Slide 1: Keysight Technologies Investor Presentation
Keysight Technologies Investor Presentation December 2017 Page 1
Slide 2: Safe Harbor
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
Slide 3: Agenda
Agenda Executive Overview Growth Initiatives Page 3
Slide 4: Compelling Investor Value Proposition
Compelling Investor Value Proposition Commitment to Growing Long-Term Total Shareholder Returns • #1 market position in key software & hardware verticals(1) Market Leader in • $15.5B electronics and communication SAM(2) Attractive Markets • 20%+ market share in core end markets(2) Aligned to Critica
Slide 5: History of Leadership and Innovation
History of Leadership and Innovation Unlocking measurement insights for over 75 years 1939–1998: The Hewlett-Packard years A company founded on electronic measurement innovation 1999–2013: The Agilent Technologies years Spun off from HP, Agilent became the World’s Premier Measurement Company 2014: K
Slide 6: Keysight Today: Market & Technology Leader
Keysight Today: Market & Technology Leader Business Overview FY17 Key Statistics • Worldwide leader in high value, mission critical Revenue Mix Services Solutions electronic design and test solutions $0.4B, 13% • Relied on by the world’s leading technology Ixia Solutions Communication companies $0.3
Slide 7: Our Value to Customers – Unmatched in the Industry
Our Value to Customers – Unmatched in the Industry Accelerating innovation to connect and secure the world WIRELESS NETWORKS AEROSPACE AUTOMOTIVE, ENERGY, COMMUNICATIONS AND CLOUD AND DEFENSE AND IOT Customer’s Product Lifecycle Simulate Prototype Manufacture Optimize Page 7
Slide 8: A Strong Financial Framework for Value Creation
A Strong Financial Framework for Value Creation Driving shareholder returns Organic Mergers & Business Model Return of Capital Growth Acquisitions • Cost Structure • R&D Investment • Strategic Alignment • U.S. Cash Flexibility Generation • SAM Expansion • Growth • Cost Reductions • Appropriate • Pro
Slide 9: Organized to Grow
Organized to Grow First to Trusted Aligned with End Markets Market Advisor Corporate Electronic Communications Ixia Services Planning and Industrial Worldwide Sales Solutions Group Solutions Group Solutions Group Technology Solutions Group Jay Satish Soon Chai Mark John Mark Alexander Dhanasekaran G
Slide 10: Strong Progress on Growth Initiatives
Strong Progress on Growth Initiatives • Strong double-digit 5G order growth in FY17 Be First in 5G • Positioning Keysight as the market leader in 5G Wireless • Collaborating with leading consortiums, universities, and research institutes to define 5G standards and technologies Expand • Ixia and Anit
Slide 11: Disciplined approach to capital investment
Disciplined approach to capital investment Phase 3 Return Capital Balanced Return of Capital Phase 2 Return Return to Growth • Return of capital tied to US cash generation of Sustained 4% CAGR • Appropriate leverage and Capital over Cycle commitment to investment Phase 1 grade credit metrics • M&A a
Slide 12: Disciplined and Well-Defined Criteria for Acquisitions
Disciplined and Well-Defined Criteria for Acquisitions The Example • Aligns with strategic growth priorities Strategic Alignment • Delivers higher gross margin R&D or software solutions • Expands Served Addressable Market (SAM) Growth • Focuses on faster growing market segments or adds key technolog
Slide 13: Long-Term Expectations
Long-Term Expectations Revenue Op Margin Profitability Growth Incremental Over the Cycle 40% on Average Sustainable growth of 4% operating margin 4% CAGR or greater of >20%* Committed Return of Capital Yields 8-10% EPS* Growth * Non-GAAP Page 13
Slide 14: Agenda
Agenda Executive Overview Growth Initiatives Page 14
Slide 15: Leadership in Attractive Markets
Leadership in Attractive Markets Electronic Services Communications Industrial Ixia(1) Segments Solutions Group Solutions Solutions Solutions Group Group Group Aerospace, Commercial Electronic Network Network End Markets Comms Defense & Industrial Services Test Visibility TOTAL Government Revenue(1,
Slide 16: Market Leader in Key Software & Instrument Platforms
Market Leader in Key Software & Instrument Platforms Core Solution Platforms Market Position(1) Simulation Software(2) #1 Ixia(3) Network Test #1 Ixia(3) Network Visibility #2/3 Network Analyzers #1 Signal Analyzers #1 Signal Sources #1 Oscilloscopes #2 (1) Per Prime Data, IHS Technology, and Compan
Slide 17: Multiple Growth Drivers Provide Diversification
Multiple Growth Drivers Provide Diversification Growth Drivers • Evolving standards – 5G Commercial Communications • All data, all the time • Internet of Things (IoT) • Rapidly expanding cloud data and apps Network Test & Visibility • Growing security risks Aerospace, Defense & • World instability G
