Keysight Technologies Q3 Fiscal Year 2017 Results August 30, 2017 - PowerPoint PPT Presentation

Keysight Technologies Q3 Fiscal Year 2017 Results August 30, 2017

Safe Harbor This communication contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. These forward-looking statements involve risks and uncertainties that could significantly affect the expected results and are based on certain key assumptions. Due to such uncertainties and risks, no assurances can be given that such expectations will prove to have been correct, and readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. The forward- looking statements contained herein include, but are not limited to, information and future guidance on the company’s go als, priorities, revenues, demand, growth opportunities, customer service and innovation plans, new product introductions, financial condition, earnings, the company’s ability to pay dividends, ability to access capital markets, the continued strengths and expected growth of the mar kets the company sells into, operations, operating earnings, and tax rates) that involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, unforeseen changes in the st rength of our customers’ businesses; unforeseen changes in the demand for current and new products, technologies, and services; customer pu rchasing decisions and timing, and the risk that we are not able to realize the savings or benefits expected from integration and restructuring activities. The words “anticipate,” “plan,” “estimate,” “expect,” “intend,” “will,” “should,” “forecast,” “project,” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. In addition to the risks above, other risks that Keysight faces include those detailed in Keysight’s filings with the Securit ies and Exchange Commission, including our Form 10- K for the fiscal year ended October 31, 2016, and Keysight’s quarterly report on Form 10 -Q for the period ended April 30, 2017. Forward- looking statements are based on the beliefs and assumptions of Keysight’s management and on currently available informat ion. Keysight undertakes no responsibility to publicly update or revise any forward-looking statement. This presentation includes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Non-GAAP measures exclude primarily the impacts of share-based compensation, restructuring and related costs, separation and related costs, acquisition and integration costs, amortization of acquisition-related balances, acquisition-related compensation expense and asset impairments. Also excluded are tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Accordingly, no reconciliation to GAAP amounts has been provided. The definitions of these non-GAAP financial measures may differ from similarly titled measures used by others, and such non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. Keysight generally uses non-GAAP financial measures to facilitate management’s comparisons to historic operating results, to competitors’ operating results and to guidance provided to investo rs. In addition, Keysight believes that the use of these non-GAAP financial measures provides greater transparency to investors of information used by management in its financial and operational decision-making. Refer slide 22 for more details on Non-GAAP financial measures. Page 2

Q3’17 Highlights – Strong Third Quarter • Orders of $879M grew 24% YoY and 8% on a core basis • Non-GAAP Revenue of $863M grew 20% YoY and 4% on a core basis • Non-GAAP EPS of 61 cents declined 2% YoY • In the 9-month period revenue grew 2% YoY on a core basis with orders growing 5% YoY on a core basis – Continue to execute and build momentum in our key growth areas • Triple-digit growth in 5G solution orders; double-digit growth in software solutions – Ixia integration activities are on track • Introduced a first to market joint Ixia and Keysight end-to-end solution for 5G * Core growth excludes the impact of currency and acquisitions.. ** Reconciliations to closest GAAP equivalent provided. Refer slide 22 for details on Non-GAAP financial measures Page 3

Q3’17 Financial Highlights Orders 1,000 • Orders : $879M, +24% y/y (+8% core*) 879 900 806 805 800 707 695 700 • Non-GAAP Revenue** : $863M, +20% y/y $ millions 600 (+4% core*) 500 400 300 • Non-GAAP Operating Margin** : +19%, 200 -50 basis points y/y 100 0 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Non-GAAP Revenue** Non-GAAP EPS ** 1,000 $0.66 863 $0.64 $0.64 900 $0.64 $0.63 758 751 800 726 718 $0.62 $0.61 700 $ millions 600 $0.60 500 $0.58 $0.57 400 300 $0.56 200 $0.54 100 $0.52 0 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 * Core growth excludes the impact of currency and acquisitions. . ** Reconciliations to closest GAAP equivalent provided. Refer slide 22 for details on Non-GAAP financial measures Page 4 .

