KLA Corp at Wells Fargo TMT Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Maybe first, Bren will tell a little bit of news out over the last 24 hours. Can you just -- can we knock out this China question and any sort of there any comments?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : You give me a lot to digest there. Maybe just -- maybe -- can we revisit some of the stuff that you said about China, just I want to make sure I understand it correctly here. So you're saying the preliminary estimate from what happened yesterday is $500 million, plus or minus $100 million for 2025 just looking at like kind of your backlog that split 70-30 systems versus services. And then can you repeat that one in terms of how you're thinking about the percentage of revenue from China next year? Because I think in the earnings call, you said -- I want to -- you said 20%, right? Now, you're thinking low --

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : 30% of total.

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. That's clear. Maybe just a couple of more questions in terms of just kind of the bigger picture and then I promise we'll dive in on the services. You talked about 2-nanometer and thinking about just the positioning there. Can you talk about like the increase in capital intensity for 2-nanometer for process control, specifically around the gate-all-around? Like how do we think about sample rates? Is it too early still to understand what that looks like? But just kind of how do we think about that? And then also I'll sneak one more in there. You're also positioned in the mask shop to benefit from 2-nanometer. So kind of can we dissect that a little bit?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : And you think about like I think in the past, like just one more question on the reticle space. In the past, like you've seen where there's been some level of reuse, just given that they haven't seen that trickle down like products moving from 7-nanometers to 5-nanometers, et cetera, et cetera. Like do you -- as you get back into 2-nanometers, do you see that kind of dynamic where they're going to have to -- like your customers need to add a lot of capacity. Because I mean clearly talking about a lot of good design starts or reacceleration designs starts at 2-nanometers. Like do we think about the reuse at 2-nanometers as increasing relative to prior nodes. Or how do you think about that?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. Maybe let's shift gears over to services. Maybe just to start, Brian, like can you give us kind of just like A little bit of an overview of the services business, like what the portfolio looks like in terms of the offerings and why services is important to your customers and then any sort of metrics you're willing to kind of share in terms of just some of the KPIs that you focus on? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:30PM, KLAC.OQ - KLA Corp at Wells Fargo TMT Summit

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Maybe like double clicking on that. Your services relative to some of your peers, right, that's a little bit more like brake fix, like talk about like the things that you do for your customers relative to that, that drives that kind of stability in terms of the contract, 75% on contract?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Yes. I mean it's very impressive that -- Bren, I think you said 49 quarters of year-over-year growth, and you still also had to comp like export restrictions, right? And over the last -- right? And so it definitely speaks to the consistency of that business.

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. Thinking about -- you guys have talked about like a services venue growth, I think the CAGR that you gave at the last Analyst Day was 12% to 14%. Well, I think you're going to have another Analyst Day here next year, you're operating above it. I mean talk about like maybe what's been the surprise that's driven the upside to that growth rate? Is it the installed base or just the service intensity? Like how do you think about, I guess, like that dynamic of what's driving the upside?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Yes. And I know you guys like past the Analyst Days, I think you've talked about like a lot of work that you guys were doing like on the Orbotech side, I'm just trying to kind of pull that service model to be more like core KLA? I mean, where do you stand on that? And like how do you think about the -- just kind of the go forward there?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Yes. And that's a good segue into trying to think about like the services intensity, how that has increased over time. I mean what are those like discussions with your customers like? I mean when they're -- you're saying, look, like things are becoming more difficult? Like how does that like work into the contract negotiation of services and just like the overall handholding or help that you're providing them in those situations as your customers are moving to new technologies or next-generation nodes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:30PM, KLAC.OQ - KLA Corp at Wells Fargo TMT Summit

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : I guess like in a situation where someone doesn't want to sign a contract, I mean, what's the driving factor of that?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. Maybe as you think about a lot of the discussions still happening around like regionalization of chip production, the geopolitical kind of climate of just making sure that we've got leading edge production in the US. So I guess like is that an opportunity for the services business in terms of kind of moving away from more regionally large fabs to smaller scale fabs that are in different regions. How do I think about that from services?

Question: Joe Quatrochi - Wells Fargo Securities, LLC - Analyst : Perfect. And I think we're out of time. So let's end it there. Thanks guys.