Good afternoon. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation September Quarter 2023 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 would like to ask a question at that time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, please press star two. Please also limit yourself to one question and one follow-up. Lastly, if you should need operator assistance, please press star zero. Thank you. I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and Market Analytics. Please go ahead. Thank you for joining us for our earnings call to discuss the results of the September 2023 quarter and our December quarter outlook. I'm joined by our CEO, Rick Wallace, and our CFO, Bren Higgins, to discuss our results released today after the market close, which are available on our IR website, along with the supplemental materials. Today's discussion is presented on a GAAP, non-GAAP financial basis, unless otherwise specified. Our full year references all relate to calendar years. A detailed reconciliation of GAAP to non-GAAP results is in the earnings materials posted on our website. Our IR website also contains future investor events as well as presentation, corporate governance information, and links to our SEC filings, including our most recent annual report and quarterly reports on Forms 10-K and 10-Q. Our comments today are subject to risks and uncertainties reflected in the respective disclosures 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 the call with some comments and quarterly highlights. Bren will conclude with our financial highlights, including our guidance and outlook. I will now turn the call over to our CEO, Rick Wallace. Rick? Thanks, Kevin. Before we cover KLA's September quarter and outlook, I'd like to address the situation in Israel as it pertains to KLA. We have many KLA employees based in Israel. We're deeply saddened by the unspeakable acts of terrorism in the Middle East and the resulting war underway. Our heartfelt condolences are with all the victims and their families, friends, and loved ones. At KLA, we're focused on employee safety and well-being, and are making efforts to assist our teams through these terrible circumstances, including resources and support for our employees and broader humanitarian support through the KLA Foundation. We all hope for a peaceful solution soon. Moving on to our September quarter results, which exceeded expectations. Specifically, revenue of $2.4 billion finished at the upper end of the guidance range. GAAP EPS was $5.41, and non-GAAP EPS was $5.74. Both also finishing at the upper end of the respective guidance ranges. These results were driven by the strength and relevance of KLA's process control portfolio. Additionally, focused execution enabled continued free cash flow generation and capital returns. We're proud of how the KLA teams continue to outperform in the marketplace and deliver on customer commitments. The overall business environment remains relatively stable for KLA. We continue to see strength in markets served by legacy nodes, despite softness in memory and leading-edge logic and foundry investments. As the industry continues to navigate the slowdown in the electronics markets, we are closely monitoring any adjusting results that affect our customers' capacity. KLA continues to outperform the industry on a relative basis because customer investment in R&D for technology advancement and transition has proven to be more resilient to market pressures. If we look at some specific highlights in the quarter, revenue was driven by strength in legacy node investment globally and industry infrastructure investments. KLA's market leadership and product success in unpatterned wafer, optical, and macro inspection also demonstrate the power of the KLA portfolio. The rapid growth of AI both enables KLA's differentiation and helps drive industry growth. KLA is a pioneer in adopting AI to improve the performance of our systems and create differentiation. And KLA has a long track record of employing deep learning and physics-based algorithms in our core technologies. As the cost of compute has declined, we are now able to deploy this capability more broadly across our product portfolio. Leveraging our AI expertise, KLA's inspection, metrology, and data analytics systems help customers solve challenges associated with current process technologies and critical industry inflections, including gate-all-around, 3D memory, EUV lithography, and advanced packaging. KLA's service business grew both sequentially and year-over-year, ending at $560 million in the September quarter, and remains on track for high single-digit% year-over-year growth in 2023. Finally, the September quarter was another excellent period from a cash flow and capital returns perspective. Quarterly free cash flow was $816 million, which drove the last 12 months free cash flow up 3% year-over-year to $3.2 billion. Total capital returns over the past 12 months are $2.4 billion. In summary, KLA's September quarter results demonstrate our continued process control leadership and the success o f our portfolio strategy. Our consistent execution, despite challenges in the marketplace, highlights the resiliency of the KLA operating model, driven by the dedication of our global teams. I'll now hand it over to Bren to cover more details on our financial performance and our outlook. Bren? Thank you, Rick. KLA delivered a strong September quarter, demonstrating consistent execution despite a challenging work marketplace. Revenue was $2.4 billion, non-GAAP diluted EPS was $5.74, and GAAP diluted EPS was $5.41, with all three coming in at the upper end of the guided ranges. Non-GAAP gross margin was 62.4%, 40 basis points above the guidance range, due to benefits from a richer product mix and better service cost performance than modeled. Non-GAAP operating expenses were $534 million, in line with guidance. Total non-GAAP operating expenses comprised $311 million of R&D and $223 million in SG&A. Non-GAAP operating margin was 40.2%. Non-GAAP other income and expense net was $47 million, and the quarterly effective tax rate was 14%. At the guided tax rate of 13.5%, non-GAAP EPS would have been 3 cents higher, or $5.77. Quarterly non-GAAP net income was $786 million. GAAP net income was $741 million. Cash flow from operations was $884 million, and free cash flow was $816 million. As a result, free cash flow conversion was a strong 104%, and free cash flow margin was 34%. The company had approximately 137 million diluted weighted average shares outstanding at the end of the quarter. The breakdown