Kla Corporation · NASDAQ:KLAC
Kla — UBS Global Industrials and Transportation Conference 2021
39 slides from Kla's conference presentation, Jun 9, 2021
Slide 1: UBS Global Industrials and Transportation Conference
UBS Global Industrials and Transportation Conference Rick Wallace CEO and President February XXXXX, 2021 June 9, 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements in this presentation other than historical facts, such as statements pertaining to: (i) our ability to meet or exceed our 2023 financial targets and the CAGR for those financial targets; (ii) the amount of dividends declared per share in 2021; (iii) WFE and mix
Slide 3: What We Will Cover Today
What We Will Cover Today Who is KLA? The KLA Operating Model Drives Our Success KLA Possess A Strong Competitive Moat A History of Strong Cash Flow & Capital Return KLA is Well Positioned to Outperform
Slide 4: Who is KLA?
KALA Who is KLA?
Slide 5: KLA Combines Growth & Best In Class Profitability With Capital Return
KLA Combines Growth & Best In Class Profitability With Capital Return Key Facts 1 Free Cash Flow and Capital Return 1 Founded 1976 Installed Base >57,200 Systems Global Locations 19 $1.9B ~30% Free Cash Flow (FCF) FCF Margin Global Employees ~11,000 PhD’s + Masters ~40% R&D % of Sales ~15% 11 Years
Slide 6: Run By A Seasoned, Internally-Developed Leadership Team
Run By A Seasoned, Internally-Developed Leadership Team RICK WALLACE BREN HIGGINS ORESTE DONZELLA AHMAD KHAN BRIAN LORIG CEO & President EVP, CFO & Global Operations EVP, CMO & Head of EPC President, KLA Semiconductor EVP, Joined: 1988 1999 1999 Process Control Global Support & Services 2004 1998 BE
Slide 7: KLA Helps Enable The Industrial Economy and "Industrial Tech"
KLA Helps Enable The Industrial Economy and “Industrial Tech” Virtually no computer, tablet, smart phone, wearable device, data center, video game console, smart factory, autonomous car, industrial monitoring equipment, medical electronic technology, or spacecraft, would exist without us. Proud to B
Slide 8: KLA Revenue Growth Accelerating Into The Digitization Era
KLA Revenue Growth Accelerating Into The Digitization Era DIGITIZATION ERA $8,000 Di ve r si f i e d S em i Ma r ke ts MOBILE ERA Da ta c ent er a nd Cl oud E x pa n si o n $7,000 A ut om ot i ve E l ec tr i f i ca t ion Redu ced C ycl i ca l it y C V- 1 9 / x F H A cce l er a t ed Di gi t i z a ti
Slide 9: Industrials Are One of Many Industries Adopting More Semi Content
Industrials Are One of Many Industries Adopting More Semi Content A r ti fi c i a l Virtual 5 G Co nn e c t i v i t y Mobile D ata Ce nte r A u to m o t i ve H e a l t h ca r e Inte l l i ge nc e Inte ra c t i o n Semiconductor Revenue by End Market Infrastructur e, Othe r Industrial 2020-24 CAGR ~7
Slide 10: What Do KLA's Products & Services Actually Do?
