KEYS - Earnings call transcript Q2 2022 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Keysight Technologies Fiscal Second Quarter 2022 Earnings Conference Call. My name is Tia, and I will be your lead operator today. [Operator Instructions] Please note that this call is being recorded today, Tuesday, May 17, 2022, at 1:30 p.m. Pacific Time. I would now like to hand the conference over to your host, Jason Kary, Vice President, Treasurer and Investor Relations. Mr. ahead, go Please Kary.

Jason Kary

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

Joining me we are of Neil by Dougherty, Satish Wallace, Global Dhanasekaran, President CFO. Mark the and Sales. In Q&A Vice session, Senior will joined our be President CEO; and

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

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

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

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

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

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

to would And Morgan, participate Lastly, is Satish. by turn to I upcoming management note the hosted I will Baird investor conferences that now, in UBS. scheduled JP and call over

Satish Dhanasekaran

provided to of the my Ron honored the about us I as has for thank like visionary future. Welcome would and the to leadership the for first be and XXXX which foundation Nersesian build of solid a am us. call you excited Keysight's CEO on. to joining Company, you, Jason, and his and all thank Thank second quarter Keysight. to earnings humbled CEO I

ago. I've on remain at in innovation time different years of working our decade, the the last is experience as accelerating I've benefited in quarter secure and with closely we on a solving focused greatly Keysight the the to execution purpose Company to successfully roles and held XX geopolitical business. many today on chain challenges. be test will from This joining great broad-based and connect his focus of innovating the since demand supply Ron I honor core Over focused team world. strong ongoing and design the by key driven while delivered challenges customers' two, results X navigating and headlines. exceptional my across comments and Keysight The had

Keysight's First, delivered for two orders, on end-market we capitalizing quarter high-value the solutions. record robust differentiated demand

momentum. us solutions delivering on enabling focus emerging first-to-market uncover Our to new adding to our is applications,

grew record per resulting we in margin revenue, durability business. earnings strong performance, share, Second, the achieved and record of operating which XX%, resilience demonstrating our

per are the earnings for fiscal based year. we raising growth our and performance half revenue on in continued growth momentum. to achieve for range our approaching the year X% We the XX% of now Third, first to expect outlook strong in XX% and share the

take look at for now deeper a the Let's quarter. our results

ongoing We which our of portfolio many results deliver including quarter supply We model, guidance $X.XX Second record which achieved to us despite market disruptions. team's are end a X% equity volatility, capitalized million of application with the These share reflection we global to and these guidance. EPS gross new of end outpaced value billion to the results and again our challenges, delivered chain leadership inflationary headwinds, pressures Also repurchases. Keysight to a of of high geopolitical the XX% strong all the continued opportunity on and accelerate consistent our was stakeholders. enables $X.XX high of grew margin the above $XX grew revenue, and of billion to XX% $X.XX, operating by margins XX%, exceeding of record our $X.XX. and orders

are releases markets software technology solutions. stream of solution our to our cycle We with PathWave market the again across our earlier this capabilities adopting seeking for services facilitate of The the deeper in that customers. Orders leaders software double grow strategy accelerates, software engagements as R&D high-value grew recurring continued the pace advance This to rapid solutions. platform our value-added continuous for agreements as of matches software-centric and end enterprise innovation and our enables secure to continue we design like customers are us cadence KeysightCare quarter. digits revenue of

satellite gain design our such solution DOCOMO, to Telefonica enabling the and driven recently XG momentum. including transformation, In by We Turning and CSG, segments telecom Group as quarter record solutions. the need Ongoing innovation well NTT Analog and of industry's of driven and end-to-end launched XG, Complex continue scenario markets technologies. benefit Aerospace, range beyond. double-digit companies our optical data remained in In computing to an revenue, solutions spanning growth Devices the in XX stand-alone workflows number announced to and XXX With in including through the twin center driven Solutions XG quarter strong, in order which applications, virtualization gig, to achieved delivered a solutions solutions XG all-time O-RAN, cyber first growth content. emulations continues and second orders device wide for business wireless, drive government record leading digital Within and standards, the defense monitoring, terabit and all-time evolution record wireline, segments. orders stack wireless revenue the investment commercial and consecutive the to continues investments certification gig test Communications data with Release and our of ultra-high QX software energy XG from rates end the and by enable the to with collaborations enable with cloud increasing record both, requirements. leading to quarter. strength drive portfolio, expect as we're applications. space in of as two, XXX-gig XG signal communications for digital wireline XG, modeling third increase revenue. and In and for achieved Americas by XXX and adoption Keysight and double-digit we continued efficiency. our and types and

