All right. Welcome, everybody. We're delighted to have Keysight here with us here today. I'm going to read a brief disclosure, and then we'll kind of get started on introductions. For important disclosures, please see the Morgan Stanley Research website, at Morgan Stanley/Research Disclosures. If you have any other questions, please reach out to your sales rep. For those of you who don't know me, I'm Meta Marshall. I cover the networking space here at Morgan Stanley. We're delighted to have Keysight here today, Neil Dougherty, CFO, and Kailash Narayanan, President of CSG. And I'm sure I butchered some last names there, but that's what I do at this conference. All right. So you just reported fiscal Q1 earnings with maybe a more cautious view on demand returning across the portfolio over the next couple of quarters versus maybe what investors were expecting.
Just how do you think about this cycle playing out versus maybe how you did 6 months, 12 months ago, and just what gives you confidence that these are more normal cycles, just maybe on the longer end of normal cycles?
Yeah. I mean, I think as you suggested, we've gotten a little bit more cautious about the timing of recovery as we progress. And I think that's fundamentally right now a function of what we're not seeing. And that's what we're not seeing, the early signs of the recovery in the funnel over the next three to six months, which we would expect to be seeing by now if, in fact, that recovery was going to come in time to meaningfully impact our revenues in the back half of our fiscal year. That being said, we believe the underlying long-term secular growth drivers in the industry remain intact. I think a little bit of an abnormal lead-in to this cycle with the supply chain disruptions. First, you had COVID.
Then you had the COVID recovery, which was contributing to kind of abnormal backlogs, which were then further exacerbated by the supply chain disruptions over the last 24 months or so, which have now normalized. And I think that that's maybe exacerbated a little bit of the volatility and might serve to elongate the cycle, at least on the order side of things, because our revenues remained stronger for a couple of quarters longer than the order side of things. So I think we're watching it carefully. But I think, again, long-term drivers exist across the portfolio, and we feel very good about our position longer term.
OK. I mean, maybe just building on that, Kailash, you were just at Mobile World Congress last week. Clearly, there's a lot of R&D still happening. How does that inform how you think about these cycles, just in terms of what still needs to happen as you think about?
Yeah. As we've outlined in our Investor Day, across the comms ecosystem as well as aerospace defense, we're enabling these long-term technology drivers, technology innovation. You look at wireless. That is about 5G and going into 6G. And we see customers continuing to spend on their long-term strategic programs. There has been a pullback on some of the quick-turn product cycles, like version B of the product that you launched in the previous year. That's where we've seen the pullback, but not on the strategic long-term programs. And then now on the wireline side, there is a tremendous amount of investment driving the AI/ML infrastructure. And we're seeing a lot of growth in our 400G, 800G, and terabit business. So net-net, and then aerospace defense, you see investment in sat comm, in electronic warfare, electromagnetic spectrum operations, radar technologies. And that's a secular driver for us as well.
So just from a thematic perspective, we're not seeing any slowdown in terms of advancing technology waves in all of these different segments.
OK. I mean, clearly, I think we can all tell there's a lot of development still going on. But what are the signposts that you're kind of looking for to gain a sense of that these down cycles are concluding?
Yeah. So why don't I, Start? I'll talk a little bit about the EISG signals, and then you can talk a little bit about what we're looking for on the comms side. So in the electronic industrial side of the business, certainly semi, we're watching that very, very carefully. And there's two parts to our business. There's the parametric test, which is kind of tied to production volumes. And new fab construction is the driver there. That business has been relatively soft. But we're watching fab timelines, which are still pushing out. The good news is they're not canceling. And I think if you follow the industry news, it does feel like there's a bow wave that's forming. And a lot of people are looking to calendar 2025 as being a strong recovery year for semi. So we're watching that.
The other portion of our business, the laser and interferometry piece, really more tied to these big photolithography machines, particularly the move to 2 nanometer and 3 nanometer. You can look at the backlog for the producers of that kind of equipment and see that they have robust backlogs. So that portion of the business has been relatively more stable. Moving through the segments, on the automotive side, by far, the softest portion of that business has been roughly the third that's tied to auto manufacturing. We'll be watching and our auto manufacturing tools support both ICE vehicles as well as electric vehicles, because what we really test are the control units. There's a lot of electronics in both types of vehicles.
