Ed Lockwood - KLA-Tencor Corp. Richard P. Wallace - KLA-Tencor Corp. Bren D. Higgins - KLA-Tencor Corp.

Timothy Arcuri - Cowen & Co. LLC Farhan Ahmad - Credit Suisse Securities (USA) LLC C.J. Muse - Evercore Group LLC Harlan Sur - JPMorgan Securities LLC Toshiya Hari - Goldman Sachs & Co. Romit Shah - Nomura Securities International, Inc. Edwin Mok - Needham & Co. LLC Stephen Chin - UBS Securities LLC Jagadish K. Iyer - Summit Redstone Partners LLC Atif Malik - Citigroup Global Markets, Inc. Patrick Ho - Stifel, Nicolaus & Co., Inc.

Good afternoon. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the KLA-Tencor March 2017 Quarterly Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question-and-answer session. Thank you. Mr. Ed Lockwood with KLA-Tencor Investor Relations, you may begin your conference. Ed Lockwood - KLA-Tencor Corp.: Thank you, Christine. Good afternoon, everyone, and welcome to our conference call. Joining me on our call today are Rick Wallace, our President and Chief Executive Officer, and Bren Higgins, our Chief Financial Officer. We're here to discuss quarterly results for the period ended March 31, 2017. We released these results this afternoon at 1:15 PM, Pacific Time. If you haven't seen the release, you can find it on our website at www.kla-tencor.com. A simulcast of this call will be accessible on demand following its completion on the Investor Relations section of our website. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation of GAAP to non-GAAP results can be found in today's earnings press release and in the investor presentation on KLA-Tencor's Investor Relations website. There, you'll also find a calendar of future investor events, presentations, and conferences, as well as links to KLA-Tencor's SEC filings, including our Annual Report on Form 10-K for the year ended June 30, 2016. In those filings, you'll also find descriptions of risk factors that could impact our future results. As you know, our future results are subject to risks. Any forward-looking statements, including those we make on this call today are subject to those risks, and KLA-Tencor cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking statements. With that, I'll turn the call over to Rick. Richard P. Wallace - KLA-Tencor Corp.: Thanks, Ed, and thank you, all, for joining us today for our March 2017 Earnings Call. I plan to briefly cover three things with you in my prepared remarks today before handing off to Bren. First, a quick look at KLA-Tencor's outstanding performance in March followed by a look at highlights of the very strong market share performance delivered by the company in 2016, and then concluding with an updated outlook for industry growth for KLA-Tencor in 2017. Let's begin with the March quarter. KLA-Tencor delivered excellent results in March, thanks to another outstanding performance by our employees in executing the company's growth strategies in what is a very exciting and dynamic period for the company and for the semiconductor industry as a whole. March shipments, revenue, and diluted GAAP and non GAAP earnings per share all came in above the mid-point of our range of guidance with shipments finishing at a record $909 million in the quarter. During the quarter, we experienced strength across our inspection and metrology portfolio with growth in market leadership metrics for the March quarter continuing the momentum we achieved in calendar year 2016 and highlighting by the quarter record for our unpatterned wafer inspection products. Working in close collaboration with leading global semiconductor device manufacturers, KLA-Tencor's strategies are focused on ensuring our customers' success. This effort is helping to address the most complex manufacturing challenges for inspection and measurement in the marketplace today in both development and capacity monitoring applications. These challenges include patterning and process window issues associated with EUV and multi-patterning lithography and as the industry moves to smaller dimensions and three-dimensional structures to address cost, power, and device performance improvements. Our successful execution of these strategies continues to bear fruit in terms of market leadership and relative outperformance of KLA-Tencor. In fact, the recent market share numbers from Gartner show the overall process control segment grew 11% in 2016 or roughly in line with WFE industry growth in the year. In that period, total revenue for KLA-Tencor grew 14% and systems revenue grew 18%. The 2016 share data also shows KLA-Tencor increased our market leadership in process control by about 300 basis points in the year, reflecting our focus on market and technology innovation in the most critical applications in inspection and metrology, as well as the breadth of our product and services portfolio. We saw a particular strength in 2016 from optical wafer inspection. Recent successful new product introductions in this flagship market for KLA-Tencor including the launch of the new Gen 5 broadband plasma platform, plus strong customer acceptance of the Gen 4 platform for a leading-edge capacity monitoring and successful new offerings in laser scanning patterned wafer inspection as well as unpatterned wafer inspection, together contributed to expansion of the total available market for process control and growth in KLA-Tencor's share of the process control market in 2016. The story for metrology in 2016 was highlighted by the growth in optical CD metrology, which is the preferred technology for an increasing number of CD metrology applications. Optical CD is playing an enabling role in the proliferation of advanced 3D device architectures and leading-edge memory and logic, measuring not only line widths but also profile features on the chip. The robust market share and relative growth delivered by KLA-Tencor in 2016 are the results of continued successful execution of product and service strategies that address the most complex inspection and measurement challenges in today's marketplace. And through that, KLA-Tencor is helping to drive growth in innovation in a period of solid sustained performance for the semiconductor industry. Turning to the overall industry environment for calendar 2017, as March results have indicated across the board, the investment landscape in each of the major customer end markets today are solid and broadly based, supporting a growth