KEYS - Earnings call transcript Q1 2020 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Keysight Technologies First Quarter 2020 Earnings Conference Call. My name is Josh, and I will be your lead operator today. [Operator Instructions] Please note that this call is being recorded today, Monday, February 24, 2020 at 1:30 p.m. 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 Kary

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

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

session Joining us President Worldwide Communications and Sales; be the Wallace, Dhanasekaran, of Group. Senior of President will Satish Solutions on Vice Mark Q&A the

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

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

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

Today's Neil financial by refer measures. to comments non-GAAP Ron and will

We will acquisitions growth, and or excludes also divestitures completed the last core which impact within of months. movements references make currency the to XX

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

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

you is in the New hosting a March scheduled at As Investor there. Exchange. March XX. New on also York see the participate Management of Day York to are XXXX to Susquehanna many X, Technology Stock in on reminder, our we Conference hope We

turn call the over I'll now, Ron. And to

Ron Nersesian

Keysight joining Jason, another you, Thank us. quarter. delivered thank for all you outstanding and

comments headlines quarter. will now markets, Our business I of well my robustness differentiated the formal as our performance solutions, diversity of consistent the as on our for end strength illustrates our key of model. the three focus the

multiple guidance including of profitable our to demonstrating we sustained earnings, dimensions of both our achieved gross and of first the high an a the strong revenue revenue and all-time start orders, and margin growth First, exceeded XX%. Keysight earnings of record quarter delivered end business, year across record

leading solutions in across and investments in and XG ongoing orders growth in strength Keysight's continued record resulted the our Second, XG-related ecosystem Communications. Commercial

across third, the fueling those are want In addition, affected. And to momentum growth are trends monitoring broad-based been have target our markets. who secular coronavirus situation acknowledge and we

confident While for of solutions, we portfolio strength we broad our software remain do some industry-focused the of and near-term in impact, potential services. see

take growth. first let's look to quarter. XX% guidance a We high reach. and We our achieved end $X.XX $X.XX earnings first the share, deeper earnings achieved quarter first the new which Now, per business and our into year-over-year represents market above our year-over-year, resilience that of XX% in reach grew a record. extensive year-over-year X% record grew quarter of orders reflecting Revenue was

Communications, First driven by Defense performance Commercial in Solutions. and was quarter Semiconductor Aerospace, Government, strength Measurement revenue and

revenue In access, systems, of driven and wireline data by wireless commercial communications, center the was technologies, record including first in by communications continued transformation cloud. fueled the XG, quarter investments infrastructure,

Our key innovate players to and success create is firsts. driven by being industry market close collaboration many with

innovative the first-to-market the our commercialization. recently accelerate the PROPSIM is a we called and solutions This Series Solution development Emulation to acquisition solution Channel example, For and line long in was by enabled latest Value introduced Anite FSXX. XG of

by connected security the announce to acquisition. expanded through a that an possible attack model testbed solution and the security, technology innovation was XG in vulnerabilities, We’re also Keysight's technology today excited and cybersecurity gained made proliferation the security is XG another enables threats customers expertise massive to lab. of surface. Ixia greater resulted XG industry-first enabling in devices

our Group, we already Group ISG, accelerate that as solution getting the and Communication into integrated traction. very of Solutions the Recall, synergies Ixia are first the Solutions to quarter, teams good

continued grew in double-digits Layer Ethernet strength for solutions. X/X as we visibility orders quarter, network consecutive investment and protocol second the in Solutions saw For Ixia XXX-gigabit

provide as a years to our Anite, other of the as our communications broad over differentiated and solutions evolves that come. us and such layers the to acquisitions customers XG span and with stack enable Ixia commercial ATX set PRISMA

global We the are broad pleased the our R&D our continue industry. solutions adoption with of XG as to lead platform

we have Keysight's laboratory solutions been XG recently the test device Korea testing that by announced example, selected XG certification. conformance for For global

are R&D key component base We to wins in XG and manufacturing this beyond quarter also for ramp seeing success globally. stations begins as devices with production

