Good morning. Thank you. I am Timothy Arcuri. I am the semiconductor and semi equipment analyst here at UBS. We are very pleased to have KLA-Tencor here with us. We have Bren Higgins, who is the CFO, and Oreste Donzella, who is the Chief Marketing Officer. First, I think Bren's going to have a safe harbor, and then we can go into some questions.
Great. Thanks, Tim. Thanks for having us here today. We'll make some forward-looking statements today, and those are subject to risk, and all of our risk factors are all on our SEC filings. You can access those on our website. Just a couple of framing comments for KLA-Tencor. KLA-Tencor is a process control business in front-end semiconductor manufacturing. We're looking to finish up here with calendar 2018 based on midpoint of our guidance, with 3rd straight double-digit year of revenue growth. Operating margins near 40%, again, based on where we guided. A very strong year for the company, we're really pleased about that. We're pleased about the market position, the product pipeline in terms of new products serving the existing markets, but also some products that are opening up some new opportunities for us.
We had earnings 2 weeks ago, nothing's really changed from earnings in terms of guidance, guided metrics, revenue, shipments, EPS, all consistent with what we said. From a context perspective, we thought the second half of the year looked like it would be down a few single-digits again, given the midpoint of guidance for our shipments, which is we provided an update in September, we reiterated that view at earnings. For calendar 2018, the shipment profile looks like it's a little bit weaker than the first half. We had indicated that as we look at 2019, and it's a little early to guide full year views on 2019, we'll have more to say after we close out earnings in January, earnings for December.
We saw a view of the first half of the year from a shipment perspective, again, being modestly better than the second half of 2018. The foundry logic segments for us look like that they're seeing some momentum today, and we would expect that to continue into 2019. I feel very good about those segments as we move into next year for our business. We're, I think, optimistic about the company's position overall. We've got diversification opportunities around what's happening in the bare wafer industry, what's happening in reticle inspection. Obviously, EUV is a technology transition happening in the industry as we move into next year. We think there's some opportunities for KLA as a technology enabler to participate in some of those opportunities. Our service business is also growing consistently about a 10% rate of growth.
One thing about the service business of KLA is, I saw an interesting metric, that 89% of every tool that KLA shipped is still in service out there, and it gives you an indication of the life and the longevity of these products out in the field. The service business is growing at about 10% a year. It's got an earnings stream we believe is accretive to the overall model, and most of it is contract-based, 75% generally year to year is service contracts. It's a nice anchor for the company as we navigate through these periods of time, and it tends to be pretty consistent year-over-year.
With that, Tim, I'm sure you have some questions, and I have Oreste, who's our Chief Marketing Officer here today with me, and there's be good to get his perspective on some of the dynamics in the industry. I'll throw a few questions that way as we get going.
Great. Thank you. Last week, there was a big supplier, not to you, but to the films guys, that talked about a fairly big recent cut that one of their customers had. It seems related to Korea memory. I'm just kind of wondering whether, vis-à-vis the guidance that you gave for December, whether you've seen any incremental weakness from either China or from Korea memory.
No, I think, consistent with what we said a few weeks ago, the shipment profile is shaping up about as we expected. The customer mix has been pretty consistent across all of that, so I don't really have anything new from that perspective in terms of what we're shipping this quarter.
Let's kind of quick into China, actually. Obviously there was the Jinhua export ban. There's been some rumblings about YMTC, maybe some funding issues there. Can you talk about China as an adder to WFE next year, how much you expect China to be for WFE next year, and maybe how much is baked into your numbers next year for the indigenous Chinese projects?
China's been great for KLA. I think the indigenous projects as they've come up, they have needed KLA in some ways to help ramp these fabs. We've participated pretty well, not just in terms of adoption, but also from a share perspective. We had the incident with JHICC, and the restrictions there, which didn't really affect our current views on the December quarter. Most of what we had shipped to that project, we shipped in the September quarter, not a lot that's affecting our numbers here now. Even as we move into 2019, most of our expectations where there could be some investment would be very late in the year if it happened at all, and at a level that we didn't really consider material. I don't think that particular situation's going to affect our business in a material way.
