Good day, ladies and gentlemen, and welcome to Keysight Technologies Fiscal Second Quarter 2025 Earnings Conference Call. My name is Tamiya and I will be your lead operator today. [Operator Instructions] This call is being recorded today, Tuesday, May 20th, 2025 at 1.30 PM Pacific time. I would now like to hand the call over to Paulenier Sims, Director of Investor Relations. Please go ahead, Ms. Sims.

Thank you and welcome everyone to Keysight's second quarter earnings conference call for fiscal year 2025. Joining me are Keysight's President and CEO, Satish Dhanasekaran and our CFO, Neil Dougherty. The press release and information to supplement today's discussion are on our website at investor.keysight.com under financial information and quarterly reports. Today's comments will refer to non-GAAP financial measures. We will also make reference to core growth, which excludes the impact of currency movements and acquisitions or divestitures completed over the last 12 months. The most directly comparable GAAP financial metrics and reconciliations are on our website, and all comparisons are on a year-over-year basis unless otherwise noted. We will make forward-looking statements about the financial performance of the company on today's call. These statements are subject to risks and uncertainties and are only valid as of today. We assume no obligation to update them and encourage you to review our recent SEC filings for a more complete view of these risks and other factors. Lastly, management is scheduled to participate in an upcoming investor conference hosted by Baird. And now I will turn the call over to Satish.

Good afternoon, everyone, and thank you for joining us today. During the second quarter, Keysight delivered revenue of $1.3 billion and earnings per share of $1.70, both of which exceeded the high end of our guidance. This marks the second consecutive quarter of revenue growth driven by continued momentum in CSG and return to growth in EISG. The demand environment was solid in the quarter with orders growing 8% year-over-year and 4% sequentially to $1.3 billion. Even as we are monitoring the overall macro environment, we enter the second half with a healthy pipeline of opportunity and strong customer engagements. Neil will have more details on the tariff impact in his remarks. Overall, our business results demonstrate the resilience of our business and the durability of our financial operating model, which is underpinned by a flexible cost structure, supply chain, and operating capabilities that allow us to quickly adapt to external dynamics. As a result of a multi-year investment, we have a diversified global supply chain, which is largely based in Southeast Asia with minimal exposure in China. Despite the near-term uncertainty, we're confident in our market leadership, the strength of our operating model, and our ability to generate value for our stakeholders. Our capital allocation priorities have not changed. We're investing for the long term while also pursuing a balanced return of capital enabled by a strong free cash flow conversion. Over the past 12 quarters, we have returned over $1.7 billion or roughly 50% of free cash flow to investors via repurchases. Turning to business segments, in CSG, commercial communications orders grew double digits. Demand remains robust in wireline, where the ongoing data center infrastructure expansion is driving order strength. We saw continued deployment of 400 and 800 gig ethernet technologies in AI-data center applications. R&D investments in…

Thank you, Satish, and hello, everyone. Second quarter revenue of $1.306 billion was above the high end of our guidance range, up 7% on a reported basis and 8% on a core basis. Orders of $1.316 billion were up 8% on both the reported and core basis. Looking at our operational results for Q2. We reported gross margin of 65%. Operating expenses were $516 million, up 4%. Q2 operating margin was 25% and increased 100 basis points over last year. Turning to earnings. We achieved $295 million of net income and delivered earnings per share of $1.70. Our weighted average share count for the quarter was 173 million shares. Our Q2 results included approximately $7 million of new tariff expenses in cost of sales, which had a 60 basis point unfavorable impact on both gross and operating margins. And resulted in an approximately $0.04 reduction in earnings per share. Moving to the performance of our segments. The Communications Solutions Group generated second quarter revenue of $913 million, up 9% on a reported and core basis. Commercial Communications revenue of $612 million was up 9%, reflecting sustained strength in wireline and growth in wireless. Aerospace defense and government achieved revenue of $301 million, an increase of 9%. Altogether, CSG delivered 67% gross margin and 26% operating margin. The Electronic Industrial Solutions Group generated $393 million in revenue, an increase of 5% with growth in semiconductor and general electronics more than offsetting a decline in automotive and energy. EISG delivered 59% gross margin and 23% operating margin. Software and services accounted for approximately 36% of Keysight revenue, while annual recurring revenue was 28% of total mix. Moving to the balance sheet and cash flow. We ended the quarter with $3.118 billion in cash and cash equivalents generating cash flow from operations of…

Thank you, Neil. Operator, will you please give the instructions for the Q&A, please?

