Slide 1: Results as of fiscal year-end 2018 (October 31, 2018)
Results as of fiscal year-end 2018 (October 31, 2018) M AY 2 0 1 9
Slide 2: Forward-looking statements
This communication contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created therein. Statements preceded by, followed by, or that otherwise i
Slide 3: Topic Presenter Duration
YouTube – One-Click Access Below Topic Presenter Duration (min) Company Overview and Strategic Direction Ron Nersesian | President and Chief Executive Officer 43 Technology Leadership Jay Alexander | SVP and Chief Technology Officer 27 Communications Solutions Satish Dhanasekaran | SVP, President –
Slide 4: Market Leadership
MARKET GAINING MARKET INCREASING RAISED THE BAR LEADERSHIP SHARE RECURRING REVENUE Increased target operating margin Market-leading position Four consecutive years Growing software and 400bps to 21-22% in diverse and growing of market share gains services solutions revenue and increased end markets
Slide 5: Presenters and topics
Company Overview and Strategic Direction Ron Nersesian | President and Chief Executive Officer Technology Leadership Jay Alexander | SVP and Chief Technology Officer Communications Solutions Satish Dhanasekaran | SVP, President – Communications Solutions Group Ixia Solutions Mark Pierpoint | SVP, Pr
Slide 6: Ron Nersesian, President and Chief Executive Officer
Ron Nersesian President and Chief Executive Officer 6
Slide 7: An exciting time at Keysight
1 2 3 4 5 6 Industry leader Deeply Aligned to critical Accelerated R&D Executed three- Well-positioned to with 80 years’ knowledgeable, industry growth investment to year strategy ahead achieve higher experience experienced and themes and innovate ahead of of plan; balanced growth, operating at the
Slide 8: FY'18 Key Statistics and Revenue Mix
FY’18 KEY STATISTICS FY’18 REVENUE MIX Headquarters Santa Rosa, CA 12% Spin-off Date1 November 1, 2014 36% Market Capitalization ~$10.7B (as of 10/31/18) 27% $3.9B Revenue Growth2,4 20% (13% core) Total Revenue5 Free Cash Flow3 $423M 25% Operating Margin 4 18.8% Commercial Communications: $1.42B6 To
Slide 9: Smart Technology Connects the World
WIRELESS SMART TECHNOLOGY CONNECTS THE WORLD INNOVATION IS EVERYWHERE NETWORKING / AUTOMOTIVE CLOUD ✓ Devices ✓ Infrastructure ✓ Cities ✓ Defense ✓ Vehicles ✓ Wearables Transforming from AEROSPACE / Hardware-centric Product to IOT DEFENSE Software-centric Solutions Company ACCELERATING INNOVATION TO
Slide 10: Relentless Demand for Data Bandwidth Drives 5G
R E L E N T L E S S D E M A N D F O R D ATA B A N D W I D T H D R I V E S 5 G , T R A N S F O R M I N G W I R E L E S S A N D W I R E D N E T W O R K 5G Brings >10X Expansion on Most Attributes* 5G Technology Impact Network Core Data Achievable Data Chipsets Devices Rates (Gb/s) Access Network Cente
Slide 11: Customers
Communications Solutions Electronic Industrial Solutions Ixia Solutions (CSG) (EISG) (ISG) Serves customers spanning Serves electronic industrial end Helps customers worldwide validate worldwide communications end markets, focusing on high growth performance and the security of their market applicat
Slide 12: Chief Executive Officer organization
Chief Executive Officer Ron Nersesian Corporate Communications Ixia Electronic Keysight Keysight Finance Legal Planning and Solutions Solutions Industrial Global Global Neil Dougherty (Acting) Jeffrey Li Technology Group Group Solutions Services Sales Group Chief Administrative Keysight Officer Glob
Slide 13: Transformed organization from product-focused to industry-focused
Transformed organization from product-focused to industry-focused Create differentiated solutions combining Hardware, Software and Services; enable customer success through new Go-to-Market and R&D strategies Increased investment in R&D process Began investing earlier in the cycle to be first-to-mar
Slide 14: From product divisions to complete solutions
FROM TO • Individual Products with hardware bias • Complete Solutions: Hardware + Software + Services • Faster customer commitments and solution • Slower, complex decision-making due to multiple development; one decision owner owners interfacing with customers • Incentivized and compensated on total
Slide 15: Be first in 5G, enter new verticals, grow software and services
Be First in Enter New Verticals Expand Leadership in Grow Services 5G Wireless (e.g., Automotive) Design and Test SW • First-to-market with 5G • 70+ auto and IoT solutions • >$500M software portfolio in • Focused on multi-brand design solutions introduced FY18 calibration, Test Asset • Winning in th
Slide 16: Core Strengths and Competitive Differentiators
CORE STRENGTHS COMPETITIVE DIFFERENTIATORS • Aligned to critical industry Experienced leadership; globally recognized growth trends in attractive and technologists and expertise; institutionalized diversified end markets knowledge and IP • Strong culture of execution Depth of technology, proprietary
Slide 17: Our Global Presence
OUR GLOBAL PRESENCE • 12,900 employees worldwide1 • Operating in over 100 countries around the world; naturally-hedged expenses and Global Headquarters Santa Rosa, CA revenues • Aligned with our customers’ local needs across all regions % FY’18 40% 19% 41% REVENUE2 AMERICAS EUROPE ASIA-PACIFIC 1 As
Slide 18: Our Corporate Social Responsibility Vision
