KEYS - Earnings call 4 2023 | Keysight Technologies, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to Keysight Technologies Fiscal Fourth Quarter 2023 Earnings Conference Call. My name is Sarah, and I will be your lead operator today. [Operator Instructions] This call is being recorded today, Monday, November 20, 2023, at 1:30 p.m. Pacific Time. I would now like to hand the call over to Jason Kary, Vice President, Treasurer and Investor Relations. ahead. go Please

Jason Kary

welcome, Call and Keysight's Quarter Fourth Thank fiscal everyone, year Conference for XXXX. Earnings you, to

Joining me we'll are our Keysight's Mark President and CEO, Dougherty. our Customer the Wallace. by CFO, Satish In Q&A joined session, be Chief Officer, Neil Dhanasekaran, and

release will today's are The financial refer website to and on Quarterly and to Financial under non-GAAP investor.keysight.com, Information information Reports. our supplement press discussion at Today's comments measures.

or currency divestitures to core within growth, excludes movements also and months. will otherwise of acquisitions and reconciliations XX comparable make reference last website, are We directly on on are noted. basis, GAAP completed a comparisons metrics the the unless which most our impact The all year-over-year and financial

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

hosted is conferences in the over Satish. scheduled participate Fargo now Wells will upcoming to call to UBS. investor turn management I and Lastly, And by

Satish Dhanasekaran

you focus us. for and comments today My will everyone, afternoon, Good on thank headlines. key X joining

results expectations. of high Fourth slightly in quarter reported revenue the solid remains as with Keysight gross of environment. macro exceeded operating finished revenue, guidance, margins share end record and First, and fourth orders and quarter ahead challenging year the per what margin, a our in came earnings

X%, X% in $X.X while earnings year, basis share full free increased and billion grew revenue core generated a the For cash flow. on we per

from end and set supply technology to demand over next-generation on a opportunities, last Despite environment, markets mixed continue the imbalances engagement we demand of the broad normalize years. end action and as customer teams X remain post-COVID across our strong, diverse markets. Second,

quarter of business with organically confident our long-term which investing We ESI. other the expand innovation ability this remain and growth our our to portfolio, addition solutions in inorganically, took our markets drivers step and and and we're address differentiated challenging forward of to both the diverse Third, needs. most addressable customers' secular

Now with performance. and and quarter share. brief delivered billion, revenue results a and Keysight's per execution. full pleased orders We're with let's $X.X fourth overview billion year our were and earnings Fourth quarter $X.XX begin $X.X of we in in

generated cash flow Orders in and $XXX also We strong billion results quarter. this year line in $X.X a demand. this our were of in of $XXX free our original expectations quarter approximately of billion million Full repurchased normalizing with year $X.X million shares were of year. per

an with We gross and $X.X XX% of XX% share. and and $X.XX revenue margins per profitability billion record delivered achieved operating in of earnings of margins all-time in high

were Aerospace the dynamics as broader to quarter, the markets. within defense Moving communications softer. Overall, manufacturing-related demand government with the our in expectations. demand industrial incrementally and markets steady increased, anticipated, electronics spending was and commercial our consistent was

record Turning grew, are Group highs. off of across both Aerospace, On Commercial business markets. while Communications to revenue year's XX%. segments. sequential Communication markets grew declined Government last Defense our orders rebalancing basis, a Solutions and

government In Department electromagnetic grew as aerospace, saw for we by in Threat large customers, U.S. the U.S. the solutions and all-time U.S., well of revenue Defense order demand modernization, win Defense spectrum healthy Emulation including European in and Leading X% investments a capabilities order Defense and applications. operation drove applications. to Keysight's satellite as Government, space growth an from high, primes, direct driven

a large solutions advanced the beyond. satellite business new of and XG in including research The for and institute breadth depth from and from record demand the contributing and saw XXXX our also portfolio quarter. solutions antenna array European our order delivery phased a goals in XG We Radar to customer their communications and enable primes support engagements premier Quantum research, to and

ongoing Commercial for solutions revenue normalize. network Sequentially, center their inventories applications. Demand and as was our hyperscalers wireless data AI constraints, we and markets demand increasing to workloads. XX%, saw for incremental in reflecting customer handle orders driven network spending expansion, declined Wireline ML in as data compute and In build by infrastructure strength Communications, center stability in and

