Keysight Technologies Inc.

Good day, ladies and gentlemen, and welcome to the Keysight Technologies fiscal second quarter 2022 earnings conference call. My name is Tia, and I will be your lead operator today. 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 this call is being recorded today, Tuesday, May 17, 2022, at 1.30 p.m. Pacific time. I would now like to hand the conference over to your host, Jason 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 2022. Joining me are Satish Dhanasekaran, President and CEO, and Neil Doherty, our CFO. In the Q&A session, we will be joined by 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 segment results. Following this conference call, we will post a copy of the prepared remarks to the website. Today's comments by Satish 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 hosted by JPMorgan, Baird, and UBS. And now I will turn the call over to Satish.

Thank you, Jason, and thank you all for joining us. Welcome to the second quarter 2022 earnings call and my first as the CEO of Keysight. I'm humbled and honored to be Keysight's CEO and excited about the future. I would like to thank Ron Nersessian for his visionary leadership of the company, which has provided us a solid foundation to build on. Over the last decade, I've had the honor of working closely with Ron and benefited greatly from his experience in many different roles I've held since joining the company 16 years ago. This is a great time to be at Keysight as we remain focused on our core purpose of accelerating innovation to connect and secure the world. Keysight delivered exceptional results in quarter two, driven by strong execution and broad-based demand across the business. The team focused on innovating, and solving customers' design and test challenges while successfully navigating the ongoing supply chain and geopolitical challenges. I will focus my comments today on three key headlines. First, we delivered record quarter two orders capitalizing on the robust end market demand for Keysight's high-value differentiated solutions. Our focus on delivering first-to-market solutions is enabling us to uncover new emerging applications adding to our momentum. Second, we achieved record revenue, strong operating margin performance, resulting in record earnings per share, which grew 27%, demonstrating the durability and resilience of our business. Third, we are raising our outlook for the year based on our strong performance in the first half and continued momentum. We now expect to achieve revenue growth approaching 8% and earnings per share growth in the range of 14 to 15% for the fiscal year. Let's now take a deeper look at our results for the quarter. Second quarter orders grew 9% to $1.46 billion and outpaced revenue, which grew 11% to a new record of $1.35 billion and was $41 million above the high end of our guidance. We achieved gross margin of 65%, operating margin of 29%, and record EPS of $1.83, exceeding the high end of our guidance by 14 cents. Also, with the ongoing equity market volatility, we again capitalized on the opportunity to accelerate share repurchases. These results are a reflection of our strong portfolio and our global team's application of the Keysight Leadership Model which enables us to deliver consistent value to all stakeholders. We delivered these results despite many headwinds, including geopolitical challenges, inflationary pressures, and continued supply chain disruptions. We continue to advance our software-centric solution strategy as the rapid pace of technology accelerates. Our customers across end markets are seeking deeper engagements earlier in the design cycle and are adopting our software solutions. The capabilities of our PathWave software platform facilitate continuous stream of releases that matches the innovation cadence of our customers. This enables us to secure enterprise agreements with market leaders for high value R&D solutions. Orders for software and value added services like Keysight Care again grew double digits as we continue to grow recurring revenue this quarter. Turning to our business segments, Communications Solutions Group delivered record second quarter orders and an all-time record revenue. Within CSG, Commercial Communications achieved all-time record orders and revenue with double-digit order growth for the third consecutive quarter. Ongoing innovation and investments in our end markets spanning both the wireless and wireline segments remain strong driven by adoption of 5G, 400 gig, 800 gig, and terabit, and optical technologies. In wireless, the increase in the number of 5G device types continues to drive test and certification requirements. With our leading solutions portfolio, we expect to benefit from the continued investment in the evolution of 5G standards, including standalone 5G, release 16, and beyond. In quarter two, Keysight announced collaborations with leading companies such as NTT Docomo, Telefonica, and Analog Devices to enable a wide range of 5G applications, including ORAN, which continues to gain momentum. In Wireline, we're enabling the digital transformation driven by cloud computing and telecom stack virtualization through our end-to-end solutions. We recently launched the industry's first 800-gig solution to enable data center design workflows for ultra-high data rates and energy efficiency. Aerospace, defense, and government achieved record Q2 revenue driven by double-digit growth in Americas and strengthened signal monitoring, cyber, and space and satellite solutions, as well as 5G and 6G applications. Complex scenario emulations continue to drive the need for modeling and digital twin solutions with increasing software content. Our leading network analyzer platform and phased array test solutions enable increasingly complex satellite communication design and test requirements. Increasing defense budgets in the U.S. and Europe are expected to provide support for higher spend going forward. CSG is well positioned to capitalize on growth by enabling innovation in our end markets through our broad and synergistic portfolio, including wireline, wireless, cybersecurity, satellite, and space solutions. The electronics industrial solutions group delivered double digit order and revenue growth for the seventh consecutive quarter driven by automotive and semiconductor solutions. In automotive, all time record revenue was driven by strong demand for our expanding portfolio of EV and AV applications. Keysight is capitalizing on strategic investments in the automotive and energy space, providing industry-first solutions that support new capabilities and use cases, such as our recently launched protocol test solution for in-vehicle networking. In addition, we're excited by the recognition of our new radar scene emulator solution, including the 2022 TechDOT 80 Europe Award. We saw strong demand for our semiconductor solutions, which delivered double-digit order and revenue growth. Investments in advanced semiconductor technologies, along with capacity expansion for existing nodes, remained robust. Over the next three to five years, we see solid customer R&D roadmaps for ICs for a broader set of applications. As an example, in Q2, we sold our first on-wafer silicon photonics parametric test solution to a major semiconductor fab to develop and manufacture next-generation data center transceivers. We believe this trend represents long-term opportunities for Keysight's R&D solutions portfolio. Our general electronics business achieved all-time record revenue as investments continued in manufacturing and device development for consumer and industrial IoT, digital health, and advanced research. We're seeing active investments globally in fundamental research in terahertz and quantum technologies. For example, We recently announced a collaboration with National Research Foundation of Singapore's quantum engineering program to accelerate research and development and education in quantum technologies. The strength of our general electronics business reflects the broad nature of applications for our solutions. Before I wrap, I'd like to acknowledge and thank our more than 14,000 employees worldwide for their commitment to our customers around the globe and for their passion in delivering market-leading solutions. I'm proud to share that Keysight was recently named as one of Fortune 100's best companies to work for in 2022. This is a recognition of our inclusive and diverse culture exhibiting value for collaboration, high performance, and innovation. Our culture also places high value on corporate social responsibility. We recently released our 2021 CSR report highlighting our progress in environmental, social, and governance efforts worldwide and announcing new goals to track through 22 and into 23. I believe Keysight has a bright future ahead. I look forward to working with the team to execute our strategy and continue to deliver greater value for our customers, shareholders, and employees. With that, I'll turn the call over to Neal to discuss our financial performance and outlook.