Keysight Technologies Q1 Fiscal Year 2017 Results February 16, 2017 - - PowerPoint PPT Presentation

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Keysight Technologies Q1 Fiscal Year 2017 Results February 16, 2017 - - PowerPoint PPT Presentation

Keysight Technologies Q1 Fiscal Year 2017 Results February 16, 2017 Safe Harbor This presentation contains forward-looking statements (including, without limitation, information and future guidance on the companys goals, priorities,


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Keysight Technologies

Q1 Fiscal Year 2017 Results

February 16, 2017

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This presentation contains forward-looking statements (including, without limitation, information and future guidance on the company’s goals, priorities, revenues, demand, growth opportunities, customer service and innovation plans, new product introductions, financial condition, earnings, the company’s ability to pay dividends, ability to access capital markets, 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, unforeseen changes in the strength of

  • ur customers’ businesses; unforeseen changes in the demand for current and new products, technologies, and services;

customer purchasing decisions and timing, timing and ability to close Ixia acquisition, and the risk that we are not able to realize the savings or benefits expected from integration and restructuring activities. The words “anticipate,” “plan,” “estimate,” “expect,” “intend,” “will,” “should,” “forecast,” “project,” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. In addition, 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 October 31, 2016. Forward-looking statements are based

  • n the beliefs and assumptions of Keysight’s management and on currently available information. Keysight undertakes no

responsibility to publicly update or revise any forward-looking statement. This presentation and the Q&A that follows include forward-looking, non-GAAP measures. Non-GAAP measures exclude primarily the impacts of share-based compensation, restructuring and related costs, separation and related costs, acquisition and integration costs, acquisition-related fair value adjustments, Japan pension settlement gain and non-cash intangible amortization. Also excluded are 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. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree

  • f accuracy. Accordingly, no reconciliation to GAAP amounts has been provided.

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Safe Harbor

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– Strong First Quarter

  • Revenue of $726M at the mid-point of guidance; EPS of 57 cents, above

guidance

  • Continued momentum in next-generation technology solutions
  • Order rate tempered due to softness in the Aerospace Defense and

Government end market – Executing on Keysight’s growth strategy with the proposed acquisition of Ixia

  • An industry pioneer in Network Test and leader in Network Visibility
  • Increases Keysight’s served addressable market by $2.5B

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Q1’17 Highlights

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Page 679 761 707 806 695 100 200 300 400 500 600 700 800 900 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

Orders

726 735 718 751 726 100 200 300 400 500 600 700 800 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

$ millions

Non-GAAP Revenue**

$0.55 $0.61 $0.63 $0.64 $0.57 $0.50 $0.52 $0.54 $0.56 $0.58 $0.60 $0.62 $0.64 $0.66

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Non-GAAP EPS **

Q1’17 Financial Highlights

* Core growth excludes the impact of currency and acquisitions ** Reconciliations to closest GAAP equivalent provided

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  • Orders: $695M, +2% y/y (+2% core*)
  • Non-GAAP Revenue**: $726M, 0% y/y

(0% core*)

  • Non-GAAP Operating Margin**: 17.7%,
  • 10 basis points y/y
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Q1’17 Revenue Distribution

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Measurement Solutions 87%

Q1’17 Revenue: $726M

Americas 36% Europe 20% Asia Pacific 44%

Split by Region

CSG 60% EISG 26% SSG 14%

Split by Segment

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Page 309 340 327 330 321 100 200 300 400 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

$ millions

Asia Pacific

143 137 122 128 144 20 40 60 80 100 120 140 160 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

$ millions

Europe

274 258 269 293 261 50 100 150 200 250 300 350 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

$ millions

Americas Q1’17 Y/Y Non-GAAP Revenue Growth**

  • Americas -5% (-5% core*): Strength in CC and SS offset

by softness in ADG and EIS

  • Asia Pacific ex-Japan +3% (+3% core*): Driven by

strength in EIS (parametric test) offset by softness in ADG and CC.

  • Europe +1% (+4% core*): Driven by strength in CC and

SS partially offset by softness in EIS.

  • Japan +6% (0% core*): Driven by strength in ADG, CC

and SS

Q1’17 Non-GAAP Revenue Distribution by Region

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* Core revenue growth excludes the impact of currency and acquisitions ** Reconciliations to closest GAAP equivalent provided Key: ADG – Aerospace, Defense & Government CC – Commercial Communications EIS – Electronic Industrial Solutions SS – Services Solutions

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Q1’17 Communications Solutions Group Highlights

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  • Revenue: $434M**, -1% y/y (-1% core*)
  • Operating Margin: 16.7%, -100 basis points y/y
  • Commercial Communications: Solid growth from 5G and next-generation data center technologies,
  • ffset by continued cautious spending across the wireless device value chain.
  • Aerospace, Defense & Government: Funding delays due to budget appropriations and continuing

resolution impacting US, while Russia and China remain soft.