strategic going satellite Our Increasing expected array spend and end higher is U.S. for broad well The provide solutions. design capitalize leading Industrial markets through growth increasingly test platform defense positioned forward. to support are enable communication in Solutions wireless, on the and complex to innovation budgets and solutions synergistic portfolio, Europe and enabling our in in satellite support and space by and our and network and CSG wireline, revenue cybersecurity, including automotive providing requirements. analyzer phased space, test use Electronics demand our investments for by the automotive, for Group capabilities semiconductor solution seventh cases, and consecutive protocol strong by AV as quarter, was automotive industry-first that EV energy launched delivered portfolio solutions expanding In for the applications. order driven double-digit on record our revenue recently solutions. and driven growth all-time networking. Keysight is in-vehicle test new capitalizing such of

OEMs quarter, with wins all major secured we During EV the across regions.

recognition capacity Tech.AD In Radar with along delivered remain revenue Europe our order We excited by Scene award. new nodes, semiconductor growth. we're technologies, demand for addition, solutions, of saw including for which the advanced the in our expansion XXXX strong robust. Emulator existing semiconductor solution, double-digit Investments and

ICs X for Over roadmaps solid we R&D years, the X see to for of a applications. next broader set customer

this solution manufacture next-generation R&D silicon We first we trend sold develop major in center our Keysight's test As an data solutions transceivers. opportunities QX, parametric photonics represents believe and for on-wafer a to semiconductor example, long-term portfolio. to fab

research electronics investments industrial terahertz general development in achieved and as in globally seeing business and advanced revenue fundamental Our all-time device continued manufacturing digital health in for investments active and record and technologies. consumer We're quantum IoT, research.

engineering quantum in for For the general of of solutions. example, we and our to quantum applications recently and research strength collaboration with a announced Singapore's development program The of Research our broad National accelerate technologies. business reflects nature Foundation electronics education

Before their Keysight that thank and as performance our worldwide for and of than collaboration, inclusive XXXX. I'd for is our recently a proud XXX's globe like and companies exhibiting one value passion was in to innovation. recognition solutions. work their our and market-leading I'm culture high This around wrap, I to delivering diverse of XX,XXX to more in share for to employees customers the commitment acknowledge best Fortune named for

Our discuss with shareholders to environmental, I into our our XXXX report, responsibility. announcing through team culture I'll Neil over efforts and track execute worldwide and on call the value strategy CSR continue working We and recently a look to believe to employees. Keysight and deliver also in to the to customers, forward 'XX. governance highlighting performance social I and ahead. 'XX and places corporate outlook. financial to goals that, our high progress future our bright social value new released for turn our With Neil? has greater

Neil Dougherty

Thank you, hello, Satish, and everyone.

high and in up our of second powered of basis. we business. $X,XXX our our in $X,XXX revenue guidance basis. XX% X% again new or In expectations was the the on million delivered of performance Our through we million, above the end XX% and as grew exceeded generated of or range a a orders, quarter once commitments core XXXX, quarter We demonstrated on core multiple quarter. on this the We headwinds XX% and delivered challenges resilience which

orders. quarter, the adjusted was canceled $X.X During the of with we and for Core and XX%. again over Russia Russia billion suspended we our backlog. Demand ended in growth supply, our entire quarter outpaced backlog operations Russian in

earnings the strength $XXX in and operating quarter. significant million operational $X.XX margin an ability headwinds reported resulting of in QX. end and above XX%. currency for supply, XX% highlights the and of high The per execute to net of We team's operating our of resiliency our our within of to which our share, the was our results and We guidance. Turning of cost $XXX delivered results margin income of despite gross expenses achieved million, business

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

our of performance the to Moving segments.

of for revenue Aerospace, terabit CSG, record or a Group $XXX and XX% the XX% Americas, of communications demand as XX% double-digit up driven and and gross growth Within up on in O-RAN million, test, XX% by XG basis. Our government Communications margin well strong and device Solutions component X%. of operating grew network delivered revenue revenue generated R&D. $XXX XX%. CSG development defense million, of margin core million revenue generated as with of commercial $XXX

driven Our margin and by market Americas gross reported core XX% growth margin second automotive Industrial remains quarter of basis, XX% XX%. Electronic Europe. million, we or Solutions up operating this backlog of the in generated a Group growth of strong, EISG on and solid semiconductor. revenue end strong The and for and reported $XXX XX% revenue in

of second of for and X.X cash consideration million million we $XXX balance the a XX% Moving total $XXX.XX, for or million. operations of to quarter flow quarter generating share equivalents, We price totaled cash billion in flow revenue. total have from the and $XXX $XXX with of shares $X.X cash Share ended shares cash repurchases flow. cash Year-to-date, X million sheet free purchased a approximately per $XXX an of average consideration this million million. at of and

solutions. to turning demand our strong Keysight outlook Now, remains The and environment guidance. for

by As supply quarters, to revenues tight continue in our be recent constrained conditions.