next this continue trend expect to beyond. We the into year and

with and progression data customer by compliance traffic Release stable devices, network business was investments and driven the is increasing needs. steady new features. In capabilities R&D driving XX as and as Open investments of in Enterprise RAN cybersecurity monitoring, standards ongoing in Wireless, well

with engagements customers Our expand. continue to R&D

MediaTek This network to enable quarter, nonterrestrial connectivity. validate we

government was Keysight to and addition, testing leading Europe. support In open universities in deployment with design, grants awarded RAN operators U.K. partnership X and in key telecom

Electronic Group. Industrial to Turning Solutions

additional orders expected, our levels revenue has compared an was in both This and XX% by by note shown recovery growth down Solutions As constraints. demand QX significantly in important post-COVID last both It XX% and an about to and portfolio Differentiated were XX% expectations year. record that of XXXX. driven to from EISG the revenue with in supply XXXX, increasing is and long-term outsized XXXX

out spending lines. half the we in time normalization the see fab for as began wafer from second foundry this to a ongoing new well customer investment In as these year, their customers spending. In semiconductor, quarter, capacity cautious as pushed size, of capital contracted

interferometer continue and expectations. to for growth Keysight's We medium- long-term recovery R&D industry's and reflecting systems customer semiconductors, silicon strong the proprietary see engagement and solutions photonics to power differentiated for

Europe The are funding, expected while battery continues opportunities vary to timing remain these being In size and quarter-to-quarter. EV and and strong, particularly legislative for engagements a systems by regional of automotive, from fueled is investment the in and and of increasing competition, funnel customer charging R&D Asia. in infrastructure deadlines government

in and General In saw Electronics, steady for automation industrial our solutions we demand digital health. advanced research,

gauge manufacturing to the broadly, indicators We're electronics the and weigh timing of watching manufacturing and to of other capacity recovery. consumer spending normalization However, portions in the on and PMI cautious market continued and more macroeconomic market. global

revenue to or annual outpace continue XXX to revenue, year, $X.X year points, As an The growth approximately Keysight of and integral basis of an year-over-year. recurring total this XX% this strategy, revenue overall. grew services and of part billion recurring software software of our increase portion driving services solution X% total

November, announced we expands of addition ESI Group. a of ESI, our increases addressable schedule, markets block of our strengthens our annual design early strategy shares The earlier of our acquisition of ahead customers' revenue into further cycles. controlling of our upstream In and recurring stages and of moving software

invest operations prudently and capitalize to are remain strong to long-term our streamline ensure In parallel, cost growth and on continue actions We additional financial targeted disciplined opportunities. we to taking performance.

of to CEO differentiated outstanding their With I'd strong of conditions. in the the as and full year. employees new like outperformance, end of performance year, fiscal commitment for it solutions, of market Neil Keysight's we execution outlook. Keysight, these our I'll thank our financial the diversity our In over of wrapping up The first my contributions, and the business durability market and model, markets record as tough continued strength our to to enter for turn position all well that, us discuss track

Neil Dougherty

billion range of a the of both XX%, basis. on just everyone. a Thank or above basis. down $X.XXX core Fourth you, guidance Orders and Satish, and quarter revenue core on was X% reported and our high declined end of billion hello, XX% $X.XXX

of quarter, with backlog. ended order $X.X the third China the the decline. year-over-year in quarter and roughly was to Similar in billion X/X demand We for muted accounted

for increase reported QX, and points, $XXX margin operational of in resulting our basis Looking at operating XX%. operating we of XXX of margin results year-over-year gross XX%, expenses an million, of

per share. income million delivered earnings and net of $XXX $X.XX of achieved We

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

Moving performance our to the of segments.

a on was and of Group down by Defense up Communications Commercial X%, million and Our Defense million, basis. generated in of and revenue Government Solutions $XXX driven revenue $XXX increasing XX% revenue XX% reported while Aerospace, of Communications technology declined modernization. $XXX budgets investments core million, and

million, of Group operating Electronic gross XX% Altogether, and gross as of generated of reported core margin and margin margin on EISG X% The Solutions X%, a operating XX% CSG delivered $XXX revenue of XX%. reported or XX%. margin of basis. down Industrial

