KLA Corporation (KLAC) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Stacy Rasgon. I'm Bernstein's senior research analyst covering U.S. semiconductors. Before we start today, I want to take care of a little bit of housekeeping. I just wanted to mention if you have questions that you'd like to get asked during this presentation, you should have a link to something called Pigeonhole. It should be on the left of your screen, you can submit those questions there, and we'll have time for Q&A like that at the end. We're also doing some live polling during the session through Bernstein's partner Procensus, and you should have a link available for that on the right side of your screen as well. With the housekeeping out of the way, it gives me a great honor to introduce our guests today, Rick Wallace, the President and CEO; and Bren Higgins, Executive Vice President and CFO of KLA Corporation. Now the semiconductor capital equipment industry has been doing a bit of a renaissance over the last several years. Even given some of the current cyclicality, total WFE spend remains well above the prior peaks. The much anticipated end of Moore's Law far from reducing the need for customers to spend on equipment seems to have, in fact, made the contributions from companies like KLA are more important than ever. And in particular, KLA's focus areas, like inspection, metrology and analytics are becoming increasingly challenging and increasingly critical toward maintaining the road maps that we have. Now we don't cover KLA, it does come up in our conversations fairly frequently with the firm playing a particularly key role within semis and semi-cap, with virtually every electronic device in the world made possible in some way due to their products and technologies, and we'll hear a little bit about that today. Now as some of you may be unfamiliar with KLA, we are going to start today with CEO, Rick Wallace, giving a presentation that highlights some of the unique aspects of KLA's business, operating model and long-term strategy. And KLA's CFO, Bren Higgins, will join Rick in the Q&A session with me afterwards. With that, I'm going to turn it over to Rick. And Rick, thank you so much for being with us here today. I really appreciate it.

