Reports Record Revenue of $990 million and EPS Growth of 23 Percent
SANTA ROSA, Calif.--(BUSINESS WIRE)--
Keysight Technologies, Inc. (NYSE: KEYS) today reported financial
results for the second fiscal quarter of 2018 ended April 30, 2018.
“Building on our outstanding start to the year, we delivered another
excellent quarter with strong order growth and record revenue and we are
raising our core revenue outlook for the year. Total revenue growth of
31 percent and 18 percent growth on a core basis was driven by
broad-based core order strength as customers accelerate development in
our key focus areas including 5G, automotive & energy and aerospace and
defense,” said Ron Nersesian, Keysight president and CEO.
Second Quarter Financial Summary
-
GAAP revenue grew 31 percent to reach $990 million, when compared
with $753 million last year. Non-GAAP revenue, which excludes the
impact of fair value adjustments to acquisition-related deferred
revenue balances, grew 32 percent to reach $999 million. Non-GAAP core
revenue, which also excludes the impact of foreign currency changes
and revenue associated with businesses acquired within the last twelve
months, increased 18 percent.
-
GAAP net income was $64 million, or $0.34 per share, compared with $49
million, or $0.27 per share in the second quarter of 2017. Non-GAAP
net income was $158 million, or $0.83 per share using 190 million
weighted average shares, compared with $114 million, or $0.64 per
share using 179 million weighted average shares in the second quarter
of 2017.
-
As of April 30, 2018, cash and cash equivalents totaled $784 million.
First Half of Fiscal Year 2018 Financial Summary
-
GAAP revenue grew 24 percent to reach $1,827 million, when compared
with $1,479 million last year. Non-GAAP revenue grew 25 percent to
reach $1,855 million and non-GAAP core revenue increased 8 percent.
-
GAAP net income was $158 million, or $0.83 per share, compared with
$158 million, or $0.90 per share last year. Non-GAAP net income was
$255 million, or $1.34 per share using 190 million weighted average
shares, compared with $212 million, or $1.20 per share using 176
million weighted average shares in the 2017 period.
-
Cash flow from operations was $282 million. Deployed capital by
repaying $260 million of pre-payable debt and repurchasing 770,000
shares for $40 million under the $350 million share repurchase program
authorization.
Reporting Segments
-
Communications Solutions Group (CSG)
CSG revenue grew 27 percent in the second quarter and 11 percent in the
first half of fiscal year 2018. CSG reported second quarter revenue of
$536 million, driven by 5G-related R&D spending across the wireless
ecosystem, early investment in next-generation 400G and PAM-4 network
test and strong 27 percent year-over-year growth in the aerospace,
defense and government end market.
-
Electronic Industrial Solutions Group (EISG)
EISG revenue grew 16 percent in the second quarter and 11 percent in the
first half of fiscal year 2018. EISG reported second quarter revenue of
$255 million, driven by strong growth for automotive and energy and
general electronics measurement solutions.
-
Ixia Solutions Group (ISG)
ISG revenue was $90 million in the second quarter and $217 million in
the first half of fiscal year 2018. ISG market conditions remained
consistent with the prior quarter; however, second quarter ISG results
were impacted by extensive integration efforts in the quarter. Many of
these integration issues are now resolved and the expected annual cost
synergies are ramping as planned.
-
Services Solutions Group (SSG)
SSG revenue grew 15 percent in the second quarter and 11 percent in the
first half of fiscal year 2018. SSG reported record revenue of $118
million in the second quarter, driven by double-digit growth for our
calibration, remarketed and repair services and solutions.
Outlook
Keysight’s third fiscal quarter of 2018 GAAP revenue is expected to be
in the range of $937 million to $967 million and non-GAAP revenue for
the third fiscal quarter of 2018 is expected to be in the range of $942
million to $972 million.
Non-GAAP earnings per share for the third fiscal quarter of 2018 are
expected to be in the range of $0.72 to $0.82, which exclude items that
pertain to future events and are not currently estimable with a
reasonable degree of accuracy. Therefore, no reconciliation to GAAP
amounts has been provided. Further information is discussed in the
section titled “Non-GAAP Measures” below.
