Slide 1: Keysight Technologies Institutional Investor Meetings
Keysight Technologies Institutional Investor Meetings June 2015
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements (including, without limitation, information and future guidance on the company’s goals, priorities, revenues, demand, growth opportunities, customer service and innovation plans, new product introductions, financial condition, earning
Slide 3: Introduction to Keysight Technologies
Introduction to Keysight Technologies Page 3
Slide 4: Keysight at a Glance
Keysight at a Glance NET REVENUE IN FY14 $2.9 billion ( ~64% from outside the US) EMPLOYEES ~9,600 PRESIDENT and CEO Ron Nersesian GLOBAL HEADQUARTERS Santa Rosa, California CUSTOMER LOCATIONS 100+ countries MANUFACTURING AND R&D LOCATIONS U.S., Europe, Asia Pacific EXCHANGE LISTING NYSE: KEYS Share
Slide 5: Keysight Overview
Keysight Overview Unlocking measurement insights for 75 years • Global electronic measurement technology Financial Metrics and market leader • FY14 Revenues $2.9B • Strong financial profile • FY 14 Operating Margin(1) 20.5% • Deep and loyal customer base • FY14 ROIC(2) 35% • ~75% of revenue via dire
Slide 6: Financial Highlights
Financial Highlights Q2 FY15 Q1’15 Q2’15 Q3’15 Guidance(1) Revenue $701M $740M $655M Core Revenue Growth(2) +7% +3% -10% Gross Margin(3) 55.6% 57.1% - Operating Margin(3) 17.1% 20.3% - EPS(3) $0.56 $0.70 $0.44 Operating Cash Flow $92M $68M - Q2 Highlights & Q3 Guidance • EPS at high end of guidance
Slide 7: Keysight Technologies Value Creation
Keysight Technologies Value Creation • Favorable trends in our end markets • Communications – explosive mobile data growth • Aerospace/Defense – defense modernization • Industrial, Computers & Semiconductors – electronic content proliferation • Transforming our portfolio in segments with highest gro
Slide 8: Investment Highlights
Investment Highlights Page 8
Slide 9: Investment Highlights
Investment Highlights 1 Focused Team with Deep Electronic Measurement Roots 2 Attractive End Markets 3 Market Leadership 4 Deep Customer Relationships 5 Portfolio Transformation for Growth 6 Strong Operating Model Page 9
Slide 10: Focused Team with Deep Electronic Measurement Roots
1 Focused Team with Deep Electronic Measurement Roots Executive staff with 29 years average industry experience Test & Measurement Experience Ron Nersesian Transformed Agilent’s Electronic Measurement Group to deliver President & CEO double digit-profit throughout the business cycle and delivered 30
Slide 11: Attractive End Markets
2 Attractive End Markets Evolving market segments present opportunities Market Size(1): $12B Long Term Market Growth(1): 3-4% Industrial, Computers, Communications (3) Aerospace Defense Semiconductors Revenue Mix (2) 34% 22% 44% Market Size (1) $4B $3B $5B 3-Year Market Growth(1) 4-6% Flat 3-5% Expl
Slide 12: Market Leadership
3 Market Leadership Technology core fuels portfolio transformation Core Platforms Leadership Position Electronic Design Highest performance design software used by 2/3 of the Automation world’s RF/Microwave designers Software Network Highest performance, broadest offering, including industry- Analyz
Slide 13: Deep Customer Relationships
4 Deep Customer Relationships Most Fortune 1000 electronics companies are Keysight customers Key Customer Facts FY14 Revenue by End Market • Diverse customer base with no single customer Industrial, Communications accounting for more than 10% of revenues(1) Computer & Semi • 75% of customer revenue
Slide 14: Keysight Customer Support and Service
4 Keysight Customer Support and Service Founded on deep customer relationships and trust • Global Reach & Capability • Service centers in 30 countries repair and calibrate customer test equipment Competitors • Consistent support for multi-national • Independent test labs customers at 50+ sites world
Slide 15: Portfolio Transformation for Growth
5 Portfolio Transformation for Growth Focus on opportunities with above-market growth rates Wireless Communications • Explosive mobile data growth and evolving wireless standards are driving investment in emerging networking technologies • Keysight recently introduced two new wireless R&D and manufa