we commitments. our we and ability However, to have navigate on to demonstrated deliver execute our effectively through confident and our in this ability environment, remain

quarter be we being a third which given range the X-point growth XXXX dynamics closing, track $X,XXX for U.S. from to of XX% now XXX also have difficult and approximately expectation to range year. to year share the confidence X%, QX in includes strong million to to we record currency. the count headwind million execution. dollar In expect shares. expect raised We're based Despite earnings raising to a XX%. of a on approach our the earnings share be full predict, now We growth $X.XX in We quarter-to-quarter revenue revenue our expectations million recent $X,XXX of the weighted in have diluted to of of per $X.XX, to strengthening year-over-year

well will capitalize I at With to our is backlog Our it now the markets. are growth we high, positioned opportunities diverse of and back set turn an the Jason on for end all-time across to Q&A. that,

Jason Kary

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

Operator

sir. America. Bank Instructions] The go first ahead, [Operator of question Ridley-Lane with David line Please is of the from

David Ridley-Lane

operations. impacted Obviously, months. seen Wondering over seen an afternoon. and have Wondering shutdowns decommitments have in any Good you your a component so supplier manufacturing, the suppliers last of lot you uptick show up of electronic that China if few if forth. any in have

Satish Dhanasekaran

David. Hi, the for question. Yes. Thanks

robust. very relationships a As we of five-point a nimble finding being have remains, as program challenging, has saw with the around team. the them, been want would is products the as demand them our in with the from this but from suppliers, from initiatives our And progress along we pleased our perspective. a very some make alternate found environment this customers as supplier can. we we really And quickly our quarter that results strong I the you other in shipping the environment paid more and customers view, upside. of have. way We're our pretty quarter, running strengthening find And can we've rich we execution strong while dividends, say revenue we're the to had sourcing, quickly with as

the a does remain way the you. but So, find we've you challenging to supply Thank point able been situation to around it. made,

David Ridley-Lane

stabilizing And to follow-up have the own expected decline, the as that, you. quick levels? your elevated times, to product, started at Thank or lead have ship -- actually a to are they those time to

Neil Dougherty

the demand outpacing Yes. Neil, Obviously, is we a situation saw way, where by where in -- this is supply.

at generally north stable. to this lead with started say, times so, I have demand call slightly times to our continuing would point they're down. back at And creeping lead outpace I'd not and pull lead times we chain time stability as loosen. lot with goal starts situation on down But ultimately work by see we in the them supply. of the average, to currently to large, this a over supply

Operator

The Matt Niknam Deutsche next is of line question Bank. with the from

Matt Niknam

constant about even And then if first, then relative quarter's guide. core just you the could in be talk sort given change how you're decline next recent seen So trends revenues. are Maybe, fiscal buying any that in the months. or patterns, the secondly, expected on Asia Thanks. wondering of demand what's headwinds maybe of in XQ embedded sequential in Russia-Ukraine that Pac, conflict And if thinking on Asia to in Europe may customer the lockdowns in Pac, driving revenue FX just Europe guide. the Neil, about currency given and reemergence you've or impacting China I'm any

Neil Dougherty

first that, of the the the take I'll guide. question about part

As better environment significant supply we've highly situation supply had is and we already we environment. And did navigated the tight constrained we in still by expected. QX as stated, our the than outperformance revenue

quarter read portion to And so, outperformance that is that was the -- QX. but originally significant into scheduled going that had a orders shipment or QX can in our of what had you we into of be

that's But impact. our we're a can quarter-over-quarter that reflects say point so, pleased and see that the on we would news, that. And estimate be best it a I basis, with significant -- in that at great this as guidance time.

that of headwinds. headwind FX. significant has the X.X-point significant kind strengthening We a within basis, we're on our have And very have guidance year-over-year saw noted, point better as call supply X-point This that now very we everybody in taking depending new environment. baking quarter-to-quarter up I the that have We the on do you of -- growth, backlog full second from the dollar relative And perturbations FX to second to a to fiscal X% we the this And We a approaching be X%. incoming works. certainly on can X% to want growth difficult full is in half account. year and the into if X% how significantly are quarter. of year think focus that we to

