KLA Corporation

Good afternoon. My name is Margo and I'll be your conference operator today. At this time, I'd like to welcome everyone to the KLA Corporation March Quarter 2025 Earnings Conference Call and Webcast. All participants' 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 limit yourself to one question and one follow-up. Lastly, if you should need operator assistance, please press star 0. Thank you. I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and Market Analytics. Please go ahead.

Welcome to our earnings call to discuss the March quarter and our June quarter outlook. Joining me is our CEO Rick Wallace and our CFO Brent Higgins. We will discuss today's results released after the market closed and available on our website along with supplemental materials. We are presenting today's discussion and metrics on a non-GAAP financial basis unless otherwise specified. All full year references made refer to calendar years. The earnings materials contain a detailed reconciliation of GAAP to non-GAAP results. KLA's IR website also contains future investor events, presentations, corporate governance information, and links to our SEC filings. Our comments today are subject to risks and uncertainties reflected in the disclosure of risk factors in our SEC filings. Any forward looking statements, including those we make on the call today, are also 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 with some introductory comments on the business environment and the quarter, followed by Bren with financial highlights and our outlook. Now, over to Rick.

Thanks, Kevin. I will start our March quarter results and talk about some comments about the current business environment, followed by some recent market share reports and finish up with some business highlights. KLA's March quarter results were above the midpoint of all the guidance range with revenue of $3.06 billion, non-GAAP diluted EPS, $8.41, and Gap diluted EPS of $8.16. Kayleigh's results continue to be fueled by strong demand in leading-edge logic and high-bandwidth memory. Kayleigh's growing advanced packaging business also made another strong contribution in the quarter. These drivers demonstrate the critical investment required for building out the infrastructure which is supporting AI. While there is notable macro uncertainty across many sectors globally, KLA has not seen any change in demand or indication from our customers of any adjustment to their announced investment plans. That said, the current unprecedented global trade uncertainty and potential second-order effects on macro demand in the future are far from clear. Given this fluid business operating environment and potential implications for KLA, We've decided to postpone our investor day from June 18th to early to mid-calendar 2026. It's our hope that the macro environment will stabilize by then, and we look forward to expanding on the story of KLA's growth strategy and increasing market relevance. Our capital return announcements today reflect not only our commitment to assertive and explicit capital allocation, but also our confidence in the business opportunities for KLA over the foreseeable future. Moving along to market share reports, this quarter marks the annual release of industry research reports showing KLA maintain a strong global share of WFE and process control markets in calendar 2024. KLA's continued share leadership was highlighted by persistently strong customer adoption of optical pattern wafer inspection and share gain in advanced wafer-level packaging. Over the past five years, KLA's share of process control has grown by nearly 250 basis points. Notably, KLA's process control share of advanced wafer-level packaging market has grown from being in third position in 2019 to being on track to assume the leading position in 2025. Turning to highlights for the quarter, KLA delivered a 30% year-over-year increase in revenue in the March quarter due to increased investment in leading-edge logic and HBM. Second, AI continues to be a key catalyst driving KLA's consistently strong performance. As AI continues to advance, the semiconductor industry is experiencing more complex design, accelerating product cycles, high-value wafer volumes, and growing advanced packaging demand. These trends underscore the increased value of process control and assisting our customers in managing a dynamic production environment as investments and complexity increase, which uniquely benefits KLA. As a further demonstration of this, the March quarter captured another period of strong momentum for our advanced packaging portfolio. Customers' adoption of KLA's advanced packaging portfolio of products demonstrate the success of our market diversification, product technology roadmap, and growth strategies. KLA's advanced packaging revenue grew to over $500 million in calendar 2024 and is now expected to exceed $850 million in calendar 2025. Fourth, the KLA services business grew to $669 million in the March quarter, up modestly sequentially and up 13% year over year. Newly announced market access restrictions in early December 2024 from the U.S. government export controls impacted service revenue growth in the March quarter. Still, as a sign of its predictability and resiliency, our service business marked its 52nd consecutive quarter of growth on a year over year basis. Finally, the March quarter was another solid quarter from a cash flow and capital returns perspective. Quarterly free cash flow was $990 million. Over the past 12 months, free cash flow was $3.5 billion with a free cash flow margin of 30% over the same period. This free cash flow margin ranks amongst the top 10% of companies in the S&P 500. Total capital returns in the March quarter was $733 million comprised of $507 million in share repurchases and $226 million in dividends. Total capital returns over the past 12 months was $3 billion. KLA's results once again demonstrated process control leadership and the success of our broad portfolio and competitive differentiation. Our consistent performance further demonstrates the critical nature of KLA's products and services, which are uniquely positioned to enable growth at the leading edge, including the ongoing build-out of AI infrastructure. With that, I'll pass the call over to Bren to cover financial highlights and our outlook.