Q4 2022 KLA Corp Earnings Call
Time, I would like to welcome everyone to the KLA Corporation June quarter, 2022 earnings conference call and webcast.
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I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and market analytics. Please go ahead.
Thank you and welcome to KLA fiscal Q4 of 2022 quarterly earnings call to discuss the results of the June quarter and the outlook for the September quarter. Joining me today is Rick Wallace, our Chief Executive Officer, and Bren Higgins, our Chief Financial Officer. During this call. We will discuss our results released today after the market close you can.
The press release shareholder letter slide deck, and infographic on the KLA IR section of our website. Today's discussion is presented on a non-GAAP financial basis, unless otherwise specified.
Whenever references are made to full year business performance. They are calendar year references 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 presentations corporate governance information and links to our SEC filings.
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 risk factor disclosure in our SEC filings.
Any forward looking statements, including those we make on the call today are 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.
Our CEO , Rick Wallace will begin the call with some brief comments on our recent June quarter results before discussing our view of the semiconductor industry demand environment and then a few June quarter highlights for.
Higgins, our CFO will conclude with some additional financial highlights from the quarter as well as our outlook and guidance.
I'd like to now turn the call over to our CEO , Rick Wallace Rick.
Thank you all for joining us today I'd like to begin with a few comments about the quarter first KLA continues to benefit from multiple growth drivers are reflected in our June quarter results.
Specifically for this quarter, our revenue of $2 5 billion.
It was at the top end of our guidance range and up 29% year over year and 9% sequentially.
EPS was $5 40.
Our non-GAAP EPS was $5 81.
Both at the top end of our guidance range.
Talented global teams at KLA and remain focused on responding to evolving customer needs and strategically navigating supply chain challenges. They are steadfast in their commitment to creating value for our customers partners and shareholders. Our teams continue to follow the KLA operating model as a guide to eat our challenges and benefit from the <unk>.
Opportunities are an evolving market.
Driving this performance with strong customer demand across major product groups macroeconomic uncertainty and the resulting effects of consumer demand are areas. We are monitoring closely.
Customers have indicated some end markets, specifically Pcs and mobile devices have softened over the past few months.
Seen memory pricing in both segments weekend.
We have elevated concerns we continue to see strong demand.
And our ability to supply from our customers with no material change in our shipment profile beyond the normal facility readiness issues and customers aligning tool deliveries with their production.
In assessing the full <unk> 20 to <unk> outlook.
As I evaluated the persistent supply chain challenges and recently announced Capex adjustment in memory category with this in mind <unk> outlook for <unk> growth in 2002 has tempered.
And we will expand more on the details when he discusses the outlook, we still see high single digit <unk> growth in calendar 'twenty, two and are confident in our ability to deliver relative outperformance if supply chain challenges abate this would be an additional upside.
Process control is one of the fastest growing segments of the overall Wi Fi market and as the market leader KLA is in an enviable position that fits the current demand landscape.
Continued investment in technology at the leading edge and increased demand for legacy nodes. We also see growth in technology categories, including advanced packaging. These factors all support steady long term growth for the Wi Fi category.
We attribute <unk> consistent and strengthening market leadership to our focus on investing in innovation at a high level to drive differentiation through a unique portfolio of products and technologies that address the most critical process control challenges our technologies help our customers drive their growth strategy.
I'd like to now briefly summarize a few quarterly highlights first KLA continues to drive strong relative outperformance versus peers and foundry logic simultaneous investments across multiple nodes remain a tailwind and memory, even with some customers investments signaled the slow demand diversification.
Remained strong across multiple other industries.
Second our wafer inspection business again delivered impressive results in the June quarter as revenues grew 20% sequentially, 49% year over year.
KLA delivered record quarterly revenue from our electronics packaging and components business in the June quarter.
Kla's service business surpassed the half billion dollars quarterly revenue level for the first time as revenue was $512 million of <unk>.