XXXX and basis We operating reported Gross grew income $X.XX, financial a X% to net headwinds. improved invested of delivered to results, basis taken our to XX revenue our structure to million year $X.X we've points FY The record actions which expanded drove margin flexibility $XXX and XX as XX%. demand resulting X% in of X%. Turning 'XX that share costs, full a core despite up exchange billion. or $X.XXX cost record in Keysight of Full XX% R&D, performance. foreign to per a while billion, points. year further reduce margin strong earnings basis was on

Total and million cash from balance ended Moving flow. $X.X cash price repurchases operations free year sheet equivalents, shares, with cash in XX% the $XXX and to billion, $XXX non-GAAP billion revenue quarter flow of share of million. fourth X,XXX the quarter and this for We generating XXX flow cash cash $XXX. totaled flow of income. net cash free $X.XXX approximately an of of per XX% Share representing average and was at the

consideration $XXX for average of $XXX $XXX shares, year of million of a XX% at cash a an price free total X.X For consideration to flow. of repurchases for This brings million. total our share million approximately the share total or

our outlook. to Now turning

demand second fiscal expect for we'll and signs we half. forward mixed, first recovery in in closely 'XX, the to Looking be the environment remain year of the watching to half

to be full earnings including year. is to will Going expected results the we forward, report ESI, which slightly on dilutive

XX% recognizes Keysight's XX% remainder timing recognized Given their evenly to in revenue the first over full annual the ESI relatively of with typically year. fiscal renewals, of year quarter, the balance the contract of

acquired. to rules, Also, our due earnings accounting proportional will GAAP to all are recognition be until shareholding, shares ESI

over our orders guidance revenue incoming past portion those orders scheduled backlog to turn to this one, of With quarter; is the and the backlog QX the based our year, QX of existing incoming into view two, a normalization that within on: of three, ship ability quarter. our is

on This income. first $XX million in $X.XXX the earnings an ESI $X.XX to XXX impact to of now count based QX range We guidance share approximately net and share diluted billion includes $X.XX range $X.XXX approximately be in the million and of of $X.XX, in from a of per billion weighted shares. ESI approximately EPS expect revenue quarter to revenue

like I highlight a FY few Now 'XX. would for items to modeling

are As decrease expect mentioned, we a I single-digit modeling in revenue. the same and Keysight core just over we period, in QX significant sequential ESI in a increase low revenue

year-over-year, down expenses we actions our have slightly business flat reflecting operating expected model be the the 'XX FY ESI, to cost and of Excluding initiated. flexibility structural to are

expected R&D to $XXX million. be the of a Annual FY of ESI, addition expect approximately non-GAAP expected With is investment expenditures be rate FY and 'XX. modeling revenue. interest million, we are we are 'XX expense $XX tax effective XX% to for to approximately be XX% Capital

conditions. market end record our will diverse challenging In ability drivers and Keysight's it for With long-term confidence to outperform, now I us for Jason closing, secular Q&A. that, in markets flexible back turn structure, growth execution, even to cost track the give in

Jason Kary

Sarah Thank you, the Neil. please instructions for give Q&A. the

Operator

Morgan Our Instructions] question Meta Marshall comes first today Stanley. with [Operator from

Meta Marshall

Maybe how about first of an question, kind talked years. business that guys couple well had the of EISG of last or done overperformance over you

where the question, run the Just represents, of trying of there is think rate to we growth then just business. of get maybe sense of going second as the And a you think a forward? the Communications that just of business on kind business -- period, just that

You stabilization mentioned business. of kind guys have that in seeing

clarify has more So largely stayed kind production it's spread the on of weakness wanted the to side. of that kind are of that that I just testing seeing the none you lab kind to of of

