On this page of StockholderLetter.com we present the 9/24/2024 shareholder letter from KLA CORP — ticker symbol KLAC. Reading current and past KLAC letters to shareholders can bring important insights into the investment thesis.

2024 Letter to Stockholders Dear Stockholders: Fiscal Year 2024 (FY24) Highlights KLA performed well in FY24 relative to industry peers, while revenue declined modestly year over year reflecting weaker Semiconductor and Wafer Fabrication Equipment (WFE) industry conditions. KLA customers continued to prioritize investments in Process Control which contributed to KLA s relative strength through the year. KLA s performance is supported by successful diversification and growth in adjacent markets, including new markets for KLA including Advanced Packaging as well as above industry growth in Service. Through it all, KLA remained focused on delivering to customer requirements, executing the financial model, and driving strong returns to shareholders. Revenue declined 7% in FY24 to $9.8 billion. Revenue in the Semiconductor Process Control segment, which accounted for 89% of KLA revenue, was down 6% in the fiscal year. Revenue from our Specialty Semiconductor Process segment declined 3% in FY24 and was 5% of revenue. This business includes etch and deposition solutions for Advanced Packaging and Specialty Semiconductor markets. Demonstrating success in new markets, KLA saw strong growth in Advanced Packaging in FY24, which partially offset challenging market conditions in automotive and consumer markets. Revenue from our PCB and Component Inspection segment decreased 13% in FY24, primarily due to continued market softening in smart phones and other consumer electronics. Service revenue grew 10% in the year to $2.3 billion. KLA s Service business has been delivering consistent growth, more than doubling since first topping $1 billion in 2019. Due to the increase in the installed base of KLA systems and improving equipment utilization rates, KLA s Service revenue is on track to deliver growth at the upper end of the range of our 12-14% long-term revenue compound annual growth rate (CAGR) target for the period from calendar year 2021 through calendar 2026, as set forth in our 2022 Investor Day. KLA s Service revenue is driven by growth in the installed base, increasing value of our contract offerings, and the extension of system lifetimes due to growth in legacy semiconductor markets. Furthermore, over 75% of the revenue generated is from recurring subscription-like contracts, reflecting the growing value of advanced process control systems and Services in our product portfolio. Free cash flow was $3.0 billion in FY24, and free cash flow margin or free cash flow as a percent of company revenue, remained very strong at 31%, placing this metric within the top-tier of the S&P 500 according to our analysis. Consistent with long-term strategic objectives, KLA delivered on our ongoing commitment to return value to shareholders, including a 14th consecutive dividend increase announced in September 2023. Also in September 2023, we announced the Board of Directors had authorized an additional $2 billion share repurchase program. Total returns to shareholders in FY24 (including dividends and share repurchases) were $2.5 billion, or approximately 83% of free cash flow. Additionally, in September 2024, we announced our 15th consecutive dividend increase to $1.70 per share per quarter, consistent with our capital return commitment and trends. KLA s balance sheet remains strong, with $4.5 billion in total cash, cash equivalents and marketable securities, $6.6 billion in debt, and an attractive bond maturity profile supported by investment- Page | 1
grade ratings from all three agencies. KLA s investment grade credit ratings underscore the strength of our balance sheet and the sustainability of our business and financial performance. We remain disciplined in executing our capital management strategy: investing at a high level to strengthen our competitive advantages, growing free cash flow, and targeting returns to stockholders of at least 85% of free cash flow over the long-term. Celebrating 40 Years of Broadband Plasma (BBP) Innovation In June 2024, KLA marked the 40th anniversary of our BBP optical patterned wafer inspectors which remain at the forefront of the semiconductor industry and an indispensable technology for our customers. Over the past 40 years, approximately 3,000 BBP systems have been installed worldwide and KLA has approximately 1,000 BBP-related patents filed. KLA s BBP systems are the flagship product of our market leading inspection portfolio. Our BBP systems use advanced optical and data processing technologies to discover critical defects on patterned wafers during chip manufacturing. Capturing critical defects helps engineers characterize and debug new processes, patterning schemes, materials and device architectures during research and development (R&D), and helps accelerate semiconductor yield, reliability and performance during high-volume manufacturing. With the continuing advancement of semiconductor technologies, we are developing physics-based artificial intelligence (AI) algorithm innovations that will extend BBP s legacy of high-sensitivity inspection at optical inspection speed into the future. Three Key Priorities in FY25 As always, our first priority is to go above and beyond to support customers and meet commitments for product delivery and support. Secondly, it is critical we execute on product roadmaps to deliver the innovation that customers expect and need to solve next generation process challenges and to enable the continued differentiation that drives KLA s business model. And finally, the third priority in fiscal year 2025 is to ensure our global teams are prepared for the expected return to growth at the leading-edge as the industry and KLA expand to support new process technology innovations to drive the compelling long-term growth outlook of semiconductor markets, including the broadening adoption of artificial intelligence (AI) applications. The KLA Operating Model informs and guides the company as we execute our strategic objectives, positions us for sustainable outperformance relative to the industry. It also guides our critical strategic objectives. These objectives fuel our growth, reliable operational excellence, and differentiation across increasingly diverse products and service offerings. Our strategic objectives also form the foundation for KLA s sustained technology leadership, wide competitive moat, leading financial performance, strong free cash flow generation, and consistent capital returns to shareholders.
