KEYS - Earnings call transcript Q1 2018 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen and welcome to Keysight Technologies' Fiscal First Quarter 2018 Earnings Conference Call. My name is Christine and I'll be your lead operator today. After the presentation, we will conduct a question-and-answer session. Please note this conference is being recorded today Thursday March 1, 2018, at 1:30 PM Pacific Time. I would now like to hand the conference over to Jason Kary, Vice President, Treasurer and Investor Relations. Mr. ahead, go Please Kary.

Jason A. Kary

welcome fiscal Keysight's year and conference quarter call for XXXX. everyone you, first to earnings Thank

Joining me CFO. are and Neil Ron Nersesian, Keysight Keysight Vice President Senior President and Dougherty, and CEO;

be this Joining the for he of Sales, calling Solutions Satish us and has in week. Mobile Communications Senior President the who Q&A will been Worldwide of in Dhanasekaran, Group, Vice Mark session from President Congress Wallace, World is where Barcelona

our on at You to the supplement can investor.keysight.com. press information discussion find and release today's website

While will link the there, Keysight's for Quarterly Financial Information click on please the investor with Reports tab. find along under There presentation results. you segment an

Following remarks this website. post a call, will to copy of the we the prepared conference

financial measures. today's Neil always, As by non-GAAP Ron comments and to will refer

comparable find metrics most financial website. our will and on the directly GAAP reconciliations You

The the are more make call. today's and statements company will statements complete We valid factors. review for to forward-looking our and the only picture performance recent as other assumes uncertainties of the SEC to a risks company's on financial today. filings update them. are company risks and no Please subject of obligation These about of

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Ronald S. Nersesian

headlines us. quarter. outstanding the and my We Thank performance the are you, quarter I'll an position with we joining our both thank three comments leadership on in delivered earnings pleased for and growing exceeding revenue and key formal focus guidance for Jason, all you with first market. and our

delivered quarter great First, start the a and to board. XXXX a is strong we across off

the results this execution. of our strength as growth by better-than-expected well order quarter Our as robust driven were

And first we build for third, of of continued contributing Second, customers growth. we technologies is our strategy delivering accelerating consecutive to Keysight's the our four quarters R&D multiple strong to increasing the investments quarter, their markets, next-generation are across in order results. half year. momentum With the raising have in first and are transformation end performance guidance

Additionally, and to in over past growth established the XXXX. backlog revenue foundation drive a has growth order strong earnings our several and expansion quarters

grew Let's for and look of of was $X.XX achieved into high-end our our range. deeper take quarter. exceeded of $X.XX We the guidance a We share, the the performance per midpoint to our earnings revenue outstanding to above also delivered new XX% on order guidance which or reach in XX% basis, guidance. a core growth a million, increased reach by which $XXX Orders QX record. quarter this quarter. our was XX% total, first above

better-than-expected strong Northern results the growth driven our California ability and recover expected. were order our to wildfires by from than including faster execution, Our

and Santa Rosa, was to capacity when year. book, QX undertaking significant still in the we synergies, to execution magnitude quarter, team's months, delivered. Santa tested, achieved but on the milestone production above We for is This of We beginning levels. work the completing and we committed integration by resiliency. the This invoice to we in circumstances. and to run-rate are wildfires Ixia's systems again once of I quarter recover our able was now When Keysight's time, realizing ship enabler sales the by integration from key major same the another we strong team's track million working a people, the Ixia of cost and to the processes. were operational our production the is the milestone and inspired build, order especially pre-fire back our to and the work, on and levels Rosa our through have in completed grow. ERP. pre-fire diligence, deliver accomplished be hard customer demand essential, this we everything savings Ixia proud fully as site do recover, bringing at team tremendous during impressive At annual was to challenges of more in in the in solutions With continued efforts focus running nine and quarter We even remain on $XX this is back the team. believe I a The considering look in continue this rose execution of above in to

faster addition than tragedy, integration member of Ixia their ERP. team supporting commitment again, diligence. worldwide we Once completed order the the recovered production to terrible employees through achieved a of into planned and thank our Keysight In Keysight's above-market growth, for and every and we each capability

markets, in investments Moving overall we and technologies dynamics. increased to our emerging continued healthy to see

technologies Our our leading-edge and fuel solution-centrics first-to-market growth momentum, our as including increase strategic activities focus, their resulting helping are areas and development in in portfolio, customers above-market investments. position our of

growing electronic warfare, is seeing in are first-to-market cornerstone With and chipsets industry Keysight we have automotive. We was high-value established leadership and geographies investment to transform core broad-based XG, as commercial level saw that investments, our technology first accelerating particularly communications strong across the highest our growth. XG and networks, we the of seeing next-generation undergoing balanced adoption transformations double-digit in with forming Overall, and orders excellent market our position the XG, growth reaching consecutive solutions ground-breaking strong The quarter such for our of XG. end-market, R&D across markets, Winning In a was devices. are are growth of channels. consecutive and key with a order around growth. in core order order quarter fourth and innovators targeted early partnerships solutions, strategy to Keysight. demand quarter of in since Order we globe key Wi-Fi, second segments our