Satish Dhanasekaran

rates, have as growth said, above Thank been beat goal to you, it. obviously, the X% X% the long-term has and some business, The positions, Meta. we serve. that with customers And have, market Absolutely. significantly performing across these differentiated to our business, the function is for -- of that's unique a a that end some And markets in they prolonged we positions almost time. really of period EISG

awaiting the that's also with focus And manufacturing. a in between holding better, with sequential a And the the is still to a recovery saw we few and Wireless, XG. quarters to And QX. R&D diversify again, us continued QX And to stability continue now Commercial stability comps company. function it's a relative to in much order business, in again, especially improvement been of that up Wireless, for for we're regard

by, saw And to signs cloud what be hyperscalers. driven again, sustained a then of push part wired some by in appears recovery the our of structure to we the ecosystem,

Operator

JPMorgan. Samik question Next from with from Chatterjee comes

Samik Chatterjee

I one, guess that comments particularly so to including the seasonality around for had, acquisition. now you just clarify the first my

sequential thinking in you be I do I about year, decline guess, think onwards? quarter what you of how And from I of about Should a in you're any the sort and is is the clarification April trough put to think terms the follow-up. see? sort guiding if terms increases have think revenues. in I the those comments XQ of of the And into about half back seasonal a you of, seasonality that correctly? that we typical Just when

Neil Dougherty

Yes.

So I do correctly. interpreted you comments think the

as QX of ESI, But the a core first XX% from XX% as of the think the renewals, X I Keysight's roughly to as their expect single-digit we to to move portion quarter, do Keysight. their mentioned, over we with QX, spread in of because timing increase low in disproportionate subsequent XX%, contract quarters. a balance XX% revenue we evenly recognized

significant on the things, of side off timing So ESI drop contractual there renewals. just the a those given is of

norms, to seasonality expect quarter seeing marketplace. taking at that in this do the return over how that the forward. the disruptions, Keysight result to wait time, of chain we're but have the business last historic think we'll than seen we obviously, move develops the as years, as time, and see we're think, we've X I supply a couple I normalization towards a the more we what of given of over that

Samik Chatterjee

of we have margin is basis in some the it comments margin year, value have a XXX a actions. also a XXX just points terms lot day -- you of where big the about, probably you I which in sort taken [ is know decline quarter, operating just for should the had about revenue think And takes. but of and earlier side, cost margins acquisition, how I think of you XX% this to to puts ], last expect was about but now Okay. deterioration

just you all to takes? about given how think can an framework give us updated for year, the puts on So particularly margins and the

Neil Dougherty

Yes.

to down same demand model of scenario. a expect the XXX shared really are activity. essentially, kind would we our basis operating model XX%, to any our pre here, revenues That's if we've that down that's normalization obviously points be says, margins describing that spin. since that acquisition XXX So in And

So think can when obviously, it's results. public you look about in layering company, ESI, you their a at

half It's ownership. own get only a full we to going while point, the this take At shares. us to to

they company. think short able that as So we cost on they our were fix in can much reduction -- in were layer as independent minds full run, we'll as once to be I ESI within energy get space, the And ownership, set running you to an really realization.

Operator

Rob comes question Our from next Mason with Baird.

Robert Mason

talked I'm where you those converted have Or just we And some XXXX those events? came of year-to-date. about wrapped revenue you the total do as year? start more Last we be out how orders XXXX? last surge quarter, any these in in looking curious perspective relative up those a to the Are would longer-dated year to are sum into revenue? then on to of

Neil Dougherty

Yes.

where were as we to So last about first quarter, all, orders X% they and of date, that's said of finished. they

rate. revenue that is The will be X sizable quarters run historic portion, X% 'XX, into the 'XX. like there pushes QX a So to of a the on majority par a although and in first with of portion we're out year, compared as that was that

Robert Mason

for And is segment that or EISG clarification, in up segment? the in likely to CSG -- just show is the

Neil Dougherty

a mix. It's

I think they skewed the not Government market. Aerospace, the Defense skewed orders year-end. end with towards earlier fourth those towards In strength the more surprising quarter, Defense year, in Aerospace and EISG, were fiscal in

really is mix. So a it

Robert Mason

could. I if question, final a as just And good. Very

be as to Just acquisition, you process? of do a line reasonable come ESI have entirety the what the time to any sense the squeeze-out should complete

Neil Dougherty

complete the we depends expect the Yes. first happens calendar tender this offer again, process, tender really what during which in It on to quarter.