grew the commercial our strong to growth strength a third quarter base diverse achieve Defense. Aerospace other and to markets. on our In double in Aerospace strong end momentum Moving quarter of our reinforces growth with across consecutive first Government, order record year-over-year communications This factors, performance broad across was Keysight's regions. beyond revenue Defense broad digits all

investments Our and and space strategic solutions with single automotive benefit U.S. to environment continue a for customer electromagnetic in spending energy, ongoing technology demand and high In radar, digits key grew satellite revenue applications. spectrum modernization. increasing from for favorable operations,

by Our and first-to-market driven next-generation success in our solutions being automotive is focus technologies. on

or C-VXX conformance example, radio For we frequency XGPP quarter of case. cellular the validation this test industry's vehicle-to-everything first achieved

Keysight commercialization the result, industry to of enabling As connected a accelerate vehicles. autonomous and is cars automotive

announced enabling formation. We manufacture collaboration on development battery the of the also This a supports provider and electrification advanced battery of with leading cells of cell cells. a collaboration vehicles by

next-generation In readiness. growth Semiconductor strong achieved revenue order Measurement investments Solutions, driven by we customer in our process strategic and

important play customer-centric in Our solutions. an differentiated to and of role Keysight's software services continue portfolio increasingly

in XXXX organizational revenue Notably, overall Software innovations orders Test XXXX was from globe. above once October. selected grew rate. quarter. that was submitted just report Award also XXXX last I'm PathWave organizations Test recent Group a growth by double-digits our named orders happy the to this the grew around of the range PathWave of services and the Keysight software Intelligence winner released quarter, for our again Business

offerings to Keysight a adoption new expansion. see was which continue also contributor such of Care, good margin as We support our gross to year-over-year our

quarter a our year. In financial Differentiated continue end summary, performance execution, to consistent we markets, and value delivered the across to another outstanding strong solutions and diverse start strong creation. drive

our week long-term our Day the expectations on our March an to X We we have Investor update for and next you to exciting and forward business. look lineup an strategy on at sharing

Now, I in our detail. financial over Neil to more outlook to will performance turn it discuss and

Neil Dougherty

hello, Thank you, Ron, and everyone.

a will that otherwise. comparisons the diverse all unless year-over-year another I quarter across on are noted I get as broad-based end strong on markets. specifically capitalize note momentum started, to We delivered Keysight's Before continue we basis

delivered on quarter For non-GAAP of billion, $X.XXX guidance XXXX, of the range well core end first our we revenue of X% basis. high which the and was grew above a

broad XX% a for core across orders than grew revenue sixth results of revenue end basis. markets. outpaced and in QX driven billion were Orders Better by on strength quarter the consecutive as total $X.XXX expected multiple XX%

gross our our million, XX%. and with for in operational at at margin reported operating above or of our $XXX XX% expenses results Looking QX, of consecutive resulting quarter fourth record margin we operating

share, earnings in end We also of achieved $XXX the million high which and delivered above our well was net income guidance. of $X.XX per

Now, moving to the of performance our segments.

of revenue XX%. driven million, gross Commercial solutions. Communications up of growth delivering $XXX and strength XG margin double-digit in margin Group $XXX of total while Our Solutions and In by QX, million, revenue of X% record XX% operating generated Communications delivered order

are As commercial we ISG Ron quarter, with starting within Ixia our Solutions Group. mentioned Group market earlier, Communications end former results in the our Solutions reporting Ixia now and the have communications first or aligned

record by high-single Order digits strong growth million, technology market into a $XXX of quarter all revenue an as this we was growth across first investment funnel in broad-based increase for end and a continued. generated and Government and regions Defense driven of have a going XX% Aerospace advanced QX.