November, X% X.X% when we headwind saying X% guide put where Just we a today, approaching the X%, are into to baked from to new FX that. there's out

very And about year. as it and currently are so, the estimates pleased we the for raising sits feel to good be situation

Mark Wallace

And and on address dynamics Matt, customer question I'll your Mark. second the Asia. of kind in hi. Europe This is

while as with continuation China, ability and COVID again well dynamically the virtual a remote our as And as work growth order noted, both, where, in we as customers lockdowns. a you had double-digit had we face-to-face to nature. pivot Pac, really restrictions Asia of in a So, as and it’s well in protocol

and in XXX to business across and segments. XXX our things. strong the of saw Asia, those all we terabit, testament demand In semi, and of particular, and a broad it's demand continued industries automotive in growth strength multiple So, gig, gig,

did we from So, very stable the Russia impact, there. cancellations. Europe, obviously, an In see

for a our So, all robust But European we comms except We the again, saw region. demand demand again, in across for order double-digit growth automotive, had our regions solutions, continues. Europe. semiconductor commercial the

with interactions pretty far broad dynamics our the customers So, remain and unchanged. so much

Operator

Goldman The from Mark of the question with is Delaney Sachs. line next

Mark Delaney

taking first Thank auto your afternoon. on was business. you to very much hoping nice role. new I in speaking the Good questions. And you start to be Satish, Yes. for the to

some the big business you today. talk how growth remarks do prepared the autonomy relative coming become mentioned vehicles, your given auto Maybe years? Company electric for and in could could overall. You of strong to Keysight the some that you now on about there think is big And like drivers, the how

Satish Dhanasekaran

Yes. Thank you.

one the think, business for say. I I than auto would exciting us very is for more reason,

with many in a strong tools trends and a decade-plus houses very uptick labs driven electrification, we're had I engaging seen in strong Tier And growing across reported, where by very solutions We've building the are engineering quarter, this quarter. the of these capabilities we're of long world. also that with number the primarily X feed with this and semiconductor we've some actually the for this the We're Tier First, driving. market. X, obviously, suppliers, end entire that the designed our And the and ecosystem auto autonomous on with the OEMs just quarters labs working globally. feeding successes, business, test as

is we're autonomous capability. synchronized So, we have our around sensor our EV, very real-time, and example. by a battery this platform enabling in-vehicle growing on into new charging testing is and excited test, ecosystem. evaluations, test, which emulation, a network it's the And build offered portfolio as solution particularly drive expanding an in We're for AV, that in-loop, XG

and with know we're we runway a automotive. with long progress making, the pleased ahead very that we're have So, we

Mark Delaney

If of of guidance. the EPS average fourth the like imply like imply more EPS be That's growth and very also would look quarter year through was midpoint helpful. follow-up would fourth rate it full in XQ guidance digits midpoint something that question the my midpoint year-on-year guidance, three slowing the I would from the Thanks. on be at mid-single the And the EPS that And $X.XX. on that the first mid-teens would quarters the quarter. to at

quarter was implied mix of fourth the cost hoping the is chain contextualize guidance Thanks. So, fourth in rate of terms supply I perhaps could growth impacting that's us. quarter? in EPS you or the better for EPS anything And there

Neil Dougherty

Yes.

a at QX think an than you to at a that. a So, close higher operating sequential the -- look up XX% our margin, prior FYXX, leading I quarters which outlier to X bit almost in need points was the take of performance full

And as R&D of quarter the fourth quite and substantial so, if year, to I the think -- one drivers you had of in -- QX. investment was that is look from other And a decrease sequential that the going last at it, within we big atypical. you QX

as And investments we basis invest move would our of business. growth from to QX move so, to expect as future the the and again a future on then increasing as in we QX sequential QX QX we we and from

so, business. again, remain we And optimistic our about

And on perturbations substantially our these and for both, EPS executing. difficult are revenue we but some of focused call, are quite year raising can quarter-to-quarter to and the guidance be

Operator

The next question is JP of with Morgan. from the Chatterjee line Samik

Samik Chatterjee

in past terms follow-up. line I that in sort your the I start when did your trends? the defense typical flow-through start when I spending prepared you I that. higher seen and order in could What quick of a Satish, your we of mean, the of start guess, remarks, role. the that of into mention budgets you to to congratulations And higher you defense on call see is your have expecting with sort -- see budgets, trends? impacting CEO first realistically time have should the be earnings in if the order

Satish Dhanasekaran

Thank you, Samik.