of revenue by reportable segments and end markets and major products and regions can be found within the shareholder letter and slides. Turning to the balance sheet, KLA ended the quarter with $3.35 billion in total cash, cash equivalents, and marketable securities. Debt principal outstanding of $5.95 billion and a flexible and attractive bond maturity profile, supported by strong investment-grade ratings from all three agencies. KLA has an impressive history of consistent free cash flow generation, high free cash flow conversion, and strong free cash flow margins across all phases of the business cycle and economic conditions. Over the last 12 months, KLA has returned $2.4 billion to shareholders, including $1.7 billion in share repurchases and $726 million in dividends paid. I also wanted to highlight that on September 5th, KLA announced an increase in the quarterly dividend level to $1.45 per share from $1.30, the 14th consecutive annual dividend increase. Since its inception in 2006, KLA has grown the quarterly dividend level at approximately 15% compound annual growth rate. Additionally, on that date, KLA announced an incremental $2 billion share repurchase authorization. These capital return actions reflect confidence in our business model and growth strategy as we progress along the path to our 2026 financial targets. Moving to our outlook. As we review the market and assess relative performance of our peers across the industry, we are adjusting our wafer fab equipment outlook for 2023 up to approximately $80 billion, reflecting a decline of approximately 16% from the $95 billion level in calendar 2022. While the timing of a meaningful resumption in WFE investment growth remains unclear, as most underlying end markets remain soft, we continue to see KLA's overall demand stabilizing around current business levels. We expect this demand profile to continue into the first half of calendar 2024. KLA's primary value proposition is focused on enabling innovation through technology advancements and transitions, which our customers continue to prioritize across all business environments. While capacity plans are often adjusted due to changing demand expectations, technology roadmap investments are more resilient. This adds additional confidence to our business expectations as customers align shipping slots with roadmap requirements. In this environment, we will continue to focus on meeting customer requirements, maintaining our high level of investment in R&D to advance our product roadmaps, and KLA's market leadership in delivering strong relative revenue growth and financial performance. As for guidance, our December quarter guidance is as follows: total revenue is expected to be $2.45 billion ± $125 million. Foundry logic is forecasted to be approximately 68%, and memory is expected to be around 32% of semiconductor process control systems revenue to semiconductor customers. Within memory, DRAM is expected to be about 85% of the segment mix and NAND, 15%. We forecast non-GAAP gross margin to be 61.5%, ±1 percentage point, as product mix expectations are modestly weaker versus the September quarter, and service period cost benefit realized in the September quarter normalizes. Inclusive of this guidance, calendar 2023 gross margins are expected to end up in the mid-61% range. Non-GAAP operating expenses are expected to be approximately $540 million. Other model assumptions for the December quarter include non-GAAP other income and expense net of approximately $45 million, and an effective tax rate of approximately 13.5%. Finally, GAAP diluted EPS is expected to be $5.54 ±$0.60, and non-GAAP diluted EPS of $5.86 ±$0.60. EPS guidance is based on a fully diluted share count of approximately 136 million shares. In conclusion, we remain focused on driving differentiation through innovation as we execute our successful portfolio strategy that supports our customers' technology roadmaps. Though the industry is correcting in calendar 2023 and sustainable demand recovery still remains unclear, we are sizing our business to ensure that we deliver a differentiated product portfolio that meets our customer technology roadmap requirements, and that we have the capacity to execute our business in line with our long-term growth expectations. With the KLA operating model guiding our best-in-class execution, we continue to implement our strategic objectives, which are geared to drive outperformance. Our focus on customer success, delivering innovative and differentiated solutions, and operational excellence is what enables us to deliver industry-leading financial and free cash flow performance, and return capital on a consistent basis. We are confident that process control's importance to enabling technology advancements bodes well for KLA's long-term growth outlook, despite challenging near-term demand trends. KLA is well positioned to deliver strong near-term relative financial performance, driven by the better-than-market performance of our semiconductor process, control, and specialty semiconductor businesses, and continued growth in service. KLA is also uniquely exposed to wafer and reticle infrastructure investments that are contributing to our relative outperformance in calendar 2023. Our business continues to stabilize, and the long-term secular trends driving semiconductor industry demand and investments in WFE remain intact and are compelling. That concludes our prepared remarks. Kevin, let's begin the Q&A. Thanks, Bren. Chelsea, if you could please provide the instructions to queue for Q&A, and we'll begin that. At this time, if you would like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star two. We remind you to please unmute your line when introduced, and if possible, pick up your handset for optimal sound quality. