Keysight Technologies Inc.

Good day, ladies and gentlemen. Welcome to the Keysight Technologies Fiscal Second Quarter 2021 Earnings Conference Call. My name is Gabriel and I'll be your lead operator today. After the presentation, we will conduct a question and answer session. If you'd like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press the pound sign. If at any time during the conference you need to reach an operator, please press star followed by zero. Please note that this call is being recorded today, Wednesday, May 19th, 2021, at 1.30 p.m. Pacific time. I would now like to hand the conference over to John Carey, Vice President, Treasurer and Investor Relations. Please go ahead, Mr. Carey.

Thank you and welcome everyone to Keysight's second quarter earnings conference call for fiscal year 2021. Joining me are Ron Nersessian, Keysight's Chairman, President and CEO, and Neil Doherty, our CFO. Joining us in the Q&A session will be Satish Dhanasekaran, Chief Operating Officer, and Mark Wallace, Senior Vice President of Global Sales. You can find the press release and information to supplement today's discussion on our website at investor.keysight.com. While there, please click on the link for quarterly reports under the Financial Information tab. There you will find an investor presentation along with Keysight's segment results. Following this conference call, we will post a copy of the prepared remarks to the website. Today's comments by Ron and Neil will refer to non-GAAP financial measures. We will also make references to core growth, which excludes the impact of currency movements and acquisitions or divestitures completed within the last 12 months. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. All comparisons are on a year-over-year basis, unless specifically noted otherwise. We will make forward-looking statements about the financial performance of the company on today's call. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please review the company's recent SEC filings for a more complete picture of our risks and other factors. Lastly, I would highlight that management is scheduled to participate in upcoming virtual investor conferences hosted by JPMorgan, Stifel, Baird, UBS, and Bank of America. And now I will turn the call over to Ron.

Thank you, Jason, and thank you, everyone, for joining us. Keysight delivered a record quarter, and we are entering the second half of the year with momentum. Our broad portfolio of differentiated solutions continues to drive growth across a diverse set of growing markets. Today, I'll focus my comments on three key headlines. First, we delivered outstanding Q2 results with all-time record orders, revenue, and free cash flow. Second, Keysight is enabling leading-edge disruptive innovation around the world. Our solutions have significant differentiation and contribute significant value to customers, which is fueling our growth for the long term. Third, while we are managing longer lead times and component availability, Our leading market position, strong customer relationships, and supply chain resiliency give us the confidence in our ability to deliver on our commitments. Now let's take a deeper look across our second quarter performance across both business segments. Record orders of $1.3 billion grew 22%. Revenue grew 36% to $1.2 billion, which was an all-time high. We delivered second quarter gross margin of 64%, operating margin of 26%, and earnings of $1.44, which was above the high end of our guidance and represents 85% year-over-year earnings growth. We also achieved record-free cash flow of $369 million. Over the last 12 months, Keysight generated just over $1 billion of free cash flow that we've deployed through approximately $500 million in acquisitions and $455 million in share repurchases. We continue to be active and disciplined in our capital deployment. Second quarter strength was broad-based with double-digit order and revenue growth across all markets and regions. Outstanding results by both business segments demonstrates the power of T-Site's diversified portfolio in 5G and beyond. Our electronic industrial solutions group achieved its third consecutive quarter of record revenue with strong double-digit order and revenue growth in general electronics, semiconductor, and automotive. The breadth of our contributions across multiple industries is exemplified by our double-digit order and revenue growth in our general electronics business. With ongoing investment in broad digital transformation, including advanced consumer electronics, digital healthcare, and industrial IoT, Keysight is enabling innovation and capturing technology inflections for the IoT ecosystem. Strong demand for our semiconductor solutions drove record orders and revenue. Customer investment in advanced technology nodes remains high, while capacity is expanding for mature processes to address surging global semiconductor demands. In automotive, record orders resulted from improved macro conditions and increasing investments in EV and AV technologies. Keysight Solutions' portfolio for the automotive market continues to expand with new advanced technologies such as AC power emulation, millimeter wave radar, power semiconductor technology, automotive Ethernet, C to V2X, and cybersecurity software systems. As the reinvention of automotive ecosystems continues, Keysight is enabling the disruptive innovation of new mobility technologies. Our communication solutions group achieved record orders and delivered double-digit order and revenue growth in commercial communications and aerospace defense and government. Aerospace defense and government revenue grew 46% driven by strong demand in space, satellite, signal monitoring, 5G, and early 6G research applications. Keysight's engagement with key industry players remains strong. We recently enabled the large prime contractors first testbed and have secured multiple 5G solutions wins in the aerospace defense and government markets. Commercial communications orders and revenue both grew double digits, driven by the ongoing investments in 5G and 400 gig, 800 gig Ethernet solutions for data centers. As 5G progresses and deployments drive sustained investment, we are uniquely positioned to capture the opportunities ahead at the ecosystem scales. Recent engagements include a broadening set of new customers as well as key industry players such as NEC, Fujitsu, and MediaTek. We continue to maximize the 5G lifecycle opportunity and lead the industry with differentiated 5G solutions. In addition, the success of our application layer strategy is reflected in the strong demand for new technologies such as O-RAN and business expansion in new end-to-end verticals. Our ability to provide complete solutions for network protocol tests, security, and visibility is enabling us to solve many challenges across the industry. In another area of disruption, we continue to advance our long-term initiative to enable the quantum revolution. We are growing our quantum engagements with key customers worldwide. We also expanded our quantum solutions portfolio this quarter with the acquisition of Quantum Benchmark, which brings deep expertise in the performance validation software for quantum computing. Keysight's software-centric solutions and higher-value services continue to drive differentiation and recurring revenue growth. For the second quarter in a row, software and services each delivered double-digit order and revenue growth. Beyond innovation, execution, and financial discipline, Keysight's culture has long embraced corporate social responsibilities. We believe our focus on climate and diversity provides us with a competitive advantage. We recently published our annual CSR report, which includes progress towards our prior goals and the announcement of our commitment to achieving net zero emissions in the company operations by 2040. We are working to set interim science-based targets to ensure our progress towards this goal. Diversity and inclusion are also embodied in our Keysight leadership model. As a CEO priority, we have specific goals and actions that will be tracked by our leadership team and the board of directors. Diversity and inclusion brief will be published this month that describes our longstanding D&I philosophy, as well as the details of our strategies and goals. While there is more work to do, Keysight remains steadfast in our commitment to CSR and building a better planet. As we look ahead, we are encouraged by the strong demand for our differentiated solutions while managing the longer lead times and component availability constraints. Our in-house high-performance semiconductor fab and the strength of our order fulfillment team are helping us manage these near-term supply challenges and give us confidence in our ability to navigate them entering the second half of this year. In summary, Keysight is enabling disruptive innovation across multiple waves of technology with a decades-long runway ahead of us. Our execution in the face of many dynamic challenges this past year is a testament to the Keysight leadership model, our employees, and the breadth and depth of our customers. Now, I would like to turn it over to Neil to discuss our financial performance and outlook in more detail.