Slide 18: Growth Strategies Aligned to Key Market Themes
Growth Strategies Aligned to Key Market Themes Growth Strategies Growth Strategies Software-centric solutions | Organic R&D investments | Strategic M&A Be first in Expand leadership in Grow services Extend into network 5G wireless T&M software business test and visibility Page 18
Slide 19: First in 5G Wireless
First in 5G Wireless Unprecedented Wireless Demand Accelerated Industry 5G Deployment Timeline 30bn+ connected devices by 2020 Pre-commercial North American deployment mid-2017 10x mobile data in five years Worldwide carrier trials begin 2H 2017 • IoT consuming exponential amount of instantaneous da
Slide 20: Expand Leadership in T&M Software
Expand Leadership in T&M Software • $2B market for electronic test software, ~7% CAGR(1) Business Update • FY17 Software revenues over $450M • New software design center staffed ahead of schedule 1 Expand simulation business — Address growth opportunities in High-Speed Digital and Power design 2 Del
Slide 21: Grow Services Business to $600M
Grow Services Business to $600M Grow Core Add New Services Leverage Portfolio Launch and Expand Multi-Vendor Build and Deploy Expand Asset Calibration Business Professional Services Management Page 21
Slide 22: Extend into Network Test and Visibility
Extend into Network Test and Visibility Creating a compelling innovation engine with Ixia to drive growth A Combination of Complementary Strengths A global leader in Industry pioneer and A global leader in measurement recognized leader in communications with the instrumentation and network test; a l
Slide 23: Keysight as a Platform for Accelerated Growth
Keysight as a Platform for Accelerated Growth High-value capabilities across the communications network and throughout the stack Components Stack Layers & Chipsets Devices Base Stations Hyperscale and Data Centers Enterprise Customer Experience Management Mobile BTS* Emulation Drive Test Layers 2 -
Slide 24: Key Messages
Key Messages Transformation Objectives Leader in Technology and market leader in Over the Cycle* profitable market ever-evolving technology market ✓ 4% revenue CAGR Transform Target fast growing areas for and expand Served Addressable ✓ Deliver >20% growth Market (SAM) operating margin ✓ 8-10% EPS g
Slide 25: Modular Form Factor
Modular Form Factor KEYSIGHT TECHNOLOGIES Page 25
Slide 26: Fast Growing Modular
Fast Growing Modular Small Portion of Total Market 2016 Total Modular Solutions Market 2016 Total Design & Test Market $1.2 Billion* $13 Billion* 18 16 14 12 37% $750M* $B 10 Other PXI/AXIe Modular 63% Modular 8 PXI/AXIe PXI/AXIe Modular 13% CAGR* 6 Modular to 2020 4 13% CAGR** 2 0 2016 2017 2018 20
Slide 27: Investments Leveraged into Multiple Form Factors
Investments Leveraged into Multiple Form Factors Provides Competitive Differentiation Form Factor Customer Best For “X-Chips” Chipset Feature Rich Box • R&D • Full measurement set • Highly integrated • One-button • Validation • High performance measurements • Complex device • Low power manufacturing
Slide 28: Reconciliations
Reconciliations KEYSIGHT TECHNOLOGIES Page 28
Slide 29: Keysight Non-GAAP gross margin reconciliation
Keysight Non-GAAP gross margin reconciliation Year Ended October 31, 2017 Gross Margin % ( in millions) GAAP Gross Profit $ 1,698 53% Amortization of acquisition-related balances 221 Share-based compensation 11 Acquisition and integration costs 4 Acquisition-related compensation expense 1 Restructur
Slide 30: Keysight Non-GAAP operating margin reconciliation
Keysight Non-GAAP operating margin reconciliation Year Ended October 31, 2017 ( in millions) Income from operations, as reported $ 235 Amortization of acquisition-related balances 260 Share-based compensation 56 Acquisition and integration costs 57 Acquisition-related compensation expense 28 Separat
Slide 31: Keysight Non-GAAP research and development expenses reconciliation
Keysight Non-GAAP research and development expenses reconciliation Year Ended October 31, 2017 2014 ( in millions) Research & development expenses, as reported $ 498 $ 361 Amortization of acquisition-related balances (1) — Share-based compensation (9) (7) Acquisition and integration costs (1) — Acqu
Slide 32: Keysight Non GAAP revenue by end market reconciliation
Keysight Non GAAP revenue by end market reconciliation Acquisition Pre-acquisition related Ixia revenue on GAAP Revenue fair value adjs Pro foma basis Non-GAAP Revenue FY17, ( in millions) Aerospace, Defense & Government $ 694 — $ 694 Commercial Communications 1,044 — 1,044 Electronic Industrial 836
Slide 33: Keysight Non GAAP revenue and free cash flow reconciliation
Keysight Non GAAP revenue reconciliation Keysight Free cash flow reconciliation Page 33