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