KEYS - Earnings call transcript Q1 2021 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Keysight Technologies' Fiscal First Quarter 2021 Earnings Conference Call. My name is Sedaris [ph] and I'll be your lead operator today. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this call is being recorded today, Thursday, February 18, 2021, at 1:30 pm Pacific Time. I would now like to hand the conference over to Jason Kerry, Vice President, Treasurer and Investor Relations. Mr. ahead, go Please Kerry.

Jason Kary

welcome, Fiscal Keysight's Year and Conference Quarter Call for XXXX. everyone, you First to Earnings Thank

Joining me are CEO; and Ron Nersesian, Keysight's Doherty, CFO. Chairman, our Neil President and

Chief session Joining the Global Sales. Senior will Operating of Officer be Vice us President and Q&A Satish in Wallace, Mark Dhanasekaran,

You a and press information discussion supplement today's will our website find on on release to investor.keysight.com.

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

Following we the of Today's financial Neil call, this prepared comments the to refer and copy conference a post will Ron remarks non-GAAP website. to will measures. by

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

directly and noted specifically the financial comparisons GAAP All website. find reconciliations our on will a basis metrics are You most year-over-year on otherwise. unless comparable

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

over management that Ron. I would call participate by virtual in upcoming conferences scheduled Lastly, note in Credit and to is will UBS. the I turn to Suisse investor Susquehanna, hosted March, And now

Ron Nersesian

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

key illustrates markets focus business performance I'll headlines. the our model. solutions, end our three and comments consistent Our of diverse of on my momentum durability differentiated broad-based strength the across Today,

despite driven first China by First, trade growth across quarter record all orders we regions headwinds. achieved

our we momentum achieve mid growth, delivered Keysight the revenue and for And from above earnings elevated confidence revenue to end XXXX. to which Fiscal the to earnings markets with growth a across solid term the near revenue and by of earnings in year. expectation trajectory year teens guidance. term the we growth variable in high and execution strong entered growth multiple Despite expenses compensation, team short expect Second, due is high third,

a grew take record We let's and of first again revenue X%. our quarter results. Now first $X.X look billion, quarter exceeded delivered deeper which orders into

grew X% First quarter $X.X to billion. revenue

discussed, headwinds quarter to digits. China year-over-year in this we revenue double faced for previously solid restrictions, both As adjusting strong first orders due the trade impact grew and

of first increased margin We make towards model. financial long-term to cash enabled XXX targets continue which and We execution $XXX margin our discipline with points at strong quarter XX%, the basis of and operating XX%, leadership delivered progress by the of free consistent gross Keysight strengthen million. flow

and of powered collaboration close to our in systems proposition XG value XG by both our revenue digits. achieved solutions end-to-end record grew where revenue XG high of Turning X%. years as we of global XX% first and with communications, to centers. XG in continued is lead in market the like was in orders makers total, digits Adjusting defense was of rollout ongoing the in the Strength grew electromagnetic for communications driven all-time spectrum unfavorable bodies. the orders new portfolio record continued and investment in network, declined single commercial impact restrictions, commercial commercial deployments well by enabling and data as trade revenue Keysight's In XG, and double while and government transit orders Ethernet new devices industry wired driven technologies to quarter strong. by rapid achieved the investment the for space growth revenue wireless and markets, technologies, XXXG XG the and communications operations, continues XXXG remains research. progression standards aerospace, of early and Keysight new

ahead opportunities XXXX. emerge. of in advancing this applications XG strategy are We XG new great quarter and momentum as make capture emerging our industries builds deployments broad platform our application embrace in as to We the progress layer

be an for investment customers. mobile continues active vendors introduced O-RAN operators. example, area for O-RAN For of a to and of suite our We end-to-end solutions recently

to of multi-vendor security the Our used networks. interoperability, performance, solutions conformance, verify are and XG

partnerships We Xilinx, also the expanding announced O-RAN industry-leaders strategic in Altiostar. and with ArrayComm space Radisys, like

