Slide 1: Keysight Technologies Institutional Investor Meetings
Keysight Technologies Institutional Investor Meetings October 14-16, 2014
Slide 2: General Notice
General Notice This presentation contains forward-looking statements (including, without limitation, information and future guidance on the company’s goals, priorities, the planned separation of the company from Agilent Technologies, Inc., revenues, demand, growth opportunities, customer service and
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 FY13 $2.9 billion (60%+ generated outside the U.S.) EMPLOYEES ~9,700 (post separation) 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
Slide 5: Timeline of Innovation
Timeline of Innovation Unlocking measurement insights for 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 In September 2013, announc
Slide 6: Agilent Spin-off of Keysight
Agilent Spin-off of Keysight Strategic rationale for separation Capitalizing on its Electronic Measurement Group (Keysight), Agilent grew its Life Sciences, Diagnostics and Analytics operations to stand-alone size and competitiveness Spin-off creates two companies with greater strategic and manageme
Slide 7: Keysight Overview
Keysight Overview Unlocking measurement insights for 75 years • Global electronic measurement technology and market leader Financial Metrics • Strong financial profile • Revenues(1) $2.9B • Deep and loyal customer base • Operating Margin(1,2) 18.5% • Sales in 100+ countries • FY13 ROIC(2) 31% • ~75%
Slide 8: Keysight Technologies Transformation
Keysight Technologies Transformation Keysight Today • World-class technology with many market-leading platforms • Strong business model delivering 18.8% operating margin (1) and leading ROIC • Keysight cash generation funded HP and Agilent’s Life Sciences growth initiatives and now must drive Keysig
Slide 9: Investment Highlights
Investment Highlights Page 9
Slide 10: Investment Highlights
Investment Highlights 1 Focused Team with Deep Electronic Measurement Roots 2 Attractive End Markets 3 Market Leadership 4 Deep Customer Relationships 5 A History of “Firsts” 6 Portfolio Transformation for Growth 7 Strong Operating Model Page 10
Slide 11: 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 12: 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% 23% 43% Market Size (1) $4B $3B $5B 3-Year Market Growth(1) 4-6% Flat 3-5% Expl
Slide 13: 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 14: Deep Customer Relationships
4 Deep Customer Relationships Most Fortune 1000 electronics companies are Keysight customers Key Customer Facts FY13 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 15: Keysight Customer Support and Service
4 Keysight Customer Support and Service Founded on deep customer relationships and trust • Global Reach & Capability FY13 Financial Metrics • Service centers in 30 countries repair and • Revenues $395M calibrate customer test equipment • Consistent support for multi-national • Operating Margin 23.5%
Slide 16: A History of "Firsts"
5 A History of “Firsts” Industry leading R&D is key to our customers’ success in a changing world First 4G LTE X-Parameters: Breakthrough First single-slot software simulation invention enables PXI two-channel tools for design of first-ever software modular Vector chipsets, base simulation capabilit
Slide 17: Portfolio Transformation for Growth
6 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 18: Strong Operating Model
7 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 financial performance throughout the cycle Profitability and Capital Eff
Slide 19: Keysight Technologies Liquidity and Capital Structure
Keysight Technologies Liquidity and Capital Structure Anticipated capital structure at time of spin • Cash and equivalents of $700M • Majority of cash is generated offshore with sufficient free cash flow accessible in the U.S. • $1.1B debt offering, of which $900M will be distributed to Agilent • LT
Slide 20: FY15 Financial Considerations
FY15 Financial Considerations • Overall market growth expectations reflect continued slow recovery with end-market growth in the range of 2.5 – 3.5% in 2015 • Operating model remains intact, while FY15 is a transition year as Keysight spins off from Agilent with the following financial structure cha
Slide 21: Appendix
Appendix KEYSIGHT TECHNOLOGIES Page 21
Slide 22: 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 22
Slide 23: 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 24: 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 (Russia, China, India, Middle East) driven by new satellites and radar technologies How We Win
Slide 25: 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 26: Opportunities to Accelerate Growth
Opportunities to Accelerate Growth Three key areas of focus Wireless Modular Solutions Software Page 26
Slide 27: 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 28: 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 29: 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 30: 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 31: Reconciliations
Reconciliations KEYSIGHT TECHNOLOGIES Page 31
Slide 32: GAAP to Non-GAAP Operating Income Reconciliation
GAAP to Non-GAAP Operating Income Reconciliation Year Ended October 31, (except LTM) $ in Millions 2011 2012 2013 LTM GAAP Income from operations $737 $733 $496 $467 Restructuring and other related costs - - 15 (5) Asset impairments 4 - 1 - Amortization of intangible assets 10 7 9 8 Transformational
Slide 33: Non-GAAP Adjusted EBITDA Reconciliation
Non-GAAP Adjusted EBITDA Reconciliation Year Ended October 31, (except LTM) $ in Millions 2011 2012 2013 LTM Non-GAAP Income from operations $760 $751 $544 $533 Plus: Depreciation and amortization 56 65 77 79 Less: Amortization of intangible assets (10) (7) (9) (8) Share-based compensation expense 3
Slide 34: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Year Ended October 31, (except LTM) $ in Millions 2011 2012 2013 LTM Net Cash provided by operating activities 751 724 566 497 Less: Purchases of property and equipment (95) (103) (69) (62) Free Cash Flow $656 $621 $497 $435 % of Revenue 19.8% 18.7% 17.2% 15.1% Page 34
Slide 35: ROIC Reconciliation
ROIC Reconciliation Year Ended October 31 $ in Millions 2013 LTM Non-GAAP Income from Operations $544 $533 Less: Taxes (84) (85) Non-GAAP Income from Operations After Taxes $460 $448 Assets (1) $1,997 $1,963 Less: Current Liabilities (536) (503) Invested Capital $1,461 $1,460 ROIC 31% 31% (1) Consis