01—Abstract
Summary
Summary of the 10-K filed December 19, 2016. Cited figures are marked; the original filing is the authoritative source.
Keysight Technologies, Inc. (KEYS) reported net revenue of $2.918 billiona 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 millionb 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 millionc share repurchase program, signaling a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Keysight Technologies reported net revenue of $2.918 billion for fiscal year 2016, a 2% increase over fiscal year 2015.
- Net income decreased to $335 million in fiscal year 2016 from $513 million in fiscal year 2015.
- The 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.
- Keysight successfully acquired Anite plc for $558 million in August 2015, strengthening its wireless software and network testing capabilities.
- Operating cash flow was $416 million for fiscal year 2016.
- The company operates in three segments: Communications Solutions Group (CSG), Electronic Industrial Solutions Group (EISG), and Services Solutions Group (SSG).
- Keysight did not pay dividends and does not anticipate paying them in the foreseeable future, focusing on reinvesting earnings and share repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Keysight Technologies, Inc. kept $0.11.
- Revenue$2.92B100.0%
- Cost of revenue−$1.29B44.3%
- Gross profit$1.62B55.7%
- Operating costs−$1.22B41.7%
- Operating income$406.0M13.9%
- Interest, other & tax−$71.0M2.4%
- Net income$335.0M11.5%
Where FY2016 revenue went
$2.92B- Cost of revenue: $1.29B, 44% of revenue
- SG&A: $818.0M, 28% of revenue
- R&D: $425.0M, 15% of revenue
- Net income: $335.0M, 11% of revenue
- Interest, other & tax: $71.0M, 2.4% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed December 19, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.92B$2.86B | +2.2% |
| Cost of Revenue | $1.29B$1.27B | +2.0% |
| Gross Profit | $1.62B$1.59B | +2.3% |
| R&D Expenses | $425.00M$387.00M | +9.8% |
| SG&A Expenses | $818.00M$787.00M | +3.9% |
| Operating Expenses | $2.51B$2.42B | +3.6% |
| Operating Income | $406.00M$431.00M | −5.8% |
| Interest Expense | $47.00M$46.00M | +2.2% |
| Net Income | $335.00M$513.00M | −34.7% |
| EPS (Basic) | $1.97$3.04 | −35.2% |
| EPS (Diluted) | $1.95$3.00 | −35.0% |
| Shares Outstanding (Basic) | 170.00M169.00M | +0.6% |
| Shares Outstanding (Diluted) | 172.00M171.00M | +0.6% |
05—Questions
Frequently Asked Questions
What were Keysight's primary revenue drivers in fiscal year 2016?
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.
How did the acquisition of Anite plc impact Keysight's business?
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.
What is Keysight's financial outlook and strategy for future growth?
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.
How did Keysight manage its cash and debt during fiscal year 2016?
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.
06—Continue