Upload
trinhnguyet
View
215
Download
1
Embed Size (px)
Citation preview
Page
Safe HarborThis 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. Due to such uncertainties and risks, no assurances can be given
that such expectations 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, growth opportunities, customer service and innovation
plans, new product introductions, financial condition, earnings, 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 and restructuring activities. The words
“anticipate,” “plan,” “estimate,” “expect,” “intend,” “will,” “should,” “forecast,” “project,” 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 October 31, 2016, and Keysight’s quarterly report on
Form 10-Q for the period ended July 31, 2017.
This presentation includes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the
overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Non-
GAAP measures exclude primarily the impacts of share-based compensation, restructuring and related costs, separation and
related costs, acquisition and integration costs, amortization of acquisition-related balances, acquisition-related compensation
expense, pension curtailment and settlement gains, Northern California wildfire related costs and others. The definitions of these
non-GAAP financial measures may differ from similarly titled measures used by others, and such non-GAAP measures should be
considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. Keysight generally
uses non-GAAP financial measures to facilitate management’s comparisons to historic operating results, to competitors’
operating results and to guidance provided to investors. In addition, Keysight believes that the use of these non-GAAP financial
measures provides greater transparency to investors of information used by management in its financial and operational
decision-making.
2
Page
• Diversified tail winds across 5G, IoT, Auto, Software, Services and Networking
• Organizational realignment to end markets
• Proven track record of operational excellence following separation
• R&D investment up over 250bps as percent of revenue since FY2014(3)
• Market share gains since 2014(1)
• Multiple levers to drive long-term 8-10% EPS(4) growth
• Ixia acquisition adds $485M(5) to the topline and $2.5B in incremental SAM
– $60M combined annual cost synergies;– $40M achieved in 12 months (Q3’18)
– $100M revenue synergies by year 5
• #1 market position in key software & hardware verticals(1)
• $15.5B electronics and communication SAM(2)
• 20%+ market share in core end markets(2)
Market Leader in Attractive Markets
Aligned to Critical Industry Growth
Themes
Strong Culture of Execution
Attractive Financial Model
Compelling Investor Value PropositionCommitment to Growing Long-Term Total Shareholder Returns
(1) Per Prime Data. Keysight core products
(2) Per company estimates for FY16. $15.5B SAM represents combined Keysight and Ixia SAM
(3) Non-GAAP measure. Refer to appendix for reconciliation
(4) Non-GAAP measure.
(5) Based on FYE Dec-31, 2016 revenue4
Page
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: Keysight is launched
Accelerating Innovation to Connect and Secure the World
History of Leadership and InnovationUnlocking measurement insights for over 75 years
5
Page
Keysight Today: Market & Technology Leader
(1) Free Cash Flow calculated as Operating Cash Flow less Capital Expenditures
(2) Non-GAAP measure. Refer to appendix for GAAP reconciliation. See non-GAAP Income from Operations divided by non-
GAAP revenue to derive operating margin
(3) Includes indirect channels
(4) Sites with greater than 50 R&D engineers
FY17 Key Statistics
Electronic Industrial
Solutions
$0.8B, 26%
Services Solutions
$0.4B, 13%
Communication
Solutions
$1.7B, 53%$3.2B
Business Overview
• Worldwide leader in high value, mission critical
electronic design and test solutions
• Relied on by the world’s leading technology
companies
• 75+ years of innovation, measurement science
expertise and deep customer relationships
Complementary Ixia Acquisition
Revenue Mix
• Industry pioneer and technology leader in network
test and visibility
• 400+ US and foreign patents issued or pending;
approximately 60% software related
• 700+ Software engineers
15 of the
Top 15 NEMS 47 of the
Top 50 Carriers 77 of the
Fortune 100
