10-QPeriod: Q1 FY2020

Keysight Technologies, Inc. Quarterly Report for Q1 Ended Jan 31, 2020

Filed March 5, 2020For Securities:KEYS

Summary

Keysight Technologies, Inc. reported strong financial results for the third quarter of fiscal year 2020 (ended January 31, 2020), showcasing robust revenue growth and improved profitability. Total net revenue increased by 9% year-over-year to $1,095 million, driven by strong performance in both the Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG). Net income saw a significant jump of 43% to $163 million, or $0.86 per diluted share, from $114 million in the prior year. This improvement was bolstered by higher revenue volume, favorable product mix, and a significant one-time gain from insurance proceeds related to the 2017 Northern California wildfires. The company's operational efficiency is evident in the expansion of its gross margin to 59.8% and operating margin to 18.5%. Research and development and selling, general, and administrative expenses increased, reflecting continued investment in growth opportunities and people-related costs. Keysight's balance sheet remains strong, with $1,693 million in cash, cash equivalents, and restricted cash. The company also demonstrated a commitment to returning capital to shareholders through $76 million in treasury stock repurchases during the quarter.

Financial Highlights

52 data points
Beta

Revenue

$1.09B

59.8% Gross Margin

Net Income

$163.00M

14.9% Net Margin

EPS (Diluted)

$0.86

Total Assets

$6.84B

Cash & Equivalents

$1.69B

Free Cash Flow

$165.00M

Financial Statements
Beta
Revenue$1.09B
Cost of Revenue$440.00M
Gross Profit$655.00M
R&D Expenses$187.00M
SG&A Expenses$300.00M
Operating Expenses$892.00M
Operating Income$203.00M
Interest Expense$19.00M
Net Income$163.00M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)188.00M
Shares Outstanding (Diluted)191.00M

Key Highlights

  • 1Total net revenue increased 9% to $1,095 million in Q3 FY2020 compared to Q3 FY2019.
  • 2Net income grew by 43% to $163 million, resulting in diluted EPS of $0.86.
  • 3Gross margin improved to 59.8% from 57.4% year-over-year.
  • 4Operating margin expanded significantly to 18.5% from 12.0% year-over-year.
  • 5The Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG) both reported revenue growth of 9% and 8% respectively.
  • 6The company repurchased $76 million of its common stock during the quarter.
  • 7A $32 million other operating gain was recognized due to insurance proceeds for wildfire damage.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in both the Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG). Specifically, the CSG saw strength in aerospace, defense, and government, and commercial communications end-markets, while the EISG benefited from growth in semiconductor measurement solutions and automotive and energy.

Profitability saw a significant improvement. Net income increased by 43% to $163 million, and the diluted Earnings Per Share (EPS) rose to $0.86 from $0.60 in the prior year. This was supported by a 2-percentage point increase in gross margin to 59.8% and a 7-percentage point expansion in operating margin to 18.5%.

Yes, Keysight recognized an other operating gain of $32 million resulting from insurance proceeds received for property, plant, and equipment damaged in the 2017 Northern California wildfires. This one-time gain contributed positively to the net income for the quarter.

Keysight maintained a strong financial position with $1,693 million in cash, cash equivalents, and restricted cash as of January 31, 2020. Net cash provided by operating activities was $197 million for the quarter, although this was lower than the $240 million reported in the same period last year, partly due to changes in working capital and a decrease in insurance recoveries compared to the prior year.