And very pleased to have KLA, with us. And with KLA, we have Rick Wallace, who's the president and CEO. And before I turn things over to Rick, I just wanted to talk about and just, you know, hearken back to a note that I think I wrote back in 2018. And I was comparing some of your financials to that of some of the industrials companies and some of the companies that people sort of consider to be industrial tech, companies like TI. And it was pretty amazing that your financials compared favorably to those companies and yet your multiple was much, much lower.
That then led to you presenting at this conference, which is not a tech conference, this is the industrials conference. And you first came in 2019 and you've come every year since. So it's definitely a theme that's been getting a lot of traction. So with that said, thank you, Rick. I'll turn things over to you.
Thanks, Tim. And I have fond memories of that conversation because I think for us and for some investors we started meeting with them, it was an interesting way to think about the company that maybe traditionally investors had not had exposure to. That's why I'm here. That's why we're here. Obviously, I'm going to make some forward looking statements, the usual caveats apply to those.
We refer you to our website. But what I'm going to talk about today, and I know you have control of your own slides, I'll just give you a little bit of color where I am in the deck if you want to follow along. I'm going to talk a little bit about who KLA is and why we think it's a company worth considering as you think about investments, in this space. I'm gonna talk about our operating model and what that's done for us as a company to sustain sustain our success. I'll talk about our competitive differentiation and barriers to entry, and then I will certainly focus on cash flow and our capital return and talk about how we're well positioned as we go forward.
We start with who is KLA. I'm on the slide now that talks about the overall company being founded in 1976. So we're not a new company. We've been around for quite a while. We shipped a huge number of systems into the field.
57,000 systems have been shipped to our customers. And what amazes a lot of people is how long many of those systems are still in operation. And that gets to an important part of our business, which is the recurring revenue from servicing those systems. We are a global company. Most of our business is not in The U.
S. Where our market share pretty consistent around the world wherever we do business. And what you see at the bottom of this chart talks about our revenue for the prior twelve months at $6,400,000,000 and that split between systems, so the actual systems that we ship, plus the $1,600,000,000 in the services from that. You can see our operating margin is very healthy at 37.9%, and we talked about free cash flow generation of about 30% on the margin, which is really one of the points we had early on with the profitability and the sustainability of our model. We do return about 70% through buybacks and through our dividends.
And we have we started a dividend. We were the first in our space, and we have eleven years consecutive now of increasing that dividend, representing our commitment to returning cash to shareholders and our confidence in our business model. Our management team has been with the company for a long time. We've grown internally. We think that's important because we've been very consistent in how we've approached the market and what we've done.
And even though we've expanded quite a bit over the years, it's we've done it by building on the success that we've had. And so we think that continuity of leadership has been really important to our success. We talk about industrial tech and we think about the different devices that you're familiar with. There's really nothing now that's electronic that doesn't have, some aspect of it that went through KLA systems to be built and to be brought to the market. That's become more important recently as the ongoing evolution of the semiconductor industry has picked up new industries, which you're very familiar with.
And the most recent public one is the automobile industry, which is heavily reliant on semiconductors, not just for electric vehicles, but for all the work that's going on in autonomous vehicles and the increased electrification of that industry. This next chart, I think Slide eight is pretty exciting. It shows our revenue over time. And what you could see is the different eras of the semiconductor industry and maybe some of the conceptions or preconceptions people have about the semiconductor industry have to do with the history of the industry. Whereas there was people used to talk about one big thing, for example, and they would talk about what that was, whether it was the PC or whether it was the cell phone.
But what you can see from this chart, and this talks about the last several years and including the market expectations for KLA in '21 and in calendar twenty one, we're really in this digitization era where the semiconductor industry is serving multiple markets now. And those markets, have to do with both business to consumer, but also business to business and included in things like data center and the expansion of cloud services. I talked a little bit about automotive. What happened with COVID nineteen and thinking back, I did this presentation virtually a year ago, and some of the trends we were seeing then have just accelerated through the last twelve months. And so we've seen that COVID nineteen was really an accelerant for the digitalization.
As we come out of the pandemic, I think there's no question that many of the lessons that we've learned during this pandemic are ones that we can build on as we go forward. Obviously, two of the big drivers are artificial intelligence and five g, and they're different, but related. So artificial intelligence is the expansion of this processing capability to allow many industries, virtually all industries, to be impacted by the ability and the opportunity for people to enhance their businesses by understanding and doing more analysis, more capability of that. Five gs is an infrastructure build. We're just at the beginning of the build out of this next generation of technology.