Customers
~32,000Number of customers(3)
100+Countries served
14R&D sites(4)
$241M Free Cash Flow(1),(2)
19%Operating Margin(2)
6
Ixia Solutions
$0.3B, 8%
Page
Our Value to Customers – Unmatched in the Industry
Customer’s Product Lifecycle
Accelerating innovation to connect and secure the world
Simulate Prototype Manufacture Optimize
7
NETWORKS
AND CLOUD
AEROSPACE
AND DEFENSE
WIRELESS
COMMUNICATIONS
AUTOMOTIVE, ENERGY,
AND IOT
Page
Driving shareholder returnsA Strong Financial Framework for Value Creation
• U.S. Cash
Generation
• Appropriate
Leverage
• Strategic Alignment
• Growth
• Value Creation
• Cost Structure
Flexibility
• Cost Reductions
• Margin Expansion
• R&D Investment
• SAM Expansion
• Profit Leverage
OrganicGrowth
Business ModelMergers &
AcquisitionsReturn of Capital
8
Page
•Commercial
Communications
•Aerospace,
Defense &
Government
•Automotive
•Energy
•General
Electronics
•Semiconductor
•Calibration
•Repair
•Remarketing
• Americas
• Europe
• Asia
• Japan
• Software
Technology
• Hardware
Technology
Organized to Grow
9
Communications
Solutions Group
Electronic
Industrial
Solutions Group
Services
Solutions Group
Soon Chai
Gooi
John
Page
Worldwide Sales
Mark
Wallace
Corporate
Planning and
Technology
Jay
Alexander
Aligned with End MarketsFirst to
Market
Trusted
Advisor
•Network Test
•Network Visibility
Ixia
Solutions Group
Mark
Pierpoint
Satish
Dhanasekaran
Page
Strong Progress on Growth Initiatives
10
Expand
Leadership in
T&M Software
Grow Services
Business by 50%
• Strong double-digit 5G order growth in FY17
• Positioning Keysight as the market leader in 5G
• Collaborating with leading consortiums, universities, and
research institutes to define 5G standards and technologies
• Ixia and Anite acquisitions materially expanded software
business
• Staffing of new software design center ahead of schedule
• New opportunities in multi-vendor support, asset
management, systems integration and training
• Continuing to win new multi-vendor business
Be First in 5G
Wireless
Page
Disciplined approach to capital investment
11
Completed 3 - 4 Years Beyond
Return
of
Capital
Stabilize asIndependent Company
• Completed April 30, 2015
• 6 months ahead of schedule
Phase 1
Separate
Sustained 4% CAGRover Cycle
• M&A as priority use of cash
– Ixia (closed 4-2017)
– Scienlab (closed 8-2017)
– Anite (closed 8-2015)
– Electroservices (8-2015)
Phase 2
Return to Growth
Balanced Returnof Capital
• Return of capital tied to US cash generation
• Appropriate leverage and commitment to investment grade credit metrics
• Opportunistic M&A
Phase 3
Return Capital
Page
The
Example
Disciplined and Well-Defined Criteria for Acquisitions
• Aligns with strategic growth priorities
• Delivers higher gross margin R&D or software solutions
• Expands Served Addressable Market (SAM)
• Focuses on faster growing market segments or adds key technology
• Expected ROIC materially above cost of capital
• Expected to be quickly accretive
• Valuation aligns with appropriate market multiples
Strategic
Alignment
Value
Creation
Growth
12
Page
Long-Term Expectations
13
RevenueGrowth
Op MarginIncremental
ProfitabilityOver the Cycle
Sustainable
4% CAGR
40% on
growth of 4%
or greater
Average
operating margin
of >20%*
Committed Return of Capital
Yields 8-10% EPS* Growth
* Non-GAAP
Page
Leadership in Attractive Markets
SegmentsCommunications
Solutions Group
Electronic
Industrial
Solutions
Group
Services
Solutions
Group
Ixia(1)
Solutions Group
End MarketsCommercial
Comms
Aerospace,
Defense &
Government
Electronic
IndustrialServices
Network
Test
Network
VisibilityTOTAL
Revenue(1,2) $1B $0.7B $0.8B $0.4B $0.33B $0.15B $3.5B
Market
Size(3,5)$4B $3B $4B $2B $1B $1.5B $15.5B
Market
Share(3)25% 23% 20% 20% 33% 10% 22%
(1) FY17 Ixia Revenue presented on proforma basis, including pre-acquisition revenue
(2) FY17 presented on a Non-GAAP basis. Refer to appendix for GAAP reconciliation
(3) Per Company estimates for FY16
(4) Market growth per Company estimates; average over 3-5 years
(5) Includes network test; excludes network assurance
(6) Weighted-average growth rate of end markets15
Page
(1) Per Prime Data, IHS Technology, and Company estimates
(2) RF/Microwave design simulation software
(3) A Keysight Company
Market Leader in Key Software & Instrument Platforms
16