goes I do where less would move number think to as the take get squeeze and we mid-year. if then the thresholds have complete immediately scenarios, we'll people to expected, bit required are where There immediately that a to that if little we'll out meet us longer think a of than to tender, I it essentially appropriate process. will squeeze-out us that, do the move

Operator

Aaron Rakers from question Wells next Fargo. Our comes with

Aaron Rakers

want the kind to metric. on go of question the longer backlog Yes. to prior I back

of quarter, is I be billion but last talked backlog came roughly the $X.X still I said which -- of about this know that number, orders, total that you X% on million. that being $XXX or you you top that of quarter? think should that last out exiting so Is --

Neil Dougherty

are right? the numbers our for the rate order the so And year if in included X%. Well, take backlog, you about

So -- a took in you have if QX, can fiscal here get orders the of most some around as it longer-dated $XXX somewhere that enter backlog, backlog our 'XX. order that that to tail million XX-month 'XX, but $XXX shipped that sitting with we that within backlog, Obviously, million at we of end year. longer-dated is of the we would in view of you took

Aaron Rakers

typically, to year. assessment? that would a be clear, be of And fair back your sounds majority X-month That's backlog that recognized a forward will in number. the was like of -- half fiscal It a the

Neil Dougherty

throughout thinking, orders just we've year. I'm as those received the all

get so And portion that half sure. skew back though large-scale is revenue It couple lump are into projects back pushed 'XX, a recognition. say a -- out for in kind there has skew that's of where there's again, we'll there for half of sum the I 'XX, a would probably

Aaron Rakers

to Because is involved? XXX you and like towards on seems out regard like real how talk Wireline I'm involved as that? Keysight's Okay. it Just to about And maybe is, AI? inflecting. you're it then seems would be clearly, seeing with the curious that that we a little gig, in -- Ethernet follow-up move possibly Perfect. just quick what exactly could bit where you're flesh

Satish Dhanasekaran

you. Thank Yes.

talked we business I parts exposure Wireless both think with our of is into as Wireline diversified Comms ecosystem. Commercial about, the and

end are inventory of a to stabilize, to starting starting tethered some obviously to computing, signs to after is compute And we're ecosystem, period was markets are the of digestion the parts networking, that core we're underway. see the Wireline what the markets. For being

But infrastructure. is by who incremental equally, hyperscalers, pretty driven that are spend some serious that's upgrading and there occurring cloud about

And test manufacturing spend itself so business. test gig terabit our It's for in in transceiver Ethernet for also and increased that we saw that's XXX manifesting manifesting quarter this itself solutions. also

the the we've seen And but by make sequential that side. seen. uptick trend, quarter so we're think the pleased encouraged quite with on X I we've progression we're doesn't Again, Wireline a

Operator

question UBS. comes Chris with next from Our Snyder

Christopher Snyder

X% in orders sequentially. So up about came

maybe orders I where just in softening X to seen X specifically quarter order involved, for number orders ML understand to X you've infrastructure, you 'XX. versus where maybe think fiscal how improved big today, can the ago? and or ago, it versus seasonality was AI related versus And continued the businesses AI about, could orders I there's talk X months you months center best ML but then And whether the on for size revenue? data it's have that

Satish Dhanasekaran

strong. maybe level, Obviously, say, the growth, the I the uptick that for Communications, of saw a our We Defense in sequential a and stability Commercial Aerospace would highest would Wireless expect. is what we our in we typically Wired sequential Yes, I which at orders part year-end just was ecosystem. in business, got from improvement, sequential say,

was, we would that. what some we EISG the business, Asia and also in softness we and see experience anticipated And China, did with particularly

in is to again, just undergoing it normalization. demand later in business context, put this Now EISG the

we and what so of so we had And was forecasted, that expected. behaved it sort as

by AI overlapping. we're we general by a Wireline Ecosystem, to technology and inherent expectations the is in that and waves progression to the stability us growth diversified, and Communications of coming regard AI go now. that become business And gives some for we've where business our pleased in some this just to we as see that the is ML, customers long-term seeing I With spend, just applications of the say business. that some we're are resilience, for back maybe rate multiple are the of it Mark expect orders. a to more for been part traffic network out will bigger I'll on ML our working hand this that make off because on driven with time comments And

