Record First Quarter GAAP Revenue of $1B Grew 20 Percent
GAAP Earnings Per Diluted Share Grew 21 Percent
SANTA ROSA, Calif.--(BUSINESS WIRE)--
Keysight Technologies, Inc. (NYSE: KEYS) today reported financial
results for the first fiscal quarter of 2019 ended Jan. 31, 2019.
“Keysight delivered an outstanding first quarter with both revenue and
earnings exceeding the high-end of our guidance. Revenue grew 20 percent
on a GAAP and non-GAAP core basis to surpass $1.0 billion, while GAAP
and non-GAAP earnings grew 21 and 81 percent respectively. We continue
to see broad-based momentum across multiple end markets with our
differentiated solutions. Given our strategic positioning in key areas
of the market, we believe we are well-positioned to continue to build on
our success and expand our leadership,” said Ron Nersesian, Keysight
president and CEO.
First Quarter Financial Summary
-
GAAP revenue grew 20 percent to reach $1,006 million, when compared
with $837 million last year. Non-GAAP revenue, which excludes the
impact of fair value adjustments to acquisition-related deferred
revenue balances, grew 18 percent to reach $1,009 million. Non-GAAP
core revenue, which also excludes the impact of foreign currency
changes and revenue associated with businesses acquired or divested
within the last twelve months, increased 20 percent.
-
GAAP net income was $114 million, or $0.60 per share, compared with
GAAP net income of $94 million, or $0.50 per share, in the first
quarter of 2018.
-
Non-GAAP net income was $176 million, or $0.93 per share, compared
with $97 million, or $0.51 per share in the first quarter of 2018.
-
As of January 31, 2019, cash and cash equivalents totaled $1,098
million.
Reporting Segments
As previously announced, Keysight recently completed an organizational
change to align its services business with its customers and end
markets. With this change, services, which was previously reported as
Services Solutions Group (SSG), is now reported in the segment in which
the services are delivered. Keysight reports results for three operating
segments: Communications Solutions Group (CSG), Electronic Industrial
Solutions Group (EISG) and Ixia Solutions Group (ISG). Additional
information regarding Keysight’s new reporting segments and prior period
results are available on the company’s website at investor.keysight.com.
-
Communications Solutions Group (CSG)
CSG reported revenue of $623
million in the first quarter, up 25 percent, driven by demand for 5G
R&D across the wireless ecosystem, data center related next-generation
400GbE digital test and aerospace, defense and government.
-
Electronic Industrial Solutions Group (EISG)
EISG revenue grew 13
percent in the first quarter to $257 million, driven by strength in
automotive and emerging IoT applications, while the semiconductor
market moderated as expected.
-
Ixia Solutions Group (ISG)
ISG revenue was $129 million in
the first quarter, compared with $127 million in the prior year first
quarter, driven by network visibility solutions, while test revenue
remained inline with last year.
Outlook
Keysight’s second fiscal quarter of 2019 GAAP revenue is expected to be
in the range of $1,057 million to $1,077 million and non-GAAP revenue
for the second fiscal quarter of 2019 is expected to be in the range of
$1,060 million to $1,080 million.
Non-GAAP earnings per share for the second fiscal quarter of 2019 are
expected to be in the range of $0.93 to $0.99, 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 “Use of Non-GAAP Financial Measures” below.
Webcast
Keysight’s management will present more details about its first quarter
FY2019 financial results and its second quarter FY2019 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 “Q1
2019 Keysight Technologies Inc. Earnings Conference Call” to
participate or dial +1 833-245-9654 (U.S. only) or +1 647-689-4226
(International) and enter passcode 8679259.
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 +1 800-585-8367 (or +1 416-621-4642 from outside
the U.S.) and entering passcode 8679259.
