KEYS - Earnings call transcript Q3 2021 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Keysight Technologies Fiscal Second Quarter 2021 earnings conference call. My name is Holly, and I'll be your lead operator today. After the presentation, we will conduct a question-and-answer session. [Operator Instruction] I would now like to hand the conference over to Jason Kary, Vice President, Treasurer, and Investor Relations.

Jason Kary

Thank you and welcome everyone to the Keysight Third Quarter earnings conference call for the fiscal year 2021.

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

presentation Senior find Global Joining reports for be information website Operating tab Wallace, at Satish information in to under Dhanasekaran, President an us the 's are you segment along on where Chief the Officer, Q&A supplement today's investor.keysight.com. with and financial on release Click The Keysight quarterly press Sales. session investor discussion, will Vice will and of our Mark link the results.

also Following we non-GAAP a call, prepared this the remarks. measures. comments will to post refer copy will of Today's financial

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

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

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

virtual Jefferies, now, scheduled that conferences highlight I the Ron. in will Lastly, Deutsche by call would to turn participate hosted Bank, upcoming I and management And is investor Citi. over to

Ron Nersesian

us. another Quarter delivered for of Keysight Jason. you, joining you, results. thank Thank everyone, And excellent

and differentiated comments across industry my markets. continue Solid key I'll a growing demand of solutions capitalize three we set Today, on on accelerating our for technology headlines. diverse dynamics to broad-based investment are focus

of highest display year. quarterly all-time was orders, QX the revenue, continued our operating durability effectively as to supply we business of margin full navigate chain model record our and on The delivered we challenges. First, record

strong our our well annualized growth and will Despite finish, results. long-term compound Keysight's significant software-centric in headwinds consistently growth, delivered through global our restrictions to both XXXX of above have earnings revenue pandemic. and solution strategy launch XX% we expected XXXX, trade Since first-to-market X% yield Second, continues annual commitments. a

highest continue aligned opportunities shareholders. well value our are we to market impact customer with as investments enable Our the success and our deliver to

Third, expect earnings of XX% at to revenue $X.XX, we EPS of which year-over-year growth growth and performance XX% our of the given our achieve represents guidance. outstanding year-to-date, XXXX midpoint

have drive targets our We incremental XXXX, intact. strong entering and revenue forward. long-term earnings momentum going expansion expect we and to margin growth And remain

$X.XX, continues of delivered and of XX%, to trade which Now XX%. deliver the high-end and earnings take earnings of restrictions of supply was orders grew look at Third to growth. XX%, Record year-over-year margin let's All-time XX% revenue chain Keysight year-over-year despite our XX% headwinds guidance growth well deeper a ongoing margin X.X outstanding gross above Quarter operating disruption. due of grew We in billion. a X.X represents performance. our record also billion QX to

Our growth also comparisons soft reflect rates are sustained growth. but not only year-over-year above-market just a result multi-year of

delivering to as strength are our orders both see solutions, customers. up new versus The of QX XX% from expected. same and up demand and was We global quarter revenue example, For differentiated pandemic. business our durability in prior XXXX, and XX%, are existing the the accelerated model from

expect pandemic Our we X,XXX in new which customers the approximately to been in customer with strong XXXX, has engagement throughout XXXX. will added exceed

all and breadth and a segments revenue and we've growth regions. business the row, Demonstrating differentiated Looking portfolio a across set across of the both reported year-over-year quarter segments at double-digit in end our third diverse for markets. order

order across double-digit revenue and Solutions Group growth its record regions, revenue. well achieved strong as all consecutive quarter Industrial as fourth Electronic Our of

for technology semiconductor demand and solutions, our record another mature revenue. global also advanced semiconductor high cloud address AI differentiated and processes chipsets for in drove investment to orders remains for Investment expansion capacity demand. Quarter in in center Continued in XG surging resulting data applications of nodes

general Our driven growth Quarter of double-digit revenue transformation, Keysight's consecutive X order record customers' in contributions s breadth of revenue. by achieved investments digital QX and the and Strength demonstrate was digital in Quarters research. demand. in broad-based record and manufacturing orders across electronics driven business multiple to recovery, X.X, academic automotive, macroeconomic IOT, investment, the technology acceleration EV all-time and meet Industry record health, advanced orders in AV industrial and ongoing by were QX expansion revenue pent-up industries. and

R&D the workflow. remains new environment emulator vehicle realistic autonomous to towards roadway emulation testing focused drive announced next-generation a for across the trend Keysight vehicles gains on momentum, cellular or We a which autonomous in-lab As C-VXX enabling technologies simulate scenarios. real-world recently solution, provides automotive

demand including solutions, to and continue compliance ethernet test. AV steady We see automotive for cybersecurity EV and

delivered Our orders and revenue. third-quarter Revenue and double-digit trade and orders record our that order larger record in communications defense, delivered achieved China. impacted despite growth solutions and double-digits Aerospace, QX regions. one revenue revenue all customers of government major in across restrictions group grew