Calendar 2026 Financial Targets Remain on Track At KLA s June 2022 Investor Day, the company introduced long-term financial targets for calendar 2026. KLA s 9-11% revenue growth objective for the period from calendar 2021 through calendar 2026 features strong relative growth in each major business segment over that period and includes the revised long-term revenue growth target of 12-14% CAGR in our Services business driven by growth in the installed base, and new value-added service offerings. KLA s long-term model assumes a baseline semiconductor industry growth CAGR of 6-7% through 2026 and ultimately for the size of the semiconductor industry to exceed $1 trillion by calendar year 2030. Delivering Sustained Outperformance In conclusion, KLA s FY24 was a success as the company continued to execute against our long-term strategic objectives and deliver strong growth against the backdrop of a challenging year for the WFE market. Despite these headwinds, KLA outperformed to meet customer requirements. Once again, the global KLA team persevered through dynamic and complex situations to produce strong relative industry performance. KLA s demonstrated resilience and adaptability in delivering on commitments reflects the unique KLA culture, which is grounded in our values. Through this, we will continue to deliver value for customers, employees, stockholders, and partners as we position the company for growth at the leading edge. As KLA continued to execute against our commitments to customers, we also made strides in environmental, social and governance (ESG) initiatives. Relevant to these initiatives, in August 2024, KLA received validation from the Science Based Target initiative (SBTi) of near-term greenhouse gas (GHG) emissions targets and published its annual Global Impact Report. KLA remains well positioned at the forefront of technology innovations, including helping enable critical AI technologies. Our investment in the long-term continues to be a top priority, given it is an essential ingredient that drives our sustained success and relative outperformance. The semiconductor and electronics landscapes are constantly changing and expanding across new geographies. Broadening customer interest is driven by more technology innovation than ever at the leading edge, as well as expansion and investment in the legacy nodes to establish local manufacturing of semiconductors and more resilient supply chains. Despite a more challenging market demand backdrop in FY24, we delivered strong relative performance, guided by the KLA Operating Model and reflecting the focused commitment of our world-class global teams. We are well positioned for a return to growth at the leading-edge in fiscal year 2025 and expect the recent improvement in our business to sustain as we move into next year. On behalf of all of us at KLA, we thank you for your ongoing support and investment. Sincerely, Richard P. Wallace President and Chief Executive Officer
Note on Forward-Looking Statements Statements in this letter other than historical facts, such as statements pertaining to: (1) the growth outlook of the semiconductor markets; (2) anticipated growth at the leading edge; (3) our long-term revenue growth targets and other long-term financial objectives announced at our June 2022 Investor Day and underlying assumptions; (4) future shareholder returns; and (5) our targets to reduce GHG emissions, are forward-looking statements and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including, but not limited to: unexpected delays, difficulties, and expenses in executing against our ESG targets, goals and commitments, including, but not limited to, our efforts to reduce GHG emissions, as well as our vulnerability to a weakening in the condition of the financial markets and the global economy; risks related to our international operations; evolving Bureau of Industry and Security of the U.S. Department of Commerce rules and regulations and their impact on our ability to sell products to and provide services to certain customers in China; costly intellectual property disputes that could result in our inability to sell or use the challenged technology; risks related to the legal, regulatory and tax environments in which we conduct our business; increasing attention to ESG matters and the resulting costs, risks and impact on our business; unexpected delays, difficulties and expenses in executing against our environmental, climate, diversity and inclusion or other ESG targets, goals and commitments; our ability to attract, retain and motivate key personnel; our vulnerability to disruptions and delays at our third party service providers; cybersecurity threats, cyber incidents affecting our and our business partners systems and networks; our inability to access critical information in a timely manner due to system failures; our ability to identify suitable acquisition targets and successfully integrate and manage acquired businesses; climate change, earthquake, flood or other natural catastrophic events, public health crises such as the COVID-19 pandemic or terrorism and the adverse impact on our business operations; the war between Ukraine and Russia, and the war between Israel and Hamas, and the significant military activity in those regions; lack of insurance for losses and interruptions caused by terrorists and acts of war, and our self-insurance of certain risks including earthquake risk; risks related to fluctuations in foreign currency exchange rates; risks related to fluctuations in interest rates and the market values of our portfolio investments; risks related to tax and regulatory compliance audits; any change in taxation rules or practices and our effective tax rate; compliance costs with federal securities laws, rules, regulations, NASDAQ requirements, and evolving accounting standards and practices; ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns; our vulnerability to a highly concentrated customer base; the cyclicality of the industries in which we operate; our ability to timely develop new technologies and products that successfully address changes in the industry; risks related to artificial intelligence; our ability to maintain our technology advantage and protect proprietary rights; our ability to compete in the industry; availability and cost of the materials and parts used in the production of our products; our ability to operate our business in accordance with our business plan; risks related to our debt and leveraged capital structure; we may not be able to declare cash dividends at all or in any particular amount; liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products; our government funding for R&D is subject to audit, and potential termination or penalties; we may incur significant restructuring charges or other asset impairment charges or inventory write offs; risks related to receivables factoring arrangements and compliance risk of certain settlement agreements with the government; and risks related to the Court of Chancery of the State of Delaware being the sole and exclusive forum for certain actions and proceedings. For other factors that may cause actual results to differ materially
 • shareholder letter icon 9/24/2024 Letter Continued (Full PDF)
 • stockholder letter icon 9/21/2023 KLAC Stockholder Letter
 • stockholder letter icon 9/23/2025 KLAC Stockholder Letter
 • stockholder letter icon More "Semiconductors" Category Stockholder Letters
 • Benford's Law Stocks icon KLAC Benford's Law Stock Score = 84


