Keysight Technologies, Inc. (KEYS) Earnings Call Transcript & Summary

Well, good morning, everyone. I'm Jason Kary, Keysight's Treasurer and Vice President of Investor Relations. On behalf of our executive team, I'd like to welcome you to Keysight's 2023 Investor Day. Three years ago, almost to the day, we were here at the NYSE for our last Investor Day. Many of you may remember that was early March of 2020 just prior to the global pandemic. What a journey it's been since that time all the way to today for all of us, both personally and professionally. Keysight has successfully navigated the challenges of the last 3 years, and we're excited to share with you today our strategy and our confidence in the long-term secular growth drivers of our business. You're going to hear at least 4 common themes throughout the day, and they're easy to remember because they all start with C. The first one is consistency, the consistency of our software-centric solution strategy and our execution. The second is co-innovation. How we're co-innovating with our customers at the forefront of technology. The third is culture, our collaborative, innovative customer-centric culture, which we believe is a competitive differentiator. And then the fourth is compounding, having transformed the business, we're now compounding and increasing the resiliency of Keysight's business model. A few logistics as we get started today. Today's event is being webcast live. The presentation is available on our website. And as always please refer to our safe harbor, which is on Slide 4 of the presentation. I guess that's Slide 3. So turning to the agenda and our speakers today. So it's a unique opportunity today to hear from all of our business leaders together. So we have with us Satish Dhanasekaran, Keysight's President and CEO; as well as our Chief Financial Officer, Neil Dougherty. They're joined by our Chief People and Administrative Officer, Ingrid Estrada; our Chief Customer Officer, Mark Wallace; as well as the Presidents of our 2 businesses. So Satish will start things off, followed by Ingrid and Kailash. We'll then have a 15-minute Q&A focused principally on those topics in the first half of the morning. And then we'll have a short break. We'll come back from the break here from Huei Sin and hear from Mark as well as Neil. So with that, I'd like to turn it over to Satish, and let's get things started.

Thank you, Jason. Good morning, and a warm welcome to all of you to Keysight's Analyst Day 2023. My name is Satish Dhanasekaran, I'm the President and Chief Executive Officer of Keysight Technologies, have been in my role since May of 2022. I've been in the company for 17 years. But one thing I must say in those 17 years, very few people go past my first name. As you can imagine, and Jason Kary happens to be one of them. He consistently tries and get so close enough. So I've been in the technology sector for 25 years. Started my career as a design engineer at Motorola, designing handsets. And therefore, as a customer of a number of tools that we make today, I've interacted with the firm through all those years. And I've always been impressed by the collaborative culture and the innovative thinking that Keysight brings -- Keysight employees bring to the marketplace. And I joined the firm in 2006, and I continue to be amazed by the work we do at Keysight and equally by the breakthroughs we're enabling the world of technology. And before I get into the slides and get started, I want to maybe make some opening remarks a little bit more around my career. I've -- through my career experiences at Keysight I've led the wireless business led several successful transformations, including the wireless business, where I've taken the business to a market-leading position in the role of GM. I have also drove a 900 basis point operating profit improvement as the President of CSG in the 4 years I held that role and most recently, as the Chief Operating Officer of the company, have been responsible for leading the operations of the company through the pandemic and also successfully navigating the supply chain situation that we faced and continue to deliver strongly. Keysight has had a great strategic direction. Since then, our founding CEO, Ron Nersesian, put together a software-centric solution strategy, which the leadership team and the entire company embraced, and that has resulted in consistent and significant value creation for our shareholders. As you can see from the -- greater than 450% total shareholder return that we delivered since that time. this strategic direction is just getting started. We see many more legs of growth and opportunity to create value for our stakeholders. And myself and the leadership team here are very excited to continue this journey, and we hope to tell you more about this today. Before I get to trade, it's all about the future. And before I get there, I want to acknowledge that the economic -- the macroeconomic uncertainties in today's environment have caused some of our customers in select markets to pull back in response to this current situation. We delivered a very strong Q1, 10% revenue growth and very strong EPS growth in the quarter and reflected this uncertainty to our Q2 guide. So that's a little bit about what I'll say about the current situation. But I want to say like our philosophy and our mindset is to run the business to create value. We're here to maximize under all conditions. When times are good, you've seen what we have done on the upside. These are different times, and we're going to continue to drive to provide upside in the -- from a business perspective, and we have great customer relationships and ways to do that. With that, I wanted to then focus my presentation today on the long term and really excited to be here to give you an update on the business, talk about the progress that we have made as a company since 2020, since we were last year. And then talk about those long-term decades long secular growth wins or tailwinds in our business that are underpinning some growth and equally important, going up the technology stack vision that I have for the company to create long-term value for all stakeholders. So with that as a basis, let me get started. Keysight today, $5.4 billion global company, market-leading position in design and test. We further strengthened in the last 3 years, our share position in this attractive market. We have 15,000 employees globally that are located near customers and we have a strong financial track record here, as you can see, and also a track record of value creation. It is worth noting that Keysight has a -- since its spin has a tremendous amount of value creation opportunities. I don't know what's happening with my slides here. Since spin, Keysight has a tremendous amount of value creation opportunities across its diverse end markets. And those end markets are key for us to create value. The fact that we have exposure into commercial communications, aerospace and defense, and industrial end markets gives us the diversity of the end market applications to go for. The one other point to worth making about Keysight is that it is an enduring business that's been around for over 8 decades and throughout that time, if there has been one fundamental driver that creates value, it has been perpetual changes in the world of technology. Well, you can think of 2G to 3G to 4G to 5G to 6G and who knows after that, the one thing we can count on is change. And throughout that time, we've been able to embrace that change and go ahead and drive value. Our software-centric solutions strategy gives us a bigger opportunity to create greater value for our shareholders as we move forward. But we remain, as always, purpose-driven and future focused. Our purpose is to accelerate innovation, and we do that by offering total solutions to customers to enable their engineering workflows and give them a distinctive advantage from a time-to-market perspective. On the future focus -- from a future focus perspective, we're focused on diversifying our end market exposure, expanding our customer base. As I mentioned there before, we have 30,000 customers, and we keep adding more customers to our platform, and we're evolving the business mix from just products to higher-value solutions, which has the effect of growing software services and recurring revenue over time. Also worth highlighting the strong free cash flow performance in the business. Keysight has had a history of maintaining and sustaining and nurturing its deep lung term customer relationships. And today, I would say relationships with Keysight's customers are increasingly more strategic than transactional. We serve 30,000 customers worldwide across these 3 diverse end markets and what a way to serve them then be organized around them. We have Kailash and Huei Sin really focus and their group is really focused on these end markets, commercial comps and aerospace and defense within our Communications group, and electronics industrial group that Huei Sin leads, and you'll hear more about the plans we have for these customers. By organizing ourselves around our customers -- we get to understand where they're going. We understand the market insight and then we're able to take that and deliver first-to-market high-value solutions that creates value over time. I've spent a lot of my career at Keysight from the day I joined in customer-facing roles or interacting with customers. And what I continue to hear from customers is the level of complexity of technology that they're dealing with remains very, very high, and they are challenged by it. The speed at which they have to move or time to market is another critical challenge for them. So as a result, our software-centric solution strategy is much more relevant today to them than ever in the past. And so you're seeking deeper longer relationships with Keysight or collaborations, and I view this as a very favorable trend in the business because often, we're engaged with customers years ahead of when even their products have to be rolled out or years ahead of when even the products get commercialized and when consumers or businesses see it. In the recent 3 years, through the COVID pandemic, we've sustained and collaborated publicly with 140 customers, and you'll see those press releases and they are all here to inform the future direction of where innovation is headed. You'll hear from Mark Wallace, who have recently has taken over the role -- additional role as the Chief Customer Officer of the company, to really see how we're going to scale these customer collaborations to create greater value. This is a great chart about the compounding value creation we've created since spin. We've doubled -- nearly doubled our revenue, growing at 10% CAGR and tripled our earnings per share, which has been growing at 17% CAGR. But equally important is how we've achieved it. Our relentless focus on making our customers successful has enabled us to identify those opportunities to complete their workflow and therefore outperform the market. We've also focused on higher value opportunities, software, services, solutions have been a bigger part of the mix. which has resulted in growing our gross margin over time. And I know we're not done on the gross margin line. We've been held at 65% by the higher inflationary environment, but we're continuing to push forward. We also maintain higher levels of operational excellence in the company. We leverage our G&A footprint. And you can see that once we have gross margin, we're able to convert that into operating profit. And you've seen that has delivered over 29% operating margin performance in the business. Very strong free cash flow growth of 18%, and we remain very confident in the long-term cash flow performance of the business. Since we were -- last year in 2020, we made some commitments around our expectations for the business in terms of revenue growth, operating margin and earnings per share. And I'm happy to state that we've exceeded on all these 3 fronts. From a revenue perspective, we continue to capitalize on what we believe our decades-long innovation trends in the end markets and focus around our customers. You may also recall, we've had to navigate pandemic effects, supply chain challenges and many geopolitical challenges, which included losing a large customer in China due to geopolitical trade headwinds. Despite that, we delivered an impressive 8% above market growth revenue, and a 500 basis points improvement in the operating profit of the business and an earnings per share of 17%. Based on the confidence we have on the free cash flows, we also returned 64% of our free cash flow or $1.9 billion to our shareholders through from 2020. As I'm excited about the results we have produced, equally important to me are the actions that we have put in place since 2020 that continue to give us a runway to grow our value over time. And they fall in 3 buckets. First, it's about growth. It's continuing to see where customers are going, where industry is going and continue to feed those decades-long growth opportunities through our organic investments in R&D that continues to be the focus for the groups. And you will hear from Kailash and Huei Sin when they present an update on where things are with 5G, where things are evolving, where is 6G, automotive, and other and quantum computing, semiconductor, all of those big megatrends that we've talked about, equally, the new areas of strategic importance for Keysight. So we'll look forward to share that with you today. The margin -- on the margin front, we're focused on expanding our margins. And software and services and life cycle value capture become a bigger theme equally important, maintaining our operational excellence as we grow and scale the company. So you'll hear more on those 2 fronts. Our culture has been a source of competitive advantage, and you'll hear more from Ingrid later about the work we're doing to heighten our customer centricity, build out our software-centric culture with tools and processes to enable our employees to scale the software beyond the $1 billion levels that we have today. We're also making deeper commitments to sustainability, diversity, equity and inclusion by integrating that into our business strategy, something that we have done quite a bit of work on which you will hear more about. So again, I would say there's a lot of actions in flight that give me tremendous confidence in the value creation possibilities with the business long term. This is a slide that points to -- you can look at the 2015 market opportunity for Keysight which was largely a hardware-centric tools market at that point in time, you could say roughly $13 billion. But as we've progressed our software-centric solution strategy we have spoken to our customers, and we've expanded what we do for them. You've all heard about the software layers of test opportunity where we've entered the protocol space and grown our SAM and with those SAM growth, our markets have grown faster as well. And so today, we are a $5 billion business, roughly $5.4 billion in a $21 billion SAM, with roughly 25% market share with plenty of opportunity for us to grow and take share. And so I'll make 2 points today. Based on what I see are the long-term drivers that are happening in our end markets, which I'll cover a little bit later, we see our growth rates of our growth expectations for our -- of our markets going up. From the 3% to 5% to 4% to 6% moving forward. And then consistent with what we've always done, which is expanding our SAM and getting into new markets, we have identified 4 attractive adjacencies that we have an active pilots in that we're continuing to foster and nurture for an additional $5 billion new SAM opportunity for Keysight. And all of these fit our strategy to be software-centric, whether it's the software test, network analytics, which is a logical extension to our O-RAN portfolio today, data management, which is what our customers want us to do more of, give them insights along with data. And then the system simulation and emulation opportunity is very attractive to Keysight as well. So what are those favorable long-term innovation drivers in our marketplace? So I would say there are 3 -- they take 3 forms. One is the technology trends around computation, connectivity are only increasing. And we have all seen the exponential rise in data that has resulted in the networks of in the last decade needing to be updated in technology and data centers and clouds needing to be updated, which has resulted in good growth for Keysight that we have all benefited from. I believe we're on a cusp of another inflection with AI/ML. With the recent public releases of ChatGPT and natural language processing algorithms and how real they are it sort of -- it gives us a flavor for where things could get not only in the consumer realm, but also in the business-to-business and automation realm. Semiconductors are becoming much more strategic for our customers. And so not only traditional semi players, but we also see many system companies vertically integrating their semiconductor strategy. We see industries that are transforming. You've seen us in 2013, see this EV/AV inflection come in and take a very small position at that time that we had and grow it to $0.5 billion of sales in the most recent fiscal year. We think there is a decades-long opportunity with [ semi ] moving forward. But we're also equally excited about the opportunities in digital health and space and satellite, which are inflecting for us, where we have small but material revenue today but faster growth opportunities moving forward. Technology is going to be a bigger driver of global GDP. If we're sitting here a decade from now, it's definitely going to be higher and bigger than what it is today. Governments around the world are recognizing it and they're investing in organic IP. And you'll see that reflected in our presentations today around government research or research opportunities for Keysight, our complex technology stack that we have in the company is a great fit to enable a lot of this IP development that's happening around the world. With today's geopolitical environment, defense modernization is a priority in the United States and with its allies that we -- which we think are favorable onshoring and sustainability to trends are here to stay and accelerate. So given the technology trends, transforming industries and market dynamics I see in our end markets, I remain confident in the 4% to 6% market growth rate potential for our end markets. So how do we achieve this? We have a consistent software-centric solution strategy. Our focus has always been to be first to market with solutions to create life cycle value for customers we're relentlessly focused on time-to-market needs and productivity needs of our customers, which we believe will create stronger business outcome for Keysight, including profitable growth, margin expansion and resiliency in the business. Let me now go into how our -- growing our software content and solutions content has actually taken us up the technology stack. As we spoke to you before, our focus has been around our customers and their workflows, and we have been enhancing our contributions we make to that. And by doing so, we have gone higher in the stack from the physical layer to the protocol layer to the application layer making ourselves more relevant to our customers today than we have ever been, and we intend to continue that progression moving forward. At the heart of our portfolio is the business that's spun out of Agilent in 2014, the physical layer tools or instrumentation business, which continues to be 70% of the business. We continue to enhance the differentiation because of our R&D investment and we continue -- this continues to be the foundational part of our business. We've taken a very small presence in protocol at spin through the acquisitions of Anite and Ixia, combine it with organic capability and have now grown into 25% of our revenue of the company and it represents 50% of the software that we have in the company. Again, going up the stack -- going up the stack, making us more relevant to customers. And as we continue the progression, we see even more attractive application areas for us to -- while it's still 5% of the revenue roughly today for us to go further in. You'll see very powerful examples of the work that we're doing in physical layer, protocol layer and application layer outside in the demo areas, hopefully pointing to the richness of the 7,000 products and the many, many solutions that we have and the different diversity of the applications that we serve. The physical layer is an area where our focus is, we have undeniable market leadership here. We invented the category of tools. You can think of the spectrum analyzers, network analyzers, oscilloscopes, AWGs, BERTs, those are the tools. And every electrical engineer needs them, and we invented many of these categories. And our focus is then to grow our differentiation. We want to find the highest performance capabilities that we have in the company and go ahead and use it to solve the most complex measurement challenges across analog and digital domains. That's our strategy here. And if you look at the physical layer designs of our customers, they're getting more complex because they're having to design their hardware for higher data rate applications, which means they have to go higher in frequency. We've long talked about the unique technology stack that we have, which makes our differentiation go higher as customers designs go higher in frequency. If you want to pump more data into an existing telecom infrastructure or data center infrastructure, you'll have to go for white bandwidth technologies. And again, there, the measurement challenges get more complex. So we're going earlier in the cycle, creating products for our customers that are first to market and differentiated, and we're able to make unique measurements for them that give them an advantage in terms of benchmarking their designs and therefore, they gain a time-to-market advantage working with us. A great example of this is the UXR. We talked about the UXR here in our 2020 Investor Day. As an oscilloscope platform we launched with unprecedented levels of performance. And 5 years since then -- since 5 years after this product was longed it still continues to be the only measurement platform in its category that's able to do a lot of the complex measurements that our customers need to be done. So highly differentiated over a longer period of time. But how did this happen? Well, it's one thing if we looked at this as a hardware tool that customers need. But this transition that I talked about that we're on to becoming a more of a software-centric solutions company has enabled our sales force and our go-to-market engine to take this as a measurement platform and position it for a varied set of applications, starting with wireline technologies, 400 gig, 800 gig, 1.6 terabytes moving into 6 and then moving into some wide bandwidth data capture and analysis applications in aerospace and defense. The UXR continues to give us accelerated growth and higher margin than the weighted average of the company because of its differentiation and uniqueness in the marketplace. And as we think about the physical layer portfolio, that's our focus is to continue to transform what was purely a tools business or a hardware testing business into a much more of a design tool that enables customers to go faster. The protocol layer, we've talked about moving up the stack. We took positions to enable 5G and the wireline protocols to design and test them but here is another example of a fast-growing application with high software content that we have, which positions our portfolio to be even more unique, our channel emulation platform that you'll see on display outside is an example of that. Today's communication designers have to design their systems and signals to operate in a wide range of real-world conditions. One might say you're in a high-speed train. You might be in a plane and your WiFi has to work in a plane, when the plane is going at a fast rate or you might be in a stadium environment, which is highly dense environment or you may have to communicate to deep space or you may have to communicate from under mine applications or under water, if you will, with -- if you're in a submarine. So all of these are -- give you a different level of complexity associated with the communication systems. Well, some day, it might be possible for an engineer to take a rocket and go to Mars and test his design. But I think in lack of that, what we have decided to do is bring more of that realism into the lab of our customers. So our best-in-class emulation platforms that we have in the company enable us to do just that and the level of realism that we're able to bring to our customers in the lab enable them to solve problems earlier, find, identify and solve problems in their design earlier in their design cycle, giving them a real distinctive advantage. And we're not -- we don't innovate in isolation, we're working with the likes of AMD to bring their technology with our technology to put these platforms together. The application layer is another attractive adjacency for the company. And one key example here is in our system simulation business. We have a core position of leadership in the RF design automation business. You'll meet [ Neil Forcier ], who's out here we'll speak to you about that. And every RF designer who uses components or power amplifiers or duplexers uses this software to design their circuits. But we're now going higher in the stack because our customers want more system-level capabilities in the simulation environment. And we're going higher and we're providing them that. One of our customers asked us IP management. It's great they do simulations, but how do they manage the output of those simulations and what does it tell them about where the designs are. I think giving them those meaningful insights is what customers expect, and that's exactly where we'll continue to expand in. So I hopefully gave you a sense for what our software-centric solution strategy has done. It's given us 3 powerful vectors for growth, starting with the physical layer where we are transforming businesses for faster growth and better margin profile as we heighten the differentiation with a focus on higher and more complex applications. More software-centric applications by leveraging our IP for a broad range of customers in the communication design marketplace with the protocol layer expansion. And the application layer remains a greenfield opportunity. We've identified a few adjacencies that we intend to pursue. But having the physical, the protocol and the application layer as a holistic portfolio offering to our customers enables us to complete the workflow and position our portfolio for greater differentiation and value creation over time. What gives me confidence that we can actually execute the strategy. It's at the center of our Keysight leadership model. The relentless focus that we have as a company on enabling our customer success, the values of the company the incentive systems in the company reinforce that, but equally, our focus on identifying those market insights. I talked a little bit about how we're organized as a company around our customers that enables us to get that differentiated outside-in perspective, which we've been able to convert to go ahead and deliver those first-to-market experiences. Let me go into and double-click on each of what I consider sustainable competitive differentiators for the firm. The co-innovation model that we have with our customers is a big one because it often gives us a pipeline of opportunities that we're looking at based on collaborations we've had in the last 3 years that gives us tremendous confidence in our business moving forward. And you can look at what customers value about Keysight. It's the deep technology breadth the multiple domains of information, whether it's physical protocol or application, they can get by working with one company versus having to do it themselves or having to go and piece it together by working with multiple players. I think this time to market focus that we bring through our co-innovation model is very unique and distinctive. For the longest time, we've had a focus on Keysight Technologies. We have a Keysight technology lab, which has been an offshoot of HP Labs decades of continuity there with tremendous talent, which is phenomenal, but we're not waiting in isolation. We're working with industry leaders, consortiums, university professors who are doing advanced research. So we're bringing all of that to bear as we put our technology stack out that's 5 years out so that our solutions can stay ahead, stay differentiated and create value over the time frame. You might say, what are some key competencies of the company. Well, we have our own semiconductor fab. We've talked about that, which gives us unique capability especially when it comes to higher frequency and millimeter wave -- or higher frequency or millimeter wave or wider bandwidth applications. We're able to create parts that give us the most differentiation and time-to-market advantage because of what we have in the company. We then bring -- put that together with partners such as Analog Devices and AMD, so -- and use our system integration expertise to bring out the 10x performance improvement that our customers expect over and above what the device is capable of. So the types of performance that we can extract is a function of that system integration expertise that we have in the company. And our investments that we've been making as a company since we formed around software with our PathWave platform, continues to pay rich dividends and is enabling more and more solutions to be built on a common fabric of software today than it's ever been, and there's plenty more of loom ahead to utilize our PathWave expertise. It's all about our first-to-market differentiated solutions to create greater value. And I would say we're focused on the richest opportunities in our end markets and all the way from simulation to optimize. You've seen us be selective. At times, we walked away from some parts of the market such as with handset manufacturing test to really focus on the R&D opportunity associated with the protocol layers. We'll continue to do active portfolio management to identify and select the best opportunities that create long-term value for our customers. And the combination of capabilities we have in the company with hardware and software and services gives us a distinctive advantage to solve customers' problems. And third, we maintain a high leverage in the solutions that are sold between our CSG groups and the EISG groups as well. So where is our focus? We want to expand our contribution to the R&D customer. By doing so, we'll grow our software and services business. You'll hear more from Mark Wallace on the work we're doing there and recurring revenue, making us more resilient over time. Probably an underappreciated part of our business is how durable our business is. I just love this chart because it tells the story of the portfolio. Look at the red piece of the graph represents products and solutions that we have made prior to spin or at spin, 2013 and prior, still represent a material part of our revenue today. The second part of the chart I love is that the new innovations, the R&D investments that we've been pouring into the business to stay differentiated, give 50% or more of our revenues from products that we've launched in the last 5 years. The longevity of our platforms with our customer base is probably not a well-known attribute, but it is part of this durable fabric we have in our business, and it's a huge strength of the business as we move forward as well. And our customers -- we have a large percentage of customers that do business with us every single year. All of this, and I'd say one of the key areas is capital allocation. And capital allocation has enabled us to create great value. It starts with our focus on organic growth by taking up our R&D investment to 16%, we've been able to say yes to opportunities, execute on them, and we continue to stay disciplined, but we see that as the right level for sustaining the differentiation of the firm. Where we've been able to do M&A. You've seen us stay very disciplined with strategic and financial hurdles in place, and we've been able to do that and bring in best-in-class talent capability and cover the solutions workflow of our customers. And finally, we remain very confident in the free cash flow generation capability of the business. And so today, I'm happy to state that the Keysight Board of Directors has approved a $1.5 billion of share repurchase authorization as we move forward. We also have a track record of bringing in capability which fits our strategy. You've seen us do that. We've done 10 deals all the way from spin to 2020. We've done 10 more deals from 2020 to '23. We focused our efforts given the high valuation on small technology tuck-ins that enhance our ability to cover our customers' workflow. But here is the capabilities that we have built. We've integrated into our strategic process the ability to identify markets, do studies on them, identify specific targets and then go ahead and figure out how do we make the deal and then how do we integrate those assets to extract value. So we have a strong activity system around this. But here is what I'll say about the most important part of it is I will not do a deal, Neil and I are very aligned on this. We will not do a deal that does not give us a return that's greater than our weighted average cost of capital. We've always maintained that hurdle, and we will continue to do so. Our culture is a source of competitive advantage. You'll hear more about it. We have a very collaborative supportive environment for our engineers to come in, thrive and develop, but it's all about outcomes and results to customers. A great example is what our engineers did when we were hit by pandemic. They insisted on coming to their office and picking up their equipment and setting up their own labs in their garages so they could take care of their customers and their commitment. That's the commitment level we have in the company that we continue to foster and nurture on top of being innovative in which we have to, given the complex nature of applications we're involved in. And you see the recognition that we are gaining externally for the type of work environment we have, and we have very high retention rates when we bring people in from an M&A, people want to stay and integrate into the company. We have a strong experienced senior leadership team that's here today. And I hope you get a chance to meet a number of them, and we intentionally shorten the presentation, so you'll get a chance to hopefully mingle with us during the demos. And so we have an our setup -- but I'll say this about them. This is a great continuity for the company that all of them are -- have stayed with the company for so long. But equally, not only are they seasoned leaders and managers of their business, they're also thought leaders in their particular domains, and I hope you will get a chance to experience that as you speak to them. So in summary, I covered quite a bit. Keysight in the strongest possible position has been in with very strong strategic direction, which we remain very confident in our ability to create value. Second, we see very favorable tailwinds in our end markets. I went through all of those earlier today. Given those 2, we're raising our targets again. We -- for growth to 5% to 7% revenue growth over the long term. Operating profit, 31% to 32% and greater than 10% EPS growth, which is what we had already always committed to. I'll leave you by saying I'm really excited about the opportunities ahead of us and believe that we're well positioned to capitalize on these decades-long opportunities to extend our value creation track record and compound value creation over time. Thank you very much. And with that, I'll hand it off to Ingrid Estrada, the Chief People Officer, to speak about culture as a source of competitive advantage.