And so we'll be watching kind of the broader auto industry dynamics, which I think not only will provide potential uplift to that manufacturing piece, but when the business is going better, you'll see more dollars flowing into the R&D side of things as well. The engagement on the EV and charging side has remained quite robust. We've seen a little bit of a pullback on the investments in the autonomous driving. And so that's kind of how that has played out. And then the last part is general electronics. And I think if you had a Venn diagram and you could kind of overlay our general electronics business with the broader manufacturing space and with China, there's a lot of shared territory in there in the middle. So coming out of supply chain, people a lot of investments in capacity in the 2022, 2021, 2022, early 2023 time frame.
Supply chain's now normalized. But you see across a wide range of industries, people now sitting on excess capacity. So we're trying to watch and see how that gets absorbed and when the kind of next wave of investments are going to happen. So things like PMI are indicators. And then the broad China macro as well has been a challenge. And we'll be watching that unfold as well. And then on the CSG side.
And then on the CSG side, let me start with commercial comms. If we look at wireless, clearly we're watching the semiconductor index. And that has started to grow over the last few months on a month-over-month basis. So that bodes well just for new chipset SKUs coming out. And those chipsets have to get into devices. Those devices have to get deployed on networks and so forth. So that's something that we watch. We're also very closely tied with all of our major customers. And we know what their strategic long-term programs are and what they're doing in the short term. So that's something that we are closely monitoring. We're seeing new applications. We're paying close attention to new applications, potentially, on the wireless devices. These could be IoT type of devices. These could be other smart devices that might incorporate technologies like AI in the future.
We have devices coming up with satellite connectivity. Those are trends that we look at. We also see segments that have sort of bottomed out in some sense, that have seen this inventory spike and things that have bottomed out, mostly on the contract manufacturing side. We look at those trends. On the wireline side, we look at telecom and data center CapEx. That has been on the rise. It is projected to increase over the next several years, driven by AI/ML and cloud expansion, cybersecurity concerns. Telecom and data center CapEx is something that we watch. On the aerospace defense side, clearly, the worldwide military expenditure is up.
It's not just up in the U.S., but globally as well, driven by not just your defense modernization spend, but by new applications, Block III, which is the next generation GPS satellites, radar, and coexistence of satellites with the new LEO constellations. And then there's research going on in areas like quantum and 5G, 6G as well on the aerospace defense side. Now, that's a business that's hard to call on a quarter-by-quarter basis because of the way the budget appropriations, et cetera, work. And this is an election year. Obviously, there might be issue dynamics associated with that. But we see that business on a secular growth path going forward.
OK. So you both basically listed out 10 growth drivers, 15 different growth drivers over the long term. I think I kind of already know the answer to this. But has anything about your experience over the past, call it, 12 months-18 months where we've started to be into this down cycle changed your view on kind of the 5%-7% longer-term growth rate?
No. We stand by that. We believe that we're going to establish a bottom if we can get back to that long-term growth rate. Obviously, we outgrew it for a period of years. We've now had a bit of a correction. We can get back on trendline.
OK. What is your kind of base case recovery scenario? Do you view this as more of kind of a gradual recovery or a stronger kind of rebound once we start to see some of that activity?
Yeah. So we're deliberately, actually, not calling at this point because we don't have visibility. Satish did say our CEO did say on our earnings call last night that historical evidence suggests that quite often, downturns like this are followed by some type of an above-market rate bounce. But we, at this point, aren't seeing the indications of that. So I think from just a general way we'll manage our business, I think we will tend to be cautious. We don't want to get spending ahead of demand. And so we'll tend to, at least in our base case, think about a more gradual climb out. And from a sales perspective, from a technology perspective, we're going to be fully ready to participate in the uptick, whatever the inflection that comes. But just from a cautious standpoint, our base case will be built about something that's more conservative.
If we get the upside, that's great.
OK. I mean, that's tended to follow your kind of guidance philosophy in the past as well.
That's right.
OK. Investors can kind of understand that overconsumption digestion taking place on EISG, where I guess we get a lot more concerns is on the 5G side. And how to think about kind of how this cycle plays out differently than the 4G cycle and why it is different. Is there any way to kind of contextualize for investors how to think about what are the differences between how you see the 5G cycle playing out than you did the 4G?
