Financial Data and Key Metrics Changes - Quarterly revenue was $2.355 billion, declining 5% year-over-year and 3% sequentially, finishing at the upper end of the guidance range [17][27] - Non-GAAP diluted EPS was $5.40, also towards the upper end of the guidance range, while GAAP diluted EPS was $4.97 [17][27] - Non-GAAP gross margin was 61.2%, 45 basis points above the midpoint of the guidance range due to product mix [17][32] - Free cash flow conversion was strong at 119%, with a free cash flow margin of 37% [18][42] Business Line Data and Key Metrics Changes - The KLA services business grew to $539 million in the June quarter, up 5% year-over-year [16] - Revenues from unpatterned wafer inspection and metrology products are expected to significantly outperform the overall WFE market [16] - Non-GAAP operating expenses were $543 million, slightly higher than guidance due to adjustments to variable compensation [32] Market Data and Key Metrics Changes - WFE outlook for 2023 remains largely unchanged, expected to decline approximately 20% from $95 billion in 2022 [43] - In memory, WFE investments are expected to decline by approximately 40%, while foundry/logic is forecasted to decline by about 10% overall [43][44] - Demand for automotive and other markets served by legacy nodes remained strong, demonstrating diversification of demand [28] Company Strategy and Development Direction - KLA remains focused on supporting customer requirements while maintaining critical R&D investments to enable technology roadmaps [40] - The company is well-positioned with a comprehensive portfolio of products to meet customer requirements [30] - KLA's primary value proposition is enabling innovation through technology transitions, which customers continue to prioritize [45] Management's Comments on Operating Environment and Future Outlook - Management noted that near-term demand headwinds persist, but there are bright spots in automotive and legacy markets [28] - The company expects demand for process control systems to stabilize around current business levels for the remainder of the year [43] - Management expressed confidence in the long-term semiconductor industry demand and investments in WFE [52] Other Important Information - KLA ended the quarter with $3.24 billion in total cash, cash equivalents, and marketable securities, with debt of $5.89 billion [33] - The company has strong investment-grade ratings from all three agencies [19] Q&A Session Summary Question: Impact of fab readiness on shipments - Management confirmed that adjustments to ramp plans were already factored into their outlook, with fewer tools being shipped but still feeling good about the forecast [6][7] Question: Strength in optical inspection lead times - Demand for optical inspection remains strong, with lead times expected to remain elevated due to ongoing strong demand [57][58] Question: Expectations for memory investments - Management indicated that while memory investments are expected to slow, there will be some additional business from Chinese DRAM customers in the second half of the year [89] Question: Competitive dynamics in China - Management acknowledged the competitive landscape in China but emphasized their strong market position and ability to meet customer needs [62][72] Question: Process control performance relative to WFE - Management noted that process control is expected to outperform WFE, driven by higher spending in logic and foundry segments [98][99]

Liquidity and Working Capital - Working capital increased to $4.60 billion as of March 31, 2023, up by $302.4 million from $4.30 billion as of June 30, 2022 [232] - The company's principal sources of liquidity as of March 31, 2023, included $2.89 billion in cash, cash equivalents, and marketable securities [232] - The company's liquidity is supported by a $1.50 billion Revolving Credit Facility, which is sufficient to meet working capital needs, capital expenditures, and other obligations for at least the next 12 months [232] Investment Portfolio and Market Risks - The company's fixed income securities portfolio was valued at $1.08 billion as of March 31, 2023, with a potential decline of $9.4 million if interest rates increased by 100 bps [238] - The company's investment portfolio is subject to interest rate risk, with a potential decline in value if market interest rates increase [238] - The fair value of the company's equity investment in a publicly traded company was $19.8 million as of March 31, 2023, with a potential decline of $10 million if market prices fell by 50% [241] - The company had net forward and option contracts to buy $235.7 million in foreign currency as of March 31, 2023, with a potential decrease of $80.5 million in fair value if currency exchange rates moved adversely by 10% [243] Debt and Credit Facilities - The fair value of the company's long-term fixed interest rate Senior Notes was $5.79 billion as of March 31, 2023, with a principal amount of $5.95 billion [239] - The company had no outstanding borrowings under its Revolving Credit Facility as of March 31, 2023, with an annual commitment fee of 9 bps [240] - The company's credit ratings as of March 31, 2023, were A from Fitch, A2 from Moody's, and A from S&P [234] Internal Controls and Financial Reporting - No changes in internal control over financial reporting during the most recent fiscal quarter that materially affected or are likely to materially affect the company's financial reporting [249] - Disclosure Controls are designed to ensure timely and accurate reporting of required information under the Exchange Act, including components of internal control over financial reporting [247] - Limitations of Disclosure Controls include the inability to prevent all errors and fraud due to inherent system constraints, resource limitations, and potential circumvention [248] - CEO and CFO certifications are included in the report, referencing Rule 13a-14 of the Exchange Act, and should be read in conjunction with the Controls and Procedures section [246]