KLAC 9/24/2024 Shareholder/Stockholder Letter Transcript:


2024 Letter to Stockholders
Dear Stockholders:
Fiscal Year 2024 (FY24) Highlights
KLA performed well in FY24 relative to industry peers, while revenue declined modestly year over
year reflecting weaker Semiconductor and Wafer Fabrication Equipment (WFE) industry conditions.
KLA customers continued to prioritize investments in Process Control which contributed to KLA   s
relative strength through the year. KLA   s performance is supported by successful diversification and
growth in adjacent markets, including new markets for KLA including Advanced Packaging as well as
above industry growth in Service. Through it all, KLA remained focused on delivering to customer
requirements, executing the financial model, and driving strong returns to shareholders.
Revenue declined 7% in FY24 to $9.8 billion. Revenue in the Semiconductor Process Control
segment, which accounted for 89% of KLA revenue, was down 6% in the fiscal year. Revenue from
our Specialty Semiconductor Process segment declined 3% in FY24 and was 5% of revenue. This
business includes etch and deposition solutions for Advanced Packaging and Specialty
Semiconductor markets. Demonstrating success in new markets, KLA saw strong growth in
Advanced Packaging in FY24, which partially offset challenging market conditions in automotive and
consumer markets. Revenue from our PCB and Component Inspection segment decreased 13% in
FY24, primarily due to continued market softening in smart phones and other consumer
electronics.
Service revenue grew 10% in the year to $2.3 billion. KLA   s Service business has been delivering
consistent growth, more than doubling since first topping $1 billion in 2019. Due to the increase in
the installed base of KLA systems and improving equipment utilization rates, KLA   s Service revenue
is on track to deliver growth at the upper end of the range of our 12-14% long-term revenue
compound annual growth rate (CAGR) target for the period from calendar year 2021 through
calendar 2026, as set forth in our 2022 Investor Day. KLA   s Service revenue is driven by growth in
the installed base, increasing value of our contract offerings, and the extension of system lifetimes
due to growth in legacy semiconductor markets. Furthermore, over 75% of the revenue generated
is from recurring    subscription-like    contracts, reflecting the growing value of advanced process
control systems and Services in our product portfolio.
Free cash flow was $3.0 billion in FY24, and free cash flow margin or free cash flow as a percent of
company revenue, remained very strong at 31%, placing this metric within the top-tier of the S&P
500 according to our analysis. Consistent with long-term strategic objectives, KLA delivered on our
ongoing commitment to return value to shareholders, including a 14th consecutive dividend
increase announced in September 2023. Also in September 2023, we announced the Board of
Directors had authorized an additional $2 billion share repurchase program. Total returns to
shareholders in FY24 (including dividends and share repurchases) were $2.5 billion, or
approximately 83% of free cash flow. Additionally, in September 2024, we announced our 15th
consecutive dividend increase to $1.70 per share per quarter, consistent with our capital return
commitment and trends.
KLA   s balance sheet remains strong, with $4.5 billion in total cash, cash equivalents and marketable
securities, $6.6 billion in debt, and an attractive bond maturity profile supported by investment-
Page | 1

