bren. Thanks, it. Thanks, Got

Operator

Thank you.

Wells next Our Quatrochi from come Joe with will question Fargo.

open. is line Your

Joe Quatrochi

Thanks question. Yeah. taking the for

Just a first of clarification.

year, thinking half export about restrictions backlog reenter clarification $XXX this your on the or that quarter? that received, the you did you're of that this for RPO second For million

Bren Higgins

case, came we backlog. prior it anything in clarification. was scrub our a as certainty, we a Never quarters, of clarification Because to until were so we out had required weren't issue, In -- going out. said I've this we out

certainty, we until had in. so left And we things

view. no point of change So that from

Joe Quatrochi

can for And reversals? then a about think do we the side, the of Thanks. just it. remind we Got margin gross inventory how this you on reserves year? about the us as think should And timing rest then follow-up, those of how

Bren Higgins

Yeah.

point were in I were there, the the think adjustments the supply chain chain fairly we supply last view. of that couple in what were had relative recall XXXX in current if the we particularly ways, of to driving meaningful and out of lot a from quarters, growth back the you point And and demand levels. making a shortages drove and given commitments we company some XXXX we've in that XXXX performance from XXXX our significant of growth saw from view, that a

to some had excess we've at to demand it to down just incremental as pace, quick So adjust driven related has levels different fairly reserves a supply.

not I terms of a like parts Service the will So see over ultimately in the the consume you away. resumption meaningful within is, of the expect those for platforms, business extendability It's given demand more than what see demand throw in as window lifetime parts. would have strength you need and of you how the happening our It's this just time, assessment. you our we

or So was expect bit not And this on a driven I that this issue we be and surprise, remarks other. the was adjusted go-forward But overall mentioned of just impact as a moving think we we second the really by the the quarter. forward, and basis, for the thought now prepared an normalize and in I previously that incremental into factor to stronger weakening an outlook it half expectation EPC that one us. we'd demand. a normalizes way provided assuming see that isn't so we've

Joe Quatrochi

you. Thank Perfect.

Operator

Thank you.

Our from Citi. next come Malik question with will Atif

open. is Your line

Atif Malik

I Hi, my for taking China. question. thank two have questions you on

year this or year last First, you're in edge before? the number is year customers the on engaged trailing domestically versus higher China of

Rich Wallace

there's higher, lot of I But say projects. no. a wouldn't

Bren Higgins

say Rick's wouldn't I but yeah, higher. mean, I – right. I

Atif Malik

due China? October? investments looking mean, period their multinational I China, how discussions are how companies they companies, your on at for with future is in in Rick, strategically Okay. they the restrictions these in looking license expansions that capacity September, the And are in coming then on export given

Bren Higgins

hard it's to clarification. us for get enough the Well,

working on they'll do. the to they're I them, – what for that's think able as same thing getting exactly be on clarification

But they're So I frankly, no us, to able having think there not us. matter, which it, with can something the press to matter most they're in discussions goes. but imagine you amount about there's them that that through. around there's the but – way that a they that's all And support the them stuff have I working think are of conversations with anxiousness that. some We're fair

Atif Malik

Thank you. Understand.

Operator

Our next question from UBS. with Arcuri will come Timothy

line Your open. is

Timothy Arcuri

Bren, lot. I a had two. Thanks

just to sounds So sounds tie to WFE. not mean, first, it I'm trying your June, process flattish. but you're control systems systems, saying And pretty in like Orbotech exclusively I this commentary it like they're

from control process maybe $XXX down to So be about systems March. have XX.XX, million

the going that that then And into back half of flat in level. saying at you're letter, the the remain year shareholder to it's

I for mean, just like this and implies WFE, XX.XX So the $XX you're take billion that record June share, in did I in year in and take I the this X.X% and if then -- I that's year you WFE I XX.XX March a flatline that, that's used high.

billion So is like your in numbers the $XX is, of structural maybe X.X, your trough share it you're Usually, that power I think low? peak, the you in six sort that staying to the where and WFE there's too but that I there high? something going could think, guess stay on is eight or question

Bren Higgins

business plus is the see minus And – with to our reasonable. not I'm your stabilized, not again, quarter. do it's around current but relative I'm levels. comments But going moving we the to this or individual now. things forward math every that's we how Tim, guide segments,