Mark Wallace

make projects. really few whats of a ability in has bit our been very in then as taking to we although long-dated intake, several And still remaining customers, that comments positive. their more backlog a convert color been just as And our I'll active the and then which remains funnel begins thanks.Chris, time quarters, last to funnel here. that it have see terms titch said high, of these in well. our decisions this to R&D all we've a some a Yes, as key new of for factor very with customers And

XXX our also doubling stabilization I'm through we I'm which some indirect and -- total, more the that of businesses, through saw and And new that very in adopted. came of business, through with continues pleased course in seeing the about distributors during customers, continue e-commerce. to We to of business strongly normalize, be year, inventories about e-commerce last the X,XXX in a our channel. those than add of the

So positive in fourth what elements quarter. there's we've seen of some the

Christopher Snyder

appreciate guess And I then that. more I a of maybe for follow-up, my modeling question.

For does guide, Keysight. revenue that the billion got. orders sharp the the billion from versus a XXXX fall off midpoint just $X.XXX at ESI organic the the we for million pretty be $XX It at include midpoint, to implying revenue, QX seems about $X.XXX

Neil Dougherty

average. the Yes. single-digit sequential million think seen Core order high particularly not on currently that EISG, in this into $XX correct. typically the your we billion, gets side we a decline $X.XXX as $X.XXX little is billion, be given bit And move $X.XXX larger And billion, sequential math I from a than we're billion normalization, expect to for is less historical year QX. decline to but we've a what you keysight. seeing, is $X.XXX QX

-- can to so that's revenue about think how And orders again, and that Core and that's getting for you with $X.XXX Keysight. billion converging,

Operator

question next Goldman from Delaney Mark with Sachs. Our comes

Mark Delaney

and the you in do highs think would And do in contribution get back some terms segment, company get on to XXX to you think things you there? alone? from historical in XG a in need Comms XG Or question from Commercial A the resumption order gig revenue the can Comms. like Commercial of

Satish Dhanasekaran

long-term outlook outlined end themes I for confident across overlapping are you, waves technology playing Investor the out in Day view Thank that. at the markets. we Mark. our Yes. solid of that remains And Absolutely, several with business, are

has as with where this been engage we priority programs. R&D focused customers intensely spend time, lower, are fact, In the on customers higher through even

And is the demand occurring had we there so changed not and after has 'XX normalization order this outsized that strategic Obviously, in business. for where growth that's view current fiscal us. 'XX,

post And we our confident ways continue because grow so remain and normalization, wireless both to in multiple to technology ecosystem. of these of across wired business, ability the

Mark Delaney

helpful. recently change That's And wins that on with or the your one any acquired. point having on any in of been landscape competitive you competitive competitors question business other opportunities the of Have any new you seen terms front out? changes in would

Mark Wallace

continues Yes. be continue all projects, The we we EV No, markets with that which of investing many we market, remain particular, to with. engage active serve. customers robust the in in automotive quite in to long-term

change So since recent no, any seen we've any not announcements.

Operator

question with Adam next Thomason from Our Thalhimer comes Davis.

Adam Thalhimer

and Congrats seeing whether going Can shoots on green more in any China the little strong you into there? what you're on is QX. color a give

Satish Dhanasekaran

Yes. thank I'll We're make with Thank and the of the in you. but pleased operational comments, 'XX. have fiscal performance you. the business Mark some execution

make strong, customers with end I'll have China in engagements Mark Our market. comments by but remain some

Mark Wallace

Yes.

Our of the the focused weakness AE semiconductor half, demand optical, next have couple second well. half. the digital, that, manufacturing in in We QX very mature for the our in first there we business see China see areas strong from remained in Where we technologies especially relatively held softer opportunities remains in around in business and on actually, incremental and high-speed I in is EISG did continue standpoint. But and the and for diverse. there auto semiconductor, is EV And activity the China quarters. up and as that continue and to expect

the And a trade do be for watch quo, well side, happens. quite I I last of to the moderation manufacturing that positioned think we'll we've experiencing that if years. would quarters. the some on say, very derisked the last demand see we when couple for we've normalization been impact We'll of several think It's the status fairly been carefully. also I bit that

Operator

next Our out with Atif comes of Citi. question from Malik

Atif Malik

next China for you maybe provide one Satish, first for XG next in optimistic The guys half restocking maybe should sounds of and to possible market are smartphones. seeing it of for milestones you in rollout on forward XX be stability looking second you're standards year? like earlier it few Is And the next about a to us XG we that year.