Slide 16: Strong Operating Model
6 Strong Operating Model Superior and stable financial performance throughout cycle • Disciplined expense and capital management ensures rapid response to macro environment • Specific levers and management process enable strong H1’15 Profitability & Capital financial performance throughout the cycle
Slide 17: Liquidity and Capital Structure
Keysight Technologies Liquidity and Capital Structure Our Top Priority is Growth Capital structure as of April 30, 2015 • Cash and equivalents of $894M • Majority of cash is generated offshore with sufficient free cash flow accessible in the U.S. • $1.1B debt (tranches of $500M and $600M maturing in
Slide 18: Recent Quarterly Financial Results
Recent Quarterly Financial Results* (adjusted for stock-based compensation) Electronic Measurement Group of Agilent Keysight Technologies $M (except per share amounts) Q1’14 Q2’14 Q3’14 Q4’14 Q1'15 Q2'15 Revenue 671 743 757 762 701 740 Cost of Goods Sold 294 323 337 335 311 318 Gross Margin 377 420
Slide 19: Appendix
Appendix KEYSIGHT TECHNOLOGIES [Page 19
Slide 20: An Overview of Keysight's End Markets
An Overview of Keysight’s End Markets A market leader in electronic test and measurement solutions Industrial, Computer, Communications Aerospace and Defense and Semiconductor Page 20
Slide 21: Keysight Technologies in Communications
Keysight Technologies in Communications Market size(1): $4B Long-term market growth(1): 4-6% End Market Growth Drivers • Mobile data traffic growing at double-digit rates each year • Components and chipsets increasing complexity • 4G and 5G technology and standards evolution How We Win Market reach
Slide 22: Keysight Technologies in Aerospace and Defense
Keysight Technologies in Aerospace and Defense Market size(1): $3B Long-term market growth(1): Flat End Market Growth Drivers • Growth of intelligence, surveillance, and reconnaissance • Growth outside US (China, India, Middle East) driven by new satellites and radar technologies How We Win Market r
Slide 23: Keysight Technologies in Industrial, Computers, Semiconductor
Keysight Technologies in Industrial, Computers, Semiconductor Market size(1): $5B Long-term market growth(1): 3-5% End Market Growth Drivers • Electronic content in industrial segment continues to proliferate • Mobile computing driven by smartphones, tablets, and notebook PCs • Cloud computing requi
Slide 24: Opportunities to Accelerate Growth
Opportunities to Accelerate Growth Three key areas of focus Wireless Modular Solutions Software Page 24
Slide 25: Transforming Product Portfolio for Growth: Wireless
Transforming Product Portfolio for Growth: Wireless New wireless communications R&D and manufacturing platforms Multi Format Tester Growth Opportunity • Explosive mobile data growth and evolving wireless standards drive investment in emerging networking technologies R&D Platform Designed for R&D and
Slide 26: Transforming Product Portfolio for Growth: Modular Solutions
Transforming Product Portfolio for Growth: Modular Solutions Significant focus area to drive growth Growth Opportunity • Increasing demand for flexibility and form factor options. Modular solutions are growing faster than overall EM market Keysight’s Fast-Growing Modular Portfolio How Keysight will
Slide 27: Transforming Product Portfolio for Growth: Software
Transforming Product Portfolio for Growth: Software Value migration to software solutions Growth Opportunity • As measurement science evolves to software, software is expected to grow faster than the electronic measurement market • Customers can extend instrument life and investment with new softwar
Slide 28: Customer New Product Introduction Workflow
Customer New Product Introduction Workflow Keysight provides innovative and leading measurement solutions at every step Simulate Prototype Manufacture I&M • Simulation (R&D) • Electronic design automation (EDA) software is used to virtually model the circuits of a new product prior to the developmen
Slide 29: Reconciliations
Reconciliations KEYSIGHT TECHNOLOGIES Page 29
