Keysight (KEYS) 19 Nov 242024 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Keysight Technologies Fiscal Fourth Quarter 2024 Earnings Conference Call. My name is Joel and I will be your lead operator today. [Operator Instructions]. This call is being recorded today, Tuesday, November 19, 2024 at 1:30 p.m. Pacific Time. I would now like to hand the call over to Paulina Sims, Director of Investor Relations. Ms. ahead, go Please Sims.

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

Joining me session, Financial investor.keysight.com are Wallace. today's and joined our discussion Keysight's Reports. Chief Information The President and Neil by our information In and CEO, press Dougherty. are release Quarterly the to Officer, on under Q&A Customer we and be CFO, will Mark Satish supplement Dhanasekaran, at website

will refer financial to comments Today's measures. non-GAAP

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

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

management scheduled Lastly, upcoming Fargo and participate investor Barclays. is in by hosted conferences to Wells

Satish. And the turn I over call now to will

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

our well ongoing expectations above and above sequentially, year-end strength X% which executed remain slightly with aerospace, X% delivered the Keysight consistent by guidance in finished and and under business. grew and share revenue our conditions, market in First, expectations. year-over-year strong high fourth driven government our defense earnings per quarter bookings range end of and our AI and U.S. Orders

the record of down drove free in and over discipline the delivering cost cash of we per second of paced in business half improvement Results billion profit $XXX and year $X were from XX% XXXX. operating and market $X.XX, throughout gradual earnings which by execution of full year performance share strong with revenue resilience expected. by Under demonstrated challenging million were highs better as flow. our the conditions, model Second,

XX% repurchases. free returned flow also of to approximately cash We of shareholders through

our solutions to opportunities progressed software-centric M&A. our industry through the of through we Third, strategy organic by collaborations selective realize while innovation breadth growth solution expanding and investing

of customers As the ahead, accelerating portfolio deep gives engagement ability strength as innovation we our markets confidence of recover. technology the differentiated in look and to with pace us outperform our

year, Now with due performance. wireline, ADG. and full returned and ongoing be the reflecting even government. in as demand AI for momentum and quarter CSG let's both stability to year-over-year overview remained defense growth Communications markets, of in wireline continue data aerospace, Keysight's AI strong center muted. Solutions and infrastructure growth an in commercial wireless sequentially to consistent telco revenue orders was investments X% begin fourth expansion and in business with across flat Group grew to In strength communications

As and for the adoption interconnects. technologies, accelerates, the including electrical XXX-gig photonics, high-speed X.X advanced and and optical investing is chiplets silicon time in terabit line industry

the At customers collaboration expand manufacturing. AI newly to stack Hyperscalers. showcased Academia our compute system the open R&D technology Keysight with portfolio continues and across in in both its solution Keysight to solutions and enable in Jose, emulation project San of workload and introduced

inferencing provides AI performance. workloads emulation solution training time infrastructure AI of model and Our fidelity and optimize high benchmark to training

critical leaders physical showcased electrical Keysight XG levels. normalizes CapEx on inventory smartphone from to the in end stable nonterrestrial RAN interoperability XXX ongoing nears telco correction early research. networks and conference, industry and peak demand was ECOC expansion, continues Open emphasis its interface standards technologies. layer progression Investment industry and optical protocol as of with In and with At gig solutions wireless, enable with

and multiple we NTT Pegatron. as Networks such with DISH DOCOMO, leaders announced industry ORAN collaborations quarter, This

interoperability full-stack in to and end-to-end our We well differentiated the for industry's with industry FRX. frequency drive also band candidate poised forward collaborated with data solutions. XG also innovation Qualcomm connection first establish We're to

continue strong. defense expected funnel and engagements are in projected communication grow LEO while aerospace, years. defense is and on remain The to to budget Asia modernization communication U.S. an defense seasonality cases government. Turning and use electromagnetic RADAR expected digits constellations increase. The to Europe Stronger-than-expected all-time low drove single remains next spectrum is few orders the is over government launched opportunities Customer operations, advanced of to investments investment Satellite high. more to in as high.

on array, leading defense Microwave our conference, Keysight the compact around European with in At recent design growing test investment in in is antenna analog capitalizing collaboration phased over-the-air capabilities the showcased devices. we modernization the and globe.