the specifications. growing Radio network XG publication of key our XG within was exceptional to XG with communications New innovation a December, record. advance we demonstrate in software orders performance Radio new In XG first and industry quarter R&D days Our to emulation together players the brought New of

are the enabled exciting have are customers of area where technology with Keysight multiple electronics the and with readiness goal this transform World solutions XG growth enabling advancements proud industry-first our week, to Mobile At industry-leading their advance further we XG market. to communications another as to continue Automotive is innovation. We showcase seeing solutions. we Congress

quarter, the with applications, OEMs set Tier including and robust investment During a solutions. In major communications on With quarters. connectivity was solutions and order R&D suppliers electronic most continue aerospace a radar has industry's double-digit Keysight broad advanced in to market. solutions malicious in our portfolio and wireless this energy grow continued consecutive market, end-market, warfare power defense and evolving electronic to achieved of has and and developing defending security X across the electronic solutions provides our electronic automotive at our this automotive focus growth looking and five testing gaps for advantage Keysight leader in of actors warfare against the been take for importance. long-standing

the XX%, For approximately although soft second orders in grew a quarter a aerospace and versus compare. row, defense

in we long-term, outlook position the in this confident remain Over our market market. and

However, we weighted expect U.S. approvals of be toward delayed over in end year the near-term, the the the given budget orders past the timing the of months. to several

component transform our and Moving beyond key software end-markets, strategy of solution-centric, to go-to-market our Keysight. approach is a

innovation of resulting in and Keysight innovation Our needs, faster. critical that accelerate into to measurement market long customers software bring helps gives and their products insight leadership history

unveiled solutions. orders expanding from an milestone early our points our that in January, were development and summary, portfolio product of very In concept important design once through PathWave, and part our organically. discrete disruptive and that software execution with across manufacturing on the larger the innovation offerings, our is platform first journey quarter deployment. workflows expand a and becoming software integrates multi-year bridges in results This and first in to is development first are gaps the quarter. the we pleased Further software and capabilities test we between the our software for lifecycle, solutions Software our industry's entire simulation, double-digits grew

And are poised well-aligned market earnings are Keysight we our model where our operational differentiating customers trends drive next-generation growing in are backlog first-to-market the and XXXX. to is expanding We revenue in With in investing solution-centrics execution, accelerating order growth and strong technologies. advantage with growth, marketplace. and electronic

I'd our and to Neil. Investor forward it Day up We have next to look exciting point, sharing you over week March to an with more this like line for you At on X. turn at

Neil P. Dougherty

everyone. Thank hello, you, and Ron,

even was say, from unforeseen good months Ramping past discussing orders accelerating meet the indicator to In were XX% Ron XX%. are for would of delivered included like we into core and to the ongoing we are three As best fourth growing itself, Keysight's of Needless accelerating and production the core this of orders I even Keysight. a underlying today wildfires QX, recovering start very of growth. we circumstances with events busy managed high the the production Northern complicated challenging that customer recovery, our shipments several order orders demand, growth, extremely wildfires. ERP. strength. capacity This quarter as is in of consecutive as business order by through strong quarter, California demand to by more like given discussed, completing Ixia delivered and the when be can the it level and impacted integration

had past with mentioned, that is have a have recover above of production our fire, worth a It pre-fire the we to expected, grown cancellation ability Ron million noting levels. As by not pleased we quarters. backlog as customer result our than and over we capacity $XXX the were now faster single order and is two

increase our still have work shipment of which and growing clear a made to have backlog, We but levels billion progress, over do lot was to solid at quarter-end. $X our

wildfires quarter, and, revenue, discussed of disruption our last half as impact to the we focused seasonality expected therefore, we of the Moving the to XXXX. guidance first on revenue from the

to the with difficult favorable XX% $XXX revenue finished up was as seasonality with from predicted, of X-percentage-point impact currency. As million, non-GAAP forecast we a quarter

X% expectations, core While a still it above year-over-year was significantly revenue was down QX on basis. our

We ramp recovery in as production continues. the expect QX revenue a significant

operational in of per $XX margin million results $XXX reported the reported above and we We of with for XXX quarter net of million, high-end expenses income margin ended and of guidance share XX.X% $X.XX We share, resulting earnings XX.X%. at which in range. Looking the diluted average a of operating million our of gross $X.XX QX, shares. our was weighted operating count

million, by remained we business the $XXX commercial grew across strong, strong the our and communications and most the segments, XXX in XG CSG production. Order government. by to end In and PAM-X defense orders as X% test. impacted of contrast, early aerospace, disruption. the network growth markets: rate was Communications of R&D our worked next-generation Moving Group, underlying two double-digit or to revenue while re-ramp and down wireless the ecosystem communications in market, was the includes as business a year-over-year, was investment at spending Solutions end performance primary CSG, gig driven wildfire

year. last grew $XXX with for generated quarter end-market $XXX QX, As this was XX.X% Total Ron margin. however, million in the revenue XX%; of with mentioned, aerospace, margin CSG compared revenue defense $XXX quarter operating in and and approximately the million government orders gross million same XX%

