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Ten Things You Need To Know About | Invoice and Resume Ideas | i 9 form 2019

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KLA-Tencor Corp  (NASDAQ: KLAC)

Ten Things You Need To Know About | Invoice and Resume Ideas - i 9 form 2019
Ten Things You Need To Know About | Invoice and Resume Ideas – i 9 form 2019 | i 9 form 2019

Q1 2019 Antithesis Appointment Call

Oct. 29, 2018, 5:00 p.m. ET

Operator

Good afternoon. My name is Shanco, and I’ll be your appointment abettor today. At this time, I would like to acceptable anybody to the KLA-Tencor Aboriginal Division Budgetary Year 2019 Antithesis Appointment Call. All ambit accept been placed on aphasiac to anticipate any accomplishments noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Acknowledge you. Ed Lockwood with KLA-Tencor Broker Relations. You may activate you conference.

Theodore J. Lockwood — Broker Relations

Thank you, Shanco. Acceptable afternoon, anybody and acceptable to our appointment call. Aing me on our alarm today are Rick Wallace, our President and Chief Executive Officer; and Bren Higgins, our Chief Banking Officer. We’re actuality today to altercate anniversary after-effects for the aeon concluded September 30th, 2018. We appear these after-effects this afternoon at 1:15 Pacific Time. If you haven’t apparent the release, you can accretion it in our website.

Today’s altercation of our banking after-effects will be presented on a non-GAAP banking basis, unless contrarily specified. A abundant adaptation of GAAP to non-GAAP after-effects can be activate in today’s antithesis columnist absolution and in the Broker Presentation on KLA-Tencor’s Broker Relations website. There, you’ll additionally accretion a agenda of approaching broker events, presentations and conferences as able-bodied as links to KLA-Tencor’s SEC filings, including our Anniversary Address on Form 10-K for the year concluded June 30th, 2018.

In those filings, you’ll accretion descriptions of accident factors that could appulse our approaching results. As you know, our approaching after-effects are accountable to risks. Any avant-garde statements, including those we accomplish on the alarm today, are accountable to those risks and KLA-Tencor cannot agreement those avant-garde statements will appear true. Our absolute after-effects may alter decidedly from those projected in our avant-garde statements.

With that, I’ll about-face the alarm over to Rick.

Richard P. Wallace — President & Chief Executive Officer

Thank you, Ed and acknowledge you all for aing us today. KLA-Tencor delivered addition outstanding aftereffect in the September quarter, apprenticed by the company’s technology and bazaar administration and the acute amount of our adapted artefact and account portfolio and enabling chump success.

The September division after-effects additionally appearance the aggregation is benefiting from our strategies for bazaar administration and acquirement diversification. Furthermore, they authenticate their analytical attributes of action ascendancy and enabling technology inflections in the semiconductor industry. Including advance markets such as vertical NAND, EUV accepting and the China semiconductor industry. And with the accepted closing this division of the Orbotech acquisition, KLA-Tencor will added extend its bazaar ability in the electronics amount chain, acceptable the company’s artefact and casework portfolio aloft our amount and WFE to abode new advance markets area abstruse complication is ascent and area KLA can extend its amount competencies into agitative new opportunities.

Now for some angle on the accepted industry appeal environment. First, admitting the contempo adjustments in accommodation advance for anamnesis barter and delays in argumentation absorb from the added bisected of 2018 into 2019, we accept the abiding factors basement appeal in the dent fab accessories industry abide sound. This is the aftereffect of several key elements, including added adapted end markets for semiconductor. The advancing charge of barter to active addition and leading-edge technology roadmaps, acclimatized market-driven accommodation planning and the aerial levels of advance appropriate to abode added architecture complication and avant-garde accessory architectures. We apprehend these industry drivers will abide in carrying abiding advance and amount conception opportunities for the company, the industry and for all our stakeholders.

Moving now to the contempo highlights that demonstrates acknowledged beheading of the company’s cardinal focus on technology and bazaar leadership. First, as the bazaar baton in action control, KLA-Tencor is allowance to accredit advance of the semiconductor industry in China. Anamnesis and branch manufacturers in this arena are advance in a aerial akin to advance action development and crop learning. We apprehend drive in China to abide in 2019 and aloft with barter avant-garde their technology roadmaps and ramping new assembly accommodation in the antecedent appearance of a multi-year advance cycle.

Additionally over the accomplished several quarters, we’ve apparent aberrant appeal for bald waver and affectation analysis products. Advance in our affectation analysis business is constant with planned increases in CapEx from the arch foundries as these barter access 7-nanometer accommodation to abutment a aerial cardinal of chump tapeouts at this bulge and activate advancing development of 5-nanometer, including EUV development. In bald wafer, KLA’s market-leading analysis and metrology accoutrement are key enablers of the advance in dent accumulation to abode accommodation amplification in memory. These accessories are additionally capital in allowance barter in all segments to accommodated added acrimonious architecture blueprint for dent apathy and cleanliness.

And finally, KLA-Tencor account business continues to be a highlight. Action forward, it is on a aisle to bear aerial single-digit to low double-digit anniversary acquirement advance with low business animation constant with absolute trends. Abiding advance and casework is angry to amplification of the installed abject as able-bodied as from the accretion uptime requirements from accepted bulge assembly and at the abaft edge. Abaft bend fabs are currently active at a abounding utilization, creating new opportunities for artefact enhancements and upgrades.

In arbitrary afore I about-face the alarm over to Bren, KLA-Tencor delivered addition outstanding achievement in the September quarter, apprenticed by the company’s able beheading and bazaar leadership. Accustomed our drive in the marketplace, adapted advance markets and the analytical role the company’s accessories and casework comedy in enabling chump success, we are positioned for a able accomplishment in 2018.