Yeah. It's a good question. So just to put this in perspective, the first 5G networks were commercialized sometime in late 2019. Then COVID hit. There's been an expansion in the C-band area in 2021, 2022. And then now we've had this inventory-related correction. So when we look at the whole landscape, it's still early stages in 5G. I wouldn't even say that we're close to mid-cycle yet. And there are only about 200+ networks around the world that are 5G ready. The quality of service and quality of experience differentiation doesn't exist today relative to 4G networks. So when you think about 5G, every network that's going to be commissioned on a go-forward basis will be a 5G network. Nobody's going to do a standalone 3G network or a 4G network.
So the investment that is going to happen and the mix of the investment is going to be geared towards 5G. It might not be as high as it was during the peak. But the mix of the investment is going to be on 5G. So the number of networks have to expand, 200+ to 800+. That's how many LTE networks you have now. And again, to put things in perspective, LTE is kind of in its 14th or 15th year. And these are long cycles. These are 10-year cyles, 15-year cycles. So we're still in the early stages. Subscribers are going to grow. And they're going to grow from 1 billion to 5 billion, 6 billion. And they'll subscribe when new devices with new capabilities are launched. And those are going to continue, especially with things like AI/ML.
Then you also have to realize that what has been commercialized is the non-standalone version of 5G, which uses 4G kind of as an anchor. The standalone version of 5G has not been commercialized. And that brings in more capabilities and more use cases. So that's something that's still ahead of us. You look at another thing that has been commercialized, and it's only the mobile phone use case that has been commercialized. There are other use cases, satellite connectivity, these industrial IoT, private networks. These opportunities, these use cases have not been commercialized. They have not been monetized. And when you look at those ecosystems, they take longer to mature. For an industrial giant to use 5G to automate a factory, that takes more time and more investment because they're not used to cellular technology. So that sort of elongates the life cycle.
And relative to where we were in 4G, which was primarily our focus was primarily in manufacturing, enhanced manufacturing, the portfolio that we have, both the things that we've done organically as well as through acquisitions like Anite Telecom, Ixia, allows us to participate more fully in this life cycle and more targeted towards R&D. The standards continue to evolve. The standards are looking at making the spectrum more efficient, making the spectrum more secure, the networks more energy efficient, more features for newer capabilities to be deployed and monetized. So all of those, we're able to participate in the R&D cycle. So we feel like and not just that. As the networks scale, you also have component manufacturing business, which is high-margin business that we would tap into. And early research in 6G has already begun. It's a small business for us.
But we already see dollars coming in from early 6G as well.
OK. One of these days, we'll be talking about 7G. But we'll all be old by then. So just I think we get the question a lot from investors of, OK, what's that next catalyst? Is it a future release cycle? Is it we get to a business case for 5G? Is it 6G? How do we think of what do you see as the nearest-term catalyst for that business? Clearly, there's a lot of room to run. But what is that kind of either the staging of that? Or how do you think of what's the next catalyst for that investment?
Yeah. Like I said, the standards evolution continues. We're seeing steady business related to that. There is an installed base that we can continue to monetize by selling hardware and software upgrades with these standards, which enables new use cases and new capabilities as well as makes the existing standard better. That's number one. The satellite connectivity use case is gaining a lot of traction. Every phone that's going to come out in the future will have satcoms. That's driving a lot of investment, a lot of R&D investment. It's a little different from where mobile phones were a few years ago. You have new capabilities like AI/ML. AI/ML today is a data center phenomenon. We know there are going to be newer applications and newer capabilities that will be deployed on PCs and smartphones.
That's going to drive data rates up, both on the wireline side as well as the wireless side. So you're going to have computation that has to occur on the phones. You're going to have some of that may have to be offloaded to the edge. And other things may have to be done in the cloud. So we see this convergence of wireless and wireline technologies raising up the need for data rates, raising up the requirements around latency, and newer capabilities, newer applications. This is going to require both on the device side and the network side to go through a lot of upgrades, R&D investment, manufacturing investment. So probably a combination of those is what I would look at as a near-term catalyst prior to 6G.
Right. OK. So last second question entry, just given the news of today. You guys gained a lot of share within 5G. Clearly, Viavi announced the acquisition of Spirent this morning. Just how do you kind of see your competitive positioning as you kind of progress through additional cycles and any kind of changes to the landscape you would see with any consolidation, realizing that it's something you're not?
A few hours old, yeah.
Yeah. It's a few hours old.