[Operator Instructions] The first question comes from Tim Long with Barclays. You may proceed.

Hi, Tim.

Hi. Maybe one and then a follow-up. Just if we could just go back to AI. I know you guys have been giving us examples of each quarter of where you guys are seeing traction. It seems like across the part of our ecosystem in emulation, simulation as well. Can you just kind of update us on what kind of new activity you are seeing there and how meaningful it is for the business? And then just on the follow-up, if you could just give a little bit more color on the orders and pipeline to get to the full year guidance. I think normally, we do see orders pick up towards the second half of the year. So I'm just curious what you are seeing in pipeline to get confidence in the second half? Thank you.

Thank you, Tim. Obviously, AI we view it as a long-term secular trend -- and with a clear multiyear road map that's forming and a great fit to our strategy of not only being a physical layer tool provider, but also going up the stack with physical and protocol layer and offering more solutions to customers. The big megatrends are clear right? We all know the AI workloads are growing. And we are making contributions around on a number of technology fronts, including in memory, compute, networking, with new standards that are forming. So our broad portfolio is really in play as we engage with these customers. And where we see the industry right now is trying to solve a number of these scale-out challenges, as they deploy this digital infrastructure, right? So that's the action or activity that's being driven, and we had another strong quarter. So for the first half -- last year, we said our wireline business was roughly $1 billion, over $1 billion, I should say, in sales. And for the first half, it grew double digits. So we feel good about our position in this emerging space. And we think it is a long-term growth opportunity for us that we are very excited. With regard to the progression of orders and what's baked into our guide, again look, I think we've said this before that we -- despite all the uncertainty and chatter out there and the customers are obviously paying attention to all the tariff talks and all the macro concerns, we have not yet seen any material change in customer behavior with regard to their immediate plans. And so as we enter the quarter, we obviously had a strong finish for Q2 as we enter Q3, our pipeline is solid and supports our guide. And we had a pretty strong uptick in pipeline activity as it relates to the second-half. So we feel good about the second half. Obviously, there are risks that we're monitoring, like everybody else, but we are focused on what we control and feel confident about where we stand today.

Okay, thank you.

Thank you. The next question comes from Matt Niknam with Deutsche Bank. You may proceed.

Hi, guys. Thanks so much for taking the question. One question and then one follow-up. I guess, first on my main question, you obviously raised the top-line outlook, I guess, on average by about 100 bps relative to the prior of 5%, so I'm curious maybe where you're seeing a little bit of an incrementally improved view relative to three months ago? That's the first question. Second, just a follow-up on cash flow from ops, it was meaningfully stronger. I'm just wondering, maybe for Neil, anything unique on the working cap side? And then maybe how to think about cash flow from ops and working cap over the duration of the fiscal year. Thanks.

Thank you. I think, again, as I mentioned before, we looked at the overperformance we've had in the first half. We take a look at our pipeline of opportunities we have, the strong backlog position we have, and we then have applied this to essentially raise the top-line expectations for the full year. Again, there is a lot of macro risks and other things people are monitoring, but we have not seen any material change in customer behavior. And if you recall, at the beginning of the year, we said we thought this year would be a slow gradual recovery in our markets. And we feel like that is exactly the trajectory we're on. So that is where we find ourselves at the end of the first half and feel confident about where we are. But like everybody else, we continue to monitor the risk due to tariffs and the geopolitical environment.

Yes. So the only thing I would add to that, that Satish as said with regard to our outlook for the year, as everybody knows, we tend to see a seasonal uplift in the fourth quarter, we are still expecting the fourth quarter to be our strongest quarter of the year, and that lends to that guidance increase. As it relates to cash flow, yes so obviously, strong cash flow within the quarter. There are a couple of things in there. So first of all, that did include a little less about $60 million worth of a gain on a hedging contract associated with the purchase price for Spirent. We had put a contract in place about a year ago set to expire at the end of our first half, which was our original thought on the timing of the close of that transaction. So we closed out that transaction and essentially rolled it forward, but when we closed it out, we did recognize about a $60 million gain on that hedge. In addition, we did see some working capital improvements. Inventory days were down by about 10%. DSO was down by about [3](ph). So that contributed to the strong cash flow performance as did significantly lower tax payments than in the year ago quarter.

Thank you. The next question comes from Mark Delaney with Goldman Sachs. You may proceed.