outlook for the overall WFE industry that's expected to be in the mid-single-digits or higher in 2017. Given the momentum in demand demonstrated in the March quarter results and with upside to the original industry growth estimates for the year coming from a broadening of the competitive landscape in 10- and 7-nanometer foundry, we now see WFE growth favoring the upper end of the initial range of our estimates for 2017 and our preliminary view of the 2018 industry landscape points to a continuation of these investment trends. Given a business model that consistently delivers superior operating leverage and ranks KLA-Tencor in the top tier of leading semiconductor companies and coupled with leadership position in each of the most critical process control markets, the March quarter results show that the stage is set to build on the momentum of calendar 2016 and deliver what we plan to be a year of double-digit revenue growth in 2017 for KLA-Tencor. Now turning to guidance for the June quarter, shipments are expected to be in a range of $890 million to $970 million. Revenue for the quarter is expected to be in a range of $885 million to $945 million with non-GAAP diluted earnings in the range of $1.46 per share to $1.66 per share. And I will now turn the call over to Bren Higgins for his comments. Bren? Bren D. Higgins - KLA-Tencor Corp.: Thanks, Rick, and good afternoon, everyone. As Rick highlighted in his opening remarks, the March quarter represented another outstanding period of financial performance and operational execution for KLA-Tencor. Shipments, revenue, and GAAP and non-GAAP diluted earnings per share each finished above the midpoint of the range of guidance in the quarter. This result was driven by strong demand across our product portfolio as well as solid execution in cost management and our manufacturing and service operations. Revenue was $914 million in the March quarter, GAAP diluted earnings per share was $1.61 in the quarter and non-GAAP diluted earnings per share was $1.62. In our press release, you'll find a reconciliation of GAAP to non-GAAP diluted earnings per share. With the exception of when I explicitly refer to GAAP results, my commentary will be focused on the non-GAAP results, which exclude the adjustments covered in the press release. Now turning to highlights of the March quarter demand environment. Although we are no longer guiding quarterly orders, for the time being, we will continue to share our perspective on the current end market demand picture to give investors insight into industry trends in KLA-Tencor's performance. Upon completion of an upgrade of our internal analysis systems, our plan is to begin providing end market mix detail for shipment results and guidance beginning in September quarter. At that time, all end market customer mix, business segment, and regional breakdowns will be provided on a shipment basis and we will discontinue all formal order commentary including disclosure of the quarterly results. But for now, for the March quarter, new orders were $990 million. Foundry was 54% of new system orders in March, driven by an anticipated broadening of the customer base for investment in 10-nanometer production and 7-nanometer development and by continued investment in legacy technology nodes. We are currently modeling foundry orders to be approximately 50% of the total in the June quarter. Memory was 42% of new orders, with investment evenly split between DRAM and NAND. We are currently modeling memory orders to be about 40% of the total in the June quarter, with NAND representing about 60% of the memory mix. Logic was 4% of new system orders and is currently forecasted to be approximately 10% of the June quarter total. In terms of the approximate distribution of orders by product group for the first quarter of calendar 2017; wafer inspection was 56% of new orders; patterning was 21%, patterning includes orders from our reticle inspection business; non-semi was approximately 3%; and service was 20% of total orders. Total shipments were a record $909 million in the quarter, finishing above the $890 million midpoint of guidance for March. Looking forward, we are modeling June quarter shipments to be a new record at the midpoint of guidance and be in a range of $890 million to $970 million. Current build plans are supporting quarterly shipment levels in excess of $900 million and we expect this trend to extend at least through the second half of the calendar year. This outlook has strengthened since the earnings call back in January. Current expectations are for second half of 2017 shipments to be up mid-single-digits versus the first half of the calendar year. Turning now to the income statement, revenue was $914 million in March, finishing above the midpoint of the range of guidance. We expect revenue to be in the range of $885 million to $945 million in the June quarter. Non-GAAP gross margin was 62.5%, in line with expectations for the quarter. The strong gross margin performance in March is consistent with recent margin trends in terms of mix of product business and operating leverage in our manufacturing and service operations. Compared to the December quarter, the benefit of the incremental sequential revenue was offset by a less favorable product mix in the period. Looking forward to the June quarter, we expect gross margin to be in the range of 62.5% and 63.5%, up about 50 basis points at the midpoint versus the March quarter, due principally to the mix of products we plan to revenue in the quarter. As we highlighted last quarter, going forward, we expect to deliver gross margin results a couple hundred basis points above our 2015 published business model targets due to a number of factors, including customer reception of new product offerings, more efficient new product introduction execution, and improved variable cost management in service and manufacturing operations. Total non-GAAP operating expenses were $224 million in March, up about $3 million compared with December and non-GAAP operating margin was 38%. We are modeling operating expense levels of between $234 million and $238 million in the June quarter due to higher compensation expenses and prototype materials expenses for current programs. For calendar 2017, we are modeling operating expenses to be around $950 million due to incremental investments in product road maps supporting 3D NAND and EUV