first EISG XX% by in margin and measurement XX%. $XXX automotive operating of reported million, of gross strength up of quarter solutions. driven generated revenue and semiconductor X% EISG next-gen margin

and repurchase cash and we the an we sheet XXX,XXX cash flow, XX% average million. of shares on equivalents approximately quarter balance open $XXX or the and in market operations $XX for total cash onto $XXX billion million acquired million Moving price from consideration authorization, our revenue. the enter our cash of Under of at with free reported flow $X.XX cash and $XXX.XX of of quarter, a flow first during share

turning our and Now, outlook guidance. to

We second billion the in $X.XXX revenue be XXXX billion. to expect quarter of range to $X.XXX

current For impact. the half assessment of growth. first midpoint reflects This growth revenue coronavirus our the of or XXXX, X% our of guidance core guidance the incorporates X%

demand Given results at the situation, on any our to impact the a of any be dynamics from do anticipate push-out expect time. this full-year and impact coronavirus in we simply not

per to $X.XX be of midpoint XXXX. based in for guidance this of a approximately the count range growth QX of the shares. diluted $X.XX to of weighted share reflects earnings earnings share on expect XX% approximately The We XXX half first million

expectations Ron mentioned, look our profitable X. As at we our business to on sharing the growth, strategy for well March our drive upcoming Day as long-term Investor latest forward as to

now Jason back With it that, turn I Q&A. the for will to

Jason Kary

you, give the for Josh, Q&A? please will instructions Thank you the Neil.

Operator

from Pitzer from [Operator Instructions] the And John first line the comes question Suisse. Credit of

open. is line Your

John Pitzer

Neil, impact. I just results. on Yes. your second for comments it your quarter Did Ron a bring if shipping bit mainly range? would and through Congratulations midpoint? you you're how Good fiscal it little Neil. Is a function or I'm it helpful. can widen the if the that Did exposure? in you quantify solid I be walk of guidance thinking view afternoon, you – the said methodology what down just the of for about kind can coronavirus the are us that And you the us? know the guess, into includes wondering it for your of China prepared

Ron Nersesian

there's a little long to of lot this answer Yes. interest Ron. the of a I'm I give bit Hi, on effects going John. the because This figure is coronavirus. a of in you

around changing, situation all, update, only at including and but customers here South is it point. know China, Korea, we we're so the as this other of is affecting what seeing very First a The an far world. situation Italy, up-to-the-minute it's in as not unfortunate countries, obviously

our but thing a sales I'd products at do manufactured not all. lot XX% but first of our that is parts of not bit We little we of have like Over receive our do say built is in what parts or to from are XX% than manufacturing we of much China, The in a China. our China, do of guide all this is. into XX% about less

let's employees. about So, our talk

in luckily research support, and XXX have coronavirus none workers another at have X,XXX in We China development. people us about and help cases non-Keysight reported all. workers, XXX those sales, Of that and

to The look for that's worthwhile us. other note a big they're thing not center employment in Wuhan, if you Hubei at is, province

throughout well that We the scattered have Szechwan folks Province some and as rest as China. Shanghai, salespeople are of Beijing, Shenzhen in in primarily, Chengdu

through people daily opened management. the Shenzhen support One are are giving rest, those remotely XXX reports we've of Shanghai, Chengdu, and third working sales the instruments with other up to folks at work remote the already control Beijing, back offices in of conferences, and remote video and as

every make to as sure doing order So, funnel we're report how and as health in our care employees. well we the is our the one, sales of taking daily customers, on get status a of everybody

in other in and or in process same clearly other big is but that regions regions, parts of the We're impact us. center as the of through a working field other smaller for not

about know assuming a or to the in business billion] we million billion] we above we of So, we in quarter, $XX delivered [$X.XXX let's said Last it. guided delivered as talk what orders orders revenue X%. in [$X.XXX implications and book bill we

that we it. million million $XX shipped Of in of $XX orders,

So that billion, backlog in we smooth additional but not actually timing have any the $X.XXX billion, $XX delivered coronavirus. of see that from out revenue can we $X.XXX the would help delays million we

backlog guided into you good The in approximately million have should of and minus situation. built that or $XX that $X.XXX We remember impact key though point worth is we've billion, have million, plus guide. we a our $XX

very that fiscal we're we John. Keysight's have any helps, not the that that at in and We year the half differentiated hope second I be very we'll of in affecting performance make this therefore products, see delays up XXXX. to confident able year, point