OUR Corporate Social Build a better planet by accelerating innovation to connect and secure the world and Responsibility VISION employing a global business framework of ethical, environmentally sustainable and socially responsible operations Selected Recognitions Ethical Governance Our The Solutions
Slide 19: Customer Coverage and Breadth of Customers
D E E P C U S T O M E R R E L AT I O N S H I P S & M A R K E T - L E A D I N G P O S I T I O N S CUSTOMER COVERAGE1 (2018) BREADTH OF CUSTOMERS3 LEADING POSITIONS4 ADI Hittite • Alphabet • Amazon • Arris • AT&T 29 of 30 Top Technology Companies BAE Systems • Boeing • Broadcomm • Cisco Software Reven
Slide 20: $16.3B Served Addressable Market
Ixia Commercial $16.3B Comms 3-5 % Served Served Addressable Addressable Avg. Market Growth Electronic Market1 Market Rate3 Industrial Aerospace, Defense & Gov’t 2 Keysight Market Share: ~24% KEYSIGHT WELL-POSITIONED FOR CONTINUED SHARE GAINS 1 Per Company estimates. Includes Network Test; excludes
Slide 21: Sustain and Accelerate Organic Growth
Deepen Balanced Sustain and Leadership Capital Allocation Accelerate Organic Position through to Drive Growth Differentiated Shareholder Value Business Model 21
Slide 22: Aggressively Pursue Opportunities
Aggressively Be First-to-Market Moving from Innovate Ahead of Pursue with Differentiated Hardware-centric to Emerging Opportunities Technology Software-centric Technologies and Aligned with Strong Solutions via Approach; Advance Extend Industry Macro Growth Superior Innovation Intimate Solution Lead
Slide 23: Market insight, employee growth, capital allocation
EMPLOYEE GROWTH MARKET INSIGHT • Early trend identification • Encourage passion • Accelerate Innovation • Inspire and facilitate growth • Anticipate change CAPITAL ALLOCATION • Focus on ROIC • Flexible, balanced approach OPERATIONAL EXCELLENCE • Highest quality FIRST-TO-MARKET SOLUTIONS • Continuous
Slide 24: Return of Capital
From 2015 Phase 3 Return Capital Investor Day Value Creation Phase 2 • Appropriate leverage and Return of Capital Transform for Growth commitment to investment grade credit metrics Sustained 4% CAGR Over Cycle • Disciplined M&A Phase 1 Form Public Company • M&A as priority use of cash ✓ Thales Servi
Slide 25: Capital allocation priorities
1 Reinvestment to Drive Organic Growth 2 Disciplined M&A 3 Return of Capital OPERATING PRINCIPLE – MAINTAIN FLEXIBILITY AND LIMIT EXCESS CASH 25
Slide 26: Previous Target vs New Target
Previous Target NEW Target (2015 Investor Day) Core Revenue Sustainable Sustainable Growth1 4% CAGR 4-5% CAGR Operating 17-18% 21-22% Margin1 EPS 8-10% ≥10% Growth1 Operating Margin targets restated to reflect the Q1’19 adoption of ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cos
Slide 27: An exciting time at Keysight
KEYSIGHT IS Transformed Accelerated organizational Strong An exciting time profitable growth Differentiated structure to align with management team and momentum business model at Keysight… customers and meeting and driven by focus on enabling superior significant increased investments exceeding cust
Slide 28: Jay Alexander, SVP and Chief Technology Officer
Jay Alexander Senior Vice President and Chief Technology Officer 28
Slide 29: Technology leadership highlights
1 2 3 4 Increased R&D investment Improved R&D efficiency Expanding our leadership Executing on strategic from ~12% to ~16% of with industry-focused on all three dimensions of software initiative – added revenue in 4 years; solutions groups that Keysight’s differentiation: $200M+ of incremental empha
Slide 30: R&D from product-focused to solution-centric
FROM TO • Product-focused divisions • Solution-centric business groups • Internal goals • Customer-driven specifications and timetables • One form factor • Multiple implementations (feature-rich box, modular, handheld) • Product line run-rate funding • Strategic Keysight growth investments OLD NEW C
Slide 31: Keysight Labs, Central Teams, R&D Centers
Solutions Groups 3 Partner with leading customers to create high-value solutions with faster time-to-market R&D Centers than previously possible of Excellence 2 Create hardware and software solution components that can address many Keysight Labs applications, focusing on deep competency Central Team
Slide 32: Customer Insight
CUSTOMER WORKFLOW SOLUTIONS SOFTWARE AND SERVICES HARDWARE TECHNOLOGY PORTFOLIO DEEP EXPERTISE / STANDARDS BODIES MARKET TRENDS AND CUSTOMER NEEDS CUSTOMER INSIGHT 32
Slide 33: Typical Measurement Process
TYPICAL MEASUREMENT PROCESS Probe / Connect Digitize and Measure Analyze Report / Decide Software and Value-Added Services Leading-Edge Hardware • Critical foundation for world-class measurements; • Hundreds of high-value SW application packages needs to be 10X better than what is being measured • >
Slide 34: Industry-Leading Technologists and Thought Leadership
INDUSTRY-LEADING THOUGHT EMBEDDED WITH TECHNOLOGISTS LEADERSHIP MARKET LEADERS • ~3,000 R&D engineers, over • Active in 30+ standards bodies • Diverse and deep customer 1/3 with M.S. or Ph.D. degrees and industry consortia relationships around the world • Deep connections with leading • 3,000+ paten
Slide 35: Key Technology Development Centers
Key Technology Development Centers Fleet, United Kingdom Bucharest, Romania Network emulation solutions Network test, visibility and security software Santa Rosa, CA Beijing, China Custom analog chipsets, Worldwide wireless test modules, interconnect software Santa Clara, CA Böblingen, Germany Keysi