And of course, we're mostly many are familiar with five gs now. But if you think of it in terms of fiber optic speed over the air in terms of data transmissivity, then you understand why it's so important. Of course, there's been a lot of talk about China and regionalization. I think one of the things that happened in the last twelve months is there was a new appreciation for the criticality of supply chain and having access to supply chain, wherever companies are, businesses are around the world. And that's led to an increased emphasis as recently as this week in The United States, for example, for this idea of regionalization of semiconductor capability.
As car plants have been impacted and others have been impacted by the lack of semiconductor due to the demand increase, we're seeing governments around the world recommit to building factories and capabilities to produce semiconductors all over the world. That, of course, is going to be a driving factor. That hasn't really impacted our business yet, but it will over time as some of these plans are put into practice. But what you can see is a strong growth of our business the last several years driven by these multiple different drivers for semiconductor across multiple. There's no one device anymore.
There's no one thing. They're multiple. And when you talk about the next chart, this chart that talks about many industries are adopting more content, I mentioned five gs and AI. Obviously, virtual interaction, what we're doing today, but what many people have been doing for the last twelve months, drove the demand for semiconductors. Mobile is having a recovery year for the first time, in a couple of years.
We're seeing accelerated sales of mobile handsets. Of course, data centers keep building out. One thing that a lot of people don't appreciate about the data center is the consumption of semiconductor and the drive for new capability in semiconductors to facilitate data centers. And there's two big factors. One is being able to handle the increased demand on the data center and how much data is going in there and being processed.
And the other is the desire to manage the cost based on the use of power and the electricity. And so there's a driver often in semiconductors just to get to the next generation to reduce the energy consumption of semiconductors. I touched on automotive, whether it's EV or just the increased capacity and the need for semiconductors inside an automotive. An automobile, that's pretty significant. I heard recently that the cost of semiconductors in automotive has increased the cost of steel inside the car.
So that's just an indicator of of that transition. Many people have probably experienced virtual health care as something that was really not happening in The US, but got accelerated through the last year as as people were not going to visit their physicians. And that's a trend that's probably going to continue to be built upon. So with all that, we're seeing a forecast for the semiconductor industry to grow nominally twice the GDP after the next several years driven by all these factors. And semiconductor equipment is what enables semiconductor manufacturers to support that growth.
Specifically as what does KLA do, we build products that primarily are used for the inspection and the measurement of the devices as they're being manufactured. I had one person explain to me one time that, wow, you're like debugging a software process. And that's a good way to think about when somebody builds one of these new fabs that costs 10,000,000,000 to $15,000,000,000 to $20,000,000,000 The challenge they have is how quickly can they get that product, that facility to yield good product. And the challenge they have is all the issues that come from integrating the most complicated manufacturing process in the world, they have to see what's going on And for that, they use inspection and metrology products from KLA to make sure that they can debug that process, ramp it, and then maintain high levels of capability.
When a new fab is brought online, if somebody spends $10,000,000,000, they don't necessarily produce product that they can sell until they've debugged the process. And every time they introduce a new process, they have an entire new set of challenges. And that's really where KLA comes in and why we've, continued to grow so successfully in the last several years because of these drivers. Let me talk a little bit about our operating model. This is Slide 11, and I'm going to go to Slide 12.
One of the things inside of KLA is we have a broad set of products. The nature of our business is such that there are multiple different engineering approaches to solving problems. So we have a broad set of products and we break into divisions to run those most effectively. So we needed a common way to run these different businesses, whether they grew up organically inside of KLA or whether we acquired them. And so the operating model really codifies our approach, making sure that we have a common mission, and that's focused on helping our customers achieve their yield and performance objectives, having a strategy that we have consistent across the company that we're going to focus on leading technology capabilities, differentiated solutions.
And we're going to do that by collaborating with our customers, driving our own innovation and execution. And lastly, we're going to have clear objectives that we measure every one of our businesses on so that we can guarantee that we're focused on the things that return value to our customers, but also, of course, to our shareholders. So you think about the operating model, it's based on these three pillars, surrounded by what we view as our values of how we get things done inside the company and the kind of expectations we have of our team. I list the values here, and I think they're important to understand a company like KLA. Perseverance is one.
