Keysight Technologies, Inc. (NYSE:KEYS) Q4 2022 Earnings Call Transcript

Mark Wallace: Yes. Thanks, Satish. And Jim, what I would ask is the go-to-market, you mentioned that, and that is an important element of this. We are attaching upfront attached services and software. We’re at about 60% for services today. I want to see that grow. So that’s another stream of advancement. The other thing that you can see is we are delivering solutions more and more through updates to our software. If you think about our 5G solutions going from Release 15 to Release 16 and 17, much of that is software updates that creates additional opportunities for up-sell, cross-sell and, of course, recurring revenue as well. So there’s — and there’s several elements of our go-to-market that we are deploying now to encourage that recurring growth and expansion of attachment upfront to our total solutions.

Jim Suva: Great. And then my follow-up is on the China. I think I heard two to three points of headwind. Is that for kind of the full fiscal year? Was there any, like, in calendar — I’m sorry, fiscal Q4, like buying ahead of the rule changes? I’m just trying to kind of triangulate around the magnitude of it. And I assume after fiscal ’23, it’s kind of all out of the model from the rule changes.

Mark Wallace: Yes. Jim, I think we said one to two points of headwind for the entire fiscal year ’23. And again, that’s based on what we estimate as the run rate of business that won’t be available to us with the new trade restrictions. There will be a little bit more in Q1 as we look at some of the backlog, but that’s the run rate. And then there was another — I think Neil mentioned another point of headwind with — from Russia.

Operator: Our next line of questions comes from the line of Meta Marshall with Morgan Stanley. Your line is now open.

Meta Marshall: In the past, you guys have talked about kind of the 5G peak was going to be much lower than kind of investors were expecting, but you kind of talked about a ’23, ’24 time period for the 5G peak. I just wanted to kind of get current thoughts on that and just how initiatives like ORAN or just some of the other initiatives are maybe extending that. And then maybe a second, you gave some context that you’re seeing some loosening in supply chain. But just kind of what is current thinking? Is it still just a small amount of parts that you’re kind of waiting to release? But just when do you see more general availability of those parts and just kind of a tightening between supply and demand?

Satish Dhanasekaran: Yes. Thank you, Meta. I think on the 5G front, I think as we have always stated, there are multiple catalysts. I think about 18 months ago, I said the first catalyst was the C-band deployments in the U.S. That’s played out as we had hoped, and we have captured a lot of that spend. We are pleased with some action that’s happening in Asia and India, parts of India that have made commitments to roll out 5G. So that’s, again, opportunity for us that’s playing out right now. But the second and the third part to this is the millimeter wave opportunity. There’s still some complex challenges with millimeter wave that customers are trying to solve. That continues to be a longer-term R&D opportunity for us as that deployment has continued to push out anyway — scale deployments anyway.