Slide 36: Increased Served Market and Added Capabilities
ADDED CAPABILITIES COMMUNICATIONS SOLUTIONS 1 Wireless protocol development test, full stack network test, visibility and Increased security Served Market ELECTRONIC INDUSTRIAL SOLUTIONS and Added Charging infrastructure test, New Growth automotive battery, and power Vectors system SERVICES SOLUTION
Slide 37: Keysight Fab and Software Design Center
KEYSIGHT FAB KEYSIGHT SOFTWARE DESIGN CENTER Santa Rosa, CA Atlanta, GA • Proprietary chips, modules, and interconnects, purpose-built for • Platform software developed with Agile methods; used by Keysight advanced solutions such as 5G businesses to speed customers’ time-to-market by connecting the
Slide 38: Key Initiatives: ~1,800 Software Engineers
KEY INITIATIVES ~1,800 SOFTWARE ENGINEERS • Consolidated core software technology development under CTO (Nov. 2015) • Advanced our software leadership with acquisitions of software-centric businesses • Anite (Aug. 2015) • Ixia (Apr. 2017) • Opened Atlanta Software Design Center (Oct. 2016) FY'14 FY'
Slide 39: Software across lifecycle phases
SIMULATE PROTOTYPE VALIDATE MANUFACTURE OPTIMIZE Electronic Design Automation (EDA) Software Simulate designs before they are built to find and fix issues Customer productivity killer: Graphical Test Software Inability to share test software, Allows non-programmers to design and execute tests specif
Slide 40: PathWave design and test software
SIMULATE PROTOTYPE VALIDATE MANUFACTURE OPTIMIZE Lifecycle Phases A breakthrough design and test software solution that accelerates the overall workflow from simulation of early concepts through manufacturing and optimization of deployed systems • Integrates Keysight’s leading software solutions, in
Slide 41: Keysight's Solutions Make the 5G Revolution Possible
• In order to achieve its performance goals, 5G is far more complex than 4G • Higher frequencies; to 28 GHz and beyond • Advanced modulation (signal processing) • Multi-element antennas using beamforming • Requires detailed simulation, prior to building a prototype and then validation of actual perf
Slide 42: Leverage Technology Synergies
Leverage Continue Accelerate Technology Enable Diversified High-Return Investment Synergies Growth Beyond Investments to in Software from Ixia Communications Extend Lead in 5G Acquisition • Solutions for higher layers in the • Custom chips for higher • Leverage Keysight hardware • Differentiated Aut
Slide 43: In Summary
IN SUMMARY Furthering our Accelerating our software Global R&D capabilities unmatched value platform and solutions with central Keysight Labs proposition: investments to continue fueling first-to-market Hardware + Software + introducing breakthroughs innovations and solutions People = Insights such
Slide 44: Satish Dhanasekaran, President - Communications Solutions Group
Satish Dhanasekaran Senior Vice President, President - Communications Solutions Group 44
Slide 45: #1 position in CSG end markets
1 2 3 4 5 #1 position in CSG Transformed Established first- Well-positioned with Strong operating end markets with organization to mover advantage in industry leaders; model to deliver on ~27% share1 industry focus, 5G through early relationships financial commitments creating a go-to- investments a
Slide 46: FY'18 Highlights
Commercial FY’18 HIGHLIGHTS Communications Recognized leadership in 5G trials and standards • Provide end-to-end solutions beyond the physical layer for $2.4B mobile chipsets, smart sensors/devices, wireless base Revenue1 +16% YoY stations, networks, data centers and cloud $1.4B • Solve challenges a
Slide 47: Initial observations, actions and accomplishments
INITIAL SIGNIFICANT ACTIONS TAKEN FY17, FY18 OBSERVATIONS ACCOMPLISHMENTS • 5G technology wave drives • Transformed to industry-focused Commercial Communications growth across the solution-centric organization - • Double-digit order growth 3 of past communications ecosystem launched 50+ new solution
Slide 48: Value, expertise, PathWave and measurement platforms
VALUE • Expertise brings customer 100 industry experts insight, workflow analysis, 300 R&D hardware engineers and improved business EXPERTISE 550 R&D software engineers outcomes • PathWave leverages PATHWAVE measurement platforms WORKFLOW to enable customer workflows SOFTWARE Electronic 5G Network C
Slide 49: Large, Growing Market
LARGE, GROWING MARKET Market Commercial Aerospace and Defense Dynamics Communications Communications Total Market1 Size1 $5.2B $4.1B $9.3B Growth Rate2 3-6% 2-3% Drivers • Explosive data growth • Global defense and effective use modernization in of spectrum response to emerging threats • New busines
Slide 50: Win in 5G, grow in defense, focus on operational excellence
WIN in 5G GROW WIN IN 5G GROW FOCUS by enabling the by enabling by enabling the by enabling on operational ecosystem defense ecosystem defense excellence workflow modernization workflow modernization • Win the technology waves • Extend market leadership • Deliver solutions with leverageable • Advanc
Slide 51: Emerging connected applications
ELECTRONIC 5G EDGE COMPUTING WARFARE EMERGING INDUSTRY 4.0 CONNECTED APPLICATIONS (VIRTUAL REALITY, AI, BIG DATA, AUTONOMOUS DRIVING) SMART CLOUD SIGNAL DEVICES (IoT) MONITORING 51
Slide 52: Commercial Communications