grade ratings from all three agencies. KLA   s investment grade credit ratings underscore the strength
of our balance sheet and the sustainability of our business and financial performance. We remain
disciplined in executing our capital management strategy: investing at a high level to strengthen
our competitive advantages, growing free cash flow, and targeting returns to stockholders of at
least 85% of free cash flow over the long-term.
Celebrating 40 Years of Broadband Plasma (BBP) Innovation
In June 2024, KLA marked the 40th anniversary of our BBP optical patterned wafer inspectors which
remain at the forefront of the semiconductor industry and an indispensable technology for our
customers. Over the past 40 years, approximately 3,000 BBP systems have been installed
worldwide and KLA has approximately 1,000 BBP-related patents filed.
KLA   s BBP systems are the flagship product of our market leading inspection portfolio. Our BBP
systems use advanced optical and data processing technologies to discover critical defects on
patterned wafers during chip manufacturing.
Capturing critical defects helps engineers characterize and debug new processes, patterning
schemes, materials and device architectures during research and development (R&D), and helps
accelerate semiconductor yield, reliability and performance during high-volume manufacturing.
With the continuing advancement of semiconductor technologies, we are developing physics-based
artificial intelligence (AI) algorithm innovations that will extend BBP   s legacy of high-sensitivity
inspection at optical inspection speed into the future.
Three Key Priorities in FY25

As always, our first priority is to go above and beyond to support customers and meet
commitments for product delivery and support.

Secondly, it is critical we execute on product roadmaps to deliver the innovation that
customers expect and need to solve next generation process challenges and to enable the
continued differentiation that drives KLA   s business model.

And finally, the third priority in fiscal year 2025 is to ensure our global teams are prepared
for the expected return to growth at the leading-edge as the industry and KLA expand to
support new process technology innovations to drive the compelling long-term growth
outlook of semiconductor markets, including the broadening adoption of artificial
intelligence (AI) applications.
The KLA Operating Model informs and guides the company as we execute our strategic objectives,
positions us for sustainable outperformance relative to the industry. It also guides our critical
strategic objectives. These objectives fuel our growth, reliable operational excellence, and
differentiation across increasingly diverse products and service offerings. Our strategic objectives
also form the foundation for KLA   s sustained technology leadership, wide competitive moat,
leading financial performance, strong free cash flow generation, and consistent capital returns to
shareholders.

Calendar 2026 Financial Targets Remain on Track
At KLA   s June 2022 Investor Day, the company introduced long-term financial targets for calendar
2026. KLA   s 9-11% revenue growth objective for the period from calendar 2021 through calendar
2026 features strong relative growth in each major business segment over that period and includes
the revised long-term revenue growth target of 12-14% CAGR in our Services business driven by
growth in the installed base, and new value-added service offerings. KLA   s long-term model
assumes a baseline semiconductor industry growth CAGR of 6-7% through 2026 and ultimately for
the size of the semiconductor industry to exceed $1 trillion by calendar year 2030.
Delivering Sustained Outperformance
In conclusion, KLA   s FY24 was a success as the company continued to execute against our long-term
strategic objectives and deliver strong growth against the backdrop of a challenging year for the
WFE market. Despite these headwinds, KLA outperformed to meet customer requirements.
Once again, the global KLA team persevered through dynamic and complex situations to produce
strong relative industry performance. KLA   s demonstrated resilience and adaptability in delivering
on commitments reflects the unique KLA culture, which is grounded in our values. Through this, we
will continue to deliver value for customers, employees, stockholders, and partners as we position
the company for growth at the leading edge.
As KLA continued to execute against our commitments to customers, we also made strides in
environmental, social and governance (ESG) initiatives. Relevant to these initiatives, in August 2024,
KLA received validation from the Science Based Target initiative (SBTi) of near-term greenhouse gas
(GHG) emissions targets and published its annual Global Impact Report.
KLA remains well positioned at the forefront of technology innovations, including helping enable
critical AI technologies. Our investment in the long-term continues to be a top priority, given it is an
essential ingredient that drives our sustained success and relative outperformance. The
semiconductor and electronics landscapes are constantly changing and expanding across new
geographies. Broadening customer interest is driven by more technology innovation than ever at
the leading edge, as well as expansion and investment in the legacy nodes to establish local
manufacturing of semiconductors and more resilient supply chains.
Despite a more challenging market demand backdrop in FY24, we delivered strong relative
performance, guided by the KLA Operating Model and reflecting the focused commitment of our
world-class global teams. We are well positioned for a return to growth at the leading-edge in fiscal
year 2025 and expect the recent improvement in our business to sustain as we move into next
year.
On behalf of all of us at KLA, we thank you for your ongoing support and investment.
Sincerely,
Richard P. Wallace
President and Chief Executive Officer