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
Page
Growth Drivers
Commercial Communications• Evolving standards – 5G
• All data, all the time
• Internet of Things (IoT)
Network Test & Visibility• Rapidly expanding cloud data and apps
• Growing security risks
Aerospace, Defense &
Government
• World instability
• Defense modernization
Automotive & Energy• Evolving battery technologies
• Connected car
General Electronics • Consumer electronics demand
Semiconductor• Technology evolution
• China investment
Services • Customer outsourcing
Multiple Growth Drivers Provide Diversification
17
Page
Be first in
5G wireless
Growth Strategies
Expand leadership in
T&M software
Grow services
business
Extend into network
test and visibility
Growth Strategies
Software-centric solutions | Organic R&D investments | Strategic M&A
Growth Strategies Aligned to Key Market Themes
18
Page
First in 5G Wireless
Source: Company estimates and Cisco Visual Networking Index forecast, Mobile World
Congress 2017, 3GPP
Unprecedented Wireless Demand Accelerated Industry 5G Deployment Timeline
Keysight Positioned to Lead
30bn+ connected devices by 2020
10x mobile data in five years
• IoT consuming exponential amount of instantaneous data
• Disruptive auto and medical applications
• Public service sector services (fire, police) adopting wireless
technologies
• Strong double-digit 5G order growth in FY2017
• >15 5G solutions launched in the last year
• Collaborating with 30+ partners worldwide on research and trials
• Frost & Sullivan 2016 Global T&M: Company of the Year Award
5G Deployment expected 2019
Pre-commercial North American deployment
mid-2017
Worldwide carrier trials begin 2H 2017
5G standards set by 2018
5G in 2019
19
Page
Expand Leadership in T&M Software
(1) Per Company estimates
Business Update
Growth Strategy
Expand simulation business
— Address growth opportunities in High-Speed Digital and
Power design
Deliver solutions focused on growth segments
— Deliver R&D (prototype test) solutions focused on growth
segments such as 5G Communications, Power, and
Automotive
Grow subscriptions and services
— Implement software capabilities to enable revenue growth
from subscriptions and from services
1
2
3
• $2B market for electronic test software, ~7% CAGR(1)
• FY17 Software revenues over $450M
• New software design center staffed ahead of schedule
4Pursue selective acquisitions
— Increasing overall software content
20
Page
Grow Services Business to $600M
Grow Core Add New Services
Expand Multi-Vendor
Calibration Business
Build and Deploy
Professional Services
Launch and
Expand Asset
Management
Leverage Portfolio
21
Page
A Combination of
Complementary
Strengths
Industry pioneer and
recognized leader in
network test; a leader in
network visibility solutions
Deep expertise in IP
network assessment,
excellent customer
relationships, software-
centric business & team
Extend into Network Test and Visibility
A global leader in
communications with the
ability to deliver
end-to-end solutions
across the network and up
and down the stack
Scale and operational
excellence to drive
revenue and
profit growth
A software-centric team to
enable further
transformation and value
creation
A global leader in
measurement
instrumentation and
software for physical and
protocol layer testing
Deep expertise in wireless
technology, strong
worldwide sales
presence, proven
operational discipline
Creating a compelling innovation engine with Ixia to drive growth
22
Page
Electrical, Optical & Wireless Test
High-value capabilities across the communications network and throughout the stack
Keysight as a Platform for Accelerated Growth
23
Keysight Classic Anite Ixia
Components
& Chipsets Devices Base Stations Hyperscale and Data Centers Enterprise
Electrical, Optical and Wireless TestFro
m h
ardw
are
to s
oftw
are
Layer 1
Layers 2 - 7 Network Test, Visibility and Security
Mobile
Network
TestMobile
Device
TestB
TS
* E
mula
tion
Drive T
est
Custo
mer
Experience
Managem
ent
Channel Emulation
Stack Layers
* Base Transceiver Station
Page
Key Messages
24
Technology and market leader in
ever-evolving technology market
✓ 4% revenue CAGR
✓ Deliver >20% operating margin
✓ 8-10% EPS growth
Transformation
Objectives
Over the Cycle*Leader in profitable
market
Target fast growing areas
and expand Served Addressable
Market (SAM)