We also include wide network It's preselected band, measurements for industry-leading analyzer. to highlighted customers capabilities designs. our high-frequency faster range latest dynamic component S and differentiated enable high parameter flagship receivers performance

for electronics semiconductor, expected, Turning to Industrial digits a Revenue memory semi general down mid-single AI. Group. grew applications our such by address but Electronic This as was offset market DDRX In as photonics. year-over-year automotive in drove robust strong by and parametric well test growth were Solutions solutions. saw driven order mixed foundry capacity advanced headwinds. to included and with investment We as year-over-year and leading-edge high-bandwidth growth Orders demand sequentially. expand as wafer technologies silicon broad-based DRAM

industry test semiconductor introduced XXXX. high-voltage the expect wafer production in an solution. Enabling continue automotive, challenges, facing this and Keysight power efficiency, innovative in single-pass and quarter, the is headwinds In X-kilovolt we to further advances

customers' and saw cautious demand while EV production-related emerging we quarter, supply. sequentially was with ore slowing stable needs. and battery due incrementally innovation focused headwinds, design cells we to near-term Even spending This remain on

broader Our as and R&D high. remain as applications well physical engagements design software-defined electrical for vehicle

in sequential saw support consumer stable team to and through development investment additions. grew advanced customer and assembly modest business industrial health made was Over workforce use at we this with quarter of solution demand period, this technology visualization ESI to application albeit and renewals research lower workflow and of in Public improvement applications. year a validate In its the general electronics, high-speed also and again and digital this contributions levels. offering and manufacturing the grew improve new connectivity simulations through performance significant steady product ESI private sector immersive demand, servicing. strong. and solutions AI

of Turning services grew software XX% and from of to and of accounted this We broad for solid XX% grew saw Software $X.X software Annual revenue. also engineering and for in prototyping a Keysight X% recurring design accounted overall. reflecting total revenue quarter roughly portfolio across of the XX% virtual XXXX, and Services. Revenues range our in Keysight industries. growth to billion approximately expansion

leverage learning bring to sector RFEDA, lead efficiencies complex to Keysight RF-integrated As automate and selected a circuit U.S. public effort government AI to in machine and to thought a joint was recognized and leader designs. private

and Keysight discipline of our progress sustain conditions. our continued has summary, operating The a to downturn. flows economic strategic In ability the in has deliver through proven cash financial variety momentum of to strong results healthy and model and flexibility

the create positioned opportunities emerge value markets business stakeholders. have for on capitalize all We to recover the us and to as stronger to ahead of

like market Before thank commitment and all sincerely again I of I'd execution our record a for once employees strong variety their under of conditions. to conclude, track outstanding contributions,

turn outlook. to I'll over and discuss financial performance With Neil that, our to it

billion range down billion X% Backlog was our Satish, reported million basis. down finish to on everyone. or and up core guidance X% a or and X% basis. of increased above the the at down were as revenue hello, you, end $X.X on a high of X% quarter Thank $X.XXX quarter core Fourth $XX $X.XXX of Orders billion. in

margin operational operating of were $XXX XX% was our up QX on core we at of XX% million Looking XX.X%. results for X% gross basis. a year-over-year. reported margin QX, Operating expenses or

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

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

$XXX down a down X% basis. basis We margin core full revenue generated which Keysight driving on was XX $X.XXX declined For further or reported efficiencies revenue, versus XX% billion, while points the sustained excluding prior investment million or in acquisitions. X%, year, XX%, of R&D operating down in XX.X% SG&A, the Gross year. of at as

XX.X% resilience of in outperform and cycle Full Net resulted $X.X basis to per Keysight's XXX the the continuing business. income was points, year $X.XX. of margin earnings of core billion of financial down down share model demonstrating operating

of gross margin XXX $XXX Moving X% defense Electronic of reported of XX%. flat CSG revenue The margin of XX% revenue of basis X%. down X%, increase fourth million, basis. performance communications on grew margin Commercial the and quarter. Solutions prior a segments. to generated $XXX million revenue of The operating approximately Altogether, XX% XX% generated Group down core EISG and margin delivered million as Communications of government operating of while an and gross aerospace, Industrial reported revenue the or a core million, $XXX versus Group our on declined of points or basis. X% XX%, quarter of $XXX Solutions