Financial Data and Key Metrics Changes - Revenue for the March quarter was $2.43 billion, representing a 6% year-over-year growth but down 18% sequentially [5][11] - GAAP EPS was $5.03 and non-GAAP EPS was $5.49, both above the midpoint of their respective guidance ranges [5][11] - Non-GAAP operating expenses were $534 million, below the expectation of $545 million due to headcount reductions and cost management [12] - Quarterly free cash flow was $926 million, leading to a 20% increase in the last 12 months' free cash flow to $3.2 billion [26] Business Line Data and Key Metrics Changes - Services revenue grew to $529 million, up 8% year-over-year and 2% sequentially, driven by an increasing installed base and customer adoption of long-term service agreements [8] - The automotive-focused business showed rapid growth, with automotive semiconductor demand increasing significantly [7] Market Data and Key Metrics Changes - Foundry/Logic is expected to account for approximately 77% of semiconductor process control systems revenue, while memory is forecasted to be around 23% [14] - In memory, DRAM is expected to represent about 85% of the segment mix, with NAND at approximately 15% [14] Company Strategy and Development Direction - The company is focused on market diversification, particularly in the automotive sector, and is working to standardize in-line defect screening methodologies [7] - KLA aims to maintain its market leadership through innovation and high levels of R&D investment, with a market share gain of approximately 300 basis points in 2022 [24] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are near-term headwinds due to the global macro economy, automotive demand and legacy markets remain strong [23] - The company expects WFE investments in memory to decline by 35% to 40% as customers adjust production to align with demand [30] - Management remains confident in the long-term semiconductor industry demand and investments, despite current market challenges [32] Other Important Information - The company returned $5.1 billion to shareholders over the last 12 months, including $4.4 billion in share repurchases and $711 million in dividends [13] - KLA ended the quarter with $2.9 billion in cash and cash equivalents, and $5.95 billion in debt [29] Q&A Session Summary Question: What is the outlook for foundry WFE in 2023? - Management indicated that lead times on optical inspection remain long, and customers continue to invest in their technology roadmaps, suggesting a stable demand environment [41] Question: How does management view memory demand recovery? - Management noted that memory sales were low at 14% in the March quarter, but they expect some stabilization in the second half of the year, albeit at low levels [44] Question: What is the expected growth for service revenues this year? - Management expects service revenues to grow in the mid- to high single-digit range, despite some headwinds from export controls [96] Question: How is the company addressing the impact of export controls on shipments to China? - Management clarified that they expect to recoup over $200 million in the second half of the year due to clarifications on export controls [94] Question: What is the expected performance of the EPC business? - Management anticipates the EPC business to improve modestly in the second half but expects it to decline year-over-year more than WFE-centric businesses [60]

Forward Looking Statements These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the impact of the COVID-19 pandemic on the global economy and on our business, financial condition and results of operations, including the supply chain constraints we are experiencing as a result of the pandemic; economic ...