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,
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 5 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 Revenue
-
Non-GAAP Core Revenue
-
Non-GAAP Net Income
-
Non-GAAP Net Income per share
Income per share is based on weighted average diluted share count. 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 ended January 31, 2019 and for projected non-GAAP
revenue amounts for the three months ended April 30, 2019. 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 $3.9B in fiscal
year 2018. 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
|
|
|
|
|
January 31,
|
|
Percent
|
|
|
2019
|
|
2018
(a)
|
|
Inc/(Dec)
|
|
|
|
|
|
|
|
Orders
|
|
$
|
1,016
|
|
|
$
|
964
|
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
1,006
|
|
|
$
|
837
|
|
|
20%
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
Cost of products and services
|
|
|
428
|
|
|
|
412
|
|
|
4%
|
Research and development
|
|
|
173
|
|
|
|
150
|
|
|
16%
|
Selling, general and administrative
|
|
|
288
|
|
|
|
295
|
|
|
(2)%
|
Other operating expense (income), net
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
27%
|
Total costs and expenses
|
|
|
885
|
|
|
|
854
|
|
|
4%
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
121
|
|
|
|
(17
|
)
|
|
‒
|
|
|
|
|
|
|
|
Interest income
|
|
|
4
|
|
|
|
3
|
|
|
63%
|
Interest expense
|
|
|
(20
|
)
|
|
|
(22
|
)
|
|
(9)%
|
Other income (expense), net
|
|
|
15
|
|
|
|
13
|
|
|
13%
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
120
|
|
|
|
(23
|
)
|
|
‒
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
6
|
|
|
$
|
(117
|
)
|
|
‒
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
114
|
|
|
$
|
94
|
|
|
22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.61
|
|
|
$
|
0.50
|
|
|
|
Diluted
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net income per share:
|
Basic
|
|
|
187
|
|
|
|
187
|
|
|
|
Diluted
|
|
|
190
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Restated to include the impact of adoption of ASU
2017-07, Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost, on November 1,
2018. There is no impact to net income or net income per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 1
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEET
|
(In millions, except par value and share amounts)
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
October 31,
|
|
|
2019
|
|
2018
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,098
|
|
|
$
|
913
|
|
Accounts receivable, net
|
|
|
580
|
|
|
|
624
|
|
Inventory
|
|
|
641
|
|
|
|
619
|
|
Other current assets
|
|
|
225
|
|
|
|
222
|
|
Total current assets
|
|
|
2,544
|
|
|
|
2,378
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
558
|
|
|
|
555
|
|
Goodwill
|
|
|
1,181
|
|
|
|
1,171
|
|
Other intangible assets, net
|
|
|
594
|
|
|
|
645
|
|
Long-term investments
|
|
|
52
|
|
|
|
46
|
|
Long-term deferred tax assets
|
|
|
741
|
|
|
|
750
|
|
Other assets
|
|
|
308
|
|
|
|
279
|
|
Total assets
|
|
$
|
5,978
|
|
|
$
|
5,824
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Short-term debt
|
|
$
|
499
|
|
|
$
|
499
|
|
Accounts payable
|
|
|
222
|
|
|
|
242
|
|
Employee compensation and benefits
|
|
|
210
|
|
|
|
276
|
|
Deferred revenue
|
|
|
317
|
|
|
|
334
|
|
Income and other taxes payable
|
|
|
56
|
|
|
|
42
|
|
Other accrued liabilities
|
|
|
96
|
|
|
|
69
|
|
Total current liabilities
|
|
|
1,400
|
|
|
|
1,462
|
|
|
|
|
|
|
Long-term debt
|
|
|
1,291
|
|
|
|
1,291
|
|
Retirement and post-retirement benefits
|
|
|
219
|
|
|
|
224
|
|
Long-term deferred revenue
|
|
|
126
|
|
|
|
127
|
|
Other long-term liabilities
|
|
|
284
|
|
|
|
287
|
|
Total liabilities
|
|
|
3,320
|
|
|
|
3,391
|
|
|
|
|
|
|
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; 193
million shares at January 31, 2019, and 191 million shares at
October 31, 2018, issued
|
|
|
2
|
|
|
|
2
|
|
Treasury stock at cost; 5.1 million shares at January 31, 2019 and
4.4 million shares at October 31, 2018
|
|
|
(222
|
)
|
|
|
(182
|
)
|
Additional paid-in-capital
|
|
|
1,925
|
|
|
|
1,889
|
|
Retained earnings