Yes, good afternoon. Thank you very much for taking my question. I was hoping to better understand the tariff topic. Maybe first one, just to level set everyone, including myself, the $75 million to $100 million, is that the gross amount of exposure that you have and the net effect this year is maybe something less than that? Or is the $75 million to $100 million, what you expect the drag on profits to be for this year?

Yes. So $75 million, $100 million to $100 million is a gross annualized number. Obviously, this thing went into effect in April, so we only have a little less than seven months of total impact. So $75 million to $100 million is the gross number -- we are working to offset that, although as we said in our previous remarks, to the extent that we are passing those costs on to customers, we made no attempt to reprice backlog, and given that we enter Q3 with about $2.4 billion of backlog, it's going to take some time for that -- for those offsets to materialize. And so relatively little here in Q3, a little bit more in Q4. But by the time we get to Q1, we expect to have those tariff costs fully mitigated.

Helpful, Neil. And that was -- my follow-up was on if you are not raising price on backlog, maybe you can help us better understand the mitigating actions that you are taking and your confidence and mitigating the tariffs as you exit the year? Thank you.

Yes. So I mean, I think as we think about tariffs, we think of the kind of two opportunities. One, what are the actions that we can take to reduce our overall tariff exposure, leveraging our global supply chain, leveraging our manufacturing footprint, taking actions to actually reduce tariff costs. And then once we get to kind of -- we've optimized the tariff cost side, the question is what can you do to further mitigate either by passing those costs on, via price or surcharges of some sort or reducing costs elsewhere in your P&L. And so we have actions going on across all of those work streams. Now when I said we are not raising price on existing backlog, right? So essentially, we said, hey, if you had orders that were already on our books, that we weren't going to go back and try and recover tariffs on those, but we have taken actions forward looking on new quotations starting in about mid-April.

Yes, Mark, this is Satish. Just to chime-in. We have a pretty resilient supply chain operations that is agile and we have considerable amount of operational realignments that we can still work on because at this point, we are assuming 10% tariff sort of is the base case for us. And should that materially change, we would be prepared to respond to those scenarios as well. Customer pricing and strategies, it is definitely a part of it, but it's also all the other operational alignments that we can make with our partners who we have a multi-year relationship with that can help us scale across geographies, if needed.

Great. Thank you very much. I’ll pass it on.

Thank you.

Thank you. [Operator Instructions]. The next question comes from Meta Marshall with Morgan Stanley. You may proceed.

Great. Thanks. A couple of questions for me. Just one, I know that your Aerospace and Defense business is kind of relatively split between kind of U.S. and Allies. But just wondering if you had seen any kind of pushback on Allied orders that were aligned to U.S. programs? Or just kind of any commentary you could kind of give on Aerospace and Defense. And then just also kind of following up on that of noted that you said kind of minimal China impact. But just how much of that [$75 million to $100 million] (ph) of impact that you guys are talking about from a growth perspective is from shipping into China versus kind of shipping into the U.S. Thanks.

Thank you, Meta. I'll take the Aerospace Defense and Neil can quantify the China impact. I'll just say that the strong quarter with growth in orders, as I mentioned, even under a continuing resolution that we've been operating under. And this is unprecedented that we are still under a continuing resolution maybe for the full year -- and so that does limit growth in new programs and such. But we saw some good orders bookings, again with our prime contractors in the U.S. and actually had a double-digit order growth in our European business. Just to give you some examples. We were awarded by NATO Forex contract, which is public to modernize RADAR and electronic support measures. We also were selected by the U.S. Army for validating Zero Trust Security, on the unified network. So the spend environment remains strong, especially with the prime contractor backlog. Again, this is a business I want to remind you, it is always difficult to call on a quarterly basis but easier to call on a longer-term because the trends are clear. And we look at it longer term and say the U.S. budget next year is likely to go up. European budgets for defense are likely to go up with the programs being put in place. And so -- and we feel good about our portfolio position in Aerospace Defense.

Yes, Meta, and just to get to the question about China. So U.S., China, China, U.S., both directions is less than 10% of total tariff exposure.

Okay, great. Thank you.

Thank you. The following comes from Aaron Rakers with Wells Fargo. You may proceed.