Webcast
Keysight’s management will present more details about its second quarter
FY2018 financial results and its third quarter FY2018 outlook on a
conference call with investors today at 1:30 p.m. PT. This event will be
webcast in listen-only mode. Listeners may log on to the call at www.investor.keysight.com
under the “Upcoming
Events” section and select “Q2
2018 Keysight Technologies Inc. Earnings Conference Call” to
participate or dial +1 866-393-4306 (U.S. only) or +1 734-385-2616
(International) and enter passcode 1275356.
The webcast will remain on the company site for 90 days. A telephone
replay of the conference call will be available at approximately 4:30
p.m. PT after the call and remain available for one week. The replay may
be accessed by dialing +1 855-859-2056 (or +1 404-537-3406 from outside
the U.S.) and entering passcode 1275356.
Forward-Looking Statements
This communication contains forward-looking statements as defined in the
Securities Exchange Act of 1934 and is subject to the safe harbors
created therein. These forward-looking statements involve risks and
uncertainties that could significantly affect the expected results and
are based on certain key assumptions of Keysight’s management and on
currently available information. Due to such uncertainties and risks, no
assurances can be given that such expectations or assumptions will prove
to have been correct, and readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the
date hereof. Keysight undertakes no responsibility to publicly update or
revise any forward-looking statement. The forward-looking statements
contained herein include, but are not limited to, information and future
guidance on the company’s goals, priorities, revenues, demand, financial
condition, earnings, the continued strengths and expected growth of the
markets the company sells into, operations, operating earnings, and tax
rates that involve risks and uncertainties that could cause Keysight’s
results to differ materially from management’s current expectations.
Such risks and uncertainties include, but are not limited to, changes in
the demand for current and new products, technologies, and services;
customer purchasing decisions and timing, and the risk that we are not
able to realize the savings or benefits expected from integration or
restructuring activities. The words “estimate,” “expect,” “intend,”
“will,” “should,” “forecast,” and similar expressions, as they relate to
the company, are intended to identify forward-looking statements.
In addition to the risks above, other risks that Keysight faces include
those detailed in Keysight’s filings with the Securities and Exchange
Commission, including our Form 10-K for the fiscal year ended Oct. 31,
2017 and Keysight’s quarterly report on Form 10-Q for the period ended
Jan. 31, 2018.
Segment Data
Segment data reflects the results of our reportable segments under our
management reporting system. Segment revenue and income from operations
are consistent with the respective non-GAAP measures as explained below
and in the attached supplemental schedules. Segment data are provided on
page 6 of the attached tables.
Use of Non-GAAP Financial Measures
In addition to financial information prepared in accordance with U.S.
GAAP (“GAAP”), this document also contains certain non-GAAP financial
measures based on management’s view of performance, including:
-
Non-GAAP Core Revenue
-
Non-GAAP Revenue
-
Non-GAAP Net Income
-
Non-GAAP Diluted EPS
See the attached supplemental schedules for reconciliations of each
non-GAAP financial measure to its most directly comparable GAAP
financial measure for the three months and six months ended April 30,
2018 and for projected non-GAAP revenue amounts for the three months
ended July 31, 2018. Following the reconciliations is a discussion of
the items adjusted from our non-GAAP financial measures and the
company’s reasons for including or excluding certain categories of
income or expenses from our non-GAAP results.
About Keysight Technologies
Keysight Technologies, Inc. (NYSE: KEYS) is a leading technology company
that helps enterprises, service providers, and governments accelerate
innovation to connect and secure the world. Keysight's solutions
optimize networks and bring electronic products to market faster and at
a lower cost with offerings from design simulation, to prototype
validation, to manufacturing test, to optimization in networks and cloud
environments. Customers span the worldwide communications ecosystem,
aerospace and defense, automotive, energy, semiconductor and general
electronics end markets. Keysight generated revenues of $3.2B in fiscal
year 2017. In April 2017, Keysight acquired Ixia, a leader in network
test, visibility, and security. More information is available at www.keysight.com.
Additional information about Keysight Technologies is available in the
newsroom at www.keysight.com/go/news and
on Facebook, Google+, LinkedIn, Twitter and YouTube.
