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Keysight Technologies Reports First Quarter 2021 Results

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Record First Quarter Orders and Revenue

Strong execution drives above guidance results

Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the first fiscal quarter of 2021 ended January 31, 2021.

"Keysight delivered an outstanding first quarter and a strong start to the year with both revenue and earnings exceeding the high end of our guidance. Order and revenue growth in the quarter was driven by strong execution and robust demand for our broad portfolio of differentiated solutions across all regions," said Ron Nersesian, Keysight’s Chairman, President and CEO. "We enter the year with momentum across multiple end markets and confidence in our revenue and earnings growth trajectory."

First Quarter Financial Summary

  • Orders grew 7 percent to reach $1.22 billion, compared with $1.14 billion last year.

  • Revenue grew 8 percent to reach $1.18 billion, compared with $1.10 billion last year, or 6 percent on a core basis, which excludes the impact of foreign currency changes and revenue associated with businesses acquired or divested within the last twelve months.

  • GAAP net income was $172 million, or $0.92 per share, compared with $163 million, or $0.86 per share, in the first quarter of 2020.

  • Non-GAAP net income was $270 million, or $1.43 per share, compared with $240 million, or $1.26 per share in the first quarter of 2020.

  • As of January 31, 2021, cash and cash equivalents totaled $1.89 billion.

Reporting Segments

  • Communications Solutions Group (CSG)
    CSG reported revenue of $852 million in the first quarter, up 4 percent over last year, driven by robust year-end spending in aerospace, defense and government across all major regions.

  • Electronic Industrial Solutions Group (EISG)
    EISG reported revenue of $328 million in the first quarter, up 18 percent over last year, driven by strength in our semiconductor measurement and general electronics solutions, particularly in Asia Pacific.

Outlook

Keysight’s second fiscal quarter of 2021 revenue is expected to be in the range of $1.19 billion to $1.21 billion. Non-GAAP earnings per share for the second fiscal quarter of 2021 are expected to be in the range of $1.29 to $1.35, 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 FY2021 financial results and its second quarter FY2021 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 2021 Keysight Technologies Inc. Earnings Conference Call" to participate or dial +1 833-968-2178 (U.S. only) or +1 778-560-2837 (International) and enter passcode 3577955. The webcast will remain on the company site for 90 days.

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. The words "expect," "intend," "will," "should," "forecast," and similar expressions, as they relate to the company, are intended to identify forward-looking statements. 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, revenues, financial condition, earnings, impacts of US export control regulations, and operations 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 disruption in the supply chain, government mandates related to pandemic conditions; changes in the demand for current and new products, technologies, and services; customer purchasing decisions and timing; and order cancellations.

In addition to the risks above, other risks that Keysight faces include those detailed in Keysight’s filings with the Securities and Exchange Commission on Keysight’s annual report on Form 10-K for the fiscal year ended October 31, 2020.

Segment Data

Segment data reflects the results of our reportable segments under our management reporting system. 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:

  • 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, 2021. 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 $4.2B in fiscal year 2020. 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, LinkedIn, Twitter and YouTube.

Source: IR-KEYS

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share data)

(Unaudited)

PRELIMINARY

Three months ended

January 31,

Percent

2021

2020

Inc/(Dec)

Orders

$

1,223

$

1,141

7%

Revenue

$

1,180

$

1,095

8%

Costs and expenses:

Cost of products and services

473

440

7%

Research and development

199

187

7%

Selling, general and administrative

301

300

-

Other operating expense (income), net

(5

)

(35

)

(85)%

Total costs and expenses

968

892

8%

Income from operations

212

203

5%

Interest income

1

6

(91)%

Interest expense

(20

)

(19

)

1%

Other income (expense), net

2

12

(89)%

Income before taxes

195

202

(4)%

Provision for income taxes

23

39

(41)%

Net income

$

172

$

163

5%

Net income per share:

Basic

$

0.93

$

0.87

Diluted

$

0.92

$

0.86

Weighted average shares used in computing net income per share:

Basic

186

188

Diluted

188

191

Page 1

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions, except par value and share data)

(Unaudited)

PRELIMINARY

January 31,

October 31,

2021

2020

ASSETS

Current assets:

Cash and cash equivalents

$

1,887

$

1,756

Accounts receivable, net

654

606

Inventory

760

757

Other current assets

265

255

Total current assets

3,566

3,374

Property, plant and equipment, net

597

595

Operating lease right-of-use assets

215

182

Goodwill

1,588

1,537

Other intangible assets, net

356

361

Long-term investments

62

61

Long-term deferred tax assets

700

740

Other assets

410

368

Total assets

$

7,494

$

7,218

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

228

$

224

Employee compensation and benefits

253

289

Deferred revenue

456

391

Income and other taxes payable

56

64

Operating lease liabilities

42

43

Other accrued liabilities

89

70

Total current liabilities

1,124

1,081

Long-term debt

1,790

1,789

Retirement and post-retirement benefits

362

362

Long-term deferred revenue

166

175

Long-term operating lease liabilities

184

149

Other long-term liabilities

332

365

Total liabilities

3,958

3,921

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; 197 million shares
at January 31, 2021, and 196 million shares at October 31, 2020, issued

2

2

Treasury stock at cost; 10.9 million shares at January 31, 2021 and
10.7 million shares at October 31, 2020