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Our first question will come from Vivek Arya with Bank of America Securities. Your line is open. Thanks for taking my question. I wanted to revisit your suggestion that first half could be stable at this, you know, the December quarter levels. So does it mean you're not expecting any change to your China shipment? Or if you could just kind of give us how you are thinking about the mix in different end markets and geos. And then kind of part B of that is, what assumption are you making about the timing of memory recovery? Is that still kind of second half awaited, and can it be incremental to this kind of conceptual first half outlook? Hi, Vivek, it's Bren. So we aren't. I'm not going to guide the first half of the year in terms of what regions or customers might be driving. As we look at the overall sales funnel and look how we're sizing the factories, our stabilization comment is at the total company level, we see the business roughly operating at about the guided levels here over the next few quarters. So we'll see how it plays out. Obviously, it's a fluid and dynamic environment. I think we'll see the semi SPC business be very consistent with that. We'll see the parts of SPC tend to be a little more capacity and shorter lead time type businesses. So we'll have to see how that plays through. But as we aggregate and just as we look out, trying to give you as much as we can into the first half, we see the business bouncing along at roughly these levels. Anything on the potential recovery in memory? Like, if, let's say, memory were to be recovering in, you know, Q1, Q2, Q3, is that visibility you would necessarily have? Or, if I ask it in a different way, what is kind of the, you know, difference between when you start to see it and when it actually starts to show up in your sales numbers? Vivek, Rick here. When we talk to customers, and we have had several conversations with memory customers recently, they've all kind of echoed the same thing in terms of, you know, historical lows right now in the market, and utilization continue to be less than what they're hoping for, although stabilized. So we don't have any indication of any near-term change in that, and they will certainly let us know, because we do have long lead items. So there's some products where there's, we're still shipping based on the fact that they're for R&D work. But in terms of capacity increases, we have no indication of any near-term changes. Thank you. Our next question will come from Harlan Sur with JP Morgan. Your line is open. Good afternoon. Thanks for taking my question. On your services business, close to 25% of your sales, you'll be driving high single digits% growth this year, and that's with your customer production activity at an all-time low. But in your shareholder letter, you guys say that you expect growth in services to accelerate to your target range of 12%-14% next year. I know you've got a wave of tools and systems coming off of warranty and onto contract. This will be a big driver, but what else are you guys assuming on this strong growth outlook for next year, and what are your assumptions for industry and manufacturing utilization? Yeah, Harlan, so there have been drivers, or long-term drivers around service growth that are implicit in our modeling and are continuing, right, in terms of the level of utilization of the install base, customers using tools for longer periods of time, and so on. You did hit on the biggest driver in terms of our expectations for growth into next year, is that we will have a number of tools that we shipped in 2021 and 2022, where we significantly outperformed the market. Those tools will be coming off of warranty and moving into contract, and our attach rate is pretty high. So it does give us some visibility into that service stream. As you know, our contract percent of the total revenue of service is over 75%. And so that visibility allows us to not only be able to plan for it, but also to optimize the cost structure that's, that's underneath it, in terms of how we deliver to our customers. Yeah, one other thing, Harlan, is that, as you know, our services isn't dependent on consumables, and so customers want to keep these tools up and going, even when they have slower utilization in other parts of the fab. But then they definitely want to ramp them as they're bringing on new nodes and starting to ramp new technology. So it's kind of the best of all worlds in the sense we don't slow down that much when it goes down, but then they're going to want to ramp as activity continues, whether it's on new technology or beginning the capacity ramps on new technology nodes. I think the final thing I'll say about it is, Rick talked about memory utilization. If you look in foundry utilizations today, we are seeing some improving utilization at the leading edge. And, you know, the legacy utilization, you know, depending on where you're at in kind of the N minus one is a little bit softer, more mature nodes, it's a little firmer. So, utilization rates are stabilizing and increasing in certain parts of our business, and so, that's an indicator for us as we look forward into 2024 in terms of additional growth for our service business. No, great. That's hugely insightful. Thank you. Given the strong lineup and aggressive cadence of tech transitions, right, especially in foundry and logic, and, you know, that's obviously driving more EUV layer adoption, right? Which is driving demand for both your optical inspectors, reticle inspection, your entire portfolio of metrology products as well. If we look into next year with more tech transitions to Gate-All-Around, introduction of backside power distribution, next-gen advanced packaging architectures, is that wave of new tools, systems, adoptions to support these transitions, is that still in front of the KLA team, or are you actually starting to see quite a bit of that now? Well, so it's good insight, Harlan. I think there's two ways to think about it. One is we're definitely seeing R&D development around that, and we have for some time, but many customers have stalled their expansion and delayed. And as you know, there's been quite a lull in especially the leading-edge companies out there in terms of really much CapEx at all as it goes toward new technology expansion. But that's coming, and when that comes, we can map out layer counts. We know we have a pretty good sense of deployment once it goes on the run card for these ramping of new nodes. And it's both on films, it covers both metrology, but also it covers inspection. And so I'd say it's in front of us as we get into calendar 2024 and beyond. Thank you. Our next question will come from Joe Quatrochi with Wells Fargo. Your line is open. Yeah, thanks for taking the questions. First is, Hi, Bren and, I know it'll come out in the queue, but can you help us with the RPO, where that was exiting the quarter? It came down a little over $500 million quarter-to-quarter. So you'll get the specifics in the 10-Q, which we'll be filing here in the next few days, but somewhere just north of $500 million. So still pretty high levels, north of $10 billion overall, but did come down a little bit quarter-to-quarter. Okay, that's helpful. And then just in that kind of context, how do we think about the, the optical inspection lead times? I think you mentioned a minute