|
|
|
1,402
|
|
|
|
1,212
|
|
Accumulated other comprehensive loss
|
|
|
(449
|
)
|
|
|
(488
|
)
|
Total stockholders' equity
|
|
|
2,658
|
|
|
|
2,433
|
|
Total liabilities and equity
|
|
$
|
5,978
|
|
|
$
|
5,824
|
|
|
|
|
|
|
|
|
|
|
|
Page 2
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
(In millions)
|
(Unaudited)
|
PRELIMINARY
|
|
|
|
|
|
|
|
Three months ended
|
|
|
January 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
114
|
|
|
$
|
94
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation
|
|
|
24
|
|
|
|
26
|
|
Amortization
|
|
|
52
|
|
|
|
52
|
|
Share-based compensation
|
|
|
27
|
|
|
|
19
|
|
Deferred tax benefit
|
|
|
(12
|
)
|
|
|
(235
|
)
|
Excess and obsolete inventory-related charges
|
|
|
7
|
|
|
|
6
|
|
Gain on divestitures
|
|
|
(1
|
)
|
|
|
-
|
|
Pension curtailment and settlement loss
|
|
|
2
|
|
|
|
-
|
|
Net unrealized gains on equity investments still held
|
|
|
(5
|
)
|
|
|
-
|
|
Other non-cash expenses, net
|
|
|
-
|
|
|
|
2
|
|
Changes in assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
|
56
|
|
|
|
99
|
|
Inventory
|
|
|
(26
|
)
|
|
|
(20
|
)
|
Accounts payable
|
|
|
(10
|
)
|
|
|
14
|
|
Employee compensation and benefits
|
|
|
(68
|
)
|
|
|
(50
|
)
|
Deferred revenue
|
|
|
43
|
|
|
|
61
|
|
Income taxes payable
|
|
|
10
|
|
|
|
115
|
|
Retirement and post-retirement benefits
|
|
|
(12
|
)
|
|
|
(12
|
)
|
Other assets and liabilities
|
|
|
39
|
|
|
|
-
|
|
Net cash provided by operating activities (a) |
|
|
240
|
|
|
|
171
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Investments in property, plant and equipment
|
|
|
(31
|
)
|
|
|
(24
|
)
|
Proceeds from divestitures
|
|
|
2
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(29
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from issuance of common stock under employee stock plans
|
|
|
30
|
|
|
|
24
|
|
Payment of taxes related to net share settlement of equity awards
|
|
|
(23
|
)
|
|
|
(15
|
)
|
Treasury stock repurchases
|
|
|
(40
|
)
|
|
|
-
|
|
Proceeds from revolving credit facility
|
|
|
-
|
|
|
|
40
|
|
Repayment of revolving credit facility
|
|
|
-
|
|
|
|
(40
|
)
|
Payment of acquisition-related contingent consideration
|
|
|
-
|
|
|
|
(3
|
)
|
Net cash provided (used) by financing activities
|
|
|
(33
|
)
|
|
|
6
|
|
|
|
|
|
|
Effect of exchange rate movements
|
|
|
7
|
|
|
|
9
|
|
|
|
|
|
|
Net increase in cash and cash equivalents and restricted cash
|
|
|
185
|
|
|
|
162
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
917
|
|
|
|
820
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
1,102
|
|
|
$
|
982
|
|
|
|
|
|
|
|
|
|
|
|
(a) Cash payments included in operating activities:
|
|
|
|
|
Income tax payments, net
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Interest payment on borrowings
|
|
$
|
0
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
Page 3
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
RECONCILIATION OF REVENUE GUIDANCE AND NON-GAAP CORE REVENUE
|
(In millions)
|
(Unaudited)
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2'19 Guidance
|
|
Year-over-year compare
|
|
|
Low end
|
|
High end
|
|
Q1'19
|
|
Q1'18
|
|
Percent
Inc/(Dec)
|
GAAP Revenue
|
|
$
|
1,057
|
|
$
|
1,077
|
|
$
|
1,006
|
|
$
|
837
|
|
|
20%
|
Amortization of acquisition-related balances
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
19
|
|
|
|
Non-GAAP Revenue
|
|
$
|
1,060
|
|
$
|
1,080
|
|
$
|
1,009
|
|
$
|
856
|
|
|
18%
|
Less: Revenue from acquisition or divestitures included in segment
results
|
|
|
|
|
|
|
-
|
|
|
(6
|
)
|
|
|
Currency impacts
|
|
|
|
|
|
|
9
|
|
|
-
|
|
|
|
Non-GAAP Core Revenue
|
|
|
|
|
|
$
|
1,018
|
|
$
|
850
|
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Non-GAAP core revenue excludes impact of currency and revenue from
acquisitions or divestitures closed within the last twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
Please refer page 7 for discussion on our non-GAAP financial
measures.
|
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Page 4
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|
KEYSIGHT TECHNOLOGIES, INC.
