Keysight Technologies Reports Fourth-Quarter and Fiscal 2015 Results

Keysight Technologies, Inc. (NYSE: KEYS) today reported strong operating results despite mixed end market conditions. Non-GAAP revenue of $756 million for the fourth fiscal quarter ended Oct. 31, 2015, declined 1 percent compared with one year ago.⁽²⁾ Currency had a negative year-over-year impact of 4 percentage points on revenue, while acquisitions contributed 4 percentage points of growth.

Compared to last year, results across end markets were mixed. Communications market revenues grew 3 percent, while aerospace & defense market revenues declined 5 percent versus a high point driven by the post-sequestration recovery. Industrial, computer, and semiconductor market revenues declined 2 percent as strength in computer and semiconductor markets was offset by softer industrial spending. Regionally, sales grew on a core basis in Asia Pacific and Japan with declines in the Americas and Europe.

Fourth-quarter GAAP gross margin of 56 percent increased 1.5 percentage points year-over-year. Non-GAAP gross margin of 58 percent increased 1.9 percentage points as the mix of R&D and software revenues improved.⁽¹⁾ Expenses increased due to acquisitions and higher R&D investment in support of key growth initiatives.

Fourth-quarter non-GAAP operating income was $157 million, or 20.7 percent of revenue.⁽¹⁾ Non-GAAP net income was $122 million, or $0.71 per share,⁽¹⁾ which excludes a tax benefit of $201 million and other net adjustments of $46 million. The tax benefit resulted primarily from a tax ruling obtained from Singapore that allows Keysight to amortize the value of the intellectual property acquired from Agilent in the separation. Fourth-quarter GAAP operating income was $111 million, or 14.8 percent of revenue. GAAP net income was $277 million, or $1.61 per share.

For fiscal 2015, non-GAAP revenue of $2.9 billion declined 2 percent and was flat on a core basis as currency had a negative year-over-year impact of 3 percentage points, while acquisitions contributed 1 percentage point of growth.⁽²⁾ Fiscal 2015 non-GAAP operating income was $559 million, or 19.5 percent of revenue.⁽¹⁾ Full-year non-GAAP net income was $432 million, or $2.52 per share,⁽¹⁾ which excludes GAAP to non-GAAP net adjustments of $81 million. Fiscal 2015 GAAP operating income was $431 million, or 15.1 percent of revenue. Full-year GAAP net income was $513 million, or $3.00 per share.

“Our strong Q4 performance contributed to a solid first year as an independent company,” said Ron Nersesian, Keysight president and CEO. “Our team’s operational discipline drove excellent earnings results in Q4 and throughout the year, while we completed the separation and closed our first major acquisition with Anite. We have also established a consistent track record of meeting our guidance commitments over the past several quarters.”

“Looking forward, our recently announced organizational structure is the next step in driving increased focus on customer solutions and accelerating our growth initiatives in 2016,” added Nersesian. “While we maintain our expectations for market growth of 2 percent in 2016, recent macro data has tempered our expectations for the first half of the year.”

Revenues and earnings are typically softer in Keysight’s first fiscal quarter. Consistent with this seasonality, first-quarter 2016 non-GAAP revenue is expected to be in the range of $702 million to $742 million.⁽²⁾ First-quarter non-GAAP earnings per share are expected to be in the range of $0.44 to $0.58.⁽³⁾

Webcast

Keysight’s management will present more details about its fourth-quarter FY2015 financial results 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 and select Q4 2015 Keysight Technologies Inc. Earnings Conference Call in the Investor News & Events – Upcoming Events section at www.investor.keysight.com. 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, Nov. 19 through Nov. 24 by dialing +1 855 859 2056 (or +1 404 537 3406 from outside the U.S.) and entering pass code 47979140.

About Keysight Technologies

Keysight Technologies (NYSE:KEYS) is a global electronic measurement technology and market leader helping to transform its customers’ measurement experience through innovations in wireless, modular, and software solutions. Keysight’s electronic measurement instruments, systems, software and services are used in the design, development, manufacture, installation, deployment and operation of electronic equipment. The business had revenues of $2.9 billion in fiscal year 2014. Information about Keysight is available at www.keysight.com.

Forward-Looking Statements

This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Keysight’s future revenues, earnings and profitability; the future demand for the company’s products and services; and customer expectations. These forward-looking statements 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 our customers’ businesses; unforeseen 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 and restructuring activities.

In addition, other risks that Keysight faces include those detailed in Keysight’s filings with the Securities and Exchange Commission, including our Form 10-Q for the fiscal quarter ended July 31, 2015. Forward-looking statements are based on 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.

Non-GAAP Measures

Keysight uses a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. The definition of these non-GAAP financial measures may differ from similarly titled measures used by others, and such non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. Keysight generally uses non-GAAP financial measures to facilitate management’s comparisons to historic operating results, to competitors’ operating results and to guidance provided to investors. In addition, Keysight believes that the use of these non-GAAP financial measures provides greater transparency to investors of information used by management in its financial and operational decision-making.

⁽¹⁾ Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, and non-GAAP net income per share 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, asset impairments and non-cash intangible amortization. In addition, non-GAAP net income and non-GAAP net income per share also excludes 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. Earnings per share is based on diluted shares. Reconciliation between non-GAAP gross margin and GAAP gross margin, non-GAAP net income and GAAP net income for Q4’15 and FY2015, is set forth on pages 5-6 of the attached tables, along with additional information regarding the use of this non-GAAP measure.

⁽²⁾ Revenues, excluding the impact of fair value adjustment to acquisition-related deferred revenue balances for the Anite acquisition are a non-GAAP measure. A reconciliation between GAAP revenue and non-GAAP revenue and non-GAAP revenue excluding currency and acquisitions (core basis) is provided on page 8 of the attached tables, along with additional information regarding the use of this non-GAAP measure.

⁽³⁾ Non-GAAP earnings per share as projected for Q1 FY16 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, asset impairments and non-cash intangible amortization. Beginning in Q1 FY16, Keysight intends to utilize a fixed long-term projected non-GAAP tax rate. When projecting this long-term rate, Keysight will 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, Keysight will evaluate its 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 long-term non-GAAP tax rate should eliminate the effects of non-recurring and period specific items. This tax rate could be subject to 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. 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. Therefore, no reconciliation to GAAP amounts has been provided.

Additional information about Keysight Technologies is available in the newsroom at www.keysight.com/go/news.

Source: IR-KEYS

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