Slide 30: GAAP to NON GAAP Operating profit reconciliation – Q1'14
GAAP to NON GAAP Operating profit reconciliation – Q1’14 KEYSIGHT TECHNOLOGIES, INC. AND SUBSIDIARIES RECONCILIATION FROM GAAP TO NON-GAAP INCOME FROM OPERATIONS THREE MONTHS ENDED JANUARY 31, 2014 (Unaudited) NON-GAAP ADJUSTMENTS Restructuring Acquisition & Project Sapp and Other Intangible Transfo
Slide 31: GAAP to NON GAAP Operating profit reconciliation - Q2'14
GAAP to NON GAAP Operating profit reconciliation - Q2’14 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME THREE MONTHS ENDED APRIL 30, 2014 (Unaudited) NON-GAAP ADJUSTMENTS Project Sapp Intangible Pre-Separation Share Based Others Adjustment (In millions, except per share
Slide 32: GAAP to NON GAAP Operating profit reconciliation - Q3'14
GAAP to NON GAAP Operating profit reconciliation - Q3’14 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME THREE MONTHS ENDED JULY 31, 2014 (Unaudited) NON-GAAP ADJUSTMENTS Project Sapp Intangible Pre-Separation Share Based Others Adjustment (In millions, except per share a
Slide 33: GAAP to NON GAAP Operating profit reconciliation – Q4'14
GAAP to NON GAAP Operating profit reconciliation – Q4’14 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME THREE MONTHS ENDED OCTOBER 31, 2014 (Unaudited) NON-GAAP ADJUSTMENTS Project Sapp Intangible Pre-Separation Share Based Others Adjustment (In millions, except per shar
Slide 34: GAAP to NON GAAP Operating profit reconciliation – FY'14
GAAP to NON GAAP Operating profit reconciliation – FY’14 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME YEAR ENDED OCTOBER 31, 2014 (Unaudited) PRELIMINARY NON-GAAP ADJUSTMENTS Restructuring Acquisition & Project Sapp and Other Intangible Transformational Integration Pre
Slide 35: GAAP to NON GAAP Operating profit reconciliation – Q1'15
GAAP to NON GAAP Operating profit reconciliation – Q1’15 KEYSIGHT TECHNOLOGIES, INC RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME THREE MONTHS ENDED JANUARY 31, 2015 (Unaudited) NON GAAP ADJUSTMENTS Project Sapp Intangible Separation Share Based Adjustment (In millions, except per share amounts) G
Slide 36: GAAP to NON GAAP Operating profit reconciliation – Q2'15
GAAP to NON GAAP Operating profit reconciliation – Q2’15 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP NET INCOME THREE MONTHS ENDED APRIL 30, 2015 (Unaudited) NON-GAAP ADJUSTMENTS Project Sapp Intangible Separation Share Based Asset Adjustment (in millions, except per share amoun
Slide 37: GAAP to NON GAAP Operating profit reconciliation – H1'15
GAAP to NON GAAP Operating profit reconciliation – H1’15 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP SIX MONTHS ENDED APRIL 30, 2015 (Unaudited) NON-GAAP ADJUSTMENTS Intangible Separation Share Based Asset Adjustment (in millions, except per share amounts) GAAP Amortization Cost
Slide 38: ROIC Reconciliation
ROIC Reconciliation Year Ended October 31, (except H1'15) $ in Millions 2014 H1'15 Non-GAAP Income from Operations $ 601 $ 270 Less : Taxes (91) (35) Non-GAAP Income from Operations after Taxes $ 510 $ 235 Non-GAAP Income from Operations after Taxes (annualized) $ 510 $ 470 (1) Assets $ 1,976 $ 1,83
Slide 39: Core Non-GAAP revenue reconciliation – Q1'15 & Q2'15
Core Non-GAAP revenue reconciliation – Q1’15 & Q2’15 KEYSIGHT TECHNOLOGIES, INC. RECONCILIATION OF REVENUE EXCLUDING THE IMPACT OF CURRENCY ADJUSTMENTS (In Millions) (Unaudited) Percent Percent Q2'15 Q2'14 Inc/(Dec) Q1'15 Q1'14 Inc/(Dec) Non-GAAP Revenue $ 740 $ 743 — $ 701 $ 671 — Less: revenue fro
Slide 40: Non-GAAP Adjusted EBITDA Reconciliation
Non-GAAP Adjusted EBITDA Reconciliation April 30, 2015 (1) $ in Millions H1'15 LTM Non-GAAP Income from Operations $ 270 596 Plus: Depreciation and amortization 46 91 Less: Amortization of intangible assets (4) (8) Adjusted EBITDA $ 312 $ 679 % of Revenue 21.7% Total Debt 1,099 Total Debt/Adjusted E
Slide 41: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Six months ended April 30, 2015 $ in Millions H1'15 Net cash provided by operating activities $ 160 Less: Investments in property, plant and equipment (31) Free Cash Flow $ 129 Page 41