inspection and metrology opportunities as well as higher variable compensation expense. Given our gross margin expectations, we expect to continue to deliver operating margins solidly above our published model for the foreseeable future. Our non-GAAP effective tax rate was 20.7% in the quarter, just below our previously guided long-term planning rate of 22%, reflecting the higher mix of revenue from products developed or manufactured offshore and other discrete items impacting the tax rate. You should assume a 22% tax rate going forward for modeling purposes. Finally, net income – non-GAAP net income for the March quarter was $256 million and we ended the quarter with 158 million fully diluted shares outstanding. I'll now turn briefly to highlights on the balance sheet and our cash flow statement. Cash and investments ended the quarter at $2.7 billion, an increase of approximately $111 million compared with the December quarter. Cash from operations was $225 million in the quarter and free cash flow was $215 million. In March, we paid an aggregate of $86 million of regular quarterly dividends and dividend equivalents for fully vested restricted stock units and made a supplemental payment of $25 million towards our outstanding term loan. We expect to continue executing our delevering commitments over the remainder of the calendar year, consistent with our leverage targets. In conclusion, KLA-Tencor's results in March reflect our market leadership, the critical nature of process control in our customer's growth strategies at the leading-edge and in legacy design rules, and our industry-leading business model. This, fueled by record total backlog of $1.7 billion at the end of the March quarter, position the company for another year of greater-than-market growth and an overall WFE industry environment that is currently forecasted to grow mid-single-digits or higher in calendar year 2017. This performance demonstrates the company's market leadership, the strong customer acceptance of the portfolio of solutions addressing the most critical yield requirements of leading-edge, and our operational core competencies. With that, to summarize, our guidance for the June quarter is: shipments in the range of $890 million to $970 million; revenue between $885 million and $945 million; and GAAP diluted EPS of $1.44 per share to $1.64 per share as well as non-GAAP diluted EPS of $1.46 per share to $1.66 per share. This concludes our remarks on the quarter. I'll now turn the call back over to Ed to begin the Q&A. Ed? Ed Lockwood - KLA-Tencor Corp.: Okay. Thank you, Bren. At this point, I'd like to open up the call up to Q&A. And we do once again request that you limit yourself to one question and one follow-up question given the limited time we have for today's call. Please feel free to re-queue for your follow-ups and we'll do our best to give everyone a chance to follow up in today's call as time permits. All right, Christine, we're ready for your first question.

Thank you. Your first question comes from the line of Timothy Arcuri from Cowen. Your line is open. Timothy Arcuri - Cowen & Co. LLC: Thank you very much. Bren, I just wanted to ask you about maybe as you think about updating your model. Everyone else is coming out with these financial models that are tied to WFE. And it looks pretty obvious that this year, WFE, you guys aren't quite as high, but if you look at the other guys, they're thinking like high, high 30s, maybe $39 billion. So it seems like $40 billion is now sort of like the new norm almost. So I'm wondering, can you give us a sense of what EPS would be in a new model at a $40 billion WFE? And then I had a follow-up. Thanks. Bren D. Higgins - KLA-Tencor Corp.: Well, Tim, we haven't published a new model so it's a little bit difficult for me to answer that in terms of different WFE levels. I mean, I think the way you have to work through that is, as I've said around the revenue performance from an operating margin perspective, I think we're operating a couple hundred basis points better than what we have published before. But the easiest way to model that is if you're talking about in nearer term, and I think it's important assumption, are we talking now or a year from now and so on? But if you're just thinking in nearer term a $40 billion environment, you'd have to think about process control intensity on that. And I think in calendar 2016, process control intensity was below 13 percentile, so somewhere between 13% and 14%. The mix of business would be a factor in that. Market share was Gartner just reported 51%. We've got internal objectives to gain share at least a point of share a year over the next few years so that's certainly a factor there. And then our service business, which is currently – would be somewhere around $800 million into calendar 2017. So if you put all that together with the operating margin, I suggest that I think you can probably work your way to an EPS result. Timothy Arcuri - Cowen & Co. LLC: Awesome. Thanks. And then I guess, Rick, a question for you. So there's a lot of concerns that have actually gotten a lot of questions recently about some perception that there's a lot of reuse between 10-nanometer and 7-nanometer. I guess it sort of ignores all the investment that still has to be made at 10-nanometer. But can you talk about that? I guess it comes down to how much backfill there is on 10-nanometer. But can you talk about that from like a high level? Thanks. Richard P. Wallace - KLA-Tencor Corp.: Absolutely, Tim. I think the biggest issue associated with 10-nanometer and 7-nanometer is the number of design starts that there are that are ultimately going to land at 7-nanometer. And 7-nanometer is a much more significant node than what we saw with 20-nanometer going to 16-nanometer, so therefore we don't see reuse as being as significant, mainly because there's going to be such an expansion in the overall capacity. So we think that will drive our intensity and it'll be more like what we saw with the 28-nanometer node. When you combine 10-nanometer and 7-nanometer, it'll look more like that. So we feel pretty good about how that is playing out. Not only that, you have multiple players in the 10-nanometer and 7-nanometer race, so you've got broad industry support, a number of foundries all competing for that as there are increased starts. Timothy Arcuri - Cowen & Co. LLC: Thank you very much.