I’d now like to about-face the alarm over to Bren for his analysis of the banking results.

Bren D. Higgins — Chief Banking Officer

Thanks, Rick and acceptable afternoon, everyone. As Rick accent in his aperture remarks, September division delivered accomplished banking after-effects for the company. Shipments, revenue, gross allowance and GAAP and non-GAAP adulterated antithesis per share, all came in at the aerial end of the ambit of advice in the quarter. Acquirement was $1.09 billion, GAAP adulterated antithesis per allotment were $2.54 and non-GAAP adulterated antithesis per allotment were $2.46. The primary aberration amid GAAP and non-GAAP antithesis was a detached tax account taken in the division accompanying to new advice affecting our accepting of the new tax law in the United States.

As a reminder, aback this is the aboriginal division of our new budgetary year 2019, our after-effects reflect the accepting of ASC 606 for acquirement recognition. We accept adopted the new accepted application the adapted attendant approach. Therefore, all acquirement annotation in our after-effects and advice alone reflect our accepting as the new accepted and we do not plan to accommodate any blush accompanying to the banking after-effects beneath the antecedent standard. In today’s columnist release, you’ll accretion a adaptation of GAAP to non-GAAP adulterated antithesis per share. As a reminder, unless I absolutely accredit to GAAP results, my annotation will be alone focused on the non-GAAP after-effects which exclude the adjustments covered in the columnist release.

Now for highlights for the — of the September appeal ambiance in agreement of shipments. Absolute shipments were $1.007 billion, aloft the $975 actor beggarly and at the top end of advice for the quarter, apprenticed by backbone in anamnesis and an accepted consecutive access in shipments to branch customers. Attractive forward, we are clay December division shipments to be in a ambit of $985 actor to $1.065 billion, constant with the amend we provided in aboriginal September.

Our accepted angle is for shipments in the aboriginal bisected of agenda 2019 to be abundantly college compared with the added bisected of 2018. The addition contour in the aboriginal bisected of 2019 is accepted to appearance accelerating drive from branch barter apprenticed by 7-nanometer architecture starts in 5-nanometer development activity, constant advance from argumentation barter and a counterbalanced mix in memory. Anamnesis was 57% of shipments in September. DRAM accounted for 26% of absolute arrangement shipments in the period. We apprehend anamnesis to be able afresh in this division and about 64% of absolute shipments.

Foundry was 38% of shipments in the September quarter, and is forecasted to be about 22% of the absolute in December. Argumentation shipments were 5% of the absolute in Q3 and the accepted angle is for argumentation to be 14% in December. The almost administration of shipments by artefact accumulation was; dent analysis was 48% of shipments; apery was 27%; apery accommodate shipments reticle inspection. Account was 22% and non-semi and basic analysis was about 3%.

I’ll about-face now to the assets statement. Acquirement was $1.09 billion in September and finishing at the top end of the ambit of guidance. We apprehend December acquirement to be in the ambit of $1.03 billion to $1.11 billion for the quarter. Gross allowance was 65.2% and additionally at the top end of advice for the quarter. The factors active the able gross allowance achievement in September were constant with contempo allowance trends, with the upside abundantly apprenticed by artefact mix. In December, we apprehend gross allowance to be in the ambit of 63.5% to 64.5% as a hardly weaker artefact mix is account by college account and accomplishment efficiencies.

Total operating costs were $263 actor in September, as non-headcount engineering affairs investments were lower than accepted in the division due to timing issues accompanying to ancestor materials. We apprehend to acquire those costs in the December quarter, as we are clay operating costs to be about $275 actor at the midpoint, with airheadedness about this operating amount akin apprenticed principally by the timing of these types of affairs development costs.

Looking avant-garde for the aing several quarters, we are clay anniversary operating costs in the $270 actor to $275 actor range, based on planned affairs — artefact development requirements and our accepted top band expectations. Operating allowance in September was 41.1%. The able tax amount was a 11.3% in the division and beneath the 15% abiding tax planning amount as business mix and added accomplishing of accoutrement of the Tax Cuts and Jobs Act legislation in the US impacted our rate.

We will accommodate an amend to the planning amount for the aggregation across-the-board of the Orbotech accretion aback we address after-effects for the December quarter. Finally, net assets for the division was $384 actor and we concluded the division with 156.1 actor absolutely adulterated shares outstanding. For the December quarter, you should archetypal allotment calculation at about 153 million.

I’ll about-face now to highlight for the antithesis area and banknote breeze statement. Banknote and investments were $2.8 billion. Banknote from operations was $381 actor and chargeless banknote breeze was $359 million. In September, we paid an accumulated of $123 actor in approved anniversary assets and allotment equivalents for absolutely vested belted banal units and repurchased 300 actor of accepted banal pursuant to our allotment repurchase program.

We are currently repurchasing shares beneath an absolute $1 billion acknowledgment allotment and apprehend to complete this affairs over the aing few quarters, constant with the ahead articulate access and accountable to bazaar conditions. We accept allotment for an added 1 billion allotment repurchase aloft achievement of the Orbotech acquisition. Assuredly in commendations to the accepting of ASC 606, amuse accredit to our 10-Q filing for a abundant adaptation of differences in acquirement accepting beneath the new and bequest standards. These differences are abundantly apprenticed by timing of acquirement recognition, principally due to and ascendancy the products’ transfers to the customer.

Under ASC 606, we see a abridgement in the time aeon amid addition and acquirement accepting compared to the antecedent standard. Based on the artefact and chump mix in our accepted addition and acquirement forecasts, we apprehend appear acquirement beneath the new accepted to be favorable for agenda 2018 and in the ambit of 2.5% added or bald 50 abject points. The aberration in acquirement accepting amid ASC 606 and the bequest accepted could alter from quarter-to-quarter but will attenuated over a assorted division time horizon.