Proven operating performance
and cash generation across cycles
Transform for
growth
Strong business
model
* Non-GAAP measure
Page
0
2
4
6
8
10
12
14
16
18
2016 2017 2018 2019 2020
Fast Growing ModularSmall Portion of Total Market
26
2016 Total Modular Solutions Market
$1.2 Billion*
2016 Total Design & Test Market
$13 Billion*
* Per Company estimates. Excludes SAM expansion from acquisition of Ixia
** Per Company estimates.
$B$750M*
PXI/AXIe
Modular
13% CAGR*
to 2020
PXI/AXIe
Modular
13% CAGR**
Keysight’s double-digit growth
continued in FY17
63%PXI/AXIe
Modular
37%Other
Modular
Page 27
“X-Chips” Chipset
• Highly integrated
• High performance
• Low power
Handheld
Feature Rich Box
Modular
Proprietary technology
developed by central
Keysight Labs, manufactured
at in-house semiconductor
fab, and deployed into all
three form factors
Investments Leveraged into Multiple Form FactorsProvides Competitive Differentiation
• R&D
• Validation
• Complex device manufacturing
• Full measurement set
• One-button measurements
• Shared lab equipment
• Manufacturing
• R&D
• Validation
• Small footprint
• Flexible configuration
• Multi-channel applications
• Installation
• Maintenance
• Portability
• Harsh environments
Customer Best ForForm Factor
PXI
AXI
Page
Keysight Non-GAAP gross margin reconciliation
29
Year Ended
October 31, 2017 Gross Margin %
( in millions)
GAAP Gross Profit 1,698$ 53%
Amortization of acquisition-related balances 221
Share-based compensation 11
Acquisition and integration costs 4
Acquisition-related compensation expense 1
Restructuring and related costs 1
Northern California wildfire-related costs 5
Other 7
Non-GAAP Gross Profit 1,948$ 60%
GAAP Revenue 3,189$
Non-GAAP Revenue 3,249$
Page
Keysight Non-GAAP operating margin reconciliation
30
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
Separation and related costs 20
Pension curtailment and settlement gains (69)
Restructuring and related costs 11
Northern California wildfire-related costs 16
Other 6
Non-GAAP income from operations 620$
GAAP Operating Margin 14%
Non-GAAP Operating Margin 19%
Page
Keysight Non-GAAP research and development expenses reconciliation
31
2017 2014
Research & development expenses, as reported 498$ 361$
Amortization of acquisition-related balances (1) —
Share-based compensation (9) (7)
Acquisition and integration costs (1) —
Acquisition-related compensation expense (8) —
Separation and related costs — (2)
Restructuring and related costs (3) 1
Northern California wildfire-related costs (1) —
Other — (1)
Non-GAAP Research & development expenses 475$ 352$
GAAP Revenue 3,189$ 2,933$
R&D as a % of GAAP Revenue 15.6% 12.3%
Non-GAAP Revenue 3,249$ 2,933$
R&D as a % of Non-GAAP Revenue 14.6% 12.0%
( in millions)
October 31,
Year Ended
Page 32
Keysight Non GAAP revenue by end market reconciliation
Pre-acquisition
Ixia revenue on
Pro foma basis
Aerospace, Defense & Government 694$ — 694$
Commercial Communications 1,044 — 1,044
Electronic Industrial 836 — 836
Ixia 196 60 215 471
Services 419 — 419
Total Revenue 3,189$ 60$ 215$ 3,464$
Non-GAAP revenue is defined to exclude the fair value adjustments to the acquisition-related deferred revenue balances.
FY17, ( in millions)
GAAP Revenue
Acquisition
related
fair value adjs Non-GAAP Revenue