Commercial Communications 52
Slide 53: Attractive Industry Attributes
COMMERCIAL COMMUNICATIONS Attractive Industry Attributes Technology Waves: 5G, WLAN, MIPI1 400G, Terabit, Optical • Business focused on technology advancement for the Information and Communications Technology industry Value Chain • Industry leaders invest for time-to-market advantage, which creates
Slide 54: Interoperability is key for global deployment
INTEROPERABILITY IS KEY FOR GLOBAL DEPLOYMENT sub-6GHz mmWave Spectrum <1GHz 2.5GHz 3.4 – 3.7GHz 4.4 – ISM 28GHz 39GHz 4.9GHz GEOGRAPHY Three NTT Orange Docomo Sprint NTT Docomo NTT Docomo Verizon Verizon AT&T EE China SoftBank OPERATOR T-Mobile China Vodafone Telecom KT SoftBank AT&T KT AT&T Mobile
Slide 55: Keysight Solutions
KEYSIGHT SOLUTIONS 1 Protocol Design MIPI Digital Test 5G Waveforms INDUSTRY FIRSTS Uniquely • 5G full stack connection enables • Demonstrated 5G data rates Channel Keysight Beamforming WiFi Coexistence >4Gbps, Over-the-Air Emulation to deliver • Solution for narrow-band IoT customer deployments suc
Slide 56: 5G Phases and Value Proposition
5G PHASES 2010 - 2015 2016 - 2019 2020 - 2025+ Prototyping, Research Commercialize, Deploy & Ramp Standards and Trials KEYSIGHT 5G VALUE PROPOSITION SIGNIFICANT PROGRESS 1. Invested early in broad set of ✓ Triple-digit 5G order growth in FY18 differentiated technology to enable 5G ✓ Strong order res
Slide 57: Aerospace, Defense and Government Communications
Aerospace, Defense and Government Communications 57
Slide 58: Attractive Industry Attributes
Attractive Industry Attributes AEROSPACE AND DEFENSE COMMUNICATIONS • Mission-critical requirements demand extreme performance and highest reliability • Security challenges multiply as commercial technology proliferates • Multi-decade programs require multi-decade support and service DoD/ Prime Publ
Slide 59: Solutions Across Aerospace and Defense Workflow
SIMULATE PROTOTYPE VALIDATE MANUFACTURE SUSTAIN Solutions Across Aerospace and Defense Communications Workflow Defense Modernization Requires ELECTRONIC SIGNAL SUPPLY OPERATIONS Broad WARFARE AND MONITORING CHAIN Solutions RADAR Threat Simulation Public Safety Subsystems Field and Service • Mission
Slide 60: Threat simulators selected by U.S. DoD
REAL WORLD RF ELECTRONIC WARFARE SIMULATION LAB Keysight threat simulators selected by U.S. DoD for hardware-in-the-loop simulation 1 1 FY17 60
Slide 61: Creating Value Through Operational Excellence
EXECUTING A RIGOROUS RELENTLESS FOCUS ON LEVERAGEABLE CUSTOMER EXPERIENCE SUPPLY CHAIN EXCELLENCE PLATFORM STRATEGY AND QUALITY MANAGEMENT • Developing solutions on • Maximizing margins through • Certified by: ISO9001:2015, PathWave software framework cost reductions, supply chain ISO17025:2005, ISO
Slide 62: Customer quotes
“We need a leading partner with your “You are ahead of the competition attributes.” in the 5G space - very different than what we are used to from you in 4G.” “Keysight is a strategic partner and we want to outsource test activity to you.” “The whole chipset ecosystem is embracing you for mmW.” “We
Slide 63: In Summary
IN SUMMARY Organization Portfolio Acquisitions focused on 5G Strong momentum repositioned to augmented solutions and exiting FY’18 in a focus on higher solution portfolio defense $9.3B1 market margin R&D and expanded modernization solutions SAM challenges 1 Per company estimates 63
Slide 64: Mark Pierpoint, President - Ixia Solutions Group
Mark Pierpoint Senior Vice President, President - Ixia Solutions Group 64
Slide 65: Keysight + Ixia combination
1 2 3 We make networks and Be first and best in the Keysight + Ixia combination applications stronger markets we serve drives customer expansion and new revenue - Expanding from pre-deployment - Highest performance with virtual opportunities and profit network test into production and cloud scalabil
Slide 66: 2018 Highlights and Revenue by Region
2018 HIGHLIGHTS REVENUE BY REGION 20% Net Revenue1 $0.45B Americas Asia Pacific 19% 61% Europe Gross Margin2 74% REVENUE MIX Operating $0.02B Income2 38% Product Operating Support 3.6% 62% Margin2 1 Net revenue for Ixia Solutions Group excludes the impact of fair value adjustments to acquisition rel
Slide 67: Network transformation requires new solutions end-to-end
N E T W O R K T R A N S F O R M AT I O N R E Q U I R E S N E W S O L U T I O N S E N D - T O - E N D 5G Brings >10X Expansion on Most Attributes* 5G Technology Impact Network Core Data Achievable Data Chipsets Devices Rates (Gb/s) Access Network Centers 10 Communications “Stack Layers” 1 5G Mobile N
Slide 68: Visibility, Test, Security
Network Design TEST VISIBILITY Harden infrastructure Eliminate blind spots Validate app performance Real-time intelligence Verify provisioning Optimize network tools SECURITY Identify vulnerabilities Network Provide resilient security Network Operations Reduce attack surface Rollout WE CHALLENGE THE
Slide 69: Ixia Solutions
WIRELESS CLOUD / WAN LAN DEVICES SECURITY DATA CENTER NETWORKS DEPLOYMENTS DEPLOYMENTS WiFi Performance Wireless / LTE Infrastructure Security SDN / NFV Application QoE / Reliability Performance Resilience Migration Hyper Scale DC Performance IxVeriwave LTE IxLoad/IxChariot PerfectStorm IxNetwork Ix
Slide 70: Network Test: Financial Services Company
