10-QPeriod: Q3 FY2016

Keysight Technologies, Inc. Quarterly Report for Q3 Ended Jul 31, 2016

Filed September 2, 2016For Securities:KEYS

Summary

Keysight Technologies, Inc. reported solid financial results for the nine months ended July 31, 2016. Total net revenue saw a modest increase of 3% to $2.167 billion, driven by a 7% increase in the third quarter to $715 million. This growth was supported by acquisitions, which contributed significantly to both orders and revenue. Net income for the nine-month period rose to $243 million from $236 million in the prior year, with diluted EPS at $1.41 compared to $1.38. The company experienced strong operational cash flow generation, providing $277 million for the nine-month period. The company's segment performance showed strength in the Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG), both of which saw revenue increases. The Anite acquisition, completed in August 2015, has been integrated and contributed to the revenue growth, particularly in the CSG segment. Keysight continues to invest in R&D to drive future innovation and address evolving market needs in areas like 5G and data center expansion.

Financial Highlights

54 data points
Beta

Revenue

$715.00M

56.8% Gross Margin

Net Income

$91.00M

12.7% Net Margin

EPS (Diluted)

$0.53

Total Assets

$3.67B

Cash & Equivalents

$664.00M

Free Cash Flow

$54.00M

Financial Statements
Beta
Revenue$715.00M
Cost of Revenue$309.00M
Gross Profit$406.00M
R&D Expenses$104.00M
SG&A Expenses$200.00M
Operating Expenses$609.00M
Operating Income$106.00M
Interest Expense$11.00M
Net Income$91.00M
EPS (Basic)$0.54
EPS (Diluted)$0.53
Shares Outstanding (Basic)170.00M
Shares Outstanding (Diluted)172.00M

Key Highlights

  • 1Total net revenue increased by 3% year-over-year for the nine months ended July 31, 2016, reaching $2.167 billion, with a 7% increase in the third quarter to $715 million.
  • 2Net income for the nine-month period increased to $243 million, up from $236 million in the prior year, with diluted EPS at $1.41.
  • 3The Anite acquisition, completed in August 2015, contributed to revenue growth and expanded Keysight's solutions in wireless communications.
  • 4Operating cash flow remained strong, generating $277 million for the nine months ended July 31, 2016.
  • 5The company repurchased $62 million of common stock under its $200 million share repurchase program initiated in February 2016.
  • 6Research and development expenses increased by 14% for the nine-month period, reflecting continued investment in innovation and new product development.

Frequently Asked Questions

The acquisition of Anite in August 2015 has been integrated and contributed to Keysight's revenue growth, particularly in the Communications Solutions Group (CSG). It expanded the company's offerings in wireless design and test solutions, specifically in the software layer.

Keysight believes the long-term growth rate for its markets is in the range of 2% to 3%. While near-term macroeconomic indicators remain mixed, the company is focused on delivering value through innovative solutions and operational efficiency.

Keysight maintained a healthy cash position with $664 million in cash and cash equivalents as of July 31, 2016, with a significant portion held by foreign subsidiaries. The company had no borrowings outstanding under its $450 million unsecured credit facility and $1.1 billion in long-term debt, consisting of senior notes.

Foreign currency movements had a negligible impact on the year-over-year comparisons for orders and a modest impact on net revenue for the periods presented. Keysight uses derivative instruments to hedge foreign currency exchange rate fluctuations on a short-term basis.