We feel pretty good about that. We're encouraged by the fact that it was a targeted effort in that case. That's probably all I have to say about that. Around China overall. We expect, I think, a continuation of what we've seen in terms of investment levels. I would expect from an order perspective that as we move into 2019, that things are a little more foundry-centric, where 2018 was a little more memory-centric. Again, that's orders. Sustaining at this, I'll call sort of $500 million-$600 million level that we've seen over the last couple of years. I think for right now, it feels pretty solid. I wouldn't say that there's any difference in terms of incremental changes from the view that we've had over the last several months, with the exception of the one issue that we talked about.
Got it. You see no issue with Chinese government funding for these projects?
Well, it depends. Look, you have to demonstrate capability and ability to ramp technology. Some of the projects clearly are moving faster than others. I would say that you've got the ones that are driving most of the spend are moving forward and pretty predictable. The others are a little less predictable, and I think a lot of it is gated by technology progress and so on. In general, the bigger projects, from what we've seen so far in our dialogue with customers, is the plans have been relatively consistent in terms of expectations for the next phase of investment and timing of the deliveries to those projects.
We have seen more milestones-based investment from both the government of China and also provinces in China. In other words, there is no lack of money, but they are putting more milestones towards what they need to show in order to get more funding in the future. That's been the same for the, let's say, the last two, three quarters. We have seen these people going through waves of investment instead of investing a bunch of money up front.
They have to prove they're viable, and I think that's Oreste's point in terms of meeting these technology milestones before funding is triggered. I don't think there's a shortage of capital or changes in philosophy. It's much more driven by progress and viability of the technology progression.
Got it. If I were to characterize 2019 WFE, I know that you haven't really guided 2019 WFE per se, but if I were to characterize it sort of as $50 billion plus or minus, which is kind of down mid-single digits year-over-year, roughly, DRAM down maybe 20%, NAND down a little bit, and foundry logic up high singles, maybe as much as 10%. Is that a fair characterization?
Well, we weren't guiding. I think segment directionally seems right. I don't know if I'll quantify it the way you did. Certainly, I feel very confident about growth of foundry logic into next year. DRAM had a very strong year this year, to expect some modest correction in DRAM seems to make sense. Flash seems there's a number of new projects. There's conversion of 2D to 3D that's happened, new projects that are ramping, layer count. We feel pretty good about the timing of those projects. We'll see how they play out in the year.
So far, I think when you look at sort of structurally around the end markets, but also profitability of customers, we feel pretty good that after three years of good growth in the industry, you could have a bit of a correction, but feels like things feel pretty modest, pretty shallow at this point.
I have a couple of comments. First of all, even if with some correction, DRAM WFE in 2019 may be the second-best year ever for DRAM. Just to give an idea of the long-term fundamentals and the high demand from a diversified end application range is helping the DRAM customers to progress and also spend some money. That's the first comment. The second comment is, if you look at the way, as Bren said, our customers are reinvesting some of their profit and so on in pretty good healthy level. We are not seeing some craziness in the spending, but people have been very conscious and very careful to spend the money based on the revenue and the profit they are generating right now.
You have to remember that in our business, we tend to be more levered to technology, less to the incremental wafer start. As long as they're progressing through development and ramping these facilities, we tend to participate the most through those parts of the cycle. The incremental wafer start on a mature ramp, process control is less exposed. They've matured the process. They still buy it, but they buy less. Where a capacity-centric peer company on the process side may be impacted maybe more significantly by some of those incremental decisions, as long as we see the technology progressing and these facilities ramping. Look, a facility gets delayed, that's a different story. To the extent that those dynamics are playing out, we tend to, I think, get exposed to a different part of that investment cycle.
I think as a result, we tend to hold up better through those cycles that way.