Satish Dhanasekaran

you. Thank Yes.

that the right, I the progression, and in the think device reductions, factors. talked industry is smartphone continued final watch for that's are at things, form I the inventory about been highest making level, chips for

So that's watch. we one thing

business year, what we increased base when Obviously, think mix in even seeing in far already customers so strong XG to is the Open from and our interest standards customers RAN, about installed have progression, new our we're XG this customers. Mark team added of

the we're our So the ecosystem. strong need continues and entire continuing differentiated to position to remain is our leadership remain to cares with portfolio, which very of and broad

gained through has the a interesting non-terrestrial also went use importance, as and the cases And the with already customers. last IP an Keysight XX XG. partnering globe lot also in the satellite so XG cases continues year, new networks we're in The that we been has Release and to with of seeing associated the some area interest off these role across kicked play what has early comes to beyond build with research organic

run So when the we've long enable out focused us these at the on around we're Day. and rates our the that next-generation we continue to over to the at priorities. put investing look at -- strong investment but grow our investment Investor that and R&D, Which themes. -- focusing business in be that will Yes, we're

Atif Malik

you're the decline? because April Neil. because of of we average. historical ESI quarter pointing coming Great. then seasonality. down thinking for with down January digits, be follow-up trough EISG April or about being revenue in recovering revenue down orders And And Neil, quarter single a you talked the quarter about high more than that to in an Should orders

Neil Dougherty

we move would Keysight, a as from you typically Core QX. sequential increase, to On see QX

see I a see But historic based think going this is but point, that's compare sense QX And increase to of give we'll everything we I QX to pass, need to wait increase. that you what expect. for on think norms. would typically, we to how some at to to you a time

Operator

from comes question next Bank. Our Matthew with Deutsche Niknam

Matthew Niknam

a one to Neil. have question for I other one follow-up and prior one

the follow-up. terms of In

in we're comms CapEx for the expectations that ADG? in fiscal and softer of about persist outlook XQ. And to unpacking So then XX-ish fiscal than of of for for from Neil, for that million that sort XQ, just the Keys, you're segments? a about about more ESI are primarily talking some maybe sustain i.e., stripping their strength seasonal more relative talking to Core million. outlook stability Is in EISG out across $XXX So

for think was at a 'XX. Analyst million $XXX Day, mark I'm what's changed? the just wondering fiscal it around I

Mark Wallace

Yes.

the seasonality, question think you regarding the mostly on right. I it So first have

I expected softness And think China in the then that then lot Asia. QX. that's we're a of EISG what to experiencing attributing and the second. and higher decrease is slightly And in we're incremental for seasonal

Neil Dougherty

Yes.

the we I obviously, than expected. business On mean, CapEx, year been has softer this the

environment. programs so reduced cases to things, And expectations the going when other forward. many is or about investments we response you for have canceled and resulting delayed think Which in current CapEx in types those either macro capacity the of in in

Operator

from comes Tim question Long Our with next Barclays.

Timothy Long

if X, could. I

ecosystem. cycle, a Wireline kind more little the in the challenged talk of could of in a there? Where some the are on about optical specifically side, we been companies bit you're bit what First, you with seeing more it's little

that about side, on talk physical seems rolling business. well one then, It quarters? line, as multiple just along of talk the kind second Automation a Defense test So the just on the over you're to as could if Could little continuing sustainability next defense you what really strong. Ixia. kind of the about you be of bit And seeing

Satish Dhanasekaran

we've always say the advantage. able an is physical at the this we'll we're I'd the between leadership Electrical believed having SerDes customers position is Sure. challenges play advantage, especially an out ability both and as the that our and monetize both and Optical to the side a you. protocol migrate us, to that dots for across having see and side our Thank and strategically, advantage the and point, for Yes. and connect

engage across the we shifting look priority ahead. to investment also to that. Which some make as and some perspective, a predominant of be I'll Mark XXX or that able I cycle. have would And caused standard Ethernet entire and comments beyond, of customers development the opportunities terabit life we're sequential to still we from on XXX say uptick continues research see. we see has the perspective with gig funnel