All right. Thank you so much for having me, Stacy. Let me start by sharing my screen and go to the slide show here. It's great to be here virtually, of course. I wish we could do this in person, but I'm really happy to have this opportunity. I'm going to share KLA. Let me start with safe harbor. A lot of things have changed, but this has not. We're still covered by our safe harbor, and you can, obviously, look to details on our website for any changes. I'm going to start, as Stacy said, a little bit about who is KLA. And even if you knew the company in the past, things have changed a bit for us given some of our recent activities and our acquisitions. When we talk about our operating model, how we run, our competitive position and then, of course, talk about capital returns and what the future looks like for us. Let me start with this. I think one thing that COVID-19 has taught us is a lot of things have changed, but one thing that has accelerated is digital transformation. And at the heart of digital transformation is the semiconductor industry, and KLA is critical to that. Because we enable people -- our customers to make the semiconductors that are enabling all the change that's going on. And our field has never been more important and never been more transformative. Also KLA has been around over 45 years, and I'm fortunate to have a very seasoned executive team that's been in place for a number of years, has seen a lot of trends. 2 things that does is it allows us to work incredibly well together. And the second thing is we've got a lot of history with customers and through this industry. And I think one thing that COVID-19 has also taught us is the relationships we have throughout the industry are incredibly important, and maintaining those virtually is something that we've been doing and continue to do as we go forward. As Stacy mentioned, there's not a device made in the industry that doesn't go through inspection or measurement or some process that KLA is involved in. And of course, the semiconductor industry started really, if you think about it with the space exploration projects in the '60s, drove the first needs, but the first consumer device was the PC. You look today and virtually everything is using semiconductors, and we're part of that. Our focus as a company has been to make sure we're very clear on our mission, our strategy and our objectives. And we've always been focused on the data era, but never has it been more prevalent and critical than it is now. We focus on leading technologies with differentiation, and we can back it up. We measure differentiation by gross margin. And years and years ago, when I was at KLA, I had a CFO at that time that said, you can tell me your gross margin, I'll tell you how differentiated your products are. And so we've always focused on that. We do it by working closely with our customers, driving innovation and then, of course, executing. At the core of what we do is we inspect, and we measure. Now that might sound simple, but it's anything but that, especially today, with the complexity that is part of the semiconductor industry as we see it today. And just to touch on that, a leading-edge factory today cost $15 billion. And at the beginning of that, there's no product coming out that yields, so that the most advanced devices when they're first manufactured by our customers don't yield yet. They don't work. And this is the only industry in the world where you spend $15 billion and not be assured to have an outcome. So the question for our customers is how quickly can they come up to speed. The process is incredibly complicated. There's over 1,000 steps. So you have to get it right, and then the costs are incredibly high. We know of customers that have lost wafers, tens of thousands to hundreds of thousands to tens of millions of dollars because their devices didn't yield. And in many of those cases, they've come back to us to provide more capability so they can see what's going on, so they can understand how their fab is operating and what changes they need to make, how they need to fix things. So we're looking for things that are anomalies. We're looking for differences as we compare the die that's in the semiconductor, and we're measuring things to make sure that the device is operating properly so that customers can get revenue from those devices and that they could do it quickly. The speed in which our customers ramp their fab from low yield to high yield has tremendous leverage. So often with our customers, it's never been about the value of the inspection, it's can you really do it? Can your inspection and measurement really enable me to climb the yield ramp faster? And as Stacy mentioned, one of the challenges for our customers is every generation of devices, this gets harder. And so the percent of the wallet, the percent of investment that our customers spend on inspection measurement goes up in order for them to be able to achieve these outcomes. So where are we as a company? We're founded in the '70s. At this point, we have 56,000 tools installed base. And what's important about that is I'll get to our service business because a large part of what we do is service those tools for a long period of time. We're, of course, global, have at this point over 10,000, about 11,000 employees. One thing that might differentiate us from a lot of companies is the percent of masters and PhDs that we have. And that's because what we're doing is solving some of the most challenging engineering problems in the world, and we're able to attract and retain talent to do that. We invest heavily in R&D, and that's what enables our competitive moat to continue to be present and enables us to solve the problems that the industry needs. Our revenue in our -- up quite a bit last year. As Stacy said, we're in a bit of a renaissance. And it's split between the systems that we sell and the service that we do. So we'll sell a system and our customer might use that system for 15 years, and we'll provide service contracts to support it. So our revenue is roughly 3/4 from the system sales and 1/4. And of course, the services are a bit of an annuity. We're a profitable company, 35.6% operating margin, and we pride ourselves on our financial performance. We also generate a lot of cash and we return it to our shareholders. That's why we think we're a good fit with the investor profile for this conference. Talking about the operating model, and this is really critical to our success. It didn't just happen. It evolved over time, and it evolved as we became more complicated. We recognize that as a company, who grew up in an industry which was full start-ups, we had to have a way to codify what we did and how we did it. But some core aspects of our business have always been true. We've always focused on leadership -- market leadership, making sure we're technological leaders and market leaders. We want to make sure that we have the technology to solve the problems of the industry and to maintain our lead. We invest heavily to make sure that we have a competitive moat, but more importantly, in many regards, is that we're able to allow our customers to achieve their objectives by solving their problems. We have a great management team, and we have a lot of talented engineers that love what they do. Because for many great engineers, the biggest attraction when you solve a hard problem is you get a harder problem to solve. And in this industry, we're never lacking for challenging product -- problems. And then lastly, we learned a while ago that the key to our success financially was to generate cash returns and to return those to shareholders, and I'll talk about that as well. As I said, we evolved over time. I joined the company -- actually, I was a customer of KLA back in the early '80s or mid-80s, and I joined in 1988, and a lot has happened since. I became CEO in 2016. And at that time, we we're evolving this operating model and evolved because we became a company with more and more divisions, more and more businesses. And we realized if we wanted to have common success across all these different entities, we had to figure out how to codify and how to run our businesses in a slimmer way because we have many product divisions, and so that's where the operating model came from. And then last year, in 2019, following our biggest acquisition of Orbotech, we outlined our plans for 2023, our financial model, knowing that our operating model was going to enable that success. And I'm happy to report 1.5 years into that acquisition, we're very confident, more confident than we even were 1.5 years ago about our success, driven heavily by this operating model. We focus on strategic objectives. Every business has these. They are 4 fundamental ones. I'm going to start with the operational excellence because I know this is an interest to investors in this conference. Free cash flow. Years ago, I remember, I first become a CEO, it was 2006, and one of the directors said, don't apologize for generating cash. Because many companies at that time, especially in tech, chased growth, almost at any cost. And for KLA, we found that in order to achieve our desire to have market-leading positions in relevant markets, growth wasn't going to be 25%. Growth was going to be more steady, but cash was there. And so we realized that, that was our secret weapon as we could generate free cash flow, reinvest that in business and then return it to shareholders. So