that the demand remains stronger than supply or your ability to supply, but how do we think about that looking into, you know, this first half of 2024? Do we expect that you'll start to see maybe some of that alleviate, you know, in the first part of next year as we get into more demand into the second half? Because we've got some new supply coming on related to some extremely long lead time parts, I would expect that we'll ship more in 2024 than we have in 2023. And so we still have a fair amount of imbalance here between where our customer demand is and our ability to supply, but there is some catch-up that's happening there. But those lead times are still pretty long. The rest of the company, somewhere around, you know, varies across different products. More capacity-centric products, lead times are very normal today, and around some of these unique products that are critical in terms of industry requirements, those are still a little bit longer. Got it. Thank you. Thank you. Our next question will come from Chris Caso with Wolfe Research. Your line is open. Yes, thank you. Good evening. I wondered if you could speak a bit about the China business right now. A little more color on the strength that you're seeing. And, you know, we obviously heard this from your peers as well, and I think, you know, the investor questions right now are about, you know, the sustainability of the China revenue at these areas. I wonder if you could address that. Yeah, absolutely. So a couple thoughts for KLA, in particular, relative to China. Because of the actions that were taken, most of the investment, nearly all of the investment that all of it we're exposed to, is on legacy nodes. And mostly that's to support the industries that are in China, where they want self-sufficiency, such as EV. And, you know, you have a lot of projects going on that require basically greenfield. So you have a fair amount of inspection measurement across the board. But beyond that, there's infrastructure investment also going on in China relative to the legacy nodes, both mask shop and also wafer manufacturing. Those projects, I think, are gonna continue for some period of time. So what we don't see is any. I think the leading-edge stuff has already been taken out, and they've stopped that, and of course, you know, for a lot of reasons. But the legacy continues, and it's pretty broad-based, and we don't believe that's gonna change in terms of the size or intent of those, and those are things that are projects that are at various stages, as they continue to build. So we feel pretty good about the sustainability of the business as we see it right now in China. So Brian can give you more specifics. In the near term, in the September quarter, we saw the level as more elevated than what I'd call a run rate, as we had other customers that were moving around in terms of deliveries, and so we were able to, so we backfilled that with some of this this demand in China, so it did push up a little bit. I would expect it would drop somewhat in Q4, but certainly remain at elevated levels. And, it's certainly something that has strengthened over the course of the year, consistent with Rick's commentary. So as we look at next year, I've got meaningful backlog with these customers. I've got in excess of $800 million in deposits for shipments for these customers. So, I would expect that we'll see some sustainability of that demand as we move into next year. And I think it's really across the segments that Rick talked about. So as I think about growth into next year in that part of the business, I think from a baseline point of view, we see it as more or less flat. You have greenfield projects, as you have construction dynamics that are influencing some timing issues. But in general, I would expect it to continue more or less at that level over a broader period of time. A lot of these orders we booked over the last couple of years, and frankly, in the expansion periods of 2021 and 2022, our more strategic and larger customers consumed the bulk of our slots. So as we've seen some slowdown over the course of 2023, that's created the slot availability for these shipments, and these customers are performing in line with the commitments that they made. That's very helpful. Thank you. Just as a follow-on, you know, to some of the other things you said with, as you're starting to fill some of those orders for, say, some of those Chinese customers that were, you weren't able to fulfill because of some of the shortages before. What effect has that had on the backlog? And is your backlog visibility going out in time, you know, about the same as it was, you know, last quarter, quarter before? Or is that backlog visibility starting to shrink as you catch up on some of those orders that you weren't able to fulfill before? I would say with new business coming into backlog, that it's not changing all that much. Right. So about the same. So I'd say it's about the same. Visibility is pretty consistent. Like I said, construction issues would be probably the bigger factor of whether projects would push or not. In a lot of cases, these are our new customers that are getting established, and so aren't necessarily exposed to some of the, the economic sort of supply-demand drivers that would affect more established customers. Now, there are those kinds of customers also, and we're seeing normal behavior from them in terms of how they're balancing their capacity given their customer demand. Thank you. Our next question will come from Atif Malik with Citi. Your line is open. Hi, thank you for taking my questions. Brian, in the past, you have talked about the China domestic spending as one-third memory makers, one-third kind of mature foundries, and one-third, like, the new entrants into the market. My question is, like, you talked about China to drop somewhat in Q4. You know, which segment of the China market are you seeing the drop-off in Q4? Yeah, I'm not. I don't have that detail here. Either there's another piece of that that's also related to the infrastructure investment that Rick talked about, the wafer infrastructure and reticle infrastructure, so there's also a component of investment that's happening there. I don't. I'm not. You know, we guide at the company level. Customer-specific activity, I'm not gonna get into that. Got it. And then, Rick, I have a question on Gate-All-Around. Historically, you guys have benefited, when the transistor moved to FinFET architecture. And as, you know, we start to see initial orders on for some of the deposition companies, can you talk about, what