We say that because every product that we have, every business that we're in, takes a lot of time to build and strengthen that business to be successful. So when we think in terms of sustainable advantage that we have, we know that it's taken us years in many cases to reach leadership position. We also know that that creates a very challenging target for our competitors, which is largely why we've stayed, so successful over time. We also have this philosophy of drive to be better to make sure we're continuing improvement on our business as we go forward. We focus on continuous improvement because we know what got us to be successful in the past won't necessarily get us to be successful in the future.
Very clear evidence of that was the changes we had to make make in the last twelve months to navigate COVID nineteen where we couldn't send people to travel. We couldn't meet in person as often, and we had to find ways to continue to focus on solving problems for our customers while keeping our employees safe. High performing teams and making sure we're honest and forthright and have a lot of integrity in the system. And lastly, we focus on being indispensable for our customers. In many cases, we do not have direct competitors.
Our customers rely on us. We take that as a significant responsibility, but also it's a great opportunity for us. So we drive our strategy, we manage by metrics, and we have a strong set of financial disciplines and rigor. And when we acquire a new company or a new business, we drive very hard to put our operating model in place. What this has led to is the results that we've been successfully achieving for years now.
Global leadership in every one of the markets that we're in. We seek not only just to lead the market, but to do so in a sustained fashion, with competitive differentiation. So we focus heavily on technology and investing to do that. You'll find that our competitive moat is big, and we invest heavily to maintain that as well as to continue to make sure we're solving the problems for the industry. We have a very experienced and energized leadership team and as I'll show, very strong record returns.
So we have these four objectives: market leadership, driving product differentiation, operational excellence, and then making sure we're focused on driving our talent forward. I think one other interesting, aspect to consider about KLA as you think about your investment portfolio and the focus on corporate social responsibility or or ERC is the fact that it's essentially in our DNA. One of the things that we do as a company is we drive the productivity up so that our customers can be more efficient with their investment, get more yield, more capability out of their investment. We also drive and help our customers reduce power consumption throughout the semiconductor supply chain. Those are two active areas that we've been involved in for years.
Of course, inside of our own operation, we spend a lot of energy on making sure that we're doing things that are sustainable from an environmental standpoint. We engage in the communities that we're involved in, and we have a very strong corporate governance structure. Let me talk a bit about our competitive moat. I'm now on Slide 18, which talks about our market shares, our market share and talks about how we achieve our market share, not just that we have. We're proud of the fact that we're more than four times bigger, in terms of share than our competitors and have been for well over a decade now in terms of our market share.
We have large competitors in terms of the size of the company, but our process control business is significantly larger than theirs. So I mentioned earlier, we focus on collaborating with our customers, we make sure we're engaged, understanding the problems that they're dealing with. We drive innovation, and then we're very good at executing against those plans to make sure we continue to solve our problems, the problems for our customers and for our industry. That drives this market share, which we're proud of. The other thing it drives is gross margin, and we'll share with you, in a bit.
I'll talk some about that. This next slide compares our gross margin with our peers and also our operating margin. So our gross margin, we feel, is a really good measurement of the value that our products create for our customers. We've historically been very proud of this. It's something that if you're a manager inside of KLA, you understand how important it is to have products that win, but also products for which we get paid.
So our view is this is value sharing. We create a lot of value for our customers, and in turn, that creates value for us in the way we drive our margins, which then translates to very strong operating margins. And some of these operating margins, think we're proud of what we've done. This has been, our biggest acquisition in our history was a couple of years ago. And while they're a strong company, their margins were dilutive to KLAs.
And in a relatively short period of time, we've been able to improve their margin and you see our margin performance, getting back toward the kind of levels that we had before we did that acquisition. So we're very proud of our ability to drive growth, both gross margin and operating margin. Another way to look at this is our operating margin against a broader universe. This is a ten year average GAAP operating margin comparison on Slide 20, shows us against our peers, but also against the industrial peers, the S and P five hundred. We talked about Dow Jones, Nasdaq, and the stocks.
No matter how you compare it, KLA has outstanding operating margin. This is no accident. This is a function and outcome of the operating model that we run inside the business and our strict adherence to the idea that if we can't create differentiation, it's not a business that we should be in. With perseverance, we'll give it time, and we'll make sure that over time we're making progress, but the outcome has got to be that we drive operating margins. In terms of innovation, we're a company that relies on new capabilities, we work very hard to stay ahead of our competitors, but also to stay in touch with what the market needs.