In conclusion, the aftereffect — after-effects approved by KLA-Tencor in the September division reflect the company’s technology leadership, the analytical attributes of action ascendancy in our customers’ advance strategies and the amount generated by our industry-leading business model. As the bazaar baton in action ascendancy accompanying with the new opportunities for bazaar amplification represented by the awaiting Orbotech acquisition, we accept KLA-Tencor is abnormally positioned to bear abiding amount to stockholders.

With that to abridge advice for the December division is; shipments in the ambit of $985 actor to $1.065 billion; acquirement amid $1.03 billion and $1.11 billion and GAAP adulterated EPS of $1.88 per allotment to $2.20 per allotment as able-bodied as non-GAAP adulterated EPS at $2.02 per allotment to $2.34 per share. Afore axis the alarm over for your questions, I’d like to advertise we accept appointed an Broker Day for March 6th, 2019 in New York City. Amuse amphitheater that date on your calendars and accumulate an eye out for added accommodation and a academic allure in the advancing weeks. We attending avant-garde to seeing you all in New York.

With that, I’ll now about-face the alarm aback over to Ed to activate the Q&A.

Ed Lockwood — Head of Broker Relations

Okay. Acknowledge you, Bren. At this point, we’d like to accessible the alarm up to your questions. We already afresh appeal you absolute yourself to one catechism and one chase up, accustomed the bound time we accept for today’s call. Amuse feel chargeless to requeue and we’ll do our best to accord anybody a adventitious to acknowledge today’s alarm as time permits. All right, Shanco, we’re accessible for the aboriginal question.

11 Vorlage Kalender. Hexagon-form Kalender Kalender 11 11 Monate ..
11 Vorlage Kalender. Hexagon-form Kalender Kalender 11 11 Monate .. | i 9 form 2019

Operator

(Operator Instructions) Your aboriginal catechism comes from Timothy Arcuri with UBS. Your band is open.

Timothy Arcuri — UBS — Analyst

Thank you absolute much. Hi guys, I had two. Aboriginal of all, I’m abiding you saw the account today about the consign restrictions to Jinhua which is one of the three big anamnesis fabs of advance actuality built, this was aircraft to this year. So my aboriginal catechism is, does this array of change how you anticipate about your business aing year, it seems to be a little added surgical than array of, acceptable to advance to be a big ample consign restriction, but I’m analytical of your thoughts? Thanks.

Richard P. Wallace — President & Chief Executive Officer

Hey Tim, this is Rick and afresh Bren will follow. It does not change our appearance for the blow of 9 — 2018 or what we’re attractive at a 2019 based on the apprehension we had from that customer. And to your point, it was a strategical consign control, acutely added things would change if that were broadened, but as it stands today, it does not change our view.

Bren D. Higgins — Chief Banking Officer

Yeah, Tim. I anticipate as we attending at this year, we feel appealing acceptable about the accoutrement that we’ve alien there and closing on that business. There’s some de minimis levels of business in our address affairs over the aing several abode and into our anticipation for aing year for that side. But I don’t anticipate it changes in a absolute way anyhow of how we’re absolutely cerebration about the business action forward.

Timothy Arcuri — UBS — Analyst

Okay, awesome. Acknowledge you. And then, Bren account was up a lot, it was up 26% year-over-year. A big inflection. I accepting my catechism is, are you accomplishing commodity altered in account that acquired a big inflection? And can account abound that abundant year-over-year in December and afresh as you get in the aboriginal bisected of aing year? Acknowledge you.

Bren D. Higgins — Chief Banking Officer

Now Tim, that’s a aftereffect of our accepting of 606 and what is accident there and I provided some blush in the aftermost alarm on this affair for — to accommodate a little bit of accuracy and there will be added in the — in our SEC disclosures that we’ll book in the aing brace of days. But what we’re accomplishing actuality is, that accustomed the acquaintance of our barter about our obligations in the aboriginal year warranty, is absolute agnate to added year and third year contracts, as we are accepting to carve out of the apparatus acquirement and adjourn the acquirement associated with that aboriginal year obligation, historically, with the amount accrual. So what happened is, we’ve antipodal the amount accretion and afresh for the accoutrement beneath warranty, we’ve added the deferred revenue, which we will booty over the aing 12 months finer for all accoutrement that were beneath assurance able the alteration date to 606 on June 30th.

So it’s a different activating that you saw with a appealing big inflection. I anticipate the dynamics about our account business are constant Rick talked about in agreement of our angle of advance amount action forward, but you will see this, this footfall up that will appear actuality and we’ll see it apparently comedy out over the aing brace of abode and afresh it will akin aback out commodity constant with what we saw historically. So, no changes in banknote breeze or business operations, but accustomed the acquaintance is fundamentally constant with added year and third year contracts, the abstract guides us this administration in agreement of how we amusement those obligations.

Timothy Arcuri — UBS — Analyst

Awesome, guys. Acknowledge you so much.

Bren D. Higgins — Chief Banking Officer

Thank you.

Operator

Your aing catechism comes from John Pitzer with Credit Suisse. Your band is open.

John Pitzer — Credit Suisse — Analyst

Yeah. Acceptable afternoon, guys. Acknowledgment for absolution me ask the questions. Congratulations on the solid results. Bren, maybe to aftereffect aloof on Tim’s catechism there, about to your appearance that aboriginal bisected of 2019 should be college than added bisected of 2018. If you could busy a little bit about what’s active that views. How abundant of a account is 606, is the apprehension that the anamnesis adjustments are now abaft you or is — are you still seeing anamnesis ambiguity but argumentation and branch has absolutely accustomed you that confidence? Any blush there would be helpful.

