KLA (KLAC) BofA Securities 2024 Global Technology Conference summary

Strategic growth targets and industry outlook

• Aiming for 9%-11% top-line growth, targeting $14B in sales and $38 EPS, with a focus on rising capital intensity and a $1T semiconductor revenue market by 2030.

• Process control market expected to outpace wafer fab equipment (WFE) growth, driven by logic/foundry mix and advanced node design activity.

• Service business updated to 12%-14% growth, supported by high attach rates and predictable, subscription-like contracts.

• Exited flat panel business to focus on higher-growth areas; system business growth now expected below 10% over the next few years.

• Confident in achieving 63%+ gross margins and 42%+ operating margins, with 85% of free cash flow returned to shareholders via dividends and buybacks.

Service business dynamics and resilience

• Service revenue is largely subscription-based, not cyclical, and closely tied to semiconductor revenue rather than WFE.

• High uptime expectations and customized support contracts drive customer loyalty and predictable revenue.

• Service business has grown every year except 2009, with metrics like contract revenue and tool service life improving.

• Tools coming off warranty and higher utilization rates are expected to add $250M-$300M in incremental service revenue this year.

• Service margins align with company averages, supporting stable cash flow and capital allocation strategies.

Market trends and near-term demand

• Sequential revenue growth expected through 2024, with the March quarter seen as the bottom and stronger second half anticipated.

• Leading-edge investment, especially for 2nm nodes, is a key growth driver, with AI and HPC fueling demand.

• Memory market shows signs of recovery, with improved utilization and financial performance among customers.

• Logic/foundry mix in WFE is rising to 60%+, favoring higher process control intensity and benefiting KLA.

• Supply constraints in high-end inspection products are easing, supporting improved share and revenue performance.