So as a result, we invest very heavily in R and D. That's an area where we think is critical in terms of our ability to maintain leadership. Our goal is to be two generations ahead of our competitors and we want to be a moving target. What we show on this slide, Slide 21, is we average 15% R and D as a percent of sales, is something we've adhered to over time to make sure that we're continuing to invest. We have many long term investments.
So this year alone, we're investing in technologies and capabilities that will not really come to the market for several years from now. And yet in spite of that, we're, despite the fact that we're making those investments, we still have this market leadership operating margin. Another way to look at this is the level of R and D of KLA in terms of the actual R and D dollars exceeds most of the revenue of our competitors in our space. So of course, our revenue is significantly larger, I mentioned over four times bigger. But even the R and D of the way we spend it.
So our view is that we continue to invest and it's R and D investment is not a guarantee of success, but if you don't invest, you won't be successful. So we're committed to continuing that investment to make sure that we really have the capabilities that our customers and the industry needs. Talk a little bit about, cash flow and capital returns, something I know that's of interest to all investors. We take this we think about generating cash as a critical part of measure of our success with the management team. And of course, has many uses.
We want to make sure we continue to invest in our new product capability. We want to make sure that we're continuing to have the opportunities if they're out there for M and A. But of course, free cash flow and conversion and returning that to shareholders is a commitment that we've had for years now. And we return on average over 70% free cash flow has been returned to shareholders through both the dividends and buybacks. And as we continue to drive our profitability, there's upward pressure on that as well.
So when we compare that and our free cash flow margin to the broader universe, again, we come out very favorably. And this is a measure of pride and something that we as a management team take very seriously is we think it's great to build great products, but we're only doing that in the cases where we can generate strong returns in terms of free cash flow. So we compare that with our semi cap peers, industry, S and P. And by any metric you choose, KLA, performs quite well in terms of generation of free cash flow. The next slide, Slide 26, highlights the fact that we're an asset light business.
And you can see when we compare with the rest of the universe, we're very low in terms of assets and very high in terms of capital returns. Again, not an accident. As you know and as you noted or saw earlier in our presentation, as I noted, our biggest investment tends to be in R and D. That's the one where we focus very heavily on. The assets that it takes to do this business, of course, we have some, but relatively light, and that's something that helps us drive these high capital returns.
The other business I touched on earlier, but just I think it's worth highlighting and for people to understand the service business from KLA. So we'll ship a system to a customer, but that system will remain in use for years and years and years. And that's increased over time. The length of usefulness of this product has increased from maybe fifteen years ago, it was four years to now it's more like twelve years, and it continues to go up, the average use of of that tool. And there are some tools, of course, that are much higher than that, that have been in use for a longer period of time.
And as a result, our service business continues to grow and it's growing at a higher rate, than our systems business because of the nature of subscription model, but also the fact that tools are remaining in service longer. So they're they're around longer. We have more opportunities to serve them, and those are tools that provide great value for our customers. So we have over 75% of our service businesses on a subscription like contract. And as we show in this chart on page 30, 27, we've had 11% growth in this since 02/2002, and we actually think that this can go up from here.
This generates a lot of free cash flow and is one of the differentiators, I think, for KLA in terms of the continued support for our business model as we go forward. Of course, that was the basis early on was a recognition of our service business and that growing that enabled us to have the confidence in a in a time where there were no other semiconductor equipment companies doing dividends, but we introduced the first one. And we've grown that as over time in an average of 15% as shown here. And so we target this 35% target target dividend payout ratio over time. And as we as you can see, we also bought back shares over time consistent with the strategy of returning 70 to 75% of our free cash flow generation to investors through either the dividends or the buybacks.
In terms of when we think about the future, we feel very strongly, very well positioned for it, very strong about our industry because of some of these dynamics that have changed. One is that the investment from our customers has gone up quite a bit in the last several years for what's called WFE or wafer fab equipment. And that's because of the increased use of semiconductors really across the board in terms of all the different industries that we talked about. The other thing that's interesting to note is that the level of volatility in the industry has decreased quite a bit. So the cyclicality has reduced partly because now there's so many more uses of semiconductors, partly because there's been some concentration in terms of the biggest semiconductor manufacturers.
And so those are both functions that have increased the predictability of this industry. Shown in the lower right quadrant here is the end demand of semiconductors and that's diversifying as well. So there are more places where these semiconductors are being deployed. And of course, that's been an important aspect of the reduced volatility of our industry. Our balance sheet, we feel very good about our bond maturities.