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

to outlook. turning our Now

occur macro degradation. to environment remain recovery for and the any expect gradually the We year, to mixed demand further barring through

target. growth of for our and the assumptions in are long-term base earnings to end X% case at Our for with X% our growth low 'XX XX% FY revenue target line

in results XX% reminder, ESI's relatively quarter, of revenue the to of a As recognized timing balance annual of XX% over full with contract our fiscal the renewals remainder recognized the year typically year. being the fiscal first in their evenly

seasonal of rest the For from decline QX the we revenue are QX. mid-single-digit the modeling in typical business, to

to billion billion earnings million quarter we result, approximately $X.XX the $X.XX in of count $X.XXX of and the a range range As based diluted in share share $X.XXX of XXX to on per QX revenue shares. expect first weighted be a to

few considerations year. a full Now the modeling for

increase expense material annual QX, Given in modeling expected a expect a levels, be effective that, the $XX for same for the At to single-digit FY we tax are expected contract Paulina we expenditures QX revenue. Q&A. and 'XX. With be $XXX Keysight revenue rate million. XX% in Capital is renewals it will non-GAAP in approximately back approximately we current expect and low now period, I million ESI in over core to to turn interest are debt decrease a annual ESI sequential the

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

Absolutely. [Operator Instructions].

line the from question Rakers from Fargo. comes Wells Aaron of first The

the I the piece results. on recovering. business. Congrats to is, the about I seems want be my It first you guess to Yes. ask wireless of question

mid-single presentation, this change? in digit, it a of -- evolve suggested that's think next the fiscal curious this you kind how in started growth of quarter. of stabilizing more Has through view conversations your I recovery just or correct of kind move past from we through the guess, I the as to we if was I'm growth I'm business deepen of as year. business Has started year? that look to order that

we quarter, on opportunities Yes. Thank where on a well infrastructure executed after we seeing question good wireless, stabilized, and feel to around say, there's XG where Specific Indeed, strength you, has the more more more we're activity your I saw. the confident, Open RAN quarters business X on capitalized continue from research. would to we and side Aaron. and the customers

a So lagging bit focused ongoing it's that evolutions. drives that. to on be continue customers And standard on where still the side, devices little

growth wireline we in see I about to call business, momentum continue 'XX, continue the when business commercial ongoing mean, driven we're believe remain we to point, our good the stable we But it that's this So will communications. that feel seeing at it. for in we'll

you're some areas Yes. quick progress kind on that, this dynamics segments. investors. up Defense that continues outlined. sticking The any with profile to? of some that, federal And programs, some Aerospace It looking that I'm of business kind the at has you Any segment, you that of any churn pretty or as of and as seen -- in you cetera, uncertainties growth et around point question around of a of like spend. the come curious with confident sounds would concern to the then follow-up, have But

Yes.

good to easiest of clarity priorities I and Allied our the actually that defense and other in satellite long-term the and the and we given are and forecast feel you both one those that look the set where Aaron, business Nations, trajectory if at moving budget the areas to, is think, the that U.S. spectrum -- typically in and gets is ultra-magnetic that investments areas, get are modernization about position. operations, space

slightly were a orders off Relative to but year from year, a the of obviously, compared down ago. year-over-year, record

wins, And we were to of wins some a the little us that had ship. which systems longer take

was term with between as had just some XXXX some But like at yet times ahead, obviously, the happened, So U.S. line. administration we business change revenue seen bring But in the the in the you does we haven't that short quarters. that look even uncertainties. in model

current there. And so the with we good situation situation, to but feel we'll regard about the monitor our business

next Mason The Rob from question Baird. with is

next Barclays. The from Tim Long apologize. is I question with

for me well. as Two

wireline. how could of for a little First, getting And maybe -- strength of big the that move leading lot pulled maybe Could is being lot expand of Obviously, you activity. some there, you because a bit that on in going you? mentioned a examples on the you in AI. is business newer into Keysight areas AI

is part going I Maybe wanted up the number gross able just business on a talk higher on well? up the just to how margin impact that one, be and that bit follow that moves as second revenues further the of here. software to as and maybe to then of move to services model about little Keysight evolving And how XX%

Thank But one driven business of of the has you, examples year. year Day last that the by is gained concepts proof highlighted this this at Investor wireline Clearly, momentum the Tim. of AI. I