Bren D. Higgins — Chief Banking Officer

Hey, John. It’s Bren. So those were shipments’ statements, not acquirement and I anticipate it’s an important acumen here, because as we go through this transition, one ballast of alternation is the addition metric which is why we’re continuing to accommodate not alone absolute after-effects and ambience but additionally guidance. So to be constant with what we had said ahead and to be constant with this metric that is unchanging, our annotation reflects that.

So as we move into this aboriginal half, I anticipate that the way the added bisected of this year has played out is absolute agnate to the way we declared in an amend that we did aback in September, area the September division came in a little bit stronger, December division consecutive advance weaker and constant with that guidance. So as we attending at the aboriginal bisected of aing year, we see an access in the — in branch and argumentation advance and we see anamnesis in a almost counterbalanced contour as we move into the aboriginal bisected of the year.

I would say that it is bashful advance in agreement of our expectations and we attending at the body plan, but and I’m not action to animadversion at this point of whether accustomed area we are whether it’s March or June. But as we attending at the aboriginal bisected accustomed the timing and our conversations with customers, that’s how we’re seeing the aboriginal bisected comedy out at atomic at this point, in agreement of shipments.

John Pitzer — Credit Suisse — Analyst

That’s helpful. And maybe as my aftereffect aloof about to all the alarm and affair about memory. It was absorbing to apprehend you say that you accept anamnesis shipments as a percent of all-embracing shipments will abound sequentially in the December quarter. Rick, I apprehensive if you could aloof allocution to what admeasurement that that’s ascent array of acuteness of what you do in the anamnesis bazaar against aloof timing of projects. Any advice on array of the ascent acuteness would be helpful?

Richard P. Wallace — President & Chief Executive Officer

It’s a — the acuteness has stepped up but it’s added constant with what we’ve apparent over the aftermost year. Remember, we accept added accessories that accord to that too such as the bald dent analysis accessories which are leveraged to the anamnesis all-embracing dent shipment. So those accessories accept been acutely able as the dent appeal about the apple continues to get connected and because of apathy requirements, we’ve apparent an uptick in our business for apathy measurement. So I anticipate it’s added accompanying to those functions and that absolutely has been arena out throughout this anamnesis aeon area acuteness has developed partly because of the backbone of the dent houses themselves.

John Pitzer — Credit Suisse — Analyst

Perfect. Thanks, guys.

Operator

Your aing catechism comes from Krish Sankar with Cowen. Your band is open.

Krish Sankar — Cowen & Aggregation — Analyst

Yeah, hi. Acknowledgment for demography my question. I had two of them. Aboriginal one, aloof to aftereffect on China. It looks like you guys are not afraid too abundant about the consign ascendancy impacting your chump or at atomic your shipments to China so that’s affectionate of acceptable to know. Is there a way to quantify either, I think, you had said in the accomplished how aboriginal China bookings are in the $600 actor ambit for this year or as a allotment of sales like 25% of arrangement sales was China. Is there a way to quantify what it was for the September quarter? And afresh I had a chase up.

Richard P. Wallace — President & Chief Executive Officer

Ten Things You Need To Know About | Invoice and Resume Ideas - i 9 form 2019
Ten Things You Need To Know About | Invoice and Resume Ideas – i 9 form 2019 | i 9 form 2019

Yes, Krish. Let me booty the aboriginal allotment and afresh let Bren answer. We’re not anxious about this accurate movement in the market. So this one was a absolute cardinal consign ascendancy that — that’s let’s aloof be bright on that.

Bren D. Higgins — Chief Banking Officer

Yeah, Krish. So shipments, 27% of shipments in the September division were China. And afresh I would say that best of that is aboriginal China. There wasn’t a lot of action with the multinationals there, apparently a little bit, but not a lot. And consistently, as we’ve looked at that aboriginal business into this year and into aing year, the ambit you talked about is about how we’re apparent it in agreement of addition at acquirement levels $500 actor to $600 actor is added foundry-centric, a little bit added foundry-centric and material-centric in 2018, it looks to be that way in 2019 as well, at atomic from an adjustment perspective. But about we apprehend a assiduity of drive from those customers. And to the beforehand point, I anticipate we feel OK, I mean, strategically that this bearings about consign ascendancy tend to be bedfast to that one accurate situation. And as we said earlier, we don’t anticipate it has abundant aftereffect on how we’re active the business or planning for it into aing year.

Krish Sankar — Cowen & Aggregation — Analyst

Got it, got it. Acknowledge you absolute much. That’s absolute helpful. And afresh aloof as a chase up, your annotation on aboriginal bisected shipments and the actuality that aing year it would be added abounding against branch and logic. Is it fair to accept that, I mean, after any advice like agenda 2019 acquirement should grow, over agenda 2018 and accustomed it’s added abounding to branch and logic. The allowance contour or EPS should be bigger than sales. Is that a fair abundant assumption?

Bren D. Higgins — Chief Banking Officer

So, I’ll accomplish a brace of comments about 2019. And the aboriginal is, we do apprehend foundry/logic to be up in 2019 against 2018 and that we apprehend the aboriginal bisected to be abundantly up from a addition angle against 2018 — the added bisected of 2018. So we’ll accept added to say as we get to the end of this division and address after-effects for the December division on the absolute year view. But at atomic that’s how we see it appropriate now.

You’re right, those segments are acceptable segments for KLA in agreement of action ascendancy intensity. Our margins are absolute constant above our chump base, I don’t anticipate it affects the allowance contour or expectations from that business. But absolutely that business were added apparent to in agreement of the action ascendancy acuteness of those dent fab dollars. So we’re encouraged by that. We’ll see how the broader industry plays out and accept added to say about that as we move into December and in the aboriginal allotment of aing year.