we targeted back then, and I'll talk about our history, we started -- we're the first company in our space to do a dividend. We also took on leverage a little bit, just to have a more effective cash flow and a more effective balance sheet. So we returned that and we generated, and we're proud of our ability to generate cash. We're also proud of our corporate social responsibility. This has always been a focus for our company. In fact, in many ways, what we're trying to do is enable customers to invest less in other business -- other investments, so that they can get more out of them. So we focus on sustainable initiatives. Obviously, we have a lot of community focus, and we have strong corporate governance. I found over the last few years, this has become more important to investors, certainly more important to some of our customers who, too, also are focused on it, and increasingly important to the candidates that we're hiring as they come out of school. So CSR is something we've been doing for years and something we've been spending more time talking about as it's very consistent with our mission. We talk about our competition a bit. When we look at where we are in terms of the industry, I think nothing kind of tells us like the process control market share. We're 4x our nearest competitor across many years, and we've sustained that. And we do that, it's not an accident. We do it by collaborating with our customers, driving innovation and executing. And we also invest. We invest heavily to make sure that we're figuring out what problems are coming, and we're providing those. And as a result, we've maintained this market share. And what comes with high market share is gross margins. So when we compare ourselves to our peers, we're proud of our gross margins. Our people are proud that we're able to get paid for what we do, and we're able to get paid, differentiated from our peers. And that drives operating margin as we drive efficiency throughout the business. And this is something that we're also focused on. Every business manager, every leader, every general manager of KLA is probably an engineer, but they've learned about the importance of driving gross margins and operating margins as part of the operating system of KLA. Looking at the last 10 years, and we think about the history of our operating margin, and we compare it to other indices, and we're pretty proud of where we stand. Higher gross margins than the S&P, the Dow Jones, Nasdaq and even the SOX. And of course, it doesn't come without investment. So our R&D continues to go up, and we focus on making sure that we're working closely with our customers, we're working ahead in 2 generations to make sure that we have the products they need well ahead of time and that we continue to bring out new products. It was going to be an interesting test this year in COVID to see how we would do, and I'm very pleased to report we've continued to drive this, be successful in spite of the challenges that we faced with COVID-19. If you look at our revenues and we compare that with our peers -- our competitors in this space, and they're significantly higher even than some very big companies, but this is in process control. The market that we're in. And one of the factors we'd like to point out is we spend more in R&D than our biggest rival gets in revenue. So this is something that I don't think R&D is the only thing that matters. You have to effectively deploy it, but it certainly matters. You have to be able to invest to be able to be successful. When it comes to cash flow, we definitely look at how fast can we get cash generated. And that's one of the -- every new product we look at, every acquisition, we think about what are the returns going to look like and how do we return that to shareholders. So we look at this gross margin and free cash flow conversion. And as you'll see, we're very asset light as a company. And so we can drive 70% of our free cash flow back to our investors through both dividends and buybacks. And we don't have to do a lot of buybacks because we don't dilute our stock very heavily. So most of that can actually be focused on dividends. Our dilution rates are very low, especially when you consider for tech because we realized long ago that for many of our employees, long-term rewards in cash are more efficient and more effective than diluting our shareholders. So here's our free cash flow margin in the last 10 years, and you can see how it compares to the same indices we showed before. Again, we're very proud of it, and there aren't that many places I think where engineers are proud of free cash flow generation like they are at KLA. I mentioned asset-light. If you look at a percent as compared again across the same indices and then our capital returns, we're very proud of this. Most of our investment is in people and our R&D workforce. And we do invest in that, as I mentioned, but it doesn't take a lot of assets to continue. Mostly, it comes in buildings and some labs in terms of where we spend our money. I mentioned early on that we have the services business that we recognized it was a growing business. If you look back for 20 years, it's grown every year and it's accelerated growth. And one of the things that's happened is customers have kept these tools in service much longer than they originally anticipated. So service can actually grow faster than the rest of our businesses because of this installed base and the attach rate from the subscription-like contracts that we have with our customers. So we've seen 10% CAGR over this, and we're expecting and we'll model that for the future to be at a high level. And this drives free cash flow and it's a virtuous cycle as our service revenue grows, our efficiencies in services grows as well. A couple of years ago, services for many companies were kind of an afterthought, for tech companies. But a few years ago, we highlighted the importance and put it on the executive staff and drove it with some really committed leadership. And now the Services group is very proud of their performance and their ability to generate returns. I talked about repurchases. And here, you can see over the last years, that the 1 year we didn't, we're in an M&A discussion, but other than that, we've been consistent purchasers of our stock, and we've increased the dividend every year, you can see since we initiated in 2006. As I mentioned, we are the first company in our space. And largely driven by our recognition of the Services business being somewhat of an annuity and that one that could support our returns. One of the questions we've had, and Stacy mentioned this, is one of the things that's changed in the industry -- two things, really. One is the demand for semiconductors has become much more ubiquitous than it was. And that's reduced the cyclicality. Wafer front end is really the term that people use for all the equipment that's used for making semiconductors. And you can see the volatility of that. KLA is already less volatile than the rest of the industry. But the last several years has become far less volatile. And the reason for that is the proliferation of devices that drive the demand for semiconductors. So that's reduced the volatility and made our business much more predictable. As I mentioned, we have taken on debt, and we're proud of where we are in terms of liquidity. We recently refinanced some of our debt and the next that we have due is not until 2024. So we feel good about where we are and how we're positioned. Let's talk about the model. We laid out the 2023 model when we looked at the post-acquisition of Orbotech. And we talked about it last year at our Investor Day. We said we can envision a growth rate that's higher than what we'd prior anticipated because of the changes in the growth that we've seen for our overall markets, the 4% to 5%, but also the fact that we've gained share, and as we continue to invest, and we also see growth in Services. So now we have a long-term model, 2023 of 7% to 9%, driven by industry growth, our ability to continue to hold and gain share in our Services business. And what's really exciting about that is that translates into this model. So 2023 targets. Right now, we envision $7 billion to $7.5 billion at 36% operating margin with $14.5 to $15.5, and we'll return over 70% of free cash flow. When we laid out this model over a year ago, September of 2019, we were confident then, but we're more confident now. Even though we've had a year of COVID, what we've demonstrated is our ability to execute on the acquisition that we did with Orbotech, and we've seen the strength in our business and the interest from our customers and continuing to partner and build on our success that we've had in the past. So we feel great about where we are and our ability to continue to drive success. So just wrapping it up, semiconductor is more important now than ever before. We're certainly in a data era. And if anything, COVID-19 has accelerated digital transformation across our customer base and across the industry. So for that reason, we're in a great position to continue to grow. We've also got this amazing Service business that augments the rest of our business. And we believe we've got a lot of qualities that should be appealing to investors that are looking for steady growth, profitability and consistent returns. And with that, I'd like to turn it over to Q&A, and thank you all for spending this time with us today.