that, Gate-All-Around opportunity means for both inspection and metrology for KLA? Yes, great question. It means a couple of things. Obviously, Gate-All-Around has been in development for a while, so we had a head start in terms of some of the architectures that we need to modify to support it. Specifically, we are leveraging Gen 4 technology instead of Gen 5, because of the nature of the contrast ability of Gen 4 to see the defects that are relevant to a Gate-All-Around architecture. We've made those investments and seen those results, and that's been one where we've leveraged existing technology, but also leveraged the work we talked about with AI to provide capability. So we're well prepared for that when it comes to the inspection challenges associated. Metrology, big opportunity is there because you're looking both for increased level of precision when it comes to the actual measurements, larger sample size, because of the concerns about consistency across the wafers and across wafer to wafer, and also some of the specifics around the High-K Metal Gate control that people are looking for. So, more capability. Again, we had a head start because as you know, that technology has been in development, so we've worked with development partners on that, so well positioned to be able to support that as it expands. So it's going to help both Process Control intensity when it comes to both inspection and with metrology, and we're well positioned to support our customers to do that. Thank you. Our next question will come from Sidney Ho with Deutsche Bank. Your line is open. Great, thank you. I want to ask about the DRAM strength that you guys are seeing. It seems like that was the main source of revenue upside in the quarter, and it looks to be, based on your comments, down slightly in the next quarter, in calendar Q4. How much of that strength is coming from shipping to the DRAM customers in China that you alluded to in the past, and how much of that is tied to advanced DRAM technology, High Bandwidth Memory and whatnot? And, when you look at Q4, which part of that segment is going to come down? Yeah, so when I look at the details, certainly the shipments into China, which were expected, were a driver from the baseline. As I look at the December quarter, in DRAM, I think you'll see a little bit of a mix across customers, but I don't think the absolute number doesn't really come down all that much. So, most of the investment is in that area, or it's in the area that you alluded to, right? In terms of supporting some of the AI demand that's out there. But, and then many bits, just general R&D investment that's happening. So it's at a pretty low level overall, and the bulk of it coming from some catch-up related to the China customer that we referred to. Well, one other area we are seeing some when it comes to the interposer in terms of packaging related to HBM, so that is also a driver. Smaller at this point, but, the growth projections are good. Remember, as DRAM is going to leverage EUV, as you know, the investment resumes, that's going to be, a great opportunity for us to continue to penetrate when it comes to the R&D, but that's not what's driving it right now. Okay, great. And maybe a follow-up from me. If you look at the SPC systems revenue, it looks like it's going to be down 5%-7% in calendar 2023. I think a quarter ago, that number was, like, down 10%-12%. Can you talk about what has changed? Is it just that the WFE market has improved somewhat, or are there other KLA-specific reasons that you would point out? But more importantly, how do you think that outperformance will do next year, considering some of the areas that you are strong in this year may see some moderation? Thanks. I'm sorry, for SPC or that was SPC? SPC. SPC. Yes, for SPC. SPC. Oh, okay. Got it. Look, we had some strength. Yeah, you know, we continue to have strength. It's kind of the same things we talked about, strength in optical. I think the process control intensity hasn't slowed across our customers, and we continue to see wafer being strong. We talked about macro being strong, so really, it's really across the portfolio of leading edge. The thing that's fallen off the most when it comes to capacity has been the product areas that are most linked to wafer starts, and those would be things like overlay and films. But when it comes to the technology inspection, continued strength there. Yeah, and I think that the infrastructure, parts of the business as well, we've seen that hold up fairly well, both in, in China, as, as we talked about in terms of, you know, doing mature so building capability to not only provide wafers, but also to do mature reticle, reticle sets for, for all the design activity that is happening. So you got that, but then on the wafer side, you also have investments that are happening globally as, as those customers prepare for not only as capacity comes on fairly slowly in that, in that industry, preparing for, the resumption in demand that, that we're expecting here in, in, in the near future. But also different strategies around inventory stocking, more wafer-to-wafer bonding, other, other demand for, for wafers. So, that's also been a driver that we've seen hold together fairly well as we move through this year. Process Control intensity is, is, has held again, I've been pretty, pretty open with it over the course of the last year, that, that despite some catch-up that might happen with some peers related to, challenges in 2022 with supply, we felt pretty good about our positioning and our exposure to some of the fastest growing markets, overall. The mix of business that's more logic foundry-centric and, this infrastructure exposure that, that I referred to. ... Thank you. Our next question will come from Krish Sankar with TD Cowen. Your line is open. Yeah, thanks for taking my question. Rick or Bren, kind of curious, you mentioned like the demand profile facing the first half of next year, but some of your peers have called calendar 2024 like a transition year. And now, how do I overlay the fact that memory could rebound in the back half of next year? How to think about either industry WFE or KLA's revenue profile next year? So I'll take part of it, and Bren can answer. We don't know what 2024 is going to look like. We, we just don't know. And we know what our customers are saying right now, but they don't really know yet either. So we're talking about a sustained level of business kind of being similar to what it is right now, until we have a reason to believe it's going to go up. Customers talk about things