• Revenue: $3.08 billion for the December quarter, above the guidance midpoint of $2.95 billion.
• Annual Revenue: $10.85 billion for calendar 2024, a 12% increase.
• Process Control Revenue: Grew by over 12% in 2024.
• Services Business Revenue: $667 million in the December quarter, up 4% sequentially and 18% year over year.
• Gross Margin: 61.7% for the December quarter.
• Operating Margin: 42.3% for the December quarter.
• Net Income: $1.1 billion for the December quarter.
• Free Cash Flow: $757 million for the December quarter.
• Cash Flow from Operations: $850 million for the December quarter.
• Total Cash and Equivalents: $3.8 billion at the end of the December quarter.
• Debt: $5.9 billion at the end of the December quarter.
• Capital Return: $877 million in the December quarter, including $650 million in share repurchases and $227 million in dividends.
• Non-GAAP Diluted EPS: $8.20 for the December quarter.
• GAAP Diluted EPS: $6.16 for the December quarter.
• Operating Expenses: $596 million for the December quarter, with $342 million in R&D and $254 million in SG&A.
• Effective Tax Rate: 13.7% for the December quarter.

• Warning! GuruFocus has detected 5 Warning Signs with GSIT.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• KLA Corp (NASDAQ:KLAC) achieved a record revenue of $10.85 billion in 2024, marking a 12% growth year-over-year.
• The company maintained industry-leading gross and operating margins at 61% and 41%, respectively.
• KLA Corp's Services business grew 15% to $2.5 billion for the year, marking 50 consecutive quarters of growth.
• Advanced Packaging revenue is expected to exceed $800 million in 2025, up from $500 million in 2024.
• KLA Corp returned $2.9 billion to shareholders through dividends and share buybacks in 2024.

Negative Points

• KLA Corp faces a potential $500 million revenue impact in 2025 due to new US government export controls affecting China.
• The company's China revenue is expected to decline by approximately 20% in 2025.
• There is uncertainty regarding the processing of export licenses by the US government, which could affect revenue.
• Operating expenses are expected to increase by approximately $15 million per quarter in 2025.
• The effective tax rate is expected to rise slightly to approximately 14% in the second half of 2025 due to global taxation changes.

Q & A Highlights

Q: What is the outlook for the process control market in 2025, and how does KLA's share compare? A: Bren Higgins, CFO, stated that KLA expects the process control market to grow solidly in 2025, driven by increased investment in leading-edge technologies. KLA's share of the WFE market is expected to increase due to higher process control intensity, particularly in advanced DRAM and high-bandwidth memory, as well as growth in advanced packaging.

Q: How is KLA managing the impact of new US export controls on its revenue? A: Bren Higgins, CFO, mentioned that KLA estimates a revenue impact of approximately $500 million, plus or minus $100 million, due to recent export controls in China. The company is hopeful for licensing opportunities to mitigate some of this impact but remains cautious due to potential delays in processing license requests.

Q: Can you elaborate on the growth expectations for KLA's advanced packaging business in 2025? A: Richard Wallace, CEO, explained that KLA's advanced packaging revenue is expected to exceed $800 million in 2025, up from $500 million in 2024. The growth is driven by increased demand for complex heterogeneous chip integration and advanced packaging solutions, which enhance the value of process control.

Q: What are the key drivers for KLA's outperformance relative to the WFE market? A: Bren Higgins, CFO, highlighted that KLA's outperformance is driven by rising process control intensity at advanced technology nodes, particularly 3-nanometer and high-bandwidth memory. Additionally, KLA's strong market position and product momentum in various segments contribute to its growth.

Q: How is KLA addressing the potential decline in China sales due to export controls and market dynamics? A: Bren Higgins, CFO, indicated that KLA expects China sales to decline by about 20% year-over-year in 2025, with China contributing approximately 29% of total revenue. The company is focusing on opportunities outside China to offset this decline and maintain growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.