Your next question comes from the line of Farhan Ahmad from Credit Suisse. Your line is open. Farhan Ahmad - Credit Suisse Securities (USA) LLC: Thanks for taking my question. My question is regarding the OpEx increase in second half of the year. Can you just talk about, what exactly are you investing? And you touched a little bit upon EUV opportunities, and I just want to understand, like, is there something new that you're doing in that area or just accelerating some of the programs that you had there? Bren D. Higgins - KLA-Tencor Corp.: Yeah, Farhan. Thanks. It's a good question. So there is some acceleration, I would call it incremental investment. We think there are opportunities for us on the inspection side. Well, frankly, metrology side as well for driving more process control into 3D NAND. And so there are a number of efforts in the company that are focused on that. There is also work that we're doing to enable EUV development activities. And so there's work there. Finally, the industry has strengthened, certainly the company performance has strengthened. So there's some variable comp dynamics that are part of that. And so when you add it all up, it looks like it's about $20 million higher for the year than what I was suggesting back in January. But our outlook has strengthened as well. So I think if you look back January versus today, we're probably in excess of $200 million of incremental revenue to where we see things today. And so if you follow our traditional drop-through model of operating margin, it's an incremental $20 million or so on costs. So it fits our model and we see it as an opportunity to invest in some of these big opportunities, we think, that will help drive process control intensity into 2018 and 2019. Farhan Ahmad - Credit Suisse Securities (USA) LLC: Thanks. And then, Rick, you talked about 2018 outlook looking positive at this stage. Can you maybe touch on some of the product drivers that give you confidence of some growth in 2018? Richard P. Wallace - KLA-Tencor Corp.: Sure. I think that as you look out into 2018, what you see is that the investment timeframe that'll include work on the 5-nanometer, so as you get to later in the year, and then continued expansion in addition to additional capacity being brought on by the guys who aren't in the lead in the 10-nanometer and 7-nanometer, so that's really from the foundry standpoint. Memory, you have continued investment going on kind of across the board. And our process control intensity is strengthening in memory so we see continued drive from that. And, of course, we've all talked about the investment that's going on in China. So right now it looks pretty good and our customers are certainly excited about their prospects as we go forward. Farhan Ahmad - Credit Suisse Securities (USA) LLC: Thank you. That's all I had.

Your next question comes from the line of C.J. Muse from Evercore ISI. Your line is open. C.J. Muse - Evercore Group LLC: Yeah. Good afternoon. Thank you for taking my question. I guess, first question, I imagine you have a pretty good view today in terms of the capital intensity as we migrate down to 7-nanometer and would love to hear your thoughts on what that intensity looks like from process control vis-à-vis 10-nanometer or 14-nanometer, whichever is easier as a compare for you? Bren D. Higgins - KLA-Tencor Corp.: Well, so, C.J., it's Bren. I mean, as we look to calendar or we look at 7-nanometer, I mean, 7-nanometer has a full shrink. You're shrinking in the front-end. You also have your shrinking in back-end in transistor wiring. So we think that that coupled with the multi-patterning schemes, the process integration structures that customers are doing with these new materials in the back-end will create a number of process window challenges, we think, will be good for our business. As we move into 7-nanometer, we have a number of new products that'll come out that customers will be able to try to address some of these technology challenges but also drive cost of ownership. So I think process control intensity per wafer goes up somewhere in that 20-ish percent range or so. Obviously, the number of wafer starts ultimately over time and design starts will be a factor in that because lots of designs change how customers invest. But how we're looking at it now is I think that to Rick's earlier comments, I mean, reuse will be limited. And I think the new product introductions plus the technology road map will be a good driver for our business. C.J. Muse - Evercore Group LLC: Very helpful. And I guess as my follow-up, if you make the assumption that your revenues and market grows in calendar 2018, will the OpEx uptick we just saw be temporary or will that continue? Will you continue to invest given the heightened revenues? And this is just investments, not including the increase in variable comp. Bren D. Higgins - KLA-Tencor Corp.: Well, the variable comp will adjust, right? So that's one factor that will play out as we move into 2018. I think the easiest way for you to think about modeling the company is back to the model that we had put out, we're targeting an operating margin level based on certain revenue targets. And we're exceeding the published model because of the strengths in gross margin, which we believe are sustainable. And so that's what's driving the outperformance. So as revenue grows, we will invest. And I think that as I outlined earlier, I think there's a lot of opportunities out there and so we'll invest in those. But we're committed to the operating model and that's how you got to think about it. C.J. Muse - Evercore Group LLC: Thank you very much.

