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Keysight Technologies Reports Fourth Quarter 2018 Results

November 20, 2018

SANTA ROSA, Calif.--(BUSINESS WIRE)--Nov 20, 2018--Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the fourth fiscal quarter of 2018 ended Oct. 31, 2018.

“Keysight delivered a very strong finish to a breakout year with both revenue and earnings exceeding the high-end of our guidance for the quarter. Revenue grew 19 percent on a GAAP basis and 16 percent on a non-GAAP basis to reach a record $1.05 billion as we continue to see broad-based momentum across multiple end markets with our solutions. Fiscal 2018 was a record year for Keysight and we are pleased with our total performance. The investments we have made over the past several years in our technology, solutions, software and services are delivering results and have enabled Keysight to be at the forefront and capture the demand we see in the market,” said Ron Nersesian, Keysight president and CEO.

Fourth Quarter Financial Summary

GAAP revenue grew 19 percent to reach $1,047 million, when compared with $878 million last year. Non-GAAP revenue, which excludes the impact of fair value adjustments to acquisition-related deferred revenue balances, grew 16 percent to reach $1,051 million. Non-GAAP core revenue, which also excludes the impact of foreign currency changes and revenue associated with businesses acquired or divested within the last twelve months, increased 17 percent. GAAP net loss was $114 million, or $0.61 per share, compared with a GAAP net loss of $38 million, or $0.20 per share, in the fourth quarter of 2017. Fourth quarter 2018 GAAP net loss reflects a non-cash goodwill impairment charge partially offset by a benefit from tax planning initiatives within the quarter. Non-GAAP net income was $193 million, or $1.01 per share using 191 million weighted average shares, compared with $135 million, or $0.71 per share using 189 million weighted average shares in the fourth quarter of 2017. As of October 31, 2018, cash and cash equivalents totaled $913 million.

Fiscal Year 2018 Financial Summary

GAAP revenue grew 22 percent over last year and totaled $3.9 billion. Non-GAAP revenue grew 20 percent to reach $3.9 billion. Non-GAAP core revenue grew 13 percent year-over-year. GAAP net income was $165 million, or $0.86 per share, compared with $102 million, or $0.56 per share in fiscal 2017. Non-GAAP net income was $618 million, or $3.24 per share, compared with $462 million, or $2.53 per share in fiscal 2017. Under the $350 million share repurchase authorization implemented in March 2018, Keysight acquired approximately 2 million shares in the open market at an average share price of $57.91, for a total consideration of $120 million during fiscal year 2018. Keysight has $230 million remaining under the current share repurchase authorization.

Reporting Segments

Communications Solutions Group (CSG)

CSG reported record revenue of $566 million in the fourth quarter, up 23 percent, driven by 5G-related R&D spending across the wireless ecosystem, data center next-generation 400GbE, high-speed digital test and aerospace, defense and government.

Electronic Industrial Solutions Group (EISG)

EISG revenue grew a record 21 percent in the fourth quarter to $249 million, driven by solid double-digit growth for automotive and energy, general electronics and semiconductor measurement solutions.

Ixia Solutions Group (ISG)

ISG revenue was $115 million in the fourth quarter, compared with $124 million in the prior year fourth quarter. ISG continued to improve sales execution; however, revenue was adversely impacted by the contract manufacturing transition.

Services Solutions Group (SSG)

SSG revenue grew 10 percent in the fourth quarter to a record $121 million, driven by growth in calibration, remarketed and repair services and solutions.

Outlook

Keysight’s first fiscal quarter of 2019 GAAP revenue is expected to be in the range of $962 million to $982 million and non-GAAP revenue for the first fiscal quarter of 2019 is expected to be in the range of $965 million to $985 million.

Non-GAAP earnings per share for the first fiscal quarter of 2019 are expected to be in the range of $0.76 to $0.82, which exclude items that pertain to future events and are not currently estimable with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided. Further information is discussed in the section titled “Use of Non-GAAP Financial Measures” below.

Webcast

Keysight’s management will present more details about its fourth quarter FY2018 financial results and its first quarter FY2019 outlook on a conference call with investors today at 1:30 p.m. PT. This event will be webcast in listen-only mode. Listeners may log on to the call at www.investor.keysight.com under the “ Upcoming Events ” section and select “ Q4 2018 Keysight Technologies Inc. Earnings Conference Call ” to participate or dial +1 866-393-4306 (U.S. only) or +1 734-385-2616 (International) and enter passcode 5978349.

The webcast will remain on the company site for 90 days. A telephone replay of the conference call will be available at approximately 4:30 p.m. PT after the call and remain available for one week. The replay may be accessed by dialing +1 855-859-2056 (or +1 404-537-3406 from outside the U.S.) and entering passcode 5978349.

Forward-Looking Statements

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 of Keysight’s management and on currently available information. Due to such uncertainties and risks, no assurances can be given that such expectations or assumptions 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. Keysight undertakes no responsibility to publicly update or revise any forward-looking statement. The forward-looking statements contained herein include, but are not limited to, information and future guidance on the company’s goals, priorities, revenues, demand, financial condition, earnings, the continued strengths and expected growth of the markets 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, changes in the demand for current and new products, technologies, and services; customer purchasing decisions and timing, and the risk that we are not able to realize the savings or benefits expected from integration or restructuring activities. The words “estimate,” “expect,” “intend,” “will,” “should,” “forecast,” 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 Securities and Exchange Commission, including our Form 10-K for the fiscal year ended Oct. 31, 2017 and Keysight’s quarterly report on Form 10-Q for the period ended July 31, 2018.

Segment Data

Segment data reflects the results of our reportable segments under our management reporting system. Segment revenue and income from operations are consistent with the respective non-GAAP measures as explained below and in the attached supplemental schedules. Segment data are provided on page 6 of the attached tables.

Use of Non-GAAP Financial Measures

In addition to financial information prepared in accordance with U.S. GAAP (“GAAP”), this document also contains certain non-GAAP financial measures based on management’s view of performance, including:

Non-GAAP Revenue Non-GAAP Core Revenue Non-GAAP Net Income Non-GAAP Diluted EPS

See the attached supplemental schedules for reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure for the three months ended October 31, 2018 and FY18 and for projected non-GAAP revenue amounts for the three months ended January 31, 2019. Following the reconciliations is a discussion of the items adjusted from our non-GAAP financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-GAAP results.

About Keysight Technologies

Keysight Technologies, Inc. (NYSE: KEYS) is a leading technology company that helps enterprises, service providers, and governments accelerate innovation to connect and secure the world. Keysight’s solutions optimize networks and bring electronic products to market faster and at a lower cost with offerings from design simulation, to prototype validation, to manufacturing test, to optimization in networks and cloud environments. Customers span the worldwide communications ecosystem, aerospace and defense, automotive, energy, semiconductor and general electronics end markets. Keysight generated revenues of $3.9B in fiscal year 2018. More information is available at  www.keysight.com.

Additional information about Keysight Technologies is available in the newsroom at  www.keysight.com/go/news  and on  FacebookGoogle+LinkedInTwitter  and  YouTube.

Source: IR-KEYS

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