continue development advance portfolio, through revenue battery electronic leader tools the advanced accelerate Record and growth collaboration of In opportunities. on is general reflected leading interoperability. measurement in for [indiscernible], Cisco extend world's one revenue and automotive In test to addition, fueled decoding Industrial growth from field expand electronic in double-digit process that customer and we in Keysight's improvement They the for end-to-end chose inside the to challenges, our electric industry. recovery redeployed Record new Keysight's General wins strength macro through partners as Asia we we presence QX, across continue investments test technologies was by research ongoing and solution despite [Indiscernible] for out provide e-mobility ongoing complement in China ElringKlinger, In salesforce to Europe, to our industry-leading our acquired solutions analytics. market. solutions capabilities with accelerated next end strategic in and protocol education have to acquisitions. as network, of over-the-air capitalize providing wireless solutions problem-solving new automotive, vehicles. in by the continued a strategic offerings technologies, In we all Americas. wireless generation semiconductor in regions was solutions. driven and bolstered demand semiconductors battery successfully Electronic the to Solutions a investment in recently stabilizing Group economic in the with announced by advanced

summary, have to around business shareholders. solution employees a were who dynamically and of for revenue the and to like world contributing one-third I'd double-digit they results our and to model customers with deliver In strategy significantly our and and Combined, to our delivered each of challenging thank increasing revenue. revenue services further the recurring reacted Keysight environment exceptional software-centric approximately total our growth. strengthen differentiation order Keysight Software durability

quarter across encouraged broad-based are and the momentum first by with markets performance We our the entering our year. pleased

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

Neil Dougherty

everyone. you, and Thank hello, Ron,

Ron mentioned, first all drove across outstanding As economic a regions. as demand quarter Keysight steady team recovery continued delivered major improvement an in the

with overcoming trade achieved restrictions. boat of revenue on Total First guidance of quarter was X% broad by Keysight X% of across We end range and build billion just high was geographies. one. multiple a Quarter and revenue successfully driven growth core billion, again X% above X% our basis. grew the orders over exceeded QX revenue increased a of first orders $X,XXX end on or basis, or $X,XXX core QX in strength markets to a

increase XXX which results margin expenses in earnings well XX% basis resulting is above gross in year-over-year. Turning Reported per We margin QX. income our the of of high XX%, and of well-managed, million end operational net to were for guidance. of operating delivered operating of of an achieve points $XXX share, $XXX million $X.XX an and

Our weighted shares. quarter million average share count was for the XXX

our the to performance Moving of segments.

Group all-time quarterly quarter Our XX% delivering and revenue $XXX X% record achieved Communication In and of orders. of commercial total was up million, gross communications operating XG XX%. QX, record first Solutions generated margin margin of

or China by second major spending transition. $XXX million, trade a by $XXX driven The administration U.S. first growth a Pacific. with an of spending the growth with basis. general as broke EISD of commercial First across XX%. from slightly across impacted all of offsetting increase revenue disruption on particularly contractor million, Quarter to electronics solutions for XX% communications quarter record revenue declined in semiconductor of revenue of driven and regions. Growth In Orders record strong year. last the generated robust Electronic revenue achieved strong and QX measurement in direct government of reported restrictions. expected we revenue year-end the operating U.S., quarter government was XX% double regions, XX% by than for X% million through digits all Aerospace, in defense customers Asia less disproportionately our Solutions core spending, Group saw a Industrial margin from prime gross margin was row, XX% compare lower and versus $XXX in the

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

and growth in flexible driver quarter FY margin. which guidance, my Before last remind variable that a spending expected is QX compensation stated everyone organic than of increase The is in all compensation, moving is other which comments to higher function like seasonally quarters. expenses XXXX, I our I'd with revenue to to principal variable of and operating

we is both as business. in decline and human will comps, in we We and compensation flexible the response element of down year of ups which and flexed notably believe expenses but revenue QX. to revenue, soft flex this participate year philosophy not up important variable our in our cost particularly a Just capital our QX last structure, are only quarters employees an with engaged downs the in in

outlook our and guidance. Now turning to

in quarter to at represents the which second revenue billion, $X,XXX range revenue be expect to XX% the $X,XXX XXXX midpoint. of growth We billion

the XXX execution. weighted earnings in million of on of In operational strong $X.XX count to expect we're the diluted order and entering $X.XX be range solid a year with per momentum, backlog the a We share to approximately based closing shares. QX share position

year. of expect to to the earnings growth Jason fiscal full to with will it high are With Q&A. for turn business back our trajectory the now the that I We teens and mid pleased achieve for

Jason Kary

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

Operator

comes Baird. of And with Instructions] question [Operator Eastman line Yes. from Rick the first your

Richard Eastman

a of of you the walk question Communication that Is operating both the just a perhaps afternoon. primarily the gross for mix at in looking kind we margin number give that. bit maybe maybe good of the around XXX. maybe Solutions that profit EISG. that us really Yes, leverage or with of saw Group? of same But And down? kind I'm little Commercial bit little Could feel out through a all maybe Is

of Just significant curious how much volume. it? I'm mix That's this versus word operating new for there. a leverage

