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

I'm Chris Snyder, a multi-industry analyst here at UBS. I'm very excited to be joined by Neil Dougherty, CFO at Keysight and Kailash Narayanan, President of the Communications Solutions Group. So thank you guys for joining.

Thanks for having us.

Maybe starting off, and this is a question I've asked a lot of the corporate so far is just around demand. There's obviously a lot going on when we look at orders, revenue with just all the variability in the supply chain. But when you guys are talking to customers and you guys are like seeing the market, how are the conversations gone around customer demand and appetite for Keysight's test and measurement solutions.

Yes. I mean I think as you know, Chris, Keysight is a pretty diverse business. We serve a wide range of end markets. There's a lot of secular drivers. And so I think as quite often the case. We've got some markets that now are doing relatively stronger and others that are experiencing a little bit of weakness. I think we've seen a bit of a checkup in the commercial communications space, they [indiscernible] Manages as a lot of our bigger customers are dealing with some inventory dynamics coming out of the supply chain situation of the prior year. Some of them have announced workforce restructuring, those types of things, which can be disruptive in the short run. I think in those markets, we take a lot of comfort in the fact that, that business is heavily skewed towards the R&D lab. And the one thing that we know is a new product pipeline is the lifeblood of these technology companies since we have a high degree of confidence that the spending in the R&D lab is going to turn back on in a relatively short period of time just because it's so essential the go forward. I think similarly kind of staying on some of the downside, the semi business, very public, right, a little bit of a pad right now in semi investments. But even there, again, we think the longer-term trajectory, the backlogs of some of the big players in this space in terms of fab equipment manufacturers are still quite extensive. We know there's a lot of cap capacity that in place related to the move to smaller process architectures, re-onshoring of fab production. And so while there's a little bit of a correction that's happening here in the short run, we think over the next 3 to 4 years that the demand in semi is going to remain strong. And then if you look at the rest of our business, it's kind of the other direction, right? Aerospace defense remains quite strong at this point in time, were 7 consecutive U.S. budgets that have had meaningful increases in defense, particularly in the defense technology part of the market where we play. You've seen an expansion of NATO and you've seen the NATO allies commit to spending on defense at a greater percentage of GDP. We're seeing increases in spending in other alleys like South Korea and Japan. And so we believe the long-term trend in that market is favorable as well. The auto industry, particularly as it relates to our business, the investments that are happening in EV technology are driving strength in that end market. And then even our general electronics business, which we think is kind of GDP linked, and we now saw an uptick in business over the course of the last year related to manufacturing and the supply chain disruption has held in surprisingly well, right? We're seeing in the education markets, investments in advanced technology in med tech, this intersection between kind of the electrical engineering world and that life sciences medical space that is still small for us today but is driving demand things like IoT, Industry 4.0 are relative drivers within a broad diverse market. So it's really a set of puts and takes, I think, as we think about the demand environment, currently?

Yes. I appreciate that. If we go back, orders came under some pressure in the January quarter, down, I guess, high single digits against the 20-plus comp to. And then the company kind of called for stability at these levels. That came through last quarter. Is that -- is just the importance of customer R&D spend the reason that you guys had confidence that things are stable until they get better, not further deteriorating?

I mean I think that's true, but I think the confidence is maybe even a little bit more tactical than that, right? And we run a 6-month funnel process. I mean based on all the observable inputs that we can see granted that can change in any moment. So is on all the reservable inputs that we see, we just completed our first half. It looks to us like the back half of the year is going to look an awful lot like the front half of the year from funnel size from things that we're hearing directly from customers about their levels of investment. And so what we said on our earnings call is that right now, again, as close as we can see it, we do not see a further downside catalyst and not good. Unfortunately, at this point, we don't see an upside catalyst either. And so we're on the lookout for either of those developments. But right now, I think, again, as good as we can see it, stability is the word of the day.