$XXX by XX% Solutions Industrial by at year. gross operating or last from X% in margin quarter was measurement. a generated XX.X%. energy solutions, & at revenue Electronic electronics automotive and reported Group, of semiconductor million, offset general decline EISG, Our measurement slight Growth up EISG margin led first and

Our XX.X% Group, revenue and revenue as their ERP renewals and Solutions in an unfavorably new million, solutions, XXX the of operating reached high-speed for a margin increase a record. of for shipments test this by of generated ISG, margin integration or inventory cut-over. support Ixia was saw ISG to Ethernet above the they impacted margin gross clean-up $XXX tied business Gross expectations one-time was XX.X%. and gigabit overall, our in quarter

the reach SSG growth sales overall Services and margin driven million. for calibration Asia-Pacific. revenue by with SSG, XX.X% regional SSG of and an Lastly, Group, XX.X%. and to remarketed reported X% $XXX Americas grew in was year-over-year of gross of in margin solutions Solutions increase strength or Revenue operating

and sheet generated quarter and to our operations. with flow $XXX million we cash million from cash Moving in in the cash cash balance ended flow, and $XXX equivalents first

cash the the first or operational flows the expect the significant were we In the fire QX, for first reductions during to XX% remainder again, purchases, atypical over million for half. our half. to Our capital out to will timing-related working flow quarter recovery, of quarter strengthened in capital by revenue, of the we was balance in linked invested $XXX free and, $XX which even out bringing million, cash which

the reform our move U.S. I overview of Before business. of we an will to tax guidance, on provide impact

provide much shift expect territorial system our tax to and rate tax our to the to corporate U.S. overall a We and access tax generation. cash lower modified rate lower greater global

eight-year estimate XXX result our Keysight basis change and deemed estimates, paying non-GAAP The some this provisions rate drop coming tax and historic which this $XXX new influx existing U.S. offshore expect on of greater totaling of while quarter. will an cash subject We legislation to $XX will points law While the currently are interpretation, impact over providing may balances cash provision now that taxes foreign the cash beginning we our earnings. to months initial XX% U.S. one-time tax than million period, a repatriation includes in over a million. new

exploring balance interests are are to to our We value currently long of shareholder best best committed shareholders strategies our different the sheet in we and and term. optimize acting over the maximizing

We Now, first turning market recovery $X.XX earnings core first raising for midpoint wildfires, weighted growth, a greater At expect shares. diluted pleased guidance, core first will Q&A. first our year. first operating and our the and and of now momentum, in quarter second incremental back and expecting non-GAAP half backlog revenue results guidance are earnings X% the year-over-year and that, half as a count based margin full-year are of than our our the our the of of dynamics, Jason order guidance to QX million continued guidance the it $X.XXX for outlook growth. from XX% current our represents growth, $XXX a our non-GAAP revenue half to strong to of of the better-than-expected per of to X%. we positive balancing our the the share in range the revenue of the of share now share raise $X.XX. EPS range implies growth billion $X.XX, guidance approximately strong to million in midpoint, $X.XXX range on half and the turn X% XX% we half, position, revenue to first core I our billion QX are With per now XXX Building for result on The we half

Jason A. Kary

give instructions the please you, for you Thank Neil. Christine, the could Q&A?

Operator

from comes question of Ahmad Farhan first Your line the Suisse. Credit from

seen Farhan in (USA) thanks first on? they you open. My any you is equipment Ahmad have - impact there the my question saw trajectory, that systems do acceleration Securities an for order rushed of to momentum wildfires looking Credit the Suisse order early order And line to question. the Was Your taking is that test think can because wanted get regarding LLC you Hi, people that second, continue? because the orders. ahead,

Ronald S. Nersesian

at because that any they up. Ron. customers but come quarter didn't of never is seemed rush that We the the this Hi, see our None to to canceled of to by equipment wildfires with is what has orders rush And books the in all, any had to And customers. of and first us. we've them purchase more primarily of to sooner. equipment purchase XG our our a more our want seen that be on driven

saw of there to across broad some spectrum that sizeable businesses, of all fires the throughout Now, of we for in players the at very any have channels. and the broad, and order order equipment placed in year. for orders use the But R&D regions momentum any that reason mention wasn't the

results saw earlier, mentioned fantastic in double-digit high-single was also commercial XG not saw growth, was only growth that the regards software a with services we was automotive which growth, saw saw digits, quarter. As another we growth we double-digit to communications, in we the

our it's channel channels, So, broad, of very multiple both and is it's momentum our regions channel. it's around world, also across indirect very, businesses, and different the across our the across direct

at work four invest expertise from committees and ago market on R&D years in be and really and we're being And Farhan the doing. our pleased you. there strategy Thank Got the you our off. our talent Suisse that seeing Ahmad dollars it. think I utilize Credit standards on competition, LLC versus results (USA) Securities if and focus how very look first it with our to first to - paying we're and is we're and

it it to could expect landscape look XG? on at World Mobile lot announced to I compare momentum just had comment partnerships, fair have seems are you guys share that releases on relative you on I then you Can if your So, XG. you Congress, out have to that it the like if on competitor, and, at you the gains are XG that press is on what a standing seeing you your meaningful have you like of competitive seems it

