10-QPeriod: Q2 FY2020

Keysight Technologies, Inc. Quarterly Report for Q2 Ended Apr 30, 2020

Filed June 2, 2020For Securities:KEYS

Summary

Keysight Technologies, Inc. reported a decrease in revenue for the third quarter of fiscal year 2020 compared to the prior year, primarily impacted by global site closures and supply chain disruptions due to the COVID-19 pandemic. While revenue declined, the company demonstrated resilience with operating margin improvements in the Electronic Industrial Solutions Group and a steady approach to research and development investments. The company's liquidity remains strong, supported by significant cash reserves and an undrawn revolving credit facility. Despite the short-term revenue headwinds, Keysight remains focused on long-term growth opportunities in next-generation technologies like 5G. The company has implemented cost-saving measures and is prudently managing its resources to navigate the current economic uncertainty while continuing to support its customers.

Financial Statements
Beta
Revenue$895.00M
Cost of Revenue$379.00M
Gross Profit$516.00M
R&D Expenses$166.00M
SG&A Expenses$251.00M
Operating Expenses$793.00M
Operating Income$102.00M
Interest Expense$20.00M
Net Income$71.00M
EPS (Basic)$0.38
EPS (Diluted)$0.37
Shares Outstanding (Basic)187.00M
Shares Outstanding (Diluted)189.00M

Key Highlights

  • 1Net revenue for the three months ended April 30, 2020, was $895 million, a decrease of 18% compared to $1,090 million in the prior year period, largely due to COVID-19 related disruptions.
  • 2Income from operations for the three months ended April 30, 2020, was $102 million, a decrease from $185 million in the prior year period, reflecting the impact of lower revenue.
  • 3Net income for the three months ended April 30, 2020, was $71 million ($0.37 per diluted share), down from $153 million ($0.80 per diluted share) in the prior year period.
  • 4Despite revenue challenges, the Electronic Industrial Solutions Group (EISG) saw its operating margin increase to 24.4% from 26.1% in the prior year, indicating improved operational efficiency or favorable product mix.
  • 5The company ended the quarter with a strong cash position of $1,841 million in cash and cash equivalents, with no borrowings outstanding under its $450 million revolving credit facility.
  • 6Keysight proactively managed costs, with selling, general, and administrative expenses decreasing by 16% for the quarter, reflecting cost-saving measures implemented due to the pandemic.
  • 7The company is strategically investing in R&D for next-generation technologies such as 5G, automotive, IoT, and defense modernization, indicating a focus on future growth drivers.

Frequently Asked Questions

The primary reason for the revenue decline was the impact of global site closures and supply chain disruptions resulting from the COVID-19 pandemic. These factors affected Keysight's ability to manufacture and deliver products and solutions to customers.

Keysight implemented several cost-saving measures, including a temporary hiring freeze, reduction in discretionary spending, lower variable compensation, and reduced outsourced manufacturing costs. Selling, general, and administrative expenses decreased by 16% for the quarter.

Keysight maintains a strong liquidity position with $1,841 million in cash and cash equivalents and an undrawn $450 million revolving credit facility. The company believes it has sufficient resources to meet its liquidity requirements for at least the next twelve months, despite ongoing uncertainty related to the COVID-19 pandemic.

Keysight is focused on investing in R&D for next-generation technologies such as 5G, next-generation automotive, IoT, and defense modernization. The company's strategy aims to capitalize on these emerging technologies to drive long-term growth.