WFE as fastest your drivers in invest maintain that product look were road of to pretty little of the confident and talked would we maps. terms this lines number and growth over bit of for inflecting overall about ability for customers some we a Particular see continuing our lines felt WFE that growing about are of XXXX factors be you terms In months and our last us. the product at in their -- there is to we share that of

investment of bare or industry we're the driver Our a exposure inflection to also the reticle is of The China silicon aren't. a an that that's in point WFE wafer silicon point. exposed is and from happening infrastructure others wafer to that view

what's us then bit I of percent for the strong think exposed seeing about remarks. little in lower other a than prepared a as finally, talked overall we a some is we're share the export to total the peers. performance as of overall, controls very And

you because add all in -- as to buy to downturn and of best well. when important KLA's share that also customers tend budgets and So up when favor is a limited, breed, tends play to are that

of confusion kinds pretty and shipments dynamics, some we partial our that that and add months, revenue our feel overall that as all for market. been a adding So we're folks up, of were share that there saying all overall when the those you making confident I've of out all I that adjustments feel comfortable number deferred about ability pretty maintain despite the to in

and foundry/logic Process is there. of control a spend certainly the intensity stronger in WFE environment more

for years. And might outperformed market down years, downturn. so always KLA down in WFE decades, has typically in that's back we even always we've us in the And a any why factor think -- I go

there's it. a of contributing that's to think I factors So number

Rick Wallace

Yes.

build to it, on Just Tim.

mentioned, relevancy share the as is the that story inspection. lot is has up process maybe think, is control significant. Bren but some I intensity platforms. I a optical think to and it's the appreciate some, of nodes Gen customers the inspection it with. X to took that of X capability really Gen optical And are fully around both our And of And of even dealing up new for a really then our while more been where shown some of people

But strength, the originally, had still more think frankly, if grow customers some I logic adoption is, I we are we're constrained, constrained capacity and -- mean, And low. very those demonstrating on we Those inspection. memory we're for two even capacity. to reason we're we're would be that value. those. we more seeing And mostly advanced when foundry, seeing albeit our it'd there, of thought is And

that's way another to look at think it. I So

it's accident, don't year the at look you of control, an I last process was relevancy overall If for think performance our solutions. it

Timothy Arcuri

a lot. a I also WFE. guess on had And I then Thanks question

are I million to And sort the in trying still -- so at But WFE $XX some get flat this, range. is think. people of

you I that there's that that in think, $XXX that was stuff Bren, said shift that banned for past. of can an the million you add-back sort of

dollar XX% if there, few from in lagging a WFE, So that's back less than China. just this China add then there's probably stuff billion and like from you're happening edge all of

that the I not stuff more is edge from just -- kind billion seeing year? It's the lagging Thanks. in China? like given number not $XX guess it's So year? this the in we're is next it increase massive lagging edge surprised I'm that helping bookings that little of helping higher a

Bren Higgins

Yes. We're or It's Tim, approximation think -- minus an about a at is a in estimate, we're an billion point. it way at this -- to XX or $XX little plus around April.

focus lot this So and executing business we lot a of don't We extra own one. put running effort. a on our

number just built. is less? factor year right? tools, overall in of clarity being this what lot if there's just share try other delays the when, customers I be up a there We'll affect projects overall are moving have terms out Could I you. the ultimately is. could market, some can that what could of the dynamics -- of to a and receive greenfield but that schedules there. that and get are when of We facilities it Perhaps, that parts, construction are impact do where some construction shows of you do it. that and just be think to more, impact But could an in And assessment actually we what we'll with sized

parts minus we comfortable we'll billion, up as moving go the of and but or it in we're lot with plus firm here. a So, $XX it,

Timothy Arcuri

Awesome, Bren, so much. thanks

Bren Higgins

Thank you.

Operator

Thank you.

question Deutsche Sidney next from Bank. will Ho come Our with

is open. line Your

Sidney Ho

questions. year taking and to for other the for want demand EPC things? recoup business back it's $XXX of your previous to the of on of year. be revenue, service or side expecting -- about with inclusive profile follow-up whether of million the on flat that half factors the to there roughly quarter-over-quarter, about are the Thanks you the Are I the talked rest you revenue of a Great. question stabilizing for similar the maybe consider

Bren Higgins

Yes, billion, in just $X.XXX the Sidney, billion did quarter. or -- right, March in we $X.XXX

at was $X.XX And on so commentary current focused billion. levels business the

bit of put given that view. of So kind about mid from low it talking But half are second a might of we guidance. single to point a pressure low on the single-digit little half-to-half digit,

second again, not view we're stabilization of here. this the half. just a guiding giving We're And

will the So half it would just that end second half, I it's in think with to be right? you modestly. roughly if possible, It be the the same -- numbers up might the half strength you close. quarter, of But March down given

Sidney Ho

to nanometers the your largest is even My about helpful. those? levels outlook That's of question the Okay. X is Taiwan outlook? longer-term and in And of customers tool reuse current higher industry's anything incremental one this your that's maybe Thanks. and is half talked the between do of what into think X capacity second follow-up nanometers. factored used you level between How