We're in good shape. We did some, some impressive refinancing in the last couple of years, and now our next debt bond maturity is until 2024, and you can see we have debt that's staggered out over time. We feel good about where we stand in terms of this. We feel like we have a balance sheet that makes sense for a company like ours given our position and the strength of our business and the cash flow generation of all aspects of our business. A couple years ago, we outlined our target model for 2023.
We did that at an Investor Day in 2019. And what we are targeting at that point was sales of $7,000,000,000 to $7,500,000,000 by 2023. If you noted in my early chart, the expectation for our revenue is in that range for this year using market consensus two years ahead of this. Our operating margin target at that was 36% with earnings at 14.5% to 15% and this payout ratio of 70% to 75%. Our framework continues as we go forward thinking the industry's growth rate is going to be higher than we originally modeled at the 7% to 9%.
It has been over the last few years. But if we continue to model that out, we have a very strong future ahead of us in terms of this framework. The operating margin, the incremental operating margin of 40% to 50% means that we drop a lot to the bottom line. That's because we leverage very heavily our investments that we already have. And we think our earnings per share as a result can grow at 1.5 times our revenue growth.
Talked about the allocation between dividends and buybacks, and we remain committed to doing that. I think there's no question that Kayla is engaged and and is a critical player in many of the industries that are transforming and and, changing and supporting, economic growth around the world. Whether it's in semiconductors, whether it's in our role in terms of enabling the next generation of semiconductors, but also enabling the continuation of semiconductors in some of the technologies that are more mature, whether it's the key technologies that are coming. And we're doing all that from a position of strength where we're continuing to drive great market positions in very important markets, which result in high operating margins and this resiliency, which drives high cash returns. So we feel very good about where we are.
I think the last several years have proven that the semiconductor industry has shifted into a very important phase of our growth. This is the data era, and there are many aspects of that. I think we're just getting started in terms of the opportunities for this industry and as a result, the opportunities for KLA. With that, I'd like to thank you all for, paying attention, listening, and certainly happy to answer any questions we have time for Tim.
Great. Thank you, Rick. So maybe I'll start with, I have a bunch of questions obviously, but let me start first with your service business. This is a really, I think an underappreciated piece of your business. And it's obviously large and growing, I guess I had a couple points on that questions.
I always think for a company that helps customers maximize yields, I always feel like there's a monetization opportunity as for you to take some of the economics where you're able to help a customer maximize yield. That would go beyond just your upfront sale of the tool. So can you talk about how you think about service and kind of how you price it? I know you have 75% of service revenue coming from contract, but it seems like a really big opportunity for you going forward that it really plays to this theme of industrials.
Yeah, no, that's a great point, Tim. And we have, I think we've engaged with our customers, over the years to support their yield ramps, as you say, part of what they get when they buy from us. And I think it's kind of included in the value that we create is the ability to leverage those assets as they're ramping their facilities. So we haven't really gotten into this model. We we look specifically at, you know, this, yield sharing, if you will.
I think most of our customers, it's it's not necessarily the way they think about their business. It's it might be more true for some smaller customers and people that are in different sectors because, they're maybe not as they don't have the resources. But it does show up in our market share. I think it shows up. I think it's part of the sustainability of our market share and our market leadership is that customers have confidence in our systems and our ability to help them meet their objectives.
And I would say that more than anything will drive our share to continue to strengthen over time. That's what we've seen in the last couple of years. The service business, I think, continues to get better too as we bring more complex tools because frankly, the older tools, there were some aspects of them, if you go back twenty years, where customers might have been tempted to self-service. Very, very difficult to self-service a leading edge tool from us now because just the complexity of it. Maybe think about it the way people might have serviced their cars once upon a time, but now it's almost impossible to self-service your car.
Got it. So so really most the service opportunity or most of the gain share from a yield perspective opportunity really is in the upfront sale of the tool. That's how you think about it.
It is. And I think that's part of why we've sustained our position. It also supports our pricing.
Got it. Yes. So I guess, Rick, also I just wanted to ask about a couple of your other end markets, which I think are quite interesting. You're in the display market, you're in the PCB market. You also have this very, very interesting specialty semiconductor business.