John Pitzer

and Ron. portfolio. It's guess, quarter consecutive very Very up, Ixia. a helpful, thorough relatively business – follow within my thorough for new second as I strong your

turned a the your business For feel of characterize there's lumpy do these the lot Is growth to mind of Ixia we Ixia kind asset. kind sustainability has you just naturally this with how in the investment I'm to [terms]. us corner had you're you a in sustainability would the like haven't of curious experience and as community, or now. of seeing

Ron Nersesian

and The with the consistent parts continues It the other was it happy we get test two visibility of visibility. – network very build-outs customers. business of a that. Ixia depends isn't we're on more and growth. larger the is end see now one smaller, bit basically network was that then linear there And but to the main them our happen linear; it little larger, in test and our a network Network network as business, a is assurance There's Ixia which grower. what section solutions, is of is

I'll summary. comments, the more turn add a to it over Satish to level that's couple maybe of high but

Satish Dhanasekaran

performance Ron. factors. the Yes. that few say of function a improved just I'll is a Thanks

associated with the from data that the improving adoption it's side XXX-gig just then execution of changes solid market both on the broader centers, First, technologies dynamics Ethernet, the through instituted. we and have and sales business

good differentiated The and are out coming customers. traction products solutions with gaining that are

mentioned which of which On with the part quarter network is Ron the brokers the adoption of business], technologies. with test visibility and broad side, taps record portfolio and as side the X/X through that had our [Layer big on a a packet XXX-gig

accelerating Looking we're on synergies ahead, really the focused inside group.

sweet XG about, both really is that convergence impacts wire we've wireless targeting. is a that line As that technologies trend big talked a and and spot we're

XG second, are co-testing, solution recently new And uniquely offerings the We with space, the Ixia is there. toolkit launched and the XG in Ron's really testbed to reference security we to transcript, started does interest combination and combination a from lot security for customers. have which technologies, for we've which positioned example, is that applied the RAM of of very of a gaining some

improving dynamics, this in well business. execution combined Thank in position synergy utilization market should So, with us solid this you. summary,

Ron Nersesian

the we the work move to say I side more we enhance At to quarter thought. integration supply get second synergies obviously with quality. we to The on and a the the expected is than basically with improvements We the lot we way chain like to the ours of double-digit the had very we're and progressing. other would that cost do to thing is growth, first, this to business that had happy had

a took more bit originally. So than had expected that little time we

solutions really about this business long-term us ability our contribution dynamics the However, workflow and provide the to and the makes going where to the end have Keysight in that one in business business' complete it's excited we to and synergies from other. the

John Pitzer

you. Thank

Operator

comes Couillard with question from ahead. Jefferies. go Brandon Your next Please

Brandon Couillard

Thanks. Good afternoon.

Ron Nersesian

Brandon. Hi,

Brandon Couillard

X%, Ron, seen in in a Europe of Can us European picture and region? you – slowest stack the sub-segments on of give of you've year. in sort region grew a macro of what two-year kind sort about terms that maybe the

Ron Nersesian

over I'm Mark. it Sure. turn going to to

Our higher growth. we was roughly than and X% order the than revenue reported, was growth X%

Head of a of take bit will picture, little a that's So, the Sales, you different but Mark, further.

Mark Wallace

Right.

to seeing X% commercial semiconductor comps our advanced have Brandon, So, Automotive, slow recovery. across up improving that as and orders, continue situation business automotive some from solutions some Europe. of and there seen we Aerospace revenue those signs on orders. gradually and auto come mixed, to conditions show Defense of X%, of and business. especially And Ron the we're next-generation said, of the delays is remains in some Russia are side

of a finally, from is expand customers only a the side, funnel portfolio in and strong continue we of other continues there forward. new well And put education particularly vehicle, new but then area opportunities electric the going around Europe customers to our broad we and to general see automotive well. with the as not lot growth business, that On electronics our focus world, both on customers, around as as an of

Some automotive very we customers moving that of traditional are mechanical Scienlab, well solutions well-positioned services. with our our these support domain, into now offering them are the more type of from and to electronics as are as broader of customers

forward. improving last conditions of see seeing going that we of continue kind and hope the we're middle as to year to So, compared