improving. We have meetings, and they talk about, you know, asking us to get ready, but until we actually see it happening, we don't really know. So it's very hard to talk about the levels. What we do know is you have historically low levels of investment happening right now in memory. And we see the same thing as you do in terms of pricing. Then we're well positioned for ramping when it does ramp. We also know we have some very good indications on some of our long-term products that are, you know, are products that have long lead times. But as Brent said, like in optical inspection, we're capacity constrained, not demand constrained on those. So that's kind of how we're looking at it. We don't really have any unique visibility into 2024 than those general trends, and the fact that utilization seems to have stabilized and is increasing on some of our market segments, but not much visibility beyond that. Yeah, look, I made the comment about utilization rates, and I think that's encouraging in terms of the stabilizing environment that we're articulating here. That's certainly a factor. Well, of course, we watch our customers' business models, their profitability, their cash flows. Okay, you're seeing the industry digest the capacity that was added, and then get, you know, sort of healthy again and see pricing and all those things improve. But then, you know, what are the catalysts that are going to drive growth into next year? You know, in our near term, as we said in the prepared comments, we see roughly, you know, this level of business as we move through the first half of the year. One of the things that we really focus on is we got to make sure that we're flexible enough to be able to respond. And so we've made a lot of investments over the last few years in our supply chain and our own capacity, to make sure that we have the flexibility to respond, because I would expect that we could get surprised. We usually do, and so we wanted to make sure that we're in a position that we're not constrained in our ability to supply and meet that when it happens. So that's our focus, and I think the color we provided in terms of how to think about the company and how we're sizing the company in the near term is reflected in all that. Got it. Got it. Thanks for that, Rick and Brent. And then a quick follow-up. Is it fair to assume the recent export control work has no material impact to your outlook? We're looking at that and working our way through it. It's quite complex, but preliminary estimates based on the baseline that was established in October of last year, right now we don't see any real material change to our business expectations related to those new regulations. But we're working our way through it. It's complex. Next, we'll have Timothy Arcuri with UBS. Your line is open. Thanks a lot. Bren, everyone's asking about 2024 WFE, but I guess I'm still a little confused as to what the right baseline is for this year. Because, you know, pretty much everyone is now guided for Q4. So if I take you, plus Applied, plus Lam, yeah, it's down 13%, so that would mean that your, you know, $80 billion number might be in the ballpark off of that mid-nineties last year. But if I include ASML, it's like flat. I mean, even if you exclude the flash shipments, it's barely down. So how is WFE down this year? I guess I'm just trying to get some understanding of, like, how you get to that $80 billion number. Is it excluding ASML somehow? Thanks. Yeah, Tim, we're not experts on this. What we do is we take a look at what. We look at the universe of peer companies and how they report. We look at what our customers say, we have some modeling that we do, and we come up with an estimate for that. So, this year is a little hard because of Flash shipments, and I don't even really understand all the nuances in that. I mean, that's for you guys to figure out. But also some of the issues that affected some of the other providers in late 2022 in terms of their ability or inability to deliver in 2022 and how that shows up in 2023. But when we look at how we're performing overall, we think that, you know, it's in and around that level. Certainly the fact that we're down, given our belief about our market position, and if you look at SPC, based on the guidance we provided, being somewhere around down, you know, we'll call it 9%-10%, somewhere in that ballpark, it doesn't feel flat to me. Okay. All right, Bren. And then I guess my second question is on inventory. It's now up to almost 300 days. It's up, like, $500 million over the past six months, but we're not really sure when WFE picks up inside of two, in, you know, side of next year. I get that you still have this huge $10.8 billion worth of PO that you're kind of working off, but why is this stuff parked so far out in the future? Is it-- Is, and, and if so, why, why, why, hold the inventory now? What's the bottleneck? Is there something on your side still that's a bottleneck, or is it more that the orders have been placed and maybe, you know, waiting for the fab to be ready to take the equipment and that's why you're building up the inventory? I guess I'm just not sure why you would build the inventory if this stuff is still parked so far out in the future. Thanks. Yeah, Tim, it's a great question, and it's a little bit of the trade-off that we make. And I spent a lot of time talking about how we were able to outperform the industry for a couple of years in a row in terms of some of the supply chain challenges that others were facing, that we weren't. Part of it has to do with how we manage our suppliers. We do have a lot of long lead time parts, and so if you just go back to, we'll call it, you know, 15 months ago, we thought 2023 was gonna be a growth year on top of what we thought was gonna be a $100 billion year in 2022. So we had made commitments. We were putting commitments out longer to get our suppliers to invest. We've invested in them in terms of partnering on their capacity expansions. So I, you know, I place those commitments to suppliers. We've been able to manage what we can, but in a lot of cases, we honor our commitments. And we feel that in the long run, we're in a good position in terms of the longevity of our platforms and where we expect demand to come from, that will consume those parts. So some of it is what you're optimizing for in terms of our differentiation, in terms of how we work with our supply chain, and we're accepting that we're gonna be pretty good customers. We're gonna live up to our commitments, and take the parts that we've committed to. So we feel pretty good