Rick Wallace

a It's Sidney. question, good

at their the And think utilization. conversations those they had they look customers node look node. of to at always are differences from I that have when terms in

our being it They're think through and of is optimize and all contemplated looking always that modeling The to that of that. the even plan the year, always the something trying year we've have portfolio. XXXX the next I rest done work in we work is do that evaluated.

intensity. consumption new new for process R&D amount control nothing the really from continue in and there's there control and capabilities perspective us need continue highlight does about to process to It So in to support customers. our that's the of invest bring and out our of

statements. what new in in we see those really So, nothing

Sidney Ho

Okay. Thank you.

Operator

you. Thank

Our next Hari Goldman question Sachs. with will come from Toshiya

open. is line Your

Toshiya Hari

the Thank a question. you so much question had to Sidney's I follow-up question. for taking

and activity upside you're control XXXX? a to What start your bias intensity for Is XXXX? into there are of expectations the potentially space. edge foundry in breadth leading design the from depth are process seeing you the Given where in

Bren Higgins

Well, designs means and test Toshiya, market yielded for the design in strong number that of -- windows. rules you tight control of think design talked then that terms starts about look, wafers different intensity managing in has deliver ways to we customers been you about, having the our in a reasons different of if and very number fairly process what

It level higher all inspection drives a of metrology. and

have different that are to. and process also process points You expected flows

all are for process have those drivers control. -- So been

more moving to new And right, EUV but layers also previous it of starts a forward. tech, As at introduction with factor. drive the also node, the here tech was the new design scaling, then more

depending positives us. a Also, size factor. for are also of die those revenue, all on mix the the is So

markets if for So put well. with as process driver you you defect same exposure density, larger to die, end with the with up more risk control a that so creates

the we a inflection market, of sustain Foundry/Logic, overall if relates to number we've look and and that are forward. just of we seen up inflection there So can you -- feel as the share here, that as at move we We back pretty think it an factors.

Toshiya Hari

as helpful. I to That's as China suppliers Got it. business suppliers and it you pertains reticle commented your as wafer my And think well. specifically then, on with follow-up,

a next wafer how so, both think And Thank on you. curious captive businesses XX But reticle those global well side months big as today? or about customers? over as should again, on the the are basis, we how merchant sustainability and

Bren Higgins

new to and added China driver couple this Yes. way, activity, because incremental support Most Overall, of count. the or reticle to -- is of legacy that's revenue million don't double us. want of infrastructure an I separating I'm probably being infrastructure so hundred and of -- in wafer for a

meaningfully business grow year. compared But overall, wafer sizable this year And a KLA. it's to for last should pretty

to would we big So wafer expect I but don't for we the suppliers, broken of haven't an part a we're want and year. it out that -- before, expensive this or growing to see CapEx

Toshiya Hari

Thank you.

Bren Higgins

you. Thank

Operator

Joe from Our next come Stanley. question Moore Morgan with will

Your line is open.

Joe Moore

you. Thank Great.

think about I you that number? of it for not weigh down kind on And both that the Can just as about would being But how year. Foundry guys. up this Memory, talk of you little you year, has can you on utilization might impact less in this the some see and than other impact guess qualitatively utilization about that? Services does I bit talk to on talked down utilizations You coming a maybe

Bren Higgins

utilization point. stable this fairly like where at the seems they Memory are have they from particularly decline continuing are. space. to come The It down, rates in clearly We don't them see

customers why and revenue, or we see So some to start -- not the capacity. running tools idling overall in because are cases, the that's

-- the we utilization opportunities environment. opportunities in the a would service have higher don't have you So

this seeing growth the at trend from that's overall expectation it rate a what pockets is. down from normalized our But point, really time driving getting line improvement. are what's worse there So to and we're not or time of

right seeing stabilization the why I So we're use it, what -- think to chose it's word, really it feels is but today. like that's is we

Joe Moore

of logic you. talked have the And guys trailing-edge opportunity you Thank separately, a of on different sort to China, helpful. couple then China here. That's times

be controls. whether Your I sense of assume about you asking utilization or validates export ahead for maybe worry they that mean, a the have there ahead there. there's anxiety putting you I of question, building see of future customers different in capacity? guess requirement Could I would could kind building do the way that be a spending, the you supply? that of do it have

Rick Wallace

equipment but I aren't possible. all when we clarity useful. mean, history unlikely It's provider, have support great the on Yeah. it of tools the of recent you've don't seem of it, very given does lost

the the think edge, is some develop technologies. expectation leading to remain of I mature able they'll these So to will controls continue on be and the

active very in market a there's China. EV Remember,

some for some mature lot a it there's to technology as markets. of So those applies of that of more need

quite seem does not in while it and we're China. leading on to what based real that's things seeing and that are be really edge, So around demand a some have for

are they the And we've China like that that factored into they feel sense, kind forecasting So of to it's markets our ramping it There that overall but doesn't won win yet, in that hope not companies for that. anyway. might up. necessarily have are

Joe Moore

Very helpful. Thank you.