Got it. Thank you, Rick. Super helpful. I want to get started a little bit on some of those broader, longer-term market questions. Now near-term cyclicality and virus and everything aside, semi cap industry, as it does appear to be coming under a structurally higher view of industry wafer fab equipment. I mean, it's -- I know where it is, now $50 billion a year, give or take, at the current level. I mean, prior peaks were like $35 billion. Now at the same time, if I look at your longer term model, you sort of were looking at sort of industry wafer fab equipment, capital intensity, at least maybe flat to slightly up, call it flattish, but you also had a point of view for new product introductions from KLA themselves coming in, which to me would suggest that you saw the intensity of process control itself actually increasing relative to overall wafer fab. I mean, Is that logic correct? And maybe could you give us a little more color around how to think about the growth of like process control in the areas in metrology and the areas where you play relative to the overall capital equipment or capital intensity of the overall sector going forward?

Yes. Let me start, and then Bren can, of course, add in. Yes, that is what we see. However, when we modeled it, we weren't sure what WFE growth was going to be. We actually modeled WFE, which is the equipment, was going to be roughly consistent with semiconductor growth because our view is that the capital intensity was going to stay the same, and we were going to see -- we created a model where we'd see marginally similar process control. But what we've seen is that on top of that, as you said, new products, so we feel pretty good about that. And in fact, we think there's room for growth in process control intensity. But when we set that model out, we didn't really want to count on it. And as you said, we have some new products that will add to both our share and process control intensity overall, and Bren can quantify some of those.