Neil Dougherty

is Rick, Neil. This Yes,

of the think looking quarter after was a I it very QX ramped QX you're mix sequentially -- QX. production you've customer in really very nature QX direction we the quarter. right. in gross think was delivery, kind -- hit significantly immediate responding of disruptions shifted and a as if favorable demand a for for And us favorable of urgent us on the margin I fourth just COVID to favorable the

the both we of slightly as well well to first lower Group nothing businesses. more comment true the leading that quarter normalized the There's what Communications kind think I It quarters one QX really And two mix. saw volume. in the is specific the in that basically as aligns across to it think EISG. was as with as return of either up I

Ron Nersesian

analysts that going you forward. And also doubt deliver at XXXX, the shows level performance at against to that able model our we look no and FY be obviously, have that day for very we we'll long-term to strong that outlined

Richard Eastman

a I'm in order the see -- Great. And XXs low if held year-over-year then year-over-year. like just looks and up, basically you quick maybe surprised growth to XX% of could. your the backlog it question, I kind

surprised I think spoke be you in place product side. or strong says business you any geography, across whether flag your you pleasantly there being the to between where I XX% year-over-year the quickly quarter? segments my particular growth backlog the lines. were two it across order math Is might know that with geographies, on orders

Ron Nersesian

couple let chime Mark mention more in with I'll detail. a and little I'll then a

if all, of the of of them China you we because expected and be First China China, the down with trade were restrictions our orders Huawei. to look down effects at much more X%

growth very, other we're strip the pleased to comes out were very surprised performance. in you of XX% And order we If the from as and pleasantly had Chinese customers. with out that compare Huawei, Huawei our past,

other the almost Our of Chinese results produce sell type do. that salesforce they accounts we that instantaneously was did of were the where do accounts type we the redeployed within and the cannot from to to into geography

add was was as digits, as double more India both a one. double well performance. comments? couple very into strong. clearly you may also was of those Mark, digit very regional that also which So strong to Japan -- want hit Europe, well

Mark Wallace

and that the in overcoming it both new both our Again, Rick, customers. just half headwinds Sure. and opportunities from add new the Ron we're would executing rotating but how covered showing really very results as well growth as well, had China customers and was with defense. from want in customers, to broad customers, across of with new it semiconductor, I penetration about we tail strong the semiconductor this again, a the goes Japan very of aerospace large really that additional demand whether pleased and fabulous of growth story at our then XXX-gigabit customers. portfolio into And I show Very existing across to multiple Europe. end growth look XG And be And XG Tier Europe, around in you business countries some China. these and new our in long if very our it most for customers, depth all of acquiring to X markets. existing was of the end was strong quarter our customers markets. of across really We two strength

Ron Nersesian

in that's was really industrial general add a One, good me Rick. a just about macro XX% talks environment couple markets. and in electronics business our That Let over more sign. comments, the up orders the

also to software software more strategy that software-centric services. grew Both corporate services. which and solutions, our orders we're and overall again this in more requires pleased So, more to moving double digits Both very quarter. and see and

Richard Eastman

you. good. Very Congrats. Thank

Ron Nersesian

Thank you.

Operator

Your of line Suva from Citigroup from comes next question Jim the Investment.

Your is line open.

Jim Suva

then kind the little little a you little okay you're I'm much more, freezing us you really you months? much just concerned Not some to and so Thank out How about just unclear should us the stuff, recently the that the you are a at my that about outlook very to next but cycle. six little question to have your chips of good is My supply about And be we talk the bit? a three looking hopefully a results bit do bit procurement with tariff so buffer in on point? bit uncertain COVID much. additional on second for can variable. forward. behind Texas shortages, an trade this to the job environment. Or is chip OpEx. question Seems and thinking as us Thank on help some chain have you tempering in and becomes

Ron Nersesian

the Sure, forward. talk going Neil the then procurement formula let and I'll piece bit on little more I'll cover a OpEx

procurement the other around as into that we world. time seeing semiconductor far cycles long as seeing taken we're well environmental As from that providers, impacts lead have we're as account the the

put though, As semi-cycles. get of just the the out a matter fact, things for that is don't account the quarter We for guidance next shape do feel the another above COVID into we billion quarter. $X.X have very and hope that worse at midpoint this we are -- come guidance, from which the standpoint of to surge, confident with out next the that although good in we was street takes for consensus

