Quarterly Results Presentation - Keysight Technologies

Transcription

Quarterly Results Presentation - Keysight Technologies
Keysight Technologies
Q2 Fiscal Year 2015 Results
May 19, 2015
Safe Harbor
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 results of Keysight to differ materially from management’s current expectations. 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 the company faces in running its operations include the ability to realize fully the benefits of the separation
of our electronic measurement business, the ability to execute successfully through business cycles; the ability to adapt successfully
its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross margin pressures; the risk
that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact
of geopolitical uncertainties on our markets and our ability to conduct business; the ability to improve asset performance to adapt to
changes in demand; the ability to introduce successfully new products at the right time, price and mix; and other risks detailed in the
company’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed with the Securities
and Exchange Commission on December 22, 2014.
You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of
this presentation. The company assumes no obligation to update the information in this presentation in light of new information or
future events. This presentation and the Q&A that follows include forward-looking, non-GAAP measures. Non-GAAP measures
exclude primarily the impacts of acquisition and integration costs, future restructuring costs, asset impairment charges, separation
costs, stock based compensation, and non-cash intangibles amortization. Also excluded are tax benefits 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 of accuracy. Accordingly, no reconciliation to GAAP amounts has been provided.
Page 2
Q2’15 Financial Highlights
Orders
900
• Orders: $697M, -11% y/y (-8% core*)
800
782
722
760
700
• Operating Margin**: 20.3% of revenue,
-80 basis points y/y
697
Q1'15
Q2'15
600
$ millions
• Revenues: $740M, 0% y/y (+3% core*)
691
500
400
300
200
100
0
Q2'14
Q3'14
EPS **
Revenues
$1.00
900
800
743
757
762
701
740
$0.90
$0.80
$0.80
$0.86
$0.80
700
$0.70
$0.70
600
$ millions
Q4'14
$0.56
$0.60
500
$0.50
400
$0.40
300
$0.30
200
$0.20
100
$0.10
$-
0
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q2'14
Q3'14
Q4'14
Q1'15
* Core revenue growth excludes the impact of currency and M&A
** Presented on a non-GAAP basis; reconciliations to closest GAAP equivalent provided. Prior periods restated to
exclude stock-based compensation
Q2'15
Page 3
Q2’15 Revenue Distribution
Q2’15 Revenue: $740M
Revenue by Segment
Customer
Support &
Services
Revenue by Region
14%
Measurement
Solutions
86%
Asia
Pacific
45%
Americas
38%
Europe
17%
Page 4
Q2’15 Revenue Distribution by Region
Americas
350
304
• Americas +19% (+19% core*)
250
$ millions
Q2’15 Y/Y Revenue Growth
300
• Europe -6% (+4% core*)
• Japan 0% (+13% core*)
282
264
282
237
200
150
100
• Asia Pacific ex-Japan -14% (-14% core*)
50
0
Q2'14
Q3'14
375
336
160
314
335
140
302
300
Q2'15
131
139
144
135
123
120
$ millions
$ millions
Q1'15
Europe
Asia Pacific
400
Q4'14
200
100
80
60
40
100
20
0
0
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
* Core revenue growth excludes the impact of currency and M&A
Page 5
Q2’15 Measurement Solutions Highlights
• Revenues: $638M, 0% y/y (+3% core*)
• Operating Margin: 20.7% of revenue, +20 basis points y/y
MS Income from Operations
MS Net Revenue
$160
$680
$663
$140
$656
$640
$ millions
$620
$606
$600
$131
$133
$132
$120
$638
$640
$ millions
$660
$145
$107
$100
$80
$60
$40
$580
$20
$0
$560
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
* Core revenue growth excludes the impact of currency and M&A
Page 6
Q2’15 Customer Support & Services Highlights
• Revenues: $102M, -1% y/y (+3% core*)
• Operating Margin: 17.7% of revenue, -730 basis points y/y
CSS Income from Operations
CSS Net Revenue
$30
$105
$26
$103
$102
$101
$100
$23
$20
$ millions
$99
$ millions
$25
$25
$95
$18
$15
$13
$10
$95
$5
$0
$90
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
* Core revenue growth excludes the impact of currency and M&A
Page 7
Q2’15 Revenue Distribution
Q2’15 Revenue: $740M
Revenue by End Market
Measurement
Solutions
86%
Aerospace
& Defense
21%
Communications
33%
Industrial,
Comps &
Semi
46%
Page 8
Keysight End Market Performance – Q2’15
ICS and U.S. A/D growth offset by softening in Communications
and International A/D
End Markets
Keysight Results
Q2’15 vs. Q2’14
% of Keysight
LTM Revenue*
Market Size**
$12B
3% decline on softness in wireless
manufacturing. Last year’s strength in
China 4G base station and infrastructure
manufacturing has moderated in FY15.