And pleased has with progressed. the way quite so the we're opportunity

over has broad contract NEMs, Do a rates orders silicon designers, billion growing of set customers we and exceeded this Our in that integrators, at system in $X service right? about manufacturers. wireline double-digit year, industry, and think hyperscalers you business

actually set it's So a of customers. broad

set actually in driving that in the what's hyperscalers right So customers a activity infrastructure investing now from upgrades. AI is concentrated large are of

chain right be continues effort and to constrained. So that's the supply the now

forums in as compute, companies OCP at the enable see and we scale the trend. to the even reflected you the around very to investments supply yet, as that were build adopted But issues capitalizing for edge, we're and we to became whether but they are the start being to centralized in before chain future, are this we big technologies ECOC made not so maybe it's yet to some build adopted, being scale in power terminal expand. It's scale this or the unlock on earlier like results can big the start about we're being think that. and involved than faster AI networking a year, the So participated and being

traffic infrastructure our And your are not to in protocol about therefore, allowing an flows optimize we're layer, opportunities, just emulate in layer, but physical AI the the excited to and how investment. customers

the the and about on near-term excited [ opportunities pretty here we're struck.] So long term capitalizing

are lower we Keysight's accretive operating But nicely margin. business, dilutive margin. the gross of think from overall, as relates obviously, average businesses software then portions to average both slightly to The are -- structure services, business. see services to mix software be it part question And shift a continuing I address margin to margin, of And would nice about Yes. the and that's it portions of a towards our to a there gross expense to service your those when as profitability those line. both Keysight's portions to contribute think gross

And add, I just this would Tim, Mark. is then,

we've it's more emulation it's shifting as new continue simulation the Customers their shown efficiencies, we're and the reduce costs systems and methods, to current in As help that to expansion resilient to of macro. increase invest on left that. -- seeing and far virtual

as with regions, And aerospace the growth a our then footprint regions, more forward. different as those of assets driver in of part, is of U.S. being Asia additional go new like further our second a we customers leverage of Keysight of defense, we see the the exposed in for parts to course, that some for broad

Rob next Jamieson Vertical Research The from with is question Partners.

quarter. the on Congrats

of for couple a quick ones me. Just

second if get in just from deep on of released is the what mean could finally I the fruition. kind benefit does benefit see 'XX? of to funding communications we much comes there business, that just funding there half Just first and actually

of And given that then, have point reversed Trump's some at I funding. guess, also risk anti-[indiscernible] this advisers any potential just that been being of

Yes.

fact, in in during the we and business serve. That the set [indiscernible] of I comms customers business think model Keysight's of of about strength good in of change. our source a rest the times broad great thing diversity is

new business at stack, the directly but some called some to we've up we're those flows funding pick There year chip do those up And times they're into open rand. out indirectly. incremental we some that direct while are so come of government wins funded things. and every of tether And or because from not heavily logos X from in to

as because labs. headlines So more just material as enthusiastic, say I in would incremental that side the not of but of are as those especially some in we're involved the R&D ways, maybe those

And so good. we feel

put is go-to-market It moving see, well. that logos across we momentum focus of new continues had our in attraction that on the our expansion renewed as be marketing of continued because see for forward place, the think to we I us with we the focus business.

just really tariffs That's about guys of And I in been another this have how you quick. Trump Can the guess strategies around just over on just or pivots X appreciate I been tariffs, previous then you that Yawei that. X helpful. region, the or And manage just APAC whether your your just in real it's years. talk dealing even way for just the in kind ZTE past. with you

therefore, just I I'm question. the the changes question understanding it's what probably you from right, policy the the Yes. are is company a U.S. behind implications NCO. If would of elections say and

sales and X and orders Asia, say were to of would And [indiscernible]. I'm them, us resources be a so tax agile like the is restriction premature little is new potential after -- compliance to Southeast pretty there should and tariffs the trade areas, be offset are right, ensuring of if capitalize everybody, more in on into our restrictions, to we discussed, prepared for when the with many spending, been rate, being along bit to It China and to opportunities both new speculating and if and in remain on breaking that a we've areas comment we're tariffs go a monitoring rule defense pivoting be except other companies occur. again, could looking my opportunities, to areas that there government

it. Got

So everything to the with saw that similar and we disruptions, like saw benefit there? chain we during supply reshoring what