15% year over year.
Finally, the June quarter was another exceptional period from the perspective of free cash flow and capital returns meet generated quarterly free cash flow of $746 million amounting to 23% year over year growth. We also announced a $6 billion share repurchase program at 24.
Percent increase in our quarterly dividend level. Additionally, we increased our long term targeted capital returns to 85% of free cash flow we remained.
Our focus on returning capital shareholders versus via our dividend and stock repurchase programs.
Also this quarter, we introduced our new long term revenue growth targets and financial model for 2026 at our June 16th 2022, Investor Day in New York City, KLA is new 9% to 11% revenue growth objectives through 26 feature strong relative growth in each of our major business lines over that period our <unk>.
Long term model assumes the baseline semiconductor industry growth CAGR of 6% to 7% through 2026th with many forecast today for the semiconductor market to exceed a trillion by 2030.
In summary, <unk> June quarter results once again demonstrate sustainable outperformance, our consistent execution against various challenges in the marketplace. Both in terms of macroeconomic uncertainty and in addressing persistent supply chain issues highlights the resiliency of the KLA operating model the dedication of our global teams and our commitment to a.
<unk> capital allocation and delivering long term value to our stakeholders chief.
Chief Financial Officer, Brian Higgins will now go through our June quarter financial highlights and outlook Brian .
Thank you Rick.
So Tricia said Kelly's June quarter results reinforce the success of our execution and strong market position.
Revenue was $2 5 billion non-GAAP gross margin was 62, 4% and non-GAAP diluted EPS and GAAP.
Aps for $5 81, and $5 40, respectively.
non-GAAP operating expenses were $514 million below our expectation of 525.
Mostly due to the timing of new employees joining versus our plan.
In addition, we also realized a cost benefit from the strong U S dollar impact, resulting from our global footprint.
Total operating expenses comprised $297 million in R&D and $217 million in SG&A.
Given the strong demand backdrop rapid expansion over the last couple of years and our revenue expectations going forward. We expect to continue our important investment in our global infrastructure and systems to scale. The Leverages <unk> KLA operating model facilitate growth.
Our investments include new product development programs.
Volume dependent resources to support our business expansion as we position the company to execute against our long term structural growth thesis.
As a result, we expect operating expenses to be approximately $530 million in September quarter, we forecast quarterly operating expenses to continue to trend higher over the balance of 2022 to support our sequential revenue growth expectations.
We will size the company based on our target operating model, which delivers 40% to 50% incremental non-GAAP operating margin leverage on revenue growth over normalized time horizon.
non-GAAP operating margin was strong at 41, 8% almost one point higher than the guidance midpoint imply.
Other income and expense net was $22 million.
Hello guidance at $43 million with a positive variance from guidance, reflecting a gain on a strategic investment that was transacted in the quarter.
Offset by a recurring mark to market adjustment of a supply investment.
For the September quarter, we forecasted at approximately $75 million to reflect the impact of the new debt issuance.
Quarterly effective tax rate was 14, 8% higher than the 13, 5% guidance due principally to the equity market impact on deferred compensation programs.
At the guided range non-GAAP earnings per share would've been <unk> <unk> higher at $5.90.
We continue to guide 13, 5% as a long term tax planning rate.
non-GAAP net income of 867 million GAAP net income was $805 million cash flow from operations was $819 million and free cash flow was $746 million.
Resulting in a free cash flow conversion of 86% and our free cash flow margin of 30%.
The breakdown of revenue by reportable segments, and end markets and major products and regions can be found within the shareholder letter on slides.
Moving to the balance sheet, where we saw a lot of activity this past quarter.
<unk> ended the quarter with $2 $7 billion in total cash.
Net of $6 7 billion.
Our flexible and attractive bond maturity profile supported by strong investment grade ratings from all three agencies.
In June S&P upgraded KLA, one notch to a minus citing improved scale and outlook for further profitable growth.