34%
$4B
Aerospace & Defense
1% decline as strength in the U.S. offset by
softening in international markets.
23%
$3B
Industrial, Computers,
Semiconductor
2% overall growth as general industrial
improved and computer and semiconductor
were stable.
43%
$5B
Communications
* Percentage of Keysight revenue for last twelve months (Q3’14 to Q2’15)
** Market size per company estimates
Page 9
Q3’15 Guidance
Guidance
Q3’15
Revenue
$635M - $675M
Revenue Growth
-16.1% to -10.8%
Earnings per share*
$0.37 to $0.51
* Presented on a non-GAAP basis
Page 10
Quarterly Financial Results*
(adjusted for stock-based compensation)
Q2’14
Q3’14
Q4’14
Q1'15
Q2'15
Revenue
743
757
762
701
740
Cost of Goods Sold
323
337
335
311
318
Gross Margin
420
420
427
390
422
GM%
56.6%
55.5%
56.1%
55.6%
57.1%
R&D
88
89
88
91
95
SG&A
175
173
171
179
177
Income from Operations
157
158
168
120
150
21.1%
20.9%
22.1%
17.1%
20.3%
1
0
2
-5
-5
Income before Taxes
158
158
170
115
145
Provision for Income Taxes
25
25
27
19
25
Net Income
133
133
143
96
120
Shares outstanding
167
167
167
170
171
$M (except per share amounts)
OM%
Other income (expense) net
Non-GAAP Diluted EPS
$
0.80
$
0.80
$
0.86
$
0.56
$
0.70
* Presented on a non-GAAP basis; reconciliations to closest GAAP equivalent provided.
Page 11
GAAP to NON GAAP Operating profit reconciliation - Q2’14
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION FROM GAAP TO NON-GAAP
NET INCOME
THREE MONTHS ENDED APRIL 30, 2014
(Unaudited)
NON-GAAP ADJUSTMENTS
(In millions, except per share amounts) GAAP
Net Revenue
Costs and expenses:
Cost of products and services
Research and development
Selling, general and administrative
Total costs and expenses
Income from operations
Other Income (expense), net
Income before taxes
Provision for Income Taxes
Net Income
Project Sapp
Intangible Pre-Separation Share Based
Amortization
Costs
Compensation
$ 743 $
-
328
89
199
616
-
127
1
128
18
$ 110 $
$
(2)
(2)
2
-
$
(17)
(17)
2 $
17
17
17 $
0.01 $
0.01 $
0.10 $
0.10 $
2
-
-
Others
$
(3)
(1)
(6)
(10)
-
Adjustment
for Taxes
Non-GAAP
$
$
(1)
(1)
10
743
-
323
88
175
586
-
10 $
1 $
7
(7) $
157
1
158
25
133
0.06 $
0.06 $
0.01 $
0.01 $
(0.04) $
(0.04) $
0.80
0.80
167
167
167
167
-
1
-
10
-
1
-
Net income (loss) per share - Basic and Diluted:
Basic
Diluted
$ 0.66 $
$ 0.66 $
Weighted average shares used in computing net income (loss) per share:
Basic
Diluted
167
167
167
167
167
167
167
167
167
167
The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.
Page 12
GAAP to NON GAAP Operating profit reconciliation - Q3’14
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION FROM GAAP TO NON-GAAP
NET INCOME
THREE MONTHS ENDED JULY 31, 2014
(Unaudited)
NON-GAAP ADJUSTMENTS
Others
(In millions, except per share amounts)
Project Sapp
Intangible Pre-Separation Share Based
GAAP Amortization
Costs
Compensation
Net Revenue
$ 757 $
-
$
343
91
202
636
-
Costs and expenses:
Cost of products and services
Research and development
Selling, general and administrative
Total costs and expenses
Income from operations
Other Income (expense), net
Income before taxes
Provision for Income Taxes
Net Income
121
1
122
15
$ 107 $
$
(2)
(2)
-
2
-
(2)
(2)
(5)
(9)
-
9
-
0.01 $
0.01 $
0.16 $
0.16 $
757
(1) $
158
158
25
133
0.05 $ (0.01) $
0.05 $ (0.01) $
(0.06) $
(0.06) $
0.80
0.80
(1)
(1)
9
-
26 $
$
-
10
(10) $
26
2 $
$
337
89
173
599
-
-
Non-GAAP
-
26
-
-
-
(2)
(24)
(26)
2
-
$
Adjustment
for Taxes
9 $
Net income (loss) per share - Basic and Diluted:
Basic
Diluted
$ 0.64 $
$ 0.64 $
Weighted average shares used in computing net income (loss) per share:
Basic
Diluted
167
167
167
167
167
167
167
167
167
167
167
167
167
167
The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.