Your next question comes from the line of Harlan Sur from JPMorgan. Your line is open. Harlan Sur - JPMorgan Securities LLC: Hi. Good afternoon. Congratulations on the solid results and on the outlook. Last call, you guys talked about the potential for shipments to be slightly down second half versus first half. Now you're expecting second half to be up by mid-single-digit percentage points. So maybe you can just help us understand what's driving the better second half view. Is it foundry, logic, 10-nanometer, 7-nanometer? Or is it memory? Is it legacy China? Is it a combination of all of the above? Bren D. Higgins - KLA-Tencor Corp.: Yeah, Harlan, it's Bren, and thank you for the comment. It really is more of an all-of-the-above statement. Certainly, logic, foundry into the second half of the year has strengthened it terms of the shipment profile. And we certainly saw that versus where we were in January. So now it looks like it's up a little bit and it's been really filling out in the December quarter. So we feel pretty good about that. I think in China we continue to be surprised by the customer pull that we see from those customers, so that's a factor in it as well. But I think all segments right now are investing and are putting a lot of pressure on us in terms of quick delivery. So I think the good thing about the upside we're seeing is it's quick orders and quick deliveries which will enable us to drive some revenue performance in the second half. But that's basically what's driving it. And I think finally the only other thing is that the order profile, so you look at the backlog that we're bringing into the year, the order result March, what we expect to be a book-to-bill greater than 1 in June. So we've got a fair amount of sort of backlog or runway in terms of what we see coming and how to scale and plan the factory through the second half of the year. Richard P. Wallace - KLA-Tencor Corp.: Just add to that, Harlan, I think one of the things that changed in the last three months is we were anticipating but not convinced that there was going to be this broad support for the 10-nanometer, 7-nanometer across multiple customers. And we see a lot more evidence of that now, so that really has strengthened the foundry side of the equation, to Bren's point, driving all those things. So it was a good quarter from that regard. Harlan Sur - JPMorgan Securities LLC: Great insights. Thank you for that. Recently on the memory side, we were talking to the CTOs of one of your large 3D NAND memory customers. And when we asked him about his equipment spending intensity going from 2D to 3D, he's saying that most of his buys are three areas: number one, deposition; number two, etch; number three, metrology. And this was for 32-layered 3D. They're transitioning to 64-layered now and still saying that metrology tool buys are a very high priority. So I know that you guys have been wanting to collect more data on this but it seems that on the metrology side, whether it's overlay, film thickness measurements, CD, whatever, that your metrology intensity for 3D is increasing pretty dramatically over 2D. So, first of all, are you seeing this sort of higher metrology intensity on 3D versus your prior assumptions? And is there any way to quantify that? Richard P. Wallace - KLA-Tencor Corp.: Harlan, yes. So, I mean, the metrology side has been pretty healthy. The concern we had was actually on the other side and the defectivity side being lower intensity. And we're seeing that strengthen. And that's relatively early just due to the offerings that we have. But I think that was the area where we think there is more upside because of all of the work that people have to do to do disruptive tests. And as the complexity increases, there's more opportunity. So we do think the intensity goes up. And I think that if you look at planar, overall process control intensity for planar versus 3D, they're actually pretty comparable now and likely more upside to that as we go forward. Harlan Sur - JPMorgan Securities LLC: Great. Thank you.

Your next question comes from the line of Toshiya Hari from Goldman Sachs. Your line is open. Toshiya Hari - Goldman Sachs & Co.: Hey, great. Thanks for taking my questions. My first one is on gross margins. You're guiding Q2 gross margins to 62.5% to 63.5%, which continues to be a pretty strong level above levels we had seen two, three years ago. Is this kind of the new normal for the company and we should expect this to be a sustainable gross margin number or going forward should we expect kind of a reversion to the 59% to 60% range? Bren D. Higgins - KLA-Tencor Corp.: Yeah. It's a good question and really, we're seeing benefit in a lot of places. I mean, we're seeing improving margin profiles in service, we're seeing improving margin profile across products. New product introduction execution has been very strong in terms of how you manage from transitioning from one product to another. And at these revenue levels, I think the scaling of our factory and the leverage that exists in that has all been good. So I don't envision a drop-off like you described. I mean, certainly, at these revenue levels, I think as I guided, I thought calendar 2017 was 62 plus or minus 50 basis points. I think we're probably at the higher end of that guidance range now as we look into next year. And I don't see anything on the horizon that suggests that this profile will change going forward. So we feel pretty good about it. And as I said earlier, I think what's driving how we're looking at our operating model and performance of various revenue levels is not so much about what we're spending, but how much more gross margin we think we're going to generate from our revenue. Toshiya Hari - Goldman Sachs & Co.: Great. And then I had a follow-up on the wafer side of things. I think it's been about a decade since the Shin-Etsus and the SUMCOs and the Filtronics have expanded capacity in a meaningful way. And we hear more and more about very tight wafer supply these days. Just curious have you had preliminary talks with your customers about potentially expanding capacity or are they still very disciplined and still 12 to 18 months out before they make a meaningful change in their capacity plans? Thank you. Richard P. Wallace - KLA-Tencor Corp.: Well, we have ongoing conversations with them as they are – we're critical suppliers to them. And there has been levels of investment for technology capability on a routine basis. But we have seen expansion recently and 2017 looks like it's going to be a very good year overall relative to capacity in support of increased capacity demands. So that business is part of the strength that we're seeing. Bren D. Higgins - KLA-Tencor Corp.: So the only thing I'll add to that is that in our unpatterned inspection business, we had a record year in FY 2016 and we just had a record quarter in that business in the March quarter from an order perspective. Now some of that is 3D NAND because 3D NAND is driving unpatterned inspection. They basically use these tools to monitor the deposition equipment to ensure cleanliness and so on, but also the wafer activity is a part of that. And I think that's starting and we expect to see that growing a little bit over time here and it'll be a nice tailwind as we progress through this year. Toshiya Hari - Goldman Sachs & Co.: Thank you so much.