Good morning, everyone. I'm Ingrid Estrada, and you just heard from Satish about our long-term growth strategies. And today, you'll hear from the rest of my colleagues about their business plans to continue to provide long-term differentiation. But for the next few minutes, I'm going to talk about our people and our culture and how they're an enduring competitive advantage that have been a critical success factor in our transformation journey to date. What you'll hear from me today will give you confidence about our ability to continue to deliver on our long-term commitments. I'll cover 3 areas today about our culture. First, as I just said, it's an enduring competitive advantage and has been front and center in our ability to continue our transformation to solutions and software-centric. We've continued to build upon our organizational capabilities, and that has been an alignment and enabling our strategy. And then we've also integrated our ESG program into our business strategy the benefit of our customers, shareholders, employees and communities. First, let me talk a little bit more about our actual culture and what it's like. So it starts with the Keysight leadership model. In 2018, we launched that, and now it's foundational. It permeates the entire company as Satish just mentioned. And it also not only gives us a common language to activate strategy, communicate effectively onboard people earlier. But it also helps inform us and continually remind us of what's important. It's customer centricity, our values and gives us a common way to assess our leaders, do they show customer centricity. Do they have the ability to develop market insights? Do they demonstrate operational excellence. This allows us to make sure we have the right leaders in the right roles, which is also foundational to driving our culture. When we combine our leadership and our attributes in the KLM along with our deeply rooted values, a compelling vision, customer-focused innovation and a collaborative environment, we have a winning formula. As a result of that, you can see on the right-hand side that we have some unique aspects of our culture, we have 5 generations of employees, a very low turnover rate at 7%, which is about half of what the industry has, a fairly long tenure of 12 years, quite a bit longer than the average industry. And then a 3,200 -- approximately 3,200 employees that have come to us through acquisitions with a 99.5% acceptance rates. We don't believe these are just accidental statistics. I think this is directly correlated to our strong culture. The stability of this culture also allows us to not only provide long-term relationships with customers and collaborative environment but also allows us to develop that deep technology expertise. When we harness that deep technology expertise, along with our strategy, it has really enabled us to make significant progress in our transformation to solutions and software-centric from an organizational and cultural aspect as well. And that, again, is across the entire company. So starting with the organization, a few years back, we evolved the organizational design to be eliminating the traditional divisional approach and then we instituted the solutions customer-oriented business unit approach. In R&D, we are now co-innovating with our key customers and our mantra is to innovate at the pace of the customers or faster. This is also where we have another mantra about being the engineer's engineer. In our go-to-market strategy, we've been evolving towards an ARR model, and now we have hundreds of frontline sellers working with complete solutions, including software and services to provide lifetime value for our customers. Mark Wallace will cover more of this. In the talent area, we've continued to increase our software and R&D engineers, primarily through acquisitions, and that's where that 3,200 new employees added comes from all part of our more important strategy around transforming to more software solution-centric again, through adding these employees. Our engineers are working with leading-edge technology companies, which puts us at the bleeding edge. This creates a very challenging yet fulfilling environment, which helps us attract and retain top innovators in the industry. We also have a key element of our culture, which is driving high performance, strategically cultivating talent along the entire career journey as how we build this high-performance culture. We actually start even before their career with us into the academics, where we sponsor STEM activities with primarily focused on females and underrepresented minorities. And we also partner closely with key universities in order to attract and retain new fresh thought leadership. Our goal is to double our campus and interns over the next few years, again, to continue to renew our thought leadership. We also provide many opportunities for employees to do continuous learning and development, which is another cornerstone of our culture. We do job rotations, job expansions. We default -- trying to do a lot of internal promotions, and we provide a lot of leadership development opportunities. Our environment, as always described as being very collegial and collaborative with a high emphasis on developing IP and then even as some of our key engineers plan to retire, we have an Emeritus program to assure that, that IP is formally and smoothly transition to the next generation of leaders. The other thing about our culture is that not only is it very effective internally at developing IP and keeping our employees highly engaged, but we also see that externally as well. Satish already mentioned an example here where some of our engineers went to great lengths to set up complex labs in their house in order to continue to deliver on commitments during the pandemic. Additionally, some other examples are last year, we did a global innovation challenge, where 52 women-led teams competed on inventions in the sustainability area. We have every 2 years, a program called the Keysight Technical Conference, where we have hundreds of internal and external thought leaders come together for several days to innovate from the outside in. The result of this is that we have greater than 85% engagement globally. And in the U.S., 90% of our employees feel that we are a great place to work. against statistics that are quite high given the average high-tech company. The next area I'd like to cover is on our corporate social responsibility. This is also something that goes back -- deeply rooted in our DNA back to our HP days and continues to be a cornerstone of our culture today as well. We have a robust corporate social program with multiple pillars and you can read through that every year in May, we publish a corporate social responsibility report. But I'm going to just give a quick update on 3 areas of it. The first one is, as I mentioned earlier, we have our ESG program integrated into our business strategy and our solutions for sustainable future are integral to that business strategy and customer success. For example, in the automotive and energy ecosystem, we deliver solutions that directly enable clean tech companies. In 2021, we declared publicly our goal to be net zero by 2040, which is 10 years ahead of the Paris Accords. And we've made strong progress in especially our reduction of energy consumption with installing large solar panels at some of our largest sites, piloting an EV fleet program and installing smart lighting solutions in almost all of our buildings. We are committed to using science-based targets, and we submitted our plans just a few weeks ago and hope to get that approved later this year. The third area I'd like to cover is our diversity, equity and inclusion and for us, that starts at the top with our Board of Directors, not only with their diversity but also their commitment to DE&I. Our top 300 executives have an objective metric in their incentive plans directly linked to making progress in DE&I and we have multiple projects initiatives and programs that are led by a dedicated DE&I director. We're proud of our company and our culture. I'm pleased to be recognized externally. Some of the organizations that I'd like to just call out are Fortune's Best Places to Work, the Bloomberg and some of the others up here that are not only just U.S. based but also global. In summary, our customer-focused culture and people are an enduring part of our competitive advantage. They are critical to continue to deliver on our results and we'll continue to fortify our culture as a key competitive differentiator. Thank you, and I'll turn it over to Kailash.