Exactly. Exactly.

is question The next with Baird. Mason from Rob

And again, on quarter. jump nice the

think is say, to I some electronics, of revenue. covered these wireline, opportunity respect about, an the of to XXXX just do within talking automotive, high your get major, all around. it like segments, your know all fair have But Would it is you think thoughts to think just we're with verticals. some you kind of a your mean I'll around of there again, in Satish, segments. wireless, But profile Just them at I level, maybe you sounds automotive of grow that you're the challenged. thoughts 'XX, the most mid-single-digit like to I'd talking general

business the our Rob Look, good. pleased I'm which to order out to that. stabilize second was That's priority for a executed as job return growth, and we've quite #X, the we to and set that half,

facts, order returned an at say for Now And perspective. growth year the from just the full yet has looking -- to you'd that. to do in CSG EIC is

demand So that sort mixed of summarizes environment. the

baking is be revenue in XX% his EPS to should forward, growth continued case, Neil year. base it. gradual growth out that section we'll expect called our that base capitalize recovery move -- and And X% we're for XXXX, not inflecting. But as we projecting segments of prepared the in, And all we case into happen. just slow in sort outlook has on our

Yes.

some is as kind just the well give as curious your the I Okay. OpEx first you just as you of some from trend with there's and what first a quarter, trajectory But at into fourth thoughts That's ESI Neil, know revenue least Could the as us a kind bit that. margin quarter, to will influences seasonality quarter would the directed enter OpEx around resets, often new follow-up I'm of year? of you little helpful. on that that I just gross assume maybe maybe sequentially. this in reflect higher And

Yes.

that. Let you've me seasonality related couple comments of the just door on to a opened touch since

comes with from effect to the expect we revenue, of gross then would in you sizable as margin mentioned uptick first model. you move have that think, upside ESI QX. as a to all, of QX that regard as QX, reverse you business in out with gross revenue the I from Similarly, margin, some though,

if it to So take it other out just side, on side. put got you one the on you've

just things the here the of OpEx, of of to are some the do regard you that quarter norm company we first do With for kind administration for salary entire year. reminding Keysight, the in

of that here impacting on, programs contraction the back the starting of period to the essentially will of OpEx as which turning a year. then P&L inflects -- pay from our So we increase next starting And a business growth, period back will now. essentially variable have be first in in half

with The next Bank. from Deutsche question is Matt Niknam

seems On that the can macro, some better pockets evolved I'm backdrop others like seems bit quarter? that little how It yet. you if there's auto, has like last to speak over like getting softer. it are curious maybe Because are a that

backdrop you U.S. commentary just you mentioned a aerospace quarter, as strong around then maybe in defense, any macro You the follow-up can about the talk what quarter? So very particularly closeout the later changed a on can to provide? the on general And

trended the XQ? into of what and of maybe that's Just how fiscal in start changed curious terms

I some about Wallace and broader the we'll then start aerospace business. don't make making about Why by Yes. macro, let comments defense some comments Mark

all, coming in into comments, better the So marginally expected were mentioned we the prepared QX first Satish his than of as in results quarter.

think I of possible that so And lot a that's strength.

in aerospace defense. was So

pressure as will pullback And think which at around development so that. this impacting seeing as previous point pretty you significantly. the to alluded significant I is think about industry and question automotive that about time, the think in the spend changes where most business this I EV macro well, in talk we're is Mark But

stability, strong in look I broader catalyst at least across you a stability, but wireline in forward not yet think nice maybe defense. for growth aerospace strength wireless, if momentum and

that do -- optimistic I and is timing. begin on it's the semi, a to in regard really turn with about when is, think a When earnest. question question think does semi everybody back of I

biggest because I and some people tied 'XX, end fully then absorbed is chain start once And the 'XX, was place to during that mark how of reinvest time what the think 'XX the going capacity capacity Over out in supply to again put as that disruptions. to industrial maybe capacity. be that manufacturing markets, question that in of

So a that's kind of the markets how end from through we're macro perspective. thinking

