Keysight Technologies Reports Third Quarter 2019 Results

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GAAP revenue of US$ 1.09B grew 8 percent and GAAP earnings per diluted share grew 32 percent

pci 5.0Keysight Technologies has reported financial results for the third fiscal quarter of 2019 ended July 31, 2019.

“Keysight delivered another excellent quarter with both revenue and earnings exceeding the high-end of our guidance. Record third quarter revenue was driven by growth across the majority of our end markets as we continued to capture a significant portion of the demand we see in the marketplace,” said Ron Nersesian, Keysight president and CEO.

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“We are also driving strong earnings growth with our commitment to operational excellence and raising our revenue outlook for the year. Given our differentiated portfolio of solutions, software and services and broad market reach, we believe we are well-positioned to continue to expand our leadership even as our markets evolve,” said Nersesian.

Third Quarter Financial Summary

  • GAAP revenue grew 8 percent to reach $1,087 million, when compared with $1,004 million last year.
  • Non-GAAP revenue grew 8 percent to reach $1,088 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 9 percent.
  • GAAP net income was $159 million, or $0.83 per share, compared with GAAP net income of $121 million, or $0.63 per share, in the third quarter of 2018.  This represents 32 percent year-over-year growth in GAAP earnings per diluted share.
  • Non-GAAP net income was $239 million, or $1.25 per share, compared with $170 million, or $0.89 per share in the third quarter of 2018.  This represents 41 percent year-over-year growth in non-GAAP earnings per diluted share.
  • As of July 31, 2019, cash and cash equivalents totaled $1,394 million.

Reporting Segments

  • Communications Solutions Group (CSG)

CSG reported revenue of $683 million in the third quarter, up 13 percent, driven by strong demand for 5G solutions across the wireless ecosystem.

  • Electronic Industrial Solutions Group (EISG)

EISG reported revenue of $295 million in the third quarter, up 3 percent, driven by strength in automotive and general electronics across a broad set of industries, offset by softness in the semiconductor market as expected.

  • Ixia Solutions Group (ISG)

ISG revenue was $110 million in the third quarter, a 7 percent decrease when compared with $119 million in the prior year third quarter, reflecting softness in the network test market, offset by high-single-digit year-over-year growth in network visibility.

Outlook

Keysight’s fourth fiscal quarter of 2019 GAAP revenue is expected to be in the range of $1,078 million to $1,098 million and non-GAAP revenue for the fourth fiscal quarter of 2019 is expected to be in the range of $1,080 million to $1,100 million.

Non-GAAP earnings per share for the fourth fiscal quarter of 2019 are expected to be in the range of $1.14 to $1.20, 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.

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, impacts of US export control regulations,  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, 2018 and Keysight’s quarterly report on Form 10-Q for the period ended April 30, 2019.

Segment Data

Segment data reflects the results of our reportable segments under our management reporting system. Segment revenue excludes the impact of fair value adjustments to acquisition-related deferred revenue balances. 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 Net Income per share

Income per share is based on weighted average diluted share count. 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 July 31, 2019 and for projected non-GAAP revenue amounts for the three months ended October 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.

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