Thank you, Ingrid. Good morning, everyone. My name is Kailash Narayanan. I lead the Communications Solutions Group. I've been with the company for over 26 years, and 18 of those years were spent in R&D roles. I spend a fair bit of time talking to customers and what energizes me is my interactions with customers on their R&D workflows with the purpose of accelerating their innovation. My team and I were just in Mobile World Congress Barcelona last week, and it was great to see 88,000 people come together to drive innovation in our industry. Now prior to taking on the CSG role, I led our Commercial Communications business as well as our Wireless businesses. I'm really excited to be here, and I'd like to cover our growth strategy with you, the upcoming market opportunities, and you'll see why we're excited about that. My presentation is going to focus on 4 key piece. Our track record, building on our strong track record of above-market performance and market leadership. Second, how we enable innovation by focusing on the R&D workflows of our customers, capitalizing on the secular technology mega trends in our end markets. Number three, how we expand our differentiated portfolio of solutions to capture above market growth. And finally, operational excellence driving unique synergies that exist within our business to enable margin expansion. The business has delivered solid above-market growth over a multiyear period. And this is net of all of the geopolitical impact. FY '22 was also a very strong year for us. Our focus on 5G R&D workflows, investment in high-performance networking and computing solutions, as well as steady progress we've made in aerospace and defense markets have led to a SAM of about $15 billion, representing a $2 billion increase since our last Investor Day. We've grown 6% revenue CAGR and have increased our operating margin by over 500 basis points since 2019. So the above market growth has really resulted from our differentiated portfolio of solutions that we have. Let me unpack the business a little bit for you. CSG comprises of 2 diverse end markets, commercial communications and aerospace defense. And they share significant synergies between that. commercial communications is a multilayer ecosystem focusing on IP -- foundational IP, companies that create foundational IP from the smallest silicon to large cloud networks, driving innovation in the wireless, wireline ecosystems network infrastructure, telco providers and cloud providers. The aerospace defense market is composed of multiple segments. We've got the AD supply chain. We've got direct government entities the prime contractors that support government entities. And there is a new area, which is -- which includes institutions and labs focused on government research. Satish touched on this earlier, there's a lot of investment going into new areas such as quantum, energy, cybersecurity and 5G, 6G technologies. These 2 markets bring us significant diversity while enabling synergies at the same time. The long-term success of modern societies is inextricably linked to advances in computing technology and leadership in digital connectivity. And these are the fundamental drivers of our end markets. More than 60% of the solutions that we create have dual purpose and apply to both end markets. And we'll see some examples of this later in the presentation. As we outlined in the Investor Day in 2020, we have grown by capitalizing on the global 5G rollouts. We're enabling new applications such as O-RAN. We've expanded our portfolio to deliver over 125 solutions and have established an installed base of over 1,600 customers, who continue to rely on us for core capabilities as 5G scales and deployments progress. We continue to accelerate defense modernization efforts and are enabling new use cases in satellite communications. We've acquired new capabilities to expand our R&D workflow coverage, and this benefits both commercial communications as well as aerospace defense markets. For example, scalable technologies that we acquired about 15 months or so ago, is bringing us new digital twin capabilities to model networks and connectivity, and this benefits both commercial communications as well as defense markets. We're continuing to extend these capabilities to enhance our portfolio differentiation. We're excited about the long-term prospects of our end markets -- of these growing end markets. This is our total SAM today. As Satish outlined, there are some near-term macro headwinds in the commercial communications market. But when you look at the 7% CAGR growth in the information and communications technology market, when you look at the long-term technology megatrends, which I'll talk about a little later, the multiple overlapping cycles of innovation and our own extensive portfolio, it's pretty clear that there are plenty of opportunities ahead for us in this market. Aerospace defense has been a steady market for us for multiple decades. But based on the increasing defense spend around the world, research investment in new areas as well as a total combined defense spend of over $1.5 trillion by allied nations, we're raising our long-term market growth rate to 3% to 4%. Our expectation is to outperform the market based on the strength of our differentiated portfolio as well as our deep customer engagements. With that market backdrop, let me now outline our profitable growth strategy. Our strategy is to capitalize on the long-term secular trends, as I outlined earlier, in commercial communications, driving innovation in wireless, wireline networking and computing. We will leverage our 5G market leadership position and maximize growth as 5G continues to scale and R&D investment shifts into 5G advanced 6G and next-generation technologies. We're well positioned to accelerate defense communications and modernization efforts as countries around the globe increase their defense budgets to build future capabilities. Another trend is increasing software content in our customers' products. And this is another strong vector of growth for us as we look to expand our software mix and ARR, driving margin expansions. And finally, operational excellence is foundational to our profitable growth strategy. Now we'll unpack a little bit and go into the details of the growth strategy within each of these areas. There are massive secular technology trends driving innovation in the ICT industry. This has huge implications to multiple end market verticals. And it was great to see examples of this in Mobile World Congress in Barcelona last week. I'll just highlight a few of these megatrends. The number of 5G subscribers is going to grow 5x over the next few years. And as the number of subscribers grow, there will be ongoing R&D investment to deliver new capabilities to deliver the desired network performance and quality of service. You already have released 17 and 18 of the standard pushing expansion of use cases in different end market verticals, including automotive, industrial and enterprise networks. The number of frequency bands for use in communications continue to increase, expanding design validation and deployment efforts. There's new investment in non-terrestrial networks, propelling satellite communications and cellular industries to invest more to address use cases beyond GPS-based location. Thousands of satellites are expected to be launched in the next several years, driving investment in these industries. And in wireline networks, data traffic continues to increase everybody's heard of ChatGPT and AI/ML is only in the beginning stages and has the potential to disruptively benefit multiple end market verticals. Now seamless operation of AI/ML requires significant investment in advanced computing technologies, CPU, GPU technologies in high-performance networking that includes 800G terabyte, low latency data center technologies and integrated silicon photonics and of course, advanced wireless connectivity that includes 5G, 6G and beyond. We're well positioned to capitalize and drive the innovation vectors in the ICT industry. Now not all of these technologies are going to achieve scale for large commercial deployments. However, they all have to be researched, prototyped, validated and sometimes limited -- and sometimes trialed on a limited scale, and all of this requires our tools. And that's what creates secular long-term opportunities for us. This slide shows a high-level technology roadmap that the industry must navigate over the next several years. I know I come from our R&D background, but I'm not going to go into the details of these tracks. But suffice to say that in wireless you're going to need significant advances in 5G, 6G and RAN technology to deliver an order of magnitude improvement in bandwidth, latency and new use cases. In wireline, the increasing network traffic and AI/ML workloads are continuing to drive higher data rates, lower power consumption requirements and new emulation requirements. ChatGPT that we referenced earlier requires 7x more network compute load in data centers relative to plan search. And then high-performance computing continues to demand new sub-5-nanometer node sizes for ultra miniaturization, higher density as well as lower power per flop. You can see that the industry has significant challenges ahead in terms of time to feasibility as well as time to market and along multiple dimensions, power, speed, density, bandwidth, use cases and so forth. And all of this requires solutions across the workflow from simulation through deployment. You see about 16 or 17 vectors here and all of these innovation vectors progress in iterative life cycle in an iterative fashion and they progress in an overlapping fashion as well. For example, 400G to be in deployment while 800G is in development and 1.6 terabyte might be in the research phase. The key takeaway here is these overlapping technology trends, faster, secular investment trends in our industry, creating opportunities for us. And our solution set continues to expand all the way from the physical layer in the protocol and the application layer to address and capture these opportunities. We're really excited to enable this future digital infrastructure, and that's really the purpose of our commercial communications business. Our strategy to win really starts with deep customer engagements, and this includes consortia. For instance, we hosted the first of its kind O-RAN conference in Santa Rosa, in our headquarters in Santa Rosa last year. It was attended by delegates from over 65 companies. We get rich insights from these deep customer engagements, and that drives our innovation and investment priorities and that leads to first-to-market solutions. An example of such a first-to-market solution is our silicon photonics solution that came from deep customer engagements and that's now going to generate and drive key advances in data center and terabyte networks. Next, our differentiated portfolio based on our core products, covering the physical layer of the technology stack, combined with the capabilities that we've acquired through acquisitions in the protocol layer is broadening our solution set. And that allows us to address new use cases and new applications. And finally, we win by expanding coverage of the customer workflow with new system-level emulation capabilities in the application layer, and that's allowing us to address new use cases such as non-terrestrial networks. See the 4-pillar strategy that I've outlined here sets up a virtuous cycle with a broader portfolio, we're able to engage earlier in the life cycle with our customers unlocking more insights, which leads to more first-to-market solutions, which leads to expanding the coverage of our customers' innovation workflow. I'll talk about a few examples on what we're doing with respect to these technology trends, and we'll start with 5G and 6G. Now we've seen the first wave of 5G network deployments. We've seen hundreds of devices that have been launched, and that's largely been around the smartphone use case. 5G continues to scale. We've got 1 billion subscribers now, and there are many new use cases that are yet to ramp. The industry continues to progress through challenges in terms of network readiness. Coverage and quality issues still persist. We also have issues in terms of ecosystem readiness in terms of new use cases. So it's clear that even basic things like Uplink, which represents the connection for the phone to the network needs significant improvements. Our strategy is pretty clear. We need to progress and help the industry navigate through these challenges, and we intend to do that by progressing [ Rel-17 ] and beyond. This is expected to drive hardware and software upgrades to our installed base. Next, the number of deployments, the network deployments is expected to increase 3x over the next several years and that's based on many regional deployments such as what's going on in India right now, driving a new ecosystem. New use cases such as energy efficiencies will become more important as deployment scale. In private networks, quality of service benchmarking and security use cases become more important. Automotive applications that Huei Sin will talk about next, millimeter wave and expansion of the spectrum into 5G unlicensed bands will deliver more -- will require more design and validation challenges. And all of this requires our tools. We're well positioned to capture these opportunities based on the strength of our portfolio and leading market position. And we're talking about 5G, 6G research is already underway. In sub-terahertz frequencies. These are extremely high frequencies, and we're enabling it with first-to-market 6G test beds. And you'll see some examples of this outside. We're partnering with the innovative wireless and optical network forum. And this forum does some foundational work related to 6G. Mark will discuss this a little later. Many regions are forming to advance 6G and we're excited to be a member of all of those forms partnering with the industry to move 6G forward. So in summary, I'm really excited about maximizing growth as 5G scales and excited to be partnering with the industry to move 6G forward. Let me point out to another example that shows our expansion into the protocol and application layer. O-RAN is driving network virtualization as well as disaggregation. Virtualization just means that more software is used to implement the network functionality. Now an integrated base station in the past is now able to be put together with multiple hardware and software blocks from different vendors, driving interoperability as well as compliance requirements. O-RAN has not achieved maturity yet, but the ecosystem is expanding. We launched an end-to-end solution Keysight Open RAN architect, covering the industry needs from silicon to cloud by combining our core product capabilities with capabilities from acquisitions such as Prisma, Ixia and Sanjole. The ecosystem is expanding. We're capitalizing on it into cloud providers, software companies, and we've extended our installed base to over 125 customers in just over 2 years. Now with O-RAN, there are other use cases like security and energy efficiency, operators care significantly about energy efficiency on their network. We demonstrated energy savings on an O-RAN network in partnership with Vodafone, and this was in display at MWC last week. And you'll see examples of this outside today. Let me now shift to talk about some examples in the wireline networks. Obviously, data traffic is increasing. And as Satish talked about, AI/ML and other use cases are driving a lot of innovation and steep demand for networking and computing resources. Keysight is the only company that provides a comprehensive set of solutions from physical characterization of the device and the network through functional validation of the protocol stack. We're partnering with leading industry companies, including optical component makers, chipset players and companies that deploy large AI clusters and data networks. You'll see an example of this industry-leading capability outside that we've launched in partnership with Nokia to drive 224 gigabit per second speeds, enabling 1.6 terabyte networks. The requirements are pretty massive and complicated when you think about a data center upgrade with each data center upgrade cycle, the entire infrastructure that includes the protocol stack network switches to each individual component needs upgrades and all of this drives investment projects in the ecosystem. It's worth double-clicking a little bit on AI/ML that we referenced earlier. AI/ML is about connecting data and intelligence that's distributed across the network, aggregating it, harmonizing it and delivering it to the user -- augmented capabilities to the user in the form of applications like ChatGPT. Now we're excited to be enabling this new application. Now what is the challenge for our industry in terms of implementing AI/ML. Well, companies have to model movement of data sets in their data centers and in the network, and they have to run training algorithms. It's extremely cost-prohibitive to implement and deploy a network and find out that you're not getting the performance in terms of latency and so forth. So all of this modeling of AI/ML workloads and performance have to be done in the digital domain in software prior to deployment we're engaging with cloud providers and hyperscalers to provide them system-level emulation capabilities. This is another example of expanding in the application layer to allow them to benchmark and model AI/ML workloads prior to deployment. So we're really excited about what the future holds here and excited to be participating in this new innovation. As you can see, there's a ton going on in commercial communications that I'm super excited about but as excited as I am about commercial communications, I'm equally excited about what's going on in aerospace defense. So we'll talk about that in the next couple of slides. This is a steady business for us. It has been for many decades. But in addition to traditional business drivers around defense modernization and modernization of communication technologies in defense, the new dimension here is really advanced digital transformation. There is a push for advanced digital transformation in aerospace defense. And there is new research going on in areas such as quantum, AI/ML, electrification and so forth. Now the timing of these investment dollars are a little hard to predict. But digital engineering and defense modernization are stated U.S. DoD objectives for a multiyear period expected to create opportunities for us. We expect U.S. DoD facilities needing modernization and this includes use cases in spectrum operations, radar and radio technologies. Not only that, we're seeing defense budgets around the world increase and in places like South Korea, Japan and Europe. Japan's defense budget went up 26% year-over-year to record high levels. And as I mentioned earlier, there's new investment in space and satellite, and this market is expected to grow at a 10% CAGR through 2030. And another area of vector for -- a vector of growth opportunity for us in aerospace defense is in the government enterprise networks around cybersecurity use cases. We've got our network visibility portfolio that can help in that regard. The rich market insights that we get by closely collaborating with the aerospace defense ecosystem has allowed us to leverage high-performance core product portfolio that we've had for decades and to win in this market. Now we've got new capabilities from Ixia, Sanjole and scalable technology acquisitions automated test capabilities from Eggplant. All of this gives us an extended portfolio to provide broader coverage and capture above-market growth. An example a new -- an example of an area in aerospace defense that's having a renaissance period is satellites, tremendous innovation in satellite communication industry. It was great to see this in Mobile World Congress, where commercial communication customers and aerospace defense customers are collaborating to advance the next-generation satellite networks. There are a number of low earth orbit constellations that have already been launched, OneWeb, Starlink and soon Amazon Kuiper, and there are dozens that are being planned. There are plenty of new applications for space and satellite, and we're excited to be participating in this market. We've had a strong portfolio of solutions to address this SATCOM space for decades. And now we're happy to be augmenting that with our 5G portfolio to address these new use cases. Our portfolio is pretty broad. We have solutions for phased-array antenna characterization. And this new ecosystem is expanding. It's got ground terminals, user terminals, regenerative repeaters, links and satellites. We're engaging with chipset players to emulate direct satellite to phone links in their labs. And Satish talked about our channel emulation capabilities, you'll see an example of this outside it allows you to model satellite link effects on radio signals and our network solutions that we acquired from Ixia can simulate IP traffic. So all of these satellite networks can be tested and troubleshot prior to deployment. I touched on government research. One of the areas where significant government research is happening is quantum computing. This represents a generational opportunity for countries as well as industry players to really gain a technological advantage and in a new domain. The number of qubits, which represents the processing power of a quantum computer is expected to grow 3 orders of magnitude in the next decade. That requires new simulation and system-level emulation capabilities. Ability to control qubits and ability to characterize errors. Now we provide our core product portfolio to control qubits and the most recent acquisition that we did in this space, Quantum benchmark is aimed at error characterization. Now this business is small for us today, but we continue to incubate this opportunity and have already extended our partnership to over 100 players in industry and academia. Now shift to software. Satish talked about the increasing software content in our customers' products. And this represents a stronger growth opportunity for us going forward. The megatrends that I talked about in both of our end markets is creating an expansion in software content. Customer innovation workflows are becoming more software-centric. Be it digital twins, network functions, new use cases in the application layer all require new capabilities from simulation to model scenarios and designs prior to prototyping and deployment. So what have we done? We've acquired scalable technologies, which gives us digital twin capabilities that can be integrated into our EDA portfolio to enhance our modeling and simulation offerings. I touched on O-RAN earlier, and that's enabling network virtualization and the software content of that portfolio is over 50%. And then when we look at use cases in the application layer, they're predominantly software-based. That includes quality of service metrics, analytics and live network assessments. To deal with this increasing software content in our customers' products, we engage with them very closely and deliver software at a pretty steady cadence, capturing value and monetizing the entire life cycle with additional software and services. Mark will touch on that a little later. CSG's software revenue CAGR outpaced our total revenue growth over the next -- over the last 3 years. We have a few levers focused on operational excellence. Number one, I talked about the common R&D that we leverage across the 2 end markets. We continue to get the best return on our investment by delivering more dual-purpose solutions that address both of our end markets. Number two, with increasing software content in our portfolio, we continue to improve the cadence of software deliveries to improve customer experience and quality, and we're looking to scale that across the entire portfolio. And finally, you've all heard about the pricing increases that we've had in our supply chain over the last 18 months, and we're working very diligently to unwind a lot of that to expand our margins. In conclusion, I'd like to leave you with 4 key takeaways. We're well positioned to capitalize on the secular steady trends steady investments in the technology trends across our end markets. The deep customer engagements that we have is unlocking rich insights and enabling breakthrough innovations and first-to-market solutions. And our differentiated industry-leading portfolio continues to broaden with the long-term investments -- organic investments and complementary acquisitions. And we're building on this portfolio to unlock more software-based solutions to drive margin expansion. With that, thank you for listening, and I'll hand this back over to Jason for our first Q&A session. Thank you.