Yes. Thanks for taking the questions. Two, if I can, I'll just ask them right away as well. So first, I think, Neil, as we talk about the guidance and getting north of that 5% growth in that 5% to 7% range that you alluded to, can you just remind us again of how we think about the incremental margin for the company. I think all the way back at the Analyst Day, you talked about anything north of 5% dropping through like a 40% incremental margin. And what I'm trying to get to is just the pace of how we could think back to getting op margin back above 30%. And then as a follow-up -- or as the second question, I should say, is that -- can you talk a little bit about the wireless business. That I think, previously talked about is kind of think of that as being stable, but it sounds like that's actually performing a little bit better. How do you think about the durability of that wireless business. Thank you.

Yes. So why don't, I'll start with the first one here on the incremental. You're absolutely correct. What we basically said is anytime our business is growing 5% or better than we would expect to drop through that growth at an operating incremental of about 40%. Now I would point out the tariffs are new and substantial incremental costs that are in the short run going to impact our ability to deliver on that incremental.

Yes. And on the wireless business?

Yes. On the wireless business, again we are continuing -- I would say, the headline is we're continuing to see stability strength in the infrastructure side, still the smartphone related businesses, some segments are so soft especially in China. So still monitoring but stable but soft. I would say the real strength is in the network infrastructure side with Open RAN some of the latest standards releases with AI and some early 6G research really driving some of the spend and customer engagements. But we have a strong position in this space, and we continue to invest for longer-term here to maintain our leadership and in the space.

Thank you. The following comes from Robert Jamieson with Vertical Research. You may proceed.

Hi, good afternoon. Thank you for taking my questions and nice quarter. Just quickly on software and services. It's a growing part of the business, up to 36% of revenue, recurring to almost 30% now. Are there any like investments that you're making to further accelerate growth here, just given the margin profile of those businesses?

No. Thank you. Again a big part of our strategy. And if you look at the business and how we performed in a downturn, as you rightfully point out, is a function of software and services because it's been such a big part of the company's resilience especially even as top-line comes under some pressure. So we -- this is clearly the area of focus across all our businesses, we have a strategy to grow the software and services. But one particular area, really excited we saw double-digit growth in our simulation business as an example. It is an area where we have placed a lot of M&A dollars and focus. If you remember, we acquired ESI, and now we are also potentially beneficiaries of this -- of the Synopsys, Ansys transaction, where we might get a couple more acquisitions to bolster our presence in the simulation space. And it does two things, right? It increases our software and recurring revenue, but equally, it allows us to engage with our customers earlier in the design cycle, which again fits our strategy of being a bigger player in our -- in the R&D parts of our market. And now as recovery does happen in our end markets, you will see that number maybe take back as a percentage of the total mix just a little because we are starting to see some of our core business recover. But I think in the long term, we so feel like there's more upside to driving the software as a percentage of revenue.

Sure. Thank you. And then just on AI, I mean, since it's been [consistent] (ph) and growing nicely. But -- and maybe you addressed this earlier, but beyond testing like the high-speed interconnection and network infrastructure -- are there any other kind of test applications or demand that we are seeing from customers within that realm? Or is that kind of coming from some of the emulation stuff that you mentioned on testing of how compute latency, et cetera, is working its way through the data centers as they are reconfiguring things for higher network speeds and things like that.

Yes. I think it is important to characterize this not just a cable test, but it's important to characterize it as -- the challenges in the digital infrastructure that's being put in place for AI are very different, right? When customers are trying to look at the scale-up and scale-out challenges they face, what might be an interconnect really turns into mission-critical fail point. If it's not performing right and the cost of failure gets up pretty substantially. So we are engaging with our customers on those mission-critical needs that they have today. But equally, from a strategic sense, we are looking at where is the industry going in 5 years. And I can tell you that the state of the art on the technology keeps growing. There's this road map that's forming around multiple dimensions, and we are participating in those to enable it. So we're there for our customers. And what we see is a big trend of pulling in the time lines because of the rapid increase in the AI workload, right? So all of this is pretty rich opportunity for us. We've also, along the way, have design wins in the software emulation space, which allows customers to isolate their performance in the AI data center and say, where is the bottleneck to get the true performance. So we are working with them on those as well. So across the board, across physical and protocol layer we're continuing to grow our contributions to this marketplace..

Okay, thank you very much.

Thank you. The next comes from Rob Mason with Baird. You may proceed.