sector about, XX% to new been for and historically, opportunity us. aerospace us. business one we very as with XG we're areas North And U.S. adoption of for applying a excited tied to, by we're our has business course, technology have into or GDP-plus talked of and the them. And is Of the new broad America. satellite and the being defense number this a It's that XG space of business

The making stability. in budget with So, pleased technology offer traction obviously budgets, applying independent huge of to the the a we're our new is we're solutions.

fact budget favorable the for also bipartisan RDT&E then year line projected subsequent XXXX, and think view that we I as in the for support sign. a you for growth have defense growth item this

is provide but spend. know, But U.S., uptick I stability think geopolitical the few and and this only an technology do more these to long regard similar than doing to been that is tend Mark expecting we better I'll offer With the intent to and comments. we we're term, to Europe, make the not as in let business in therefore, have GDP, activity, continue tensions quote solutions. our average a also new over and a

Mark Wallace

Samik, Yes. is Mark. this

customers, program the here was add start to to in we've expect just approved. both some increased. U.S. prime contractors, flowing government and think Satish, budget watching we the starts funding that And was to the the I in of half. direct as It to new second been our our

'XX look programs we many the you've that and year multiyear, to And Europe been as flow increased nations, the flows with And through. from see the forward know, you going we'll spend of in fiscal what's will as beyond. So, nowadays following on well as NATO how Western this probably that. into are

quarters to years I'll strong that is in been other area many space. aspects the future. we And We the opportunities that be the particular mention We of industry segment think excited are that very then, us about opportunities is as this is us we're into on. space just And focus for expect about. hot a there are that or of talking for well. a for to funnel trend Commercial new growth last a then, very going continue we've continuing long-term modernization see favorable I thing around representing

Samik Chatterjee

is in increases. very there wondering environment general because your revenue capacity versus -- million you're if is of to I what's of Neil, follow-up, similar in of where or guidance of I sort year the guide that Neil. half-on-half for seems upside But there what typical X% modest for of saw we terms about understand what a of trying sort components would potential supply to in sort which it your mean, more for supply be of better? just growth own to sort performance, compared revenue last improvements of are is. And And implies your I'm very Just capturing sort the $XXX year. guess more my this year last embedded

Neil Dougherty

Yes.

across don't you in quarters, more So, we've seen the though talked the got that. this look driven things COVID if some prior there's we expectation well second China, an COVID thinking in shutdowns half are have To this broader an even we about that in incrementally the chain of I that supply not improvement in in material think tech worse Russia-Ukraine argument or directly. year. shutdowns QX, point, the as by situation as see those would impact challenging, And industry, us in conflict fact, the

of open to fab that I are performance think us We come the we and of secondary dividends revenue new technology items or of quantify our the contributed that paying deliver. supply. us, to new can as parts out subcomponents that look efforts as centers qualify instrumentation. for our to -- or for some have our look Those able goods own the things have that been to at we sources that sources suppliers, for we've relationships for we well finished with at capacity control, up engineering feed and our the to both our

you supply still we and much the second forward, guide for specifically look chain-constrained. we about very as are but -- asked the so, half, And

of products in sight that parts that what our of delivery of bakes kind and our the piece we're into get to really of of is hands that's our And that hands direct into out is I the actively to line of a so, need but It's we the line the time door on situation getting managed, customers. think customers them. a a product to good doing job very being acceptable

Satish Dhanasekaran

Yes. Satish. this is Samik,

Just to what on to mentioned. Neil add

flawlessly. prudent billion. our we're to over there, and earlier, demand and to ensure We continues to are we mentioned a very as execute we our in solid the agile. confident, that continuing challenges and very feel know very execute We seriously. guide have backlog but be And The $X.X we supply. mentioned commitments, to it outpace nimble Neil And I take to very we position, out

Operator

The with next from Stanley. Marshall Morgan is question Meta

Meta Marshall

OpEx of OpEx. as revenue, questions me. Despite couple One, the of expected. kind in A the for about came

pressures of so, those how managing, then, just as are kind coming mentioned to And photonics in you OpEx, long-term finding T&E win a silicon and follow-up, inflationary seems or either where the wanted on a Obviously, some you're of I efficiencies. And good new back opportunity. it like just see guys you guys test.

Just from interest you've of already progress ramp other seen as and you've time kind whether to that? customers made in Thanks.