Yes. No, I appreciate that. And then maybe to Kailash, the Communications Solutions Group is the one that -- of the 2 segments, others being the electronic industrial group, has been the weaker on the communication side. Can you just a little talk about what you're kind of seeing under the surface there within comms, where are you kind of seeing pressure? Where are you seeing stability, anything actually getting better?

Sure. And within the Communication Solutions Group, we've got 2 main markets, right? We have the commercial communications space, which is where we have the weakness. And then you have aerospace defense that rolls up under Communication Solutions group as well, where we've seen strength. And within commercial communications, we largely look at it as wireless and wireline. In wireless, we've seen a little bit of a slowdown, primarily in component manufacturing, things, chipsets and components that go inside wireless devices due to that inventory buildup over the last -- that our customers have done over the last couple of years, there is a little bit of a slowdown in that. But R&D investments in wireless continues. We have ongoing 5G deployments. We have O-RAN. We have newer versions of the 5G standard that's generating investment satellite connectivity to see robust customer engagements and R&D spend there. So customers are primarily scrutinizing and pausing some of the near-term continuous improvement type of R&D spend, but the long-term strategic spend continues. On the wireline side, same thing, long-haul networks, components that go into long-haul networks being a little bit of a pause because a little bit of overcapacity, but we're seeing use cases like AIML already driving up demand in data traffic. So we see research spend going on in the 800G networks, silicon that's focused on AIML, things like that. So these strategic long-term engagements are still moving forward. the softening is primarily due to our manufacturing exposure in the component sector.

And the I think that's interesting. So when you look at the kind of the underlying trends within comms, the R&D piece is showing more stable than the overall. Is that the same for 5G as well within comm is the R&D piece holding more stable?

Yes. A lot of our R&D business income is in the wireless sector, in particular, is related to 5G. You see the first version of the 5G standard is being deployed. But then you have Release 16 and Release 17, these are versions of the standard that are still not deployed yet. And then there is R&D spend going on into that. These are taking 5G into other use cases. A lot of people tend to think about 5G just as a smartphone-related use case. That was the case with 4G, but 5G is really about other use cases, right? You've got industrial factory automation, you have private networks, you have satellite connectivity. So these are use cases that are yet to be deployed. There's a lot of R&D spend going on into that. O-RAN or Open Radio Network Infrastructure is being developed. That is to improve network coverage and connectivity. It's attracting newer customers. It's the ability for any system integrator to put pieces together and build a network or build a base station, and this is driving both R&D spend as well as deployment spend. And you can kind of imagine when multiple pieces have to interact with each other, the need for testing and interoperability type of use cases go up, and that brings in our solutions. So those are some of the R&D areas. And while we're talking about all of this, research has already started, right? Spending 6G research has already started. That's a technology that probably will get deployed over the next 5, 7 years or so, but research spend on 6G has already started. So when you look at all of this in aggregate, yes, we see customer engagements, fairly robust R&D on strategic programs continuing.

I appreciate that. You mentioned AI in your response. Obviously, it's been a big focus for everybody, really the whole year, but even I'd say more so over the last 2, 3 weeks now. Keysight core competency, customer R&D, exposure to data centers, exposure to semi. What does that mean what is the investment we're seeing in AI and the focus we're seeing. What does it mean for Keysight?