Got it. If we took $50 billion next year, plus or minus, if I take your system share, I take your system shipments and I divide it by total WFE, it's gone from 8.1 in 2012, which was a heavy foundry and logic year, down to 7.6 in 2013, 6.6 in 2014, and it was 6.4 in 2015. It bounced up just a little bit in 2016, but it's been sort of in the 6.3 range last year and this year in these very, very heavy memory years. If you overlay that with mix, I know that people like to get in the weeds, but at the end of the day, there's a fairly high correlation between your WFE share and mix. It seems like next year is going to be a much heavier foundry and logic year. I think that you would agree to that.
Why wouldn't you gain a lot of WFE share next year? It seems like you're set up to gain a lot, and also it seems like you have a couple of new tools coming out that could add incrementally on that as well. Can you kind of talk about how you position next year versus how you positioned the last couple of years?
Sure. Process control intensity, I'm going to trust your numbers were all good there. Got my calculator out. Process control intensity over the last few years has improved. It's improved about, let's say, a point and a half overall for the industry. Our share position has improved over that same period of time. As we look at this year, or if you go into 2019, probably 12%+ kind of process control intensity. We've seen improvement in memory, and that's been a big factor, right? That's been a factor for us that memory's always been our lowest adopted market, but we've seen improvements in metrology. We've seen improvements in bare wafer inspection, bare wafer metrology, and that has helped the memory piece. Foundry logic, we're more exposed to that on a $1 for process control versus $1 for wafer fab equipment.
Our confidence into next year is a process control intensity improvement's pretty good. We do have some products in our business that are also inflecting, which are driving some of that, and I think there's some sustainability. The reticle inspection part of the business, which is supporting seven nanometer tape-out activity for seven nanometer demand, but also supporting EUV, that's been a good thing. I talked about bare wafer. I think there's a continuation there. These dynamics probably hold as we move forward. I do think there's an opportunity for it to go up next year. I think the share position looks pretty good. On the new product side, I don't know how much that will contribute in a meaningful way in 2019, although I do believe it will drive opportunities as we move into 2020 from some of the new products that are coming out.
I think directionally, it feels like there's a good opportunity for us and that logic and foundry tends to be better, and the dynamics in reticle and in wafer seem to be holding pretty strongly. I don't know, Oreste, you have more to add?
I think he's right. Generally, you see the mix in WFE between memory and logic has been driving the process control intensity. This year has been a little bit of an exception because in a very, very high memory year in the WFE mix, we are going to perform very, very well and for two reasons. First of all, China intensity has been higher than the rest of the world, even in memory. The second thing, as Bren pointed out, is we are increasing the process control intensity memory based on bare wafer, based on many different applications. Next year, we'll get the advantage of a much higher foundry in the WFE mix. It's going to be higher as well in terms of overall process control intensity.
Do you think, just back of the envelope math would say that if you can get back to 8% share, which seems doable, maybe not next year, but if we sort of go into a more horizontal scaling environment with EUV, where you guys have pretty good attached to EUV, that you could get back to roughly 8%, which would be another $1 billion for the company at a $50 billion WFE run rate. Can you talk specifically about your dollar attached to EUV? I know that it's sort of difficult to break out, but there's a couple companies positively levered to EUV, of which you're one. Can you actually talk about that?
Rusti, you want to take this one?
Yes. EUV gives us a lot of opportunities. Let's start from mask first, reticle inspection. Right now, it's not only EUV. We are seeing a surge in the reticle inspection business because there are many, many tape-outs at 7 nanometer. The 7 nanometer is partially EUV and mostly non-EUV. This is an incredible opportunity for us because we are not seeing the same number of tape-outs since maybe 28 nanometer node. This is driven not only by smartphone, but also by everything around the new data economy. Some portion of the reticle inspection is EUV specific because we have a product offer that is dedicated to EUV, and it's the new Teron 640e that is doing very, very well to qualify EUV masks at the mask shops. This is the first opportunity with EUV.
The second opportunity EUV that we are seeing more and more is in the wafer inspection, in how you qualify the process and the mask by printing wafers and then getting inspected with the Gen 5 plasma imaging tool. This is another additional opportunity we see, and this is also very important for us because it gives us the opportunity to demonstrate the value of Gen 5, that is our latest and greatest optical wafer inspection tool. People look at the ability of Gen 5 to measure and qualify reticle and eventually broaden up the scope of the product in the fab. We see really EUV as a big driver of business, in particular in these two areas, the reticle inspection of EUV mask and printability of the EUV lithography on the wafer through Gen 5.