Neil Dougherty

some question not far biggest your of short-term couple that the variable program. forward. course are to going by of investment -- I comments likely our made levels as increase stable, the we Jim, But driver expect and, my is well, Yes, increases our in quarters stable do be only kind the impact, of remarks. of over and second pay forward-looking next some underlying the was think Certainly And OpEx. I are prepared to related are

QX last is prepared are of a where variable expenses have principal in year. compensation all and back QX be than relative quarter, this like therefore see growth revenue mentioned in That and revenue we variable to of The to seasonally both this I and of growth year. operating in QX other my revenue expected organic comps higher last compensation higher function in quarters soft the drivers will quarters remarks As and margin year. we bounce

is materially be Our going variable compensation higher. to

non-executive are in is the program, relative pay $XX you employees roughly sales, QX very of variable and results saw more revenue R&D, And that to in since our between in of guided we all program expect split of strong variable sequential SG&A. participants XX% that our as QX. cost million increase So, equally than growth compensation increases and of

levels But Specifically return our pay levels. that again, impacting more to are we expense normalized and the investment the is to our OpEx lines and that past about. stable level going variable you asked note once get important underlying to QX,

Jim Suva

again, your you Thank congratulations you, Thank you. and and team. to

Ron Nersesian

it's that growth we the Jim. our for up, short-term guided out that's take to one the look we've Thanks, why And in for our effect producing few had model, mentioned we the teens in think just at finish times remarks. year a EPS a as overall prepared of you if whole and

Operator

Stifel. Your next John from with question of comes Marchetti a line

open. Your line is

John Marchetti

sort Thanks you strength? much versus maybe is I of Millimeter of continue of Whether Wave take new maybe is very much. XG? customers, in could was standalone, XG? sub-XG? non, of much at strength moving How about if the some from just as And coming the about wondering hinted it's versus it talk in different of comment and into you see how the a or you moment variants to that older that

Ron Nersesian

Satish, to feel free this question. answer

Satish Dhanasekaran

Yes, Ron. I'll that, take

think that of across of XG verticals. result this in different as as seeing I XXX platform. expanding that the we quarter, in over effects new XG is the scaling the a have deploying our about we deployments we're customers one And technology interest ecosystem, to broader of as talked end market added this

strong. that that's all its we've of the the for level, regions, continues ecosystem. So parts At be growth highest I across XG to think all stated and

interest, from defense, which scale as strategy. Xg term the in we see long we there's technology And term cycle, automotive, it we to as new talked [indiscernible] upgrade Wave at pattern steady talked Right? new Millimeter business, manufacturing about announced R&D teams we've this the long just four about see on that industrial. got an such commercialize aerospace, everything broad look the feel of and dynamic verticals and we've about and and we such for in push confident to the projections is manufacturing introductions a So, see is XX O-RAN as and product select has as it's have over interest profitable momentum, And investment this finally -- opportunities, sort are industry. based and capturing as our is new quarter manufacturing You teams. deploys, we as feed this this

John Marchetti

a have just you XXXX that's guys curious these XXXX as or think little things in there, newer in actually think extends And if case, bit? out if peaked of that out with maybe you. follow the I'm for past, you sort of mentioned a or Satish, up on, some the it still market you coming this

Satish Dhanasekaran

on what I based think peak XG I deployed. projected to seen parts the Yes, have of of industry Millimeter being CapEx to an due we've past, sort in think we seen the Wave

lead. However, for a in our that portfolio wired value Ron monetize referenced, more content, only much but both poor so and services, we has the plugged lifecycle effect, end-to-end business, in software broad have not our we have comms, portfolio able early, created, a wireless higher sort of we're of and higher from as the incident and to

John Marchetti

Thank you.

Operator

Your of comes with is question from line Chatterjee next Morgan, one open. Samik J.P. your

Unidentified Analyst

Joker this [ph] for on Samik. Hi, is

question my in two think the momentum quarters and segments? content? So of first in great we you industrial aerospace, sustainability, business execution I is is of a the And what had your again. should how guess electronic just row. around Obviously, driving both those

Mark Wallace

take… I should Ron,

Ron Nersesian

Sure.