Note on Forward-Looking Statements
Statements in this letter other than historical facts, such as statements pertaining to: (1) the growth
outlook of the semiconductor markets; (2) anticipated growth at the leading edge; (3) our long-term
revenue growth targets and other long-term financial objectives announced at our June 2022
Investor Day and underlying assumptions; (4) future shareholder returns; and (5) our targets to
reduce GHG emissions, are forward-looking statements and are subject to the Safe Harbor provisions
created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are
based on current information and expectations and involve a number of risks and uncertainties.
Actual results may differ materially from those projected in such statements due to various factors,
including, but not limited to: unexpected delays, difficulties, and expenses in executing against our
ESG targets, goals and commitments, including, but not limited to, our efforts to reduce GHG
emissions, as well as our vulnerability to a weakening in the condition of the financial markets and
the global economy; risks related to our international operations; evolving Bureau of Industry and
Security of the U.S. Department of Commerce rules and regulations and their impact on our ability to
sell products to and provide services to certain customers in China; costly intellectual property
disputes that could result in our inability to sell or use the challenged technology; risks related to the
legal, regulatory and tax environments in which we conduct our business; increasing attention to ESG
matters and the resulting costs, risks and impact on our business; unexpected delays, difficulties and
expenses in executing against our environmental, climate, diversity and inclusion or other ESG
targets, goals and commitments; our ability to attract, retain and motivate key personnel; our
vulnerability to disruptions and delays at our third party service providers; cybersecurity threats,
cyber incidents affecting our and our business partners    systems and networks; our inability to access
critical information in a timely manner due to system failures; our ability to identify suitable
acquisition targets and successfully integrate and manage acquired businesses; climate change,
earthquake, flood or other natural catastrophic events, public health crises such as the COVID-19
pandemic or terrorism and the adverse impact on our business operations; the war between Ukraine
and Russia, and the war between Israel and Hamas, and the significant military activity in those
regions; lack of insurance for losses and interruptions caused by terrorists and acts of war, and our
self-insurance of certain risks including earthquake risk; risks related to fluctuations in foreign
currency exchange rates; risks related to fluctuations in interest rates and the market values of our
portfolio investments; risks related to tax and regulatory compliance audits; any change in taxation
rules or practices and our effective tax rate; compliance costs with federal securities laws, rules,
regulations, NASDAQ requirements, and evolving accounting standards and practices; ongoing
changes in the technology industry, and the semiconductor industry in particular, including future
growth rates, pricing trends in end-markets, or changes in customer capital spending patterns; our
vulnerability to a highly concentrated customer base; the cyclicality of the industries in which we
operate; our ability to timely develop new technologies and products that successfully address
changes in the industry; risks related to artificial intelligence; our ability to maintain our technology
advantage and protect proprietary rights; our ability to compete in the industry; availability and cost
of the materials and parts used in the production of our products; our ability to operate our business
in accordance with our business plan; risks related to our debt and leveraged capital structure; we
may not be able to declare cash dividends at all or in any particular amount; liability to our customers
under indemnification provisions if our products fail to operate properly or contain defects or our
customers are sued by third parties due to our products; our government funding for R&D is subject
to audit, and potential termination or penalties; we may incur significant restructuring charges or
other asset impairment charges or inventory write offs; risks related to receivables factoring
arrangements and compliance risk of certain settlement agreements with the government; and risks
related to the Court of Chancery of the State of Delaware being the sole and exclusive forum for
certain actions and proceedings. For other factors that may cause actual results to differ materially



shareholder letter icon 9/24/2024 Letter Continued (Full PDF)
 

KLAC Stockholder/Shareholder Letter (KLA CORP) 9/24/2024 | www.StockholderLetter.com
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