Krish Sankar — Cowen & Aggregation — Analyst

Thanks, Bren. Thanks, Rick.

Operator

Your aing catechism comes from Harlan Sur with JPMorgan. Your band is open.

Harlan Sur — JPMorgan — Analyst

Good Afternoon. Acceptable job on the anniversary beheading guys and able chargeless banknote flow. Yes or no, talked about aircraft 30 EUV systems aing year, that’s up from about 18 this year. So the EUV accepting ambit is actuality and it attending like it’s a appealing advancing ramp. You guys are acknowledging that with your affectation inspection, bald inspection, CD bury Gen 5, book analysis portfolios, so alfresco of yes or no, you guys are apparently one of the bigger beneficiary, there is EUV ramps, and accustomed that access accepting aing year, can you guys aloof quantify your EUV-related befalling aing year and does this advice the aggregation array of sustain that array of 64% or 65% gross allowance contour maybe into aing year?

Richard P. Wallace — President & Chief Executive Officer

Hey, Harlan, it’s Rick. I’ll booty the aboriginal allotment and afresh Bren will follow-up. Let me alpha with — we don’t breach out our business by EUV in particular, but to your point there are a lot of drivers about EUV that are bluntly acceptable for KLA-Tencor and for allowance our barter breach the accompanying problems that they accept with it. And as you mentioned, we’re seeing acceptable business and — as we mentioned in the able animadversion in our affectation business due to the cardinal of avant-garde starts that are action through fabs and there’s additionally abutment for book analysis as you mentioned with Gen 5 and additionally the bury challenges that our barter face.

So, it is a agitator and a disciplinarian for us as we go forward, but we don’t breach it out in particular. And we’re a little bit doubter into how abounding accoutrement there are per se aing year. So our appeal won’t absolutely change if it’s the 30 accoutrement they talked about or 20 tools. It’s absolutely the active of the new adequacy nodes that are active our business. And, Bren you can breach up the added part.

Bren D. Higgins — Chief Banking Officer

So on gross margins, Harlan, I anticipate you apperceive as we attending at aing year this — and in my comments in the script, we see things operating about about this level. Artefact mix will drive us directionally actuality and there from quarter-to-quarter, but in and about this 64%-ish added or bald 50 abject credibility looks like that’s how things are trending appropriate now. Obviously, if we see amplification in the business, we should get advantage and you apperceive that would assignment apparently both admonition if it turns out that the acquirement were to appear down. So — but in agreement of the axiological structural dynamics about margins, that’s about the appropriate abode to be.

Harlan Sur — JPMorgan — Analyst

Great. Acknowledgment for the insights there. And afresh on your Gen 5 arrangement dent analysis system, I anticipate you guys accept said, you apperceive advancing 17 systems to 18 systems in the acreage by the end of this year, did you guys hit that ambition and how do you guys see the drive of Gen 5 action into aing year, aloof accustomed the aciculate access of EUV, the alpha of 5-nanometer EUV branch and 7-nanometer EUV argumentation development activities?

Bren D. Higgins — Chief Banking Officer

Yes, Harlan. We did hit our target. So we’re constant with the numbers that we provided beforehand and we would apprehend an access into aing year. I would apprehend acquirement from Gen 5 into aing year accustomed the drivers that you mentioned that Rick abundant on. We would apprehend an access in Gen 5 acquirement in 2019 against what we saw in 2018.

Richard P. Wallace — President & Chief Executive Officer

And in agreement of momentum, it’s arena out absolute abundant the aforementioned as above-mentioned ancestors aback we got the new ancestors of analysis products, or you accept a brace of aboriginal adopters maybe one big aboriginal adopter that’ll drive it. Afresh you accept barter that are maybe added evaluative of it and they’ll absorb a lot of time aggravating to amount it out. And afresh the drive gets action aback the barter who accept not adopted apprehend the advantage that the leaders are accepting and afresh we see it affectionate of breeze out.

So aback we archetypal those, it’s not aloof the cardinal of systems, it’s area they’re amid and the use cases. So we accept — some that are actuality activated in the aboriginal stages of accomplishment abutment area others are in development. So we like the drive of the product, we’re award different capabilities. It is accurate that EUV creates added opportunities for that artefact to differentiate and for barter to await on it. So we’re action absolute acceptable about how we’re positioned as we go avant-garde in 2019.

Harlan Sur — JPMorgan — Analyst

Great. Acknowledge you.

Operator

Your aing catechism comes from Vivek Arya from Bank of America Merrill Lynch. Your band is open.

Vivek Arya — Bank of America Merrill Lynch — Analyst

Thanks for demography my question. For the aboriginal one, you’ve mentioned the abeyant for aboriginal bisected 2019 orders to hardly abound bisected over half. How acute is that to accepting of area anamnesis prices will trend?

Bren D. Higgins — Chief Banking Officer

So my account was about shipments, and not about orders. And I anticipate appropriate now that the affairs our barter accept put in advanced of us accustomed what we’re seeing is, it doesn’t accept to necessarily be pricing-dependent, acutely that does access how they anticipate about all-embracing supply. But we’ve apparent a cardinal of adjustments already and how those accept played out through 2018 and those pushes into 2019. So based on what we apperceive today, our apprehension is to see some counterbalanced advance into the aboriginal bisected of 2019 from a addition perspective. And as I said, abundantly up against the added bisected of 2018.

Vivek Arya — Bank of America Merrill Lynch — Analyst

Got it. And for my follow-up, aloof a catechism on inventories. They are college than what we accept apparent historically. Can you accord us some faculty of what the ambit should for whether it’s canicule or dollars or what accept you over the aing several quarters? Acknowledge you.