On Defense all growth have we've trend the seen of a recent been contractors say, in technology the that the quarter. spending and should well in backlog the U.S., Defense only out. side in that, is prime of the I I a in And business, in referencing in XXXX. say think uptick, equally, In business, growth bodes but that's I in for investments playing stronger orders. Aerospace and But most Defense would the globe, the across Aerospace again, increased the not the U.S.

in for fiscal getting bipartisan we passed Aerospace and Obviously, we Mark the make comments. watch Defense given be confident Defense I'll exists, the that business. about important budget milestone that because think 'XX. some an outlook But support the for that's have I reasonably can

Mark Wallace

not and R&D wireline side. on for XXX into build-out And add. in is manufacturing much of upgrades. and we've uptick manufacturing Satish has seen But well. feeding Yes. network the we optical saw spend covered data what transceivers, this center it There's pattern an to

saw we funnel support a would and the sequential So that improvement continuing.

server infrastructure side. AI saw GPU also We on testing physical and the

particularly as growth our solutions pointed our broader out, portfolio reflected was demand in there's And some enterprise there. you protocol from of network visibility some in customers. So growth,

during QX. we capture strengths these all So are that able to were

Operator

of Ridley-Lane from Bank comes with question next America. Our David

David Ridley-Lane

quick on group, understand but completely that's modest, So anything it revenue I first Really the of is should first the ESI be If the margin? should understanding comments very tailwind the there sort in I'm implied be quarter? guidance, a that but onetime the question to margins the on margins. quarter actually seasonality in

Neil Dougherty

You to just even should QX up be guide, the the for QX with able bridging adjust that we if ESI, bridge the really results to X from put items. you

is is million reduction talked XX% the which sufficient million $XXX bridge right, reduction the delta. first The in revenue, so rate the implied the about, tax to million second revenue $XXXX from in And from to $XXXX about to should goes we in just increase the be XX%.

David Ridley-Lane

the in in uncertain, areas, fiscal year the maybe then the in and impact of full China. full several orders pushouts semiconductors there in Okay. sort sort you more were for year, know size line to other of could 'XX, if it's And up expect of of project then broadly similar But time pushouts. should stayed show look, from but magnitude And construction those always we has project intact, kind 'XX? a I fiscal

Neil Dougherty

confidence delivery on we we product, going I books. If have people your speaking, generally to out question. take sure they're leave the ultimately that of are those orders not follow I'm and pushing

Mark Wallace

about semi fabs? Are you specifically that Is speaking with ...

David Ridley-Lane

it to a later. recognize order revenue and revenue the the an where fab, got that itself status so if construction orders, would semi and was just was you pushed, that It tied

Neil Dougherty

X got So of out you're and 'XX 'XX pushed out beyond? and of talking where deliveries about

David Ridley-Lane

Yes.

Mark Wallace

Yes.

So early fabs. backlog. there's of it been X And some is that late part right pushed in the factors. second And I I has out the because demand, on going think and then 'XX forward-looking delays 'XX. semi think is of delays characterized specifically, the One of into you

Operator

our for now That any back like call Jason concludes to Q&A I for remarks. to Kary would the turn session closing today.

Jason Kary

and Thank everyone, us. you, Sara, thank for you, joining

Just up to to to call, you. and turn it over I'll the over wrap Satish,

Satish Dhanasekaran

validation. which for thank in your Thank remain customer our I our we're I want And support of and to around incredibly we growth know, technology next-generation to you, for all confident future, continuing let want shareholders have strong invest Jason. you teams, to Keysight.

of an buy good given you've cash also flow and recent back Thank business, a And the rest flow spending we're much, position shares, and current own in free have we're operating us doing strong XXX% environment. you our perspective at a also our cash maintaining the seen the most in the over so, the valuation from your in While discipline of prudent very and you hope in in factoring in this time. quarter, very free finally, day. confident our of

Operator

our conference concludes That call.

disconnect your now may lines. You

Keysight (KEYS) 20 Nov 232023 Q4 Earnings call transcript