Yes. It's obviously an exciting space, getting a lot of attention. When you think about this particular use case, it's sort of hitting an inflection point primarily due to 2 factors. One, the data availability, big data availability is improving, which is a key ingredient for AIML. And then democratization of technologies that can deploy and develop AIML capabilities with ChatGPT and tools like that, now more people have access to develop and deploy AIML technology. So it's kind of hitting an inflection point. So you're going to see more AIML focused chips. So in the semi space, that's exposure to us. You're going to see sub 7-, 5-nanometer technology development, foundry investments take place, all of that is positive. You're going to see those chips coming out that need more R&D testing because they're going to be focused on AIML, KPI and performance. So that's chipset R&D functional tests, so on and so forth. So we're going to see exposure to that. You're going to see AIML servers GPU cards and more of that. And so there's capacity expansion, you have ODMs and OEMs that are going to make many of these cards. So there's a positive vector there. Then we also look at how these AIML GPUs, CPUs, switches all get put together into a network. And high-speed networking will, in general, benefit from this. We've already been supplying 400-gig and 800-gig solutions to this market, but we expect on a forward-looking basis for those to ramp. And finally, the biggest challenge, and this is a new area, even with an AIML for us, is customers don't know how to really benchmark their AIML performers. They're building algorithms, they're building models, but they need to do this cost effectively and they have to train their models in a short amount of time and also look at energy efficiency, it's AIML training takes -- consumes a lot of energy. So there's multiple KPIs that they're trying to optimize and the only way that they're able to do this now is to do this through brute force, meaning let's build an AIML network. Let's buy a bunch of CPUs, GPUs, put it together, train the out, see how it works. And if it doesn't just keep doing the trial and error. So we have an opportunity to help the industry with that problem. So all in all, pretty exciting, still early days, but we're excited about what this can do for us in the longer term.

Yes. I appreciate that. Maybe kind of going from kind of communication group to the multiyear kind of outlook. At the Investor Day back in March, the company about 5% to 7% organic growth outlook and the increase from the prior 4 to 6. And to me, that was noteworthy because as long as I've covered the stock, the negative view has been very consistent. Keysight is very heavily involved in 5G R&D as 5G is deployed, there's this headwind coming, and that would weigh on growth. Clearly, you guys don't see it that way, 5-year raising the growth outlook. Can you just kind of talk about what gives you guys confidence in the ability to generate that level of growth through this 5G, 6G and [indiscernible].

Yes, a couple of things. So first of all, I think the business is far more diversified than people realize. The 5G story has done a ton of press, I think rightfully so, it's been a great story. But since our spin-off back in 2014, we've grown at a 10% compounded annual growth rate. Both CSG and EISG share that same growth rate. So the growth has not been dominated by one segment over the other. I think over multiple years going back even free spin, we've been on a fundamental transformation of our business to shift the focus of our revenue streams more towards our customers' R&D labs versus their manufacturing lines. The business today is about 60% manufacturing and the commercial communications space, that Kailash manages is probably closer to 70%, right? So heavy skewed towards R&D versus manufacturing. And so the one of the things that gives us confidence is the our customers are some of the best technology companies in the world and their lifeblood is their new product pipeline, their ability to invest in R&D and drive innovation. And so while the industry goes through a transition from 4G to 5G, ultimately to 6G, I encourage people to look at the R&D budgets of the market makers in this space and find the period of time where they took multiple years off from investing in R&D during the lull, it just doesn't happen that way, right? These big customers, they still have teams that are working on 4G development because as parts of the world, they don't have 4G today. People are still working to drive efficiencies from their 4G network. So there's still we still get significant revenue from R&D. Currently, the crust of the market is 5G. That is absolutely true. But as Kailash has just mentioned, these customers already are seeing teams working on 6G research. And that mix is going to shift over time, right? At some point in the future, 6G will be the predominant and 5G will roll down. But -- but the overall trend on R&D spend for these customers is secular growth, right? And so we want to continue to meet their needs as they go through this evolution from 4G to 5G to 6G, which is fundamentally different than where we were. When 4G was rolling out when we were primarily providing manufacturing tools customers rather than R&D tools. So it's that shift that gives us confidence.

Yes. No, I appreciate that. And then I would agree for what [indiscernible] my initiation was much more than 5G. That's always been something I've been focused on. And maybe we could talk a little bit about those. On the defense and government piece, we all kind of see defense budgets going higher. We see RDT&E taking share kind of within that. So can you just kind of talk about how that business has trended? Are we starting to see an acceleration even as kind of budgets come through in dollars [indiscernible]. What's the outlook there?