And Satish has Yes. I 'XX, government nations. on program part the of about defense remained think the in put year, as last Matt, continuing starts. the defense, the aerospace talked top year on priority first focus a modernization allied in We -- some fiscal the had the resolution U.S. new fiscal which delays and

government we fourth entered the budgeting certain we delays because as of which September, not would see, into year-end So we saw the quarter spend as with in was process. the increased fiscal normally in

contractors So contractors the for that about We as well that U.S. as as prime to the to and investments situation Europe continued talking see many big was Western we've a government unfold. continues positive. the in as quarters from in direct geopolitical the been prime well the

of offer over promising So I that government-funded Quantum the parts the occurring continue longer those MSO come us continue satellite around term, and opportunities the all us quarters. in with areas that's together. And space be coming to factors think are research the and then to for world of some

question next with Chatterjee is JPMorgan. Samik The from

target outline a comments seeing, growth about those terms if and recovery you're you X% in really for sort and the should what in your have businesses I earlier what fiscal areas, X think you're electronics. in cap of your quick that. your what mixed semi about I for How a thinking I expectations Seems of are not back both about I after my for embedded but go embedding bit general to or guess of Satish, just of can kind all particular, are follow-up like in first how one, inflection if 'XX. can

Thank Samik. you,

and in I silicon for of see of think fabs, solutions based think that that's wafer photonics bit slowdown trend of somewhat in as voltage reported topologies semiconductor what us. on and offset types equipment we test I well. continues bigger semi little our a by our by of for and some the that a seeing part around opportunities new the somewhat we're the of memory the wafers, for -- manufacturers number semiconductor offset just higher pipeline business, a

levels in So semi the -- us. that you from mix, for still we think these put grows

of again, as a level. roughly and know, revenue XX% And one the total general you From perspective, quarter at doesn't started we again, our is trend. semiconductors, to a electronics what company see, make have

it's to the which finally want which saw return should strength quarter. call level, Again, this business that some But should year. think It's research the we think growth we -- just to all manufacturing in resulted in on But of at EISG to which point. well, difficult I point you. return do I as So stability QX, broad continues that, -- customer in around put stability underlying in return we the caution in should in new manufacturing give some as one growth. technologies, to that just we at move order spending that forward next-generation

Okay.

is this Neil. for more my And maybe follow-up, Okay.

I to look where a the you those of volume margin that the margin gross is you previous margin from getting of from think, XX%. investors something to sort about guidance sort targets? different about how a drivers at this perspective, targets think that gap some needs were much was but thinking other your to closer not target? at lot should for drivers at there question bit really significantly relative a that a when to and they a you're is beyond point get to you're to How that your XX%, Neil, fiscal evaluated Or leverage, more you're of 'XX, longer we XX% of be XX% target that operating to

things. of Yes, say a I'd couple

margins think held on Keysight cycle. software you gotten have held all, from on up have the business. if even the total gross gross downside we're Obviously, But look the here of how of margins of the the of the at business, So ESI in first I with cycle. pretty well downside core addition pleased the up we've some benefit

about start of you out margin think further put points off targets when line. the off think basis that operating -- where, margin at those on XXX I we we're we're targets XXX, again, XX% that to operating XX%, significantly levels. And but current

start I that we that going at significant where opportunity accretive to margins. be short dilutive operate I to are on and profit the the made and that gross run, on that's get of look to to margin think having side the as operating businesses those significantly for integrated operating leverage model to us we've you within And acquisitions those them things. impact to Keysight close acquisitions gap margins operating think need to the the but in greater some acquisitions start drive are

And track. operate above long-term back we realize growth we And us of get confident disciplined seen in leverage business we can business. those opportunity continue to to and deliver earnings power this this on sort Samik, and when rates, model you've of remain a able be the to have, we growth the way in

next with is The Stanley. Marshall Meta Morgan from question

Meta. Congrats on quarter. This is Karan the on for

EV cause have have that, exposures positive So remain within outside there are you outside improving? on business pickup on auto other any could starting a maybe that just in Clearly, I And the quite that the simulation. of of you follow-up. automotive side. But then a sales

Yes. Sure.

quite project several test that the EV several slowdown robust automotive. labs. to part the been So parts The that have around and over is battery we're years there delays are with investments seeing last