in the long run about our positioning in terms of our ability to grow when we see a reacceleration from the industry. The other issue is that our service business continues to grow, right? It grows every year, and that growth drives a fair amount of demand in service. It's a high complexity, high mix, low volume business, and because of the customization of the parts, we tend to have to do end-of-life buys and have to buy a lot of parts to support that business. When you look at our margin profile overall for the company, feel like the trade-offs that we're making are appropriate, and we think it has played a big role in our relative success. Thank you. Our next question will come from Charles Shi with Needham. Your line is open. Hey, thanks for taking my question. This morning, I think, well, one of your smaller peers in Europe, they talked about seeing some weakening of the mature Foundry Logic side of the WFE. I wonder if KLA is seeing something similar, I mean, either through your process control business or the SPC business. And if not, why is that? And I have a second question. Thank you. Not really. Look, we're watching for certain parts of, I'll call them non-China legacy, exposure to automotive, industrial, some of those markets, to see if that has an effect on customer demand. But right now, our expectations around legacy in the near term has been fairly consistent. Got it. So, Bren, maybe a question on OpEx. Both of your peers in the Bay Area, they are raising their OpEx for basically the next calendar year. How should we think about KLA's OpEx going into next year? Say, you talked about you're expecting revenue to be run rating at the current level. Should we be thinking OpEx is kind of flat until you see the uptick of in the revenue, I mean, before you really raise the OpEx? Thanks. Well, run rating at the current level does give you a little bit of growth into next year, and as I said, we would expect to see growth in service. I actually think SPC probably has some a modest improvement off of pretty, pretty depressed levels. Our incremental operating margin model drives how we're running the business in terms of expectations for leverage on incremental revenue. So I would expect to see a modest uptick in OpEx. We're also balancing sort of near term in terms of of how we're sizing for the current environment, but also our long-term investment requirements. And given our market position and our desire to go to market with the portfolio that we think is a competitive advantage for KLA, it does drive some requirements for investment. And we'll do that independent of top line when appropriate. But as we're looking out going forward, I would say that we'll probably see OpEx tick up a little bit as we move through 2024, but not a big change, more in line with general kind of cost of living type adjustments, overall. Thank you. Our next question will come from Joe Moore with Morgan Stanley. Your line is open. Great. Thank you. You talked about maybe a little bit of weakness at the cutting edge of foundry logic. What if you could talk about that? And then I guess just contextually, if we're in an environment where there's very aggressive investment in Gate-All-Around and backside power, but there's sort of limited wafer requirements in year one for those technologies. I would think that helps KLA in terms of percentage of WFE, but can you just walk us through, you know, how much of your—how much money will they spend on the development of those processes versus the expansion of wafer fab capability there? Well, so we still do get investment at the front end, but the, you know, for more for development, but the ramp phase is really where you see that's where you see more of it. So you get it at the front when they're doing development, and then as it starts to ramp, you get more. And we get less incrementally across the portfolio as you are in high volume. So yes, it would help us in terms of intensity around those new nodes, but often those companies are also expanding the trailing nodes at a similar time, one or two generations. So, you know, on balance, it doesn't look that different overall as most of these companies ramp, if that makes sense. So you get it at the front end, but the rest of the. So you look at process control intensity, it doesn't really change that much in foundry logic year to year, because they're investing across multiple parts. The biggest change has come from the mix of foundry logic to memory, and memory is increasing some. So yeah, there are more layers, there's more investment going on, but it's still balanced by they're going to ramp, we hope not just the R&D, but they're going to be ramping in terms of across the board. That's how we get to the, you know, the model that we found for 2026, is based on process control intensity inching up over time as processes just get more challenging. Yeah, the roadmap schedules have held pretty well together. What we've seen is customers adjusting some of the capacity plans. So as you look at 2024, you're more likely to see, for example, more, you know, N3, you're going to see N2 activity, and we'll start to see some of that soon. But the bulk of it will be more at N3. What you likely don't see is you probably won't see a lot of investment from our major customers in some of the more legacy parts of their businesses where they pull back. But to Rick's point, you know, we're seeing some of it. We'll see that investment as they ramp. We're seeing more investment today in production, given the number of designs that are moving through the leading-edge nodes and the different process flows, is creating opportunities for and more challenges for our customers in terms of process control and defectivity challenges across different designs as they test design rules in different ways. So I think we have our normal historic exposure to R&D and to ramp, but over the last few years, we've we're seeing, particularly with the introduction of DUV and the progressing of scaling, we're seeing more adoption in what we call the HVM, or the high volume manufacturing phases. Great. Thank you. Thank you. Our next question will come from Blayne Curtis with Barclays. Your line is open. Hey, thanks for letting me take a question. I just wanted to follow back up on the comments you just made on foundry logic. So with flat, it seems like China's probably up within that mix, and then you said leading edge is weak. I'm just kind of curious how that changes for December. It seems like the outlook's fairly flat, so is that weakness in leading edge kind of stabilized? And