I think the only thing I would add is historically, whenever there's a change in litho technology, or any significant changes architecturally in chip design, you do see an inflection in more process control monitoring because it's new, it's a mature process. Customers try to beat that down over time, but we historically have seen some inflection in the spending levels. We'll see how that plays out as we move into EUV, certainly on the front end. We would expect process control intensity to probably uptick a bit. In any scenario we model, it's hard for us to see how it comes down. We feel pretty confident about, look, linear scaling's always been good for KLA, smaller defects that matter. EUV enabling that has been good for our business.
We feel pretty confident about that, and then in some of these particular areas could create some additional opportunities as we move into more of a high-volume production scenario, which we are still a little ways away from. We will see how it actually plays out at 5 nanometer, but that is certainly the path our customers are on.
Got it. Just as you think about incremental revenue drivers into next year, I bucket it into 3 things. Number 1, Gen 5, which you just talked about, number 2, the NAND X-ray product, and number 3, service. I think about each of those being $75, $100, $150, maybe incrementally year-over-year next year, so that if all of them hit, you are at $450, sort of an incremental revenue on a flattish WFE number. Are those reasonable numbers?
I think on the X-ray side, we are pretty encouraged by the product. We have shipped a couple. We would expect to book the number of systems in 2019. I think the revenue number you talked about is probably more 2020 than it is 2019. Because what we are doing right now is we are working with customers on probe tools. We are working on the next generation, which builds off the current platform that addresses the broad commercial opportunity. We will see those orders start to book next year. We will see those shipments and therefore the revenue happen more in 2020 on that front.
Your comment, we did talk about Gen 5, I think the way you are thinking about the Gen 5 opportunity, but also from service, those seem to be reasonable against the flattish or independent of the WFE spend in terms of what we are seeing right now.
Got it. Just on service, there was a big bump in service in the September quarter, up 26% year-over-year, it seemed to be related more to 606 adoption. Can you update us in terms of how to think about service? Is the year-over-year growth rate going to go from the mid-20s today, which is obviously being impacted by 606, does that year-over-year growth fade back down to the low teens longer-term growth rate number? Is there going to be some digestion of this initial implementation of 606?
No. What's happening with 606 is, we're moving from, it's a reclass of what was a cost accrual for the first-year warranty. If you look at the experience and obligations we have on the first year of tools, it isn't really any different than a second-year contract would look, or a third-year contract. When you look at the 606 literature, given those, I'll call the materiality of the obligations we have to provide services to the tool, that we have to now defer the revenue and take it over the first year. No change to the financials, it just moves from a cost accrual to a revenue deferral structure. That shows up in the service revenue, which is the pop you saw. We'll have that hold out at this level and then we'll grow from there.
It isn't that there was anything new in the business, it was more the reclass related to 606. In general, as I said in the opening comments, the service business is growing at 10% plus or minus. There are tools in the install base. One great thing about the demand profile that we're seeing today across semi is older fabs being run harder. Customers are looking for more capability on those tools. Utilization rates are higher. Uptime is becoming more critical as they run more designs through. We're seeing a step up, not just the tools breaking down, but also in the need for contract support for those tools. That's been a nice inflection.
We're also developing and adding new capabilities to those tools as well, where the fab is full, but if you can actually do a productivity improvement, a speed upgrade or something like that on an old platform, those customers are receptive to all that. We think it's a good driver for us, in terms of long-term growth. If you look historically, it's always also been non-volatile. You could have CapEx cycles in the industry. But even in 2009, the service business was just down 10% or so. It tends to be up and to the right as they run these tools over time, and we expect it to be sort of in that 10% range. The other good thing is that given consolidation of customers, it allows you to get leverage across the resources to support those customers.