Brandon Couillard

step us margin to drivers higher follow-up of a can up the to the perhaps year-over-year where the the room And sort and expansion margin Thanks. terms is Thanks. exited year; behind and gross in from for of year the of first you push bridge gross Neil, kind to last in help that that? factors speak quarter XX% continue you a the

Mark Wallace

have the are think us that levers line. margin helping multiple I we gross on

solutions nature have all, of to solutions pointed I the first-to-market leads as and first-to-market the well of of tools as strategy the First overall content. providing in higher nature, towards to that complete opposed to to as software migrate differentiation marketplace solutions to higher the just

gross us that winning as we smaller saw a to well. sale gross in mix notably, of margin continued tends strong business. gross our a but a mix margin mix quarter, terms does nice margins in the in our It improvement toward in improvement in this So, of the software, is it's helping R&D be higher business. And only shift below-average total, we but services actually pretty have saw services not

as you think is I which is well. support Keysight new see the Care, migration additive is toward pay-for there offering our – being or

Brandon Couillard

Okay. Thank you.

Operator

from Stifel. line Your of the Marchetti next John question from comes

Your line open. is

Ron Nersesian

John. Hi,

John Marchetti

Sorry that. obviously fair I new winning globally. there customers curious just a is you're number that, strength wanted if you talked about the ask, just still that And to can Ron, you XG Is think customers? business? of strengthening characterize continuing the looking Just curious should business that gain how sort existing customer momentum, it it? at we by profile or the of you're about within that in reordering to as about

Ron Nersesian

Yes. overall with Satish pleased from And of will really I'm that. talk take to to go players. he'll you customer X Tier as other it through that, starts base about the but breadth our

Satish Dhanasekaran

results very them XG. years new and XG Yes. of Thanks, with set we ecosystems. this indicated all regions and for scale. strong adding work we're diverse as record the Ron. Very on also a across would say we through and to representing The pleased the be customers a as business, new growth I collaborations that customers have but with sustained foundation of continue across

XX-plus So customers which this quarter, source new platform, been has into strength. of our a we XG added

announced XXX% XXXX the number this. this of out last August maybe the are That to-date. is that to point play being about for out up of One year when is particular – this been spoke that XXX announced we adoption driver XG. and since devices of remaining devices to of year that I that'll like have is Over part

place will ecosystem well. the driver So that to is big continue a as that and for

application to view, up where R&D also the this in our wins an differentiation and starting through point quarter new is as in pretty we're had features but we're customers' landing, test for manufacturing decent our from finally, stations some we of well. pick be base components we're to And coverage manufacturing in wins increasing continue strong as have we following And lifecycle. stated we've in the

John Marchetti

that you within I sure talked the a follow-up to some that of OEMs in about and within And complicated that still that, category? looking is really broaden XG? you're operators fit a where there's out failure of technology this roll cast of higher? as guys historically cost out reach you're high you. Thank a in is production failure. maybe the still that opportunities to wanting of little such change it for make mean, Is And try bit at to a that to strategy to as XG, cost does it have a Is

Ron Nersesian

There that for opportunities XG. in down just a it are you there the in us and wired wired you components well the is doubt no you manufacturing. and R&D of at XG, our is of or and grown really wireless can't see part subassemblies, grown XG presence manufacturing value-add but plenty put even side. high us in There the handle data to Whether look model, business our on to has dramatically, that or plays for has be with on able that opportunities not

and playing layer us and you'll of at So On tools of many we've on that, everything network. been millimeter-wave, there all it complex, on that decades more where to the when more to the in more the network, fiber way new see difficult top that's most moves it's back gets going physical our through to optic everything and look especially many, for relatively as for competitors. is the do, more you the opportunities physical and from layer,

us. not an to us is So focus areas but we the cost provides failure high, value-add of where total on opportunity focus for and really in add margins on generate where we that only can great

John Marchetti

Thank you.

Ron Nersesian

Thanks, John.

