Keysight Technologies Inc.

Good day, ladies and gentlemen, and welcome to the Keysight Technologies Fiscal Fourth Quarter 2022 Earnings Conference Call. My name is Dante, 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. 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 zero. This call is being recorded today, Thursday, November 17, 2022, at 2 p.m. Pacific time. I would now like to hand the conference over to Jason Carey, Vice President, Treasurer, and Investor Relations. Please go ahead, Mr. Carey.

Thank you, and welcome everyone to Keysight's fourth quarter earnings conference call for fiscal year 2022. Joining me are Keysight's President and CEO, Satish Dhanasekaran, and our CFO, Neil Doherty. In the Q&A session, we'll be joined by Senior Vice President of Global Sales and Chief Customer Officer, Mark Wallace. You can find the press release and information to supplement today's discussion on our website at investor.keysight.com under the financial information tab and quarterly reports. Today's comments by Satish and Neil will refer to non-GAAP financial measures. We will also make reference to core growth, which excludes the impact of currency movements and acquisitions or divestitures completed within the last 12 months. The most directly comparable GAAP financial metrics and reconciliations are on our website, and 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. We assume no obligation to update them. Please review our recent SEC filings for a more complete picture of these risks and other factors. Lastly, management is scheduled to participate in upcoming investor conferences hosted by Credit Suisse in Las Fargo. We hope to see many of you there. And now I will turn the call over to Satish.

Thank you, Jason, and thank you all for joining us. Keysight reported strong fourth quarter results, which exceeded the high end of our guidance and drove a strong finish to the year. Before we get into the quarter, I want to highlight our exceptional performance for fiscal year, which illustrates continued progress we're making in transforming the company to a software-centric solutions provider. We set new records for orders, which grew 12% to $6 billion, a new record for revenue, which was up 10%, and a new record for earnings per share, which increased 22%, all the while returning capital through $849 million in share repurchases, or 89% of free cash flow. In addition, we continue to invest in next-generation technologies for long-term differentiation and and see a high level of engagement and activity with our customers around their future needs. Today, I'll focus my comments on three key headlines. First, we delivered an all-time record revenue and earnings per share in the fourth quarter ahead of expectations enabled by outstanding execution by Keysight teams who successfully navigated supply chain, geopolitical, and macro dynamics. We achieved record orders of 1.6 billion with steady bookings throughout the quarter and a book-to-bill of 1.09. While our customers' multi-year roadmaps remain unchanged, they are exercising more caution given the macro backdrop, which we anticipate will moderate demand in the near term. Third, as we enter fiscal 23, we remain confident in our ability to outperform the market based on the differentiation of our solutions, our strong R&D customer value proposition, and the robust backlog position we have entering the year. And as we look longer term, the secular innovation trends in our end markets remain strong. Now let's take a deeper look at the strength of the fourth quarter. Record orders of 1.6 billion grew 9% on a core basis. Record revenue grew 15% on a core basis, with solid growth across all regions as Keysight teams successfully navigated challenging dynamics. This resulted in record quarterly earnings of $2.14 per share. The strength and resiliency of our business model is due to our strategic efforts to diversify our industry exposure. This has been best exemplified in the growth of our electronic industrial solutions group and our ability to leverage our industry-leading first-to-market solutions to enable expansion across the broader communications ecosystem. EISG achieved its ninth consecutive quarter of double-digit order and revenue growth. Auto, semiconductor solutions, and general electronics all achieved record quarterly revenue. For the year, both orders and revenues set new records as we capitalize on continued investments across all three EISG markets. In automotive, we're pleased with the continued adoption of our solutions portfolio as orders grew double digits for the seventh consecutive quarter and exceeded $500 million this year. Automotive OEMs and their suppliers continue to focus on strategic new mobility investments, which drove key wins for Keysight. In addition, automotive-focused semiconductor companies continue to add capabilities to support EV and AV applications, which we view as a favorable long-term dynamic. We recently announced the SignLab DC Emulator, which enables customers to accurately characterize high-voltage, high-power electric vehicle battery performance under varying real-world charging conditions. And Keysight's PathWave Labs operations software won 2022 Auto Tech Breakthrough Award for overall electric vehicle technology. In support of AV applications, silicon designers are exploring adoption of commercial standards such as MIPI for automotive and other surround sensor applications, including cameras and in-vehicle infotainment displays. We are now expanding our leading compliance test solutions to offer advanced verification and diagnostic capabilities for automotive designers. Turning to our semiconductor solutions business, Q4 was the 10th consecutive quarter of double-digit order growth and a record revenue quarter. We saw sustained demand for our wafer test solutions and precision positioning capabilities, which enabled the realization of advanced process nodes. In addition, Keysight has continued to partner with industry leaders Synopsys and Ansys on RF and millimeter wave integrated circuit design flows built for today's wireless communication requirements, including 5G and 6G system on chips. Keysight received a Partner of the Year award from TSMC for joint development design flows in RF and millimeter wave nodes. In general electronics, Record orders grew double digits this quarter as demand remained strong and broad-based across industrial IoT and digital health as well as education and advanced research markets. Turning to Communication Solutions Group, the business delivered strong orders and record revenue. Annual orders and revenue were all-time highs despite geopolitical headwinds and delays in U.S. defense budget appropriations. Commercial communications revenue grew 10% this quarter and 11% for the year, with growth across all regions. Investments across communications ecosystem continued throughout the year, with sustained spending in next-generation wireless and wireline technologies. Ongoing investments in 5G standards, new spectrum, growing deployments around the world, and steady evolution from 400 gig to 800 gig to terabit Ethernet drove growth. We had another record year for 5G orders as Keysight's market leading solutions continue to provide the industry with new capabilities needed for development of next generation devices as well as wireless and wireline networks. Examples that highlight our portfolio's alignment with key industry priority include a recent partnership with IBM to integrate our Open RAN capabilities into their cloud automation tools to accelerate network deployments. We also completed the validation of our first 5G location-based service use case from Global Certification Forum by combining the testing of 5G new radio and global navigation satellite system technologies into a single platform. Lastly, in collaboration with key silicon and data center partners, We enabled the industry's first 1.6 terabit transmission and data center interconnect, leveraging our high-speed digital solutions. Aerospace, defense, and government business revenue grew 4% for the quarter and 3% for the year, setting a new record while navigating geopolitical headwinds. Steady investments in spectrum operations, cybersecurity, and space and satellite drove demand. 5G continued to expand in aerospace and defense end markets, and we saw increasing investment in advanced research. Proposed increases in investment in the US and allied countries for modernization of defense capabilities and new satellite and space applications position us well for future opportunities. As an integral part of our solution strategy, software and services order and revenue growth this year continued to outpace Keysight overall, which has driven our annual recurring revenue to approximately $1.2 billion. Software and services again represented just over one-third of Keysight's total revenue for the year. Keysight's focus on customer success and innovation is driving our development of first-to-market, high-value solutions. Our achievements over the years exemplify Keysight's collaborative culture and our talented workforce, and we are honored that Keysight has placed 10th on the Fortune's Best Workplaces in Technology list for 2022. We believe our differentiated culture gives us a unique ability to recruit and develop capable talent and will be our sustaining competitive advantage. In conclusion, I would like to thank our employees for all their contributions, commitment, and strong track record of execution. In the midst of an uncertain economic environment, we remain confident in the resilience of our business, the strength of our balance sheet, and the flexibility of our operating model. Now I'll turn it over to Neil to discuss our financial performance and outlook in more detail.