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KLA Corporation (KLAC) CFO Bren Higgins Hosts UBS Global Technology and AI Conference (Transcript)
KLACKLA(KLAC)2024-12-05 02:11

KLA Corporation Conference Call Summary Company Overview - Company: KLA Corporation (NASDAQ: KLAC) - Event: UBS Global Technology and AI Conference - Date: December 4, 2024 Key Points Industry Dynamics - Export Controls Impact: KLA anticipates a 500millionincrementalimpactfromnewexportrestrictionsfor2025,with70500 million incremental impact from new export restrictions for 2025, with 70% affecting systems and 30% affecting services [3][4] - **China Business Decline**: KLA expects its China business to decrease by approximately 20% in 2025, down from about 40% in 2024 [4] - **WFE Growth Expectations**: Despite challenges, KLA expects modest growth in wafer fabrication equipment (WFE) spending in 2025, driven by leading-edge investments [7][8] Financial Performance - **Service Growth**: Service revenue growth is projected to be in the high single digits to low double digits, down from a trend of 12% to 14% due to headwinds [5] - **Market Share**: KLA's market share in WFE is expected to increase by approximately 75 basis points, with a potential gain of 20 basis points in 2025 despite challenges in China [8][9] - **Revenue Growth Projections**: KLA anticipates a revenue growth rate of 9% to 11% over time, with operating margins between 40% and 50% [27] Product and Technology Insights - **Advanced Packaging Demand**: KLA's revenue from advanced packaging is projected to grow from 300 million in 2023 to 750millionin2025,drivenbyhigh−performancecomputing[14]−∗∗SoftwareIntegration∗∗:KLAemphasizestheimportanceofsoftwareinitsvalueproposition,withstandalonesoftwarerevenuedoublingto750 million in 2025, driven by high-performance computing [14] - **Software Integration**: KLA emphasizes the importance of software in its value proposition, with standalone software revenue doubling to 175 million over the past four to five years [42] - AI Utilization: KLA is leveraging AI to enhance its systems and improve yield learning cycles, collaborating with NVIDIA on advanced computing architectures [45][46] Market Trends and Customer Behavior - Backlog and RPO: KLA's backlog has increased to approximately 10-11 months, reflecting both cyclical and secular changes in customer ordering behavior [47][52] - Regionalization Effects: The emergence of government stimulus in Japan and other regions is expected to create opportunities for KLA, particularly in service and support for new foundries [54][56] Challenges and Considerations - Gross Margin Stability: KLA's gross margins have been stable around 61% to 62%, with challenges in pushing margins higher due to pricing discipline and market dynamics [28][31] - China Market Rationalization: There is a potential for forced consolidation in the Chinese market, which could impact KLA's long-term outlook [20][24] Conclusion - KLA Corporation is navigating a complex landscape with export controls and a shifting market in China, while also capitalizing on growth opportunities in advanced packaging and software integration. The company maintains a positive long-term outlook with expected revenue growth and stable margins, despite short-term challenges.