NETWORK TEST Financial Services Company Chief Information Officer Fortune 1000 financial derivatives marketplace CUSTOMER needed to evaluate Distributed Denial of Service Technology Leadership (DDoS) mitigation and ensure DDoS attack NEED • Scale, performance, density response • First-to-market: 10G
Slide 71: Network Packet Brokers
THE DATA CENTER Solutions Network Solutions Network Operations Acquire Taps and Packet Bypass Brokers Switch Application Acquire Operations Distribute • Aggregation Switch Security • Filtering Acquire • Load Balancing Admin • SSL Decryption • NetFlow Servers Analyze and Decide Forensics 71
Slide 72: Network Visibility: Director of Banking
NETWORK VISIBILITY Director of Banking IT Operations Executive Large European bank needed to analyze suspect CUSTOMER traffic entering network and ensure high availability NEED of security tools Massive Scale and Performance • Single pane of glass Deployed iBypass 40-10 with inline Network • Physica
Slide 73: Revenue Mix
REVENUE MIX 86% • Digitization is impacting every 64% business 60% 40% • Added solutions and capability to 36% address Enterprise segment 14% • Expect this to continue to achieve target mix by 2020 CY'11 FY'18 FY'20 Target Enterprise Operators & NEMs CUSTOMER BASE CONTINUES TO GROW AND DIVERSIFY 73
Slide 74: Market growth drivers
MARKET GROWTH DRIVERS CLOUD NETWORK SECURITY $2.2B 90% 36% Mobile Data Traffic Moves Growth in Global Security Total Addressable to Cloud Apps by 20193 Incidents 2015 to 20164 1 Market 5-9% Growth Rate 2 BIG DATA IoT 25GB 20B of Data per Capita per Connected Devices Month by 20205 by 20206 1 Per Com
Slide 75: Implications
Massive Data Growth Digitization Pervasive Shift to the Cloud Challenges Drives New Technologies Across Businesses Existing Business Models Higher speeds and wider Pressure on costs and Restructuring of the market bandwidths scalability • Consolidations • 400G+ • Virtualization | Cloud | • New, non-
Slide 76: Network test and visibility portfolio
WiFi / Cellular Interworking Customer Experience Layers 2-7 Network Test, Visibility, BTS1 Emulation Mobile Network Mobile Device Management Security Drive Test Test Test 5G Network Stress Testing RF/uW Converter Base Station Layer 1 Electrical, Optical, and Wireless Test Channel Emulation Channel I
Slide 77: Extend, Expand, Enhance
EXTEND EXPAND ENHANCE Product to Solution Customer For Emerging Leadership Base Hybrid-Cloud 77
Slide 78: Product to solution leadership
• Be first-to-market with market-leading speeds and performance: 400G+, 5G, 802.11ax and SSL • Streamline hardware platforms with fewer more scalable offerings across portfolio • Leverage key software platforms for virtualization and cloud as networking evolves – new business models • Develop source
Slide 79: Continue strategic expansion
• Capitalize on sales leverage • Geographic expansion in Europe and Asia-Pacific | Aerospace, Defense and Government and Primes | Tier 2 / Tier 3 Service Providers • Increased go-to-market investment in visibility and security • Continue to develop and enhance indirect go-to-market partners and prog
Slide 80: Build on network expertise and technology leadership
• Offer our customers and partners • Increased network and application intelligence • Enhanced security solutions • Highly scalable and software offerings for traditional, hybrid, and cloud networks • Evolve visibility and test solutions for artificial intelligence and machine learning BUILD ON NETW
Slide 81: In Summary
IN SUMMARY Combination of leading Expanding customer Powerful capabilities creating base and market long-term growth drivers breakthrough products opportunities 81
Slide 82: Gooi Soon Chai, President - Electronic Industrial Solutions Group
Gooi Soon Chai Senior Vice President, President - Electronic Industrial Solutions Group Head of Order Fulfillment and IT 82
Slide 83: Targeted investments to win in our markets
1 2 3 4 5 Targeted investments Rapid expansion of Strategy in place to Deep relationships Well-positioned to win to win in our markets solutions for the continue to win and with customers to through technology with an emphasis on connected and capture profitable provide next- leadership high growth
Slide 84: A Leader in Test and Measurement Solutions
A Leader in Test and Measurement Solutions Across a Broad Set of Electronic Industrial End Markets FY’18 HIGHLIGHTS $4.8B ADDRESSABLE MARKET1 KEY CUSTOMERS $1.1B • Automotive OEMs and Revenue +15% YoY AUTOMOTIVE components suppliers $1.1B • Electronics manufacturers Orders +13% YoY GENERAL • Academi
Slide 85: Connected devices, automotive transformation, massive data
1 2 3 PROLIFERATION OF AUTOMOTIVE INDUSTRY MASSIVE DATA CONNECTED DEVICES TRANSFORMATION VOLUMES • 20B connected devices by • Electronic content in vehicles to • 50 Trillion gigabytes of stored 20201 double by 20303 data by 20206 • Each person will be connected • 90% of new cars will be • Demand for
Slide 86: Initial observations, actions and accomplishments
INITIAL SIGNIFICANT ACTIONS TAKEN FY17, FY18 OBSERVATIONS ACCOMPLISHMENTS • Opportunities in high-value • Expanded into automotive and • Delivered 15% revenue automotive, emerging IoT emerging IoT applications by growth and 18% profit applications and China broadening solutions portfolio growth in F
Slide 87: Our Role in the connected devices ecosystem