Yeah. So obviously, we saw the news this morning. And both Viavi and Spirent play in the same large sandbox that we play in. We know them to be good companies. And we're in the process of digesting this combination and what it means for our industry. But I think back to the heart of your question around our competitive positioning, we continue to just think of Keysight as being very well positioned in terms of breadth of portfolio, our ability to service wireless, wireline, industrial end markets, technology leadership, great customer relationships with banner market-making customers across multiple ecosystems. It's really a breadth of portfolio and a breadth of industries that we serve that is kind of unmatched by many of these smaller, more niche I don't know if that's the right word, but more narrowly focused competitors that exist in the space.
Yeah. And a case in point is on things like 6G. While we engage very early in 5G and established a first-to-market position based on all of our R&D investment, we're engaging even earlier in 6G because of the capabilities that we have now that we've built up during the 5G cycle, the customer engagements and relationships that we have, and the R&D investment that we continue to make. And we're still the company with the broadest and deepest portfolio across the whole communications ecosystem.
OK. Perfect. Kailash, you just brought up a little bit about everything that's going on within AI and wired networks. And clearly, there's not a room in here that's not talking about AI investment of some sort. So just can you maybe lay out what parts of the AI ecosystem you're testing today and where the opportunities are to kind of expand that exposure, if there are any?
You bet. Yeah. I mean, first of all, it's an exciting use case. We're very happy that we're able to participate in that with our capabilities. We've always talked about Keysight as enabling innovation workflows that advance next-generation technology waves, be it on the wireless side and on the wireline side. And now what we see is AI/ML developing into a compelling use case that's driving and accelerating some of that investment. Today, we are largely focused on enabling the AI/ML infrastructure, the backend, the data center infrastructure. You think of these networks having to go at very high speeds. You think about these networks having to be very low latency in terms of providing responses to the user and getting computations, high-performance compute done in an extremely fast manner. So these are the things that we enable. So when I look at AI/ML, I look at silicon.
So there's going to be more AI/ML chips that are going to come out. That will need R&D spending on the various interfaces those chips have. New architectures, like chiplet architectures, are being conceived of to drive high-performance compute from a chipset perspective. So there's that. So that's silicon. That silicon then goes into some type of a system. So let's call it I mean, that could be a GPU. It could be an accelerator card. It could be motherboards and so forth. So there we see R&D as well as CM manufacturing business. So that's silicon system. And then you go into these systems getting deployed in a network. There are going to be pools of CPUs, pools of GPUs, pools of memory that need to be connected. So that drives high-speed networking and high-speed compute businesses, PCIe Gen 6, Gen 7, 400G, 800G.
There's going to be modeling of cybersecurity concerns, all of that. So that drives that portion of the business. And a newer thing that we're also seeing is customers want to model the performance of these AI/ML workloads prior to actual deployment. Today, they can only connect these GPUs together to assess the performance of their large language models and so on and so forth. For these things to be a little bit more real-time, they want to see ahead of time. They want to model this in software. So we're seeing more traction on that side of things. We just recently announced some of our modeling and benchmarking capabilities for AI/ML workloads in partnership with Arista. And there's going to be more of those engagements in the pipeline for us. Now, that's all on the AI/ML infrastructure wireline side.
But as I said before, the AI/ML applications are going to percolate more towards the devices and the PCs. There are already some projections on hundreds of millions of smartphones and PCs that are going to get launched next year and the year after that deploy AI/ML applications. What that means is you're going to have to do AI/ML type of computations on the device, at the edge, and at the back end. And this is going to drive data rates throughout the network. And those are the things that we end up supporting and doing. The RAN itself, the radio access network itself, will benefit with AI/ML capabilities. So in the 3GPP standards, we see AI/ML being written into that to drive the efficiency of networks, to deploy spectrum more effectively, to support things like millimeter wave FR2 mobility.
Those are things that will get researched and studied where we have a play.
OK. So again, so many different kind of areas that we just touched on there. I think investors, myself, sometimes have trouble contextualizing, OK, of this wireline business, how much of that customer base is still what Ixia's customer base was versus how much has that evolved since you had it? Or just how to think about who that customer base is for wireline today, particularly as we think of all the different areas that you just laid out of exposure.
Yeah. We've certainly expanded the customer base. Silicon providers. We have silicon providers. We have component makers, the optical component makers, switch makers. We have the network equipment makers, the Ciscos of the world, the Arista Networks of the world. We have hyperscalers. We have cybersecurity companies, people that make firewalls and applications that run on that. We have CMs and ODMs that make some of these CPUs, GPUs. So it's pretty diverse. And when we acquired Ixia, it was a limited set of customers. So we've been able to participate in it fully because we have a complete full-stack solution. We touch the physical layer, the protocol layer, as well as the application layer. So that's clearly broadened the footprint.