Neil Dougherty

I'll take of photonics Mark question. Satish we'll that, the let silicon part the or of and first then address the part

in QX, did of will, was to kind kind see The entertainment spending OpEx the a not of So, not didn't quarter, of return lot travel, right? spike, of yes, the meaningful did to we the and is, and return and our in regard Omicron of you that with to -- if we return and of T&E right middle facilities second any we costs, answer see -- honest office.

the more physical at to QX, recently, beginning our employees back in bring sites Difficulty]. We to our started have of [Technical

reramp entertainment travel We event. and normal, quarter to starting not of of a are starting return see here -- as to but third to a more more

continue high solutions can and where to marketplace monetize we manage that across As portfolio places cost to to or on number in seeing of I the continue exists to -- our that our differentiated bring differentiation of capitalize software the to action that. inflation so content different managing our look in is and P&L. that the regard with challenges that can to And we're we a inflation, think

the P&L. look you if date I job think a at good margin the to managing the those across increases business, inflationary of we're performance doing

Satish Dhanasekaran

amount look the cycle. Customers earlier are inputs the Yes. they much you strong collaborations entire record are if of that I for design in the is Keysight, getting with very engaging base at high. a Meta, often and of we're us think -- engagement at customer deeper us,

of their to pleased. wireless, we're wireline it's and pleased win of each silicon very with I where the be design understand Silicon collaboration high-throughput solution we're even and relationships demands future first, to the is getting there mean, them our to it. some very players own it. tremendous from these amount up to technologies on be industry new photonics enable and be at progress the environment. way a continue the some and well we're to successful. with cloud, silicon of is strategy the positioned your are strength of I If all inputs we of So, from working positioned, all across the to with starts it activity look wins because a seen is the very and players data verticalize progress one traditional define the of our of IP and matches very and and able are semiconductor strategies a that is the center possible is the deeper to that going well to cloud unique, wafer a and is moving the as act fab to given an occurring where the from designs And photonic the system solution that customers these stack want both to

up area to a another opening Keysight position growth. it's will continue which where for new us So, is future franchise,

Meta Marshall

Thanks. Congrats, Perfect. guys.

Satish Dhanasekaran

Thank you.

Operator

the Thank line you. Snyder with next is from question Chris The of UBS.

You may proceed.

Chris Snyder

to I you. wanted Thank the backlog. ask about

above of and remarks roughly I prepared where year $X.X XX% been well the disclosed it revenue obviously, think is it's be to billion, current the guide, which historically.

guidance capacity on this and it does commentary around chain, sound will not backlog be certainly this released the like any supply to year. based So,

backlog impact? So, is or come I Any release? the the through think many, color it of will we will be over good question see should about guess, in on it we just cadence of tapered color or is, quarters? how many kind this duration helpful. Like, my Any there

Neil Dougherty

Yes. We not Well, absolutely reduce expect you're first, going right. do at backlog year. this that all we're to

to In going challenging estimate we the backlog. to current in would of remainder be the we're to to our supply that which continue through year fact, fiscal environment, we add expect

to situation resolves the itself, at how eventually is honest we to to -- a from step-function supply don't elevated And not period. that backlog going chain allows improvement broader more levels how the to from what that a there's educated be one- guesses But function or level of because I'm current is think, us where across know backlog right? over chain only supply going its the like. way it's expecting this two-quarter a that's the answer a I really its normalized winds flush look point

slowly I the our think it's quote to -- down a more of on that down more backlog to and bringing us going be products normalized lead slowly much working levels. and times function

Satish Dhanasekaran

they a we we for growing and having business good with about give given tend higher longer-term growth a the with long-term the we're customers quarter these And the as deeper, business. to relationships by view pretty also bullish are And the our enter into in as prospects this very solutions ecosystem, engaging across and backlog. us And trend -- wireline and favorable confidence think we're visibility to industrial -- our our wireless, that the business.

trends backlog that mega as of around these vectors well. multiple growth is We this some of big driving have

Chris Snyder

that. appreciate I

my maybe level, the a whether Company I But So, from question charging infrastructure or is, the proliferation? I'll next could growth trends just kind R&D -- business? understand follow whether around benchmark in I autonomous. driver what's and earlier can the secular of there all battery any just spend, business. Just this up battery like turn we then, auto, help about the where is potential? R&D, monitor on high is track my the it's guess growth levered be on back like industry commentary biggest really into how think auto and for to one, And that's here, EV of model to conceptualize anything great

Satish Dhanasekaran

Yes.