Later in June we issued $3 billion of new debt and announced the completion of a tender offer for $500 million.
Our senior notes due 2024.
Actions reinforce the KLA maintained diligent oversight of our cost of capital and awareness of the impact on shareholder value of the appropriate capital structure for our business and productive capital allocation.
As demonstrated by the new calendar 2026 financial targets and capital return actions announced at our recent Investor day.
L. A is confidence in our business over the long term and is committed to a consistent strategy of cash returns that includes both dividend growth increasing share repurchases.
Consistent with this we increased our long term capital returns target as mentioned earlier.
Over the last 12 months KLA has returned $5 $5 billion to shareholders, including $4 9 billion in share repurchases.
639 million in dividends paid.
Turning to our outlook we have.
Adjusted our overall WP outlook for calendar 'twenty two to reflect persistent supply chain challenges that are gaining shipments and revenue recognition for many of our peers.
We now expect the Debbie I think market to grow in the high single digits to approximately 95 billion to 2022 off of a baseline of roughly 87%.
Calendar 2021.
This outlook reflects the continued broad based strength of demand across customer segments.
While we work hard to manage capacity KLA and with our suppliers supply chain shortages continue to constrain our ability to meet customer demand.
While our supplier engagement strategy that we discussed at our Investor day is validated through this cycle.
Fire visibility remains challenging and has not been improved over the past three months.
As indicated in the last couple of quarters, we continue to expect sequential growth through this calendar year.
KLA is total revenue growth to meet or exceed the low 20% range, but semiconductor process control systems growing several points faster than the company average.
Finally <unk>.
We expect demand to continue exceeding supply during the calendar year second half.
<unk> is in position to deliver another year of sustainable outperformance in our semi PC business, which should translate into strong relative growth overall.
Looking ahead as indicated earlier.
We're concerned with the macroeconomic environment and how it may affect demand for our customers' products and their capacity plans as we move into calendar 2023.
Denise the pressure from customers to deliver remains high and is driving our expectations for sequential growth through calendar 2022.
We are encouraged by the diversification and sustainability of our current demand profile and the company's operational execution.
Strategically, adding capacity across our global manufacturing footprint to support our customers' growing process control requirements, our near term outlook and our long term through cycle growth thesis.
Our September quarter guidance is as follows.
Total revenue is expected to be in a range of $2 6 billion, plus or minus a $125 million.
Foundry logic is forecasted to be approximately 64%.
Memory is expected to be around 36% of semi PC systems revenue.
And memory DRAM is expected to be about 40% of the segment mix in NAND, 60%.
We forecast non-GAAP gross margin to be in a range of 62% to 64%.
Finally, GAAP diluted EPS is expected to be in a range of $5 28 to $6 38.
And non-GAAP diluted EPS in a range of $5 76.
$6 80.
<unk> guidance is based on a fully diluted share count of approximately 143 million shares.
In conclusion, despite the macro and supply chain headwinds.
The secular trends driving semiconductor growth and investments in WMA is both durable and compelling over the long run.
Broad based customer demand and simultaneous investments supporting growing semiconductor content across technology nodes remains important trends in our industry.
These are long term secular growth drivers for the industry is technology investment and the resumption of scaling reflects the value of that semiconductors, and our industry had in lowering our customers'.
Costs for our customers and enabling a broader application universe for semiconductor based technology across multiple end markets.
When it comes to KLA, considering our track record of execution and the power of our portfolio we.
We have confidence in our ability to continue to deliver sustainable outperformance throughout changing economic periods.
As we look at the leading indicators for our business, including our backlog and sales funnel visibility with <unk>.
To invest in expanding our business infrastructure and the required capabilities to support our outlook and maintain our product development investments to enable industry growth and support our customers' multiyear investment plans.
This provides an element of stability that shores up our confidence in the demand outlook for the future.
These factors combined with the KLA operating model, the guys or execution.