The incremental operating margins from that business on that revenue growth is also pretty attractive, and people talk about the negatives of consolidation. I think one of the positives is the ability to consolidate your support infrastructure around those customers and to drive leverage in the service business.
Great. Thank you. Maybe a couple questions on Orbotech.
Yeah.
We're now into phase 3. There's 6 more weeks until the end of the year. You've sort of had the stated deadline as the end of the year. Can you sort of update us on the approval process for Orbotech, and if the government were to, in some way, block the deal, what is the plan B?
Hmm. Yeah, that's an interesting question. Back to what we said at earnings, we would expect to close it in the fourth quarter. I remember in investors, when we announced the transaction back in March, people would ask me, "Why is it going to take so long?" We had full expectation it would take to the fourth quarter. We're there now, our expectation today is that we close it this year. We've cleared all the other jurisdictions, except for China, and we're having constructive and pretty healthy dialogue with the regulatory authorities there as we work through this. Nothing's changed from what we expected and what we said at earnings. Plan B is interesting. You know, right now, I don't know. I don't think there ever would be a plan B.
Look, I don't have any reason to question plan A at this point. We're moving through it. I think the Orbotech business has done pretty well. They just announced their quarter last week, and it's very consistent with the deal thesis that we put together. There's rising complexity in those businesses, which we like. It exposes us to more of the electronics food chain, so there's a broader SAM opportunity for the company. Our customers pursue capability and cost and improvement in lots of ways. Some ways is process node shrinks, which certainly we're exposed to, but they're also doing things to PCB boards. They're doing things with packaging, and this exposes us as a company to more of those opportunities. We think it fits pretty well.
It's complex systems, the ability to leverage the footprint, rising complexity, as I said, a service infrastructure that we can drive over time. We're excited about the opportunities. We're ready from an operational perspective as we move forward here and we close the deal.
I still get a lot of questions on the deal and on the rationale for the deal because people say KLA is the highest end of technology, and the perception is that Orbotech is a sort of a less advanced version of what you do. I think people have a difficult time figuring out the real strategic rationale. Can you just again talk about what KLA brings to the Orbotech business, how you're going to make the Orbotech business better?
Well, I think to the points I made earlier, look, there is a much step-up market from where we are, right? Finding 10 nanometer defects is not a challenge for Orbotech. Certainly the exposure it provides to more of those market opportunities is something that's intriguing to us. One thing about our business I've had people mention to me is like, "Well, the margins are lower." Well, my margins haven't always been where they are today. I mean, we don't have to go back very far in the past to see when we were talking about gross margins that were 59% or 60%, and now we're 64% or so. There are plenty of examples in the company where we've been able to take businesses over time and drive higher levels of profitability out of them. Orbotech has market-leading positions.
We know how to run businesses with market-leading positions, and we think over time that we can leverage a number of the core competencies in the company to drive that business and to make it better over time. I talked about, I don't want to be repetitive with all the other things I talked about that we're encouraged by, but at the end of the day, what we're looking to do is to expose ourselves to more the value chain, where complexity is rising to fuel our revenue and earnings targets. Certainly we've got a return on cash objective for the deal, and we thought it made sense relative to the alternatives we looked at. We're excited about it.
Just on that front, just in terms of the accretion from the deal, I think display has certainly faded a bit since the deal from a CapEx perspective. I thought that the Orbotech results in the context of what's going on were actually pretty good. If you sort of sort through all that, it seems like maybe you get $0.30, $0.40 worth of accretion next year, calendar year from the deal, and maybe up to $1 out in 2020. Are those the right numbers given sort of where you currently see Orbotech?
Well, I think that's probably about right. One of the factors in that will be how quickly we buy back the shares from the transaction. The transaction is basically two-thirds cash, one-third stock, and we have a buyback that's contingent to effectively buy back the shares we're going to issue in the transaction. The pace of that will ultimately impact that number. The ranges you're talking about $0.30, I don't know what you said, $0.35, $0.40, in that ballpark, and then something in excess of $1 or so in 2020 based on how we're seeing these segments is what we said at the time that we announced the transaction. Orbotech's 2020 plan was certainly a milestone in that they've been fairly public with, I don't see any reason why we would look at that and see it any differently today.
