KLA Corporation

Please stand by. Your meeting is about to begin. Good afternoon. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation December Quarter 2025 Earnings Conference Call and 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'd 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 question. 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 the December 2025 quarterly earnings call. I'm joined by our CEO, Rick Wallace, and our CFO, Brent Higgins. We will discuss today's results as well as our March quarter and calendar 2026 outlook, which we released after the market closed and is 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 we make 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 risk 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 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. We will begin the call with Rick providing commentary on the business environment in our quarter, followed by Bren with financial highlights and our outlook. Before I turn the call over to Rick, I wanted to remind everyone that we are hosting our Investor Day on March the 12th, and invitations were recently emailed out. Now, over to Rick. Thank you, Kevin.

I will summarize the KLA's overall performance for 2025 and the December quarter, as well as cover the current industry landscape. For 2025, KLA continued to deliver relative growth outperformance, along with strong profitability, free cash flow generation, and return to shareholders. For 2025, revenue grew 17% to a record $12.745 billion, with our process control systems business outpacing the industry growth by several points. Earnings per share grew 29% year over year, demonstrating the strong leverage in our model, and KLA maintained industry-leading gross margins and operating margins of 62.8% and 43.6% respectively. The company also grew free cash flow 30% to $4.4 billion and returned $3 billion in a combination of dividends and share buybacks. KLA's process control system revenue grew 19%, Our service business grew 15% for the year. And 2025 is expected to be another year of process control share growth for KLA. The demand for AI infrastructure, coupled with KLA's industry leadership and process control, positions the company well in supporting all major growth vectors in semiconductor manufacturing, including advanced logic, high bandwidth memory, and advanced packaging. In the December quarter, KLA delivered strong results across the board with revenue of $3.3 billion, non-GAAP diluted EPS of $8.85, and GAAP diluted EPS of $8.68. Highlights contributing to this performance include 70% year-over-year revenue growth fueled by investment in leading-edge foundry logic and high-bandwidth memory and DRAM. AI remains a core driver of KLA's performance and a key factor for and our growing industry leadership. As KLA solutions enable our customers to deliver products needed for AI, our systems are also applying AI-driven analytics to deliver actionable insights that streamline chip manufacturing and accelerate innovation and time to yield for next-generation AI applications. We believe that our experience reflects the compelling capabilities, cost, and power consumption available with GPU-based compute architectures. and is fueling the ongoing HPC infrastructure build-out. Looking ahead, KLA's innovations with AI will produce actionable data for our customers that accelerate system performance, reduce the cost of ownership, and improve their return on investment in KLA systems. In the December quarter, KLA continued to grow in advanced packaging, rising demand for more powerful systems of chips, is driving advanced packaging and increasing the value of process control in the chip package, which has fueled significant growth in this expanding market for KLA. KLA continues to see strong momentum in advanced packaging revenue growth and market share with calendar 2025 total systems revenue of approximately $950 million, representing over 70% year-over-year growth. And as we look forward, To calendar 2026, we expect this momentum to continue with year-over-year percentage growth expectations in the mid to high teens driven by faster-than-market growth for our process control products. Daily services business grew to $786 million in the December quarter, up 6% sequentially and 18% year-over-year. This was the 16th consecutive year of annual service revenue growth, with a compounded annual growth rate greater than 12% over that timeframe. Finally, the December quarter remained strong for both free cash flow and capital returns. Quarterly free cash flow was a record $1.26 billion. Total capital return in the December quarter was $797 million, comprised of $548 million in share repurchase and $250 million in dividends. Total capital returns over the past 12 months was $3 billion. The industry dynamics to support the demand for AI infrastructure reinforce KLA's growing relevance for our customers, and our broad product portfolio plays a critical role in enabling customer success. Additionally, the emerging and fast-growing advanced packaging market further strengthens KLA's relative position. Finally, rising semiconductor content across diverse end markets, coupled with strategic investments and legacy nodes, remains a key driver of dependable long-term growth for KLA and the semiconductor equipment industry. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.