<unk> us to continue outperforming our industry as we execute our strategic objectives.
Objected to fuel our growth.
<unk> operational excellence.
Differentiation across an increasingly diverse product and service offerings.
The foundation of our sustained technology leadership wide competitive moat industry, leading financial performance bond.
A long standing track record of robust free cash flow generation and consistent and growing capital returns to shareholders.
That concludes our prepared remarks, I'll turn the call back over to Kevin to begin the Q&A.
Kevin.
Thank you Brian .
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We will take our first question from Harlan sur of Jpmorgan.
Hey, good afternoon, guys congratulations on the solid results and quarterly execution.
You guys as lead times are quite long way do you guys have good visibility into next year and I think even into.
In some cases 2024, you highlighted some of the demand headwinds in your prepared remarks and also maybe some of the early signals from your customers on that.
There is sort of conservative capex spending plans going forward I know youre not seeing anything meaningful in terms of near to midterm ship implants, but giving your customers are all booking into next year have you guys seen any changes in longer term orders as a result of your customers increasingly negative views on demand for next year.
Yeah Harlan thanks.
Thanks for the comments and the question I would say that certainly in the near term we have seen no no changes from our customers in fact, the pressures as high today as it was three months ago and our adjustments to the near term WSJ were really related to some of the challenges that a lot of our peer companies are facing in terms of their ability to either ship tools are recognized.
Revenue and that would have an impact on <unk> given the expectations for the second half.
In terms of growth in the second half versus the first half.
It's too early for us to call 'twenty three is certainly where we're monitoring what we see there.
We think about our planning and as we move into.
As we move outside of this year from at least from where we sit today.
We see a sustainability and our output levels as we move into the first part of 'twenty. Three now we will have to watch and see what what our customers end up doing.
Particularly to some of the challenges in the memory space and what that might mean, but at least from where we sit today, we've seen no real churn in.
In the backlog and an expectation in terms of delivery timing.
Yes, even pattern to that Harlan one of the things we have seen because obviously, we've been talking with customers recently and they are they know we're aware of some of the talk that they're telling us basically two things one keep our slots and two if somebody else's spot opens up could you. Please give it to us so we're seeing for process control and feel like we are.
Probably a little bit of a different positions.
Players are.
Great.
In the event.
Wgst decline next year.
<unk> got several positive buffers right and I feel like one of the biggest ones is that your services business historically.
It does not decline during downturn, so like if I look back over the past 20 years I think there's only been one year video services business has been down and then more near term I think over the past four downturns.
The team has actually grown it services business and also those downturn so outside of the stable annuity like subscription service contracts and I know you guys talked about expansion on services opportunities on legacy nodes like what else has allowed the team to grow it services business in periods, where <unk> spending as we can.
Historical track record on the EPC services business during the downturn.
So kind of two questions you threw in the EPC one of Dan Let me start with the process control one.
What we've seen historically in downturns is customers don't want to get productivity one of the ways. They do that is they focus heavily on yield improvement process stability. So we actually see utilization stay high on the on the services in order to keep the tool is capable and sometimes they'll actually deploy some of their limited budget tour.
Upgrading the installed base.
In terms of EC obviously, we've not really been through a cycle with that so it's a little bit secondhand knowledge, but it depends on the segment that they are in terms of but as you know as a percent of our overall business.
That will not change the dynamic that we see overall for our services should we had some headwinds going into next year daily.
The only other thing I'll add heartland is that we are seeing investment across multiple nodes and so from a leading edge point of view certainly the complexity of the tools that are going in to support those markets. The drivers of those markets, particularly around data center and high performance compute will drive.
Drive our customers to.
Given how they buy process control.
We want to keep these tools up and use them as they're trying to navigate through these technology transitions. So that's an important aspect of.
The value that we add so even if they are pulling back on some of the capacity investments they might be making there still investing in R&D and ramping facilities at the end the wafer start goals within a particular timeframe.
<unk>.