Great. Okay. We had a question from the audience to just sort of talk about how the trade issues are impacting the company and how you sort of plan for your business in light of these trade issues.
Certainly, there's a lot of noise out there, we saw the one situation, which again, I feel that given that it was targeted in a very specific situation, was encouraging that there wasn't some sort of broad action. Clearly, those issues are out there, we do a lot to stay on top of what's going on on there. I don't really have any new to say on that front. In terms of how it's impacting our business operationally, we don't source a lot in China, the impact from tariffs on the sourcing activity is pretty minimal. Most of what we import in the U.S., we ship back out. You've got a credit to the tariff, if you will, that you would pay when you bring something in, then you turn around and ship it back out again.
I think it's something we're monitoring very closely. We haven't changed what we're doing operationally. Certainly, we have the flexibility to do that if we felt like we needed to, there was duration to what we're looking at. We do have a big footprint in China. We do R&D in China. We obviously have sales and service in China. We also do manufacturing there. Manufacturing that's there tends to ship out, there's value add in other areas, country of origin changes and all of that's why the impact is immaterial. It's something we're watching very closely and China's been good for us. Certainly, if there was a situation where it impacted our ability to ship in a longer-term period to those customers, I think that it would have an impact on us.
Historically, when there has been export control, it's typically been around process tools. It's typically been as leading edge, trailing edge. There's a lot of those dynamics that would need to be worked out and clear to be able to assess the impact. It's certainly something you can't ignore, we're monitoring as closely as we can.
Great. In preparation for this, I was just looking at what the Street has modeled for you next year. I don't talk to my peers as much as Ed does or at all, really. It's interesting because on up revenue next year, the Street has your earnings down. This year, if I just take your guidance for December, you're going to do about $9 this year. You typically report at the high end of your guidance, so you're going to probably do in excess of $9 this year. The Street next year has you at $8.63 on up revenue. Obviously, you're running above your model in terms of gross margin. Your OpEx is a little bit higher than the model, but the operating margin is 39%, higher than the 38% in the model as well.
Why would earnings be down next year? Is there some reason why on up revenue, earnings would be down? It seems to me like if WFE is $50 billion, that you're going to earn closer to the high nines versus high eights.
Okay. Maybe I'll just do it this way. Just given the changes in mix that we expect into next year, without quantifying what the WFE level is, look, I would expect the company to outperform the WFE spend in just about any scenario we'd look at. If you believe the industry is down 5%, the company ought to be flattish. If you thought the industry was flattish, the company ought to have growth next year. We've had some gross margin tailwind that I would expect, that as the mix of business changes, we could see a little bit of drag on there, but I'm still modeling between, as I've said publicly all along, 63%-64%. The cost level which we said $270 million-$275 million per quarter is how we're driving the business today.
I think that that's how you ought to model it moving forward. The pace of buyback obviously impacts the earnings number, and I think when you play that all the way through, we ought to be in line with the public model, perhaps better from an operating margin perspective. I guess we'll have more to say as we get into the January calls after we report December, see what the orders in the backlog look like, what the funnel looks like in terms of how we see next year. Hopefully that helps.
Great. Can you talk about competition? I continue to hear, not as much as I used to, but I continue to hear about E-beam and about how that's going to be a big problem for you. Can you talk about the threats, maybe talk about E-beam in a little bit more detail, and sort of how Gen 5 has sort of hit back at some of the threat that maybe existed from E-beam last year or even the year before?
Sure. Oreste, why don't you go ahead? I haven't gotten this question in a while.
Yeah, I can take it. If you look at historically, the split of optical and E-beam wafer inspection has been pretty much the same flat. It goes like if you look at the entire pie of optical wafer inspection now is around $1.2 billion, TAM, a nd generally 80% goes into optical and 20% goes in E-beam. That's been there forever. I don't expect these dynamics to change at all. The reason is these two technologies are really complementary for our customers to solve their critical challenges. People are using E-beam mostly for electrical defect detection, that is so-called voltage contrast defects, and some guidance in the pure R&D phase of a new product or a new technology life cycle. Still, the optical is the workhorse for process troubleshooting and in-line inspection monitoring.