OUR ROLE Enabling building blocks that power the connected devices ecosystem SMART CITY INDUSTRY 4.0 CHIPSETS ELECTRONICS HEALTHCARE WEARABLE ENERGY DEVICES TECHNOLOGY SOURCES AUTOMOTIVE Providing End-to-End Solutions throughout the Innovation Lifecycle SIMULATE PROTOTYPE VALIDATE MANUFACTURE OPTIMI
Slide 88: Enable growth in connected devices and semiconductors
ENABLE ENABLE ACCELERATE ACCELERATE technology technology growthin growth in the the advancement advancement andand ConnectedDevices Connected Devices expansion expansionin the in the Ecosystem Ecosystem semiconductor semiconductor industry industry • High-value automotive • Process nodes advancemen
Slide 89: Connected devices ecosystem and differentiated solutions
CONNECTED DEVICES ECOSYSTEM KEYSIGHT DIFFERENTIATED SOLUTIONS • Design Simulation + + + • Wireless Coexistence Smart Personal Medical Home Wearable Diagnostic • Compliance Tests • RF Over-the-Air (OTA) Test Solutions + + + • Digital Signal and Data Test Industry 4.0 Digital Healthcare Automotive • B
Slide 90: Automotive solutions introduced over past 3 years
INTELLIGENCE CONNECTIVITY POWER SECURITY Electronics Telematics and Battery and Charging Network and Safety Infotainment Infrastructure 70+ • • • Engine Control Unit Body Control Unit Tire Pressure • • Navigation systems Automatic emergency call • • Li-ion cell performance test Charging function and
Slide 91: Bumper-to-bumper test solutions for the connected car
Power Steering Control Hybrid Electric Vehicle Rear-view Camera (HEV) / Electric Vehicle (EV) Backup Sensors Power Seat Control Infotainment / Navigation Modules (DVD, eCalls, Hands-Free Telephony, GPS) Electronic Stability Control Module Climate Control System Fuel Injection Module Remote Keyless E
Slide 92: Long-range radar for ADAS
The Challenge The Solution CUSTOMER NEED Develop long-range Rapid developments in the Provided a high-accuracy, high- radar for Advanced autonomous vehicle with demand throughput test solution to simulate for greater safety features are radar targets in various realistic Driver Assistance fueling th
Slide 93: Keysight's Solutions for semiconductor
DRIVERS KEYSIGHT’S SOLUTIONS DESIGN VERIFICATION • Device modeling and characterization Continuously Shrinking New Device PRECISION POSITIONING Dimensions Architectures China • Nano-scale positioning supporting next-generation lithography process • Smaller, faster • 3D memory • Semiconductor and den
Slide 94: Parametric test for shrinking ICs
The Challenge The Solution MARKET NEED • Advancements in device structure and State-of-the-art parametric test Address complexity of new applications require IC chipsets systems used to characterize wafer shrinking integrated that have higher performance and structure that enable customers to circui
Slide 95: In Summary
IN SUMMARY Maintaining Delivered strong Broad range of Well-positioned to leadership and results: solutions and strong accelerate growth in enabling technology 15% revenue and global reach to automotive and advancement in 13% order growth in address the new emerging IoT semiconductor FY’18 connected
Slide 96: Mark Wallace, SVP - Global Sales
Mark Wallace Senior Vice President – Global Sales 96
Slide 97: Deep and trusting customer relationships
1 2 3 4 5 Deep and trusting Global scale, Optimizing Doubling frontline Deploying customer leverage and structure, sales capacity enhanced digital relationships capability drives compensation and without increasing demand generation high efficiency and skills for industry cost envelope capability lo
Slide 98: FY'18 Key Statistics
OVERVIEW FY’18 KEY STATISTICS GEOGRAPHIC SALES TEAM • Large global footprint with Total Orders $4.1B 22% 2,700+ customer-facing and Asia-Pacific customer support resources >2,700 45% Americas Core Order Growth 12%1 Europe • 600+ peaked solution, industry 33% and application experts End Customers >32
Slide 99: Changing customer buying practices
SHRINKING OPERATIONAL INDUSTRY CHANGING MARKET WINDOWS DEMANDS EXPANSION BUYING PRACTICES • Invest earlier in Focused on: • More companies creating • Spend >50%1 of pre-standards R&D • Reduced costs smart, connected devices buying journey online • Require innovative • Increased asset • More complexi
Slide 100: Delivered 12% core order growth in FY'18
FY16 OBSERVATIONS SIGNIFICANT ACTIONS TAKEN ACCOMPLISHMENTS • Great customer relationships, • Shift to solutions-based selling • Increased frontline sales satisfaction and loyalty • Repurposed organization to capacity by 30% FY16- • Viewed by market as trusted increase frontline sellers FY18 advisor
Slide 101: Grow new customers, accelerate solutions, expand services
GROW ACCELERATE EXPAND New Customers Solutions Services • Double selling capacity • Engage first and deeply with • Deploy new services channel • Scale industry marketing to industry leaders • Improve customers’ business results reach emerging customers • Leverage first-mover through services advanta
Slide 102: Global sales force growth
KEYSIGHT APPROACH GLOBAL SALES FORCE GROWTH • Double frontline salesforce and deploy leading-edge, digital marketing to accelerate new customer acquisition 1,000 • Hold selling costs flat through resource reallocation and 2x 800 reinvestment 650 550 500 2018 RESULTS ✓ Double-digit lead generation gr
Slide 103: Global account teams and industry leaders
• Dedicated Keysight global account teams, focused on Tier 1 industry leaders and their global ecosystems • Keysight customer engagement process 34 23% 97% harnesses Keysight’s full 5G public Organic order Top 30 Tech capability – from sales to R&D collaborations with growth in FY’18 in companies us