ADAS, should but We're that's flow-through seeing of part The seeing we're for increasing of or autonomy the also communications, parts that inventories test vehicles our crossing see stay pause that have side, business software-defined a part that's that that. levels, into that. sensor so is our technology the continued normalize, demand and another where business of as manufacturing innovation in a is the steady well. manufacturing over we multiple So lot remained we software and of as some forth, lower

work of frame. lot a being in there's done So that

attention, but doesn't And lot much at the news on the a that least calls, infrastructure. as the other attention one gets get is of these from

we're additional associated that the and infrastructure charging with region world, the represents in of So every standards the opportunities those pursuing.

drivers for on secular an advanced AV, years. of us over coming the around growth, of long-term So new manufacturing technologies drivers remains many focus area back

maybe opportunity of take the helpful. That's your of today? that or content sort in there areas to coming seeing the that could products any back side, that you're are it. see And Got offer to then you advantage new portfolio AI grow you

Yes. Good question.

us. which provide we in and think early impact concentrated I with we it's logical industry enabling areas, for with are of we and the rich and sampling is pretty design, tools, set customers or associated on We're mentioned, AI of way come our is where all be the going provide ecosystem today our the with small a opportunity in we focus it's today, the the today, participating and more come our layer parts opportunity what seeing we're tools expect [indiscernible] a broader, other growth is the as that the results seen we emulation -- physical the from scopes have on. from have it's a that enabling set opportunities a and to in Again, customers still pilots bigger our to we're the workflow, scopes tools to for emulation R&D right platforms. of And from test.

Davis. Thalhimer with is Thompson, question from next Adam The

Congrats on to ask first in about on margin And I Communications. congratulations -- the the I retirement. operating wanted beat. to your first ask wanted Mark, about

outlook ever was me of margin think surprise. operating best quarterly your that I took there? kind that drove is what and what Curious by the

Yes.

held the So very in that up business. pleased in have obviously, strong we're margins with results Gross very CSG.

think recurring software, side, from very pleased standpoint, position we I ESG saw. the on we're I profitability the on there's and a less we're the I strong invest and software higher mix. efficiencies less on significant to we while that on SG&A than from driving to margins. -- foot revenue that helps the only higher think upside But in so From side, capitalize continuing do portfolio not margin see impact diversity which think we the CSG a see R&D tight ourselves keeping obviously content, gas in our resulting the profitability

this obviously, this very operating all-time quarter, record, we it quarter. margins not So but in profitability strongest the was saw strong an CSG

in growth EISG, think what weakness about full And the year, are to offsets auto? then in the you as the

and about 'XX? talking in You're 'XX

auto year. of 'XX, fiscal what in this For [indiscernible]

again, back-end about capacity We've put look years. prior the semi some Yes. I think the for a more be the that look absorption place of talked mean of loaded. in as industrial gradual to and we Keysight there level teams as optimism was the is fab I in programs likely to at the reason with broader year. forward, the to improvement and through markets,

modest for the back that industrial in expect do Satish some increase with And yet has said, is some markets. order of so the as not to I end which EISG, be growth would in in opportunity and of semi there half we markets returned think the recovery to an significant would so the year. strength And

Delaney with Sachs. question Mark Goldman next is The from

on Will here. Delaney Mark for

Just M&A. on one

So business the if still in ongoing, and financial proposed Keysight that do larger in near available? open to term was transaction the will since with firing transactions it one be made other is

evaluate announced, we I very we markets specific more We've also strong bandwidth at it's to focused a on a as we'll them. while pursue point, And Yes. would capital this we M&A. much we've that to identified we're the deals look look, of we a that given have not pursue say, through. reiterated and at to just organic selective we're disciplined strategy But that continue remain as which have growth we'll realizing. working already matter deals targets, always studied

any fiscal or capital one helpful. be more about color on helpful. you cadence thinking 'XX, be that be should And for that just How add buybacks No, can there should any location. we would commentary

transaction, our And obviously, close we minimum, significant we look Spirent buyback we say company. will, the continue the I Yes. will but a that of for expect with the capital -- do would be forward that, The thing at to a outlay which is only program what the on as at front. at to a buyback to more opportunistic off to least to do traded we'll close see might get cash Spirent transaction, the balance between the ready the and we trying starting opportunities against be anti-dilutive level then strike

That would Sims to back call like Paulina concludes our for question-and-answer comments. session to any for the I closing turn today.

and thank Have Thank you, all you great joining a for today. us operator, day.

our conference call. This concludes

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