Satish Dhanasekaran

between and before, the as business across very As COVID macro the general or record is coming a defense defense And common revenues. recovery. segment. tracking as electronics we mentioned our and aerospace, record pleased the business industrial far orders in And regions, our probably dynamic aerospace, that's the all recovery is strength concerned,

And States healthy, business defense The focus around outlook or portfolios in modernization, budget in our we pretty that particular cautiously NDAA in feel December, also a business. well. defense, position optimistic the healthy on look these backlog us as have of aerospace to the we into teams about the the we continue United for the passage new the on forward. Specifically,

strong So, to next growth the we couple expect of continue quarters.

increased our IC referenced the the the from far by investment concerned, EISG as business Mark again, seeing As and business, advanced earlier. general also China is that electronics but broad nodes where driven strength we're semiconductor investments

Unidentified Analyst

it. Got

Ron Nersesian

as into that and also software well comment earlier, this that different such solutions, quarter, would modular mentioned contributing EISG our services have I market very market. strong factors been a general and are that the as to had electronics play all form overall as

Unidentified Analyst

And follow up. appreciate I a the color. quick then just

know XG seeing You, a you're year, on was guys kind and XG XG but the of I'm momentum that how declines moderate the can update starting there. to obviously side? curious, the seeing went last into just because you're impact on are there the an we big about side? get COVID, out declines the there, we play detail seeing I on

Mark Wallace

and was uptake I XG sequentially. and flat that the been and record together, has sequentially if in we've this and pleased and a we've was portfolio very feel It include momentum as grown us feel for we XG quarter at referenced. quarter good you Yes, in the XX with I the mention XG quarter-over-quarter did XG new and that We to year-over-year about quarter-over-quarter. launched we're market. products feed

Unidentified Analyst

the Got it. on the Appreciate color, guys. results. Congrats

Ron Nersesian

you. Thank

Operator

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

is line open. Your

Mehdi Hosseini

how do a help Thanks Yes. out volume ethernet if you the you a communication trending half? taking of And plays that the give as please group? XXX-gig in for Satish. be Neil, you understand second sector would reference. question. could for great us for some it especially And with brand see Can One as overall XXX-gig the for XXX-gig and follow the me mixer mix

thinking quantitative of the how mix accounting think give was the what services is? and of about one-third us mix I a qualitative software software was Can a a should you there it forward? or for looking we Where the of mention be ago? software revenue. of And assessment year

Satish Dhanasekaran

I'll Mehdi. Yes, XXX-gig the maybe with start question,

we what the saw have scale. shift really and of that expect say, tail XXX-gig year driven telco adapting, is of a we of adaption broader will the data more quarter over still the technologies, wireline and a X long Metro evolutions was was increased calls. to XXX-gig, strong and economies should particular referenced the this I center it and from saw heavily spend Tier for opportunities. we've XXX-gig the year that in of pretty on I we As years with or demand, maturity as think number well We scale last And start done at by technology XXX-gig demand customers in occur, which in Asia very

frontend that. the expect in early on also to the are investments which I XX to that production of on R&D, in still we're would XX play say XXX-gig, out So, in months. we in

early. So, engaged we're

suite for we well, commercial R&D quarter, which the XXX-gig our from the offerings full opportunities benefit communications on also the as positions the this well announced from of us wireless business. only side, to Just XG wireline in but not

it As referenced We far as and our pathway software XG from I'll the for to coming before, it as franchise content important I'll pass XG Neil. see ARR. seeing from software, off, contracts We're I which just for us think higher kick with maybe which software Neil renewals off solutions, our have have to a helps design can subscription growth, become comment. also and with percentage make a them. growth in the we double-digit our of the

Neil Dougherty

continues is And approximately terms the revenues. Satish outgrow the that broader software relative this growing digits previously we've mentioned, total of in double it of again quarter. the XX% software, of said as size to has Just business,

software continue So and it solutions expect over that this is do so more continue time complete content. with that increasing migration we mix we will towards slowly as to higher

Mehdi Hosseini

may, here. just for follow up quick I If a Neil

high of teens? be could a growth execute EPS potentially deliver above the upside the source and If drive you line, margin that mid potentially that to could growth this top year towards gross the software

Neil Dougherty

margin. run, as of increasing long see a we software content driver the over Certainly, gross

taking added to years past we've over gross our software seen as think I well actions couple to that of other as you've portfolio, drive our northward. as margins the

shift, it's It's know, and not dramatic. the You steady the, time. mix slow over

gross they're EPS couple the speaking, a over going our things to a that to shift growth So, there's between link determining quarters. play into hard the are of absolutely lot me of a level next a -- our yes, generally go for margin improvement course direct several that is But time. going contributing software role over the in immediate quarters of over to and to mixed next draw increases,