Yes. It's -- so when you look at our aerospace defense business for a long time, we've sort of characterized this as a GDP plus-plus type of a business. And it's been a fairly steady tracking that sort of characterization. Now global defense budgets are going up clearly in the U.S., but as Neil pointed out earlier, in allied nations and in countries like South Korea, Japan, and this exposure is giving us a little bit more predictability over the next several years in terms of what's to come. It's kind of hard to get that from a defense spend and how it gets appropriated and gets into programs. And that program spend is what we're exposed to. It might -- there may be quarter-to-quarter perturbations because it's all dependent on releasing budgets and assigning it to programs. But in -- so looking for a short-term acceleration is probably not the way to think about it, but it's more secular long term and with increasing focus on onshoring and government research and governments and nations wanting to drive technical superiority, all of this is leading to spend, right? And within our AD business you've got things about next-gen capabilities. You have ranges like [ DoD ] ranges requiring recapitalization where they shift from legacy infrastructure to new infrastructure radar use cases, things like that is a growth vector. The other piece is space and satellite. This is a Renaissance period, if you will, for space and satellite because you've got, again, legacy satellite infrastructure that is rolling over to new infrastructure. And it also needs to interoperate with the new commercial space applications like the low earth orbit LEO satellites that companies like Amazon and SpaceX and these folks are putting up there to provide global connectivity. So these systems have to interoperate and that's driving spend. And then government research [indiscernible] is also pouring in on new areas like 5G and 6G, how does 5G get utilized in defense applications. What are key topics that need to get researched over there, things like quantum, digital twins, lots of areas that are generating interest in R&D investment. So when you kind of look at all of those, it is a secular growth vector. We were comfortable enough to raise our long-term growth rates by 1 point as we outlined at the Investor Day.

If I -- just a quick add on, right, the we're now 7 or 8 consecutive years with increasing defense budgets in the U.S. And you brought up the RDT&E line item for those people that don't know, there's 1 line -- line item within the budget that we pay particular to RDT&E, research, development, test and evaluation. It's kind of the technology line item in the budget and we pay that's where we really play. And what you've seen over the last several years is that, that line item has grown at a faster rate than the [indiscernible]. So there's even more money that's going into defense technology than average. But that gives us comp.

Yes. No, I appreciate that. And then maybe turning to auto. From a very high level, it feels like the company is kind of levered into every good auto trend, EV battery, charging infrastructure eventually autonomous, which you kind of combined the electronic and the network test going to converge. It seemed like -- in correction, it seemed like that was one that maybe started to see have seen some improvement over the last couple of quarters. Like how should investors think about this business? Like what's the driver of the business? And how should we think about it going forward?

Yes. So much like the rest of our business, I mean the primary focus for us in the auto space is in the R&D lab, right? So we do have some -- a small portion aligned with the rest of the company, kind of 30% of our auto business is manufacturing related, but the primary focus is the R&D lab. And the current driver of that market is the EV evolution, right? The move towards electric vehicles, and so we're working with auto manufacturers, Tier 1 OEMs, Tier 1 suppliers to help build better batteries. How do you increase the range of a vehicle? How do you increase the life of the battery more charged patient cycles, the charge time, all of those things are the things that people are working on. As you said, we work with the charging infrastructure guys to make sure that the connectivity between all of the different auto manufacturers and all the different charging manufacturers that when you pull into a charging station, you don't need to worry about who made your car and who made the charging station that you're going to be able to get effective and safe charge, payment will happen effectively that handshake happens effectively. So that's what's driving the market today. But I think as we look forward, potentially more exciting opportunity even for Keysight is this whole transition towards autonomous driving because the way autonomous is ultimately going to manifest is through a convergence of multiple different communications technologies. It's going to going to take wireless technologies like 5G, WiFi, Bluetooth, LAN, things like radar and LiDAR that we do in the aerospace defense industry. So it's a convergence of a bunch of technologies where we already have a high degree expertise that are going to need to work in concert with one another to enable these high levels of autonomous driving. So we're really -- that's a little bit more of a forward-looking opportunity, but it's one that we're really excited about and that we really feel like we're in reposition to help the market with those advances.