Page 13
GAAP to NON GAAP Operating profit reconciliation – Q4’14
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION FROM GAAP TO NON-GAAP
NET INCOME
THREE MONTHS ENDED OCTOBER 31, 2014
(Unaudited)
NON-GAAP ADJUSTMENTS
(In millions, except per share amounts)
Net Revenue
GAAP
$
762
Costs and expenses:
Cost of products and services
Research and development
Selling, general and administrative
Total costs and expenses
343
91
198
632
Income from operations
Other Income (expense), net
Income before taxes
Provision for Income Taxes
Net Income
130
3
133
32
101
$
Project Sapp
Intangible Pre-Separation Share Based
Amortization
Costs
Compensation
Others
$
$
-
$
(2)
-
$
-
(4)
(2)
(21)
(27)
(2)
2
$
2
$
27
27
27
$
$
0.01
0.01
$
$
0.16
0.16
2
-
(2)
(1)
(5)
(8)
-
Adjustment
for Taxes
Non-GAAP
$
$
-
-
(1)
(1)
8
1
(1)
8
-
335
88
171
594
-
-
$
8
$
-
$
$
$
0.05
0.05
$
$
-
$
$
762
$
(5)
5 $
168
2
170
27
143
Net income (loss) per share - Basic and Diluted:
Basic
Diluted
$ 0.60
$ 0.60
0.03
0.03
$
$
0.86
0.86
Weighted average shares used in computing net income (loss) per share:
Basic
Diluted
167
167
167
167
167
167
167
167
167
167
167
167
167
167
The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.
Page 14
GAAP to NON GAAP Operating profit reconciliation – Q1’15
KEYSIGHT TECHNOLOGIES, INC
RECONCILIATION FROM GAAP TO NON-GAAP
NET INCOME
THREE MONTHS ENDED JANUARY 31, 2015
(Unaudited)
NON GAAP ADJUSTMENTS
(In millions, except per share amounts)
Net revenue
GAAP
$
Costs and expenses:
Cost of products and services
Research and development
Selling, general and administrative
Total costs and expenses
Income from operations
Other income (expense), net
Income before taxes
Provision (benefit) for taxes
Net income
Intangible
Amortization
701 $
318
96
206
620
$
-
Project Sapp
Separation
costs
$
(2)
(2)
81
(3)
78
8
70 $
-
Share Based
Compensation
Other
$
$
(1)
(7)
(8)
2
2
2
$
0.01
0.01
$
$
-
(4)
(4)
(21)
(29)
8
(1)
7
7 $
Adjustment
for Taxes
- $
$
701
-
311
91
179
581
(1)
(1)
(1) $
11
(11) $
120
(5)
115
19
96
0.17 $ (0.01) $
0.17 $ (0.01) $
(0.07) $
(0.06) $
29
29
29 $
(1)
1
-
-
Non-GAAP
Net income (loss) per share - Basic and Diluted:
Basic
Diluted
$
$
0.42
0.41
$
$
0.04
0.04
$
$
0.57
0.56
Weighted average shares used in computing net income (loss) per share:
Basic
Diluted
168
170
168
170
168
170
168
170
168
170
168
170
168
170
The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.