Mehdi Hosseini

you. Thank

Ron Nersesian

you for years. look orders, then the you're that last And incrementals, ahead Ms: trying how And so. think projections, just do if much looking should to over big model high-teen or and was from short at I go understand and method, And so our upsides expect the five delivered Yes. have to how there? exceed we our we a pretty conservative when also, Well consistently continue is term, we to our to to where about where EPS some growth? to take

Satish Dhanasekaran

kind can put in incremental, you incrementals we're of where quarters our been we and quarter return term on that would or the QX, performance levels. market quarters. that the line. on over in several more over the lapped of of over otherwise by see some have have where pressure business encouraged the next think guide I to expense very normalized our those kind the couple the short have we're do pressures on the of But relative normal our course We some they the comps than the by impact business top that will EPS to

Mehdi Hosseini

guys. thanks, Okay,

Ron Nersesian

Thank you.

Operator

with your Goldman comes Sachs, line question Delaney next Your Mark open. is

Mark Delaney

variable to the I slightly news. you're understand that a is flattish you're there or trying variable X% else growth and in the commentary reported I besides good growth year-over-year, thanks teens But more of for high comp quarter. or recognizing the which yes, discussing company math implied into is the the to was good growth of that sense EPS comp, so. for afternoon, Yes. higher, half the factor is Good hoping full-year into the lot guidance very to implied and relatively EPS the dig second If mid or that anything my just EPS the is taking question. right, And higher XX% Thanks. makes to today?

Neil Dougherty

our the margins gross margin, had significant year only than were higher a only The quarter had extraordinarily previously. earlier do we'd thing margins have had gross we I mentioned significantly revenue highest last Right? we that, pretty QX in ever favorable. is Not we'd by

So, tough as well. a into equation going we quarter is that are going to have factor in fourth to the ultimate year-over-your comp that

Mark Delaney

that strength help increased of different you're XG the Wave. business was Wave describe make and in deployments That's the and you seeing for have opportunity extent what on sense. the Wave helpful some Thank perhaps companies to within question to Millimeter you. China? seen order the adaption and Can Millimeter your Millimeter My strength geographies in

Ron Nersesian

Yes, thank you.

long heavily as customers. is one from think us. bans. in have see referenced by the the Wave increase a before, I our very U.S. We At point, opportunity this interest for we a term steady driven Millimeter

of to XX with sort the for a Millimeter to We're of XX the it to online, about gigahertz a push with spectrum. talking seeds the sow gigahertz And can coming spectrum XX Winter of expect think gigahertz You XXXX China's be to that Wave. range, we XX Olympics, showcase tends think gigahertz new runway. I

So those some early further space. the out, if then drivers. clearly about And you research are occurring terahertz look thinking start even you

this very a is a competitive differentiation. opportunity. again, Keysight's got long-term So

have talked a some solve Currently, Millimeter and address and this about well-positioned rates, dynamic peak to and management, advanced critical second in beam we We term to challenges gigabits above. well-positioned in working higher are per Wave commercializing this. there. customers like It's we're we're long data with XX

Mark Delaney

Thank you.

Operator

of next question Barclays. Long the Your line Tim from comes from

Your line is open.

Unidentified Analyst

think that your parse this network going strong closer, again, XXXG for How on on Good perspective? on for could also we as Just Tim. out? CSG, hardware what what about testing very meant ability the see seasonality QX you the side for us of afternoon. between out cycle this that we then that inning we should This off the business is Congratulations help essence has and results. what measure cycle implies pace? QX you just And coming in are Peter [ph] On the versus and here A&D. strong from very wireline

Ron Nersesian

your question. please repeat didn't I it? you hear Could

Unidentified Analyst

this sorry. better? I'm Is

Neil Dougherty

Yes.

That a help. would just down slow could touch. you If

Unidentified Analyst

I Sure. CSG. asking just was on

was think sense perspective? A&D, in Just was what out starting are if how a a base? parse between coming cycle as up could wondering you what the should have visibility has you the And network for from strong a follow hardware just us cycle And the of see then wondering we help you closer, QX about QX wireline XXXG inning measurement given test versus we on I side? that that seasonality, we the meant do side

Satish Dhanasekaran

record orders we for Again, the first. and defense of the comps have next aerospace, the given couple the take I'll from quarters. favorable Yes. comms,

our revenue of business performance the governments strong the strategic also of focus expect priorities aligned in defense around areas world. some are modernization the around with the We and