Well, very good. So while we're going to bring Satish and Kailash, you can stay up here and Ingrid back up for our first Q&A session, which will be about 15 minutes. [Operator Instructions] One topic that I want to just address right out of the gate upfront, just to clarify, so because I've gotten a lot of questions about this is I think as many of you are aware, we are aware as well that there is a company in our industry that's undergoing a strategic review process. From a policy standpoint, we don't comment on other companies strategic reviews or the rumors associated with that. So we appreciate your interest in our perspective on that, but we won't be commenting on that today. So with that, I see Mark has his hand up over here. So let's go to Mark Delaney.

Thank you very much for the questions and for the presentation today, Mark Delaney with Goldman Sachs. Two questions, if I could. First, Satish, you showed the slide showing the revenue mix, how there's a lot of durability to the business, revenue coming from products that were launched several years ago, some coming from newer products. I was hoping maybe we could talk about how that might look for the wireless business and give us a sense how much is coming from 3G, 4G versus 5G? And then when should we think about 6G becoming a more meaningful driver of the business?

Yes, I'll maybe have Kailash cover some of it. But I think the -- Mark, the point that I made earlier is the longevity associated with our platforms because we sell a lot of the same tools and solutions to multiple end markets. For example, in our aerospace and defense government business, once we're designed into a program, those programs go for 10, 15 years. And also that's a positive. The other area that I'll talk about is more around our software and services, which is now 1/3 of the company's revenue, which again adds to further levels of durability for us. With regard to your specific question, we still have legacy revenue business associated with wireless. I mean we've talked about that roughly being [ $100 million quarter-ish levels ]. And so that really speaks to our customers' needs as they expand and things like that, the breadth of the customer base that we cover enables those sort of upgrades to keep coming in. So that's pretty strong. With regard to 6G, we've been on it, we first said we would invest in 6G in the 2020 Investor Day. So we've been investing on it. And Kailash, if you have any time lines associated with that?

Thanks for the question, Mark. With our wireless business, obviously, 5G is a big component of it. And as Satish talked about, our 3G, 4G and legacy business is also fairly meaningful, multiple hundreds of millions every year. From a 6G perspective, we're obviously seeing a lot of traction in the industry, particularly in the terahertz and terabyte optics, with that focus. It's not a meaningful business for us right now. However, research is already underway and we expect pretrials work to start in the 2026, '27 time frame with some type of commercialization in '28. So we expect to see it get more meaningful in the next 2 to 3 years.

I think the 1 point I'll make is the complexity. We went from 2G to 3G to 4G and 5G. And we knew that 5G was a step-up in complexity in terms of the domains if you've seen those spider charts you go look at some of the visions for 6G, it's still early, but if you look at those visions, I think that technology stack has to keep upgraded upgrading and you ask yourself towards what end. Does this all happen because people are still not yet done deploying 5G. And so you think that, that would take more time. But I think given the number of dimensions in which the 6G technology is evolving, I think the overall complexity associated with that will cause greater levels of research spend for us, and we start to see that already as well.

Just one other question for me, please. You talked about the 5% to 7% growth rate. I believe you characterized it as a sustainable growth rate. Can you elaborate on what you mean by a sustainable growth rate and what type of macro environment might be needed to hit that type of revenue volume?

Neil, you want to take that.

Yes, I'm going to talk about that a little bit more here in the tail end of the presentation. But that's designed to be what we think the markets are growing over time. Obviously, there are going to be points in time where we're growing faster than that point in time, we're growing slower. But later in the presentation, I'll break it down for you by market, and we can talk more about that.

Okay. Great.

I think that diversity of end markets, Mark, is another appreciated fact of Keysight, right, that we have aerospace and defense and government, completely different budget stream. You'll hear from Huei Sin on industrial and commercial comps.

Okay. Great. Let's go to Jim here in the front row.

Thank you. It's Jim Suva from Citigroup. And for those on the webcast, they really missed out the product demos, which were very interesting and educational. Thank you for bringing those in, and it's a packed house despite a busy week. I have one question, and I don't know if it's best for Satish or Neil or maybe both of you, and that's about the CHIPS Act, I'm not sure many fully understand and comprehend that Keysight's actually has its own fabrication facilities and so on the CHIPS Act, can you kind of answer it on kind of both sides of, do you approach the CHIPS Act as something you're going to try to go into the details of -- not at this event, but look at it for an investment perspective. And then what about your customers? Because if customers are putting up new fabs in Arizona, Texas and things -- so likely, in my view, need more Keysight's equipment for that. So can you talk about the CHIPS Act both internally and how you look at it? And then from a customer perspective and kind of the timing around the CHIPS Act that you see it coming in.

I think the posture from governments around the world, Jim, thank you for -- by the way, first, thank you for recognizing the demos. I think the teams put together these demos. And each of these have success case studies associated with not just a customer but a larger pool of customers. So that's what you get to see if you're here in New York. I think with regard to the CHIPS Act, I think more than the specifics associated with because it's like $40 billion or whatever the number associated with it and our defense budget is $1 trillion. So let's put it in perspective, it's small. But I think it's the posture that governments are taking and we see this increasingly to sort of associate technology IP with national security. I think it's a big shift that's happened, and it's bipartisan. And I think that bodes very well for the sector in general. And I think for us being an enabler of many of these things, we're not just asking ourselves, could we sell more, which we will, but also what more can we do to enable these customers to be successful. And I think some of the simulation domain expansion opportunity that I laid out, was in recognition of this that we can't just do component-level simulations and walk away. We've got to enable those customers to connect that workflow and go faster. So that's sort of our focus. So we're looking at the organic investments made in the West by governments to shore up their IP, including semiconductor to say, how does our portfolio have to grow. And so those are the investments we're looking at. With regard to our own complex fabrication processes that we run in the company, we've taken a look at and Neil can comment on that, whether we would benefit from some of those incentives being offered at some point. We do have extensive relationships with [indiscernible] and other agencies for some high-tech stuff. We do have some collaborations and we received some small funding in the past. But maybe there are more opportunities with chipset.

Yes, it goes beyond our fab. We do high-end packaging technologies and other high-tech manufacturing here in the United States. And we're currently assessing whether any of our expansion plans will qualify for potential funding -- funding through CHIPS. But I think as you indicated and as Satish commented, the bigger opportunity is probably from a demand generative standpoint in terms of the level of investment so it's going to drive not just in the U.S., but the similar activities around the world.

Aaron Rakers at Wells Fargo. I've got 2 questions. One question was, I think in the slide deck you quantified, I think it was greater than $500 million, in automotive orders. I'm curious if you could help us frame the pace of that growth and what you're seeing there as far as that pipeline is concerned. Because it seems like that's going to be a key driver of growth opportunity for the company. And then maybe, Neil, I'm not going to steal your thunder from the later presentation. But I'm curious as you kind of drive this attach rate up on services and software, where do you think you ultimately can drive this model to as far as recurring contributions relative to that 21% that was in the prior slide?