Hi, yes. Good afternoon. Just a couple of questions. On the general electronics business, I'm curious just given all the realignment of supply chain activity, maybe it's around [2%] (ph) versus tariffs the last time. As companies look at where their manufacturing footprints need to reside -- can you just speak to maybe the impact on that business from a demand side? And again, I'm maybe thinking more on the production test side, if that's an influence. And then I'll just go ahead and ask my follow-up. Neil, could -- just to think about the tariff impact in the third quarter, is it kind of roughly a doubling of what you experienced in the second?

Yes, I'll take the second one first here. I think it's likely a little bit more than that. We had about three weeks of tariff impact in April versus obviously, a full quarter. Now we have already taken mitigating actions that are having a positive impact. So I don't think you can extrapolate totally forward from $8 million just based on the number of weeks -- sorry, $7 million. But it is a little bit more than a doubling. It is more than a doubling of what we saw in Q2, just given the time involved.

Yes. I think when you look at the general electronics business, given it is a broad marketplace for us in terms of the number of different types of applications that -- that end market represents. We see no change in sort of the areas such as digital health and research because those are -- those tend to be durable in nature. And the manufacturing parts of it do move around. So on one hand, China still remains weak in that area. But I would say that there's a lot of recent conversations we are having with customers because they are trying to diversify their manufacturing footprint. Now it's not materially yet reflected in our results, but could be an opportunity for us to engage in that we are working with our customers on. So it's still early days, but it's driven by the tariffs and what might happen. So there is a lot of scenario planning that's occurring, and it will probably be play out over the next 90 days to 180 days.

I see. Thank you.

Thank you.

The following comes from Adam Thalhimer with Thompson, Davis. You may proceed.

Hi, good afternoon guys. Great quarter. Can you parse through orders a little bit? I'm curious if there was any -- to what extent you saw pre-buy activity ahead of any surcharges and what our expectation should be for order trends after the surcharges went into effect?

Yes. So I would say, just taking a look at the orders in Q2, orders progressed fairly linearly in the quarter. The funnel conversion was what we expected. We had a strong intake in the funnel as well, which is what we reflected into Q3. And then I would say April was strong, in part because it's the end of our first half for our compensation for our sales force. So it does tend to have a strong April. So no real change. We didn't see any difference in pull-in, pull-outs of cancellations or anything of that kind. And that's why we -- our position is, while customers are watching the macro and evaluating the risk associated with it, we haven't seen any material change in customer behavior.

Good to hear. And then secondly, I wanted to ask about Asia. The revenue there was really strong in the quarter. And maybe you can just give some high level thoughts on China demand?

Yes, I would say Asia was strong. And again, it is across all of our segments really commercial communications being the leader, semiconductors saw strong demand as new nodes and new technologies such as silicon photonics are being deployed and General Electronics also had some growth in Asia. I would just maybe make a comment about China. Orders were flattish for the quarter in China with strength in a few sectors. But clearly, the -- as I mentioned before, the general electronics, with the manufacturing exposure was weak and automotive in China was also weak. We continue to monitor the POS demand, although we have a very small indirect business. We continue to monitor that. It seems largely in line. So China, I would say, continues to hold up well in this environment.

Thanks Satish.

Thank you.

The next question comes from Samik Chatterjee with JPMorgan. You may proceed.

Hi, thanks for taking my question. Satish, maybe if I can or try to -- good to hear from you. So on the drivers of wireline demand and --. Thank you. Drivers of wireline demand, I'm trying to sort of address that maybe in terms of how to think about sustainability and your customers clearly are doing well on volume. But -- how should we think about the strength you are seeing driven by progress on R&D from your customers relative to maybe sort of what they're seeing on their volume outlook and driven by production. So maybe if you can share any color about -- I know communications is very R&D aligned for you, but what does it look like for wireline? And is the demand you are seeing there? Are you selling new testers when it comes to like either silicon photonics or CPO support? Or are you just seeing more sort of customers buying just because their volume outlooks are stronger? Anything you can share on that front? And I have a follow-up. Thank you.

No, good. That's a great question, Samik. I think I would just say, when we looked at our wireline business, say, a year or two ago, we have said the majority of the business R&D and I would probably put it as 80-20-ish roughly as the ratio of R&D to manufacturing. Now we've probably seen a 10-point swing in the manufacturing in that area, but that is sort of where we are, still heavily R&D oriented, but we are clearly also benefiting from all of the manufacturing activity that's happening as the industry is trying to ramp for digital infrastructure. But when I look at the portfolio of products that we service all the way from early R&D to call it, mainstream or R&D or validation through deployment, whether it is with our AWG, spurts, scopes, our silicon photonics, wafer test systems, network analysers, software with our AI benchmarking and network speed emulators. So a pretty broad category of products that we're selling to. And actually, as we -- as I think about the whole first half, I would say the number of customers that participated in that has also grown for us, it is a good sign that the ecosystem is expanding, as more companies are coming in driven -- given that this is going to eventually be a long term opportunity. And when I look at the -- look at some of the data trends that are going on and the standards progressions really bodes well for our R&D business. We'll have some times when we'll pick up manufacturing demand as well because we have a portfolio. But strategically, the R&D business is more valuable to us.

