KLA Corporation

Good afternoon. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation June Quarter 2023 Earnings Conference Call-In Webcast. All participant lines have been placed in a listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2. Please also limit yourself to one question and one follow-up. Lastly, if you should need operator assistance, please press star 0. Thank you, and I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and Market Analytics. Please go ahead, sir.

Thank you for joining us for our earnings call to discuss the results of the June 2023 quarter in our September quarter outlook. Joining me is our CEO, Rick Wallace, and our CFO, Brent Higgins. During this call, we will discuss our results released today after the market closed, along with supplemental materials that are all available on our IR website. Today's discussion is presented on a non-GAAP financial basis, unless otherwise specified. Whenever we make full-year references, they relate to calendar years. A detailed reconciliation of GAAP to non-GAAP results is in the earnings materials posted on our website. Our IR website also contains future investor events, as well as presentations, corporate governance information, and links to our SEC filings, including our most recent annual report and quarterly reports on Forms 10-K and 10-Q. Our comments today are subject to risks and uncertainties reflected in the risk factor disclosure in our SEC filings. Any forward-looking statements, including those we make on the call today, are subject to those risks, and KLA cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking statements. Rick will begin the call with some comments and quarterly highlights. Fred will conclude with our financial highlights, including our guidance and outlook. I will now turn the call over to our CEO, Rick Wallace. Rick? Thank you, Kevin. Let's start with a summary of KLA's performance in the quarter along with a few highlights. Further color and detail on my comments and the semiconductor demand environment can be found in our shareholder letter released earlier today. KLA's June quarter results exceeded expectations and demonstrated consistent execution despite a challenging marketplace. Specifically, revenue of $2.355 billion finished at the upper end of the guidance range, declining 5% on a year-over-year basis and 3% sequentially. GAAP earnings per share was $4.97, and non-GAAP EPS was $5.40, with each finishing at the upper end of their respective guidance ranges. As near-term demand headwinds persist, there are some bright spots. In particular, automotive and other markets served by legacy nodes remain strong, demonstrating the diversification of demand and growing adoption of semiconductor technology across multiple industries. Additionally, process control plays a critical role in enabling our customers to execute on node and technology transitions that are the focus of R&D efforts, and that is more resilient to near-term pressures. We work closely with our customers, and they continue to prioritize R&D investments. This is important for KLA as our products are heavily relied upon during the R&D process, as well as the early ramp phase when faster time to yield is critical. KLA remains focused on supporting our customers' requirements while maintaining critical R&D investments to enable our technology roadmap. Our June quarterly results are the latest example of successfully meeting or exceeding our commitments and creating value for our customers, partners, and shareholders. Specific factors driving KLA's performance this quarter include KLA's market leadership and process control, which includes some of the most critical and fastest growing segments of WFE. Growth and market leadership in critical wafer and vertical infrastructure is fueling relative growth for KLA. For example, revenues from our unpatterned wafer inspection and metrology products used in silicon wafer and photomask manufacturing are expected to significantly outperform the overall WFE market. and deliver strong growth in a down year for the industry. The KLA services business grew to $539 million in the June quarter, up 5% year-over-year. Our consistent execution, despite challenges in the marketplace, continues to prove the resiliency of the KLA operating model and the dedication of our global teams. KLA remains well-positioned with a comprehensive portfolio of products to meet customer requirements. I'll now hand it to Bren to go through our financial highlights. Bren? Thanks, Rick. KLA delivered results at the upper end of the range of guidance and commitments, demonstrating consistent execution despite a challenging marketplace. Our continued focus on meeting customer needs while expanding market leadership, sustaining industry-leading gross and operating markets, generating strong free cash flow, and maintaining our long-term strategy of assertive capital allocation is what makes us successful. Quarterly revenue was $2.355 billion, towards the upper end of the guided range of $2.125 to $2.375 billion Non-GAAP diluted EPS was $5.40, also towards the upper end of the guidance range of $4.23 to $5.43. GAAP diluted EPS was $4.97, above the midpoint of guidance. Non-GAAP gross margin was 61.2%, 45 basis points above the midpoint of the guidance range due to product mix, as upside in the quarter was driven by higher margin products, normalizing freight expense and improving factory utilization's overall capacity adjusted to current demand expectations. Non-GAAP operating expenses were $543 million, slightly higher than guidance due to adjustments to variable compensation. Total operating expenses comprised $314 million in R&D and $229 million in SG&A. Non-GAAP operating margin was 38.1%. Other income and expense debt was $49 million, and the quarterly effective tax rate was 12.4%. With a guided tax rate of 13.5%, non-GAAP EPS would