Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Last year and first half of this year was more mature node by spending maybe more infrastructure focused as well. As you step into the second half of this year, it does feel like advanced node momentum is starting to accelerate right, both foundry and logic and memory and -- appears to be reflected in your confidence on improving spending outlook for this calendar year. Given your relatively longer lead time, your critical role in enabling these advanced technology migrations, like how are customer discussions, the initial forecast visibility and outlook for calendar '25 shaping up for the team? I mean I assume it's a more advanced technology-driven profile next year, which should be good for the team, but wanted to get your views.
A: (Richard P. Wallace - KLA Corporation - President, CEO & Executive Director) Great. Harlan, thanks for the question. This is Rick. Absolutely, we are having different kind of discussions now than we've had for a while with our leading-edge logic and memory customers. As they prepare for the ramp and we're seeing increased demand for -- they are seeing increased demand, they're talking about tool availability, scheduling of resources, making sure that they don't get behind, really conversations we haven't had for a while.
Q: Great. And did you see the continued growth in the services business with industry utilizations clearly on an upward trajectory. You've got record number of tools coming off warranty customers, I think, wanting more value-added services and offerings just given the complexity challenges ahead? Has the view on the services growth profile improved relative to the last earnings call? I know you talked about being at the upper end of that sort of 12% to 14% sort of target range this year on the last call. Has that changed?
A: (Bren D. Higgins - KLA Corporation - Executive VP & CFO) I would say -- Harlan, it's Bren. I would say, look, we're continuing to see very strong momentum, utilization rates are improving. We had a lot of tools come off of warranty, and they go into contract and our conversion rate is about 95%. So that's very positive. Customers are extending lives of the systems, which bodes well for long-term service growth overall. So I think as we track here, I think we feel pretty good about the range that we have, and we're closer to the upper end for sure than the lower end as we move forward over the next few years.
Q: I guess, first question, a near-term question on the mix you expect for June, which a pretty massive shift to foundry/logic from memory. So, I guess, as part of that, can you speak to some of the underlying drivers? And within that, do you see perhaps a pickup from domestic China memory beyond the June quarter? Or I think in the prior quarter, you talked about revenue rec pushed to the June quarter. So curious about the moving parts there.
A: (Richard P. Wallace - KLA Corporation - President, CEO & Executive Director) Yes. I would say as far as China memory goes, it's more first half heavy than second half, while we're having very positive conversations with our customers on the memory front, as Rick indicated, in terms of long-term plans, we're seeing their businesses now improve. We're seeing profitability and cash flow starting to improve. But we don't expect any significant investments as we move through the rest of the year. Nothings could change. But I think that the profile, it might tick up a little bit in the second half overall, non-China but I don't see it changing in a real meaningful way.
Q: Excellent. And then in terms of your commentary around accelerating top line revenues throughout the remainder of calendar '24. I guess, can you speak to the main drivers there as it relates to perhaps 2-nanometer pilot logic in Arizona handset-related EPC. What's really driving that? And is there sort of a percentage growth rate we should be thinking about half-on-half?
A: (Bren D. Higgins - KLA Corporation - Executive VP & CFO) Yes. C.J., I think you covered most of them, right? We will see some early investment in 2-nanometer. You have the 3-nanometer build-out. You have the investment that you mentioned in Arizona. So those are all pretty good for logic/foundry segment. Right now, when I look at the overall business first half versus second half, I think the second half is high single digits versus the first half in that ballpark. We're not guiding, but I think it's going to end up in that range as we progress through the year.
Q: I have two of them. One is, Rick or Bren, last quarter, you kind of said that for KLA, the overall calendar '24 revenues could grow mid-single digits based on WFE. And obviously, some of these expectations that mid-single digits (inaudible). Given that you do have some exposure on that side, I'm just kind of curious how to think about your overall revenue profile for this year -- year-over-year? And then I have a follow-up.
A: (Bren D. Higgins - KLA Corporation - Executive VP & CFO) Yes. So -- and when you look at the WFE level and when we talk about a flat to modestly up. And that, I think, depends on your view of WFE as everybody adds it up differently. Our view is that WFE was probably $90 billion to $91 billion, and then it's slightly up from there -- or flat to slightly up from there in terms of how we're looking at this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