XG, growth operations, a spectrum early research again were space U.S. by investment comparison, internationally, from while and was contractor While rebounded satellite, from Europe ago, solid coupled soft with applications. Asia. benefiting driven in prior-year and prime government strong, year XG a electromagnetic growth

their a solution research research. with integrated next-generation a terabit leading drove application leading-edge 's significant institute and testbed wireless quarter. Keysight wireline win is and Our in strategy this enabling XG

chipsets service of U.S. In also offering program adoption, providers. into XXX-gig uptime restrictions, increased needs. centers, the trade grew record third-quarter by and customers from to QX, defense, entered Communications engagements spending double-digits. new and Ethernet deployments and our contractor will revenue impact benefit China both services XG of orders Ongoing revenue by XXX-gig and for driven in data ORAN and Communications adjusted enable achieved orders the devices, aerospace, their for Our prime multiple was and surfaces. strength we calibration XG and mission-critical Commercial Commercial for rollout differentiated global government

by XG selected such along as gigabits new other NEC, connections. key Our In firsts. Vodafone, achieve innovators second data partnership industry with to with was remains Qualcomm, had XXX earlier deliver the which the for quarter solutions lead and leaders per of continue XG we enhances a also [Indiscernible], strong continues Samsung, as O-RAN deployment ethernet. of further system, were Keysight's Dell to year, to solutions collaboration with deployments. wireline end-to-end we cloud next-generation XG first with WaveJudge such standards, Keysight first for strong to expanding as test driven our industry Keysight XX commercial Europe's adoption wireless this Gigabit enable network. by acquired

Cisco saw key oscilloscopes our high combination XXX within network newly and value. Higher-value leading interoperability, levels are of we [Indiscernible] insight layer ethernet is a our apps enabler Error $X of solutions and Quarter. networks. driving Bit customer the demonstrated new physical demand [Indiscernible] Our announced testers with our data driving while billion. Amphenol, position. strengthening The partnership services rate, recent a Gigabit AIR differentiation exceeding multi-vendor next-generation In of and strong with Rate and competitive

view as Keysight on drive growth our a execution and of while excellence and Our or 's growing to competitive operational reducing are They overall continues high-performance business the margin 's expansion durability above average. is mix margin culture Keysight Employee model Keysight the to component focus our of consistent the of to critical cyclicality. key our model employees both our a with we and increasing our services at Company is software leadership advantage. contributing are Operating an success.

of to pandemic-related This recognition innovative human experience to experiences, award resources overall As and are the the in awards employees employee proactively such, [Indiscernible] of online. Malaysia despite honored our recognized is in team engage create we have unprecedented by winner positive team as the challenges.

were customers, production our restrictions to employees Malaysian operations COVID at Keysight and since imposed employees, implemented are circumstances in for Malaysia have COVID Keysight job suppliers. an were of and the employees and our outstanding facility Our the mitigate a done impacted. XX now program our vaccinated. XX% both Over risk vaccine of under difficult To employees suppliers. -

rates our strategy local averages. vaccination addition, a In U.S. is generating are large results. our above site momentum strong summary, continues, at In community their and

have of to on am execution finish us we and many capitalize opportunities consistent ahead forward our the confident our in fiscal We of look track growth as XXXX. to record commitments. on I and year, ability a delivering

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

Neil Dougherty

and Thank you, Ron, everyone. hello,

mentioned, the Ron better-than-expected investment in differentiated Resulting As as delivered accelerated demand Keysight in technology quarter outstanding broad-based solutions. another quarter. results our for

the Third-quarter guidance on our XX% orders or on core a We was above achieved a one XX% high-end revenue XX% core third-quarter and of basis. grew XX% basis. billion of or of $X,XXX,XXX up

the impact XX%. Excluding restrictions, China orders grew trade of

despite of operating higher and Operating our was We Turning variable our over points margin well-managed earnings $XXX The to operational high-end $XXX XXX results, reported of income QX XX%, a which points. the gross basis compensation. which XX XX%, per delivered were of a million in basis guidance. achieved net million expenses up $X.XX was margin of above share, we increased year-over-year.