Source: IR-KEYS
|
|
|
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
April 30,
|
|
Percent
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Inc/(Dec)
|
|
|
|
|
|
|
|
|
|
Orders
|
|
$
|
987
|
|
|
$
|
805
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
990
|
|
|
$
|
753
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of products and services
|
|
|
447
|
|
|
|
340
|
|
|
31
|
%
|
|
Research and development
|
|
|
156
|
|
|
|
119
|
|
|
30
|
%
|
|
Selling, general and administrative
|
|
|
299
|
|
|
|
256
|
|
|
17
|
%
|
|
Other operating expense (income), net
|
|
|
(12
|
)
|
|
|
(4
|
)
|
|
230
|
%
|
|
Total costs and expenses
|
|
|
890
|
|
|
|
711
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
100
|
|
|
|
42
|
|
|
140
|
%
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2
|
|
|
|
2
|
|
|
27
|
%
|
|
Interest expense
|
|
|
(21
|
)
|
|
|
(24
|
)
|
|
(13
|
)%
|
|
Other income (expense), net
|
|
|
2
|
|
|
|
2
|
|
|
(41
|
)%
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
83
|
|
|
|
22
|
|
|
282
|
%
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
19
|
|
|
|
(27
|
)
|
|
(168
|
)%
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
64
|
|
|
$
|
49
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
|
$
|
0.28
|
|
|
|
|
Diluted
|
|
$
|
0.34
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net income per share:
|
|
|
|
|
|
|
|
Basic
|
|
|
188
|
|
|
|
177
|
|
|
|
|
Diluted
|
|
|
190
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 1
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
April 30,
|
|
Percent
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Inc/(Dec)
|
|
|
|
|
|
|
|
|
|
Orders
|
|
$
|
1,951
|
|
|
$
|
1,500
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
1,827
|
|
|
$
|
1,479
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of products and services
|
|
|
857
|
|
|
|
662
|
|
|
29
|
%
|
|
Research and development
|
|
|
302
|
|
|
|
227
|
|
|
33
|
%
|
|
Selling, general and administrative
|
|
|
588
|
|
|
|
469
|
|
|
26
|
%
|
|
Other operating expense (income), net
|
|
|
(15
|
)
|
|
|
(83
|
)
|
|
(82
|
)%
|
|
Total costs and expenses
|
|
|
1,732
|
|
|
|
1,275
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
95
|
|
|
|
204
|
|
|
(53
|
)%
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5
|
|
|
|
3
|
|
|
57
|
%
|
|
Interest expense
|
|
|
(43
|
)
|
|
|
(36
|
)
|
|
20
|
%
|
|
Other income (expense), net
|
|
|
3
|
|
|
|
3
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
60
|
|
|
|
174
|
|
|
(65
|
)%
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
(98
|
)
|
|
|
16
|
|
|
(724
|
)%
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
158
|
|
|
$
|
158
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.84
|
|
|
$
|
0.91
|
|
|
|
|
Diluted
|
|
$
|
0.83
|
|
|
$
|
0.90
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net income per share:
|
|
|
|
|
|
|
|
Basic
|
|
|
187
|
|
|
|
174
|
|
|
|
|
Diluted
|
|
|
190
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEET
|
|
(In millions, except par value and share amounts)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
October 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
784
|
|
|
$
|
818
|
|
|
Accounts receivable, net
|
|
|
579
|
|
|
|
547
|
|
|
Inventory
|
|
|
597
|
|
|
|
588
|
|
|
Other current assets
|
|
|
229
|
|
|
|
224
|
|
|
Total current assets
|
|
|
2,189
|
|
|
|
2,177
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
546
|
|
|
|
530
|
|
|
Goodwill
|
|
|
1,891
|
|
|
|
1,882
|
|
|
Other intangible assets, net
|
|
|
754
|
|
|
|
855
|
|
|
Long-term investments
|
|
|
59
|
|
|
|
63
|
|
|
Long-term deferred tax assets
|
|
|
203
|
|
|
|
186
|
|
|
Other assets
|
|
|
281
|
|
|
|
240
|
|
|
Total assets
|
|
$
|
5,923
|
|
|
$
|
5,933
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
-
|
|
|
$
|
10
|
|
|
Accounts payable
|
|
|
240
|
|
|
|
211
|
|
|
Employee compensation and benefits
|
|
|
241
|
|
|
|
217
|
|
|
Deferred revenue
|
|
|
347
|
|
|
|
291
|
|
|
Income and other taxes payable
|
|
|
47
|
|
|
|
28
|
|
|
Other accrued liabilities
|
|
|
78
|
|
|
|
62
|
|
|
Total current liabilities
|
|
|
953
|
|
|
|
819
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,789
|
|
|
|
2,038
|
|
|
Retirement and post-retirement benefits
|
|
|
309
|
|
|
|
309
|
|
|
Long-term deferred revenue
