10-QPeriod: Q3 FY2015

Keysight Technologies, Inc. Quarterly Report for Q3 Ended Jul 31, 2015

Filed September 3, 2015For Securities:KEYS

Summary

Keysight Technologies, Inc. reported revenue of $665 million for the third quarter of fiscal year 2015, a decrease of 12% compared to the same period last year. Net income for the quarter was $70 million, down from $107 million in the prior year. The decline in revenue and net income reflects challenges in key markets and the ongoing transition as a newly independent public company following its separation from Agilent Technologies. The company is focusing on investing in product development to address evolving customer needs driven by faster data rates and new technology standards. However, overall orders decreased by 5% year-over-year for the quarter. Management highlights strategic investments in wireless communications and software, further bolstered by the recent acquisition of Anite. Despite the revenue decline, the company is implementing cost-saving measures, including workforce reductions, and maintains a strong cash position.

Financial Highlights

53 data points
Beta

Revenue

$665.00M

55.6% Gross Margin

Net Income

$70.00M

10.5% Net Margin

EPS (Diluted)

$0.41

Total Assets

$3.10B

Cash & Equivalents

$1.00B

Free Cash Flow

$100.00M

Financial Statements
Beta
Revenue$665.00M
Cost of Revenue$295.00M
Gross Profit$370.00M
R&D Expenses$90.00M
SG&A Expenses$183.00M
Operating Expenses$565.00M
Operating Income$100.00M
Interest Expense$12.00M
Net Income$70.00M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)169.00M
Shares Outstanding (Diluted)172.00M

Key Highlights

  • 1Total net revenue for the three months ended July 31, 2015 was $665 million, a 12% decrease year-over-year.
  • 2Net income for the quarter was $70 million, compared to $107 million in the prior year's same quarter.
  • 3Total orders decreased by 5% year-over-year for the three months ended July 31, 2015.
  • 4The company announced a workforce reduction program affecting approximately 85 employees and a voluntary pre-retirement program for about 160 employees.
  • 5Keysight acquired Anite plc in August 2015 to expand its offerings in wireless communications design and test, and network test.
  • 6Cash and cash equivalents increased to $1,000 million as of July 31, 2015, up from $810 million at October 31, 2014.
  • 7Interest expense of $12 million was recorded for the quarter, compared to no interest expense in the prior year, due to senior notes issued in October 2014.

Frequently Asked Questions

The decrease in revenue and net income is attributed to several factors, including challenging market conditions, particularly in the communications and aerospace and defense sectors, and the ongoing transition as an independent company following its separation from Agilent. Overall orders also declined, indicating reduced customer spending.

Keysight is focusing on strategic investments in research and development for new products and solutions, particularly in wireless communications and software, highlighted by the acquisition of Anite. Concurrently, the company is implementing cost-saving measures, including workforce reductions and restructuring programs, to optimize its operations and cost structure.

The acquisition of Anite, which closed in August 2015, is a strategic move to expand Keysight's solutions in wireless communications design and test, specifically in the software layer for design and validation. It also provides an adjacent market opportunity in Network Test, strengthening the company's position in key growth areas.

Keysight's financial position appears solid, with cash and cash equivalents increasing to $1,000 million as of July 31, 2015, up from $810 million at the end of the previous fiscal year. This increase provides liquidity for operations, investments, and potential future strategic initiatives.