|
SEGMENT RESULTS INFORMATION
|
(In millions, except where noted)
|
(Unaudited)
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications Solutions Group
|
|
|
|
|
|
YoY
|
|
|
Q1'19
|
|
Q1'18
|
|
% Chg
|
Revenue
|
|
$
|
623
|
|
|
$
|
500
|
|
|
25%
|
Gross margin, %
|
|
|
61.1
|
%
|
|
|
57.2
|
%
|
|
|
Income from operations
|
|
$
|
138
|
|
|
$
|
63
|
|
|
|
Operating margin, %
|
|
|
22
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Industrial Solutions Group
|
|
|
|
|
|
YoY
|
|
|
Q1'19
|
|
Q1'18
|
|
% Chg
|
Revenue
|
|
$
|
257
|
|
|
$
|
229
|
|
|
13%
|
Gross margin, %
|
|
|
58.9
|
%
|
|
|
56.6
|
%
|
|
|
Income from operations
|
|
$
|
54
|
|
|
$
|
38
|
|
|
|
Operating margin, %
|
|
|
21
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ixia Solutions Group
|
|
|
|
|
|
YoY
|
|
|
Q1'19
|
|
Q1'18
|
|
% Chg
|
Revenue
|
|
$
|
129
|
|
|
$
|
127
|
|
|
1%
|
Gross margin, %
|
|
|
71.3
|
%
|
|
|
75.5
|
%
|
|
|
Income from operations
|
|
$
|
12
|
|
|
$
|
18
|
|
|
|
Operating margin, %
|
|
|
9
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
Restated for (1) the recently announced organizational change to
align our services business with its customers and end markets. With
this change, services, which was previously reported as Services
Solutions Group (SSG), is now reported as part of the Communications
Solutions Group (CSG) and Electronic Industrial Solutions Group
(EISG); and (2) the retrospective application of ASU 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, which the company adopted
on November 1, 2018.
|
|
Net revenue for the Ixia Solutions Group excludes the impact of
amortization of acquisition-related balances of $3 million and $19
million for Q1'19 and Q1'18, respectively. Segment revenue and
income from operations are consistent with the respective non-GAAP
measures as discussed on Page 7.
|
|
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|
|
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|
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Page 5
|
|
KEYSIGHT TECHNOLOGIES, INC.
|
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
|
(In millions, except per share amounts)
|
(Unaudited)
|
PRELIMINARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
January 31,
|
|
|
2019
|
|
2018
|
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
GAAP Net income
|
|
$
|
114
|
|
|
$
|
0.60
|
|
|
$
|
94
|
|
|
$
|
0.50
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related balances
|
|
|
54
|
|
|
|
0.28
|
|
|
|
89
|
|
|
|
0.47
|
|
Share-based compensation expense
|
|
|
27
|
|
|
|
0.14
|
|
|
|
19
|
|
|
|
0.10
|
|
Acquisition and integration costs
|
|
|
2
|
|
|
|
0.01
|
|
|
|
19
|
|
|
|
0.10
|
|
Northern California wildfire-related costs
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
|
0.04
|
|
Other
|
|
|
(3
|
)
|
|
|
(0.02
|
)
|
|
|
3
|
|
|
|
0.02
|
|
Adjustment for taxes(a) |
|
|
(18
|
)
|
|
|
(0.08
|
)
|
|
|
(134
|
)
|
|
|
(0.72
|
)
|
Non-GAAP Net income
|
|
$
|
176
|
|
|
$
|
0.93
|
|
|
$
|
97
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - diluted
|
|
|
190
|
|
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three months ended January 31, 2019 and
January 31, 2018 management used a non-GAAP effective tax rate of
12% and 15%, respectively.
|
|
|
|
|
|
|
|
|
|
Historical amounts have been reclassified to conform with the
current presentation.
|
|
|
|
|
|
|
|
|
|
Please refer page 7 for discussion on our non-GAAP financial
measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 6
|
|
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 and divested 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:
|
|
•
|
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 other acquisition and integration 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.
|
|
|
•
|
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.
|
|
|
•
|
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
include net unrealized gains on equity investments still held,
restructuring and related costs, and significant non recurring
events like goodwill impairment charges, realized gains or losses
associated with our employee benefit plans, costs related to unusual
disaster like Northern California wildfires, gain on sale of assets
and small divestitures, separation and related costs, 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 second fiscal quarter of 2019 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 7
|
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190221005880/en/
EDITORIAL CONTACT:
Denise Idone
+1 631-849-3500
denise.idone@keysight.com
INVESTOR CONTACT:
Jason Kary
+1 707-577-6916
jason.kary@keysight.com
Source: Keysight Technologies, Inc.