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

Quarter to investments CSG, across revenue of Communications driven the basis Communications leadership The increased Solutions our in up operating performance XX%, points of of margin Commercial XX Group, Third emerging gross revenue of XG by XX%. increased and million our $XXX continued $XXX CSG X%, year-over-year. XX%. applications. or Moving the which was segments, our margin lifecycle, delivered a million achieved

EISG strength record were reported Aerospace, XX% for or basis. restrictions, Government U.S. and double-digits. $XXX notable mentioned, core semiconductor, Ron all grew all Solutions Europe. margin regions all growth regions markets on strong, double-digit impact Defense, by XX% adjusting and grew As million revenue generated up operating XX% as the record of Electronic trade a revenue XX%. million revenue and The $XXX across across automotive or grew Commercial XX% a margin of gross recorded transient and electronics, major Industrial of and a and of Communications general Order revenue Group unfavorable quarter another revenue double-digits. led of solutions, orders and and EISG

quarter from of flow. and million equivalents billion revenue. the cash free and cash of $X our reported $XXX and or We operations XX% cash and with flow ended sheet to of balance flow third Moving over in $XXX cash cash million,

acquired priorities investments growth, focused Under market repurchase. and during allocation capital the shares the $XXX. organic on in share are share an open XXX,XXX value-creating authorization we remain and our repurchase average unchanged on Quarter, acquisitions, of and approximately price Our

consideration of For a total $XX million.

outlook guidance. and our to turning Now,

the Quarter X% our revenue billion, which midpoint Fourth growth at to be revenue midpoint. in the revenue Full-year the X,XXX representing $X.X is revenue of of range $X,XXX,XXX,XXX guidance expect at growth. represents billion, XX% of We to XXXX the

a face XXXX. negative and and effect represent earnings not XX% since over COVID-related of but growth last only the X%, years, year accomplished significant XXXX XXX substantial representing weighted are -$X.XX on of EPS our share our the expect expected XX% earnings be guidance In shares. diluted of count $X.XX, of share the at closing, approximately midpoint We long-term QX million the in the two Both Full-year are restrictions. above China $X.XX expectations our growth. disruption per and of per share revenue earnings annual in to based compounded range last trade

of sustainable Our resilience consistent and ability growth. our profitable execution demonstrates to the drive business our and

revenue XXXX, we Beyond as Jason I intact that, our targets, as see model for expansion. back margin opportunity long-term and incremental well continued as our With earnings to Q&A. now for it turn the will remain financial growth

Jason Kary

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

Operator

you do yourself question Instructions]. the question of our your [Operator We [Operator gentlemen, ask and Ladies line one line that And come from Instructions] Jim please Jim, Suva is first open. limit will to Citigroup. with

go Okay, next to we'll the caller.

will next Our with line Hosseini from of question Susquehanna. the come Mehdi

Mehdi Hosseini

of adoption, the then application And in under arrow. Two some is early group. under maybe commercialized, more under high-end is be categorized follow-up. for communications commercial used be communications it's equipment now a like is that it reclassified way would sell currently it's traditionally middle millimeter Yes. questions, mid-layer And I -- categorize the the possible and Communications? Could of regarding Commercial follow-up high-frequency communication versa, categorized have when vice it you in in or that

Satish Dhanasekaran

in the business is Satish, and engineers. to portfolio take sell across focus defense. us millimeter-wave Mehdi, across portfolio, broad. set all And lot you're right of that and is maintain pretty to CSG, Industrial Clearly, I'll aerospace, both we the this out opportunity this. leverage And a for common between is pointing a tools the our of commercial our in

in in businesses interests driven we're orders of in by out take Now, And on actually markets such And -- sure. leverage and for is will commercialization the different them. space play of now quite used being buy is across as classify lot a it spectrum broad, XG. way. the to in globe. who this And its communications. It's maintain But bit clearly and it a finds time of satellite millimeter-wave end being to in aerospace the with our application based across operating able we automotive customers technology that used

Mehdi Hosseini

I we're have update will long the an I of to And mix, are you been it? ratable any and phase but operating above Any follow-up great you. know Neil. just on longer-term Thank increasing margin? one the target get in then here. and you be have long-term When you target, metric, you. on you're Thank how focusing -- software we a business mix for the going operating operate where above can like it's -- update been

Neil Dougherty

Yes.

to make on Just answer. Satish comment tack one final 's to

As long-term result defense, orders of classification operating revenue commercial is our EISG actually because and with aerospace, customer, and comps done. a of have within by a Under only XG model. sales that, but of the way we question about, that not as well also

pleased First, results. the very with we're

XXXX target FYXX this March guide XX%. we QX, -- If XX XXXX you year Day in look X expect basically we the XX at an quarters margin long-term at outlined plus our -- with Operating Analyst our to said our date finish to to where here that for we at

that We in here be 'XX. FY level are going at XX% to

that pleased we're years achieved two ahead we we've achieve of objective to So, expected that where it.

room have while making I than margin we across been long-term And have model. updated We do guide business. that updated we're then, today for don't multiple you we've expansion. I done. progress as continued that you we for working believe said faster will And expected. an we're or that our don't the tell comments we So, today, levers an believe prepared that have we in

the that of overall abroad ARR software businesses are grow a upper leverage infrastructure. initiatives and focused noted You rates to over instead the services you've and growing rate margin several them, average faster couple margin improvement go a to mid-XX of our seen from on our the our continuing improvement gross last faster our range percent than into wherever years G&A at then therefore that's gross the Company XXs continuing and at

our have to to we in believe continue of improvement we to levers forward. drive we so, lot continue remain going and ability And a confident margin

Mehdi Hosseini

Thank you, guys.