Page 15
GAAP to NON GAAP Operating profit reconciliation – Q2’15
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION FROM GAAP TO NON-GAAP
NET INCOME
THREE MONTHS ENDED APRIL 30, 2015
(Unaudited)
NON-GAAP ADJUSTMENTS
(in millions, except per share amounts)
Net Revenue
GAAP
$
Intangible
Amortization
740 $
-
Costs and expenses:
Cost of products and services
Research and development
Selling, general and administrative
Total costs and expenses
324
96
192
612
-
Income from operations
Other income(expense), net
128
(6)
Income before taxes
122
Provision for taxes
26
Net income
$
Project Sapp
Separation
Costs
Share Based
Compensation
$
$
-
(2)
(5)
(5)
2
-
5
-
2
-
5
-
96 $
2 $
0.57 $
0.56 $
0.01 $
0.01 $
-
Other
$
-
(4)
(2)
(7)
(13)
(2)
Asset
Impairment
$
-
Non-GAAP
$
740
1
(3)
(2)
-
318
95
177
590
13
-
2
2
(1)
-
150
(5)
13
2
1
-
145
5 $
Adjustment
for Taxes
-
13 $
2 $
(1)
1 $
25
1 $
120
Net income (loss) per share - Basic and Diluted:
Basic
Diluted
$
$
0.03
0.03
$
$
0.08
0.08
$
$
0.01 $ 0.01
0.01 $ 0.01
$
$
-
$
$
0.71
0.70
Weighted average shares used in computing net income (loss) per share:
Basic
Diluted
169
171
169
171
169
171
169
171
169
171
169
171
169
171
169
171
The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.
Page 16
Organic Non-GAAP revenue reconciliation – Q2’15
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION OF ORGANIC Non-GAAP REVENUE
(In Millions)
(Unaudited)
PRELIMINARY
Non-GAAP Revenue
Less revenue from acquisition and divestitures
included in segment results
Organic Non-GAAP Revenue
Organic Non-GAAP Revenue by Region
Americas
Europe
Asia Pacific
Organic Non-GAAP Revenue
Q2'15
$
740
$
(1)
739
Q2'15
$
281
123
335
$
739
Q2'14
$
743
$
—
743
Q2'14
$
237
131
375
$
743
Percent
Inc/(Dec)
0%
—
-1%
Percent
Inc/(Dec)
18%
-6%
-11%
-1%
Organic Non-GAAP revenue is defined as Non- GAAP revenue excluding the impact of material
acquisitions and divestitures that have closed within the past year.
Management believes that these measures provide useful information to investors by reflecting an
additional way of viewing aspects of Keysight's operations that, when reconciled to the corresponding
GAAP measures, help our investors to better identify underlying growth trends in our business and
facilitate easier comparisons of our revenue performance with prior and future periods and to our peers.
We excluded the effect of recent acquisitions and divestitures because the nature, size and number of
these can vary dramatically from period to period and between us and our peers, which we believe may
obscure underlying business trends and make comparisons of long-term performance difficult.
The preliminary reconciliation of Non-GAAP to Organic Non-GAAP revenue is based on our current information.
Page 17
Core Non-GAAP revenue by segment and region reconciliation – Q2’15
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATIONS OF Non-GAAP CORE REVENUE BY SEGMENT AND REGION
Non-GAAP CORE REVENUE IS Non-GAAP ORGANIC REVENUE EXCLUDING THE IMPACT OF CURRENCY ADJUSTMENTS
(in millions)
(Unaudited)
PRELIMINARY
Year-over-Year
Revenue by Segment
Measurement Solutions
$
Customer Services and Support
Keysight
$
Americas
Europe
Japan
Asia Pacific ex-Japan
Total Revenue
Asia Pacific
638 $
640
0%
101
103
-2%
739 $
743
-1%
$
739 $
743
-1%
$
$
281
123
92
243
739 $
335 $
237
131
91
284
743
375
18%
-6%
0%
-14%
-1%
-11%
Currency-Adjusted (Core)
Year-over-Year
Q2'15
Q2'14
% Change
Q2'15
$
$
(22)
$
660 $
640
3%
(5)
$
106
103
3%
(27)
$
766 $
743
3%
Currency
Adjustments (a)
NON GAAP ORGANIC
Year-over-Year
Q2'15
Q2'14
% Change
Revenue by Region
Revenue
Currency
Adjustments (a)
NON GAAP ORGANIC
Year-over-Year
Q2'15
Q2'14
% Change
Currency-Adjusted (Core)
Year-over-Year
Q2'15
Q1'14
% Change
Q2'15
$
(27)
$
$
(1)
(13)
(11)
(2)
(27)
(13)
$
766 $
743
3%
$
$
282
136
103
245
766 $
348 $
237
131
91
284
743
375
19%
4%
13%
-14%
3%
-7%
(a)
We compare the year-over-year change in revenue excluding the effect of foreign currency rate fluctuations to assess the performance of our underlying business. To determine the
impact of currency fluctuations, current period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the actual exchange
rate in effect during the respective prior periods.
Non-GAAP Organic revenue is defined as Non-GAAP revenue excluding the impact of material acquisitions and divestitures that have closed within the past year.
The preliminary reconciliation of GAAP Organic revenue adjusted for the impact of currency is estimated based on our current information.
Page 18