|
|
|
119
|
|
|
|
101
|
|
|
Other long-term liabilities
|
|
|
230
|
|
|
|
356
|
|
|
Total liabilities
|
|
|
3,400
|
|
|
|
3,623
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
Preferred stock; $0.01 par value; 100 million shares authorized;
none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Common stock; $0.01 par value, 1 billion shares authorized; 190
million shares at April 30, 2018 and 188 million shares at October
31, 2017, issued
|
|
|
2
|
|
|
|
2
|
|
|
Treasury stock at cost; 3.1 million shares at April 30, 2018 and
2.3 million shares at October 31, 2017, respectively
|
|
|
(102
|
)
|
|
|
(62
|
)
|
|
Additional paid-in-capital
|
|
|
1,837
|
|
|
|
1,786
|
|
|
Retained earnings
|
|
|
1,205
|
|
|
|
1,041
|
|
|
Accumulated other comprehensive loss
|
|
|
(419
|
)
|
|
|
(457
|
)
|
|
Total stockholders' equity
|
|
|
2,523
|
|
|
|
2,310
|
|
|
Total liabilities and equity
|
|
$
|
5,923
|
|
|
$
|
5,933
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 3
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
(In millions)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
April 30,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
158
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
157
|
|
|
|
73
|
|
|
Share-based compensation
|
|
|
34
|
|
|
|
31
|
|
|
Debt issuance expense
|
|
|
-
|
|
|
|
9
|
|
|
Deferred tax benefit
|
|
|
(237
|
)
|
|
|
(13
|
)
|
|
Excess and obsolete inventory-related charges
|
|
|
11
|
|
|
|
6
|
|
|
Gain on sale of assets and divestiture
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
Pension curtailment and settlement gains
|
|
|
-
|
|
|
|
(68
|
)
|
|
Asset impairment
|
|
|
-
|
|
|
|
7
|
|
|
Other non-cash expenses, net
|
|
|
5
|
|
|
|
1
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
(31
|
)
|
|
|
10
|
|
|
Inventory
|
|
|
(18
|
)
|
|
|
(10
|
)
|
|
Accounts payable
|
|
|
20
|
|
|
|
(17
|
)
|
|
Employee compensation and benefits
|
|
|
23
|
|
|
|
-
|
|
|
Income taxes payable
|
|
|
125
|
|
|
|
(7
|
)
|
|
Retirement and post-retirement benefits
|
|
|
(22
|
)
|
|
|
(6
|
)
|
|
Deferred revenue
|
|
|
71
|
|
|
|
30
|
|
|
Other assets and liabilities
|
|
|
(6
|
)
|
|
|
(32
|
)
|
|
Net cash provided by operating activities (a)
|
|
|
282
|
|
|
|
164
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Investments in property, plant and equipment
|
|
|
(58
|
)
|
|
|
(33
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
|
-
|
|
|
|
8
|
|
|
Change in restricted cash and cash equivalents, net
|
|
|
-
|
|
|
|
1
|
|
|
Proceeds from sale of investments
|
|
|
-
|
|
|
|
4
|
|
|
Acquisition of businesses and intangible assets, net of cash acquired
|
|
|
(3
|
)
|
|
|
(1,622
|
)
|
|
Proceeds from divestiture
|
|
|
12
|
|
|
|
-
|
|
|
Net cash used in investing activities
|
|
|
(49
|
)
|
|
|
(1,642
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from issuance of common stock under employee stock plans
|
|
|
33
|
|
|
|
21
|
|
|
Proceeds from issuance of common stock under public offering
|
|
|
-
|
|
|
|
444
|
|
|
Payment of taxes related to net share settlement of equity awards
|
|
|
(16
|
)
|
|
|
(11
|
)
|
|
Treasury stock repurchases (b)
|
|
|
(28
|
)
|
|
|
-
|
|
|
Proceeds from short-term borrowings
|
|
|
40
|
|
|
|
170
|
|
|
Proceeds from issuance of long-term debt
|
|
|
-
|
|
|
|
1,069
|
|
|
Payment of debt issuance costs
|
|
|
-
|
|
|
|
(16
|
)
|
|
Repayment of debt and credit facility
|
|
|
(300
|
)
|
|
|
-
|
|
|
Net cash provided by /(used in) financing activities
|
|
|
(271
|
)
|
|
|
1,677
|
|
|
|
|
|
|
|
|
Effect of exchange rate movements
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(34
|
)
|
|
|
200
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
818
|
|
|
|
783
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
784
|
|
|
$
|
983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Cash payments included in operating activities:
|
|
|
|
|
|
Income tax payments, net
|
|
$
|
(11
|
)
|
|
$
|
(34
|
)
|
|
Interest payment on borrowings
|
|
$
|
(41
|
)
|
|
$
|
(22
|
)
|
|
|
|
|
|
|
|
(b) For the six months ended April 30, 2018, we
repurchased 773,352 shares of common stock for $40 million, held as
treasury stock and accounted for at trade date using the cost
method. There were $12 million stock repurchases pending settlement
as of April, 30 2018.