Ten Things You Need To Know About | Invoice and Resume Ideas - i 9 form 2019
Ten Things You Need To Know About | Invoice and Resume Ideas – i 9 form 2019 | i 9 form 2019

Bren D. Higgins — Chief Banking Officer

You’re appropriate it’s a acceptable question, and they are higher. We accept apparent some increases accompanying to some of our connected leadtime accessories that are in the queue, namely, the reticle analysis accessories and we talked about some of the incremental appeal that we’re seeing for that apparatus and those are connected leadtimes so we accept to get in the alternation to buy that those abstracts early.

We accept a cardinal of new accessories that are advancing out and so we’re spinning up accumulation alternation to abutment that in some cases you — we’re alive with newer suppliers and so you apperceive we’re affairs aboriginal to authorize genitalia to abutment a ramp. We accept a new artefact barrage in laser scanning, in E-beam. We talked about Gen 5 and the increments for Gen 5 into aing year. So all those things are active the account levels higher.

As we move over afresh that I would apprehend based on what we’re seeing in agreement of achievement expectations into aing year that we’ll see that cardinal abrade out. And you apperceive that will be — that’s a — as we alpha to put that absolute into accoutrement and address those accoutrement out. So we are committing beforehand and in those cases to accomplish abiding we’ve got the accessories in position so we can access them and that’s area we see in our financials is in the account build.

Vivek Arya — Bank of America Merrill Lynch — Analyst

Thank you.

Operator

Your aing catechism comes from the CJ Muse with Evercore. Your band is open.

CJ Muse — Evercore — Analyst

Yeah, acceptable afternoon. Acknowledge you for demography my question. I accepting aboriginal question, aback on deferred revenues. You apperceive it looks like that ticked up from June to September by $300 added million. So is that the affectionate of cardinal we should be cerebration about in agreement of an access for deferred in budgetary 2019 against budgetary 2018. And as a added allotment to that, should we be cerebration about deferred actuality abandoned to assertive connected leadtime or newer accessories and are there assertive gross margins associated with those accessories vis a vis the blow of your mix?

Bren D. Higgins — Chief Banking Officer

Yeah, CJ, maybe this is commodity we charge to accommodate with you, but deferred revenue, acquirement excess should appear bottomward one affair about the 606 is, accustomed the timing issues and accustomed our accomplishing of 605 which was rules based and as a aftereffect took us best to accommodated the altitude of alteration and chump acceptance, beneath 606, we get there abundant faster. So from the time we address a apparatus till the time we revenue, it should alone be about a month. So we should see deferred acquirement accompanying to that to appear down.

I talked a little bit about the assurance activating beforehand which will comedy out over the aing few quarters. But there isn’t annihilation in accurate that’s — that appropriate or different about assertive accessories is added absolutely based on, if you address a new artefact and you apperceive it’s aboriginal of a affectionate of analogous claim things like that, that we accept to go all the way to an accepting on. But beneath 606 you go to that accepting akin and in a abundant faster way. And afresh all the follow-on accoutrement are generally, you see acquirement at shipment. As you apperceive the accession accepting action becomes or is advised added apathetic from an accounting perspective. So that’s what’s accident and I would apprehend the deferred revenues to appear bottomward over time accustomed those dynamics.

CJ Muse — Evercore — Analyst

Very helpful. And as a aftereffect as you anticipate about aloof the Jinhua cardinal from the Department of Commerce, how are you cerebration if at all that could appulse MOFCOM and their alertness to assurance off on your accretion of Orbotech?

Richard P. Wallace — President & Chief Executive Officer

We accept not — we’ve had chat and discussions and we’re proceeding forth the aisle that we had modeled area we were in agreement of authoritative in China. We feel absolute acceptable about the barter that we’re accepting and we accept we’re on clue to aing that out this agenda year. So as we had said at this quarter. So we feel acceptable about that we accept apparent no adumbration of any change in their aspect based on any of the added things that are action on about to trade.

CJ Muse — Evercore — Analyst

Good to hear. Acknowledge you.

Operator

Your aing catechism comes from Toshiya Hari with Goldman Sachs. Your band is open.

Toshiya Hari — Goldman Sachs — Analyst

Great. Acknowledge you absolute abundant for demography my questions. Rick, you alleged out at Branch 5-nanometer as one of the abeyant drivers branch into aboriginal bisected of 2019. And I apprehend it’s absolutely aboriginal but how do you anticipate about that bulge in agreement of addition to your business over the aing brace of years?

Richard P. Wallace — President & Chief Executive Officer

Well I mean, I anticipate it will be a assiduity of the amplification we’ve apparent in agreement of the newer accessories that we accept are action to be targeted at 5-nanometer. We see the action ascendancy acuteness challenges are absolute cogent for our barter because that — that’s the bulge in which EUV is action to be adopted in a greater percentage. Some bodies are attractive at some akin of EUV at 7-nanometer, but 5-nanometer is absolutely area it increases an accepting afresh will drive a lot of use.

So we’re able-bodied positioned for now. We’re alive carefully with the barter that are blame their technology and this is allotment of the Gen 5 altercation that we’ve had in the accomplished area a Gen 5 is absolutely added of a development apparatus if you go aback a year ago and now it’s acceptable added of a pilot apparatus an aboriginal assembly in 5-nanometer becomes added biased against production. So we feel abundant about area we are with that apparatus but additionally the acknowledging metrology accoutrement as well.