Operator

you. Thank

from Curtis Barclays. come with will question next Our Blayne

is line Your open.

Blayne Curtis

taking faster the was growing than for about I question. curious, Thanks outlook, my mean, legacy I talked Hey. you in leading edge.

that come within perspective a is today? a us from? give could perspective And you where it's Foundry/Logic if mix where of curious maybe Just

Bren Higgins

you call lagging. it about it less Well, closer not It's the I XX% less to revenue what's profile, or outlook. leading, XX-nanometer, less. terms of so what's declining KLA, XX above. in than less just growing. mean have than if above and declining It's versus for it's overall you XX% our mix really is of XX% just so normally, of And it's our about about in thought then XX% we'll is nanometers

our So to give mix this it being you sense bigger quarter. part a of a of

of it's some you from a in amount markets And certainly, supporting guys have of fair the pretty China broad-based industrial the investments investment, and and big and so also some a all, automotive is markets, analog but happening on. factor sensor

demand rising, content the didn't frankly customers, of the a leading investment semiconductor most that couple largest in taking edge of we you're given areas there's those so last the -- over these given is at seeing that's So and steady investment supply-demand markets earned of the where years into imbalance the our more lot strength slots. in ship and

to is some some last so in ways, weren't a and we've wanted adjustments folks So that memory deliver leading and by is we've as seen that into six over in and getting statement, seen adjust, of or this year, consumed able logic slots, the capacity customers we the edge to our this largest months earlier and some them.

Blayne Curtis

the Thanks. And on wanted sheet. inventories then you the I balance on ask to

data record level a well. as it's near record in think I --

about I'm are still grow going How will kind of top guess kind work I curious inventories you everybody flat line kind of gross to on margin of has phenomena managing impact on. So down? you any thinking if down? this and the it as that

Rick Wallace

supply suppliers trusted but partners that reason the a Yeah. and supply KLA has differentiation custom innovation starts And the not look systems, for inventory. unique business And that very fair componentry where our relates asset driving company relationships times, there's amount with we're the around I've as you are than and to a of a chain. transactional it it more that our into drives said this model many and velocity to is for

we make when result to we out Lead As what them. parts optimize for accept And times differentiation. orders to what to commitments. optimize is going need we take are put to we that, going of long, we we're a accept that for is take we're that

that we're in products. volume in And strength the our platforms, good believe the a of buying long we we'll that pretty that run, extendability service, the consume given parts the of we're against economically, place that

new expect or that products XX I'd some out, bit. for trending that a that to XX products unique months drift it's out seen start to it I'm and up, have to little buy parts out to up, it already things we've maybe be for will coming so. starting will the trend coming flatten are new So parts for over But next

I very much. expect So it don't to turn

That's strong why rarely environments. point term above these We've inventory an even upturn two very from -- view. much in of times gotten above

but that when it, lot supply of sort XX products we'll -- years, carry to they that, as of we for are it. XX and there's buying to it's you're that, So buy our result And support parts to of a manage are strategy. fundamental living a support continue chain to to that

Blayne Curtis

Thank you.

Operator

Chin next with Stifel. will question Brian come Our from

line open. Your is

Brian Chin

intensity Hi, Rick, immaturity But Maybe there. Good afternoon. of what less intensive. extent lower does of particularly Thanks greenfield to that production of China control trailing clearly for process market, asking in the for for a faster time kind the lines, edge counteract do situations lot typical and guess I also edge? as these factors of the question. kind desire is trailing these sort how of for to

Rick Wallace

for of it the a fabs. think on is I that One depends Well, the ways. couple applications --

actually fab, So if a for have just automotive you traditional legacy do of different need process control an a fab. you're if you're than you kind

that's thing. So one

on relative basis, The control size more on get -- a fab. the that a you to fab efficiency actually be on And depending then process a little and the it's of harder intensity can the have higher. large scale bit

get these as tend so mega And little fabs result. not bit you fabs, be intensity of as actually then to a and a