have been $0.07 lower, or $5.33. Quarterly non-GAAP net income was $743 million. GAAP net income was $685 million. Cash flow from operations was $959 million, and free cash flow was $880 million. As a result, free cash flow conversion was strong at 119%, and free cash flow margin was 37%. The company had approximately 137.7 million diluted weighted average shares outstanding at the end of the quarter. Breakdown of revenue by reportable segments and end markets in major products and regions can be found within the shareholder letter and slides. Switching to the balance sheet, KLA ended the quarter with $3.24 billion in total cash, cash equivalents, and marketable securities, debt of $5.89 billion, and a flexible and attractive bond maturity profile supported by strong investment grade ratings from all three agencies. Turning to our outlook, our WIP outlook for 2023 remains largely unchanged at down approximately 20% from $95 billion in 2022. While the timing of a meaningful resumption in WFE investment growth remains unclear, we continue to see overall demand stabilizing around current business levels for our semiconductor process control systems business, and we expect this demand profile to continue through the remainder of the year. Our 2023 WFE estimate reflects a top-down assessment of industry demand as follows. In memory, we expect WFE investment to decline by approximately 40%, Foundry Logix has declined by about 10% overall, with legacy investment outperforming the segment overall due principally to automotive and continued demand for legacy design nodes. KLA's primary value proposition is focused on enabling innovation through technology transitions, which our customers continue to prioritize across all business environments. While capacity plans are often adjusted due to changing demand expectations, technology roadmap investments are more resilient. This adds additional confidence to our business expectations as customers align shipment slots with roadmap requirements. In this environment, we will continue to focus on meeting customer requirements, maintaining our high-level investment in R&D to advance our product roadmaps and KLA's market leadership in delivering strong relative revenue growth and financial performance. Moving to guidance now, our September quarter guidance is as follows. Total revenue is expected to be $2.35 billion, plus or minus $125 million. Foundry logic is forecasted to be approximately 70%, and memory is expected to be around 30% of semi-PC systems revenue. Within memory, DRAM is expected to be about 90% of the segment mix, and NAND 10%. We forecast non-GAAP gross margin to be roughly flat at 61% plus or minus one percentage point as product mix expectations and cost components are consistent with the prior quarter. Given our current view of a stabilizing demand environment for the remainder of 2023, we expect full-year calendar gross margin to trend near 61%. Non-GAAP operating expenses are expected to be approximately $535 million. as cost measures executed earlier in the calendar year align our current cost structure with top-line expectations. We would expect quarterly operating expenses to remain around this level for the remainder of the calendar year. Other model assumptions for the September quarter include other income and expense net of approximately $48 million and affected tax rate of approximately 13.5%. Finally, gap to the VPS is expected to be $5.02 plus or minus $0.60. and non-GAAP diluted DPS of $5.35 plus or minus 60 cents. DPS guidance is based on a fully diluted share count of approximately 137 million shares. In conclusion, we continue to see process controls importance to technology transitions and advancements key to R&D growth and prioritization despite persistent weakness in our customers' businesses. We are also exposed to wafer and reticle infrastructure investments that are contributing to our revenue performance As a result, KLA remains positioned for strong relative performance versus the industry in 2023. Looking ahead, we continue to see the business environment stabilizing and remain confident that the secular trends driving long-term semiconductor industry demand and investments in WFE remain strong and compelling. Broadening semiconductor demand and simultaneous investments supporting growing semiconductor content across multiple technology nodes remain catalysts for sustainable long-term industry growth. Multiple applications for leading-edge roadmaps are driving competitive dynamics and design challenges requiring more customer engagement and faster time to results. Technology investment and node transitions reflect the value that semiconductors in our industry have in lowering costs for our customers and enabling a broader application universe for semiconductor-based technology across multiple end markets. While the global economy and semiconductor industry are facing challenges, KLA is well-positioned to deliver strong relative financial performance, driven by better-than-market performance of our SEMAPC and SPTS businesses, and continue growth in services. We remain focused on innovation as we execute our portfolio strategy to support our customers' technology roadmaps and multi-year investment plans. With the KLA operating model guiding our execution, we will implement our strategic objectives and drive out performance. These objectives are also the foundation for our technology leadership and competitive differentiation. Our focus on customer success, delivering innovative and differentiated solutions, and operational excellence continues to enable us to deliver industry-leading financial and free cash flow performance while delivering consistent capital returns to shareholders. That concludes my remarks. I'll now turn the call back over to Kevin to begin the Q&A. Thank you, Brent. Chelsea, can you please provide instruction for questions?