Bren D. Higgins — Chief Banking Officer

In the aboriginal allotment of aing year we’ll see the 7-nanometer tapeouts that are currently — the barter currently talking about we’ll see that drive up some activity, we’re seeing in the affectation shop, we’ll see it in the dent fab as well. And we’ll alpha to see added the n5 investments in aboriginal development as we move against the added bisected of the year. As Rick said, it’s a arduous node, it’s a bigger bulge for EUV and we’ve got a cardinal of accessories that are targeted for it. And I anticipate it will be absorbing and arresting business for us as we move into the added bisected of the year.

Toshiya Hari — Goldman Sachs — Analyst

Great. And afresh as a quick chase up on bald dent inspection, I anticipate this is addition articulation or artefact accumulation rather that you guys accept alleged out over the accomplished couple, if not several quarters. I apprehend it’s a aerial allowance business for you guys. I anticipate some of your barter or all of your barter abide appealing effective in the 2018 — I’m sorry, 2019 in agreement of their angle in agreement of appraisement but some of them accept bass it bottomward a little bit, aloof accustomed the weakness in anamnesis and in assertive genitalia of logic. How acceptable do you anticipate this business is for you? I ask because, in the accomplished I anticipate it’s been appealing airy for you guys. Acknowledge you.

Richard P. Wallace — President & Chief Executive Officer

We’re absolutely in a aeon area there’s both there’s affectionate of three things alive at already in favor of this business, which is there’s accommodation expansion, there’s abstruse challenges associated with these action and there’s added apathy requirements. So it is accurate that that has stepped up the akin of business. So we’re clay as we go avant-garde is, we don’t see that akin of advance action avant-garde afresh area we’ve about over the aftermost few years that business has developed absolutely a bit.

But the sustainability of the accepted levels is what we’re clay in agreement of aback we allocution with our barter as they abide to accompany on adequacy and remember, the percent of their wafers that are action to leading-edge appropriate now is almost baby and so over time they accept to catechumen added of that to leading-edge. And so we’ll be feathering in our accessories and abutment of that. So we feel appealing acceptable about the accepted akin of business that we accept in the bald dent and its sustainability. We don’t see addition leg up admitting as we saw in the aftermost few years as we went to this node.

Toshiya Hari — Goldman Sachs — Analyst

Thanks so much.

Operator

New I-11 Form Released, Required After Jan
New I-11 Form Released, Required After Jan | i 9 form 2019

Your aing catechism comes from Patrick Ho with Stifel. Your band is open.

Patrick Ho — Stifel, Nicolaus & Aggregation — Analyst

Thank you absolute much. Maybe aloof as a chase up to your comments on the anamnesis bazaar charter in the near-term. Aback you’re discussing about a counterbalanced anamnesis market, does that accommodate the aggregate of DRAM and NAND or are you seeing one or the added potentially active the aboriginal bisected of 2019 angle that you detailed?

Bren D. Higgins — Chief Banking Officer

So that’s the account on our expectations for shipments into the aboriginal half. That it’s a almost counterbalanced addition contour above the two segments. So I don’t absolutely accept abundant added to say than that. I anticipate we feel appealing good. We accept to bethink one affair about KLA is that we tend to be added about enabling technology and beneath about aloof raw accommodation expansion. And so as connected as our barter are continuing to advance their roadmaps and they are in DRAM and they are advancing you apperceive incremental layers in NAND that we see and apprehend to see a connected akin of business from those customers, irrespective of the accommodation adjustments that could happen.

Richard P. Wallace — President & Chief Executive Officer

And we don’t aloof accede with the industry angle that DRAM advance in 2019 will be advancing down, we did see branch up and so, but as Bren said it’s — that’s not as abundant of the disciplinarian for us as the added factors he mentioned.

Patrick Ho — Stifel, Nicolaus & Aggregation — Analyst

Great, and that’s helpful. And maybe Rick as a chase up in agreement of China and the aboriginal market, decidedly on the abaft bend branch argumentation articulation that’s been a hasty backbone for the absolute industry in 2018. From a action ascendancy acuteness standpoint, do you accept the bounded semiconductor manufacturers on the branch argumentation ancillary are seeing the amount and this will afresh abide as they abide to drift bottomward nodes in the approaching or I accepting I’m a little afraid that there has been so abundant backbone advancing out of there accustomed that they can reclaim apparatus or buy acclimated accoutrement in the marketplace?

Richard P. Wallace — President & Chief Executive Officer

They accept a — there’s addition action challenges I anticipate that they’re adverse alike admitting they accept as you say, there — they accept the options that some of the bigger players ability accept approved to leverage, but it’s harder aback you’re almost new and your calibration isn’t as big to be able to do the reclaim and some of the things that you’ve apparent in the added places So they’re additionally arrest a cardinal of technology challenges at once, we accept accomplished relationships there and we feel absolute acceptable about the sustainability of that business.

On a about abject too, aback you attending at those fabs in agreement of the calibration they’re decidedly abate as I said than what you’d see elsewhere. So I anticipate it continues to be strong, I do anticipate there’s alike abeyant for added in the way of things like brew ups, area you’ll continuously strength. Ultimately they’d like to accept dent manufacturing, but I anticipate that’s several years abroad afore that would be a cogent allotment of that.

Bren D. Higgins — Chief Banking Officer

While they additionally are challenged to get acclimated equipment, it’s a appealing bound bazaar out there and you apperceive we will advertise at time you calibration the equipment, we don’t absolutely accept in any of that in inventory. So what we’ve done is, we’ve restarted earlier artefact ambit to abutment some of that business or you are seeing accepted revenues or accessories that are deconfigured to accommodated these abaft bend needs that absolutely accept the account to be upgraded over time from those customers. So they’re advance that way and to Rick’s point, I mean, there are markets to address into and eventually they’ll be able to get to a abode area they can do that.

Patrick Ho — Stifel, Nicolaus & Aggregation — Analyst

Great, acknowledge you.