Okay. Got it. And for my follow-up, if I can sort of stay with the wireline demand, but more sort of when we think about adoption of technologies like CPU and silicon photonics, I'm imagining sort of visualizing it as more of the test demand moves towards a bit more sort of semiconductor level testing. So anything you can share there in terms of how you see the competitive landscape does it change from what you've had in sort of 400 gig, 800 gig? And do you think you have the sort of entire stack to address some of those complexities? Or is there something that you need to add to the portfolio to address sort of when the overall sort of technology moves more closer to semiconductor testing?

No, you are very astute to pick up the change right, between electrical to optical or that conversion. It's been an area of emphasis and investment for us, especially as things go into silicon. This is why we invested about 18 months ago to intercept the demand from silicon photonics. We talked about this on a call as well. And we are now benefiting from that. That requires bringing together optical capabilities with our electrical capabilities and probing and complex metrology. So really in our wheelhouse as a company to go after this opportunity. Co-packaged optics is another great example of what I saw from customers. I think that is accelerating as well. And if we need more capabilities, we can acquire talent, but I think we have a strong foundation to start with today that we actually at OFC, we showcased multiple first in this area 448 gig transmission, a key enabler of 3.2 terabits and so on and so forth. So we had about 50 demonstrations. So it will continue to grow. But you're right, this is where the puck is moving to and we find ourselves having a strong foundation to intercept this.

Okay, great. Thank you. Thanks for taking my questions.

Thank you. We have a question from Mehdi Hosseini with SIG. You may proceed.

Yes. Thanks for allowing me to ask question. I want to follow up on the wireline. And Satish, I just want to look at the big picture. You talked about the connection is moving from copper to actually moving towards optical. And when you look at the entire market for both networking test as well as the testing that happens with the component and component migrating to optical. Would it be fair to say that your content would increase as you migrate from 800 gig to 1.2 terabytes. And if content increases, including both system-level test and semiconductor, what is the magnitude of the increase? Or you can -- are they help us qualitatively or quantitatively? And I have a follow-up.

No, that's -- look, I think I don't know that I would say that from what we see that it is either going to be electric or optical. I think it is electrical for some applications where you obviously have a better sort of economics and then optical where you need the performance and it's where the puck is moving to. So I think this sort of hybrid is where the solutions are needed. And I think being a company that has both technologies we find ourselves in a really good position across the stack, as you pointed out, memory, compute, networking so on and so forth. Now with regard to the magnitude of the opportunity typically, as the complexity goes up, we would see the types of solutions that customers need, especially in early R&D tend to be more complex, and therefore, we're adding more value to our customers as we get there. Now as those technologies mature, obviously, the puck moves to the next one. And then therefore, the volume may drop on the previous technology. It is always the case that, that happens, but the net effect of these overlapping waves of technology is it's -- it really supports our long-term growth expectations for the company that we have set to be in the 5% to 7% range.

Okay. And then a follow-up for Neil. If I just take a midpoint of your revenue guide for fiscal year '25, assuming that the sequential growth is stronger in October versus July and embedding the tariff impact into your margin profile, would it be fair to say that there is a slight decline in operating margin from April to July, and it would go kind of sideways from July to October. So your fiscal year '25 operating margin would be kind of flattish compared to fiscal year '24.

One second. Yes. I mean, I think as we look forward here, I think we're kind of range-bound, I would say, in a pretty tight range. Obviously, we're going to see -- we would expect to see a seasonal uplift here as we move from Q3 to Q4. I -- but -- and as always, we would expect absent tariffs to continue to drive a strong incremental on that flow through.

Okay. Thank you.

Thank you. That concludes our question-and-answer session for today. I would like to turn the call back to Paulenier Sims for any closing comments.

Thank you, Tamia, and thank you all for joining us today. Have a great rest of your day.

This concludes our conference call. You may now disconnect.