With So evolutions, and XXX-gig the wireline question terahertz the we business if drivers XXX-gig. wireline, portfolio the we're three ethernet are the areas is feel the entire speed gaining The and to which where think focus regard security of on And XXX-gig, is for good Clearly, your of theme, in on area second in involves about on business. we you high terabit customer interest. focus now and the are as a beyond. And right visibility. third XXX-gig, it.

be the or In span, building the we're would which IT expect terms we to hybrid And work it in towards of a enterprise is hear or everything the see visibility folks to and pipeline a year. as peg. mode recovery we good in we later occur business, a return in that on back

overall, we're But business. seeing part quarter. for you driver that the and communications this strength our see So that's commercial in of with synergies reflected probably the we're of the business that pleased a

Unidentified Analyst

color. the for you thank Great,

Operator

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

Your open. line is

David Ridley-Lane

and what evening. Thank on both impacts restrictions you. the on trade from you've of revenue, done headwind estimated for the those? both Good was orders the Since math

Ron Nersesian

roughly to Keysight was to CSGs at commercial It heavily points comm. to Obviously specifically six the level. seven skewed

it to think for the get So, commercial comms the headwind if was you commercial communications digit double I a business. level,

David Ridley-Lane

it. Got

Ron Nersesian

result China the orders pleased comms on record that were in business. headwinds extraordinarily we given for contact, the trade that Putting commercial with

David Ridley-Lane

ask. Got on little us you I'll the tell one since that acquisition more it? a then, you closed. on it, bit up else has Okay. no Can And picked

a it And million How it's so the like seems I into the it fast-growing from or $XXX cash of about fits revenue. portfolio? was in flow think very market. it part

kind So, your revenue what's expectations of as well? near-term

Satish Dhanasekaran

enables believe XG that deployments momentum and saying, be more our half enables monolithic And estimate, at to within We this are interoperability Yes, on us RAN maybe importantly, us I'll smaller customers to Open revenue highly help more system will block. our focusing a continue to Roughly -- as a at issues. and which what place given categories, with to of new testing trends, complex Keysight are used of complete it's customer the commercial into disaggregating and software-centric the the it's profitable, plays point strategy business. space, aligns an acquisition product resolve like the scale it start workflow acquisition. by really the taking M&A comms

David Ridley-Lane

And one for it. me. then last Got

for in now repurchase? share You're a caps about a net Keysight's you? on How cash do in being net think you aggressive position. be position ability to Is aligned more

Neil Dougherty

sorry. I'm ahead, Go

Ron Nersesian

Yes.

provide our return to obviously, the Our wax. a great first and grow above business objective, is

produce know our again, continue can go for that further we look M&A But we if it. spend we're going [indiscernible], can't and ahead So hourly you to an to opportunities not strategy.

speculative. will So, see go not and and go we after can that deliberate very too ahead things you focused and we're are we're very

So that priority. first our is

The repurchases. if do the end we had funds, we second day, would that opportunistic excess of share at thing rather the through

still, then but average saw, below price repurchase. shares a we're did through you But going organic at on not to like this do you $XXX as where in was the funded As third making in dividend is saw from this that $XXX million that point. growth after And that over quarter, sure QX, something R&D. ahead first, we would be we're far and

growth and a look to and enhance M&A capital. produce ahead invested it's return could for on that go higher Second, our

we for sure bit and a before, done opportunistic opportunity. stated Third, big buybacks. a have like clearly make is to very more little which least to plan at share anti-diluted, see look but if will we get we've we we aggressive we're

Operator

Thalhimer Your from next [ph] Davis. Thomas Adam comes from of question a line

Your line is open.

Adam Thalhimer

Hi, enough. guys. Close Great quarter.

Neil Dougherty

Thanks, Adam.

Ron Nersesian

Adam. Thanks,

Adam Thalhimer

I'm early if the Biden thoughts eased. their and been got some Shoot, administration this about to that question, of There waste Huawei. maybe some restrictions ask but on curious have any might have just you that? get a indications I of be

Ron Nersesian

at and and the that. go any we ahead about growth very we smooth other Biden to the outside quarter would to selling, in to our over insight pleased were seeing But in order having that had to that stop revenue Well, when ahead according and line have we pleased top growth government accounts and very, to reported do laws. our to right double-digit as basically that concerned we're what to And have compare that don't particular administration our go will what I'm very do. we

Huawei certainly us. So, if be things were significant with any to would or government upside at that for change other restrictions,

Adam Thalhimer

you. Okay, thank

Ron Nersesian

Adam. Thanks,

Operator

UBS. comes next a Chris question from Your of from lot Snyder

Your line open. is

Chris Snyder

Thank you.