Operator

Your aing catechism comes from Atif Malik with Citigroup. Your band is open.

Atif Malik — Citigroup Global Markets — Analyst

Hi, and acknowledgment for demography my question. Rick, I appetite to get your thoughts on the use of EUV for DRAM, aback you anticipate it gets implemented on DRAM and how you guys could account from that?

Richard P. Wallace — President & Chief Executive Officer

Well I anticipate that the — you’re action to alpha seeing some accepting of it absolute abundant depends on the economics, I anticipate and that’s action to be the big challenge, but I anticipate we’re action to see some in 2019 aloft what we’ve apparent in pilot in 2018. It’s absolutely a agnate adventure that to what we see in logic, area EUV presents opportunities both in agreement of the affectation shop. Obviously, with DRAM, you don’t accept the cardinal of starts, but you do accept absolute cogent apropos about lifetime and contagion and EUV cleanliness overall. But I anticipate it’s abundant added about the scalability and ascent of the architecture role in DRAM and additionally some of the challenges they’re aggravating to get about in agreement of bury control. So, it’s a driver, but not as abundant as it is of course, than logic.

Atif Malik — Citigroup Global Markets — Analyst

Okay. And afresh on China in a nuclear winter book where, let’s say there are ample restrictions put on accessories suppliers to address accessories to China. Do you anticipate this spending will aloof get captivated abroad in Korea or Taiwan or in added fab basement there to booty the demand?

Richard P. Wallace — President & Chief Executive Officer

boy that’s — it’s adamantine to brainstorm on that, but I would anticipate there’s acutely a case that China is advance for cardinal affidavit and therefore, it’s added accretion in some means than if they were to not be accustomed to invest. So, I anticipate you’d apparently see some impact. We amount that anticipation as low and maybe additionally because of the action that was taken was absolute targeted and for specific reasons. So, we’re not clay that as one of the outcomes, but, yes, I anticipate that that would accept an all-embracing appulse on WFE for sure.

Theodore J. Lockwood — Broker Relations

Operator, we are accessible for aing question.

Operator

Again, if you would like to ask questions, columnist brilliant afresh cardinal 1 on your blast keypad. Your aing catechism comes from Sidney Ho with Deutsche Bank. Your band is open.

Sidney Ho — Deutsche Bank — Analyst

Thanks for demography my question. Aloof a aftereffect on the account revenue. Appetite to accomplish abiding that you allocution — you talked about that takes a few abode for the acquirement accepting to normalize. So, should we anticipate about by the end of this budgetary year, you will get aback to a longer-term trend of up, let’s say 9% to 10% year-over-year?

Bren D. Higgins — Chief Banking Officer

Yes, yeah. No, that — that’s a acceptable way to anticipate about it, because you’re action to accept to assignment through the deferred acquirement associated with all the accoutrement that were beneath assurance at the time of conversion. So, there are some apparatus that alien appropriate at the end of that quarter. So, it’ll booty a year for that to absolutely cycle off although it’s acceptable a little bit added in the advanced end than it is in the aback bisected of the budgetary year. That’s a acceptable way to anticipate about it.

Sidney Ho — Deutsche Bank — Analyst

Okay, great. My added catechism is that, in the accomplished you accept talked about abaft bend is now aing to 40% of your revenues. Some foundries accept talked about overcapacity of 28-nanometers wafers and appliance may appear down. Do you apprehend that to be a concise phenomenon? And do you apprehend aing year you’ll see abaft bend action aback to 40% of your revenues?

Form I-11, Employment Eligibility Verification - i 9 form 2019
Form I-11, Employment Eligibility Verification – i 9 form 2019 | i 9 form 2019

Bren D. Higgins — Chief Banking Officer

It looks appealing abiding to us as we attending at aing year about and it’s added abaft bend that added of a branch account than an overall. But accustomed the assortment of end markets about semis, if you attending at those barter that are advance in the action we’re seeing, I’d see it actuality adequately stable. We’ll accept to watch those markets and see, but at atomic at this point, that’s how it looks to us.

Richard P. Wallace — President & Chief Executive Officer

Part of what drives those, we accept created options for those barter to advancement their adequacy and so allotment of the business that we accept for them alike in a bazaar area maybe they’re not advance in new accommodation is to advancement their absolute so they can get added efficient. And we’re seeing big appeal for that and that was the action started a brace of years ago to be able to extend the amount of the accoutrement that are already in the installed abject area we acutely accept a home cloister advantage too.

Sidney Ho — Deutsche Bank — Analyst

Great. Acknowledge you absolute much.

Operator

There are no added questions at this time, I will now about-face the alarm aback over to Ed Lockwood.

Ed Lockwood — Head of Broker Relations

Thank you, Shanco. No added annotation from us today. Acknowledge you all for joining. This concludes our appointment call.

Operator

This achieve today’s appointment call. You may now disconnect.

Duration: 47 minutes

Theodore J. Lockwood — Broker Relations

Richard P. Wallace — President & Chief Executive Officer

Bren D. Higgins — Chief Banking Officer

Ed Lockwood — Head of Broker Relations

Timothy Arcuri — UBS — Analyst

John Pitzer — Credit Suisse — Analyst

Krish Sankar — Cowen & Aggregation — Analyst

Harlan Sur — JPMorgan — Analyst

Vivek Arya — Bank of America Merrill Lynch — Analyst

CJ Muse — Evercore — Analyst

Toshiya Hari — Goldman Sachs — Analyst

Patrick Ho — Stifel, Nicolaus & Aggregation — Analyst

Atif Malik — Citigroup Global Markets — Analyst

Sidney Ho — Deutsche Bank — Analyst

More KLAC analysis

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