Operator

Your line with Mehdi of next the question comes SIG. Hosseini from

is line Your open.

Mehdi Hosseini

a of you learn months target off and is a Huawei, associated happens the And of take more understand when to Can of over. that but some with – XXX to a of assuming the And Ron, taking point over tried what this XX was half follow was are to like quarters is ago, de-risk pushed is XXX what especially for X, is, basis question. revenue basis out, from first now Huawei, that you I to like these revenue of taken Thanks us coronavirus, with happens the couple out? to what the coronavirus tariffs. X, help there and tariff up. have point revenue from have want Yes. the now opportunities opportunities push that the we hopefully my opportunity I

Ron Nersesian

come the I'll customers solutions those I'll and quantify good and us Yes. but Neil for just Huawei go situation, products and to start this, the I'm to Huawei like products. let demand and going our say there's and a ahead really they

we for the further we they're looking the out. have year, modest in As in long-term help the many we differentiated markets tools but our a and to amount look forecast, in lead have to them

Neil Dougherty

I that's right. think

I think from We disruption same impact in see that comments, believe we we any to of be an the may absolute on fiscal in believe results push-out ultimate demand year. that coronavirus, broader a demand. in level my the as has simply short-term the largely I it coronavirus a this don't that is would in said

you broad within strength look if Huawei we think at I saw the specifically, more quarter.

we our the terms expected them regulations, Commerce in to of first be. limited sell ahead limited what Huawei of a with of are in quarter where Huawei, sales with but Department complying we to We even the portfolio, bit were we're can to that

here. I we provided we estimate with however customer we're pretty Huawei forward, we of that from thinking of as X% move a think as to comfortable forward look X% as the

Mehdi Hosseini

you're more a ability going you dive by driven of offer you're this incremental there? is stack your traction longer-term of any Are to think full incremental stack? much know there about or week, how of by into your seeing I but capturing this we that Is booking, to next full offering business then, as actually target? And any Okay. is

Satish Dhanasekaran

I'd give XXX serve scripts an offer working that entire the I'll test test U.S. that Satish ability for plans come this example. competition you a recently we're up – with the with and the operators. a We just we huge It operator No differentiator many any four Yes. here, us from I In Yes, XG. maybe is follow-through. separates us. released may to for ecosystem cases, just announced think product-oriented for products. is

So, someone and that operators wants in a now to that fastest these of ecosystem their up service way ramping getting have time-to-market.

an you sort that's So, when you are get of portfolio. the with end-to-end of working advantage example somebody that the has

and this ability you customers to with is to example able have were provide to Our them the testbed. and the broad the of prototype give reconfigure the Defense another create we I'll that Aerospace solutions. solutions advantage. were the capabilities We in lab. our just A ones again security wanted threat an with environment five-year number

help. those hopefully, So,

Mehdi Hosseini

base? Your more from Europe broad or basis. companies, a sequential that OEM was double-digit Was a revenue up of on by OEM that incumbent is driven customers,

Neil Dougherty

seasonality into on or commissions don't sequential at regions customer works Europe is our well that the into base, built other as and how We such sales even and force many basis look our a there because out. as

on So, to X% why taken quarter. the X% order we for it growth growth compare and and revenue look at year-over-year modestly we've that's it a

Mark Wallace

Defense shows in and I see is was we There like just before, would I markets Yes. improvements broad-based softness last some automotive. solutions year well. some seeing We're And the our see of We're this some in Mark. semiconductor. Aerospace see trends and customers particularly end in starting and signs moderating did that again some said conditions mixed we're respect. providing certain to as in add improvement to starting to we're some them,

direction. in positive trending more it's a So,

Mehdi Hosseini

it. Got you. Thank

Operator

David the Your of America. from from line of question comes Ridley-Lane next Bank

open. is line Your

David Ridley-Lane

bit afternoon. was Good any well? flush as good the to end potentially budget like defense little do underlying what growth – is you this drive aerospace of pretty feel order year payment – on the more see get color or to at you a I that you helping did the wanted and revenue and

Satish Dhanasekaran

I Satish. is This hi. it. take Yes, will

record the orders Defense finish and front, last on building this record we Aerospace billion year. the On quarter, had $X

in far. awarded So, factor. The the being very of the lot so contribution to are wins by contractors with that’s program There the a supply pleased DoD, is big stability a results the in is prime chain. budget that flowing through U.S.

with us the combined good Electromagnetic in decades to space our us that In region. capability for Space are receiving solutions Satellite providing Spectrum Operations position differentiated solutions particular, Our of and growth Solutions, well.