(772

)

(752

)

Additional paid-in-capital

2,134

2,110

Retained earnings

2,708

2,536

Accumulated other comprehensive loss

(536

)

(599

)

Total stockholders' equity

3,536

3,297

Total liabilities and equity

$

7,494

$

7,218

Page 2

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

PRELIMINARY

Three months ended

January 31,

2021

2020

Cash flows from operating activities:

Net income

$

172

$

163

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

28

24

Amortization

59

56

Share-based compensation

43

39

Deferred tax expense

1

18

Excess and obsolete inventory-related charges

7

7

Gain on insurance proceeds received for damage to property, plant and equipment

-

(32

)

Other non-cash expense (income), net

7

1

Changes in assets and liabilities:

Accounts receivable

(38

)

(3

)

Inventory

-

(36

)

Accounts payable

4

(26

)

Employee compensation and benefits

(54

)

(63

)

Deferred revenue

50

29

Income taxes payable

(1

)

10

Retirement and post-retirement benefits

(1

)

(3

)

Other assets and liabilities

18

13

Net cash provided by operating activities(a)

295

197

Cash flows from investing activities:

Investments in property, plant and equipment

(28

)

(32

)

Acquisition of businesses and intangible assets, net of cash acquired

(96

)

(5

)

Insurance proceeds received for damage to property, plant and equipment

-

32

Net cash used in investing activities

(124

)

(5

)

Cash flows from financing activities:

Proceeds from issuance of common stock under employee stock plans

28

26

Payment of taxes related to net share settlement of equity awards

(49

)

(49

)

Treasury stock repurchases

(20

)

(76

)

Payment of acquisition-related contingent consideration

(2

)

-

Net cash used in financing activities

(43

)

(99

)

Effect of exchange rate movements

8

-

Net increase in cash, cash equivalents and restricted cash

136

93

Cash, cash equivalents and restricted cash at beginning of period

1,767

1,600

Cash, cash equivalents and restricted cash at end of period

$

1,903

$

1,693

(a) Cash payments included in operating activities:

Income tax payments, net

$

(22

)

$

(9

)

Page 3

KEYSIGHT TECHNOLOGIES, INC.

RECONCILIATION OF CORE REVENUE

(In millions)

(Unaudited)

PRELIMINARY

Year-over-year compare

Q1'21

Q1'20

Percent Inc/(Dec)

Revenue

$

1,180

$

1,095

8%

Adjustments:

Revenue from acquisitions or divestitures included in segment results

(10

)

-

Currency impacts

(13

)

-

Core Revenue

$

1,157

$

1,095

6%

Core revenue excludes the impact of currency and revenue from acquisitions or divestitures closed within the last twelve months.

Please refer last page for discussion on our non-GAAP financial measures.

Page 4

KEYSIGHT TECHNOLOGIES, INC.

SEGMENT RESULTS INFORMATION

(In millions, except where noted)

(Unaudited)

PRELIMINARY

Communications Solutions Group

YoY

Q1'21

Q1'20

% Chg

Revenue

$

852

$

818

4%

Gross margin, %

64.6

%

65.7

%

Income from operations

$

224

$

201

Operating margin, %

26

%

25

%

Electronic Industrial Solutions Group

YoY

Q1'21

Q1'20

% Chg

Revenue

$

328

$

277

18%

Gross margin, %

63.4

%

61.1

%

Income from operations

$

96

$

73

Operating margin, %

29

%

26

%

Segment income from operations is consistent with the respective non-GAAP financial measures as discussed on last page.

Page 5

KEYSIGHT TECHNOLOGIES, INC.

NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATION

(In millions, except per share data)

(Unaudited)

PRELIMINARY

Three months ended

January 31,

2021

2020

Net Income

Diluted EPS

Net Income

Diluted EPS

GAAP Net income

$

172

$

0.92

$

163

$

0.86

Non-GAAP adjustments:

Amortization of acquisition-related balances

58

0.31

59

0.31

Share-based compensation

43

0.23

39

0.21

Acquisition and integration costs

3

0.01

2

0.01

Northern California wildfire-related impacts

-

-

(32

)

(0.17

)

Restructuring and related costs

1

0.01

2

0.01

Others

6

0.03

1

0.01

Adjustment for taxes(a)

(13

)

(0.08

)

6

0.02

Non-GAAP Net income

$

270

$

1.43

$

240

$

1.26

Weighted average shares outstanding - diluted

188

191

(a) For the three months ended January 31, 2021 and 2020, management uses a non-GAAP effective tax rate of 12%.

Please refer last page for details on the use of 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 generally relates to an acquisition and 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. We may not have non-GAAP revenue in all periods.

Core Revenue is GAAP/ Non-GAAP revenue (as applicable) 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.

Free cash flow includes net cash provided by operating activities adjusted for investments in property, plant & equipment.

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 impacts 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, and significant non recurring events like realized gains or losses associated with our employee benefit plans, costs and recoveries related to unusual disaster like Northern California wildfires, gain on sale of assets and small divestitures, etc.

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.

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 2021 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/20210218005911/en/

Contacts

EDITORIAL CONTACT:
Denise Idone
+ 1 941-888-2388
denise.idone@keysight.com

INVESTOR CONTACT:
Jason Kary
+1 707-577-6916
jason.kary@keysight.com