Yes, sir. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star 2. We remind you to please unmute your line when introduced and, if possible, to pick up your handset for optimal sound quality. In the interest of time, we ask that you please limit yourself to one question and one follow up. Our first question will come from Joe Quattrochi with Wells Fargo.

Question.

I was wondering if you could maybe talk about the strength that you're seeing in your blank way for business. How do you see that looking into next year? And is there a risk of maybe some digestion after a pretty strong investment cycle there? Hey, Joe, thanks for the question. This year has been a strong year for that. We have a very strong market position there, so that's been good for us. And you're seeing investment from the global players, but also investment in infrastructure in China to provide more domestic supply. It tends to invest according to a different cycle. I wouldn't exactly call it counter-cyclical, but the lead time to get equipment to actually make silicon wafers takes some time. And so you see those customers continuing to invest through to prepare for future demand. They're also dealing with new capacity requirements related to hybrid bonding and some of the other wafer-to-wafer packaging techniques that are out there that are driving incremental demand as well. So as we look at this year, it's going to continue to grow this year, expect it to do well. But I do think as we move into next year, we'll see some moderation of that investment. So while I don't think it will fall off a lot, I don't think we'll see it grow into next year. Got it. That's helpful. And another question as a follow-up, you guys saw some pretty, I think, anything upside to your memory kind of expectations or at least relative to what you were thinking in you know, three months ago and particularly around DRAM, just wondering if you could maybe comment on what drove that in the quarter. Sure. We had some movement across a number of our customers, uh, and the number overall is frankly pretty low. Uh, but that was part of it. The other part is we also had some shipments that we weren't expecting to, uh, to make in the quarter related to, uh, one of our Chinese DRAM customers. And the clarification of some of the export rules enabled us to ship some additional equipment there. So that was a factor in the upside on the DRAM side.

Got it. Thank you.

Thank you. Our next question will come from CJ Muse with Evercore.

Yeah, good afternoon. Thank you for taking the question. I guess first question, can you update us on where optical inspection lead times are? And, you know, given the importance of that tool set for, you know, R&D lines, you know, is that something that you expect will sustain at elevated levels? Or do you think that that should normalize over time?

Thank you, James. The answer is The demand continues to be very strong for a couple of reasons that we've talked about many times. And we have struggled in increasing the output. So we're still booked out through as far as we can see into next year. So business remains strong. The product has had a lot of success dealing with some of the challenges we're seeing. So we expect that to remain elevated. And we're working hard to actually increase capacity in order to meet that demand, but that's going to take some time. Yeah, lead times will come down a little bit. I don't know if they'll come down all that much given the drivers of that product line. But as new capacity comes online, as we move through 24 and beyond, we'll see it We'll see them come down a little bit, but I think you'll still see them remain elevated for some time. You know, one of the nice, who we talked about in the past, CJ, is that we're still running Gen 4 in addition to Gen 5. And Gen 4 is really seeing pretty good adoption in places that we didn't necessarily forecast, like automotive. So we still have pretty good tailwinds for that.

Very helpful. And I guess as my follow-up, encouraging to see your semi-service business grow sequentially. Can you kind of comment how you see that playing out in the second half? And, you know, what kind of potentially negative impact are you seeing from lower utilization from your memory customers?

Yes, we're very pleased with the performance and service, and it's not atypical for us at Adounder to see service utilized because people are still trying to squeeze out all the yield capability they have. We have seen utilization. We had forecasts from some customers for a higher level of or a lower level of utilization asking us to back off a little bit. And those have moderated through the year to the point where utilization rates are higher than what had been forecasted by our customers at the beginning of the year, specifically in leading edge markets. leading edge logic boundaries. So that has been an upside. Memory looks a little bit slower in that regard, but it's kind of what we forecasted. And with the level of shipments, we feel very good about our long-term forecast for the services business.

Thank you.

Thank you. Our next question comes from Chris Sincar with TD Cowan. Your line is open.