to tethered being And it, level, if is occurring. autonomous the ecosystem it's entire if that's R&D the R&D innovate look it's by automakers, And driver. at at poised the you time. range we're think spend organic made look simplistic spending to with And the continually long-term to at only capabilities. a I you investments on increase

around in-house point would that also a the So, would of own number [Technical I if you external even dynamic I few to. generation Difficulty] R&D and back say, labs years look would from the driven ago, EV bigger think I the features the world. of more the sketchy, to of be more closest more to investment across and but automakers cars was world starting concerns ESG more these environment by we're have and goals see there as fairly

Mark Wallace

thing there's what's Satish solutions is to to being part vehicle, happening this connectivity of And and track the for us earlier. the just add the to these we everyone. funded capabilities. the multiple what of the infrastructure, we Mark. computational of the the harder to it transformation, ecosystems, is which with we you announced drivetrain; the and intersects technology said, within I'll this wave around makes electrification transformation within heavily the -- by Hey all one millimeter to is to communications all such But to external with the network space whole and industry just continue to, around elements just this innovate Chris, that's mobility why it some sensors. just areas of that's it strength. which this important And space, remarkable, whether for different many of the with charging it's or global the It's high-frequency nations said is as an leaders as so

a it's of So, innovation. of long runway with elements kinds all different long,

Operator

is The line Hosseini Mehdi SIG. with next question from of the

Mehdi Hosseini

a explain the apologize dynamic, basis. questions since on on and some two asking have I qualitative raised, have the any perhaps not One already but you late. maybe I color, follow-ups. pricing I'm if for the of to me quantitative I call can joined been

two vertically economics they extract the You mission-critical these enabled to you are relatively to these mission-critical assuming more application, and And from relatively customers. I and with more perhaps -- have strategic relevancy Are have more have relationship your follow-up. a higher input lower you integrated, customers? costs

Satish Dhanasekaran

mean, customers, our around for our is total look really the you has thank strategy ourself. to that question. Mehdi, Absolutely. been Yes. this solutions at I then, offering you focus since separating and

very offer by us time, over at higher industry the look customers layered their tougher through it of And we've needs. most and is challenges cycle has software life serve, some in content. to with that We solutions. work allows And clear. definition, the we strategy we Our in services, which

the favorable the of and All to inflationary in pricing face. margins of offset help that we ability pressures that our continue some grow to to business is

Mehdi Hosseini

Okay.

the contemplating your that margin favor in has economics than stock guide? or that raising flow been you've So, in free very been paying flow? also Is asking since a as dialed quick cash then, dividend and rather more Like, a has pressure, reflected better I'm a perhaps digit. would active And into of thinking company's capital buyback? double free that's this stable with a you're has reflect buyback. that return ability And to else under been rather already topic have there and you cash cash extract would follow-up, been your FX more anything

Satish Dhanasekaran

you, Thank Mehdi.

you heard, And we're towards on Keysight multiple create we -- end-market have. stated, think critical opportunity you to really mission-critical as as at I applications, many bullish the value. exposures long-term

And be continue so, approach congruent to with this for we disciplined, capital allocation. to that, committed balanced

is First obviously opportunities differentiation, our growth organic customers. we with engage a lot to seeing priority and invest for and of we're as

to opportunities. disciplined for are we continuing with look Second, M&A -- but we're and

and to current aggressive opportunities, buybacks done to And we lastly, to quarter. on the sense And see remain capital hurdle strong more a the of as of our we for of we'll make it have in it as return it. situation, past. that share through this make strategy. remain sure take done fits has And where course, believe our we advantage will be but we have funnel, patient have We we the that like continue we

can We we share as we'll at deploy have deploy, we see opportunities $XXX and that buyback continue previously these authorized to of it levels. still million

Neil Dougherty

relative I on your it's of about mentioned put second for the the there's And second To question all into X% that headwind extent basis percentage-point FX the part we our currency. had guide. X.X to baked out accounted in growth, of that's And yes, that the we has to X% full of in half. was FX year to year-over-year X points then, have moved date, guide. when additional an original unfavorable a guide a our

X% from X%, that, again, on to So, as at additional [Technical unfavorable based baked X% but we're all [ph] X.X raising there's an into of points Difficulty] today. currency the rates

Operator

The is next Citigroup. with of question Suva Jim the from line

Jim Suva

let software? is and Less that the question the have markets or past services, end again, with end you. attach with a one is, the software and these and newer past? newer could Thank like rate us the these of similar you more for Is automotive than and and bit specifically just I opportunity power? little know some about markets, growing services what