Your next question comes from the line of Romit Shah from Nomura. Your line is open. Romit Shah - Nomura Securities International, Inc.: Yes. Thank you and congratulations. I think there's been this perception or there was at least, as memory spending grew as a percentage of WFE, KLAs revenue growth would underperform. That's kind of the trend that we saw in 2014 and 2015. But more recently, the revenue performance has been substantially better in spite of pretty healthy memory spending. I can't say I appreciate what's the difference this cycle. And if you could talk maybe a little bit about if DRAM continues to grow as a percentage of WFE, how does KLA do in that environment? Richard P. Wallace - KLA-Tencor Corp.: Well, there's really two things. One, what we saw in the period you referred to where it was underperforming – where we underperformed, I think the other thing that happened in addition to the mix shifting quite fast toward memory. You also had a lot of reuse happening, so it was kind of a combination of factors that played against us. What we have now is expansion of capacity continuing in foundry. Foundry continues to be reasonably strong. Less reuse, more players in our memory process control intensity going up over time, and then some other factors like the last conversation we just had like the OEMs and the wafer manufacturers investing. So really a broad customer base. On top of all that, we have China, where the process control intensity tends to be higher overall because these are smaller projects. So we have a lot of factors working in our favor that are supportive of our revenue growth performance. Romit Shah - Nomura Securities International, Inc.: So is it fair, Rick, to say that you're sort of agnostic to the mix of WFE? Richard P. Wallace - KLA-Tencor Corp.: Not agnostic. We have a much higher percentage of adoption in foundry than we do in memory. But unless there is a major shift in terms of the relative performance, we believe we'll continue to perform in line or better than the industry as we go forward. Romit Shah - Nomura Securities International, Inc.: That's helpful. Thank you.

Your next question comes from the line of Edwin Mok from Needham & Company. Your line is open. Edwin Mok - Needham & Co. LLC: Great. Thanks for taking my question. So recently one of (34:57) your customer and I think we've heard from other people as well that there's talk about shrinking from 20-nanometer to 22-nanometer rather than moving down to 14-nanometer and then 10-nanometer, 7-nanometer, right? And how would that benefit or affect your business? Do you expect that shrink to drive increased process improvement? Richard P. Wallace - KLA-Tencor Corp.: I'm sorry from 28-nanometer to 22-nanometer, is that what you said? Edwin Mok - Needham & Co. LLC: Yes. Yeah. Richard P. Wallace - KLA-Tencor Corp.: Yeah. Sure. I mean, any time there is any kind of shrink going on, there tends to be increased demand for, especially in the wafer side, wafer inspection side for finding smaller defects. So that will drive it. But you're talking about a relatively small part of our overall market. So you wouldn't see as big a change as you would in a node shift down to 7-nanometer, for example, if that makes sense. But sure, any of those trends are good, and especially when the fabs – from our standpoint, if it's the smaller fab doing it, the relative process control intensity is higher just because of where they are on the yield curve and on the volume curve, if that makes sense. Edwin Mok - Needham & Co. LLC: Okay. Actually that's helpful color there. And then on your guidance outlook, I think you've talked about a logic order picking up this quarter. Is this kind of renewal resumption of spending by the logic guys or was it just a kind of one-quarter timing of things? Bren D. Higgins - KLA-Tencor Corp.: Yeah. I think when you look across the year, our view on logic spending in 2017 versus 2016 is relatively flat, so I think it's a quarterly dynamic more than anything. So, yeah, I think it's just – we got orders that are going to get placed and numbers a little bit higher next quarter. Edwin Mok - Needham & Co. LLC: Okay. Great. Thank you.