Operator

with come the Citigroup. of line And Suva Jim from our next will question

Jim Suva

Thank you hear very me? much. Can you

Ron Nersesian

Yes.

Jim Suva

take Thank the I When I sales. a about looks I you've longer-term, and look your automotive, been look specifically or at at a smaller Great. underpenetrated end least think portion you. markets, of them, it your where like at

it's look for something you think out, or ahead, more big unique being in you calibrated and materially out at every tested, As have favorable times is or years that going it? actually electronics Or more is that design to compared I that's there something and unique multiple about the the newer that seems you you sold just look there things that industry could consumer lot mean, is is car car there into ahead, for that be Company from maybe it would the same, electronics. to they something the the a about be the much should coming now, years be like big Is profitability pretty a you I or for design prevent already because ones how it? it? need

may the automotive insights us give some strategic have? on view you can If that you

Ron Nersesian

Sure. Hi, Jim. Ron. This is

automotive It large in very really a is way. at a you overall transforming take If our business. look

Whether suspension cetera. at in more on wireless and and test. or you car for turning XG, and systems. regards many, car for put performance. combustion sensors communicate with a around that big As really are batteries shocks was cars electronics. into into But itself with radar strength. plays computers more many electromechanical engine built that that electronics relatively really the the devices. really sensors lot things and world, And automobile of is a computer and et are right the it's low-tech whole that different transducers wireless Sure, to are engine our there or the To is with the to In old the look either know, we microprocessors

this a see we very for trend So, big as long-term us.

for competitive role As Things value really very as in are reduced doesn't is market from But R&D, we're much sweet price we the us. focus, a a spot be far in. that to production, going complex, get simple us. it's a Things it area that that more depends. test; in as to need that we that have as where won't playing

EV a opportunity really, is AV, going So, R&D-focused for forward. us really technology great

Jim Suva

the Thank teams. you much you and to all and so congratulations for details your

Ron Nersesian

The team Jim. Thanks, job. did great a

Operator

come question the Bank. to next with of from our Deutsche Matt is And line going Niknam

Matt Niknam

taking thank I supply follow-up. questions. guys, for on chain you Hey eon one the have and

chain, on to saw Tailwinds challenges thoughts you've on talked XXXX this Headwinds managed relative seeing. impact supply on to you've obviously new Can or embedded that the expecting and or year. my Just into guide? even customers then of the through Quarter, navigate to then improvement you the peers Last you incremental exceed you're comment adding and next you last any any some quarter's of about follow-up, year And whether

Just terms from? Thanks. mix, skew of any color these are in you can customers terms provide of or new coming in where

Ron Nersesian

is new and I'll as over the of then we it the supply will answer, customers. Wallace, excellent This our of Sure. go on start talk Ron. head progress off chain then Mark turn about forward. our sales, to And Neil

with we've on products, this semiconductors the before. right in-house. more complex to that First, our regard make in we are supply commented chain, The

So, a cases, the fab have, measurement the have many able accurate be to has device, because be more of products literally commercial XX we and in boutique that that the we're to to have produce I more management buy we measure times -- parts control performance performance products fulfillment. on do of team think other and have order we and exceptional the commercial from we devices. common components That But chain, common our some although some an gives us supply obviously suppliers. to

no Quarter. our more is But revenue little after doubt test beat more order measurement bit we'd Quarter be Quarter, up expectations in And done suppliers. there if with our after a were components, to take think job to excellent able obviously, they've organization the continue that fulfillment largest quickly. an the industry. There have I We our and working we

we'll to Now add it some commentary. more turn over will who Neil,

Neil Dougherty

Yes.

supply the start, the production where highly that's control the vertical to we that I specialized integration we're but would impact. -- fact chain guess most as the the I to of Just really our not situation said, our supply the of and chain immune helps mute Ron parts

where while impact small. And we within guided X and relatively is it's so, not X the where not QX the just within is impact the quarter, --

our can't product And the I this customers on terribly of the a managing into orders concern, examples huge to had a customers to think that chain our find they acceptable. so, of we I the expectations think timeline I the job point get don't hands at be to we're getting customers. doing good where canceled and of any our hands the a risks because of it's the manage point us have supply inability of and product into