If you think about within memory or even within some of the trailing edge areas those areas are.
Areas, where process control intensity tends to be a little bit lower.
And so I think just in terms of how we see the investment play out those are areas that we're less exposed to just don't think that they would affect the business to.
To the degree that they might impact other more capacity centric players.
Great. Thank you.
Our next question comes from.
Krish <unk> of Cowen Your line is open.
Hi, This is Robert on.
For Chris Thanks for taking my questions.
My first question was just around.
If you could provide any color.
On potential impacts of the business.
In terms of shipments to China, if there were any sort of restrictions.
This might look like whether tool Pacific or based on tax basis.
Sub 14 nanometer shipments.
Just sort of how youre thinking about that and then I have one follow up.
Well specific to that question and of course, there was some.
Our peers have gotten this question as well, but we did receive a notification from the U S government about licensing requirements for China related to sub 14 nanometer development and production.
Of course, we will.
<unk> engaged with the government have been in active dialogue or a fully comply with all applicable laws and guidance here I would say that given the lead time and timing unpredictability of new licenses.
But this has no effect on our guidance for the upcoming quarter or comments on the remainder of 'twenty two.
And I would say as I look at the funnel over the next 12 months, given where investment is happening and what we expect we don't see any material impact to our business from this new requirement. So I don't want to speculate on what else could happen but.
Just on what we know today and what we've been asked.
That's mostly what I have to say about the topic.
Okay. That's helpful and then just real quick.
Have you provided in the past the breakdown between domestic and international shipments.
China, if I remember correctly, maybe you mentioned domestic.
Domestic customers for more skewed towards.
Smaller foundry players is that a fair assumption.
Yes, that's still true.
The multinational activity in China is more mature and so.
Most of our business is in China, it tends to be native China as it relates to semiconductor process control. So within semiconductor process control systems about 25% or so of our shipments are.
Our China overall for the whole company as you with the service and include other parts of the company and EPC and so on you end up closer to one this last quarter was 29%.
Most so most of the business there and most of it is is across multiple projects. There's a lot of projects. They tend to be more foundry logic. You also have investment in infrastructure related to reticle infrastructure and wafer infrastructure. So there is investments that are happening there and we have products serve those parts of the market as well.
Great. Thank you.
Okay.
Our next question comes from Joe <unk> of Wells Fargo.
Yeah. Thanks for taking my question I was wondering if you could bring to go through kind of the puts and takes on gross margin this quarter and how we should think about the cost pass through this quarter and what's embedded in the guidance.
Yes, it's pretty much played out the way we expected we had more EPC revenue quarter to quarter as we had a record quarter and you can see and that was a little dilutive from a mix point of view and certainly the challenges related to supply chain and what that means in terms of factory efficiency is also a bit of a drag.
On our margins, but we had modeled that in for the most part and I think the guidance midpoint was 62 and a half and we were $62 four so pretty much as we had expected as we look at the September quarter.
Most of the growth is coming from our in fact, all of the growth and then a little bit because I would expect DTC to be down some quarter on quarter is coming from semi PC, it's a richer mix.
And so we'll see that go up about 50 basis points or so at the midpoint. We are seeing pressure from cost increase both in terms of parts, but also in terms of freight and logistics and I think thats taking away. Some of the what you would expect to see in terms of incremental leverage in our <unk>.
Expanding revenue environment like we're in so it's offsetting some of those benefits, but at the end of the day, we felt like we would be operating somewhere around 63% through this year and that's been the guidance of getting it.
For the most part.
In line with that.
That's very helpful. And then maybe I missed it but what was the mix of DRAM versus NAND for this quarter I know you data for the September quarter Guide.
Yes, so 45% was memory and the mix was two thirds DRAM.
Perfect. Thank you.
Our next question is from Patrick Ho of Stifel.
Thank you very much and congrats on a nice quarter maybe.