Ronald S. Nersesian

in like as will speak See, to though competition. like to wasn't Agilent I part was We to don't our to to comment We I generation. of not say XG, role our this. lack will performance able say XG, provide of it on more cash compete ourselves. being or our in

So, enough. invest did measurement we focused great we to are top XG, one day a we early in order we're own be of our doing not like top On now been are in since did not this that, leader. we destiny, had needed that of to control seeing the in and company. But We we results. invest

needed we to realized had gaps. we together pull to some solutions, is example Another and go where and we ahead

went we And be acquired of with the technology Keysight, those protocol for classic area. also was or levels, our come we in then Spain. at put which first. at software in products the developed and things solutions to software And out on has accelerate offering So, and have using ATX lot we expertise really Anite together over a Anite, wireless and that up XG

He on from Satish there is Now Dhanasekaran the with be phone Congress. commenting Mobile competitors, won't is at Keysight seeing he everybody what he share our but on World customers. can

Satish Dhanasekaran

Farhan, plans, World of display operators pull a question. for XG in ecosystem. was accelerated Ron. Mobile Multiple Clearly, here the thanks the declaring acceleration on creates industry Thank Congress. really broad Yeah. the you, at

with for referenced broad some invest but to press platform we've And I ago, releases, a predicted scales Something beyond that goes press ecosystem. releases. continuing that you we this the a bit little know and been approach

industry-firsts. enabled and platform many solutions Our have

the were would frequency XX XXX high booth you Qualcomm demonstration with modem. gigahertz example, for if at So, have you the Qualcomm seen

If that at would Ixia you for demonstration newest our acquisition, our seen others. a XG. at the showcase were XK have helped was display video you amongst on if on China Mobile this display Intel were booth, Solution you booth, solution And

most So, strong Ron. And most quarter. driver these in are adopted. trend a Thanks, commercial the our at which in fact had powerful acceleration examples are the we as by solutions this a being and performance we positive view of order the scale that our segment communications recent evidenced

Ronald S. Nersesian

comment, Thank you. one Farhan. And last

last has factor top can all Farhan years big more many ago, first. these And I that side not he the fast, an other together for and speak for product past, it company, it because Where the is tools many Group - have he sit have then, Ahmad products all and and different total The appropriate accessible to we so Thank over up, be our priority the want in big customers world had but while order you. a Securities years And its them transformed commitments all now, very company. solutions into customers. That's we this is Communications everything and quickly act making Got speed industry-focused very, lines was the the back exactly (USA) LLC pull focused. four make was Credit a could on Suisse turned company difference were we a in where to Satish we it. have. the of and give company the they with what in down and leads him,

Operator

Goldman Hari of line Toshiya Our comes Sachs. from next question from the

Your open. line is

Toshiya Hari

remarks well. I your some your of Great. for aerospace your taking outlook. and color comms gave you for But strong follow-up Ron, could you on the color share a your part the defense hoping order your I question had business. results. the and EISG for congratulations additional question as prepared and business I in think, some Thanks was on

Ronald S. Nersesian

as We offerings hands. their gone Sure. equipment to and Congress the and overall and thing our in Neil chip say providers we're World successful. our When I XG help talked comms Mobile ahead productive right looking accelerate make them into and seeing more could business, operators revenue them about about providers – if and has is perspective. well can plays you more that as he's look you think one

it So seeing the automotive, the and that the With technology but electric auto. very adoption some all Sales autonomous play wireless new vehicles, Vice And over for too. are also market. that is value communications it's our play are high-tech Wallace good Mark him are for more high that to of regards actual in [Senior and Keysight is President (sic) President] going note not comments vehicles, important parts going and let in in that I'm that to vehicles. we forward. business. turn continue we're much And breakthroughs we to with this expect We who only that make to just to

Mark Wallace

comment you'd a I'll Sure. about make on asked aerospace, defense, that.