So, I'll that. at leave it

Ron Nersesian

with customers, it effort to that's Mark, of new I over And before regard different turn many to things. an doing

well program we or Mark to that worked indirect feet First, folks direct added our channels on talk many those have or of field street our salespeople and to that could in efforts make will our marketing the of as expanding people engineers our expand on our We've sure about, all presence. And things top there, that feed understand increasing value. as efforts other. each

Mark Wallace

Thanks, Matt, just right. on That's that. I'll build Ron. And

And all results of we very you've as segments the hear heard industry leaders. broad-based all on As a with our put innovating were you calls attention lot these across from regions. in

Ron But is high than we his to new XX this more are XXX we're prepared year. which And QX. we last customers track strong, mentioned And top XXXX, up design. during Our double-digit. added XXX exceeding in by as statements, very on largest were added customers

as of year, new which, was this the online, reaching than through have e-commerce a of focus and new through indirect our a We channel, marketing, direct on our our is be access which a customers. customers customers ago, are big as at years just electronically will more it where of channel, platform, twice combination of distributors few and end who the majority combination a Keysight

customer today. in growth could it's the after think segments to addition broad-based of higher this on that we of So, adds gives this And all broader top-line I footprint across diversity that to to us delivering base that solutions you are think the quarter strength and our delivers quarter. it focused

Matt Niknam

great. the caller. That's for guys, Thank you, all

Ron Nersesian

Thank you.

Operator

Our line Snyder Chris next question UBS. will come with of from the

Chris Snyder

orders. guide, the had question My I last midpoint think the QX of is the outpaced FQX below Thank revenues on which few puts the you. back mean, revenues I X% orders. at years, looking FQX FQX

expectations So, and Company seeing software headwinds chain we reflects that Or to just revenues? will does guidance supply into the times push longer or persist? duration longer are customer a as return the lead backlog continues

Ron Nersesian

Yes.

I point do to the very I chain feel to of a those ability it's be can and our constraints don't concerns say behind a We're supply forward. the mix limitations supply on of us. there'll that at manage we chain, continue we chain certainly like several think this actively supply continuing going ship those factors. as of result are to some expect

comfort then efforts revenue think that notably own very highlighted I that earlier limited semi that seen we some in we ratable you and construction deferred increases are most the recognition look customer from system those have seen as have strong. relationship to And see that going on later place But we some that given in has are is in some business that Keysight in -- looking the relatively with orders, the revenues. the our take market, believe of customers the amount the communicate markets, secure to their software and for and in we particularly think fact resulting accounts out, orders we they're is needs. set and of supply fab our services I that just underway delivery of the

Chris Snyder

strong are customers business then Is has. by share fact market new additions is And the customers or Company people that. the it known, wallet supply lot just just around ecosystem verticals customer addressable that the all driven appreciate not chain comments that the in that who customers. done expanding? want the previous the has the seeing maybe share XG existing here haven't XXXX and taking rate the is I that new of market follow a a existing previously? history brings As have for up to I into from new total on with we're Company Keysight Keysight the or that

Mark Wallace

Yes. is will some that. I Chris, add to more this Mark. color

XX,XXX baseline do with You the have more we first year. customers that and business each to start every with than

than So, XXX countries. more we have -- in

is broad wide. our and presence So,

on You accelerating in elements, key that of of the the great the footprint And into ecosystems the XG is example that all through leverage. achieving ecosystem. customers one ecosystems. which is did hit O-RAN expansion success bringing new is we're really various the a then is expanding our

The is other reach marketing broad-based us capacity is part some of mentioned the Ron again increased combination and more that more to into enabling of selling segments. customers the

all and before, companies in base said a and turn it's several the As ICE regions. we're on customers quarters, ramp automotive. with part the to call, and running new that vehicles, us that still in strategy. for been X is more serving And we large spoke research. from vehicles seeing We've on, earlier of helping years of accounts we and as going example, an X early forward. transformation, of It's customers electric this in customers it's education And as number we to saw we're autonomous a our -- this about I more days build saw last this the prior of

Ron Nersesian

-- And the only

Chris Snyder

that. Appreciate all of

Ron Nersesian

solutions a of important more growth more rates software ecosystem, X we just also add our added and would higher over I of a the us thing share, customer think our We've others. versus percentage expanded have with at share. exactly But take customer's it's only the gains you our X, that is go to wallet if for years up offerings, share. and into back you'll last clearly you're take a share competitors X, to look look also Keysight. expanded at to market and get which X, gives wallet right. I at communications down our and look the And services And our see We've

Chris Snyder

you. Thank

Ron Nersesian

You're welcome.