Satish Dhanasekaran

Jim. you, Thank

have and and to average more products which then teams lab we engineering to we instruments ability core a monetize is As as they software stated, services. higher are greater weighted the solutions, starting of that beyond go through use, into

is be over as layer, application realize the deploying real-world the investing challenges still auto on we're those latest ADE in things. But So, have, we're the innings in we're rich as continue also top industry bring early with and we'll offering software. to we that. platform, time, into opportunity of lab, very that expand we more to our we bigger see building it the The XG which into

Operator

The next question is from Baird. the line of Rob Mason with

Rob Mason

new Satish, electronics question the your general business. my My as was congratulations around role I'll well. to just add

revenue that like you related business. as business part business maybe as And And curious that's And well. at more general that. that to describing how that as PMI-sensitive. least sure a broadened that how there I of rate record a lot just seems of business, there. perhaps in were order kind you're caught the the perspective, performed curious all-time newer view the I just as the viewing electronics out, macroeconomic there's I'm if historical applications mention piece But, did from of thought the of there. I'm of You not was Historically, then, piece well. of

Satish Dhanasekaran

thought of focus when continues our with we've bring customers. And chain the adding been IoT. customer the been some move applications R&D and base. business Mark company and such started able I'll value have say up to we're about a electronics to over team manufacturing orders. great doing as has as time, correlation general to more we the have mean, it digital answer applications, in you're newer health as I'll the we end-market It's we And question. with to part -- right. a when first it had to But as how and Yes. bigger I it

that So, over continue to in direction. it be expect time, we would to more

of focus is area that around advanced also research. Another for group

Singapore quantum. noted, around -- Singapore the As I a in university some we announcements had with with

a major research associated win with also We in business. terahertz had that

but that So, opportunities durable little has more manufacturing in seeking bit value-added, to a ensure we continue business, more business the rest. had sustainable, historically that than that we're exposure

I'll to to speak about... So, Mark hand just over

Mark Wallace

there solutions. segments healthcare. And our new We've to added multiple bright so and around again which saw several industries strong represents our during of nearly softness XXX the order the new spots see base real have growth Satish. in the other of that and demand because Thanks, funding, Sure. as helps saw some softness wins customers to forth. lot We have been of education. we broad some delays continue of growth the moderating for the there. come and Satish across customers some priorities diversify new saw just Rob, in digital from this with we But some in R&D across did the of quarter, R&D mentioned, Yes. with With the a advanced upon base we spending some around university. mainly Asia government some research solutions quarter,

But So, geopolitical we all we of demand saw. are some less of more activities R&D our affected which the the some all, to GDP of see with situation, the continued a for or I solutions. growth think in translates advanced markets in some moderating

Rob Mason

color. great That's Sure.

Neil, quick be we your Neil. of how -- around the out at you within around price-cost backlog? some dynamic commentary you Just taking your The anything, monitoring as is follow-up, for how our that backlog as should the inflation, there -- look margin your call maybe assumptions just a should rising convert that again, just, would we

Neil Dougherty

increase much like little seems it cost time at there cost of at want whereas delivery real revenue, mean, price if secure recognized -- be in and is which issue that backlog are of the to delay we increases the the product. a input would time particularly side, price backlog you bit more the biggest create on a between which time, the a impact the might the does I increase

good some can it gets mismatch that I managing, so, But but job think, the doing this is of inflationary very And and actively in timing something off. speaking, environment quarter-to-quarter cause we're margins. protecting generally we're managing a perturbations if

Operator

line Thompson The Thalhimer next the with from Davis. question Adam of is

Adam Thalhimer

softening you any in Great afternoon. On quarter, one have M&A. guys. expectations? seller Quick seen Good M&A, on

Neil Dougherty

we've to yet. the Not kind of lot prior seem Obviously, pullbacks, a seller but be still seen linked to valuations. market expectations

right with So, of hoping regard a to our get staying we're some watching bit be return But mismatch that these disciplined opportunity closely and now, managing hurdles and a of on funnel, our does to very actively we act that there. targets. seem the little there to

Adam Thalhimer

if you’ve out, sorry, Neil? then, what fleshed And it. Got impact, this but Russia was the

Neil Dougherty

-- about points. X it's We

quarter within growth us. order Adjusted kind business million We it for for was the X% core a XX. So, was XX. canceled of been for Russia, It low-$XX historically backlog Russia. has

Operator

I questions are for to time. it any at additional back management remarks. There closing will pass team the now no this

Jason Kary

many you the thank Tia, wish We all and for great joining a you, us you forward thank at and upcoming conferences, of day. Well, with speaking to you look today.

Operator

you. today's concludes Thank call. That conference

You now lines. your may disconnect

Keysight (KEYS) 17 May 222022 Q2 Earnings call transcript