Neil saw prepared rebound in strong a and strong QX, QX. mentioned very defense aerospace, Ron in we As orders in following their comments,

for demand we're pleased and and very both growth at from customers to years, see of stable XX%. business. this We our nearly with government also is quarters in drives coming strong for things So, continuing been one business from international strong our demand fairly a of those And contractors, opportunities of that we many this but diversity Keysight and see that. the us the U.S. has

for being budget if part toward month. to Long-term And we in see the the short-term, electronic into investments have the be a we're of that good of does help occur, we're year. the did to some with the presence and to result this OEMs very for expand, just the orders to Tier and solutions well. our So double-digit have continuing from in latter OEMs that we're modernizing X year, row we is our a R&D in spend the Bochum, signed traction want a probably Germany we to started test to underscore made using know some automotive expanding all the we in it later continue quarters Scienlab that company like acquisition, five when the as to flow get as see we business. in then as really growth, us X U.S. should making we position I last Tier technology fiscal of waiting defense begin a And radar, capture position battery in good warfare very initiative: the does, continue to the just that to

Toshiya Hari

for talked one-time as I prepared bit remarks a your for Thanks to inventory a Ixia year-over-year you a that? item Great. housekeeping big for your about Okay. basis. And, related impacting then follow-up, little margin one see In come surprised a little was down number that. the And business. How was separately, Neil. bit your EISG on a

you there of would If kind you. can Thank explain went helpful. that be what on

Neil P. Dougherty

Yeah.

So couple different things in there.

you'll relates gross roughly the that. it's as business quarter first, dipped they quarter a X.X% it XX% around had margin So, been to than that ISG, a and bit $XXX this about notice little in business, that more million and running

was of – – the than inventory is it we size less ERP the million again, one-time did. size that that related cleanup $X So and, the was to migration

of They right. margin the a mix mix, wide and about side, really range shift. see is that in change gross the On sell products we EISG business,

not I side; still products and think changes business first higher the margins parametric bigger strong, relatively we levels. little to really that to but two main be test the margin tends remain one of a positioning semi is bit on then while our laser good sell into which semiconductor: parametric are we up some test, quite sell systems there is

pressure downward saw margins EISG. And put on semi we – a so little in that was some mix bit

Toshiya Hari

so you Thank much. Okay.

Operator

Stifel. question Newton line comes of the Patrick from next Your from

open. Your line is

Patrick Michael Newton

the you Neil, quarter for taking question. my Thank questions. Yeah. and orders. two-part first Great Ron, side, Satish. a for organic I order afternoon, Good on guess

clearly. your and to But order revenue accelerating overall, growth the think help you order trends rate Neil, that trends that a commercial last communications saw quantify you You then growth, we for us if level curious order forming we at there X% if inferring double-digit lag highest I have and commented kind is double-digit R&D or two decelerate the future that X% growth I'm you can the think reached more quarters relationships. You could year, about a the believe between And little Keysight. since that orders effect you that provided military order and to rate X%, XG about And rate, about revenue? guess growth you order already I growth rate Are to the more your the tied growth software long-term disconnect more X% longer below having understand content? is because going also orders duration. are to talked that of

Neil P. Dougherty

take back the second to those order first question. come and one we'll So of I'll then the

So start X% X% hitting for growth as and the you implied to year, think growth. the guide about revenue first-half revenue core our X% to

we're growth lengthening seeing noted, you But seeing as revenue into half. definitely the our second are So accelerating a we conversion of order-to-revenue cycle.

longer within as and customer orders mentioned If systems of typical time. you lengthen recognition. as deferred base have sale balances we and we are more than can the that product you'll defense, a revenue software that sale. balance both look the associated with requirements on those time-based as sell sheet, see sign-off also have services And aerospace, our order-to-revenue and conversion you there increasing increasing have installation in revenue that period cycle sales, solutions The to tends

of course ramp half, second seeing revenue QX strong to So definitely the strong the production ramp a we as at a QX. and from move look we're we as

position, you go the with As year QX the the of being QX would this our that year, to the seasonality production see of think because relatively the backlog that it's the probably high having. muted but we a back that strong half business of still is weaker a the point. level, being quarter that recovery strongest certainly typical we're revenue continues, basic bit you probably seasonality At in

less with of above backlog an we increase a QX slightly that position but remains. the So given maybe see still QX strong

Ronald S. Nersesian

regard with that. orders. order for growth you mentioned, with question double-digit it for your at But of look Patrick, very solid And, We're was was pleased we comps, growth, triple-digit saw to growth all order XG. solid commercial if as

Patrick Michael Newton

to hoping for in consensus well, was assets I performed whether prior underperform, to give the I'll but kind nitpicking of business targets The continue you or proxy but incredibly I guess, a the right. And a overall negative. Ixia acquisition. the finer there. All growth point, think related to a expectations pass Ron, on it's I then,

whether this didn't your business, business slowdown on talked growing provide So how Layer small you many your well the visibility the guess X off or I seen a because Or order X, also understand base? and XG commentary? from us prepared XXX-gig heard the already can help about really test slowing you as from remarks. investors in growth can is some the we've I about all think specifically visibility is hear side, of duration and that is core revenue as underperformance challenges you in any details competitors that's any of might

Ronald S. Nersesian

turn to this second. Mark to going I'm Wallace over in Yeah. a

able opportunity to no with very has have ones doubt pleased for and our very private. is were that now. doubt in had as And no gone growth Yeah. some we digit the And which the on growth. There's order our growth a the on pleased softness you was that for when pull parts, XXXG this cost overall know, solid to that. there's you've very top that we're market right some did public still So valuable lot the as high-single-digit high-single-digit big situation integrate together. we going be And that, was of that a competitor's that moving seen of revenue see to pleased nice acquisition recently us. what synergies. in high-single the one saw ISG, seen we're you in the with results. see. to We we We're see We're you growth, you've But growth competitors,