Operator

Our will come Samik question Chatterjee with of line from JPMorgan. next the

Joe Cardoso

[Indiscernible] for Joe this I'm Chatterjee. respondent Cardoso, Hi, is Samik

to circling and back me for question one automotive. Just

the incrementally the Within and touch been around you companies and leverage competitive upcoming landscape general not there this Can EVs to with auto, AV's finding there? that in relative Particularly has auto-aligned whether the to on world, opportunities. automotive excitement given both you're not and looking those how auto-aligned you. new competition of there? it tougher is area driving the auto differentiation potential traditional Thank and of

Satish Dhanasekaran

Samik. Thanks,

days early to a forming. EV innovators XG do going And embedded of differentiation but And clearly, and entire to larger the goes with other changes going in you look our the to if as the were be its us dimension, making EV precision and big on to EV and where And all give think AV, in to strength Ron one the it. we're today. and have measure -- is going I stack space, on best metrology this av mentioned, regard that's we that's segment, bringing that auto biggest is around very getting you that enable With current this just factor at there cars we're voltage a on. unique to in extending of and lot that of position with able a that's XG of continues from -- matter about still on the innovation Pavlov lead aspect parameters of basic and a decision marketplace trends to are to our connectivity And the extending ranges in making it's and the the a differentiation. one technology configuring impact eco-system going IP that different apply us a application set. lot it's autonomous into

Still pleased We ahead. marketplace. we're consecutive standard approach Dechra this of as had to and Some Quarter. to of and that. growth in Quarter of very plenty new as this there's successes you very partnership saw, of the auto test well continue account are strong with entered to the days, on And runways double-digit early growth we're a in promote with having we second results into just this

Joe Cardoso

And then competitive landscaping tougher?

Satish Dhanasekaran

But Yes. as long the to to and the to needed there marketplace, to play traditional But we the are in have are to -- and expertise about think combustible there's not that it, that the in space competitors that needed try opportunity. address this competitive been Clearly, IP trying landscape. this configure anytime term.

bring there. perspective very think I we a unique

Joe Cardoso

guys. Got appreciate it. the I color., Thanks,

Operator

And line Ridley-Lane come the of with America. question will David next from our Bank of

David Ridley-Lane

Good evening.

came the call disruptions Keysight kind you've built up up due built COVID-XX already with and year, Fiscal backlog I of what year-to-date, an a backlog. above-average would So prior into to in 'XX, year

this extends? XX backlog excess you deliver see are you should next that think delivery do How over that months? able Do how So of that timing, the think Is the about we to that? supply of interplay you something chain? it on

Mark Wallace

It's question. a great Yes.

again, good points which I our start I in of timing, they I'd is which them the need meeting job So needs the think that at done reiterating satisfactory, getting least. really and the of a by we've customers products made, that

you built think I know, a up significant backlog. we've as

that backlog to right to down than come think larger going over it's is businesses I -- a significantly now it previously. to to has into going temporal, been growing

to expect material or carrying But would a backlog. amounts be of to one higher we expect there's So, be backlog. of flush going that two-quarter I don't

the supply them line we're the still our in deliveries investing going we're backlog the capacity, customers manage over the to down bring needs our of size business. constraints addition I of continue meet on it chain scheduling of levels time in to and think ultimately work to as and working with we with which

Ron Nersesian

we grow backlog That for to us have. able such does continue that base to revenue a situation confidence of our a be to having provide strong lot

David Ridley-Lane

Got quarter of as there's making to then the are O-RAN a I But see investments. been first think result? tangible industry know -- orders I here. been cited orders. as for a starting driver a you've lot it. There's been And interest via you've than is you this

Satish Dhanasekaran

made we the O-RAN time was strategic cloud. to going for with we so a we've take longer that than a the the that the and that. the virtualized Yeah. were level, participating year the ago, pact comes the Alliance are get or flexibility original long O-RAN with of technology At economics seen to advantage stacks highest

launched that and have architect subsequently and and sizable capability made made then And acquisition the ran have open order were offering remember, a quarter. of it Keysight, Last we Amazon we took the you couple cloud Keysight we available which capabilities, already, some us -- open Ixia very now unique -- as we've the acquisition an of which a pipeline to made we Quarter, so, gave we And architect able ran received with combine we've this on strong we ago, years the and our a Prisma,

Satish Dhanasekaran

As coming customers are that in perspective. this for a software opportunity into from

feel So; very the about our good in testing marketplace. We it's software. software position

think Ron ran already the the Just globe had Vodafone, And selecting highlight around one test. open Keysight centers as us with success and phones in heard want offering. -- have that the of and core referenced to partner our also you've for integration I selected test multiple design a

of trend, So is O-RAN, from this grow but very it. time. again, well-positioned this a to we'll continue But today, that business long-term over timeline a pleased with one we're

David Ridley-Lane

Alright. Thank you Thank in very on results much and the congratulations you. great very market. a tough

Ron Nersesian

Thank you.