to And kind willingness like following billion cash right-size, of larger optimal just there's to acquisition $X.X up cash So, quarter a finished type while with balance the the alone? which that historical targets? What on bolt-on certainly difficult stream go acquisitions, a be the is keep you steady there capital cash, Because on view after just been level of above company to a of feels well of with these bolt-ons is allocation. it do little levels. is hand? The bit the to

Ron Nersesian

the there the pay significant. in a the look of look large things But is that a XXX small upside, point very Sure, more very we shareholders. make strategy. you at And dozen again, high a right, up well, premium you much to looked premium of for acquisitions, for into to much that made have want for make at to obviously, this when as I'll large we that except we But over just say smaller, most dollars and at that have is the off for different two sure them. you and and our acquisitions. this, them have we're the for amount a selective. you're company, continue We've And fit about the of hurdle pays been

more We Neil, company to now. we that. and need are something the to you unfortunately, cash else you we may than much share have we have right M&A But aggressively more run looking than add? at want can't

Neil Dougherty

that to in over of -- Ron, And cash value level need. cash than to going add more or have we I level did is we a put the lot that through go with into opportunities in of thing it the return currently was to cash creating like would is time. to I have the that a for QX work we looking Yes, fashion, things only M&A last that and we of optimal fluctuates agree cash favorable we're But of the optimal year. looking it either

to continue to continue we'll that. do So,

Chris Snyder

the that. And then EISG? Thank the term and pricing environment, the you growth for mid-single positive digit for targets? second question, for both CSG of any, pricing, if you just company's what core baked is level long talk into can And about

Ron Nersesian

the always on at in We our and going differentiation look in segment. what's how pricing depending particular is market on much a

in make lot have the competition, and on utilize we and that with unique. environment much look to opportunities go that not is a don't in we end certainly ahead but we workflow leadership we But XG to and do that the you us. we're different what cannot sure doing gouge but for when there's We're have want if of differentiation long-term our products, across so we're stick power. customers. not it's going look We pricing great, and clearly, too a they So to good only

increases and as as a to our inflation. review we state we that's look margins our is, we far or and higher a minimum the offset So, for at not publicly. But twice that amount what do to year price opportunities for drive will something we pricing continue so to do

Chris Snyder

Thank you.

Ron Nersesian

Thanks, Chris.

Operator

Couillard of Jefferies. from next a Brandon from Your question line comes

line Your is open.

Brandon Couillard

latest have trends Ron, you that turn my questions Most Good there the think of on any has Thanks. thanks. Hey, any the there? call mentioned I in afternoon. covered. of don't And order market been thoughts if perhaps been auto Curious, market? specifically But, yet. in kind

Ron Nersesian

Well, let We've Yes. for the certainly been the answer infrastructure I'll EV. focusing this. Satish and overall battery on test

autonomous sees a we've more to same depressed, as look to But good chance a in comment in it's vehicles, prepared continue Also, mentioned as the the have get had position seen we be let the where I'll the we that in remarks a we Satish far and as we going. he as thing. win that bit auto We that market and market, at in on know, earlier, little all nice the space.

Satish Dhanasekaran

the Definitely EV The business thanks, with R&D applications. the is for the stabilizing, And signs gen definitely slow strong a business around applications. With auto is we world as on reference. help focusing in standards, depressed steady in continuing AV by we're electrification, push of view implementing Ron. ranges, and C-VXX of and to on XG Yes. with creating we're position opportunity to bidirectional more We're and the seeing the recovery that have interoperability But have there value on a the technology focus needs global next in we manufacturing particular, China a parts market. focused on extend progress. charging including differentiated long-term a help

auto EV as the may even strong we but we this with So, especially see AV. continue portfolio bigger customers. as and in is the end to and where a That's start market be traction, engaged be market expectation, to recovers, our our

Brandon Couillard

second sort what the you Thanks. just is a China would headwind in remind And, X% year-over-year top basis quarter? line of the to to on trade That us the Neil, a similar X%?

Neil Dougherty

that Yes, was before QX X%-ish told X% skewed just half, X%, range. what on was the we it you was to We've towards what we the said QX. so said X% QX is obviously in

Brandon Couillard

you. Got Thank you.

Operator

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

Jason Kary

day. Hi. Thanks, great all further and everyone no today you a for like Sedaris. just comments. joining us wish to I thank

Operator

This conference call. concludes our

now disconnect. may You

Keysight (KEYS) 19 Feb 212021 Q1 Earnings call transcript