Mark Wallace

test and And I had visibility quarter. increased is this that. revenue the both and to add of Yeah. a saw Patrick, We both during We lot growth would orders in Mark. in where the XXXG, shift but first for pressure There XXXG actually to to the with is market. we're a from activity product. shipping in XXXG up. is We're XXXG picking pricing again demand

and we see wireless For system. technologies. integrated only protocol cellular continued World Wi-Fi we XG expect Wi-Fi, next-generation demand Mobile At for demonstrated Wi-Fi industry's and and the verification to both Congress,

saw the the introduced we solutions demonstrated UE emulation and across the on from right providers. visibility And service the segments, also we've side, all acquisition. We are NEMS, enterprise that system. growth all customer These since

story. good a it's So

Patrick Michael Newton

the... are what comment you Can

Neil P. Dougherty

just UE and are wanted add synergistic the two to those between technologies thing. and technical directly Ixia, solution one the and side both I emulation Keysight on companies. And from combine so That Wi-Fi

Ronald S. Nersesian

very point. a important that's And

the Keysight things or companies already And and technologies technologies our doing and he were fact understand and One when with not to also these President, of of bring knows does Mark that we the marketplace in very doing acquisition he we're well. market, that was both that the saw know making Pierpoint, that is opportunity the that we the two only strong. together, the new

R&D organization. he technology to organization and plug So of integrated has run the high-performance knows leadership a makes He circuits into the lot that the how components.

Also what by So further get the to overlap. there from cost potential he knows helps have, is that compared knows as of understanding companies synergies we revenue organization, drive capabilities outside, he forward. we knowing and to how go both capability synergies and the where the someone

far hand, as So accelerating. where for we're segment pleased right we on at we And with on on as don't pass perfect, the but we're level. the commercial your that orders, comps orders comment very not are report It's other now.

Patrick Michael Newton

revenue can the that then you side, just double single was visibility Okay. digits? whether rate And growth or comment on

Neil P. Dougherty

to No, going we're not on comment that. further

Patrick Michael Newton

you. Thank Great.

Operator

Your the Barclays. next Joseph comes of from line question Wolf from

open. is line Your

Joseph Wolf

you. Thank

momentum as customer can given what's see Just pull-through business wanted a these the we breadth go base, for lab and well? some product if to XG going field, up market? means if ISG what mix, that in and the timing, there to moving end in meaning and many then on into into you quarters how follow could acceleration, through are And portfolio if is the of this on orders business expect

Neil P. Dougherty

proximity Yeah. Maybe his customers. able those that best to to given is Satish answer

Satish Dhanasekaran

that I industry is real. acceleration you, say the Thank would Neil.

it. us right. I Congress SKUs, product Mobile World customers And to think got in witness of in those are early stages, terms in very still of our

a work it's the our prototypes dealing does a whether mean still and technology point these station probably were So But with Having base at can for prove this early chipset, have this what trials that, proven to that very display. said business. essential that to you're really on or that. the vintage were

more and having it's lately Our also XG participating be our ever than for we to And we've XG. that most us solution insertions platforms in are Anite now equipment, many as Ron for test more have a new to additional are Ixia done upgraded customers. before. and of referenced. to Keysight, up customers In comprehensive to tool The in acquisitions offer to gave capability cases,

it we if all up, you for that, runway with all our solutions. sum So see a clear

Our well collaborations they future bodes or our for with business. two, a that the a lead customers indicate and have pretty solid that their quarter plans are but not roadmap just

Joseph Wolf

then and the taxes. just And Great. cash on up follow Thank to the you.

guess keep does once the spinoff cash or thinking the guys you you plan rethink, I buybacks? you're to are If or repatriation, you and the accelerate, dividends about were, cause and any about where thought that with where from

Neil P. Dougherty

Yes.

access us is the Under So we tax had access tax to going of to reform structure, standpoint. certainly cash U.S. definitely about an in XX% prior help cash the to from the our

acquisition we of significant be thoughts capital From access system, talking that allocation percent the to want number really With we territorial-based our about our expect about I standpoint, the our the move de-levering to one Ixia. post continues XX-plus complete will cash week. be our a next to the Day of anywhere to more it. to we'd Obviously Analyst leverage transaction. have priority that on at capital allocation added

more So look that point. forward to sharing at

Joseph Wolf

Excellent. Thank you.

Operator

line next Vijay Bhagavath Bank. Your from the question Deutsche comes of from

is open. line Your

Vijay Bhagavath

here Yeah. Hey, can Hope you so. Ron, guys good evening, Neil. Germany in okay. me hear I'm

Ronald S. Nersesian

Vijay. problem, No Yes.

Vijay Bhagavath

Yeah, perfect.

