Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KLA Corp (KLAC, Financial) reported strong financial performance with revenue of $2.84 billion, exceeding expectations and at the upper end of guidance ranges.
- The company experienced strong double-digit sequential and year-over-year revenue growth, particularly in foundry logic and memory sectors.
- KLA Corp's advanced packaging portfolio is gaining traction, with expected revenue exceeding $500 million in CY24 and continued growth anticipated in CY25.
- The service business grew to $644 million in the September quarter, marking the 49th consecutive quarter of year-over-year growth.
- KLA Corp demonstrated strong cash flow and capital returns, with a quarterly free cash flow of $935 million and total capital return of $765 million in the September quarter.
Negative Points
- Gross margin was slightly below the midpoint of the guidance range due to a weaker-than-expected systems product mix.
- Operating expenses increased to $560 million, with significant investments in R&D and SG&A.
- The company faces potential risks from export controls and geopolitical tensions, particularly concerning its China business.
- China's revenue contribution is expected to decline from 42% to around 30% in 2025, indicating potential challenges in this market.
- There is uncertainty regarding the impact of potential export restrictions on future business operations and financial performance.
Q & A Highlights
Q: How does the excitement around leading-edge investments align with the fact that only one leading foundry is increasing spending while others are cutting back?
A: Richard Wallace, CEO: The demand is driven by customers of the foundries, not the foundries themselves. Significant demand for 2-nanometer and 3-nanometer technologies is driving robust forecasts for bookings into 2025. AI is a major demand driver, impacting both training and inference chips.
Q: Can you provide more details on your China exposure and expectations for the December quarter?
A: Bren Higgins, CFO: China exposure was about 42% in September and is expected to decrease to the mid-30s in the December quarter. For 2025, we anticipate it will drop to around 30%. The service market in China is less mature, so service revenue is a smaller percentage compared to the corporate average.
Q: What are your expectations for the process control business, particularly in metrology and patterning, as we move into next year?
A: Bren Higgins, CFO: We expect growth in metrology and reticle inspection next year due to increased design starts and advanced memory technologies. Inspection growth has been driven by yield challenges and advanced packaging, which will continue to be a driver.
Q: How do you view the NAND market for next year, considering the low base this year?
A: Bren Higgins, CFO: We expect some incremental investment in NAND next year, driven by improved utilization rates and financial performance of our customers. However, we don't anticipate significant growth in absolute dollar terms.
Q: How are you preparing for potential export controls impacting your China business?
A: Richard Wallace, CEO: We don't speculate on potential export controls until they are announced. Our guidance range considers various scenarios, and we are comfortable with it. We will assess the impact once any new controls are announced.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