I appreciate that. One thing that I think investors sometimes have trouble when thinking about Keysight. I it's more of a capacity play. It's not some -- another company that sells a widget into production, and you can kind of model that out. I mean it's really an installed base and I guess kind of the question we get a lot is, well, how do we know the world needs more test and measurement capacity. So I guess what gives you guys confidence that customers need more test and measurement capacity? And kind of with that, what is the catalyst for whether it's an upgrade, a new unit incremental? What drives that?

Yes. I mean maybe talk about some of the comms in the aerospace defense markets, right? What our customers are trying to do is really look at developing new IP, new technology-driven IP and this could be in pursuit of higher data rates if it's in wireline. It could be in pursuit of wider bandwidth, faster response times, meaning lower latency. All of this means that you need to have smaller chips, you need to have higher density chips. All of this requires investment in R&D, right? If you -- and these are complicated R&D topics that require heavy investment in -- throughout their workflow. And what we do is we enable that workflow all the way from simulation. They can't just go and put a chip out, they need to model that first in software. So we have an EDA portfolio that helps them simulate what that might look like. And then they'll need to build a proof of concept or an initial prototype. That needs to be modeled, characterized to see how it correlated with simulation. And then they -- once that sort of cycle continues and then you move on to producing pilot designs which need to be tested at scale. So for all of these workflows, and finally, they need to get deployed in the live network and then they need to be monitored, troubleshot. They need to be assessed for cybersecurity, these types of risks. So when you look at that overall workflow, it requires access and our tools. And most of it is focused on the front end and the R&D phase of it. And this is what sort of drives this, right? So whenever customers are building out new SKUs, generally and adding new capabilities, it drives a need for our solutions. When they're moving from one generation to another generation of technology that drives spend. And these are all kind of overlapping. So it doesn't move in a sequential manner. So that's -- that's the beauty of the diversity that we have. You've got 5G going on. There's still meaningful spend in 4G. There's 6G research coming up, there's push for 800G and terabit now driven by AIML. You've got satellite connectivity that's needed in aerospace, defense and automotive and commercial sectors. All of these are sort of overlapping waves of innovation that requires our solutions, right? That's what gives us the confidence. On top of that, we have the broadest portfolio than anybody else in the industry in our industry, and our technology stack is pretty deep. We've got thousands of R&D engineers who have had the expertise to deliver these capabilities and engage with customers. So all of that gives us the confidence.

At the highest level, what does Keysight do? We make hardware software tool solutions for electrical engineers. So what do you need to believe to have confidence in the opportunity going forward, you need to believe that electrical engineering base, technology innovation is going to continue. And just look at the markets we talked about, wireless, wireline networking not to mention the devices, aerospace, defense, technology, automotive, semiconductor, the digitization that's going into everything from refrigerators to IoT. Suffice it to say, we have a high degree of confidence that electrical engineering based innovation is going to continue going forward. And as Kailash said, nobody has a broader portfolio and a deeper bench of technology in that Keysight. And so we're highly confident about the opportunity that lies ahead of us in the R&D lab.

We really appreciate that. Back in, I guess, I think February when the fiscal Q1 when orders were under some pressure. You guys talked about really like a lengthening of sales cycle. Customers just taking a little bit longer to decide if they're going to buy. Has that stabilized? We see orders kind of stabilizing? Is it fair to assume that, that sales lengthening has stabilized?