We a wave also of – the where broader us long a upgrading re-tooling that defense are their well and run. capabilities, internationally, modernization people and for broader see position

David Ridley-Lane

And just sort the can talk and early different headcounts recent topic, how even expansion, in then results hirers, a you further? ramping up you. hires about productivity your maybe sales sales increasing those the are potentially towards force you your of Thank on biased

Mark Wallace

Sure. make a This that. comment is Mark; I'll on

where of will we week, be in track are a progress our on I is we the I are. across where really is. Investor the we conference, all sellers So, making doubling on hiring next good you site growth regions, Day next What can outlining and and steps at frontline detail focused we're amount the with number tell of across on stand what tremendous are key

see best opportunities, the equipping hires we're we where training. and teams our tools with the our concentrating we're right to and So,

capacity not frontline an terms So seeing increase the in only productivity well. their are also sellers as number we of just improving of is we've but in deployed,

next So, week. lot tuned go I'll stay detail more more. again, in through for a

David Ridley-Lane

to. forward much. you look I Thank very Okay.

Ron Nersesian

you. Thank

Operator

Your Davis. Thompson of next Thalhimer question Adam comes from the from line

Your line open. is

Adam Thalhimer

Hi. Good great afternoon, a on guys. quarter. Congrats

Ron Nersesian

you. Thank

Adam Thalhimer

Wave it's in in first I field? performing and Millimeter Wave, on Millimeter ask wanted how to the your general thoughts about

Neil Dougherty

of far Yes, why deployment customers X-gigahertz for a there's face, so at the very would subscale deployments embraced continue be and say a early challenges days scale. up ecosystem. part still our with lot helping it's of millimeter still I wave the that, and to scaling large are that is there, our even you tools which know

I environment the of in bands here creating with both spectrum demand tools our sort sort frequency factor higher for this new is is would this heterogeneous bands and marketplace. mention cycle of other The of this frequency getting integrated

millimeter-wave high that that is place days and early the with that's be no with ecosystem all Eventually spectrum very millimeter-wave and be in put millimeter-wave, doubt will offerings will there the [time]. because but of being currently So, overall innovation is realized based the just there undergoing.

Adam Thalhimer

to cash flow wanted and ask I And Okay. about balance sheet.

net on think now, your M&A, there do could any tuck-ins? the the you Your more are you about or think, is do And IPO. deployment? continued debt big out is on there since cash for lowest What thoughts tied it's I

Ron Nersesian

think drive do, looking any we're organic don't growth capital in expect – terms investments continue We're talked our Mark see the making to close we to have I to force. changes you $XXX the sales don't our about priorities. Yes. any in what in strike allocation million just we'll with of doubling invest, we significant R&D to year, to investments per to balance

M&A, And I last out You through which we'll and remaining active value an when to comes that, $XX disciplined patient this we authorization stock have, add think, have acquisitions. but quarter. but is development $XXX add outstanding, worth value on it opportunities to we – remain looking there as have we're of We capital well, that million right? then are returning million funnel we mentioned process, actively for the

appropriate and those balance you'll over trade And see strike off time. amongst will us categories that continue so, think as I to

Adam Thalhimer

Okay. Thanks, guys.