Yes. Stacy, so the way we thought about it, is you're right, is we really wanted the story to be more about what we thought was happening within our space and also some new products that we were introducing. So our view overall was, look, capital intensity is no longer declining. There's a lot of efforts in the industry to keep it from going up, but we're going to have a flattish assumption. And so WFE going forward would grow, mostly in line with semiconductor revenue. And certainly, we've seen -- and I think that was reasonably conservative, but at the same time, we didn't necessarily want to make judgments about that. But as you look back over the last year or so, we've seen a lot of growth there. And I think one of the wildcards that initially, and we wanted to see it play out was the growth of foundry/logic, which has now, for a number of years, it wasn't growing or it certainly wasn't growing as fast as memory was growing. And over the last few years, we've seen strength there and mostly enabled by the introduction of new lithography capability in the industry, which has driven scaling, which has increased the Moore's Law attributes of devices in logic and foundry. And so you look at the broader end market demand, plus the EUV effect and so that's driven more investment than in that part of the market. And that part of the market is more process control intensive. So that's been encouraging for us. We also were looking at new products with the introduction of EUV that we would have products that would enable us to get customers to spend more in process control and improve our share position. And there were a number of new products that we talked about at Investor Day that would be an adder to that industry growth. Service continues to do what it's always done. It's been a 10% growth business. And yes, it's larger numbers now, but our view on that is that it continues to grow at that level. A lot of the installed base is still in service. It's being run harder today than customers have historically. In fact, 85% of the tools at KLA and Tencor have shipped, going back to the '70s, are still in service at some level by customers out there. Doesn't mean we're servicing all of them, but customers are still using them. But it is an indicator of the useful life of these products. And so that would be an underlying driver to contribute, another couple of points to the overall growth rate. So when you add up the pieces, you get up to the 7% to 9% longer-term through-cycle view of top line growth for the company.

Got it. To touch on Services for a minute, I mean, would it make sense that -- and again, where you're coming out, like historically, it grew at 10%, you're modeling that kind of going forward. But as the installed base grows and the tools themselves become more complex, would it be only way to think that Services actually could grow faster than it has grown in the past. I mean, I would just think, overall, as you've got more and more tools building into the installed base, and especially with the longer life of them, Services could be an even bigger driver. Like, what would be wrong with that kind of logic?

Well, we keep telling our teams that we use that same logic with them. Yes, absolutely. And given the strength we're seeing in the overall business over the last couple of years, that's adding more to the installed base. And our customers buy our tools and with process control, they tend to buy what they need. They don't necessarily buy a lot of extra tools. And then so what they do is that they rely on them and so they run them pretty hard. In a lot of cases, they're very complicated. They don't have huge installed bases like they would have processed tools, where they can build their own capability to service the tools. So they rely on us to keep the tools up. And so it is a driver for us in terms of just broader installed base and more growth there. So I think that we feel pretty confident about the 9% to 11%. And I do think for the reasons that you mentioned that there could be some upside there. We have to execute. We got to keep customers and continue to deliver value on some of the offerings we have, particularly on trailing edge products and the ability to continue to service them, which is not always easy just given supply chain challenges and so on. But there is an opportunity there. And if we can execute and deliver value for sure.

And one more question on Services. What drove the inflection over the last couple of years in Services? I mean, the chart was doing this and then it did that.

Yes. Most of that has been the -- there's a couple of factors. A, it's just we've seen a lot of growth in the business overall, right? The business will grow. Systems, process control systems will grow 15% this year. So that's been a driver of it. We've also added in the Orbotech services businesses. And so that's been a driver as well. So if you look at our overall service, I think external reported is somewhere between $1.3 billion and $1.4 billion. About $300 million to $350 million or so of that is related to the Orbotech businesses. The rest is the semi process control. The other point about service is customer consolidation has been a big driver for leverage in the business, right? We've been able to invest in infrastructure. And so we're able to drive good operating leverage on the revenue growth today because fabs are closer together, we can get leverage on our resources, we've invested in capabilities to support them. And so that's been a good driver for the -- from a profitability point of view for the service business as well.

