10-KPeriod: FY2016

Keysight Technologies, Inc. Annual Report, Year Ended Oct 31, 2016

Filed December 19, 2016For Securities:KEYS

Summary

Keysight Technologies, Inc. (KEYS) reported net revenue of $2.918 billion for the fiscal year ended October 31, 2016, a modest 2% increase year-over-year, largely driven by the acquisition of Anite plc in August 2015. The company operates across three main segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG), and Services Solutions Group (SSG). While net revenue showed slight growth, net income declined to $335 million from $513 million in the prior year, impacted by increased R&D expenses, acquisition-related intangible amortization, and integration costs. However, operating cash flow remained robust at $416 million. Strategically, Keysight is focusing on new wireless communication measurement solutions, particularly for 5G, expanding its software offerings, and leveraging its broad portfolio of hardware and services. The company has a strong technological foundation with over 75 years of experience and maintains leadership in several core instrumentation categories. Geographically, 65% of revenue was generated outside the United States, demonstrating a significant international footprint. Keysight also executed a $200 million share repurchase program, signaling a commitment to returning value to shareholders.

Financial Highlights

56 data points
Beta

Revenue

$2.92B

55.7% Gross Margin

Net Income

$335.00M

11.5% Net Margin

EPS (Diluted)

$1.95

Total Assets

$3.80B

Cash & Equivalents

$783.00M

Free Cash Flow

$329.00M

Financial Statements
Beta
Revenue$2.92B
Cost of Revenue$1.29B
Gross Profit$1.62B
R&D Expenses$425.00M
SG&A Expenses$818.00M
Operating Expenses$2.51B
Operating Income$406.00M
Interest Expense$47.00M
Net Income$335.00M
EPS (Basic)$1.97
EPS (Diluted)$1.95
Shares Outstanding (Basic)170.00M
Shares Outstanding (Diluted)172.00M

Key Highlights

  • 1Keysight Technologies reported net revenue of $2.918 billion for fiscal year 2016, a 2% increase over fiscal year 2015.
  • 2Net income decreased to $335 million in fiscal year 2016 from $513 million in fiscal year 2015.
  • 3The company's strategic focus includes investments in new wireless communication measurement solutions (especially for 5G), enhanced software solutions, and industry-focused offerings across various form factors.
  • 4Keysight successfully acquired Anite plc for $558 million in August 2015, strengthening its wireless software and network testing capabilities.
  • 5Operating cash flow was $416 million for fiscal year 2016.
  • 6The company operates in three segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG), and Services Solutions Group (SSG).
  • 7Keysight did not pay dividends and does not anticipate paying them in the foreseeable future, focusing on reinvesting earnings and share repurchases.

Frequently Asked Questions

Keysight's primary revenue driver was its Communications Solutions Group (CSG), which accounted for approximately 60% of total revenue. Growth in CSG was supported by the commercial communications market, particularly advancements in 5G technologies and data center expansion, though partially offset by weakness in the smartphone supply chain. The Electronic Industrial Solutions Group (EISG) also contributed with growth in Asia Pacific and Japan, while the Services Solutions Group (SSG) remained relatively flat.

The acquisition of Anite plc for $558 million in August 2015 significantly strengthened Keysight's wireless software design and test portfolio and expanded its market reach in Network Test. This allowed Keysight to offer more comprehensive hardware and software solutions for wireless communications, particularly in areas like 5G development and network performance testing.

Keysight anticipates long-term market growth of 2-3% and is strategically investing in key areas such as new wireless communication measurement solutions (focusing on 5G), industry-specific solutions across different form factors, enhanced software capabilities, and expanding its services offerings. The company also emphasizes continuous operational efficiency improvement and innovation to address evolving customer needs and technological standards.

Keysight ended fiscal year 2016 with $783 million in cash and cash equivalents, an increase from the prior year. The company generated $416 million in operating cash flow and had no borrowings outstanding under its $450 million credit facility. Long-term debt remained stable at approximately $1.1 billion, primarily consisting of senior notes due in 2019 and 2024. The company also approved a $200 million stock repurchase program.