Hi, thanks for taking my question. I have two of them. First one, Rick, you know, obviously you have, like, very strong revenues from China. There's been some chatter that the U.S. might, you know, expand the export controls to even maybe mature nodes. I know right now you're capped at 14 nanometers and below for FoundryLogic. Is there any commentary you can give on that and how to think about it? Like, let's say, for example, 14 goes to 28, the restriction on 28 goes to 40. Is there a way to quantify the impact to your sales and then add a follow-up?

Yeah, I won't speculate what the government will do or not do on that. We have ongoing conversations with them, obviously, and really we've been supportive of their efforts to try to figure out how to cut off the very leading edge. Beyond that, that's not conversations we've been having with them. But in terms of quantifying, obviously, given that most of the business we have in China is legacy, that would obviously impact our ability to support them in legacies.

Got it, got it. Thanks, Ludwig. And then as a follow-up, you know, based on the numbers, it looks like you're going to outperform WFE again this year, and you do this last couple of years. The last couple of years, it is more, you know, some of your peers were supply chain constrained while you were not. And this year, obviously, you know, there's a lot of technology buys. I'm just wondering, as we head into next year or the next couple of years, as WFE starts rebounding, Is there a risk that some of the fabs already bought process control equipment that you could actually underperform WSE?

Well, so I would say that we were supply constrained, but for a different reason. I mean, we continue to struggle with the demand that we've had for optical. And as I mentioned to a prior question, we continue to see demand for that. So it's true that we managed our supply chain, but we still had gaps. It wasn't like we got hit with things that we didn't expect. We just couldn't ramp as much as expected. some of our customers wanted. The process control intensity has gone up. I mean, one thing that we clearly forecasted and we're seeing play out now is as EUV gets adopted in more nodes and on more layers and advanced architectures happen, there's a greater need for process control, and that's really what we're experiencing. So when we talk about the analyst day and what we're seeing play out is increased need for process control across all technologies, and we feel good about how that looks as we go forward and some of the stick to the forecast we had for our analyst day for 2026.

Got it. Thanks, Roderick. Very helpful. Thank you.

Thank you. Our next question will come from Sidney Ho with Deutsche Bank.

Thank you for taking the question and congrats on the good results. A few of your peers have talked about SAP readiness being impacting their shipment this year, especially for EUV tools. Is that something that you already kind of factored in, you know, WFE outlook you gave a quarter ago when you also said Xamarin Logic would be down 10%, which you should reiterate today? Or are there some other offsets that you would point out that kind of offset that?

Yeah, Cindy, it's a good question. And it's something that we had already factored in to our plans as we looked out. What you're seeing is adjustments to some of the ramp plans. And so while there's still some shipments going into some of these facilities, fewer tools. But it's something that we had already made adjustments for. I think know it tends to usually in a shorter lead time tools feel it first and then it gets you know progressively it eventually those those delays filter into everybody but it but it does take some time so we feel very good about the forecast we've provided here in terms of our expectations over the next uh the next couple quarters okay great thanks that's helpful um as a follow-up um

Speaking of China, I know the revenue is now back to the 30% level. You talked about some of the shipments that came in a little earlier. But I want to ask a little different angle. It's clear that there's a big push for self-sufficiency in China, but certain toolsets are harder to replace than others. Can you give us maybe a little bit of color in the competitive dynamics there that some of your process control requirements could be satisfied by domestic companies? Thanks.

Yeah, our market share continues to be strong. I mean, we started focusing on legacy market opportunities several years ago. In fact, we started some older product lines, and they continue to be the most competitive, really, at all price points. So we feel while there is more competition at Trilling Edge, we're very well positioned to be able to win. And a lot of customers have a lot of confidence around the world in our capabilities. So we feel good about our ability to compete against any competitors that are out there. You know, we've been competing with people for a long time in terms of capabilities. So this is not unique that we would have competition in China. And you have to remember our competitive offerings in China or any other region are really based on the portfolio products that we can offer. So we can... We can offer lots of solutions to our customers, to Rick's point, some of our older generation tools, which we've restarted, but even de-configured versions of more recent tools. And then we allow our customers to manage across their requirements, either for economic or, you know, more advanced tools, more capabilities. So our go-to-market in terms of the portfolio benefits us in that region as much as it does anywhere else.

Great. Thank you very much.

Thank you. Our next question comes from Brian Chin with Steeple.

Hi there. Thanks. Good afternoon. Thanks for letting us ask a question.