Your next question comes from the line of Stephen Chin from UBS. Your line is open. Stephen Chin - UBS Securities LLC: Hi, Rick and Bren. Congrats on the results and the guidance. I just had a follow-up question on WFE spend from China. In China, we are continuing to see satellite pictures of some of these big domestic China fabs making pretty good progress constructing their shelves. How impactful do you think domestic China WFE will be this year for pilot line equipment? Thanks. Bren D. Higgins - KLA-Tencor Corp.: Well, when you look at our order profile, I mean, it was so what we saw in 2016 and what we expect to see in 2017 for the most part is foundry-centric. And so it was roughly 15% of foundry orders in 2016 and maybe 25% of foundry orders in 2017. I think what's interesting is while the memory investment from a shipment perspective is more of an 2018 and beyond dynamic, we are starting to see memory orders show up in the funnel. And so as we look, I'm not sure exactly when we'll see those orders booked, whether we'll see them booked in June or whether we will see them booked in September. But they are for shipments in early 2018. And so your question about progress on the facilities is a good one, and so far as we monitor that and we begin to staff up in anticipation of supporting these ramps, these are factories we watch pretty closely. But right now, there's a lot of activity there and we're chasing trying to hire people and ramp up to be able to support those customers in a pretty diverse fab footprint overall across the country. Stephen Chin - UBS Securities LLC: Okay. Thanks, Bren. And then a follow-up question on the market share gains that KLA saw last year. Do you get the sense that customers were waiting for KLA's new products last year and the strong gains you saw last year should continue into this year as well? Thanks. Richard P. Wallace - KLA-Tencor Corp.: I certainly think we create more momentum with new products in general than in the industry cycle. So a new product cycle is very good for us. And I think that in this case, there are two things. One, there is a large-scale adoption of, in this case, our Gen 4. But not just that. We brought out the Gen 5, but also in metrology we had products that were meeting a need. So I'd say that our market share position continues to be very strong. We are investing very heavily in new capability to bring it on. But the other thing we've done in response to the demand in China, we've actually restarted some of our product lines that are well-suited for that market because we believe market share in China is critical going forward. The other thing that's going on there and you may be well familiar is one of the big challenges a lot of our customers have there is talent and engineering talent. So one of the other ways we can help is with the worldwide apps, presence and the ability to support them as they ramp, not only do they benefit but we benefit from strong share as well. Stephen Chin - UBS Securities LLC: Okay. Thanks, Rick.

Your next question comes from the line of Jagadish Iyer from Summit Redstone. Your line is open. Jagadish K. Iyer - Summit Redstone Partners LLC: Thanks for taking my question. Congrats on a solid execution. Two questions, Rick. First, on the 10-nanometer and the 7-nanometer, I'm just wondering, how should we think of growth between the wafer inspection and metrology? We have new materials being added and new dimensions with the FinFETs and things like that. So I just wanted to get your perspective on the growth between wafer inspection and metrology. Then I have a follow-up. Richard P. Wallace - KLA-Tencor Corp.: Sure. Yeah. I think the way I think about it is the wafer inspection is really driving more capability in terms of – if you think about smaller defects and the actual scaling has happened to go into 7-nanometer, so not only do they need more capable tools but they have to run them at higher resolutions, which drives the utilization in a way that they need more capacity. Metrology, there are more layers, especially with multi-patterning. So what you end up with is more capacity device in addition to increased technology. So on a percentage base, both are growing slightly different drivers between the two though. Jagadish K. Iyer - Summit Redstone Partners LLC: Okay. Fair enough. I just wanted – the second question as a follow-up is I wanted to understand your momentum on your Gen 5 tool. And how should we think about the ramp in calendar 2017 versus calendar 2016? And is there a possibility of seeding Gen 5 into memory at some point? Thanks. Richard P. Wallace - KLA-Tencor Corp.: Yeah. Gen 5 is pretty much doing what we thought it would do. And like any new product introduction, not necessarily exactly in the places because it's kind of had different adoption in different locations. But we've broadened our penetration. And Gen 5 is now at both memory and at foundry and logic facilities. And we're seeing we've got multiple orders now in both foundry but also what we're seeing in memory. So we feel pretty good about our penetration. We're on the plan that we laid out when we introduced the product in terms of our 2016 objectives. And Bren can talk to the details of that. And then we hope to be entering – through 2017 entering 2018 with a lot of momentum. Bren D. Higgins - KLA-Tencor Corp.: Yeah, I think as Rick said, it's going pretty much according to plan. We revenued four tools in 2016, our plan is to revenue 8 to 10 tools in 2017. To Rick's point, they're seeded all over in multiple customers so across all the settlements. The other dynamic is driving Gen 5 besides the discovery opportunities where we compete more directly with (42:33) capabilities is that you're also seeing it deployed in EUV development situations too because it's used as a tool for radical verification when they print wafers and use the wafer results to calibrate pattern fidelity on the wafer or the reticle. So there's an additional use case there that we're encouraged by and we're in line with our plans. And I think by the end of calendar year 2017, we should have somewhere between, I don't know, 15 and 18 tools or so in the field fully installed. So we'll see how many we actually end up with revenue beyond the plan, I told you, but there's – they're out there and getting deployed, demonstrating value. Jagadish K. Iyer - Summit Redstone Partners LLC: Congrats on a solid execution. Richard P. Wallace - KLA-Tencor Corp.: Thank you.