You really are broadening your end market exposure as well. So can you just talk about those particular end markets and maybe are there other end markets to where you could bring your technology to bear as well? And I guess as part of that, how much overlap is there among these end markets from an engineering perspective? If you look at like an industrial company, they can leverage engineering across lots of different end markets. And I think that you're beginning to be able to do that more and more.
Yes, great question. I think there's a couple, before this discussion today, was on a review of some of the programs in these specialty markets and there's some overlap and then there's some news. Specialty semiconductors for those that aren't aware are really the most, mostly tied to power, tied to the five g rollout, but tied to automotive. So that's a business that we bought as part of an acquisition a couple years ago. They're having a great year, and it's a it's a really strong business and one that I think the synergy with KLA comes mostly with them in terms of customer access because they were relatively small and there are some big customers that wouldn't necessarily engage with them, not because their technology wasn't good, but because you know, our customers are very large and they want to make sure that they minimize the number of engagements they have because it's so hard to supply do supplier management.
So we've actually gotten some sales synergies lined up and that will grow, from that. From technology synergy in both the PCB, which is the printed circuit board business, which is also one that we acquired and flat panel, there's more overlap between those capabilities. And we are sharing technology and we're definitely seeing technical benefit from doing that. And I think in both of those cases, we have broader exposure. And Tim, as you know, one of the challenges for our customers has been the cost of Moore's Law means this whole push on the more than more, which is a push to packaging.
And that's an area that we're now heavily engaged in based on our footprint. You mentioned display. The display market is not the reason we did the acquisition, though. I'd be happy to, point to you because I know you've asked about this. We're pretty confident display has hit a bottom, and we think it actually we've done a good job of managing our costs there so that we are well positioned to have that be a profitable business going forward based on some recovery and some technology innovation that we're happening with our customers.
It's not a big business for us, but it fits the KLA operating model in terms of putting the cost structure right and then making sure that we participate in the most profitable segments. But you're right, our breadth of positioning has done a couple of things that have surprised us a little bit. We've had more conversations with different players that probably wouldn't have we wouldn't have had access to or different parts of different companies, in the past based on these acquisitions. So we think we go back to the 2019 and we rolled out what we thought were the growth outside of Core Semi and we think it's well set up to continue to do that.
Got it. One more thing I think that people might not realize about the company is that the core competency of the average engineer at KLA is quite different than many of the companies that you compete with. You're really more of a software company. So I guess, can you talk about that and talk about maybe how you're bringing artificial intelligence to bear in the products that you're offering to the market?
Yeah. Thank you for that. It is true. I think in two areas or maybe three, we're able to attract some really outstanding talent And it's simply because of the kind of the work that we do. If you think about advanced optics, the people that are doing that, there aren't many places where you can go and work on the challenging kind of problems, that we have for engineers at KLA.
That's a differentiation for us. And as a result, we have a core competency in optics and in design, that that has few rivals. Certainly, most of our competitors do not have that capability. AI is an interesting one because for years, the the proposition for KLA has been, even when I started many, many years ago, we collected images. So if you think about what our system does, it's a simple microscope.
We we look at a specimen. We do some basic analysis of that, and we try to find differences or make measurements. Early on, algorithms were a big part of what we did, and we were hiring engineers in the early days to do algorithms. We actually started using GPUs, graphic processors from people like NVIDIA well before others did to process that data into advanced algorithms. Artificial intelligence is really an outgrowth of that, and it's about the massive amount of data that comes across our systems and our ability to extract information.
So AI is present now. Artificial intelligence is present in several different product lines that we have. And, the the idea is to create and extract more signal from noise from these products at a very high rate. So as a result, we've hired a number of people that are working in AI and we actually have a centralized function as well as distributed function. Part of what we did when we build our second headquarters in Ann Arbor, Michigan, which we did in the last couple years, is hire a really great AI team, which is driving a lot of our work there for across the company.
But divisions also inside of them have AI expertise, and that's true in The US and all over the world. And we think that is one of our differentiators, and that's a way that we can even though it seems like we spend a lot of money, we get more leverage out of that if we can drive more algorithms. So that I'd say that's never ending. Last part, and I think this is really important, the cost of our systems, because they're relatively expensive, they can actually afford a tremendous amount of processing. And as a result, we can have really advanced algorithms on those systems.
I think for most companies that they don't really necessarily have that same dynamic. So their investment is gonna be pretty minimal and maybe doing things like managing their fleet or doing things like managing spares, which is also what we're doing. But that's not the bulk of what we do with AI.