Slide 104: Renewals and new business
Renewals • Focused on maintaining a high renewal rate (>80%) • Customer Success Specialists: distinctive roles who are experts at process New Business • Channel tuned for new business acquisition • Skills, measures, and incentive compensation aligned to new business capture 104
Slide 105: Expanding service solutions for the entire lifecycle
CUSTOMER EQUIPMENT PRIOR GO-FORWARD LIFECYCLE FOCUS STRATEGY ACQUIRE Demo Equipment Resale • Add new sources for used equipment USE • New Premium Support Plans Intrinsic Support (Free) • KeysightCare M A I N TA I N Keysight Equipment Calibration • Managed Services and Repair • Multi-brand Calibratio
Slide 106: Focused sales deployment in Bay Area
THE SITUATION Significant growth of R&D investments in communications sector in California Changed of managers, increased sellers by and application experts by THE CHALLENGE Account teams focused on established accounts, no capacity Created lab to provide new for expansion business model options to
Slide 107: In Summary
IN SUMMARY Global scale and Well-positioned to Distinct Doubling frontline leverage drives capitalize on advantages enable sellers while growth shifting customer greater customer maintaining flat with low selling trends value creation selling costs cost 107
Slide 108: Neil Dougherty, SVP and Chief Financial Officer
Neil Dougherty Senior Vice President and Chief Financial Officer 108
Slide 109: Financial highlights
1 2 3 4 5 Executed on Delivering on our Driving expansion Increasing our Transitioning to a targeted growth financial of operating margin focus on free cash more balanced initiatives and commitments flow conversion approach to capital gaining momentum allocation 109
Slide 110: Revenue, Operating Margin, Free Cash Flow, EPS
Revenue ($B)1 Operating Margin %1,2 Free Cash Flow ($M) 1,3,4 EPS1 +20% y/y +65% y/y +28% y/y +13% core +0.4 pts y/y $423 $3.24 $3.91 18.8% 18.1% 18.4% $3.25 17.6% $329 $2.52 $2.43 $2.53 $2.86 $2.93 $296 $256 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 Growth thro
Slide 111: Commitments and progress
COMMITMENT PROGRESS Top-line Achieved 13% core growth in FY’18 Achieve 4% revenue growth by FY’19 Growth Four consecutive years of market share gains2 Operating Deliver 40% OM incremental on 4% core growth Achieved committed incremental in FY’18 Margin1 Baseline operating margin of 17-18% OM% above
Slide 112: Leverage Profile and Capital Structure
Leverage Profile Capital Structure As of ($M) Q2’19 ($M) • ~$1.7B available liquidity $450M Revolving Credit Facility Undrawn • $1,277M cash/cash equivalents 3.30% Senior Notes due 2019 500 • $450M revolving credit facility 4.55% Senior Notes due 2024 600 • Committed to investment grade rating 4.60%
Slide 113: Cost management and structural flexibility
LASER FOCUS ON STRUCTURAL LONG-TERM COST MANAGEMENT FLEXIBILITY EVOLUTION KLM • LEAN • Minimal fixed cost • Allocate resources to growth highest return • Eliminate waste • Outsourced supply opportunities • Continuous chain • Proactive structural improvement • Indirect sales channel cost management •
Slide 114: Margin targets by 2021
PRIOR NEW TARGET IMPROVEMENT TARGET BY 2021 Gross Margin 56-58% 61-63% 500 bps DRIVERS • Improved market position R&D % 13% 15% 200 bps • Operating leverage • Favorable mix shift (SW, R&D) SG&A % 25-27% 25-26% (50) bps • Ixia synergy realization • Ongoing cost reductions Operating Margin % 17-18% 21
Slide 115: Revenue Sensitivity
Revenue Sensitivity -10% BASELINE +10% Operating Margin1 -3-4 ppts 17-18% 21-22% +2-3 ppts Current 2021 Operating Margin targets restated to reflect the Q1’19 adoption of ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” ENABLED BY ST
Slide 116: Free Cash Flow Conversion
Large Investments Free Cash Flow Conversion 1 Complete 100% 80–90% Target 69% 79% ✓ Post-separation IT investments 75% 68% 55% ✓ Anite and Ixia acquisition 50% integration completed 25% ✓ Pension funding improved 0% FY'15 FY'16 FY'17 FY18 FY'19 FCF CONVERSION1 TARGET OF 80-90% BEGINNING IN FY19 1 No
Slide 117: Tax rate reduction and cash repatriation
Tax Rate Increased Cash Cash Capital Reduction Availability Repatriation Deployment Tax rate1 reduced from Move to modified Deemed repatriation Go-forward capital ~17% in FY17 to12% territorial system provided one-time U.S. allocation strategy exiting FY18 increases projected cash influx of >$500M i
Slide 118: Capital allocation: reinvestment, M&A, return of capital
1 Reinvestment in Core Business to Drive 2 Disciplined M&A 3 Return of Capital Organic Growth • Maintain R&D investment at • Continued focus on tuck-in • Driven by return to organic ~15% of revenue acquisitions growth • Average annual capex of • Aligned with targeted growth • Further enabled by tax
Slide 119: M&A strategic and financial criteria
STRATEGIC CRITERIA FINANCIAL CRITERIA • Aligns with strategic growth priorities • Accretive to EPS within 18 months • Expands Served Addressable Market (SAM) • ROIC materially above WACC by year 5 • Increases/adds exposure to higher-growth end markets • Cost and/or revenue synergies • Provides high
Slide 120: Keysight's core growth expectation 4-5%