Your next question comes from the line of Atif Malik from Citigroup. Your line is open. Atif Malik - Citigroup Global Markets, Inc.: Hi. Thanks for taking my question. Nice job. Rick, in your prepared remarks, you talked about gaining share and seeing strength in unpatterned wafer inspection last year. What drove that strength in terms of end markets? Was it just the volume of wafers being kind of cranked out in 3D NAND, or which end markets drove that strength? And then I have a follow-up. Richard P. Wallace - KLA-Tencor Corp.: Well, unpatterned really does benefit from 3D NAND. So we definitely see demand coming from 3D NAND. And we also see it just in general multi-patterning there are more layers and customers have long realized that monitor wafers can be a very efficient way to clean and maintain and come up from downtime on tools to re-verify their process. So that's really it. Plus we saw, as Bren said, we think the momentum continues based on some of the work we're seeing in the wafer manufacturers which are part of what was driving our March results. So we think that continues to be strong for us. Atif Malik - Citigroup Global Markets, Inc.: Okay. And then on China, the investor community is still kind of skeptical on the Chinese projects, obviously there's 10-plus or these (44:36) and then 5 or 6 more active ones. But overall, when you look at these projects, do you think China has the expertise or the engineering talent to build and run these fabs or are we going to be seeing (44:52) build these fabs and just kind of learn through the experience and then kind of stumble or move towards low-end products (44:58)? I just want to get your sense of how ready China is to build fabs and then run them? Richard P. Wallace - KLA-Tencor Corp.: It's a great question. Let's start with there's certainly a significant commitment, and I've been in this industry a long time and I would say I've heard this before out of China but we're seeing a lot more evidence now of actual commitment. There's also leadership has been put in place from other areas so you have experienced leaders now running a lot of these companies that have demonstrated their ability to run successful organizations in other parts of the world. So I think you have that. The biggest gap probably ends up being the engineering workforce to be able to execute. And I think in that case, what we're seeing is a lot of these ambitious projects are also coming with requests for support from equipment companies. And so we're definitely feeling that and are participating. We are relatively cautious too. And if you take our plans, we don't bake in everything that we hear that's said in China in terms of how we run the business. But we're also positioned to be able to support it, should it ramp. And I think the most significant part of that expansion to WFE is not in 2017 or 2018. It's actually toward the end of 2018-2019. And so I think it's still early. Right now we feel very good about the prospects for 2017, and the early 2018 numbers look very doable from our standpoint. Atif Malik - Citigroup Global Markets, Inc.: Very helpful. Thanks.

Your next question comes from the line of Patrick Ho from Stifel, Nicolaus. Your line is open. Patrick Ho - Stifel, Nicolaus & Co., Inc.: You answered this a little bit when you talked about the Gen 5 product and some of the applications that you're getting adoption for that product. But given the continued success of the Gen 4, is that slowing any of the, I guess, the product momentum for Gen 5 and that adoption given that Gen 4 is still, I guess, a workhorse tool for even these next-generation nodes? Richard P. Wallace - KLA-Tencor Corp.: Not really. I mean, I think that goes to two things. One is our customers have always sought the lowest cost solution for solving the inspection problems. So if we had not expanded the Gen 4, then maybe that would be the case. But the Gen 5 in its development isn't yet at a point where it could have offloaded those inspections. Whenever we introduce a whole new technology platform, we almost are forced to reduce the functionality of it on introduction, which is the case here. So it has capability but it doesn't have the same breadth of capability that a Gen 4 would have. That will happen over time, and as that does, the Gen 5 will take more and more of the layers as we go forward. Patrick Ho - Stifel, Nicolaus & Co., Inc.: Great. And as a follow-up question, given your strong exposure to the foundry segment, today we're seeing the second-tier foundries building out their 28-nanometer capabilities. How much of, I guess, your expertise in that node given that you've helped the other leading players ramp up on that years ago, how much are you helping out those second-tier players and how is that helping provide potential incremental business or even services opportunities with these second-tier foundries that are trying to get ramped up? Richard P. Wallace - KLA-Tencor Corp.: Well, we definitely have a close partnership with many players across the board on, say, 28-nanometer, and I do think we support them as best we can. We don't really make money on services from that. What we do is we support them with tool sales. Our market share tends to be pretty good, and we're committed to doing what – helping them with best practices in terms of ramping their facilities. These are very capable people, but they do often appreciate the support. The other thing I'd mention is in some cases we've actually restarted some of the older products to be able to support them with exactly the capabilities that they need. So we're not selling the latest generation, in general, into those facilities. We'll sell a mix. Some new and some of the maybe Gen 3 kind of product line. Patrick Ho - Stifel, Nicolaus & Co., Inc.: Great. Bren D. Higgins - KLA-Tencor Corp.: Market share, just only thing I'll add is market share tends to be stronger with those customers? And so what comes with that is, to Rick's point, the need for some additional support as we work through it. So we have applications engineers in fabs all around the world and they get deployed in these opportunities. And we think we benefit pretty well from the market position we have on the tools and these folks help the customers get value out of the tools. Patrick Ho - Stifel, Nicolaus & Co., Inc.: Great. Thank you.

There are no further questions at this time. Mr. Ed Lockwood, I turn the call back over to you. Ed Lockwood - KLA-Tencor Corp.: Okay. Thank you, Christine, and thank you, all, for joining us here on our call today. Just a reminder, an audio replay of today's call will be available on our website later on this afternoon. And once again, we appreciate your interest in KLA-Tencor. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.