I guess worth noting that we had a meaningful wireline business prior to acquiring Ixia, focused in the physical layer, just like we had a meaningful physical layer wireless business before we acquired Anite. So that's kind of the transition we've been on. Historically, strengthened the physical layer, both wireless and wireline. We did the Anite acquisition to move into the protocol layer for wireless. We did the Ixia acquisition to move into the protocol layer for wireline. So now we can service that entire ecosystem, wireless to wireline, which is converging a physical layer through the protocol layer and now into the application layer as well. That's the strategy we've been implementing over a decade now.
OK. So I mean, maybe turning to the aerospace business. I don't think anybody here would be remiss to think this is not an elevated geopolitical environment, which is kind of triggering a lot of funding. But how much should we think about the growth of that business being driven by kind of the environment that we're in and kind of the elevated spend environment versus just space exploration, some of these other areas within that business that have been kind of growth drivers kind of before this environment?
Yeah. I think we're seeing a little bit of both. Some of the technologies that have been deployed are fairly old and there is legacy. So there is this defense modernization trend that's going on that's secular. It clearly is base by base, and it's program by program. But there is clearly a trend there. And on top of that, so this would be getting exposed to the research and development spend, if you will.
But also it's bipartisan support, which is also important.
Exactly. Then you also get exposed to the operational part of the business. That's due to the current geopolitical climate. And if you're supplying some capabilities to a foreign country, to a foreign ally, that needs to get replenished. And that stock gets replenished with more and newer capabilities, next-generation capabilities, which drives more program spend. So we get exposed to both the research development aspect of things as well as the operational and maintenance part of the budget. There is exploration, more exploration now on new areas, like quantum, like cybersecurity, like 5G and 6G. How can that be deployed and coexist with some of the military technologies? So I think it's a little different. And this is one of the reasons we're seeing outsized growth in our aerospace defense business. And we were confident enough to raise the growth rate by a point last year.
We stand by that. It's a little challenging to call it quarter by quarter. But when you look at it secularly over a multi-year period, we're pretty comfortable with those rates. Yeah.
OK. I mean, Neil, maybe circling back to the auto business. There's obviously been a lot of discussion about kind of the downturn in EVs that we've seen. You kind of briefly alluded to it. But just how much of kind of that auto business is tied to kind of EV production versus other longer-term drivers?
Yeah. So about a third of our auto business is tied to production in general. But again, what we're testing is electronic control units, complex populated PC boards, essentially. And those control units could be going into either an ICE vehicle or an EV vehicle. So it is more volume-driven across the industry than it is necessarily levered to one particular type of drivetrain technology. The remaining 2/3+ of our business is tied to kind of next-generation auto, primarily EV, but also to a certain extent AV and other types of electronic sensor development that's happening in the R&D lab. I think by far, the most immediate opportunity and the one that's driving strength in that ecosystem over the last several years is the EV and charging opportunity. I think AV is, there's certainly waves of investment that are happening. But it's further out.
So there's a little bit more patience that's playing out there. Whereas the auto OEMs are definitely in a race right now to catch Tesla and others and get EVs on the road. We're supporting that, again, not just from a battery development, how do you build a better battery and improve range and the life of these vehicles, but also from a charging infrastructure, which is a fundamental challenge for broader adoption of EVs across the industry.
OK. You just made the ESI acquisition, which kind of enhanced kind of that auto portion of the business. Just can you speak to kind of what the rationale was there and how that kind of fits within the auto portfolio?
Yeah. I mean, I think not just Keysight, but as evidenced by a wave of acquisitions in that CAE, computer-aided engineering space, others are seeing it as well, this desire for the engineering populations at tech companies around the world to do more work in software upfront before they build physical layer prototypes. And so Keysight already had a presence broadly in this space, but more on the EDA side of things, helping our customers simulate RF and microwave network devices in software before they build prototypes. And this moves us into an adjacent space. EDA and CAE we view as adjacent spaces. And with ESI, we found a CAE player that was focused very much in end markets where we're focused, primarily automotive. But we believe their technology is directly extensible into the aerospace defense end markets, a market where they don't have a lot of direct presence today.
And so it was a good fit both thematically around this emulation, simulation engineering software space, and from a market perspective with the focus on auto and aerospace defense, which are our markets where we're very much focused.