Yes. Thank you, Aaron. Just I think I'll wait for Huei Sin's presentation because she's going to talk about auto, but it's an exciting opportunity. I think it was more in the context of an example of a business we were not in, really. We recognize that inflection was happening. We made some investments and then we have grown the business to $500 million. And I'm particularly excited by the diversity of our total portfolio. I think it's probably a little underappreciated because the breadth of how much we cover for customers, and in our general electronics business, especially, right? I think we would have lumped the auto in our general electronics business in the past. But I think calling that out allowed us to focus and invest. And I think digital health, space and satellite provide similar inflections that we're looking at right now. But if you look at the auto business, the last few years has been very, very strong. But that's, I think, what we have said publicly as well, and you've heard it, it's largely because of the government's push towards climate change, which is really part of that equation. And automakers are in this transition from an ICE to EV. But I do think sustainability is going to be a bigger impact. I think I read somewhere that sustainability investments have now matched fossil fuel investments. And for net carbon -- yes, a neutral situation, the sustainability investments would have to be multiple orders higher than fossil fuel investments. And I think if you look at that world from that lens, I think the investments in technology to drive sustainability will only have to get higher. We feel good about not only our position in auto, but also our ability to enable sustainability, especially from a technology perspective. I think Kailash mentioned base stations are big guzzlers of energy today. And I think that's not a sustainable equation as well. And so the industry is thinking about that.

Yes. With regard to the second question, Mark is going to talk more about our software and services business in a few minutes. But I just -- maybe as a preview to that, we have 2 vectors in which we can work to increase our recurring revenues, first, by growing our software and services business as a percentage of the overall mix. But those businesses continue to grow at a rate that's faster than the overall company. But then there's the other vector, which is particularly on the software side, changing the way we do software business with our customers. And we have made significant progress in increasing the recurring portion of our software sales. We think there's a lot of room -- further room ahead, but I'll let Mark deal with that here in his presentation coming up.

Okay. Let's go to Matt in the back right next to you, Kathleen.

It's Matt Niknam from Deutsche Bank. So 2 quick ones. One, you mentioned SAM or TAM growth. It's a little bit better than what we had heard at the last Analyst Day. So is that just the market is doing better because of just the dynamics you laid out? Or is it Keysight really pursuing more of this diversity of end markets that we're hearing increasingly about? That's question one. Question two on the macro. Obviously, we spoke a lot about -- or we heard a lot about the softness on the last call. You alluded to it earlier in your presentation, Satish, just if you can just comment in terms of conversations with customers, how long you may anticipate that persisting at all over the course of this fiscal year?

Thank you, Matt. I think the first part of the question was have we outperformed the market? And I think the answer is absolutely. And that's our expectation. When markets go stronger, our position in the portfolio is that we would [indiscernible]. So you've seen that happen in the last few years. There is no doubt about that. Second part to your question was more around -- you had 3-part question in that.

The first question was around [indiscernible], the second was [indiscernible]?

Yes, from an end market perspective, I think the industrial end markets, you'll see -- I'll just wait on Huei Sin to unpack them for you really points to the richness of the opportunity that we have. You've seen even in aerospace defense; I think space and satellite is an industry that we're pretty excited about. So those do tend to give us a lot of those double-digit type of growth opportunities because of the lower -- it's a lower business today, but it has a lot of growth potential for us. And with regard to the near-term macro situation, I think we've said a lot about this on the earnings call. Our customers, especially in semiconductor and who are associated with technology are dealing with inventory situations in their business, and that's caused them to pull back. I think the uncertainty remains high. So I don't want to speculate as to how long that might last. But I want to assure you that we are focused on maximizing our business under any environment.

Okay. So we'll go to Rob and then come to you, Chris.

Rob Mason with Baird. Satish, I wanted to go reference the slide that you put up around adjacencies, market adjacencies. You outlined, I think, $5 billion. I wanted to make sure that, that is not rolled up in -- and that's separate from the 7 -- or the $20 billion.

Absolutely.

Okay. So how do you think about your adjacencies and -- because some of the areas you outlined for, some of these certainly seem like there are areas you're already involved in, software test, for an example, data management more so. So how do you think -- I'm curious, which ones are more near-term in terms of where you think you have critical mass? And what do you need to see for those to move more into your core business or you think of them not as an adjacent market but the core markets?

Yes, thank you. So the way we think about this is we've started -- in each of those 4 areas I outlined, we have certain organic positions today. I'll give you a great example is Open RAN, right? We've extended our platform to take on this virtualization mega trend that's playing out in our end markets. But where we stop is where the lab begins and ends. And what our customers are telling us now is you have to go beyond that because the lines of distinction between a lab and deployment changes in the Open RAN environment because of the open-end disaggregated nature of the network. They want to be able to connect that workflow and so we need more capability and more investments to actually go ahead and enter that marketplace because we have a very strong position in the lab with customers, and our customers want us to add more analytics capabilities in the network, and analytics example that I just mentioned. With regard to software test, you're right, we entered software test with a Eggplant acquisition we made. And now we see that while Eggplant is great at automation and other things, we see some adjacencies because you see digitalization is occurring across companies, right? Salesforce.com, there's so many packages that customers, enterprise, IT environments are using, they have to test every time they have to launch these packages. So they want us to provide more capability there. So each of these areas that we're looking to expand into are adjacencies to our core positions today.

All right. Great. Let's go to Chris here in the front. And then I want to get you guys a break. So.

This is Chris Snyder from UBS. I wanted to reference Slide 48, and then you might not remember it off hand, but it was the one where we had the 5G to 6G. And you had advanced 5G kind of almost bridging the gap from one to the other. It feels like there is maybe a blurring of the G cycles relative to 2G, 3G, 4G. So I guess my question is, is that bridging essentially? Is that due to the company now competing more effectively across the stack relative to position in 4G? Or is that just due to the heterogeneous nature of the 5G rollout? And with that, would you expect a pocket of softness on that 5G to 6G handover?

Yes, thanks for the question, Chris. I mean, let me -- maybe just to step back a little bit and think about what's going on in the market, right? Largely, it's the smartphone use case that has so far driven all the network deployments and devices. So it's largely been consumer-driven, right? And now we're shifting more to enterprise use cases and business use cases. And if you look at Release 16, Release 17 and 5G advanced -- Release 18 is otherwise known as 5G advanced, they're all focused on; a, improving some consumer-oriented performances, but largely delivering features for enterprise. And as one of the CEOs of the largest operators in the U.S. said, a 5G network is a multipurpose network and there are many, many revenue streams that are still yet to be unlocked. So when you look at something like Release 18 or 5G advanced, it has more than twice the number of study items with respect to all of the other releases combined. So it's a combination of this expansion into the B2B or the enterprise use case, plus all of the adjustments that have to be made to the network to deal with the scaling from a consumer perspective. So we do see that trend continue, and we see that sort of bridging over to 6G. And 6G is already doing -- some of the aspects of 5G advanced will materialize fully in 6G. So from that perspective, it does do the blurring. But what we're looking to enable is, hey, how can we enable the scaling for consumer deployments, how can we enable the scaling for all of the enterprise use cases, which has a lot more complexity. There are about 550 work items just in Release 17, 18 and 16 that have to be implemented. Not all of these features are going to be implemented right away. It's going to take a multiyear period, and we expect 6G to catch and become material within that time frame.

I think the B2B application use case is in a very nascent stage for 5G. And I think China has done the most work in provisioning the network in that area. The Chinese operators have done it. And I think the rest of the world, that still remains to be -- to play out.

Okay. Well, very good. It is just about 10 after the hour. So let's take a quick 10-minute break and come back at 20 after or 21 after, and we'll get started with the second half of our presentation with Huei Sin.

Great job.

Thank you. [Break]

Okay. Welcome back, everyone. If you want to make your way back into the room. I appreciate that it was a short break, but we want to try and keep ourselves as much to schedule as possible. So it's my pleasure to introduce the President of our Electronic Industrial Solutions Group, Ee Huei Sin, and have you come up and speak to that portion of our business. So welcome, Huei Sin. Thank you.

