KLA(KLAC) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - KLA Corporation reported a revenue growth of 12% for calendar 2024, reaching a record $10.85 billion, with process control revenue also growing over 12% and services business growing 15% to$ 2.5 billion [9][10] - The company maintained industry-leading gross and operating margins at 61% and 41% respectively [9] - Free cash flow increased to $3.4 billion, with$ 2.9 billion returned to shareholders through dividends and share buybacks [10][18] - For the December quarter, revenue exceeded $3 billion for the first time, with non-GAAP diluted EPS at$ 8.20 and GAAP diluted EPS at $6.16 [11][20] Business Line Data and Key Metrics Changes - Advanced packaging revenue grew to approximately$ 500 million in calendar 2024, with expectations to exceed $800 million in calendar 2025, up from a previous estimate of$ 750 million [17] - The services business achieved $667 million in the December quarter, marking a 4% sequential and 18% year-over-year growth, resulting in 50 consecutive quarters of year-over-year growth [17][18] Market Data and Key Metrics Changes - KLA expects the wafer fab equipment (WFE) market to grow by a mid-single-digit percentage in 2025, driven by investments in leading-edge logic and high bandwidth memory [24] - The company anticipates a decline in its China sales by approximately 20% year-over-year due to export controls and market digestion [99] Company Strategy and Development Direction - KLA is focused on leveraging its differentiated portfolio to support customers in navigating increasing complexity and growing design starts in semiconductor devices [12][33] - The company aims to maintain its leadership position in process control, particularly in advanced packaging and AI-related technologies [15][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for advanced semiconductors, stating that AI is a crucial driver for KLA's growth, with expectations for continued market share gains [15][33] - The company is cautious about the impact of recent export controls, estimating a revenue impact of approximately$ 500 million in 2025, primarily affecting the systems business [25][26] Other Important Information - KLA's balance sheet remains strong, with $3.8 billion in cash and cash equivalents and a debt of$ 5.9 billion, allowing for funding of growth strategies and capital returns [22] - The company plans to maintain its operating expense trajectory to support product development and scaling investments [29] Q&A Session Summary Question: What is happening to the process control part of the market this year? - Management indicated that KLA's share of overall WFE opportunity is expected to grow, driven by increased investment in leading-edge technology and strong demand in advanced packaging [43] Question: Can you help us with the linearity for revenue this year? - Management stated that they expect stability around the $3 billion level for the first half of the year, with potential fluctuations as the year progresses [47] Question: What is the growth outlook for your advanced packaging businesses? - Management confirmed a 60% growth outlook for advanced packaging, driven by increased complexity and demand for inspection and metrology solutions [56] Question: How do you expect your service business to perform in calendar '25? - Management anticipates high single-digit growth for the service business in the short term, with long-term growth expectations remaining positive despite current headwinds [73] Question: Can you provide details on the impact of export controls on revenue? - Management clarified that the estimated impact from export controls is primarily related to logic projects, with minimal contribution from memory [165]