I think, again, stabilization is a good word. It does feel like we're almost in the exact position we were in a year ago, where was there's this urgency to get in line, right? The supply chain situation of a year ago accelerated the sales cycle because people wanted to secure their spot in line and get in the queue for what we're lengthening lead times. And now with lead times, our supply chain dramatically better where for the lion's share of our portfolio were back where we were before this whole thing started. So lead times have come in, their own demand has slowed. And so they just slowing things down. I think the good news is, from our perspective, the engagement remains high, right? We continue to engage with these customers. We know they haven't given up on these programs. They're just moving a little slower in the short run to try and get themselves through their own inventory and digestion and these things. And so yes, I think it has stabilized. And again, we have a high degree of confidence that while these companies do pause, they don't pause for long.

Yes. No, I appreciate that. One thing that's always kind of stood out on Keysight is not the margins, but just the rate of change in the margins. If you go back in 2018, I think it was 18-ish percent operating margin now we're roughly 30. If I look at the incremental over that period, it's almost 60, if my math is right. Can you just talk about what's driven that because there's I cover -- I mean other companies made up similar margins, but no one has expanded them at the rate that you guys have?

Yes. I mean I think some of -- we spun out of [ Agilent ] 8 years ago. The business had been underinvested in. It had languished from a growth perspective. We turned the investment of. We got the business growing again. Our model essentially says invest in growth, invest in R&D, invest in sales, make sure you're funding the CapEx that's necessary to grow your business, leverage everything else, right? And so I think as we've kind of changed our go-to-market to move more towards solutions, those solutions tend to be more differentiated in the marketplace, higher value added, therefore, higher margin. We've added a ton of software content, probably tripled our software business with now significantly over $1 billion over this 8-year period of time, obviously, high margin it's not just the margin performance, but to the value add that we're bringing to customers. And so I think that fundamental transformation about the way we think about the market opportunities has not only increased growth. It's increased the margin of the things that were -- the value that we're adding to customers, and therefore, the margin that's associated with and is fundamentally transform the Business.

Yes. No, I appreciate that. And then maybe a follow-up on software. I know haven't gotten there yet. But can you talk about -- obviously, software, it's growth accretive, it's significantly margin accretive. But what about from a competitive positioning? You guys are much bigger than everybody else. And with the industry, like I guess, many kind of accelerating towards software, what does that allow for you guys from a competition kind of [indiscernible] perspective?

Why don't I start and I'll let Kailash jump in, but I pull back to the comments that Kailash was making earlier. We're really far focused on our customers' R&D workflow. And because of the breadth of our portfolio, not just in hardware and software, we have the largest set of building blocks with which to aid our customers across that workflow. The design tools that they need at the front end in the simulation phase feedback loop as they prototype and then validate those solutions and ultimately come up with something that's manufacturable and deployable in a commercial environment. So I think in this space, you really need both or you need to have differentiated hardware, core measurement capability and to increasingly add value put the software around it. And so it's not something where someone can really come in and just do the software piece, you really need to have this complete set of tools to be offered to be able to offer them a complete solution.

Yes. And we've kind of outlined our strategy at the Investor Day moving from a box-based physical layer business into the protocol layer and the application layer and the protocol layer business drives the need for our customers to emulate things that they would deploy in a software-defined environment. So there was a lot of attach rates to software. It's a complete solution with our hardware platforms, driving more software content because it they need to see how things are going to look like or perform or behave out and drill deployment in their lab. So that's driving a lot of software content. We've been able to acquire many companies such as Prisma Telecom that emulates a device. We've acquired scalable network technologies, which provides a digital twin capability for network modeling. We've added [ egg ] plant a couple of years ago that's into software automated test. We're now able to string these assets together as Neil talked about and provide very focused capabilities to each of these diversified end markets, right? So those are hard to duplicate because you need to have the core assets up and down the technology stack, and you have to have the software assets and the workflow expertise to stitch it all together. So certainly a big differentiator for us.

I appreciate that. So the -- I feel like the theme here really going back to the last earnings call is just stability. And I think that's obviously welcome given all the macro uncertainty. But the next kind of left step from here is growth or a return to growth. And obviously, there's a lot of uncertainty in the market. But what should investors look at or track to determine if, okay, things are kind of returning back to growth mode because just the nature of R&D is kind of opaque. And I think there's not always a ton of visibility from the outside looking in trying to determine when things are turning in either direction really.