Thank you. Good morning, everyone. I'm Ee Huei Sin, President of Keysight Electronic Industrial Solutions Group. I'm based in Asia with a diverse and global team, and I have well over 30 years of experience in the technology industries spanning from semiconductor, computer, storage [ battery-powered ] to test and measurement. Okay. Prior to my current role, I spent more than 5 years leading Keysight's general electronics business, the business that have -- the business that have outgrown the market and delivered continuous operating margin improvement over the years. So I'm very happy to be here to share EISG's business strategy on how we will continue to deliver sustainable and profitable growth, okay. Now here are the 4 key messages that I'll be covering in this session. First, I will share EISG results, and how we deliver what we have promised at the last Investor Day in 2020. Next, I will cover the current industrial mega trend that will give Keysight EISG a long runway of growth, followed by an in-depth look at our competitive advantages and our differentiated solutions. And this will position us very well to outperform the market. Now let me start by summarizing EISG's last year's performance. FY '22 truly was a banner year. We grew double-digit in both revenue and operating income and achieved an impressive operating margin of 31%, okay. EISG grew at 12.5% CAGR on our revenue for the last 3 years. Therefore, we continue to gain market share. We hold 27% of the market we serve and outgrew the market by 3 percentage points in FY '22 itself. So our EISG 3 businesses: general electronics, automotive and energy as well as semiconductor, contributed to this strong growth and performance. Now in terms of what -- okay, in terms of what we have presented at our last Investor Day, I'm very pleased to report that we deliver and beat our commitment. I've just shown you our exceptional FY '22 results, and in fact, we have demonstrated consistent track record over the years, if you follow us over the many years. We have, in EISG broadened our solution offering across the automotive and IoT ecosystems. In particular, the acquisition of Verisco and Nordsys enhance our capability to address this industry-leading solution inside the automotive market. And within the IoT space, we have expanded into the consumer technology and also the digital health space. As for our semiconductor industry, we strengthened our leadership position in advanced semi technology through our deep collaboration with the industry leaders. And through this accomplishment, we unlock new opportunities in e-mobility, we captured growth from the digital transformation from AI, ML, IoT, cloud computing. We also capitalized on the breadth of our technology to develop solutions for the integrated chipset advancement. All in all, coupling with our operational excellence and laser focused on our customer success, we executed and delivered to our commitments. So that was EISG's past performance. Now let's move our focus and attention towards the future. And here are the mega trends impacting EISG's 3 businesses, 3 end markets. Acceleration in digitization is the major driver in the general electronics market. In particular, we see searches in the immersive technology growing to $1.5 trillion by 2030. We also expect digital health market to triple to more than $800 billion in the next 5 years. And within the academia area, you heard earlier, that's actually a growing government funding for the advanced research, and more than 70% of the universities also having a strategy for digital transformation. In the automotive market, due to both environmental and safety reasons, this industry is going through a major evolution, right, with a major shift and focus into EV, electric vehicles, and autonomous vehicles or AV. This evolution will drive the increase of both electronics and software content. And electronics is predicted to increase from 35% to around 50% of a new car costs by 2030. As for the semiconductor industry, next-generation innovation is driven by major government investments towards semiconductors self-independence. This is apparent from -- just now there's a question on this. This is apparent from initiatives such as CHIPS Act and also this EU Digital Compass 2030. Besides that, there's also a greater demand for smaller, more efficient and multifunctional chipset, which drives advanced node development all the way down to 2-nanometer as well as these highly integrated chipset design. Now to fully maximize the potential offered by this mega trend, EISG's strategy for profitable growth focuses on 3 areas. We will enable the smart application in general electronics, advanced innovation in automotive industry and capitalize on the next-generation semiconductor development and expansion. As what Satish shared earlier, we aim to provide the total solution that cuts across physical, protocol and application layer in each of these areas. Building on our strong foundation for operational excellence, we will continue to focus first-to-market differentiated solution aligning to customers and market needs. Our end-to-end solution will encompass hardware, software and services, and we are working towards increasing our software content to both organic and inorganic growth. Now let's take a more in depth look on how we will achieve this growth strategy. I will start with the general electronics business. This business serves the broadest market with multiple verticals covering consumer electronics, process control, factory automation, health care, education and more, okay? So this market actually is -- general electronics business is very broad with many, many long tier customers. 90% of this customer doing business with us at less than $500,000 a year. So it's a very long tier, many, many smaller size for us. The general electronic markets has many exciting new opportunities, which are sometimes not well understood. And actually, this new area is what represent growth opportunities for Keysight. Here, our focus is on the emerging trends such as digitization, edge computing and big data. We see investment in high-speed digital technologies as well as the new frequency bands to support this digital transformation evolution, as what Kailash has presented earlier, right? And to accelerate this technology innovation, we're also seeing an increased focus in technology research. Our main strategy to win here is to drive innovation, targeting connected consumer devices and industrial automation, where Keysight's strength in wireless communication will give our customer the advantage in their IoT devices as well as the associated infrastructure to support. We will also capitalize on the rapid pace of technology transformation in the digital health by leveraging our expertise to address the development of medical devices -- medical IoT devices, okay, and also new imaging modality. Another key area for -- to focus in this general electronics business is in the academia, both in advancing the academic research as well as enabling the hybrid and digital learning. Keysight, we partnered with all the leading universities and research institution to advance and to drive emerging technologies. Overall, we aim to capture this emerging opportunity in our broad customer base. So these are some of the emerging high-growth verticals and of course our broad differentiated solutions. As you can see in the slides, the broad range of customer, customer from example, Panasonic in consumer electronics, we're talking about Rockwell Automation in factory automation, we're talking about Medtronic in health care. So we have a very broad, diverse customer. And each of these verticals that I'm showing there have very different applications and needs. For example, immersive realities require high fidelity audio and video interfaces as well as strict compliance to wireless technology regulations. While smart manufacturing depends heavily on the mission-critical sensors. And then we see this consumer IoT device maker, it's about the connectivity, it's about the core existence of the IoT devices, and also sometimes the consumer experience are some of the key considerations. And in the case of digital health, wireless and battery life are critical to ensure resilient operations of the connected medical devices. These are very critical, right? It impacts the patients. As for the academic advanced research, the focus will be on hot topics that are essential to technology innovation and advancement such as advanced material sciences, quantum and biomedical engineering. So to address this very diverse vertical market with such different needs, our broad -- Keysight's broad and differentiated solutions from high-performance solutions, software all the way to basic instruments become one of our strongest value to our customer in this area. Now next, I would like to cover our strategy to grow in the automotive market. To capitalize on what I shared earlier on this automotive industry evolution. Our key focus is on the new mobility. The government regulator pushed the transition away from the internal combustion engine, or ICE, with countries such as EU and China targeting to completely phase out ICE cars by 2035, will drive major investment in electric vehicles. At the same time, we are also seeing a growing investment in advanced driver assistance systems to provide a higher level of vehicle autonomy from the current level 2, 2 plus all the way to 5 and also for safety reasons. Here, our extensive solution portfolio and technology leadership are the key for us to win. Leveraging Keysight's strength in radar and 5G wireless communication enable us to deliver the first-to-market AV solutions, addressing essential applications such as autonomous drive emulation and cellular vehicle-to-everything, C-V2X. We will also expand our EV test solution to address battery test ecosystem and the critical charging infrastructure. So now let's take a look at the new mobility automotive ecosystem. With our major focus on new mobility, Keysight, we aim to provide value across the entire ecosystem, which cut across the EV, autonomous driving, and the in-vehicle systems. The EV ecosystems cover the overall infrastructure and smart grid as well as the battery cell and module for the vehicles. And automomous driving relies heavily on the radars and sensors as well as the wireless communication to connect the cars with everything else around it, and also cybersecurity as one of the key consideration. And lastly, in-vehicle systems require internal communication to control all the electronic spots within the vehicle itself. Each of these areas will require a very unique and specialized testing. And this is where Keysight's more than 100 solutions -- portfolio of more than 100 solutions come into place. So let's take a closer look at some of our exciting solution in EV space. Electric vehicles are all about EV batteries. And we know that battery packs drive costs, brings performance and also charging time. Keysight, our high-performance solutions enable assessments of performance, quality and safety from the cell level to pack level, helping our customers to develop a better battery. Our solutions are environmental friendly and efficient with more than 96% energy regeneration, which is industry-leading performance. Another key area of focus in the overall EV ecosystem is charging. There is significant government investment for the EV charging infrastructure in line with the push for the EV adoption in the market, right? And also conformance test coverage. Our solutions are ready to address the vehicle-to-grid and vehicle-to-infrastructure. In fact, we contribute directly to the standard body by -- in helping defining the bidirectional charging standards. So that's EV examples. And next, let's look at some of our industry-first solutions for the autonomous vehicles. In AV, the radar serve as the eyes of the car, right? And it is critical that the built-on radar module is thoroughly tested. And in this area, Keysight's Radar Scene Emulator enables a whole new level of testing by addressing the missing link between cumulation and the road testing. And with this solution, our customers are able to conduct repeatable tests under reverse condition with rear sensors and emulate complex full scene roadway scenario within a Tesla environment. And our customers are not the only ones to recognize the value of Keysight solutions. These Radar Scene Emulator has won multiple industry awards, including Hardware Innovation of the Year from Automotive Testing Technology International and also from Tech.AD USA awards in Testing, Validation & Safety. So you will be able to see our exciting Radar Scene Emulator demo outside, and I believe some of you already walked through the area. So these are a clear indicator of the industry trust and confidence in our solutions. Now another important aspect of autonomous vehicles is vehicle-to-everything communications, V2X Communication. This is super critical, especially in this highly condensed urban driving scenarios. This is where Keysight's strength and leadership in 5G wireless comes into play. We offer the only solution to cover test cases from lab to field testing, supporting all regional standards. And through our Nordsys acquisition, we also have the broader solution portfolio to simulate and emulate complex non-line of sight communication, non-line-of-sight drive profile. Here, I would like to share a quote from OmniAir Consortium, which is the leading industrial association promoting interoperability and the certification for connected vehicles. Basically working together with industry partners like Keysight allows OmniAir to offer the world's first testing and certification program for C-V2X radio. Now last but not least, I would like to cover our strategy to grow in the semiconductor market. As I mentioned earlier, there's a strong push for our supply chain self-reliance and resilience from many governments around the world. And competition for our technology leadership is fierce, resulting in significant regional chip investment. Besides, digital transformation also drives continuous demand for more and more IC and the next generation of chipset. Here, our strategy to win is to capture this new investment by working very closely with our customers in their expansion activities. So as they move to different locations, we are going to work with them. We will also enable advanced node development and deployment through close collaboration with industry leaders, and expand into adjacent application for this integrated IC wafer testing. At Keysight, we are advancing semiconductor innovations in 2 areas. Firstly, to accelerate advanced node development, Keysight offers a highly differentiated parametric test solution to address higher density testing, faster test speed and other test coverage required. We are also partnering with key customers on new destructive technologies to support 3-nanometer chips and beyond. And for the semiconductor equipment, our advanced optical capability and position metrology solutions help enable the next generation of lithography systems. Secondly, enabling the industry -- what the industry term is More than Moore, which is the optimization of integrated circuit by combining digital and analog functions into the same chip. As this complexity increases, Keysight solution will help to advance our customers' innovation in this technology. Basically, we co-innovate with our customer in overcoming challenges in this area. Now here are some of the examples of how. Keysight, we provide the total wafer test solution, including semiconductor test software to address More than Moore applications. And by pulling together Keysight's expertise and our technology from Keysight Lab, we are able to provide the only turnkey solution for silicon photonic as well as millimeter wafer level test. And we also offer the most complete solution for time to market for the power semi. By basically by harnessing Keysight's leadership in different fields of the test area and the strength of our broad portfolio, our customers are able to accelerate semiconductor capability expansion. So in summary, there are 4 key messages I would like you to take away. First, for EISG, we will continue to execute our clear strategy to extend our successful and proven track record of sustainable growth. Second, to achieve this, we will capitalize on industry mega trends in digitization, new mobility automotive and the next-generation semiconductor innovation. And this will provide us with a long runway of growth, right? But we will leverage the breadth and depth of Keysight Technologies and expertise to enable speed to market and allow us to address new emerging applications. Fourth, we are confident to outperform the market by maximizing our installed base and expanding our end-to-end solutions. Thank you. Now let me pass on to Mark.

Great. Thank you, Huei Sin. Good morning. My name is Mark Wallace, and as the Chief Customer Officer and Head of Sales for the company, I'm excited to provide this update to all of you. So as Ingrid spoke about, our customer-centric culture and business model is a distinct competitive advantage, especially with today's rapidly evolving markets. And we are expanding our first-to-market solution leadership even further through software and services and customer value created by thousands of trusted advisers within our now massive and highly efficient global sales force. And in my role, as Satish mentioned, as Chief Customer Officer, I'm helping to align the entire company to focus externally, to define customer success through the eyes of our customers, and to harness the full power of Keysight and deliver differentiated outcomes to our customers in support of the same customer success metrics. So looking around, I see some faces I haven't met before by way of further introduction. I joined this company in 1988 as an electrical engineers -- smiling. And I've spent most of the time in sales. So I'm glad to be here. So today, I'll share compelling examples of how we're enabling distinct business and technical outcomes for our customers and across entire ecosystems. Three key messages for you to take away from today's presentation. Number one, since the spin from Agilent, we continue to transform our company from products to solutions, and now we're extending beyond the solution sale to deliver continuous value to our customers through software and services and a focus on maximizing customer lifetime value. Number two, we've aligned our powerful go-to-market approach with our business strategy to create a seamless multi-touch environment for our customers focused on their success. And number three, we're leveraging our deep and growing customer relationships and our large global presence to capture market insight, to drive innovation and to extend our first-to-market solution leadership even further. So with that, let's take a closer look at sales and software and services at Keysight. So as Satish articulated earlier, we have a large and diverse business serving more than 30,000 customers in 100 countries every year. We have achieved consistent above-market order growth with 14% core order growth last year and a compounded 11% order growth since spin. Over the last several years, we've onboarded hundreds of incremental frontline sellers and solution engineers that work daily with our customers around the world. We've grown our services capability and capacity through our regional service centers and through our global network of resident professionals. These RPs, as we call them, are our services delivery experts, supporting and enabling our customers on-site, while supporting all of our products and solutions. Altogether, our more than 5,000 R&D solution engineering and services resources are distributed around the globe, close to customers with about 10% of these experts residing on-site and embedded in specific customer workflows. These are the trusted advisers that our customers rely on to solve their most difficult engineering challenges and to save time, to reduce cost and ultimately to achieve success. And this is further evidenced, again, as Satish talked about, through the more than 140 public collaborations that have occurred just since the last Investor Day with many, many more nonpublic strategic engagements. And many of these experts are also the industry thought leaders that Kailash referenced earlier, working to advance innovation through their work in standard-setting bodies and industry consortia. Altogether, this is the successful formula of co-innovation. This is the virtuous cycle. And as a purpose-driven organization at Keysight, this is the purpose of sales to advance and scale strategic customer collaborations. So reflecting back briefly on the last Investor Day, we have done everything we said we would do and more. We've more than doubled the number of front-line sellers over the last 5 years as we committed to do. And as a matter of fact, we've added more than 200 incremental frontline sellers hired from outside the company just since the last Investor Day. And we are now in the process, just now of fully deploying this full sales capability, again, in part to help scale our ability to engage with customers strategically. We have been focused on sales productivity, which we have increased by a stunning 47% while reducing our cost per order dollar by 29%. This is achieved through the continuing deployment of advanced sales productivity tools and training and value selling skills. And we still have a lot of headroom left to achieve. We've grown our top customers. We've added thousands more. We've expanded our value-added services capabilities, growing total orders for services last year to more than $720 million. We've grown our recurring revenue from software and services. We've achieved a 28% CAGR in services bookings attached upfront when we sell our product. And all of this is made possible through the successful deployment of our dedicated software and services sales organization and our global renewal sales function. And finally, we have just recently launched new, even higher value-added services for complete solutions, which are just starting to ramp right now. And at the core of all of this is our go-to-market. And we've designed this go-to-market from the ground up as well as standing up. Three global sales channels, all designed to maximize value to our customers. And as the foundation of our go-to-market, we begin, as always, with our customers. And the challenges they face to be first, to deal with this increasing complexity that we spoke about and to be ready for what's next. Our omnichannel that we call it, which just refers to all customer touch points has been designed to scale value to all customers through our first-to-market solutions, which, by definition, means hardware plus software, plus services, plus our global consultative sales organization, right? From stand-alone subscription software and services and through our efficient and low-cost e-commerce and partner-led channels. Now for Keysight, omnichannel creates sustaining value from deeper and expanded customer collaborations. From extending our reach even further through a global network of more than 800 channel partners from increasing recurring revenue and streamlining the integration of acquired software sales channels. This is all combined with the continuing expansion of our global e-commerce capability, which is now live in 33 countries around the world. We're making it fast and easy for customers to acquire our growing portfolio of products and services. And as we've done for years successfully, we continue to dynamically deploy our resources to the best opportunities to maximize our growth and success across all cycles and leverage synergies and cross-selling capabilities, which I will touch on further in the next slide with an example around our software. So as you can see from this graphic, we have more than tripled our software revenue since spin through organic and inorganic investments. As was mentioned before, we have grown our software at a faster pace than the rest of Keysight increasing the total percentage of revenue from software from 12% in 2014 to 21% last year. And we'll continue to accelerate the growth from software faster than the rest of Keysight over the next several years. It's really striking, though, to see that more than half of our total software revenue comes from our first-to-market solutions as Kailash and Huei Sin further articulated. And this is a reflection of the strong demand for our solutions and the importance of software. And we continue to shift to a recurring model, which is based on a subscription-based licensing and a for-pay software support model, increasing the stickiness of our business and growing the annualized recurring portion of our software from 31% to nearly 50%. All of this is achieved through the expansion of our digital business model and the deployment of our enterprise software sales capabilities. And we still see a significant opportunity to grow our software franchise even further. By increasing the number of software assets organically and through strategic M&A. Through co-innovating with our customers as we always do and as outlined in the Keysight leadership model and by leveraging our reach and cross-selling capabilities. So an example of this last item is with Eggplant. And with Eggplant, Keysight is a leader in AI-based automated software test and user experience optimization. And when combined with our 5G solutions for our commercial customers with the 5G smartphone as the device under test, we are able to verify the physical layer, the RF performance, interrogate and verify the protocol and for the first time, optimize the performance of the applications and the user experience. This is powerful and unique in the industry. It's elevating our strategic importance to our customers, and it's all about creating customer success. Another way we create customer success is through our value-added services. And we're taking a one Keysight approach to expanding value through all our customers through a consistent user and customer experience across our end-to-end services portfolio. This is to help our customers to acquire new products, to ramp their productivity, to optimize utilization and over time to upgrade and refresh their capabilities to keep pace with ever advancing standards and technologies. Since the last Investor Day, our customers have adopted our premium Keysight Care franchise with more than half of all eligible products sold last year, including advanced or extended premium services, which they paid for. And we still see a long runway of growth ahead by growing our services attach rates through our -- both our direct sales channel and our distribution channels, by increasing Keysight Care renewals, a which we doubled last year and will double again moving forward, by expanding Keysight Care beyond the product to complete solutions, which include hardware plus software plus professional services. And as we uniquely continue to support and migrate and manage our massive installed base of products and services around the world. So let's put it all together in a spotlight of how we're not only creating success for a particular customer, but enabling an entire ecosystem. And Kailash mentioned this before. In this case, the advanced optical and wireless ecosystem in Japan. And this engagement began many years ago where Keysight began working with commercial companies and research institutes, as directed by the government in Japan, we came together to help align the entire industry in developing the next-generation transports communication system, which at that time was 100 gigabit Ethernet. And as we begin, we had a unique position with the breadth of our solutions to provide test capabilities for components and modules and complete systems. But over time, we became the trusted partner of choice as we commercialized many innovations around collaborating with customers around hardware, integrating their test chips into the world's first high-speed arbitrary waveform generator. By integrating their software and DSP algorithms into our optical modulation analyzers and probably most importantly, with what we've done with our experts and embedding them into our customers' labs. It's a great example of our first-to-market hardware and software and services, enabling an entire ecosystem and industry. And each subsequent year with government research funding for 400-gigabit, 600, 800-gigabit last year and now 1.6 terabits, we remain engaged in helping to enable this process to move forward. When I was in Japan a few months ago, I met with Dr. [ Tomy Zala ], who is the Head of the NTT Device Innovation Center, and he told me the Keysight is one of the most important companies who can assist in our innovation and without us, they would not have been able to achieve their latest proof of concept. We remain the supplier of choice for the Japan team as we move forward with this year's innovation. So that's it. In summary, we have a large and powerful sales team of trusted advisers that are deepening customer relationships and expanding outcomes, which enable customer success. We're moving beyond the solution sale using software and services to enhance our customers' workflow and grow customer lifetime value. Our large and efficient global sales force, combined with our omnichannel go-to-market are designed to scale with the company and deliver and extract value from our solutions, from our software and services and through our efficient and low-cost transactional channels. And together, software, services and sales at Keysight act as a force multiplier, creating sustaining compounded growth for Keysight. Thank you very much. And with that, I'll invite Neil Dougherty to come up and bring us home.