Maybe first off in terms of leading edge versus trailing edge foundry logic, obviously, I think a lot of it leading edge customers are still powering through.
With their investment plans.
The question of timing of when making it tools.
Can you characterize what you're seeing on the trailing edge given that theres a lot of noise around that have you seen any changes in that marketplace.
Our investment plans for that.
Device marketplace still on track.
On a going forward basis.
And yes, you're right.
Leading edge guys are continuing.
And we don't expect in our conversations with them. We don't expect any change in that in terms of the trailing edge, it's not really been a big part of our business and as we look forward.
We're still struggling with demand with supply for some of them and so actually the conversations we've been having have been more about them asking if they can accelerate deliveries then changing the profile. So given the conversations we've had and their desire to upgrade their facilities, it's not really a.
Change in our profile.
May soften, but it hasn't yet and in fact if anything.
I made earlier if people are asking a spot open up could they get access to them and that's really been more of the conversation that we've been having because some of the products that they need, especially in the trailing at tend to be bvt kind of oriented products, where we have tremendous demand.
Yes.
The thing I would add is about 80% of the revenue tends to be leading edge.
So where we are selling to the trailing edge you do have customers that are strategically trying to in source more so theyre, making more investments in longer term investments.
Yes.
Specifications for for end products are changing that could change process control requirements, but generally if theyre just expanding capacity to run parts that they've been running for a long time that are just reflecting as a result of the strong demand environment, you don't see real significant changes in process control intensity. They just add their process control.
Equipment as they're expanding the wafer starts at a particular facility so that drive the process control intensity that that's fairly light now over time.
I think what's happening in the end markets is creating some opportunities for us, but it is less of an impact in terms of the.
The financial or the revenue contribution from those customers to KLA, it's great. It's great revenue and it's profitable revenue given that we're selling older platforms for platforms that we've been able to extend into those markets, but the big driver for our business is much more around leading edge than than what we're seeing in the trail.
Yeah.
Great that's really helpful and maybe as a quick follow up question for you.
They've done a really good job of managing through the supply chain issues that in the screen ecosystem scene.
Costs are obviously elevated whether it's freight and logistics.
The movement.
Components and things of that nature, how do you look at the core.
Cost environment over the next several quarters is this something that we're just going to have to assume at least through the rest of 2002 and possibly into 2003.
Yes.
It's a good question and of course everything is more expensive and so we're seeing that flow through earlier in prior quarters, maybe the last quarter the quarter before I talked about this year expecting to see a 100.
Basis point kind of impact.
One point or so from incremental cost increase at <unk> freight into intuit, it's probably a little bit higher than that and so we are seeing that play through <unk>.
Generally when prices go up they don't necessarily go down.
And so we're not really planning on it and we will have to.
I said at Investor day that work for us to do in terms of how we think about.
In this overall.
Our products generally.
We're a value sell and so we think about the returns our customers are getting from our products and we try to share in the value of that return and part of our new capability cadence in terms of how we offer that to the market.
Managing not only new capability from a competitive point of view is important to that but also what it means to financial model in terms of an opportunity for us to reassess the cost situation in a particular tool and how cost of ownership plays out in terms of the improvements that we're offering and how we will share that so we're being opportunistic where we can serve.
We're not benefiting from that from the revenue expansion from a scale point of view and so we're not giving discounts related purely to volume to the extent that we have in the past and so we're resetting some of that with our customers.
But in general I think it's much more about.
The value offering and how things are.
Kind of how things are priced over time.
Great. Thank you again.
We will take our next question from <unk> Malik of Citi.
Hi, Thank you for taking my question I have a question on chips to act and I understand it's early it looks like equipment companies might be able to get money to expand manufacturing of equipment in the U S with priority going to companies that already manufactured in the U S and I understand you guys have manufacturing both the inside the U S and outside.
How would this change of control your long term manufacturing strategy.