Q3’17 Non -GAAP Revenue by Segment & by Region Q3’17 Non -GAAP Revenue*: $863M By Segment By Region SSG 12% ISG Asia Americas 14% Pacific CSG 40% 43% 49% Measurement Solutions EISG 87% 25% Europe 17% * Reconciliations to closest GAAP equivalent provided. Refer slide 22 for details on Non-GAAP financial measures Page 5

Q3’17 Non -GAAP Revenue Trend by Region Americas Y/Y Non-GAAP Revenue Growth** 400 347 • Americas +29% (+1 % core*): Strength in EI, SS, CC with 350 softness in ADG 293 300 269 261 263 • Asia Pacific ex-Japan +15% (+6% core*): Strength in EI 250 $ millions and SS with softness in ADG 200 150 • Europe +23% (+8% core*): Strength in EI and ADG with softness in CC and SS 100 50 • Japan +2% (+2% core*): Strength in ADG and SS offset by 0 weakness in EI Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Asia Pacific Europe 400 366 150 361 160 144 330 327 134 321 140 128 122 300 120 $ millions 100 $ millions 200 80 60 40 100 20 0 0 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Key: ADG – Aerospace, Defense & Government * Core revenue growth excludes the impact of currency and acquisitions CC – Commercial Communications ** Reconciliations to closest GAAP equivalent provided. Refer slide 22 for EI – Electronic Industrial Solutions details on Non-GAAP financial measures IS – Ixia Solutions Page 6 SS – Services Solutions

Q3’17 Communications Solutions Group Highlights • Revenue: $418M, -1% y/y (-1% core*) • Operating Margin: 15.7%, -240 basis points y/y • Commercial Communications: Continued strong growth in 5G and new Wi-Fi technologies, offset by lower spending on 4G technologies. Strength in 400G optical technologies. • Aerospace, Defense & Government: US budget delays in H1 FY17 resulted in soft Q3 revenues, as expected. Western Europe and Japan grew y/y while Asia softened. CSG Revenue CSG Income from Operations $500 $100 $442 $434 $424 $424 $418 $77 $75 $75 $72 $400 $80 $66 $ millions $ millions $300 $60 $200 $40 $100 $20 $0 $0 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 * Core revenue growth excludes the impact of currency and acquisitions Net revenue for Communications Solutions Group excludes the impact of fair value adjustments to acquisition related deferred revenue balances for the Anite acquisition. Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on slide 22.. Page 7

Q3’17 Electronic Industrial Solutions Group Highlights • Revenue: $218M, +14% y/y (+15% core*) • Operating Margin : 25.3%, +220 basis points y/y • Auto and Energy solutions momentum continued with strength in Asia Pacific ex Japan, the Americas, and Europe. • Semiconductor parametric test solutions growth continued, with strength in Asia Pacific ex-Japan, Europe and the Americas. • General electronics had strong growth in Europe and Asia Pacific ex-Japan, with softness in the Americas EISG Revenue EISG Revenue EISG Income from Operations EISG Income from Operations $250 $250 $57 $57 $220 $220 $218 $218 $55 $55 $60 $60 $201 $201 $191 $191 $192 $192 $47 $47 $200 $200 $50 $50 $44 $44 $42 $42 $40 $40 $ millions $ millions $150 $150 $ millions $ millions $30 $30 $100 $100 $20 $20 $50 $50 $10 $10 $0 $0 $0 $0 Q3'16 Q3'16 Q4'16 Q4'16 Q1'17 Q1'17 Q2'17 Q2'17 Q3'17 Q3'17 Q3'16 Q3'16 Q4'16 Q4'16 Q1'17 Q1'17 Q2'17 Q2'17 Q3'17 Q3'17 • Core revenue growth excludes the impact of currency and acquisitions. Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on slide 22. Page 8