All right. Good morning, everyone. Thank you for being here. I believe most of you know me, but for those of you that do not, I'm Neil Dougherty, I'm the Chief Financial Officer here at Keysight, and I have been since the time of Keysight spinoff from Agilent back in 2014. And I'm here today to talk to you about Keysight from a financial perspective, but specifically, giving you a little bit of a longer-term view in terms of what you can expect from Keysight moving forward. I'm going to focus my comments today on 4 key themes: First, Keysight is a business that has been and expects to continue to compound returns on behalf of investors. Second, we believe we have an increasingly resilient financial model that positions us well to outperform in a variety of macroeconomic circumstances. Third, we'll continue to leverage a consistent and disciplined capital allocation framework that balances investments to drive the continued organic growth of our business with investments in M&A and return of capital. And finally, we're continuing to raise the bar on the financial expectations for this business as we move forward. So let's start by taking a closer look at our financial performance. And as you can see, both since our spin in late 2014 and since our last Analyst Day in March of 2020, we made significant progress in transforming our financial performance across a wide range of important financial metrics. Over this 8-year period of time, we've grown our revenues at a 10% compounded annual growth rate, improved our gross margins by 850 basis points, our operating margins by over 1,100 basis points. We've grown our free cash flows at an 18% rate and our EPS at a 17% compounded annual growth rate. A couple of other comments. First, focusing on that 10% compounded annual growth rate for Keysight revenues. I think it's underappreciated how balanced our growth has been over this period of time. Not only is Keysight growing at a 10% compounded annual growth rate, but both of our operating segments. CSG and EISG share that same 10% compounded annual growth rate over this period of time. Second, focusing on the margin improvement of 1,100 basis points, certainly a great result. But most importantly, we didn't do it by mortgaging our future. We actually grew our operating margins by 1,100 basis points, while at the same time, more than doubling our investments in R&D and more than doubling our direct sales force, positioning us well to continue to grow into the future. And so we do believe that the company is positioned not just for continued growth, but for continuing margin expansion, strong cash flow generation and to continue to compound earnings on behalf of investors. Before I move forward and talk about kind of the longer-term financial expectations for the business, I did feel it was important to address the current macroeconomic environment. Obviously, it's a little bit uncertain time that we're in at this point in time. But we believe that there are important and unique elements of Keysight that enabled this business to outperform in a variety of macroeconomic circumstances, including the circumstances that we find ourselves in today. And that confidence comes from the structural flexibility that we have built into our cost structure. It starts with the fact that 100% of our employees from the executives in this room all the way down to the folks that are working on our manufacturing lines, have a portion of their pay that fluctuates with Keysight's business performance. The 2 drivers of that variable pay are organic revenue growth and our operating margin level. And so should we center a macroeconomic environment that puts either of those under pressure, I have a systematic and automatic way to reduce spending on the single largest component of my cost structure, which is our people. Beyond that, approximately 50% of our manufacturing is outsourced, 20% of our sales flow through an indirect channel. We make strategic and significant use of flexible staffing. And again, all of this gives us a systematic and automatic way for our cost structure to respond to changing macroeconomic conditions. It gives us confidence in our ability to outperform. And unlike the last time we were here 3 years ago, when I talked about the same cost structure flexibility in the same model, the model has now been put to a real world test. That real world test came via the COVID pandemic. Back in Q2 of 2020, we were forced to shut down our manufacturing production and stop shipping to customers. In that particular quarter, our revenues shrunk 18% versus the prior year. But we still delivered 19% operating margin, which was a decline of just 500 basis points versus the prior year, actually outperforming the model that you see in front of you. For the full year, our revenues were down 3%, but we actually grew our operating margins and grew our EPS for the year. Beyond that, we believe our business is more resilient than it's ever been. You've just heard from Mark about the 33% of our business that comes from software and services. We've talked earlier about the increasing portion of our business that is sold into our customers' R&D labs versus their manufacturing lines and how we believe that, that is a more resilient sale over time. In addition, we've heard from Kailash and from Huei Sin about the strong secular growth drivers that exist across a broad cross-section of our industry, which will not providing total immunity for macroeconomic conditions, certainly provide a significant buffer. In addition, we have a strong and flexible balance sheet, generate strong free cash flow, and we entered this fiscal year with over $2.5 billion of backlog, which positions us well as we enter this period of uncertainty. Now let's take a quick look at that balance sheet. I think the #1 point here is this business is in a very strong liquidity position with over $3 billion of available liquidity, including $2.2 billion of cash and then I will move forward and talk a little bit about what we can expect from this business as we move forward. And I think the #1 point that I would like to make is that we remain committed to the same operating model that we have now been discussing for the last 8 years, and that's an operating model that calls for this business to deliver 40% operating leverage when we grow our business mid-single digits or better. When we grow our top line, we have a high degree of confidence in our ability to continue to expand margins, both gross margins and operating margins. And when you're growing your business and expanding margins you would expect to continue to have strong free cash flow conversion. Then it becomes a question of how do we deploy that capital on behalf of investors to continue to drive further value so that we can continue to compound earnings. So now let's take a look at each one of these, starting with the top line. As you've already heard from Satish, we're increasing the long-term growth expectations for this business today to 5% to 7% moving forward. And we're able to do that because we believe the underlying markets we serve are actually growing faster than we previously communicated in a couple of areas. As you heard from Kailash, we now believe because of the investments that are happening in the U.S. aerospace defense modernization and the commitments that are allies, particularly in Europe, are making to spend on defense at a higher percentage of GDP as well as the investments that are happening around space and satellite that those aerospace defense and government markets are now growing at 3% to 4% versus the 2% to 3% that we communicated previously. And within EISG, the commercial adoption of electric vehicle technology and autonomous driving as well as the investments that are happening around the world in terms of digitization, the semiconductor content that, that's driving. And the investments that are being made in regions around the world to assure semiconductor supply. The electronic industrial markets are now growing at 4% to 6% rate versus the 2% to 3% that we had communicated previously. And so our markets now at the Keysight level, we believe, are growing at 4% to 6%, and Keysight remains committed to outperform market growth by 100 to 200 basis points annually, which enables us to deliver that 5% to 7% growth expectation. If you look in the lower left, you can see how this has played out over the last 3 years. Since we were last year, in March of 2020, we believe the market grew at 5%, and Keysight grew at 8%. So the market grew at the high end of the previously communicated market growth range of 3% to 5%. And we actually outperformed the 100 to 200 basis points of market outperformance, outperforming the market by 300 basis points over that period of time. Again, when we grow our business, we have a high degree of confidence in our ability to expand margins, both gross and operating margins. And the ability to grow gross margin starts with the ongoing and sustained favorable mix shift that we've been seeing in our business really over an extended period of time. We continue to see an increasing portion of our business coming from both R&D and operations. Today, a little bit more than 1/3 of our business is in the manufacturing side of the business, but I would point that out that, that's based on FY '22 numbers when there was very significant investments happening in manufacturing as the technology space was dealing with the supply chain constraints over the last 18 to 24 months. 33% of our business coming from software and services, which not only increases the margins and that, but it increases the durability of our business because a significant portion of those revenues are recurring in nature. We believe our strategy itself has components that help us improve our gross margins. When you are first to market with software-centric solutions focused on the R&D customers, those -- that is differentiated that can be monetized. And what we often find is the complete solutions that we bring into the markets are -- come with a significantly higher gross margins than the core instruments that we've traditionally brought to the marketplace. And as many of you know, we have select vertical integration, which presides us with both the cost and technology advantage in the marketplace. Beyond that, it comes down to execution. We're constantly working to drive productivity across our organization. Three areas of focus currently driving increased productivity in the sales force, continuing to leverage our low-cost G&A infrastructure and then focusing on our supply chain. I think supply chain is an interesting topic. Over the last 18 to 24 months, this portion of our team has been singularly focused on product delivery, getting products into hands of our customers. Now with the supply chain situation starting to improve, we can once again turn this team's focus to the cost side of the equation and continue to put additional efforts into improving our gross margins moving forward. Again, when we're growing our business and improving margins, we expect to deliver strong free cash flow. You can see here in the upper right that this is a business that over the last 3 years has averaged $1 billion of free cash flow. Free cash flows did decline in FY '22, but that was solely a function of the pressure that was put on working capital is a direct result of the supply chain disruptions. And as you can see, we expect to get back to strong free cash flow growth here in fiscal '23. When we think about how we're going to deploy that capital, first and foremost, we're focused on continuing to fund the organic growth of our business. We do that first through the R&D line, and we continue to believe that investing in R&D at approximately 16% of the revenue is the right level for this business. We will also continue to invest in our sales channel and capability, not just capacity but strengthening our software capabilities and our e-commerce capabilities to continue to drive revenue. Beyond that, the management team has a strong desire to put money to work via value-accretive M&A. We believe it's an important way for us not just to bring technology into the company, but for us to expand the markets with which we serve. And I'll talk a little bit more about M&A here in just a minute. And then beyond that, we're active returners of capital. Satish announced earlier today that our Board has recently approved a new $1.5 billion share repurchase authorization. We're committed at a minimum to continue to offset the dilutive impact of our equity-based compensation programs. But as you've seen from us in the recent past, we're often much more active with our buyback program than that. And we continue to believe in the long-term opportunities that exist for Keysight and that we can create value by investing in our own shares. So moving forward to M&A. As you heard from Satish, we've done 20 M&A transactions in the 8 years that we've been an independent company. And those transactions align well with the secular growth themes that are driving our business, commercial communications, next-gen auto, quantum computing software test. And so we are looking for targets that really align with both our strategic and financial filters, financial criteria that we have set for M&A. From a strategic perspective, we're looking to expand our addressable markets. Satish outlined today earlier, $5 billion of adjacent SAM that we found of interest. We're looking for targets that have high software content or high recurring revenue that expand our portfolio of high value-added solutions or augment our talent and solutions capability. From a financial perspective, we take a long-term view of value creation through M&A, recognizing it can take time to deliver value. ROIC is the primary metric that we use when evaluating M&A targets, but we're focused on ROIC in year 5, again taking a long-term view of value creation. Our ideal M&A target is one that will be accretive to our organic growth rate as well as to our gross margin. We do use -- look at both revenue and cost synergy opportunities when evaluating M&A targets. We look at our large global sales force, our manufacturing footprint, our leverageable G&A infrastructure is significant points of synergy capture for Keysight when evaluating potential transactions. So at this point, I've talked about our ability to grow our business, improve margins, generate cash, how we intend to deploy that cash. And so now let me tie that together and highlight what we believe are our new operating targets for this business as we move forward. I've already talked about the new 5% to 7% growth rate, which is up 100 basis points from the prior model. We expect to continue to drive gross margin improvement reaching 66% to 67% over the coming years, while we drive operating margins to 31% to 32%, and we're going to do that by continuing to deliver 40% operating leverage on mid-single-digit growth while delivering EPS growth that is 10% or greater. So I've covered a lot in a short period of time. But really, there are 4 things that I want you to remember from this discussion. First and foremost, Keysight has been and expects to continue to compound earnings on behalf of investors. Second, ours is a resilient business model, and we are well positioned to outperform in the current macroeconomic environment. Third, we have a disciplined capital allocation process that balances investments for organic growth with M&A and return of capital. And fourth, as you've just seen, we continue to raise the bar on the financial expectations for this business. So with that, I'm going to turn it back to Jason for our second Q&A.

All right. Thank you, Neil. So now we're going to move to our second Q&A session, and we're going to bring the full team up. So while we're doing that, the folks with the mics in the back are getting ready. So hopefully, just one quick logistics thing as we just to be thinking about. We will have the demos staffed after the presentation today. And then for those of you who need to head out a little bit early, we have box lunches which you can pick up on the way out on the left-hand side there. So all right. So Jim, looks like you've got your hand up there. So Jim Suva.

It's Jim Suva from Citigroup. This question is probably most appropriate for Neil. Neil, on Slide 95, you talked about your capital allocation. There was a nice pie chart where it showed cash utilization from fiscal '15 to '22 of 45% acquisitions, 35% stock buyback, 15% CapEx. Just curious, is that -- you changed a lot of your other financial goals of raising the bar going forward on the outlook of revenues and margins. This pie that you demonstrated on this, does it need to shift a little bit more in any way or any of those pie pieces should be bigger or smaller as we think about -- Satish just raise the bar on basically everything across, which is great to see. But I was wondering about from a cash utilization, how we should think about going forward?

Yes. I think the way we think about that is, again, looking to balance the set of opportunities that are in front of us. Clearly, the #1 priority is to continue to fund the organic growth of our business. But beyond that, the mix -- the relative mix of, say, M&A and return of capital is really going to depend on the circumstances we find ourselves in. How actionable is our funnel? What is the relative valuation of not just Keysight but other players in the marketplace and our ability to put that cash to use. Again, I think our bias is to put the cash to use in growth generative ways. Organic growth, M&A, but if we're not finding the right targets at the right price, as we -- as you've seen from us, we won't hesitate to return the capital to shareholders.

Okay. About in the back there. David?