It's important obviously the mix very modular. and So software my to question shift investors. around for is

product in that anything of So Ron, chime intended? so no portfolio you do an pun and can can Neil outcome, well, like proactively, in please as terms engineer you

Ronald S. Nersesian

move to our to cyclical business a of revenue. doubt manufacturing of no that was, that's and recurring that out our to strategy increase R&D overall let's there's to by say, is less Well, moving part

we some but also It's whole plug-ins again to as not research added just will whether and be way are of in time. there able doing unveiled you're be take together there's and exists their all-encompassing packs operations of certain you to other save portfolio. able lifecycle. for anything all areas. those operations, So in But to there, a ahead instrumentation. are development, or the platform more from building That going It software tie years. effectively are the to whether business, you And than or the industry. instrument are software we'll not software and doing development at are will on obviously be that or encompasses new people's product you'll results brand part classified that that application the software help we've look our Ixia to being And as still the this is platform a it's more

and we and to acquisitions. But cash But waste for overpay that the R&D gross on know take But as business, mentioned see to double-digits to it ourselves. build to is us that. We'll I our move will margin also As the our move small still accelerate we you part of time not going and us software recurring opportunity to earlier, our grew Services that. will we're and it's XX%, continuing a the software we move revenue. less than great but as for are help a again, to relatively help continue line.

Vijay Bhagavath

A Okay. for Neil. quick follow-on

capture tendency in year? there's the overspend business. seeing in Now cars, management a to through the we also of and about XG OpEx with testing the in How momentum to should strength the Thanks. think ADAS for the you're rest connected

Neil P. Dougherty

about revenue. I investing like at mean R&D think in the right feel of I Yeah, we're we XX% level today,

keeping gas investments in that differently in XG these examples. to make best automotive and to foot are win and sure we're making technology seeing that are we are areas however, think our here where we managing necessary two the I that on the continue we the being inflection,

going at point don't using less see the for or down, that this model year been or the we the way in or past so. either investing invest we're to a more so, change And up material at we've we're continue to

Vijay Bhagavath

Thank you.

Operator

Your of Research. next from Citi from Stanley question the line comes Kovler

Your line open. is

Stanley Kovler

taking Thanks the Hi. some wanted to your industry question. about overall a for asking just M&A off my been space. in bit start landscape. I little There's

related how competitors in One Can guys some you of just testing. a portfolio areas? fit Ron, XG? a especially well acquired how of versus and great. you've you business bit and in a from position market will your more be But mentioned the as to perspective differentiation XG competitive help color little us you through on expansion landscape understand RAM portfolio invested and

Ronald S. Nersesian

Sure.

integrity. Our we high-performance just But goes that only our largest we'll strategy third are that ahead fab providing new overall differentiation we're But also we software our and expanding great, is We hardware provide based to be we be people. further. provide platform continuing have and going take is the of and creates measurements But software provide and of measurement solution the over makes components solutions. not to that around high-performance to part our years, let's provider. the with say,

standards sale. or see our us size We before from market. the everything in the but whether of most at that sale, group, helping that's where it's been whether infiltrating the the not our of an part the sale, during everything come customers that's When core to and have technical because in automotive or numbers wireless of look solutions, market with communications area it's after years we the depth for of consulting to because only our the we've devising you solutions

an solutions we're capital for not key overpay So We're big going acquisition our an acquisition going return do or that in markets. differentiation and to acquisition above get our do solutions, an we further won't very marketplace. we're our is more of to those everything providing in the market competition customers and effective be in the quickly get we can and solutions. beat differentiation when And to really to and helping total their provide very, cost

making with we and that. at So successful robust on we are now, Right priority process have M&A our a Ixia. sure look we is

such as that in integrated And we we're the XG business We the components and have Anite, well of Ixia, due lot as from of Anite. to R&D integration We've of We've from just winning expanded company. solutions our the other the going the and a the parts also rest and we acquisitions automotive. much in into months was stated to said our we're we've SAM further. goal completed also help win our as nine systems which done us, and in

firm the and earlier That we call, was off making we're thought we are Scienlab, we made in that But on very investments will acquisition and pleased was now, Germany greater pay the but very, So small that. on the today we than M&As. with we do an delevering. even focused made mentioned right of that

Stanley Kovler

recovery higher you to leverage of can expectations? versus for half, wanted when your prior help second And relative the about OpEx. the communications, for to the Japan at in business, like first midpoint communications look And Thanks. look half the coming the reform. margins first half this the prior I in wind think XG? first in where a looking from a it outlook know and on should operating on I the the Thanks. at $X.XX XG be us should thinking in of looks testing of the for And Where up there half the spending we this especially Neil could we investing international versus year, up tax terms if outlook How just the into your out to you're then particularly of the then there. look with in businesses, function is And follow those margins. are specifically trajectory ask regions of the does how we like? Europe I'm also XG? When at

Ronald S. Nersesian

I'll answer question quickly. very the first

other acquisitions them and have up core Americas and core close growth which as But, our was growth for at flat. currency, Asia was of Japan, double-digits, Pacific embedded in XX%. We everybody's growth is numbers all in the Ixia this high and seen very Europe both well was were most regions; instance, out overall, our as time. factoring up to single-digits

the core growth a across on flat Europe see regions bit we of a all – basically was little with basis. So