I guess understanding again that memory investment in general is reduced, and it sounds like the China memory shift that might have hit there in the June quarter But if I were to assume that some of your DRAM activity in coming quarters will be more geared toward DDR5 and applications for high-performance, high-density DRAM for data center and AI applications, are you noticing or anticipating a higher level of process control intensity for that kind of spend? Well, look, for more advanced, For more advanced DRAM, particularly with the introduction of EUV, it's driven higher intensity variables, and there's the infrastructure to support the introduction of that, particularly around radical quality and radical fidelity. That's been a... a driver of process control intensity for us over the last couple of years. And so I would expect that we'll continue to see it. I'm not expecting to see an uptick in business from memory customers. There will be some additional business from the Chinese DRAM customer in the second half of the year. But we're not really seeing any changes in overall utilization rates in memory, as Rick said earlier. And so I think until our customers start to see the pricing improvement, improve their profitability and cashflow, I don't think we're going to see meaningful investments. Now we will participate in process node development as we always have, and that's going to be the biggest driver of the contributions from that market. Okay, got it. That's helpful. And then maybe just a broader follow-up question. Obviously there's some underutilization of capacity at the leading foundries and more advanced FinTech nodes. And this might just be a cyclical phenomena, but in your conversations with them, do you detect any changes in how they might elect to deploy capital in support of multiple advanced nodes differently? Well, I mean, they've slowed down, I mean, for sure. We've seen and heard the reports on forecasts for their investment in WFE going down, so I think that's been the main one. The leading indicators that we are looking at that are encouraging As I mentioned earlier, it's called we've had utilization rates creep back up from what was forecasted just a few months ago. The other thing is we're still seeing a heavy number of design starts. And so, of course, it takes a while for those to filter through, but we still anticipate a very large number of designs at the advanced node, and so that will pretend for a strong business down the road. You can't pick the timing, but I think that, you know, this slowdown in terms of their investment is related to the overall business environment, but not the fundamental dynamics. I think that looks pretty good as we get, you know, the next few quarters behind us.

That's helpful. Thank you.

Thank you. Our next question comes from Tim Arcuri with UBS.

Thanks a lot. Bren, can you give the purchase obligation number? I think it was about $12 billion last quarter. I assume it came down a smidge and booked a bill that's still less than one. And then also, can you tell us how much is sitting outside of 12 months, that number?

So the specific details will come through when we file our K here in another week or so. But it was down about a little over $500 million quarter to quarter. So book to bill was a little less than one. We still see some activity in terms of new orders. So the backlog levels are obviously very elevated. So it's come down. It seems like it's been coming down right around that $500 million or so per quarter for the last few quarters. but still close to $11.5 billion overall. And the beyond 12 months is between 40% and 50% of it. It's delivered beyond the 12-month window. Cool. Thanks for that. And then, Brent, just for the soft guide for December, it sounds like process control system shipments are pretty flat. uh it looks like maybe epc should be up a smidge because you had said before that epc would be about you know down about 20 for the year so is that right and i guess part of that um was that you had said last call that maybe the process control shipments in december depended on a couple projects so uh so sort of what's the you know what are like puts and takes on process control shipments in uh december Yes, I don't want to get specific on guiding December, but certainly consistent with the prepared remarks, we see a stabilizing rate moving forward, and obviously that's plus or minus, given the integers of some of our ASPs, that can be plus or minus $20 or $30 million generally overall across the businesses. And, of course, we drive the business to meet the targets we have overall and not necessarily try to deliver to certain numbers across each of the segments. That being said, service continues to grow and will grow a little bit each quarter, just like it generally always has as the install base continues to grow over time, and so we see growth in service. EPC could potentially be a little bit volatile, so I... I'd like to be optimistic. We'll see it pick up from current levels as we get closer to the end of the year, but not modeling it today. I'd like to see, you know, it's a good indicator given it's short lead time. It's more capacity-centric. It's closer to consumer, so it's a decent indicator on consumer markets when we see it recover because it weakened earlier and so should recover sooner perhaps than the semi-PC part of it. And then so semi-PC, I think, will generally, you know, be somewhat consistent with the June quarter result as it flows through into September, which is, again, back to the point of relatively flat guidance quarter on quarter. Yes, there are some projects at the end of the year. We'll see how those play out. Could cause the numbers to skew a bit in terms of deliveries into December. And so we'll just have to see how that goes as we work closely with those customers. And so depending on that, that could cause potentially... maybe the number would be a little bit higher. But if you just think about it over a couple of quarter timeframe, the choice of the word stabilizing was an important one because that's generally how we see the business overall here over the next couple of quarters.