That's interesting. I would have thought the customer consolidation, in general, would be a negative for you and for semi cap broadly in terms of profitability, just given the better bargaining power and negotiating power of the customers.

Well, so Stacy, you think about it like this, if a lot of service time is not actually in the fab because there's transport time, there's time to go in. So if you go back long enough, you could have a person service 1 system, and it could take a fair amount of their time. Now if they can go into a fab and they can service 10, so, yes, you might have customer power in terms of negotiating, but you have efficiency based on the density. And so you have a lot more systems to be serviced and you have the ability to -- the downtime, the utilization, which is something we track of the service engineers goes up. So that's an area. Now one thing that's been interesting in COVID is a lot of interest in remote, and tell -- so we brought a lot of technology to bear in the last year, both for installations and also service, which is something customers have been reluctant to do because of IP, but I think we're working through that. So there are -- there is reason to believe it can get more efficient as we go forward.

Okay. Got it. Now the other aspect -- one of the other aspects of the longer-term growth model was new product introduction. You talked about like an accelerated pace of new product introduction. I know you talked about a few of these at the Analyst Day. But in general, if I were to broaden the question, like, what are some of the sort of the most difficult technical challenges that you're now helping your customers with that are going to be rolling into the model over the next several years? Like, where are you actually really leveraging your know how to help the customers. What are the toughest things that they're dealing with right now that you're helping them with?

Well, I'll start, and then again, Bren can add in. EUV. If you think about EUV, EUV has presented a number of additional challenges for our customers that heretofore have not really been solved. And as they scale in production, there's more opportunity there. So that's one area. The other area is in memory, there've been -- there has been more opportunity for memory inspection and measurement than there have been solutions. And that's because the problem by memory going vertical, it's gotten new technologies how to deal with that. So we have products in both of those areas that are enabling customers to solve more problems and provide growth. And as I said in the opening comments, we're making progress on that. There's certainly a huge customer need for that, but 2 areas, and maybe Bren can quantify some of those.

Well, the other part about it is -- and it really covers to Rick's point about both segments is an e-beam inspection offering, right? So a new offering that is part of our inspection portfolio. And we're really the only provider out there that can offer multiple technology solutions to our customers to balance their needs in the facility, both from a sensitivity and yield learning point of view, but also from volume and production efficiency point of view. And so the introduction of e-beam capability allows our customers to do some of their high-end defect discovery work, and we use that information that comes off those tools and with AI algorithms to do machine learning to train our inspectors. Signal-to-noise is a huge challenge for our customers in trying to speed your learning and fab. And so using these capabilities enables them to help find that noise or find that signal through the noise and to accelerate that process. Most of our competitors offer point products, but being able to introduce a solution that allows us to leverage the portfolio. And we have metrology strategies that are similar to this, but on the inspection side, that that's also a factor in our model. So we had opportunities around reticle and reticle qualification; new high-end pattern inspection tools, we call it our Gen 5 product, the second iteration of that; memory; metrology opportunities; but also a new product offering to leverage the inspection portfolio with e-beam technology. Those are the biggest sort of new product opportunities. We thought that based on our assumptions on the market that when you aggregate all of it, it would create a $500 million type opportunity for the company by 2023. Now we have to execute and see the market and get some of these capabilities out there in a blend of intensity and share improvement. So that was an upper above the industry growth that we had modeled there, where we talked about 1% to 2% of incremental CAGR coming from that.

Got it. Got it. And I guess, across the 2 private -- like, within inspection and metrology, do you see similar growth opportunities and trajectory for both of those businesses? Or are there differences between them?

Well, there are definitely differences, but there are things that are driving both of them. And now that scaling is back on, one thing that EUV did on advanced nodes is we went through this period where there was no new lithography technology. So scaling had really slowed for a number of years. So EUV is driving both things. One, you're driving the defect level has to go down because smaller defects matter. And so that drives our inspection business. The other thing that's driven is the registration from layer to layer is more and more critical. So businesses around overlay around the measurement of that have gotten increasingly important and the places where people sample goes up. So that's a driver. Then the other one we talked about is memory, and memory just capacity is going up, and that drives it, too. So we really have several segments that are all driving it. But I'd say in aggregate, there's not a huge difference between what we're seeing out of metrology growth and inspection growth.