It's been forever, and it will continue that way because both the technology will continue to progress. We don't see any change. In fact, Gen 5, you mentioned Gen 5, Tim, and it's a clear example where we are evolving our optical wafer inspection technology to find smaller and smaller defects, physical defects. That's the reason why I get this question all the time. I don't believe it's going to change because, again, the complementary of these two technologies are needed for our customers to solve their problems. Even with, for example, multi-beam that is on the street right now and so on, in reality, even with the multi-beam E-beam inspection, we are talking about a tool that is between 100 and 1,000 times slower than one wafer per hour.
Even with the multi-beam and the very, very complex technology, people will continue to use optical for their mainstream line monitoring applications. That's the reason why more than saying these two technologies are in competition, these two technologies are complementary, and we have seen for the last 20 years, and I bet you we will see for another 10 years.
We're going to have more to say about that market, and we've been investing in the market. What we have said in the past is that to Oreste's point about the general thesis of the complementary nature of optical and the E-beam, but that another me-too market in that space didn't make a lot of sense for KLA. If we believe that, I think going forward, if we could come out with something that is not me-too, is something that brings unique value coupled with the optical franchise of the company, then it could be intriguing for us. The thing that is driving with optical inspection, it's not that we're starved for light. We have plenty of light.
It's being able to figure out what's real and what's not, the signal-to-noise challenges in there, and we've made lots of investments in the company to make the optical tool more design-based, more relevant, more computational methods to be able to help speed the time to results there. Leveraging E-beam capability with the rest of the portfolio to provide some baseline information that provides or increases the relevancy of BBP could be an opportunity for us. I'm not launching any products now, but at the same time, I do feel that we've been investing a lot in the area to see is, can you leverage the portfolio across the different technologies to drive or create more value for our customers? If you can do that, then there's an opportunity for us to leverage a play in that market.
Great. Thank you. This is a question more about your shareholder base, but post-Orbotech, you're going to look a lot more like an industrial, arguably, than a traditional semi cap company. Obviously, you have a lot less cyclicality than the other sort of more mainstream semi cap companies do. If you took your name off of the slide and you showed your return on invested capital, you showed how fast you grow, you showed how cyclical your cash flows are, it all compares pretty favorably to the industrial companies that trade at significantly higher cash flow multiples than you do. You have kind of a unique shareholder base because you used to have one very large shareholder, and so you're kind of building your shareholder base.
Do you see signs that the Orbotech deal is going to bring in a new class of shareholder, a more of an industrial shareholder?
Yeah, no, that's a great question. We've always had this challenge because our business is very different than our capacity-centric peers. Real peers for KLA's business has always been a bit of a challenge, because our customers buy our products differently. Obviously, we're exposed to a lot of the same dynamics, but as I said earlier, where we participate is very different as a technology enabler. Certainly, Orbotech broadens that appeal, broadens that story more. I don't think we've seen anything yet, but at the same time, I do think that as it diversifies the business. What's changing with Orbotech is that we're serving a broader market where complexity is rising, and there's an opportunity for us to lever more of what we do well.
What is not changing is our focus on driving profit in terms of the growth rate of earnings relative to the revenue growth rate, the leverage that we drive the business to, the way we manage the cash flow that the business generates. We're strong believers that cash flows don't get valued unless they're deployed productively. If you look at our track record, both across the dividend, but also share repurchases, the way we use leverage in our capital structure, this enables us to do more of that. It certainly, I think, changes those dynamics, exposes to other ones, and at the end of the day, I think it exposes us to a broader set of customers and more problems to solve.
In the long run, I think that's pretty compelling with the revenue and earnings growth targets we have, 6%-8% top line, greater than 10% earnings growth. Cash flows deployed. I think it's a pretty compelling story over time.
I do too. Thank you very much.
Thank you, Tim.
Thanks, guys.