What Do KLA’s Products & Services Actually Do? KLA’s Systems, Software, and Services Enable The Most Advanced Inspection and Measurement In The World Inspection Metrology Find Critical Defects Measure Critical Dimensions Smaller Than the Wavelengths of Visible Light You Can’t Fix What You Can’t Find
Slide 11: The KLA Operating Model Drives Our Success
The KLA Operating Model Drives Our Success
Slide 12: Our Shared Purpose is the Foundation for the KLA Operating Model
Our Shared Purpose is the Foundation for the KLA Operating Model MISSION STRATEGY OBJECTIVES Improve customer yield, Provide leading technologies, Achieve world-class results in performance and time-to- differentiated solutions and market leadership, product market, enabling the superior customer ex
Slide 13: The KLA Operating Model is Values-Based and Centered on 3 Pillars
The KLA Operating Model is Values-Based and Centered on 3 Pillars 1 2 3 Consistent strategy Management by Financial discipline and execution metrics and rigor Application of common Culture of performance Exert efficiency and processes and discipline and accountability operating discipline in o
Slide 14: The Results of Having The KLA Operating Model Are Compelling
The Results of Having The KLA Operating Model Are Compelling 1 Global leader in process control and supplier of process-enabling solutions for the data era Sustained technology leadership allows us to remain at forefront of industry trends with 2 new capabilities and technologies, enabling our profi
Slide 15: KLA's Four Strategic Objectives Serve As Our Guide
KLA’s Four Strategic Objectives Serve As Our Guide 15 KLA Non-Confidential | Unrestricted
Slide 16: Corporate Social Responsibility and Sustainability is in Our DNA
Corporate Social Responsibility and Sustainability is in Our DNA Reducing overall environmental impact by focusing on improving yield and efficiency for our customers Sustainable Environmental Initiatives Community Programs & Initiatives Corporate Governance Transportation: Avoiding wasted space a
Slide 17: KLA Possesses A Strong Competitive Moat
KLA Possesses A Strong Competitive Moat Market Leadership and Best in Class Margins | Innovation | Significant R&D Advantage
Slide 18: Global Market Leader in Semiconductor Process Control
Global Market Leader in Semiconductor Process Control Process Control Market Share Highly Valued and Trusted Partner 60% 50% 4x 40% Listen and Partner, Follow Up Measure and NEAREST COMPETITOR Confirm Commit and and Ensure Continuously 30% ACROSS ALL REGIONS Understanding Deliver Value Improve 20% 1
Slide 19: KLA Has A History of Best-In-Class Margins Versus Leading Peers
KLA Has A History of Best-in-Class Margins Versus Leading Peers GROSS MARGIN1 45% OPERATING MARGIN1 70% 40% 60% 35% Best in Class Best in Class Gross Margin 30% Operating Margin 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0% 0% CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 LTM CY10 CY11 CY12 CY1
Slide 20: KLA Has Best in Class GAAP Operating Margins vs. Broader Universe
KLA Has Best in Class GAAP Operating Margins vs. Broader Universe 10-Yr. Avg. GAAP Operating Margin % KLA Semi Cap Peers1 2 Industrial Peers S&P 500 DJIA NASDAQ SOX 0% 5% 10% 15% 20% 25% 30% 35% Source: Bloomberg as of 3/31/21 1 ASML, AMAT, LCRX 2 DHR, FTV, ROP, ETN 20 KLA Non-Confidential | Unrestr
Slide 21: KLA Innovates to Differentiate
KLA Innovates to Differentiate Embedded in R&D R&D INVESTMENTS ($M) with customers $877 $901 $819 $625 Working two $481 $499 $567 generations ahead ~15% Avg. R&D as a % of Sales Continued leadership in innovation 2015 2016 2017 2018 2019 2020 LTM Innovation 2X pace of competition Leadership in Desig
Slide 22: High Level of R&D Investment Powers Market Leadership
High Level of R&D Investment Powers Market Leadership 2020 GARTNER PROCESS CONTROL SYSTEMS REVENUE ESTIMATES ($M) KLA Applied Materials Hitachi High-Technology Onto Innovation Lasertec ASML KLA Process Control R&D Source: Gartner April 2021 and Company estimates $0 $500 $1,000 $1,500 $2,000 $2,500 $
Slide 23: A History of Strong Cash Flow & Capital Returns
A History of Strong Cash Flow & Capital Returns Sustainable Free Cash Flow | Rapidly Growing Services Business | Consistent Capital Returns
Slide 24: FCF Generation Fuels Consistent Capital Return to Shareholders