I'm sorry, Bren, were you about to say something?

No. I -- for some reason, I had some technical difficulties. I dropped off. So -- and I don't know what's going on now with my camera, but I'm sure Rick covered it.

Even we can't see you. It's okay.

Yes. I'm sure Rick covered it well.

Yes. I want to touch again, if I can go back to the e-beam commentary for a moment. There are other players that are already doing e-beam. ASML, I think, is already doing multi-beam. Can you give us maybe a little more color on what the e-beam road map that you have looks like versus the competition?

Yes. I'm happy to do that. I just sat through 2 days of reviews on programs. So I'm very updated. So we had some -- we have a fundamental approach to e-beam that's different architecturally than our peers, but we have the added benefit of having the leading optical inspectors. So for those of you who aren't following this in great detail, optical inspection is much faster than e-beam. E-beam in theory finds more or finds the defects that are more critical, smaller. So the benchmarking that we've seen so far as we've rolled out our e-beam product, we're getting very good feedback from customers. We're getting a sense that we're not just finding what the other guys are finding or measuring, but we're doing more based on the architecture that we've driven. So we have a road map to continue that. We also have it for both reticle inspection and wafer inspection. As Bren mentioned, we've always used the thought that they were complementary. Because one of the successes KLA has had, and we had this when we merged with Tencor, and I came from KLA, I realized there's a huge benefit in giving customers a portfolio and the choice of how they want to implement the best strategy for them. So on the one hand, we have the road map, we have the linkage with our optical. On the other hand, we benefit from customers not feeling like we're forcing them to adopt a system. So we feel pretty good about our differentiation in e-beam, but also in how it ties to the other products. There are other things that are going on. One -- and I'm sure this wouldn't be a surprise to people. There's a lot of efforts in machine learning and AI and inspection. But what we've noticed is we've been able to leverage our approach that we use across multiple products and multiple divisions. And that's enabled us to leverage the algorithms in the groups that we're doing there, including what we're doing in e-beam, and we think that gives us an additional advantage. The pictorial that's behind me, that's the building that we're building in Ann Arbor. And it just finished. We put the last steel in, we'll be fully up in Michigan. And we're about 250 people, but that's 1 place we've added a lot of AI capability to address centrally these challenges that we face across our product portfolio. So we're really proud of where we stand in both algorithms as well as core e-beam technology.

Got it. That's helpful. I want to ask about some of the longer-term like share targets. So like currently, you put up that chart, which I thought was fantastic, showing your market share, at least especially in process technology, it was 50%, much higher than peers. The long term, I think you said you thought the TAM would be $10 billion-plus and the revenues will be $7 billion plus, which is more like a 70% share. I don't know if I'm like doing apples and oranges or not. But it seems to me like you're seeing market share like overall at least as a percentage of the TAM going up. Can you talk a little bit about what's driving that? I don't know if that's the Orbotech acquisition or if it's something else. But like how do I -- what's the bridge from where we are now and where we're going there?

Sure. What we laid out in our plans -- 2023 plans that we laid out in 2019 was we're going to -- our goal was to gain half a market share per year. So 2.5 points over 4 years. That was the 2 to 2.5 percentages, not 20%. But we actually gained 2.5% in 2019. And so now we're continuing on that pace to gain about 0.5% per year. So I think you've seen different data, but we know that customers are always -- it goes back to this consolidation. We're always going to have competition in every market segment that we have. So we don't want to make plans that are counting on huge inflections in market share, but rather continuous gaining in share as we bring out new products, and we continue to invest. So the 2023 plan that we talked about has pretty modest market share improvements over time. And part of that is we don't compete in every segment of process control. We only compete in the ones where we feel we have differentiation, and we can have a significant lead in the market. So there are some markets that we don't play in. So our 50% is inclusive of some of the ones, for example, CD SEM is a market we don't compete in. But our plans are to continue to gain share, but modest gains over time, given how dynamic our customers can be and they're tough. We're going to battle them for share all the time.