David Ridley-Lane from BofA. Auto has been a great story for Keysight. What's kind of the next opportunity? What's the next auto? What's the next -- one of these growth vectors you laid out spacing satellite run and others that could hit that $0.5 billion mark?

Thank you. Just maybe just before I hand it off to Huei Sin and Kailash to really speak about the other themes that are coming up. I think at the highest level, you look at the world of technology I think the pie is only getting bigger, right? The applicability of technology not only to the traditional customers who generate the IP, but also to the end market verticals that are getting transformed by applying that technology. And so at that intersection Keysight sits, and we expect to continue to grow our portfolio as a growing company, expanding our customer base. I think digital health, we've talked about that has been very exciting for us so far, and we continue to invest in it, space and satellite, even though they're traditional sectors they're going through tremendous change. So maybe I'll let you guys provide some ...

Okay. So I think in ESG, definitely, I share that, in fact, automotive new mobility is relatively new for us. So if we see a long runway of growth, we see this evolution is happening. And there is another new area as what Satish mentioned is digital health care. This is really the inflection. We're seeing that a lot more electrification. We thought in the defense electrification is happening in the health care. The whole industry is going through a transformation. So this is a growing opportunity. But underlying all this, I want to highlight our strength in Keysight that we partner with all the university -- leading university for the research. We are partnering with all the research institutions around the world. And that we reach out to so many new and start-up companies. We are in a good position to also support this emerging and looking for the trend that's going to happen in the industry.

Yes. When you look at the communication solutions in aerospace defense business, we're excited about all of the enterprise applications that 5G is going to bring. As I mentioned earlier, we're moving from the consumer space to the enterprise space. You look at something like private networks, that's expected to grow from something like $500 million in '22, to $6.5 billion in the next 5 years. So pretty tremendous opportunities on the enterprise side. So that's one. We're clearly excited by what's going on in non-terrestrial networks. As I mentioned in my presentation, I was excited by so many executives -- senior executives represented by both commercial communications as well as aerospace defense customers coming together to really advance this forward. And defense agencies like U.S. Space Force are looking to augment their current satellite infrastructure capabilities with these commercial 5G-based standards. So that's very exciting to us. And new applications that we're enabling on the wireline networks, AIML. I mean many of these applications are going to originate on the mobile side and all of that traffic has to be dealt with and performance has to be provided by the wireline networks, and we're really excited about enabling AIML. That's an emerging use case and certainly quantum. So space satellite, quantum, AIML, 5G expansion and enterprise use cases, these are what I'm excited by.

I would just add one more to add to both what Huei Sin and Kailash just said, I shared with you the go-to-market approach. And all of this is aligned back to the company's strategy. So these areas that we're focused on to grow an adjacency to develop technology or to deploy multiple areas of competency, it's instantaneously realized through our go-to-market, through our direct and indirect channels. So this is a really great virtuous cycle of us using this large sales organization to not only capture the business, but to accelerate this innovation with our key customers.

Let's see. Let's go to Aaron here, and then we'll come back.

Yes, thank you for taking the second question. I guess I want to go back to the $5 billion adjacency and you talked about Neil, the 5% to 7% growth rate. I guess the simple question of that is how do you define success in that? Where do you see the biggest opportunity if I look out over the time horizon that you've laid out? How do we, as investors, think about, how you think about success in addressing those opportunities? And then I'll put the second question out there right away. On the semiconductor side, I'm curious, do you have everything that you outlined in-house today for the growth strategy there? I know you made a small acquisition of Cliosoft recently. So I'm curious of how you're thinking about inorganic investments to drive further growth in semiconductors?

Yes. So the question is on SAM expansion and how do we define success is we want to keep growing our -- keep growing the business faster than the rate of the underlying market. So that's sort of the single barometer for success. So if you look at the 4 new market adjacencies that put out, one of them, we have a very strong position in. I think that's the simulation end market for our app designers. I think we are the tool of choice. I think the logical step for us is to go ahead and complete the workflow. You've seen what we have done as we started to do that in the wireless business where we added Anite, then we expanded into wireline. I think we've developed really some core competency in sort of building those blocks one at a time and completing the customer workflow, you can expect more of the same in those 4 areas. And all of those are pretty logical next steps for us.

Okay. Good. And the second question was around semiconductor. And do we have everything in-house that we need or what -- any acquisitions?

Sure. for the semiconductor business, right now, we are really addressing the wafer production, the R&D and the production. So as our opportunity comes from this major investment from the government around the world for these self-independent, we know what's going on right now. So this is going to give us a lot of investment and technology competition that is going to go into. So I expect that this is not going to stay stagnant. Now we're already talking about 2 nanometer. So what's next? It maybe is getting more expensive, and that's where more the most application come into play to create a more efficient, but true functional versus continued miniaturization of the chips. So the more than most, we already see a lot of new opportunity, like the examples I show you, all these are very new. And we see -- we're going to see more and more on specific application coming out soon. And this is an area that will continue to grow with our strength in the parametric test solution and our strength across the key sites. You heard from Kailash on silicon photonic down the road millimeter wave, anything else from our Keysight, and that's why how we see that will continue to grow in that layer.

I think on the simulation front, there's definitely more opportunity for us to bring in talent, and that's Cliosoft is an example of -- one example of what we've done recently.

Okay. Let's go to Chris here, and then we'll go to Matt in the back.

I have a 2-parter for Neil on the impact of software on the margin profile of the business. It felt like from a lot of Mark's slides and presentation that the software piece is a bit more of a stable revenue generator than the hardware. I think half of it, I believe, is coming from recurring revenues. So in a slowdown environment, would the business increasingly -- or mix to softer at an accelerated rate, what I would assume is positive for gross margin. That's kind of point A. And then point Two, on the multiyear kind of targets, the 31% to 32% in fiscal '26, it's basically 40% incremental on, I think, 6% kind of average core growth. But it feels like there's obviously going to be dollars going to M&A, margin accretive M&A, software-focused M&A, as you pointed out, would that be incremental to that margin trajectory just because that's coming on above the company average?

Yes. Let me take the second one first. So the model we laid out is an organic model. And obviously, hard to know what we might do in the M&A space. And so I would view that as kind of incremental and would depend very deal specific, the impact that, that would have on the overall model. Your first question was mixing towards software, yes. Thank you. Sorry about that. Yes. I mean, I think certainly, the recurring components, if we do end up in a macro situation, those are going to be much more stable. The software certainly is growing faster than the overall business. As you've seen, the shift is not -- we're not -- the shift is slow is my point, right? We're slowly incrementing up the software. So I think Naturally, it has a positive impact in terms of both gross and ideally operating margins as we move forward, we work that into kind of the expectations of the model that we have laid out. Obviously, for do, do a large software M&A, for example, that could accelerate our gross margin as well as the software mix is the way I would address that.

I think the portfolio, if you look at the portfolio picture around the physical layer and protocol layer and application layers. I mean, what we're seeing even an environment that's slowing down customers who have recurring contracts the first thing they recur -- they renew and move forward. So there's a lot of stickiness with software, a lot of stickiness with services. I think it will -- that's why the focus is on continuing to expand that pie.

Perfect. Very good. Let's go to Matt.

One on CapEx and then one on cap allocation. I guess CapEx broadly, Neil, if you could just speak to where the incremental CapEx dollars are going towards and just elaborate on that? And then secondly, on M&A, either for Satish or Neil. I think in the past you've maybe had a little bit more of an appetite for smaller software-oriented tuck-ins and with your leadership market share in test and measurement around 25% plus today. I'm just wondering if you can maybe help us frame, is M&A going to be incrementally steered towards horizontal integration, vertical integration, software-oriented? Just any parameters you can help us think about more broadly?

Yes. So first question was ...

First question was on CapEx.

CapEx, yes.

That's the problem with asking 2-part question. It's hard to remember.

So let me deal with the CapEx question upfront. So obviously, CapEx really goes into a number of different areas, particularly over the recent past significant investments going into capacity as we ourselves, we're dealing with the supply chain situation and trying to keep up with things in our own plants. A significant portion of our CapEx goes to fund the R&D investments that are being made across the 2 businesses to get us to achieve the kind of technical parameters that are needed across our broad portfolio of products to hit the industry benchmarks that are needed. And I think the last piece is continuing to ensure that we have the technology building blocks that have sustained the differentiation that are needed for this industry, right? We tend to need a significantly higher level of performance in the test space than is needed for the products that are being developed using our tools. And so relatively low mix, but really high-performance building blocks, many of which we do in-house. And we continue to fund those both our fab packaging technologies, these types of things is a significant drop of capital investment.

Yes. We have customers who depending on their demand, they come to us and say, we want more of 2-nanometer test capability. We have been saying yes, and we've opened up additional capacity so that we can help them be successful. So those are things that we invest in along with differentiation. On the M&A, you've seen us look at -- over the years, we've looked at hundreds, I think we say 300, but it's more than that. And more importantly, we've looked at many markets, right? We looked at both horizontal and vertical end markets, both inside of our SAM because we're only a 25% player in $20 billion. So it's a pretty fragmented space, as you can imagine. So we look both internally and outside of our SAM for expansions. And ultimately, it comes down to can we transact a business at a reasonable valuation with a reasonable set of assumptions. I think that's the most important thing for success in this place. And is there a strong strategic fit with the business. And you've seen us quickly integrate like we did with Ixia, move it into CSG and work towards putting that big picture together. So those are some thoughts that we have. There isn't any bias on one or the other, except the common thread would be software being a big part of the strategy.

Okay. Other questions, Rob?

Rob Mason with Baird. So this is automotive question, maybe similar to the semiconductor question in terms of where you think the portfolio is in terms of having all the pieces you need? And I frame the question based on one of the slides, you talk about expanding EV test into battery test ecosystems, charging infrastructure. I'm curious if -- how much of your business is there today versus you need to get there? And then also talk about acquiring or partnering to increase your regional penetration, customer penetration, I'm curious which parts globally are you strongest today in your automotive business or with certain types of customers?

Okay. So I think there is a number of questions in there. First of all, I think in terms of the mix, EV is definitely we see this as a growing. This is actually at the inflection point. If you look back a few years ago versus now, there's a lot of activity going on. One of the key change is the OEM. They used to be outsourcing all this technology for Tier 1, Tier 2 suppliers to do it for them. But this is going to be a key differentiation from all these EV OEMs, and they are moving a lot of R&D internally. So the EV solution that we're working on a lot actually focusing to help them in term of developing the battery, the right type of battery. We see a lot of OEMs start to do it themselves. So this is the beginning. So I see this as still a long way of growing. So we're talking about the total ecosystem. Right now, I will say we focus a lot more in the R&D that really value our differentiation, our core competency, in terms of performance, efficiency that I described earlier. So that is the EV space. Charging is also another exciting area. So as the push for EV adoption, we are the infrastructure. Now U.S., Europe, you can see Europe announced EUR 280 billion to fund all these charging infrastructure to support their push to 2035 to convert everything to [indiscernible] and convert everything to EV car. So that gives us a lot of opportunity. Right now, we are the only one can support worldwide standard. One of the challenges in automotive is there's not a law of standard. There's a law of standard discussion, but it's not standardized yet. So the more standard for this is actually opportunity for Keysight because that's where we can come in with expertise, but we are seeing that direction. They are moving towards that. So right now, there are different standards, but we can provide worldwide EV charging standards. And this is, again, a beginning. If you look at the number of infrastructure for EV charging in U.S. and where the government wants to bring it to be, you know there's a lot of opportunity for growth continuously for us. So I will say that we have good position, but I'm sure there's a continuous use case, continuous conformance testing, and we are following by sitting inside the standard body itself and participating. So that's the EV portion. And that's what we talk about. And AV, I want to highlight AV maybe. We did not see the major inflection point. Now the industry believes level 5 is not going to happen so quickly. Now versus a few years ago, everybody has thinking 10 years, 15 years, 20 years, we'll be level 5. It's a lot more complicated because the infrastructure to be able to support a level 5 fully autonomous car. But autonomous is all about wireless communication. It's about the sensor, it's about the communication, the non-life of side. That's exactly our strength in Keysight. So I see this is really a sweet spot for us is the beginning and there's a lot of future, and we will be able to drive -- they start putting FCC standard, any standard for connected vehicles and Keysight sweet spots, okay? And the last question on M&A. We continue to look for the missing tuck-in. We need to just last year, the last 12 months, [indiscernible], both are very software-focused, help us to get into a lot of immediate protocol a year. Satish talked about physical protocol application. So we'll continue to look. But we're not just limiting. We will look at both as this. The other asset is to see any other regional presence or unique capability or unique customer access that we can have, okay? So that's ongoing. So right now, if you talk about where we have more business, if you can see where the key OEM, right, in Europe and U.S. and some of the part in Asia, and that's where our presence.

Great. All right. Well, I want to thank the executive presenters, and we'll turn it over to Satish for closing remarks.

Okay. I hope you found today's session informative and about not only the success and the track record Keysight had, but also the forward-looking momentum and the new vectors of growth and innovation that we're comped on. I look at the world of technology that we've been in, I think we see significant new vectors of acceleration. I think the business-to-business piece of adopting new technology, different end markets, transforming, all those are new levers for Keysight to continue to expand. And as I mentioned, we have a very sound strategic direction that we're continuing to gain momentum with. The software-centric solutions in an era where our customers are trying to go faster than ever before, offering them total solutions, they come to one place that they can rely on with high quality, and that will be there, it's a big deal for customers. And I hear this from a number of our B2B customers today that they can count on us to enable their success across their whole value chain and life cycle. So we're a strong market leader in our end markets, and we're only strengthening our position even in core parts of the market where we had undeniable leadership, we continue to transform those pieces such as what you saw in the physical layer. Our strategy continues to resonate. And as I mentioned at the beginning, our business -- primary driver has been perpetual change. We've been here for 80 years, and I know we want to build this for the next 80. And we have an attractive market by in itself, that offers plenty of opportunity to grow. We're also looking at new adjacencies that we mentioned to the tune of $5 billion. And ultimately, we have a very strong business model that helps us accrete profits and EPS during good times as well as provide resilient cash flows to our shareholders during different macroeconomic cycles. So that's it. Thank you all for coming. I'm very excited to meet all of you, and we'll be here as long as you want to talk to us, and I hope you enjoy the demos. Thank you.