Yes. I mean I think I started discussion with the discussion on kind of what our relative strengths and weaknesses in terms of our end market where currently, and obviously, commercial comms being one. I think the good news is that the market-making customers in this space are they're all household names, right? This is the Qualcomms and the Googles and the Samsungs of the world. And so one of the things I'd be watching is, it's what's happening with those kind of market-making customers in the space. Are they getting past their workforce with structuring? Do they -- what are they saying about their inventory situations and their level of investment. I mean, I think we obviously have a deeper level of visibility because we're in their R&D labs on a day-to-day basis. And there's an advantage for them to keep us up to speed on what their demand requirements are and what their road maps are like. But I think from an investor stand point you can learn a lot just from what these kinds of companies are saying publicly about their levels of investment. Same on the semiconductor side, right, which is the other area of relative weakness the TSMCs of the world are very public companies, right? And you can learn a lot from their public statements.

Yes. No, I appreciate that. Maybe turning kind of lastly here to the capital deployment. Not only is the company a very strong cash generator, but there's just a lot of cash on the balance sheet to I want to say $2.5 billion, $2.4 billion at the end of last quarter. Can you just talk about what should investors expect from a capital deployment perspective?

Yes. I think, again, we're trying to strike a balance here. I think first and foremost, as I've already said, we want to make sure that we are funding the future growth of our business. So I think even in the situation right now, where our business is under a little pressure, we're going to keep our core. We might pause some nascent R&D programs, but our core R&D program, 6G, quantum computing, these things that are going to drive the future growth of our business, we're going to keep those things on track. We're going to continue to invest in our sales force, again, to make sure that the business is positioned to grow. I think beyond that, the management team has a preference to put work put capital to work in value-accretive growth generative M&A. I think there's challenges there. We have a pretty disciplined approach in terms of our return hurdles. There's a -- as you can tell from our comments today, there's a pretty strong software bias to our M&A funnel. Those valuations have been challenging, let's just say. And so I think we've done 15 or 16 acquisitions in the 8 years that we've been out as an independent public company, and I think you can see us continue to do that. But if we're not finding ways to put capital to work, we'll return capital. And so we've committed at a minimum to be anti-dilutive with our buyback program. But over the last couple of years, we've been significantly more aggressive than that. And again, we're trying to at the moment, make sure that we retain some dry powder so that when we do find strategic opportunities, we have the ability to pull the trigger, but at the same time, be good stewards of capital and not hesitate to return it to our shareholders when we see the opportunity.

Yes, I appreciate that. If I kind of go back over the long term there really wasn't that much buybacks. It's all kind of software M&A bolt-on, I think it was the overarching focus. The past couple of years, much more buybacks and kind of to your credit, you kind of kind of modestly, the multiples were high and buybacks was the right place. Is that algorithm shifting? Obviously, multiples are down broadly. Capital is tighter. So I imagine maybe there's not as much competition for assets. And when you have $2.4 billion of cash, maybe financing rates aren't all that much of a concern on the deal map.

I think it remains to be seen. And I think reason for some optimism, it does feel to me there's maybe an increasing level of actionability on some of the assets in our space. I mean we track a broad range of things look at hundreds of things every year. I mean, we try and to cast a broad net, but it does feel like that there is maybe a little bit of an uptick in terms of the actionability of some of these assets. The question is transactability, right, to particularly a lot of these founder-led companies, have they let go of the valuations of late 2021 and realize the new reality. And I think [indiscernible]

Yes. Well, I could ask questions all day, but we're up on time. So thank you, Neil. Thank you, Kailash. Thank you to everyone both in the room, listening on the webcast, and I hope everyone has a great day.

Thank you, Chris. Appreciate it.

Thank you. Thank you, Chris.