They're solutions also that been have market. proven looking in for the

product not might established for advanced a been time much application long And are lines that for us, so as we've that support. those need supporting

think for business customers, our good also that for KLA. I a good factors all but are those So both

higher ways leading-edge And in we always change whenever yield. as process they fab, And a So yes, to have not up. nodes, getting to control. as they their see go still a but intensive process it's upgrading value there's in interest catch

Brian Chin

you. a Thank just maybe Great. And follow-up. quick

of March this nature of Can it's a In really looks kind like case percent terms you a quarter dollar of you -- well, classic such of situation? memory in on the that a characterize as coming of a think I of uptick, towards or lows is in a and kind DRAM. of suggested bouncing the is it of that June more also pretty bottom this the focused basis more along increasing off

Bren Higgins

of than Yes, base, latter. more our deliveries very some investments think and the timing other it's wouldn't I with it characterize just anything think it's that customer some of I tool as I -- technology-centric.

this characterize wouldn't low exception of I It's -- of technology pretty been with level even of been a quarter-to-quarter. So while it the it. given the since some the the China it's as with It's opportunities. centered uptick

Brian Chin

Got it.

Bren Higgins

Thank you Brian. last Operator, we question. have time for one

Operator

SIG. Hosseini Our last Mehdi will come from with question

Your is line open.

Mehdi Hosseini

Thanks taking Yes. for my questions.

having go go Can diversification with And regarding others, But especially two your range. to billion guide. I for to plus? material $XX $XX me. billion you a wanted and just to enable $XX $XX If without what does follow-ups a run $XX the peak with the WFE to not me XXXX to you the to half of a second billion close in hit Just to it take you WFE commentary rate XX% WFE the for in in no better semiconductor billion. looking decline if asking December that trough the of forward, would calendar, I WFE revenue to without in – billion revenues $X revenue billion I your having those seems to you to I'm and first And trend have hit go and follow-up. did if XX% understand, to half

Bren Higgins

– Yes, the rising that overall that levels is more the lower WFE ties of the we've and we're over to seen share WFE Mehdi, share sustains. as this years market, able of of so couple I last should we do the back things revenue, to of one be mean, gaining that

dynamics believe solve There we there's mix that and affect amount products of given are the continue to there are have Now and problems for dynamics a But we fair that it. sustainability to that driven believe can new other it. customers. factors

road inflecting to scaling exposure are have markets pretty the We are to critical and that maps there. out

that in successful overall a to of generally our But one opportunity. point differentiation logic continue a WFE basis are that half by of And be grow mix the of we think lot Investor about the if new Day that in and to talked one at share about terms XXX mix and indicator And we're clear the of point to our in products as percent with improved -- coming we we share terms that's for stays our do to a of that, objectives. points. a of us We that foundry/ there's lot some able share, an opportunity almost So our we have. talked year year. XX-ish is

Mehdi Hosseini

content of quick of equipment, Okay. reuse application? And think for were the how some customers then just one If any follow-up. should diagnostic that about we to price your

Bren Higgins

is Rick others. customers are given looking than that as capacity, they're product And always are optimize to are they're this earlier, investment this nothing equipment cost what there's opportunity certain Well and of there types where their do amount always said new the -- that. there to making, more looking

continue think of for you out forward, their when was But going scaling drive that limited major given technology capabilities. designs technology and increase reuse look as capacity dynamics customers EUV in there's to easy It I number a to they will layers, element a customers drivers. only very to and that our upgrade had no

that they to if a requirement that am wafer there's reuse they believe will in sustainable I the in capacity start for it. or long sure to to opportunities try But the drop try relocate run, look

reassembled move can't and facility. be have brought up. then they to calibrated These it right, to have shipped to disassembled, tools if be you're a and it overnight, moving You particularly different and

So, term those tend decisions. to be longer

pretty fab idle that but back typically time, that do run or need if it move they structurally, they a capacity the for have at term the will online. good setup period an feel to What they So, it in don't expectation of with longer is that short they node to the equipment. come for about

are design there's that environment amount it's And really seven out start is just fair given there -- volumes a the at designs five, and low. still of

Rick modeled forward. view our in as of But it said, And moving new. it's growth out. So, KLA nothing in how we'll opportunity see plays

Mehdi Hosseini

Thank you. Okay.

Kevin Kessel

turn time call everyone, Mehdi. And instructions. your today know thank some of earnings appreciate seeing be busy at can you you, for season. any final so she to conferences. we Chelsea, I'll provide the of And for that, you, it's over back many the Thank upcoming -- I We'll with it.

Operator

and ladies Corporation time, conclude you, Thank gentlemen. wonderful disconnect XXXX webcast. earnings Please KLA line This your at and day. call the this quarter a have March and does

KLA (KLAC) 26 Apr 232023 Q3 Earnings call transcript