OK. I know it's small within the overall portfolio, but just refreshing investors to see their contribution to growth or kind of margin impact of that acquisition.
Yeah. So it's roughly $140 million of revenue, generating mid-teens profitability prior to the acquisition. This is really much more of a growth play for Keysight than it is a cost play. We will have the opportunity to take out some public company costs and other things. But really, we're focused first and foremost on implementing what was a strong internal growth plan that the ESI team was already executing and then potentially accelerating that further through expansion into aerospace defense, leveraging our own presence in the automotive industry, our opportunities. And obviously, as a pure software business, high recurring revenue, gross margins well into the 80% range. Keysight's good at driving leverage when we're growing businesses. So if you can deliver the growth, we can improve profit just through leverage over the course of the next several years.
OK. So you talked a lot about driving leverage as you grow. In this downturn, you've shown margin resiliency, only seen about a 300 basis point-400 basis point step back despite kind of a 10% pullback in revenue. What steps have you taken to kind of enable yourself to have that margin protection? And just how do those steps kind of better prepare you as we come out of this?
Yeah. I think as we think about maintaining margins across the business cycles, really, for Keysight, we've done a lot of work over the years to put in structural elements that essentially, systematically, and automatically adjust as our business enters the downside of a business cycle. And so the single biggest component of that is obviously our variable pay programs. 100% of Keysight employees have a portion of their pay that fluctuates with business performance. And so as we do enter softer macroeconomic conditions, we get a natural governor in the single largest component of our cost structure. Beyond that, we have roughly half of our manufacturing outsourced. We have a meaningful indirect channel on the sales force that provides further, again, structural protections.
I think this situation is maybe a little bit different than when we originally put the model together, primarily because of inflationary elements that are still present in the economy. And so you have seen us supplement those structural elements with some more proactive types of cost reduction. So I've referenced on the earnings call that we do expect our OpEx spending to be down year-over-year, about 3%, with virtually all of that savings coming from the SG&A side of the house versus the R&D side of the house. Because one of the things that we've been very consistent in our messaging on is our intention to maintain R&D investments across the macroeconomic cycle so that we are well positioned to participate in the upcycle that we're hitting our market windows. We have the right technologies in the marketplace at the right time.
We intend to continue to invest in R&D. We're looking to pare back on the G&A side of things in response to the current macroeconomic environment.
One more point I'll make on that is just the gross margin of the business. One of the items that doesn't get a lot of visibility is the software content that we have in our portfolio. Despite the decline in revenue, CSG, as well as commercial comms, achieved record gross margins. That's all based on significant software content that we're able to sell to our installed base in the form of upgrades as these standards and technologies evolve and as customers execute their R&D programs, very different from where we were in the previous cycle.
OK. Any questions from the audience? Perfect. Maybe this last question, how are you thinking about capital allocation and ways to be kind of advantageous in downturns to kind of better position for longer-term growth?
Yeah. It's a great question. And I just touched on it, right? We've laid out our capital allocation over the last decade, really. The number one portion of that is to make sure that we're continuing to invest to support the organic growth of our business. And I just talked about how we intend to maintain R&D investments in this environment to facilitate that. And we believe that we're well positioned to fully participate in the upturn. We're excited about our 6G portfolio, quantum computing, all of these areas, the move to smaller process architectures like 2 nanometer and 3 nanometer. We're making sure we're hitting those market windows. Beyond that, I think we look to strike a balance between returning capital to our investors and doing value accretive M&A.
If you just look over the past couple of quarters, in the fourth quarter of the year, we bought over $400 million. So we repurchased over $400 million of our own shares when there was a dislocation on our share price down into the 120s. And then here, in the first quarter of the year, we settled the ESI acquisition for between $900 million and $1 billion. And so again, looking to strike that balance. We have a robust funnel of potential M&A opportunities. But we stay disciplined as it relates to our return hurdles. And we're committed to, at a bare minimum, be anti-dilutive with our buyback program.
But I think we've exhibited over the years that when circumstances dictate, and that could either be value related or it could be the size and actionability of the M&A funnel, we won't hesitate to put more money to work in terms of returning capital to investors.
OK. Well, Neil, Kailash, sounds like a great story that I still am very excited about and look forward to seeing how things come out of the downturn. So I appreciate you guys being here today.
Thank you for the atmosphere.
Thank you.