End-Market Market Growth Keysight Segments Key Markets Size1 Rates1,2 Revenue3 Position4 Share Commercial Communications $5.2B 3 - 6% $1.4B #1 ~27% Communications Solutions Aerospace, Defense & Gov’t $4.1B 2 - 3% $1.0B #1 ~24% Electronic Indust. Solutions Electronic Industrial $4.8B 2 - 3% $1.1B #1
Slide 121: Previous Target vs New Target
Previous Target New Target (2015 Investor Day) Core Revenue Sustainable Sustainable Growth1 4% CAGR 4-5% CAGR Operating 17-18% 21-22% Margin1 EPS 8-10% ≥10% Growth1 • 21-22% operating margin to be achieved in 2021 ASSUMPTIONS: • Share count maintained flat 1 Non-GAAP measure. Core revenue growth exc
Slide 122: In Summary
IN SUMMARY Returning Meeting or Increasing capital Driving EPS exceeding key focus on FCF driven by growth financial goals conversion growth 122
Slide 123: Appendix
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Slide 124: Reconciliation of GAAP to non-GAAP Revenue
Reconciliation of GAAP to non-GAAP Revenue FY18 FY17 FY16 FY15 GAAP Revenue $ 3,878 $ 3,189 $ 2,918 $ 2,856 Acquisition-related Fair Value Adjustments 36 60 12 6 Non-GAAP Revenue $ 3,914 $ 3,249 $ 2,930 $ 2,862 KEYSIGHT TECHNOLOGIES 124
Slide 125: Reconciliation of Income from Operations to non-GAAP
Reconciliation of Income from Operations to non-GAAP Income from Operations FY18 FY17 FY16 FY15 Income (loss) from operations, as reported $ (394) $ 148 $ 375 $ 390 Goodwill impairment 709 - - - Amortization of acquisition-related balances 265 256 56 23 Share-based compensation expense 59 56 49 55 A
Slide 126: Non-GAAP Net Income and Diluted EPS Reconciliation
Non-GAAP Net Income and Diluted EPS Reconciliation FY18 FY17 FY16 FY15 GAAP Net income $ 165 $ 102 $ 335 $ 513 Non-GAAP adjustments: Goodwill impairment 709 - - - Amortization of acquisition-related balances 265 256 56 23 Share-based compensation 59 56 49 55 Acquisition and integration costs 49 67 1
Slide 127: Note on non-GAAP revenue
Note: Non-GAAP revenue is defined to exclude the fair value adjustments to the acquisition-related deferred revenue balances. 127
Slide 128: Free Cash Flow as a Percent of non-GAAP Net Income
Free Cash Flow as a Percent of non-GAAP Net Income FY18 FY17 FY16 FY15 Net Cash Provided by Operating Activities ' $ 555 $ 328 $ 420 $ 388 Less: Investments in PP&E (132) (72) (91) (92) Free Cash Flow $ 423 $ 256 $ 329 $ 296 Non-GAAP Net Income 618 462 419 432 FCFI/NI 68% 55% 79% 69% ‘restated for A
Slide 129: LTM Adjusted EBITDA reconciliation
LTM April 30, 2019 Net Income $ 274 Add: Provision (benefit) for Income Taxes (432) Income (loss) before taxes (158) Add: Interest Income (17) Interest Expense 80 Depreciation and amortization 304 EBITDA 209 Add back: Non-GAAP adjustments Goodwill Impairement 709 Amortization of acquisition-related
Slide 130: Gross debt, net debt and total capital
As at April 30, 2019 (in millions) Term Loan $ - Senior notes, par value (1,800) Gross Debt $ (1,800) Less: Cash and cash equivalents $ 1,277 Restricted Cash 3 Net Debt $ (520) Gross Debt as above $ 1,800 Add: Shareholders equity 2,798 Total Capital $ 4,598 130
Slide 131: Executive Biographies
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Slide 132: Ron Nersesian
RON NERSESIAN PRESIDENT AND CHIEF EXECUTIVE OFFICER Ron Nersesian is president and chief executive officer of Keysight Technologies. In November, 2011, he was named executive vice president and chief operating officer of Agilent Technologies. The following year, in November 2012, he was promoted to
Slide 133: Neil Dougherty
NEIL DOUGHERTY SVP AND CHIEF FINANCIAL OFFICER Neil Dougherty is senior vice president and Chief Financial Officer of Keysight Technologies. As CFO Dougherty leads the company's global finance operations including tax, treasury, and investor relations. Dougherty joined Hewlett-Packard in 1996 as a f
Slide 134: Jay Alexander
JAY ALEXANDER SVP AND CHIEF TECHNOLOGY OFFICER Jay Alexander is senior vice president and chief technology officer of Keysight Technologies. Alexander leads Keysight's centralized planning and technology development team to focus on top opportunities and market trends to address unmet needs. Alexand
Slide 135: Satish Dhanasekaran
SATISH DHANASEKARAN SVP, PRESIDENT – COMMUNICATIONS SOLUTIONS GROUP Satish Dhanasekaran is senior vice president of Keysight Technologies, and president of the Communications Solutions Group (CSG). Named CSG president in July 2017, Dhanasekaran leads the $1.8 billion business which addresses the com
Slide 136: Gooi Soon Chai
GOOI SOON CHAI SVP, PRESIDENT – ELECTRONIC INDUSTRIAL SOLUTIONS GROUP Gooi Soon Chai is senior vice president, Keysight, and president of the Electronic Industrial Solutions Group which addresses the automotive, energy, general electronics, manufacturing, and semiconductor businesses. Gooi is also r
Slide 137: Mark Wallace
MARK WALLACE SVP – GLOBAL SALES Mark Wallace is senior vice president, global sales for Keysight. As the leader of the company's global sales function, Wallace is responsible for orders and customer satisfaction for the company. Most recently, Wallace was vice president and general manager of the Am
Slide 138: Mark Pierpoint
MARK PIERPOINT SVP, PRESIDENT – IXIA SOLUTIONS GROUP Mark Pierpoint is senior vice president of Keysight Technologies, and president of Keysight's Ixia Solutions Group which provides network test and visibility solutions for validating, optimizing and securing networks. Before being named ISG presid