Operator

come the Thalhimer will of Davis. with line question next Adam Our from Thompson

Adam Thalhimer

Thanks. Good afternoon, guys, congratulations. and

Ron Nersesian

Adam. Thanks,

Adam Thalhimer

where how we of for do us you also, give there? cycle one I on the visibility sense wanted to semiconductor semiconductors, you are have in a much Keysight? And ask can question

Satish Dhanasekaran

which of out, by on especially are advancements semi-process. is X-nanometer, consecutive play, of the I'll the on playing building With very strong that datacenter are we're quarters pleased in for revenue to X playing in we orders, driven and take where on XG given the dynamics And lithography the the business. record, very and and regard quarter. with and there. going X-nanometers. the wafer Clearly, end the applications this. X-nanometer, We're performance that test, front Again, around

think those of and ramp the one, very up. opportunities get still all to in innings, stable are node-size-based nodes then because I those early have new

So, very it's early there. stages still

that So, to Obviously, over fairly mature stable we into part time. a going to there for about processes. And demand sizes think be, remains what the given will to of capacity capital being high those be node is and new And we the view longer-term. business that this through is 'XX. that it current be semi shortage is happens spend seen on continue scaling

center this all other projections, end-market you -- new demand, at are this feeding to supply chain, highlight for it's dynamic whether U.S any data localize but that's these semi have point. a look of Europe business. or or regions, factored the into it's of come dramatic again, But could it's into looking XG, at one topology, the likely drivers, upside that's to outlook that important memory, and those to We the given infrastructure also not spend and more into the

Adam Thalhimer

you very Good outlook. much. Thank

Operator

the will question line from come Baird. next Our of Mason Rob with

Rob Mason

production Good kind is muted -- capacity? think that, trying as Several boost update time, on I And 'XX? an several went perhaps you're to you continuing of already the an your we increase the this maybe seasonality head was as to know to seasonality internally that of kind relatedly of questions well, But we business effort, some just afternoon. did same COVID-related the continuing efforts Yes. of reasons, muted at I we speak as through of missed or restrictions about the year around but supply chain, for seasonality maybe into into do how capacity that -- front. own I the battling just seasonality with head kind you it.

Ron Nersesian

question. great A Yeah.

to have we of obviously capacity year. we We're been of point, million own to year. our So just in and revenue billion a $X.X revenue at as continue invest last be $X.X did this going increasing

the job bit the expansion like I chain a but bit ahead little given of it how investing of own certainly We've item. doesn't good within of significantly So, we're capacity feel did items make quarter. talk to capacity a forward that revenue. Those curve, gating look that longer relieving in did future as our we particularly -- gating our we're pressure added now growth we in to for there. were capacity right little doing done constraint added enough items mean constraints. continuing Last -- there and we've supply subcontractors, some investments we quarter, continue of this potentially we're some business, factories the a to no is was That the not is to have further where that about us of staying the

in of question, sit beginning many back the to of QX seasonality question answered the model to I of our this we our as businesses I've the On off of any times QX, tend over quarter year. think little then down model coming year biggest the a bit in with That's how we business. quarter QX, sit the as would QX and down up big finish a our sequentially down QX, of the model to year, at I years. in in When highest

of of the be about has all supply several year, out chain needs quarters. As the some we think to constraints because this COVID, that's expected muted seasonality with that talked last capacity, and and it And year been. we through we recently the from expected more the historically proven then over more rebound this than I here

doesn't look remain forward, than think that That at expect to next couple we less I over will quarters, of to typically think I swings there just muted any, are, be won't hard they the and it's least intact. I be seasonality call. as that that, mean beyond the

Operator

question Our will Delaney of line come Sachs. next Mark from the with Goldman

Mark Delaney

to puts the other that perhaps been to the hoping you growth either trade-related And more China own of there bit seeing your or reported. of took more maybe Good takes restructuring in are you have able Yes. not you context are the resources ended the the as and as to some into certain some other those to what shift was too. some of cited customers, a up trade But Companies customers of and headwinds, rate customers afternoon. thanks extent of focus on share? what market you elaborate able you've offset on question. I headwind could for taking The a