*Core revenue growth excludes the impact of currency and acquisitions ** Reconciliations to closest GAAP equivalent provided

$440 $446 $424 $442 $434 $0 $100 $200 $300 $400 $500 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

CSG Revenue**

$78 $84 $77 $75 $72 $65 $70 $75 $80 $85 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

CSG Income from Operations

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  • Revenue: $192M, 0% y/y (0% core*)
  • Operating Margin: 21.7%, +200 basis points y/y
  • Semiconductor parametric test solutions order and revenue growth continued with strength in Asia

Pacific ex-Japan and Japan

  • Automotive and energy solutions continue to gain momentum with strength in in Asia Pacific ex-Japan

and Japan

  • General electronics was soft in the quarter due to on-going weaker global macro environment

Q1’17 Electronic Industrial Solutions Group Highlights

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*Core revenue growth excludes the impact of currency and acquisitions

$191 $193 $191 $201 $192 $0 $50 $100 $150 $200 $250 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

EISG Revenue

$38 $40 $44 $47 $42 $0 $10 $20 $30 $40 $50 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

EISG Income from Operations

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  • Revenue: $100M, +5% y/y (+5% core*)
  • Operating Margin: 14.4%, +50 basis points y/y,
  • Year-over-year revenue growth of 5%, driven by strength in calibration services and increased sales
  • f remarketed solutions.
  • Strong double-digit order growth driven by strength in the Americas and in Asia Pacific ex-Japan.

Q1’17 Services Solutions Group Highlights

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*Core revenue growth excludes the impact of currency and acquisitions

$95 $96 $103 $108 $100 $0 $20 $40 $60 $80 $100 $120 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

SSG Revenue

$13 $11 $19 $20 $14 $0 $5 $10 $15 $20 $25 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 $ millions

SSG Income from Operations

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Commercial Communications 35% Aerospace, Defense & Government 25% Electronic Industrial 26% Services 14%

By End Market

Q1’17 Non-GAAP Revenue Distribution By End Market

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End Market Q1 Revenue YoY %

Commercial Communications $254M +2% Aerospace, Defense & Government $180M

  • 6%

Electronic Industrial $192M 0% Services $100M +5% Total* $726M 0%

* Reconciliations to closest GAAP equivalent provided

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Refer to our Safe Harbor slide for the risks on forward-looking statements

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Q2’17 Non-GAAP Guidance

Guidance Q2’17 Revenue $720M - $760M Revenue Growth

  • 2.0% to +3.4%

Earnings per share $0.54 to $0.68

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Reconciliations

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GAAP to Non-GAAP Operating Margin reconciliations: Q1’16 & Q1’17

The preliminary reconciliation from GAAP to non-GAAP operating margin is estimated based on our current information

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GAAP Net Income to Non-GAAP Net Income reconciliations: Q1’16-Q1’17

The preliminary reconciliation from GAAP to non-GAAP net income is estimated based on our current information

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GAAP Revenue to Non-GAAP Core Revenue reconciliation: Q1’17

The preliminary reconciliation from GAAP to non-GAAP core revenue is estimated based on our current information

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Non-GAAP Revenue by Segment and Region: Q1’17

The preliminary reconciliation from GAAP to non-GAAP revenue by segment and region is estimated based on our current information

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Non-GAAP Core Revenue by Segment and Region: Q1’17

The preliminary reconciliation of non-GAAP core revenue by segment and region is estimated based on our current information

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Segment Revenue reconciliation: Q1’16-Q1’17

The preliminary reconciliation of segment revenue is based on our current information.

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Non-GAAP Revenue by Region reconciliation: Q1’16-Q1’17

The preliminary reconciliation of GAAP to non-GAAP revenue by region is based on our current information.

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Non-GAAP Revenue by End Market reconciliation: Q1’17

The preliminary non-GAAP revenue by end market information is estimated based on our current information.

Percent Percent Q1'17 Q1'16 Inc/(Dec) Q1'17 Q1'16 Q1'17 Q1'16 Inc/(Dec) Aerospace, Defense & Government 180 $ 191 $

  • 6%

— $ — 180 $ 191 $

  • 6%

Commercial Communications 254 244 4% — 5 254 249 2% Electronic Industrial 192 191 — % — — 192 191 — % Services 100 95 5% — — 100 95 5% Total Revenue 726 $ 721 $ 1% — 5 $ 726 $ 726 $ — % Non-GAAP revenue is defined to exclude the fair value adjustments to the Anite acquisition-related deferred revenue balances.

PRELIMINARY

GAAP Revenue Non-GAAP Revenue

KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION OF NON-GAAP REVENUE BY END MARKET (In millions) (Unaudited)

Acquisition-related fair value adjs