KLA Corporation (NASDAQ:KLAC) Q2 2023 Earnings Conference Call January 26, 2023 6:00 PM ET Company Participants Kevin Kessel - Vice President of Investor Relations & Market Analytics Rick Wallace - Chief Executive Officer Bren Higgins - Chief Financial Officer Conference Call Participants C.J. Muse - Evercore Joe Quatrochi - Wells Fargo Harlan Sur - JPMorgan Vivek Arya - Bank of America Brian Chin - Stifel Sidney Ho - Deutsche Bank Atif Malik - Citi Tim Arcuri - UBS Krish Sankar - Cowen & Company Toshiya Ha ...

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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 KLA CORPORATION (Exact name of registrant as specified in its charter) Delaware 04-2564110 (State or other jurisdiction of incorporation or organization) One Technology Drive, Milpitas, California 95035 (I.R.S. Employer Identification No.) For the quarterly period ended December 31, 2022 or ☐ TRANSITION REPORT ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-09992 KLA CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|----------------------------------|-------|-------|-------|-------|--------------------------------------------------------|-------|--------------------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Quarter Ended September 30, 2022 | | | | | Q1 Fiscal 2023 Earnings • ...

Financial Data and Key Metrics Changes - KLA reported record revenue of $2.7 billion for the September quarter, growing 31% year-over-year and 10% sequentially [8][21] - Non-GAAP net income exceeded $1 billion for the first time, with GAAP earnings per share at $7.20 and non-GAAP EPS at $7.06, both above guidance [8][21] - Operating cash flow reached $1 billion for the first time, with free cash flow of $927 million and a free cash flow margin of 34% for the 12 months ended September 30, 2022 [12][23] Business Line Data and Key Metrics Changes - Revenue from patterning systems grew 49% sequentially and 67% year-over-year [11] - KLA Services business revenue increased to $529 million in the September quarter, up 16% year-over-year [12] - The SPTS segment also delivered strong quarterly revenue, particularly in advanced packaging and automotive electronics [11] Market Data and Key Metrics Changes - The semiconductor industry is experiencing a strategic shift with a more diverse end market mix, impacting device pricing, especially in memory [16] - KLA expects a decline in WFE investment of approximately 20% in CY 2023, primarily driven by memory customers adjusting to lower consumer demand [28][30] - The company anticipates a gross direct impact of $600 million to $900 million on revenue due to new China export regulations [30][70] Company Strategy and Development Direction - KLA's operating model focuses on delivering for customers, navigating supply chain challenges, and investing in R&D [10][33] - The company aims to maintain a high level of investment in technology and infrastructure to support long-term growth objectives despite a softening near-term outlook [36][40] - KLA's strategic objectives are designed to fuel growth, operational excellence, and differentiation across its diverse product and service offerings [41] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is a slowdown in consumer electronics impacting semiconductor pricing, long-term growth for the semiconductor equipment industry remains intact due to ongoing R&D investments [17][38] - The company remains confident in its ability to deliver sustainable relative outperformance despite the anticipated decline in WFE demand [40][41] - Management emphasized the importance of technology roadmaps and customer investments in enabling technology transitions, which are expected to continue regardless of the business environment [32][40] Other Important Information - KLA returned $5.2 billion to shareholders over the last 12 months, including $4.6 billion in share repurchases and $664 million in dividends [25] - The company ended the quarter with nearly $3 billion in cash and a flexible bond maturity profile supported by strong investment-grade ratings [24] Q&A Session Summary Question: KLA's revenue and earnings potential in a down year - Management indicated that KLA has historically outperformed WFE in down years, particularly due to continued customer investments in technology and process control [45][46] Question: Outlook for mask inspection business - Management expects reticle inspection to outperform the overall semi PC business, driven by strong EUV adoption [48][50] Question: Impact of China regulations on services - Service revenue from China is expected to grow but at a lower rate than the long-term target due to the strong dollar and other factors [59][61] Question: Changes in backlog and lead times - KLA's backlog grew modestly, and management expects some normalization of lead times as capacity comes online [64][66] Question: Context of $600 million to $900 million revenue impact from China - Management provided a range based on existing backlog and sales funnel forecasts, indicating that service revenue constitutes about 10% to 15% of that impact [70][72] Question: WFE intensity outlook - Management believes that WFE intensity will trend slightly higher in the long term due to ongoing technology advancements, despite potential short-term declines [74][78]