Mark Wallace

are combined We Ron us two business and across coming especially X.XG, XG being to the give all So, this regions. in there is the because that investments The base see communications Mark. together on talked X.XG XG just and I'll specifically. is made so about. add outcome just components those station, demand around stabilizing

Neil P. Dougherty

this is above with half core and delivers shipments I we've that first we to going what's expect on provided would our on noted here in Obviously growth production. revenues then the incremental But growth. you that address a and guidance it had which in a as the guide, volatile core half X% than XX%, bit does promised margins. – incremental our are is deliver on core for is typically and Yeah, more Neil your the question given the

so you think And X% for growth half these, second on the year. to half as second I full core the you for think about about X% modeling in would anchor that. margins about talked We've range the

at growing with So XX% of incremental. be that meeting the first than on – better in X% half, half obviously off that the and we'll in second focused

perspective the see in synergies. from also improvement second a We margin cost half Ixia significant from the

run in the is we into rate some now of integration the ERP are but it really mechanism cost that big that Ixia. allow taking start to have So out this was the triggering to us

run such lot of quarter per at quarter be we'll a synergies. for that this Ixia $XX QX work million million or $XX that so we're And by annually rate a doing

Stanley Kovler

guys. Thanks,

Neil P. Dougherty

you. Thank

Operator

comes question the from from Mason of Rob Baird. next line Your

open. is line Your

Rob W. Mason

the afternoon. Yes, but A in there? had have about is want that some quarter, did the there, questions answered, products you difference but lot how but curious noted what for backlog think the good in ask semiconductor been my Ron, the business, I to business. I'm I look outlook strong may of the maybe

Mark Wallace

So, answer the Rob, this I'll Mark, outlook. is

of a our of the of in seasonal solutions, process year. they business as our in a purchased demand test we nano-positioning broad of semiconductor. a the lot fabs of lot Neil a really last business decline some capacity strong in And and parametric in customers wafer a part are have We utilizing the we the mentioned. in And saw the saw quarter, as for tools

we example memory investments and in carry And expect continue see half China, second forward, to the many years going continuing ahead. an around Looking occurring other for capture beyond. from that's to and we over opportunities to into growth as

think There I over well-positioned. So, the business, broad are mix shifts some nature of time. our we're

Rob W. Mason

Sure.

business comments following XG around Okay. just then, that maybe up on And your stabilizing. earlier

or against but the pool at even as rate? more grew XG, quarter and within I noted now you're think year over works the seeing you a two a tips that it the out end you next prior that you had that point with some, look is where accelerated there

Ronald S. Nersesian

take XG we XG question on see the to transition Satish, that from to you want how occurring.

Neil P. Dougherty

We so. may have lost Satish,

Satish Dhanasekaran

Yeah. I'm here.

trend XG Sorry. XG Last the good pretty quarters, we've Yes, that observed the by driven provided stabilizing a business stability in that I'm referenced. here, so observation. few enhancements, Neil. a very you

capabilities occurring of in move And there's cases features XG. forward to be we standalone. innovation flavors, also use a new will with with non-standalone automotive first other XG. continue there's on along and deployed XG, see we coming which non-standalone the two As The IoT version, with C-VXX and lot

in about you could that you might where I the years headed. hard So be will turn although a okay you immediate there is maybe complete describe, parts of see to if trend now, near-term feel that experiencing see are XG; there But off businesses it's XG that XX fast the that. but from of reasonably be forward the

Mark Wallace

that will And Satish, of breadth than I'll different just the is add one. This is One Mark. very thing I XG say XG. is

also the side. growth So But mentioned wave. digital EDGE, and seeing over-the-air millimeter we're you XXXG seeing and that PAM-X we're testing in on on areas on continued for the growth the the

to So we in very be than going think I a to different XG. combine saw that's scenario what

Rob W. Mason

half guide? prior just change the Maybe helpful. real currencies quick, last very that's your you, Neil, for Thank did first versus question. one Okay. How assumption the

Neil P. Dougherty

Yes.

but revenue impact profit seeing it's the X-point line, favorable neutral. we're half, on first about currency Over a the from

over they last to the quarter a line. the we're it ago, on – favorable revenue X-point months so of we And revenue neutral. up .So, were the profit half making line first was impact the Our about we now favorable expenses points when currency on has three occurred dollar-for-dollar up are called almost were about if X and half just that

Rob W. Mason

you. Okay. Very good. Thank

Operator

There Kary, over turn are no questions to time. Mr. I call the further back Jason this at you.

Jason A. Kary

Thank many Day. and week much with of you very Very right. next for day. today. the have being speaking seeing good. and on look at to you call Thank we'll great forward you All Investor And our a

Operator

conference today's call. concludes This

You may now disconnect.

Keysight (KEYS) 1 Mar 182018 Q1 Earnings call transcript