FCF Generation Fuels Consistent Capital Return to Shareholders Free cash flow1 & conversion2 FCF $B Conversion Market 2.3 $2.0 Investment $1.8 140% in Growth and Leadership and 1.8 New Products Differentiated $1.3 120% 1.3 $1.1 $1.2 Solutions $0.8 0.8 100% 103% 94% 99% 98% 92% 88% 0.3 80% Cash Retur
Slide 25: Attractive Free Cash Flow Margins Compared to Broader Universe
Attractive Free Cash Flow Margins Compared to Broader Universe 1 10-Yr. Avg. Free Cash Flow Margin % KLA 2 Semi Cap Peers 3 Industrial Peers S&P 500 DJIA NASDAQ SOX 0% 5% 10% 15% 20% 25% 30% Source: Bloomberg as of 3/31/21 ; 1 Free Cash Flow Margin = Free Cash Flow / Revenue 2 ASML, AMAT, LCRX 3 DHR
Slide 26: KLA Runs An Asset-Lite, High Capital Return Business Model
KLA Runs An Asset-Lite, High Capital Return Business Model Asset-Lite High Capital Return 10-Yr Dividends + Repurchases / FCF LTM Capex / Revenue 10% 104% 87% 8% 79% 80% 81% 6% 4% 3% 1 KLA S&P 500 DJIA NASDAQ SOX KLA S&P 500 DJIA NASDAQ SOX 1 KLA’s capital return includes the 2014 leveraged recapita
Slide 27: Services Delivers Recurring Revenue at 2x Industry Growth Rate
Services Delivers Recurring Revenue at 2x Industry Growth Rate KLA SERVICES REVENUE ($M) COMMENTARY $1,800 $1,600 Growing installed base of > 57,200 systems $1,400 Risen to ~25% of total revenue $1,200 >75% revenue from subscription-like service $1,000 contracts in semiconductor process contro
Slide 28: Return to Shareholders Balanced Between Buybacks and Dividends
Return to Shareholders Balanced Between Buybacks and Dividends Consistent share repurchases 3 Strong track record of annual dividend increases $Millions ($/per share) July 2020 Announced Dividend Increase to $3.60 $3.60 $3.50 ~$80 $1,062 ~35% $3.10 Avg Price Per $2.84 Share Since Target Dividend 15%
Slide 29: KLA is Well Positioned To Outperform
KLA is Well Positioned To Outperform Less Cyclical Industry| Investment Grade Balance Sheet| Attractive Long-Term Model
Slide 30: Industry Growth and Diversification Has Reduced Volatility
Industry Growth and Diversification Has Reduced Volatility WFE Mix Favors Foundry/Logic WFE Doubled In 5 Years 100% WFE ($M) 15.1% 30% $80,000 CAGR 80% 45% 50% 52% 55% 56% $56B 60% $60,000 40% $40,000 70% 50% 55% 48% 20% 45% 44% $20,000 0% $- 2016 2017 2018 2019 2020 2021E 2016 2017 2018 2019 2020 2
Slide 31: Strong Balance Sheet With No Bond Maturities Until 2024
Strong Balance Sheet With No Bond Maturities Until 2024 Balance Sheet Summary1 ($M) Bond Maturity Profile Investment Grade Credit Ratings Total Cash2 $ 2,443 Bonds Outstanding $ 3,450M Moody’s A2 4 Working Capital $ 3,376 Total Assets $ 9,939 Weighted Average Rate 4.37% S&P BBB+ Debt3 $ 3,422 Weight
Slide 32: 2023E Long-Term Targets
2023E Long-Term Targets 2023E ONGOING FINANCIAL MACRO ASSUMPTIONS TARGETS FRAMEWORK Semiconductor industry CAGR of 4% - 5% Capital intensity ~flat SALES $7.0B - $7.5B 7% - 9% CAGR ~60% memory / ~40% foundry/logic mix Process Control Market grows with WFE OPERATING MARGIN * 36%+ 40% - 50% (In
Slide 33: KLA is a High Performing Company Enabling Key Trends Across Industries
KLA is a High Performing Company Enabling Key Trends Across Industries KLA Has Many Qualities Investors These Key Trends Value From Will Transform The Resiliency to Way Competitive Moats We All Live and and High Cash Work Returns The “Data Era” Will Semiconductors Drive Key Trends KLA is Critical to
Slide 34: Appendix
KLA + Appendix Reconciliations
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures * 35 KLA Non-Confidential | Unrestricted
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures* * Refer to “Reconciliation of Non-GAAP Financial Measures – Explanation of Non-GAAP Financial Measures” for detailed descriptions and information for each reconciling item. 36 KLA Non-Confidential | Unrestricted
Slide 37: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures* * Refer to “Reconciliation of Non-GAAP Financial Measures – Explanation of Non-GAAP Financial Measures” for detailed descriptions and information for each reconciling item. 37 KLA Non-Confidential | Unrestricted
Slide 38: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 38 KLA Non-Confidential | Unrestricted
Slide 39: For more info go to the KLA IR website
For more info go to the KLA IR website: ir.kla.com Contacts: Kevin Kessel, CFA Ed Lockwood Vice President IR & Market Analytics Senior Director, IR kevin.kessel@kla.com ed.lockwood@kla.com
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