|
|
|
|
Page 4
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
RECONCILIATION OF REVENUE EXCLUDING IMPACTS OF CURRENCY AND
ACQUISITIONS
|
|
(In millions)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3'18 Guidance
|
|
Year-over-year compare
|
|
Year-over-year compare
|
|
|
|
Low end
|
|
High end
|
|
Q2'18
|
|
Q2'17
|
|
Percent
Inc/(Dec)
|
|
H1'18
|
|
H1'17
|
|
Percent
Inc/(Dec)
|
|
GAAP Revenue
|
|
$
|
937
|
|
|
$
|
967
|
|
$
|
990
|
|
|
$
|
753
|
|
31
|
%
|
|
$
|
1,827
|
|
|
$
|
1,479
|
|
24
|
%
|
|
Amortization of acquisition-related balances
|
|
|
5
|
|
|
|
5
|
|
|
9
|
|
|
|
5
|
|
|
|
|
28
|
|
|
|
5
|
|
|
|
Non-GAAP Revenue
|
|
$
|
942
|
|
|
$
|
972
|
|
$
|
999
|
|
|
$
|
758
|
|
32
|
%
|
|
$
|
1,855
|
|
|
$
|
1,484
|
|
25
|
%
|
|
Less: Revenue from acquisitions included in segment results
|
|
|
|
|
(84
|
)
|
|
|
-
|
|
|
|
|
(219
|
)
|
|
|
-
|
|
|
|
Currency impacts
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
Non-GAAP Core Revenue
|
|
|
|
|
|
|
$
|
895
|
|
|
$
|
758
|
|
18
|
%
|
|
$
|
1,605
|
|
|
$
|
1,484
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please refer to page 9 for discussion on our non-GAAP financial
measures.
|
|
|
|
Page 5
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
SEGMENT RESULTS INFORMATION
|
|
(In millions, except where noted)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications Solutions Group
|
|
|
|
|
|
YoY
|
|
|
|
|
|
YoY
|
|
|
|
Q2'18
|
|
Q2'17
|
|
% Chg
|
|
H1'18
|
|
H1'17
|
|
% Chg
|
|
Revenue
|
|
$
|
536
|
|
|
$
|
424
|
|
|
27%
|
|
$
|
956
|
|
|
$
|
858
|
|
|
11%
|
|
Gross Margin, %
|
|
|
61.7
|
%
|
|
|
61.3
|
%
|
|
|
|
|
61.3
|
%
|
|
|
60.9
|
%
|
|
|
|
Income from Operations
|
|
$
|
126
|
|
|
$
|
75
|
|
|
|
|
$
|
185
|
|
|
$
|
147
|
|
|
|
|
Operating Margin, %
|
|
|
23
|
%
|
|
|
18
|
%
|
|
|
|
|
19
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Industrial Solutions Group
|
|
|
|
|
|
YoY
|
|
|
|
|
|
YoY
|
|
|
|
Q2'18
|
|
Q2'17
|
|
% Chg
|
|
H1'18
|
|
H1'17
|
|
% Chg
|
|
Revenue
|
|
$
|
255
|
|
|
$
|
220
|
|
|
16%
|
|
$
|
458
|
|
|
$
|
412
|
|
|
11%
|
|
Gross Margin, %
|
|
|
61.3
|
%
|
|
|
61.8
|
%
|
|
|
|
|
60.3
|
%
|
|
|
60.9
|
%
|
|
|
|
Income from Operations
|
|
$
|
67
|
|
|
$
|
57
|
|
|
|
|
$
|
104
|
|
|
$
|
99
|
|
|
|
|
Operating Margin, %
|
|
|
26
|
%
|
|
|
26
|
%
|
|
|
|
|
23
|
%
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ixia Solutions Group (a)
|
|
|
|
|
|
YoY
|
|
|
|
|
|
YoY
|
|
|
|
Q2'18
|
|
Q2'17
|
|
% Chg
|
|
H1'18
|
|
H1'17
|
|
% Chg
|
|
Revenue
|
|
$
|
90
|
|
|
$
|
12
|
|
|
NA
|
|
$
|
217
|
|
|
$
|
12
|
|
|
NA
|
|
Gross Margin, %
|
|
|
75.8
|
%
|
|
|
77.1
|
%
|
|
|
|
|
75.7
|
%
|
|
|
77.1
|
%
|
|
|
|
Income from Operations
|
|
$
|
(7
|
)
|
|
$
|
(2
|
)
|
|
|
|
$
|
11
|
|
|
$
|
(2
|
)
|
|
|
|
Operating Margin, %
|
|
|
-8
|
%
|
|
|
-13
|
%
|
|
|
|
|
5
|
%
|
|
|
-13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services Solutions Group
|
|
|
|
|
|
YoY
|
|
|
|
|
|
YoY
|
|
|
|
Q2'18
|
|
Q2'17
|
|
% Chg
|
|
H1'18
|
|
H1'17
|
|
% Chg
|
|
Revenue
|
|
$
|
118
|
|
|
$
|
102
|
|
|
15%
|
|
$
|
224
|
|
|
$
|
202
|
|
|
11%
|
|
Gross Margin, %
|
|
|
40.6
|
%
|
|
|
40.9
|
%
|
|
|
|
|
40.5
|
%