Operator

line from comes question of Please Citigroup of the go Investments. ahead. next Jim Suva Your

open. line is Your

Jim Suva

you like I I to. out. have it in any now believe at time is push And correctly, If them order sounds you'd Thank you so you. and that coronavirus two the take just questions can heard a like same the

up impact I is, in So, revenue the is I did or the why question guidance revenues believe I it orders? the understand does impact only orders year-over-year, were ask reason And but looks the orders on hesitancy don't about have the it also impact like on the basis, XX% the I a orders coronavirus actually reaccelerated, XX% the sales. or I core also. orders some just know up about the on which

force Then question expansion? lines on Thank of you my types we it more Is very more R&D things about the guys also the kind still mentioned behind more think your expanding think second of should about all sales or when is, a kind lot in of you into regions. of you volume how going higher you. sales or work of putting resources all the really different across front we focused up force, like side

Ron Nersesian

with the start Thanks, Jim. I'll off coronavirus. first

First didn't any of QX impact on all, see we orders.

was right I our at was People end ends and it end of near to January. third at were Year. of Chinese of New head for know, that I in you week matter the fact of out think January the starting January the QX a China As point

ahead, great. that's so planned had people So,

our X% forward Going we're assuming, we're we happy the but we've will guided in QX, us about did. with or very situation and hit with it accordingly revenue as backlog X%,

Mark Wallace

will more I we've I want few there's Mark. thunder week, concentrating And Jim, this next a diversify is, deploying that reach lot comments. steal One and all our and increasing and capacity. don't but customers make broaden a three more the geographies the talked about selling new to into from we're is areas acquiring basically our to business.

continuing we're on that. So,

deploying part well e-commerce that efficiency from of We are as also as an standpoint.

continue the feed area a and how helping customers. focus selling renewal we our ago, that our includes third grow of A and services our services Our solutions top our launched sales recurring concentrated remains focus we revenue. focus which including priorities sell our that is of we contribute software on and around value to of on and expand portfolio. And business, to the is we the to a channel year-and-a-half and part one

again, next interest. I the more appreciate week. coming So,

Jim Suva

greatly much. see so you you We'll Thank week. next It's appreciated.

Ron Nersesian

Thanks, Jim.

Operator

And Deutsche your question line from Bank. the of next Brian with comes Yun

Your open. is line

Brian Yun

a high to questions of few Hi, your... had all-time on guys. I Nice kind margins. see gross

Ron Nersesian

Thanks.

Brian Yun

opportunity. ...software

XG you that just if able And percent software about then, revenues changing expand next automotive the versus is see sales think share I can to finally, licenses over First, you are the and then, case quarter? talk as or today, on of of broadly, you measurement can years? purchased being software very how the few what And percent a is this opportunity. if if maybe use clear, software test but subscription software you is what

Ron Nersesian

Yes.

double-digits. our grew single The great is our that the subscription a we Revenue very more comments growth the solutions growth so and Let we digits, direction continue network over with but that's increasing ARR, recurring regards software. grew of lot a we couple me more an business. more just services pleased but we're the our portfolio order taking. instantaneous growth, higher on make we're with could from revenue to see network assurance emulation by driven and was and Orders thing why we're our working time And the not and than see revenue. change, shift to

Neil Dougherty

And the are complete and then, services. that, add the software just customers providing the I and that's combination of and will our – what we're solutions, hardware to

a solutions and our the security coming our of or mentioned or of automotive is is solutions, XG as the network application part around around you it's all a solutions, large this together growing portfolio. whether that play, So,

now way think the of a of based that's is I applications model. occurring difference terms more customers a in And accelerating is consume those subscription the

supporting we're So, the a process time, that's support deployed with whether updates or or services, which them XG. through being through renewal automotive it's over application

Brian Yun

Okay. Thank you.

Operator

like question-and-answer Thank Jason that the conference to comments. to Kary today. I closing you. That for for back concludes would session any turn

Jason Kary

turn this Okay. over to it close Thanks, I'll up. Josh. Ron to

Ron Nersesian

you attending. thank everyone for Well,

Day. that very As we biannual very of of And you next Analyst performance with pleased our Thank prospects many we have. or seeing and we've were you. you seen we're for we with pleased week long-term annual to the And probably look QX forward in the Keysight. know,

Operator

call. This concludes our conference

You may now disconnect.

Keysight (KEYS) 25 Feb 202020 Q1 Earnings call transcript