Hi, Thanks for the question Yeah. It doesn't really change our strategy, we're not going to make decisions based on that we're going to make decisions as we always have based on where it makes the most sense for us to build the products to support our customers, where we can get the talent and where we can.
The supply chain that we need so it will not impact our decisioning.
After assets that were fairly asset light so to the extent that we're building or expanding our facilities anywhere it's really about <unk>.
Space more than anything and some equipment. So it isn't it's very different than what our customers in terms of significant billions of dollars of investment in our production facility. So to Rick's point, it's much more about the operational motives that we have in terms of why we build what we build where and.
Incentives, whether they come in the form of grants that come in the form of taxes or secondary obviously, we always optimize for wherever we are with the primary motive is very operational for us.
Great Mcdonalds brand 90 days ago.
We're talking about EPC system is growing 20% for the year in <unk>.
June was a record quarter or are you still looking at 20% growth for the EPC systems for the full year and how.
How are you what are you seeing in the mobile segment versus the auto segment of.
That end market.
Yes, no. It's a great question auto is continues to be strong auto and power, but we have seen some pressure, particularly in the PCP part of the business driven by the.
The softness in the mobile market I would expect ETP systems to be in the mid teens in terms of growth this year, a little bit stronger in the second half versus the first half just as the whole company is a little bit stronger.
But yeah, it's mostly been we've seen strength and improvement in SPT as our specialty semiconductor given its exposure to automotive the power, but we've seen some softness on the PCB side, so net debt.
Still a nice growth mid teens growth, but not not 20%.
Thank you.
And once again.
If you have a question or a follow up please press star one now on your telephone keypad.
One moment, while we queue.
We will take our final question from Goodbody Schnell of Jefferies.
Hi, Thanks for taking my question I just wanted to go back on something that was at play.
So you mentioned that.
Your question Mike.
Looking for slide <unk>.
Opens up.
Can you help me.
I understand how that works.
Thank you.
Push out some of your customers.
That means.
That's not inside a cool thing to estimate has to go back into line.
Is that alright interpretation.
Yes, so I think our customers have the same kind of question you do it doesn't really work that way I mean, what they really want to do is move up the priority list, but as we keep explaining to them.
We have far more demand than we have supply and while we're working hard to expand it. So it's just a question of can we can we get things done sooner and Thats really what they are asking is can you help but my point is.
That is for many customers the way they are approaching this they are hopeful that this will give them a chance to get some of the products that are pretty far out in delivery. So that's kind of the way to think about it it's not really exactly the same we do have allocations for for people, but they're just aren't open slots. So if somebody were to drop out of the queue. The next person.
Just move up in terms of the way that would work. So it's not people arent going to jump ahead in the line.
And so if I understand thank you Sir.
In case.
Does it push counting Nordic cancels.
They open up with slide eight.
Push out.
Tom.
So if somebody had a December slot right now and they said we don't need that until June. The next person in line in December would get that slot and they would be fit in somewhere in June.
Okay.
Likely or are customers that have slots in June that would love to have a slot in December so.
The lead times on some of our products. So that's the natural churn we see in a lot of it is tied to sometimes facilities and facility readiness. It also can be tied to whether they receive.
Certain tools from other other customers as they're setting up our other suppliers that they are setting up their production lines. So you always see a little bit of movement like that but to Rick's point were under serving the level of demand we have and so customers are having to get in line a long way out and a lot of cases, and so the ability to satisfy that.
Demand earlier.
Would be an opportunity for a lot of our customers that they would certainly want to take advantage of given the strength of <unk>.
<unk>.
Demand that they have seen but also their desire for these products in.
And our constraints around them.
Got it thank you.
Hey.
Thank you and thank you everyone for joining us we know how busy it is today in terms of earnings. So I appreciate your time and interest.
With that I will turn the call back over to Leo to call. It.
This concludes the KLA Corporation June quarter, 2022 earnings call and webcast. Please disconnect. Your line at this time and have a wonderful day.
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