Great, Ben. Thanks a lot.

Thank you. And as a reminder, that is star one to enter the questioning queue. Our next question will come from Harlan Sir with JPMorgan. Harlan, please make sure you're off mute.

Yeah, sorry about that. Good afternoon. Thanks for taking my question. Maybe as a follow-up to Tim's question, you know, your prior view was for process control be down roughly kind of mid-teens relative to WFP, which was down 20%. Now, off of the better June quarter results, and if I flatline, stabilize that process control for the remainder of the calendar year off of the June quarter, it looks like your process control franchise is actually going to be down only 10% to 12% for the full year, so even better outperformance versus WFP. You mentioned mask inspection, bear wafer. a strong dynamic. What other product segments are driving the better implied outlook for process control?

Yeah, yeah, your math is consistent. So, yes, that's how it will play out, assuming the December quarter comes through the way we expect today. We talked about Bear Wafer obviously being a strong driver. Optical inspection, reticle inspection is also a business that isn't declining as much as the overall market. So we've seen strength in those areas. So it's mostly there. Look, it Given the percent of investment that's happening in Logic and Foundry, obviously the process control intensity there is higher than it is in memory. So that tends to provide a nice tailwind in terms of the dynamics within WFE playing towards KLA. And so obviously the products we talked about are big drivers, but overall it's good in terms of the percent spent on our products as a percent of the total.

No, I appreciate that. You know, advanced packaging demand is kicking off quite strongly, right? Driven by all these accelerated compute workloads like AI, right? You have HBM, co-ops, packaging, multi-chips, stack dive configuration, you know, TSMC, Intel, all the memory guys, the OSATs, right? You guys supply into all of them. Are you seeing the demand pick up for your solutions for accelerated compute applications and Is advanced packaging segment growing this year for the team, or is that sort of AI-accelerated compute demand being somewhat offset by some of the more consumer-focused end markets?

Harlan, yes, good observation. And we have seen an increase. There haven't been a ton of bright spots with our customers, but that's one, and that has happened fairly recently. We've seen an uptick. It's a relatively small number at a It's gone up quite a bit, but off of a small number. So absolutely, we've seen it. And we've seen it directly tied to some accelerated orders for some work that we've done, as you know, with EPC and combining some of the products we have. Semi-process control and EPC, absolutely seen that. So we're seeing an uptick in that. Yeah, you have the overall packaging market down, what, 15% to 20% or so. But if we look at our packaging business within the company, it's pretty flat as year to year. Rick talked about some of the recent upside we're seeing related to some of the AI drivers that are occurring right now. So it's a good and evolving story moving forward as more complexity moves into the package across process but also process control.

Perfect. Thank you.

Thank you. Our next question will come from Atif Malik with Citi.

Hi, thank you for taking my question. I have a question on leading-edge logic investments. At Semicon West a couple of weeks ago, when we spoke to suppliers, there were expectations that the leading-edge spending could be up less than mature nodes into next year. And I assume a process control intensity is higher on leading versus mature nodes. My question to you is, are there any major product cycles or e-beam or x-ray or a major contribution from areas like auto, which could help perhaps offset your exposure to leading edge investments next year?

Sure. I think that for KLA, the one thing you have to keep in mind is we're still supply limited. on some of our most critical process control products that apply to the leading edge, such as optical and even some of the radical products. We just cannot, we still cannot meet demand. So I think we have a natural governor in there in terms of being able to keep that business sustained over, you know, the next several quarters based on even the current booking environment. So I think that's one factor. And then the other is we still see, especially with the new architectures that are being out there and people moving to the next generation transistor architectures, a lot of demand for the leading edge in the R&D phase. So we feel pretty good about how we're positioned for that, less so than one who is primarily focused on capacity. Thank you.

Thank you. And as a reminder, that is star 1 to ask a question. All right, and there are no further questions in the queue at this time, so I would like to turn the floor back over to Kevin Kessel for any additional or closing remarks.

Thank you very much, Chelsea. And I wanted to thank everyone again for their interest and their time. We know it's a very busy earnings season. It's also a very busy day. This was a later call in order to try to accommodate as much as we could. So we look forward to speaking to all of you in the weeks ahead. And with that, I'll turn it back to Chelsea for any final remarks.

Thank you, ladies and gentlemen. This concludes the KLA Corporation June quarter 2023 earnings call and webcast. Please disconnect your line at this time and have a wonderful day.