Got it. Thanks, Rick. I I I guess one more thing that that really makes you a lot more like industrial company or an, you know, industrial tech company is that is that you you tend to be more levered to a more stable part of the of the, you know, overall spending pie in, you know, all these different end markets that you're in. And and so in times where there's a lot of capacity being added, maybe you don't do quite as well during those times. But in times when, you know, when when the cycle sort of rolls over, you have a much more stable model than your peers do.
Looks a lot more like an industrial company and you get some premium growth versus those industrials as well. So can you just talk about that? Can you talk about sort of where we are right now and sort of where you fit in the overall? I always think of you as the last product that a customer will stop buying before they turn off the lights is your product.
Right. I think it's true. We're less capacity driven, than people that sell simply for, if you're ramping volume. And we're also broader in terms of just the fact that we sell to the people We have a a non insignificant part is to other equipment manufacturers because, and and materials manufacturers, they buy our equipment too. And in older facilities, what's interesting, if you think about expansion of, let's say, IoT, all the devices that are being made for the Internet of Things, those are mostly in older factories.
Well, one of the biggest levers they have in this time of shortages is yield. And so that's the one thing. It's harder to buy a lot of process equipment, but we do see the opportunity to upgrade and sell to those. So I think our exposure is broader. I think it is, as as you point out, it becomes less cyclical because of that.
The exciting thing now, of course, we're seeing this growth because there's so much investment in new technology and capability is is the underwriter of that. We also have multiple players investing in new technology. So one of the things, as you know, Tim, for a while, one of the major US guys wasn't investing as much in leading edge. And as they increase their investment in leading edge, in leading edge logicfoundry, that gives us more opportunity as well. So I think it's true.
We're broader than our peers. And I think as a result, we do have a more stable stream of revenue. And, and as a result, I think it it does behave more like an industrial, which is we liked your analysis when you first did it. Like Mostly the multiples, we like the multiples.
Of course, yes. So maybe let me just give you a chance to sort of, you know, wrap things up on capital allocation. This is something that also makes you a lot different than your peers. I mean, there's been, TI sort of began a long time ago and TI has a very predictable capital allocation model and TI returns all their free cash flow every year. You know, they they were paying a full, you know, onshore, you know, corporate rate.
So so they so so so they sort of were the were the, you know, forefathers of what other companies are now trying to do. You have a pretty predictable model where you try to return 75% of your cash flow. You were the first in the space to pay a dividend. You raise it every year. But can you just talk just broadly about capital allocation and maybe also just from an investor perspective, what do you think investors had?
Has there been any sort of pivot that you sensed in terms of what they want from kind of a capital allocation perspective?
Sure. And as you point out, we've, we've been consistent with the dividend. The the view and, you'll often hear Bren say this is frequency over magnitude in terms of increases. So we've been very consistent about the returning, but we have these other guiding principles about the percent of free cash flow that we're going to leverage for the dividend and for buybacks. We have done an acquisition recently, but but as we go forward and as the size of the company and the service revenue increases, we feel more and more confident of our ability if we needed to raise money to do that without having to rely on cash because we've gone to the debt market successfully several times, and we can sin continue to see the price of debt going down for us over time.
So, yes, we're committed to the returns. I think it has been a blend in terms of both dividend and also in terms of buybacks. I think our customers are really depending on who you talk to, I think those are the two biases that you hear. And based on the performance of our industry, I think we have some of both. But we're we're committed to the dividend.
That's one thing we want to be clear about, and we're committed to increasing it as as we increase our free free cash flow. Could the 75% go higher? It's possible. We do have other uses of capital, though, that we, don't wanna rule out. So I think that, you know, the the position you've stated from another company may make sense for them, but we feel pretty good about where we are today.
And we feel really proud of the fact that we've been increasing it and we've been driving our free cash flow. I think the key to returns is our ability to continue to drive the free cash flow at the percentage that we have because that's what we do. We know our investors if they can't model it, they can't model it increasing, we don't get valued for. So we want to make sure they're it's clear what we're communicating.
Well, thanks a lot, Rick. You know, I I have to really add it to you since you've, you know, since you've been, you know, head of the company, the company really has been executing very, very well. And and and this and this diversification strategy is really a great testament to your leadership. So thank you for your time here and I think we'll wrap it up. So thank you.
Thank you, Rick.
Thank you, Tim. Appreciate Okay. Bye.