|
|
|
40.2
|
%
|
|
|
|
Income from Operations
|
|
$
|
18
|
|
|
$
|
17
|
|
|
|
|
$
|
35
|
|
|
$
|
31
|
|
|
|
|
Operating Margin, %
|
|
|
15
|
%
|
|
|
16
|
%
|
|
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The Ixia Solutions Group operating results for
Q2'17 and H1'17 include activity for 13 days during the period,
from the date of acquisition, April 18, 2017, through April 30,
2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue for our segment, Ixia Solutions Group and
Communication Solution Group excludes the impact of amortization
of acquisition-related balances of $8 million and $1 million for
Q2'18, respectively, and $27 million and $1 million for H1'18,
respectively. Net revenue for our segment, Ixia Solutions Group
and Communication Solution Group excludes the impact of
amortization of acquisition-related balances of $4 million and $1
million for Q2'17, respectively, and $4 million and $1 million for
H1'17, respectively. Segment revenue and income from operations
are consistent with the respective non-GAAP measures as discussed
on Page 9.
|
|
|
|
Page 6
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
|
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
2017
|
|
|
|
Net Income
|
|
Diluted EPS
|
|
|
Net Income
|
|
Diluted EPS
|
|
|
Net Income
|
|
Diluted EPS
|
|
Net Income
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net income
|
|
$ 64
|
|
$ 0.34
|
|
|
$ 49
|
|
$ 0.27
|
|
|
$ 158
|
|
$ 0.83
|
|
$ 158
|
|
$ 0.90
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related balances
|
|
65
|
|
0.34
|
|
|
26
|
|
0.15
|
|
|
154
|
|
0.81
|
|
36
|
|
0.21
|
|
Share-based compensation expense
|
|
15
|
|
0.08
|
|
|
13
|
|
0.07
|
|
|
34
|
|
0.18
|
|
31
|
|
0.18
|
|
Acquisition and integration costs
|
|
17
|
|
0.09
|
|
|
31
|
|
0.17
|
|
|
36
|
|
0.19
|
|
37
|
|
0.21
|
|
Acquisition-related compensation expense
|
|
-
|
|
-
|
|
|
28
|
|
0.16
|
|
|
-
|
|
-
|
|
28
|
|
0.16
|
|
Separation and related costs
|
|
1
|
|
0.01
|
|
|
8
|
|
0.05
|
|
|
2
|
|
0.01
|
|
14
|
|
0.08
|
|
Pension curtailment and settlement gains
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
(68)
|
|
(0.39)
|
|
Northern California wildfire-related costs
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
|
7
|
|
0.04
|
|
-
|
|
-
|
|
Restructuring and related costs
|
|
11
|
|
0.06
|
|
|
1
|
|
0.01
|
|
|
13
|
|
0.07
|
|
3
|
|
0.01
|
|
Other
|
|
(6)
|
|
(0.03)
|
|
|
8
|
|
0.04
|
|
|
(6)
|
|
(0.03)
|
|
-
|
|
-
|
|
Adjustment for taxes (a)
|
|
(9)
|
|
(0.06)
|
|
|
(50)
|
|
(0.28)
|
|
|
(143)
|
|
(0.76)
|
|
(27)
|
|
(0.16)
|
|
Non-GAAP Net income
|
|
$ 158
|
|
$ 0.83
|
|
|
$ 114
|
|
$ 0.64
|
|
|
$ 255
|
|
$ 1.34
|
|
$ 212
|
|
$ 1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - diluted
|
|
190
|
|
|
|
|
179
|
|
|
|
|
190
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three and six months ended April 30, 2018 and
April 30, 2017, management uses a non-GAAP effective tax rate of 15%
and 17% respectively. Historical amounts are reclassified to conform
with current presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please refer to page 9 for discussion on our non-GAAP financial
measures.