then kind of any perspective as to where leading edge goes next year? I feel like where we are today, I think your stabilization comment is the right one. I think we've de-risked it, and given that, you know, we tend to be more of a long lead time provider, I think we've made a lot of the adjustments that we needed to make already in terms of how we're planning for this year. And as we move into next year, you know, I think if you just sort of aggregate leading-edge activity, we'll see, you know, as customers start to provide a little bit more insight. But again, back to the stabilization comments, I don't see it declining from here. Thanks. I just want to ask on service, in your letter, you talked about getting back to that 12%-14%. I just want to know, is that assuming any utilization increases, or is that just purely the tools coming off of their agreement? Yeah, it's the latter. I think we're expecting utilization to, like, slowly improve, but the bulk of it will come from new tools coming into contract. Thanks. Thank you. I think to expect to start to see overall industry improvement into 2024, the first thing you'll see is utilization start to improve. So we would expect that. And then once you see that, then eventually the, you know, utilization will get to a place where customers need new capacity, and then those decisions happen. Thank you. Our next question will come from Mehdi Hosseini with SIG. Your line is open. Yes, sir. Thanks for taking my question. Just a quick follow-up. As you think about the R&D project, especially you highlight the Gate-All-Around, at some point, we have to change the narrative to High- NA, and I want to just, get an update. How do you see, kind of opportunities as it relates to High- NA, specifically, on the patterning and how to follow up? Well, I mean, what High- NA enables is the continuation of scaling, right? So that's been goodness for KLA. You've noticed process control intensity in general, but more specifically for KLA, has gone up as EUV has started to be adopted because now you're scaling. We're not, we're not on what was traditionally Moore's Law, but we're seeing scaling. So High- NA means there's going to be more scaling happening, and that's going to be good, and it's specifically good for KLA because it drives the highest performance requirements, which plays to our portfolio strength. So part of what our modeling is when we look. Now, we don't see a lot of High- NA happening in the timeline that we laid out for 2026 for our Investor Day. It's after that, but we'll see early stages of it before 2026, and that'll drive continue to provide more opportunity for us to participate in higher process control intensity. ... Are you implying that Gen 5 could be, the use of Gen 5 could be extended to High- NA for pattern? Oh, for sure. Absolutely. Absolutely. We're still using Gen 4. We're using Gen 4 now because of the extensions that we made in the platform, not just in terms of wavelength, but adding more processing capability, the leveraging of AI, the use of both, you know, Gen 4 and Gen 5. Actually, Gen 4 will outship Gen 5 this year, and we'll continue to see that adoption. So it really, it's talking about the critical layers, and we have more extensions in mind and in the, on, on the works that we're doing right now for Gen 5, that'll extend it well and, you know, into the, even, even in the high-NA, the Hyper-NA, which is gonna come after that. So we're, we feel very good about our optical product portfolio. Okay, and then the second follow has to do with China. It seems like for KLA and the peer group, the China mix is getting closer to 50%. Could there be a scenario where opportunities for KLA would actually step up, given the fact that many of these customers are new and they have yield issue? And I understand China is mostly for trailing edge, but with new entrants, new players, could the higher emphasis on improving yield by these new players have a higher mix of China for KLA relative to the peer group? Well, you have a lot of customers that are subscale, that are trying to develop process capability and demonstrate capability to customers, also invest for viability over time in terms of, you know, longer term node progression. So, in early stages, subscale stages like that, you're gonna see a heavier investment in process control. Now, as they continue to push roadmaps, it might stay there because they never really had a huge, meaningful amount of capacity at each node. But you do see higher levels of adoption early on as you're trying to. Because if you think about it, you might buy a few process tools here and there, but you need the whole suite of process control. And so, so that's why we tend to see a little bit more activity there. But I think given that, the desire to progress along roadmaps and to progress nodes, you're gonna see, I think, a continued level of investment overall. But certainly as you start to mature, and if you're running a limited number of designs, you know, process control intensity, while higher in production than it used to be, is still lower than it is in what we'll call the ramp phase of a project. Thank you. Our last question will come from Brian Chin with Stifel. Your line is open. Hi there. Thanks for sneaking me in. I'll just ask one question then to get us out of here. But you can correct me if I'm wrong here, but I've gotten the sense maybe that given how strong the infrastructure bare wafer and reticle inspection business into China was this year, that it could subside a little into calendar 2024 relative to its strength again this past year. Is that sort of implicit in your outlook in the first half next year? And also, do you think that is proportional in any way to sort of the rate of China fab build activity that you can maybe observe for next year? Well, I don't think it's. I think the overall wafer infrastructure investment, that's been, you know, faster than WFE growth this year, will flatten out as we move into next year. So there's, you know, that starts to slow down. On China specifically, though, I don't see it changing much. I don't think it's gonna grow much next year, but I don't see it falling off. And that's across, that's across wafer, silicon wafer, but also around reticle capability. Okay, great. Thank you. Thank you, Brian. And, yeah, thank you, Chelsea. I just wanted to thank everyone again for their time and turn the call back over to you for any final instructions. This does conclude the KLA Corporation September quarter 2023 earnings call and webcast. Please disconnect your line at this time.