Keysight Technologies Inc.

Good day, ladies and gentlemen. Welcome to the Keysight Technologies Fiscal Fourth Quarter 2021 Earnings Conference Call. My name is Catherine, and I will be your lead operator today. After the presentation, we will conduct a question and answer session. If you would 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 the star followed by zero. Please note that today's call is being recorded today, Monday, November 22nd, 2021 at 1.30 Pacific time. I would now like to hand the call over to Jason Carey, Vice President, Treasurer in Investor Relations. Please go ahead, Mr. Carey.

Thank you and welcome everyone to Keysight's fourth 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 Janashikaran, 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 otherwise noted. 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 note that management is scheduled to participate in upcoming investor conferences in December hosted by Credit Suisse, Wells Fargo, and Barclays. And now I will turn the call over to Ron.

Thank you, Jason, and thank you all for joining us. Keysight delivered a record quarter and fiscal year. Strong demand for our portfolio of differentiated solutions is fueling continued momentum across all of our end markets. Today, I'll focus my comments on four key headlines. First, demand for Keysight's differentiated solutions continues to be very strong with orders exceeding our expectations. Outstanding order growth of 21% in the fourth quarter topped off an excellent fiscal year where we grew 18%. Demand continues to be balanced across our business with double-digit gains across all end markets and regions, both in the fourth quarter and for the full fiscal year. Second, we delivered outstanding Q4 results Exceptional execution by Keysight employees around the world resulted in record revenue, gross margin, operating margin, and earnings per share for the fourth quarter and for the fiscal year 2021. Third, we entered 2022 with strong momentum, robust end market demand, and record backlog. Assuming a loosening of the supply situation in the second half of the calendar year, we expect fiscal year 2022 revenue growth of 6% to 7% while delivering 10% earnings growth. Beyond 2022, we are increasingly confident in our ability to deliver sustained above market results. we have established a strong track record of execution and our competitive position earned over the past seven years of investment and transformation has only grown stronger. Lastly, given the strength of our cash position and generation, we continue to see tremendous opportunities for value creation through disciplined investment and organic capabilities, targeted acquisitions, And accordingly, today we announced a new share repurchase authorization of $1.2 billion. Now let's take a deeper look at the strength of our fourth quarter and the fiscal year 2021 financial performance. In the fourth quarter, we saw continued momentum in the demand environment. Revenue grew 6% with growth across all regions. Operational excellence resulted in record profitability as we delivered gross margin of 66%, operating margin of 31%, and earnings of $1.82 per share. Fourth quarter results drove a very strong finish to an excellent year. In 2021, we overcame five percentage points of China trade headwinds and delivered 18% order growth to outpace the overall market, which continues to be strong. Despite a tightening supply environment, we ended the year with 17% revenue growth and achieved record profitability with gross margin of 65%, operating margin of 28%, and earnings of $6.23 per share. Compared to pre-pandemic fiscal year 2019, orders and revenue have grown 21% and 15% respectively over this two-year period, highlighting the continued strong demand for our market-leading solutions. Broad-based growth across multiple dimensions of the business demonstrates the breadth of our customer base. We added more than 2,000 customers in 2021 and more than 1,900 in 2020 as we continue to expand our footprint, adding to the stability and durability of our business model. Despite the headwinds we faced in 2021, we delivered annual double-digit order and revenue growth in both business segments. The Electronic Industrial Solutions Group achieved its fifth consecutive quarter of record revenue driven by double-digit growth in semiconductor solutions and in automotive. Another quarter of record semiconductor revenue was fueled by ongoing investments in advanced technology nodes and capacity expansion to address pent-up demand. In automotive, we achieved record orders for the third consecutive quarter of double-digit order and revenue growth. Investment remains strong in EV and AV technologies. This quarter, we announced a collaboration with NIO, one of China's top EV automakers, who selected Keysight's 5G and CD2X network emulation solutions. Strong demand for general electronic solutions was driven by continued investments in digital transformation, industrial IoT, digital health, industrial 4.0, and advanced academic research. The Communication Solutions Group delivered double-digit order growth and record revenue in the fourth quarter. For the year, orders and revenue grew double digits despite the impact of China trade restrictions. Commercial communications achieved all-time record orders and revenue in the fourth quarter. Q4 was another record quarter for 5G driven by the strength of our platform, continued O-RAN adoption, and new industry applications. In addition, we saw ongoing investments in 400G and 800G R&D across the entire communications ecosystem. Increased spending in data centers and network security drove double-digit order growth in network test and visibility. In aerospace defense and government, double-digit order growth was driven by ongoing investments in technology with a focus on space and new commercial technologies like 5G. We recently announced a collaboration with Lockheed Martin to advance 5G in support of mission-critical communications for aerospace and defense applications. Keysight's first-to-market solutions are enabling the rapid progression of new technologies and winning engagement with industrial leaders like NXP, NEC, and MediaTek. In Q4, we joined Google's cloud partner initiative to support agile orchestration of innovative 5G services at the network edge. Our end-to-end solutions portfolio continues to capture new opportunities as the 5G lifecycle progresses and expands into aerospace, defense, and government, automotive, and industrial applications. We continue to accelerate Keysight's capabilities to provide industry-leading solutions through strategic acquisitions and recently added scalable network technologies to our software-centric solutions portfolio. Scalable is a provider of best-in-class network simulation solutions to model and visualize communication networks and cyber-guides for aerospace, defense, and government customers. We're excited to welcome the Scalable team to Keysight. Our software-centric solutions and higher-value services continue to drive differentiation, strengthen our competitive position, and capture a higher percentage of our customers' wallet share. In fiscal year 2021, software and services not only delivered double-digit order and revenue growth, but also outpaced Keysight's overall growth. Combined, they represented just over one-third of Keysight's total revenue for the year. We also continued to grow annualized recurring revenue, which now exceeds $1 billion. The growth in software and services, as well as the recurring revenue, further strengthens while at the same time contributing to Keysight's margin expansion. Keysight's focus on first-to-market, software-centric solutions and operational excellence drives our consistent execution. We have a strong track record of performance and proven business resiliency. Since our inception as a public company seven years ago, we have achieved a 10% compound annual revenue growth rate, expanded gross margin by over 800 basis points, increased operating margin by nearly 1,000 basis points, and generate 16% annualized EPS growth, all like significantly increasing investment in R&D and sales to drive future growth. Over the same period, we have nearly tripled the size of our software revenue and more than doubled recurring revenue while growing services 75%. These accomplishments are a testament to Keysight's leadership model, our values, and our people. I would like to thank all Keysight employees for their exceptional execution and dedication. We continue to capitalize on these multiple ways of technology innovation and long-term secular growth trends across multiple markets. We exit this year in a strong competitive position and expect to continue to deliver sustained, above-market, profitable growth. Now, I will turn it over to Neil to discuss our financial performance and outlook in more detail. Happy Thanksgiving.