|
|
|
|
Page 7
|
|
|
|
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
|
GAAP REVENUE BY END MARKET
|
|
(In millions)
|
|
(Unaudited)
|
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YoY
|
|
|
|
Q2'18
|
|
Q2'17
|
|
% Chg
|
|
Aerospace, Defense & Government
|
|
$
|
213
|
|
$
|
168
|
|
27%
|
|
Commercial Communications
|
|
|
322
|
|
|
255
|
|
26%
|
|
Electronic Industrial
|
|
|
255
|
|
|
220
|
|
16%
|
|
Ixia (a)
|
|
|
82
|
|
|
8
|
|
NA
|
|
Services
|
|
|
118
|
|
|
102
|
|
15%
|
|
Total Revenue
|
|
$
|
990
|
|
$
|
753
|
|
31%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The Ixia Solutions Group operating results for Q2'17
include activity for 13 days during the period, from the date of
acquisition, April 18, 2017, through April 30, 2017.
|
|
|
|
Page 8
|
|
|
|
|
Non-GAAP Financial Measures
Management uses both GAAP and non-GAAP financial measures to analyze and
assess the overall performance of the business, to make operating
decisions and to forecast and plan for future periods. We believe that
our investors benefit from seeing our results “through the eyes of
management” in addition to seeing our GAAP results. This information
enhances investors’ understanding of the continuing performance of our
business and facilitates comparison of performance to our historical and
future periods.
Our non-GAAP financial measures may not be comparable to similarly
titled measures used by other companies, including industry peer
companies, limiting the usefulness of these measures for comparative
purposes.
These non-GAAP measures should be considered supplemental to and not a
substitute for financial information prepared in accordance with GAAP.
The discussion below presents information about each of the non-GAAP
financial measures and the company’s reasons for including or excluding
certain categories of income or expenses from our non-GAAP results. In
future periods, we may exclude such items and may incur income and
expenses similar to these excluded items. Accordingly, adjustments for
these items and other similar items in our non-GAAP presentation should
not be interpreted as implying that these items are non-recurring,
infrequent or unusual.
Non-GAAP Revenue includes recognition of acquired deferred
revenue that was written down to fair value in purchase accounting.
Management believes that excluding fair value purchase accounting
adjustments more closely correlates with the ordinary and ongoing course
of the acquired company’s operations and facilitates analysis of revenue
growth and business trends.
Non-GAAP Core Revenue is non-GAAP revenue (see Non-GAAP Revenue
above) excluding the impact of foreign currency changes and revenue
associated with businesses acquired within the last twelve months We
exclude the impact of foreign currency changes as currency rates can
fluctuate based on factors that are not within our control and can
obscure revenue growth trends. As the nature, size and number of
acquisitions can vary significantly from period to period and as
compared to our peers, we exclude revenue associated with recently
acquired businesses to facilitate comparisons of revenue growth and
analysis of underlying business trends.
Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP
Diluted EPS may include the following types of adjustments:
-
Share-based Compensation Expense: We exclude share-based
compensation expense from our non-GAAP financial measures because
share-based compensation expense can vary significantly from period to
period based on the company’s share price, as well as the timing, size
and nature of equity awards granted. Management believes the exclusion
of this expense facilitates the ability of investors to compare the
company’s operating results with those of other companies, many of
which also exclude share-based compensation expense in determining
their non-GAAP financial measures.
-
Acquisition-related Items: We exclude the impact of certain
items recorded in connection with business combinations from our
non-GAAP financial measures that are either non-cash or not normal,
recurring operating expenses due to their nature, variability of
amounts and lack of predictability as to occurrence or timing. These
amounts may include non-cash items such as the amortization of
acquired intangible assets and amortization of items associated with
fair value purchase accounting adjustments, including recognition of
acquired deferred revenue (see Non-GAAP Revenue above). We also
exclude transaction and certain other cash costs associated with
business acquisitions that are not normal recurring operating
expenses, including amortization of amounts paid to redeem acquires’
unvested stock-based compensation awards, and legal, accounting and
due diligence costs. We exclude these charges to facilitate a more
meaningful evaluation of our current operating performance and
comparisons to our past operating performance.
-
Separation and Related Costs: We exclude all incremental
expenses incurred to effect the separation of Keysight from Agilent.
We exclude expenses that would not have been incurred if we had no
plan to spin-off including, among other things, branding, legal,
accounting and advisory fees, costs to resize and optimize our
infrastructure and other costs to separate and transition from
Agilent. We believe that these costs do not reflect expected future
operating expenses and do not contribute to a meaningful evaluation of
the company’s current operating performance or comparisons to our
operating performance in other periods.
-
Restructuring and Related Costs: We exclude incremental
expenses associated with restructuring initiatives, usually aimed at
material changes in the business or cost structure. Such costs may
include employee separation costs, asset impairments, facility-related
costs, contract termination fees, and costs to move operations from
one location to another. These activities can vary significantly from
period to period based on the timing, size and nature of restructuring
plans; therefore, we do not consider such costs to be normal,
recurring operating expenses. We believe that these costs do not
reflect expected future operating expenses and do not contribute to a
meaningful evaluation of the company’s current operating performance
or comparisons to our operating performance in other periods.
-
Northern California wildfire-related costs and Other Items: We
exclude certain other significant income or expense items that may
occur occasionally and are not normal, recurring, cash operating from
our non-GAAP financial measures. Such items are evaluated on an
individual basis based on both quantitative and qualitative factors
and generally represent items that we would not anticipate occurring
as part of our normal business on a regular basis. While not
all-inclusive, examples of certain other significant items excluded
from non-GAAP financial measures would be: costs related to unusual
disaster like Northern California wildfires, significant realized
gains or losses associated with our employee benefit plans, gain on
sale of assets and small divestitures etc.
-
Estimated Tax Rate: We utilize a consistent methodology for
long-term projected non-GAAP tax rate. When projecting this long-term
rate, we exclude any tax benefits or expenses that are not directly
related to ongoing operations and which are either isolated or cannot
be expected to occur again with any regularity or predictability.
Additionally, we evaluate our current long-term projections, current
tax structure and other factors, such as existing tax positions in
various jurisdictions and key tax holidays in major jurisdictions
where Keysight operates. This tax rate could change in the future for
a variety of reasons, including but not limited to significant changes
in geographic earnings mix including acquisition activity, or
fundamental tax law changes in major jurisdictions where Keysight
operates. The above reasons also limit our ability to reasonably
estimate the future GAAP tax rate and provide a reconciliation of the
expected non-GAAP earnings per share for the third fiscal quarter of
2018 to the GAAP equivalent.
Management recognizes these items can have a material impact on our cash
flows and/or our net income. Our GAAP financial statements, including
our Condensed Consolidated Statement of Cash Flows, portray those
effects. Although we believe it is useful for investors to see core
performance free of special items, investors should understand that the
excluded costs are actual expenses that may impact the cash available to
us for other uses. To gain a complete picture of all effects on the
company’s profit and loss from any and all events, management does (and
investors should) rely upon the Condensed Consolidated Statement of
Operations prepared in accordance with GAAP. The non-GAAP measures focus
instead upon the core business of the company, which is only a subset,
albeit a critical one, of the company’s performance.
Page 9
View source version on businesswire.com: https://www.businesswire.com/news/home/20180530006368/en/
Source: Keysight Technologies, Inc.