Ron Nersesian

Mark, want take or do -- to that you

Mark Wallace

Yes. Yes, I will Hey, to. Mark. be happy

year. the we certain were COVID I that the did part really affected before, segments impact As early year and more some by mentioned in uplift recovery see from the last of this

right, supply we've into be broad things manufacturing both about, consider the would And the that to sales automotive, then indirect. direct and Education and of research. talked our chain, some You customers,

know broad-based in a talked We and we in many, it visibility obviously, you certainly eMobility. and capturing before we and about quarters comms, great all experience. the aerospace, including the some funnels But growth going it's And commercial gives we're continuing had trade investments various forth. pivot and this testament that available forecasts business exclude and as are China. our those where us the slower areas So, And through the was originate. the this we've in ability the get ability the dynamic about in technologies that out to job so again, process quarter really but And to China, our cycles. China, many headwinds regions, you growth small the capture them when that from with most their still really it that's of to to And overcame that's growth sustaining quarter, all comes again, impact. longer we as that's double-digit a fabs throughout in a for of to a us done across talking we pull-in semiconductor, in last defense, top-line where next-generation moving that

automotive, semiconductor electronics. So, general again,

in not we've pivoted around captured we've China, So, but also the world. this only

Ron Nersesian

large the team with But excellent have that to restricted to and still companies regard have were the And say, more making behind And year. been trade more specifically providing going getting job a that list. has there's added done us. some into is we future. to forward that with headwind of up look headwinds, that growth an this the despite sales no been And doubt for, most there let's the

Mark Wallace

Yeah. from I strong to a want more QX add last quarter in the just a on that. little of was China. customer one headwind

So, it's little forward. better a be going going to

Mark Delaney

Just a follow-up and supply with question on chain, Malaysia. specifically

restrictions of are in you or levels of rates or Given those normal factory, have vaccination the about rates, at you what your operate can you Malaysia within to can extent near-normal Malaysia? vaccination you Thanks. that much there capacity on in how still talk mentioned operating because can

Ron Nersesian

Yes. We're in Penang in Malaysia.

work we southern our regardless that where this first to week. massive that, the of that have in of part as But very the dose dose. did our vaccinate contract partners, only of not we in they Some come first beginning of week, our contact occurred outbreaks This second they gets in not but effort our of also are. were employees received a us with, have some Anybody with Penang XX% shippers manufacturers, bigger over folks Malaysia, getting in. the had Malaysia of that in the and that have the that we we

orders So that we that. constraint in a very production we not The certain we'll good now. as build getting the continue areas grow, the just But lower-level feels but capacity Malaysia. feel is to That's some, components that about good. right very in have constraint

it's all do As together, as facilities do U.S., some we have the as in manufacture built some do well Germany. manufacturing where other And we guide. all in the in the what we into we

Mark Delaney

Thank you.

Ron Nersesian

You're welcome.

Operator

come question with our And Brandon Jefferies. Couillard from line the will of next

Brandon Couillard

single-digits. [Indiscernible] the growth mean, if quarter, Hey, that is surprise the clarification in revenue two than little better the be sound three-year change wouldn't fourth on low I a guide. in XQ on the good much. a the roll-off to like would headwinds It in-market quarter deceleration the implied to that all that's the If Neil, case, stack doesn't afternoon. just comps. fourth imply which

managing it here trains But well. to and talked you You and there. supply about be chains seem fairly

or you in missing something are So, market? one more am perhaps embedding I here little around conservatism end particular a

Neil Dougherty

ship we've incremental as gone revenues to building think and right year, ability drive year XXXX no, been ability through QX,XXXX gone we've our the QX. our XXXX we've as QX, this to through Yeah, I

guiding are QX. to We XXXX

So, we're some making aggressions. stepped-up

bounce-back COVID shutdown. big In reopened the was terms the revamp, QX year-over-year following our of year quarter additional factories the and up growth obviously, rates, after of last

unusually And just ago. last year that margins but And a extraordinarily of margins tough so, we line, frankly, we and we've on mix grew the gross comparison that in revenue high. the have not about from an saw QX year talked operating favorable

making make 'XX. revenue our to going progress -- as forward and rates to in to continue fourth to that really we're as ramping FY point we of mute continue capacity, adding is here in progress the just thinking we thinking something comp But I I'd growth well-positioned so, to about And from really tough terms perspective, quarter. if that's to look you're that it

Brandon Couillard

And but quarter? revenue give the service Okay. third I missed growth this, maybe for you did and then software the

Neil Dougherty

both with very double-digits do not, business. to making we're in of we're here continue very lines And for fourth but businesses strongly both quarter. the pleased did grow the areas, very, We in progress both

Brandon Couillard

Got you. you. Thank

Operator

Jason I and with call And that over conclude today's comments. you. the Thank turn and answer that, Kary for will question to will closing session,

Jason Kary

conferences everyone We upcoming all Thank and us you of forward you, wish and Holly. today. a thank look at speaking you to you evening. the many great joining a for And great with day

Operator

like for your we'd today's you conference again, to Once call. participation thank in

You may now disconnect.

Keysight (KEYS) 19 Aug 212021 Q3 Earnings call transcript